November 18, 2015
Dear Alcatel Lucent Security Holder,
On behalf of Alcatel
Lucent’s board of directors, I am pleased to inform you that Nokia Corporation today commenced an offer to exchange all Alcatel Lucent’s outstanding ordinary shares held by U.S. holders, American depositary shares representing ordinary
shares, wherever located, and OCEANEs held by U.S. holders, for Nokia Corporation ordinary shares or American depositary shares, as applicable. The remainder of Alcatel Lucent’s outstanding ordinary shares and OCEANEs, which are held by persons
outside the U.S., are the subject of a parallel public exchange offer in France. The U.S. offer and French offer are being made pursuant to a Memorandum of Understanding, dated April 15, 2015, as amended, between Alcatel Lucent and Nokia
Corporation.
At their meeting of October 28, 2015 and as a result of the matters described in the section entitled “Item 4. The
Solicitation or Recommendation—Reasons for Alcatel Lucent’s Board Recommendation” in the enclosed Alcatel Lucent Solicitation / Recommendation Statement on Schedule 14D-9, the participating members of the Alcatel Lucent board of
directors, taking into account the factors described in that section, unanimously:
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determined that the exchange offer is in the best interest of Alcatel Lucent, its employees and its stakeholders (including the holders of the Alcatel Lucent ordinary shares and
holders of other Alcatel Lucent securities); |
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(ii) |
recommended that all holders of Alcatel Lucent ordinary shares and holders of Alcatel Lucent American depositary shares tender their Alcatel Lucent ordinary shares and/or their
Alcatel Lucent American depositary shares pursuant to the exchange offer; and |
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(iii) |
recommended that all holders of OCEANEs tender their OCEANEs pursuant to the exchange offer. |
A copy of the Alcatel Lucent Solicitation / Recommendation Statement on Schedule 14D-9 is enclosed. It contains additional information relating to the exchange offer in the United States, including a description of
the reasons for the determination and recommendation described above. Also enclosed are Nokia Corporation’s U.S. Exchange Offer / Prospectus, dated November 12, 2015, letters of transmittal for use in tendering your Alcatel Lucent securities
and other related documents. These documents set forth the terms and conditions of the exchange offer in the United States. We urge you to read the enclosed information and consider it carefully before tendering any of your Alcatel Lucent
securities.
On behalf of Alcatel Lucent’s board of directors, we thank you for your support.
Sincerely,
Philippe Camus
Chairman and Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
(RULE 14d-101)
SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
Alcatel Lucent
(Name of Subject Company)
Alcatel Lucent
(Name of Persons Filing Statement)
Ordinary shares,
nominal value EUR 0.05 per ordinary share
American Depositary Shares, each representing one ordinary share, nominal value
EUR 0.05 per ordinary share
(Title of Class of Securities)
FR0000130007
013904305
(CUSIP Number of Class of Securities)
Jean Raby
Chief Financial and Legal Officer
Alcatel Lucent
148/152 Route de la Reine
92100 Boulogne-Billancourt
France
Telephone Number +33
(1) 55 14 10 10
Facsimile Number +33 (1) 55 14 14 05
(Name, address and telephone numbers of person authorized to receive notices and
communications on behalf of the persons filing statement)
With copies to:
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| Gauthier Blanluet Sullivan & Cromwell LLP 24, rue Jean-Goujon
75008 Paris
France Facsimile Number +33
(1) 73 04 10 10 |
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Richard C. Morrissey Sullivan & Cromwell LLP 1 New Fetter Lane
London EC4A 1AN United
Kingdom Facsimile Number +44 (0) 20 7959 8950 |
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Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. |
TABLE OF CONTENTS
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| Item 1. Subject Company Information. |
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| Item 2. Identity and Background of Filing Person. |
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| Item 3. Past Contacts, Transactions, Negotiations and Agreements. |
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| Item 4. The Solicitation or Recommendation. |
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| Item 5. Persons/Assets, Retained, Employed, Compensated or Used. |
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| Item 6. Interest in Securities of the Subject Company. |
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| Item 7. Purposes of the Transaction and Plans or Proposals. |
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| Item 8. Additional Information. |
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| Item 9. Exhibits. |
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| ANNEX A: Opinion of Zaoui & Co. S.A., dated April 14, 2015. |
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A-1 |
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| ANNEX B: Opinion of Zaoui & Co. S.A., dated October 28, 2015. |
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| ANNEX C: Unofficial English Translations of Independent Expert Report of Associés en Finance, dated October 28,
2015, and Addendum, dated November 9, 2015. |
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Item 1. Subject Company Information.
Name and Address
The name of the subject company is
Alcatel Lucent, a French société anonyme (“Alcatel Lucent”). The address of Alcatel Lucent’s principal office is 148/152 route de la Reine, 92100 Boulogne-Billancourt, France. The telephone number of
Alcatel Lucent’s principal executive office is +33 (1) 55 14 10 10.
Securities
This Solicitation/Recommendation Statement on Schedule 14D-9 (this “Schedule 14D-9”) relates to:
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Alcatel Lucent’s ordinary shares, nominal value EUR 0.05 per share (“Alcatel Lucent Shares”); |
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American Depositary Shares, evidenced by American Depositary Receipts, each representing one Alcatel Lucent Share (“Alcatel Lucent ADSs”);
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EUR 628 946 424 Alcatel Lucent bonds convertible/exchangeable into new Alcatel Lucent Shares or exchangeable for existing Alcatel Lucent Shares due on July 1, 2018
(“2018 OCEANEs”); |
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(iv) |
EUR 688 425 000 Alcatel Lucent bonds convertible/exchangeable into new Alcatel Lucent Shares or exchangeable for existing Alcatel Lucent Shares due on January 30,
2019 (“2019 OCEANEs”); and |
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EUR 460 289 979.90 Alcatel Lucent bonds convertible/exchangeable into new Alcatel Lucent Shares or exchangeable for existing Alcatel Lucent Shares due on
January 30, 2020 (“2020 OCEANEs” and, together with the 2018 OCEANEs and the 2019 OCEANEs, “OCEANEs” and the OCEANEs, together with the Alcatel Lucent Shares and the Alcatel Lucent ADSs, “Alcatel Lucent
Securities”). |
The Alcatel Lucent Shares and the Alcatel Lucent ADSs are registered pursuant to the U.S. Securities Exchange Act
of 1934, as amended (the “Exchange Act”). The OCEANEs are not registered pursuant to the Exchange Act.
As of October 31, 2015, the
latest practicable date before the date of this Schedule 14D-9, there were 2 841 508 155 Alcatel Lucent Shares issued (including 472 058 361 Alcatel Lucent ADSs issued), of which 40 115 700 Alcatel Lucent Shares
were held in treasury by Alcatel Lucent or its subsidiaries, EUR 349 413 670 2018 OCEANEs outstanding, EUR 167 500 000 2019 OCEANEs outstanding and EUR 114 499 995 2020 OCEANEs outstanding.
For further information on Alcatel Lucent Securities outstanding as of October 31, 2015, see the section entitled “Item 8.
Additional Information—Alcatel Lucent Shares on a Fully Diluted Basis” below, which is incorporated herein by reference.
Item 2. Identity and Background of Filing Person.
Name and Address
Alcatel Lucent, the subject company, is the person filing this Schedule 14D-9. The name, business address and business telephone number of
Alcatel Lucent are set forth in the section entitled “Item 1. Subject Company Information—Name and Address” above.
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Exchange Offer
This Schedule 14D-9 relates to an exchange offer comprised of two offers (separately, the “U.S. Offer” and the “French Offer” and collectively, the “Exchange
Offer”) by Nokia Corporation, a Finnish Corporation (“Nokia”), as disclosed in the Tender Offer Statement on Schedule TO (together with the exhibits thereto, as amended, the “Schedule TO”), filed by Nokia
with the U.S. Securities and Exchange Commission (the “SEC”) on November 18, 2015, the date of this Schedule 14D-9.
For every one
Alcatel Lucent Share validly tendered into, and not withdrawn from, the U.S. Offer, holders will receive, 0.5500 of a share of Nokia (a “Nokia Share”). For every one Alcatel Lucent ADS validly tendered into, and not withdrawn from,
the U.S. Offer, holders will receive 0.5500 of a Nokia American depositary share (a “Nokia ADS”), each Nokia ADS representing one Nokia Share. The ratio of 0.5500 Nokia Shares per one Alcatel Lucent Share is referred to as the
“exchange ratio”. For every one 2018 OCEANE validly tendered into, and not withdrawn from, the U.S. Offer, holders will receive 0.6930 Nokia Shares, for every one 2019 OCEANE validly tendered into, and not withdrawn from, the U.S.
Offer, holders will receive 0.7040 Nokia Shares, and for every one 2020 OCEANE validly tendered into, and not withdrawn from, the U.S. Offer, holders will receive 0.7040 Nokia Shares.
The U.S. Offer is being made on the terms and subject to the conditions set forth in section entitled “The Exchange Offer” in Nokia’s exchange offer/prospectus (the “exchange
offer/prospectus”), which is part of a Registration Statement on Form F-4 filed by Nokia with the SEC on August 14, 2015, as amended from time to time (the “Form F-4”), and is incorporated by reference into the
Schedule TO. A copy of the exchange offer/prospectus is included as Exhibit (a)(1) to this Schedule 14D-9 and the section entitled “The Exchange Offer” is incorporated herein by reference.
The French Offer to exchange 0.5500 Nokia Shares for every Alcatel Lucent Share, 0.6930 Nokia Shares for every 2018 OCEANE, 0.7040 Nokia Shares for every 2019
OCEANE and 0.7040 Nokia Shares for every 2020 OCEANE is being made pursuant to separate offer documentation available to holders of Alcatel Lucent Shares and OCEANEs located in France (holders of Alcatel Lucent Shares and OCEANEs located outside of
France may not participate in the French Offer except if, pursuant to the local laws and regulations applicable to those holders, they are permitted to participate in the French Offer).
The Exchange Offer is being made pursuant to a Memorandum of Understanding, dated as of April 15, 2015 (as such agreement may be amended, supplemented or otherwise modified from time to time, the
“Memorandum of Understanding”), by and between Alcatel Lucent and Nokia. A more complete description of the Memorandum of Understanding, including the Amendment to the Memorandum of Understanding, dated October 28, 2015, by and
between Alcatel Lucent and Nokia (the “Memorandum of Understanding Amendment”), is included in the section entitled “The Memorandum of Understanding” in the exchange offer/prospectus. A copy of the exchange
offer/prospectus is included as Exhibit (a)(1) to this Schedule 14D-9 and the section entitled the “Memorandum of Understanding” is incorporated herein by reference. The summary of Memorandum of Understanding and the Memorandum of
Understanding Amendment included in the section entitled “The Memorandum of Understanding” in the exchange offer/prospectus does not purport to be complete and is qualified in its entirety by reference to the Memorandum of
Understanding and the Memorandum of Understanding Amendment, copies of which are included as Exhibits (e)(1) and (e)(2), respectively, to this Schedule 14D-9 and are incorporated herein by reference.
Holders of Alcatel Lucent ADSs located outside of the United States may participate in the U.S. Offer only to the extent the local laws and regulations applicable
to those holders permit them to participate in the U.S. Offer. Holders of Alcatel Lucent Securities who are restricted from participating in the U.S. Offer pursuant to Sanctions (as defined in the exchange offer/prospectus) may not participate in
the U.S. Offer.
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No fractional Nokia Shares or fractional Nokia ADSs will be issued. Holders of Alcatel Lucent Securities tendering
into the U.S. Offer or the French Offer will receive cash in lieu of any fractional Nokia Shares or Nokia ADSs to which such holders may otherwise be entitled, following the implementation of a mechanism to resell such fractional Nokia Shares or
Nokia ADSs.
Holders of options to acquire Alcatel Lucent Shares (“Alcatel Lucent Stock Options”) who wish to tender in the Exchange
Offer or the subsequent offering period, if any, must exercise their Alcatel Lucent Stock Options, and Alcatel Lucent Shares must be issued to such holders prior to the Expiration Date (as defined below) or the expiration of the subsequent offering
period, as applicable. Pursuant to the Memorandum of Understanding, Alcatel Lucent agreed to accelerate or waive certain terms of the Alcatel Lucent Stock Options, subject to certain conditions.
Restricted stock granted by Alcatel Lucent (“Performance Shares”) cannot be tendered in the Exchange Offer or the subsequent offering period, if
any, unless such Performance Shares have vested and are not subject to transfer restrictions prior to the Expiration Date (as defined below) or the expiration of the subsequent offering period, as applicable. Pursuant to the Memorandum of
Understanding, Nokia and Alcatel Lucent agreed to implement a mechanism with respect to unvested Performance Shares granted before April 15, 2015 pursuant to which the beneficiaries may waive their rights to receive Performance Shares in
exchange for Alcatel Lucent Shares, subject to certain conditions.
The U.S. Offer and withdrawal rights for tenders of Alcatel Lucent Shares and
OCEANEs in the U.S. Offer will expire at 11:00 a.m., New York City time (5:00 p.m. Paris time), on December 23, 2015 (as such time and date may be extended, the “Expiration Date”), unless the Exchange Offer is extended.
The deadline for validly tendering and withdrawing Alcatel Lucent ADSs in the U.S. Offer is 5:00 p.m., New York City time, on the U.S. business day immediately
preceding the Expiration Date, which will be December 22, 2015 (as such time and date may be extended, the “ADS Tender Deadline”), unless the U.S. Offer is extended.
The purpose of the Exchange Offer is for Nokia to acquire all of the Alcatel Lucent Securities in order to combine the businesses of Nokia and Alcatel Lucent.
Nokia’s obligation to accept, and to exchange, any Alcatel Lucent Securities validly tendered into the U.S. Offer is subject only to:
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the number of Alcatel Lucent Securities validly tendered in accordance with the terms of the Exchange Offer representing, on the date of announcement by the
French stock market authority (Autorité des marchés financiers) (the “AMF”) of the results of the French Offer taking into account the results of the U.S. Offer, more than 50% of the Alcatel Lucent Shares on a
fully diluted basis (the “Minimum Tender Condition”); and |
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Nokia shareholders having approved the authorization for the Nokia board of directors to issue such number of new Nokia Shares as may be necessary for delivering
the Nokia Shares offered in consideration for the Alcatel Lucent Securities tendered into the Exchange Offer and for the completion of the Exchange Offer (the “Nokia Shareholder Approval”). |
Subject to applicable SEC and AMF rules and regulations, Nokia reserves the right, in its sole discretion, to waive the Minimum Tender Condition to any level at or
above a number of Alcatel Lucent Shares representing more than 50% of the Alcatel Lucent share capital or voting rights, taking into account, if necessary, the Alcatel Lucent Shares resulting from the conversion of the OCEANEs validly tendered into
the Exchange Offer (the “Mandatory Minimum Acceptance Threshold”).
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Nokia, Alcatel Lucent and the holders of Alcatel Lucent Securities will not know whether the Minimum Tender Condition
is satisfied before the publication by the AMF of the results of the French Offer (taking into account the results of the U.S. Offer). At such time, Nokia would determine, in its sole discretion, whether to waive the Minimum Tender Condition to any
level at or above the Mandatory Minimum Acceptance Threshold.
The foregoing summary of the Exchange Offer does not purport to be complete and is
qualified in its entirety by the more detailed description and explanations contained in the section entitled “The Exchange Offer” in the exchange offer/prospectus which is incorporated herein by reference.
Nokia’s registered office and its principal executive office is Karaportti 3, FI-02610 Espoo, Finland, and the telephone number is +358 (0) 10 448 8000,
as set forth in the exchange offer/prospectus.
Information relating to the Exchange Offer, including this Schedule 14D-9 and related documents, can be
found on the SEC’s website at www.sec.gov, or on Alcatel Lucent’s website at www.alcatel-lucent.com. Neither these websites nor the information on or available through them are a part of this Schedule 14D-9 or incorporated herein by
reference, and should not be considered a part of this Schedule 14D-9.
Item 3. Past Contacts, Transactions,
Negotiations and Agreements.
Except as described in this Schedule 14D-9, including documents incorporated herein by reference and the exhibits
hereto, to the knowledge of Alcatel Lucent, as of the date of this Schedule 14D-9, there exists no material agreement, arrangement or understanding, nor any actual or potential conflict of interest, between Alcatel Lucent or its affiliates, on the
one hand, and (i) any of Alcatel Lucent’s executive officers, directors or affiliates, or (ii) Nokia or any of Nokia’s executive officers, directors or affiliates, on the other hand.
Alcatel Lucent’s board of directors was aware of all such contracts, agreements, arrangements or understandings and any actual or potential conflicts of
interest and considered them along with other matters set forth under “Item 4. The Solicitation or Recommendation—Reasons for Approving the Memorandum of Understanding” below and “Item 4. The Solicitation or
Recommendation—Reasons for Alcatel Lucent’s Board Recommendation” below.
Relationship with Nokia
Memorandum of Understanding
A summary of the material terms
of the Memorandum of Understanding is included in the section entitled “The Memorandum of Understanding” in the exchange offer/prospectus and is incorporated herein by reference. The summary in the exchange offer/prospectus may not
contain all of the information about the Memorandum of Understanding that is important to holders of Alcatel Lucent Securities, and holders of Alcatel Lucent Securities are encouraged to read the Memorandum of Understanding, which is attached as
Annex A to the exchange offer/prospectus, carefully in its entirety. The legal rights and obligations of Alcatel Lucent and Nokia are governed by the specific language of the Memorandum of Understanding and not the summary described in the section
entitled “The Memorandum of Understanding” in the exchange offer/prospectus.
The Memorandum of Understanding contains representations,
warranties and covenants by each of Nokia and Alcatel Lucent. These representations and warranties were (i) made solely for the benefit of the other party to the Memorandum of Understanding; (ii) were not intended to be treated as
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categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (iii) may have been qualified in the Memorandum
of Understanding by disclosures that were made to the other party in connection with the negotiation of the Memorandum of Understanding; (iv) may apply contract standards of “materiality” that are different from
“materiality” under the applicable securities laws; and (v) were made only as of the date of the Memorandum of Understanding, the French Offer filing date or such other date or dates as may be specified in the Memorandum of
Understanding. Information concerning the subject matter of the representations, warranties and covenants may change after the date of the Memorandum of Understanding, which subsequent information may or may not be fully reflected in public
disclosures. In addition, such representations, warranties and covenants may have been qualified by certain disclosures not reflected in the text of the Memorandum of Understanding and may apply standards of materiality and other qualifications and
limitations in a way that is different from what may be viewed as material by holders of Alcatel Lucent Securities. Only Alcatel Lucent and Nokia are parties to the Memorandum of Understanding, which does not confer any rights upon or give any
causes of action to the holders of Alcatel Lucent Securities. Neither holders of Alcatel Lucent Securities nor any other third parties should rely on the representations, warranties and covenants or any descriptions thereof as characterizations of
the actual state of facts or conditions of Alcatel Lucent, Nokia, or any of their respective subsidiaries or affiliates.
Alcatel Lucent acknowledges
that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the
statements in this Schedule 14D-9 not misleading.
The foregoing summary of Memorandum of Understanding and the Memorandum of Understanding Amendment
does not purport to be complete and is qualified in its entirety by reference to the Memorandum of Understanding and the Memorandum of Understanding Amendment, copies of which are included as Exhibits (e)(1) and (e)(2), respectively, to this
Schedule 14D-9 and are incorporated herein by reference.
Other Arrangements
In 2015, Nokia has reimbursed Alcatel Lucent approximately EUR 124 000 and USD 62 000 for out-of-pocket expenses paid by Alcatel Lucent to third parties for shareholder analysis at the request of Nokia in
connection with the Exchange Offer, including shareholder analysis in accordance with Rule 14d-1 under the Exchange Act.
Arrangements with
Executive Officers and Directors of Alcatel Lucent
Alcatel Lucent’s executive officers and directors may have interests in the Exchange
Offer and the other transactions contemplated by the Memorandum of Understanding that are different from, or in addition to, the interests of the holders of Alcatel Lucent Securities generally. These interests may create potential conflicts of
interest. Alcatel Lucent’s board of directors was aware of these interests and considered them, among other matters, in approving the Memorandum of Understanding and the transactions contemplated by the Memorandum of Understanding, as set forth
under “Item 4. The Solicitation or Recommendation—Reasons for Approving the Memorandum of Understanding” below, and in determining that the Exchange Offer was in the best interest of Alcatel Lucent, its employees and its
stakeholders (including holders of Alcatel Lucent Shares and holders of other Alcatel Lucent Securities) and recommending that all holders of Alcatel Lucent Securities tender their Alcatel Lucent Securities pursuant to the Exchange Offer, as set
forth under “Item 4. The Solicitation or Recommendation—Reasons for Alcatel Lucent’s Board Recommendation” below.
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Effect of the Exchange Offer on Alcatel Lucent Shares, Alcatel Lucent ADSs, OCEANEs and Share- and Equity-Based
Incentive Plans
Consideration for Alcatel Lucent Shares and Alcatel Lucent ADSs
If Alcatel Lucent’s executive officers and directors were to tender any Alcatel Lucent Shares or Alcatel Lucent ADSs they own for exchange pursuant to the Exchange Offer, they would receive the same
consideration on the same terms and conditions as the other holders of Alcatel Lucent Shares and Alcatel Lucent ADSs generally.
As of April 13,
2015, the date immediately prior to the public announcement of discussions related to a possible business combination between Alcatel Lucent and Nokia, Alcatel Lucent’s executive officers and directors (and their respective affiliates and
affiliated investment entities) as of that date owned 6 785 573 Alcatel Lucent Shares (including Alcatel Lucent Shares represented by Alcatel Lucent ADSs). If Alcatel Lucent’s executive officers and directors (and affiliates and
affiliated investment entities) as of April 13, 2015 had validly tendered all of their outstanding Alcatel Lucent Shares and Alcatel Lucent ADSs held as of that date pursuant to the Exchange Offer, Alcatel Lucent’s executive officers and
directors (and their respective affiliates and affiliated investment entities) as of that date would have received Nokia Shares having an aggregate value of approximately EUR 28 974 397, based on the closing price of the Nokia Shares as of
April 13, 2015 of EUR 7.77.
October 27, 2015, the date before the determination and recommendation by Alcatel Lucent’s board of
directors in respect of the Exchange Offer, Alcatel Lucent’s executive officers and directors (and their respective affiliates and affiliated investment entities) as of that date owned 6 815 005 Alcatel Lucent Shares (including
Alcatel Lucent Shares represented by Alcatel Lucent ADSs). If Alcatel Lucent’s executive officers and directors (and affiliates and affiliated investment entities) as of October 27, 2015, pursuant to the Exchange Offer, were to validly
tender all of their outstanding Alcatel Lucent Shares and Alcatel Lucent ADSs held as of that date, Alcatel Lucent’s executive officers and directors (and their respective affiliates and affiliated investment entities) as of that date would
receive Nokia Shares having an aggregate value of approximately EUR 22 285 066 based on the closing price of the Nokia Shares as of October 27, 2015 of EUR 5.95.
Consideration for OCEANEs
No Alcatel Lucent executive officers or directors hold any OCEANEs. However, if
Alcatel Lucent’s executive officers and directors were to hold OCEANEs and tender any OCEANEs they own for exchange pursuant to the Exchange Offer, they would receive the same consideration on the same terms and conditions as the other holders
of OCEANEs generally.
Distribution of Unrestricted Alcatel Lucent Shares
On October 28, 2015, Alcatel Lucent’s board of directors resolved, on the recommendation of the compensation committee, to grant to Alcatel Lucent employees, in lieu of the Alcatel Lucent Stock Options
Plan (as defined below) that Alcatel Lucent’s board of directors had considered granting in respect of the year ended December 31, 2014 and which has not been granted, unrestricted Alcatel Lucent Shares (representing a maximum total number
of 3 507 185 as of October 31, 2015) according to a ratio of one Alcatel Lucent Share per two Alcatel Lucent Stock Options, subject to the completion of the Exchange Offer, to the presence condition being fulfilled as of the
Expiration Date and to an undertaking to sell the unrestricted Alcatel Lucent Shares on the market no later than two French trading days before the last day of the subsequent offering period. A maximum aggregate amount of 275 000 unrestricted
Alcatel Lucent Shares are expected to be granted to Alcatel Lucent’s executive officers. No unrestricted Alcatel Lucent Shares would be granted to directors who are not executive officers.
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In certain jurisdictions, the mechanisms described above may be adjusted to comply with possible applicable legal,
regulatory or other local constraints.
The foregoing summary of the distribution of Alcatel Lucent Shares does not purport to be complete and is
qualified in its entirety by reference to the Form of Replacement Share Grant Notification, a copy of which is included as Exhibit (e)(9) to this Schedule 14D-9 and is incorporated herein by reference.
Acceleration of Alcatel Lucent Stock Options
In connection
with its long-term incentive compensation arrangements, Alcatel Lucent grants Alcatel Lucent Stock Options to employees and members of management pursuant to plans in effect from time to time (“Alcatel Lucent Stock Options Plans”).
The Alcatel Lucent Stock Option Plans have the following terms:
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the vesting of Alcatel Lucent Stock Options generally occurs: |
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for Alcatel Lucent Stock Options Plans for beneficiaries located in France, over three successive periods (an initial 2-year vesting period after which
beneficiaries acquire 50% of the entitlement, a second 1-year vesting period after which the beneficiaries acquire an additional 25% of the entitlement, and a third 1-year vesting period after which the beneficiaries acquire the remaining 25% of the
entitlement); and |
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for Alcatel Lucent Stock Options Plans for beneficiaries located outside of France, over four successive 1-year periods (beneficiaries acquire 25% of the
entitlement at the end of each period); |
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vesting at the end of each period is subject to: |
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presence conditions, which are satisfied if the relevant beneficiary maintains his or her position as an employee at Alcatel Lucent (or one of its subsidiaries)
at the expiration date of each relevant period; and |
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for executive directors and members of the leadership team only, performance conditions related to free cash flow. |
As of October 31, 2015, there were 81 040 440 Alcatel Lucent Stock Options issued, out of which 67 452 250 Alcatel Lucent Stock Options
were exercisable and the Alcatel Lucent Shares which may be issued pursuant to their exercise were transferable.
In connection with the Exchange Offer,
on April 14, 2015 Alcatel Lucent’s board of directors, on the recommendation of the compensation committee, resolved to offer to accelerate or waive any vesting periods, vesting conditions, performance conditions and presence conditions
and lock-up periods for Alcatel Lucent Stock Options granted prior to the date of the Memorandum of Understanding (a maximum amount of approximately 13 588 190 Alcatel Lucent Stock Options as of October 31, 2015), subject to:
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the completion of the Exchange Offer; |
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applicable presence conditions being fulfilled on the Expiration Date; |
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holders of accelerated Alcatel Lucent Stock Options undertaking to exercise all of their unvested Alcatel Lucent Stock Options as well as all of their vested
Alcatel Lucent Stock Options (except, as the case may be, those that are subject to a tax lock-up period provided by French or Belgian law); and |
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holders of accelerated Alcatel Lucent Stock Options authorizing the Alcatel Lucent Stock Options Plan administrator to sell on the market all the resulting
Alcatel Lucent Shares on their behalf no later than two French trading days before the last day of the subsequent offering period. |
Holders of Alcatel Lucent Stock Options will not be required to exercise any of their Alcatel Lucent Stock Options and to sell the resulting Alcatel Lucent Shares
where the sum of the exercise price and the related costs and expenses relating to the exercise and sale of the resulting Alcatel Lucent Shares will exceed the Alcatel Lucent Share price. Instead, by accepting the acceleration of their Alcatel
Lucent Stock Options, such holders will be required to irrevocably accept to be bound by an Underwater Stock Options Liquidity Agreement with respect to the Alcatel Lucent Stock Options not exercised pursuant to the preceding sentence, as further
described in the section entitled “—Liquidity Agreement Offered to Holders of Underwater Stock Options” below. In addition, holders will be required to irrevocably accept to be bound by a Lock-Up Liquidity Agreement, as further
described in the section entitled “—Liquidity Agreements Offered to Holders of Alcatel Lucent Stock Options and Beneficiaries of Performance Shares Granted Before 2015 and Subject to a Lock-Up Period” below, with respect to the
Alcatel Lucent Stock Options subject to a tax lock-up period provided by French or Belgian law, unless the holder elects to accelerate such Alcatel Lucent Stock Options.
In respect of holders of Alcatel Lucent Stock Options who elect not to accept the acceleration, the terms and conditions of their Alcatel Lucent Stock Options will remain unchanged, including the presence
conditions and, as applicable, performance conditions. Certain holder of Alcatel Lucent Stock Options will be offered the Lock-Up Liquidity Agreement, as further described in the section entitled “—Liquidity Agreements Offered to
Holders of Alcatel Lucent Stock Options and Beneficiaries of Performance Shares Granted Before 2015 and Subject to a Lock-Up Period” below.
In
certain jurisdictions, the mechanisms described above may be adjusted to comply with possible applicable legal, regulatory or other local constraints.
The foregoing summary of the Alcatel Lucent Stock Options does not purport to be complete and is qualified in its entirety by reference to the Form of Stock Option
Acceleration Agreement, a copy of which is included as Exhibit (e)(7) and is incorporated herein by reference, and to the Alcatel Lucent Stock Options Plans, copies of which are included as Exhibits (e)(14) to (e)(21) to this Schedule 14D-9 and are
incorporated herein by reference.
As of April 13, 2015, Alcatel Lucent’s executive officers and directors (and their respective affiliates
and affiliated investment entities) as of that date owned Alcatel Lucent Stock Options (including unvested Alcatel Lucent Stock Options which may be accelerated as described above) exercisable into approximately 841 777 Alcatel Lucent Shares at
a weighted average exercise price of EUR 2.262 per Alcatel Lucent Share. If Alcatel Lucent’s executive officers and directors (and affiliates and affiliated investment entities) as of April 13, 2015, had exercised all Alcatel Lucent
Stock Options (including unvested Alcatel Lucent Stock Options which may be accelerated as described above) held as of that date and had validly tendered all of the resulting Alcatel Lucent Shares pursuant to the Exchange Offer, Alcatel
Lucent’s executive officers and directors (and their respective affiliates and affiliated investment entities) as of that date would have received Nokia Shares having an aggregate value (net of the exercise price of the Alcatel Lucent Stock
Options) of approximately EUR 1 690 288, based on the closing price of the Nokia Shares as of April 13, 2015 of EUR 7.77.
As of
October 27, 2015, Alcatel Lucent’s executive officers and directors (and their respective affiliates and affiliated investment entities) as of that date owned Alcatel Lucent Stock Options (including unvested Alcatel Lucent Stock Options
which may be accelerated as described above) exercisable into 849 100 Alcatel Lucent Shares at a weighted average exercise price of EUR 2.406 per Share. If Alcatel
8
Lucent’s executive officers and directors (and affiliates and affiliated investment entities) as of October 27, 2015, were to exercise all Alcatel Lucent Stock Options (including
unvested Alcatel Lucent Stock Options which may be accelerated as described above) held as of that date and validly tender all of the resulting Alcatel Lucent Shares pursuant to the Exchange Offer, Alcatel Lucent’s executive officers and
directors (and their respective affiliates and affiliated investment entities) as of that date would receive Nokia Shares having an aggregate value (net of the exercise price of the Alcatel Lucent Stock Options) of approximately EUR 733 622,
based on the closing price of the Nokia Shares as of October 27, 2015 of EUR 5.95.
Acceleration of Performance Shares
In connection with its long-term incentive compensation arrangements, Alcatel Lucent grants Performance Shares to employees and members of management pursuant to
plans in effect from time to time (“Performance Share Plans”). The Performance Share Plans have the following terms:
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Performance Shares entitle the recipient to receive Alcatel Lucent Shares upon vesting; |
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the vesting of Performance Shares generally occurs: |
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• |
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for Performance Share Plans adopted in 2014 and later, over two successive 2-year periods (an initial 2-year vesting period after which beneficiaries acquire 50%
of the entitlement and a second 2-year vesting period after which beneficiaries acquire the remaining 50% of the entitlement); |
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for Performance Share Plans for beneficiaries located in France adopted prior to 2014, after a 2-year period and with an additional 2-year holding period; and
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for Performance Share Plans for beneficiaries located outside of France adopted prior to 2014, after a 4-year period; |
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vesting is subject to the assessment at the end of each relevant period of: |
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• |
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presence conditions, which are satisfied if the relevant beneficiary maintains his or her position as an employee at Alcatel Lucent (or one of its subsidiaries)
at the expiration date of each relevant period; and |
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• |
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performance conditions. |
As of
October 31, 2015, there are 28 188 080 unvested Performance Shares and 2 506 385 vested Performance Shares that remain subject to a holding period which is not expected to expire prior to the closing date of the Exchange Offer.
In connection with the Exchange Offer, on April 14, 2015 Alcatel Lucent’s board of directors, on the recommendation of the compensation
committee, resolved to allow beneficiaries of Performance Shares granted prior to the date of the Memorandum of Understanding to exchange each of their unvested Performance Shares (a total maximum number of 18 217 530 Alcatel Lucent
Performance Shares to Alcatel Lucent’s knowledge as of October 31, 2015) for an unrestricted Alcatel Lucent Share, minus, in the relevant countries, the number of Alcatel Lucent Shares which have to be sold in order to cover payable tax
charges, subject to:
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• |
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the completion of the Exchange Offer; |
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• |
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applicable presence conditions being fulfilled on the Expiration Date; and |
9
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• |
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holders of accelerated Performance Shares authorizing the Performance Share Plan administrator to sell on the market all the resulting Alcatel Lucent Shares on
their behalf no later than two French trading days before the last day of the subsequent offering period. |
In respect of beneficiaries
who elect not to accept the acceleration and except as set forth in the following sentence, the terms and conditions of the Performance Shares, including the performance conditions and the presence conditions, will remain unchanged. Nokia and
Alcatel Lucent have agreed that Alcatel Lucent would amend the terms and conditions of any Performance Shares that remain outstanding in order to, in case of Reduced Liquidity (as defined below), use the stock market price of Nokia Shares instead of
the stock market price of Alcatel Lucent Shares as the reference stock market price and to adjust the representative reference panel. Certain beneficiaries of Performance Shares will be offered the Lock-Up Liquidity Agreement, as further described
in the section entitled “—Liquidity Agreements Offered to Holders of Alcatel Lucent Stock Options and Beneficiaries of Performance Shares Granted Before 2015 and Subject to a Lock-Up Period” below.
In certain jurisdictions, these mechanisms may be adapted to comply with possible applicable statutory, regulatory or other type of constraints.
The foregoing summary of the Performance Shares does not purport to be complete and is qualified in its entirety by reference to the form of Performance Shares
Acceleration Agreement, a copy of which is included as Exhibit (e)(8) hereto and is incorporated herein by reference, and the Performance Share Plans, copies of which are included as Exhibits (e)(13) and (e)(22) to (e)(24) to this Schedule 14D-9 and
are incorporated herein by reference.
On July 29, 2015, Alcatel Lucent’s board of directors, on the recommendation of the compensation
committee, resolved to adopt an additional Performance Share Plan (the “2015 Performance Share Plan”) pursuant to which Alcatel Lucent expects, as of October 31, 2015, to issue a maximum amount of 9 970 550
Performance Shares to Alcatel Lucent employees. The Performance Shares issued pursuant to the 2015 Performance Share Plan will be subject to customary presence and performance conditions over a four-year vesting period, and will not be accelerated
in connection with the Exchange Offer. The beneficiaries of Performance Shares issued pursuant to the 2015 Performance Share Plan will be required to enter into a 2015 Performance Share Plan Liquidity Agreement, as further described in the section
entitled “—Liquidity Agreement Offered to Beneficiaries of Performance Shares granted pursuant to the 2015 Performance Share Plan” below.
In certain jurisdictions, these mechanisms may be adapted to comply with possible applicable statutory, regulatory or other type of constraints.
The foregoing summary of the Performance Shares to be issued pursuant to the 2015 Performance Share Plan does not purport to be complete and is qualified in its entirety by reference to the 2015 Performance Share
Plan, a copy of which is included as Exhibit (e)(10) to this Schedule 14D-9 and is incorporated herein by reference.
As of April 13, 2015, Alcatel
Lucent’s executive officers and directors (and their respective affiliates and affiliated investment entities) were beneficiaries of 417 651 Performance Shares (including unvested Performance Shares which may be accelerated as for any
employee under the conditions described above. If Alcatel Lucent’s executive officers and directors (and affiliates and affiliated investment entities) as of April 13, 2015, had exchanged all Performance Shares (including unvested
Performance Shares which may be accelerated as for any employee under the conditions described above) held as of that date for Alcatel Lucent Shares and had validly tendered all of the resulting Alcatel Lucent Shares pursuant to the Exchange Offer,
Alcatel Lucent’s executive officers and directors (and their
10
respective affiliates and affiliated investment entities) as of that date would have received Nokia Shares having an aggregate value of approximately EUR 1 783 370, based on the closing
price of the Nokia Shares as of April 13, 2015 of EUR 7.77.
As of October 27, 2015, Alcatel Lucent’s executive officers and directors
(and their respective affiliates and affiliated investment entities) were beneficiaries of 311 975 Performance Shares (including unvested Performance Shares which may be accelerated as for any employee under the conditions described above, but
excluding those Performance Shares granted pursuant to the 2015 Performance Share Plan, which will not be accelerated in connection with the Exchange Offer and will remain subject to presence and performance conditions). If Alcatel Lucent’s
executive officers and directors (and affiliates and affiliated investment entities) as of October 27, 2015, were to exchange all Performance Shares (including unvested Performance Shares which may be accelerated as for any employee under the
conditions described above, but excluding those Performance Shares granted pursuant to the 2015 Performance Share Plan, which will not be accelerated in connection with the Exchange Offer and will remain subject to presence and performance
conditions) held as of that date for Shares and validly tender all of the resulting Shares pursuant to the Exchange Offer, Alcatel Lucent’s executive officers and directors (and their respective affiliates and affiliated investment entities) as
of that date would receive Nokia Shares having an aggregate value of approximately EUR 1 020 158, based on the closing price of the Nokia Shares as of October 27, 2015 of EUR 5.95.
Acceleration of the Performance Units
In connection with
its long-term incentive compensation arrangements, Alcatel Lucent grants performance units (“Performance Units”) exclusively to executive officers and directors. Performance Units are conditional rights which grant the beneficiary
the right to receive compensation in cash. Performance Units are subject to the satisfaction of performance and presence conditions at the end of the vesting period. Performance conditions, presence conditions, and vesting periods for Performance
Units vary and are set by Alcatel Lucent’s board of directors when the Performance Units are granted.
Performance Units granted to the leadership
team (other than Alcatel Lucent’s president and chief executive officer) would be accelerated upon a change of control of Alcatel Lucent, pursuant to a decision of Alcatel Lucent’s board of directors in 2013, as for any employee in
connection with his or her Performance Shares as described above. For further information on arrangements with respect to Performance Units granted to Mr. Combes and the reduction in Performance Units agreed between Alcatel Lucent and
Mr. Combes, see the section entitled “—Employment Arrangements—Employment Arrangements with Mr. Michel Combes (Former Chief Executive Officer and Former Director)” below. The Performance Units granted to
Mr. Philippe Camus, Alcatel Lucent’s chairman and interim chief executive officer, will not be accelerated in connection with the Exchange Offer. Performance Units granted to all beneficiaries are payable in cash upon the date of
acceleration.
The foregoing summary of the grant of Performance Units does not purport to be complete.
As of April 13, 2015, Alcatel Lucent’s executive officers and directors (and their respective affiliates and affiliated investment entities) were
beneficiaries of 5 890 000 Performance Units (including unvested Performance Units which may be accelerated as described above). If Alcatel Lucent’s executive officers and directors (and affiliates and affiliated investment entities)
as of April 13, 2015, had exchanged all Performance Units (including unvested Performance Units which may be accelerated as for any employee under the conditions described above) held as of that date for cash compensation, Alcatel Lucent’s
executive officers and directors (and their respective affiliates and affiliated investment entities) as of that date would have received cash compensation having an aggregate value of
11
approximately EUR 23 836 250, based on the closing price of Alcatel Lucent Shares as of April 13, 2015 of EUR 3.86, except for the Performance Units granted to Mr. Combes,
which would have been payable in Alcatel Lucent Shares (or Nokia Shares, following completion of the squeeze-out of Alcatel Lucent Shares, if any) at their respective maturity dates in 2016, 2017 and 2018 (one Alcatel Lucent Share (or 0.5500 Nokia
Shares) per Performance Unit) and for which the estimated value is calculated based on the closing price of the Nokia Shares as of April 13, 2015 of EUR 7.77 and the exchange ratio of 0.5500, resulting in an implied value of EUR 4.27 per
Performance Unit.
As of October 27, 2015, Alcatel Lucent’s executive officers and directors (and their respective affiliates and affiliated
investment entities) were beneficiaries of 3 205 000 Performance Units (including unvested Performance Units which may be accelerated in connection with the Exchange Offer). If Alcatel Lucent’s executive officers and directors (and
affiliates and affiliated investment entities) as of October 27, 2015, were to exchange all Performance Units (including unvested Performance Units which may be accelerated under the conditions described above) held as of that date for cash
compensation, Alcatel Lucent’s executive officers and directors (and their respective affiliates and affiliated investment entities) as of that date would receive cash compensation having an aggregate value of approximately EUR
10 448 300, based on the closing price of the Alcatel Lucent Shares as of October 27, 2015 of EUR 3.26.
Liquidity Agreements Offered
to Holders of Alcatel Lucent Stock Options and Beneficiaries of Performance Shares Granted Before 2015 and Subject to a Lock-Up Period
Pursuant to
the Memorandum of Understanding, Nokia will offer liquidity agreements (the “Lock-Up Liquidity Agreements”) to the French tax residents who are beneficiaries of the following plans, as a result of tax constraints to which they are
subject:
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Performance Share Plans n°A0914RUROW and n°A0914RPROW dated September 15, 2014, namely, a maximum number of 1 796 429 Alcatel Lucent
Shares as of October 31, 2015; |
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• |
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Alcatel Lucent Stock Options Plan n°A0812NHFR2 dated August 13, 2012, namely, a maximum number of 26 420 Alcatel Lucent Shares as of
October 31, 2015; |
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• |
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Alcatel Lucent Stock Options Plans n°A0312COFR2, n°A0312CPFR2 and n°A0312NHFR2 dated March 14, 2012, namely, a maximum number of
1 474 681 Alcatel Lucent Shares as of October 31, 2015. |
The Lock-Up Liquidity Agreements will also be offered to
Belgian tax residents who are beneficiaries of the following plan, provided that they opted for the taxation at the grant on a reduced basis of these Alcatel Lucent Stock Options and that they committed to hold these Alcatel Lucent Stock Options:
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• |
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Alcatel Lucent Stock Options Plan n°A0713COBE2 dated July 12, 2013, namely, a maximum number of 170 637 Alcatel Lucent Shares as of
October 31, 2015. |
Pursuant to the Lock-Up Liquidity Agreements, in case of (i) delisting of the Alcatel Lucent Shares,
(ii) holding by Nokia of more than 85% of the Alcatel Lucent Shares or (iii) average daily trading volume of Alcatel Lucent Shares on Euronext Paris falling below 5 000 000 Alcatel Lucent Shares for 20 consecutive French trading days (any
such event, “Reduced Liquidity”), the Alcatel Lucent Shares received by holders of Alcatel Lucent Stock Options will automatically be exchanged for either Nokia Shares or for cash consideration equal to the market value of such
Nokia Shares, upon exercise of these Alcatel Lucent Stock Options after expiration of the applicable lock-up period. The Lock-Up Liquidity Agreement also provides that the relevant Performance Shares would be automatically exchanged by Nokia for
either Nokia Shares or for cash consideration equal to the market value of such Nokia Shares, shortly after the end of the applicable lock-up period.
12
The exchange ratio to be offered pursuant to the Lock-Up Liquidity Agreements would be consistent with the exchange
ratio of the Exchange Offer, subject to certain adjustments, in case of certain financial transactions of Nokia or Alcatel Lucent, in order for the holders of Alcatel Lucent Stock Options and beneficiaries of Performance Shares to be able to obtain
the same value in either Nokia Shares or cash consideration that they would have obtained if such a transaction had not taken place.
In certain
jurisdictions, the mechanism described above may be adjusted to comply with possible applicable legal, regulatory or other local constraints.
The
foregoing summary of the Lock-Up Liquidity Agreements does not purport to be complete and is qualified in its entirety by reference to the Forms of Lock-Up Liquidity Agreement, copies of which are included as Exhibits (e)(3) and (e)(4) to this
Schedule 14D-9 and are incorporated herein by reference.
Liquidity Agreement Offered to Holders of Underwater Stock Options
Pursuant to the Memorandum of Understanding, Nokia has agreed to offer a liquidity agreement (the “Underwater Stock Options Liquidity Agreement”)
to holders of Alcatel Lucent Stock Options with respect to (i) the vested Alcatel Lucent Stock Options not covered by the undertaking to sell described in the section entitled “—Acceleration of Alcatel Lucent Stock
Options” above where the sum of the exercise price and the costs and expenses relating to the exercise and sale of the resulting Alcatel Lucent Shares will represent more than 90% of the Alcatel Lucent Share price as of the closing
of the last day of the subsequent offering period on Euronext Paris and (ii) the unvested and vested Alcatel Lucent Stock Options to be subject to a liquidity agreement as described in the section entitled “—Acceleration of Alcatel
Lucent Stock Options” above. The Underwater Stock Options Liquidity Agreement would provide for Alcatel Lucent Shares received to be automatically exchanged by Nokia for either Nokia Shares or for cash consideration equal to the market
value of such Nokia Shares.
The exchange ratio to be offered pursuant to the Underwater Stock Options Liquidity Agreement would be consistent with the
exchange ratio of the Exchange Offer, subject to certain adjustments, in case of certain financial transactions of Nokia or Alcatel Lucent, in order for holders of Alcatel Lucent Stock Options to be able to obtain the same value in either Nokia
Shares or cash consideration that they would have obtained if such a transaction had not taken place.
In certain jurisdictions, the mechanism described
above may be adjusted to comply with possible applicable legal, regulatory or other local constraints.
The foregoing summary of the Underwater Stock
Option Liquidity Agreement does not purport to be complete and is qualified in its entirety by reference to the Form of Underwater Stock Option Liquidity Agreement, a copy of which is included as Exhibit (e)(6) to this Schedule 14D-9 and is
incorporated herein by reference.
Liquidity Agreement Offered to Beneficiaries of Performance Shares granted pursuant to the 2015 Performance Share
Plan
Pursuant to the Memorandum of Understanding, Nokia and Alcatel Lucent have agreed to enter into a liquidity agreement (the “2015
Performance Share Plan Liquidity Agreement”) with all beneficiaries of Performance Shares granted pursuant to the 2015 Performance Share Plan, pursuant to which, in case of Reduced Liquidity at the date of expiration of the applicable
vesting period, all Performance Shares granted pursuant to the 2015 Performance Share Plan, representing a maximum amount of 9 970 550 Alcatel Lucent Shares as of October 31, 2015, would be automatically exchanged by Nokia for either
Nokia Shares or for cash consideration equal to the market value of such Nokia Shares shortly after the end of the vesting period.
13
The exchange ratio to be offered pursuant to the 2015 Performance Share Plan Liquidity Agreement would be consistent
with the exchange ratio of the Exchange Offer, subject to certain adjustments, in case of certain financial transactions of Nokia or Alcatel Lucent, in order for the beneficiaries of Performance Shares granted pursuant to the 2015 Performance Share
Plan to be able to obtain the same value in either Nokia Shares or cash consideration that they would have obtained if such a transaction had not taken place.
In certain jurisdictions, the mechanism described above may be adjusted to comply with possible applicable legal, regulatory or other local constraints.
The foregoing summary of the 2015 Performance Share Plan Liquidity Agreements does not purport to be complete and is qualified in its entirety by reference to the Form of 2015 Performance Share Plan Liquidity
Agreement, a copy of which is included as Exhibit (e)(5) to this Schedule 14D-9 and is incorporated herein by reference.
14
Table of Consideration Related to the Exchange Offer as of Immediately Prior to the Memorandum of Understanding
The following table sets forth as of April 13, 2015 the approximate aggregate amount of consideration that Alcatel Lucent’s executive
officers and directors as of that date would have been entitled to receive in connection with the completion of the Exchange Offer, assuming that such executive officers and directors (1) validly tendered all Alcatel Lucent Shares and Alcatel
Lucent ADSs held by them pursuant to the Exchange Offer, (2) exercised all Alcatel Lucent Stock Options held by them for Alcatel Lucent Shares and validly tendered such Alcatel Lucent Shares into the Exchange Offer, (3) exchanged all
Performance Shares held by them for Alcatel Lucent Shares and validly tendered such Alcatel Lucent Shares into the Exchange Offer and (4) received cash compensation in respect of all Performance Units granted to them. Unless otherwise
indicated, estimated values are calculated based on the closing price of the Nokia Shares as of April 13, 2015 of EUR 7.77 and the exchange ratio of 0.5500, resulting in an implied value of EUR 4.27 per Alcatel Lucent Share.
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| Name and Title |
|
Number of
Alcatel
Lucent
Shares and
Alcatel
Lucent
ADSs(1) |
|
|
Estimated
Value Alcatel
Lucent
Shares and
Alcatel
Lucent ADSs |
|
|
Number
of Alcatel
Lucent
Stock
Options(2) |
|
|
Estimated
Value of
Alcatel
Lucent
Stock
Options(3) |
|
|
Number
of
Performance
Shares(4) |
|
|
Estimated
Value of
Performance
Shares |
|
|
Number
of
Performance
Units(5) |
|
|
Estimated
Value
of
Performance
Units(6) |
|
|
Estimated
Total Value of
Consideration |
|
| Philippe Camus (Chairman) |
|
|
1 131 352 |
|
|
€ |
4 830 873 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
400 000 |
|
|
€ |
1 544 000 |
|
|
€ |
6 374 873 |
|
| Jean C. Monty (Vice Chairman) |
|
|
5 030 001 |
|
|
€ |
21 478 104 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
€ |
21 478 104 |
|
| Michel Combes (CEO and Director)(7) |
|
|
— |
(8) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 685 000 |
|
|
€ |
11 464 950 |
|
|
€ |
11 464 950 |
|
| Francesco Caio (Director) |
|
|
2 100 |
|
|
€ |
8 967 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
€ |
8 967 |
|
| Carla Cico (Director) |
|
|
29 359 |
|
|
€ |
125 363 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
€ |
125 363 |
|
| Stuart E. Eizenstat (Director) |
|
|
29 963 |
|
|
€ |
127 942 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
€ |
127 942 |
|
| Kim Crawford Goodman (Director) |
|
|
6 348 |
|
|
€ |
27 106 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
€ |
27 106 |
|
| Louis R. Hughes (Director) |
|
|
33 926 |
|
|
€ |
144 864 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
€ |
144 864 |
|
| Véronique Morali (Director) |
|
|
500 |
|
|
€ |
2 135 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
€ |
2 135 |
|
| Olivier Piou (Director) |
|
|
88 955 |
|
|
€ |
379 838 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
€ |
379 838 |
|
| Jean-Cyril Spinetta (Director) |
|
|
29 791 |
|
|
€ |
127 208 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
€ |
127 208 |
|
| Total Other Executive Officers(9) |
|
|
403 278 |
|
|
€ |
1 721 997 |
|
|
|
841 777 |
|
|
€ |
1 690 289 |
|
|
|
417 651 |
|
|
€ |
1 783 370 |
|
|
|
2 805 000 |
|
|
€ |
10 827 300 |
|
|
€ |
16 022 956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
6 785 573 |
|
|
€ |
28 974 397 |
|
|
|
841 777 |
|
|
€ |
1 690 288 |
|
|
|
417 651 |
|
|
€ |
1 783 370 |
|
|
|
5 890 000 |
|
|
€ |
23 836 250 |
|
|
€ |
56 284 305 |
|
| (1) |
Includes certain Alcatel Lucent Shares held by directors that are subject to restrictions and may not be tendered into the Exchange Offer. In particular:
|
| |
(a) |
Article 12 of Alcatel Lucent’s By-Laws requires each director to hold at least 500 Alcatel Lucent Shares. As a result, Alcatel Lucent expects that no director will tender
the 500 Alcatel Lucent Shares he or she holds in compliance with this requirement. |
| |
(b) |
The 2010 annual shareholders meeting of Alcatel Lucent authorized the payment of additional attendance fees (jetons de présence) to directors,
subject to each director (i) using the |
15
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additional attendance fees received (after taxes) to purchase Alcatel Lucent Shares and (ii) holding the acquired Alcatel Lucent Shares for the duration of his or her term of office.
|
| |
(c) |
The terms of Alcatel Lucent’s Performance Shares Plans and related decisions of Alcatel Lucent’s board of directors require that Mr. Philippe Camus continues to
hold the Alcatel Lucent Shares granted in connection therewith and the Alcatel Lucent Shares purchased in connection therewith for so long as he remains the Chairman of Alcatel Lucent’s board of directors. Mr. Camus is also required to
continue to hold any Alcatel Lucent Shares acquired during his term for so long as he remains in office. |
| (2) |
Includes Alcatel Lucent Stock Options granted prior to the date of the Memorandum of Understanding which Alcatel Lucent’s board of directors has resolved to accelerate.
|
| (3) |
Calculated using a weighted average exercise price for the Alcatel Lucent Stock Options of EUR 2.262. |
| (4) |
Includes Performance Shares granted prior to the date of the Memorandum of Understanding which Alcatel Lucent’s board of directors has resolved to accelerate.
|
| (5) |
Includes Performance Units granted prior to the date of the Memorandum of Understanding which Alcatel Lucent’s board of directors has resolved to accelerate, but excludes
those Performance Units with performance conditions relating to periods prior to the date of the Memorandum of Understanding for which the relevant conditions were not satisfied. |
| (6) |
Calculated based on the right to receive cash compensation in cash in respect of each Performance Unit equal to the value of one Alcatel Lucent Share, and based on the closing
price of Alcatel Lucent Shares as of April 13, 2015 of EUR 3.86, except for the Performance Units granted to Mr. Combes, which would have been payable in Alcatel Lucent Shares (or Nokia Shares, following completion of the squeeze-out of
Alcatel Lucent Shares, if any) at their respective maturity dates in 2016, 2017 and 2018 (one Alcatel Lucent Share (or 0.5500 Nokia Shares) per Performance Unit) and for which the estimated value is calculated based on the closing price of the Nokia
Shares as of April 13, 2015 of EUR 7.77 and the exchange ratio of 0.5500, resulting in an implied value of EUR 4.27 per Performance Unit. |
| (7) |
Reflects amounts attributable to Mr. Combes as of April 13, 2015, which Alcatel Lucent’s board of directors subsequently resolved, with the agreement of and upon
the request of Mr. Combes, to reduce to a payment in cash of EUR 3 251 307 in respect of Performance Units for the years ended December 31, 2013 and 2014 a maximum amount in cash of EUR 1 408 887 in respect of
Performance Units for the year ended December 31, 2015, as further described in the section entitled “—Employment Arrangements—Employment Arrangements with Mr. Michel Combes (Former Chief Executive Officer and Former
Director)” below. |
| (8) |
Excludes 500 Alcatel Lucent Shares held by Mr. Combes that have been lent by Florelec, a subsidiary of Alcatel Lucent, to Mr. Combes for the duration of his term as a
director of Alcatel Lucent, in order to satisfy Article 12 of Alcatel Lucent’s By-Laws, which requires each director to hold at least 500 Alcatel Lucent Shares, and which will be returned to Florelec for no consideration at the end of such
term. |
| (9) |
The other executive officers of Alcatel Lucent as of April 13, 2015, were Mr. Jean Raby, Mr. Philippe Keryer, Ms. Nicole Gionet, Mr. Tim Krause and
Mr. Philippe Guillemot who, together with Mr. Combes, comprised the Management Committee of Alcatel Lucent. |
Table of
Consideration Related to the Exchange Offer as of Immediately Prior to Alcatel Lucent’s Recommendation
Between April 13, 2015 and the date
of this Schedule 14D-9, Ms. Sylvia Summers was appointed a director by the meeting of Alcatel Lucent’s shareholders on May 26, 2015, Ms. Véronique Morali’s term as a director ended on July 15, 2015,
Mr. Michel Combes resigned as a director and chief executive officer effective as of September 1, 2015, and Mr. Philippe Camus was appointed interim chief executive officer effective as of September 1, 2015.
16
The following table sets forth as of October 27, 2015, the approximate aggregate amount of consideration that
Alcatel Lucent’s executive officers and directors as of that date would be entitled to receive in connection with the completion of the Exchange Offer, assuming that such executive officers and directors (1) validly tender all Shares and
ADSs held by them pursuant to the Exchange Offer, (2) exercise all Stock Alcatel Lucent Stock Options held by them for Alcatel Lucent Shares and validly tender such Alcatel Lucent Shares into the Exchange Offer, (3) exchange all
Performance Shares held by them (other than Performance Shares granted pursuant to the 2015 Performance Share Plan, which will not be accelerated in connection with the Exchange Offer and will remain subject to presence and performance conditions)
for Alcatel Lucent Shares and validly tender such Alcatel Lucent Shares into the Exchange Offer and (4) receive cash compensation in respect of all Performance Units granted to them. Unless otherwise indicated, estimated values are calculated
based on the closing price of the Nokia Shares as of October 27, 2015 of EUR 5.95 and the exchange ratio of 0.5500, resulting in an implied value of EUR 3.27 per Share.
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| Name and Title |
|
Number of
Alcatel
Lucent
Shares and
Alcatel
Lucent
ADSs(1) |
|
|
Estimated
Value Alcatel
Lucent
Shares and
Alcatel
Lucent ADSs |
|
|
Number
of Alcatel
Lucent
Stock
Options(2) |
|
|
Estimated
Value of
Alcatel
Lucent
Stock
Options(3) |
|
|
Number
of
Performance
Shares(4) |
|
|
Estimated
Value of
Performance
Shares |
|
|
Number
of
Performance
Units(5) |
|
|
Estimated
Value
of
Performance
Units(6) |
|
|
Estimated
Total Value of
Consideration |
|
| Philippe Camus (Chairman & Interim CEO) |
|
|
1 131 352 |
|
|
€ |
3 699 521 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
400 000 |
|
|
€ |
1 304 000 |
|
|
€ |
5 003 521 |
|
| Jean C. Monty (Vice Chairman) |
|
|
5 033 706 |
|
|
€ |
16 460 219 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
€ |
16 460 219 |
|
| Francesco Caio (Director) |
|
|
5 803 |
|
|
€ |
18 976 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
€ |
18 976 |
|
| Carla Cico (Director) |
|
|
33 062 |
|
|
€ |
108 113 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
€ |
108 113 |
|
| Stuart E. Eizenstat (Director) |
|
|
33 668 |
|
|
€ |
110 094 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
€ |
110 094 |
|
| Kim Crawford Goodman (Director) |
|
|
10 053 |
|
|
€ |
32 873 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
€ |
32 873 |
|
| Louis R. Hughes (Director) |
|
|
37 631 |
|
|
€ |
123 053 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
€ |
123 053 |
|
| Olivier Piou (Director) |
|
|
92 658 |
|
|
€ |
302 992 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
€ |
302 992 |
|
| Jean-Cyril Spinetta (Director) |
|
|
33 494 |
|
|
€ |
109 525 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
€ |
109 525 |
|
| Sylvia Summers (Director) |
|
|
500 |
|
|
€ |
1 635 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
€ |
1 635 |
|
| Total Other Executive Officers(7) |
|
|
403 078 |
|
|
€ |
1 318 065 |
|
|
|
849 100 |
|
|
€ |
733 622 |
|
|
|
311 975 |
|
|
€ |
1 020 158 |
|
|
|
2 805 000 |
|
|
€ |
9 144 300 |
|
|
€ |
12 216 146 |
|
| Total |
|
|
6 815 005 |
|
|
€ |
22 285 066 |
|
|
|
849 100 |
|
|
€ |
733 622 |
|
|
|
311 975 |
|
|
€ |
1 020 158 |
|
|
|
3 205 000 |
|
|
€ |
10 448 300 |
|
|
€ |
34 487 147 |
|
| (1) |
Includes certain Alcatel Lucent Shares held by directors that are subject to restrictions and may not be tendered into the Exchange Offer. In particular:
|
| |
(a) |
Article 12 of Alcatel Lucent’s By-Laws requires each director to hold at least 500 Alcatel Lucent Shares. As a result, Alcatel Lucent expects that no director will tender
the 500 Alcatel Lucent Shares he or she holds in compliance with this requirement. |
| |
(b) |
The 2010 annual shareholders meeting of Alcatel Lucent authorized the payment of additional attendance fees (jetons de présence) to directors, subject to each
director (i) using the additional fees received (after taxes) to purchase Alcatel Lucent Shares and (ii) holding the acquired Alcatel Lucent Shares for the duration of his or her term of office. |
17
| |
(c) |
The terms of Alcatel Lucent’s Performance Shares Plans and related decisions of Alcatel Lucent’s board of directors require that Mr. Philippe Camus continues to
hold the Alcatel Lucent Shares granted in connection therewith and the Alcatel Lucent Shares purchased in connection therewith for so long as he remains the Chairman of Alcatel Lucent’s board of directors. Mr. Camus is also required to
continue to hold any Alcatel Lucent Shares acquired during his term for so long as he remains in office. |
| (2) |
Includes Alcatel Lucent Stock Options granted prior to the date of the Memorandum of Understanding which Alcatel Lucent’s board of directors has resolved to accelerate.
|
| (3) |
Calculated using a weighted average exercise price for the Alcatel Lucent Stock Options of EUR 2.406. |
| (4) |
Includes Performance Shares granted prior to the date of the Memorandum of Understanding which Alcatel Lucent’s board of directors has resolved to accelerate, but excludes
those Performance Shares granted pursuant to the 2015 Performance Share Plan, which will not be accelerated in connection with the Exchange Offer and will remain subject to presence and performance conditions. |
| (5) |
Includes Performance Units granted prior to the date of the Memorandum of Understanding which Alcatel Lucent’s board of directors has resolved to accelerate, but excludes
those Performance Units with performance conditions relating to periods prior to the date of the Memorandum of Understanding for which the relevant conditions were not satisfied. |
| (6) |
Calculated based on the right to receive compensation in cash in respect of each Performance Unit equal to the value of one Alcatel Lucent Share and based on the closing price of
Alcatel Lucent Shares on October 27, 2015 of EUR 3.26. |
| (7) |
The other executive officers of Alcatel Lucent as of the date of this Schedule 14D-9 are Mr. Jean Raby, Mr. Philippe Keryer, Ms. Nicole Gionet, Mr. Tim Krause
and Mr. Philippe Guillemot who, together with Mr. Camus, comprised the Management Committee of Alcatel Lucent. |
Employment
Arrangements
Alcatel Lucent is managed by its board of directors, which consists of ten members as of the date of this Schedule 14D-9. The
functions of the chairman of Alcatel Lucent’s board of directors have been performed by Mr. Philippe Camus since October 1, 2008. As of April 13, 2015, Alcatel Lucent’s other directors were Mr. Jean C. Monty
(Vice-Chairman), Mr. Francesco Caio, Ms. Carla Cico, Mr. Michel Combes, Ms. Kim Crawford-Goodman, Mr. Stuart E. Eizenstat, Mr. Louis R. Hughes, Ms. Véronique Morali, Mr. Olivier Piou and
Mr. Jean-Cyril Spinetta. Ms. Sylvia Summers was appointed a director by the meeting of Alcatel Lucent’s shareholders on May 26, 2015. Ms. Morali’s term as a director ended on July 15, 2015. Mr. Combes resigned
as a director effective as of September 1, 2015.
The functions of the chief executive officer were performed by Mr. Michel Combes from
April 1, 2013 to September 1, 2015, and by Mr. Philippe Camus as interim chief executive officer since September 1, 2015. As of April 13, 2015, Alcatel Lucent’s executive officers were the six members of Alcatel
Lucent’s ‘Management Committee’, comprising Mr. Combes (CEO and Sales), Ms. Nicole Gionet (Human Resources), Mr. Tim Krause (Marketing), Mr. Jean Raby (Finance and Legal), Mr. Philippe Guillemot (Operations)
and Mr. Philippe Keryer (Strategy & Innovation). Mr. Camus replaced Mr. Combes as a member of the Management Committee effective as of September 1, 2015. Alcatel Lucent’s executive officers are primarily responsible
for the strategy and organization of Alcatel Lucent, policies to be implemented, long-term financial planning and the human resources strategy. Alcatel Lucent’s executive officers are also responsible for supervising the implementation of
Alcatel Lucent’s plans and projects, monitoring the performance of each segment of activity and allocating the resources between these different segments.
Set out below is a summary of employment arrangements and potential benefits upon termination of employment for Alcatel Lucent’s executive directors as of April 13, 2015, Mr. Philippe Camus and
Mr. Michel Combes, Alcatel Lucent’s other directors and Alcatel Lucent’s other executive officers.
18
Other than as described below and as described in the section entitled “—Indemnification of Alcatel
Lucent’s Executive Officers and Directors” below, there are no commitments towards directors and executive officers that constitute compensation, allowances or benefits due or likely to be due as a result of the termination of
employment.
Employment Arrangements with Mr. Philippe Camus (Interim Chief Executive Officer and Chairman of the Board)
The following table sets forth the compensation granted to Mr. Philippe Camus for the years ended December 31, 2013 and 2014.
|
|
|
|
|
|
|
|
|
| |
|
Year ended December 31, |
|
| |
|
2014 |
|
|
2013 |
|
| |
|
(EUR) |
|
| Fixed compensation |
|
|
200 000 |
|
|
|
200 000 |
|
| Grant of Performance Units(1) |
|
|
1 157 600 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
1 357 600 |
|
|
|
200 000 |
|
| (1) |
Mr. Camus was granted 400 000 Performance Units in the year ended December 31, 2014. The grant was valued at EUR 1 157 600, calculated based on the
Alcatel Lucent Share price on March 19, 2014, the date on which it was granted by Alcatel Lucent’s board of directors. It does not reflect the level of achievement (partial or total) of the performance conditions attached to the
Performance Units and assessed over 2 years. The gains actually realized will depend on the value of each Performance Unit, calculated based on the average Alcatel Lucent Share price over the 20 trading days preceding March 19, 2016.
|
The Performance Units granted to Mr. Philippe Camus will not be accelerated in connection with the Exchange Offer.
Mr. Philippe Camus was appointed interim chief executive officer effective as of September 1, 2015. Alcatel Lucent has not entered into an
employment agreement with Mr. Camus. In 2014, Alcatel Lucent’s board of directors determined the compensation policy for the executive directors, including Mr. Camus. The compensation of Mr. Camus consists of a fixed annual
compensation and long-term compensation in the form of Performance Units, which were subject to presence and performance conditions when granted. In the year ended December 31, 2014, Mr. Camus received a grant of Performance Units vesting
over 2 years and subject to performance conditions to be assessed in 2016. This grant is not considered annual long term compensation. Mr. Camus has not been granted any other Performance Units. The Performance Units granted to
Mr. Philippe Camus will not be accelerated in connection with the Exchange Offer.
Mr. Camus did not receive any variable compensation,
benefits in kind, Alcatel Lucent Stock Options or Performance Shares in the years ended December 31, 2014 and 2013. Mr. Camus is not entitled to any supplemental pension scheme.
Alcatel Lucent has not made any commitment to Mr. Camus with respect to compensation, indemnities or benefits owed or likely to be owed, by reason of the termination or change of his position or following such
termination or change of position.
19
Employment Arrangements with Mr. Michel Combes (Former Chief Executive Officer and Former Director)
The following table sets forth the compensation granted to Mr. Michel Combes for the years ended December 31, 2013 and 2014.
|
|
|
|
|
|
|
|
|
| |
|
Year ended 31 December |
|
| |
|
2014 |
|
|
2013 |
|
| |
|
(EUR) |
|
| Fixed compensation |
|
|
1 200 000 |
|
|
|
900 000 |
|
| Variable
compensation(1) |
|
|
804 000 |
|
|
|
616 500 |
|
| Grant of Performance Units(2) |
|
|
2 025 800 |
|
|
|
1 367 600 |
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
4 029 800 |
|
|
|
2 884 100 |
|
| (1) |
Variable compensation is paid in the following year, after the publication of the annual results on the basis of which the achievement level of the annual performance targets is
determined. |
| (2) |
Mr. Combes was granted 1 300 000 Performance Units in the year ended December 31, 2013. The grant was valued at EUR 1 367 600, calculated on the
basis of the Alcatel Lucent Share price on April 2, 2013, the date on which he took office as CEO. |
Mr. Combes
was granted 700 000 Performance Units in the year ended December 31, 2014. The grant was valued at EUR 2 025 800, calculated on the basis of the Alcatel Lucent Share price on March 19, 2014, the date on which it was granted
by Alcatel Lucent’s board of directors.
On September 10, 2015, Alcatel Lucent’s board of directors resolved to replace
all Performance Units granted to Mr. Combes with payments in cash, subject to the completion of the Exchange Offer.
Mr. Combes resigned as
chief executive officer effective as of September 1, 2015, and Alcatel Lucent’s board of directors subsequently resolved, with the agreement of and upon the request of Mr. Combes, certain reductions in compensation to Mr. Combes,
as further described below. Alcatel Lucent had not entered into an employment agreement with Mr. Michel Combes. In 2014, Alcatel Lucent’s board of directors determined the compensation policy for the executive directors, including
Mr. Combes. The compensation of Mr. Combes was determined each year by Alcatel Lucent’s board of directors following recommendation of the compensation committee. The total annual compensation of Mr. Combes consisted of a fixed
portion and a variable portion, plus long-term compensation and benefits. The variable compensation was determined each year by Alcatel Lucent’s board of directors according to pre-defined performance criteria. Mr. Combes did not receive
any benefits in kind (except for the use of a car), Alcatel Lucent Stock Options or Performance Shares in the years ended December 31, 2013 and 2014.
Mr. Combes also participated in the private pension plan applicable to all corporate executives of Alcatel Lucent’s French subsidiaries (AUXAD plan) for the portion of compensation that exceeded eight
times the annual French social security limit beyond which there is no legal or contractual pension scheme, subject to performance conditions pursuant to applicable law.
Mr. Combes had a termination benefit pursuant to a Change of Control Letter (as defined below) equal to one year of compensation (fixed and target variable remuneration), subject to performance conditions as
required by applicable regulation. This termination benefit was subject to a performance condition, which requires that Alcatel Lucent’s free cash flow has been positive for at least one fiscal year prior to the end of Mr. Combes’
position as chief executive officer, as reported by Alcatel Lucent in its audited consolidated financial statements.
20
In compliance with the French AFEP-MEDEF Code of Corporate Governance for Listed Companies, Mr. Combes’
termination benefit would only be paid if the following conditions are met: (a) Alcatel Lucent’s board of directors terminates Mr. Combes’ as CEO in the context of a change of control or strategy and (b) the performance
condition as described above is met. This termination benefit will not be payable as a result of the resignation of Mr. Combes as a director and chief executive officer, which was effective as of September 1, 2015.
In connection with the Exchange Offer, on April 14, 2015, Alcatel Lucent’s board of directors, on the recommendation of the compensation committee,
resolved to accelerate the Performance Units granted to Mr. Combes, to waive the presence and performance conditions and to adjust the payment conditions, though Alcatel Lucent’s board of directors subsequently resolved, with the agreement
of and upon the request of Mr. Combes, to reduce the amount of compensation payable to Mr. Combes in connection with Performance Units, as further described in the next paragraph. Under the original terms, the Performance Units granted to
Mr. Combes would have been payable in Alcatel Lucent Shares (or Nokia Shares after the squeeze-out of Alcatel Lucent Shares, if any) at their respective maturities in 2016, 2017 and 2018 (one Alcatel Lucent Share per Performance Unit).
On September 10, 2015, Alcatel Lucent’s board of directors resolved, with the agreement of and upon the request of Mr. Combes, to
replace all Performance Units described above granted to Mr. Combes with payments in cash in a maximum aggregate amount of EUR 4 660 194. The 1 025 649 Performance Units to which Mr. Combes was entitled for the years
ended December 31, 2013 and 2014 were replaced with a payment in cash of EUR 3 251 307, which was calculated based on the average price of Alcatel Lucent Shares in the 20 trading days prior to August 31, 2015 of EUR 3.17 and the
ratio of one Alcatel Lucent Share per Performance Unit. The 666 666 Performance Units granted to Mr. Combes in respect of the year ended December 31, 2015 were reduced to 444 444 Performance Units to reflect the actual presence
of Mr. Combes at Alcatel Lucent during the year ended December 31, 2015, and may be reduced further based on the actual level of achievement of the performance criteria for the year ended December 31, 2015 applicable to Performance
Units. The maximum amount of this payment in cash to Mr. Combes in respect of the year ended December 31, 2015 is EUR 1 408 887, which was calculated based on the average price of Alcatel Lucent Shares in the 20 trading days
prior to August 31, 2015 of EUR 3.17 and the ratio of one Alcatel Lucent Share per Performance Unit. The payments are subject to the completion of the Exchange Offer. Each amount will be reduced by an amount corresponding to the wage part of
the social charges owed on the date of payment by Alcatel Lucent to Mr. Combes.
In connection with the Exchange Offer, Mr. Combes was
entitled to be granted 350 000 Alcatel Lucent Shares in lieu of the 700 000 Alcatel Lucent Stock Options Alcatel Lucent’s board of directors had considered granting him in respect of the year ended December 31, 2014, as further
described in the section entitled “—Distribution of Unrestricted Alcatel Shares” above, though Alcatel Lucent’s board of directors subsequently resolved, with the agreement of and upon the request of Mr. Combes, to
reduce the amount of compensation payable to Mr. Combes in connection with Alcatel Lucent Shares, as further described in the next paragraph.
On
September 10, 2015, Alcatel Lucent’s board of directors resolved, with the agreement of and upon the request of Mr. Combes, to replace the 350 000 Alcatel Lucent Shares described above to which Mr. Combes was entitled with a
payment in cash in a maximum amount of EUR 184 915. The 350 000 Alcatel Lucent Shares to which Mr. Combes was entitled were reduced to 58 333 Alcatel Lucent Shares to reflect the actual presence of Mr. Combes at Alcatel
Lucent during the year ended December 31, 2015 and the vesting schedule for the Alcatel Lucent Stock Options, and may be reduced further based on the actual level of achievement of the performance criteria for the year ended December 31,
2015 applicable to Alcatel Lucent Stock Options. The maximum amount of this payment was calculated based on the average price of Alcatel Lucent Shares in the 20 trading days prior to
21
August 31, 2015 of EUR 3.17 and the payment is subject to the completion of the Exchange Offer. This amount will be reduced by an amount corresponding to the wage part of the social charges
owed on the date of payment by Alcatel Lucent to Mr. Combes.
Prior to Mr. Combes’ resigning as chief executive officer of Alcatel
Lucent, Alcatel Lucent’s board of directors requested that Alcatel Lucent enter into a non-compete agreement with Mr. Combes, effective upon the date of his resignation. The request for Mr. Combes to enter into a non-compete agreement
was made upon the recommendation of the compensation committee and the corporate governance and nominations committee, in light of Mr. Combes’ level of expertise in the telecommunications sector and the experience he had acquired within
Alcatel Lucent, and in order to protect Alcatel Lucent’s interests. The non-compete agreement also contained a non-solicitation obligation. Mr. Combes entered into the non-compete agreement with Alcatel Lucent on July 31, 2015.
In consideration of his agreement not to compete directly or indirectly with Alcatel Lucent for a period of three years, Mr. Combes would have
received a payment in three installments over three years, in an aggregate amount of either 1 467 900 Alcatel Lucent Shares (in the event the Exchange Offer is not completed) or 807 345 Nokia Shares (in the event the Exchange Offer is
completed), though Alcatel Lucent’s board of directors subsequently resolved, with the agreement of and upon the request of Mr. Combes, to reduce the amount of compensation payable to Mr. Combes in connection with the non-compete
agreement, as further described in the next paragraph. Under the original terms, in the event that any payment in Alcatel Lucent Shares or Nokia Shares were legally or contractually prohibited, Mr. Combes would have received payments in cash
corresponding to the value of the Alcatel Lucent Shares or Nokia Shares, as applicable, as of the relevant payment dates.
On September 10, 2015,
Alcatel Lucent’s board of directors resolved, with the agreement of and upon the request of Mr. Combes, to replace the non-compete payment in Alcatel Lucent Shares or Nokia Shares described above with a non-compete payment in cash. The
non-compete payment will remain payable in three installments over three years, in an aggregate amount of EUR 3 100 000. The obligation of Mr. Combes not to compete directly or indirectly with Alcatel Lucent was also extended to
a period of forty months, and will now expire on December 31, 2018. This amount will be reduced by an amount corresponding to the wage part of the social charges owed on the date of payment by Alcatel Lucent to Mr. Combes.
The non-compete agreement was approved by Alcatel Lucent’s board of directors on October 28, 2015, and will be subject to approval by shareholders at the
next general meeting of Alcatel Lucent pursuant to Articles L. 225-38 et seq. of the French commercial Code.
22
Employment Arrangements with Other Directors
The following table sets forth the compensation received by each director (other than Mr. Philippe Camus and Mr. Michel Combes) during the years ended December 31, 2014 and 2013.
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|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year ended December 31, |
|
| |
|
2014 |
|
|
2013 |
|
| |
|
Total Gross |
|
|
Amount
received as
member of a
committee |
|
|
Amount
received as
chairman of a
committee |
|
|
Total
Gross |
|
| |
|
(EUR) |
|
| Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Daniel Bernard |
|
|
44 238 |
|
|
|
7 500 |
|
|
|
7 500 |
|
|
|
121 044 |
|
| Francesco Caio |
|
|
52 789 |
|
|
|
5 000 |
|
|
|
— |
|
|
|
N/A |
|
| Carla Cico |
|
|
86 373 |
|
|
|
10 000 |
|
|
|
— |
|
|
|
87 254 |
|
| Stuart E. Eizenstat |
|
|
110 426 |
|
|
|
20 000 |
|
|
|
— |
|
|
|
112 746 |
|
| Kim Crawford Goodman |
|
|
97 905 |
|
|
|
17 500 |
|
|
|
— |
|
|
|
87 722 |
|
| Louis R. Hughes |
|
|
125 426 |
|
|
|
20 000 |
|
|
|
15 000 |
|
|
|
117 638 |
|
| Sylvia Jay |
|
|
44 576 |
|
|
|
10 000 |
|
|
|
— |
|
|
|
110 575 |
|
| Jean C. Monty |
|
|
109 042 |
|
|
|
5 000 |
|
|
|
25 000 |
|
|
|
110 935 |
|
| Véronique Morali |
|
|
52 789 |
|
|
|
5 000 |
|
|
|
— |
|
|
|
N/A |
|
| Olivier Piou |
|
|
131 810 |
|
|
|
30 000 |
|
|
|
— |
|
|
|
120 575 |
|
| Jean-Cyril Spinetta |
|
|
134 626 |
|
|
|
15 000 |
|
|
|
22 500 |
|
|
|
121 511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
990 000 |
|
|
|
145 000 |
|
|
|
70 000 |
|
|
|
990 000 |
|
Each director listed above receives a fixed amount of annual compensation, in each case calculated as a portion of an annual amount
determined by the Alcatel Lucent shareholders meeting. Each director listed above also receives a variable amount determined in accordance with their attendance at board meetings and at any meetings of the committees of which he or she is a member.
Directors may also receive an additional variable amount tied to a commitment to acquire and retain Alcatel Lucent Shares. None of the directors listed above have been granted any Alcatel Lucent Stock Options, Performance Shares or Performance Units
in the years ended December 31, 2014 or 2013. Ms. Sylvia Summers was appointed a director by the meeting of Alcatel Lucent’s shareholders on May 26, 2015, and is expected to receive customary compensation in respect of the year
ended December 31, 2015.
Alcatel Lucent has not made any commitment to any of the directors listed above with respect to compensation, indemnities
or benefits owed or likely to be owed, by reason of the termination or change of his or her position or following such termination or change of position.
In connection with the Exchange Offer and pursuant to the terms of the Memorandum of Understanding, Alcatel Lucent and the Corporate Governance &
Nomination committee of Nokia’s board of directors have nominated Mr. Louis R. Hughes, Mr. Jean C. Monty and Mr. Olivier Piou to Nokia’s board of directors, and Mr. Piou as Vice-Chairman of Nokia’s board
of directors, in each case subject to the approval of Nokia’s shareholders.
23
Employment Arrangements with Other Executive Officers
The following table sets forth the compensation received by the executive officers of Alcatel Lucent (other than Mr. Michel Combes) on an aggregate basis during the years ended December 31, 2014 and 2013.
|
|
|
|
|
|
|
|
|
| |
|
Year ended December 31, |
|
| |
|
2014(1) |
|
|
2013(2) |
|
| |
|
(EUR thousands) |
|
| Short-Term Benefits |
|
|
|
|
|
|
|
|
| Fixed remuneration |
|
|
2 953 |
|
|
|
4 423 |
|
| Variable
remuneration(3) |
|
|
1 896 |
|
|
|
1 658 |
|
| Directors’ fees |
|
|
900 |
|
|
|
900 |
|
| Employer’s social security contributions |
|
|
727 |
|
|
|
3 436 |
|
| Termination benefits and retirement indemnities |
|
|
— |
|
|
|
3 137 |
|
| Other Benefits |
|
|
|
|
|
|
|
|
| Post-employment benefits |
|
|
944 |
|
|
|
(1 619 |
)(4)
|
| Share-based payments |
|
|
3 180 |
|
|
|
5 702 |
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
10 600 |
|
|
|
17 638 |
|
| (1) |
In the year ended December 31, 2014, the executive officers of Alcatel Lucent (other than Mr. Michel Combes) comprised Mr. Jean Raby, Mr. Philippe Keryer,
Mr. Tim Krause (from January 1), Mr. Philippe Guillemot and Ms. Nicole Gionet. |
| (2) |
In the year ended December 31, 2013, the executive officers of Alcatel Lucent (other than Mr. Michel Combes) comprised Mr. Ben Verwaayen (until March 31),
Mr. Jean Raby (from September 1), Mr. Philippe Keryer, Mr. Philippe Guillemot (from July 1), Ms. Nicole Gionet (from July 1), Mr. Stephen Carter (until June 30), Mr. Jeong Kim (until May 31),
Mr. Paul Tufano (until October 31), Mr. Robert Vrij (until November 3) and Mr. George Nazi (until June 30). The 2013 French exceptional additional income tax on personal income above EUR 1 million has been reported
as an operating expense in the 2013 income statement (above figures do not include the potential impact of such exceptional tax). |
| (3) |
Including retention bonuses. |
| (4) |
The positive effect is mainly due to gain related to the amendment of AUXAD, which is a French supplemental pension plan for the portion of income that exceeds eight times the
annual French social security pension limit, beyond which there is no legal or contractual pension scheme. Starting January 1, 2013, the plan was amended to be fully aligned with the conditions of the French AGIRC scheme (General Association of
Pension Institutions for Managerial Staff). |
In the ordinary course of business and unrelated to the Exchange Offer, Alcatel Lucent and
its subsidiaries entered into employment agreements with Ms. Nicole Gionet, Mr. Tim Krause, Mr. Jean Raby, Mr. Philippe Guillemot and Mr. Philippe Keryer, who, together with Mr. Philippe Camus, comprise the executive
officers of Alcatel Lucent as of the date of this Schedule 14D-9.
The compensation of Alcatel Lucent’s executive officers consists of a fixed
portion, a variable portion and long-term compensation and benefits based on Alcatel Lucent performance criteria reviewed by the compensation committee of Alcatel Lucent’s board of directors, similar to those applicable to a large number of
managers of Alcatel Lucent, and on their individual performance. The fixed portion of compensation for executive officers may also include, where applicable, benefits in kind and expatriation or repatriation allowances as well as housing allowances
for expatriates. The variable portion for each fiscal year, payable the following year, is defined by the ‘Achievement Bonus Plan’, the variable compensation plan of Alcatel Lucent approved by the compensation committee of Alcatel
Lucent’s board of directors. In addition, directors’ fees, if any, received by executive officers for their participation in meetings of the board of directors of Alcatel Lucent’s subsidiaries are deducted from the salaries paid.
24
Alcatel Lucent entered into a change of control letter (each, a “2013 Change of Control Letter”) with
Mrs. Gionet, Mr. Raby, Mr. Guillemot and Mr. Keryer on December 23, 2013 and with Mr. Krause on April 8, 2015, as well as a letter with Mr. Keryer on March 29, 2006 (the “2006 Change of Control
Letter” and, together with the 2013 Change of Control Letters, the “Change of Control Letters”). Pursuant to the terms of the 2013 Change of Control Letters, each other executive officer is entitled to receive a minimum
payment in cash of one and one half times the executive officer’s total base salary plus target bonus in the event the executive officer is terminated without cause or there is any material reduction of the executive officer’s duties
within twelve months following the occurrence of a change of control. Pursuant to the terms of the 2006 Change of Control Letter, Mr. Keryer will be entitled to an indemnity in connection with his termination of an amount up to two times the
total gross amount of his annual compensation. Pursuant to the terms of the Change of Control Letters, the aggregate amounts payable to the executive officers are approximately EUR 10 109 000.
For further information on the amount of consideration that Alcatel Lucent’s other executive officers may receive in connection with the Exchange Offer,
including Alcatel Lucent Stock Options and Performance Shares which have been accelerated in connection with the Exchange Offer, see the sections entitled “—Table of Consideration Related to the Exchange Offer as of Immediately Prior to
the Memorandum of Understanding” and “—Table of Consideration Related to the Exchange Offer as of Immediately Prior to Alcatel Lucent’s Recommendation” above, which are incorporated herein by reference.
The foregoing summary of the Change of Control Letters does not purport to be complete and is qualified in its entirety by reference to the Form of
2013 Change of Control Letter, a copy of which is included as Exhibit (e)(11) to this Schedule 14D-9 and is incorporated herein by reference, and the Form of 2006 Change of Control Letter, a copy of which is included as Exhibit (e)(12) to this
Schedule 14D-9.
Indemnification of Alcatel Lucent’s Executive Officers and Directors
Indemnification under French law
French law generally limits
the ability of a French company to indemnify its (i) directors, as well as (ii) its chief executive officer (Directeur Général) and (iii) its deputy chief executive officers (Directeurs Généraux
Délégués) ((ii) and (iii) collectively or individually referred to herein as the “Officer(s)”), against their liabilities. Alcatel Lucent does not have any deputy chief executive officers.
However, if a director or an Officer is sued by a third party and ultimately prevails in the litigation on all counts, but is nevertheless required to bear
attorneys’ fees and costs, Alcatel Lucent may in specified circumstances reimburse those fees and costs pursuant to an indemnification arrangement with the director or the Officer, to the extent permitted under applicable law.
Alcatel Lucent indemnifies its directors and certain of its current and former executive officers for third-party claims alleging certain breaches of their
fiduciary duties as directors or executive officers. Certain costs incurred for providing such indemnification may be recovered under various insurance policies.
The French Commercial Code does not prohibit a company from purchasing directors and officers insurance for all or part of the members of its management. Under French law, a company is, in principle, responsible to
third parties for the consequences of the decisions of its directors or Officers, such as violations of the laws and regulations applicable to French commercial companies, breaches of a company’s articles of association or mismanagement. If
those decisions qualify as mismanagement for instance, the relevant director or Officer may be required to fully or partly indemnify the company. In addition, under French law, the directors and Officers are liable individually or jointly, as the
case may be, to the company or to third parties to the same extent.
25
Indemnification and Insurance pursuant to the Memorandum of Understanding
Subject to the completion of the Exchange Offer and for six years following the completion of the Exchange Offer, Nokia agreed to cause Alcatel Lucent or its
subsidiaries to indemnify and provide advancement of expenses to all past and present directors and senior officers of Alcatel Lucent on terms not less favorable to such director or senior officer than those provided to him or her by Alcatel Lucent
or its subsidiaries on the date of the Memorandum of Understanding. The preceding indemnity provision will be deemed satisfied if Alcatel Lucent or Nokia purchase a six-year “tail” prepaid policy on the relevant terms.
Nominees to Nokia’s Board of Directors
In
accordance with the Memorandum of Understanding, the Corporate Governance & Nomination committee of the Nokia board of directors and Alcatel Lucent have jointly identified Mr. Louis R. Hughes, Mr. Jean C. Monty and
Mr. Olivier Piou as nominees to the Nokia board of directors.
Nokia has convened an extraordinary general meeting of Nokia shareholders to
consider and vote on, among other things, the election of three nominees to Nokia’s board of directors, jointly identified by the Corporate Governance & Nomination committee of Nokia’s board of directors and by Alcatel Lucent. The
extraordinary general meeting is currently scheduled for December 2, 2015. Proxy materials related to the extraordinary general meeting have been separately distributed by Nokia. The election of the nominees to Nokia’s board of directors
would be subject to a successful completion of the Exchange Offer. The election of the nominees to Nokia’s board of directors at the extraordinary general meeting must be approved by shareholders representing at least a majority of the votes
cast at the extraordinary general meeting. There is no assurance that any of the three nominees will be elected as directors of Nokia at the Nokia shareholders meeting.
Pursuant to the terms of the Memorandum of Understanding, in the event that such individuals are not elected as directors of Nokia at the Nokia shareholders meeting, the same provisions shall apply to the next
annual general meeting of Nokia.
The terms of the Memorandum of Understanding also provide that the Corporate Governance & Nomination
committee of Nokia’s board of directors shall nominate one of these three nominees as a vice chairman of Nokia’s board of directors for shareholder consideration at such Nokia shareholders meeting. The Corporate Governance &
Nomination committee of Nokia’s board of directors has nominated Mr. Olivier Piou for vice chairman of Nokia’s board of directors.
Employee Matters following Closing
For further
information on Nokia’s intentions with respect to management of Nokia and Alcatel Lucent, see the section entitled “The Transaction—Intentions of Nokia over the Next Twelve Months—Management of Nokia and Alcatel
Lucent” in the exchange offer/prospectus, which is incorporated herein by reference.
For further information on Nokia’s commitments in
relation to employment following the completion of the Exchange Offer, see the section entitled “The Transaction—Intentions of Nokia over the Next Twelve Months—Intentions of Nokia with respect to employment in France” in
the exchange offer/prospectus, which is incorporated herein by reference.
Rule 14d-10(d) Matters
The compensation committee of Alcatel Lucent’s board of directors has approved, in accordance with the non-exclusive safe harbor provisions contained in Rule
14d-10 under the Exchange Act, among
26
other things, each agreement, arrangement or understanding entered into by Alcatel Lucent or its subsidiaries with any of its executive officers, directors or employees pursuant to which
consideration is paid to such executive officer, director or employee, as an “employment compensation, severance or other employee benefit arrangement” within the meaning of Rule 14d-10(d) under the Exchange Act. Each member of the
compensation committee of Alcatel Lucent is an “independent director” as determined by the AFEP-MEDEF Code of Corporate Governance for Listed Companies in France (code de gouvernement d’entreprise des sociétés
cotées), in accordance with the requirements of Rule 14d-10(d)(2) under the Exchange Act and the instructions thereto. Each member of the compensation committee of Alcatel Lucent, other than Olivier Piou, is also an “independent
director” as determined under Rule 303A.02 of the NYSE Listed Company Manual.
Item 4. The Solicitation or
Recommendation.
Recommendation of Alcatel Lucent’s Board of Directors
At a meeting held on April 14, 2015, Alcatel Lucent’s board of directors unanimously approved the terms of and entry into the Memorandum of Understanding. The press release dated April 15, 2015,
announcing the Exchange Offer and the approval of the Memorandum of Understanding by Alcatel Lucent’s board of directors is included as Exhibit (a)(7) hereto and is incorporated herein by reference.
At a meeting held on October 28, 2015, Alcatel Lucent’s board of directors, taking into account the factors described in the section entitled
“—Reasons for Alcatel Lucent’s Board Recommendation” below, issued a favorable opinion on the public exchange offer, it being specified that, in light of their proposed nomination to Nokia’s board of directors,
Mr. Louis R. Hughes, Mr. Jean C. Monty and Mr. Olivier Piou decided not to participate in the discussions on and not to vote on the reasoned opinion. The participating members of Alcatel Lucent’s board of directors
unanimously:
| |
(i) |
determined that the Exchange Offer was in the best interest of Alcatel Lucent, its employees and its stakeholders (including holders of Alcatel Lucent Shares and holders of other
Alcatel Lucent Securities); |
| |
(ii) |
recommended that all holders of Alcatel Lucent Shares and holders of Alcatel Lucent ADSs tender their Alcatel Lucent Shares and/or their Alcatel Lucent ADSs pursuant to the
Exchange Offer; and |
| |
(iii) |
recommended that all holders of OCEANEs tender their OCEANEs pursuant to the Exchange Offer. |
ACCORDINGLY, THE PARTICIPATING MEMBERS OF ALCATEL LUCENT’S BOARD OF DIRECTORS, TAKING INTO ACCOUNT THE FACTORS DESCRIBED IN THE SECTION ENTITLED “—REASONS FOR ALCATEL LUCENT’S BOARD
RECOMMENDATION” BELOW, UNANIMOUSLY RECOMMEND THAT HOLDERS TENDER THEIR ALCATEL SHARES, ALCATEL LUCENT ADSS AND, OCEANES PURSUANT TO THE EXCHANGE OFFER.
Alcatel Lucent’s board of directors draws the attention of the holders of the OCEANEs to the fact that, under the terms of each of the OCEANEs, the opening of the Exchange Offer will result in, among other
things, a temporary adjustment to the conversion/exchange ratio applicable to each series of OCEANEs and, in certain circumstances, the right of holders of OCEANEs to request early redemption of outstanding OCEANEs during a specified period, at a
price calculated in accordance with the terms of the relevant OCEANEs. As a result, holders of OCEANEs will have a number of alternatives to tendering into the Exchange Offer available with respect to the OCEANEs held, each of which has different
characteristics and is subject to specific risks, which the holders of OCEANEs will have to appreciate based on their specific situation and the then prevailing circumstances.
27
For further information on such alternatives and on the consequences of the Exchange Offer under the terms of each of
the OCEANEs, see the section entitled “The Exchange Offer—Matters Relevant for OCEANEs Holders” in the exchange offer/prospectus, which is incorporated herein by reference, the prospectus applicable to each series of OCEANEs
and the Independent Expert Report attached as Annex C to this Schedule 14D-9 and is incorporated herein by reference.
Alcatel Lucent’s board of
directors also notes that Associés en Finance, which has been appointed by Alcatel Lucent as independent expert in accordance with Article 261-1 et seq. of the AMF General Regulation (the “Independent Expert”), delivered
their written report, dated October 28, 2015, on the financial terms of the Exchange Offer (the “Independent Expert Report”). In particular, according to the Independent Expert Report, as of April 9, 2015, which was
assumed by the Independent Expert to be the latest date prior to rumors of a possible transaction between Alcatel Lucent and Nokia, the Exchange Offer with respect to the holders of OCEANEs displayed a premium to the intrinsic value (i.e. the value
calculated based on certain assumptions defined by the Independent Expert) and to the listed price of each series of OCEANEs. The Independent Expert Report noted that as of October 23, 2015, the exchange ratio shows a substantial premium to the
listed and to the intrinsic values of the 2018 OCEANEs and a very small discount (below 5%) to the listed and intrinsic values of the 2019 OCEANEs and the 2020 OCEANEs based on their respective 1-month or 3-month averages. In particular, the
Independent Expert Report noted that, based on the estimated post-Exchange Offer intrinsic values of the OCEANEs, the exchange ratio proposed during the Exchange Offer would provide a premium of between 18.8% and 19.0% for the 2018 OCEANEs, a
discount of between 0.4% and 3.5% for the 2019 OCEANEs and between a premium of 0.3% and a discount of 2.9% for the 2020 OCEANEs. The exchange ratio proposed for the 2019 OCEANEs and the 2020 OCEANEs pursuant to the Exchange Offer is equivalent to
the spot listed prices of the OCEANEs and to their intrinsic values at October 23, 2015. The Independent Expert Report also noted that it is important to mention that the listed prices and the intrinsic values of the OCEANEs reflect current
market conditions and current liquidity levels. The Independent Expert Report noted that holders of OCEANEs that choose to keep their OCEANEs would, should the Exchange Offer be successful, take the risk of a substantial drop in liquidity of the
underlying Alcatel Lucent Shares and of the OCEANEs. The Independent Expert Report also noted that, on the other hand, should the Exchange Offer fail, such holders of OCEANEs would take the risk of a potential drop in the price of the Alcatel Lucent
Shares. The Independent Expert Report concluded that the exchange ratio of 0.6930 Nokia Shares for one 2018 OCEANE, 0.7040 Nokia Shares for one 2019 OCEANE and 0.7040 Nokia Shares for one 2020 OCEANE is fair.
Alcatel Lucent’s board of directors reminds holders of Alcatel Lucent Securities that an unofficial English translation of the full text of the Independent
Expert Report of the Independent Expert, Associés en Finance, dated October 28, 2015, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the report,
is attached as Annex C to this Schedule 14D-9 and is incorporated herein by reference, and urges holders of Alcatel Lucent Securities to carefully read the Independent Expert Report in its entirety.
The press release dated October 29, 2015, announcing the determination and recommendation of Alcatel Lucent’s board of directors is included as Exhibit
(a)(43) hereto and is incorporated herein by reference.
28
Background of the Exchange Offer
The following summarizes the material events (but only those material events) that led to the signing of the Memorandum of Understanding and the commencement of the Exchange Offer and does not purport to
catalogue every conversation or meeting among representatives of Nokia and Alcatel Lucent.
Alcatel Lucent’s board of directors regularly
evaluates Alcatel Lucent’s strategic direction and ongoing business plans. As part of this evaluation, Alcatel Lucent’s board of directors has from time to time considered a variety of strategic alternatives for Alcatel Lucent, including
additional partnerships or strategic alliances with other participants in the industry, purchases or sales of businesses or assets, or business combination transactions.
On April 16, 2013, shortly following the appointment of Michel Combes as Chief Executive Officer of Alcatel Lucent, Mr. Combes and members of management discussed development of the Shift Plan, a detailed
three-year plan announced in June 2013 designed to reposition Alcatel Lucent as a specialist provider of IP and Cloud Networking and Ultra-Broadband Access, the high-value equipment and services essential to high-performance networks. The Shift Plan
was based on their expectations for industry trends in the telecommunications industry, including accelerated changes driven by the adoption of new mobile devices and of new applications and services, greater connectivity to the internet and a
dramatic increase in the number of connected devices, and pressure on telecommunications providers to improve their networks in terms of coverage, capacity and quality. Mr. Combes and these members of management considered that the Shift Plan
would improve the ability of Alcatel Lucent to compete effectively over the long-term, and in this context that Alcatel Lucent could consider concentrating on key areas or combining some or all of its businesses with those of other companies based
on the need for scale in an economically challenging environment.
In the spring and summer of 2013, although the priority of Alcatel Lucent’s
management remained the implementation of the Shift Plan, Alcatel Lucent’s management also considered that strategic transactions could assist in repositioning Alcatel Lucent’s business and in improving Alcatel Lucent’s profitability
and financial position. Therefore, in parallel to the execution of the Shift Plan and as a way to create optionality, Alcatel Lucent’s management contacted representatives of Nokia, Company A and Company B to discuss possible strategic
transactions.
On June 18, 2013, Alcatel Lucent’s board of directors met in Paris, France, where Michel Combes provided the board members with
an update regarding recent discussions with the potential partners in the telecommunications industry regarding potential strategic alternatives.
On
July 13 and 14, 2013, representatives of Alcatel Lucent, including Michel Combes, met with representatives of Company A to further explore a possible joint venture involving the wireless businesses of Alcatel Lucent and Company A or
contribution of the wireless business of Company A to Alcatel Lucent in exchange for an interest in Alcatel Lucent.
On July 19, 2013, Stephen
Elop, the then President and Chief Executive Officer of Nokia, and Michel Combes, Chief Executive Officer of Alcatel Lucent, met in Brussels, Belgium, to discuss various strategic options involving Nokia and Alcatel Lucent, including a potential
combination of Nokia Solutions and Networks with Alcatel Lucent, or a potential combination of Nokia Solutions and Networks and Alcatel Lucent’s wireless business.
On July 30, 2013, Alcatel Lucent’s board of directors met in Paris, France, and decided that, although the priority of Alcatel Lucent’s management was the implementation of the Shift Plan, a
combination with another partner in the telecommunications industry would be an attractive option to give Alcatel
29
Lucent the critical size needed to compete in the telecommunications industry, particularly in the field of mobile networks. Alcatel Lucent’s board of directors noted that no clear strategic
alternative had emerged to date, but that contacts with potential partners in the telecommunications industry were ongoing. Alcatel Lucent’s board of directors agreed to continue the ongoing discussions with potential partners.
In August and September 2013, following the initial discussions between the Chief Executive Officers of Nokia and Alcatel Lucent, further meetings and telephone
conversations were held involving Timo Ihamuotila, Executive Vice President and Chief Financial Officer, from Nokia and Jesper Ovesen, the then Executive Chairman of Nokia Solutions and Networks, and Philippe Camus, Chairman of Alcatel Lucent’s
board of directors, Michel Combes, Chief Executive Officer, and Jean Raby, Chief Financial and Legal Officer, from Alcatel Lucent. These discussions focused on high level issues with respect to a potential combination of Nokia Solutions and Networks
and Alcatel Lucent, including various scenarios for the structuring of any such combination.
On October 2, 2013, Risto Siilasmaa, Chairman of the
Nokia board of directors and Timo Ihamuotila met with Philippe Camus and Michel Combes in London, England, at the offices of Sullivan & Cromwell LLP (“Sullivan & Cromwell”), external legal advisor to Alcatel
Lucent, with Philippe Camus participating via a video conference link from New York to discuss the potential combination of Nokia Solutions and Networks and Alcatel Lucent at a conceptual level. At this meeting, Nokia representatives indicated that
timing of any discussions was not optimal from Nokia’s perspective given the then ongoing sale of Nokia’s Devices and Services business to Microsoft.
On October 5, 2013, Alcatel Lucent’s board of directors met by conference call. Philippe Camus provided the board with an update of preliminary discussions with Nokia with respect to the potential
combination of Nokia Solutions and Networks and Alcatel Lucent. Mr. Camus also indicated that a potential combination of the businesses of Alcatel Lucent and Nokia had been discussed in general terms, though the material terms of any potential
transaction (including any premium for Alcatel Lucent’s shareholders) had not been fully developed. Following further discussion, Alcatel Lucent’s board of directors determined that, although a combination with Nokia could be advantageous
to Alcatel Lucent, management should remain focused on implementation of the financial restructuring elements of the Shift Plan. Alcatel Lucent’s board of directors considered that a possible transaction with Nokia could be reassessed at a
later time in light of Alcatel Lucent’s financial situation and other potential alternatives available at such time.
Between October 2013 and May
2014, Nokia and Alcatel Lucent engaged in periodic contacts to assess willingness to reengage on discussions of a potential strategic transaction and continued high level discussions on possible transaction terms and structures during this period.
In late 2013, representatives of Alcatel Lucent, including Michel Combes and Philippe Keryer, also held further meetings with senior management of
Company A regarding a possible strategic alliance between the two companies. Company A expressed an interest in continuing to explore a possible strategic alliance.
On January 2, 2014, Alcatel Lucent entered into a confidentiality agreement with Company A to further explore a strategic alliance between the two companies. Potential transaction structures for the strategic
alliance were discussed, including the contribution of the wireless businesses of Company A and Alcatel Lucent to a joint venture in which Alcatel Lucent would hold a majority interest and Company A would hold a minority interest. Alcatel Lucent and
Company A also explored the possibility, concurrently with the joint venture, that Company A would have acquired a minority interest in Alcatel Lucent on terms to be defined.
30
In January 2014, Alcatel Lucent retained Zaoui & Co. S.A. (“Zaoui”) as its financial advisor
to assist in exploring potential strategic transactions.
On January 30, 2014, representatives of Alcatel Lucent’s financial and legal
advisors, Zaoui and Sullivan & Cromwell, met with representatives of Company A’s financial and legal advisors to discuss potential transaction structures.
On February 14, 2014, representatives of Alcatel Lucent, including Jean Raby and Philippe Keryer, met with representatives of Company A to discuss a possible strategic alliance. Zaoui participated in the
discussions. During this meeting, representatives of Alcatel Lucent presented an overview of the group and its strategy with a particular focus on the wireless activities. Representatives of Company A made a similar presentation. Alcatel Lucent and
Company A representatives discussed the framework for a potential strategic alliance.
In March and April 2014, Alcatel Lucent continued to engage in
periodic contacts with Nokia, Company A and Company B regarding possible strategic transactions.
On May 28, 2014, Alcatel Lucent’s board of
directors met in Paris, France, and via conference call to discuss possible strategic alternatives. The strategic alternatives considered included a contribution of Alcatel Lucent’s wireless business to Nokia Solutions and Networks in return
for a minority interest in the enlarged Nokia Solutions and Networks, a joint venture between the wireless businesses of Alcatel Lucent and Company A and a combination of the businesses of Alcatel Lucent and Company B. Alcatel Lucent’s board of
directors also considered narrowing the operational scope of Alcatel Lucent’s wireless business as a base case scenario in order to restore the profitability of Alcatel Lucent’s wireless division.
In the summer of 2014, substantive discussions between Nokia and Alcatel Lucent resumed following a call between Timo Ihamuotila and Jean Raby, where Alcatel
Lucent proposed to contribute its wireless business to Nokia Solutions and Networks in return for a minority interest in the enlarged Nokia Solutions and Networks. The scope of the contribution excluded legacy pension liabilities in the United
States, which would have remained with Alcatel Lucent. There were no further discussions on a combination of Nokia Solutions and Networks and Alcatel Lucent.
In the summer of 2014, Alcatel Lucent and Company B also continued to discuss the structure and terms of a possible strategic transaction, including reciprocal diligence exercises. In addition, Alcatel Lucent
determined not to pursue further discussions with Company A regarding a possible joint venture involving its wireless business as a result of a failure to agree on a transaction scope and structure that could be implemented within a reasonably
acceptable timeframe and remaining differences on proposed governance arrangements for the possible joint venture.
In the summer of 2014, Alcatel
Lucent also approached several other parties to explore whether these parties had an interest in a strategic transaction. Other than discussions with Nokia, Company A and Company B, discussions regarding possible strategic transactions between
Alcatel Lucent and other parties did not advance beyond initial contact.
On July 29, 2014, a Nokia team led by Samih Elhage, Executive Vice
President and Chief Financial and Operating Officer of Nokia Networks met with Alcatel Lucent representatives, including Jean Raby, Remi Thomas, Senior Vice President Mergers & Acquisitions of Alcatel Lucent, and Philippe Keryer, Chief
Strategy and Innovation Officer of Alcatel Lucent, in Paris, France, to discuss at a high level the potential contribution of Alcatel Lucent’s wireless business to Nokia Solutions and Networks in return for a minority interest in the enlarged
Nokia Solutions and Networks.
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On July 30, 2014, Alcatel Lucent’s board of directors met in Boulogne-Billancourt, France, and via
conference call to discuss developments in Alcatel Lucent’s industry and possible strategic alternatives available to Alcatel Lucent. Zaoui and Sullivan & Cromwell participated in the discussions of strategic alternatives, including a
combination of the businesses of Alcatel Lucent and Company B or the creation of a joint venture involving Alcatel Lucent’s wireless business with the wireless businesses of Company A or Nokia. Alcatel Lucent’s board of directors
considered the impact, if any, of recent performance of Alcatel Lucent’s mobile access business on such strategic alternatives, on possible value for the holders of Alcatel Lucent Shares of potential strategic alternatives and key criteria to
be taken into consideration by Alcatel Lucent’s board of directors in evaluating such alternatives, taking into account the consequences for employees, and customers and the regulatory constraints and risks associated with each strategic
alternative. Alcatel Lucent’s board of directors discussed a number of possible issues with the possible combination with Company B, including in respect of intellectual property, receipt of regulatory approvals and impact on other strategic
alternatives under consideration by Alcatel Lucent. In respect of a joint venture involving Alcatel Lucent’s wireless business, Alcatel Lucent’s board of directors considered the financial and operational implications of a separation of
the wireless business from Alcatel Lucent’s other businesses.
On August 5, 2014, representatives of Alcatel Lucent met with representatives
of Company B to conduct diligence on possible obstacles in connection with a strategic transaction, including pension issues, potential restructuring in France, antitrust issues associated with the wireless business and the risk that the transaction
would pose to the intellectual property revenues of Company B. Jean Raby subsequently met with the Company B’s head of strategy to discuss these issues and the possible transaction. Company B subsequently stated an interest in acquiring all of
Alcatel Lucent, excluding Alcatel Lucent’s wireless business, pension liabilities and Alcatel Lucent Submarine Networks (“ASN”). Alcatel Lucent did not indicate agreement to the proposed scope of the possible transaction.
Following this meeting, Alcatel Lucent and Company B continued limited due diligence exercises, including with respect to Alcatel-Lucent Shanghai Bell, Co. Ltd. (“ASB”), Alcatel Lucent’s wireless business and IP Routing
business and Company B again proposed a potential acquisition by Company B of Alcatel Lucent, excluding Alcatel Lucent’s wireless business, pension liabilities and ASN. In response to this proposal, Alcatel Lucent proposed as an alternative
that the parties investigate a possible full combination of the businesses of Alcatel Lucent and Company B.
On August 6, 2014, Timo Ihamuotila and
Samih Elhage had a telephone conversation with Jean Raby concerning a potential contribution of Alcatel Lucent’s wireless business to Nokia Solutions and Networks in return for a minority interest in the enlarged Nokia Solutions and Networks.
The discussion focused on the strategic rationale for such transaction and the potential structuring matters.
Throughout August 2014, there were a
series of telephone discussions involving representatives of Nokia, including Timo Ihamuotila and Samih Elhage, and representatives of Alcatel Lucent, including Jean Raby and Philippe Keryer, regarding the potential contribution of Alcatel
Lucent’s wireless business to Nokia Solutions and Networks in return for a minority interest in the enlarged Nokia Solutions and Networks, particularly around the scope of the assets to be contributed, the terms of any non-compete and a
strategic partnership in IP routing. Nokia and Alcatel Lucent concluded that it was not possible to arrive at satisfactory terms for the potential contribution of Alcatel Lucent’s wireless business to Nokia Solutions and Networks in return for
a minority interest in the enlarged Nokia Solutions and Networks, largely as a result of remaining overlap in the businesses and the potential conflicts created by Alcatel Lucent holding a minority interest in the enlarged Nokia Solutions and
Networks business. Nokia and Alcatel Lucent agreed they would continue to explore other possible strategic transactions that would not raise similar concerns, including a sale of Alcatel Lucent’s wireless business to Nokia.
On September 4, 2014, Nokia and Alcatel Lucent agreed to actively discuss a possible sale of Alcatel Lucent’s wireless business to Nokia and entered into
a non-disclosure agreement.
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On September 15, 2014, Alcatel Lucent’s board of directors met in Boulogne-Billancourt, France, and via
conference call. During the meeting, representatives of Alcatel Lucent’s management provided an update on the ongoing strategic discussions regarding a potential acquisition of Alcatel Lucent’s wireless business by Nokia and a combination
of the businesses of Alcatel Lucent and Company B and in particular the mains issues and possible consequences of each strategic alternative. Alcatel Lucent’s board of directors also discussed the alternatives available to Alcatel Lucent in the
event that such discussions would not result in an offer. Zaoui and Sullivan & Cromwell participated in the discussions of strategic alternatives, and discussed their analysis of the risks related to the strategic alternatives under
consideration by Alcatel Lucent. Alcatel Lucent’s board of directors requested that management continue to explore strategic alternatives.
On
September 15, 2014, Nokia representatives, including Timo Ihamuotila, Maria Varsellona, Executive Vice President and Chief Legal Officer of Nokia, and Samih Elhage met in London, England, with Jean Raby, Remi Thomas and Philippe Keryer, to
discuss a potential sale of Alcatel Lucent’s wireless business to Nokia and the mechanics for a potential carve out of Alcatel Lucent’s wireless business from the rest of Alcatel Lucent.
Between September 15, 2014 and September 22, 2014, representatives of Nokia and Alcatel Lucent engaged in several telephonic discussions and exchanged
emails with respect to a potential acquisition of Alcatel Lucent’s wireless business by Nokia. The discussions focused on the carve out of Alcatel Lucent’s wireless business from the rest of Alcatel Lucent and matters related to the
treatment of ASB, a joint venture between Alcatel Lucent and China Huaxin Post and Telecommunication Economy Development Center, in connection with a potential transaction between Nokia and Alcatel Lucent.
On September 22, 2014, Nokia representatives, including Samih Elhage, together with representatives of J.P. Morgan Limited (“J.P. Morgan”),
financial advisor to Nokia, and Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden Arps”), external legal advisor to Nokia, participated in an Alcatel Lucent management presentation in Chicago, Illinois, U.S., with respect
to Alcatel Lucent’s wireless business. The presentation was led by Dave Geary, Alcatel Lucent President of Wireless, Steven Sherman, Chief Financial Officer of Wireless, and Remi Thomas, and was also attended by the representatives of Zaoui and
Sullivan & Cromwell.
On September 28, 2014, Rajeev Suri, President and Chief Executive Officer of Nokia, called Michel Combes and
indicated that, subject to the approval of the Nokia board of directors and other customary conditions, including completion of due diligence, Nokia would be prepared to submit a non-binding offer to purchase Alcatel Lucent’s wireless business
for approximately EUR 600 million. Mr. Combes advised Mr. Suri that a purchase price of EUR 600 million would be insufficient for management to recommend the transaction to Alcatel Lucent’s board of directors, but that Alcatel
Lucent would continue to negotiate and conduct due diligence exercises with a view to improving the terms of the transaction. Following further negotiations and due diligence, Nokia indicated that it would be prepared to offer up to EUR 1.1 billion
for the purchase of Alcatel Lucent’s wireless business, subject to the approval of the Nokia board of directors and other customary conditions, including completion of due diligence.
On October 3, 2014, Alcatel Lucent’s board of directors met in Boulogne-Billancourt, France, and via conference call to discuss developments with respect to the strategic alternatives under consideration
by Alcatel Lucent, in particular the possible sale of Alcatel Lucent’s wireless business to Nokia or a combination of the businesses of Alcatel Lucent and Company B. Management presented information regarding the proposed transaction
structures, including the proposed scope of each potential transaction, process for implementation (in particular with respect to regulatory risks, and issues relating to intellectual property revenues), feedback from the counterparties and process
and timing for further discussions. Alcatel Lucent’s board of directors, at the recommendation of management,
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approved continued discussions with Nokia with the objective of receiving a satisfactory non-binding indicative offer in a reasonable timeframe.
On October 6, 2014, Nokia representatives, including Timo Ihamuotila and Samih Elhage, together with representatives of J.P. Morgan and Skadden Arps,
participated in an Alcatel Lucent management presentation in Paris, France, at the offices of Sullivan & Cromwell focusing on the carve-out of Alcatel Lucent’s wireless business. The presentation was led by Dave Geary and Remi Thomas,
and was also attended by Jean Raby and the representatives of Zaoui and Sullivan & Cromwell.
On October 15, 2014, Nokia sent a letter to
Alcatel Lucent with a non-binding indicative offer for the acquisition of Alcatel Lucent’s wireless business. The letter offered to acquire Alcatel Lucent’s wireless business (with such scope as identified in the letter and including
Alcatel Lucent’s interest in the wireless business of ASB, but excluding Alcatel Lucent’s interest in the non-wireless business of ASB) for EUR 1.15 billion cash payable at closing of the transaction plus EUR 250 million cash payable
post-closing, subject to Nokia’s ability to repatriate certain cash funds held by Alcatel Lucent’s wireless business. The letter included several assumptions and numerous conditions, including performance of a due diligence review of
Alcatel Lucent’s wireless business to Nokia’s satisfaction, the delivery to Nokia of a comprehensive plan for the carve out of Alcatel Lucent’s wireless business from Alcatel Lucent, completion of the carve out in all material
respects before closing of the transaction, negotiation of definitive documentation to implement the transaction and closing conditions (including Nokia’s request to condition the transaction on obtaining consents from key customers of Alcatel
Lucent).
Between October 19, 2014 and November 3, 2014, representatives of Nokia, including Timo Ihamuotila and Maria Varsellona,
representatives of Alcatel Lucent, including Jean Raby and Remi Thomas, and the representatives of J.P. Morgan, Zaoui, Skadden Arps and Sullivan & Cromwell participated in a series of conference calls, discussing Nokia’s non-binding
indicative offer letter and its terms and conditions. The discussions focused on Nokia’s indicative price, the process for carving out Alcatel Lucent’s wireless business from the rest of the company, the scope of and responsibility for
regulatory conditions and other closing conditions (including Nokia’s request to condition the transaction on obtaining consents from key customers of Alcatel Lucent). The discussions also focused on the process for carving out the wireless
business of ASB from the rest of ASB, which would have required the consent of Alcatel Lucent’s joint venture partner in ASB.
On October 29,
2014, Alcatel Lucent’s board of directors met in Murray Hill, United States, and via conference call and video conference. Representatives of Alcatel Lucent’s management and Zaoui participated in the meeting. Alcatel Lucent’s
management presented information on the ongoing strategic discussions regarding a potential sale of Alcatel Lucent’s wireless business to Nokia or a combination of the businesses of Alcatel Lucent and Company B, and in particular the timing and
scope of each potential transaction, significant remaining issues in relation to each potential transaction, and proposed steps for resolving such issues. Alcatel Lucent’s board of directors discussed the viability of each of those two
potential transactions and their relative advantages and disadvantages, including timing of a potential transaction and the possible value to be created for Alcatel Lucent’s stakeholders in connection with any potential transaction. Alcatel
Lucent’s board of directors also considered possible valuation scenarios in respect of its wireless business, the expected process and timeline for a potential acquisition and strategic alternatives available to Alcatel Lucent following a sale
of its wireless business. Alcatel Lucent’s board of directors also considered potential alternatives to these two transactions, and concluded that other alternatives were unlikely to be achieved within a reasonable timeframe. Alcatel
Lucent’s board of directors confirmed that management could continue its discussions with respect to the potential transactions with Nokia and Company B.
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On November 13, 2014, representatives of Sullivan & Cromwell sent to representatives of Skadden Arps the
initial draft term sheet for a potential acquisition of Alcatel Lucent’s wireless business by Nokia.
On November 13, 2014, representatives of
Nokia, J.P. Morgan and Skadden Arps met with the representatives of Alcatel Lucent, Zaoui and Sullivan & Cromwell in London, England, at the offices of Sullivan & Cromwell to discuss the initial draft term sheet for a potential
acquisition of Alcatel Lucent’s wireless business by Nokia. The discussion focused on the conditions precedent for the signing of definitive documentation and closing of the transaction (including Nokia’s request to condition the
transaction on obtaining consents from key customers of Alcatel Lucent), and termination rights that may be available to either party, as well as the process for carving out Alcatel Lucent’s wireless business from the rest of the company and
the process for carving out the wireless business of ASB from the rest of ASB.
On November 17, 2014, Rajeev Suri and Timo Ihamuotila met with
Michel Combes and Jean Raby in Helsinki, Finland to discuss the material aspects of the draft term sheet for a potential acquisition of Alcatel Lucent’s wireless business by Nokia. The discussion focused on the purchase price adjustment
mechanism, logistics of carving out the wireless business from Alcatel Lucent, the transaction timeline and transaction termination fees. Alcatel Lucent also proposed that the parties consider discussions on a potential full combination of the
businesses of Nokia and Alcatel Lucent, but no substantive discussions on this potential combination occurred at this time.
On November 21, 2014,
representatives of J.P. Morgan and Skadden Arps met in London, England, at the offices of Zaoui with the representatives of Zaoui and Sullivan & Cromwell to discuss the term sheet for a potential acquisition of Alcatel Lucent’s
wireless business by Nokia. The discussion focused on the inclusion of a non-compete provision into a potential transaction as well as a standstill provision, regulatory conditions and a potential fiduciary out provision for Alcatel Lucent in
connection with a superior proposal.
On November 21, 2014, representatives of Skadden Arps sent to representatives of Sullivan & Cromwell
a revised draft of the term sheet for a potential acquisition of Alcatel Lucent’s wireless business by Nokia, which reflected significant outstanding differences on key transaction terms, including purchase price, purchase price adjustment
mechanism, reorganization steps, closing conditions (including Nokia’s request to condition the transaction on obtaining consents from key customers of Alcatel Lucent), allocation of regulatory risk, termination rights, transaction termination
fees, carve-out issues and timing and treatment of ASB.
On November 24, 2014, representatives of Nokia, including Timo Ihamuotila, Maria
Varsellona and Samih Elhage, and representatives of J.P. Morgan and Skadden Arps met in Paris, France, at the offices of Skadden Arps with the representatives of Alcatel Lucent, including Jean Raby, Remi Thomas and Philippe Keryer, and the
representatives of Zaoui and Sullivan & Cromwell to discuss the term sheet for a potential acquisition of Alcatel Lucent’s wireless business by Nokia. The discussion focused on the key transaction terms, including purchase price,
purchase price adjustment mechanism, reorganization steps, closing conditions (including Nokia’s request to condition the transaction on obtaining consents from key customers of Alcatel Lucent), allocation of regulatory risk, termination
rights, transaction termination fees, carve-out issues and timing and treatment of ASB.
On December 3, 2014, Alcatel Lucent’s board of
directors met in Boulogne-Billancourt, France, and via conference call, to discuss the status of negotiations with respect to a potential acquisition of Alcatel Lucent’s wireless business by Nokia and a combination of certain of the businesses
of Alcatel Lucent and Company B. With respect to a potential acquisition of Alcatel Lucent’s wireless business by Nokia, Alcatel Lucent’s board of directors considered the terms of the transaction that remained subject to
35
negotiation, including calculation of purchase price, closing conditions (including Nokia’s request to condition the transaction on obtaining consents from key customers of Alcatel Lucent)
and allocation of risk with respect to required regulatory approvals. With respect to a possible combination with Company B, Alcatel Lucent’s board of directors considered the scope of the transaction and material issues in relation to a
potential transaction, including regulatory approvals, intellectual property and pension liabilities. In light of the lack of significant progress in late 2014 to advance negotiations between Alcatel Lucent and Company B on either a possible
acquisition of Alcatel Lucent, excluding Alcatel Lucent’s wireless business, pension liabilities and ASN, or a possible full combination of the businesses of Alcatel Lucent and Company B, Alcatel Lucent suspended discussions with Company B to
focus on a possible transaction with Nokia.
During December 2014, representatives of Nokia and Alcatel Lucent engaged in several telephonic discussions
and exchanged emails with respect to the term sheet for a potential acquisition of Alcatel Lucent’s wireless business by Nokia. The discussions focused on key terms, including purchase price, purchase price adjustment mechanism, closing
conditions (including Nokia’s request to condition the transaction on obtaining consents from key customers of Alcatel Lucent), allocation of regulatory risk, termination rights, transaction termination fees, carve-out issues and timing and
treatment of ASB.
On January 5, 2015, representatives of Sullivan & Cromwell sent to representatives of Skadden Arps a revised draft of
the term sheet for a potential acquisition of Alcatel Lucent’s wireless business by Nokia, which reflected continuing discussions on key terms, including purchase price, purchase price adjustment mechanism, closing conditions (including
Nokia’s request to condition the transaction on obtaining consents from key customers of Alcatel Lucent), allocation of regulatory risk, termination rights, transaction termination fees, carve-out issues and timing and treatment of ASB.
On January 7, 2015, representatives of Nokia, including Timo Ihamuotila and Maria Varsellona, and representatives of J.P. Morgan and Skadden Arps
met in Berlin, Germany with the representatives of Alcatel Lucent, including Jean Raby and Remi Thomas, and the representatives of Zaoui and Sullivan & Cromwell to discuss the term sheet for a potential acquisition of Alcatel Lucent’s
wireless business by Nokia. The discussion focused on the purchase price adjustment, logistics of carving out the wireless business from Alcatel Lucent and the size of the transaction termination fee. Following this discussion, Mr. Ihamuotila
and Mr. Raby had a separate discussion in general terms on a potential acquisition of Alcatel Lucent by Nokia.
On January 9, 2015,
representatives of Skadden Arps sent to representatives of Sullivan & Cromwell a revised draft of the term sheet for a potential acquisition of Alcatel Lucent’s wireless business by Nokia, which reflected continuing discussions on
purchase price, purchase price adjustment mechanism, closing conditions (including Nokia’s request to condition the transaction on obtaining consents from key customers of Alcatel Lucent), allocation of regulatory risk, termination rights,
transaction termination fees and definition of material adverse effect.
On January 14, 2015, representatives of Alcatel Lucent and their advisors
presented carve-out financial information in respect of Alcatel Lucent’s wireless business to representatives of Nokia and their advisors in Munich, Germany.
On January 14, 2015, representatives of Sullivan & Cromwell sent to representatives of Skadden Arps a revised draft of the term sheet for a potential acquisition of Alcatel Lucent’s wireless
business by Nokia reflecting the continuing discussions on key terms, including purchase price, closing conditions (including Nokia’s request to condition the transaction on obtaining consents from key customers of Alcatel Lucent), allocation
of regulatory risk, termination rights, reverse transaction termination fees and definition of material adverse effect.
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On January 16, 2015, Risto Siilasmaa met with Philippe Camus, Chairman of Alcatel Lucent’s board of
directors, in Paris, France, to discuss the potential acquisition of Alcatel Lucent’s wireless business by Nokia. The discussion focused on high level issues associated with the potential acquisition of the wireless business, including the
proposed purchase price and transaction timeline. Mr. Siilasmaa and Mr. Camus also discussed the potential acquisition of Alcatel Lucent by Nokia.
On January 19, 2015, representatives of Nokia, including Timo Ihamuotila, Maria Varsellona and Samih Elhage, and representatives of J.P. Morgan and Skadden Arps participated in a conference call with the
representatives of Alcatel Lucent, including Jean Raby and Remi Thomas, and the representatives of Zaoui and Sullivan & Cromwell to discuss the term sheet for a potential acquisition of Alcatel Lucent’s wireless business by Nokia. The
discussion focused on the termination provisions for a potential transaction and the closing conditions (including Nokia’s request to condition the transaction on obtaining consents from key customers of Alcatel Lucent).
On January 23, 2015, representatives of Skadden Arps sent to representatives of Sullivan & Cromwell a revised draft of the term sheet for a potential
acquisition of Alcatel Lucent’s wireless business by Nokia, which reflected significant remaining differences on purchase price, closing conditions (including Nokia’s request to condition the transaction on obtaining consents from key
customers of Alcatel Lucent), allocation of regulatory risk, termination rights and size of reverse transaction termination fee.
On January 26,
2015, Timo Ihamuotila called Jean Raby, informing him that Nokia would like to explore the possibility of acquiring Alcatel Lucent. Mr. Raby stated that Alcatel Lucent was prepared to engage in preliminary discussions on this topic.
Mr. Ihamuotila stated that Nokia would like to engage in a due diligence review of Alcatel Lucent with a view to a potential acquisition of Alcatel Lucent by Nokia. Mr. Ihamuotila and Mr. Raby agreed that Nokia would perform limited
due diligence review of Alcatel Lucent, focusing on Alcatel Lucent’s pension liabilities, intellectual property and regulatory and compliance matters. On January 29, 2015, representatives of Nokia sent to representatives of Alcatel Lucent
a due diligence request list for such review. Alcatel Lucent provided reciprocal due diligence requests, and engaged in due diligence and valuation exercises in respect of Nokia.
On January 27, 2015, representatives of Nokia, including Maria Varsellona and Samih Elhage, and representatives of J.P. Morgan and Skadden Arps participated in a conference call with the representatives of
Alcatel Lucent, including Jean Raby and Remi Thomas, and the representatives of Zaoui and Sullivan & Cromwell to discuss the term sheet for a potential acquisition of Alcatel Lucent’s wireless business by Nokia.
On February 2, 2015, representatives of Nokia and its advisors met in Paris, France, at the offices of Sullivan & Cromwell with the representatives
of Alcatel Lucent and its advisors to conduct due diligence review of Alcatel Lucent with respect to a potential acquisition of Alcatel Lucent by Nokia. Due diligence discussions focused on Alcatel Lucent’s pension liabilities, as well as
regulatory and compliance matters. Nokia and Alcatel Lucent continued to perform reciprocal due diligence review of each other’s businesses on select topics, including pension liabilities, regulatory and compliance matters, intellectual
property, ASB, Nokia’s HERE business, recent acquisitions by Nokia and material litigation, until April 14, 2015.
On February 5, 2015,
Risto Siilasmaa and Philippe Camus had a telephone conversation where they generally discussed the status of negotiations between the parties and a potential strategic transaction.
On February 5, 2015, Alcatel Lucent’s board of directors met in Boulogne-Billancourt, France, and via video conference to discuss developments in the negotiation of a strategic transaction with Nokia.
Zaoui and Sullivan & Cromwell participated in the meeting. Alcatel Lucent’s board of directors considered the financial and transactional aspects of a potential sale of Alcatel Lucent’s wireless
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business to Nokia. Zaoui presented a description of the scope of such an acquisition, as well as a valuation analysis, summary of potential value creation, possible execution risks and likely
timing of the transaction. Alcatel Lucent’s board of directors also considered the strategic rationale for a sale of Alcatel Lucent to Nokia, the industry, operational and market factors that supported a combination, and the financial aspects
of a combination. Zaoui discussed possible benefits of a combination, including possible synergies and the financial position of the combined businesses and presented a summary of the possible valuation of the combined entity and potential value
creation for the shareholders as a result of such combination. Alcatel Lucent’s board of directors concluded by considering the key items to be addressed prior to announcement of a potential acquisition of Alcatel Lucent by Nokia, including
satisfactory completion of reciprocal due diligence and valuation processes in respect of Nokia, engagement with key stakeholders and finalizing the transaction documentation. Alcatel Lucent’s board of directors authorized management to
continue ongoing negotiations with Nokia.
On February 9, 2015, Rajeev Suri met with Michel Combes in London, England, to discuss a potential sale
of Alcatel Lucent’s wireless business to Nokia and to conduct a high level discussion of the rationale for a potential acquisition of Alcatel Lucent by Nokia.
Between February 13, 2015 and February 17, 2015, representatives of Nokia and Alcatel Lucent held a series of telephone conversations, discussing the term sheet for a potential acquisition of Alcatel
Lucent’s wireless business by Nokia. At the conclusion of these discussions, a number of material issues set forth in the draft term sheet remained outstanding and unresolved, including closing conditions (including Nokia’s request to
condition the transaction on obtaining consents from key customers of Alcatel Lucent), and the timeline and conditions for the planned carve out and related possible price implications. As a result of the negotiations and discussions to date, Nokia
and Alcatel Lucent also viewed a potential acquisition of Alcatel Lucent’s wireless business by Nokia as having significant obstacles to execution associated with the process for carving out Alcatel Lucent’s wireless business from the rest
of the company, the process for carving out the wireless business of ASB from the rest of ASB and the response of customers and other stakeholders to a carve out transaction, and that a full combination of the businesses of Nokia and Alcatel Lucent
could be comparatively advantageous from both a strategic and a value creation standpoint. In particular, certain customers of Alcatel Lucent had proactively expressed concerns about the potential disruption to business that a sale of Alcatel
Lucent’s wireless business would entail, given the long period needed to separate the wireless business from the other businesses of Alcatel Lucent. Nokia and Alcatel Lucent also recognized that a combination would be consistent with market
preference for large vendors with scale and scope, particularly in 5G. Following February 17, 2015, Nokia and Alcatel Lucent did not resume substantive discussions with respect to a potential acquisition of Alcatel Lucent’s wireless
business by Nokia and did not execute any additional documentation with respect to any such transaction.
On March 5, 2015, representatives of
Nokia, including Risto Siilasmaa, Rajeev Suri, Timo Ihamuotila and Maria Varsellona met with representatives of Alcatel Lucent, including Philippe Camus, Michel Combes and Jean Raby, in Paris, France, at the offices of Sullivan & Cromwell.
At the meeting, Mr. Siilasmaa and Mr. Suri communicated to Mr. Camus and Mr. Combes Nokia’s non-binding offer to acquire Alcatel Lucent for 0.491 Nokia Shares for each Alcatel Lucent Share. In addition, Nokia representatives
discussed other terms and conditions and various aspects of a potential transaction. Mr. Camus and Mr. Combes indicated that Alcatel Lucent viewed the offer to be inadequate in light of its view of the relative values of Alcatel Lucent
Shares and Nokia Shares.
On March 8, 2015, representatives of Nokia, met in London, England, at the offices of Skadden Arps with representatives
of Alcatel Lucent to conduct limited financial due diligence review of Alcatel Lucent to assist Nokia in its valuation of Alcatel Lucent. Alcatel Lucent engaged in reciprocal due diligence and valuations exercises in respect of Nokia.
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On March 9, 2015, Rajeev Suri met with Michel Combes in Paris, France, to discuss the transaction timeline and
the scope and length and the extent of each company’s due diligence efforts.
On March 10, 2015, Risto Siilasmaa met with Philippe Camus in
London, England, for an overall discussion of the potential transaction and significant obstacles to announcing a transaction.
Between March 11,
2015 and March 14, 2015, representatives of Nokia, J.P. Morgan, Skadden Arps, Alcatel Lucent, Zaoui and Sullivan & Cromwell held a series of telephonic discussions concerning key terms of a potential transaction. The discussions
focused on the scope and length of due diligence review and transaction timing, as well as standstill and exclusivity proposals. Nokia and Alcatel Lucent were not able to reach any agreement on possible standstill or exclusivity provisions at this
time.
On March 13, 2015, Alcatel Lucent’s board of directors met in Boulogne-Billancourt, France, and via conference call and video
conference to discuss the key terms of a potential combination of the business of Alcatel Lucent and Nokia, including the ongoing discussions regarding the exchange ratio of a potential exchange offer and the valuation analysis in respect of
possible exchange ratios based on the trading price of Alcatel Lucent Shares and Nokia Shares. Alcatel Lucent’s board of directors discussed possible considerations as to the fairness of premiums in the exchange offer and the need for Alcatel
Lucent’s board of directors, in the event an acceptable exchange ratio were proposed, to be satisfied as that the Exchange Offer would be reasonably likely to be completed. Alcatel Lucent’s board of directors also discussed possible
alternatives to a strategic transaction with Nokia, including a sale of Alcatel Lucent’s wireless business, or another possible business combination or a strategic partnership, and determined that no strategic alternatives were feasible at such
time. Alcatel Lucent’s board of directors considered the possible reaction of Alcatel Lucent’s significant customers. Alcatel Lucent’s board of directors also considered the prior discussions by Alcatel Lucent with respect to various
strategic alternatives, including discussions on possible transactions with Company A and Company B. Alcatel Lucent’s board of directors considered the terms of a possible transaction to be discussed further with Nokia, including the exchange
ratio, certainty of completion of the combination, governance of the combined businesses and the future of the Alcatel Lucent organization and employees.
On March 16, 2015, representatives of Nokia, including Timo Ihamuotila and Maria Varsellona, and representatives of J.P. Morgan and Skadden Arps met in
London, England, at the offices of Sullivan & Cromwell with the representatives of Alcatel Lucent, including Jean Raby and Remi Thomas, and the representatives of Zaoui and Sullivan & Cromwell, to discuss the non-financial terms of
the combination, including the conditions precedent of a potential exchange offer by Nokia to acquire Alcatel Lucent. The discussions focused on the timing of the Nokia extraordinary general meeting of shareholders contemplated by the Nokia
Shareholder Approval and the level of the minimum tender condition.
On March 17, 2015, Risto Siilasmaa, Timo Ihamuotila and Maria Varsellona met
with Philippe Camus, Michel Combes and Jean Raby in London, England, at the offices of Skadden Arps to discuss the proposed exchange ratio, offer structure and key offer terms, including offer conditions. Representatives of Nokia presented a revised
proposal with an exchange ratio range of 0.514 to 0.538 Nokia Shares per Alcatel Lucent Share, as compared to the offer of 0.491 Nokia Shares per Alcatel Lucent Share made on March 5, 2015. Mr. Camus responded that Alcatel Lucent viewed
the offer to be inadequate in light of its view of the relative values of Alcatel Lucent Shares and Nokia Shares. Representatives of Nokia informed representatives of Alcatel Lucent that the Nokia board of directors was not yet prepared to revise
the exchange ratio and that the board of directors was meeting on March 25, 2015 to further discuss a potential transaction with Alcatel Lucent.
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On March 22, 2015, Risto Siilasmaa and Philippe Camus had a telephone conversation where they discussed the
proposed exchange ratio, handling of Alcatel Lucent’s submarine business and Nokia’s governance structure after the potential acquisition.
On
March 25, 2015, Risto Siilasmaa and Philippe Camus had a telephone conversation where they discussed the proposed exchange ratio and status of Nokia’s approach to the transaction.
On March 27, 2015, representatives of Nokia, including Risto Siilasmaa, Rajeev Suri, Timo Ihamuotila and Maria Varsellona met with representatives of Alcatel Lucent, including Philippe Camus, Michel Combes and
Jean Raby in London, England, at the offices of Sullivan & Cromwell. Mr. Siilasmaa and Mr. Suri began the meeting by confirming Nokia’s offer to acquire Alcatel Lucent for 0.538 Nokia Shares for each Alcatel Lucent Share.
Following negotiations between the parties, the representatives of Nokia and Alcatel Lucent agreed on the exchange ratio of 0.5500 Nokia Shares for each Alcatel Lucent Share, subject to the approval of Alcatel Lucent’s board of directors.
On March 29, 2015, Alcatel Lucent’s board of directors met by conference call. A presentation prepared by Zaoui regarding the financial
aspects of the transaction was provided ahead of the meeting. Alcatel Lucent’s management discussed the financial terms of the offer, including an overview of recent performance of Alcatel Lucent Shares and Nokia Shares and other valuation
considerations, the anticipated synergies, the proposed operations and governance structure of the combined company following completion of the Exchange Offer and management’s support for the proposed Exchange Offer. Alcatel Lucent’s board
of directors then discussed the process for the proposed transaction, fairness considerations in respect of the proposed exchange ratio, the possibility to renegotiate the exchange ratio and the availability of potential alternatives to the proposed
transaction. Alcatel Lucent’s board of directors expressed its full support for the Chairman and management team and authorized them to continue discussions with Nokia.
On March 29, 2015, Philippe Camus telephoned Risto Siilasmaa to inform him of the support of Alcatel Lucent’s board of directors for the proposed exchange ratio, subject to agreement on other terms of the
proposed transaction.
On March 30, 2015, representatives of Skadden Arps sent the initial draft of the Memorandum of Understanding to the
representatives of Sullivan & Cromwell.
On April 1, 2015, Risto Siilasmaa had a telephone conversation with Philippe Camus where they
discussed the proposed exchange ratio and communications with the French government.
On April 2, 2015, representatives of Nokia, including Timo
Ihamuotila and Maria Varsellona, and representatives of J.P. Morgan and Skadden Arps met in Paris, France, at the offices of Sullivan & Cromwell with representatives of Alcatel Lucent, including Jean Raby, and the representatives of Zaoui
and Sullivan & Cromwell to discuss the key terms of the Memorandum of Understanding, including responsibility for the regulatory approvals in connection with the Exchange Offer and Exchange Offer conditions.
On April 5, 2015, representatives of Sullivan & Cromwell sent a revised draft of the Memorandum of Understanding to the representatives of Skadden
Arps, which reflected continuing discussions on key terms, including scope of representations, warranties and covenants, closing conditions, allocation of regulatory risk, termination rights, transaction termination fees and board and shareholder
recommendation processes.
On April 6, 2015, representatives of Nokia, including Timo Ihamuotila and Maria Varsellona, J.P. Morgan and Skadden Arps
held a conference call with representatives of Alcatel Lucent, including
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Jean Raby, Zaoui and Sullivan & Cromwell to discuss the key terms of the Memorandum of Understanding, including transaction conditions and termination fees.
On April 8, 2015, representatives of Skadden Arps sent a revised draft of the Memorandum of Understanding to the representatives of Sullivan &
Cromwell, which reflected continuing discussions on key terms, including scope of representations, warranties and covenants, closing conditions, allocation of regulatory risk, termination rights, transaction termination fees and board and
shareholder recommendation processes.
On April 10, 2015 and April 11, 2015, the full management teams of Nokia, including Rajeev Suri, Timo
Ihamuotila and Maria Varsellona, and Alcatel Lucent, including Michel Combes, Jean Raby and Remi Thomas, held reciprocal all-day management presentations and due diligence sessions in London, England, at the offices of Skadden Arps. These reciprocal
due diligence sessions covered, among other things, financial, human resources, legal, pensions, compliance, tax and business line specific diligence matters. Representatives of J.P. Morgan, Zaoui, Skadden Arps and Sullivan & Cromwell also
participated in these sessions.
On April 11, 2015, representatives of Sullivan & Cromwell sent a revised draft of the Memorandum of
Understanding to the representatives of Skadden Arps, which reflected continuing discussions on key terms, including closing conditions, allocation of regulatory risk, termination rights, transaction termination fees and board and shareholder
recommendation processes.
On April 12, 2015, representatives of Nokia, including Rajeev Suri, Timo Ihamuotila and Maria Varsellona, and
representatives of J.P. Morgan and Skadden Arps met with the representatives of Alcatel Lucent, including Michel Combes, Jean Raby and Remi Thomas, and the representatives of Zaoui and Sullivan & Cromwell, in London, England, at the offices
of Skadden Arps to discuss the Memorandum of Understanding. The parties agreed on the scope and timing of the remaining transaction conditions at this meeting.
On April 13, 2015, Michel Combes contacted the Ministry of Economy, Industry and Digital Technology of the French Republic to update them on strategic developments with respect to Alcatel Lucent, following
previous periodic discussions on strategic options under consideration, and to inform them of the likely announcement of a potential transaction between Nokia and Alcatel Lucent in the near term.
On April 13, 2015, representatives of Skadden Arps sent a revised draft of the Memorandum of Understanding to the representatives of Sullivan &
Cromwell, which reflected continuing discussions on key terms, including the minimum tender condition, allocation of regulatory risk, termination rights and transaction termination fees.
On April 13, 2015, Alcatel Lucent was advised that the Nokia board of directors held an in-person meeting in London, England, where the board of directors was updated on the developments in negotiations with
Alcatel Lucent and the transaction timeline.
On April 13, 2015, Alcatel Lucent’s board of directors met in Paris, France, at the offices of
Sullivan & Cromwell and by video conference. The meeting was also attended by members of Alcatel Lucent’s senior management and representatives from Zaoui and Sullivan & Cromwell. Alcatel Lucent’s board of directors
evaluated the terms of the proposed transaction, including the exchange ratio and terms of the draft Memorandum of Understanding. Members of Alcatel Lucent’s senior management updated Alcatel Lucent’s board of directors on developments
with respect to the proposed acquisition of Alcatel Lucent by Nokia since the previous meeting of the board, including the conclusions of the reciprocal due diligence and valuation exercises carried out by Alcatel Lucent in respect of Nokia. Zaoui
and Sullivan & Cromwell reviewed the financial and legal terms of the Memorandum of Understanding,
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based on an advanced draft of the Memorandum of Understanding. Zaoui explained the financial terms of the Exchange Offer and the potential impact on the holders of Alcatel Lucent Shares and
OCEANEs, including the premium implied by the exchange ratio and considerations regarding valuation of Alcatel Lucent and Nokia. Sullivan & Cromwell also discussed the fiduciary duties of Alcatel Lucent’s board of directors in
considering the Memorandum of Understanding and the timetable of the proposed transaction.
On April 13, 2015, rumors of a possible offer or
transaction by Nokia to acquire Alcatel Lucent’s wireless business were publicly reported, following rumors of the potential sale of HERE by Nokia on April 10, 2015.
On April 14, 2015, in response to the rumors, Nokia and Alcatel Lucent issued a joint public announcement prior to the open of markets in Europe confirming that they were in advanced discussions with respect
to a potential full combination, which would take the form of a public exchange offer by Nokia for Alcatel Lucent.
On April 14, 2015,
representatives of Nokia, including Timo Ihamuotila and Maria Varsellona, and representatives of J.P. Morgan and Skadden Arps met with representatives of Alcatel Lucent, including Jean Raby and Remi Thomas, and the representatives of Zaoui and
Sullivan & Cromwell, in Paris, France, at the offices of Skadden Arps to finalize the remaining terms of the Memorandum of Understanding, including agreement on the size of the termination fees.
On April 14, 2015, Alcatel Lucent was advised that the Nokia board of directors held a conference call meeting, where it resolved to approve the proposed
acquisition of Alcatel Lucent and the execution of the Memorandum of Understanding.
On April 14, 2015, Alcatel Lucent’s board of directors
held a conference call meeting, which was also attended by representatives of Alcatel Lucent’s senior management, Zaoui and Sullivan & Cromwell. Management provided an update on discussions with Nokia since the previous board meeting,
while Zaoui and Sullivan & Cromwell reviewed the final financial and legal terms of the Memorandum of Understanding. Zaoui delivered to Alcatel Lucent’s board of directors its oral opinion, which was confirmed by delivery of a written
opinion dated April 14, 2015, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations described in its written opinion, the exchange
ratio proposed to be paid to the holders (other than Nokia and its affiliates) of Alcatel Lucent Shares, including Alcatel Lucent ADSs, pursuant to the Exchange Offer was fair from a financial point of view to such holders, as further described
under the section entitled “—Opinions of Alcatel Lucent’s Financial Advisor” below. The opinion delivered by Zaoui is attached as Annex A to this Schedule 14D-9. Following additional discussion and consideration of the
Memorandum of Understanding and the terms and conditions of the Exchange Offer, Alcatel Lucent’s board of directors unanimously approved the terms of the Memorandum of Understanding and the draft press release announcing the transaction.
On April 15, 2015, Nokia and Alcatel Lucent executed the Memorandum of Understanding.
On April 15, 2015, prior to the open of markets in Europe, Nokia and Alcatel Lucent jointly announced the execution of the Memorandum of Understanding and the proposed acquisition of Alcatel Lucent by Nokia by
way of an exchange offer by Nokia for all outstanding equity securities of Alcatel Lucent.
After the announcement of the execution of the Memorandum of
Understanding, Alcatel Lucent promptly began the information process of its French Group Committee (Comité de Groupe France) in order to obtain its opinion on the proposed public exchange offer. Between April 15, 2015 and
June 1, 2015, Alcatel Lucent, with Nokia’s participation, held a series of meetings with the French Group
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Committee and responded to its information and other requests. The consultations were conducted in accordance with Article L. 2323-23 of the French Labor Code and French practice. On June 1,
2015, Alcatel Lucent’s French Group Committee delivered its opinion, indicating that it does not oppose the proposed acquisition of Alcatel Lucent by Nokia.
On June 4, 2015, further to the French Group Committee consultation process, Alcatel Lucent’s board of directors expressed its full support for the proposed combination with Nokia. The opinion of the
French Group Committee is included as part of Alcatel Lucent’s response offer document approved by the AMF on November 12, 2015 in response to the French Offer filed by Nokia and approved by the AMF on the same day.
In addition, following the execution of the Memorandum of Understanding, Nokia and Alcatel Lucent promptly began the filings and regulatory review processes in all
relevant jurisdictions necessary for the consummation and implementation of the Exchange Offer and the combination of the businesses of Nokia and Alcatel Lucent. As of the date hereof, all material regulatory approvals for the Exchange Offer have
been received. Refer to the section entitled “The Exchange Offer—Legal Matters; Regulatory Approvals” in the exchange offer/prospectus for further discussion of the applicable regulatory approvals.
On October 22, 2015, the board of directors of Nokia approved the submission of the French Offer with the AMF.
On October 28, 2015, Alcatel Lucent’s board of directors met in New York City, United States. The meeting was also attended by representatives of Alcatel
Lucent’s senior management, Zaoui and Sullivan & Cromwell. Management provided an update on discussions with Nokia since the previous board meeting, while Zaoui and Sullivan & Cromwell reviewed the final financial and legal
terms of the Memorandum of Understanding. Zaoui delivered to Alcatel Lucent’s board of directors its updated oral opinion, which was confirmed by delivery of an updated written opinion dated October 28, 2015, to the effect that, as of such
date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations described in its written opinion, the exchange ratio proposed to be paid to the holders (other than Nokia and its
affiliates) of Alcatel Lucent Shares, including Alcatel Lucent ADSs, pursuant to the Exchange Offer was fair from a financial point of view to such holders, as further described under the section entitled “—Opinions of Alcatel
Lucent’s Financial Advisor” below. The updated opinion delivered by Zaoui is attached as Annex B to this Schedule 14D-9. The report on the financial terms of the Exchange Offer by the Independent Expert, which was appointed as
independent expert in accordance with Article 261-1 et seq. of the AMF General Regulation, was delivered to Alcatel Lucent’s board of directors on October 28, 2015. Following additional discussion and consideration of the terms and
conditions of the Exchange Offer, the participating members of Alcatel Lucent’s board of directors, taking into account the factors described in the section entitled “—Reasons for Alcatel Lucent’s Board
Recommendation” below, unanimously determined that the Exchange Offer is in the best interest of Alcatel Lucent, its employees and its stakeholders (including holders of Alcatel Lucent Shares and holders of other Alcatel Lucent Securities),
recommended that all holders of Alcatel Lucent Shares and holders of Alcatel Lucent ADSs tender their Alcatel Lucent Shares and/or their Alcatel Lucent ADSs pursuant to the Exchange Offer and recommended that all holders of OCEANEs tender their
OCEANEs pursuant to the Exchange Offer.
On November 18, 2015, Nokia filed its Schedule TO with the SEC and commenced the U.S. Offer.
Reasons for Approving the Memorandum of Understanding
On April 13, 2015, Alcatel Lucent’s board of directors met in Paris, France, at the offices of Sullivan & Cromwell and by video conference. The
meeting was also attended by members of Alcatel Lucent’s
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senior management and representatives from Zaoui and Sullivan & Cromwell. Alcatel Lucent’s board of directors evaluated the terms of the proposed transaction, including the exchange
ratio and terms of the draft Memorandum of Understanding. Members of Alcatel Lucent’s senior management updated Alcatel Lucent’s board of directors on developments with respect to the proposed acquisition of Alcatel Lucent by Nokia since
the previous meeting of the board, including the conclusions of the reciprocal due diligence and valuation exercises carried out by Alcatel Lucent in respect of Nokia. Zaoui and Sullivan & Cromwell reviewed the financial and legal terms of
the Memorandum of Understanding, based on an advanced draft of the Memorandum of Understanding. Zaoui explained the financial terms of the Exchange Offer and the potential impact on the holders of Alcatel Lucent Shares and OCEANEs, including the
premium implied by the exchange ratio and considerations regarding valuation of Alcatel Lucent and Nokia. Sullivan & Cromwell also discussed the fiduciary duties of Alcatel Lucent’s board of directors in considering the Memorandum of
Understanding and the timetable of the proposed transaction.
On April 14, 2015, Alcatel Lucent’s board of directors held a meeting, which was
also attended by members of Alcatel Lucent’s senior management and representatives from Zaoui and Sullivan & Cromwell, to consider the final financial and legal terms of and entry into the Memorandum of Understanding. At this meeting,
Alcatel Lucent’s board of directors was briefed on the final terms of the Memorandum of Understanding by Sullivan & Cromwell and Zaoui. Zaoui delivered to Alcatel Lucent’s board of directors its oral opinion, which was confirmed
by delivery of a written opinion dated April 14, 2015, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations described in its written
opinion, the exchange ratio proposed to be paid to the holders (other than Nokia and its affiliates) of Alcatel Lucent Shares, including Alcatel Lucent ADSs, pursuant to the Exchange Offer was fair from a financial point of view to such holders, as
further described in the section entitled “—Opinion of Alcatel Lucent’s Financial Advisor” below. The full text of Zaoui’s written opinion dated April 14, 2015, which sets forth a description of the assumptions
made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Zaoui in preparing its opinion, is attached to this Schedule 14D-9 as Annex A. Following additional discussion and consideration of the
Memorandum of Understanding and the terms and conditions of the Exchange Offer, Alcatel Lucent’s board of directors unanimously approved the terms of the Memorandum of Understanding.
In evaluating the Memorandum of Understanding and the transactions contemplated thereby, including the Exchange Offer, Alcatel Lucent’s board of directors consulted with Alcatel Lucent’s senior
management, as well as Zaoui, which was retained by Alcatel Lucent as financial advisor in connection with the Exchange Offer. Alcatel Lucent’s board of directors resolved to approve the Memorandum of Understanding on the basis of numerous
factors, including the following non-exhaustive list of material factors and benefits of the Memorandum of Understanding and the Exchange Offer, each of which Alcatel Lucent’s board of directors believed supported its unanimous determination to
approve the Memorandum of Understanding.
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Premium of Exchange Ratio Over Alcatel Lucent Shares Trading Price. Alcatel Lucent’s board of directors considered that, based on the closing share
price of Nokia Shares (on NASDAQ OMX Helsinki Ltd. (“Nasdaq Helsinki”)) of EUR 7.77 on April 13, 2015, as further described in the section entitled “—Background of the Exchange Offer” above, the exchange
ratio offered an equivalent of EUR 4.27 per Alcatel Lucent Share (or EUR 4.48 per Alcatel Lucent Share on a fully diluted basis), and valued Alcatel Lucent at EUR 15.6 billion on a fully diluted basis, corresponding to:
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a premium to holders of Alcatel Lucent Shares of 11% and a fully diluted premium of 16%, in each case based on the closing price of Alcatel Lucent Shares (on
Euronext Paris) as of April 13, 2015; |
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a premium to holders of Alcatel Lucent Shares of 18% and a fully diluted premium of 24%, in each case based on the weighted average price of Alcatel Lucent
Shares (on Euronext Paris) for the period beginning March 16, 2015 and ending April 13, 2015; |
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a premium to holders of Alcatel Lucent Shares of 28% and a fully diluted premium of 34%, in each case based on the weighted average price of Alcatel Lucent
Shares (on Euronext Paris) for the period beginning January 14, 2015 and ending April 13, 2015; |
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a premium to holders of Alcatel Lucent Shares of 48% and a fully diluted premium of 55%, in each case based on the weighted average price of Alcatel Lucent
Shares (on Euronext Paris) for the period beginning October 14, 2014 and ending April 13, 2015; and |
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a premium to holders of Alcatel Lucent Shares of 54% and a fully diluted premium of 61%, in each case based on the weighted average price of Alcatel Lucent
Shares (on Euronext Paris) for the period beginning April 11, 2014 and ending April 13, 2015. |
The fully
diluted premiums above reflect the implied premium paid by Nokia to Alcatel Lucent’s market capitalization, based on volume weighted average price of Alcatel Lucent Shares over the referenced period, as adjusted for the dilutive effect of the
OCEANEs, which represent a substantial portion of Alcatel Lucent Shares on a fully diluted basis.
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Premium Over Historical Exchange Ratio. Alcatel Lucent’s board of directors considered that the exchange ratio of 0.5500 represented a premium to the
historical average ratios of the volume weighted average price of Alcatel Lucent Shares to the volume weighted average price of Nokia over various periods, in particular: |
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a premium to holders of Alcatel Lucent Shares of 11% and a fully diluted premium of 16% to the historical exchange ratio of 0.497, based on the closing price of
Alcatel Lucent Shares (on Euronext Paris) and Nokia Shares (on Nasdaq Helsinki) as of April 13, 2015; |
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a premium to holders of Alcatel Lucent Shares of 11% and a fully diluted premium of 16% to the historical exchange ratio of 0.497, based on the weighted average
price of Alcatel Lucent Shares (on Euronext Paris) and Nokia Shares (on Nasdaq Helsinki), in each case for the period beginning March 16, 2015 and ending April 13, 2015; |
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a premium to holders of Alcatel Lucent Shares of 16% and a fully diluted premium of 21% to the historical exchange ratio of 0.475, based on the weighted average
price of Alcatel Lucent Shares (on Euronext Paris) and Nokia Shares (on Nasdaq Helsinki), in each case for the period beginning January 14, 2015 and ending April 13, 2015; |
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a premium to holders of Alcatel Lucent Shares of 28% and a fully diluted premium of 35% to the historical exchange ratio of 0.428, based on the weighted average
price of Alcatel Lucent Shares (on Euronext Paris) and Nokia Shares (on Nasdaq Helsinki), in each case for the period beginning October 14, 2014 and ending April 13, 2015; and |
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a premium to holders of Alcatel Lucent Shares of 27% and a fully diluted premium of 33% to the historical exchange ratio of 0.435, based on the weighted average
price of Alcatel Lucent Shares (on Euronext Paris) and Nokia Shares (on Nasdaq Helsinki), in each case for the period beginning April 11, 2014 and ending April 13, 2015. |
The fully diluted premiums above reflect the implied premium paid by Nokia to Alcatel Lucent’s market capitalization, based on volume weighted
average price of Alcatel Lucent Shares over the referenced period, as adjusted for the dilutive effect of the OCEANEs, which represent a substantial portion of Alcatel Lucent Shares on a fully diluted basis.
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Implied Premium on a Fully Diluted Basis. Alcatel Lucent’s board of directors considered the premium implied by the exchange ratio on a fully diluted
basis taking into account the Alcatel Lucent Shares issuable upon exercise of Alcatel Lucent Stock Options, vesting of |
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Performance Shares and conversion/exchange of OCEANEs (including the effect of the Exchange Offer on the terms of the OCEANEs). In particular, Alcatel Lucent’s board of directors considered
that the opening of the Exchange Offer will result in an adjustment to the conversion/exchange ratio of each series of OCEANEs. Alcatel Lucent’s board of directors also considered that the 2019 OCEANEs and the 2020 OCEANEs, as a result of the
adjustment to the conversion/exchange ratio of each series and taking into account that the exchange ratio offered an equivalent of EUR 4.27 per Alcatel Lucent Share, based on the closing price of Nokia Shares of EUR 7.77 on April 13,
2015, had an implied value upon conversion/exchange in excess of their respective principal amounts. Alcatel Lucent’s board of directors considered that, as a result of the fixed exchange ratio, a greater number of Nokia Shares would be
issuable to holders of Alcatel Lucent Securities on a fully diluted basis than the number of Nokia Shares that would be issuable without taking these factors into account. Alcatel Lucent’s board of directors also considered that subsequent
changes in the price of Alcatel Lucent Shares or Nokia Shares may affect the decision of holders of OCEANEs to convert/exchange their OCEANEs into Alcatel Lucent Shares or to tender their OCEANEs into the Exchange Offer, which could have a
corresponding impact on the number of Nokia Shares actually issued to holders of Alcatel Lucent Securities upon completion of the Exchange Offer. Alcatel Lucent’s board of directors considered that fully diluted premiums provided a meaningful
assessment of the premium implied by the exchange ratio. For an explanation of the calculation of fully diluted premium, based on the closing price of Nokia Shares of EUR 7.77 on April 13, 2015, reference is made to Appendix 1 of the Press
Release on Announcement of the Exchange Offer, a copy of which is included in Exhibit (a)(7) to this Schedule 14D-9 and is incorporated herein by reference. |
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Negotiation Process and Procedural Fairness. Alcatel Lucent’s board of directors considered the fact that the terms of the Memorandum of
Understanding and the Exchange Offer were the result of robust arm’s-length negotiations conducted by Alcatel Lucent, with the knowledge and at the direction of Alcatel Lucent’s board of directors, and with the assistance of its financial
and legal advisors. Alcatel Lucent’s board of directors believed that, as a result of such process, it has obtained Nokia’s best and final offer, and that, as of the date of the Memorandum of Understanding, the exchange ratio represented
the highest implied consideration per Alcatel Lucent Share reasonably obtainable. |
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Business and Financial Condition of Alcatel Lucent. Alcatel Lucent’s board of directors considered the current and historical financial condition,
results of operations, business, competitive position, properties, assets and prospects of Alcatel Lucent. Alcatel Lucent’s board of directors evaluated, based on their knowledge of and their familiarity with Alcatel Lucent’s business,
financial condition and results of operations, Alcatel Lucent’s financial plan and prospects of Alcatel Lucent if it were to remain independent. Alcatel Lucent’s board of directors considered Alcatel Lucent’s current financial plan,
including the risks associated with achieving and executing upon Alcatel Lucent’s business plans, as well as the industry, economic and market conditions and trends in the markets and competitive environment in which Alcatel Lucent operates.
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Business and Financial Condition of Nokia. Alcatel Lucent’s board of directors considered, based on the diligence exercise conducted, the current and
historical financial condition, results of operations, business, competitive position, properties, assets and prospects of Nokia, as well as the industry, economic and market conditions and trends in the markets and competitive environment in which
Nokia operates. |
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Strategic Alternatives. Alcatel Lucent’s board of directors considered potential alternatives to the Exchange Offer, including the possibility that
Alcatel Lucent would continue to operate as an independent entity, the potential benefits to the holders of Alcatel Lucent Securities of these alternatives and the timing and likelihood of successfully completing such alternatives,
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as well as the belief of Alcatel Lucent’s board of directors that none of these alternatives was reasonably likely to create greater value for the holders of Alcatel Lucent Securities taking
into account risks of execution as well as business, competitive, industry and market risks. Alcatel Lucent’s board of directors also considered the fact that Alcatel Lucent had actively explored transactions other than the Exchange Offer with
other market participants as described in the section entitled “—Background of the Exchange Offer” above. |
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Participation in the Future of the Combined Businesses. Alcatel Lucent’s board of directors considered that the combination of the businesses will
continue to offer holders of Alcatel Lucent Securities who participate in the Exchange Offer and receive Nokia Shares or Nokia ADSs would have the opportunity to participate in any future earnings or growth of the combined businesses of Alcatel
Lucent and Nokia and benefit from any potential future appreciation in the value of the Nokia Shares or Nokia ADSs. In particular, Alcatel Lucent’s board of directors considered the following factors in relation to participation of holders of
Alcatel Lucent Securities in the future of the combined businesses: |
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a combination of the businesses of Nokia and Alcatel Lucent would offer a unique opportunity to create a European champion and global leader in ultra-broadband,
IP networking and cloud applications and provide a platform to accelerate Alcatel Lucent’s strategic vision, with the financial strength and critical scale needed to develop the next generation of network technology, including 5G;
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the combined businesses would be expected to have strong innovation capabilities, with Alcatel Lucent’s Bell Labs and Nokia’s FutureWorks, as well as
Nokia Technologies, which Nokia stated would remain as a separate entity with a clear focus on licensing and the incubation of new technologies, and with more than 40 000 R&D employees and investment of EUR 4.7 billion in R&D in 2014,
the combined businesses would be in a position to accelerate development of future technologies including 5G, IP and software-defined networking, cloud, analytics as well as sensors and imaging; |
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Alcatel Lucent and Nokia also have highly complementary portfolios and geographies, with particular strength in the United States, China, Europe and
Asia-Pacific, and would be expected to bring together complementary strengths in fixed and mobile broadband, IP routing, core networks, cloud applications and services; |
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the combined businesses would be positioned to target a larger addressable market with an improved growth profile as compared to Alcatel Lucent as a standalone
business, and the belief of Alcatel Lucent’s board of directors that consumers are increasingly seeking to access data, voice and video across networks, creating an environment in which technology that used to operate independently now needs to
work together, and the belief of Alcatel Lucent’s board of directors that the combined businesses would be well-placed to assist telecom operators, internet providers and other large enterprises address this challenge;
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the combination of the businesses of Alcatel Lucent and Nokia would target approximately EUR 900 million of full-year operating cost synergies within three
years, assuming closing of the transaction in the first half of 2016, in a wide range of areas, including (i) organizational streamlining, rationalization of overlapping products and services, central functions, and regional and sales
organizations; (ii) reduction of various overhead costs in real estate, manufacturing and supply-chain, information technology and overall general and administrative expenses, including redundant public company costs; (iii) procurement
given expanded purchasing requirements of the combined businesses; and (iv) R&D efficiencies, particularly in wireless; |
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the combined businesses would also target reductions in interest expenses of approximately EUR 200 million to be achieved on a full year basis in 2017, with
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Exchange Offer expected to be accretive to Nokia earnings on a non-IFRS basis (excluding restructuring charges and amortization of intangibles) in 2017; |
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the combined businesses would be expected to have a strong balance sheet; |
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Nokia has stated its intention to maintain its long term target to return to an investment grade credit rating and manage the combined capital structure
accordingly by retaining significant gross and net cash positions and by proactively reducing indebtedness, including through exercise of an early repayment option for its EUR 750 million convertible bond in the fourth quarter of 2015, which is
expected to result in the full conversion of this convertible bond to equity prior to the closing of the Exchange Offer, with no expected cash outflow; |
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although Nokia has stated that it has suspended its capital structure optimization program, including suspending the share repurchase program execution,
effective immediately, until the completion of the Exchange Offer, it has also indicated that it intends to evaluate the resumption of a capital structure optimization program for the combined businesses of Alcatel Lucent and Nokia;
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Nokia’s statement that Nokia Technologies, a source of innovation, expertise and intellectual property, would not be impacted by the Exchange Offer and will
remain as a separate entity with a clear focus on incubating new technologies and sharing those technologies through an active licensing program; and |
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the combined businesses of Alcatel Lucent and Nokia, would be expected to have increased scale and scope in a variety of dimensions, including increased
financial scale, greater diversification of markets, and a larger product portfolio than Alcatel Lucent alone, thereby diversifying certain of the risks associated with holding Alcatel Lucent Securities alone. |
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Opinion of Alcatel Lucent’s Financial Advisor. Alcatel Lucent’s board of directors considered the oral opinion of Zaoui delivered to it on
April 14, 2015, which was confirmed by delivery of a written opinion dated April 14, 2015, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications
and limitations described in its written opinion, the exchange ratio proposed to be paid to the holders (other than Nokia and its affiliates) of Alcatel Lucent Shares, including Alcatel Lucent ADSs, pursuant to the Exchange Offer was fair from a
financial point of view to such holders, as further described in the section entitled “—Opinion of Alcatel Lucent’s Financial Advisor” below. The full text of Zaoui’s written opinion dated April 14, 2015, which
sets forth a description of the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Zaoui in preparing its opinion, is attached to this Schedule 14D-9 as Annex A.
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Due Diligence. Alcatel Lucent’s board of directors considered the scope of the due diligence investigation of Nokia conducted by Alcatel
Lucent’s management, including (i) several days of reciprocal business due diligence sessions attended by representatives of Alcatel Lucent and Nokia, (ii) a detailed review of Nokia’s financial statements with the assistance of
outside advisors, (iii) dedicated diligence sessions on the strategy and operations of HERE and Nokia Technologies and (iv) the responses to diligence requests provided by representatives of Nokia in further management presentations or
discussions with representatives of Alcatel Lucent responses; |
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Employee Matters and French Commitments. Alcatel Lucent’s board of directors considered that Nokia has stated that it intends to maintain employment
in France that is consistent with Alcatel Lucent’s end-2015 Shift Plan commitments, with a particular focus on the key sites of Villarceaux (Essonne) and Lannion (Côtes d’Armor). In addition, Nokia has stated that it
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expects to expand R&D employment with the addition of several hundred new positions targeting recent graduates with skills in future-oriented technologies, including 5G, to ensure ongoing
support for customers, activities for support services, and that pre- and post-sales are expected to continue as well. |
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Governance of Nokia. Alcatel Lucent’s board of directors considered Nokia’s intention for the combined business following completion of the
Exchange Offer to include a leadership team built on strengths of both Nokia and Alcatel Lucent and the commitment by Nokia pursuant to the Memorandum of Understanding for the Corporate Governance & Nomination committee of Nokia’s
board of directors and Alcatel Lucent to jointly identify three nominees to Nokia’s board of directors. Alcatel Lucent’s board of directors considered that the election of these director nominees would be subject to a completion of the
Exchange Offer and the approval at Nokia’s extraordinary general meeting by Nokia shareholders representing at least a majority of the votes cast. |
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Likelihood of Completion. Alcatel Lucent’s board of directors considered its belief that the Exchange Offer will likely be completed, based on, among
other factors: |
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the absence of any financing condition to completion of the Exchange Offer, given the consideration is payable in Nokia Shares; |
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the fact that the conditions to the commencement and completion of the Exchange Offer are specific and limited in scope; |
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its expectation that required regulatory and antitrust approvals would be obtained within a reasonable timeframe; and |
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Alcatel Lucent’s ability under the Memorandum of Understanding to pursue damages in certain circumstances. |
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Termination Fees Payable by Nokia. Alcatel Lucent’s board of directors considered that the Memorandum of Understanding may require Nokia to pay
termination fees to Alcatel Lucent in the event the Memorandum of Understanding is terminated under specified circumstances, including: |
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a termination fee of EUR 150 million for termination by Alcatel Lucent or Nokia for the failure of Nokia to obtain the Nokia Shareholder Approval;
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a termination fee of EUR 300 million for termination by Alcatel Lucent for (i) a Nokia Change in Board Recommendation (as defined in the section
entitled “The Memorandum of Understanding—Nokia Change in Board Recommendation” in the exchange offer/prospectus) or (ii) a material breach by Nokia of certain obligations under the Memorandum of Understanding and Nokia
having taken deliberate action to frustrate the Nokia Shareholder Approval; |
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a termination fee of EUR 100 million for termination by Alcatel Lucent for failure to receive the required foreign investment approval in France; and
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a termination fee of EUR 400 million for termination by Alcatel Lucent or Nokia for failure to receive certain required regulatory and antitrust approvals,
other than the foreign investment approval in France, or as a result of an injunction or law prohibiting the Exchange Offer. |
Alcatel Lucent’s board of directors considered that the amount of the termination fees that may be payable by Nokia were comparable to fees in transactions of a similar size, including transactions in the
European market, were reasonable in light of the circumstances, were likely to encourage Nokia to comply with the terms of the Memorandum of Understanding and promote the completion of the Exchange Offer. Alcatel Lucent’s board of directors
also
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considered provisions regarding the possible limitations on Nokia’s payment of termination fees as a result of such fees being found unlawful or unenforceable. Alcatel Lucent’s board of
directors also recognized that the provisions in the Memorandum of Understanding relating to these termination fees and the amounts of such termination fees were determined following robust arm’s-length negotiations.
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Other Terms of the Memorandum of Understanding. Alcatel Lucent’s board of directors considered the other terms of the Memorandum of Understanding,
which are more fully described in the section entitled “The Memorandum of Understanding” in the exchange offer/prospectus. Certain other terms of the Memorandum of Understanding that Alcatel Lucent’s board of directors
considered important included: |
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Minimum Tender Condition. Completion of the Exchange Offer is conditioned on the satisfaction of the Minimum Tender Condition, which, if satisfied, would
demonstrate strong support for the Exchange Offer by holders of Alcatel Lucent Securities because satisfaction of the Minimum Tender Condition would require that at least a majority of Alcatel Lucent Shares (calculated on a fully-diluted basis)
would have been tendered in the Exchange Offer and not withdrawn. Alcatel Lucent’s board of directors also considered that the Minimum Tender Condition, as a result of being determined by a majority of Alcatel Lucent Shares (calculated on a
fully-diluted basis), was more likely to be satisfied than a higher threshold and more likely to provide certainty to holders of Alcatel Lucent Securities that Nokia would complete the Exchange Offer. Alcatel Lucent’s board therefore viewed the
Minimum Tender Condition as preferable to potentially higher minimum levels for tenders in the Exchange Offer. Alcatel Lucent’s board of directors also considered that Nokia would have the ability to waive potentially higher minimum levels for
tenders in the Exchange Offer and have greater optionality in respect of completion of the Exchange Offer. Alcatel Lucent’s board of directors considered that, subject to applicable SEC and AMF rules and regulations, Nokia reserves the right,
in its sole discretion, to waive the Minimum Tender Condition, but cannot waive the Mandatory Minimum Acceptance Threshold. |
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Ability to Respond to Certain Unsolicited Alternate Proposals. If at any time Alcatel Lucent receives a bona fide written Alternate Proposal (as defined
in the section entitled “The Memorandum of Understanding—No Solicitation of Alternate Proposals” in the exchange offer/prospectus) or any written request for non-public information or inquiry relating to Alcatel Lucent by any
person or group of persons who has or is expected to make any bona fide written Alternate Proposal, in each case that Alcatel Lucent’s board of directors determines in good faith constitutes or is reasonably likely to lead to a Superior
Proposal (as defined in the section entitled “The Memorandum of Understanding—No Solicitation of Alternate Proposals” in the exchange offer/prospectus), Alcatel Lucent may engage or otherwise participate in any discussions or
negotiations (including by way of furnishing non-public information or granting access to any of the properties or assets of Alcatel Lucent or its subsidiaries), subject to certain conditions as described in the section entitled “The
Memorandum of Understanding—No Solicitation of Alternate Proposals” in the exchange offer/prospectus. |
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Ability of Alcatel Lucent to Change Board Recommendation in Response to Superior Proposal. At any time, Alcatel Lucent’s board of directors may make
a Change in Alcatel Lucent Board Recommendation (as defined in the section entitled “The Memorandum of Understanding—Change in Alcatel Lucent Board Recommendation” in the exchange offer/prospectus) in response to the receipt of
any bona fide written Alternate Proposal that Alcatel Lucent’s board of directors determines in good faith constitutes a Superior Proposal, subject to certain conditions as described in the section entitled “The Memorandum of
Understanding—Change in Alcatel Lucent Board Recommendation” in |
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the exchange offer/prospectus. Alcatel Lucent’s board of directors considered that a termination fee of EUR 300 million may be payable by Alcatel Lucent to Nokia following termination
of the Memorandum of Understanding by Alcatel Lucent or Nokia for a Change in Alcatel Lucent Board Recommendation in response to a Superior Proposal. |
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Ability of Alcatel Lucent to Change Board Recommendation in Response to an Alcatel Lucent Intervening Event. At any time prior to the filing of the French
Offer with the AMF, Alcatel Lucent’s board of directors may make a Change in Alcatel Lucent Board Recommendation in response to an Alcatel Lucent Intervening Event (as defined in the Memorandum of Understanding), which may result from certain
changes that were unknown and not reasonably foreseeable by Alcatel Lucent’s board of directors on the date of the Memorandum of Understanding, subject to certain conditions. Alcatel Lucent’s board of directors considered that a
termination fee of EUR 300 million may be payable by Alcatel Lucent to Nokia following termination of the Memorandum of Understanding by Nokia for a Change in Alcatel Lucent Board Recommendation in response to an Alcatel Lucent Intervening
Event. |
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Ability of Alcatel Lucent to Change Board Recommendation in Response to Nokia Material Adverse Effect. At any time after the filing of the French Offer
with the AMF and following reasonable notice to Nokia, Alcatel Lucent’s board of directors may make a Change in Alcatel Lucent Board Recommendation in response to a Material Adverse Effect (as defined in the Memorandum of Understanding) with
respect to Nokia, if Alcatel Lucent’s board of directors determines in good faith (after consultation with its outside legal counsel and financial advisors) that its failure to do so would be inconsistent with its fiduciary duties under
applicable law. |
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Standstill. In the event that the Memorandum of Understanding is terminated by Alcatel Lucent for a material breach by Nokia of certain obligations under
the Memorandum of Understanding or a Nokia Change in Board Recommendation, then for the longer of (i) 12 months following the date of such termination and (ii) 18 months following the date of the Memorandum of Understanding, Nokia has
agreed, subject to certain exceptions, not to acquire or offer to acquire any equity securities of Alcatel Lucent. |
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Long-Stop Date. Alcatel Lucent’s board of directors believed that the long-stop date of the Memorandum of Understanding, which is June 30, 2016
(and which may be extended to September 30, 2016 in certain circumstances), allows for sufficient time to file the French Offer while minimizing the length of time that Alcatel Lucent would be required to operate subject to interim operating
covenants. |
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Cooperation. Nokia has agreed to cooperate with Alcatel Lucent and to use its reasonable best efforts to cause the conditions to the Exchange Offer to be
satisfied and to launch and complete the Exchange Offer as promptly as reasonably practicable. Nokia has also agreed to use its commercially reasonable best effort to obtain all consents pursuant to contracts to which Alcatel Lucent or its
subsidiaries is a party as is reasonably necessary or advisable in connection with the completion of the Exchange Offer. |
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Alcatel Lucent Material Adverse Effect. The Memorandum of Understanding excludes certain matters when determining whether a Material Adverse Effect (as
defined in the Memorandum of Understanding) has occurred with respect to Alcatel Lucent, the occurrence of which would permit Nokia to terminate the Memorandum of Understanding. The exclusions comprise (i) any change in global, national or
regional political conditions (including the outbreak of, or changes in, war, acts of terrorism or other hostilities) or in general global, national or regional economic, regulatory or market conditions or in national or global financial or capital
markets, so long as in each case such changes do |
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not disproportionately impact Alcatel Lucent and its subsidiaries relative to other participants in the same or similar industries; (ii) any change in applicable accounting principles or any
adoption, implementation or change in any applicable law (including any law in respect of taxes) or any interpretation thereof by a relevant authority; (iii) any change generally affecting similar industries or market sectors in the geographic
regions in which Alcatel Lucent and its subsidiaries operate, so long as in each case such changes do not disproportionately impact the Person and its Subsidiaries relative to other participants in the same or similar industries; (iv) the
negotiation, execution, announcement or performance of the Memorandum of Understanding or completion of the transactions contemplated thereby; (v) any change or development to the extent resulting from any action by Alcatel Lucent and its
subsidiaries that is expressly required to be taken by the Memorandum of Understanding; (vi) any change resulting from or arising out of hurricanes, earthquakes, floods, or other natural disasters; (vii) the failure of Alcatel Lucent and
its subsidiaries to meet any internal or public projections, forecasts or estimates of performance, revenues or earnings (it being understood that any change, condition, effect, event or occurrence that caused such failure but that are not otherwise
excluded from the definition of Material Adverse Effect may constitute or contribute to a Material Adverse Effect); (viii) the announcement of Nokia as the prospective acquirer of Alcatel Lucent and its subsidiaries or any announcements or
communications by or authorized by Nokia regarding Nokia’s plans or intentions with respect to Alcatel Lucent and its subsidiaries (including the impact of any such announcements or communications on relationships with customers, suppliers,
employees or regulators); or (ix) any actions (or the effects of any actions) taken (or omitted to be taken) by Alcatel Lucent and its subsidiaries upon the written request or written instruction of, or with the written consent of, Nokia.
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In reaching its determination and recommendation described above, Alcatel Lucent’s board of directors also considered the
following potentially negative factors:
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Fixed Exchange Ratio. Alcatel Lucent’s board of directors considered the fact that because the consideration for Alcatel Lucent Shares in the
Exchange Offer is a fixed exchange ratio of Nokia Shares, holders of Alcatel Lucent Shares could be adversely affected by a decrease in the trading price of the Nokia Shares and the fact that neither the Memorandum of Understanding nor the terms of
the Exchange Offer provide for any adjustment of the exchange ratio if the trading price of Nokia Shares decreases or a price-based termination right or other similar protection in favor of Alcatel Lucent or holders of Alcatel Lucent Shares. Alcatel
Lucent’s board of directors determined that this structure was appropriate and the risk acceptable in view of the ability of each holder of Alcatel Lucent Securities to choose whether to accept the exchange ratio at the time of the Exchange
Offer. Alcatel Lucent’s board of directors also considered the opportunity holders of Alcatel Lucent Shares have as a result of the fixed exchange ratio to benefit from any increase in the trading price of Nokia Shares between the announcement
and completion of the Exchange Offer. |
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Integration. Alcatel Lucent’s board of directors considered the risk that the potential benefits of the Exchange Offer and the combination of the
businesses of Alcatel Lucent and Nokia, including any potential synergies relating to the combination of the businesses of Alcatel Lucent and Nokia, will not be realized or will not be realized within the expected time period and the risks and
challenges associated with the integration, including as a result of less than all Alcatel Lucent Securities being acquired by Nokia in the Exchange Offer or any subsequent squeeze-out. Alcatel Lucent’s board of directors considered that, based
on the level of diligence conducted by Nokia and the discussions regarding the proposed integration process, the integration of the businesses of Alcatel Lucent and Nokia was reasonably likely to be completed within a reasonable time following the
completion of the Exchange Offer. |
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Risks the Exchange Offer May Not Be Completed. Alcatel Lucent’s board of directors considered the risk that any of the conditions to the commencement
or completion of the Exchange Offer, including receipt of required regulatory and antitrust approvals, receipt of the Nokia Shareholder Approval and satisfaction of the Minimum Tender Condition, would not be satisfied and that the Exchange Offer may
therefore not be completed. In particular, Alcatel Lucent’s board of directors considered that the resolution contemplated by the Nokia Shareholder Approval must be approved by shareholders representing at least two-thirds of the votes cast and
Nokia Shares represented at such extraordinary general meeting of Nokia’s shareholders. Alcatel Lucent’s board of directors also considered the risks and costs to Alcatel Lucent if the Exchange Offer is not completed, including the
diversion of management and employee attention, potential employee attrition, the potential effect on vendors, distributors, customers, partners and others that do business with Alcatel Lucent and the potential effect on the trading price of Alcatel
Lucent Securities. Alcatel Lucent’s board of directors considered its expectation that required regulatory and antitrust approvals would be obtained within a reasonable timeframe, as well as the fact that termination fees may be payable by
Nokia to Alcatel Lucent following termination of the Memorandum of Understanding for failure to receive required regulatory or antitrust approvals. Alcatel Lucent’s board of directors also considered that the opening of the Exchange Offer would
result in an adjustment to the conversion/exchange ratio of the OCEANEs, and that such adjustment would have a corresponding dilutive effect on other holders of Alcatel Lucent Securities even if the Exchange Offer is not completed.
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Nokia Shareholder Approval. Alcatel Lucent’s board of directors considered that Nokia’s obligation to accept, and to exchange, any Alcatel
Lucent Securities validly tendered into the Exchange Offer would be subject to receipt of the Nokia Shareholder Approval and that there was no guarantee that such approval would be obtained. In particular, Alcatel Lucent’s board of directors
considered the fact that the Nokia shareholders meeting would not be called until after all relevant regulatory and antitrust approvals had been received and that the resolution contemplated by the Nokia Shareholder Approval must be approved by
Nokia shareholders representing at least two-thirds of the votes cast and Nokia Shares represented at such extraordinary general meeting of Nokia’s shareholders. Alcatel Lucent’s board of directors also considered that a termination fee of
EUR 150 million may be payable by Nokia to Alcatel Lucent following termination of the Memorandum of Understanding by Alcatel Lucent or Nokia for failure of Nokia shareholders to approve the authorization for Nokia’s board of directors to
issue such number of new Nokia Shares as may be necessary for delivering the Nokia Shares offered in consideration for Alcatel Lucent Securities tendered into the Exchange Offer and for the completion of the Exchange Offer.
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Ability of Nokia to Change Board Recommendation in Response to a Nokia Intervening Event. At any time prior to the Nokia shareholder vote, Nokia’s
board of directors may make a Change in Nokia Board Recommendation in response to a Nokia Intervening Event (each as defined in the section entitled “The Memorandum of Understanding—Change in Nokia Board Recommendation” in the
exchange offer/prospectus), which may result from certain changes that were unknown and not reasonably foreseeable by Nokia’s board of directors on the date of the Memorandum of Understanding, subject to certain conditions as described in the
section entitled “The Memorandum of Understanding—Change in Nokia Board Recommendation” in the exchange offer/prospectus. Alcatel Lucent’s board of directors considered that a termination fee of EUR 300 million may be
payable by Nokia to Alcatel Lucent following termination of the Memorandum of Understanding by Alcatel Lucent for a Nokia Change in Board Recommendation in response to a Nokia Intervening Event. |
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Non-Solicitation Covenant. Alcatel Lucent’s board of directors considered that the Memorandum of Understanding requires Alcatel Lucent not to and to
cause its subsidiaries not to and to use its reasonable best efforts to cause its and its subsidiaries’ senior officers, directors or representatives not to solicit alternate proposals from third parties with respect to the purchase of Alcatel
Lucent Securities or assets or other business combination transactions. However, based upon Alcatel Lucent’s prior exploration of certain strategic alternatives, as described in the section entitled “—Background of the Exchange
Offer” above, Alcatel Lucent’s board of directors believed it had a strong basis for determining that the Exchange Offer was the best transaction reasonably likely to be available to Alcatel Lucent, and that Alcatel Lucent’s board
of directors retained the ability to respond to certain unsolicited Alternate Proposals and make a Change in Alcatel Lucent Board Recommendation in response to a Superior Proposal. |
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Expense Reimbursement and Termination Fees Payable by Alcatel Lucent. Alcatel Lucent’s board of directors considered that the Memorandum of
Understanding may require Alcatel Lucent to pay expense reimbursement or termination fees in specified circumstances, including: |
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an expense reimbursement of up to EUR 40 million for termination by Alcatel Lucent or Nokia in circumstances relating to the Independent Expert Report or
Alcatel Lucent French Group Committee process; |
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an expense reimbursement of EUR 100 million for termination by Alcatel Lucent or Nokia in circumstances relating completion of a second Alcatel Lucent
French Group Committee process required as a result of material changes in commitments to the government of France which are materially adverse to Alcatel Lucent’s employees; |
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a termination fee of EUR 300 million for (i) termination by Alcatel Lucent or Nokia for withdrawal of the French Offer following any decision or
measure by Alcatel Lucent’s board of directors leading to such withdrawal, (ii) termination by Alcatel Lucent or Nokia following a Change in Alcatel Lucent Board Recommendation in response to a Superior Proposal or (iii) termination
by Nokia for a Change in Alcatel Lucent Board Recommendation other than in response to a Superior Proposal or a Material Adverse Effect in respect of Nokia; and |
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a termination fee of EUR 300 million for termination by Alcatel Lucent or Nokia for failure of the Minimum Tender Condition where (i) there has been a
public announcement of an Alternate Proposal, (ii) there has been no Change in Alcatel Lucent Board Recommendation, and (iii) Alcatel Lucent later enters into and completes such Alternate Proposal. |
Alcatel Lucent’s board of directors considered that the amount of the expense reimbursement and termination fees were comparable to fees in
transactions of a similar size, including transactions in the European market, were reasonable in light of the circumstances and were not likely to deter alternate proposals. Alcatel Lucent’s board of directors also considered provisions
regarding the possible limitations on Alcatel Lucent’s payment of termination fees as a result of such fees being found unlawful or unenforceable. Alcatel Lucent’s board of directors also recognized that the provisions in the Memorandum of
Understanding relating to these fees were insisted upon by Nokia as a condition to entering into the Memorandum of Understanding, and the amounts were determined following robust arm’s-length negotiations.
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Interim Operating Covenants. Alcatel Lucent’s board of directors considered that from the date of the Memorandum of Understanding until the earlier
to occur of the Exchange Offer completion date or the termination of the Memorandum of Understanding, Alcatel Lucent has agreed to conduct its business and the business of its subsidiaries in the ordinary course
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consistent with past practice. The Memorandum of Understanding also imposes restrictions on the conduct of Alcatel Lucent’s business prior to the completion of the Exchange Offer that may
limit Alcatel Lucent and its subsidiaries from taking specified actions, which may delay or prevent Alcatel Lucent from undertaking business opportunities that may arise pending completion of the Exchange Offer including in respect of issuances,
sales and disposals of Alcatel Lucent Securities, incurrence of indebtedness, creation of liens, sales or disposals of assets, settlement of litigation, amendment or termination of material contracts, entry into non-competes that would restrict the
business of Nokia or materially restrict the business of Alcatel Lucent and maintenance of intellectual property rights. |
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Potential Conflicts of Interest. Alcatel Lucent’s board of directors considered the potential conflict of interest created by the fact that Alcatel
Lucent’s directors and executive officers may have financial interests in the transactions contemplated by the Memorandum of Understanding, including the Exchange Offer, that may be different from or in addition to those of other holders of
Alcatel Lucent Securities, as described in the section entitled “Item 3. Past Contacts, Transactions, Negotiations and Agreements” above. |
In the course of reaching its determination to approve the Memorandum of Understanding and the transactions contemplated thereby, including the Exchange Offer, Alcatel Lucent’s board of directors considered
numerous factors, including the factors specified in the foregoing discussion, and Alcatel Lucent’s board of directors concluded that the positive factors relating to the Memorandum of Understanding and the transactions contemplated thereby,
including the Exchange Offer, substantially outweighed the potential negative factors. The foregoing discussion of information and factors considered and given weight by Alcatel Lucent’s board of directors is not intended to be exhaustive, but
includes the principal factors considered by Alcatel Lucent’s board of directors. In view of the variety of factors considered in connection with its evaluation of the Memorandum of Understanding and the transaction contemplated thereby,
including the Exchange Offer, Alcatel Lucent’s board of directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determinations. In addition,
individual members of Alcatel Lucent’s board of directors may have given different weights to different factors.
Reasons for Alcatel
Lucent’s Board Recommendation
In accordance with Article 231-19 of the AMF General Regulation, at its meeting on October 28, 2015, the
participating members of Alcatel Lucent’s board of directors unanimously delivered a reasoned opinion (avis motivé) of the Exchange Offer for Alcatel Lucent, the holders of Alcatel Lucent Securities and Alcatel Lucent’s
employees. The following is a translation from French of the original reasoned opinion of Alcatel Lucent’s board of directors. Certain terminology has been conformed to the defined terms used in this Schedule 14D-9 and certain typographical
conventions have been conformed to United States usage.
“The present reasoned opinion has been reached by the following members of
Alcatel Lucent’s board of directors, who were present: Mr. Philippe Camus, Ms. Carla Cico, Mr. Stuart E. Eizenstat, Ms. Kim Crawford Goodman, Mr. Jean-Cyril Spinetta and Ms. Sylvia Summers, it being specified
that, in light of their proposed nomination to the board of directors of Nokia, Mr. Louis R. Hughes, Mr. Jean C. Monty and Mr. Olivier Piou decided not to participate in the discussions on and not to vote on the reasoned
opinion. Mr. Francesco Caio was absent.
Alcatel Lucent’s board of directors was reminded that in order to diligently complete
its assessment of the Exchange Offer and to reach a reasoned opinion on the Exchange Offer, it was assisted by Zaoui, as financial advisor to Alcatel Lucent, and Sullivan & Cromwell, as legal advisor to Alcatel Lucent.
In accordance with Article 231-19 of the AMF General Regulation and pursuant to the provisions of the Memorandum of Understanding, Alcatel
Lucent’s board of directors was required to provide
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its assessment of the Exchange Offer and the expected impact of the Exchange Offer on Alcatel Lucent, holders of Alcatel Lucent Securities and employees of Alcatel Lucent.
The Chairman of Alcatel Lucent’s board of directors reminded the members of the rationale and the main terms and conditions of the proposed
combination of the businesses of Alcatel Lucent and Nokia, as agreed in the Memorandum of Understanding, dated as of April 15, 2015, as amended by the Memorandum of Understanding Amendment, dated as of October 28, 2015, and as announced on
April 15, 2015. The Chairman also notes that the Exchange Offer is expected to be filed with the AMF on October 29, 2015.
The
Chairman noted to the members that Alcatel Lucent’s board of directors had received the Independent Expert Report of the Independent Expert, Associés en Finance, which was appointed as independent expert in accordance with Article 261-1
et seq. of the AMF General Regulation, on the financial terms of the Exchange Offer.
The Chairman also noted to the members that
representatives of Zaoui presented their oral opinion, which was confirmed by delivery of a written opinion dated October 28, 2015, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed,
matters considered, and qualifications and limitations described in its written opinion, the exchange ratio proposed to be paid to the holders (other than Nokia and its affiliates) of Alcatel Lucent Shares, including Alcatel Lucent ADSs, pursuant to
the Exchange Offer was fair from a financial point of view to such holders.
Alcatel Lucent’s board of directors has also taken the
following into consideration:
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Premium of Exchange Ratio Over Alcatel Lucent Shares Trading Price. Alcatel Lucent’s board of directors considered that, based on the closing share
price of Nokia Shares of EUR 7.77 on April 13, 2015, the exchange ratio offered an equivalent of EUR 4.27 per Alcatel Lucent Share (or EUR 4.48 per Alcatel Lucent Share on a fully diluted basis), and valued Alcatel Lucent at EUR 15.6
billion on a fully diluted basis, corresponding to: |
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a premium to holders of Alcatel Lucent Shares of 11% and a fully diluted premium of 16%, in each case based on the closing price of Alcatel Lucent Shares (on
Euronext Paris) as of April 13, 2015; |
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a premium to holders of Alcatel Lucent Shares of 18% and a fully diluted premium of 24%, in each case based on the weighted average price of Alcatel Lucent
Shares (on Euronext Paris) for the period beginning March 16, 2015 and ending April 13, 2015; |
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a premium to holders of Alcatel Lucent Shares of 28% and a fully diluted premium of 34%, in each case based on the weighted average price of Alcatel Lucent
Shares (on Euronext Paris) for the period beginning January 14, 2015 and ending April 13, 2015; |
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a premium to holders of Alcatel Lucent Shares of 48% and a fully diluted premium of 55%, in each case based on the weighted average price of Alcatel Lucent
Shares (on Euronext Paris) for the period beginning October 14, 2014 and ending April 13, 2015; and |
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a premium to holders of Alcatel Lucent Shares of 54% and a fully diluted premium of 61%, in each case based on the weighted average price of Alcatel Lucent
Shares (on Euronext Paris) for the period beginning April 11, 2014 and ending April 13, 2015. |
The fully
diluted premiums above reflect the implied premium paid by Nokia to Alcatel Lucent’s market capitalization, based on volume weighted average price of Alcatel Lucent Shares over the referenced period, as adjusted for the dilutive effect of the
OCEANEs, which represent a substantial portion of Alcatel Lucent Shares on a fully diluted basis.
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Exchange Ratio for the OCEANEs. Alcatel Lucent’s board of directors considered that the exchange ratio applicable to each series of OCEANEs pursuant
to the Exchange Offer is |
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based on the conversion/exchange ratio applicable to that series, including the temporary adjustment to each of the conversion/exchange ratios as a result of the opening of the French Offer in
accordance with the terms and conditions set out in the prospectus of each series of OCEANEs. The exchange ratio would represent a premium to the historical trading prices of each series of OCEANEs over various periods, including, based on the
closing price of Nokia Shares of EUR 7.77 on April 13, 2015, a premium to holders of 2018 OCEANEs of 28%, a premium to holders of 2019 OCEANEs of 13% and a premium to holders of 2020 OCEANEs of 13%, based on the closing prices of each series of
OCEANEs (on Euronext Paris) as of April 13, 2015 and an opening date of the Exchange Offer of November 18, 2015. Alcatel Lucent’s board of directors considered the conclusions of the Independent Expert reflected in the Independent
Expert Report. In particular, according to the Independent Expert Report, as of April 9, 2015, which was assumed by the Independent Expert to be the latest date prior to rumors of a possible transaction between Alcatel Lucent and Nokia, the
Exchange Offer with respect to the holders of OCEANEs displayed a premium to the intrinsic value (i.e., the value calculated based on certain assumptions defined by the Independent Expert) and to the listed price of each series of OCEANEs. The
Independent Expert Report noted that as of October 23, 2015, the exchange ratio shows a substantial premium to the listed and to the intrinsic values of the 2018 OCEANEs and a very small discount (below 5%) to the listed and intrinsic values of
the 2019 OCEANEs and the 2020 OCEANEs based on their respective 1-month or 3-month averages. In particular, the Independent Expert Report noted that, based on the estimated post-Exchange Offer intrinsic values
of the OCEANEs, the exchange ratio proposed during the Exchange Offer would provide a premium of between 18.8% and 19.0% for the 2018 OCEANEs, a discount of between 0.4% and 3.5% for the 2019 OCEANEs and between a premium of 0.3% and a discount of
2.9% for the 2020 OCEANEs. The exchange ratio proposed for the 2019 OCEANEs and the 2020 OCEANEs pursuant to the Exchange Offer is equivalent to the spot listed prices of the OCEANEs and to their intrinsic values at October 23, 2015. The
Independent Expert Report also noted that it is important to mention that the listed prices and the intrinsic values of the OCEANEs reflect current market conditions and current liquidity levels. The Independent Expert Report noted that holders of
OCEANEs that choose to keep their OCEANEs would, should the Exchange Offer be successful, take the risk of a substantial drop in liquidity of the underlying Alcatel Lucent Shares and of the OCEANEs. The Independent Expert Report also noted that, on
the other hand, should the Exchange Offer fail, such holders of OCEANEs would take the risk of a potential drop in the price of the Alcatel Lucent Shares. The Independent Expert Report concluded that the exchange ratio of 0.6930 Nokia Shares for one
2018 OCEANE, 0.7040 Nokia Shares for one 2019 OCEANE and 0.7040 Nokia Shares for one 2020 OCEANE is fair. |
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Participation in the Future of the Combined Businesses. Alcatel Lucent’s board of directors considered that the combination of the businesses will
continue to offer holders of Alcatel Lucent Securities who participate in the Exchange Offer and receive Nokia Shares the opportunity to participate in any future earnings or growth of the combined businesses of Alcatel Lucent and Nokia and benefit
from any potential future appreciation in the value of the Nokia Shares. In particular, Alcatel Lucent’s board of directors considered the following factors in relation to participation of holders of the Alcatel Lucent Securities in the future
of the combined businesses: |
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a combination of the businesses of Nokia and Alcatel Lucent would offer a unique opportunity to create a European champion and global leader in ultra-broadband,
IP networking and cloud applications and provide a platform to accelerate Alcatel Lucent’s strategic vision, with the financial strength and critical scale needed to develop the next generation of network technology, including 5G;
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the combined businesses would be expected to have strong innovation capabilities, with Alcatel Lucent’s Bell Labs and Nokia’s FutureWorks, as well as
Nokia Technologies, which Nokia stated would remain as a separate entity with a clear focus on licensing and the incubation of new technologies, and with more than 40 000 R&D employees and investment of EUR 4.7 billion in R&D in 2014,
the combined businesses would be in a position to accelerate development of future technologies including 5G, IP and software-defined networking, cloud, analytics as well as sensors and imaging; |
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Alcatel Lucent and Nokia also have highly complementary portfolios and geographies, with particular strength in the United States, China, Europe and
Asia-Pacific, and would be expected to bring together complementary strengths in fixed and mobile broadband, IP routing, core networks, cloud applications and services; |
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the combined businesses would be positioned to target a larger addressable market with an improved growth profile as compared to Alcatel Lucent as a standalone
business, and the belief of Alcatel Lucent’s board of directors that consumers are increasingly seeking to access data, voice and video across networks, creating an environment in which technology that used to operate independently now needs to
work together, and the belief of Alcatel Lucent’s board of directors that the combined businesses would be well-placed to assist telecom operators, internet providers and other large enterprises address this challenge;
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the combination of the businesses of Alcatel Lucent and Nokia would target approximately EUR 900 million of full-year operating cost synergies within three
years, assuming closing of the transaction in the first half of 2016, in a wide range of areas, including (i) organizational streamlining, rationalization of overlapping products and services, central functions, and regional and sales
organizations; (ii) reduction of various overhead costs in real estate, manufacturing and supply-chain, information technology and overall general and administrative expenses, including redundant public company costs; (iii) procurement
given expanded purchasing requirements of the combined businesses; and (iv) R&D efficiencies, particularly in wireless; |
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the combined businesses would also target reductions in interest expenses of approximately EUR 200 million to be achieved on a full year basis in 2017, with
the Exchange Offer expected to be accretive to Nokia earnings on a non-IFRS basis (excluding restructuring charges and amortization of intangibles) in 2017; |
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the combined businesses would be expected to have a strong balance sheet; |
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Nokia has stated its intention to maintain its long term target to return to an investment grade credit rating and manage the combined capital structure
accordingly by retaining significant gross and net cash positions and by proactively reducing indebtedness, including through exercise of an early repayment option for its EUR 750 million convertible bond in the fourth quarter of 2015, which is
expected to result in the full conversion of this convertible bond to equity prior to the completion of the Exchange Offer, with no expected cash outflow; |
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although Nokia has stated that it has suspended its capital structure optimization program, including suspending the share repurchase program execution until the
completion of the Exchange Offer, it has also indicated that it intends to evaluate the resumption of a capital structure optimization program for the combined businesses of Alcatel Lucent and Nokia; |
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Nokia’s statement that Nokia Technologies, a source of innovation, expertise and intellectual property, would not be impacted by the Exchange Offer and will
remain as a separate entity with a clear focus on incubating new technologies and sharing those technologies through an active licensing program; and |
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the combined businesses of Alcatel Lucent and Nokia, would be expected to have increased scale and scope in a variety of dimensions, including increased
financial scale, greater diversification of markets, and a larger product portfolio than Alcatel Lucent alone, thereby diversifying certain of the risks associated with holding Alcatel Lucent Securities alone. |
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Enhanced Scale. Alcatel Lucent’s board of directors considered that the enhanced scale of the combined businesses of Alcatel Lucent and Nokia would
allow more effective competition in an economically challenging environment. Alcatel Lucent’s board of directors also recognized that a combination of the businesses of Alcatel Lucent would be consistent with market preference for large vendors
with scale and scope, particularly in the context of the advent of 5G and related required investments. |
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Rights Attaching to New Nokia Shares. Alcatel Lucent’s board of directors considered that the new Nokia Shares will have the same rights and benefits
as all existing ordinary shares of Nokia, including the right to any future dividend. |
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Integration and Reorganization. Alcatel Lucent’s board of directors considered Nokia’s announcement that the strategic direction of Alcatel
Lucent will be to continue to offer leading solutions in Alcatel Lucent’s business lines by taking advantage of the increased customer base attributable to the combination of Nokia and Alcatel Lucent. Nokia has stated that it intends to
integrate Alcatel Lucent into the Nokia group as soon as possible after the completion of the Exchange Offer. In addition, Nokia has stated that as soon as possible following the completion of the Exchange Offer, it intends to propose changes to the
composition of the Alcatel Lucent board of directors. The composition of the Alcatel Lucent board of directors will take into account the new share ownership structure of Alcatel Lucent and in particular, the ownership level of Nokia. Nokia has also
stated that it currently expects that after the completion of the Exchange Offer, the Nokia Networks business would be conducted through four business groups: Mobile Networks, Fixed Networks, Applications & Analytics and IP/Optical
Networks. Nokia has stated that these business groups would provide an end-to-end portfolio of products, software and services to enable the combined company to deliver the next generation of leading networks solutions and services to customers.
Alongside these, Nokia Technologies would continue to operate as a separate business group. Each business group would have strategic, operational and financial responsibility for its portfolio and would be fully accountable for meeting its targets.
The four Nokia Networks business groups would have a common Integration and Transformation Office to drive synergies and to lead integration activities. Nokia has stated that the business group leaders would report directly to Nokia’s President
and Chief Executive Officer and stated the following: |
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Mobile Networks (MN) would include Nokia’s and Alcatel Lucent’s comprehensive Radio portfolios and most of their converged Core network
portfolios including IMS/VoLTE and Subscriber Data Management, as well as the associated mobile networks-related Global Services business. This unit would also include Alcatel Lucent’s Microwave business and all of the combined company’s
end-to-end Managed Services business. Through the combination of these assets, Mobile Networks would provide leading end-to-end mobile networks solutions for existing and new platforms, as well as a full suite of professional services and
product-attached services. |
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Fixed Networks (FN) would comprise the current Alcatel Lucent Fixed Networks business whose cutting-edge innovation and market position would be further
supported through strong collaboration with the other business groups. This business group would provide copper and fiber access products and services to offer customers ultra-broadband end-to-end solutions to transform their networks, deploying
fiber to the most economical point. |
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Applications & Analytics (A&A) would combine the Software and Data Analytics-related operations of both companies. This comprehensive
applications portfolio would include Customer Experience Management, OSS as distinct from network management such as service fulfilment and assurance, Policy and Charging, services, Cloud Stacks, management and orchestration, communication and
collaboration, Security Solutions, network intelligence and analytics, device management and Internet of Things connectivity management platforms. CloudBand would also be housed in this business group, which would drive innovation to meet the needs
of a convergent, Cloud-centric future. |
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IP/Optical Networks (ION) would combine the current Alcatel Lucent IP Routing, Optical Transport and IP video businesses, as well as the software defined
networking (SDN) startup, Nuage, plus Nokia’s IP partner and Packet Core portfolio. IP/Optical Networks would continue to drive Alcatel-Lucent’s technology leadership, building large scale IP/Optical infrastructures for both service
providers and, increasingly, web-scale and tech-centric enterprise customers. |
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Nokia Technologies (TECH) would remain as a separate entity with a clear focus on licensing and the incubation of new technologies. Nokia Technologies
would continue to have its own innovation, product development and go-to-market operations. |
Nokia has also stated that
it expects to align its financial reporting under two key areas: Nokia Technologies and the Networks business. The Networks business would comprise the business groups of Mobile Networks, Fixed Networks, Applications & Analytics and
IP/Optical Networks. Nokia has also stated that it expects to provide selective financial data separately for each of the four Networks business groups to ensure transparency for Nokia investors over the performance of each of them.
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Strategic Announcements by Nokia. Alcatel Lucent’s board of directors considered Nokia’s announcement on August 3, 2015, of its agreement
to sell its HERE digital mapping and location services business to a consortium of leading automotive companies, comprising AUDI AG, BMW Group and Daimler AG. The transaction values HERE at an enterprise value of EUR 2.8 billion with a normalized
level of working capital and is expected to close in the first quarter of 2016, subject to customary closing conditions and regulatory approvals. Upon closing, Nokia estimates that it will receive net proceeds of slightly above EUR 2.5 billion, as
the purchaser would be compensated for certain defined liabilities of HERE currently expected to be slightly below EUR 300 million as part of the transaction. Alcatel Lucent’s board of directors considered that strategic alternatives with
respect to HERE were taken into account at the time of approval of the entry of Alcatel Lucent into the Memorandum of Understanding. |
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Strategic Decision by Alcatel Lucent. Alcatel Lucent’s board of directors considered Alcatel Lucent’s decision, announced on October 6,
2015, that it is to continue to operate its undersea cables business, Alcatel Lucent Submarine Networks or ASN, as a wholly owned subsidiary. Alcatel Lucent’s board of directors considered that ASN will continue to execute its strategic
roadmap, strengthen its leadership in submarine cable systems for telecom applications and pursue further diversification in the Oil & Gas Sector. Alcatel Lucent’s board of directors considered that possible strategic alternatives with
respect to ASN were taken into account at the time of approval of the entry of Alcatel Lucent into the Memorandum of Understanding. |
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Conditions to the Filing of the Exchange Offer. In accordance with the terms and conditions of the Memorandum of Understanding, the filing of the Exchange
Offer is subject to the fulfillment of certain conditions contained in the Memorandum of Understanding. In particular, Alcatel Lucent’s board of directors notes that: |
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Nokia has obtained all required antitrust and competition approvals (including from the European Commission, the United States and China);
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Nokia has obtained approval from the Committee on Foreign Investment in the United States; |
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Nokia has obtained approval from Ministry of Economy, Industry and Digital Technology of the French Republic pursuant to applicable regulation on foreign
investments in France (Articles L. 151-1 et seq. and R. 153-1 et seq. of the French Monetary and Financial Code); |
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all approvals from the banking and insurance regulators have been obtained, including the European Central Bank, required due to the indirect change of control
of certain subsidiaries; and |
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Nokia’s board of directors has recommended that the shareholders of Nokia approve the authorization for the Nokia board of directors to issue such number of
new Nokia Shares as may be necessary for delivering the Nokia Shares offered in consideration for Alcatel Lucent Securities tendered into the Exchange Offer and for the completion of the Exchange Offer, and has not subsequently withdrawn such
recommendation. |
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Conditions to the Completion of the Exchange Offer. In accordance with French law and the AMF General Regulation, the Memorandum of Understanding, the
exchange offer/prospectus and the draft French offer document (projet de note d’information) prepared by Nokia, the completion of the Exchange Offer is subject to the main following conditions: |
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the Minimum Tender Condition; and |
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the Nokia Shareholder Approval. |
Alcatel Lucent’s board of directors considered that, subject to applicable SEC and AMF rules and regulations, Nokia reserves the right, in its
sole discretion, to waive the Minimum Tender Condition to any level at or above the Mandatory Minimum Acceptance Threshold.
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Other Provisions of the Memorandum of Understanding. Alcatel Lucent’s board of directors considered that the provisions of the Memorandum of
Understanding, including the obligations of Alcatel Lucent under the Memorandum of Understanding, and the transactions contemplated thereby continue to be in the best interests of Alcatel Lucent, its employees and its stakeholders (including holders
of Alcatel Lucent Shares and holders of other Alcatel Lucent Securities). |
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Previous Opinion of Alcatel Lucent’s Financial Advisor. Alcatel Lucent’s board of directors considered the oral opinion of Zaoui delivered to it
on April 14, 2015, which was confirmed by delivery of a written opinion dated April 14 , 2015, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered, and
qualifications and limitations described in its written opinion, the exchange ratio proposed to be paid to the holders (other than Nokia and its affiliates) of Alcatel Lucent Shares, including Alcatel Lucent ADSs, pursuant to the Exchange Offer was
fair from a financial point of view to such holders. |
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French Offer Document. Alcatel Lucent’s board of directors considered the draft French offer document (projet de note d’information)
prepared by Nokia, including the reasons for the Exchange Offer, Nokia’s intentions following completion of the Exchange Offer, the |
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agreements that may have an impact on the Exchange Offer, the terms of the Exchange Offer, the assessment of the exchange ratio and the valuation analysis prepared by Société
Générale, acting as the presenting bank in connection with the French Offer, which Nokia intends to file together with the French Offer with the AMF on October 29, 2015. |
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Finnish Listing Prospectus. The Finnish listing prospectus for the listing of Nokia Shares on Nasdaq Helsinki, which was approved by the Finnish Financial
Supervisory Authority on October 23, 2015 and which was passported into France on October 26, 2015 for listing of Nokia Shares on the Euronext Paris, and in particular the sections entitled “The Alcatel Lucent
Transaction”, “The Memorandum of Understanding” and “The Exchange Offer”, which describe the Exchange Offer and the combination of the businesses of Alcatel Lucent and Nokia. |
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Finnish Proxy Materials. The Finnish proxy materials made available to Nokia’s shareholders on October 26, 2015, and in particular the section
entitled “Recommendation of Nokia’s Board of Directors” which contained the recommendation of Nokia’s board of directors that the shareholders of Nokia approve the authorization for Nokia’s board of directors to issue
such number of new Nokia Shares as may be necessary for delivering the Nokia Shares offered in consideration for Alcatel Lucent Securities tendered into the Exchange Offer and for the completion of the Exchange Offer. |
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Exchange Offer/Prospectus. The exchange offer/prospectus included in the registration statement on Form F-4 filed by Nokia with the SEC on August 14,
2015, as amended on October 22, 2015, and in particular the section entitled “Reasons for the Exchange Offer” which described the rationale for the combination of the businesses of Alcatel Lucent and Nokia and the section
entitled “Risk Factors” which described the principal risks related to the Exchange Offer and Nokia. |
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Alcatel Lucent French Group Committee Information. The information document provided by Nokia to the Alcatel Lucent French Group Committee on the Exchange
Offer and their opinion dated June 1, 2015, as well as the report of the advisor appointed by the Alcatel Lucent French Group Committee dated May 22, 2015. |
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French Response Document. The draft response document (projet de note en réponse) prepared by Alcatel Lucent. |
Based on the Independent Expert Report, Alcatel Lucent’s board of directors also acknowledged that when considering the exchange ratio offered
in the Exchange Offer to the Company holders of Alcatel Lucent Securities, the Independent Expert stated in its Independent Expert Report that:
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The Exchange Offer is optional for both holders of Alcatel Lucent Shares and holders of OCEANEs in the sense that they can choose to tender their securities into
the Exchange Offer or not. |
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the Independent Expert’s work, through a multi-criteria analysis, had led to the following results: |
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The exchange ratio of 0.5500 Nokia Share for 1 Alcatel Lucent Share shows a premium of +6% to the implied ratio based on share prices as of April 9, 2015
and a premium between +9% and +14%, for the 1, 2 and 3 month volume weighted average prices of both shares. Given numerous rumors about consolidation scenarios in the sector and notably around Alcatel Lucent and Nokia, it is likely that the price of
Alcatel Lucent Shares was already incorporating a speculative premium. As a matter of fact, the exchange ratio for the 6 and 9 month volume weighted average prices before April 9, 2015, shows a premium of +27% and +29% respectively.
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Looking at a diversified sample of Telecom Equipment manufacturers, the comparable companies valuation analysis, based on market forecast consensus as of
October 23, 2015, leads up to an average implied parity of 0.50. At 0.5500 Nokia Share for 1 Alcatel Lucent Share, the proposed exchange ratio provides a premium of +10% to the valuation of the two companies using the comparable valuation
approach. |
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The intrinsic valuation of Alcatel Lucent and Nokia based on the discounted cash flow methodology (DCF to firm or DCF to equity) using, for the short term market
consensus forecast and for the longer term Trival modeling, leads to an implied parity between 0.48 and 0.52 based on market conditions prevailing as of October 23, 2015 and without taking into account any impact of the combination. Hence, the
exchange ratio of 0.5500 Nokia Share for 1 Alcatel Lucent Share provides a premium of +6% to +14% to these implied parities. |
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Based on the above, at 0.5500 Nokia Share for 1 Alcatel Lucent Share, the exchange ratio is fair for holders of Alcatel Lucent Shares.
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The Exchange Offer, in respect of both Alcatel Lucent Shares and OCEANEs, entails a change, during the offer period, in the conversion/exchange ratios of each
series of OCEANEs. The Exchange Offer with respect to each series of OCEANEs takes into account this adjustment to the conversion/exchange ratio. Thus, the number of Nokia Shares to be exchanged will depend on the success ratio of the Exchange
Offer, in particular with respect to each series of OCEANEs. However, regardless of the result of the Exchange Offer with respect to each series of OCEANE and the number of Nokia Shares that will consequently be issued, the exchange ratio of 0.5500
Nokia Shares per Alcatel Lucent Share is higher than the implicit parities coming from the discounted cash flow calculation performed by the Independent Expert based on market conditions as of October 23, 2015. Hence confirming that the
Exchange Offer is fair with respect to the Alcatel Lucent Shares. |
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Beyond the premium that holders of Alcatel Lucent Shares will get compared to the intrinsic valuation, holders of Alcatel Lucent Shares that tender their Alcatel
Lucent Shares, will become holders of Nokia Shares, one of the most liquid shares of the Euro zone, and it is expected that the liquidity of the Nokia Shares will further increase should the Exchange Offer be successful. In addition, those holders
of Nokia Shares will be in a position to benefit from the potential incremental value creation if the planned synergies materialize. |
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The Exchange Offer is optional for the holders of OCEANEs and allows them, should they tender their OCEANEs, to benefit from the same financial conditions that
they would get if they decide first to convert their OCEANEs into Alcatel Lucent Shares and then to tender these Alcatel Lucent Shares into the Exchange Offer. Therefore there is no breach of parity between shareholders and holders of OCEANEs.
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As of April 15, 2015, the date of announcement of the contemplated combination, the Exchange Offer with respect to the holders of OCEANEs displayed a
premium to the intrinsic value and to the listed price of each series of OCEANEs. The Independent Expert Report noted that as of October 23, 2015, the exchange ratio shows a substantial premium to the listed and to the intrinsic value of the
2018 OCEANEs and a very small discount (below 5%) to the listed and intrinsic values of the 2019 OCEANEs and the 2020 OCEANEs based on their respective 1-month or 3-month averages. In particular, the Independent Expert Report noted that, based on
the estimated post-Exchange Offer intrinsic values of the OCEANEs, the exchange ratio proposed during the Exchange Offer would provide a premium of between 18.8% and 19.0% for the 2018 OCEANEs, a discount of between 0.4% and 3.5% for the 2019
OCEANEs and between a premium of 0.3% and a discount of 2.9% for the 2020 OCEANEs. The exchange ratio proposed for the 2019 OCEANEs and the 2020 OCEANEs pursuant to the Exchange Offer is equivalent to the spot listed prices of the OCEANE bonds and
to their |
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intrinsic values at October 23, 2015. It is important to mention that the listed prices and the intrinsic values of the OCEANE reflect current market conditions and current liquidity levels.
Holders of OCEANEs that choose to keep their OCEANEs would, should the Exchange Offer be successful, take the risk of a substantial drop in liquidity of the underlying Alcatel Lucent Shares and of the OCEANEs. On the other hand, should the Exchange
Offer fail, such holders of OCEANEs would take the risk of a potential drop in the price of the Alcatel Lucent Shares. Hence, the exchange ratio of 0.6930 Nokia Shares for one 2018 OCEANE, 0.7040 Nokia Shares for one 2019 OCEANE and 0.7040 Nokia
Shares for one 2020 OCEANE is fair. |
Alcatel Lucent’s board of directors considered that, based on the valuation
work of the Independent Expert and the above explanations, the Independent Expert concluded that the terms of the Exchange Offer by Nokia for Alcatel Lucent Shares and OCEANEs are fair.
Alcatel Lucent’s board of directors considered that the full text of the Independent Expert Report of the Independent Expert, Associés
en Finance, dated October 28, 2015, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the report, would be attached to Alcatel Lucent’s Schedule 14D-9
and response document (note en réponse) available to holders of Alcatel Lucent Securities.
Finally, Alcatel Lucent’s
board of directors reviewed the potential consequences of the Exchange Offer on the stakeholders of Alcatel Lucent, including the employees of Alcatel Lucent, and acknowledged the following:
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Continued Presence in France. Nokia has stated that it is a global company, with deep roots and heritage in many parts of the world and that when it joins
with Alcatel Lucent, Nokia expects that France, where Alcatel Lucent is a fundamental participant in the technology ecosystem, will be a vibrant center of the combined company. Nokia has stated that it intend to be an important contributor to the
overall development of the broader technology ecosystem and a driver of innovation in France. Nokia has stated that consistent with this goal, it expected that after the completion of the Exchange Offer Nokia will have a presence in France that
spans leading innovation activities including a 5G/Small Cell Research & Development Centre of Excellence; a Cyber-Security lab similar to Nokia’s existing facility in Berlin designed to support European collaboration on the topic; and
a continued focus on Bell Labs and wireless Research & Development. Nokia has stated that engaging with and supporting projects and academic efforts that enhance the development of future technologies will remain an important priority.
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Employment in France. Nokia has also stated that it intends to maintain employment in France that is consistent with Alcatel Lucent’s end-2015 Shift
Plan commitments, with a particular focus on the key sites of Villarceaux (Essonne) and Lannion (Côtes d’Armor). In addition, Nokia has stated that it expects to expand R&D employment with the addition of several hundred new positions
targeting recent graduates with skills in future-oriented technologies, including 5G, to ensure ongoing support for customers, activities for support services, and that pre- and post-sales are expected to continue as well. In the context of the
proposed combination with Alcatel Lucent and subject to its consummation, Nokia has stated that its commitments in France relating to employment are the following: |
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Follow the Shift Plan commitments regarding the level of employment in France, for a period of at least two years after the completion of the Exchange Offer. The
base comprises Alcatel Lucent France/International (ALUI) operational heads (excluding branches), Bell Labs France, RFS (Radio Frequency Systems) and excluding ASN (Alcatel-Lucent Submarine Networks) and EU factory (landing point of the reference
perimeter is 4 200 headcount and excluding RFS unit). Nokia will maintain resources from its French operations throughout the reference period to support its customers in France; |
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Strengthen the operations and activity levels for the long term at the two major technology sites of Villarceaux (Essonne) and Lannion (Cotes d’Armor)
following the completion of the Exchange Offer, with a focus on augmenting existing activities, functions, and advanced research work; |
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Increase significantly and sustainably the R&D presence in France scaling up 5G, IP network management platforms (incl. Software Defined Networking) and
cyber-security with employment evolving from 2 000 people to 2 500 people including the recruiting of at least 300 newly graduated talents over the coming three years. The R&D employment level will be maintained for a period of at
least four years after the completion of the Exchange Offer; |
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Localize in France worldwide technology centers of expertise following the completion of the Exchange Offer, including in the areas of: 5G and Small Cells
R&D to anchor France in the future of wireless activities for the combined group, as France will be equipped with a full 5G innovation engine which will encompass research activities with Bell Labs, development activities as well as end to end
platforms and trial networks; IP management platforms (incl. Software Defined Networking); cyber Security (research, product development and platforms) while continuing to leverage the partnership established by Alcatel Lucent with Thalès;
Bell Labs; and Wireless Transmission; |
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A major worldwide corporate organization in charge of strategic innovation including networks research and Bell Labs will be led from France and will comprise
key staff members; maintain some operations and activities at operational hubs located in France and providing services to other locations in the world following the consummation of the transaction, including in the areas of local support services
and local pre- and post-sales resources for France and selected European & African countries; and |
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Take all necessary measures to find sustainable solutions for the French employees who could be impacted by the rationalization of corporate activities between
Nokia and Alcatel Lucent. |
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Additional French Commitments. Nokia has stated that in its discussions with the French government, Nokia has confirmed that France will play a leading
role in the combined company’s R&D operations. Nokia will build on the strong competencies in the country within key technology areas, on the existing presence of Alcatel Lucent and its strong engagement in the technology ecosystem in
France, and on the excellent new technical talent available from French universities. In addition to the employed-related commitments described in the section entitled “—Employment in France” above, Nokia has stated that it has
made the following commitments in the context, and subject to, the proposed combination with Alcatel Lucent: |
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Alcatel Lucent will be represented by three board members in the combined company. Nokia will be also listed on Euronext Paris. The combined company will
establish or keep the adequate legal entities in France and comply with French regulations related to sensitive contracts. |
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Nokia expects to benefit from becoming a deeply embedded part of France, tapping into and helping develop the technology ecosystem of the country. Nokia will
invest further in the digital innovation ecosystem in France following the completion of the Exchange Offer, primarily through the establishment of a long-term investment fund in the range of EUR 100 million. This fund will mainly target the
Internet of Things, cyber-security and software platform enablers for next generation networks. |
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Nokia intends to support the development of the overall telecom ecosystem in France and to ensure continuity of Alcatel Lucent’s current initiatives. This
involves playing an |
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active role in the government’s “Industry of the Future” program, funding academic tuition, programs and chairs, situating technology experts within France (such as within Bell
Labs France), and continuing Alcatel Lucent’s involvement in major initiatives such as Pôles de compétitivité Systematic, Cap Digital, and Images and Réseaux. Nokia will also develop three industrial platforms
and networks prototypes in France within the fields of 5G, Industrial Internet, Internet of Things connectivity and cyber-security. |
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Nokia has stated that following the completion of the Exchange Offer, Nokia, which will remain headquartered in Finland, intends to leverage the combined
strengths of the companies’ strategic business locations and major R&D centers in other countries, including Finland, Germany, the United States and China. |
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Nokia has committed, upon completion of the Exchange Offer, to providing regular updates to the French government as the integration of the two companies
progresses. |
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Employee Arrangements. Pursuant to the Memorandum of Understanding, Alcatel Lucent agreed to accelerate or waive certain terms of the Alcatel Lucent Stock
Options, Performance Shares and Performance Units in connection with the Exchange Offer, subject to certain conditions. Pursuant to the Memorandum of Understanding, Nokia and Alcatel Lucent have also agreed to enter into Liquidity Agreements with
certain holders of Alcatel Lucent Stock Options, Performance Shares and Performance Units, pursuant to which such holders would be entitled to receive Nokia Shares under certain circumstances. |
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Employee Considerations. Alcatel Lucent completed the consultation with its French Group Committee as required by applicable French regulations. The
French Group Committee indicated in its opinion of June 1, 2015 that it did not oppose the proposed combination of Alcatel Lucent with Nokia. Alcatel Lucent’s board of directors considered that Alcatel Lucent’s employees would benefit
from the combination due to multiple factors, including the enhanced scale of the combined businesses of Alcatel Lucent and Nokia, the stability provided by the combined balance sheet of Alcatel Lucent and Nokia and the commitments made by Nokia in
relation to employment, as further described above. |
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Customers and Suppliers Support. Alcatel Lucent’s board of directors considered that there is substantial support from customers and suppliers for
the combination of the businesses of Alcatel Lucent and Nokia, including as a result of the enhanced scale of the combined businesses of Alcatel Lucent and Nokia and as a result of the stability provided by the combined balance sheet of Alcatel
Lucent and Nokia. |
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Governance of Alcatel Lucent. Nokia has stated that Alcatel Lucent’s board of directors, in case of success of the Exchange Offer, will immediately
reflect the new share ownership structure of Alcatel Lucent, and in particular, the ownership level of Nokia. Alcatel Lucent’s board of directors expects that Alcatel Lucent’s board of directors will be mainly composed of Nokia
representatives, with remaining positions being held by independent directors in accordance with the requirements of the AFEP-MEDEF Code, to the extent applicable to Alcatel Lucent at the relevant time. |
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Governance of Nokia. Nokia has committed pursuant to the Memorandum of Understanding for the Corporate Governance & Nomination committee of
Nokia’s board of directors and Alcatel Lucent to jointly identify three nominees to Nokia’s board of directors, and has nominated Mr. Louis R. Hughes, Mr. Jean C. Monty and Mr. Olivier Piou. Nokia further nominated
Mr. Piou as the Vice Chairman of Nokia’s board of directors. Alcatel Lucent’s board of directors considered that the election of these director nominees would be subject to a completion of the Exchange Offer and the approval at
Nokia’s extraordinary general meeting by Nokia shareholders representing at least a majority of the votes cast. Alcatel Lucent’s board of directors also considered that on October 7, 2015, Nokia announced the
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planned leadership of Nokia post-completion of the Exchange Offer. However, no resolution regarding the composition of the Nokia Leadership team following the completion of the Exchange Offer has
been made. |
Alcatel Lucent’s board of directors considered that Nokia has stated that no resolution had been made
as to which of the abovementioned persons would serve as members of the Nokia Group Leadership Team after the completion of the Exchange Offer. The proposed appointments would only be implemented after the successful completion of the Exchange Offer
and be subject to the completion of the relevant works council consultation procedures, if any.
As a result of the foregoing, the
participating members of Alcatel Lucent’s board of directors, taking into account the factors above, unanimously:
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determined that the Exchange Offer is in the best interest of Alcatel Lucent, its employees and its stakeholders (including the holders of Alcatel Lucent Shares and holders of
other Alcatel Lucent Securities); |
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recommended that all holders of Alcatel Lucent Shares and holders of Alcatel Lucent ADSs tender their Alcatel Lucent Shares and/or their Alcatel Lucent ADSs pursuant to the
Exchange Offer; and |
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recommended that all holders of OCEANEs tender their OCEANEs pursuant to the Exchange Offer. |
Alcatel Lucent’s board of directors draws the attention of the holders of the OCEANEs to the fact that, under the terms of each of the OCEANEs,
the opening of the Exchange Offer will result in, among other things, a temporary adjustment to the conversion/exchange ratio applicable to each series of OCEANEs and, in certain circumstances, the right of holders of OCEANEs to request early
redemption of outstanding OCEANEs during a specified period, at a price calculated in accordance with the terms of the relevant OCEANEs. As a result, holders of OCEANEs will have a number of alternatives to tendering into the Exchange Offer
available with respect to the OCEANEs held, each of which has different characteristics and is subject to specific risks, which the holders of OCEANEs will have to appreciate based on their specific situation and the then prevailing circumstances.
For further information on such alternatives and on the consequences of the Exchange Offer under the terms of each of the OCEANEs, see
the section entitled “The Exchange Offer—Matters Relevant for OCEANEs Holders” in the exchange offer/prospectus, which is incorporated herein by reference, the prospectus applicable to each series of OCEANEs and the Independent
Expert Report attached as Annex C to this Schedule 14D-9 and is incorporated herein by reference.
The board of directors noted that all
the members of Alcatel Lucent’s board of directors (Mr. Philippe Camus, Mr. Francesco Caio, Ms. Carla Cico, Mr. Stuart E. Eizenstat, Ms. Kim Crawford Goodman, Mr. Louis R. Hughes, Mr. Jean C. Monty,
Mr. Olivier Piou, Mr. Jean-Cyril Spinetta and Ms. Sylvia Summers) confirmed that, within the limit provided by Article 12 of the By-Laws of Alcatel Lucent (i.e., each member shall retain 500 Alcatel Lucent Shares), he or she intends
to validly tender or cause to be validly tendered pursuant to the Exchange Offer all Alcatel Lucent Securities held of record or beneficially owned by such director immediately prior to the expiration of the Exchange Offer, as it may be extended
(other than Alcatel Lucent Securities for which such holder does not have discretionary authority). In addition, the 2010 annual shareholders meeting of Alcatel Lucent authorized the payment of additional attendance fees (jetons de
présence) to directors, subject to each director (i) using the additional fees received (after taxes) to purchase Alcatel Lucent Shares and (ii) holding the acquired Alcatel Lucent Shares for the duration of his or her term of
office. As a result, each member of Alcatel Lucent’s board confirmed that he or she will hold any Alcatel Lucent Shares purchased with these additional fees for so long as he or she remains a director of Alcatel Lucent and any such restrictions
remain applicable.
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The terms of Alcatel Lucent’s Performance Shares plans and related decisions of Alcatel
Lucent’s board of directors require that Mr. Philippe Camus continues to hold the Alcatel Lucent Shares granted in connection therewith and the Alcatel Lucent Shares purchased in connection therewith for so long as he remains the Chairman
of Alcatel Lucent’s board of directors. Mr. Camus is also required to continue to hold any Alcatel Lucent Shares acquired during his term for so long as he remains in office. As a result, Mr. Camus confirmed that he will not be
allowed to tender the Shares he holds into the Exchange Offer, given that and for as long as these undertakings to hold the Alcatel Lucent Shares he holds are enforceable.
The foregoing does not include any Alcatel Lucent Securities over which, or with respect to which, any director acts in a fiduciary or representative capacity or is subject to the instructions of a third party with
respect to such tender.
Alcatel Lucent’s board of directors also confirmed that, pursuant to the terms of the Memorandum of
Understanding, Alcatel Lucent will, and will cause each of its subsidiaries to, tender into the Exchange Offer all Alcatel Lucent Securities held by Alcatel Lucent or any of its subsidiaries as of the date of the opening of the French Offer, other
than those Alcatel Lucent Securities held for purposes of (i) Alcatel Lucent Shares to be granted in lieu of accelerated Performance Shares and (ii) Alcatel Lucent Shares to be granted in lieu of the Alcatel Lucent Stock Options Plan that
Alcatel Lucent’s board of directors had considered granting in respect of the year ended December 31, 2014.”
In the course of reaching its
determination that the Exchange Offer is in the best interests of Alcatel Lucent, its employees and its stakeholders (including holders of Alcatel Lucent Shares and holders of other Alcatel Lucent Securities) and its recommendation that holders of
Alcatel Lucent Securities accept the Exchange Offer and tender their Alcatel Lucent Securities into the Exchange Offer, Alcatel Lucent’s board of directors considered numerous factors, including the factors specified in the foregoing discussion
and the factors discussed in the section entitled “—Reasons for Approving the Memorandum of Understanding” above. The foregoing discussion of information and factors considered and given weight by Alcatel Lucent’s board of
directors is not intended to be exhaustive, but is believed to include all of the principal factors considered by Alcatel Lucent’s board of directors in making its determination and recommendation. In view of the variety of factors considered
in connection with its evaluation of the Exchange Offer, Alcatel Lucent’s board of directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its
determination and recommendation. In addition, individual members of Alcatel Lucent’s board of directors may have given different weights to different factors.
In arriving at their respective determination and recommendations, the directors of Alcatel were aware of the interests of executive officers and directors of Alcatel Lucent as set forth in the section entitled
“Item 3. Past Contacts, Transactions, Negotiations and Agreements” above.
The full text of Zaoui’s updated written opinion dated
October 28, 2015, which sets forth a description of the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Zaoui in preparing its updated opinion, is attached as Annex B
to this Schedule 14D-9 and is incorporated herein by reference.
An unofficial English translation of the full text of the Independent Expert Report of
the Independent Expert, Associés en Finance, dated October 28, 2015, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the report, and Addendum,
dated November 9, 2015, are attached as Annex C to this Schedule 14D-9 and are incorporated herein by reference, and Alcatel Lucent urges holders of Alcatel Lucent Securities to carefully read the Independent Expert Report in its entirety.
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Intent to Tender
Subject to the following paragraph, each member of Alcatel Lucent’s board of directors (Mr. Philippe Camus, Mr. Francesco Caio, Ms. Carla Cico, Mr. Stuart E. Eizenstat, Ms. Kim
Crawford Goodman, Mr. Louis R. Hughes, Mr. Jean C. Monty, Mr. Olivier Piou, Mr. Jean-Cyril Spinetta and Ms. Sylvia Summers) confirmed that, within the limit provided by Article 12 of the By-Laws of Alcatel Lucent
(i.e., each member shall retain 500 Alcatel Lucent Shares), he or she intends to validly tender or cause to be validly tendered pursuant to the Exchange Offer all Alcatel Lucent Securities held of record or beneficially owned by such director
immediately prior to the expiration of the Exchange Offer, as it may be extended (other than Alcatel Lucent Securities for which such holder does not have discretionary authority). In addition, the 2010 annual shareholders meeting of Alcatel Lucent
authorized the payment of additional attendance fees (jetons de présence) to directors, subject to each director (i) using the additional fees received (after taxes) to purchase Alcatel Lucent Shares and (ii) holding the
acquired Alcatel Lucent Shares for the duration of his or her term of office. As a result, each member of Alcatel Lucent’s board confirmed that he or she will hold any Alcatel Lucent Shares purchased with these additional fees for so long as he
or she remains a director of Alcatel Lucent and any such restrictions remain applicable.
The terms of Alcatel Lucent’s Performance Shares plans
and related decisions of Alcatel Lucent’s board of directors require that Mr. Philippe Camus continues to hold the Alcatel Lucent Shares granted in connection therewith and the Alcatel Lucent Shares purchased in connection therewith for so
long as he remains the Chairman of Alcatel Lucent’s board of directors. Mr. Camus is also required to continue to hold any Alcatel Lucent Shares acquired during his term for so long as he remains in office. As a result, Mr. Camus
confirmed that he will not be allowed to tender the Shares he holds into the Exchange Offer, given that and for as long as these undertakings to hold the Alcatel Lucent Shares he holds are enforceable.
The foregoing does not include any Alcatel Lucent Securities over which, or with respect to which, any director acts in a fiduciary or representative capacity or
is subject to the instructions of a third party with respect to such tender.
Alcatel Lucent has been informed that, as of the date of this Schedule
14D-9, each executive officer (other than Mr. Camus, whose intentions are described above) intends to tender the Alcatel Lucent Securities that he or she holds into the Exchange Offer, subject to any statutory, regulatory or other constraints
that may apply.
The number of Alcatel Lucent Securities held by executive officers and directors as of April 13, 2015, and as of October 27,
2015, is set forth under “Item 3. Effect of the Exchange Offer on Alcatel Lucent Shares, Alcatel Lucent ADSs, OCEANEs and Share- and Equity-Based Incentive Plans” above.
Certain employee holdings of Alcatel Lucent Shares are managed collectively through the FCP 2AL Mutual Fund (Fonds Commun de Placement Actionnariat Alcatel-Lucent) (“FCP 2AL”).
FCP 2AL is a special mutual fund (Fonds Commun de Placement d’Entreprise) put in place for the implementation of the incentive agreements and the corporate savings plans, entered into between the companies of the Alcatel Lucent
group and their employees. FCP 2AL is categorized as a mutual fund invested in listed securities of the company (FCPE investi en titres cotés de l’entreprise). FCP 2AL’s management objective is to enable the unit
holders to participate in Alcatel Lucent’s development by investing a minimum of 95% of assets managed by FCP 2AL in Alcatel Lucent Shares, the remainder being invested in Euro monetary UCITS (OPCVM Monétaire Euro) and/or
liquid instruments. FCP 2AL’s performance mirrors the performance of the Alcatel Lucent Shares both upwards and downwards.
The mutual fund
supervisory board (conseil de surveillance du Fonds Commun de Placement Actionnariat) of FCP 2AL, which held 1.16% of Alcatel Lucent’s share capital and 2.30% of voting
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rights of Alcatel Lucent as of June 30, 2015, will decide whether or not to tender the Alcatel Lucent Shares it holds. It will announce such determination in a press release. If such Alcatel
Lucent Shares are tendered into the Exchange Offer the supervisory board of FCP 2AL will amend the rules of the fund, subject to approval of these amendments by the AMF, in order to substitute any reference in the plan to “Alcatel Lucent”
by “Nokia”.
Alcatel Lucent will and will cause each of its subsidiaries to tender into the Exchange Offer all Alcatel Lucent Securities held
by Alcatel Lucent or any of its subsidiaries as of November 18, 2015, the date of the opening of the Exchange Offer, other than those Alcatel Lucent Securities held (i) to be granted in lieu of accelerated Performance Shares and (ii) to be
granted in lieu of the Alcatel Lucent Stock Options Plan that Alcatel Lucent’s board of directors had considered granting in respect of the year ended December 31, 2014.
As of October 31, 2015, the latest practicable date before the date of this Schedule 14D-9, Alcatel Lucent and its subsidiaries held 40 115 700 Alcatel Lucent Shares in treasury, of which
(i) 18 307 676 Alcatel Lucent Shares were reserved to be granted in lieu of accelerated Performance Shares and (ii) 3 513 332 Alcatel Lucent Shares were reserved to be granted in lieu of the Alcatel Lucent Stock Options
Plan that Alcatel Lucent’s board of directors had considered granting in respect of the year ended December 31, 2014.
For further information on
the undertaking to tender accelerated Alcatel Lucent Stock Options and Performance Shares, see the section entitled “The Offers—Additional Exchange Mechanism” in the exchange offer/prospectus, which is incorporated herein by
reference.
Opinions of Alcatel Lucent’s Financial Advisor
Alcatel retained Zaoui as financial advisor to Alcatel Lucent’s board of directors in connection with the Exchange Offer and the other transactions contemplated by the Memorandum of Understanding, which are
collectively referred to as the “Transaction” throughout this section. In connection with this engagement, Alcatel Lucent’s board of directors requested that, prior to Alcatel Lucent entering into the Memorandum of
Understanding, Zaoui provide an opinion as to the fairness from a financial point of view to the holders (other than Nokia and its affiliates) of Alcatel Lucent Shares, including Alcatel Lucent ADSs, of the exchange ratio to be paid to such holders
pursuant to the Exchange Offer.
On April 14, 2015, Zaoui delivered to Alcatel Lucent’s board of directors its oral opinion, which was
subsequently confirmed by delivery of a written opinion dated as of such date, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations
described in its written opinion, the exchange ratio proposed to be paid to the holders (other than Nokia and its affiliates) of Alcatel Lucent Shares, Alcatel Lucent ADSs, pursuant to the Exchange Offer was fair from a financial point of view to
such holders.
Alcatel Lucent’s board of directors further requested that, prior to determining that the Exchange Offer was in the interests of
Alcatel Lucent and its stakeholders (including holders of Alcatel Lucent Securities) and recommending that holders of Alcatel Lucent Shares tender their Alcatel Lucent Shares into the Exchange Offer, Zaoui update its fairness opinion. On
October 28, 2015, Zaoui delivered to Alcatel Lucent’s board of directors its oral opinion, which was subsequently confirmed by delivery of a written opinion dated as of such date, to the effect that, as of such date and based upon and
subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations described in its written opinion, the exchange ratio proposed to be paid to the holders (other than Nokia and its affiliates) of Alcatel
Lucent Shares, Alcatel Lucent ADSs, pursuant to the Exchange Offer was fair from a financial point of view to such holders.
The full text of
Zaoui’s written opinions dated April 14, 2015 and October 28, 2015, which set forth a description of the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Zaoui
in preparing its opinions,
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are attached as Annex A and Annex B, respectively, to this Schedule 14D-9. The summary of the written opinions of Zaoui contained in this Schedule 14D-9 are qualified in their entirety by the
full text of Zaoui’s written opinions. Zaoui’s advisory services and opinions were provided for the information and assistance of Alcatel Lucent’s board of directors in connection with its consideration of the Transaction and whether
to determine that the Exchange Offer was in the interests of Alcatel Lucent and its stakeholders (including holders of Alcatel Lucent Securities) and recommend the Exchange Offer to holders of Alcatel Lucent Securities and may not be used for any
other purpose without Zaoui’s prior written consent. In addition, Zaoui’s opinions do not constitute a recommendation as to whether any holder of Alcatel Lucent Shares, including Alcatel Lucent ADSs, should tender their Alcatel Lucent
Shares or Alcatel Lucent ADSs into the Exchange Offer or as to any other matter.
Zaoui expressed no opinion in either its April 14, 2015
opinion or its October 28, 2015 opinion as to the fairness from a point of view of the exchange ratio to be paid to the holders of the OCEANEs. Zaoui further noted that the Memorandum of Understanding provides that (i) if 95% or more of
either (A) Alcatel Lucent Shares and voting rights or (B) Alcatel Lucent Shares and Alcatel Lucent Shares issuable upon conversion of the OCEANEs, in each case are owned by Nokia at the closing of the Exchange Offer, then Nokia shall
implement a squeeze-out of the remaining Alcatel Lucent Shares and/or OCEANEs, as applicable within three months of closing the Exchange Offer or, if applicable, the subsequent offering period for the Exchange Offer; or (ii) if Nokia own less
than 95% of Alcatel Lucent Shares or voting rights attached to Alcatel Lucent Shares at the closing of the Exchange Offer or, if applicable, the subsequent offering period for the Exchange Offer, Nokia reserves the right to (a) commence a
mandatory buy-out of Alcatel Lucent Shares pursuant to Article 236-3 of the AMF General Regulation if at any time it owns 95% or more of the voting rights attached to Alcatel Lucent Shares, (b) commence at any time a simplified offer for
Alcatel Lucent Shares pursuant to Article 233-1 et seq. of the AMF General Regulation, or (c) cause Alcatel to be merged into Nokia or an affiliate thereof, contribute assets to, merge certain of its subsidiaries with, or undertake other
reorganizations of, Alcatel Lucent. Zaoui did not express any opinion in either its April 14, 2015 opinion or its October 28, 2015 opinion on any such transaction described in the preceding sentence.
In connection with rendering the opinions described above and performing its related financial analyses, Zaoui reviewed, among other things:
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a draft of the Memorandum of Understanding; |
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annual reports to shareholders of Alcatel Lucent and Annual Reports on Form 20-F of Alcatel Lucent for the three fiscal years ended December 31, 2014;
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annual reports to shareholders of Nokia and Annual Reports on Form 20-F of Nokia for the three fiscal years ended December 31, 2014;
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certain interim reports to shareholders of each of Alcatel Lucent and Nokia; |
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certain other communications from Alcatel Lucent to its shareholders and from Nokia to its shareholders; |
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certain publicly available research analyst reports for Alcatel Lucent and Nokia; |
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with respect to the opinion delivered on April 14, 2015, certain publicly available forecasts for Alcatel Lucent available as of April 13, 2015, which forecasts
were derived from the arithmetic average of available financial metrics for Alcatel Lucent published by analysts determined by Zaoui to be of international repute and which forecasts were sufficiently detailed for use in Zaoui’s financial
analysis (the “Alcatel Lucent Street Forecasts”); |
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with respect to the opinion delivered on April 14, 2015, certain publicly available forecasts for Nokia available as of April 13, 2015, which forecasts were
derived from the arithmetic average of available financial metrics for Nokia published by analysts determined by Zaoui to be of international repute and which forecasts were sufficiently detailed for use in Zaoui’s financial analysis (the
“Nokia Street Forecasts”); |
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with respect to the opinion delivered on October 28, 2015, certain publicly available forecasts for Alcatel Lucent published after announcement of the
Transaction and available as of October 27, 2015, which forecasts were derived from the arithmetic average of available financial metrics for Alcatel Lucent published by analysts determined by Zaoui to be of international repute and which forecasts
were sufficiently detailed for use in Zaoui’s financial analysis (the “Updated Alcatel Lucent Street Forecasts”);
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with respect to the opinion delivered on October 28, 2015, certain publicly available forecasts for Nokia published after announcement of the Transaction and
available as of October 27, 2015, which forecasts were derived from the arithmetic average of available financial metrics for Nokia published by analysts determined by Zaoui to be of international repute and which forecasts were sufficiently
detailed for use in Zaoui’s financial analysis (the “Updated Nokia Street Forecasts”); and |
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certain publicly available operating and financial synergies estimates by the management of Nokia to result from the Exchange Offer (the
“Synergies”). |
Zaoui also participated in discussions with members of the senior managements of Alcatel Lucent and
Nokia regarding their assessment of the strategic rationale for, and the potential benefits of, the Exchange Offer and the past and current business operations, financial condition and future prospects of Alcatel Lucent and Nokia; reviewed the
reported price and trading activity for Alcatel Lucent Shares and Nokia Shares; compared certain financial and stock market information for Alcatel Lucent and Nokia with similar information for certain other companies the securities of which are
publicly traded; reviewed the financial terms of certain recent comparable business combinations; and performed such other studies and analyses, and considered such other factors, as Zaoui deemed appropriate.
For purposes of rendering its opinions, Zaoui, with the consent of Alcatel Lucent, relied upon and assumed the accuracy and completeness of all of the financial,
legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, it, without assuming any responsibility for independent verification thereof. In that regard, Zaoui assumed, with the consent of Alcatel Lucent,
with respect to the opinion delivered on April 14, 2015, that Alcatel Lucent Street Forecasts and Nokia Street Forecasts, and, with respect to the opinion delivered on October 28, 2015, the Updated Alcatel Lucent Street Forecasts and the
Updated Nokia Street Forecasts, in each case were a reasonable basis upon which to evaluate the business and financial prospects of Alcatel Lucent and Nokia, respectively, and Zaoui also assumed that the Synergies had been reasonably prepared on a
basis reflecting the best currently available estimates and judgments of Nokia’s management. Zaoui had not made an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance
sheet assets and liabilities) of Alcatel Lucent or Nokia or any of their respective subsidiaries and Zaoui had not been furnished with any such evaluation or appraisal. Zaoui assumed that all governmental, regulatory or other consents and approvals
necessary for the completion of the Transaction would be obtained without any adverse effect on Alcatel Lucent or Nokia or on the expected benefits of the Transaction in any way meaningful to its analysis. Zaoui assumed that the Transaction would be
consummated on the terms set forth in the draft Memorandum of Understanding, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.
Zaoui’s opinions did not address the underlying business decision of Alcatel Lucent to engage in the Transaction, or the relative merits of the Transaction as
compared to any strategic alternatives that may be available to Alcatel Lucent, or the decision of Alcatel Lucent’s board of directors to determine that the Exchange Offer was in the interests of Alcatel Lucent and its stakeholders (including
holders of Alcatel Lucent Securities) or recommend the Exchange Offer to holders of Alcatel Lucent Securities; nor did it address any legal, tax, regulatory or accounting matters. Zaoui was not authorized to conduct a process to solicit, and did not
conduct a process to solicit, interest from any other third party with respect to any business combination or other extraordinary transaction in each case involving the sale of all or substantially all of the Alcatel Lucent Shares and/or assets of
Alcatel Lucent. Zaoui’s opinions
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address only the fairness from a financial point of view to the holders (other than Nokia and its affiliates) of Alcatel Lucent Shares, including Alcatel Lucent ADSs, as of the date of opinions,
of the exchange ratio to be paid to such holders pursuant to the Memorandum of Understanding. Zaoui did not express any view on, and opinions did not address, any other term or aspect of the Memorandum of Understanding or the Transaction or any term
or aspect of any other agreement or instrument contemplated by the Memorandum of Understanding or entered into or amended in connection with the Transaction, including, the form or structure of the Transaction or the likely timeframe in which the
Transaction will be consummated, the fairness of the Transaction to, or any consideration received in connection therewith by, the holders of any other class of securities (including holders of OCEANEs), creditors, or other constituencies of Alcatel
Lucent; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of Alcatel Lucent, or class of such persons, in connection with the Transaction, whether relative to the
exchange ratio to be paid to the holders of Alcatel Lucent Shares, including Alcatel Lucent ADSs, pursuant to the Memorandum of Understanding or otherwise. Zaoui did not express any opinion as to the prices at which Nokia’s shares will trade at
any time or as to the impact of the Transaction on the solvency or viability of Alcatel Lucent or Nokia or the ability of Alcatel Lucent or Nokia to pay their respective obligations when they become due. Zaoui’s opinions were necessarily based
on economic, monetary, market and other conditions as in effect on, and the information made available to Zaoui as of, the date of such opinion and Zaoui assumed no responsibility for updating, revising or reaffirming any opinion given by it based
on circumstances, developments or events occurring after the date of such opinion, it being understood that subsequent developments may affect any opinion given by Zaoui and the assumptions used in preparing it.
Summary of Zaoui’s Financial Analysis Relating to its April 14, 2015 Opinion
The following is a summary of the material financial analyses prepared and reviewed with Alcatel Lucent’s board of directors in connection with the opinion delivered on April 14, 2015. The following
summary, however, does not purport to be a complete description of the financial analyses performed or factors considered by, and underlying the opinion of, Zaoui, nor does the order of the financial analyses described represent the relative
importance or weight given to those financial analyses by Zaoui. Zaoui may have deemed various assumptions more or less probable than other assumptions, so the reference ranges resulting from any particular portion of the analyses summarized below
should not be taken to be Zaoui’s view of the actual exchange ratio. Some of the summaries of the financial analyses set forth below include information presented in tabular format. In order to fully understand the financial analyses, the
tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses performed by Zaoui. Considering the data in the tables below without considering all financial
analyses or factors or the full narrative description of such analyses or factors, including the methodologies and assumptions underlying such analyses or factors, could create a misleading or incomplete view of the processes underlying Zaoui’s
financial analyses and its opinion.
Except as otherwise noted, the following quantitative information, to the extent that it is based on market data,
is based on market data as it existed on or before April 13, 2015, and is not necessarily indicative of current market conditions.
The implied
exchange ratio reference ranges described below were calculated using the number of Alcatel Lucent Shares outstanding on a fully diluted basis and the number of Nokia Shares outstanding on a fully diluted basis, in each case calculated on a treasury
share method basis, taking into account outstanding in-the-money stock options in relation to Alcatel Lucent Shares and Nokia Shares, respectively, Performance Shares and Nokia Performance Shares, respectively, other equity awards and convertible
securities (including the OCEANEs, with equity dilution based on adjusted conversion ratio as per the clause relating to takeover bids, in accordance with the terms of the OCEANEs), based on information provided by Alcatel Lucent and Nokia.
73
Historical Exchange Ratio Analysis Relating to its April 14, 2015 Opinion
Zaoui reviewed the historical trading prices for the publicly-traded Alcatel Lucent Shares and Nokia Shares for the 52 weeks prior to April 13, 2015. Zaoui
calculated historical average exchange ratios over various periods by dividing the VWAP of Alcatel Lucent Shares over such period by the VWAP of Nokia Shares over the same period. The term “VWAP” refers to the volume weighted average price
during a reference period which is the weighted average prices at which the relevant share traded during such period relative to the volumes at which such share traded at such prices. Zaoui sourced its VWAP information from Bloomberg. Zaoui then
compared those exchange ratios to the exchange ratio.
The table below sets forth the historical average exchange ratios over the periods specified.
|
|
|
|
|
| Time Periods |
|
Exchange Ratio |
|
| Spot (April 13, 2015) |
|
|
0.497x |
|
| 1-month VWAP |
|
|
0.497x |
|
| 3-month VWAP |
|
|
0.475x |
|
| 6-month VWAP |
|
|
0.428x |
|
| 12-month VWAP |
|
|
0.435x |
|
The historical exchange ratio analysis performed by Zaoui indicated a range of exchange ratios of 0.428x to 0.497x, as compared to
the exchange ratio of 0.550x.
Analyst Price Target Analysis Relating to its April 14, 2015 Opinion
Zaoui reviewed the target prices published by a number of equity analysts on each of the Alcatel Lucent Shares and Nokia Shares. Zaoui believes that equity
analysts’ target prices provide a relevant benchmark to assess the exchange ratio as a large number of equity analysts cover each of Alcatel Lucent and Nokia and publish recommendations and target prices for each of the companies. In conducting
its analysis, Zaoui considered price targets as of April 13, 2015 published by equity analysts from banks of international repute that cover and provide price targets for both of Alcatel Lucent and Nokia, and used these price targets to
calculate an implied exchange ratio.
The following table sets forth the range of implied exchange ratios based on analyst price targets.
|
|
|
|
|
| Price Target |
|
Implied
Exchange Ratio |
|
| High |
|
|
0.651x |
|
| Low |
|
|
0.329x |
|
The analyst price targets analysis performed by Zaoui indicated a range of implied exchange ratios of 0.329x to 0.651x, as compared
to the exchange ratio of 0.550x.
Premiums Paid Analysis Relating to its April 14, 2015 Opinion
In order to assess the premium offered to holders of Alcatel Lucent Shares in the Transaction relative to the premiums offered to shareholders in other
transactions, Zaoui reviewed the premiums paid in precedent share exchange transactions in France (“Offre Publique d’Echange” or “OPE”) valued above EUR 1 billion since January 1, 2000, which transactions
resulted in a change of control of the target company and where the consideration did not include a cash component. There were four such transactions in total reviewed by Zaoui for its analysis, which transactions are identified in the table below.
The historical exchange ratios and implied premiums paid in these precedent share exchange transaction were disclosed in the relevant offering prospectuses filed with the AMF and publicly
74
available on the AMF website. The mean of the premiums paid (calculated using the historical exchange ratios) in the precedent transactions reviewed were 23.0%, 21.7% and 19.5% over a 3-month, 6-month and 12-month period, respectively.
The following table sets forth the precedent transactions
reviewed in connection with the premiums paid analysis.
|
|
|
|
|
| Date Announced |
|
Acquirer |
|
Target |
| October 2014 |
|
Bolloré |
|
Havas (63.8% stake) |
| May 2006 |
|
Fonciére des Régions |
|
Bail Invest Fonciére (63% stake) |
| January 2001 |
|
Schneider Electric |
|
Legrand |
| July 2000 |
|
Vinci |
|
Groupe GTM |
The premiums paid analysis performed by Zaoui indicated a range of implied exchange ratios of 0.520x to 0.589x, as compared to the
exchange ratio of 0.550x. No company or transaction utilized in the premiums paid analysis is identical to Alcatel Lucent or Nokia or to the Transaction.
Selected Comparable Companies Analysis Relating to its April 14, 2015 Opinion
Alcatel Lucent Comparable Companies
Zaoui performed a selected comparable companies analysis with respect to
Alcatel Lucent. For purposes of this analysis and comparison, Zaoui reviewed and analyzed certain financial information, valuation multiples and market trading data related to selected comparable publicly traded telecom equipment providers which it
viewed, based on its professional judgment and experience and taking into account the company’s business profile, geographic region and size, as reasonably comparable or relevant for purposes of this analysis of Alcatel Lucent. No company,
independently or as part of a set, is identical to Alcatel Lucent or its business segments. As part of its analysis, Zaoui determined that Alcatel Lucent is not directly comparable to any other European or American telecom equipment provider company
due to the relative contribution and difference in profitability of its Core Networking versus its Access activities. As a consequence, Zaoui determined to use a different set of comparable companies for Alcatel Lucent in each of Core Networking and
Access as set forth below:
Core Networking Peers:
Access
Peers:
For each of the Alcatel
Lucent comparable companies, Zaoui calculated and compared the ratio of such company’s enterprise value (calculated as the market capitalization of such company based on its closing share price on April 13, 2015, plus debt, less cash, cash
equivalents and marketable securities, plus minorities and less associates) to such company’s estimated earnings before interest and taxes (or EBIT) for each of the years ending December 31, 2015 and 2016. The financial information for
each
75
of the selected companies listed above and used by Zaoui in its analysis was based on public filings, consensus estimates, recent equity research reports and other publicly available information.
The following table sets forth the average of the trading multiples for the Alcatel Lucent comparable companies considered in this analysis for each of
the years ending December 31, 2015 and 2016.
|
|
|
|
|
|
|
|
|
| |
|
Average for Year Ended December 31, |
|
| Enterprise Value to Estimated EBIT |
|
2015
|
|
|
2016
|
|
| Core Networking |
|
|
10.8x |
|
|
|
9.5x |
|
| Access |
|
|
14.8x |
|
|
|
13.0x |
|
In performing its analysis, Zaoui considered that price to earnings (or P/E) multiples tend to be very heterogeneous due to
differences in depreciation and provisional accounting policies, as well as due to differences in capital structures, and that valuation based on P/E multiples is not commonly used by equity analysts in the telecom equipment provider sector, and
therefore Zaoui determined not to undertake an analysis of the exchange ratio applying P/E multiples of comparable companies.
Nokia Comparable
Companies
Zaoui performed a selected comparable companies analysis with respect to Nokia. For purposes of this analysis and comparison, Zaoui
reviewed and analyzed certain financial information, valuation multiples and market trading data related to selected comparable publicly traded telecom equipment providers which it viewed, based on its professional judgment and experience and taking
into account the company’s business profile, geographic region and size, as reasonably comparable or relevant for purposes of this analysis of Nokia. No company, independently or as part of a set, is identical to Nokia or its business segments.
As part of its analysis, Zaoui determined that Nokia is not directly comparable to any other European or American telecom equipment provider company due to its business profile and difference in nature between its Nokia Networks, HERE and Nokia
Technologies businesses. As a consequence, Zaoui determined to use a different set of comparable companies for each of its Nokia Networks, HERE and Nokia Technologies businesses as set forth below:
Nokia Networks Peers:
HERE
Peers:
Nokia
Technologies Peers:
| |
• |
|
Universal Display Corporation |
| |
• |
|
Tessera Technologies Inc. |
| |
• |
|
Dolby Laboratories Inc. |
76
For each of the Nokia comparable companies, Zaoui calculated and compared the ratio of such company’s enterprise
value (calculated as the market capitalization of such company based on its closing share price on April 13, 2015, plus debt, less cash, cash equivalents and marketable securities, plus minorities and less associates) to such company’s
(i) estimated earnings before interest, taxes, depreciation and amortization (or EBITDA), (ii) estimated earnings before interest and taxes (or EBIT) or (iii) estimated sales, in each case for the years ending December 31, 2015
and 2016. The financial information for each of the selected companies listed above and used by Zaoui in its analysis was based on public filings, consensus estimates, recent equity research reports and other publicly available information.
The following table sets forth the average of the trading multiples for the Nokia comparable companies considered in this analysis for each of the
years ending December 31, 2015 and 2016.
|
|
|
|
|
|
|
|
|
| |
|
Average for Year Ended December 31, |
|
| Enterprise Value to Estimated |
|
2015
|
|
|
2016
|
|
| Nokia Networks EBITDA |
|
|
9.4x |
|
|
|
8.8x |
|
| HERE
Sales(1) |
|
|
2.2x |
|
|
|
2.1x |
|
| Nokia Technologies EBIT |
|
|
16.0x |
|
|
|
13.8x |
|
| (1) |
Given the difference in profitability of companies comparable to Nokia’s HERE business, Zaoui took into consideration sales multiples in valuing the HERE business.
|
Determination of Implied Exchange Ratio
Zaoui then calculated implied exchange ratio reference ranges on a fully diluted basis using the Alcatel Lucent Street Estimates and the Nokia Street Estimates by dividing the low end of the implied per share
equity value reference range for Alcatel Lucent, by the low end of the implied per share equity value reference range for Nokia, in each case as indicated in the selected comparable companies analyses and shown in the table below, and by dividing
the high end of the implied per share equity value reference range for Alcatel Lucent by the high end of the implied per share equity value reference range for Nokia, in each case as indicated in the selected comparable companies analyses and shown
in the table below. In determining the implied equity value per share, Zaoui added to the implied enterprise value cash and cash equivalents and investments in associates and joint-ventures as of December 31, 2014 and subtracted from the
implied enterprise value the value of debt and non-controlling interests as of December 31, 2014. The net financial debt of Alcatel Lucent and Nokia were restated for the conversion of all Alcatel Lucent and Nokia convertible instruments.
The following table sets forth the range of implied exchange ratios (on a fully diluted basis) based on a selected comparable companies analysis.
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fully Diluted Equity Value per Share |
|
Alcatel Lucent |
|
|
Nokia |
|
|
Implied
Exchange Ratio |
|
| High End |
|
€ |
3.69 |
|
|
€ |
7.41 |
|
|
|
0.498x |
|
| Low End |
|
€ |
3.56 |
|
|
€ |
6.86 |
|
|
|
0.520x |
|
The selected comparable companies analysis performed by Zaoui indicated a range of implied exchange ratios (on a fully diluted
basis) of 0.498x to 0.520x, as compared to the exchange ratio of 0.550x.
77
Discounted Cash Flow Analysis Excluding Synergies Relating to its April 14, 2015 Opinion
A discounted cash flow analysis is a method of evaluating an asset using estimates of the future unlevered free cash flow generated by the asset and taking into
consideration the time value of money with respect to those future cash flows by calculating their “present value”. Present value refers to the current value of estimated future cash flows generated by the asset, and is obtained by
discounting those cash flows (including the asset’s terminal value) back to the present using a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, capitalized returns and
other relevant factors. Terminal value refers to the capitalized value of all estimated cash flows generated by an asset during beyond the final forecast period.
Alcatel Lucent DCF
Zaoui performed a discounted cash flow analysis for Alcatel Lucent, without regards to the
Synergies, to calculate the estimated net present value of (1) the standalone unlevered free cash flows (calculated as EBIT adjusted for tax, depreciation, amortization, restructuring charges, change in working capital and capital expenditures)
that Alcatel Lucent was projected to generate during the time period from January 1, 2015 to December 31, 2019, based on the Alcatel Lucent Street Forecasts and extrapolated by Zaoui until 2019; and (2) the terminal value for Alcatel
Lucent. Zaoui, using its professional judgment and expertise, calculated a range of terminal values for Alcatel Lucent at the end of the forecast period by applying a perpetual growth rate ranging from 1.5% to 2.5% of the unlevered free cash flow of
Alcatel Lucent for the terminal period based on the Alcatel Lucent Street Forecasts. The unlevered free cash flows and the range of terminal values were then discounted to present values using a range of discount rates from 9.0% to 10.0%, which were
based on Alcatel Lucent’s weighted average cost of capital. Zaoui took the sum of the present value ranges for Alcatel Lucent’s future cash flows and terminal value to calculate a range of implied enterprise values, and then added to such
implied enterprise value cash and cash equivalents and investments in associates and joint-ventures as of December 31, 2014, subtracted the value of Alcatel Lucent’s debt as of December 31, 2014 (assuming full dilution from the
OCEANEs) and subtracted the value of non-controlling interests as of December 31, 2014 to arrive at a range of implied equity value per Alcatel Lucent Share of EUR 3.37 to EUR 4.18.
The following table sets forth projected unlevered free cash flows of Alcatel Lucent for the periods indicated that were used by Zaoui in its discounted cash flow analysis. These projections were based on
information contained in the Alcatel Lucent Street Forecasts and extrapolated by Zaoui.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, |
|
| |
|
2015E |
|
|
2016E |
|
|
2017E |
|
|
2018E |
|
|
2019E |
|
| |
|
(in EUR million) |
|
| Unlevered free cash flow |
|
|
445 |
|
|
|
806 |
|
|
|
1 113 |
|
|
|
1 136 |
|
|
|
1 220 |
|
Nokia DCF
Zaoui performed a
discounted cash flow analysis for Nokia, without regards to the Synergies, to calculate the estimated net present value of (1) the standalone unlevered free cash flows (calculated as EBIT adjusted for tax, depreciation, amortization, change in
working capital and capital expenditures) that Nokia was projected to generate during the time period from January 1, 2015 to December 31, 2019, based on the Nokia Street Forecasts and extrapolated by Zaoui until 2019; and (2) the
terminal value for Nokia. Zaoui, using its professional judgment and expertise, calculated a range of terminal values for Nokia at the end of the forecast period by applying a perpetual growth rate ranging from 1.5% to 2.5% of the unlevered free
cash flow of Nokia for the terminal period based on the Nokia Street Forecasts. The unlevered free cash flows and the range of terminal values were then discounted to present values using a range of discount rates from 8.5% to 9.5%, which were based
on
78
Nokia’s weighted average cost of capital. Zaoui took the sum of the present value ranges for Nokia’s future cash flows and terminal value to calculate a range of implied enterprise
values, and then added to such implied enterprise value cash and cash equivalents and investments in associates and joint-ventures as of December 31, 2014, subtracted the value of Nokia’s debt as of December 31, 2014 (assuming full
dilution from the convertible bonds) and subtracted the value of non-controlling interests as of December 31, 2014 to arrive at a range of implied equity value per Nokia Share of EUR 6.41 to EUR 7.78.
The following table sets forth projected unlevered free cash flows of Nokia for the periods indicated that were used by Zaoui in its discounted cash flow analysis.
These projections were based on information contained in the Nokia Street Forecasts and extrapolated by Zaoui.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, |
|
| |
|
2015E |
|
|
2016E |
|
|
2017E |
|
|
2018E |
|
|
2019E |
|
| |
|
(in EUR million) |
|
| Unlevered free cash flow |
|
|
1 461 |
|
|
|
1 530 |
|
|
|
1 517 |
|
|
|
1 569 |
|
|
|
1 677 |
|
Implied Exchange Ratio
Zaoui then calculated an implied exchange ratio reference range on a fully diluted basis by dividing the low end of the implied per share equity value reference
range for Alcatel Lucent by the low end of the implied per share equity value reference range for Nokia, in each case indicated by the discounted cash flow analyses, and by dividing the high end of the implied per share equity value reference range
for Alcatel Lucent by the high end of the implied per share equity value reference range for Nokia, in each case indicated by the discounted cash flow analyses.
The following table sets forth the range of implied exchange ratios (on a fully diluted basis) based on a discounted cash flow analysis excluding synergies.
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fully Diluted Equity Value per Share |
|
Alcatel Lucent |
|
|
Nokia |
|
|
Implied Exchange
Ratio |
|
| High End |
|
€ |
4.18 |
|
|
€ |
7.78 |
|
|
|
0.537x |
|
| Low End |
|
€ |
3.37 |
|
|
€ |
6.41 |
|
|
|
0.525x |
|
The discounted cash flow analysis excluding synergies performed by Zaoui indicated a range of implied exchange ratios (on a fully
diluted basis) of 0.537x to 0.525x, as compared to the exchange ratio of 0.550x.
Summary of Zaoui’s Financial Analysis Relating to its
October 28, 2015 Opinion
The following is a summary of the material financial analyses prepared and reviewed with Alcatel Lucent’s board
of directors in connection with the written opinion dated October 28, 2015. The following summary, however, does not purport to be a complete description of the financial analyses performed or factors considered by, and underlying the opinion
of, Zaoui, nor does the order of the financial analyses described represent the relative importance or weight given to those financial analyses by Zaoui. Zaoui may have deemed various assumptions more or less probable than other assumptions, so the
reference ranges resulting from any particular portion of the analyses summarized below should not be taken to be Zaoui’s view of the actual exchange ratio. Some of the summaries of the financial analyses set forth below include information
presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses performed by
Zaoui. Considering the data in the tables below without considering all financial analyses or factors or the full narrative description of such analyses or factors, including the methodologies and assumptions underlying such analyses or factors,
could create a misleading or incomplete view of the processes underlying Zaoui’s financial analyses and its opinion.
79
Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is
based on market data as it existed on or before April 13, 2015, and is not necessarily indicative of current market conditions.
The implied
exchange ratio reference ranges described below were calculated using the number of Alcatel Lucent Shares outstanding on a fully diluted basis as of June 30, 2015 and the number of Nokia Shares outstanding on a fully diluted basis as of
June 30, 2015, in each case calculated on a treasury share method basis, taking into account outstanding in-the-money stock options in relation to Alcatel Lucent Shares and Nokia Shares, respectively, Performance Shares and Nokia Performance
Shares, respectively, other equity awards and convertible securities (including the OCEANEs, with equity dilution based on an adjusted conversion ratio as per the clause relating to takeover bids, in accordance with the terms of the OCEANEs), based
on information provided by Alcatel Lucent and Nokia.
Historical Exchange Ratio Analysis Relating to its October 28, 2015 Opinion
Zaoui determined that historical trading prices for the publicly-traded Alcatel Lucent Shares and Nokia Shares after April 13, 2015 were not
relevant as such trading prices had been impacted by the announcement of the Transaction. Therefore, the analysis described in the section entitled “—Historical Exchange Ratio Analysis Relating to its April 14, 2015
Opinion” above continued to be the relevant analysis as it related to historical exchange ratios.
Analyst Price Target Analysis Relating to
its October 28, 2015 Opinion
Zaoui determined that price targets published by equity analysts on each of the Alcatel Lucent Shares and Nokia
Shares on and after April 13, 2015 were not relevant as such market data had been impacted by the announcement of the Transaction. Therefore, the analysis described in the section entitled “—Analyst Price Target Analysis Relating
to its April 14, 2015 Opinion” above continued to be the relevant analysis as it related to analyst price targets.
Premiums Paid
Analysis Relating to its October 28, 2015 Opinion
No share exchange transactions (“Offre Publique d’Echange” or
“OPE”) valued above EUR 1 billion were announced on or after April 13, 2015 in France. Therefore, the analysis described in the section entitled “—Premiums Paid Analysis Relating to its April 14, 2015
Opinion” above continued to be the relevant analysis as it related to premiums paid in precedent share exchange transactions in France.
Selected Comparable Companies Analysis Relating to its October 28, 2015 Opinion
Alcatel Lucent Comparable Companies
Zaoui updated its selected comparable companies analysis with respect to
Alcatel Lucent. For purposes of this analysis and comparison, Zaoui reviewed and analyzed certain financial information, valuation multiples and market trading data through October 27, 2015 related to selected comparable publicly traded telecom
equipment providers which it viewed, based on its professional judgment and experience and taking into account the company’s business profile, geographic region and size, as reasonably comparable or relevant for purposes of this analysis of
Alcatel Lucent. No company, independently or as part of a set, is identical to Alcatel Lucent or its business segments. As part of its analysis, Zaoui determined that Alcatel Lucent is not directly comparable to any other European or American
telecom equipment provider company due to the relative contribution and difference in profitability of its Core Networking versus its Access activities. As a consequence, Zaoui determined to
80
use a different set of comparable companies for Alcatel Lucent in each of Core Networking and Access as set forth below:
Core Networking Peers:
Access
Peers:
For each of the Alcatel
Lucent comparable companies, Zaoui calculated and compared the ratio of such company’s enterprise value (calculated as the market capitalization of such company based on its closing share price on October 27, 2015, plus debt, less cash,
cash equivalents and marketable securities, plus minorities and less associates) to such company’s estimated earnings before interest and taxes (or EBIT) for each of the years ending December 31, 2015 and 2016. The financial information
for each of the selected companies listed above and used by Zaoui in its analysis was based on public filings, consensus estimates, recent equity research reports and other publicly available information.
The following table sets forth the average of the trading multiples for the Alcatel Lucent comparable companies considered in this analysis for each of the years
ending December 31, 2015 and 2016.
|
|
|
|
|
|
|
|
|
| |
|
Average for Year Ended December 31, |
|
| Enterprise Value to Estimated EBIT |
|
2015
|
|
|
2016
|
|
| Core Networking |
|
|
11.0x |
|
|
|
9.7x |
|
| Access |
|
|
12.9x |
|
|
|
11.1x |
|
In performing its analysis, Zaoui considered that price to earnings (or P/E) multiples tend to be very heterogeneous due to
differences in depreciation and provisional accounting policies, as well as due to differences in capital structures, and that valuation based on P/E multiples is not commonly used by equity analysts in the telecom equipment provider sector, and
therefore Zaoui determined not to undertake an analysis of the exchange ratio applying P/E multiples of comparable companies.
Nokia Comparable
Companies
Zaoui updated its selected comparable companies analysis with respect to Nokia. For purposes of this analysis and comparison, Zaoui
reviewed and analyzed certain financial information, valuation multiples and market trading data through October 27, 2015 related to selected comparable publicly traded telecom equipment providers which it viewed, based on its professional
judgment and experience and taking into account the company’s business profile, geographic region and size, as reasonably comparable or relevant for purposes of this analysis of Nokia. No company, independently or as part of a set, is identical
to Nokia or its business segments. As part of its analysis, Zaoui determined that Nokia is not directly comparable to any other European or American telecom equipment provider company due to its business profile and difference in nature between its
Nokia
81
Networks and Nokia Technologies businesses. As a consequence, Zaoui determined to use a different set of comparable companies for each of its Nokia Networks and Nokia Technologies businesses as
set forth below.
Nokia Networks Peers:
Nokia Technologies Peers:
| |
• |
|
Universal Display Corporation |
| |
• |
|
Tessera Technologies Inc. |
| |
• |
|
Dolby Laboratories Inc. |
On August 3,
2015, Nokia announced an agreement to sell its HERE digital mapping and location services business at an enterprise value of EUR 2.8 billion. Zaoui has considered this transaction value in its comparable companies analysis, Zaoui noted that the
enterprise value of HERE was consistent with Zaoui’s valuation for the business.
For each of the Nokia comparable companies, Zaoui calculated and
compared the ratio of such company’s enterprise value (calculated as the market capitalization of such company based on its closing share price on October 27, 2015, plus debt, less cash, cash equivalents and marketable securities, plus
minorities and less associates) to such company’s (i) estimated earnings before interest, taxes, depreciation and amortization (or EBITDA) or (ii) estimated earnings before interest and taxes (or EBIT), in each case for the years
ending December 31, 2015 and 2016. The financial information for each of the selected companies listed above and used by Zaoui in its analysis was based on public filings, consensus estimates, recent equity research reports and other publicly
available information.
The following table sets forth the average of the trading multiples for the Nokia comparable companies considered in this
analysis for each of the years ending December 31, 2015 and 2016.
|
|
|
|
|
|
|
|
|
| |
|
Average for Year Ended December 31, |
|
| Enterprise Value to Estimated |
|
2015
|
|
|
2016
|
|
| Nokia Networks EBITDA |
|
|
9.1x |
|
|
|
8.5x |
|
| Nokia Technologies EBIT |
|
|
12.9x |
|
|
|
11.0x |
|
Determination of Implied Exchange Ratio
Zaoui then calculated implied exchange ratio reference ranges on a fully diluted basis using the Updated Alcatel Lucent Street Estimates and the Updated Nokia Street Estimates by dividing the low end of the implied
per share equity value reference range for Alcatel Lucent, by the low end of the implied per share equity value reference range for Nokia, in each case as indicated in the selected comparable companies analyses and shown in the table below, and by
dividing the high end of the implied per share equity value reference range for Alcatel Lucent by the high end of the implied per share equity value reference range for Nokia, in each case as indicated in the selected comparable
82
companies analyses and shown in the table below. In determining the implied equity value per share, Zaoui added to the implied enterprise value cash and cash equivalents and investments in
associates and joint-ventures as of June 30, 2015 and subtracted from the implied enterprise value the value of debt and non-controlling interests as of June 30, 2015. The net financial debt of Alcatel Lucent and Nokia were restated for
the conversion of all Alcatel Lucent and Nokia convertible instruments.
The following table sets forth the range of implied exchange ratios (on a fully
diluted basis) based on a selected comparable companies analysis.
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fully Diluted Equity Value per Share |
|
Alcatel Lucent |
|
|
Nokia |
|
|
Implied
Exchange Ratio |
|
| High End |
|
€ |
3.30 |
|
|
€ |
6.54 |
|
|
|
0.504x |
|
| Low End |
|
€ |
3.25 |
|
|
€ |
6.30 |
|
|
|
0.515x |
|
The selected comparable companies analysis performed by Zaoui indicated a range of implied exchange ratios (on a fully diluted
basis) of 0.504x to 0.515x, as compared to the exchange ratio of 0.550x.
Discounted Cash Flow Analysis Excluding Synergies
Alcatel Lucent DCF
Zaoui updated its discounted cash flow
analysis for Alcatel Lucent, without regards to the Synergies, to calculate the estimated net present value of (1) the standalone unlevered free cash flows (calculated as EBIT adjusted for tax, depreciation, amortization, restructuring charges,
change in working capital and capital expenditures) that Alcatel Lucent was projected to generate during the time period from June 30, 2015 to December 31, 2019, based on the Updated Alcatel Lucent Street Forecasts and extrapolated by
Zaoui until 2019; and (2) the terminal value for Alcatel Lucent. Zaoui, using its professional judgment and expertise, calculated a range of terminal values for Alcatel Lucent at the end of the forecast period by applying a perpetual growth
rate ranging from 1.5% to 2.5% of the unlevered free cash flow of Alcatel Lucent for the terminal period based on the Updated Alcatel Lucent Street Forecasts. The unlevered free cash flows and the range of terminal values were then discounted to
present values using a range of discount rates from 9.0% to 10.0%, which were based on Alcatel Lucent’s weighted average cost of capital. Zaoui took the sum of the present value ranges for Alcatel Lucent’s future cash flows and terminal
value to calculate a range of implied enterprise values, and then added to such implied enterprise value cash and cash equivalents and investments in associates and joint-ventures as of June 30, 2015, subtracted the value of Alcatel
Lucent’s debt as of June 30, 2015 (assuming full dilution from the 2018 OCEANEs) and subtracted the value of non-controlling interests as of June 30, 2015 to arrive at a range of implied equity value per Alcatel Lucent Share of EUR
3.00 to EUR 3.77.
The following table sets forth projected unlevered free cash flows of Alcatel Lucent for the periods indicated that were used by
Zaoui in its discounted cash flow analysis. These projections were based on information contained in the Updated Alcatel Lucent Street Forecasts and extrapolated by Zaoui.
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, |
|
| |
|
2015E |
|
|
2016E |
|
|
2017E |
|
|
2018E |
|
|
2019E |
|
| |
|
(in EUR million) |
|
| Unlevered free cash flow |
|
|
436 |
|
|
|
530 |
|
|
|
903 |
|
|
|
962 |
|
|
|
1 129 |
|
83
Nokia DCF
Zaoui updated its discounted cash flow analysis for Nokia, without regards to the Synergies, to calculate the estimated net present value of (1) the standalone
unlevered free cash flows (calculated as EBIT adjusted for tax, depreciation, amortization, change in working capital and capital expenditures) that Nokia was projected to generate during the time period from June 30, 2015 to December 31,
2019, based on the Updated Nokia Street Forecasts and extrapolated by Zaoui until 2019; and (2) the terminal value for Nokia. Zaoui, using its professional judgment and expertise, calculated a range of terminal values for Nokia at the end of
the forecast period by applying a perpetual growth rate ranging from 1.5% to 2.5% of the unlevered free cash flow of Nokia for the terminal period based on the Updated Nokia Street Forecasts. The unlevered free cash flows and the range of terminal
values were then discounted to present values using a range of discount rates from 8.5% to 9.5%, which were based on Nokia’s weighted average cost of capital. Zaoui took the sum of the present value ranges for Nokia’s future cash flows and
terminal value to calculate a range of implied enterprise values, and then added to such implied enterprise value cash and cash equivalents and investments in associates and joint-ventures as of June 30, 2015, subtracted the value of
Nokia’s debt as of June 30, 2015 (assuming full dilution from the convertible bonds) and subtracted the value of non-controlling interests as of June 30, 2015 to arrive at a range of implied equity value per Nokia Share of EUR 6.02 to
EUR 7.38.
The following table sets forth projected unlevered free cash flows of Nokia for the periods indicated that were used by Zaoui in its
discounted cash flow analysis. These projections were based on information contained in the Updated Nokia Street Forecasts and extrapolated by Zaoui.
|
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|
|
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|
|
|
|
|
| |
|
Year Ended December 31, |
|
| |
|
2015E |
|
|
2016E |
|
|
2017E |
|
|
2018E |
|
|
2019E |
|
| |
|
(in EUR million) |
|
| Unlevered free cash flow |
|
|
1 300 |
|
|
|
1 515 |
|
|
|
1 504 |
|
|
|
1 550 |
|
|
|
1 642 |
|
Implied Exchange Ratio
Zaoui then calculated an implied exchange ratio reference range on a fully diluted basis by dividing the low end of the implied per share equity value reference
range for Alcatel Lucent by the low end of the implied per share equity value reference range for Nokia, in each case as indicated in the discounted cash flow analyses, and by dividing the high end of the implied per share equity value reference
range for Alcatel Lucent by the high end of the implied per share equity value reference range for Nokia, in each case as indicated in the discounted cash flow analyses.
The following table sets forth the range of implied exchange ratios (on a fully diluted basis) based on a discounted cash flow analysis excluding synergies.
|
|
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|
|
|
|
|
|
|
| Fully Diluted Equity Value per Share |
|
Alcatel Lucent |
|
|
Nokia |
|
|
Implied
Exchange Ratio |
|
| High End |
|
€ |
3.77 |
|
|
€ |
7.38 |
|
|
|
0.511x |
|
| Low End |
|
€ |
3.00 |
|
|
€ |
6.02 |
|
|
|
0.497x |
|
The discounted cash flow analysis excluding synergies performed by Zaoui indicated a range of implied exchange ratios (on a fully
diluted basis) of 0.497x to 0.511x, as compared to the exchange ratio of 0.550x.
84
General
The
preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and,
therefore, a financial opinion is not readily susceptible to summary description. In arriving at its fairness determinations, Zaoui considered the results of all of the analyses and did not draw, in isolation, conclusions from or with regard to any
factor or analysis that it considered. Rather, Zaoui made its determinations as to fairness on the basis of its experience and professional judgment after considering the results of all of the analyses. No company or transaction used in the above
analyses as a comparison is directly comparable to Alcatel Lucent or Nokia or the proposed Transaction.
Zaoui prepared these analyses for purposes or
providing its opinions to Alcatel Lucent’s board of directors as to the fairness from a financial point of view to the holders of Alcatel Lucent Shares and Alcatel Lucent ADSs, as of the date of such opinion, of the exchange ratio. These
analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon projections of future results are not necessarily indicative of actual future results,
which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to substantial uncertainty, being based upon numerous factors or events beyond the control of the parties or their
respective advisors, none of Alcatel Lucent, Nokia, Zaoui or any other person assumes responsibility if future results are materially different from those forecast.
Zaoui’s financial analyses and opinions were only one of many factors taken into consideration by Alcatel Lucent’s board of directors in its evaluation of the Transaction. Consequently, the analyses
described above should not be viewed as determinative of the views of Alcatel Lucent’s board of directors or management with respect to the exchange ratio or as to whether Alcatel Lucent’s board of directors would have been willing to
determine that a different consideration was fair. The consideration for the Transaction was determined through arm’s-length negotiations between Alcatel Lucent and Nokia and was approved by Alcatel Lucent’s board of directors. Zaoui
provided advice to Alcatel Lucent during these negotiations. Zaoui did not recommend any specific exchange ratio to Alcatel Lucent or Alcatel Lucent’s board of directors or that any specific exchange ratio constituted the only appropriate
consideration for the Transaction. Zaoui did not express any view on whether Alcatel Lucent’s board of directors should determine that the Exchange Offer was in the interests of Alcatel Lucent and its stakeholders (including holders of Alcatel
Lucent Securities) or recommend the Exchange Offer to holders of Alcatel Lucent Securities.
Alcatel Lucent’s board of directors selected Zaoui as
its financial advisor in connection with the Exchange Offer based on various factors and criteria, including Zaoui’s understanding of Alcatel Lucent’s business, Zaoui’s leadership position in and understanding of the French market,
and other capabilities and strengths.
In connection with Zaoui’s services as the financial advisor to Alcatel Lucent’s board of directors,
Alcatel Lucent has agreed to pay Zaoui a transaction fee of EUR 23.4 million, one-third payable upon announcement of the Exchange Offer and two-thirds payable contingent upon completion of the Exchange Offer and an incentive fee payable
contingent upon completion of the Exchange Offer at the discretion of Alcatel Lucent. In addition, Alcatel Lucent has also agreed to pay Zaoui an aggregate retainer fee in respect of the year ended December 31, 2014 of EUR 0.6 million. Alcatel
Lucent has also agreed to reimburse Zaoui’s reasonable out-of-pocket expenses incurred in connection with Zaoui’s engagement, and to indemnify Zaoui against certain liabilities that may arise out of Zaoui’s engagement. Any amount
payable by Alcatel Lucent to Zaoui will be grossed up taking into account any tax payable in respect of such amount. Zaoui may also in the future provide financial advisory
85
services to Alcatel Lucent and its affiliates or Nokia and its affiliates for which Zaoui may receive further compensation.
Report of Independent Financial Expert
Prior to making its determination and recommendation at the
meeting of October 28, 2015, Alcatel Lucent’s board of directors received the Independent Expert Report of the Independent Expert, Associés en Finance, in accordance with Article 261-1 et seq. of the AMF General Regulation,
including the Independent Expert’s opinion (attestation d’équité), dated as of October 28, 2015, stating that, as of the date of the Independent Expert Report and based upon and subject to the assumptions,
qualifications and other considerations set forth therein, the Independent Expert concluded that the terms of the Exchange Offer by Nokia for Alcatel Lucent Shares and OCEANEs are fair.
An unofficial English translation of the full text of the Independent Expert Report of the Independent Expert, Associés en Finance, dated October 28, 2015, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the review undertaken in connection with the Independent Expert Report, and Addendum, dated November 9, 2015, are attached as Annex C to this Schedule 14D-9 and are incorporated herein by
reference, and Alcatel Lucent urges holders of Alcatel Lucent Securities to carefully read the Independent Expert Report in its entirety.
Item 5. Persons/Assets, Retained, Employed, Compensated or Used.
Alcatel Lucent retained Zaoui as its financial advisor in connection
with the Exchange Offer. Information pertaining to the retention of Zaoui in “Item 4. The Solicitation or Recommendation—Opinion of Alcatel Lucent’s Financial Advisor” is incorporated herein by reference.
Alcatel Lucent retained the Independent Expert, Associés en Finance, pursuant to Article 261-1 et seq. of the AMF General Regulation. Alcatel Lucent has
agreed to pay customary fees to the Independent Expert for its services and to reimburse reasonable out-of-pocket expenses in connection therewith.
The
Alcatel Lucent French Group Committee, pursuant to Articles L.2323-35 and L. 2323-21 et seq. of the French Labor Code (Code du travail), retained Syndex as advisor in connection with its opinion delivered on June 1, 2015. Alcatel Lucent
has agreed, on behalf of the French Group Committee, to pay customary fees to Syndex for its services.
Except as set forth above, neither Alcatel
Lucent nor any person acting on its behalf has or currently intends to employ, retain or compensate any person to make solicitations or recommendations to the holders of Alcatel Lucent Securities on its behalf with respect to the Exchange Offer or
related matters.
86
Item 6. Interest in Securities of the Subject Company.
During the 60 calendar days prior to the date of this Schedule 14D-9, Alcatel Lucent has not granted any Alcatel Lucent Stock Options, Performance Shares or
Performance Units. During the 60 calendar days prior to the date of this Schedule 14D-9 and in the ordinary course, Alcatel Lucent has issued 4 171 834 Alcatel Lucent Shares to employees of Alcatel Lucent (other than executive officers)
who have exercised Alcatel Lucent Stock Options and has issued Alcatel Lucent Shares to executive officers who have exercised Alcatel Lucent Stock Options as set forth in the following table.
|
|
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|
|
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|
|
| Name |
|
Date of Transaction |
|
Nature of Transaction |
|
No. of Alcatel Lucent
Securities |
|
Exercise Price |
| Mr. Timothy Krause |
|
September 22, 2015 |
|
Cashless exercise of Alcatel Lucent Stock Options |
|
423 Alcatel Lucent Stock Options exercised |
|
EUR 1.893 per Alcatel Lucent Stock Option |
|
|
|
|
|
| Mr. Timothy Krause |
|
September 22, 2015 |
|
Cashless exercise of Alcatel Lucent Stock Options |
|
23 778 Alcatel Lucent Stock Options exercised |
|
EUR 2.271 per Alcatel Lucent Stock Option |
|
|
|
|
|
| Mr. Timothy Krause |
|
September 22, 2015 |
|
Cashless exercise of Alcatel Lucent Stock Options |
|
26 420 Alcatel Lucent Stock Options exercised |
|
EUR 1.893 per Alcatel Lucent Stock Option |
|
|
|
|
|
| Ms. Nicole Gionet |
|
November 3, 2015 |
|
Cashless exercise of Alcatel Lucent Stock Options |
|
6 881 Alcatel Lucent Stock Options exercised |
|
EUR 1.893 per Alcatel Lucent Stock Option |
|
|
|
|
|
| Ms. Nicole Gionet |
|
November 3, 2015 |
|
Cashless exercise of Alcatel Lucent Stock Options |
|
423 Alcatel Lucent Stock Options exercised |
|
EUR 1.893 per Alcatel Lucent Stock Option |
|
|
|
|
|
| Ms. Nicole Gionet |
|
November 3, 2015 |
|
Cashless exercise of Alcatel Lucent Stock Options |
|
11 889 Alcatel Lucent Stock Options exercised |
|
EUR 2.271 per Alcatel Lucent Stock Option |
|
|
|
|
|
| Ms. Nicole Gionet |
|
November 3, 2015 |
|
Cashless exercise of Alcatel Lucent Stock Options |
|
7 926 Alcatel Lucent Stock Options exercised |
|
EUR 1.893 per Alcatel Lucent Stock Option |
|
|
|
|
|
| Mr. Timothy Krause |
|
November 5, 2015 |
|
Cashless exercise of Alcatel Lucent Stock Options |
|
42 272 Alcatel Lucent Stock Options exercised |
|
EUR 1.419 per Alcatel Lucent Stock Option |
|
|
|
|
|
| Mr. Timothy Krause |
|
November 5, 2015 |
|
Cashless exercise of Alcatel Lucent Stock Options |
|
7 926 Alcatel Lucent Stock Options exercised |
|
EUR 1.893 per Alcatel Lucent Stock Option |
|
|
|
|
|
| Mr. Timothy Krause |
|
November 5, 2015 |
|
Cashless exercise of Alcatel Lucent Stock Options |
|
9 247 Alcatel Lucent Stock Options exercised |
|
EUR 3.501 per Alcatel Lucent Stock Option |
|
|
|
|
|
| Mr. Timothy Krause |
|
November 5, 2015 |
|
Cashless exercise of Alcatel Lucent Stock Options |
|
12 110 Alcatel Lucent Stock Options exercised |
|
EUR 3.596 per Alcatel Lucent Stock Option |
In addition, on October 28, 2015, Alcatel Lucent’s board of directors resolved to grant a maximum amount of
3 513 332 unrestricted Alcatel Lucent Shares in lieu of the Alcatel Lucent Stock Options Plan that Alcatel Lucent’s board of directors had considered granting in respect of the year ended December 31, 2014, subject to the
conditions described in the section entitled “Item 3. Past Contacts, Transactions, Negotiations and Agreements—Effect of the Exchange Offer on Alcatel Lucent Shares, Alcatel Lucent ADSs, OCEANEs and Share- and Equity-Based Incentive
Plans—Distribution of Unrestricted Alcatel Lucent Shares” above. The executive officers of Alcatel Lucent have been allocated a maximum amount of 275 000 unrestricted Alcatel Lucent Shares as follows: Mr. Jean Raby (95 000
Alcatel Lucent Shares), Mr. Tim Krause (35 000 Alcatel Lucent Shares), Mr. Philippe Guillemot (107 500 Alcatel Lucent Shares) and Ms. Nicole Gionet (37 500 Alcatel Lucent Shares).
87
Other than as set forth above, no transactions with respect to Alcatel Lucent Securities have been effected during the
60 calendar days prior the date of this Schedule 14D-9, by Alcatel Lucent or, to Alcatel Lucent’s knowledge after making reasonable inquiry, by any of its executive officers, directors, affiliates or subsidiaries.
Item 7. Purposes of the Transaction and Plans or Proposals.
Subject Company Negotiations
Except as otherwise described in this Schedule 14D-9, Alcatel Lucent is
not undertaking or engaged in any negotiation in response to the Exchange Offer that relates to or would result in (i) an extraordinary transaction, such as a merger, reorganization or liquidation involving Alcatel Lucent or any subsidiary of
Alcatel Lucent; (ii) a purchase, sale or transfer of a material amount of assets of Alcatel Lucent or any subsidiary of Alcatel; (iii) a tender offer for or other acquisition of Alcatel Lucent’s securities by Alcatel Lucent, any
subsidiary of Alcatel Lucent, or any other person; or (iv) a material change in the present dividend rate or policy, indebtedness or capitalization of Alcatel Lucent. As described in the Memorandum of Understanding, Alcatel Lucent’s board
of directors, in connection with the exercise of its fiduciary duties, is permitted under certain conditions to engage in negotiations in response to an unsolicited alternate proposal.
Transactions and Other Matters
Except as set forth in this Schedule 14D-9, there is no transaction,
resolution of Alcatel Lucent’s board of directors, agreement in principle, or signed contract that is entered into in response to the Exchange Offer that relates to or would result in one or more of the matters referred to in the immediately
preceding paragraph of this Item 7.
Item 8. Additional Information.
Regulatory Approvals
Pursuant to the Memorandum of
Understanding, the filing of the French Offer with the AMF was conditional on the receipt of approvals (or expiration of the relevant waiting periods) from antitrust or similar authorities in nine jurisdictions, including the United States, the
European Union and China. In addition, the filing of the French Offer with the AMF was subject to the authorization of the Ministry of Economy, Industry and Digital Technology of the French Republic and the receipt of the required approval of the
Committee on Foreign Investment in the United States. These regulatory approvals were received prior to the filing of the French Offer with the AMF.
For further information on required regulatory approvals, see the section entitled “The Exchange Offer—Legal Matters; Regulatory
Approvals—Regulatory Approvals for the Exchange Offer” in the exchange offer/prospectus, which is incorporated herein by reference.
Pursuant to the AMF General Regulation, prior to the opening of the French Offer with the AMF, Nokia was required to obtain approvals (or expiration of the
relevant waiting periods) from the banking and/or insurance supervisory authorities in Europe (European Central Bank), Luxembourg (Commissariat aux Assurances), and Vermont (United States) (Vermont Department of Financial Regulation),
as a result of the indirect change of control, if the Exchange Offer is successful, of the French banking company Electro Banque and the Luxembourg reinsurance company Electro Re, both directly wholly-owned subsidiaries of Alcatel Lucent, as well as
the Luxembourg insurance company Electro Assurance and the U.S. insurance company First Beacon Insurance Company, both directly wholly-owned subsidiaries of Electro Re. Nokia obtained the approvals of the Vermont Department of Financial Regulation
on
88
July 9, 2015, the Commissariat aux Assurances on August 14, 2015, and the European Central Bank on October 20, 2015.
Nokia Shareholder Approval Required
Nokia’s obligation to accept, and to exchange, any Alcatel
Lucent Securities validly tendered into the U.S. Offer is subject to Nokia shareholders having approved the authorization for the Nokia board of directors to issue such number of new Nokia Shares as may be necessary for delivering the Nokia Shares
offered in consideration for the Alcatel Lucent Securities tendered into the Exchange Offer and for the completion of the Exchange Offer. The resolution must be approved by shareholders representing at least two-thirds of the votes cast and Nokia
Shares represented at such extraordinary general meeting of Nokia’s shareholders.
Alcatel Lucent French Group Committee’s Opinion
In accordance with the Memorandum of Understanding and applicable law, the Alcatel Lucent French Group Committee (Comité de Groupe
France) consultation process was completed and the Alcatel Lucent French Group Committee issued its opinion on June 1, 2015. On June 4, 2015, following the issuance of the Alcatel Lucent French Group Committee’s opinion, Alcatel
Lucent’s board of directors issued a statement expressing its full support for the proposed combination with Nokia.
Alcatel Lucent
Shareholder Approval Not Required
There is no approval required from Alcatel Lucent’s shareholders in connection with the Exchange Offer
under applicable French law.
No Appraisal Rights
There are no appraisal rights available to holders of Alcatel Lucent Securities in connection with the Exchange Offer under applicable French law.
Squeeze-Out
Nokia has stated that if, at the completion of the Exchange Offer or the subsequent
offering period, if any, Nokia owns 95% or more of the share capital and voting rights of Alcatel Lucent (Alcatel Lucent Shares held in treasury being considered as held by Nokia for the purpose of the calculation), Nokia intends to request from the
AMF, within three months of the expiration of the French Offer period, the implementation of a squeeze-out for the remaining outstanding Alcatel Lucent Shares.
In addition, Nokia has stated that if, at the completion of the Exchange Offer or the subsequent offering period, if any, Nokia owns 95% or more of the sum of the outstanding Alcatel Lucent Shares and Alcatel
Lucent Shares issuable upon conversion of all of the OCEANEs then outstanding (Alcatel Lucent Shares held in treasury being considered as held by Nokia for the purpose of the calculation), Nokia intends to request from the AMF, within three months
of the expiration of the French Offer period, the implementation of a squeeze-out for the remaining OCEANEs.
For further information on a squeeze-out,
see the section entitled “The Transaction—Intentions of Nokia over the next twelve months—Squeeze-out” in the exchange offer/prospectus, which is incorporated herein by reference.
89
Delisting and Deregistration
Nokia has stated that, after completion of the Exchange Offer, and as applicable, after any subsequent offering period, Nokia intends, subject to applicable law and securities exchange regulations, to request from
Euronext Paris the delisting of the Alcatel Lucent Shares and OCEANEs from the regulated market of Euronext Paris. As promptly as practicable following completion of the Exchange Offer, Nokia also intends to seek to delist the Alcatel Lucent ADSs
from the NYSE and, subject to applicable law, to deregister the Alcatel Lucent Shares and Alcatel Lucent ADSs and terminate the reporting obligations of Alcatel Lucent under the Exchange Act.
For further information on delisting and deregistration, see the section entitled “The Exchange Offer—Certain Consequences of the Exchange Offer—Reduced Liquidity of Alcatel Lucent
Securities” in the exchange offer/prospectus, which is incorporated herein by reference.
Termination of Deposit Agreement
Nokia has stated that, as promptly as practicable after completion of the Exchange Offer or the subsequent offering period, if any, Nokia
intends, subject to applicable law, to cause Alcatel Lucent to terminate the Alcatel Lucent deposit agreement. Following such termination, the Alcatel Lucent depositary would perform no further acts under the Alcatel Lucent deposit agreement, except
to receive and hold (or sell) distributions on the deposited securities and deliver the deposited securities being withdrawn.
For further information
on the termination of Alcatel Lucent’s deposit agreement, see the section entitled “The Exchange Offer—Certain Consequences of the Exchange Offer—Termination of the Alcatel Lucent Deposit Agreement” in the exchange
offer/prospectus, which is incorporated herein by reference.
Alcatel Lucent Shares on a Fully Diluted Basis
The following table sets forth the number of Alcatel Lucent Shares outstanding as of as of October 31, 2015, the latest practicable date before the date of
this Schedule 14D-9, including the number of Alcatel Shares issuable pursuant to the Alcatel Lucent Stock Options, the Performance Shares and the OCEANEs.
|
|
|
|
|
|
|
|
|
| Description |
|
Number of Alcatel
Lucent Shares |
|
|
Percentage of
Alcatel Lucent
Shares |
|
| Alcatel Lucent Shares |
|
|
2 841 508 155 |
|
|
|
75.94% |
|
| Alcatel Lucent ADSs |
|
|
472 058 361 |
|
|
|
12.62% |
|
| Alcatel Lucent Shares held in treasury by Alcatel Lucent |
|
|
13 005 087 |
|
|
|
0.35% |
|
| Alcatel Lucent Shares held in treasury by subsidiaries of Alcatel Lucent |
|
|
27 110 613 |
|
|
|
0.72% |
|
| Alcatel Lucent Stock Options(1) |
|
|
81 040 440 |
|
|
|
2.17% |
|
| Performance
Shares(2) |
|
|
18 217 530 |
|
|
|
0.49% |
|
| 2018
OCEANEs(3) |
|
|
440 261 224 |
|
|
|
11.77% |
|
| 2019
OCEANEs(3) |
|
|
214 400 000 |
|
|
|
5.73% |
|
| 2020
OCEANEs(3) |
|
|
146 559 993 |
|
|
|
3.92% |
|
|
|
|
|
|
|
|
|
|
| Total Alcatel Lucent Shares on a Fully Diluted Basis |
|
|
3 741 987 342 |
|
|
|
100.00% |
|
| (1) |
Includes Alcatel Lucent Stock Options granted prior to the date of the Memorandum of Understanding which Alcatel Lucent’s board of directors has resolved to accelerate.
|
90
| (2) |
Includes Performance Shares granted prior to the date of the Memorandum of Understanding which Alcatel Lucent’s board of directors has resolved to accelerate, but excludes
those Performance Shares granted pursuant to the 2015 Performance Share Plan, which will not be accelerated in connection with the Exchange Offer and will remain subject to presence and performance conditions. |
| (3) |
Reflects adjustment to the applicable conversion/exchange ratio of the OCEANEs as a result of the opening of the Exchange Offer. |
Ownership of Alcatel Lucent Shares
The following
table sets forth certain information known to Alcatel Lucent concerning the ownership of Alcatel Lucent Shares as of December 31, 2014.
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Alcatel Lucent Shares outstanding
as of December 31, 2014 |
|
|
Theoretical Voting Rights
based on Alcatel Lucent
Shares outstanding as of
December 31, 2014(1) |
|
|
Voting Rights Exercisable
at General Meeting
based
on Alcatel Lucent Shares
outstanding as of
December
31, 2014(2) |
|
| Name of Holder of Alcatel
Lucent Shares |
|
Number of
Alcatel
Lucent
Shares |
|
|
Percentage
of Alcatel
Lucent
Shares |
|
|
Double
Voting
Rights |
|
|
Total
Number of
Votes |
|
|
Percentage
of Votes |
|
|
Total
Number of
Votes |
|
|
Percentage
of Votes |
|
| The Capital Group Companies, Inc.(3) |
|
|
290 280 811 |
|
|
|
10.29 |
% |
|
|
— |
|
|
|
290 280 811 |
|
|
|
10.11 |
% |
|
|
290 280 811 |
|
|
|
10.26 |
% |
| BlackRock Inc.(3) |
|
|
136 616 484 |
|
|
|
4.84 |
% |
|
|
— |
|
|
|
136 616 484 |
|
|
|
4.76 |
% |
|
|
136 616 484 |
|
|
|
4.83 |
% |
| Caisse des Dépôts et
Consignations(3)(4)(5) |
|
|
100 901 700 |
|
|
|
3.58 |
% |
|
|
8 243 622 |
|
|
|
109 145 322 |
|
|
|
3.80 |
% |
|
|
109 145 322 |
|
|
|
3.86 |
% |
| Amundi(3) |
|
|
84 642 286 |
|
|
|
3.00 |
% |
|
|
— |
|
|
|
84 642 286 |
|
|
|
2.95 |
% |
|
|
84 642 286 |
|
|
|
2.99 |
% |
| DNCA Finance(5) |
|
|
83 884 900 |
|
|
|
2.97 |
% |
|
|
— |
|
|
|
83 884 900 |
|
|
|
2.92 |
% |
|
|
83 884 900 |
|
|
|
2.96 |
% |
| FCP 2AL(3) |
|
|
34 418 607 |
|
|
|
1.22 |
% |
|
|
33 969 215 |
|
|
|
68 387 822 |
|
|
|
2.38 |
% |
|
|
68 387 822 |
|
|
|
2.42 |
% |
| Other institutional investors in France(5)(6) |
|
|
107 521 500 |
|
|
|
3.81 |
% |
|
|
— |
|
|
|
107 521 500 |
|
|
|
3.75 |
% |
|
|
107 521 500 |
|
|
|
3.80 |
% |
| Alcatel Lucent Shares held in treasury by Alcatel
Lucent(7) |
|
|
13 010 214 |
|
|
|
0.46 |
% |
|
|
— |
|
|
|
13 010 214 |
|
|
|
0.45 |
% |
|
|
— |
|
|
|
— |
|
| Alcatel Lucent Shares held in treasury by subsidiaries of Alcatel
Lucent(7) |
|
|
27 110 113 |
|
|
|
0.96 |
% |
|
|
— |
|
|
|
27 110 113 |
|
|
|
0.94 |
% |
|
|
— |
|
|
|
— |
|
| Public |
|
|
1 942 045 655 |
|
|
|
68.86 |
% |
|
|
7 947 675 |
|
|
|
1 949 993 330 |
|
|
|
67.93 |
% |
|
|
1 949 993 330 |
|
|
|
68.89 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
2 820 432 270 |
|
|
|
100.00 |
% |
|
|
50 160 512 |
|
|
|
2 870 592 782 |
|
|
|
100.00 |
% |
|
|
2 830 472 455 |
|
|
|
100.00 |
% |
| (1) |
Theoretical voting rights include the Alcatel Lucent Shares held by Alcatel Lucent and its subsidiaries which do not have voting rights. |
| (2) |
The voting rights exercisable at the General Meeting of holders of Alcatel Lucent Shares do not include Alcatel Lucent Shares with no voting rights. |
| (3) |
Information based on declarations made by the holders of Alcatel Lucent Shares. |
| (4) |
Includes Alcatel Lucent Shares held by BPI Participations France. |
| (5) |
Information based on Alcatel Lucent TPI Report as of June 30, 2014 and IPREO shareholders report as of December 31, 2014. |
| (6) |
Other institutional investors in France holding, individually, more than 0.50% of the Alcatel Lucent Shares. |
| (7) |
Alcatel Lucent Shares held in treasury by Alcatel Lucent or its subsidiaries do not have voting rights pursuant to applicable French law so long as held in treasury.
|
91
The following table sets forth certain information known to Alcatel Lucent concerning the ownership of Alcatel Lucent
Shares as of June 30, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Alcatel Lucent Shares outstanding
as of June 30, 2015 |
|
|
Theoretical Voting Rights
based on Alcatel Lucent
Shares outstanding as of
June 30, 2015(1) |
|
|
Voting Rights Exercisable
at General Meeting
based
on Alcatel Lucent Shares
outstanding as of
June 30,
2015(2) |
|
| Name of Holder of Alcatel
Lucent Shares |
|
Number of
Alcatel
Lucent
Shares |
|
|
Percentage
of Alcatel
Lucent
Shares |
|
|
Double
Voting
Rights |
|
|
Total
Number of
Votes |
|
|
Percentage
of Votes |
|
|
Total
Number of
Votes |
|
|
Percentage
of Votes |
|
| The Capital Group Companies, Inc.(3) |
|
|
281 970 300 |
|
|
|
9.95 |
% |
|
|
— |
|
|
|
281 970 300 |
|
|
|
9.78 |
% |
|
|
281 970 300 |
|
|
|
9.92 |
% |
| Odey Asset Management, LLP(3) |
|
|
139 392 500 |
|
|
|
4.92 |
% |
|
|
— |
|
|
|
139 392 500 |
|
|
|
4.84 |
% |
|
|
139 392 500 |
|
|
|
4.90 |
% |
| BlackRock Inc.(3) |
|
|
114 609 500 |
|
|
|
4.04 |
% |
|
|
— |
|
|
|
114 609 500 |
|
|
|
3.98 |
% |
|
|
114 609 500 |
|
|
|
4.03 |
% |
| Caisse des Dépôts et
Consignations(3)(4) |
|
|
101 498 600 |
|
|
|
3.58 |
% |
|
|
8 243 622 |
|
|
|
109 742 222 |
|
|
|
3.81 |
% |
|
|
109 742 222 |
|
|
|
3.86 |
% |
| DNCA(3) |
|
|
85 074 900 |
|
|
|
3.00 |
% |
|
|
— |
|
|
|
85 074 900 |
|
|
|
2.95 |
% |
|
|
85 074 900 |
|
|
|
2.99 |
% |
| Aviva Plc(3) |
|
|
56 354 800 |
|
|
|
1.99 |
% |
|
|
— |
|
|
|
56 354 800 |
|
|
|
1.95 |
% |
|
|
56 354 800 |
|
|
|
1.98 |
% |
| Amundi(3)(5) |
|
|
42 737 400 |
|
|
|
1.51 |
% |
|
|
— |
|
|
|
42 737 400 |
|
|
|
1.48 |
% |
|
|
42 737 400 |
|
|
|
1.50 |
% |
| FCP 2AL(5) |
|
|
32 778 404 |
|
|
|
1.16 |
% |
|
|
32 708 499 |
|
|
|
65 486 903 |
|
|
|
2.27 |
% |
|
|
65 486 903 |
|
|
|
2.30 |
% |
| Other institutional investors(3) |
|
|
1 129 716 700 |
|
|
|
39.86 |
% |
|
|
18 173 |
|
|
|
1 129 734 873 |
|
|
|
39.19 |
% |
|
|
1 129 734 873 |
|
|
|
39.74 |
% |
| Alcatel Lucent Shares held in treasury by Alcatel
Lucent(6) |
|
|
13 006 408 |
|
|
|
0.46 |
% |
|
|
— |
|
|
|
13 006 408 |
|
|
|
0.45 |
% |
|
|
— |
|
|
|
— |
|
| Alcatel Lucent Shares held in treasury by subsidiaries of Alcatel
Lucent(6) |
|
|
27 110 113 |
|
|
|
0.96 |
% |
|
|
— |
|
|
|
27 110 113 |
|
|
|
0.94 |
% |
|
|
— |
|
|
|
— |
|
| Public |
|
|
810 210 667 |
|
|
|
28.58 |
% |
|
|
7 269 016 |
|
|
|
817 479 683 |
|
|
|
28.36 |
% |
|
|
817 479 683 |
|
|
|
28.76 |
% |
| Total |
|
|
2 834 460 292 |
|
|
|
100.00 |
% |
|
|
48 239 310 |
|
|
|
2 882 699 602 |
|
|
|
100.00 |
% |
|
|
2 842 583 081 |
|
|
|
100.00 |
% |
| (1) |
Theoretical voting rights include the Alcatel Lucent Shares held by Alcatel Lucent and its subsidiaries which do not have voting rights. |
| (2) |
The voting rights exercisable at the General Meeting of holders of Alcatel Lucent Shares do not include Alcatel Lucent Shares with no voting rights. |
| (3) |
Information based on Alcatel Lucent TPI Report as of June 30, 2015 and IPREO shareholders report as of June 30, 2015. |
| (4) |
Includes Alcatel Lucent Shares held by BPI Participations France. |
| (5) |
Information based on declarations made by the holders of Alcatel Lucent Shares. |
| (6) |
Alcatel Lucent Shares held in treasury by Alcatel Lucent or its subsidiaries do not have voting rights pursuant to applicable French law so long as held in treasury.
|
Consequences Under Agreements Entered Into by Alcatel Lucent in the Event of a Change of Control
OCEANEs
Under the terms of each of the OCEANEs, the opening
of the Exchange Offer will constitute a “change of control” with respect to the OCEANEs which would result in, among other things, a temporary adjustment to the conversion/exchange ratio applicable to each series of OCEANEs and the right
of holders of OCEANEs to request early redemption of outstanding OCEANEs during a specified period, at a price in cash equal to par plus, as applicable, accrued interest from the date the interest was last paid preceding the date of early
redemption, to the date set for the early redemption.
For further information on the consequences of the Exchange Offer under the terms of each of the
OCEANEs, see the section entitled “The Exchange Offer—Matters Relevant for OCEANEs Holders” in the exchange offer/prospectus, which is incorporated herein by reference.
92
Senior Notes
In December 2010, Alcatel Lucent issued Senior Notes due January 15, 2016 with an 8.50% coupon in an aggregate amount of EUR 500 million, of which Alcatel
Lucent repurchased in an aggregate principal amount of EUR 75 243 000 in May 2013 and EUR 210 391 000 in July 2014. In July 2013, Alcatel-Lucent USA Inc. issued Senior Notes due January 1, 2020 with an 8.875% coupon in an
aggregate principal amount of USD 500 million. In November 2013, Alcatel-Lucent USA Inc. issued Senior Notes due November 15, 2020 with a 6.75% coupon in an aggregate principal amount of USD 1 000 million, of which Alcatel-Lucent USA
Inc. repurchased in an aggregate principal amount of USD 300 million in September 2015. In December 2013, Alcatel-Lucent USA Inc. issued Senior Notes due July 1, 2017 with a 4.625% coupon in an aggregate principal amount of USD 650
million.
Under the terms of each series of notes, the settlement of the Exchange Offer is expected to constitute a “change of control”, which
is defined, among other things, as the acquisition by any person of more than 50% of the Alcatel Lucent Shares entitled to vote for directors of Alcatel Lucent. As a result, Alcatel Lucent or Alcatel-Lucent USA Inc., as applicable, will be
required to offer to repurchase all of the notes of each series at a cash price equal to 101% of their respective principal amounts, plus any accrued and unpaid interest, and to repurchase all notes tendered for purchase in such offer. Notice of the
offer to repurchase must be distributed to holders of the notes within 30 calendar days of the change of control and specify a date of repurchase no earlier than 30 calendar days and no later than 60 calendar days from the date of the delivery of
such notice. The timing and conduct of any offers to repurchase will be subject to applicable securities laws and regulations. In the event that Alcatel-Lucent USA Inc. repurchases not less than 90% of the aggregate principal amount of notes of any
series upon a change of control, Alcatel-Lucent USA Inc. will have the right, upon not less than 30 calendar days’ notice nor more than 60 calendar days’ notice, to redeem all the notes of such series that remain outstanding at the same
purchase price. This redemption right is only applicable to the notes issued by Alcatel-Lucent USA Inc. and not Alcatel Lucent’s Senior Notes due January 15, 2016.
Other Agreements
Alcatel Lucent is a party to various agreements with third parties, including joint venture
agreements, certain financing facilities, pension funds agreements, contracts for the performance of engineering and related work/services, IT contracts, technology and intellectual property rights licenses as well as employment agreements that
contain change of control provisions that will be triggered upon the completion of the Offer. Agreements with change of control provisions typically provide for or permit the termination of the agreement upon the occurrence of a change of control of
one of the parties, which can be waived by the relevant counterparties. If Nokia and Alcatel Lucent determine that one or more of such waivers are necessary, Alcatel Lucent will make reasonable efforts to seek and obtain these waivers.
Except as set forth above, Alcatel Lucent is not aware of any material agreements that could be amended or terminated solely as a result of a change of control of
Alcatel Lucent.
Cautionary Statement Regarding Forward-Looking Statements
This Schedule 14D-9 contains forward-looking statements that reflect Alcatel Lucent’s current expectations and views of future events and developments. Some of these forward-looking statements can be
identified by terms and phrases such as “anticipate,” “should,” “likely,” “foresee,” “believe,” “estimate,” “expect,” “intend,” “continue,” “could,”
“may,” “plan,” “project,” “predict,” “will” and similar expressions. These forward looking statements are subject to a number of risks and uncertainties, many of which are beyond Alcatel
Lucent’s control, which could cause actual results to differ materially from such statements. These forward-looking statements are based on Alcatel Lucent’s beliefs,
93
assumptions and expectations of future performance, taking into account the information currently available to us. These forward-looking statements are only predictions based upon Alcatel
Lucent’s current expectations and views of future events and developments and are subject to risks and uncertainties that are difficult to predict because they relate to events and depend on circumstances that will occur in the future. Risks
and uncertainties include: the fixed nature of the exchange ratio, changes in the value of Nokia Shares; the effect of the issuance of Nokia Shares in connection with the Exchange Offer; the successful implementation of business or integration plans
following completion of the Exchange Offer; the accuracy of estimates dependent on external factors; the consequences of a change of control in respect of Alcatel Lucent’s indebtedness; the impact of the Exchange Offer on the OCEANEs; the
impact of a change of control on Alcatel Lucent’s agreements with third parties; the actual financial impact of the Exchange Offer; the accuracy of financial information regarding the combined businesses; the effect of the Exchange Offer on
trading markets for Alcatel Lucent Securities; the impact of the reduced ownership of holders of Alcatel Lucent Securities in the combined company; future issuances of additional Nokia Shares or other securities; the success of the listing of the
Nokia Shares on the Euronext Paris; the impact of financial interests of executive officer and directors of Alcatel Lucent in the Exchange Offer; the ability of holders of Nokia Shares to exercise voting rights; the effects of implementation of the
squeeze-out; the consequences of failing to complete the squeeze-out; the possible adverse tax consequences resulting from a change of ownership of Alcatel Lucent; the ability of holders of Nokia Shares to exercise preemptive rights; and the impact
on the combined company (after giving effect to the proposed transaction with Nokia) of any of the foregoing risks or forward-looking statements; as well as other risk factors listed from time to time in Nokia’s or Alcatel Lucent’s filings
with the SEC.
The forward-looking statements should be read in conjunction with the other cautionary statements that are included elsewhere, including
the section entitled “Risk Factors” in the Form F-4, the most recent annual reports of Alcatel Lucent and Nokia on Form 20-F, reports furnished by Alcatel Lucent and Nokia on Form 6-K, and any other documents that Alcatel Lucent or
Nokia has filed with the SEC. Any forward-looking statements made in this communication are qualified in their entirety by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by Alcatel
Lucent will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Alcatel Lucent or its business or operations. Except as required by law, Alcatel Lucent undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Where You Can Find
Additional Information
Alcatel Lucent and Nokia are subject to the informational requirements of the Exchange Act and in accordance therewith
each file periodic reports and other information with the SEC relating to their respective businesses, financial condition and other matters. Copies of such reports and other information can be obtained at prescribed rates from the Public Reference
Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549, or free of charge at the web site maintained by the SEC at http://www.sec.gov.
The
SEC allows Alcatel Lucent to “incorporate by reference” information into this Schedule 14D-9, which means that Alcatel Lucent can disclose important information to you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this Schedule 14D-9, except for any information superseded by information contained in or incorporated by reference into this Schedule 14D-9.
This Schedule 14D-9 relates to the Exchange Offer by Nokia to exchange all Alcatel Lucent Securities for Nokia Shares. This Schedule 14D-9 includes the
solicitation/recommendation of Alcatel Lucent with respect to the Exchange Offer, and does not constitute or form part of any offer to exchange, or a
94
solicitation of an offer to exchange, any Alcatel Lucent Securities in any jurisdiction. This Schedule 14D-9 is not a substitute for the tender offer statement on Schedule TO or the exchange
offer/prospectus included in the Registration Statement on Form F-4 (File No. 333-206365) filed by Nokia with the SEC, the listing prospectus filed by Nokia with the Finnish Financial Supervisory Authority, the tender offer document (note
d’information) filed by Nokia with the AMF or the response document (note en réponse) filed by Alcatel Lucent with the AMF (including the letter of transmittal and related documents and as amended and supplemented from time to
time, the “Exchange Offer Documents”). No offering of securities shall be made in the United States except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933. The Exchange Offer
will be made only through the Exchange Offer Documents.
The making of the proposed exchange offer to specific persons who are residents in or nationals
or citizens of jurisdictions outside France or the United States or to custodians, nominees or trustees of such persons (the “Excluded Shareholders”) may be made only in accordance with the laws of the relevant jurisdiction. It is the
responsibility of the Excluded Shareholders wishing to accept an exchange offer to inform themselves of and ensure compliance with the laws of their respective jurisdictions in relation to the proposed exchange offer. The tender offer will be made
only through the Exchange Offer Documents.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE EXCHANGE OFFER DOCUMENTS AND ALL OTHER RELEVANT
DOCUMENTS THAT NOKIA OR ALCATEL LUCENT HAS FILED OR MAY FILE WITH THE SEC, AMF, NASDAQ HELSINKI OR FINNISH FINANCIAL SUPERVISORY AUTHORITY WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION THAT INVESTORS AND
SECURITY HOLDERS SHOULD CONSIDER BEFORE MAKING ANY DECISION REGARDING THE EXCHANGE OFFER.
The information contained in this Schedule 14D-9 must not be
published, released or distributed, directly or indirectly, in any jurisdiction where the publication, release or distribution of such information is restricted by laws or regulations. Therefore, persons in such jurisdictions into which this
Schedule 14D-9 is published, released or distributed must inform themselves about and comply with such laws or regulations. Nokia and Alcatel Lucent do not accept any responsibility for any violation by any person of any such restrictions.
The Exchange Offer Documents and other documents referred to above, if filed or furnished by Nokia or Alcatel Lucent with the SEC, as applicable, will
be available free of charge at the SEC’s website (www.sec.gov).
Nokia’s tender offer document (note d’information) and Alcatel
Lucent’s response document (note en réponse), containing detailed information with regard to the French Offer, are available on the websites of the AMF (www.amf-france.org), Nokia (http:// nokia.com/) and Alcatel Lucent (www.alcatel-lucent.com).
95
Item 9. Exhibits.
The following Exhibits are filed herewith or incorporated herein by reference.
|
|
|
| Exhibit No. |
|
Description |
| (a)(1) |
|
Exchange Offer/Prospectus, dated November 12, 2015 (incorporated by reference to Amendment No. 3 to the Registration Statement on Form F-4 filed with the SEC by Nokia on November 12,
2015) |
|
|
| (a)(2) |
|
Form of Letter of Transmittal for Certificated Alcatel Lucent ADSs (incorporated by reference to Exhibit 99.1 to Amendment No. 3 to the Registration Statement on Form F-4 filed with the
SEC by Nokia on November 12, 2015) |
|
|
| (a)(3) |
|
Form of Letter of Transmittal for book-entry only Alcatel Lucent ADSs (incorporated by reference to Exhibit 99.2 to Amendment No. 3 to the Registration Statement on Form F-4 filed with
the SEC by Nokia on November 12, 2015) |
|
|
| (a)(4) |
|
Notice of Guaranteed Delivery (Alcatel Lucent ADSs) (incorporated by reference to Exhibit 99.3 to Amendment No. 3 to the Registration Statement on Form F-4 filed with the SEC by
Nokia on November 12, 2015) |
|
|
| (a)(5) |
|
Letter to Clients (incorporated by reference to Exhibit 99.4 to Amendment No. 3 to the Registration Statement on Form F-4 filed with the SEC by Nokia on November 12,
2015) |
|
|
| (a)(6) |
|
Letter to Brokers (incorporated by reference to Exhibit 99.5 to Amendment No. 3 to the Registration Statement on Form F-4 filed with the SEC by Nokia on November 12,
2015) |
|
|
| (a)(7) |
|
Press Release on Announcement of Exchange Offer, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16,
2015) |
|
|
| (a)(8) |
|
Investor Presentation, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16, 2015) |
|
|
| (a)(9) |
|
Factsheet, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16, 2015) |
|
|
| (a)(10) |
|
Email to Employees from CEO of Alcatel Lucent, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16, 2015) |
|
|
| (a)(11) |
|
Letter from Chairman of Nokia, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16, 2015) |
|
|
| (a)(12) |
|
Transcript of Call with Alcatel Employees, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16, 2015) |
|
|
| (a)(13) |
|
Q&A Regarding Deal Alcatel-Lucent and Nokia, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16,
2015) |
|
|
| (a)(14) |
|
Thomson Reuters StreetEvents Edited Transcript, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16, 2015) |
|
|
| (a)(15) |
|
Q&A Regarding the Proposed Transaction Between Alcatel-Lucent and Nokia, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent
on April 16, 2015) |
|
|
| (a)(16) |
|
Transcript of Press Conference, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16,
2015) |
96
|
|
|
| Exhibit No. |
|
Description |
| (a)(17) |
|
Global Sales Advisory: Transaction between Alcatel-Lucent and Nokia, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16,
2015) |
|
|
| (a)(18) |
|
Transcript of Call with Alcatel Lucent Employees by Alcatel Lucent’s CEO, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on
April 17, 2015) |
|
|
| (a)(19) |
|
Press Release on Q1 2015 Results, dated May 7, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on May 7, 2015) |
|
|
| (a)(20) |
|
Transcript of Q1 2015 Earnings Call, dated May 7, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on May 8, 2015) |
|
|
| (a)(21) |
|
Intranet Posting, dated May 7, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on May 8, 2015) |
|
|
| (a)(22) |
|
Transcript of Q1 Quarterly Call, dated May 7, 2015 8:46 am CET (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on May 18, 2015) |
|
|
| (a)(23) |
|
Transcript of Q1 Quarterly Call, dated May 7, 2015 8:58 am CET (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on May 18, 2015) |
|
|
| (a)(24) |
|
Transcript of Q1 Quarterly Call, dated May 7, 2015 10:00 am CET (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on May 18, 2015) |
|
|
| (a)(25) |
|
Transcript of Q1 Quarterly Call, dated May 7, 2015 10:45 am CET (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on May 18, 2015) |
|
|
| (a)(26) |
|
Transcript of Video Interview, dated May 24, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on June 1, 2015) |
|
|
| (a)(27) |
|
Press Release on Consultation of French Group Committee, dated June 4, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on June 4,
2015) |
|
|
| (a)(28) |
|
Investor Q&A (General) (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on June 15, 2015) |
|
|
| (a)(29) |
|
Investor Q&A (Process and Technical) (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel-Lucent on June 15, 2015) |
|
|
| (a)(30) |
|
Press Release on Early Termination of U.S. Antitrust Waiting Period, dated June 17, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel-Lucent on June 17,
2015) |
|
|
| (a)(31) |
|
Press Release on Q2 2015 Results, dated July 30, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on July 30, 2015) |
|
|
| (a)(32) |
|
Press Release on Governance Structure for Proposed Combination, dated July 30, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on July 30,
2015) |
|
|
| (a)(33) |
|
Announcement of European Commission Approval of Acquisition, dated July 24, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on July 30,
2015) |
|
|
| (a)(34) |
|
Transcript of Q2 2015 Earnings Call (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on July 31,
2015) |
97
|
|
|
| Exhibit No. |
|
Description |
| (a)(35) |
|
Transcript of Top 200 Call, dated July 30, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on July 31, 2015) |
|
|
| (a)(36) |
|
Announcement of Filing of Form F-4 by Nokia (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on August 14, 2015) |
|
|
| (a)(37) |
|
E-mail Regarding Integration Planning (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on August 28, 2015) |
|
|
| (a)(38) |
|
Nokia Announcement of CFIUS Clearance for Proposed Acquisition of Alcatel Lucent, dated September 14, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel
Lucent on September 15, 2015) |
|
|
| (a)(39) |
|
Convertible Bond Q&A (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on September 29, 2015) |
|
|
| (a)(40) |
|
Nokia Announcement of Planned Leadership and Organizational Structure, dated October 7, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on October
7, 2015) |
|
|
| (a)(41) |
|
Nokia Announcement of Clearance from China’s Ministry of Commerce for Proposed Acquisition of Alcatel-Lucent, dated October 19, 2015 (incorporated by reference to the filing under Rule
425 with the SEC by Alcatel Lucent on October 20, 2015) |
|
|
| (a)(42) |
|
Nokia Announcement of Receipt of all Required Regulatory Approvals to Proceed with Filing of its Public Exchange Offer for Alcatel-Lucent, dated October 21, 2015 (incorporated by reference to
the filing under Rule 425 with the SEC by Alcatel Lucent on October 21, 2015) |
|
|
| (a)(43) |
|
Alcatel Lucent’s Board of Directors Issues Favorable Opinion on Public Exchange Offer Filed by Nokia, dated October 29, 2015 (incorporated by reference to the filing under Rule 425
with the SEC by Alcatel Lucent on October 30, 2015) |
|
|
| (a)(44) |
|
Press Release on Availability of Alcatel Lucent’s response offer document in connection with public exchange offer initiated by Nokia, dated November 12, 2015 (incorporated by reference
to the filing under Rule 425 with the SEC by Alcatel Lucent on November 13, 2015) |
|
|
| (a)(45) |
|
Unofficial English Translation of Alcatel Lucent Offer Response Document, dated October 29, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on
November 16, 2015) |
|
|
| (a)(46) |
|
Unofficial English Translation of Alcatel Lucent Information Relating in Particular to the Legal, Financial and Accounting Aspects of Alcatel Lucent (Other Information), dated November 17,
2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on November 17, 2015) |
|
|
| (a)(47) |
|
Press Release on Availability of Alcatel Lucent “Other Information” document in connection with public exchange offer initiated by Nokia, dated November 17, 2015 (incorporated by
reference to the filing under Rule 425 with the SEC by Alcatel Lucent on November 17, 2015) |
|
|
| (e)(1) |
|
Memorandum of Understanding, dated April 15, 2015, by and between Alcatel Lucent and Nokia (incorporated by reference to Exhibit 2.1 to the Registration Statement on Form F-4 filed with
the SEC by Nokia on August 14, 2015) |
|
|
| (e)(2) |
|
Amendment to the Memorandum of Understanding, dated October 28, 2015, by and between Alcatel Lucent and Nokia (incorporated by reference to Exhibit 2.2 to Amendment No. 2 to the Registration
Statement on Form F-4 filed with the SEC by Nokia on November 6, 2015) |
98
|
|
|
| Exhibit No. |
|
Description |
|
|
| (e)(3) |
|
Form of Lock-Up Liquidity Agreement to be entered into by and among Alcatel Lucent, Nokia and some or all of the relevant holders of Alcatel Lucent Stock Options* |
|
|
| (e)(4) |
|
Form of Lock-Up Liquidity Agreement to be entered into by and among Alcatel Lucent, Nokia and some or all of the relevant beneficiaries of Performance Shares* |
|
|
| (e)(5) |
|
Form of 2015 Performance Share Plan Liquidity Agreement to be entered into by and among Alcatel Lucent, Nokia and all of the relevant beneficiaries of Performance Shares issued pursuant to
the 2015 Performance Share Plan* |
|
|
| (e)(6) |
|
Form of Underwater Stock Options Liquidity Agreement to be entered into by and among Alcatel Lucent, Nokia and some or all of the relevant holders of Alcatel Lucent Stock
Options* |
|
|
| (e)(7) |
|
Form Stock Option Acceleration Agreement to be entered into by and among Alcatel Lucent and some or all of the relevant beneficiaries of Alcatel Lucent Stock Options* |
|
|
| (e)(8) |
|
Form of Performance Shares Acceleration Agreement to be entered into by and among Alcatel Lucent and some or all of the relevant beneficiaries of Performance Shares* |
|
|
| (e)(9) |
|
Form of Replacement Share Grant Notification* |
|
|
| (e)(10) |
|
2015 Performance Share Plan Rules* |
|
|
| (e)(11) |
|
Form of 2013 Change of Control Letter* |
|
|
| (e)(12) |
|
Form of 2006 Change of Control Letter* |
|
|
| (e)(13) |
|
March 14, 2012 Performance Share Plan for Beneficiary Employees of Non-French Companies (incorporated herein by reference to Exhibit 99.3 filed with the Registration Statement on Form S-8
filed with the SEC by Alcatel Lucent on August 2, 2012 (File No. 333-183016)) |
|
|
| (e)(14) |
|
March 14, 2012 Corporate Stock Subscription Options Plan for Beneficiary Employees of Non-French Companies (incorporated herein by reference to Exhibit 99.1 filed with the Registration
Statement on Form S-8 filed with the SEC by Alcatel Lucent on August 2, 2012 (File No. 333-183016)) |
|
|
| (e)(15) |
|
March 14, 2012 Corporate Stock Subscription Options Plan with Performance Conditions for Beneficiary Employees of Non-French Companies (incorporated herein by reference to Exhibit 99.2 filed
with the Registration Statement on Form S-8 filed with the SEC by Alcatel Lucent on August 2, 2012 (File No. 333-183016)) |
|
|
| (e)(16) |
|
March 14, 2012 French Corporate Stock Subscription Options Plan* |
|
|
| (e)(17) |
|
August 13, 2012 Corporate Stock Subscription Options Plan for Beneficiary Employees of Non-French Companies (incorporated herein by reference to Exhibit 99.1 filed with the Registration
Statement on Form S-8 filed with the SEC by Alcatel Lucent on March 27, 2013 (File No. 333-187560)) |
|
|
| (e)(18) |
|
August 13, 2012 French Corporate Stock Subscription Options Plan* |
|
|
| (e)(19) |
|
December 17, 2012 Corporate Stock Subscription Options Plan for Beneficiary Employees of Non-French Companies (incorporated herein by reference to Exhibit 99.2 filed with the Registration
Statement on Form S-8 filed with the SEC by Alcatel Lucent on March 27, 2013 (File No. 333-187560)) |
|
|
| (e)(20) |
|
July 12, 2013 Corporate Stock Subscription Options Plan for Beneficiary Employees of Non-French Companies (incorporated herein by reference to Exhibit 99.1 filed with the Registration
Statement on Form S-8 filed with the SEC by Alcatel Lucent on December 26, 2013 (File No. 333-193089) |
99
|
|
|
| Exhibit No. |
|
Description |
|
|
| (e)(21) |
|
July 12, 2013 French Corporate Stock Subscription Options Plan* |
|
|
| (e)(22) |
|
July 12, 2013 Performance Share Plan for Beneficiary Employees of Non-French Companies (incorporated herein by reference to Exhibit 99.2 filed with the Registration Statement on Form S-8
filed with the SEC by Alcatel Lucent on December 26, 2013 (File No. 333-193089)) |
|
|
| (e)(23) |
|
July 12, 2013 French Performance Share Plan* |
|
|
| (e)(24) |
|
September 15, 2014 Performance Share Plan for Employees (incorporated herein by reference to Exhibit 99.1 filed with the Registration Statement on Form S-8 filed with the SEC by Alcatel
Lucent on December 18, 2014 (File No. 333-201034)) |
100
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
|
|
|
|
|
|
|
|
|
|
|
ALCATEL LUCENT |
|
|
|
|
| Date: November 18, 2015 |
|
|
|
By: |
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/s/ Jean Raby |
|
|
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|
Name: |
|
Jean Raby |
|
|
|
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Title: |
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Chief Financial and Legal Officer |
ANNEX A
Opinion of Zaoui & Co. S.A., dated April 14, 2015
[Letterhead of Zaoui & Co. S.A.]
April 14, 2015
Board of Directors
Alcatel S.A.
148/152 route de la Reine
92100 Boulogne-Billancourt
FRANCE
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a
financial point of view to the holders (other than Nokia Corporation (the “Offeror”) and its affiliates) of the outstanding ordinary shares, par value €0.05 per share (the
“Company Shares”), including Company Shares represented by American Depository Shares (“ADSs”), of Alcatel S.A. (the “Company”) of the Exchange Ratio (as defined below) to be paid to such holders pursuant to the Offers
(as defined below). The Memorandum of Understanding, dated April 14, 2015 by and between the Offeror and the Company (the “MOU”) contemplates that the Offeror will undertake public exchange offers in France and in the United States
(the “Offers”), pursuant to which the Offeror, subject to the satisfaction or waiver of certain conditions set forth in the offers to exchange relating to the Offers, will exchange, for each Company Share (including ADSs) properly tendered
and not withdrawn, 0.55 ordinary shares, no par value, of Offeror (the “Offeror Shares)” (the “Exchange Ratio”), as may be adjusted pursuant to the terms of the MOU. We note that the MOU contemplates that the Offeror will, in the
Offers, also offer to exchange all OCEANEs, as defined in the MOU, for the Exchange Ratio; we express no opinion as to the fairness from a point of view of the Exchange Ratio to be paid to the holders of the OCEANEs. We note further that the MOU
provides that if (i) 95% or more of the Company Shares or Company Securities (as defined in the MOU) and voting rights attached to the Company Shares are owned by the Offeror at the closing of the Offers, the Offeror shall implement a
squeeze-out of the remaining Company Shares within three (3) months of Closing the Offers; or (ii) the Offeror own less than 95% or the Company Shares or voting rights attached to the Company Shares at the Closing of the Offers, the
Offeror reserves the right to (a) commence a mandatory buy-out of the Company Shares pursuant to Article 236-3 of the AMF General Regulation (as defined in the MOU) if at any time it owns 95% or more of the voting rights attached to the Company
Shares, (b) commence at any time a simplified offer for the Company Shares pursuant to Article 233-1 et seq. of the AMF General Regulation (as defined in the MOU), or (c) cause the Company to be merged into the Offeror or an
affiliate thereof, contribute assets to, merge certain of its subsidiaries with, or undertake other reorganizations of, the Company. We are not expressing any opinion on any such transaction described in the preceding sentence.
Zaoui & Co. S.A. has acted as financial advisor to the Company in connection with, and has participated in certain of the negotiations leading to, the Offers
contemplated by the MOU (the “Transactions”). We expect to receive fees for our services in connection with our engagement, a substantial portion of which is contingent upon consummation of the Transactions, and the Company has agreed to
reimburse certain of our expenses arising, and indemnify us against certain liabilities that may arise, out of our engagement. In the two years prior to the date hereof, we have provided financial advisory services to the Company and have received
fees in connection with such services. We may also in the future provide financial advisory services to the Company and its affiliates or the Offeror and its affiliates for which we may receive compensation.
A-1
In connection with this opinion, we have reviewed, among other things, a draft of the MOU; annual reports to shareholders
of the Company and Annual Reports on Form 20-F of the Company for the three fiscal years ended December 31, 2014; annual reports to shareholders of the Offeror and Annual Reports on Form 20-F of the Offeror for the three fiscal years
ended December 31, 2014; certain interim reports to shareholders of each of the Company and the Offeror; certain other communications from the Company to its shareholders and from the Offeror to its shareholders; certain publicly available
research analyst reports for the Company and the Offeror; certain forecasts for the Company derived from a consensus of selected analysts (the “Company Street Forecasts”); certain forecasts for the Offeror derived from a consensus of
selected analysts (the “Offeror Street Forecasts”); and certain operating and financial synergies projected by the management of the Offeror to result from the Transactions (the “Synergies”). We have also participated in
discussions with members of the senior managements of the Company and the Offeror regarding their assessment of the strategic rationale for, and the potential benefits of, the Transactions and the past and current business operations, financial
condition and future prospects of the Company and the Offeror; reviewed the reported price and trading activity for the Company Shares and Offeror Shares; compared certain financial and stock market information for the Company and the Offeror with
similar information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent comparable business combinations; and performed such other studies and analyses, and considered such other
factors, as we deemed appropriate.
For purposes of rendering this opinion, we have, with your consent, relied upon and assumed the accuracy and completeness of all
of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, us, without assuming any responsibility for independent verification thereof. At your direction, our analysis relating to the
business and financial prospects for the Company and for the Offeror for purposes of this opinion has been made on the basis of the Company Street Forecasts and the Offeror Street Forecasts, respectively. We have assumed, with your consent, that the
Company Street Forecasts and the Offeror Street Forecasts are a reasonable basis upon which to evaluate the business and financial prospects of the Company and the Offeror, respectively. We express no view as to reasonableness of the Company Street
Forecasts or the Offeror Street Forecasts or the assumptions on which they were based, including the selection of the analyst forecasts from which the Company Street Forecasts and the Offeror Street Forecasts were derived, respectively. We have also
assumed that the Synergies have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Offeror. We have not made any independent evaluation or appraisal of the assets and
liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of the Company, the Offeror or any of their respective subsidiaries and we have not been furnished with any such evaluation or appraisal. We have
assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Transactions will be obtained without any adverse effect on the Company or the Offeror or on the expected benefits of the Transactions in
any way meaningful to our analysis. We have assumed that the Transactions will be consummated on the terms set forth in the draft MOU, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to
our analysis. We have relied as to all legal matters relevant to rendering our opinion upon the advice of counsel. We do not express any opinion as to any tax or other consequences that may result from the Transactions, nor does our opinion address
any legal, tax, regulatory or accounting matters, as to which we understand the Company has received such advice as it deems necessary from qualified professionals.
Our opinion does not address the underlying business decision of the Company to engage in the Transactions, or the relative merits of the Transactions as compared to
any strategic alternatives that may be available to the Company. In arriving at our opinion, we were not authorized to conduct a process to solicit, and did not conduct a process to solicit, interest from any third party with respect to any business
combination or other extraordinary transaction in each case involving the sale of all or
A-2
substantially all of the capital stock and / or assets involving the Company. This opinion addresses only the fairness from a financial point of view to the holders (other than the Offeror and
its affiliates) of Company Shares, including ADSs, as of the date hereof, of the Exchange Ratio to be paid to such holders pursuant to the MOU. We do not express any view on, and our opinion does not address, any other term or aspect of the MOU or
Transactions or any term or aspect of any other agreement or instrument contemplated by the MOU or entered into or amended in connection with the Transactions, including, the form or structure of the Transactions or the likely timeframe in which the
Transactions will be consummated, the fairness of the Transactions to, or any consideration received in connection therewith by, the holders of any other class of securities (including holders of OCEANEs), creditors, or other constituencies of the
Company; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of the Company, or class of such persons, in connection with the Transactions, whether relative to the
Exchange Ratio to be paid to the holders (other than the Offeror and its affiliates) pursuant to the MOU or otherwise. We are not expressing any opinion as to the prices at which the Offeror Shares will trade at any time or as to the impact of the
Transactions on the solvency or viability of the Company or the Offeror or the ability of the Company or the Offeror to pay their respective obligations when they come due. Our opinion is necessarily based on economic, monetary, market and other
conditions as in effect on, and the information made available to us as of, the date hereof and we assume no responsibility for updating, revising or reaffirming this opinion based on circumstances, developments or events occurring after the date
hereof, it being understood that subsequent developments may affect this opinion and the assumptions used in preparing it.
Our advisory services and the opinion
expressed herein are provided for the information and assistance of the Board of Directors of the Company in connection with its consideration of the Transactions and may not be used for any other purpose without our prior written consent, except
that a copy of this opinion may be included in its entirety in any filing the Company or the Offeror is required to make in connection with the Transactions if such inclusion is expressly required by applicable law. In addition, this opinion does
not constitute a recommendation as to whether any holder of Company Shares, including ADSs, should tender their shares into the Offers or as to any other matter.
Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Exchange Ratio to be paid to the holders (other than the Offeror and its
affiliates) of Company Shares, including ADSs, pursuant to the Offers is fair from a financial point of view to such holders.
|
| Very truly yours, |
|
| /s/ Yoël Zaoui |
| Yoël Zaoui |
| ZAOUI & CO. S.A. |
A-3
ANNEX B
Opinion of Zaoui & Co. S.A., dated October 28, 2015
[Letterhead of Zaoui & Co. S.A.]
October 28, 2015
Board of Directors
Alcatel S.A.
148/152 route de la Reine
92100 Boulogne-Billancourt
FRANCE
Ladies and Gentlemen:
You have requested an update of our opinion, initially
delivered on April 14, 2015, as to the fairness from a financial point of view to the holders (other than Nokia Corporation (the “Offeror”) and its affiliates) of the outstanding ordinary shares, par value €0.05 per share (the “Company Shares”), including Company Shares represented by American Depository Shares (“ADSs”), of Alcatel S.A. (the “Company”) of the Exchange
Ratio (as defined below) to be paid to such holders pursuant to the Offers (as defined below). The Memorandum of Understanding, dated April 14, 2015 by and between the Offeror and the Company (the “MOU”) contemplates that the Offeror
will undertake public exchange offers in France and in the United States (the “Offers”), pursuant to which the Offeror, subject to the satisfaction or waiver of certain conditions set forth in the offers to exchange relating to the Offers,
will exchange, for each Company Share (including ADSs) properly tendered and not withdrawn, 0.55 ordinary shares, no par value, of Offeror (the “Offeror Shares)” (the “Exchange Ratio”), as may be adjusted pursuant to the terms of
the MOU. We note that the MOU contemplates that the Offeror will, in the Offers, also offer to exchange all OCEANEs, as defined in the MOU, for the Exchange Ratio; we express no opinion as to the fairness from a point of view of the Exchange Ratio
to be paid to the holders of the OCEANEs. We note further that the MOU provides that if (i) 95% or more of the Company Shares or Company Securities (as defined in the MOU) and voting rights attached to the Company Shares are owned by the
Offeror at the closing of the Offers, the Offeror shall implement a squeeze-out of the remaining Company Shares within three (3) months of Closing the Offers; or (ii) the Offeror own less than 95% or the Company Shares or voting rights
attached to the Company Shares at the Closing of the Offers, the Offeror reserves the right to (a) commence a mandatory buy-out of the Company Shares pursuant to Article 236-3 of the AMF General Regulation (as defined in the MOU) if at any time
it owns 95% or more of the voting rights attached to the Company Shares, (b) commence at any time a simplified offer for the Company Shares pursuant to Article 233-1 et seq. of the AMF General Regulation (as defined in the MOU), or
(c) cause the Company to be merged into the Offeror or an affiliate thereof, contribute assets to, merge certain of its subsidiaries with, or undertake other reorganizations of, the Company. We are not expressing any opinion on any such
transaction described in the preceding sentence.
Zaoui & Co. S.A. has acted as financial advisor to the Company in connection with, and has participated
in certain of the negotiations leading to, the Offers contemplated by the MOU (the “Transactions”). We expect to receive fees for our services in connection with our engagement, a substantial portion of which is contingent upon
consummation of the Transactions, and the Company has agreed to reimburse certain of our expenses arising, and indemnify us against certain liabilities that may arise, out of our engagement. In the two years prior to the date hereof, we have
provided financial advisory services to the Company and have received fees in connection with such services. We may also in the future provide financial advisory services to the Company and its affiliates or the Offeror and its affiliates for which
we may receive compensation.
B-1
In connection with this updated opinion, we have reviewed, among other things, the MOU; annual reports to shareholders of
the Company and Annual Reports on Form 20-F of the Company for the three fiscal years ended December 31, 2014; annual reports to shareholders of the Offeror and Annual Reports on Form 20-F of the Offeror for the three fiscal years
ended December 31, 2014; certain interim reports to shareholders of each of the Company and the Offeror; certain other communications from the Company to its shareholders and from the Offeror to its shareholders; certain publicly available
research analyst reports for the Company and the Offeror published prior to April 13, 2015; certain forecasts for the Company derived from a consensus of selected analysts published after announcement of the Transactions and available as of
October 27, 2015 (the “Updated Company Street Forecasts”); certain forecasts for the Offeror derived from a consensus of selected analysts published after announcement of the Transactions and available as of October 27, 2015 (the
“Updated Offeror Street Forecasts”); and certain operating and financial synergies projected by the management of the Offeror to result from the Transactions (the “Synergies”). We have also participated in discussions with
members of the senior managements of the Company and the Offeror regarding their assessment of the strategic rationale for, and the potential benefits of, the Transactions and the past and current business operations, financial condition and future
prospects of the Company and the Offeror; reviewed the reported price and trading activity for the Company Shares and Offeror Shares as it existed on or before April 13, 2015; compared certain financial and stock market information for the
Company and the Offeror available as of October 27, 2015 with similar information available as of October 27, 2015 for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain comparable
business combinations announced prior to April 13, 2015; and performed such other studies and analyses, and considered such other factors, as we deemed appropriate.
For purposes of rendering this opinion, we have, with your consent, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory,
tax, accounting and other information provided to, discussed with or reviewed by, us, without assuming any responsibility for independent verification thereof. At your direction, our analysis relating to the business and financial prospects for the
Company and for the Offeror for purposes of this opinion has been made on the basis of the Updated Company Street Forecasts and the Updated Offeror Street Forecasts, respectively. We have assumed, with your consent, that the Updated Company Street
Forecasts and the Updated Offeror Street Forecasts are a reasonable basis upon which to evaluate the business and financial prospects of the Company and the Offeror, respectively. We express no view as to reasonableness of the Updated Company Street
Forecasts or the Updated Offeror Street Forecasts or the assumptions on which they were based, including the selection of the analyst forecasts from which the Updated Company Street Forecasts and the Updated Offeror Street Forecasts were derived,
respectively. We have also assumed that the Synergies have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Offeror. To the extent that an analysis is based on market data
for the Company and the Offeror, we determined it was not relevant to include any market data that became available after April 14, 2015, the date on which we orally delivered our original opinion to the Board of Directors of the Company, as
the trading prices of the Company Shares and the Offeror Shares were thereafter impacted by the announcement of the Transactions. We have not made any independent evaluation or appraisal of the assets and liabilities (including any contingent,
derivative or other off-balance-sheet assets and liabilities) of the Company, the Offeror or any of their respective subsidiaries and we have not been furnished with any such evaluation or appraisal. We have assumed that all governmental, regulatory
or other consents and approvals necessary for the consummation of the Transactions will be obtained without any adverse effect on the Company or the Offeror or on the expected benefits of the Transactions in any way meaningful to our analysis. We
have assumed that the Transactions will be consummated on the terms set forth in the MOU, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to our analysis. We have relied as to all legal
matters relevant to rendering our opinion upon the advice of counsel. We do not express any opinion as to any tax or other
B-2
consequences that may result from the Transactions, nor does our opinion address any legal, tax, regulatory or accounting matters, as to which we understand the Company has received such advice
as it deems necessary from qualified professionals.
Our opinion does not address the underlying business decision of the Company to engage in the Transactions, or
the relative merits of the Transactions as compared to any strategic alternatives that may be available to the Company, or the decision of the Board of Directors of the Company to recommend the Transactions to holders of Company Shares. In arriving
at our opinion, we were not authorized to conduct a process to solicit, and did not conduct a process to solicit, interest from any third party with respect to any business combination or other extraordinary transaction in each case involving the
sale of all or substantially all of the capital stock and / or assets involving the Company. This opinion addresses only the fairness from a financial point of view to the holders (other than the Offeror and its affiliates) of Company Shares,
including ADSs, as of the date hereof, of the Exchange Ratio to be paid to such holders pursuant to the MOU. We do not express any view on, and our opinion does not address, any other term or aspect of the MOU or Transactions or any term or aspect
of any other agreement or instrument contemplated by the MOU or entered into or amended in connection with the Transactions, including, the form or structure of the Transactions or the likely timeframe in which the Transactions will be consummated,
the fairness of the Transactions to, or any consideration received in connection therewith by, the holders of any other class of securities (including holders of OCEANEs), creditors, or other constituencies of the Company; nor as to the fairness of
the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of the Company, or class of such persons, in connection with the Transactions, whether relative to the Exchange Ratio to be paid to the
holders (other than the Offeror and its affiliates) pursuant to the MOU or otherwise. We are not expressing any opinion as to the prices at which the Offeror Shares will trade at any time or as to the impact of the Transactions on the solvency or
viability of the Company or the Offeror or the ability of the Company or the Offeror to pay their respective obligations when they come due. Except as otherwise stated herein, our opinion is necessarily based on economic, monetary, market and other
conditions as in effect on, and the information made available to us as of, the date hereof, and we assume no responsibility for updating, revising or reaffirming this opinion based on circumstances, developments or events occurring after the date
hereof, it being understood that subsequent developments may affect this opinion and the assumptions used in preparing it.
Our advisory services and the opinion
expressed herein are provided for the information and assistance of the Board of Directors of the Company in connection with its consideration of whether to recommend the Transactions to holders of Company Shares and may not be used for any other
purpose without our prior written consent, except that a copy of this opinion may be included in its entirety in any filing the Company or the Offeror is required to make in connection with the Transactions if such inclusion is expressly required by
applicable law. In addition, this opinion does not constitute a recommendation as to whether any holder of Company Shares, including ADSs, should tender their shares into the Offers or as to any other matter.
Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Exchange Ratio to be paid to the holders (other than the Offeror and its
affiliates) of Company Shares, including ADSs, pursuant to the Offers is fair from a financial point of view to such holders.
|
| Very truly yours, |
|
| /s/ Yoël Zaoui |
| Yoël Zaoui |
| ZAOUI & CO. S.A. |
B-3
ANNEX C
Unofficial English Translations of Independent Expert Report of Associés en Finance, dated October 28, 2015, and Addendum, dated November
9, 2015
Important Note: The following Independent Expert Report of Associés en Finance, dated October 28, 2015, and Addendum, dated November
9, 2015, are unofficial English translations of the original French versions and have been prepared for informational purposes only. In the event of any inconsistency between the English and French versions, the French versions shall prevail.
C-1
Fairness opinion by Associés en Finance on Nokia’s public exchange offer for all securities issued by
Alcatel Lucent
28 October 2015
C-2
Contents
C-3
C-4
| • |
|
Assignment and resources |
Context
Nokia and Alcatel-Lucent, two leading European telecom manufacturers, started discussions in 2013 with a view to combining some of their activities. Those discussions
gained speed in early 2015, when a plan for a full combination of the two companies was considered, to create a financially solid European group that is a leading player in its market. Negotiations between the two groups focused on a combination
through a public exchange offer, and the exchange terms were increased in favour of Alcatel-Lucent shareholders as the discussions progressed, resulting in the terms presented in the present exchange offer.
On 14 April 2015, following movements in Alcatel-Lucent’s share price and market rumours about plans involving the two groups, an initial press release was
published mentioning discussions between Nokia and Alcatel-Lucent about Nokia acquiring the whole of Alcatel-Lucent. On 15 April 2015, a press release announcing the planned public exchange offer and its main terms was published. The public
exchange offer (hereinafter “offer” or “public exchange offer”) is for all securities issued or to be issued by Alcatel-Lucent, including the three issues of OCEANEs maturing in 2018, 2019 and 2020. The press release states that
Nokia will make an offer for those OCEANEs that is equivalent to the offer for ordinary shares. After the transaction, Alcatel-Lucent shareholders would own around 33.5% of the new group’s fully diluted capital, and Nokia shareholders around
66.5%, assuming a 100% tender rate.
Nokia has also announced its intention to carry out a squeeze-out on Alcatel-Lucent’s shares after the offer, if it has at
least 95% of Alcatel-Lucent’s capital and voting rights. On the other hand, if Nokia does not obtain at least 50% of Alcatel-Lucent’s fully diluted capital after the offer, the offer will lapse, although Nokia reserves the right to waive
that 50% threshold1.
Associés en Finance’s assignment
Alcatel-Lucent’s Board of Directors has appointed Associés en Finance2 as an independent appraiser under
article 261-1 I of the Autorité des Marchés Financiers’ General Regulation, which states that a company that is the object of a public offer must appoint an independent appraiser where that offer is capable of generating conflicts
of interest within its board of directors, its supervisory board or governing body, so as to potentially affect the objectivity of the reasoned opinion that the governing body must provide on the proposed offer. Associés en Finance’s
assignment falls specifically within paragraph 5 of article 261-1 I of the AMF’s General Regulation, which requires an independent appraiser to be used “if the offer pertains to financial instruments in multiple categories and is priced in
a way that could jeopardise the fair treatment of shareholders or bearers of the financial instruments
| 1 |
As indicated in the French offer document, the minimum acceptance threshold (50%) shall be calculated as follows: the numerator includes (i) all Shares validly tendered into the Offer and into the U.S. Offer
(including Shares represented by ADSs) on the closing date of the last of the two Offers, (ii) all Shares issuable upon conversion of the OCEANEs validly tendered into the Offer and into the U.S. Offer on the closing date of the last of the two
Offers, taking into account the conversion ratio applicable on the closing date of such Offers; the denominator includes (i) all Shares issued and outstanding (including Shares represented by ADSs) on the closing date of the last of the two
Offers and (ii) all Shares issuable at any time prior to, on or after the closing date of the last of the two Offers upon exercise of any outstanding options, warrant, convertible securities or rights to purchase, subscribe or be allocated,
newly issued Shares, including upon conversion of the OCEANEs (taking into account the conversion ratio applicable on the closing date of such Offers), exercise of Stock Options or acquisition of Performance Shares. |
| 2 |
Associés en Finance and Détroyat Associés merged in late 2014 to form “Associés en Finance, Jacquillat et Détroyat Associés”. Its trading name is “Associés
en Finance”, sometimes referred to in this document using the acronym “AEF”. |
C-5
targeted by the bid”, and paragraph 2, which refers to the conflict of interest that may arise if the management of the target company or persons that control it have formed an agreement
with the offer or that is capable of affecting their independence.
Associés en Finance’s assignment is to produce a fairness opinion on the exchange
ratios offered in Nokia’s public exchange offer for all securities issued by Alcatel Lucent. The exchange ratios are 0.5500 Nokia shares for each Alcatel-Lucent share, 0.6930 Nokia shares for each Alcatel-Lucent OCEANE 2018, 0.7040 Nokia shares
for each Alcatel-Lucent OCEANE 2019 and 0.7040 Nokia shares for each Alcatel-Lucent OCEANE 20203.
The
Associés en Finance people involved in this assignment are Bertrand Jacquillat, honorary chairman of Associés en Finance and assignment leader, Arnaud Jacquillat, CEO, Catherine Meyer, Partner, Julien Bianciotto, Pierre Charmion,
Laurent Sitri and Viet Do-Quy, financial analysts. Philippe Leroy, Chairman of the Board of Directors, is in charge of quality control.
Independence
Associés en Finance and Détroyat Associés, along with Associés en Finance in its new configuration since the two entities
merged, confirm that they have no conflicts of interest and are independent from all participants in this transaction within the meaning of article 261-4 of the AMF General Regulation and instruction 2006-08 of 25 July 2006 relating to
independent appraisals.
Accordingly, Associés en Finance, Détroyat Associés and their employees:
| |
• |
|
Have no legal or capital links with the companies concerned by the Offer or with their advisors so as to affect their independence; |
| |
• |
|
Have not carried out any assessment on behalf of Alcatel-Lucent or Nokia in the last 18 months; |
| |
• |
|
Have not advised Alcatel-Lucent or Nokia or any entity that those companies control within the meaning of article L.233-3 of the French Commercial Code in the last 18 months; |
| |
• |
|
Have no financial interest in the success of the Offer, are not owed any debt by or owe any debt to any company concerned by the Offer so as to affect their independence; |
| |
• |
|
Do not maintain any repeated relations with any bank so as to affect the independence of Associés en Finance. In particular, neither Associés en Finance nor Détroyat Associés have taken part
in independent appraisal assignments in which Société Générale was the sponsoring bank in the last 18 months. |
| |
• |
|
Have not been given any assignment – other than the present assignment – by the companies concerned by the Offer with respect to the coming months. |
For transparency purposes, Associés en Finance states that in the first half of 2014 it indirectly contributed to a research assignment for Alcatel-Lucent. The
work consisted of researching academic literature and reviewing broker notes, and did not involve any advisory activity. The remuneration of that work represented less than 5% of Associés en Finance’s revenue. Associés en Finance
believes that it fulfils the independence criteria required to perform this assignment.
Disclaimer
The information used in performing our work was either provided by Alcatel-Lucent, Nokia and their advisors, or was public.
| 3 |
Nokia’s Tender Offer on Alcatel-Lucent’s shares and OCEANE bonds is made with four fractional digits exchange ratios. |
C-6
To the extent that the business plans used internally by Alcatel-Lucent and Nokia are confidential, Associés en
Finance’s valuation work used forecast data taken from market consensus forecasts and its own estimates, extrapolated over the long term by methods habitually used as part of the Trival valuation method. The forward-looking assumptions made by
Associés en Finance in its valuations were compared with information from Alcatel-Lucent’s 2015 budget, and with information obtained from meetings with Alcatel-Lucent’s management.
Alcatel-Lucent and Nokia certified to us that there were no agreements connected with the present offer between the various entities, the two companies’ management
teams or minority shareholders that could have an impact on the offer exchange ratios, other than those mentioned in this report. Nokia has also certified that it has not acquired any Alcatel-Lucent shares in the last 12 months.
Alcatel-Lucent’s Board of Directors has decided to offer group employees who hold stock options and performance shares the opportunity to monetise in certain cases
those instruments as part of Nokia’s public exchange offer. Accordingly, a system has been set up to reduce the lock-up period of any shares resulting from these deferred remuneration methods. Arrangements have also been made for the CEO. These
arrangements are described later in this document.
Associés en Finance has not carried out any physical review nor any independent assessment of the
non-current assets, other assets or liabilities of Alcatel-Lucent and Nokia or those of their subsidiaries and affiliates. Associés en Finance has not carried out any independent review of current or potential litigation, claims or other
potential liabilities that the companies have or may have. In general, data, documents or information sent to or accessed by Associés en Finance has been assumed to be accurate without independent checking, and Associés en Finance
shall not bear any liability in relation to those data, documents and information. Associés en Finance cannot guarantee the accuracy of forecasts, estimates or information provided.
This appraisal report and its conclusion about the fairness of the Offer’s financial terms for the Company’s shareholders and OCEANE holders do not represent
a recommendation for Alcatel-Lucent shareholders or OCEANE holders regarding the way in which they should act in respect of the Offer.
Performance of
Associés en Finance’s assignment
Associés en Finance was appointed by Alcatel-Lucent’s Board of Directors on 4 June 2015.
Associés en Finance’s assignment took place between 15 June 2015 and 28 October 2015. The present report is based on 23 October 2015 market prices.
During that period, Associés en Finance had regular contact in person and by telephone with the various people listed in Appendix 2.
The detailed work schedule and information sources used are also set out in Appendix 2. In performing its assignment, Associés en Finance used its own methods
and databases (Trival model), along with meetings and various sources of available information.
| • |
|
Alcatel-Lucent and Nokia: presentation, analysis and strategy |
Assessing the fairness
of Nokia’s public exchange offer for Alcatel-Lucent requires us to form an opinion on the proposed exchange ratios between the Nokia shares offered and the Alcatel-Lucent shares and OCEANEs to be acquired. This involves assessing the two
companies and valuing the Nokia shares and the Alcatel-Lucent shares and OCEANEs. These values depend on contractual factors, particularly in the case of the Alcatel-Lucent OCEANEs, but above all on the economic and financial prospects of the two
companies on a stand-alone basis. These economic and financial
C-7
prospects are influenced by the industrial and technological context in which the two companies operate. That context involves regular technological disruption, as shown by both companies’
history and the description of their activities. Both companies’ prospects rely on their financial foundations, which are shown by the description of the two groups’ historical financial information in terms of margins, growth and
financial position. The financial foundations and general characteristics of the two groups, along with the operational and technological environment in which they operate, to some extent determine the cash flows that Nokia and Alcatel-Lucent will
be able to generate in the future and the risks relating thereto.
| |
• |
|
Brief history and general characteristics of the two groups |
In the past, the two
groups have experienced numerous changes in scope, in a sector that has seen frequent technological disruption and consolidation between players. For Alcatel-Lucent, the most significant transaction before the proposed combination with Nokia was the
2006 combination between French company Alcatel and US company Lucent. Nokia’s scope has changed greatly in the last two years, after the company acquired 100% of its networks joint venture with Siemens and sold its mobile handset business to
Microsoft. Nokia is also in the process of selling HERE to a consortium of German carmakers. Through these transactions, the two groups now mainly operate in the telecom infrastructure sector.
The chronology of the main events involving the two groups since 2006 is set out in Figure 1.
C-8
Figure 1
Brief chronology of the two groups
C-9
Source: companies and press
C-10
Ownership
Shares in the
two groups are widely held, with a free float of 97.44% for Alcatel-Lucent and 98.55% for Nokia (excluding employees and treasury shares). Their main shareholders are pension funds and asset management companies. The offer document discloses the
following breakdowns of share capital, on June 30, 2015 regarding Alcatel-Lucent and on September 28, 2015 regarding Nokia4.
Table 1
Ownership of Alcatel-Lucent shares
on June 30, 2015
|
|
|
|
|
| Capital Group Companies |
|
|
9.95 |
% |
| Odey Asset Management |
|
|
4.92 |
% |
| Blackrock |
|
|
4.04 |
% |
| CDC |
|
|
3.58 |
% |
| DNCA |
|
|
3.00 |
% |
| Aviva PLC |
|
|
1.99 |
% |
| Amundi |
|
|
1.51 |
% |
| FCP 2AL (employees) |
|
|
1.16 |
% |
|
|
|
|
|
| Treasury stock |
|
|
1.40 |
% |
|
|
|
|
|
Source: Company
Table 2
Ownership of Nokia shares on October 20, 2015
|
|
|
|
|
| Varma Mutual Pension Insurance Company |
|
|
2.19 |
% |
| Ilmarinen Mutual Pension Insurance Company |
|
|
0.79 |
% |
| The State Pension Fund |
|
|
0.70 |
% |
| Schweizerische Nationalbank |
|
|
0.66 |
% |
| Elo Mutual Pension Insurance Company |
|
|
0.41 |
% |
| Svenska Litteratursällskapet i Finland rf |
|
|
0.39 |
% |
| Nordea Bank Finland Plc |
|
|
0.31 |
% |
| Folketrygdfondet |
|
|
0.31 |
% |
| Nordea Suomi Fund |
|
|
0.30 |
% |
| Keva (Local Government Pensions Institution) |
|
|
0.27 |
% |
|
|
|
|
|
| Treasury stock |
|
|
1.45 |
% |
|
|
|
|
|
Source: Company, French draft offer document
On the date that Nokia published its information memorandum on its proposed public exchange offer for Alcatel-Lucent, Nokia did not own any shares in Alcatel-Lucent
directly or indirectly, or alone or in concert5.
| 4 |
Nokia only has data on the number of shares held by shareholders registered in Finland and the shareholders who have reported their holding to Nokia in accordance with Chapter 9, Section 5 of the Finnish Securities
Market Act. |
| 5 |
Made up of 2,834,460 thousand shares on June 30, 2015, of which 40,117 thousand were held in treasury. |
C-11
| |
• |
|
Description of activities |
Alcatel-Lucent is a Franco-American telecom manufacturer.
In 2014, the group generated revenue of €13.2 billion and had 52,673 employees. At end-March 2015, its market capitalisation was around €9.9
billion. The group is listed on Euronext Paris and the New York Stock Exchange.
Nokia is a Finnish telecom manufacturer. It is listed on NASDAQ OMX in Helsinki and
on the New York Stock Exchange. At end-March 2015, its market capitalisation was around €25.8 billion. In 2014, it had revenue of €12.7
billion and employed 57,566 people.
Alcatel-Lucent and Nokia are two of the world’s leading telecom manufacturers alongside Cisco, Ericsson, Huawei, ZTE, and
Juniper Networks.
Business6
Figure 2
Business mix
Source: companies
Alcatel-Lucent (see
Figure 2) operates in most segments of telecom infrastructure and has three operating segments: Core Networking (IP routing, terrestrial, submarine (ASN) and wireless transport, and software platforms), shown in grey on the pie chart above,
Access (fixed, mobile – RAN and RFS7, managed services and licensing), shown in blue, and Other.
Nokia’s telecom infrastructure business is less diversified than Alcatel-Lucent’s. It is focused on Mobile Access and to a lesser degree on software
platforms.
Nokia’s two other operating segments are Nokia Technologies and HERE. Nokia Technologies’ purpose is to manage and monetise the
group’s large patent portfolio, and is one of the group’s main potential growth drivers. The mapping and geolocation business HERE originates from Nokia’s acquisition of Gate5 in 2006 and above all Navteq in 2008, and is in the
process of being sold8.
| 6 |
Information relating to market shares and expected growth rates are taken from the two companies’ annual reports and industrial analyses carried out by specialist companies (see appendixes). |
| 7 |
Radio Frequency Systems is a company specialising in radio antennae and cables, wholly owned by ASB (Alcatel-Lucent Shanghai Bell). |
| 8 |
Where possible on the basis of available information, data will be presented by separating HERE from Nokia’s other businesses. |
C-12
Alcatel-Lucent’s Core Networking business accounted for 45% of the group’s revenue in 2014, and has three
divisions9.
The IP Routing business is mainly focused on routers using IP (Internet Protocol) to determine the
path to be taken by signals in order to reach the desired destination. The global router market for Service Providers is expected to grow by 4% per year10. Routers break down into edge
routers (around 70%), core network routers (around 30%)11 and virtualisation hardware (still marginal). In edge routers, Alcatel-Lucent ranks second in the market with a share of 27%, behind Cisco
and ahead of Juniper and Huawei11, and has steadily increased its market share since it entered this segment in 2003. Alcatel-Lucent has made core network routers since 2012, and is aiming to
increase its market share in this segment to match its market share in edge routers. It currently ranks fourth in the world in core routers, with a market share of 4%12. In this segment, companies
distinguish themselves by offering hardware that takes up less space, handles more traffic, routes traffic more quickly and is more energy efficient. After the combination with Nokia, the combined entity will remain the world’s second-largest
player in IP Routing for service providers, behind Cisco and ahead of Juniper12.
The IP Transport business
consists of three divisions. Terrestrial IP Transport involves carrying information by fibre-optic cable. Previously, Alcatel-Lucent mainly focused its innovation efforts on the technological capabilities of optical fibres, particularly in optical
multiplexing (WDM). Like other Western manufacturers such as Nortel, Alcatel-Lucent has in the last ten years been challenged by intense competition from Huawei and ZTE, which have established themselves as leaders in terrestrial optical transport.
With a 12% market share, Alcatel-Lucent is Europe’s leading manufacturer in this business area13. However, the segment – in which Nokia does not operate – remains highly fragmented14 and is undergoing consolidation. The ASN division consists of the optical submarine transport activities of Alcatel-Lucent, which is the world leader in this area. The business has high entry
barriers but investment in submarine cables is very cyclical. Clauses in the transaction with Nokia provide for exchange ratios to be adjusted if ASN is spun off before the combination is
complete15. The Wireless Transmission division involves carrying information wirelessly (by microwave), a technique that is used in long-distance fixed networks instead of via fibre-optic cable,
and within mobile access networks to carry traffic from relay antennae to the core network (backhauling). Nokia no longer operates in this segment since it sold its business to DragonWave. The combination with Alcatel-Lucent will enable it to move
back into the segment.
The IP Platforms division develops software platforms allowing operators to provide applications. The division includes operation and
customer management services, including OSS (Operations Support Systems, a platform for managing and supervising operator networks) and Customer Experience, which allows consumer hardware to be managed remotely and the development of network
analytical intelligence (Analytics). It also includes collaboration and communications solutions, including IMS (IP
| 9 |
The following information use the segment classification used by Alcatel-Lucent since 2013. |
| 10 |
Source: Routers Report Five Year Forecast 2014-2018, Dell’Oro Group, July 2014. |
| 11 |
Source: Routers Report 4Q2014: Market Summary & Vendor Information: Enterprise Routers, Service Providers Routers – Worldwide & Regions, Dell’Oro Group, February 2015.
|
| 12 |
Based on 2014 market data; Source: Routers Report 4Q2014: Market Summary & Vendor Information: Enterprise Routers, Service Providers Routers – Worldwide & Regions, Dell’Oro Group, February
2015. |
| 13 |
Source: Optical Transport Report 4Q2014: Market Summary & Vendor Information: WDM, Multiservice Multiplexer, Optical Switch, Optical Packet – Worldwide & Regions, Dell’Oro Group, February
2015. |
| 14 |
The other main players are Huawei, Coriant, Ciena and ZTE |
| 15 |
However, Alcatel-Lucent announced on the 6th of October 2015 that it will retain ASN as a fully-owned subsidiary |
C-13
Multimedia Subsystems), which allow clients to offer multimedia services to users regardless of location and using the handset of their choice. Alcatel-Lucent also provides tools for managing
mobile user data and NFV (Network Function Virtualization) platforms designed to help operators deploy virtualised applications like Cloudband. In this area, Nokia has similar resources, which are often complementary to those of Alcatel-Lucent (IMS,
OSS, Customer Experience, Analytics etc.).
Alcatel-Lucent’s Access business accounted for 54% of the group’s revenue in 2014, and has four
divisions, with the two main ones being wireless and fixed access.
In fixed broadband access, Huawei’s arrival in the market 2003/04 led to a price war.
Alcatel-Lucent is the only European provider still operating in this segment. Margins have recovered since 2010/12, helped significantly by the reduction in the number of players in the market16.
Revenue growth is low, but the business generates cash. Fixed access has always included ADSL17, used for the broadband transport of data on copper wires using multiplexing, and in the last five
years VDSL, which offers speeds close to those obtained using fibre, in which Alcatel-Lucent is world leader, due in particular to innovations such as Vectoring and G.fast. Alcatel-Lucent was a very early innovator in fibre-optic access (BPON and
then GPON) and has become one of the leading players in this market. Overall, Alcatel-Lucent is the world leader in fixed access (DSL and PON, excluding terminating units) for service providers, with a market share of around 34%. Huawei ranks second
with a market share of 27%18. Alcatel-Lucent has little or no presence in fixed access for cable operators, however, its diversification strategy aims at increasing its turnover with these
customers.
Mobile broadband access is one of Nokia’s strong points. It is the world number three with an 18% market share, and it achieved an operating margin
of 11.3% in this segment in 2014. Northern European manufacturers (Nokia, Ericsson, Siemens) were the first to invest in this area (with GSM-2G technology) because of the specific features of their home markets, where low population density makes it
costly to extend fixed networks. In the last ten years, as new generations of technology have arrived (3G and then 4G), this market has seen the rapid rise of Huawei (and to a lesser extent ZTE), acquisitions by Ericsson, Nokia and Alcatel-Lucent of
divisions operating in this area owned by North-American manufacturers (Nortel and Motorola), and the emergence of Samsung. Alcatel-Lucent ranks number four in RAN19 with a market share of 11.5%,
and number four in LTE20 with a market share of 14%21, and the business reduces the group’s Access margins. Alcatel-Lucent has lost market
share in this business in the last few years because of its initial failure to invest substantially in W-CDMA/3G, the rise of Huawei and the obsolescence of CDMA22 (in which the group had strong
positions via Lucent) in the USA. The development of 5G requires economies of scale, and this is what prompted the initial talks between Alcatel-Lucent and Nokia regarding a potential transaction involving mobile access businesses, before the plan
to carry out a full combination. The combination between Nokia and Alcatel-Lucent will give the combined group a market share of around 30% in LTE, making it the world leader ahead of Ericsson (27%) and Huawei (23%)23.
| 16 |
There are now only three main players in the market: Huawei, Alcatel-Lucent and, to a lesser extent, ZTE. |
| 17 |
ADSL = Asymmetric digital subscriber line; VDSL : very high bit-rate DSL. |
| 18 |
Source: Access Report 4Q2014: Market Summary & Vendor Information: Cable Modem, DSL, PON, Dell’Oro Group, February 2015. |
| 19 |
RAN = Radio Access Network. The three market leaders are Ericsson, Huawei and Nokia. |
| 20 |
LTE = Long-Term Evolution, one of the 4G standards. |
| 21 |
Source: Mobility Report 4Q2014: Market Summary & Vendor Information: GSM, CDMA, WCDMA, Mobile WiMAX, LTE FDD / TDD – Worldwide & Regions, Dell’Oro Group, February 2015.
|
| 22 |
CDMA = Code-Division Multiple Access, the 2G and 3G standard in the USA. |
| 23 |
Based on 2014 market data; Source: Mobility Report 4Q2014: Market Summary & Vendor Information: GSM, CDMA, WCDMA, Mobile WiMAX, LTE FDD / TDD – Worldwide & Regions, Dell’Oro Group,
February 2015. |
C-14
Geographical position
The two groups have a complementary fit in geographical terms (Figure 3). Alcatel-Lucent has a strong presence in North America (44% of revenue due to its relationships
with Verizon, AT&T and Sprint24) and in Europe (23%, mainly Western Europe), but less so in Asia (20%) although it has a significant presence in China though its Alcatel-Lucent Shanghai
Bell (ASB) joint venture.
Nokia (including HERE) has a large market share in Asia (37% of revenue, with a presence in South Korea and Japan). It also has a strong
presence in Europe (31%) but not in North America (15%). Latin America and the rest of the world do not currently generate much revenue for Nokia, which is also the case at Alcatel-Lucent.
Figure 3
Geographical mix
Source: companies
| 24 |
In 2014, Alcatel-Lucent generated 54% of its revenue from its top 10 clients. Verizon accounts for 14% of its revenue, AT&T 11% and Sprint 10%. |
C-15
| |
• |
|
The two group’s main financial data: growth, margins and financial position |
Analysis of income statements and operational indicators
Table 3
Alcatel-Lucent’s operational
indicators
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjusted 2014 format |
|
| Alcatel-Lucent (in € millions) |
|
2006 |
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
| Revenue |
|
|
18 254 |
|
|
|
17 792 |
|
|
|
16 984 |
|
|
|
15 157 |
|
|
|
15 996 |
|
|
|
15 327 |
|
|
|
14 446 |
|
|
|
13 764 |
|
|
|
13 813 |
|
|
|
13 178 |
|
| Gross income |
|
|
6 253 |
|
|
|
5 709 |
|
|
|
5 794 |
|
|
|
5 111 |
|
|
|
5 571 |
|
|
|
5 660 |
|
|
|
4 347 |
|
|
|
4 011 |
|
|
|
4 322 |
|
|
|
4 408 |
|
| Gross margin (%) |
|
|
34.3 |
% |
|
|
32.1 |
% |
|
|
34.1 |
% |
|
|
33.7 |
% |
|
|
34.8 |
% |
|
|
36.9 |
% |
|
|
30.1 |
% |
|
|
29.1 |
% |
|
|
31.3 |
% |
|
|
33.4 |
% |
| Recurring operating income before PPA |
|
|
95 |
|
|
|
110 |
|
|
|
466 |
|
|
|
-56 |
|
|
|
288 |
|
|
|
819 |
|
|
|
-260 |
|
|
|
-250 |
|
|
|
278 |
|
|
|
623 |
|
| Recurring operating margin before PPA |
|
|
0.5 |
% |
|
|
0.6 |
% |
|
|
2.7 |
% |
|
|
-0.4 |
% |
|
|
1.8 |
% |
|
|
5.3 |
% |
|
|
-1.8 |
% |
|
|
-1.8 |
% |
|
|
2.0 |
% |
|
|
4.7 |
% |
| Restructuring costs |
|
|
-731 |
|
|
|
-856 |
|
|
|
-562 |
|
|
|
-605 |
|
|
|
-375 |
|
|
|
-203 |
|
|
|
-490 |
|
|
|
-479 |
|
|
|
-518 |
|
|
|
-574 |
|
| % of revenue |
|
|
-4.0 |
% |
|
|
-4.8 |
% |
|
|
-3.3 |
% |
|
|
-4.0 |
% |
|
|
-2.3 |
% |
|
|
-1.3 |
% |
|
|
-3.4 |
% |
|
|
-3.5 |
% |
|
|
-3.8 |
% |
|
|
-4.4 |
% |
| Operating income after other expenses, excluding goodwill |
|
|
-988 |
|
|
|
-1 592 |
|
|
|
-2 031 |
|
|
|
-692 |
|
|
|
-309 |
|
|
|
417 |
|
|
|
-1 135 |
|
|
|
-1 114 |
|
|
|
-171 |
|
|
|
137 |
|
| Pre-tax income |
|
|
-774 |
|
|
|
-1 224 |
|
|
|
-1 877 |
|
|
|
-697 |
|
|
|
-257 |
|
|
|
182 |
|
|
|
-1 067 |
|
|
|
-1 787 |
|
|
|
-881 |
|
|
|
-365 |
|
| Income tax |
|
|
42 |
|
|
|
-60 |
|
|
|
-153 |
|
|
|
60 |
|
|
|
-37 |
|
|
|
544 |
|
|
|
-530 |
|
|
|
-423 |
|
|
|
173 |
|
|
|
316 |
|
| among those deferred income tax |
|
|
113 |
|
|
|
51 |
|
|
|
-54 |
|
|
|
123 |
|
|
|
53 |
|
|
|
586 |
|
|
|
-458 |
|
|
|
-353 |
|
|
|
229 |
|
|
|
377 |
|
| Goodwill write-downs excluding PPA |
|
|
0 |
|
|
|
2 913 |
|
|
|
3 272 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
522 |
|
|
|
522 |
|
|
|
568 |
|
|
|
0 |
|
| Non-controlling interests |
|
|
42 |
|
|
|
41 |
|
|
|
42 |
|
|
|
20 |
|
|
|
42 |
|
|
|
49 |
|
|
|
-77 |
|
|
|
-77 |
|
|
|
10 |
|
|
|
35 |
|
| Income from equity affiliates |
|
|
22 |
|
|
|
110 |
|
|
|
96 |
|
|
|
1 |
|
|
|
14 |
|
|
|
4 |
|
|
|
2 |
|
|
|
5 |
|
|
|
7 |
|
|
|
15 |
|
| Discontinued operations |
|
|
159 |
|
|
|
610 |
|
|
|
33 |
|
|
|
132 |
|
|
|
-12 |
|
|
|
414 |
|
|
|
666 |
|
|
|
639 |
|
|
|
-25 |
|
|
|
-49 |
|
| Net income attributable to owners of the parent |
|
|
-273 |
|
|
|
-3 518 |
|
|
|
-5 215 |
|
|
|
-524 |
|
|
|
-334 |
|
|
|
1 095 |
|
|
|
-1 374 |
|
|
|
-2 011 |
|
|
|
-1 304 |
|
|
|
-118 |
|
Source: company and Associés en Finance adjustments – N.B.: PPA = purchase price allocation (related to Lucent) –
2006 proforma Alcatel-Lucent
Table 4
Nokia’s operational indicators
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unadjusted |
|
|
adjusted 2013 format |
|
| Nokia (in € millions) |
|
2006 |
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
| Revenue |
|
|
41 121 |
|
|
|
51 058 |
|
|
|
50 710 |
|
|
|
40 984 |
|
|
|
42 446 |
|
|
|
38 659 |
|
|
|
30 176 |
|
|
|
15 968 |
|
|
|
15 400 |
|
|
|
12 709 |
|
|
|
12 732 |
|
| Gross income |
|
|
13 379 |
|
|
|
17 304 |
|
|
|
17 373 |
|
|
|
13 264 |
|
|
|
12 817 |
|
|
|
11 319 |
|
|
|
8 390 |
|
|
|
5 560 |
|
|
|
5 559 |
|
|
|
5 345 |
|
|
|
5 638 |
|
| Gross margin (%) |
|
|
32.5 |
% |
|
|
33.9 |
% |
|
|
34.3 |
% |
|
|
32.4 |
% |
|
|
30.2 |
% |
|
|
29.3 |
% |
|
|
27.8 |
% |
|
|
34.8 |
% |
|
|
36.1 |
% |
|
|
42.1 |
% |
|
|
44.3 |
% |
| Recurring operating income before PPA |
|
|
5 502 |
|
|
|
6 097 |
|
|
|
5 741 |
|
|
|
2 277 |
|
|
|
1 962 |
|
|
|
795 |
|
|
|
-556 |
|
|
|
-117 |
|
|
|
416 |
|
|
|
1 055 |
|
|
|
1 511 |
|
| Recurring operating margin before PPA |
|
|
13.4 |
% |
|
|
11.9 |
% |
|
|
11.3 |
% |
|
|
5.6 |
% |
|
|
4.6 |
% |
|
|
2.1 |
% |
|
|
-1.8 |
% |
|
|
-0.7 |
% |
|
|
2.7 |
% |
|
|
8.3 |
% |
|
|
11.9 |
% |
| Restructuring costs |
|
|
0 |
|
|
|
-93 |
|
|
|
-360 |
|
|
|
-178 |
|
|
|
-112 |
|
|
|
-500 |
|
|
|
-1 807 |
|
|
|
-169 |
|
|
|
-1 174 |
|
|
|
-395 |
|
|
|
-97 |
|
| % of revenue |
|
|
0.0 |
% |
|
|
-0.2 |
% |
|
|
-0.7 |
% |
|
|
-0.4 |
% |
|
|
-0.3 |
% |
|
|
-1.3 |
% |
|
|
-6.0 |
% |
|
|
-1.1 |
% |
|
|
-7.6 |
% |
|
|
-3.1 |
% |
|
|
-0.8 |
% |
| Operating income after other expenses, excluding goodwill |
|
|
5 488 |
|
|
|
7 985 |
|
|
|
4 966 |
|
|
|
2 105 |
|
|
|
2 070 |
|
|
|
17 |
|
|
|
-2 303 |
|
|
|
-298 |
|
|
|
-821 |
|
|
|
519 |
|
|
|
1 379 |
|
| Pre-tax income |
|
|
5 695 |
|
|
|
8 224 |
|
|
|
4 964 |
|
|
|
1 840 |
|
|
|
1 785 |
|
|
|
-85 |
|
|
|
-2 643 |
|
|
|
-429 |
|
|
|
-1 178 |
|
|
|
239 |
|
|
|
984 |
|
| Income tax |
|
|
-1 357 |
|
|
|
-1 522 |
|
|
|
-1 081 |
|
|
|
-702 |
|
|
|
-443 |
|
|
|
-290 |
|
|
|
-1 145 |
|
|
|
-73 |
|
|
|
-304 |
|
|
|
-202 |
|
|
|
1408 |
|
| among those deferred income tax |
|
|
-54 |
|
|
|
687 |
|
|
|
433 |
|
|
|
34 |
|
|
|
355 |
|
|
|
462 |
|
|
|
-504 |
|
|
|
262 |
|
|
|
25 |
|
|
|
152 |
|
|
|
1782 |
|
| Goodwill write-downs excluding PPA |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
908 |
|
|
|
0 |
|
|
|
1 090 |
|
|
|
0 |
|
|
|
1 090 |
|
|
|
0 |
|
|
|
0 |
|
|
|
1 209 |
|
| Non-controlling interests |
|
|
60 |
|
|
|
-459 |
|
|
|
-99 |
|
|
|
-631 |
|
|
|
-507 |
|
|
|
-324 |
|
|
|
-683 |
|
|
|
-343 |
|
|
|
-31 |
|
|
|
-21 |
|
|
|
8 |
|
| Income from equity affiliates |
|
|
28 |
|
|
|
44 |
|
|
|
6 |
|
|
|
30 |
|
|
|
1 |
|
|
|
-23 |
|
|
|
-1 |
|
|
|
-23 |
|
|
|
-1 |
|
|
|
4 |
|
|
|
-12 |
|
| Discontinued operations |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
109 |
|
|
|
-2 334 |
|
|
|
-801 |
|
|
|
2 299 |
|
| Net income attributable to owners of the parent |
|
|
4 306 |
|
|
|
7 205 |
|
|
|
3 988 |
|
|
|
891 |
|
|
|
1 850 |
|
|
|
-1 164 |
|
|
|
-3 106 |
|
|
|
-1 163 |
|
|
|
-3 786 |
|
|
|
-739 |
|
|
|
3 462 |
|
Source: company and Associés en Finance adjustments
Developments in both groups’ operating environment mean that their results have been fairly inconsistent, as a result of restructuring operations, changes in scope
and their success or otherwise in positioning themselves in new emerging technologies.
C-16
Successive changes in the scope of their activities, particularly in Nokia’s case, make it complex to analyse revenue
movements.
Figure 4
Comparison of
gross margins
Source: company and Associés en Finance adjustments
Figure 5
Comparison of recurring operating
margins
Source: company and Associés en Finance adjustments
Each group has made significant losses at certain times, both operating losses and losses arising from asset impairment or the exceptional costs of restructuring plans.
These losses were caused by several factors.
| |
• |
|
Both companies have experienced difficulties integrating past acquisitions and/or combining with other companies, i.e. Alcatel’s combination with Lucent and Nokia’s combination with Siemens Networks. Those
difficulties resulted in weak operating margins in the years following the transactions, along with significant impairment losses. |
| |
• |
|
The telecom infrastructure business is also dependent on technology, and so is subject to unforeseen events and disruption that cause margins to vary. Returns
on investment depend |
C-17
| |
on the combination of technological development, the market share gained by new products and the resources used, which involve a large amount of R&D expenditure. In 2014, R&D spending
equalled 16.8% of revenue at Alcatel-Lucent (plus capitalised investment equal to 1.2% of revenue) and 19.6% of revenue at Nokia. High R&D expenditure supports future growth but may also reduce profitability if it does not produce commercial
success. |
| |
• |
|
The various sector players, and the European players in particular25 have had to deal with competitive pressure from Chinese groups since the 2000s (particularly
Huawei), which have captured significant market share through an aggressive pricing policy. |
Figure 6 shows, for illustration purposes,
the revenue (in euro terms) of Huawei, Ericsson, Alcatel-Lucent and Nokia between 2007 and 2014. These calculations should be treated with caution, partly because Huawei did not publish its financial statements in accordance with IFRS in 2007 and
has naturally benefited from the intrinsic growth in its national market26. In addition, Nokia’s revenue has fallen sharply as a natural result of selling its mobile handset business.
However, Figure 6 shows the pressure that Huawei is putting on its competitors. Huawei’s revenue growth has been mainly organic.
Figure 6
Revenue
Source: Bloomberg, companies and Associés en Finance adjustments
| 25 |
Huawei does not operate in the US telecom market, where the various players’ competitive positions are more protected. |
| 26 |
Although Huawei is unlisted, it still publishes financial statements. It also operates in areas other than telecom infrastructure. |
C-18
Figure 7, which should be treated with the same caution, shows the operating margins of the same four groups since 2011,
which is when Huawei adopted IFRS accounting principles.
Figure 7
Operating margins since 2011
Source: Bloomberg, companies and Associés en Finance adjustments
| |
• |
|
For a long time, Nokia led the mobile handset market, but it was materially affected by the arrival of smartphones and Apple’s entry into the market from 2007, which eventually led it to sell this business to
Microsoft. |
These various factors – merger-related integration problems, technological risks, stiff competition from Chinese companies and, in
Nokia’s case, the decline in its mobile handset market share – prompted both companies to refocus their businesses (see also the chronology in Figure 1). Nokia started to refocus in 2011. The main stages in the process were outsourcing
R&D support functions (administrative management); acquiring most of Motorola’s mobile networking business in 2010, selling its fixed access business to Adtran in 2011; selling its microwave transport business to Dragonwave in June 2012;
spinning off its optical transport business (Coriant) in May 2013; buying out Siemens’ 50% stake in their telecom networking joint venture NSN (now Nokia Networks) for €1.7 billion, and
recently selling the mobile handset business to Microsoft (announced in 2013 and closed at the beginning of 2014). Alcatel-Lucent launched a cost-cutting plan in 2009, followed in 2012 by another restructuring plan and supplemented by a broader plan
to redefine the group from an operational, strategic and financial point of view. The Shift plan, introduced in June 2013, aimed to reposition Alcatel-Lucent as a specialist in IP networking and superfast broadband access, which are both essential
for next-generation networks. It involved quantitative targets that varied between divisions, with a revenue target of at least €7 billion for Core Networking in 2015 and a cash flow target of
over €200 million for the Access and Other segments.27 At end-2014,
€675 million of cost savings had been achieved, and
| 27 |
The Shift plan is intended to reposition Alcatel-Lucent as a specialist in IP networks and superfast broadband access, and innovation efforts will be focused on those areas. The operational aspects of the plan involve
managing the group’s new segments (Core Networking, Access and Other) in a clearly distinct manner, and it includes a cost-cutting target of €950 million. The financial part of the plan is
to carry out a financial reorganisation, rescheduling debt and reducing it by €2 billion, partly through the sale of selected assets intended to raise at least €1 billion in 2013-15. The initial targets of the Shift plan included reducing fixed costs by €1 billion and achieving cash flow of €250 million in the Access segment, although those targets were adjusted after the disposals that took place in 2014. |
C-19
at end-June 2015 €746 million had been achieved out of the Shift plan’s overall target of
€950 million between 2013 and 2015. Both groups have therefore seen their margins recover substantially in the last few years.
Table 5
Comparison of quarterly non-IFRS
operating margins
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Q3 2013 |
|
|
Q4 2013 |
|
|
Q1 2014 |
|
|
Q2 2014 |
|
|
Q3 2014 |
|
|
Q4 2014 |
|
|
Q1 2015 |
|
|
Q2 2015 |
|
| Alcatel-Lucent |
|
|
3.2 |
% |
|
|
7.8 |
% |
|
|
1.1 |
% |
|
|
4.1 |
% |
|
|
5.2 |
% |
|
|
7.1 |
% |
|
|
2.5 |
% |
|
|
5.1 |
% |
| Core Networking |
|
|
6.2 |
% |
|
|
14.9 |
% |
|
|
7.1 |
% |
|
|
9.0 |
% |
|
|
8.5 |
% |
|
|
16.0 |
% |
|
|
2.8 |
% |
|
|
9.1 |
% |
| Access |
|
|
2.4 |
% |
|
|
3.8 |
% |
|
|
-2.4 |
% |
|
|
0.6 |
% |
|
|
3.4 |
% |
|
|
0.3 |
% |
|
|
3.8 |
% |
|
|
1.3 |
% |
| Nokia |
|
|
11.7 |
% |
|
|
9.3 |
% |
|
|
11.0 |
% |
|
|
11.8 |
% |
|
|
13.7 |
% |
|
|
13.8 |
% |
|
|
8.3 |
% |
|
|
16.2 |
% |
| Mobile Access |
|
|
4.9 |
% |
|
|
7.6 |
% |
|
|
8.2 |
% |
|
|
7.7 |
% |
|
|
15.2 |
% |
|
|
12.5 |
% |
|
|
-0.2 |
% |
|
|
8.8 |
% |
| Global Services |
|
|
12.3 |
% |
|
|
15.2 |
% |
|
|
10.8 |
% |
|
|
13.9 |
% |
|
|
11.3 |
% |
|
|
14.6 |
% |
|
|
7.3 |
% |
|
|
9.3 |
% |
| HERE |
|
|
10.0 |
% |
|
|
9.8 |
% |
|
|
4.8 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
6.8 |
% |
|
|
7.3 |
% |
|
|
9.3 |
% |
| Nokia Technologies |
|
|
60.0 |
% |
|
|
66.9 |
% |
|
|
65.6 |
% |
|
|
65.3 |
% |
|
|
64.5 |
% |
|
|
51.7 |
% |
|
|
72.6 |
% |
|
|
58.0 |
% |
Source: company and Associés en Finance adjustments
Alcatel-Lucent’s revenues and margins are strongly seasonal, and improve over the course of the calendar year. The last four quarters all show an improvement
relative to the year-earlier periods except Q4-14, when the Access segment suffered. In its most recent quarterly publication for Q2, the group showed positive cash flow after restructuring charges for the first time since the Alcatel-Lucent merger.
Management emphasised that restructuring charges should be lower after 2015, and so the group should comfortably be able to achieve positive free cash flow. For 2015, Alcatel-Lucent has confirmed its aim of hitting that target, despite restructuring
costs.
Nokia also sees seasonal variations, but to a lesser extent. Like Alcatel-Lucent, the group has recently improved its margins year-on-year every quarter
except in Q1-15, when the Mobile Access segment made an operating loss. In its most recent quarterly publication for Q2, Nokia showed its best operating margin figures since Q4-07. Nokia Networks’ overall gross margin reached an all-time high.
The group invested more in the Technologies segment in Q2 than in Q1, resulting in a sequential decline in margins. However, margins should rise when the monetisation of Nokia’s patent portfolio starts to accelerate.
C-20
Balance sheet and cash flow analysis28
Table 6
Alcatel-Lucent: simplified balance
sheet information since 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjusted 2014 format |
|
|
Alcatel-Lucent balance sheet (in € millions) |
|
2006 |
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
| Intangible assets |
|
|
16,324 |
|
|
|
11,558 |
|
|
|
6,782 |
|
|
|
6,382 |
|
|
|
6,426 |
|
|
|
6,163 |
|
|
|
4,995 |
|
|
|
4,995 |
|
|
|
4,157 |
|
|
|
4,192 |
|
| of which goodwill |
|
|
10,977 |
|
|
|
7,328 |
|
|
|
4,215 |
|
|
|
4,168 |
|
|
|
4,370 |
|
|
|
4,389 |
|
|
|
3,820 |
|
|
|
3,820 |
|
|
|
3,156 |
|
|
|
3,181 |
|
| Property, plant and equipment |
|
|
2,026 |
|
|
|
1,428 |
|
|
|
1,351 |
|
|
|
1,260 |
|
|
|
1,311 |
|
|
|
1,263 |
|
|
|
1,164 |
|
|
|
1,133 |
|
|
|
1,075 |
|
|
|
1,132 |
|
| Inventories |
|
|
2,259 |
|
|
|
2,235 |
|
|
|
2,196 |
|
|
|
1,624 |
|
|
|
2,295 |
|
|
|
1,975 |
|
|
|
1,940 |
|
|
|
1,940 |
|
|
|
1,935 |
|
|
|
1,971 |
|
| Trade receivables |
|
|
5,841 |
|
|
|
6,154 |
|
|
|
6,432 |
|
|
|
4,959 |
|
|
|
4,792 |
|
|
|
4,579 |
|
|
|
3,767 |
|
|
|
3,757 |
|
|
|
3,312 |
|
|
|
3,512 |
|
| Financial assets |
|
|
1,688 |
|
|
|
2,445 |
|
|
|
1,459 |
|
|
|
766 |
|
|
|
666 |
|
|
|
829 |
|
|
|
768 |
|
|
|
798 |
|
|
|
770 |
|
|
|
886 |
|
| Pension-related assets |
|
|
2,734 |
|
|
|
3,472 |
|
|
|
2,298 |
|
|
|
2,400 |
|
|
|
2,746 |
|
|
|
2,765 |
|
|
|
2,797 |
|
|
|
2,797 |
|
|
|
3,150 |
|
|
|
2,636 |
|
| Cash and equivalents |
|
|
8,808 |
|
|
|
5,306 |
|
|
|
5,941 |
|
|
|
5,621 |
|
|
|
5,692 |
|
|
|
4,675 |
|
|
|
4,949 |
|
|
|
4,949 |
|
|
|
6,497 |
|
|
|
5,615 |
|
| Total assets adjusted |
|
|
39,680 |
|
|
|
32,598 |
|
|
|
26,459 |
|
|
|
23,012 |
|
|
|
23,928 |
|
|
|
22,249 |
|
|
|
20,380 |
|
|
|
20,369 |
|
|
|
20,896 |
|
|
|
19,944 |
|
| Equity |
|
|
15,493 |
|
|
|
11,232 |
|
|
|
4,633 |
|
|
|
3,740 |
|
|
|
3,545 |
|
|
|
3,854 |
|
|
|
1,946 |
|
|
|
1,938 |
|
|
|
2,933 |
|
|
|
1,861 |
|
| Non-controlling interests |
|
|
498 |
|
|
|
515 |
|
|
|
591 |
|
|
|
569 |
|
|
|
660 |
|
|
|
747 |
|
|
|
745 |
|
|
|
745 |
|
|
|
730 |
|
|
|
833 |
|
| Provisions |
|
|
3,466 |
|
|
|
3,597 |
|
|
|
3,167 |
|
|
|
2,439 |
|
|
|
2,295 |
|
|
|
853 |
|
|
|
1,730 |
|
|
|
1,730 |
|
|
|
1,594 |
|
|
|
895 |
|
| Net debt |
|
|
-993 |
|
|
|
-258 |
|
|
|
-846 |
|
|
|
-866 |
|
|
|
-314 |
|
|
|
72 |
|
|
|
-118 |
|
|
|
-124 |
|
|
|
-241 |
|
|
|
-306 |
|
| Gross debt |
|
|
7,815 |
|
|
|
5,048 |
|
|
|
5,095 |
|
|
|
4,755 |
|
|
|
5,378 |
|
|
|
4,747 |
|
|
|
4,831 |
|
|
|
4,825 |
|
|
|
6,256 |
|
|
|
5,309 |
|
| Pension-related liabilities |
|
|
5,331 |
|
|
|
4,402 |
|
|
|
4,807 |
|
|
|
5,043 |
|
|
|
5,090 |
|
|
|
5,706 |
|
|
|
5,330 |
|
|
|
5,338 |
|
|
|
3,854 |
|
|
|
5,163 |
|
| Trade payables |
|
|
7,077 |
|
|
|
7,804 |
|
|
|
8,166 |
|
|
|
6,466 |
|
|
|
6,960 |
|
|
|
6,342 |
|
|
|
5,798 |
|
|
|
5,793 |
|
|
|
5,529 |
|
|
|
5,883 |
|
| Total equity and liabilities adjusted |
|
|
39,680 |
|
|
|
32,598 |
|
|
|
26,459 |
|
|
|
23,012 |
|
|
|
23,928 |
|
|
|
22,249 |
|
|
|
20,380 |
|
|
|
20,369 |
|
|
|
20,896 |
|
|
|
19,944 |
|
| Gearing without pension assets and liabilities |
|
|
-6 |
% |
|
|
-2 |
% |
|
|
-16 |
% |
|
|
-20 |
% |
|
|
-7 |
% |
|
|
2 |
% |
|
|
-4 |
% |
|
|
-5 |
% |
|
|
-7 |
% |
|
|
-11 |
% |
| Gearing with pension assets and liabilities |
|
|
10 |
% |
|
|
6 |
% |
|
|
32 |
% |
|
|
41 |
% |
|
|
48 |
% |
|
|
65 |
% |
|
|
90 |
% |
|
|
90 |
% |
|
|
13 |
% |
|
|
82 |
% |
| Capital intensity |
|
|
0.96 |
|
|
|
0.70 |
|
|
|
0.41 |
|
|
|
0.40 |
|
|
|
0.39 |
|
|
|
0.50 |
|
|
|
0.35 |
|
|
|
0.37 |
|
|
|
0.30 |
|
|
|
0.37 |
|
Source: company and Associés en Finance adjustments
Table 7
Nokia: simplified balance sheet
information since 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unadjusted |
|
|
adjusted 2013 format |
|
| Nokia balance sheet (in € millions) |
|
2006 |
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
| Intangible assets |
|
|
1,081 |
|
|
|
4,120 |
|
|
|
10,414 |
|
|
|
8,076 |
|
|
|
7,691 |
|
|
|
6,250 |
|
|
|
5,523 |
|
|
|
5,523 |
|
|
|
3,591 |
|
|
|
2,913 |
|
| of which goodwill |
|
|
532 |
|
|
|
1,384 |
|
|
|
6,257 |
|
|
|
5,171 |
|
|
|
5,723 |
|
|
|
4,838 |
|
|
|
4,876 |
|
|
|
4,876 |
|
|
|
3,295 |
|
|
|
2,563 |
|
| Property, plant and equipment |
|
|
1,602 |
|
|
|
1,912 |
|
|
|
2,090 |
|
|
|
1,867 |
|
|
|
1,954 |
|
|
|
1,842 |
|
|
|
1,431 |
|
|
|
1,431 |
|
|
|
566 |
|
|
|
716 |
|
| Inventories |
|
|
1,554 |
|
|
|
2,876 |
|
|
|
2,533 |
|
|
|
1,865 |
|
|
|
2,523 |
|
|
|
2,330 |
|
|
|
1,538 |
|
|
|
1,538 |
|
|
|
804 |
|
|
|
1,275 |
|
| Trade receivables |
|
|
8,252 |
|
|
|
14,256 |
|
|
|
14,941 |
|
|
|
12,780 |
|
|
|
12,211 |
|
|
|
12,038 |
|
|
|
9,238 |
|
|
|
9,176 |
|
|
|
3,898 |
|
|
|
4,708 |
|
| Financial assets |
|
|
576 |
|
|
|
911 |
|
|
|
766 |
|
|
|
1,282 |
|
|
|
1,699 |
|
|
|
1,322 |
|
|
|
1,329 |
|
|
|
1,391 |
|
|
|
1,468 |
|
|
|
1,404 |
|
| Pension-related assets |
|
|
206 |
|
|
|
218 |
|
|
|
55 |
|
|
|
68 |
|
|
|
85 |
|
|
|
106 |
|
|
|
142 |
|
|
|
152 |
|
|
|
38 |
|
|
|
30 |
|
| Cash and equivalents |
|
|
8,537 |
|
|
|
11,753 |
|
|
|
6,820 |
|
|
|
8,293 |
|
|
|
11,364 |
|
|
|
10,469 |
|
|
|
9,494 |
|
|
|
9,494 |
|
|
|
13,936 |
|
|
|
7,297 |
|
| Total assets adjusted |
|
|
21,808 |
|
|
|
36,046 |
|
|
|
37,619 |
|
|
|
34,231 |
|
|
|
37,527 |
|
|
|
34,357 |
|
|
|
28,695 |
|
|
|
28,705 |
|
|
|
24,301 |
|
|
|
18,343 |
|
| Equity |
|
|
11,968 |
|
|
|
14,773 |
|
|
|
14,208 |
|
|
|
13,088 |
|
|
|
14,384 |
|
|
|
11,873 |
|
|
|
8,061 |
|
|
|
7,937 |
|
|
|
6,468 |
|
|
|
8,611 |
|
| Non-controlling interests |
|
|
92 |
|
|
|
2,565 |
|
|
|
2,302 |
|
|
|
1,661 |
|
|
|
1,847 |
|
|
|
2,043 |
|
|
|
1,386 |
|
|
|
1,302 |
|
|
|
192 |
|
|
|
58 |
|
| Provisions |
|
|
1,904 |
|
|
|
3,246 |
|
|
|
3,485 |
|
|
|
2,580 |
|
|
|
2,104 |
|
|
|
1,655 |
|
|
|
2,134 |
|
|
|
1,714 |
|
|
|
227 |
|
|
|
-1,815 |
|
| Net debt |
|
|
-8,221 |
|
|
|
-10,479 |
|
|
|
-2,368 |
|
|
|
-3,090 |
|
|
|
-6,085 |
|
|
|
-5,148 |
|
|
|
-3,945 |
|
|
|
-3,945 |
|
|
|
-2,546 |
|
|
|
-4,605 |
|
| Gross debt |
|
|
316 |
|
|
|
1,274 |
|
|
|
4,452 |
|
|
|
5,203 |
|
|
|
5,279 |
|
|
|
5,321 |
|
|
|
5,549 |
|
|
|
5,549 |
|
|
|
11,390 |
|
|
|
2,692 |
|
| Pension-related liabilities |
|
|
98 |
|
|
|
254 |
|
|
|
175 |
|
|
|
174 |
|
|
|
169 |
|
|
|
176 |
|
|
|
178 |
|
|
|
420 |
|
|
|
237 |
|
|
|
530 |
|
| Trade payables |
|
|
7,430 |
|
|
|
13,934 |
|
|
|
12,997 |
|
|
|
11,525 |
|
|
|
13,744 |
|
|
|
13,289 |
|
|
|
11,387 |
|
|
|
11,783 |
|
|
|
5,787 |
|
|
|
8,267 |
|
| Total equity and liabilities adjusted |
|
|
21,808 |
|
|
|
36,046 |
|
|
|
37,619 |
|
|
|
34,231 |
|
|
|
37,527 |
|
|
|
34,357 |
|
|
|
28,695 |
|
|
|
28,705 |
|
|
|
24,301 |
|
|
|
18,343 |
|
| Gearing without pension assets and liabilities |
|
|
-68 |
% |
|
|
-60 |
% |
|
|
-14 |
% |
|
|
-21 |
% |
|
|
-37 |
% |
|
|
-37 |
% |
|
|
-42 |
% |
|
|
-43 |
% |
|
|
-38 |
% |
|
|
-53 |
% |
| Gearing with pension assets and liabilities |
|
|
-69 |
% |
|
|
-60 |
% |
|
|
-14 |
% |
|
|
-20 |
% |
|
|
-37 |
% |
|
|
-36 |
% |
|
|
-41 |
% |
|
|
-40 |
% |
|
|
-35 |
% |
|
|
-47 |
% |
| Capital intensity |
|
|
0.09 |
|
|
|
0.14 |
|
|
|
0.28 |
|
|
|
0.29 |
|
|
|
0.24 |
|
|
|
0.23 |
|
|
|
0.18 |
|
|
|
0.35 |
|
|
|
0.28 |
|
|
|
0.36 |
|
Source: company and Associés en Finance adjustments
| 28 |
Provisions are net of deferred tax |
C-21
Both groups have a net cash position29, but given low returns on cash,
interest payments on gross debt are resulting in a net interest expense on the income statement.
Nokia’s very large net cash position at end-2014 was due to
the sale of its mobile handsets business to Microsoft, along with a €1.4 billion down-payment by Microsoft with respect to a 10-year licensing agreement.
Net cash positions are common among technology companies, as they need to maintain a safety cushion of cash because of operational risks and the amount of R&D they
have to finance, and to ensure they have enough flexibility to finance acquisitions. Moreover, customers pay attention to the financial health of their telecom equipment providers, in order to secure their long-term network development. In addition,
part of their cash is not immediately available, because it is subject to exchange controls30.
Cash positions
should also be viewed in the light of both groups’ weak cash generation in the past, particularly Alcatel-Lucent’s, as a result of the aforementioned volatility in operating margins, and their significant capital expenditures31.
Table 8
Cash-flows (€ million)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Alcatel-Lucent |
|
|
|
|
|
|
|
|
|
|
adjusted 2014 format |
|
| Simplified cash-flows |
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
| Cash-flows from operating activities |
|
|
-5 |
|
|
|
-126 |
|
|
|
19 |
|
|
|
-144 |
|
|
|
-221 |
|
|
|
127 |
|
| Net expenditure on non-current assets(a) |
|
|
-532 |
|
|
|
-569 |
|
|
|
-510 |
|
|
|
-512 |
|
|
|
-427 |
|
|
|
-394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flow |
|
|
-537 |
|
|
|
-695 |
|
|
|
-491 |
|
|
|
-656 |
|
|
|
-648 |
|
|
|
-267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nokia |
|
|
|
|
|
|
|
|
|
|
adjusted 2014 format |
|
| Simplified cash-flows |
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
| Cash-flows from operating activities (b) |
|
|
3,247 |
|
|
|
4,774 |
|
|
|
1,137 |
|
|
|
-354 |
|
|
|
72 |
|
|
|
-115 |
|
| Net expenditure on non-current assets(c) |
|
|
-458 |
|
|
|
-658 |
|
|
|
-1,366 |
|
|
|
-182 |
|
|
|
-269 |
|
|
|
-267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flow |
|
|
2,789 |
|
|
|
4,116 |
|
|
|
-229 |
|
|
|
-536 |
|
|
|
-197 |
|
|
|
-382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (a) |
2009 figures as reported in the 2010 annual report. |
| (b) |
Cash flows from operating activities are adjusted for Microsoft’s €1.4 billion downpayment under a 10-year licencing agreements, which reduce the working
capital requirement in the published financial statements. |
| (c) |
Including the acquisition of Motorola’s mobile network infrastructure business in 2011 (now part of Nokia Networks). |
Source: companies and Associés en Finance adjustments
These various
factors explain why, before the public exchange offer was announced, Alcatel-Lucent had a Standard and Poor’s credit rating of B and Nokia a rating of BB – i.e. both non-investment-grade – despite having net cash positions.
| 29 |
Convertible bonds and OCEANEs are included in the gross debt figures above. |
| 30 |
Alcatel-Lucent’s registration document states that €1.207 billion of cash, cash equivalents and marketable securities are subject to exchange restrictions in
certain countries, mainly China. |
| 31 |
At both groups, R&D spending – mostly recorded as operating expenses – accounts for most of their investment. |
C-22
Their weak cash flow has prompted both companies to adopt cost-cutting policies, but also to address the situation through
adjustments to the scope of their activities through significant disposals32, a decision not to pay any dividends since 2007 in Alcatel-Lucent’s case33, and capital increases34. For Alcatel-Lucent, the situation explains why the Shift plan, in addition to its operational aspects, included several
financial initiatives, including reorganising the group’s debt, strengthening its financial position and selling assets. A €957-million capital increase was launched in November 2013 and the
group undertook several buybacks of bonds and convertible bonds accompanied by fresh issues (including issues of OCEANEs maturing in 2018 in June 2013, and OCEANEs maturing in 2019 and 2020 in June 2014) in order to reduce the average cost of
financing and increase the maturity and flexibility of its debt. The group’s cost of gross debt has fallen to 6.4% from 7.9% in 2012. Alcatel-Lucent has turned the corner, with positive operational cash flow in 2014 and the aim of achieving
overall positive cash flow from 2015.
It should also be noted that, since the merger with Lucent, Alcatel-Lucent has recorded significant obligations relating to
retirement benefits and other post-employment benefits on its balance sheet. The amount of these liabilities has been reduced and they have been restructured, with a shift towards more secure plan assets, which consist largely of bonds and cash.
These efforts are intended to reduce gross liabilities and to make net provisions on the balance sheet much less sensitive to financial market conditions35. However, the net balance of assets and
liabilities relating to pensions and other post-employment benefits (€2.5 billion at end-2014) leads to greater volatility in the group’s equity and makes it more sensitive to financial
market conditions than is the case at Nokia, where the net balance was €500 million at end-2014.
| |
• |
|
Fundamentals: the two companies’ operating and technological environment and their strengths and weaknesses |
The telecom equipment market has fundamental characteristics, some of which have been mentioned above in the financial analysis of the two groups that relate to their
stand-alone operational and financial positions and form the basis of their future development.
Firstly, the market is driven by technological disruption, which
causes step-changes in markets and rapid changes in competitive positions. This is the case in mobile access, where the various generations of standards (2G-GSM, 2G/3G-CDMA, 3G-UMTS, 4G-LTE and soon 5G) require companies to develop a large number of
products to keep up with an ever-changing market. In fixed access, the introduction of new encoding methods has increased speeds from around 100Kb/s initially with ADSL to 100Mb/s today (with VDSL Vectoring and G.fast). Similarly, new technological
breakthroughs have caused major changes in fibre-optic access (BPON, ePON, GPON and soon T-WDMPON). In optical transport and IP
| 32 |
Nokia’s main disposals are described above. Alcatel-Lucent’s main disposals consisted of its stake in Thales in 2009, Genesys in 2012, LGS and the Enterprise division in 2014. |
| 33 |
For Nokia, dividends were falling until recently: €0.53 per share with respect to 2007, €0.40 per
share between 2008 and 2011, and no dividend with respect to 2012. Nokia shareholders received an ordinary dividend of €0.11 and a special dividend of
€0.26 with respect to 2013, and a dividend of €0.14 per share with respect to 2014. Nokia had also started a share buyback programme,
which it discontinued when it announced the proposed merger with Alcatel-Lucent. |
| 34 |
Including Alcatel-Lucent’s capital increase of almost €1 billion in late 2013 as part of the Shift plan. |
| 35 |
It should be noted that an offer has been made to former employees and beneficiaries in the USA to convert their monthly annuity payments into lump sums on a voluntary basis (the “Alcatel-Lucent Retiree Lump-Sum
Window program”). This offer will reduce the Group’s retirement benefit obligations (liabilities) and the related payments will come from pension assets (assets). As a result, both assets and liabilities will be reduced. The group is also
carrying out “section 420” transfers, i.e. transfers of certain assets, representing a surplus compared with liabilities, to other funds. |
C-23
routing, speeds have risen from 10Gb/s to 400Gb/s in the space of a few years and soon 1Tb/s. Telecom networks are also seeing a mass shift towards virtualised software solutions using hosted
cloud infrastructure, boosting innovation in software platforms.
In all segments, developments have been made possible by ongoing major innovation efforts
supported by internal R&D units (such as Bell Labs at Alcatel-Lucent and Future Works at Nokia), and external efforts (via strategic partnerships). R&D results in fixed costs that need to be covered by a sufficiently large market share. Once
fixed costs have been covered, the contribution margin and operational gearing is high. Critical mass is therefore vital in the telecom infrastructure market. This is particularly true in mobile access, which is the largest potential market and
attracts the most R&D expenditure. In mobile access, Nokia ranks third in the world and its market share (18%) is sufficient to achieve double-digit margins. The addition of Alcatel-Lucent’s mobile business – which ranks fourth in
the sector – will increase operational gearing.
In addition to this aspect, which is inherent to technology companies, the telecom market and the networking
market in particular are seeing new developments related to the all-digital era. Players capable of meeting the technological and industrial challenges posed by exponential growth in digital usage and the digitisation of the economy have genuine
growth prospects. After the digital revolution seen between 1990 and 2000, when IT tools, the internet and mobile telephony became much more widespread, the industry has entered a new phase involving an explosion in digital usage, superfast mobile
broadband access, cloud computing and connected objects. This upheaval is giving rise to a new era represented by the “internet of things”. Smart objects – which are permanently connected to the internet and to each other, and which
collect data – are transforming our everyday lives in areas such as home automation and healthcare. This market is seeing exponential growth with 70 billion devices expected to connect to the Internet by 2020. The digitisation of the economy is
also entering a new phase. After the success of pure players directly connected to the digital economy – such as Google, Amazon, Facebook and Apple – all industrial sectors now need to go digital, in terms of both their operational
arrangements and their product ranges.
The surge in usage and requirements represents a considerable challenge for current networks. They were built in a very
hierarchical way to carry voice calls, and then adapted to carry data, but now need to change radically. The aim is to allow a transaction from a system in which numerous networks coexisted to a convergent all-IP system in which very high speeds are
the norm (fixed and mobile). In addition to this convergence, the very architecture of networks needs to be reviewed and replaced with a distributed model, which is less centralised and brings broadband infrastructure as close as possible to the
end-user. Increasingly, we are moving away from a hardware-based, infrastructure-dominated model to a software-based model, in which connecting infrastructure in a smart way to deal with data flows, consumption peaks etc. is just as important as the
infrastructure itself. According to Infonetics Research, telcos’ spending on network virtualisation solutions – SDN (Software Defined Network) and NFV (Network Functions Virtualization) – will reach $11 billion in
2018 versus $500 million in 2013.
As a result, networks have again become crucial in meeting the challenges posed by the digitisation of the economy, and networks
and infrastructure manufacturers can again play a key role. Whereas the abundance of mobile devices, connected objects and cloud offerings will diminish their value as they gradually become commoditised, access to a flawless network that allows them
to function will become a crucial issue. For example, it is unthinkable that smart cars and driverless cars will be allowed to run if there is the slightest risk of a network outage. Infrastructure manufacturers could therefore regain a position of
strength with respect to makers of smartphones (Apple, Samsung, Lenovo, HTC), makers of connected objects and providers of cloud infrastructure (Amazon, Microsoft, Google, Dropbox, etc.). However, to achieve that objective, network equipment
suppliers need critical mass and global firepower. Only then will they be able to afford and cover the investment required to finance innovation and to deal with competition.
C-24
These movements, which began in the USA five or six years ago, seem to be major economic growth drivers, but are at an
early stage in Europe, where there is therefore the potential for growth.
Strengths and weaknesses
The two groups’ development on a stand-alone basis and market trends are summarised in the SWOT analysis below. This analysis forms the basis for assessing the
risks to be factored into the two groups’ subsequent valuations.
Table 9
SWOT analysis of the two companies
|
|
|
| Alcatel-Lucent (stand-alone) |
|
|
| Strengths |
|
Weaknesses |
|
|
| Significant market share in most markets in which Alcatel-Lucent operates. |
|
The client base is fairly concentrated: in 2014, the group’s top ten clients accounted for 54% of its revenue, and its top three clients accounted for 35%. The group is highly exposed to the US
market. |
|
|
| Large presence in the USA. |
|
Despite commercial successes (China, USA), Alcatel-Lucent has not been able to gain wide acceptance for its 4G networks in Europe and the rest of Asia. In mobile networks, where it lacks critical mass, the group
has suffered from its lack of a large 3G installed base and its insufficiently competitive offering in the single RAN market. |
|
|
| Global leader in fixed-line broadband access. |
|
Direct competition with Huawei in several segments is keeping prices under pressure. |
|
|
| Fairly strong position in China (market share of around one third in segments open to foreign competition). |
|
Gross debt is still relatively high, as are gross liabilities relating to pensions and other staff benefits. |
|
|
| Business refocused on strong, diversified positions via the Shift plan. |
|
|
|
|
| Frequent awards for innovation (e.g. Bell Labs). |
|
|
|
|
| Opportunities |
|
Threats |
|
|
| Broader client segments: Cloud Service Providers, very large corporations (banks etc.), governments and companies with specific requirements (transport etc.). |
|
High technological risk. |
|
|
| Telecom network/IT convergence and fixed/mobile convergence underpinning demand for hardware and network software platforms. |
|
Lacks critical mass in mobile networks, especially since investments in 5G networks will lead to large financing requirements. |
|
|
| Acquisition opportunities in certain core networking segments; increasing market share, better coverage of R&D costs, positions in emerging technologies. |
|
Risks relating to the investment cycles of operator clients and sensitivity to their margins (which are falling). |
|
|
| Development in the high-growth markets of platforms and network applications. |
|
Dependence on telecom operators and risk that a top-10 customer may not renew its contracts. |
|
|
| Large patent portfolio and monetisation potential, (it currently generates less revenue than Nokia’s). |
|
Adverse currency movements, particularly concerning the dollar. |
|
|
|
|
Emergence of new competitors. |
C-25
|
|
|
| Nokia (stand-alone) |
|
|
| Strengths |
|
Weaknesses |
|
|
| Position in superfast mobile broadband networks (3G and 4G). |
|
Competition from Huawei in mobile access, creating pressure on prices. |
|
|
| Full control over NSN acquired in 2013, allowing streamlining in terms of governance, costs and commercial strategy. |
|
Weak product differentiation in the mobile networks market, in which producers have little pricing power. |
|
|
| Large presence in Asia (Japan, South Korea etc.). |
|
Lack of diversification in the networks business, Nokia unable to take advantage of fixed/mobile convergence (Nokia does not have any expertise or products in IP routers) or offer comprehensive solutions for
clients. |
|
|
| Strong R&D operation, supported by the Future Works unit. |
|
Weak position in the USA, a market that is relatively sheltered from Chinese competition. |
|
|
| Very large patent portfolio, particularly in mobile networks and handsets. |
|
Few opportunities for diversification in high-growth non-telco markets. |
|
|
| Financial position strengthened by the disposals of the mobile handset business and HERE. |
|
Lack of strong R&D operations outside mobile networks and handsets. |
|
|
| Opportunities |
|
Threats |
|
|
| Telecom network / IT convergence underpinning demand for hardware and mobile network software platforms. |
|
High technological risk. |
|
|
| Acquisitions but also organic growth, made possible by the stronger balance sheet. |
|
Risks relating to the investment cycles of operator clients and sensitivity to their margins (which are falling). |
|
|
| Ability to capitalise on the globally recognised Nokia brand (see recent announcements about possible mobile phone licensing agreements). |
|
Emergence of new competitors. |
|
|
| Ability to focus investments on a slimmed-down portfolio. |
|
Nokia Technologies: sensitive to revenues from select licences |
|
|
| Current discussions on licensing agreements (agreement with LGE, revenues which are subject to arbitration / dispute with Samsung) could lead to the renegotiation of current contracts, with a positive outcome for
Nokia Technologies. |
|
Slow patent monetisation. |
|
|
| Win-win partnership with Microsoft in licensing. |
|
Currency exposure. |
|
|
| Monetisation of the patent portfolio in mobile technology by re-entering the mobile handset market. |
|
|
|
|
| Development in the high-growth markets of platforms and network applications. |
|
|
C-26
The combination between Alcatel-Lucent and Nokia should strengthen their positions in several ways: complementary
geographical presence, complementary product positions (Alcatel-Lucent’s strong positions in core networking, Nokia’s strong positions in mobile access, allowing the combined group to propose a comprehensive offering to operators and to
take advantage of fixed/mobile convergence), significant firepower in R&D36 (in particular supporting diversification into high-growth sectors such as software platforms and non-telco
clients), improved profitability by achieving economies of scale allowing the coverage of fixed costs, creation of a global group on the scale of Ericsson and Huawei, stronger financial position, and increased firepower for carrying out
acquisitions. These various factors are expected to generate post-combination synergies.
| • |
|
Valuation: examination of the terms and conditions of the offer and fairness of the exchange ratio applied to the shares |
An analysis of the fairness of the public exchange offer should take the following aspects into consideration:
| |
• |
|
Nokia’s offer is non-mandatory, |
| |
• |
|
The offer is optional for both shareholders and for OCEANE bondholders, who have the possibility of accepting or declining the offer made to them, |
| |
• |
|
An analysis of the fairness of the exchange ratio for the OCEANE bonds must consider the fairness of the exchange ratio applied to the shares and must ensure that the equal treatment of the shareholders and OCEANE
bondholders is not compromised. |
A cash offer justifies payment of a control premium, which factors in the synergies that the combination between the
two groups is likely to generate and which minority shareholders give up by tendering their shares to the offer, in return for receipt of this premium37. The same does not hold true for a public
exchange offer. The target company’s shareholders, if they tender their shares to the offer, will become shareholders in the company making the offer and thus automatically benefit from the value unlocked by attainment of the expected
synergies, in proportion to the interest they hold in the capital of the company making the offer. In the present case, the exchange ratio may be regarded as fair for shareholders if it reflects the fair value of both Alcatel-Lucent and Nokia,
making for a fair allocation of the rights to the combined entity’s capital, and if it leads to the synergies anticipated from the combination being shared fairly. To estimate the fair value of both companies, the intrinsic value of both
companies independently of the public exchange offer needs to be examined.
The fairness of the treatment afforded to the OCEANE bondholders and shareholders is
dealt with specifically in section V.
| |
• |
|
Examination of the share price performance of Alcatel-Lucent, Nokia and the exchange ratio implied by share prices |
Review of Alcatel-Lucent’s share price performance
Alcatel-Lucent’s
share price performance has several striking characteristics: its considerable volatility, like that of most tech stocks, its sensitivity to trends in its finances, its high level of liquidity and the strong share price gains since year-end 2012, as
its volume-weighted average share price reached its lowest point in October 2012 (at €0.682). Alcatel-Lucent’s share price has gained substantial ground
| 36 |
The combined entity will be the world’s number two telecom manufacturer, behind Huawei and ahead of Cisco. |
| 37 |
Academic research shows that the acquisition premium paid by the buyer is predominantly a function of the anticipated synergies, competition in the M&A market and the relative bargaining power of the buyer and the
target. |
C-27
since then and especially since Michel Combes took over as the group’s Chief Executive Officer (announced on 22 February 2013 effective 1 April 2013, Shift plan unveiled on
19 June 2013). Since mid-2011, the group’s share price has not risen above the €4 mark (apart from on 14 April 2015, when speculation about a link-up with Nokia peaked).
Figure 8
Alcatel-Lucent’s
volume-weighted average share price since year-end 2006
Source: Bloomberg
Alcatel-Lucent has not
paid out any dividends since 2007.
Share price volatility
A
share’s volatility measures the level of uncertainty about its returns, and is calculated using past share price performance data.
Alcatel-Lucent’s share
price performance has been highly volatile, which is attributable to several factors:
| |
• |
|
The very nature of its business activities, which are sensitive to rapid advances in communication technologies. |
| |
• |
|
By the same token, its earnings reports can trigger strong swings in the share price. For example, its shares rose by +19.4% on 31 October 2013 when it reported its Q3 2013 results and then by +16.1% on
30 October 2014 when it reported its Q3 2014 results. |
| |
• |
|
The rumours that surfaced on several occasions concerning industry consolidation/combination scenarios, including a link-up between Alcatel-Lucent and Nokia (e.g. the share price rose on 18 December 2014 on rumours
of talks about a deal with Nokia, and also in autumn 201338). The impact of this speculation peaked in the very last sessions prior to the offer. |
| |
• |
|
Changes in its financial structure and the rating given to it by credit rating agencies, plus the major burden on its finances attributable to pension liabilities. While debt pay-down and the drive to overhaul the
group’s financial structure gained pace after the Shift plan was introduced, the share price still appeared in 2011 and 2012 to react significantly to any strains in the debt markets (e.g. share price volatility increased in summer 2011 and
|
| 38 |
On 25 September 2013 Reuters reported that talks had been held at Nokia with a view to a link-up with Alcatel-Lucent, which drove the latter’s share price up 6.3% on 26 September. On 20 November 2013, the
Wall Street Journal reported that Nokia had walked away from the table, and Alcatel-Lucent shares declined afterwards. |
C-28
| |
spring 2012 in tandem with the level of 5-year CDS on Alcatel-Lucent’s debt). The company’s rating has been changed by the rating agencies on numerous occasions39. |
| |
• |
|
Alcatel-Lucent’s successive exits from and subsequent return to the CAC 40 index (exit on 24 December 2012, return on 23 December 2013). |
Figure 9
Alcatel-Lucent’s volatility
Figure 10
Level of Alcatel-Lucent’s CDS
Source: Bloomberg
Examination of Nokia’s share price performance
Figure 11
Nokia’s volume-weighted
average share price since year-end 2006
Source: Bloomberg
Nokia’s share
price has displayed just as much volatility as Alcatel-Lucent’s (see Figure 12) for similar reasons. Like for Alcatel-Lucent, earnings reports often lead to steep swings in the share price (gain of 12.0% on 19 July 2012 after the release
of Q2 2012 interim results, 10.7% decline on 23 January 2014 after the full-year 2013 results were published). Just as for Alcatel-Lucent, volatility rose in the last few trading sessions prior to the announcement of the proposed offer.
| 39 |
Changes in S&P’s credit rating of Alcatel-Lucent: BB- on 5 May 2006/BB- rating placed on credit watch with negative implications on 12 Dec. 2008/B+ on 3 March 2009/B on 9 November 2009/B rating
placed on credit watch with negative implications on 21 Dec. 2012/B on 18 Feb. 2013/B- on 21 June 2013/B on 18 August 2014/B placed on credit watch with positive implications on 17 April 2015 after the announcement of the link-up with
Nokia/finally B+ rating placed on credit watch with positive implications on 5 August 2015 |
C-29
The level of Nokia’s CDS always remained below that of Alcatel-Lucent’s CDS until the proposed offer was
unveiled. Just as for Alcatel-Lucent, the volatility of Nokia shares displayed a high level of correlation with the level of its CDS, with volatility and CDS peaking in summer 2012 when Nokia’s credit rating was downgraded from BB+ to BB- by
Standard & Poors against the backdrop of choppy market conditions ahead of the ECB’s announcements. This downgrade followed on from the release of the group’s interim results40.
Figure 12
Volatility comparison
Figure 13
Comparison of 5-year CDS
Source: Bloomberg
Assessment of the liquidity of the two shares
Nokia belongs to the
index of the largest-cap stocks in the euro zone (Euro Stoxx 50 index), while Alcatel-Lucent belongs to the CAC 40 index. Accordingly, both Alcatel-Lucent and Nokia have highly liquid shares.
| 40 |
Like Alcatel-Lucent’s, Nokia’s S&P rating underwent significant changes over time: BBB+ placed on credit watch with negative implications on 9 June 2011/BBB on 2 August 2011/BBB- on 2 March
2012/BB+ on 27 April 2012/BB- on 15 August 2012/B+ on 5 May 2013/B+ placed on credit watch with positive implications on 9 September 2013/BB on 15 May 2014 and BB+ on 17 April 2015 after the proposed link-up with
Alcatel-Lucent was announced. |
C-30
Table 10 shows a calculation of the illiquidity coefficients of Alcatel-Lucent and Nokia at end-March 2015, prior to the
announcement of Nokia’s proposed public exchange offer for Alcatel-Lucent shares, compared with that of their competitors in Associés en Finance’s Trival model (see Appendix 6), and the major telecom operators who are their
customers41. At that date, the Trival illiquidity coefficients ranged between 0.58 (Apple) and 2.19 (Groupe Flo).
Table 10
Details of the illiquidity
coefficient to end-March 2015
(data in foreign currencies converted into €)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| County |
|
Company |
|
Daily trading
vol. |
|
|
Absorbable
amounts |
|
|
Free floats |
|
|
Absorbable amounts
as a % of free float |
|
|
Trival
illiquidity
coefficient |
|
| |
|
(€ m) |
|
|
(€ m) |
|
|
(Ranking) |
|
|
(€ m) |
|
|
|
| FR |
|
Alcatel Lucent |
|
|
62.9 |
|
|
|
25.4 |
|
|
|
241 |
|
|
|
7,790 |
|
|
|
0.3 |
% |
|
|
0.85 |
|
| FI |
|
Nokia |
|
|
86.0 |
|
|
|
57.8 |
|
|
|
135 |
|
|
|
26,395 |
|
|
|
0.2 |
% |
|
|
0.76 |
|
| SE |
|
Ericsson |
|
|
100.5 |
|
|
|
56.5 |
|
|
|
108 |
|
|
|
34,746 |
|
|
|
0.2 |
% |
|
|
0.75 |
|
| US |
|
Cisco Systems |
|
|
738.4 |
|
|
|
437.4 |
|
|
|
31 |
|
|
|
130,983 |
|
|
|
0.3 |
% |
|
|
0.66 |
|
| US |
|
Juniper |
|
|
100.8 |
|
|
|
54.0 |
|
|
|
248 |
|
|
|
7,278 |
|
|
|
0.7 |
% |
|
|
0.83 |
|
|
|
|
|
|
|
|
|
| US |
|
Verizon |
|
|
651.2 |
|
|
|
495.0 |
|
|
|
14 |
|
|
|
187,650 |
|
|
|
0.3 |
% |
|
|
0.64 |
|
| US |
|
AT&T |
|
|
739.2 |
|
|
|
592.0 |
|
|
|
16 |
|
|
|
176,485 |
|
|
|
0.3 |
% |
|
|
0.64 |
|
| US |
|
Sprint Corporation |
|
|
68.5 |
|
|
|
18.9 |
|
|
|
326 |
|
|
|
3,485 |
|
|
|
0.5 |
% |
|
|
0.91 |
|
| ES |
|
Telefonica |
|
|
356.0 |
|
|
|
221.3 |
|
|
|
72 |
|
|
|
55,967 |
|
|
|
0.4 |
% |
|
|
0.70 |
|
| GB |
|
Vodafone |
|
|
190.8 |
|
|
|
107.3 |
|
|
|
54 |
|
|
|
80,480 |
|
|
|
0.1 |
% |
|
|
0.70 |
|
| DE |
|
Deutche Telekom |
|
|
191.4 |
|
|
|
99.7 |
|
|
|
77 |
|
|
|
51,684 |
|
|
|
0.2 |
% |
|
|
0.72 |
|
| FR |
|
Orange |
|
|
164.6 |
|
|
|
71.7 |
|
|
|
110 |
|
|
|
34,309 |
|
|
|
0.2 |
% |
|
|
0.74 |
|
Source: Bloomberg and Trival
Absorbable
amounts reflect the amount of capital that may be traded on a daily basis without moving the share price by more than 1%. For Alcatel-Lucent, absorbable amounts accounted for 0.3% of its free float at end-March 2015 – a level equivalent to that
for Nokia (0.2%) or for Ericsson and Cisco. The structural liquidity of Nokia shares, as reflected by its free float in millions of euros, is significantly higher than Alcatel-Lucent’s.
| 41 |
In line with the method applied by Associés en Finance, outlined in Appendix 6, two factors are used to calculate the illiquidity coefficient – the size of the free float and absorbable amounts. The lower
the illiquidity coefficient, the more liquid the company (an illiquidity coefficient of 1 represents a company with liquidity equal to the average of the sample of stocks tracked in Associés en Finance’s Trival model). Calculations of
transactions and absorbable amounts are carried out over a period of 45 calendar days. The free float rankings are shown relative to all 513 companies tracked to end-March 2015 by Associés en Finance. |
C-31
Both stocks’ high level of liquidity is backed up by an analysis of the daily trading volumes, as shown in Table 11
and Table 12. Alcatel-Lucent’s daily trading volumes are particularly high, which probably reflects the speculation referred to previously.
Table 11
Alcatel-Lucent’s trading
volumes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Alcatel-Lucent - Share liquidity |
|
Average daily volume |
|
|
Total volume |
|
| |
Number of
shares |
|
|
As a % of
capital |
|
|
As a % of
free float |
|
|
Number of
shares |
|
|
As a % of
capital |
|
|
As a % of
free float |
|
| |
|
|
|
|
|
| 9 April 2015 |
|
|
13,081,072 |
|
|
|
0.5 |
% |
|
|
0.5 |
% |
|
|
13,081,072 |
|
|
|
0.5 |
% |
|
|
0.5 |
% |
| 1 month to 9 April 2015 |
|
|
18,373,342 |
|
|
|
0.7 |
% |
|
|
0.7 |
% |
|
|
385,840,174 |
|
|
|
13.7 |
% |
|
|
14.4 |
% |
| 2 months to 9 April 2015 |
|
|
18,107,671 |
|
|
|
0.7 |
% |
|
|
0.7 |
% |
|
|
742,414,518 |
|
|
|
26.3 |
% |
|
|
27.8 |
% |
| 3 months to 9 April 2015 |
|
|
21,387,787 |
|
|
|
0.8 |
% |
|
|
0.8 |
% |
|
|
1,326,042,775 |
|
|
|
47.0 |
% |
|
|
49.6 |
% |
| 6 months to 9 April 2015 |
|
|
24,529,848 |
|
|
|
0.9 |
% |
|
|
0.9 |
% |
|
|
3,066,230,991 |
|
|
|
108.7 |
% |
|
|
114.7 |
% |
| 9 months to 9 April 2015 |
|
|
23,734,655 |
|
|
|
0.8 |
% |
|
|
0.9 |
% |
|
|
4,533,319,052 |
|
|
|
160.8 |
% |
|
|
169.7 |
% |
Table 12
Nokia’s trading volumes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Average daily volume |
|
|
Total volume |
|
| Nokia - Share liquidity |
|
Number of
shares |
|
|
As a % of
capital |
|
|
As a % of
free float |
|
|
Number of
shares |
|
|
As a % of
capital |
|
|
As a % of
free float |
|
| |
|
|
|
|
|
| 9 April 2015 |
|
|
10,040,167 |
|
|
|
0.3 |
% |
|
|
0.3 |
% |
|
|
10,040,167 |
|
|
|
0.3 |
% |
|
|
0.3 |
% |
| 1 month to 9 April 2015 |
|
|
12,879,011 |
|
|
|
0.4 |
% |
|
|
0.4 |
% |
|
|
270,459,228 |
|
|
|
7.4 |
% |
|
|
7.7 |
% |
| 2 months to 9 April 2015 |
|
|
12,218,364 |
|
|
|
0.3 |
% |
|
|
0.3 |
% |
|
|
500,952,905 |
|
|
|
13.6 |
% |
|
|
14.2 |
% |
| 3 months to 9 April 2015 |
|
|
14,618,742 |
|
|
|
0.4 |
% |
|
|
0.4 |
% |
|
|
906,362,011 |
|
|
|
24.5 |
% |
|
|
25.6 |
% |
| 6 months to 9 April 2015 |
|
|
17,362,457 |
|
|
|
0.5 |
% |
|
|
0.5 |
% |
|
|
2,118,219,760 |
|
|
|
56.9 |
% |
|
|
60.1 |
% |
| 9 months to 9 April 2015 |
|
|
18,189,842 |
|
|
|
0.5 |
% |
|
|
0.5 |
% |
|
|
3,419,690,233 |
|
|
|
91.7 |
% |
|
|
96.8 |
% |
Source: Bloomberg
Analysis of the
exchange ratio based on share prices
For highly liquid shares, as is the case for both Alcatel-Lucent and Nokia, the ratio implied by share prices over time
is relevant to an analysis of the proposed exchange ratio. Figure 14 focuses on the period starting at the beginning of 2014 after the first few months of implementation of the Shift plan by Alcatel-Lucent and after the rights issue carried out by
the group in November 2013. The implied ratio is calculated based on volume-weighted average share prices.
C-32
Figure 14
Trends in the implied ratio between Alcatel-Lucent’s and Nokia’s share price
N.B. Insofar as Nokia pays a dividend and Alcatel-Lucent does not, there is a difference between the ratio including and excluding
dividends. This explains why the ratio implied by the share prices fell into line with the proposed exchange ratio after the offer was announced only once Nokia’s dividend was detached.
Source: Bloomberg and Associés en Finance calculations
Reflecting
Alcatel-Lucent’s and Nokia’s volatility, the ratio implied by the share prices is also volatile, even over fairly short periods. It reached a low point of around 0.3 in the second half of October 2014 ahead of the publication of
Alcatel-Lucent’s Q3 2014 results, before picking up after this release and stabilising in a 0.49-0.52 range after both companies published their full-year 2014 results.
Table 13 shows the exchange ratios implied by the ratio between Alcatel-Lucent’s and Nokia’s share price prior to the offer. These calculations call for two
additional comments, given the numerous rumours that circulated about a link-up between the two groups and about a sale of Alcatel-Lucent’s mobile activities to Nokia. Firstly, the reference period ends on 9 April 2015, i.e. before rumours
about both companies substantially increased. On 10 April, rumours surfaced that Nokia was divesting HERE, rekindling speculation about Nokia’s desire to acquire Alcatel-Lucent’s mobile activities. These rumours gained more and more
impetus to the point where both companies published a joint press release on 14 April confirming the discussions between Nokia and Alcatel-Lucent about a possible link-up between the two groups through a public share exchange offer. The peak in
the implied ratios in Figure 14 coincides with this first press release. In addition, as stated previously, the need for consolidation in the European telecom industry and the complementary fit between Nokia and Alcatel-Lucent had long given rise to
rumours in the capital markets of a link-up between the two companies42. It is reasonable to believe that Alcatel-Lucent’s share price (and thus shareholders) had already benefited from a
speculative premium even before the proposed offer was announced, aside from the positive effects deriving from the group’s operational turnaround.
| 42 |
N.B. In September 2013, Reuters announced that Nokia was mulling over a tie-up with Alcatel-Lucent; In May 2014 there were further comments about the issue appeared in the Les Echos newspaper, later carried by
other media outlets; In December 2014 the German press reported talks about a link-up between both groups. |
C-33
Table 13
Implied ratio by comparison with listed prices prior to the offer
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Alcatel-Lucent’s
share price |
|
|
Nokia’s share
price |
|
|
Implied
exchange
ratio |
|
| Closing price on 9 April 2015 |
|
|
3.65 |
|
|
|
7.04 |
|
|
|
0.52 |
|
|
|
|
|
| |
|
Alcatel-Lucent’s
weighted
average share
price |
|
|
Nokia’s weighted
average share
price |
|
|
Implied
exchange
ratio |
|
| 1 month to 9 April 2015 |
|
|
3.57 |
|
|
|
7.06 |
|
|
|
0.51 |
|
| 2 months to 9 April 2015 |
|
|
3.52 |
|
|
|
7.01 |
|
|
|
0.50 |
|
| 3 months to 9 April 2015 |
|
|
3.30 |
|
|
|
6.85 |
|
|
|
0.48 |
|
| 6 months to 9 April 2015 |
|
|
2.83 |
|
|
|
6.56 |
|
|
|
0.43 |
|
| 9 months to 9 April 2015 |
|
|
2.74 |
|
|
|
6.43 |
|
|
|
0.43 |
|
| N.B. Nokia’s share price restated for the dividend |
|
|
|
|
|
|
|
|
|
Source: Bloomberg and Associés en Finance calculations
The offer ratio of 0.5500 shows a premium of 6% to the implied ratio based on share prices on the 9th of April 2015 and a premium between +9% and +14%, for the VWAP 1,
2 and 3 months of both shares. The exchange ratio on VWAP 6 and 9 months before the 9th of April shows a premium of +27% and +29% respectively43.
Since the public exchange offer was announced, Alcatel-Lucent’s share price has consistently stayed in line with the exchange ratio implied by the offer once
Nokia’s share traded ex-dividend (6 May 2015), with the ratio implied by share prices averaging 0.54 and fluctuating between 0.53 and 0.56. Over the period since the proposed public exchange offer was announced, the exchange ratio implied by
share prices has only very occasionally inched above 0.5500x and that was in the days that followed publication of the Q1 2015 results. Publication of both groups’ latest interim results in late July did not affect the fluctuation range for the
ratio, with the report driving up both stocks. Nokia shares gained 7.5% after Nokia Networks reported stronger-than-anticipated operating profit. Alcatel-Lucent’s share price rose 5.6% after it reported its interim results.
| |
• |
|
Valuation methods set aside |
Net book method
Calculating the book value of equity is an asset-based method predicated on historical costs that reflects only to a limited extent the future potential of the two
companies44.
| 43 |
From Nokia’s perspective, the adjustment of the conversion as per each OCEANE’s documentation entails the necessity to buy an additional number of Alcatel-Lucent shares compared to the existing number of
shares ahead of the proposed offer. This possible new number of shares created as a result of the offer would then potentially generate additional dilution. On this basis, the Nokia offer on Alcatel-Lucent shares would imply a higher premium than
the one calculated on the share price before the announcement. |
| 44 |
As a guide, net book value per share at the end of the first half of 2015 stood at €0.88 for Alcatel-Lucent and
€2.46 for Nokia respectively, implying an exchange ratio of 0.36x. Pro forma net book value per share at 30 June 2015 came to €3.86 for
the combined entity including the sale of HERE, implying an exchange ratio of 0.23 (i.e. €0.88/€3.86). |
C-34
Adjusted net book value method
The adjusted net book value method can be used to calculate a theoretical value of equity by adjusting assets and liabilities to market value. This method is
particularly suitable for holding companies, but neither Alcatel-Lucent nor Nokia are this type of company. And the value of their assets can also be adjusted by applying valuation methods based on discounted cash flows.
Dividend-based valuation
The discounted dividend model was not used
insofar as the two companies in question have pursued different dividend policies in the past – Alcatel-Lucent has not paid out any dividends since 2007, while Nokia’s dividends have been inconsistent. In place of this method, we elected
to use the DCF to equity method, which is presented below, because this takes into consideration the ability to make distributions subject to the constraint of a target leverage ratio.
Associés en Finance applied the main types of valuation
method, with adjustments to the specific case in hand. Though diversified, Alcatel-Lucent’s business portfolio is built around telecom infrastructure: there is no need to present separate valuations of its divisions, because differences in
their growth rates and margins are measured directly in the combined results at group level.
For its part, Nokia is active in three areas – Nokia Networks,
HERE and Nokia Technologies – with very different growth rates and margins. Accordingly, a valuation by individual division is presented. It is worth noting that the disposal of HERE, with an agreement being signed on 3 August (sale to an
automotive consortium consisting of Audi, BMW and Daimler for an enterprise value of €2.8 billion and net proceeds of €2.5 billion) will not
lead to the exchange ratio being adjusted, unless an exceptional dividend is paid before the offer closes. In all the following calculations, HERE is shown at this disposal value.
The valuation methods presented are summarised in Table 14.
Table 14
Summary of the valuation methods
implemented
|
|
|
|
|
| Method |
|
Implementation details |
|
Applicability of the method |
| Analysts’ price targets (for guidance purposes) |
|
Price targets for both shares, before the offer is announced |
|
x (for guidance purposes) |
|
|
|
| Discounted cash flow model |
|
- Method applied using two different approaches: DCF to firm, DCF to equity
- Calculations made using aggregate data for both groups |
|
x |
|
|
|
| Valuation based on a peer comparison |
|
- Valuation of Alcatel-Lucent calculated for the group as a whole
- Different multiples applied to Nokia Networks and Nokia Technologies, plus HERE’s disposal value |
|
x |
C-35
|
|
|
|
|
| Method |
|
Implementation details |
|
Applicability of the method |
|
|
|
| Sum-of-the-parts valuation |
|
- Alcatel-Lucent’s business divisions cover the same area of business (telecom network equipment manufacturer). At the same time, the method
cannot be applied because detailed consensus estimates are not available for Alcatel-Lucent’s business divisions - The method is suitable for application to
Nokia: * Nokia Networks included at the average valuation obtained from the discounted cash flow, peer comparison and comparable industry transaction methods
* HERE included at its disposal value * Nokia Technologies included at the value
obtained from a peer comparison |
|
x for Nokia |
|
|
|
| Valuation implied by industry transaction multiples |
|
- The comparable industry transactions method is not suitable when both groups are considered as a whole. In Alcatel-Lucent’s case, the
method cannot be applied insofar as the level of the group’s 2014 margins is not representative of its future performance45. In Nokia’s case, there are no reference transactions for a
group with an identical business portfolio. - We examined whether this method could be applied to Nokia’s business divisions individually: there
are transactions that could be used to value Nokia Networks. A direct transaction reference value now exists for HERE. Even so, the only patents-related transactions available for Nokia Technologies lack sufficient comparability, which makes this
method unsuitable |
|
Not applicable |
| 45 |
We do not present the results of the industry transaction methods separately insofar as the available data is for earnings multiples: it makes sense to use these only when the results to which these multiples are
applied can be considered to be relatively representative of future performance, and this cannot be said of Alcatel-Lucent’s 2014 results. |
C-36
| |
• |
|
Coverage of both companies by investment analysts and price targets (for guidance purposes) |
The price targets set by investment analysts are not so much valuations, as opinions. That said, Table 15 shows the price targets set by analysts for both companies
in the period between the release of both their full-year results and 9 April 2015. Both groups are widely covered (especially Nokia, which is covered by brokers in Scandinavia as well as by US and UK brokers).
Table 15
Exchange ratio implied by
investment analysts’ price targets, for indicative purposes
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Alcatel-Lucent |
|
|
Nokia |
|
|
Implied
exchange
ratio |
|
| Average price targets prior to announcement |
|
€ |
3.85 |
|
|
€ |
7.12 |
|
|
|
0.54 |
|
Source: Bloomberg consensus estimate
The
average figure of 0.54 masks substantial differences, with the exchange ratios implied by investment analysts’ price targets varying between 0.30 and 0.82.
| |
• |
|
Analysis of any recent transactions in the two groups’ capital (for reference purposes) |
Nokia did not own any Alcatel-Lucent shares prior to the submission of the draft offer document.
It is worth recalling that Alcatel-Lucent’s most recent rights issue under the Shift plan took place in November 2013. It was priced at €2.1 per share, which is significantly below the current share price.
For its part, Nokia implemented a share
repurchase plan between July 2014 and March 2015. Under this plan, it repurchased 2.46% of its capital at an average price of €6.57 per share.
| |
• |
|
Discounted cash flow method: DCF to firm and DCF to equity approaches |
To reflect
financial developments in recent years and the economic and competitive environment, projections were prepared for both Alcatel-Lucent and Nokia using principles used independently by Associés en Finance in order to apply the Trival valuation
method.
The Trival model is applied in two different ways using the same projections prepared by Associés en Finance’s investment analysts: a DCF to
equity valuation model, which takes into account projected cash flows available to shareholders after factoring in minimum net debt or cash constraints, leading to a calculation of equity value, and a DCF to firm valuation model, which incorporates
the same projected cash flows, before any financing considerations, leading to calculation of an enterprise value, then an equity value through deduction of net debt and other adjustments.
The DCF to equity and DCF to firm valuation models use the same projected cash flows and methods for estimating operating risks. The only respect in which they differ
from each other is the use they make of the figures. The market premiums resulting from these calculations are distributed by Associés en Finance to its clients on a regular basis, independently and in advance of this appraisal.
C-37
| |
• |
|
Parameters used to value the companies |
| |
• |
|
Preparation of projections |
Insofar as the business plans of both companies
are confidential given the strength of competition in the telecom infrastructure market, the valuations implemented are predicated on consensus estimates over a short-term horizon, which reflect the market’s expectations for both companies.
These market consensus estimates were compiled using individual broker forecasts for both companies, after any adjustments made to their projections following publication of the interim results. A check was also made to ensure that these forecasts
were indeed for each of the companies on a standalone basis.
For the long-term extrapolation of data, Trival method for preparing projections, as described in
Appendix 6, was used.
Our valuation was predicated on the following elements:
| |
• |
|
The medium-and long-term projections for Alcatel-Lucent’s and Nokia’s main P&L line items (sales, operating margins), were prepared taking the economic and competitive environment into account. For the
period between 2017 and 2035, our model projects an identical rate of growth for Nokia and for Alcatel-Lucent. An assumption was made that growth would peak in 2020, before dipping gradually until 2050, in line with the modelling principles used in
Trival. Margin trends were assumed to follow a similar pattern. |
| |
• |
|
Net profit is modelled based on trends in net financial expense and the tax rate. A tax rate of 25% was used for Nokia, which reflects the estimated long-term normalised tax rate provided by the company, and 30% for
Alcatel-Lucent, which is in line with the group’s main regions of activity. The tax loss carryforwards on the balance sheet are assumed to be used progressively, thereby reducing the tax rate over the first few years in the forecasting horizon
(out until 2020). Net financial expense takes into account cash projections and rate of return index to swap rates and 6-month Euribor. The cost of gross debt is estimated using both companies’ CDS over the three-month period prior to
announcement of the offer. |
| |
• |
|
The valuation model adopted is based on a scenario of investment flows remaining stable as a percentage of sales beyond 2020 and growth in the WCR being proportional to top-line growth. |
| |
• |
|
In keeping with the modelling principles used in Trival, terminal value is the residual value of equity in 2050 (DCF to equity approach) or the residual value of long-term capital in 2050 (DCF to firm approach).
|
| |
• |
|
A target leverage ratio constraint is applied in the DCF to equity model (see Appendix 6 for details of the Trival model). The composition of balance sheet
(property, plant and equipment, intangible assets, WCR), capital intensity, the nature of business activities and cyclical profile are characteristic of a business and accompanied by a normalised financial structure. Accordingly, companies such as
Alcatel-Lucent and Nokia are exposed to major technological risk, which warrants a cash, safety and flexibility buffer being maintained. Their balance sheets are also characterised by a fairly low level of property, plant and equipment, and a far
higher level of intangible assets – which are usually much harder to finance using debt. As a result, the model used in the DCF to equity approach assumes a negative leverage ratio (i.e. a cash pile) will always be maintained by applying a
target leverage ratio of -10%. This is consistent with the target leverage ratios adopted for technology companies in Trival (including for Alcatel-Lucent and Nokia, independently of the valuations presented here). A negative normalised leverage
ratio is also factored in to reflect the fact that part of the nominal cash pile shown in the financial statements is not available because it is subject to currency controls. As indicated previously, this cash cannot simply be paid out. The
normalised leverage ratio is factored in from the beginning of the period over which the consensus |
C-38
| |
estimates are extrapolated. Prior to this, the cash flows to shareholders are calculated based on the consensus dividend estimates. Next the cash flows to shareholders are determined based on the
projected operating cash flows subject to the target leverage constraints. |
| |
• |
|
For Nokia, any cash in excess of the leverage ratio of -10% in 2014 was considered to be surplus cash and treated as a financial investment immediately available to shareholders. Part of this cash pile derived from the
advance licence payment made by Microsoft in 2014. |
The risk factors used to determine the relevant discount rate for both groups were predicated on
the SWOT analysis carried out previously. They are summarised in paragraph —.
The models adopted display the average growth rates stated in Table 16.
Table 16
Growth rates adopted in the models
by comparison with Trival comparators, excluding combination-related synergies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Compound average growth rate |
|
|
|
2014/2017 |
|
|
2017/2032 |
|
|
2032/2047 |
|
| Sales |
|
Alcatel-Lucent |
|
|
5,5 |
% |
|
|
2,8 |
% |
|
|
2,4 |
% |
|
|
Nokia |
|
|
4,0 |
% |
|
|
2,8 |
% |
|
|
2,4 |
% |
|
|
Nokia + Alcatel-Lucent post-offer |
|
|
4,8 |
% |
|
|
2,8 |
% |
|
|
2,4 |
% |
|
|
Cisco/Ericsson average |
|
|
3,8 |
% |
|
|
3,8 |
% |
|
|
2,7 |
% |
| Operating profit before non-recurring items |
|
Alcatel-Lucent |
|
|
30,7 |
% |
|
|
2,5 |
% |
|
|
1,0 |
% |
|
|
Nokia |
|
|
11,5 |
% |
|
|
1,8 |
% |
|
|
1,0 |
% |
|
|
Nokia + Alcatel-Lucent post-offer |
|
|
18,1 |
% |
|
|
2,1 |
% |
|
|
1,0 |
% |
|
|
Cisco/Ericsson average |
|
|
11,9 |
% |
|
|
3,4 |
% |
|
|
1,9 |
% |
*Source: Trival data
Since Nokia has
already largely improved its operating performance, the growth anticipated by the market consensus between 2014 and 2017 is not as strong as that forecast for Alcatel-Lucent, which is still in process of realizing the benefits of its Shift plan.
The rates of growth in sales and operating profit before non-recurring items forecast for Alcatel-Lucent and Nokia are consistent with those applied in the Trival
valuation method for Cisco and Ericsson. Over the long term, the prospective growth rates for Nokia and Alcatel-Lucent (on a stand-alone basis) are slightly lower than for the two other telecom equipment groups. Cisco’s strength derives from
its substantial presence in the US market, which is sheltered from competition from Chinese equipment manufacturers, and Ericsson’s from its competitive position.
| |
• |
|
Examination of agreements related to the public exchange offer and outcome of the offer |
Mechanism accelerating the allotment of certain deferred compensation mechanisms
In keeping with the principles applied within the Alcatel-Lucent group for the implementation of deferred compensation mechanisms, certain stock options and performance
shares are currently subject to performance conditions and a condition of presence on the payroll before they are granted definitively, and then to holding requirements, once they have been granted. Specific arrangements are also provided for46 in the event of a public offer for the Company’s shares. Alcatel-Lucent’s board of
| 46 |
See Pages 225 and 226 of the 2014 registration document. |
C-39
directors decided to allow holders to monetise their stock options during the public exchange offer made by Nokia, by accelerating the definitive grant of these instruments and making them
available immediately. Alcatel-Lucent’s board of directors also decided to accelerate arrangements for the performance shares, by enabling their beneficiaries to waive their rights to receive performance shares in return for Alcatel-Lucent
shares available immediately. These accelerated arrangements will be contingent upon the success of the offer and the presence of the relevant beneficiaries on the payroll on the final day of the initial offer.
In practice, the plan is for the performance conditions to be dropped in the future and for the Alcatel-Lucent stock options and performance shares to be made available
immediately insofar as their holders agree to exercise their “at the money” stock options47 and sell the Alcatel-Lucent shares resulting from the acceleration arrangements during the
reopened offer.
What’s more, the stock option plans that were due to have been set up in 2014 but could not be set up at that date were replaced by the grant
of Alcatel-Lucent shares becoming available immediately subject to the same condition of sale during the reopened offer. This allotment will be contingent upon the success of the offer and the presence of the relevant beneficiaries on the payroll on
the final day of the initial offer.
In keeping with the changes made for the group’s employees, the vesting conditions for the deferred remuneration
mechanisms in favour of Michel Combes, Chief Executive Officer in office when the public exchange offer was announced, are to be amended as a result of the offer.
He received performance units under a deferred compensation mechanism, attributable in tranches over a three-year period, subject to attainment of annual performance
criteria and a condition that he remained in his position as Chief Executive Officer. The performance units were due to be settled in cash (payment of a sum equivalent to the value of an identical number of shares). Three performance plans were set
up (March 2013, March 2014, March 2015).
The board of directors decided at its meeting on 10 September 2015 that Michel Combes’ 2015 tranche of
performance units will vest on a pro rata basis subject to attainment of the associated performance criteria, to be assessed in 2016 once the 2015 financial year comes to an end. The maximum amount of these deferred compensation mechanisms will be €4,845,109, which is calculated based on the average opening price of Alcatel-Lucent shares in the 20 trading sessions preceding Michel Combes’ final day of activity at the group (i.e. a share
price of €3.17). This amount will be paid only in the event that the Public Exchange Offer initiated by Nokia goes ahead and may be reduced depending on the degree of attainment of the
performance criteria for the 2015 tranche.
The impact on Alcatel-Lucent’s shareholders of these various decisions related to the vesting of deferred
compensation mechanisms for all employees is measured by incorporating in the valuation all the instruments under consideration (i.e. full dilution scenario, with dilution resulting from the stock options, provided that they are “in the
money” or virtually assured for performance shares48). The impact on Alcatel-Lucent’s shareholders of the decisions related to the vesting of Michel Combes’ deferred compensation
mechanisms is measured by adding €4,845,109 to debt.
| 47 |
If Nokia holds more than 95% of Alcatel-Lucent share capital and voting rights following the first offer and implements a squeeze-out immediately thereafter, without any reopened offer, the Alcatel-Lucent stock options
which are subject to the exercise undertaking will be exercised before the squeeze-out. |
| 48 |
Subject to the beneficiaries not opting to take up the acceleration arrangements, particularly those opting to take advantage of the liquidity mechanism outlined below. The dilution would then be staggered over time.
|
C-40
Lastly, a €3.1 million payment due in one-third instalments over
three years is payable under the no-compete agreement signed by Michel Combes with Alcatel-Lucent as a result of his departure from the group following the announcement of the combination plan.
Liquidity mechanism
A liquidity mechanism is provided for holders of
the stock options and performance shares unable to tender their shares to the offer49, or for holders of “out of the money” stock options and for holders of performance shares allotted
under the 2015 plan should the liquidity of Alcatel-Lucent shares become insufficient (delisting, Nokia gains possession, directly or indirectly, of over 85% of Alcatel-Lucent shares, or daily trading volumes fall below the 5 million share
mark). In such circumstances, all the performance shares and shares created through the exercise of stock options would be converted in the future into Nokia shares based on the public exchange offer’s exchange ratio (subject to adjustments in
certain cases50).
Another consequence of the public exchange offer is that once the public exchange offer
opens, holders of the Alcatel-Lucent OCEANE bonds will have their allotment rights adjusted. This point is dealt with in section V on the OCEANE bonds.
All these
points arising from the existence of the public offer would lead to a significant increase in the fully-diluted number of Alcatel-Lucent shares by comparison with the figures stated in the intrinsic valuations on a standalone basis (see Table 17).
Preliminary agreement
Associés en Finance reviewed the
preliminary agreement signed on 15 April 2015 by both companies in connection with the draft offer and did not identify any issues likely to compromise equal treatment of the various holders of Alcatel-Lucent securities.
Other aspects related to the offer
The response document submitted by
Alcatel-Lucent indicates the implications of a change in control of the group for the due date of certain of its debts51: these change in control clauses stipulate that, in such circumstances,
Alcatel-Lucent will have to make an offer to holders of the relevant debt to buy back the bonds they hold for 101% of their nominal value plus all unpaid accrued interest. Alcatel-Lucent may also offer, in advance and on the basis of a pre-existing
agreement about the change in control, to repurchase these bonds, contingent upon completion of the change in control.
The terms and conditions of the OCEANE bonds
issued by the group will also be affected, and the changes are analysed in section V.
| 49 |
Owing to legal, tax or regulatory restrictions, governance constraints or a holding period. |
| 50 |
The customary circumstances are provided for: merger by Alcatel-Lucent, merger by Nokia, exceptional dividend paid out by Nokia or Alcatel-Lucent after the public exchange offer, including through a spin-off, other
transactions affecting the value of Nokia shares (e.g. stock split). |
| 51 |
2017 bond carrying interest at a rate of 4.625% and a nominal amount of $650 million/2020 bond carrying interest at a rate of 6.75% and a nominal amount of $1 billion/2020 bond carrying interest at a rate of
8.875% and a nominal amount of $500 million. |
C-41
| |
• |
|
Determination of the number of shares excluding offer-related effects |
The number of shares used in the calculations takes account of shares in issue at 30 June 2015 less treasury shares plus shares that may be issued when dilutive
instruments are exercised, where these are in-the-money, and performance shares. Since it is an intrinsic valuation – i.e. it does not take into consideration the effects of the public exchange offer – the Alcatel-Lucent 2019 and 2020
OCEANE bonds are not taken into account in this calculation since they are not “in-the-money” based on the conversion ratio in force prior to the public offer52. An adjustment is made to
equity and debt following exercise of the dilutive instruments.
Table 17
Number of shares used for the intrinsic valuations excluding the effects of the offer
|
|
|
|
|
| In thousands of shares |
|
Alcatel-Lucent |
|
Nokia |
| Number of shares at 30 June 2015 |
|
2,834,460 |
|
3,678,329 |
| Number of treasury shares |
|
-40,117 |
|
-54,327 |
| Number of in-the-money stock options53 |
|
59,876 |
|
5,065 |
| Number of performance shares and bonus shares |
|
29,090 |
|
15,986 |
| OCEANE and convertible bonds |
|
370,379 (2018 OCEANE) |
|
313,724 (2017 conv.) |
| Number of shares used in the calculations |
|
3,253,688 |
|
3,958,777 |
Source: Companies and Associés en Finance calculations
| |
• |
|
Adjustments used to arrive at equity value from enterprise value |
Some of the valuation methods described below (intrinsic DCF to firm approach or peer comparison) initially establish an enterprise value from which debt is deducted (or
to which the net cash is added) and to which other adjustments are made to arrive at equity value. The methods customarily used by appraisers consist in examining the cash position and balance sheet provisions and to include these provisions in the
valuation with discernment where they can be regarded as liabilities and thus as debt-equivalents. To this end, based on the year-end 2014 accounts, Associés en Finance took into account the following items in the transition from
Alcatel-Lucent’s and Nokia’s enterprise value to equity value:
| |
• |
|
Employee benefit provisions were included directly in debt, in line with Associés en Finance’s customary approach with its Trival model. The same applies to other financial assets and liabilities.
|
| |
• |
|
Provisions for warranties, provisions for loss-making contracts, provisions for commitments to suppliers, provisions for litigation. |
| |
• |
|
Minority interests are included at their balance sheet value. |
| |
• |
|
Equity affiliates and other financial assets. In Nokia’s case, any net cash in excess of 10% of equity is regarded as surplus to requirements and added to financial assets; |
| |
• |
|
Lastly, adjustments were made affecting equity and/or debt and/or the number of shares by comparison with the accounts at 31 December 2014 (payment of the 2014 dividend and first-quarter 2015 share buybacks by
Nokia, exercise of Alcatel-Lucent’s stock options). |
| 52 |
See section V and the impact of the public offer on the OCEANE bonds’ conversion ratios. |
| 53 |
The Alcatel-Lucent and Nokia stock options are taken into account when their exercise price is less than or equal to the average share price in the previous three months, i.e.
€3.21 for Alcatel-Lucent and €5.96 for Nokia. |
C-42
Overall, the total adjustments made to reflect the transition from enterprise value to equity value added €5.1 billion for Nokia and subtracted €2.0 billion for Alcatel-Lucent.
| |
• |
|
How the projected cash flows were discounted : DCF to firm and DCF to equity approaches |
| |
• |
|
Discount rate applied to projected cash flows |
In
Associés en Finance’s Trival model (DCF to equity approach, see Appendix 6), the discount rate is a function of market parameters (premiums) and specific risk and liquidity factors.
Market parameters
The market parameters used, and thus the cost of
equity, relate to a specific market environment in which discount rates have never been as low with abundant liquidity as a result of the ECB’s bold initiatives (Figure 15).
Figure 15
Required rates of return in the
equity market since 200254
Source: Trival, Associés en Finance
That said, bond yields have picked up significantly since the end of April, especially with the situation in Greece, which started to drag down the value of the equity
markets. In addition, economic concerns about China triggered a significant decline in equities from August 2015 onwards. As a baseline assumption, both companies’ valuation is predicated on the average daily premiums over the three months to
23 October 2015 and thus is supported by the still very low level of discount rates by past standards. The projections also reflect the spot rates at 23 October 2015.
The average market premiums produced by Trival over the past three months (to 23 October 2015) are as follows:
| |
• |
|
Equity market risk premium: 6.46%; |
| |
• |
|
Equity market illiquidity premium: 1.65%; |
C-43
Risk and liquidity factors specific to Alcatel-Lucent and Nokia
| |
• |
|
Risk is built into the valuation in three ways: |
| |
• |
|
The forecasting risk, a rating established based on the SWOT analysis presented above on an ascending risk scale from 1 to 9. Given the factors presented above, a forecasting risk of 7 was applied for both
Alcatel-Lucent and Nokia, as this reflects the specific characteristics and momentum of their businesses, |
| |
• |
|
The financial risk on an ascending risk scale from 1 to 555. The financial risk rating is 2 for both groups and reflects not only their current financial structure,
but also their ability to generate significant operating cash flows and to pay down their debt over the next few years. This financial risk rating was one notch higher for Alcatel-Lucent until December 2013 when it was lowered to 2 after the
financial components of the Shift plan were implemented, |
| |
• |
|
The sector risk, which is the equity beta of the benchmark index. In this case, the beta of the technology sector was applied (beta of the Technology Eurostoxx index as opposed to the broader Eurostoxx Large
index), which stood at 0.94 at 23 October 2015. |
The combination of the three risk components leads to a relative risk rating of
1.12 for both of the groups. The relative risk ratings produced by the Trival model currently range from 0.48 to 1.99, with the average relative risk rating at 1.0.
| |
• |
|
The cost of equity used in the Trival model is also a function of the size of the company’s free float: Alcatel-Lucent’s market illiquidity coefficient56
stood at 0.83 and Nokia’s at 0.75 at 23 October 2015. |
After-tax cost of equity
After applying coefficients specific to both groups and market parameters indicated above, the discount rates used were as follows:
Table 18
Average cost of equity over the
three months to 23 October 2015
|
|
|
|
|
|
|
| |
|
Market parameters (three-
month average) |
|
Alcatel-Lucent’s parameters |
|
Nokia’s parameters |
| Equity risk premium |
|
6.46% |
|
7.26% (=6.46% x 1.12) |
|
7.26% (=6.46% x 1.12) |
| Equity illiquidity premium |
|
1.65% |
|
1.36% (=1.65% x 0.83) |
|
1.24% (=1.65% x 0.75) |
| Y intercept |
|
-0.97% |
|
-0.97% |
|
-0.97% |
| After-tax cost of equity |
|
7.14% |
|
7.65% |
|
7.53% |
Calculated based on the average premiums observed over the past three months, the standalone after-tax cost of equity
came to 7.65% for Alcatel-Lucent and 7.53% for Nokia.
Weighted average cost of capital
For both companies, the long-term model takes into account positive net cash, which justifies the use of an average cost of capital equivalent to the cost of equity.
| 55 |
The risk to shareholder flows is directly related to the target level of debt/(cash). |
| 56 |
The Trival illiquidity coefficient usually reflects the size of the free float and absorbable amounts. In the case at hand, we took solely into account the free float component insofar as the absorbable amounts
calculated based on trading volumes, may be skewed by arbitrage trade during the pre-offer period. |
C-44
| |
• |
|
Results of the intrinsic standalone valuation of Alcatel-Lucent and Nokia based on the long-term projections prepared by Associés en Finance and the implied exchange ratio
resulting therefrom |
The assumptions used to calculate the free cash flows were described starting on page 30.
The projected cash flows were then discounted at the rates shown above. Our valuation produced the results shown in Table 19 based on the different discount rates
applied (spot rate at 23 October 2015, maximum rate and minimum rate since the beginning of 2015).
Table 19
Intrinsic valuation of Alcatel-Lucent and Nokia and sensitivity factors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Baseline assumption
(3-month average) |
|
|
Spot rate
at 23 October |
|
|
2015 maximum
rate (6 January) |
|
|
2015 minimum
rate (13 April) |
|
| Alcatel-Lucent’s discount rate |
|
|
7.65 |
% |
|
|
7.46 |
% |
|
|
8.44 |
% |
|
|
6.77 |
% |
| Nokia’s discount rate |
|
|
7.53 |
% |
|
|
7.31 |
% |
|
|
8.28 |
% |
|
|
6.60 |
% |
| DCF to Equity |
|
Alcatel-Lucent |
|
|
3.20 |
|
|
|
3.31 |
|
|
|
2.82 |
|
|
|
3.72 |
|
|
|
Nokia |
|
|
6.62 |
|
|
|
6.77 |
|
|
|
6.13 |
|
|
|
7.34 |
|
|
|
Exchange ratio |
|
|
0.48 |
|
|
|
0.49 |
|
|
|
0.46 |
|
|
|
0.51 |
|
|
|
Premium/discount to exchange ratio of 0.5500 |
|
|
14% |
|
|
|
13% |
|
|
|
19% |
|
|
|
8 |
% |
| DCF to firm |
|
Alcatel-Lucent |
|
|
3.78 |
|
|
|
3.89 |
|
|
|
3.39 |
|
|
|
4.31 |
|
|
|
Nokia |
|
|
7.27 |
|
|
|
7.42 |
|
|
|
6.80 |
|
|
|
7.97 |
|
|
|
Exchange ratio |
|
|
0.52 |
|
|
|
0.52 |
|
|
|
0.50 |
|
|
|
0.54 |
|
|
|
Premium/discount to exchange ratio of 0.5500 |
|
|
6% |
|
|
|
5% |
|
|
|
10% |
|
|
|
2 |
% |
It is worth noting that this valuation is based on Nokia in its 2014 configuration, i.e. including HERE. Whether or not HERE is included
in the calculations does not change the outcome insofar as Associés en Finance’s DCF valuation of HERE, prior to the announcement of the sale, was an enterprise value of
€2.8 billion, in line with the disposal value.
Premium sensitivity to Alcatel-Lucent discount rate
Associés en Finance valuation work relies on risk estimate drawn from its Trival methodology. Risk level accounted upon in Trival reflects both
companies fundamental risk appraisal. Nearly at par today, it is important to note that Alcatel-Lucent recorded for a long time a higher risk level than Nokia (see Figure 12, volatility and CDS comparison). In this respect, Table 19 discloses the
impact of a 25 or 50 basis point increase in Alcatel-Lucent’s discount rate.
C-45
Table 20
Alcatel-Lucent discount rate increase sensitivity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Baseline assumption |
|
|
Alcatel-Lucent +
0,25% |
|
|
Alcatel-Lucent +
0,50% |
|
| Alcatel-Lucent’s discount rate |
|
|
7.65 |
% |
|
|
7.90 |
% |
|
|
8.15 |
% |
| Nokia’s discount rate |
|
|
7.53 |
% |
|
|
7.53 |
% |
|
|
7.53 |
% |
| DCF to Equity |
|
Alcatel-Lucent |
|
|
3.20 |
|
|
|
3.07 |
|
|
|
2.95 |
|
|
|
Nokia |
|
|
6.62 |
|
|
|
6.62 |
|
|
|
6.62 |
|
|
|
Exchange ratio |
|
|
0.48 |
|
|
|
0.46 |
|
|
|
0.45 |
|
|
|
Premium/discount to exchange ratio of 0.5500 |
|
|
14 |
% |
|
|
18 |
% |
|
|
23 |
% |
| DCF to Firm |
|
Alcatel-Lucent |
|
|
3.78 |
|
|
|
3.65 |
|
|
|
3.53 |
|
|
|
Nokia |
|
|
7.27 |
|
|
|
7.27 |
|
|
|
7.27 |
|
|
|
Exchange ratio |
|
|
0.52 |
|
|
|
0.50 |
|
|
|
0.49 |
|
|
|
Premium/discount to exchange ratio of 0.5500 |
|
|
6 |
% |
|
|
10 |
% |
|
|
13 |
% |
| |
• |
|
Impact of how the offer is implemented |
The previous
calculations determined the implied exchange ratio between the two stocks resulting from the intrinsic standalone valuation of the two groups. Implementation of the public exchange offer entails, prior to the impact of any synergies anticipated by
both groups, a potential increase in the number of shares to be issued by Alcatel-Lucent, owing to changes in the conversion ratios of the OCEANE bonds, as described in section V.
The dilution caused by the OCEANE bonds will vary according to the level of the share price at the time of the offer. In the calculations presented above, three
assumptions are presented depending on how successful the offer for the Alcatel-Lucent 2019 and 2020 OCEANE bonds is. In all three scenarios, it is assumed that the 2018 OCEANE bonds will be converted into equity, thereby giving rise to additional
dilution linked to the offer57.
The groups will incur advisory costs as a result of the offer (€70 million to €100 million, source: F4 document filed with the SEC, factored in here based on an estimate of €85 million).
Should the offer succeed, the combined entity will have a far larger market capitalisation than
previously. In Trival, that translates into a lower discount rate, which would decline from 7.53% for Nokia prior to the impact of the offer to 7.48% for the combined entity.
These various factors would lead to the following results, adding together the projected cash flows of both companies prior to the impact of synergies. Before
synergies, the implied exchange ratios obtained using our baseline discount rate assumption range from 0.50 to 0.55, depending on the conversion rate used applied to the Alcatel-Lucent 2019 and 2020 OCEANE bonds (0%, 50% or 100%). The exchange ratio
of 0.5500 offered implies premiums of between 1% and 10% to these implied exchange ratios. These premiums are lower than in the intrinsic standalone valuations owing to the additional dilution caused by the modified OCEANE bond conversion rates.
| 57 |
See section V.A for details of the characteristics of the various OCEANE bonds. |
C-46
Table 21
Impact of the how the offer is implemented on the exchange ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
2019 and 2020 OCEANE conversion assumption |
|
| |
|
|
|
0% conversion |
|
|
50% conversion |
|
|
100% conversion |
|
| DCF to Equity |
|
Alcatel-Lucent |
|
|
3.20 |
|
|
|
3.20 |
|
|
|
3.20 |
|
|
|
Nokia/Alcatel-Lucent |
|
|
6.39 |
|
|
|
6.29 |
|
|
|
6.20 |
|
|
|
Exchange ratio |
|
|
0.50 |
|
|
|
0.51 |
|
|
|
0.52 |
|
|
|
Premium/discount to exchange ratio of 0.5500 |
|
|
10 |
% |
|
|
8 |
% |
|
|
6 |
% |
| DCF to firm |
|
Alcatel-Lucent |
|
|
3.78 |
|
|
|
3.78 |
|
|
|
3.78 |
|
|
|
Nokia/Alcatel-Lucent |
|
|
7.16 |
|
|
|
7.04 |
|
|
|
6.93 |
|
|
|
Exchange ratio |
|
|
0.53 |
|
|
|
0.54 |
|
|
|
0.55 |
|
|
|
Premium/discount to exchange ratio of 0.5500 |
|
|
4 |
% |
|
|
2 |
% |
|
|
1 |
% |
| |
• |
|
Potential effect of synergies |
Table 22 on page 31 showed the growth rates
anticipated for both groups prior to the impact of synergies, which may be harnessed by integrating Nokia and Alcatel-Lucent. The synergies estimated by the two groups consist in
€900 million in operating synergies from 2019 after taking into account €900 million in non-recurring costs, plus an estimated €200 million in financial synergies starting in 2017.
Were these synergies to be realized, it would increase
shareholders’ wealth by comparison with the situation they were in prior to the offer. The nature of the anticipated synergies – innovation capabilities enhanced by the size of R&D activities, complementary product fit facilitating the
establishment of leadership positions, savings on operating costs – means that these synergies are not attributable specifically to one particular company. For these synergies to be shared evenly, the initial exchange ratio must also be fair.
The impact of these synergies was modelled assuming that once 100% are achieved in 2019, the positive impact of operating synergies would be realized after five
years in what is a constantly evolving technological environment. Between 2015 and 2019, a gradual ramp-up in these synergies is anticipated. With the projection of different levels of synergies
(€800 million and €1.3 billion including financial synergies) and application of different discount rates (between 7% and 10%),
synergies are estimated to add between €0.4 and €0.7 to the share’s value, i.e. 6% to 11% based on the DCF to equity and 5% to 10% based
on the DCF to firm approaches, on a fully-diluted basis.
It is worth underlining that the attainment of these synergies remains subject to execution risks and
risks arising from changes in the technological and competitive environment.
A peer comparison consists in determining a company’s
value by looking at the multiples at which shares in listed companies active in the same sector or with a similar operational profile and then applying these multiples to the corresponding key P&L indicators for the company under consideration.
The relevance of this comparative method depends on whether a sample exists of similar companies in terms of their sector of activity, size and profitability and
also the stability and consistency of the margins and growth rates over the forecasting horizon (generally, forecasts are prepared for periods of two or three years).
C-47
In the case at hand, this method is applied as follows:
| |
• |
|
For Alcatel-Lucent, a single multiple is applied to the entire group, as all its activities are focused on telecom infrastructure. For Nokia, which has a more diversified business profile, it makes more sense to apply
different multiples to Nokia Networks and Nokia Technologies. HERE is included at its disposal value. |
| |
• |
|
For Alcatel-Lucent and Nokia Networks, the sample of peers used (see the “telecom infrastructure sample” heading in Table 22) includes both general and more specialised component makers, to cover a
broad spectrum of telecom infrastructure activities, since it is not possible to build a sample perfectly replicating the weighting of the various activities conducted by both groups. The sample used includes Ericsson, Cisco, Juniper, ZTE, Ciena and
Adtran. |
| |
• |
|
For Nokia Technologies, the peer sample used (see the “patent royalties” heading in Table 22) consists of companies holding major patent portfolios and generating a significant proportion of their
revenue base from licences and royalties. This includes Qualcomm, Universal Display, Tessera, Dolby, Interdigital and Rambus. |
Appendix 3 describes
more precisely the various companies included, while Table 22 presents their operational profile.
Table 22
Operational profile: margins and growth rates of companies in the sample
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Sales
2014R |
|
|
2014-2017 CAGR |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Company |
|
Country |
|
|
Sales |
|
|
EBIT |
|
|
2014R |
|
|
2015E |
|
|
2016E |
|
|
2017E |
|
| Telecom infrastructure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cisco |
|
USA |
|
|
43,566 |
|
|
|
4.1 |
% |
|
|
13.9 |
% |
|
|
22.5 |
% |
|
|
25.6 |
% |
|
|
29.3 |
% |
|
|
29.5 |
% |
| Ericsson |
|
Sweden |
|
|
24,348 |
|
|
|
4.0 |
% |
|
|
13.0 |
% |
|
|
9.3 |
% |
|
|
9.5 |
% |
|
|
10.9 |
% |
|
|
12.0 |
% |
| ZTE |
|
China |
|
|
12,084 |
|
|
|
9.0 |
% |
|
|
56.9 |
% |
|
|
2.2 |
% |
|
|
6.3 |
% |
|
|
6.6 |
% |
|
|
6.6 |
% |
| Juniper |
|
USA |
|
|
4,201 |
|
|
|
4.3 |
% |
|
|
25.3 |
% |
|
|
13.8 |
% |
|
|
23.9 |
% |
|
|
24.0 |
% |
|
|
23.9 |
% |
| Ciena |
|
USA |
|
|
2,102 |
|
|
|
2.9 |
% |
|
|
61.7 |
% |
|
|
3.4 |
% |
|
|
10.4 |
% |
|
|
11.8 |
% |
|
|
13.3 |
% |
| Adtran |
|
USA |
|
|
572 |
|
|
|
1.2 |
% |
|
|
(1.2 |
%) |
|
|
7.5 |
% |
|
|
2.3 |
% |
|
|
6.1 |
% |
|
|
7.0 |
% |
| Average, telecom infrastructure |
|
|
|
|
|
|
|
|
4.3 |
% |
|
|
28.3 |
% |
|
|
9.8 |
% |
|
|
13.0 |
% |
|
|
14.8 |
% |
|
|
15.4 |
% |
| Median, telecom infrastructure |
|
|
|
|
|
|
|
|
4.1 |
% |
|
|
19.6 |
% |
|
|
8.4 |
% |
|
|
9.9 |
% |
|
|
11.4 |
% |
|
|
12.7 |
% |
|
|
|
|
|
|
|
|
|
| Patent royalties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Qualcomm |
|
USA |
|
|
23,721 |
|
|
|
(2.0 |
%) |
|
|
4.7 |
% |
|
|
31.0 |
% |
|
|
33.4 |
% |
|
|
35.1 |
% |
|
|
37.7 |
% |
| Dolby |
|
USA |
|
|
873 |
|
|
|
4.2 |
% |
|
|
1.4 |
% |
|
|
27.0 |
% |
|
|
21.8 |
% |
|
|
22.4 |
% |
|
|
24.9 |
% |
| Universal Display |
|
USA |
|
|
173 |
|
|
|
19.8 |
% |
|
|
44.3 |
% |
|
|
30.7 |
% |
|
|
27.8 |
% |
|
|
40.3 |
% |
|
|
53.7 |
% |
| InterDigital |
|
USA |
|
|
378 |
|
|
|
(0.5 |
%) |
|
|
(2.7 |
%) |
|
|
40.6 |
% |
|
|
40.8 |
% |
|
|
37.5 |
% |
|
|
na |
|
| Tessera |
|
USA |
|
|
253 |
|
|
|
1.8 |
% |
|
|
(4.6 |
%) |
|
|
64.7 |
% |
|
|
57.7 |
% |
|
|
51.2 |
% |
|
|
na |
|
| Rambus |
|
USA |
|
|
269 |
|
|
|
1.5 |
% |
|
|
na |
|
|
|
23.8 |
% |
|
|
37.9 |
% |
|
|
39.1 |
% |
|
|
na |
|
| Average, Patent royalties |
|
|
|
|
|
|
|
|
4.1 |
% |
|
|
8.6 |
% |
|
|
36.3 |
% |
|
|
36.6 |
% |
|
|
37.6 |
% |
|
|
38.8 |
% |
| Media, Patent royalties |
|
|
|
|
|
|
|
|
1.6 |
% |
|
|
1.4 |
% |
|
|
30.8 |
% |
|
|
35.7 |
% |
|
|
38.3 |
% |
|
|
37.7 |
% |
Sources: Companies, Capital IQ/Notes: CAGR: compound annual growth rate/Financial data for the calendar year ending on 31 Dec.
The peer group multiples are presented in Table 23 for the various samples used for the divisions. The multiples are calculated using the volume-weighted
average prices over a month to 23 October 2015. Given the downturn in the capital markets since August 2015, the multiples were also examined based
C-48
on the average share price over the three-month period to 23 October 2015. The multiples used are EBIT multiples58. To make this clearer,
only the details of the calculations of average prices over one month are presented.
Table 23
Multiples based on 1-month average share prices to 23 October 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Company |
|
Mkt cap. |
|
|
Net debt |
|
|
Enterprise
value |
|
|
EV/EBIT |
|
| |
|
|
|
2014R |
|
|
2015E |
|
|
2016E |
|
|
2017E |
|
| Telecom infrastructure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cisco |
|
|
125,433 |
|
|
|
(31,835 |
) |
|
|
93,082 |
|
|
|
9.7x |
|
|
|
7.9x |
|
|
|
6.3x |
|
|
|
5.8x |
|
| Ericsson |
|
|
28,855 |
|
|
|
(2,751 |
) |
|
|
27,477 |
|
|
|
11.1x |
|
|
|
10.6x |
|
|
|
9.1x |
|
|
|
7.8x |
|
| ZTE |
|
|
10,210 |
|
|
|
924 |
|
|
|
11,339 |
|
|
|
ns |
|
|
|
14.3x |
|
|
|
12.3x |
|
|
|
11.1x |
|
| Juniper |
|
|
9,981 |
|
|
|
(32 |
) |
|
|
9,950 |
|
|
|
16.2x |
|
|
|
8.8x |
|
|
|
8.2x |
|
|
|
7.5x |
|
| Ciena |
|
|
2,692 |
|
|
|
406 |
|
|
|
3,098 |
|
|
|
na |
|
|
|
13.2x |
|
|
|
9.5x |
|
|
|
8.6x |
|
| Adtran |
|
|
675 |
|
|
|
(88 |
) |
|
|
593 |
|
|
|
14.0x |
|
|
|
na |
|
|
|
15.6x |
|
|
|
10.8x |
|
| Average, telecom infrastructure |
|
|
29,641 |
|
|
|
(5,563 |
) |
|
|
24,256 |
|
|
|
12.8x |
|
|
|
10.9x |
|
|
|
10.2x |
|
|
|
8.6x |
|
| Median, telecom infrastructure |
|
|
10,096 |
|
|
|
(60 |
) |
|
|
10,644 |
|
|
|
12.6x |
|
|
|
10.6x |
|
|
|
9.3x |
|
|
|
8.2x |
|
|
|
|
|
|
|
|
|
| Patent royalties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Qualcomm |
|
|
80,677 |
|
|
|
(9,459 |
) |
|
|
71,213 |
|
|
|
8.9x |
|
|
|
8.9x |
|
|
|
9.0x |
|
|
|
8.3x |
|
| Dolby |
|
|
3,156 |
|
|
|
(609 |
) |
|
|
2,555 |
|
|
|
10.5x |
|
|
|
12.9x |
|
|
|
11.0x |
|
|
|
8.4x |
|
| Universal Display |
|
|
1,511 |
|
|
|
(323 |
) |
|
|
1,194 |
|
|
|
23.6x |
|
|
|
ns |
|
|
|
11.6x |
|
|
|
6.3x |
|
| InterDigital |
|
|
1,630 |
|
|
|
(393 |
) |
|
|
1,245 |
|
|
|
7.8x |
|
|
|
9.1x |
|
|
|
10.5x |
|
|
|
na |
|
| Tessera |
|
|
1,563 |
|
|
|
(392 |
) |
|
|
1,171 |
|
|
|
7.1x |
|
|
|
8.4x |
|
|
|
9.8x |
|
|
|
na |
|
| Rambus |
|
|
1,205 |
|
|
|
(186 |
) |
|
|
1,019 |
|
|
|
16.7x |
|
|
|
9.5x |
|
|
|
8.5x |
|
|
|
na |
|
| Average, Patent royalties |
|
|
14,957 |
|
|
|
(1,894 |
) |
|
|
13,066 |
|
|
|
12.4x |
|
|
|
9.8x |
|
|
|
10.1x |
|
|
|
7.7x |
|
| Media, Patent royalties |
|
|
1,597 |
|
|
|
(392 |
) |
|
|
1,219 |
|
|
|
9.7x |
|
|
|
9.1x |
|
|
|
10.1x |
|
|
|
7.7x |
|
Sources: Companies, Capital IQ/Notes: financial data for the calendar year to 31 December; the multiples shown take into account the
debt forecasts for each period under consideration
Two methods are used to assess Nokia’s corporate overheads: the first is predicated on consensus
financial projections compiled by Capital IQ, to which a multiple is applied based on a valuation-based weighting for each segment (including HERE, which is taken into account at its disposal value). Based on 1-month average share prices, this
weighted multiple stands at 11.5x for 2015, 10.8x for 2016 and 9.0x for 2017. The other method consists in estimating corporate overheads using a normalised figure of 0.5% of sales and then capitalising them at the group’s cost of capital as
determined previously. These two methods both suggest that €1.0 billion should be deducted from the combined enterprise value of Nokia’s divisions.
| 58 |
We decided against using sales multiples given the differences in margins between the various companies. Neither did we use EBITDA multiples, as these do not take into account the differences in how R&D expenses are
accounted for. P/E multiples are skewed by the differences in companies’ financial structures. |
C-49
Table 24
Results of the peer comparison (based on 1-month average share prices)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Value per share in € or in € m |
|
2015E |
|
|
2016E |
|
|
2017E |
|
|
Average |
|
| Nokia Netw orks (EV) |
|
|
12 602 |
|
|
|
12 039 |
|
|
|
10 138 |
|
|
|
11 593 |
|
| HERE (transaction value) |
|
|
|
|
|
|
2 800 |
|
|
|
|
|
|
|
2 800 |
|
| Nokia Technologies (EV) |
|
|
5 371 |
|
|
|
6 074 |
|
|
|
5 367 |
|
|
|
5 604 |
|
| Corporate overheads |
|
|
|
|
|
|
-1 026 |
|
|
|
|
|
|
|
-1 026 |
|
| Nokia (enterprise value) |
|
|
19 747 |
|
|
|
19 888 |
|
|
|
17 279 |
|
|
|
18 971 |
|
| Nokia (value per share) |
|
€ |
6,30 |
|
|
€ |
6,47 |
|
|
€ |
5,82 |
|
|
€ |
6,20 |
|
|
|
|
|
|
| Value per share in € or in € m |
|
2015E |
|
|
2016E |
|
|
2017E |
|
|
Average |
|
| Alcatel-Lucent (EV) |
|
|
10 728 |
|
|
|
12 253 |
|
|
|
11 970 |
|
|
|
11 650 |
|
| Alcatel-Lucent (value per share) |
|
€ |
2,64 |
|
|
€ |
3,28 |
|
|
€ |
3,41 |
|
|
€ |
3,11 |
|
After adjustments for the forecast debt, the results suggest an exchange ratio of 0.50 (also 0.50 based on multiples derived from
three-month average share prices). The offer’s exchange ratio of 0.5500 indicates a premium of 11% to this implied exchange ratio, in a range of -5% to +31% (Table 25). The highest premiums derive from calculations for 2015, with
Alcatel-Lucent’s valuation still dragged down by its lower margins.
Table 25
Implied exchange ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
2015E |
|
|
2016E |
|
|
2017E |
|
|
Average |
|
| 1-month average price |
|
Value per Alcatel-Lucent share |
|
€ |
2.64 |
|
|
€ |
3.28 |
|
|
€ |
3.41 |
|
|
€ |
3.11 |
|
|
|
Value per Nokia share |
|
€ |
6.30 |
|
|
€ |
6.47 |
|
|
€ |
5.82 |
|
|
€ |
6.20 |
|
|
|
Exchange ratio |
|
|
0.42 |
|
|
|
0.51 |
|
|
|
0.59 |
|
|
|
0.50 |
|
|
|
Premium/discount to exchange ratio of 0.5500 |
|
|
31 |
% |
|
|
9 |
% |
|
|
-6 |
% |
|
|
10 |
% |
| 3-month average price |
|
Value per Alcatel-Lucent share |
|
€ |
2.67 |
|
|
€ |
3.34 |
|
|
€ |
3.47 |
|
|
€ |
3.16 |
|
|
|
Value per Nokia share |
|
€ |
6.35 |
|
|
€ |
6.58 |
|
|
€ |
5.91 |
|
|
€ |
6.28 |
|
|
|
Exchange ratio |
|
|
0.42 |
|
|
|
0.51 |
|
|
|
0.59 |
|
|
|
0.50 |
|
|
|
Premium/discount to exchange ratio of 0.5500 |
|
|
31 |
% |
|
|
8 |
% |
|
|
-6 |
% |
|
|
9 |
% |
| |
• |
|
Comparable industry transaction method (considered, but not used) |
The
comparable industry transaction method involves looking at the multiples implied by recent mergers and acquisitions considered to be comparable in terms of the business profile and the deal, geographical and temporal environment, with financial
terms that were made public. This method is often complicated by a lack of reliable data concerning the multiples or the limited number of recent transactions involving genuinely comparable companies.
In the case at hand, as indicated in Table 14, the comparable industry transaction method of valuation is not relevant considering both groups as a whole:
Alcatel-Lucent’s 2014 margins are not representative of its future performance, and applying transaction multiples to them would produce a very low value for the Franco-US group, while it does not seem appropriate to apply a single multiple to
the entire Nokia group.
In addition, the comparable industry transaction method cannot be applied directly to analyse the proposed exchange ratio insofar as deals
in the sector are usually paid for in cash (public tender offer),
C-50
whereby shareholders in the target company receive consideration for the potential synergies. As such, the transaction multiples are not the same. Since the deal under consideration is a public
exchange offer, whereby the shareholders are given the option of maintaining an interest in the group’s future performance and thereby benefiting as synergies are achieved, these transactions do not provide a very relevant point of reference.
Accordingly, the comparable industry transaction method was not used to calculate the exchange ratio. Even so, it is used on a divisional basis for Nokia as part
of the sum-of-the-parts valuation method, presented for indicative purposes only.
| |
• |
|
Sum-of-the-parts valuation (for indicative purposes only) |
The
sum-of-the-parts valuation is suitable for Nokia, but is not appropriate for use with Alcatel-Lucent, as its businesses are all concentrated in the same sector of activity (i.e. telecom infrastructure). In addition, there are no market consensus
estimates available for the core networking and access businesses.
For Nokia, the work performed here involves valuing its various divisions individually using the
appropriate methods.
For HERE, disposal value is used, while for Nokia Technologies, a valuation based on a peer comparison appears more pertinent.
The monetisation of patents is highly unpredictable, making it very hard to model using the discounted cash flow model. The comparable industry transaction method does not appear to be suitable for Nokia Technologies, either, since the deals seen
for patent portfolios produce a broad array of values, with the heterogeneous nature of these patent portfolios accounting for the low degree of comparability.
Three methods are used for Nokia Networks – the discounted cash flow model, a peer comparison, the results of which have already been presented, and the
comparable industry transaction method.
Only a DCF to firm approach to the discounted cash flows model is used for Nokia Networks since no information is available
about the division’s financial structure. This would have been required to apply the DCF to equity approach. The discount rate used is very slightly higher than that adopted for the Nokia group overall (7.60% compared with 7.53%) owing to the
smaller size of its assets. Nokia Networks’ growth rate and margins are slightly lower than those for the Nokia group at large, since its main growth driver is the monetisation of Nokia Technologies’ patents, a high-margin segment. Lastly,
Nokia Networks accounts for the bulk of the group’s investments, with those made by the other businesses consisting almost exclusively of R&D costs expensed directly. This method yields an enterprise value figure of €14.6 billion for Nokia Networks.
The comparable industry transaction method was also used for Nokia Networks.
The multiples derived from comparable deals since 2010, details of which are provided in Appendix 4, vary considerably, irrespective of the period over which they were observed, prompting the use of the median rather than the average value in
calculations. Since divisional EBITDA figures were not available, EBIT multiples were used. The median EBIT multiple since 2010 stands at 16.1x. Applied to Nokia Networks’ 2014 EBIT, this multiple produces an enterprise value estimate of €18.751 billion for the division.
Just as with a peer comparison, corporate overheads were deducted from the
combined valuation of Nokia’s divisions.
C-51
Table 26
Sum-of-the-parts valuation of Nokia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Value per share in € or in € m |
|
DCF to firm |
|
|
Peer comparison
(1-month and 3-
month) |
|
|
Transaction
multiples |
|
|
Average |
|
| Nokia Networks |
|
|
14 595 |
|
|
|
11 674 |
|
|
|
18 751 |
|
|
|
15 007 |
|
| HERE (transaction value) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 800 |
|
| Nokia Technologies |
|
|
|
|
|
|
5 696 |
|
|
|
|
|
|
|
5 696 |
|
| Corporate overheads |
|
|
|
|
|
|
-1 031 |
|
|
|
|
|
|
|
-1 031 |
|
| Nokia (enterprise value) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 471 |
|
| Nokia (value per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
€ |
6,97 |
|
The decisions taken on how to apply the method tend to drive up Nokia’s valuation (with the inclusion of transaction values). This
valuation is presented here for indicative purposes only since it can be applied solely to Nokia. The average valuation obtained falls within the range of the others arrived at for Nokia.
| |
• |
|
Summary of the exchange ratios obtained |
Table 27
Summary of the exchange ratios obtained
|
|
|
|
|
|
|
|
|
| Value per share in € or exchange
ratio |
|
Ratios implied by prices |
|
DCF (intrinsic value) |
|
Peer comparison |
| |
Reference period: 1 month,
2 months, 3 months, spot
before announcement |
|
Baseline values |
|
Baseline values |
| |
|
To equity |
|
To firm |
|
(1-month and 3-month average) |
| Alcatel-Lucent |
|
|
|
€3.20 |
|
€3.78 |
|
€3.13 |
| Nokia |
|
|
|
€6.62 |
|
€7.27 |
|
€6.24 |
| Implied exchange ratio |
|
0.48 to 0.52 |
|
0.48 |
|
0.52 |
|
0.50 |
| Premium/discount to exchange ratio of 0.5500 |
|
6% to 14% |
|
14% |
|
6% |
|
10% |
|
|
|
|
| |
|
Reference period: 6 and 9
months prior to
announcement |
|
Highest and lowest
discount rates since
January |
|
Extreme values |
| Implied exchange ratio |
|
0.43 |
|
0.46 to 0.54 |
|
0,42 à 0,59 |
| Premium/discount to exchange ratio of 0.5500 |
|
27% to 29% |
|
2% to 19% |
|
-6% à 31% |
The above calculations are presented without taking into account the impact of the dilution generated by the change in the arrangements
for the exercise of the OCEANE bonds arising from the public tender offer, which trims the offer’s premium to between +1% and +10% in the baseline DCF calculations (vs. 6% to 14% in the baseline calculations above).
| • |
|
Analysis of the work performed by the sponsoring bank on assessing the exchange ratio between the two shares |
As is customary, Société
Générale CIB, the bank sponsoring the offer, predicates its assessment of the exchange ratio on a multi-criteria valuation.
C-52
Methods set aside: the methods discarded by the sponsoring bank in this multi-criteria approach do not call
for any particular comments, since Associés en Finance largely shares Société Générale’s conclusions concerning the lack of suitability of these methods. For example, both Associés en Finance and the
sponsoring bank set aside the net book value, adjusted net book value and discounted dividend model methods. Associés en Finance replaced this method with a discounted cash flow model subject to a leverage ratio constraint (DCF to equity
approach). Lastly, unlike Société Générale, Associés en Finance presented valuations implied by transactions observed in the sector, while concluding that this method was not suitable in this particular case.
Methods used by Société Générale
The
multi-criteria valuation presented by the sponsoring bank is based on four approaches: share price analysis, investment analysts’ price targets, a peer comparison and a discounted cash flow (DCF) model. These approaches are similar to those
applied by Associés en Finance, yet differ in terms of certain application details and the parameters underpinning the valuation methods.
Aside from the
application parameters described below, the approach adopted by Société Générale differs from Associés en Finance’s in terms of its selection of certain reference periods:
| |
• |
|
For methods linked purely to the equity market (analysis of the ratio implied by share prices, investment analysts’ price targets), both the sponsoring bank and Associés en Finance present the results prior
to announcement of the offer. The aim of this to eliminate the influence over prices caused by the offer’s announcement. |
| |
• |
|
Conversely, Associés en Finance decided to consider the latest projections for both groups when using methods incorporating forecasts (peer comparison, discounted cash flow model). Specifically, it applied
estimates prepared after publication of their interim results, while making sure to check that these estimates were indeed for each of the groups on a standalone basis. An examination of the fairness of the offer needs to ensure that use of current
projections for both groups yields implied exchange ratios that back up the offer’s exchange ratio. This approach helps to reflect exactly what Alcatel-Lucent minority shareholders are giving up if they tender their shares to the offer
(Alcatel-Lucent’s intrinsic value is a function of its current prospects). In return for giving these up, they receive Nokia shares, the intrinsic value of which is also a function of the group’s current prospects. In its analysis,
Société Générale CIB used the Market Consensus as it was at 9 April 2015 before the offer was announced. These two approaches remain consistent insofar as the main financial reports by both companies after the offer
was announced (interim results) did not produce a significant change in the relative size of both groups. |
Another difference on a related point is
worth highlighting. With the sponsoring bank conducting its valuation at 9 April 2015, it valued HERE at this same date, whereas Associés en Finance included HERE at its disposal value based on the deal announced after 9 April 2015.
| |
• |
|
Evaluation of the exchange ratio by the sponsoring bank and comparison with Associés en Finance’s analysis |
| |
• |
|
Analysis of the exchange ratio based on pre-offer share prices |
Like
Associés en Finance, Société Générale presented an analysis of the exchange ratio implied by share prices at 9 April 2015, which is before rumours of a transaction between the groups surfaced. Results of the
analysis performed by the sponsoring bank show a range for the implied exchange ratio of between 0.4226 and 0.5084 depending on the periods under consideration (up to 12 months prior to 9 April 2015). Associés en Finance arrived at a
range of between 0.43 and 0.52 over a shorter
C-53
timespan (9 months), adjusted for the impact of Nokia’s dividend (€0.14, since the public exchange offer explicitly stipulates that it
is for Nokia shares after the 2014 dividend has been paid).
| |
• |
|
Exchange ratio implied by brokers’ price targets before the offer was announced |
On average, the results presented by Société Générale yield an implied exchange ratio of 0.5395, which is identical to that arrived at by
Associés en Finance for indicative purposes. The range presented by the bank is also very broad (between 0.2976 and 0.8182).
| |
• |
|
Details of the transition between enterprise value and equity value |
The main
differences arising in the adjustments made for the transition from enterprise value to equity value by the sponsoring bank and Associés en Finance’s calculations are as follows:
| |
• |
|
For Nokia, Associés en Finance applies an adjustment to net cash of €5.1 billion, whereas that applied by Société Générale
stands at €5.5 billion. This difference is attributable to the post-2014 close changes taken into account by Associés en Finance (mainly the
€512 million dividend payment after the offer was announced). |
| |
• |
|
For Alcatel-Lucent, the difference between adjustments made for the transition from enterprise value to equity (€1.1 billion applied by Société
Générale, €2.0 billion by Associés en Finance) lies principally in the difference in how pension liabilities net of taxes are handled. Société
Générale uses the difference between the market value of invested funds (€30.2 billion) and value of its liabilities
(€31.6 billion), adjusted for tax effects, whereas Associés en Finance uses the entire provision for pension liabilities recorded on the balance sheet (€2.5 billion, including the effect of surpluses not recognised for accounting purposes), adjusted for tax effects. |
| |
• |
|
Both Associés en Finance and the sponsoring bank excluded Alcatel-Lucent’s 2018 OCEANE bonds and Nokia’s 2017 convertible bond from the reference debt, since these two financial instruments are
“in-the-money”. These restatements are made to reflect the increase in the number of shares taken into account in the valuation. Both Associés en Finance and the sponsoring bank account an amount of €173 million in first-quarter 2015 related to share buybacks by Nokia |
The number of shares used
by Société Générale in its calculations stands at 3,949,523 for Nokia and 3,214,067 for Alcatel-Lucent (compared with 3,958,777 and 3,253,688 in the calculations submitted by Associés en Finance). These
fairly minor differences arise for two main reasons. Firstly, the reference date used is not the same (most recent data available used by Associés en Finance, year-end 2014 financial documents by Société Générale).
Secondly, stock options were handled differently. Société Générale uses the treasury stock method, which assumes that the company uses the funds received when stock options are exercised to buy back a portion of its own
shares in the market. Meanwhile, Associés en Finance’s approach is to consider the total dilution (how many new shares would be created in total through the exercise of the stock options and the corresponding impact on equity and debt).
Using one or other of the methods has only a marginal impact on the results obtained59.
| 59 |
For illustrative purposes, the impact on Alcatel-Lucent’s DCF valuation submitted by Associés en Finance would be 0.2% if it were calculated handling stock options under the treasury stock method.
|
C-54
| |
• |
|
Exchange ratio implied by peer comparison valuations |
The sponsoring
bank’s approach to peer comparisons differs from Associés en Finance’s in certain respects:
| |
• |
|
The reference date for the calculations: this impacts both companies’ projections and also the levels of the peer group’s multiples, since the equity markets have lost significant ground since April 2015 (the
Euro Stoxx index declined 8% between 9 April 2015 and 23 October 2015). Even so, the overall direction of multiples affected both Alcatel-Lucent and Nokia. |
| |
• |
|
The composition of the telecom networks sample: both Associés en Finance and Société Générale consider that Alcatel-Lucent’s two major divisions both fall broadly within the field
of telecom equipment and are thus valued together60. The Nokia Networks division also operates in the same area. The samples used by the sponsoring bank differ slightly from that submitted by
Associés en Finance: Associés en Finance decided to build a single sample (Cisco, Ericsson, ZTE, Juniper, Ciena and Adtran) for Alcatel-Lucent and Nokia Networks to cover the entire spectrum of equipment manufacturers, given the
absence of any companies sufficiently comparable in terms of their business activities, margins, growth and size to Alcatel-Lucent’s and Nokia Networks’ specific profile. Société Générale elected to present a
different sample for each company: Cisco, Ericsson and ZTE for Nokia Networks (companies also used by Associés en Finance) and the same sample plus Juniper and Ciena for Alcatel-Lucent (companies also used by Associés en Finance).
Société Générale did not include Adtran (equipment maker specialised in fixed networks, which Associés en Finance adds in for the aforementioned purpose of covering the full span of the telecom equipment sector).
Lastly, Société Générale includes Alcatel-Lucent in its peer group for Nokia Networks, and includes Nokia in the peer group applied for Alcatel-Lucent. Associés en Finance cannot take the same approach, as it works
to a date after the offer was announced at a time when the respective share price of both companies and thus their multiples were influenced by the very existence of the offer. The difference in the sample used by Société
Générale for Alcatel-Lucent and for Nokia Networks does not cause the respective valuations to be skewed since the average multiples arrived at are identical for both companies. |
| |
• |
|
How HERE is handled: Associés en Finance included HERE at the disposal value announced, which is akin to treating HERE as a cash equivalent, while Société Générale presents a valuation
based on the multiples observed for its peers Tom Tom and Garmin, two companies specialised, like HERE, in GPS navigation systems. |
| |
• |
|
The peers identified for Nokia Technologies: like Associés en Finance, the sponsoring bank chose companies focused primarily on exploiting their technological skills and expertise to earn licensing revenues. The
samples selected are very similar: Dolby Laboratories, InterDigital, Qualcomm, Rambus and Tessera by Société Générale, while Associés en Finance included Universal Display in addition to these five companies.
|
| |
• |
|
The handling of unallocated expenses or corporate costs: unlike Associés en Finance, Société Générale did not isolate corporate costs but assigned them to Nokia Networks, the
group’s largest revenue contributor, based on the difference between overall operating profit and the operating profit projected for HERE and Nokia Technologies. |
| |
• |
|
The adjustments presented above for the transition between enterprise value and equity value, and the number of shares taken into account. |
| 60 |
Associés en Finance and Société Générale both make the observation that the lack of forecasts for Alcatel-Lucent’s divisions mean that Alcatel-Lucent’s Core Networking and
Access divisions cannot be valued separately. |
C-55
To sum up, notwithstanding the differences in the parameters applied, the calculations made by Associés en Finance
and by Société Générale yield similar implied exchange ratios: 0.4725 to 0.4900 for the sponsoring bank, and an average of 0.50 for Associés en Finance.
| |
• |
|
Exchange ratio implied by DCF valuations |
The main principles underpinning the
sponsoring bank’s approach to the discounted cash flow model were as follows:
| |
• |
|
Owing to the confidentiality of the business plans, the estimates used for the short term (2015 and 2016) were those based on the Market Consensus. Associés en Finance adopted the same principle, except that the
reference dates used are not the same (the latest projections available in Associés en Finance’s DCF valuation, early April 2015 forecasts in Société Générale’s analysis); |
| |
• |
|
The projections for the 2017 to 2020 period are extrapolated based on the 2016 forecasts out to 2020 using the normalised levels resulting from the Market Consensus; |
| |
• |
|
The tax rates adopted until 2020 are 24% for Nokia and 12% for Alcatel-Lucent, taking into account the geographical sales mix and an adjustment for the use of tax loss carryforwards; |
| |
• |
|
From 2020 onwards, terminal value incorporates the following parameters: a normalised EBIT margin of 11.3% for Nokia and 8% for Alcatel-Lucent, a perpetual growth rate of 2.8% and 2% for both companies respectively,
respective tax rates of 24% and 29%, capital expenditure equal to depreciation and amortisation and, lastly, a WCR increasing in proportion to the growth in sales. |
Even though Associés en Finance also uses Market Consensus forecasts for the short term, it does not apply the same methodology insofar as it extrapolates the
projections for the main P&L items over the very long term (2050) at conservative levels consistent with sector trends. The methodology used by Associés en Finance, in keeping with the principles of its Trival model, cannot therefore
be compared line by line with the normalised figures used from 2020 onwards by the sponsoring bank.
Even so, it is worth highlighting the following key points:
| |
• |
|
The long-term tax rates applied by Associés en Finance (25% for Nokia and 30% for Alcatel-Lucent) differ only very slightly from those applied by Société Générale (24% and 29%
respectively). |
| |
• |
|
In addition to the short-term data derived from the Market Consensus (summarised between 2014 and 2017 in Table 16), Associés en Finance projects still significant growth in sales and margins out to 2020 against
the backdrop of the dramatic surge in data traffic underpinning telecom equipment makers’ business trends. As a result, the projections adopted by Associés en Finance in 2020 are significantly higher than those used by
Société Générale (the operating profit estimates for Nokia and Alcatel-Lucent are some 16% higher than those adopted by Société Générale for 2020). |
| |
• |
|
Conversely, mirroring the approach taken by all the companies tracked in the Trival model, Associés en Finance projects a gradual slowdown in growth rates and margins to long-term levels below the normalised
level presented by Société Générale (the margin projected in 2050 is 7.4% for Alcatel-Lucent and 10% for Nokia, compared with normalised margins of 8% and 11.3% respectively in Société
Générale’s projections). |
| |
• |
|
Lastly, the discount rates adopted by the sponsoring bank and Associés en Finance are not the same. Société Générale used a
discount rate of 8.6% for Nokia and 9.4% for Alcatel-Lucent. These rates are obtained by calculating an average for each of the companies – firstly |
C-56
| |
of the WACC rates derived from brokers’ research, and secondly of a calculation taking into account the average beta calculated by reference to peers applied to market parameters61 and assuming zero debt. The calculations presented by Associés en Finance are predicated on its Trival valuation model and are predicated on lower discount rates (7.53% for Nokia and 7.65%
for Alcatel-Lucent), but these are applied to average forecasts that are also lower, in line with the aforementioned conservatism principle adopted in Trival. |
To conclude, the results presented by Associés en Finance and Société Générale, though prepared at different dates and applying
different parameters in the discounted cash flow models, do not diverge in terms of the relative size of the two groups and the exchange ratio that these results imply (the implied exchange ratio stands at 0.5114 in Société
Générale analysis versus 0.52 in Associés en Finance analysis, which means that the offer’s exchange ratio of 0.5500 stands at a premium of 6% to 8% to this figure).
Lastly, Associés en Finance also included a DCF to equity approach to the discounted cash flow model, which applies a debt constraint. The results yield an
exchange ratio of 0.48 between Alcatel-Lucent and Nokia, implying that the offer’s exchange ratio provides a 14% premium.
| |
• |
|
Comparison of the results of the analysis by the sponsoring bank with that prepared by Associés en Finance |
The results obtained by the sponsoring bank are compared with those arrived at by Associés en Finance in Table 28.
Table 28
Comparison of the results produced
by Associés en Finance and the sponsoring bank
|
|
|
|
|
| Method |
|
Associés en Finance: premium
(discount) implied by the ratio |
|
Sponsoring bank: premium
(discount) implied by the
ratio |
|
|
|
| Analysis of the ratio implied by market share prices |
|
Premium between +6% and +29% depending on the reference period (spot at 9 April 2015, 1, 2, 3, 6, 9 months) |
|
Premium between +8.2% and +30.1% depending on the reference period (spot at 9 April 2015, 1, 3, 6, 12 months) |
|
|
|
| Ratios implied by analyst target prices |
|
For information only |
|
1.9% premium |
|
|
|
| DCF to firm |
|
6% premium to central value |
|
7.5% premium |
|
|
|
| DCF to equity |
|
14% premium to central value |
|
Method not used |
|
|
|
| Peer-group multiples |
|
10% premium to central value |
|
Premium between 12.2% and 16.4% |
| • |
|
Analysis of the offer for the OCEANE bonds |
The calculations below are based
upon the indicative timetable for the offer.
Under the Shift plan with its debt restructuring program, Alcatel-Lucent has raised the bulk of its financing in euros
since 2013 by issuing bonds with conversion and/or exchange options for new or existing ordinary shares (hereinafter the “OCEANE bonds”). The public exchange offer launched by Nokia covers Alcatel-Lucent’s shares and also the
OCEANE bonds based on an exchange ratio of 0.6930 Nokia shares for every Alcatel-Lucent 2018 OCEANE bond, 0.7040 Nokia shares for every
| 61 |
The market premiums used are those calculated by Société Générale. |
C-57
Alcatel-Lucent 2019 OCEANE bond and 0.7040 Nokia shares for every Alcatel-Lucent 2020 OCEANE bond tendered. It is the first time ever in France that a public exchange offer on OCEANE, complex
financial derivative, is implemented. Associés en Finance’s task is to confirm the fairness of this specific part of the offer and to ensure that shareholders and bondholders are treated equally.
| |
• |
|
Characteristics of the OCEANE bonds and impact on the allotment ratio |
On the
day the transaction was announced, three types of OCEANE bonds were in issue, and their main features are summarised in Table 29.
Table 29
Main characteristics of the OCEANE bonds at 31 December 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
OCEANE 2018 |
|
|
OCEANE 2019 |
|
|
OCEANE 2020 |
|
| Date of issue |
|
|
3/7/13 |
|
|
|
10/6/14 |
|
|
|
10/6/14 |
|
| Date of maturity |
|
|
1/7/18 |
|
|
|
01/30/2019 |
|
|
|
01/30/2020 |
|
| Original maturity in years |
|
|
5.00 |
|
|
|
4.64 |
|
|
|
5.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nominal value |
|
€ |
1.80 |
|
|
€ |
4.11 |
|
|
€ |
4.02 |
|
| Number of bonds issued |
|
|
349 414 680 |
|
|
|
167 500 000 |
|
|
|
114 499 995 |
|
| Size of issue |
|
€ |
628 946 424 |
|
|
€ |
688 425 000 |
|
|
€ |
460 289 980 |
|
| Issue premium * |
|
|
36.8 |
% |
|
|
40.2 |
% |
|
|
37.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Coupon rate |
|
|
4.250 |
% |
|
|
0.000 |
% |
|
|
0.125 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| S&P rating at issue |
|
|
CCC |
|
|
|
B- |
|
|
|
B- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Allotment ratio prior to the offer ** |
|
|
1.06 |
|
|
|
1.00 |
|
|
|
1.00 |
|
| Conversion threshold prior to the offer *** |
|
€ |
1.70 |
|
|
€ |
4.11 |
|
|
€ |
4.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number of OCEANE bonds in issue |
|
|
349 413 680 |
|
|
|
167 500 000 |
|
|
|
114 499 995 |
|
| Number of potential new shares **** |
|
|
370 378 501 |
|
|
|
167 500 000 |
|
|
|
114 499 995 |
|
| as a % of the number of shares excl.treasury |
|
|
13.3 |
% |
|
|
6.0 |
% |
|
|
4.1 |
% |
* Nominal value divided by the average share price at issue
** Number of allotable shares per OCEANE bond
*** Nominal value / Allotment ratio
****
Number of OCEANE bonds X Allotment ratio
At 31 December 2014, the three OCEANE bonds in issue could potentially give rise to the issue of 652,378,496 new
shares, or 23.5% of the number of shares in the Company excluding treasury shares.
Bondholders possess the right to the allotment of shares that may be exercised
at any time62 (American-type OCEANE bonds). An OCEANE bond carries entitlement to the allotment of a number of shares equal to the product of the allotment ratio stated in Table 29 and the number
of OCEANE bonds. The potential maximum number of new shares is thus determined by how this right is exercised by the OCEANE bond holders.
The OCEANE bonds are
redeemable in full at par at maturity, but the Company may redeem them earlier as follows:
| |
• |
|
At any time by making purchases in the market, off-market or through tender or exchange offers; |
| 62 |
Since 12 August 2013 for the 2018 OCEANE bonds and since 20 July 2014 for the 2019 and 2020 OCEANE bonds. |
C-58
| |
• |
|
At any time at par, plus any accrued interest, if the number of OCEANE bonds in issue for a given category falls to below 15% of the number of OCEANE bonds issued in the relevant category; |
| |
• |
|
At any time from a certain date at par plus any accrued interest if the arithmetic mean of the product of the allotment ratio and the opening share price in the market over a period of 20 consecutive days out of the
previous 30 days, exceeds a percentage of the nominal value laid down in the terms and conditions of the relevant OCEANE bonds (so-called soft call clause). The terms and conditions of the soft call applicable to the various OCEANE bonds are shown
in Table 30. |
Table 30
Soft call terms and conditions for each of the OCEANE bond issues
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
OCEANE 2018 |
|
|
OCEANE 2019 |
|
|
OCEANE 2020 |
|
| Effective date |
|
|
1/8/2016 |
|
|
|
1/3/2017 |
|
|
|
1/9/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Percentage of nominal value |
|
|
130 |
% |
|
|
125 |
% |
|
|
125 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nominal value |
|
€ |
1.80 |
|
|
€ |
4.11 |
|
|
€ |
4.02 |
|
| Allotment ratio prior to the offer |
|
|
1.06 |
|
|
|
1.00 |
|
|
|
1.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Alcatel-Lucent’s average share price above which the soft call may be triggered (in the absence of an offer) |
|
€ |
2.21 |
|
|
€ |
5.14 |
|
|
€ |
5.03 |
|
Holders also possess an option enabling them to request the early redemption at par plus any accrued interest in the event of a change
in control of the Company, within the time limit and on the conditions stipulated in the prospectus relating to the issue of the various OCEANE bonds63. A change in control occurs when a third
party gains possession, directly or indirectly, of:
| |
• |
|
either the majority of the Company’s voting rights; |
| |
• |
|
or over 40% of these voting rights if no other shareholder in the Company, acting alone or in concert, holds more. |
There is also an acceleration clause linked to the definitive cessation of the listing of the underlying share, which stipulates that, where so decided by each of the
meetings of the holders of the 2018, 2019 and 2020 OCEANE bonds, the OCEANE bonds in each category may fall due for redemption at par plus any accrued interest, where:
| |
• |
|
the Company’s shares cease to be listed on Euronext Paris and are not listed on any other regulated market in the European Union, and |
| |
• |
|
the Company’s ADRs or shares cease to be listed on a regulated market in the United States. |
Lastly, an adjustment
to the share allotment ratio (SAR) of the OCEANE bonds is provided for where a public offer is made for the Company’s shares. The revised share allotment ratio is set using the following formula:
|
|
|
|
|
| Revised SAR = SAR x (1 + Issue premium x |
|
D |
|
) |
| |
DT |
|
| 63 |
See the French draft offer document. |
C-59
D is the number of days between the opening date of the offer and the OCEANE maturity date. DT is the number of days
between the issue date and the OCEANE maturity date.
Table 31 lays down how the revised share allotment ratio applicable to each of the categories of OCEANE bonds
is calculated assuming the offer opens on 18 November 2015.
Table 31
OCEANE allotment ratio during the offer, assuming the offer opens on 18 November 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2018 OCEANE |
|
|
2019 OCEANE |
|
|
2020 OCEANE |
|
| Allotment ratio prior to the offer |
|
|
1.06 |
|
|
|
1.00 |
|
|
|
1.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issue premium |
|
|
36.8 |
% |
|
|
40.2 |
% |
|
|
37.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Date of issue |
|
|
07/03/13 |
|
|
|
06/10/14 |
|
|
|
06/10/14 |
|
| Opening date of offer |
|
|
11/18/15 |
|
|
|
11/18/15 |
|
|
|
11/18/15 |
|
| Date of maturity |
|
|
07/01/18 |
|
|
|
01/30/19 |
|
|
|
01/30/20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Residual maturity in days (D) |
|
|
956 |
|
|
|
1169 |
|
|
|
1534 |
|
| Original maturity in days (DT) |
|
|
1824 |
|
|
|
1695 |
|
|
|
2060 |
|
| Portion of residual term to maturity (D/DT) |
|
|
52.41 |
% |
|
|
68.97 |
% |
|
|
74.47 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revised allotment ratio during the offer |
|
|
1.26 |
|
|
|
1.28 |
|
|
|
1.28 |
|
If the offer is conditional, the revised allotment ratio applies between the opening date of the offer and:
| |
• |
|
The date falling 15 business days after the AMF publishes the results of the offer (or 15 days after the final day on which the shares can be tendered to the offer, if it is reopened) where the offer proceeds;
|
| |
• |
|
the publication date of the offer’s results where the offer does not proceed. |
| |
• |
|
Analysis of the prices of the OCEANE bonds |
The 2018, 2019 and 2020 OCEANE
bonds were admitted to trading on Euronext Paris as soon as they were issued. They are traded on a regular basis predominantly in the OTC markets, which means that their price trends can be analysed since their date of issue. As previously stated,
the price on 9 April 2015 has been used as a point of reference because Alcatel-Lucent’s share price was affected by rumours prior to the announcement of the offer.
C-60
Figure 16 shows trends in the price of the 2018 OCEANE bonds issued on 3 July 2013 in relation to trends in
Alcatel-Lucent’s share price. The price of the 2018 OCEANE bond, the share price and the conversion threshold are shown on the left-hand scale. The OCEANE/share premium is shown on the right-hand scale.
Figure 16
Price of the 2018 OCEANE bonds,
Alcatel-Lucent’s share price and trends in the premium
Since July 2013, shortly after it was issued, the 2018 OCEANE bonds traded at a premium of around 40% to Alcatel-Lucent’s share
price – just above the issue premium of 37%. On 5 August 2013, the share price moved above the conversion threshold, before rapidly settling at significantly higher levels following the strong performance of Alcatel-Lucent shares in the
second half of 2013. Since then, the share price has never slipped back below the conversion threshold, and so the 2018 OCEANE bonds are clearly “in-the-money”. On 9 December 2013, the share allotment ratio was adjusted from 1.00 to
1.06 following the company’s rights issue. As the share price moved higher, the OCEANE bond/share premium narrowed significantly, reflecting the “pure-equity” profile of the 2018 OCEANE bonds and the reduction in their time value. It
hovered at around 15% until the beginning of 2015, with some turbulence in October 2014 before the share price picked up after publication of the group’s third-quarter 2014 results. Following the steep share price gains in early 2015, the
OCEANE bond/share premium sank to an all-time low of around 9% between mid-March and early April 2015. On 9 April 2015, the price of the 2018 OCEANE bonds stood at €3.99, with the share
price at €3.65 and the exchange ratio at 3.65 * 1.06 = €3.87.
C-61
Figure 17 shows trends in the price of the 2019 OCEANE bonds issued on 10 June 2014 in relation to trends in
Alcatel-Lucent’s share price. The price of the 2019 OCEANE bonds, the share price and the conversion threshold are shown on the left-hand scale. The OCEANE/share premium is shown on the right-hand scale.
Figure 17
Price of the 2019 OCEANE bonds,
Alcatel-Lucent’s share price and trends in the premium
In the first few months after the issue of the 2019 OCEANE bonds, Alcatel-Lucent’s share price plunged lower, sinking from €2.96 on 10 June 2014 to €1.88 by mid-October 2014. The price of the 2019 OCEANE bonds was affected to a lesser extent, since their bond
component cushioned the blow, with the OCEANE bond/share premium rising to 85% from 40% at issue. The Company’s share price then started moving higher again, rising above the conversion threshold for the first time on 14 April 2015, when
speculation about the offer for the Company peaked. Since then, it has stayed within a €3-€4 channel. Before the offer opens and the
allotment ratio is adjusted, the 2019 OCEANE bonds clearly laid “out-of-the-money”. In the meanwhile, the OCEANE bond/share premium has stabilised at between 30% and 40%. On 9 April 2015, the price of the 2019 OCEANE bonds stood at €4.64, with the share price at €3.65 and the exchange ratio at 3.65 * 1.00 = €3.65.
C-62
Figure 18 shows trends in the price of the 2020 OCEANE bonds in relation to trends in Alcatel-Lucent’s share price.
The price of the 2020 OCEANE bonds, the share price and the conversion threshold are shown on the left-hand scale. The OCEANE/share premium is shown on the right-hand scale.
Figure 18
Price of the 2020 OCEANE bonds,
Alcatel-Lucent’s share price and trends in the premium
Since the 2019 and 2020 OCEANE bonds were issued on the same date with fairly similar characteristics, price trends in the 2020
OCEANE bonds are similar to those observed previously for the 2019 OCEANE bonds. Despite the share price recovery since mid-October 2014, the 2020 OCEANE bonds are thus clearly “out-of-the-money”, or at least they were before the offer
opened and the allotment ratio was adjusted. On 9 April 2015, the price of the 2020 OCEANE bonds stood at €4.64, with the share price at
€3.65 and the exchange ratio at 3.65 * 1.00 = €3.65.
| |
• |
|
Valuation of the OCEANE bonds prior to announcement of the offer |
| |
• |
|
Intrinsic valuation at 9 april 2015 |
The value of an OCEANE bond consists of a
“bond floor”, representing the value of any coupons and the redemption at par at maturity, plus an option component, representing the value of the right to the allotment of shares. Depending on the price of the underlying share, the OCEANE
bonds may have a profile resembling either the bond or the share more closely. As a result, an intrinsic valuation of the OCEANE bonds requires an estimate of the following parameters:
| |
• |
|
The reference price of the underlying share |
| |
• |
|
The volatility of the underlying share |
| |
• |
|
The dividend yield of the underlying share |
The intrinsic valuation of the OCEANE bonds is also a function of their characteristics, as described above,
including the coupon rate, whether the allotment rights can be exercised at any time and the risk of early redemption by the issuer above certain share price levels (soft call).
C-63
The binomial model is used to arrive at an intrinsic valuation of the OCEANE bonds. Owing to its flexibility, it is best
suited to capturing all of their characteristics as effectively as possible. It can factor in the possibility of the right to the allotment of shares being exercised at any time and the dilution this causes, the 2018 and 2020 OCEANE bond coupon
payments and the Company’s soft call.
Reference price of the underlying share
As discussed above, Alcatel-Lucent’s share price was driven by considerable speculation from 10 April onwards, and so the share price on 9 April 2015 is
taken into consideration. Since the Company’s shares are liquid, the OCEANE bonds were valued at the 9 April 2015 closing price of €3.65.
Volatility of the underlying share
As stated above (see Figure 9),
Alcatel-Lucent’s share price is structurally more volatile than the market at large. In times of severe stress, the share’s 3-month volatility climbs well above 50%. On 9 April 2015, the share’s 3-month volatility stood at 30%
and its 1-year volatility was at 37%. The baseline valuation at 9 April 2015 is predicated on normalised volatility in the underlying share of 35%, which is also in line with the implied volatility of the valuation of the 2019 and 2020 OCEANE
bonds when they were issued in June 2014.
Dividend yield of the underlying share
Alcatel-Lucent has not paid out any dividends since 2007. On 9 April 2015, the scenario of an anticipated yield of 0% over the life of the OCEANE bonds seemed
realistic and in line with the consensus view.
Residual maturity
On
9 April 2015, the residual maturity of the 2018, 2019 and 2020 OCEANE bonds stood at 3.23, 3.81 and 4.81 years respectively.
Risk-free rate
On 9 April 2015, the 3-year euro swap rate stood at 0.10% and the 5-year euro swap rate at 0.22%. Based on three-month averages, the 3-year euro swap rate was 0.15%
and the 5-year euro swap rate 0.29%. The risk-free rates corresponding to the 2018, 2019 and 2020 OCEANE maturities were estimated using linear interpolation at 0.17%, 0.21% and 0.27% respectively.
Credit risk
On 9 April 2015, the 3-year Alcatel-Lucent CDS stood at
1.19% and the 5-year CDS at 1.98%. Based on the averages for the previous three months, the 3-year Alcatel-Lucent CDS was 1.25% and the 5-year CDS was 2.11%. The CDS rates corresponding to the 2018, 2019 and 2020 OCEANE maturities were estimated
using linear interpolation at 1.35%, 1.60% and 2.03% respectively.
Dilution
As explained previously, the 2018 OCEANE bonds are well “in-the-money”, since Alcatel-Lucent’s share price has not fallen below the conversion threshold
for almost the past two years. The shares created through the exercise of the 2018 OCEANE bonds still in issue at 31 December 2014 are thus included in the number of shares taken into account by the market, as are in-the-money stock options. On
9 April 2015, the 2019 and 2020 OCEANE bonds were still well out-of-the-money and are not taken into account in calculations of the initial number of shares.
C-64
To value the OCEANE bonds, trends in the Company’s share price are represented by a binomial tree factoring in the
possibility of the right to allotment of shares being exercised at any time. The capital gain realised by OCEANE bondholders is a function of the dilution created through exercise of their right to the allotment of shares:
| |
• |
|
If the share price is below €4.02 (conversion threshold of the 2020 OCEANE bonds): |
The 2019 and 2020
OCEANE bonds lie out-of-the-money, and there is no additional dilution. The diluted price is equal to the share price.
| |
• |
|
If the share price is above €4.02, but below €4.11 (conversion threshold of the 2019 OCEANE bonds): |
Only the 2020 OCEANE bonds are in-the-money. The post-dilution price is calculated as follows:
|
|
|
|
|
| Diluted price = |
|
(N0 x
price) + (Nominal2020 conv. x N2020 conv.) |
|
|
| |
(N0 + N2020 conv.) |
|
| |
• |
|
If the share price is above €4.11: |
The 2019 and 2020 OCEANE bonds are in-the-money. The
post-dilution price is calculated as follows:
|
|
|
|
|
| Diluted price = |
|
(N0 x
price) + (Nominal2020 conv. x N2020 conv.) + (Nominal2019 conv. x N2019 conv.) |
|
|
| |
(N0 + N2020 conv. + N2019
conv.) |
|
At each node in the binomial tree, the capital gain obtained when the right to allotment of shares is exercised by the OCEANE
bondholders is thus calculated using the diluted price. The same adjustment is made for stock options that move in-the-money.
Results of the intrinsic valuation
of the 2018, 2019 and 2020 OCEANE bonds at 9 April 2015
Given the parameters discussed above and all the characteristics of the OCEANE bonds, Table 32
shows the valuation obtained using the binomial method for the 2018, 2019 and 2020 OCEANE bonds at 9 April 2015.
C-65
Table 32
Results of the intrinsic valuation using the binomial method of the 2018, 2019 and 2020 OCEANE bonds at 9 April 201564
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2018 OCEANE |
|
|
2019 OCEANE |
|
|
2020 OCEANE |
|
| Underlying share price |
|
€ |
3.65 |
|
|
€ |
3.65 |
|
|
€ |
3.65 |
|
| Volatility of the underlying share |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
| Dividend yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
| Residual maturity |
|
|
3.23 |
|
|
|
3.81 |
|
|
|
4.81 |
|
| Risk-free rate |
|
|
0.17 |
% |
|
|
0.21 |
% |
|
|
0.27 |
% |
| Credit risk |
|
|
1.35 |
% |
|
|
1.60 |
% |
|
|
2.03 |
% |
| Intrinsic valuation of the OCEANE bond |
|
€ |
3.99 |
|
|
€ |
4.76 |
|
|
€ |
4.78 |
|
| Exchange ratio |
|
€ |
3.87 |
|
|
€ |
3.65 |
|
|
€ |
3.65 |
|
| Time value |
|
€ |
0.12 |
|
|
€ |
1.11 |
|
|
€ |
1.13 |
|
| OCEANE bond price |
|
€ |
3.99 |
|
|
€ |
4.64 |
|
|
€ |
4.64 |
|
The results of the valuation obtained using the binomial method for each of the OCEANE bond tranches are close to the listed prices. The
small difference in value is primarily attributable to the inclusion of normalised volatility of 35%, above the volatility of Alcatel-Lucent shares at 9 April 2015 (3-month volatility of 30%). The price of the OCEANE bonds thus provides a
useful point of reference for assessing their valuation.
| |
• |
|
Analysis of the offer at 9 April 2015 |
The adjustment of the share
allotment ratio (SAR) of the OCEANE bonds when a public offer is made for the Company’s shares is intended to offer holders compensation for a portion of the premium paid when the OCEANE bonds were issued, in proportion to their residual term
to maturity. Under the public exchange offer made by Nokia to 2018, 2019 and 2020 OCEANE bondholders, the latter may exchange them for a number of Nokia shares equal to the product of the revised share allotment ratio, determined for each of the
categories of OCEANE bonds, and the exchange ratio offered for Alcatel-Lucent shares (i.e. 0.5500 shares). This calculation thus yields (Table 33) an exchange ratio of 0.6930 Nokia share for 1 2018 OCEANE, 0.7040 Nokia share for 1 2019 OCEANE, and
0.7040 Nokia share for 1 2020 OCEANE.
| 64 |
Time value represents the interest for holders not to exercise their right to the allotment of shares immediately and to hold onto the bonds instead. The greater the time value of an OCEANE bond, the greater the
interest for holders not to exercise their right to the allotment of shares immediately. |
C-66
Given Nokia’s share price at 9 April 2015 and the characteristics of the offer, the premiums over the intrinsic
value of the OCEANE bonds at 9 April 2015 are shown in Table 33.
Table 33
Premium/(discount) to the intrinsic valuation of the 2018, 2019 and 2020 OCEANE bonds at 9 April 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2018 OCEANE |
|
|
2019 OCEANE |
|
|
2020 OCEANE |
|
| Nokia’s share price |
|
€ |
7.18 |
|
|
€ |
7.18 |
|
|
€ |
7.18 |
|
| Exchange ratio offered for the shares |
|
|
0.5500 |
|
|
|
0.5500 |
|
|
|
0.5500 |
|
| Revised allotment ratio for the OCEANE bonds |
|
|
1.26 |
|
|
|
1.28 |
|
|
|
1.28 |
|
| Number of Nokia shares offered per OCEANE bond |
|
|
0.6930 |
|
|
|
0.7040 |
|
|
|
0.7040 |
|
| Value obtained per OCEANE bond |
|
€ |
4.98 |
|
|
€ |
5.05 |
|
|
€ |
5.05 |
|
| Intrinsic value of the OCEANE bond |
|
€ |
3.99 |
|
|
€ |
4.76 |
|
|
€ |
4.78 |
|
| Premium/discount to intrinsic value |
|
|
25 |
% |
|
|
6 |
% |
|
|
6 |
% |
| OCEANE bond price |
|
€ |
3.99 |
|
|
€ |
4.64 |
|
|
€ |
4.64 |
|
| Premium/discount to intrinsic value |
|
|
25 |
% |
|
|
9 |
% |
|
|
9 |
% |
Table 34 shows the indicative exchange ratio implied by a comparison of the price of each of the OCEANE bonds with Nokia’s share
price, calculated on average over several periods to 9 April 2015.
Table 34
Exchange ratios calculated based on listed prices
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2018 OCEANE |
|
|
2019 OCEANE |
|
|
2020 OCEANE |
|
| Exchange ratio offered |
|
|
0.6930 |
|
|
|
0.7040 |
|
|
|
0.7040 |
|
| Ratio based on prices at 9 April 2015 |
|
|
0.5550 |
|
|
|
0.6462 |
|
|
|
0.6458 |
|
| Ratio based on 5-day averages |
|
|
0.5527 |
|
|
|
0.6487 |
|
|
|
0.6479 |
|
| Ratio based on 1-month averages |
|
|
0.5438 |
|
|
|
0.6402 |
|
|
|
0.6395 |
|
| Ratio based on 3-month averages |
|
|
0.5274 |
|
|
|
0.6391 |
|
|
|
0.6357 |
|
| Ratio based on 6-month averages |
|
|
0.4966 |
|
|
|
0.6176 |
|
|
|
0.6070 |
|
| Ratio based on 9-month averages |
|
|
0.4938 |
|
|
|
0.6203 |
|
|
|
0.6060 |
|
At 9 April 2015, the exchange ratios calculated based on listed prices over the periods under consideration are still lower than
the exchange ratios stated in the Offer (0.6930 Nokia share for 1 2018 OCEANE, 0.7040 Nokia share for 1 2019 OCEANE, and 0.7040 Nokia share for 1 2020 OCEANE). At this date of 9 April 2015, the proposed exchange ratio provided a significant
premium to the prices of the OCEANE bonds prior to announcement of the offer.
| |
• |
|
Options open to OCEANE bondholders at the time of the offer |
OCEANE
bondholders have several options under the public exchange offer. Studying these and comparing the financial results obtained can be used to calculate the value of the various OCEANE bonds and form an opinion concerning the fairness of the offer
made to their holders. The options open to an OCEANE bondholder are as follows:
| |
• |
|
Tender OCEANE bonds to the public exchange offer in return for Nokia shares |
| |
• |
|
Request allotment of Alcatel-Lucent shares, then tender these shares to the public exchange offer |
| |
• |
|
Request allotment of Alcatel-Lucent shares, then hold onto them or sell them on the market |
| |
• |
|
Hold onto their OCEANE bonds or sell them on the market. |
C-67
| |
• |
|
Tender OCEANE bonds to the public exchange offer in return for Nokia shares |
Under Nokia’s public exchange offer, 2018, 2019 and 2020 OCEANE bondholders may exchange their OCEANE bonds for a number of Nokia shares equal to the product of the
revised share allotment ratio and the exchange ratio proposed for Alcatel-Lucent shares. Table 35 shows the value obtained in this case if Nokia’s share price is at €6.00 and assuming the
offer opens on 18 November 2015.
Table 35
Value obtained by tendering OCEANE bonds to Nokia’s public exchange offer
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2018 OCEANE |
|
|
2019 OCEANE |
|
|
2020 OCEANE |
|
| Nokia’s share price |
|
€ |
6.00 |
|
|
€ |
6.00 |
|
|
€ |
6.00 |
|
| Exchange ratio offered for the shares |
|
|
0.5500 |
|
|
|
0.5500 |
|
|
|
0.5500 |
|
| Revised allotment ratio for the OCEANE bonds |
|
|
1.26 |
|
|
|
1.28 |
|
|
|
1.28 |
|
| Number of Nokia shares offered per OCEANE bond |
|
|
0.6930 |
|
|
|
0.7040 |
|
|
|
0.7040 |
|
| Value obtained per OCEANE bond |
|
€ |
4.16 |
|
|
€ |
4.22 |
|
|
€ |
4.22 |
|
If, upon publication of the results of the offer, the success threshold is reached (i.e. if Nokia manages to secure over 50% of
Alcatel-Lucent shares on a fully-diluted basis65), the OCEANE bondholders directly become shareholders in Nokia, which then has control of Alcatel-Lucent, and have capitalised on the upward
adjustment of the allotment ratio. Should the offer fail, the situation of the OCEANE bondholders remains identical to what it was prior to the launch of the offer. They can then no longer capitalise on adjustment of the allotment ratio but retain
their exposure to Alcatel-Lucent shares.
| |
• |
|
Request allotment of Alcatel-Lucent shares, then tender these shares to the public exchange offer |
OCEANE bondholders can then take advantage of the temporary adjustment to the allotment ratio by requesting the allotment of Alcatel-Lucent shares, then tendering these
to the public exchange offer for Alcatel-Lucent shares. Table 36 shows the value obtained in this case if Nokia’s share price is at €6.00 and Alcatel-Lucent’s share price is in line
with the proposed exchange ratio of 0.5500, i.e. €3.30.
Table 36
Value obtained by exercising rights to allotment of shares during the offer, then tendering the Alcatel-Lucent shares obtained to Nokia’s public
exchange offer
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2018 OCEANE |
|
|
2019 OCEANE |
|
|
2020 OCEANE |
|
| Nokia’s share price |
|
€ |
6.00 |
|
|
€ |
6.00 |
|
|
€ |
6.00 |
|
| Exchange ratio offered for the shares |
|
|
0.5500 |
|
|
|
0.5500 |
|
|
|
0.5500 |
|
| Alcatel-Lucent’s share price |
|
€ |
3.30 |
|
|
€ |
3.30 |
|
|
€ |
3.30 |
|
| Revised allotment ratio for the OCEANE bonds |
|
|
1.26 |
|
|
|
1.28 |
|
|
|
1.28 |
|
| Value obtained per OCEANE bond |
|
€ |
4.16 |
|
|
€ |
4.22 |
|
|
€ |
4.22 |
|
Since the terms of the offer for the OCEANE bonds were laid down to enable holders to tender their holdings directly without exercising
the right to the allotment of shares, the value obtained through this second strategy is identical to that gained in the first. Even so, if the share price of Nokia and Alcatel-Lucent failed to adjust to the exchange ratio proposed by Nokia during
the offer, the values obtained by holders from these two strategies could differ.
| 65 |
Or if Nokia decides to waive this minimum tender condition and applies the regulatory minimum threshold, i.e. 50 % of the Company share capital or voting rights (not diluted). |
C-68
Should Nokia’s offer fail, OCEANE bondholders have become shareholders in Alcatel-Lucent in line with the revised
allotment ratio, since they exercised their right to the allotment of shares before tendering these to the offer. Even though the offer failed, the holders benefited from the adjustment to the allotment ratio, but lost out on the time value of their
OCEANE bonds. The difference between the first two options afforded to bondholders arises primarily in the event that the offer fails.
| |
• |
|
Request allotment of Alcatel-Lucent shares, then retention of the shares, or sale of the shares |
OCEANE bondholders can take advantage of the temporary adjustment to the allotment ratio by requesting the allotment of Alcatel-Lucent shares, but then opting not to
tender the shares they obtain to the public exchange offer. OCEANE bondholders become shareholders in Alcatel-Lucent in line with the revised allotment ratio, since they exercised their right to the allotment of shares during the offer. Until the
offer closes and while Nokia’s and Alcatel-Lucent’s shares remain aligned with the exchange ratio proposed by Nokia, the value obtained from this strategy is identical to that produced by the two previous strategies. Once the offer has
closed, the situation of the former OCEANE bondholders depends on the outcome of the offer and is identical to that of the other Alcatel-Lucent shareholders who did not tender their shares.
The OCEANE bondholder who would request the allotment of Alcatel-Lucent shares, and who would sell them thereafter on the market would be in the same position than the
bondholder who would request the allotment of shares and would hold them, except that the first one would have monetised his investment and would no more be exposed to changes in the prices of Alcatel-Lucent shares
| |
• |
|
Hold onto the OCEANE bonds |
OCEANE bondholders may opt not to take advantage
of the temporary adjustment to the allotment ratio while not tendering their OCEANE bonds to the offer, either. When the initial offer closes – irrespective of its results – OCEANE bondholders still have the right to the allotment of
shares, plus the protection of securing redemption at nominal value at maturity (bond floor). Even so, as described in section V.A on the characteristics of the OCEANE bonds, the adjustment to the allotment ratio comes to an end at the date of the
publication of the results of the offer if the success threshold is not reached, or 15 days after it is reopened if the offer proceeds. As such, the situation of OCEANE bondholders depends on the results of the offer.
| |
• |
|
Nokia failed to obtain more than 50% of Alcatel-Lucent shares on a fully-diluted basis |
The offer does not go
ahead66. OCEANE bondholders may no longer take advantage of the revised allotment ratio, and their situation remains identical to what it was prior to the launch of the offer. It is also similar
to that of bondholders who tendered their OCEANE bonds directly to the offer.
| |
• |
|
Nokia obtained over 50% of Alcatel-Lucent shares on a fully-diluted basis. |
The threshold for success is
reached, but the situation of the OCEANE bondholders depends on satisfaction of three combined, mutually dependent conditions:
| |
• |
|
The number of Alcatel-Lucent shares owned by Nokia stands at over 95% of the former’s capital. Nokia has made plans to launch a squeeze-out procedure for the Company’s shares, and so OCEANE bondholders
who decided to hold onto them run the risk of owning a financial instrument convertible into or exchangeable for Alcatel-Lucent shares that are not listed. |
| 66 |
It is worth to say that Nokia could in theory waive the 50% threshold and could apply the regulatory minimum threshold. |
C-69
| |
• |
|
The number of shares and OCEANE bonds owned by Nokia stands at over 95% of the fully-diluted capital. Nokia has made plans to launch a squeeze-out procedure for the OCEANE bonds, and the OCEANE bondholders who
decided to hold onto them after the original offer will receive consideration under the squeeze-out procedure in either Nokia shares or in cash. |
| |
• |
|
The number of bonds in issue stands at less than 15% of the number of bonds issued. Nokia is in a position to exercise the allotment right relative to the OCEANE bonds transferred to it following the offer within
15 business days of the close of the reopened offer. During this period, Nokia can take advantage of the adjustment to the allotment ratio. If, for each category of OCEANE bonds, that gives rise to a number of OCEANE bonds in issue of less than 85%
of the number of OCEANE bonds in the category of OCEANE bonds under consideration, the terms and conditions of each of the OCEANE bond categories presented in the corresponding prospectus allow the Company to redeem them early at par plus any
accrued interest, subject to a notice period of at least 30 calendar days. |
These terms and conditions should be assessed when the results of the
initial offer are published and, even more crucially, when the results of the reopened offer are published. The various possible scenarios and their implications are presented in Appendix 5.
In any case, the clause provided for in the event of a change in control of the Company entitles OCEANE bondholders to request early redemption at nominal value plus
any accrued interest. This early redemption value at the holder’s request represents a point of reference for the valuation in an appraisal of the offer. That said, the exercise of this clause by holders is akin to giving up the time value of
their OCEANE bonds, which, in normal solvency conditions, gives them value in excess of nominal value plus accrued interest. Accordingly, it makes sense for bondholders to exercise their change in control clause only if the results of the offer lead
them to believe that they may not be able to take advantage of this time value, that is if they are obliged to accept a lower amount or if they risk becoming holders of OCEANE bonds convertible into or exchangeable for Alcatel-Lucent shares that are
not listed (see Appendix 5).
The early redemption value of the various OCEANE bonds is presented in Table 37 at 4 February 2016, which is the day after the
expected publication date of the results of the re-opened offer likely to enable bondholders to activate the change in control clause.
Table 37
Early redemption value of the various OCEANE bonds at 4 February 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2018 OCEANE |
|
|
2019 OCEANE |
|
|
2020 OCEANE |
|
| Nominal value |
|
€ |
1.80 |
|
|
€ |
4.11 |
|
|
€ |
4.02 |
|
| Semi-annual coupon |
|
€ |
0.03825 |
|
|
|
— |
|
|
€ |
0.00251 |
|
| Most recent coupon date |
|
|
1/1/16 |
|
|
|
— |
|
|
|
1/30/16 |
|
| Next coupon date |
|
|
7/1/16 |
|
|
|
— |
|
|
|
7/30/16 |
|
| Accrued interest |
|
€ |
0.00715 |
|
|
|
— |
|
|
€ |
0.00007 |
|
| Early redemption value |
|
€ |
1.807 |
|
|
€ |
4.110 |
|
|
€ |
4.020 |
|
C-70
Owing to their higher nominal value, the 2019 and 2020 OCEANE bonds have a far higher early redemption value than the 2018
OCEANE bonds. Table 38 shows for each OCEANE bond the level of the Alcatel-Lucent share price below which the value that bondholders would obtain by exercising their allotment right or by tendering their OCEANE bonds to the offer would be less than
the early redemption value.
Table 38
Level of Alcatel-Lucent’s share price corresponding to the early redemption value
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2018 OCEANE |
|
|
2019 OCEANE |
|
|
2020 OCEANE |
|
| Early redemption value |
|
€ |
1.81 |
|
|
€ |
4.11 |
|
|
€ |
4.02 |
|
| Revised allotment ratio during the offer |
|
|
1.26 |
|
|
|
1.28 |
|
|
|
1.28 |
|
| Corresponding price of the underlying share |
|
€ |
1.43 |
|
|
€ |
3.21 |
|
|
€ |
3.14 |
|
Should the Company be unable to go ahead with a squeeze-out procedure for either the Alcatel-Lucent shares or OCEANE bonds and where the
risk of early redemption of the OCEANE bonds at the Company’s request is limited, the determination of the value obtained by a bondholder who has opted to hold onto their OCEANE bonds requires an intrinsic valuation given the Company’s new
characteristics.
| |
• |
|
Valuation of the OCEANE bonds at the time of the offer |
The model used for
this valuation is identical to that used in section V.C.1, but the parameters should be adjusted according to Alcatel-Lucent’s position when the offer closes. The situation of OCEANE bondholders should be assessed on the day after the reopened
offer closes, that is on 4 February 2016 according to the indicative offer timetable. As part of the intrinsic valuation of the OCEANE bonds, which analyses whether or not it is in the interest of OCEANE bondholders to retain them, the
threshold for success of the offer is considered to have been exceeded67.
Reference price of the underlying
share
The reference price of the Alcatel-Lucent share used here derives from the exchange ratio and the spot price of the Nokia stock at 23 October 2015,
that is €6.225. Additional calculations are performed based on 1-month and 3-month averages, i.e €6.11 and €5.96 per Nokia share.
| 67 |
Should the offer fail, it is hard to predict the likely changes in the valuation parameters of the OCEANE bonds (price of the underlying share, volatility, level of the CDS, etc.). |
C-71
Volatility of the underlying share
Figure 19 shows trends in the 1-year rolling volatility of Alcatel-Lucent and Nokia shares since the beginning of 2012.
Figure 19
Rolling 1-year volatility of
Alcatel-Lucent and Nokia shares
Prior to the announcement of the offer, the volatility of Alcatel-Lucent shares appeared to be higher than that of Nokia’s.
Should the offer be successful, the volatility of Alcatel-Lucent shares should fall into line with the volatility of Nokia shares. The valuation presented is based on a volatility estimate of 30%.
Dividend yield of the underlying share
Should the offer be successful, it is
assumed that the dividend yield of Alcatel-Lucent shares would fall into line with the dividend yield of the Nokia shares. The valuation presented assumes a yield of 2.4% based on the most recent dividend yield paid by the Company and the consensus
estimate of the next dividend payment divided by the average share price.
Repo rate
Assuming the success threshold is reached, Alcatel-Lucent’s share liquidity could be significantly reduced, in particular if Nokia get close to the squeeze-out
threshold. It would be more difficult for OCEANE bondholders to hedge their position lending or borrowing shares. Disclosed valuation relies on a 1.0% repo rate.
Residual maturity
The indicative timetable for the offer states that the
results of the initial offer will be published no later than on 30 December 2015. Should the offer be successful, it would then be reopened from 14 January 2016 to 3 February 2016. The OCEANE bonds are thus valued on the day after the
end of the offer, for bondholders who decided to hold onto them without exercising their right to the allotment of shares. The residual maturity of the 2018, 2019 and 2020 OCEANE bonds stood at 2.41, 3.99 and 3.99 years respectively.
Risk-free rate
The risk-free rate used is the three-month average of the
euro swap rate corresponding to the maturity date of each OCEANE bond at 23 October 2015. The risk-free rates are respectively 0.10%, 0.15% and 0.26% for the 2018, 2019 and 2020 OCEANE bonds.
C-72
Credit risk
Changes in
Alcatel-Lucent’s and Nokia’s credit risk as reflected by the level of their CDS were presented in section III.A. These trends reflect the restructuring carried out by both companies in recent years.
Prior to the announcement of the offer, Nokia’s 5-year CDS traded at around 100 basis points, compared with around 200 basis points for Alcatel-Lucent’s.
Since the announcement, the level of both companies’ CDS has been equivalent. Should the offer be successful, the situation is expected to stabilise.
The
valuation presented is predicated on a CDS level similar to that of Nokia, i.e. 0.78%, 0.93% and 1.20% for the 2018, 2019 and 2020 OCEANE bonds, depending on their maturity.
Dilution
The number of Alcatel-Lucent shares at the close of the offer will
depend on how the OCEANE bondholders act and whether they decide to exercise their allotment right, tender their OCEANE bonds to the public exchange offer or hold onto them. Should the offer be successful, the 2018 OCEANE bonds are considered as
having been converted in full by their holders at the revised allotment ratio. In the calculations presented, the 2019 and 2020 OCEANE bonds are considered not to have been converted.
Results of the intrinsic valuation of the 2018, 2019 and 2020 OCEANE bonds at 4 February 2016
Given the parameters discussed above and all the characteristics of the OCEANE bonds, Table 39 shows the valuation obtained under the binomial method for the 2018, 2019
and 2020 OCEANE bonds at 4 February 2016 assuming current market parameters (at 23 October 2015).
Table 39
Premiums/(discounts) offered to bondholders based on the revised allotment ratios, spot, average 1-month and 3-month prices at 23 October 2015 and
intrinsic valuations of the OCEANE bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
2018 OCEANE |
|
|
2019 OCEANE |
|
|
2020 OCEANE |
|
| Price at 23 october 2015 |
|
OCEANE bond price |
|
€ |
4.23 |
|
|
€ |
4.44 |
|
|
€ |
4.41 |
|
| |
Intrinsic value of the OCEANE bond |
|
€ |
3.63 |
|
|
€ |
4.40 |
|
|
€ |
4.37 |
|
| |
Price of Nokia shares |
|
€ |
6.23 |
|
|
€ |
6.23 |
|
|
€ |
6.23 |
|
| |
Exchange ratio offered |
|
|
0.6930 |
|
|
|
0.7040 |
|
|
|
0.7040 |
|
| |
Exchange ratio offered during the offer |
|
€ |
4.31 |
|
|
€ |
4.38 |
|
|
€ |
4.38 |
|
|
|
Premium/discount to intrinsic value |
|
|
18.8 |
% |
|
|
-0.4 |
% |
|
|
0.3 |
% |
| Average
1-month |
|
Average OCEANE bond price |
|
€ |
4.08 |
|
|
€ |
4.39 |
|
|
€ |
4.35 |
|
| |
Intrinsic value of the OCEANE bond |
|
€ |
3.56 |
|
|
€ |
4.38 |
|
|
€ |
4.34 |
|
| |
Average price of Nokia shares |
|
€ |
6.11 |
|
|
€ |
6.11 |
|
|
€ |
6.11 |
|
| |
Exchange ratio offered |
|
|
0.6930 |
|
|
|
0.7040 |
|
|
|
0.7040 |
|
| |
Exchange ratio offered during the offer |
|
€ |
4.23 |
|
|
€ |
4.30 |
|
|
€ |
4.30 |
|
|
|
Premium/discount to intrinsic value |
|
|
18.9 |
% |
|
|
-1.8 |
% |
|
|
-0.9 |
% |
| Average
3-month |
|
Average OCEANE bond price |
|
€ |
3.94 |
|
|
€ |
4.39 |
|
|
€ |
4.34 |
|
| |
Intrinsic value of the OCEANE bond |
|
€ |
3.47 |
|
|
€ |
4.35 |
|
|
€ |
4.32 |
|
| |
Average price of Nokia shares |
|
€ |
5.96 |
|
|
€ |
5.96 |
|
|
€ |
5.96 |
|
| |
Exchange ratio offered |
|
|
0.6930 |
|
|
|
0.7040 |
|
|
|
0.7040 |
|
| |
Exchange ratio offered during the offer |
|
€ |
4.13 |
|
|
€ |
4.20 |
|
|
€ |
4.20 |
|
|
|
Premium/discount to intrinsic value |
|
|
19.0 |
% |
|
|
-3.5 |
% |
|
|
-2.9 |
% |
C-73
Based on Nokia’s share price at 23 October 2015 or on Nokia’s average share price over periods of one to
three months, the exchange ratio proposed during the offer would provide a premium of between 2.0% and 4.8% for the 2018 OCEANE bond, a discount of between 1.3% and 4.4% for the 2019 OCEANE bond and a discount of between 0.6% and 3.3% for the 2020
OCEANE bond. Based on the estimated post-offer intrinsic values of the OCEANE bonds, the exchange ratio proposed during the offer would provide a premium of between 18.8% and 19.0% for the 2018 OCEANE bond, a discount of between 0.4% and 3.5% for
the 2019 OCEANE bond and between a premium of 0.3% and a discount of 2.9% for the 2020 OCEANE bond. The discount to the theoretical value of the 2019 and 2020 OCEANE bonds and the discount to their market price are very limited.
| |
• |
|
Analysis of the appraisal of the terms and conditions of the offer for the OCEANE bonds presented by the bank sponsoring the offer |
The methods used by the sponsoring bank in its assessment of the terms and conditions of the offer for the OCEANE bonds (price analysis, conversion value, theoretical
intrinsic value and early redemption value) are similar to those adopted by Associés en Finance and presented above.
Approach based on quoted price
analysis
Since OCEANE bonds are traded mostly off-market, the closing price depends on the contributors selected and the type of price reported (bid, ask, mid,
trade). The sponsoring bank has chosen to make its calculations using prices resulting from the arithmetic mean of purchase prices at UBS, Nomura, Citigroup, Barclays and CACIB reported by Bloomberg, while Associés en Finance uses the generic
BGN price calculated by Bloomberg. The results reached by the sponsoring bank and Associés en Finance are similar.
Approach based on conversion value
The calculations of adjustments to the allotment ratios and exchange ratios implied by the sponsoring bank are identical to those that were performed by
Associés en Finance.
Approach based on theoretical intrinsic value
The theoretical valuations of the OCEANE bonds performed by the sponsoring bank and by Associés en Finance yield results that are fairly close to each other at
9 April 2015. The Alcatel-Lucent share price used (€3.65) at 9 April 2015 is identical. The credit spreads used by the sponsoring bank are slightly different to those used by
Associés en Finance, but the impact on valuations is almost zero. The sponsoring bank also uses a normalised cost of borrowing for Alcatel-Lucent shares of 50 basis points, while Associés en Finance does not factor this element into
its valuation. A volatility range of 35%/37% is used by the bank, while Associés en Finance applies a volatility of 35%.
At 9 April 2015, the values
obtained by the sponsoring bank and Associés en Finance are similar to those for the 2018 OCEANE bonds and extremely close to the listed price. For the 2019 and 2020 OCEANE bonds, the theoretical intrinsic values obtained by the sponsoring
bank are slightly lower than the OCEANE bond prices, while those obtained by Associés en Finance are slightly higher.
Approach based on early redemption
value
Associés en Finance calculates the early redemption value at 4 February 2016, while the sponsoring bank calculates this value at 1 March
2016. The sponsoring bank has opted to consider the position at the maximum early redemption date, while Associés en Finance takes the view that holders’ decision will be made at the day after the closing date of the reopened offer, when
they have to give up once and for all on the possibility of tendering their OCEANE bonds to Nokia’s offer.
C-74
Irrespective of the method used, the main point of divergence between the sponsoring bank’s and Associés en
Finance’s approach is the period over which the Offer price is assessed. The sponsoring bank has decided to halt its analysis at 9 April 2015, without considering trends in prices beyond that date. Associés en Finance also presents
its analysis of the Offer at the latest possible date so that it can get as close as possible to the conditions offered to OCEANE bondholders when the Offer opens. The Offer is for a financial instrument with trends vis-à-vis the underlying
share that are not linear, and the financial markets have been in a highly turbulent state since spring 2015.
| |
• |
|
Conclusion of the analysis of the offer for the OCEANE bonds (at 23 October 2015) |
The fairness of the offer made to Alcatel-Lucent OCEANE bondholders should be assessed in view of the various options they are given and the corresponding financial
terms and conditions.
Shareholders and OCEANE bondholders are afforded equal treatment: Nokia’s offer to holders is to exchange their OCEANE bonds for a
number of Nokia shares equal to the product of the revised share allotment ratio and the exchange ratio offered for Alcatel-Lucent shares. The public exchange offer takes into account the allotment ratio provided for in the issue prospectus for the
various OCEANE bonds, which aims to compensate their holders for a portion of the premium paid at issue, in proportion to their residual term to maturity.
Accordingly, the offer places bondholders in a situation similar to that they could have achieved by exercising their share allotment right during the public offer and
by tendering the shares they duly obtain to the offer, but without having to give up their OCEANE bonds, should the offer fail.
Since it is optional in nature, the
bondholders also have the option of not tendering their OCEANE bonds to the offer. Should the offer be successful, bondholders are assured of being able to obtain at least par plus accrued interest by invoking the change in control clause. At
certain Alcatel-Lucent share price levels, the exchange ratio offered to OCEANE bondholders during the public exchange offer may be less than this amount.
On
23 October 2015, and since the announcement of public exchange offer, Alcatel-Lucent’s share price has traded in a range between €2.76 and
€3.90, averaging €3.32. Nokia’s share price has traded between €5.10 and €7.51, averaging €6.20 (very close to Nokia’s share price at 23 October 2015), which implies an exchange value for Alcatel-Lucent shares
(based on the proposed exchange ratio of 0.5500) of between €2.80 and €4.13, averaging
€3.41.
For the 2018 OCEANE bonds, the exchange ratio at the revised allotment ratio has thus always remained
significantly above their early redemption value and intrinsic value. It is thus in the interest of 2018 OCEANE bondholders to tender their OCEANE bonds to the offer. Following announcement of the offer, the price of the 2018 OCEANE bonds instantly
adjusted to reflect the exchange ratio under the offer.
The offer made by Nokia to the 2019 and 2020 OCEANE bondholders provided premiums to the intrinsic values
and OCEANE bond prices at the time of the announcement (Table 33). Since the announcement, there has been a hefty fall in the equity markets, with the Euro Stoxx Technologies sinking 3.8%. At certain Nokia share price levels, the exchange ratio
offered to OCEANE bondholders during the public exchange offer could work out at less than the theoretical intrinsic value.
It is worth adding that the average
prices and intrinsic values of the OCEANE bonds reflect current liquidity conditions, while bondholders opting to keep hold of their OCEANE bonds would run the risk of a significant decline in the liquidity of the underlying and, should the offer
fail, a potential fall in Alcatel-Lucent’s share price.
C-75
Furthermore, bondholders opting to keep hold of their 2019 and 2020 OCEANE bonds will have to be particularly careful about
scenarios potentially resulting in a squeeze-out procedure or early redemption of their OCEANE bonds or even a squeeze-out procedure for the underlying share (see Appendix 5). Should the offer be successful, they will nonetheless be in a position to
obtain the early redemption value by exercising at the appropriate juncture this right to redemption in the event of a change in control.
The offer made by Nokia
to bondholders is optional in nature and enables:
| |
• |
|
Bondholders opting to tender their OCEANE bonds to the offer to receive the same financial terms and conditions as if they had exercised their right to the allotment of shares, then tender these to the offer. This
ensures equal treatment of shareholders and OCEANE bondholders; |
| |
• |
|
Bondholders opting not to tender their OCEANE bonds to the offer to benefit at the very least from a redemption value for their OCEANE bonds equal to nominal value plus any accrued interest, from the moment that the
change in control is effective. |
At 9 April 2015, the proposed exchange ratio provided a significant premium to the prices of the OCEANE bonds,
and to their intrinsic values, prior to the announcement of the offer.
By comparison with prices at 23 October 2015, the exchange ratio proposed during the
offer provides a significant premium to the listed price of the 2018 OCEANE bonds and to their intrinsic values. For the 2019 and 2020 OCEANE bond issues, the exchange ratio proposed under the offer represents a very small discount to the 1-month or
3-month average at 23 October 2015 and to their intrinsic values. The exchange ratio proposed during the offer is equivalent to the spot listed price of the OCEANE bonds and to their intrinsic values at 23 October 2015.
| • |
|
Associés en Finance’s conclusion |
This fairness opinion of
Associés en Finance has been determined in the context of the planned public exchange offer that Nokia intends to launch on all securities issued or to be issued by Alcatel-Lucent (ordinary shares and OCEANE). The proposed exchange ratios are
0.5500 Nokia share for 1 Alcatel-Lucent share, 0.6930 Nokia share for 1 Alcatel-Lucent OCEANE 2018, 0.7040 Nokia share for 1 Alcatel-Lucent OCEANE 2019, 0.7040 Nokia share for 1 Alcatel-Lucent OCEANE 2020.
The Nokia offer is a voluntary offer and the combination with Alcatel-Lucent would create a worldwide leader in telecommunication networks with a diversified geographic
coverage and a large scope of activities.
The Offer is optional for both Alcatel-Lucent shareholders and Alcatel-Lucent OCEANE owners in the sense that they can
choose to tender their securities to the offer or not.
Our work, through a multi-criteria analysis, has led to the following results:
| |
• |
|
The exchange ratio of 0.5500 Nokia share for 1 Alcatel-Lucent share shows a premium of +6% to the implied ratio based on share prices on the 9th of April 2015 and a premium between +9% and +14%, to the VWAP 1, 2 and 3
months of both shares. Given numerous rumors about consolidation scenarios in the sector and notably around Alcatel-Lucent and Nokia, it is likely that the Alcatel-Lucent share price was already incorporating a speculative premium. As a matter of
fact, the exchange ratio on VWAP 6 and 9 months before the 9th of April shows a premium of +27% and +29% respectively. |
| |
• |
|
Looking at a diversified sample of Telecom Equipment manufacturers, the comparable companies valuation analysis, based on 23rd of October market forecast
consensus, leads to |
C-76
| |
an average implied parity of 0.50. At 0.5500 Nokia share for 1 Alcatel-Lucent share, the proposed exchange ratio provides a premium of +10% to the valuation of the two companies using the
comparable valuation approach. |
| |
• |
|
The intrinsic valuation of the two groups based on the Discounted Cash Flow methodology (DFC to firm or DCF to equity) using, for the short term market consensus forecast and for the longer term Trival modeling, leads
to an implied parity between 0.48 and 0.52 based on market conditions prevailing on the 23rd of October 2015 and without taking into account any impact of the combination. Hence, the exchange ratio of 0.5500 Nokia share for 1 Alcatel-Lucent share
provides a premium of +6% to +14% to these implied parities. |
Based on the above, at 0.5500 Nokia share for 1 Alcatel-Lucent share, the exchange ratio
is fair for Alcatel-Lucent shareholders.
The Exchange Offer, for both Alcatel-Lucent shares and Alcatel-Lucent OCEANEs, entails a change, during the offer period,
in the conversion ratios of the various OCEANEs. The offer for the OCEANEs takes into account this conversion adjustment. Thus, the number of Nokia shares to be created will depend on the success ratio of the offer, in particular for the
different OCEANEs. However, regardless of the result of the offer for the OCEANEs and the number of Nokia shares that will consequently be issued, the share exchange ratio of 0.5500 is higher than the implicit parities coming from the DCF
calculation performed by Associés en Finance at 23rd of October market conditions. Hence confirming that the offer for the shares is fair.
Beyond the
premium that they will get compared to the intrinsic valuation, Alcatel-Lucent shareholders, who will tender their shares, will become invested in one of the most liquid shares of the Euro zone and it is expected that the liquidity of the share will
further increase should the offer be successful. In addition those shareholders will be in a position to benefit from potential incremental value creation if the planned synergies materialize.
The offer is optional for the OCEANE holders and allows them, should they tender their OCEANE, to benefit from the same financial conditions that they would get if they
decide first to convert their OCEANE into shares and then tender these shares to the offer. Therefore there is no breach of parity between shareholders and OCEANE holders.
On the announcement date of the contemplated combination, the proposed offer to the OCEANE holders displays a premium to the intrinsic value and to the listed price of
each OCEANE. On the 23rd of October, the exchange ratio shows a substantial premium to the listed and to the intrinsic value of the 2018 OCEANE and a very small discount (below 5% on average) to the listed and intrinsic value of the OCEANE 2019 and
2020 based on a 1-month or 3-month average. The exchange ratio proposed during the offer is equivalent to the spot listed price of the OCEANE bonds and to their intrinsic values at 23 October 2015. It is important to mention that the listed
price and the intrinsic value of the OCEANE reflect current market conditions and current liquidity levels. OCEANE holders that would choose to keep their OCEANE would, should the offer be successful, take the risk of a substantial drop of the
underlying shares’ liquidity and of the OCEANEs’ liquidity. On the other hand, should the offer fail, they would take the risk of a potential drop of the Alcatel-Lucent shares. Hence, the exchange ratio of 0.6930 Nokia shares for 1
Alcatel-Lucent OCEANE 2018, 0.7040 Nokia shares for 1 Alcatel-Lucent OCEANE 2019 and 0.7040 Nokia share for 1 Alcatel-Lucent OCEANE 2020 is fair.
Associés
en Finance‘s valuation work and the above explanations lead us to conclude that the terms of the optional exchange offer by Nokia on Alcatel-Lucent shares and OCEANEs are fair.
Associés en Finance
C-77
Appendix 1: Presentation of the appraiser
Associés en Finance and Détroyat Associés announced their merger in December 201468.
Created in 1979, Associés en Finance is a financial analysis and valuation specialist. Its co-founder, Bertrand Jacquillat, helped develop various valuation and
financial techniques that are now used by the whole financial community.
Created in 1968 by Jean-Michel Détroyat, Détroyat Associés was one of
the very first independent French financial consultancy and research firms.
The combination of these two companies has enabled the creation of the only independent
corporate finance and valuation expert with a strong financial culture, whose legitimacy is based on its in-depth knowledge of the financial markets, its financial modelling skills and its highly rigorous approach. The new entity has a workforce of
around 25, making it a leading player in the Paris market in terms of both numbers and quality.
One of Associés en Finance’s specific features is its
proprietary valuation model Trival®. Trival monitors over 500 listed companies sorted by sector, which allows for a consistent and rigorous approach to their valuation. The model calculates,
on a daily basis, market risk and illiquidity premiums, and the cost of financing resources for the whole market and for individual companies in particular. These market premiums are used as a benchmark by a large number of external appraisers and
valuers. The model is also a powerful analytical tool for the valuation of unlisted companies and assets.
Associés en Finance tracks a number of companies
in the telecom and electronic sector within its valuation model, enabling it to develop in-depth knowledge of the sector that is unique among independent appraisal firms.
| 68 |
Associés en Finance and Détroyat Associés merged in late 2014. The trading name of the new entity is “Associés en Finance, Jacquillat et Détroyat Associés”. For
readability purposes, this report hereinafter refers to the company as “Associés en Finance” or “AEF”. |
C-78
Before and after their merger, Associés en Finance and Détroyat Associés have performed a number of
independent valuation assignments and provided over 200 fairness opinions. Associés en Finance and Détroyat Associés have recently acted as independent appraisers in relation to the following transactions involving shares traded
on regulated markets:
|
|
|
|
|
|
|
|
|
| Date |
|
Target |
|
Initiator |
|
Sponsoring bank(s) |
|
Type of offer |
| July 2015 |
|
Serma |
|
Financière Ampère Galilée |
|
Invest Securities |
|
Simplified public tender offer |
| June 2015 |
|
Société d’Edition de Canal+ |
|
Vivendi |
|
CM-CIC Sec. / Credit Agricole CIB |
|
Public tender offer |
| November 2014 |
|
Nexeya |
|
Nexeya Invest |
|
Natixis |
|
Public buyout offer and squeeze-out |
| October 2014 |
|
Cameleon Software |
|
Pros Holdings |
|
Bryan Garnier & Co |
|
Simplified public tender offer |
| September 2014 |
|
Club Méditerranée |
|
Global Resort |
|
Lazard Frères / Unicredit Bank AG |
|
Public tender offer |
| September 2014 |
|
Orosdi |
|
CEREP Investment France |
|
Oddo Corporate Finance |
|
Public buyout offer |
| September 2014 |
|
Alphamos |
|
DMS |
|
Rochefort & Associés |
|
Capital increase |
| July 2014 |
|
Carrefour Property Developpement |
|
CRPF 13 |
|
Natixis |
|
Public buyout offer |
| December 2013 |
|
Meetic |
|
Match.com |
|
BNP Paribas |
|
Simplified public tender offer |
| November 2013 |
|
LaCie |
|
Seagate |
|
BNP Paribas |
|
Simplified public tender offer |
Associés en Finance has not joined either of the two professional associations authorised by the AMF under article 263-1 of its
General Regulation. Associés en Finance’s expertise and experience in terms of financial analysis and valuations, along with its internal procedures, ensure the demanding, independent prior quality control that is required in this type
of assignment.
Staff involved in the assignment
The people
working on this assignment are as follows:
| |
• |
|
Bertrand Jacquillat, co-founder of Associés en Finance and Honorary Chairman, simultaneously pursued a university career and a hands-on career in finance, helping to disseminate advances in financial
theory in France. He has held a number of university posts (professor at the Universities of Berkeley and Stanford, visiting fellow at the Hoover Institution, professor at HEC in Paris and the Universities of Lille and Paris-Dauphine between 1969
and 1999). He was a professor at Sciences Po Paris between 1999 and 2014 and is now Emeritus Professor. He is the vice-chairman of the Cercle des Economistes, and the author and/or co-author of over fifty scientific articles and a number of books.
He is also a board member of Klépierre and Presses Universitaires de France. |
| |
• |
|
Philippe Leroy, Chairman, has been responsible for the operational supervision or quality control of all assignments conducted by Détroyat
Associés since 2007. A graduate of the exclusive ESSEC business school in Paris, he began his career at Bossard Consultants before joining the banking industry, first with BGP-SIB, then with Chase Manhattan Bank where he was General Manager
in France, and HSBC Markets, also as Managing Director, where he created the Primary Dealers Department. He was also |
C-79
| |
Director of Corporate Finance and member of the executive committee of Vivarte. Moreover, he has held a number of positions as corporate officers and is a court expert for the Paris Court of
Appeal. |
| |
• |
|
Arnaud Jacquillat, CEO, is in charge of the operational supervision of Associés en Finance and its business development. After starting his career at Nomura, he joined Banque NSM and then ABN AMRO in
Amsterdam as vice-president in charge of strategy for the investment banking division. He then spent 15 years as an investment banker with ABN AMRO and Royal Bank of Scotland. |
| |
• |
|
Catherine Meyer, Partner, is an analyst and head of valuation, appraisal and advisory assignments, as well have having cross-discipline responsibility for training and quality control over the company’s
work. A graduate of HEC business school in Paris, she is also a member of SFAF, the French association of financial analysts. |
| |
• |
|
Pierre Charmion, financial analyst, joined Associés en Finance in 2011. He has a Master’s Degree (Master 222) in Financial Markets and Asset Management from the University of Paris-Dauphine, and began
his career in the Convertibles and Fixed Income department of Oddo Asset Management. He specialises in the valuation of derivatives. |
| |
• |
|
Julien Bianciotto, financial engineer and analyst, joined Associés en Finance in 2006. He is a graduate of the prestigious École Polytechnique and ENSAE (French school of statistics and economic
administration), and his responsibilities include the coverage of technology companies. |
| |
• |
|
Laurent Sitri, financial analyst and valuer, joined Associés en Finance in 2004. He has a Master’s Degree (Master 104) in Finance from the University of Paris Dauphine and an MBA from Strathclyde
Graduate Business School, Glasgow (Scotland). He has worked in the financial markets for around 15 years and leads valuation assignments in a range of sectors. |
| |
• |
|
Viet Do-Quy, financial analyst and valuer, has a Specialised Masters in Finance from ESCP Europe and a Master’s degree in Economics from Paris-XII University. He has worked in mergers and acquisitions at
Rothschild & Cie, Société Générale and then Benoit & Associés. He has experience in advisory and valuation assignments covering a wide variety of sectors. |
Remuneration
The fee for this assignment is fixed, not dependent on
the result of the offer, and amounts between €500,000 and €650,000 excluding VAT, depending on the time spent on the assignment.
C-80
Appendix 2: Performance of the assignment
Associés en Finance has had meetings with the following people:
| |
• |
|
Philippe Camus, Chairman of the Board of Directors, Alcatel-Lucent, Chairman and CEO at 1 September 2015; |
| |
• |
|
Michel Combes, CEO of Alcatel-Lucent at the time the offer was announced; |
| |
• |
|
Jean Raby, Chief Financial and Legal Officer, Alcatel-Lucent; |
| |
• |
|
Rémi Thomas, Global Head of Mergers & Acquisitions and Corporate Development, Alcatel-Lucent; |
| |
• |
|
Fred Ludtke, Vice President Mergers & Acquisitions, Alcatel-Lucent; |
| |
• |
|
Jean-Pierre Lartigue, Head of Corporate Strategy, Alcatel-Lucent; |
| |
• |
|
Olivier Durand, Deputy CFO, Alcatel-Lucent; |
| |
• |
|
Xavier Langlois d’Estaintot, Group Treasurer, Alcatel-Lucent; |
| |
• |
|
Christine Henry, Senior Manager Mergers & Acquisitions, Alcatel-Lucent; |
| |
• |
|
Nathalie Trolez-Mazurier, Head of Securities Law and Company Law, Alcatel-Lucent; |
| |
• |
|
Stéphane Zeghbib, Executive Director, Zaoui & Co, advisor to Alcatel-Lucent; |
| |
• |
|
Jonathan Arzel, Associate, Zaoui & Co, advisor to Alcatel-Lucent; |
| |
• |
|
Xavier Bindel, Managing Director Head of Mergers & Acquisitions, JP Morgan, advisor to Nokia; |
| |
• |
|
Patrik Czornik, Vice President, JP Morgan, advisor to Nokia; |
| |
• |
|
Jean-Baptiste Duchamp, JP Morgan, advisor to Nokia; |
| |
• |
|
Gauthier Blanluet, Partner, Sullivan & Cromwell; |
| |
• |
|
Alexandre Merle, Associate, Sullivan & Cromwell; |
| |
• |
|
Marie-Anne Pic, Associate, Sullivan & Cromwell; |
| |
• |
|
Seela Apaya-Gadabaya, Practice Area Associate, Sullivan & Cromwell; |
| |
• |
|
Julien Benhamou, Vice President, Société Générale Corporate & Investment Banking, sponsoring bank; |
| |
• |
|
Alexandre Courbon, Managing Director, Société Générale Corporate & Investment Banking, sponsoring bank; |
| |
• |
|
Kevin Debrabant, M&A analyst, Telecom & Media, Société Générale Corporate & Investment Banking, sponsoring bank. |
The work schedule included the following:
| |
• |
|
Analysing Alcatel-Lucent and Nokia’s registration documents and annual reports since 2006; |
| |
• |
|
Analysing Alcatel-Lucent and Nokia’s quarterly and half-yearly results publications; |
| |
• |
|
Analysing the OCEANE 2018, 2019 and 2020 issue prospectuses; |
| |
• |
|
Analysing the prospectus relating to Alcatel-Lucent’s capital increase in 2013; |
C-81
| |
• |
|
Reading the minutes of Alcatel-Lucent board meetings since 2013; |
| |
• |
|
Analysing Alcatel-Lucent’s 2015 budget and discussing the matter with Olivier Durand; |
| |
• |
|
Examining initial offer presentation documents prepared by JP Morgan (advisor to Nokia) and Zaoui (advisor to Alcatel-Lucent) sent to Alcatel-Lucent’s Board of Directors; |
| |
• |
|
Reading the Memorandum of Understanding; |
| |
• |
|
Analysing broker notes; |
| |
• |
|
Reading industry analyses by Dell’Oro, Analysys Mason, TBR etc.; |
| |
• |
|
Using external financial databases (Bloomberg, Capital IQ); |
| |
• |
|
Using the Associés en Finance Trival database; |
| |
• |
|
Examining work done by Société Générale CIB, the offer’s sponsoring bank, and critically reviewing information prepared by the sponsoring bank for the purpose of assessing the offer
price; |
| |
• |
|
Analysing Nokia’s draft information memorandum; |
| |
• |
|
Carrying out a financial analysis of Alcatel-Lucent and Nokia covering their financial statements and strategy; |
| |
• |
|
Analysing the technological and competitive environment; |
| |
• |
|
Examining securities transactions; |
| |
• |
|
Examining dilutive instruments; |
| |
• |
|
Valuing the companies using a multi-criteria approach; |
| |
• |
|
Holding discussions with the various people listed above; |
| |
• |
|
Analysing recent transactions involving sector companies; |
| |
• |
|
Reviewing/assessing adjustments involved in the transition from enterprise value to equity value; |
| |
• |
|
Preparing the appraisal report to be included in the response memorandum. |
Assignment timetable
Associés en Finance was appointed by Alcatel-Lucent on 4 June 2015. Associés en Finance’s assignment took place between 15 June 2015 and
27 October 2015. During that period, Associés en Finance had regular contact in person and by telephone with the various people listed above.
C-82
Appendix 3: Detailed information on comparable companies
“Telecom infrastructure” sample
|
|
|
|
|
|
|
|
|
|
|
|
|
| Company |
|
Country |
|
Business
description |
|
Market
capitalisation |
|
2014R
financials |
|
2014R revenue by
business |
|
2014R revenue
by region |
|
|
|
|
|
|
|
|
|
|
|
Telecoms hardware manufacturer specialising in enterprise networks |
|
€123,740m |
|
Revenue €42,698m
EBIT margin 22.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Generalist telecoms hardware manufacturer |
|
€29,272m |
|
Revenue €23,906m
EBIT margin 9.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Generalist telecoms hardware manufacturer focused on the Chinese market |
|
€10,739m |
|
Revenue €11,741m
EBIT margin 5.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecoms hardware manufacturer specialising in enterprise networks |
|
€9,356m |
|
Revenue €4,117m
EBIT margin 13.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecoms hardware manufacturer specialising in fibre-optic networks |
|
€2,638m |
|
Revenue €2,062m
EBIT margin 3.4% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecoms hardware manufacturer specialising in fixed networks |
|
€709m |
|
Revenue €561m
EBIT margin 7.5% |
|
|
|
|
Sources: companies, Capital IQ, AEF analysis / 1-month average market cap at 27 August 2015; financial data for the calendar year
ended 31 December
C-83
“Patent licensing” sample
|
|
|
|
|
|
|
|
|
|
|
|
|
| Company |
|
Country |
|
Buiness
description |
|
Market
capitalisation |
|
2014R
financials |
|
2014R revenue
by business |
|
2014R revenue
by region |
|
|
|
|
|
|
|
|
|
|
|
Mobile technologies, particularly CDMA-based processors and software systems |
|
€84,546m |
|
Revenue €23,248m
EBIT margin 31.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audio technologies for devices including TVs, PCs, DVD players, Blu-Ray players, smartphones, tablets and video games consoles |
|
€3,047m |
|
Revenue €857m
EBIT margin 27.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OLED (Organic Light Emission Display) technologies used in devices including TVs, smartphones and tablets |
|
€1,690m |
|
Revenue €170m
EBIT margin 30.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless communication technologies used in products based on 2G, 3G, 4G and IEEE 802 (LAN or local area network) standards |
|
€1,626m |
|
Revenue €370 million
EBIT margin 40.6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile IT, memory, data storage and 3D integrated circuit technologies |
|
€1,622m |
|
Revenue €248m
EBIT margin 64.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Memory technologies and security systems for smartphones and tablets |
|
€1,355m |
|
Revenue €264m
EBIT margin 23.8% |
|
|
|
|
Sources: companies, Capital IQ, AEFDA analysis / 1-month average market cap; financial data at 31 December
C-84
Appendix 4: Details of past transactions in the sector
These calculations take into account recent transactions (since 2010) that have a strong strategic element, involving companies taking positions in and entering new
markets, and diversifying and integrating their product portfolios. The sample of comparable transactions identified is provided in Table 40. The multiples involved in these transactions show a very wide range, prompting us to use median rather than
mean figures in our calculations.
Table 40
Transaction multiples in the sample adopted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Date of
announcement |
|
Target |
|
|
|
Financial data (€ m) Multiples (historical) |
|
|
Margin |
|
| |
Name |
|
Country |
|
Business |
|
Buyer |
|
% acquired |
|
|
EV |
|
|
Revenue |
|
|
EBITDA |
|
|
EBIT |
|
|
EBITDA |
|
|
EBIT |
|
| 04-May.-15 |
|
Cyan |
|
USA |
|
NFV/SDN solutions and packet optical transport controllers |
|
Ciena |
|
|
100.0 |
% |
|
|
379 |
|
|
|
3.5x |
|
|
|
nm |
|
|
|
nm |
|
|
|
(25.2 |
%) |
|
|
(28.5 |
%) |
| 08-Apr.-15 |
|
Transmode |
|
Sweden |
|
DWDM- and Ethernet-based metropolitan optical networks |
|
Infinera |
|
|
95.8 |
% |
|
|
336 |
|
|
|
3.3x |
|
|
|
21.7x |
|
|
|
33.5x |
|
|
|
15.0 |
% |
|
|
9.7 |
% |
| 02-Mar.-15 |
|
Aruba Networks |
|
USA |
|
WLAN enterprise solutions |
|
HP |
|
|
100.0 |
% |
|
|
2,386 |
|
|
|
3.3x |
|
|
|
13.7x |
|
|
|
16.1x |
|
|
|
24.3 |
% |
|
|
20.6 |
% |
| 28-Jan.-15 |
|
Broadband Network division of TE |
|
USA |
|
Telecoms, enterprise and WiFi solutions |
|
CommScope |
|
|
100.0 |
% |
|
|
2,646 |
|
|
|
1.6x |
|
|
|
10.0x |
|
|
|
11.4x |
|
|
|
15.5 |
% |
|
|
13.7 |
% |
| 15-Dec.-14 |
|
Riverbed Technology |
|
USA |
|
Application performance infrastructure solutions |
|
Thoma Bravo / Ontario Teachers |
|
|
100.0 |
% |
|
|
3,223 |
|
|
|
3.2x |
|
|
|
13.9x |
|
|
|
25.2x |
|
|
|
23.2 |
% |
|
|
12.7 |
% |
| 15-Apr.-14 |
|
Enterprise division of Motorola Solutions |
|
USA |
|
Mobile IT, communication technology and data capture solutions |
|
Zebra Technologies |
|
|
100.0 |
% |
|
|
2,713 |
|
|
|
1.3x |
|
|
|
8.3x |
|
|
|
9.3x |
|
|
|
16.2 |
% |
|
|
14.4 |
% |
| 24-Feb.-14 |
|
TriQuint Semiconductor |
|
USA |
|
Manufacturing of radio-frequency (RF) semiconductors |
|
RF Micro Devices |
|
|
100.0 |
% |
|
|
1,256 |
|
|
|
1.7x |
|
|
|
15.8x |
|
|
|
nm |
|
|
|
10.7 |
% |
|
|
(1.2 |
%) |
| 20-Dec.-13 |
|
LGS Innovations |
|
USA |
|
Secure networks and solutions for US national security |
|
Madison Dearborn Partners |
|
|
100.0 |
% |
|
|
145 |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
| 21-Oct.-13 |
|
Tellabs |
|
USA |
|
Optical transport hardware |
|
Marlin Equity Partners |
|
|
100.0 |
% |
|
|
251 |
|
|
|
0.4x |
|
|
|
34.7x |
|
|
|
nm |
|
|
|
1.1 |
% |
|
|
(3.6 |
%) |
| 01-Jul.-13 |
|
Nokia Siemens Networks (NSN) |
|
Finland |
|
Nokia/Siemens joint venture in fixed and mobile network hardware |
|
Nokia |
|
|
50.0 |
% |
|
|
3,015 |
|
|
|
0.2x |
|
|
|
2.9x |
|
|
|
6.7x |
|
|
|
8.1 |
% |
|
|
3.5 |
% |
| 23-Jan.-13 |
|
Intucell |
|
Israel |
|
SON (Self-Optimizing Network) technologies |
|
Cisco |
|
|
100.0 |
% |
|
|
361 |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
| 03-Dec.-12 |
|
Optical Networks division of NSN |
|
Germany |
|
Optical transport hardware |
|
Marlin Equity Partners |
|
|
100.0 |
% |
|
|
na |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
| 21-Feb.-12 |
|
BelAir Networks |
|
Canada |
|
WiFi network solutions |
|
Ericsson |
|
|
100.0 |
% |
|
|
188 |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
| 12-Dec.-11 |
|
Broadband Access division of NSN |
|
Finland |
|
Fixed broadband network hardware |
|
Adtran |
|
|
100.0 |
% |
|
|
18 |
|
|
|
0.1x |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
| 04-Nov.-11 |
|
Microwave Transport division of NSN |
|
Finland |
|
Microwave transport |
|
DragonWave |
|
|
100.0 |
% |
|
|
13 |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
| 01-Aug.-11 |
|
PAETEC |
|
USA |
|
Voice, data and internet enterprise communication solutions. |
|
Windstream |
|
|
100.0 |
% |
|
|
1,763 |
|
|
|
1.3x |
|
|
|
7.5x |
|
|
|
28.5x |
|
|
|
17.1 |
% |
|
|
4.5 |
% |
| 14-Jun.-11 |
|
Telcordia |
|
USA |
|
OSS/BSS software solutions |
|
Ericsson |
|
|
100.0 |
% |
|
|
908 |
|
|
|
1.6x |
|
|
|
6.3x |
|
|
|
7.1x |
|
|
|
24.9 |
% |
|
|
21.8 |
% |
| 16-Nov.-10 |
|
Trapeze Networks |
|
USA |
|
WLAN infrastructure for enterprise |
|
Juniper |
|
|
100.0 |
% |
|
|
115 |
|
|
|
2.7x |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
| 27-Oct.-10 |
|
CommScope |
|
USA |
|
Network infrastructure solutions |
|
Carlyle |
|
|
100.0 |
% |
|
|
3,521 |
|
|
|
1.5x |
|
|
|
7.7x |
|
|
|
11.3x |
|
|
|
19.4 |
% |
|
|
13.3 |
% |
| 16-Sep.-10 |
|
Occam Networks |
|
USA |
|
Broadband network hardware and software for copper and fibre networks |
|
Calix |
|
|
100.0 |
% |
|
|
124 |
|
|
|
1.7x |
|
|
|
22.2x |
|
|
|
36.9x |
|
|
|
7.8 |
% |
|
|
4.7 |
% |
| 19-Jul.-10 |
|
Wireless assets of Motorola Solutions |
|
USA |
|
Wireless network hardware (CDMA, WCDMA, WiMAX, LTE) |
|
Nokia Siemens Networks (NSN) |
|
|
100.0 |
% |
|
|
657 |
|
|
|
1.0x |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
|
|
na |
|
| 13-Jul.-10 |
|
ADC Telecommunications |
|
USA |
|
Telecoms systems for telcos and cable operators |
|
TE Connectivity (formerly Tyco |
|
|
100.0 |
% |
|
|
923 |
|
|
|
1.2x |
|
|
|
9.3x |
|
|
|
17.5x |
|
|
|
13.2 |
% |
|
|
7.1 |
% |
| Mean since 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.7x |
|
|
|
13.4x |
|
|
|
18.5x |
|
|
|
12.2 |
% |
|
|
6.6 |
% |
| Median since 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.6x |
|
|
|
10.0x |
|
|
|
16.1x |
|
|
|
15.3 |
% |
|
|
8.4 |
% |
| Source: Capital IQ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C-85
Transaction details
On
4 May 2015, Ciena announced the acquisition of Cyan, which specialises in optical transmission and NFV/SDN (Networks Functions Virtualization / Software-Defined Control). The transaction was completed on 3 August 2015 for a total of $488
million ($33.6 million in cash and 10.6 million Ciena shares, plus the purchase of Cyan convertible bonds for $50 million and the purchase of Cyan stock options). Cyan sells packet-optical transport controllers. However, Ciena was mainly
interested in Cyan’s Blue Planet division containing its nascent NFV/SDN business, enabling operators to virtualise their key network functions such as management of VoIP calls, mobile networks and content delivery networks. NFV/SDN
technologies can transform a network infrastructure, based on a proprietary hardware platform and customised for each operator, into a virtualised network architecture that exists in the cloud, managed by software, and standardised and shared
between several operators. These technologies allow resources to be shared between operators, reducing their operating costs and investment and also their hardware and power consumption costs, thereby helping them deal with growth in data traffic
and the explosion in bandwidth-consuming technologies.
On 8 April 2015, Infinera announced an agreed takeover of Transmode, which specialises in metro
packet-optical networking based on DWDM (Dense Wavelength Division Multiplexing) and Ethernet technologies. The initial cash-and-shares offer valued Transmode at SEK2,966 million (€317 million)
or SEK109 per share, representing a 12.1% premium to the market price, and was followed by a second, alternative, all-cash offer. When it closed on 7 August 2015, 95.8% of Transmode shares had been tendered to the offer. The average transaction
price valued Transmode’s equity at SEK3,377 million (€352 million). Transmode specialises in metropolitan optical networks, which are larger than local area networks (LANs), covering areas
ranging from a few blocks of houses to an entire city. The acquisition will enable Infinera to combine its expertise in long-distance optical networks in North America with those of Transmode in metropolitan optical networks in Europe. The deal
strengthened Infinera’s position in the WDM optical networks market, in view of the expected transition to 100Gb/s networks.
On 2 March 2015, Aruba
Networks, a provider of hardware and services for wireless local area networks (WLANs), was acquired by Hewlett-Packard for $3.0 billion in cash. The deal valued Aruba Networks at $24.67 per share, a 34.0% premium to the share price on the day
before the announcement, and was HP’s largest transaction since 2011. The transaction supported the group’s general aim of strengthening its presence in the WLAN market, which is expected to grow by 40% (around $13 billion) by 2019, as the
Wi-Fi IEEE 802.11ac protocol adopted in January 2014 harmonises performance standards. After the deal, HP had a market share of 8.6% versus 2.6% previously, bringing it closer to undisputed market leader Cisco with 28.7%. The acquisition of Aruba
Networks, the main supplier to the University of California but also Chinese conglomerate Dalian Wanda, will strengthen HP’s presence in China. The deal was completed on 19 May 2015, and the integration of Aruba Networks within HP
Networking, a division of HP Enterprise, coincides with the splitting of the HP group into Hewlett-Packard Enterprise (business services and professional hardware) and Hewlett-Packard Inc. (PCs and printers). After this restructuring, Meg Whitman
expected future acquisitions to focus on data storage and new-generation IT centre hardware.
On 28 January 2015, CommScope, a provider of network
infrastructure solutions, announced the acquisition of the BNS (Broadband Network Solutions) division of TE Connectivity for $3.0 billion in cash. The deal covered TE Connectivity’s telecom networks, enterprise networks and wireless networks
businesses. Most of the assets sold corresponded to the ADC Telecommunications assets that TE Connectivity had acquired five years earlier. The combination was highly strategic for CommScope, enabling it to diversify both its product range and its
geographical positions. The deal made CommScope a leading player in network infrastructure solutions, including RF (radio frequency) systems, coaxial Ethernet cables and fibre-optics. Through this transaction, CommScope also acquired a portfolio of
7,000 patents and gained exposure to the small-cell DAS (Distributed Antenna Systems)
C-86
solutions market, which addresses network black spots within a large building by installing a network of small antennae acting as repeaters throughout the building. The deal strengthened
CommScope’s presence in Europe, the Middle East, Africa and Asia-Pacific.
On 15 December 2014, private equity fund Thoma Bravo and Canadian pension fund
Ontario Teachers Pension Plan announced the acquisition of Riverbed Technology, a leading player in the optimisation of wide area networks (WANs) and application performance. Difficulties integrating Opnet Technologies, a producer of network traffic
management software acquired for $921 million in 2012, the general decline in the WAN market, and pressure from activist investor Elliott Management which owned 10.5% of the group’s shares, prompted Riverbed Technology to undertake a strategic
review and cost-cutting programme of around $20-25 million announced in October 2014. This process led to the acquisition of Riverbed Technology for $3.5 billion in cash ($21 per share) and its delisting.
On 15 April 2014, Zebra Technologies, which specialises in flow and inventory management solutions using barcodes and RFID (Radio Frequency Identification)
technology, acquired the Enterprise division of Motorola Solutions, including mobile IT solutions and data capture technology, for $3.45 billion in cash. The transaction excluded the iDEN product portfolio. The acquisition aimed to strengthen Zebra
Technologies’ position in the AIDC (Automatic Identification and Data Capture) sector and to help the group develop in the “internet of things” market.
On 24 February 2014, RF Micro Devices, a producer of radio frequency (RF) semiconductors, announced a merger with rival TriQuint Semiconductor for $1.59 billion.
The combination of these two US hardware manufacturers took place in September 2014 via a public exchange offer, after which each company owned 50.0% of the new group named Qorvo Inc. The merger created a major player in mobile radio frequency
solutions, network infrastructure and defence.
On 20 December 2013, Alcatel-Lucent sold shares in its LGS Innovations subsidiary to a group of investors led
by private equity fund Madison Dearborn Partners. The terms of the agreement included a total cash payment of $200 million, with 50.0% paid when the deal closed and 50.0% as earn-out payments depending on LGS’ operating results in fiscal 2014.
LGS Innovations has been a supplier to the US federal government for 60 years. The company sells secure networks, satellite and voice over IP (VoIP) communication solutions, optical routers and solutions for US national security, defence and
research.
On 21 October 2013, Marlin Equity Partners announced the acquisition of Tellabs for a total amount of $891 million in cash at a price of $2.45 per
share, representing a 4.3% premium to the previous closing market price. Taking into account net cash of $551 million, the enterprise value of the deal was $340 million. Tellabs supplies optical transmission hardware to telecom operators, cable
operators, companies and governments in over 90 countries worldwide. The acquisition formed part of a build-up strategy, combining the activities of Tellabs with those of Coriant (resulting from the acquisition of NSN’s optical transmission
assets), and Sycamore’s assets in the same segment, which were acquired on 31 January 2013 for $18.8 million. Tellabs had started a strategic restructuring process in order to refocus on the fibre-optic and mobile networks segment. The
group had been making losses for three years because it was losing market share to sector heavyweights Huawei, Cisco and Alcatel-Lucent, and because of a contraction in its client base due to a wave of consolidation among telecom operators.
On 1 July 2013, Nokia acquired from Siemens the 50.0% it did not already own in the NSN (Nokia Siemens Networks) joint venture, specialising in fixed and mobile
network hardware, for $1.7 billion. The terms of the deal included a cash payment of $1.2 billion and a 1-year vendor loan of $500 million granted by Siemens. NSN became profitable in 2012 following drastic cost-cutting and a series of disposals of
unprofitable businesses such as its fixed broadband telecom business to US telecom
C-87
hardware manufacturer Adtran, and its fibre-optic unit to private equity fund Marlin Equity Partners. After the deal, NSN became a wholly owned subsidiary of Nokia and was renamed Nokia
Solutions and Networks and then Nokia Networks. It is now one of Nokia’s most profitable divisions and became Nokia’s core business after it sold its mobile handset business in 2014.
On 23 January 2013, Cisco announced the acquisition of Intucell, an Israeli start-up based in Ra’anana and a provider of self-optimizing network (SON)
technologies, for $475 million in cash. The SON platform enables mobile telecom operators to configure and manage networks automatically, by adjusting them in line with demand in real time. The transaction also met Cisco’s strategic aim of
strengthening its cloud computing and software-defined networks (SDN) business.
On 3 December 2012, NSN sold its Optical Networks division to private equity
fund Marlin Equity Partners. The terms of the agreement were not made public. NSN’s Optical Networks division is a leading player in its market segment, developing optical transmission solutions and hardware. The deal involved the transfer of
1,900 employees to a new entity named Coriant, headquartered in Munich.
On 21 February 2012, Ericsson announced the acquisition of BelAirs Networks, a
Canadian specialist in WiFi networks, for $250 million. The development of heterogeneous network (HetNet) technology forms part of the group’s strategy of improving the broadband experience by managing the coexistence of mobile and WiFi
technologies.
On 12 December 2011, Adtran acquired NSN’s fixed broadband internet hardware (Broadband Access) business. The purchase price was not made
public, but was estimated by analysts to be $20 million. The transaction comprised broadband technologies, intellectual property and a diverse client base across 20 countries in Europe, the Middle East, Africa, India, Russia and Asia. However, it
did not include any production plants. The deal made Adtran the world number two in the MSAP (Multi-Service Access Platform) and broadband DSL (Digital Subscriber Line) markets. The transaction formed part of NSN’s strategic plan to refocus on
mobile broadband. The low value of the transaction was due to the decline in the business, which was generating falling sales, a low gross margin of 30% and operating losses.
On 4 November 2011, NSN sold its microwave transmission division to Canada’s DragonWave, along with the related OSS (Operational Support Systems) business,
for a total of €8.7 million, including a €12.7 million cash payment, 2,000,078 DragonWave shares worth €5.3 million and another €1.2 million payment for specific property, plant and equipment. The final acquisition price included a
post-closing repayment of €10.6 million by NSN to DragonWave because of weak business performance during the 12 months following the closing. The deal also included an earn-out payment of up
to €80 million depending on performance, which was not triggered. The acquisition enabled DragonWave to diversify geographically outside North America by taking solid positions in Europe,
the Middle East, Africa and India. After the transaction, DragonWave became a strategic partner of NSN in packet-based microwave transmission through a framework agreement under which NSN is responsible for sales and DragonWave is in charge of the
product range, R&D and operations.
On 1 August 2011, Windstream acquired PAETEC, which specialises in voice, data and internet enterprise communication
solutions. The total transaction price was $2.3 billion and involved an exchange of shares (0.46 Windstream shares for each PAETEC share), valuing PAETEC at $5.62 per share, i.e. a 27.0% premium to the previous closing price. Windstream issued
73.4 million new shares worth $863 million, and took on PAETEC’s net debt ($1.4 billion). Synergies were estimated at $100 million and the value of tax loss carryforwards at $250 million. Windstream is the USA’s fifth-largest local
telecom operator, with a presence in 29 states, mainly in rural regions. The PAETEC acquisition formed part of a series of deals (Nuvox, Iowa Telecommunications, Q-Comm) reflecting Windstream’s
C-88
strategy of diversifying into enterprise services, driven by the fact that increasing numbers of consumers were disconnecting their fixed-line home phones. With the acquisition of PAETEC,
enterprise broadband services accounted for 66.0% of the group’s revenue.
On 14 June 2011, Ericsson announced the acquisition of Telcordia from
Providence Equity Partners and Warburg Pincus for $1.15 billion in cash (no debt). This was Ericsson’s largest deal since its acquisition of Nortel’s mobile network hardware business for $1.13 billion in 2009. Telcordia, the former R&D
division of US telco AT&T, which spun it off in 1982, specialises in OSS/BSS (Operational Support Systems / Business Support Systems) software solutions that help manage telcos’ supervision centres, in order to optimise their data traffic
and address network saturation. The explosion in mobile internet use is creating opportunities, but at the same time requires heavy investment, which is a concern for telcos. As a result, they are increasingly keen on these BSS/OSS software
solutions, which enable them to optimise their existing networks and limit new investment. The deal also allowed Ericsson to increase its presence in the North American market, where Telcordia had 70.0% of its revenue, generated in particular from
telcos AT&T, Verizon and Qwest, and to expand in emerging markets, serving telcos such as Oi (Brazil) and Tata (India).
On 16 November 2010, Juniper
acquired from Belden its Trapeze Networks division, specialising in WLAN (Wireless Local Area Network) infrastructure for companies, for $152.1 million in cash. In 2008, Belden had acquired Trapeze Networks, based in California, for $136.1 million
in cash. The transaction had major strategic appeal for Juniper, enabling it to grow in the WLAN infrastructure market, a fast-growing segment because of convergence and the surge in mobile internet usage. WLAN technology is intended for companies
whose mobile workers need wireless connectivity, such as medical and educational establishments, manufacturers and hotels. The WLAN market was worth an estimated $3.4 billion in 2014, versus $2.2 billion in 2010. In the second quarter of 2010, Cisco
(51.9%), Aruba (11.2%), Motorola (7.9%), HP Procurve/3Com (6.1%) and Trapeze (2.9%) shared 80.0% of this market.
On 27 October 2010, CommScope was
acquired by private equity firm Carlyle for $3.9 billion in cash, or $31.5 per share, representing a 36.0% premium to the closing price on 22 October 2010. CommScope was delisted on 14 January 2011. The company relisted in 2013 when
Carlyle sold part of its stake.
On 16 September 2011, Calix, a broadband network access hardware producer operating in North America and Latin America,
acquired its rival Occam Networks for $213.1 million, comprising $94.5 million in cash and $118.6 million in shares. The acquisition combined Occam’s expertise in IP and Ethernet with Calix’s skills fibre-optic access, and consolidated the
two companies’ positions in copper access.
On 19 July 2010, NSN announced the acquisition of Motorola Solutions’ wireless network infrastructure
assets, including the GSM, CDMA, WCDMA, WiMAX and LTE divisions. The purchase price was $1.2 billion on the day of the announcement, but was renegotiated to $975 million when the deal closed on 29 April 2011, after the exclusion of the GSM
business. Motorola Solutions retained substantially all of its patents relating to wireless network infrastructure. Through that acquisition, NSN aimed to be the world’s second-largest supplier of WiFi infrastructure.
On 13 July 2010, Tyco Electronics (currently TE Connectivity), announced the acquisition of ADC Telecommunications, a provider of telecom systems for telcos and
cable operators, for $1.25 billion in cash. This represented a price of $12.75 per ADC share, a 44.0% premium to the closing price on the day before the announcement. When the deal closed, the price was $1.26 billion. The transaction was intended to
make Tyco Electronics one of the leading players in the FTTH (Fiber To The Home) market, to diversify its client portfolio and to extend its geographical position, since ADC had strong positions in the North American and Chinese markets,
serving major clients like AT&T and Verizon.
C-89
Appendix 5: analysis of possible scenarios if OCEANEs are retained after the
public exchange offer
This appendix focuses on the situation of OCEANE holders that
have decided to retain their OCEANEs, in the event that Nokia obtains more than 50% of Alcatel-Lucent’s fully diluted share capital after the offer and that the change of control described in the OCEANE issue prospectus takes place.
Alcatel-Lucent and Euronext Paris will have to make a statement regarding this situation, and holders will be able to request early redemption of their OCEANEs at par value plus any accrued interest.
Table 41 summarises the various scenarios possible after the offer results are published.
Table 41
Possible scenarios affecting the
situation of OCEANE-holders who have decided to retain their OCEANEs
|
|
|
|
|
|
|
| |
|
Percentage of ALU shares
owned by Nokia |
|
Percentage of ALU’s fully-
diluted share capital
owned by Nokia |
|
Percentage of OCEANEs
in issue in each category |
| Condition: |
|
> 95% |
|
> 95% |
|
< 15% |
| Scenario 1 |
|
YES |
|
YES |
|
YES |
| Scenario 2 |
|
YES |
|
YES |
|
NO |
| Scenario 3 |
|
YES |
|
NO |
|
YES |
| Scenario 4 |
|
YES |
|
NO |
|
NO |
| Scenario 5 |
|
NO |
|
YES |
|
YES |
| Scenario 6 |
|
NO |
|
YES |
|
NO |
| Scenario 7 |
|
NO |
|
NO |
|
YES |
| Scenario 8 |
|
NO |
|
NO |
|
NO |
In the first two scenarios, Nokia is able and willing to carry out a squeeze-out on Alcatel-Lucent shares and OCEANEs, on terms that
must be equal to or better than those proposed in the public exchange offer. In these scenarios, the public exchange offer was very successful, both for the shares and the OCEANEs.
In addition, Nokia can convert the OCEANEs it holds into shares, thereby reducing the number of OCEANEs in issue. For OCEANE categories in which the number of OCEANEs
in issue falls below 15% of the number issued in that category (scenario 1), Alcatel-Lucent, now over 95%-owned by Nokia, is also able to redeem them early at par value plus any accrued interest.
Holders who decided to retain their OCEANEs in order to capture the time value of money will be unable to do so. However, they will obtain terms equal to or better than
those proposed in the offer when Nokia carries out a squeeze-out. In that event, they can also receive cash instead of the Nokia shares proposed in the public exchange offer. In addition, they can still opt for early redemption at par value plus
accrued interest in the event of a change of control.
In scenarios 3 and 4, Nokia is willing and able to carry out a squeeze-out on Alcatel-Lucent shares, but is
unable to do so for the OCEANEs. In these scenarios, the public exchange offer was very successful for the shares, but had mixed or limited success for the OCEANEs.
The fulfilment of the third condition is therefore fundamental. For OCEANE categories in which the number of OCEANEs in issue falls below 15% of the number issued in
that category (scenario 3), Alcatel-Lucent, now over 95%-owned by Nokia, is also able to redeem them early at par value. For the other OCEANE categories, or if Nokia decides not to do so, holders take the risk of becoming holders of financial
instruments whose underlying asset consists of unlisted Alcatel-Lucent shares. However, if
C-90
Alcatel-Lucent shares are no longer listed on a regulated market, the OCEANE issue prospectuses allow holders, pursuant to a decision in each OCEANE-holder meeting voting in accordance with the
quorum and majority requirements provided for by law, to request, for each OCEANE category, early redemption of all OCEANEs concerned at par value plus any accrued interest.
Holders who decided to retain their OCEANEs in order to capture the time value of money will be unable to do so, but they will still be able to opt for early redemption
at par value plus any accrued interest in the event of a change of control.
In scenarios 5 and 6, Nokia is willing and able to carry out a squeeze-out on the
OCEANEs, but is unable to do so for the shares. These are scenarios in which Nokia has obtained slightly less than 95% of the shares, but its very successful offer for the OCEANEs gave it over 95% of the capital on a fully diluted basis. However,
Nokia can convert the OCEANEs it holds following the offer into shares. That decision will allow it to own more than 95% of existing Alcatel-Lucent shares and to carry out a squeeze-out on the shares as well.
Holders are then in a situation identical to that described in the first two scenarios.
In scenarios 7 and 8, Nokia is not able to carry out a squeeze-out on Alcatel-Lucent shares or the OCEANEs. However, for OCEANE categories in which the number of
OCEANEs in issue falls below 15% of the number issued in that category (scenario 7), Alcatel-Lucent, now controlled by Nokia, is also able to redeem them early at par value plus any accrued interest. For OCEANEs in another category (scenario 8) or
if Nokia decides not to do so, holders may retain their OCEANEs and capture the time value of money.
C-91
Appendix 6: Detailed presentation of Associés en Finance’s Trival® model
The Trival valuation model developed by Associés en Finance is used to measure changes in valuation parameters in financial markets (risk and illiquidity
premiums, market premiums, interest rates, borrower spreads). Trival is an extended version of the previous Capital Market Line model, used from 1977 to 2001.
1. Trival: a cost of equity model
The valuation of a
company in the financial market is based on two factors:
| |
• |
|
medium- to long-term free cash flow forecasts that depend on the levels of margins, growth, capital intensity of the activity concerned and the target financial position; |
| |
• |
|
the rate of return required by the investor, itself depending on the level of anticipated risk in the economic entity valued and the liquidity of its stock on the market. |
Trival is a capital asset pricing model. Institutional asset managers use it to help them make their portfolio allocations by major asset class (bonds, shares,
high-risk or low-risk securities, liquid or illiquid securities, etc.) and in the selection of individual securities. It is also used by the various valuers involved in market transactions or business combinations. The special feature of Trival is
that it explicitly takes liquidity into account alongside the two “classic” parameters of returns and anticipated risk. It is a benchmark tool in terms of anticipated returns in the equity market and market premiums.
The world of Trival
The model encompasses over 500 companies within
the same sample: around 360 in the eurozone and around 150 companies outside the eurozone (mainly large North American and European non-eurozone companies) of very different sizes, with free floats of around
€30 million for the smallest to over €550 billion for the largest (around €150
billion for the largest free float among eurozone companies).
Market parameters are calculated on the basis of the sub-sample of eurozone stocks and are updated on
a daily basis.
Anticipated rate of return: discounted cash surpluses available for shareholders
The anticipated return is based on calculating the cash surpluses available for shareholders based on development plans worked out by the financial analysis team of
Associés en Finance. This method, used by all valuers, allows both dividends and share buybacks to be integrated within the cash flow breakdown. These cash surpluses are determined by simulating balance sheets, taking into account investment
requirements and a standardised financial position. The financial position is linked to volatility in the value of assets financed, on which the confidence of lenders depends. The cost of debt is made up of a pivot rate, to which is applied a spread
reflecting the company’s rating and the company’s yield spread in the market.
The simulation model has three periods. The first involves a transition
from the current debt structure to the target structure, taking into account the organic growth and acquisitions capacity of the business as demonstrated by the company under consideration. In the second period, the variables involved in the
company’s returns converge towards the average in its business sector. In the third period, all sectors converge such that the economic rent disappears and the simulation is completed by basing the final value on the book value of residual
equity.
C-92
The model takes into account more than twenty variables per company. Its aim is primarily to show the underlying gaps in
business growth, profitability and the use of long-term capital between companies that are direct competitors, clients, etc.
Cash flows available for the investor
are calculated after payment of corporation tax, interest expense and debt flows (redemptions or new borrowings). It therefore produces a predicted return on equity expressed in market value terms after corporate income tax but before tax borne by
shareholders.
From economic asset to listed financial asset
Microeconomic simulations on a portfolio of industrial assets do not always correspond to the financial and legal reality of the listed financial asset. A first
adjustment is made by taking non-controlling interests into account, investments that are not fully consolidated, and unrealised capital gains or losses on financial assets. A second adjustment is made by taking into account various securities
(ordinary shares, preferred shares), excluding non-controlling interests in those securities, and adopting a standardised number of shares.
The anticipated rate of
return is the discount rate that makes the sum of the present values of predicted cash flows and adjustments linked to the consolidated financial statements mentioned in the previous paragraph equal to the market capitalisation. It is therefore a
predicted return on equity expressed in market value terms after corporate income tax but before tax borne by shareholders.
Anticipated risk
One of the specific features of the models developed by Associés en Finance is that they do not refer to a beta coefficient calculated ex-post on the basis of the
stockmarket prices but, instead, to an anticipated risk. The drawback of ex-post beta figures is that they are largely unreliable correlation coefficients, i.e. unstable and with a low level of statistical significance.
Anticipated risk results from a combination of forecasting risk, financial risk and sector risk.
Forecasting risk corresponds to the degree of confidence with which the analyst can make predictions for the future. Forecasting risk is the external perception of all
earnings variability factors, whether linked to internal company factors (products, strategy, quality of management, quality of information) or to its environment (competition in the sector, degree of regulation). It factors in a proprietary
Associés en Finance qualitative rating, representing a synthesis of twelve criteria for assessing the strengths and weaknesses of the company concerned. It is directly linked to the anticipated variability of movements in the share price
concerned compared with changes in the economic environment or earnings “surprises”. Forecasting risk is calculated on a scale of 1 to 9, with the median rating being 5.
Financial risk is similar to the ratings given by financial rating agencies. Financial risk, which is calculated on a scale of 1 to 5 (with 3 being the median rating),
reflects the solidity of the financial position and the company’s ability to meet its financial commitments as part of its development scenario. It takes into account, on the basis of predicted cash flows worked out by Associés en
Finance, the company’s financial position (debt relative to enterprise value), the size and volatility of assets, hedging of interest expenses through operations, and the number of years of cash flow that the debt represents.
Sector risk corresponds to the market beta of the sector index to which the company being analysed belongs.
C-93
Liquidity
In the model,
this is assessed in terms of structural liquidity, i.e. the free float, as is now the case in the weighting of large market indices, and by cyclical liquidity. The coefficient allocated to the liquidity is standardised at 1.
Structural liquidity is expressed as the ratio of the inverse of the logarithm of a listed company’s free float and the average of inverses of logarithms of the
free float of each company in the sample.
Cyclical liquidity is calculated by the inverse of the logarithm of the amount of tradable capital for a 1% variation in
the share price.
Companies are ranked by decreasing order of liquidity - or increasing illiquidity - in order to obtain a positive slope as in the case of the risk
premium. Very liquid stocks have an illiquidity coefficient of below 1 with relatively illiquid stocks having an illiquidity coefficient above 1.
The inclusion of
liquidity in Trival as a factor in valuing financial assets makes a significant contribution. It can be observed in general that risk and liquidity are independent: i.e. risk does not vary by liquidity sub-sample and that liquidity also does not
vary by risk sub-sample.
Regression between the actuarial rates obtained and the two attributes of relative risk and relative illiquidity, taking into account the
level of operational risk and the size of the entity, enables us to determine the rate of return normally demanded for the company. This is the cost of equity.
The
parameters obtained by this regression are the risk premium, the illiquidity premium and a residue. By taking liquidity into account, it is easier to explain valuations since the coefficient of determination (R2) of the double regression is in general higher than 65% (currently 75%).
2. Trival WACC:
model for directly estimating the weighted average cost of capital
Based on figures previously calculated for each company covered and for the equity market
as a whole, it is possible to calculate the weighted average cost of capital or WACC.
The traditional approach is to calculate the WACC based on the proportions of
equity and debt making up total capital employed at market value (enterprise value = adjusted market capitalisation + debt). The results of this method are fairly sensitive to the respective weightings given to debt and equity financing.
As a result, Associés en Finance has developed a method for directly estimating the WACC: based on forecast cash flows for each company determined using the
method described above, it is possible to calculate the WACC directly.
In practice, based on cash flow projections in Trival, we can calculate:
| |
• |
|
The actuarial rates obtained by comparing cash flows (before taking into account interest expenses and after tax) with enterprise value (adjusted market capitalisation plus debt); |
| |
• |
|
Operational risk (based on average financial risk) and the amount of assets employed. Operational risk is calculated using the methods set out in section 1, except that the financial risk rating is fixed at the median
level of 3 – the valuation is initially neutral regarding financial position: it involves determining a theoretical enterprise value before taking into account the financial position – and risks obtained are standardised on an average of
1.0. The amount of assets employed is based on the enterprise value (market capitalisation plus debt). |
C-94
All WACC calculations are carried out excluding bank stocks.
Regression between the actuarial rates obtained and the two attributes of operational risk and the amount of assets, directly derived from information used to determine
the cost of equity (section 1), allows us to determine, taking into account the level of operational risk and the size of the entity, the rate of return normally demanded for the company, which corresponds to the WACC.
The parameters obtained by this regression are the operational risk premium, the scale premium and illiquidity premium and the Y-co-ordinate of the plan. The
coefficient of determination (R2) of the double regression is currently 70%.
C-95
Addendum
Remuneration
The final amount of the fees of Associés en Finance
for this Fairness Opinion, based on the time spent, which was not known at the time of the issuance of the expert report, stands at €625,000 excluding taxes.
Indicative timetable of the offer
Associés en Finance was
informed of a change in the indicative timetable of the offer, scheduled for November 18th 2015, during 26 trading days (instead of 25 days corresponding to the closing of the initial offer on December 23rd instead of December 22nd, the previous
scheduled date).
This change in the schedule does not modify the conclusions of Associés en Finance regarding the fairness of the offer for the shares and the
OCEANEs of Alcatel-Lucent.
Done in Paris, on November 9th, 2015
/s/ Arnaud
Jacquillard
Arnaud Jacquillat
Associés en Finance
C-96
INDEX TO EXHIBITS
The following exhibits are filed herewith or incorporated herein by reference:
|
|
|
| Exhibit No. |
|
Description |
| (a)(1) |
|
Exchange Offer/Prospectus, dated November 12, 2015 (incorporated by reference to Amendment No. 3 to the Registration Statement on Form F-4 filed with the SEC by Nokia on November 12, 2015) |
|
|
| (a)(2) |
|
Form of Letter of Transmittal for Certificated Alcatel Lucent ADSs (incorporated by reference to Exhibit 99.1 to Amendment No. 3 to the Registration Statement on Form F-4 filed with the SEC by Nokia on November 12,
2015) |
|
|
| (a)(3) |
|
Form of Letter of Transmittal for book-entry only Alcatel Lucent ADSs (incorporated by reference to Exhibit 99.2 to Amendment No. 3 to the Registration Statement on Form F-4 filed with the SEC by Nokia on November 12,
2015) |
|
|
| (a)(4) |
|
Notice of Guaranteed Delivery (Alcatel Lucent ADSs) (incorporated by reference to Exhibit 99.3 to Amendment No. 3 to the Registration Statement on Form F-4 filed with the SEC by Nokia on November 12, 2015) |
|
|
| (a)(5) |
|
Letter to Clients (incorporated by reference to Exhibit 99.4 to Amendment No. 3 to the Registration Statement on Form F-4 filed with the SEC by Nokia on November 12, 2015) |
|
|
| (a)(6) |
|
Letter to Brokers (incorporated by reference to Exhibit 99.5 to Amendment No. 3 to the Registration Statement on Form F-4 filed with the SEC by Nokia on November 12, 2015) |
|
|
| (a)(7) |
|
Press Release on Announcement of Exchange Offer, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16, 2015) |
|
|
| (a)(8) |
|
Investor Presentation, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16, 2015) |
|
|
| (a)(9) |
|
Factsheet, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16, 2015) |
|
|
| (a)(10) |
|
Email to Employees from CEO of Alcatel Lucent, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16, 2015) |
|
|
| (a)(11) |
|
Letter from Chairman of Nokia, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16, 2015) |
|
|
| (a)(12) |
|
Transcript of Call with Alcatel Employees, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16, 2015) |
|
|
| (a)(13) |
|
Q&A Regarding Deal Alcatel-Lucent and Nokia, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16, 2015) |
|
|
| (a)(14) |
|
Thomson Reuters StreetEvents Edited Transcript, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16, 2015) |
|
|
| (a)(15) |
|
Q&A Regarding the Proposed Transaction Between Alcatel-Lucent and Nokia, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16, 2015) |
|
|
| (a)(16) |
|
Transcript of Press Conference, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16, 2015) |
1
|
|
|
| Exhibit No. |
|
Description |
| (a)(17) |
|
Global Sales Advisory: Transaction between Alcatel-Lucent and Nokia, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 16, 2015) |
|
|
| (a)(18) |
|
Transcript of Call with Alcatel Lucent Employees by Alcatel Lucent’s CEO, dated April 15, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on April 17, 2015) |
|
|
| (a)(19) |
|
Press Release on Q1 2015 Results, dated May 7, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on May 7, 2015) |
|
|
| (a)(20) |
|
Transcript of Q1 2015 Earnings Call, dated May 7, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on May 8, 2015) |
|
|
| (a)(21) |
|
Intranet Posting, dated May 7, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on May 8, 2015) |
|
|
| (a)(22) |
|
Transcript of Q1 Quarterly Call, dated May 7, 2015 8:46 am CET (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on May 18, 2015) |
|
|
| (a)(23) |
|
Transcript of Q1 Quarterly Call, dated May 7, 2015 8:58 am CET (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on May 18, 2015) |
|
|
| (a)(24) |
|
Transcript of Q1 Quarterly Call, dated May 7, 2015 10:00 am CET (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on May 18, 2015) |
|
|
| (a)(25) |
|
Transcript of Q1 Quarterly Call, dated May 7, 2015 10:45 am CET (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on May 18, 2015) |
|
|
| (a)(26) |
|
Transcript of Video Interview, dated May 24, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on June 1, 2015) |
|
|
| (a)(27) |
|
Press Release on Consultation of French Group Committee, dated June 4, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on June 4, 2015) |
|
|
| (a)(28) |
|
Investor Q&A (General) (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on June 15, 2015) |
|
|
| (a)(29) |
|
Investor Q&A (Process and Technical) (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel-Lucent on June 15, 2015) |
|
|
| (a)(30) |
|
Press Release on Early Termination of U.S. Antitrust Waiting Period, dated June 17, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel-Lucent on June 17, 2015) |
|
|
| (a)(31) |
|
Press Release on Q2 2015 Results, dated July 30, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on July 30, 2015) |
|
|
| (a)(32) |
|
Press Release on Governance Structure for Proposed Combination, dated July 30, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on July 30, 2015) |
|
|
| (a)(33) |
|
Announcement of European Commission Approval of Acquisition, dated July 24, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on July 30, 2015) |
|
|
| (a)(34) |
|
Transcript of Q2 2015 Earnings Call (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on July 31, 2015) |
2
|
|
|
| Exhibit No. |
|
Description |
| (a)(35) |
|
Transcript of Top 200 Call, dated July 30, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on July 31, 2015) |
|
|
| (a)(36) |
|
Announcement of Filing of Form F-4 by Nokia (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on August 14, 2015) |
|
|
| (a)(37) |
|
E-mail Regarding Integration Planning (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on August 28, 2015) |
|
|
| (a)(38) |
|
Nokia Announcement of CFIUS Clearance for Proposed Acquisition of Alcatel Lucent, dated September 14, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on September 15, 2015) |
|
|
| (a)(39) |
|
Convertible Bond Q&A (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on September 29, 2015) |
|
|
| (a)(40) |
|
Nokia Announcement of Planned Leadership and Organizational Structure, dated October 7, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on October 7, 2015) |
|
|
| (a)(41) |
|
Nokia Announcement of Clearance from China’s Ministry of Commerce for Proposed Acquisition of Alcatel-Lucent, dated October 19, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on
October 20, 2015) |
|
|
| (a)(42) |
|
Nokia Announcement of Receipt of all Required Regulatory Approvals to Proceed with Filing of its Public Exchange Offer for Alcatel-Lucent, dated October 21, 2015 (incorporated by reference to the filing under Rule 425 with the SEC
by Alcatel Lucent on October 21, 2015) |
|
|
| (a)(43) |
|
Alcatel Lucent’s Board of Directors Issues Favorable Opinion on Public Exchange Offer Filed by Nokia, dated October 29, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on October
30, 2015) |
|
|
| (a)(44) |
|
Press Release on Availability of Alcatel Lucent’s response offer document in connection with public exchange offer initiated by Nokia, dated November 12, 2015 (incorporated by reference to the filing under Rule 425 with the SEC
by Alcatel Lucent on November 13, 2015) |
|
|
| (a)(45) |
|
Unofficial English Translation of Alcatel Lucent Offer Response Document, dated October 29, 2015 (incorporated by reference to the filing under Rule 425 with the SEC by Alcatel Lucent on November 16, 2015) |
|
|
| (a)(46) |
|
Unofficial English Translation of Alcatel Lucent Information Relating in Particular to the Legal, Financial and Accounting Aspects of Alcatel Lucent (Other Information), dated November 17, 2015 (incorporated by reference to the
filing under Rule 425 with the SEC by Alcatel Lucent on November 17, 2015) |
|
|
| (a)(47) |
|
Press Release on Availability of Alcatel Lucent “Other Information” document in connection with public exchange offer initiated by Nokia, dated November 17, 2015 (incorporated by reference to the filing under Rule 425 with
the SEC by Alcatel Lucent on November 17, 2015) |
|
|
| (e)(1) |
|
Memorandum of Understanding, dated April 15, 2015, by and between Alcatel Lucent and Nokia (incorporated by reference to Exhibit 2.1 to the Registration Statement on Form F-4 filed with the SEC by Nokia on August 14,
2015) |
|
|
| (e)(2) |
|
Amendment to the Memorandum of Understanding, dated October 28, 2015, by and between Alcatel Lucent and Nokia (incorporated by reference to Exhibit 2.2 to Amendment No. 2 to the Registration Statement on Form F-4 filed with the
SEC by Nokia on November 6, 2015) |
3
|
|
|
| Exhibit No. |
|
Description |
|
|
| (e)(3) |
|
Form of Lock-Up Liquidity Agreement to be entered into by and among Alcatel Lucent, Nokia and some or all of the relevant holders of Alcatel Lucent Stock Options* |
|
|
| (e)(4) |
|
Form of Lock-Up Liquidity Agreement to be entered into by and among Alcatel Lucent, Nokia and some or all of the relevant beneficiaries of Performance Shares* |
|
|
| (e)(5) |
|
Form of 2015 Performance Share Plan Liquidity Agreement to be entered into by and among Alcatel Lucent, Nokia and all of the relevant beneficiaries of Performance Shares issued pursuant to the 2015 Performance Share Plan* |
|
|
| (e)(6) |
|
Form of Underwater Stock Options Liquidity Agreement to be entered into by and among Alcatel Lucent, Nokia and some or all of the relevant holders of Alcatel Lucent Stock Options* |
|
|
| (e)(7) |
|
Form Stock Option Acceleration Agreement to be entered into by and among Alcatel Lucent and some or all of the relevant beneficiaries of Alcatel Lucent Stock Options* |
| (e)(8) |
|
Form of Performance Shares Acceleration Agreement to be entered into by and among Alcatel Lucent and some or all of the relevant beneficiaries of Performance Shares* |
|
|
| (e)(9) |
|
Form of Replacement Share Grant Notification* |
|
|
| (e)(10) |
|
2015 Performance Share Plan Rules* |
|
|
| (e)(11) |
|
Form of 2013 Change of Control Letter* |
|
|
| (e)(12) |
|
Form of 2006 Change of Control Letter* |
|
|
| (e)(13) |
|
March 14, 2012 Performance Share Plan for Beneficiary Employees of Non-French Companies (incorporated herein by reference to Exhibit 99.3 filed with the Registration Statement on Form S-8 filed with the SEC by Alcatel Lucent on
August 2, 2012 (File No. 333-183016)) |
|
|
| (e)(14) |
|
March 14, 2012 Corporate Stock Subscription Options Plan for Beneficiary Employees of Non-French Companies (incorporated herein by reference to Exhibit 99.1 filed with the Registration Statement on Form S-8 filed with the SEC by
Alcatel Lucent on August 2, 2012 (File No. 333-183016)) |
|
|
| (e)(15) |
|
March 14, 2012 Corporate Stock Subscription Options Plan with Performance Conditions for Beneficiary Employees of Non-French Companies (incorporated herein by reference to Exhibit 99.2 filed with the Registration Statement on Form
S-8 filed with the SEC by Alcatel Lucent on August 2, 2012 (File No. 333-183016)) |
|
|
| (e)(16) |
|
March 14, 2012 French Corporate Stock Subscription Options Plan* |
|
|
| (e)(17) |
|
August 13, 2012 Corporate Stock Subscription Options Plan for Beneficiary Employees of Non-French Companies (incorporated herein by reference to Exhibit 99.1 filed with the Registration Statement on Form S-8 filed with the SEC by
Alcatel Lucent on March 27, 2013 (File No. 333-187560)) |
|
|
| (e)(18) |
|
August 13, 2012 French Corporate Stock Subscription Options Plan* |
|
|
| (e)(19) |
|
December 17, 2012 Corporate Stock Subscription Options Plan for Beneficiary Employees of Non-French Companies (incorporated herein by reference to Exhibit 99.2 filed with the Registration Statement on Form S-8 filed with the SEC by
Alcatel Lucent on March 27, 2013 (File No. 333-187560)) |
|
|
| (e)(20) |
|
July 12, 2013 Corporate Stock Subscription Options Plan for Beneficiary Employees of Non-French Companies (incorporated herein by reference to Exhibit 99.1 filed with the Registration Statement on Form S-8 filed with the SEC by
Alcatel Lucent on December 26, 2013 (File No. 333-193089) |
4
|
|
|
| Exhibit No. |
|
Description |
|
|
| (e)(21) |
|
July 12, 2013 French Corporate Stock Subscription Options Plan* |
|
|
| (e)(22) |
|
July 12, 2013 Performance Share Plan for Beneficiary Employees of Non-French Companies (incorporated herein by reference to Exhibit 99.2 filed with the Registration Statement on Form S-8 filed with the SEC by Alcatel Lucent on
December 26, 2013 (File No. 333-193089)) |
|
|
| (e)(23) |
|
July 12, 2013 French Performance Share Plan* |
|
|
| (e)(24) |
|
September 15, 2014 Performance Share Plan for Employees (incorporated herein by reference to Exhibit 99.1 filed with the Registration Statement on Form S-8 filed with the SEC by Alcatel Lucent on December 18, 2014 (File No.
333-201034)) |
5
Exhibit (e)(3)
LOCK-UP STOCK OPTIONS LIQUIDITY AGREEMENT
BETWEEN:
| |
• |
|
Nokia Corporation, a corporation incorporated under the laws of Finland, with a share capital of EUR 245,896,461.96, which registered office is located Karaportti 3, 02610 Espoo, Finland, registered with
the Trade Register of the Finnish Patents and Registration Office under number 0112038-9, duly represented for the purposes hereof (“Nokia”) |
on the first part,
| |
• |
|
Alcatel-Lucent, a société anonyme incorporated under the laws of France, with a share capital of EUR 141,210,168.20, which registered office is located 148/152, Route de
la Reine – 92100 – Boulogne-Billancourt, France, registered with the Nanterre company registry under number 542.019.096, represented for the purposes hereof by Philippe Camus, duly authorized, (the “Company”)
|
on the second part,
AND
| |
• |
|
The beneficiary having complied with the Acceptance Process (the “Beneficiary”, and together with Nokia and the Company, the “Parties”), |
on the third part,
RECITALS:
In connection with the Public Exchange Offers, Nokia has undertaken under certain conditions to propose a mechanism that would ensure
the liquidity of certain Option Underlying Shares if the liquidity of the Company Shares is significantly reduced as a result of the completion of the Public Exchange Offers (as further described below). The terms and conditions of this liquidity
mechanism are set forth in this agreement.
THEREFORE, IT HAS BEEN AGREED AS FOLLOWS:
| 1. |
Acceptance of the Lock-Up Stock Options Liquidity Agreement |
The terms and
conditions of this liquidity agreement (the “Lock-Up Stock Options Liquidity Agreement”) shall be applicable to and binding on the Beneficiary, Nokia and the Company, provided that (i) the Beneficiary complies with the
Acceptance Process at any time by the last day of the Initial Offering Period, (ii) Nokia reaches the Success Threshold following the Initial Offering Period and (iii) the resolutions required to implement the Public Exchange Offers are
approved by Nokia’s shareholders.
The definitions of the terms contained in this Lock-Up Stock Options
Liquidity Agreement are set forth in Appendix 1 to this Lock-Up Stock Options Liquidity Agreement.
| 3. |
Scope of the Lock-Up Stock Options Liquidity Agreement |
This Lock-Up Stock
Options Liquidity Agreement is applicable to the Option Underlying Shares delivered to the Beneficiary upon exercise of the Stock Options granted to the Beneficiary pursuant to any of the plans listed in Appendix 2.
| 4. |
Reduced Liquidity of Company Shares |
A reduced liquidity (a “Reduced
Liquidity”) of the Company Shares held by the Beneficiary shall occur if at least one of these conditions applies:
| |
• |
|
The Company Shares are no longer listed on a regulated stock market within the meaning of article L. 421-1 of the French monetary and financial code (Code monétaire et financier);
|
| |
• |
|
Nokia directly or indirectly holds at least 85% of the Company Shares; or |
| |
• |
|
the average daily volume of the Company Shares traded on Euronext Paris calculated on the last consecutive twenty (20) trading days preceding the relevant date falls below five million (5,000,000) Company
Shares. |
The Company shall notify to the Beneficiary and Nokia by email during the Exercise Period (as defined below)
of the occurrence of any Reduced Liquidity of the Company Shares within 5 business days of such occurrence (the “Reduced Liquidity Notification”). The Reduced Liquidity Notification shall include an example of an Exchange Ratio
calculation determined based on the assumption that the Option Underlying Shares Exchange occurred on the business day preceding the date of the Reduced Liquidity Notification, and shall detail the adjustments, if any, to be applied to the Exchange
Ratio pursuant to this Lock-Up Stock Options Liquidity Agreement. Unless a claim is made in accordance with the provisions of Article 7, the Exchange Ratio calculation and the adjustments (if any) as notified shall be final and binding except if an
updated Reduced Liquidity Notification is made before the Option Underlying Shares Exchange, in accordance with Article 6.2 of this Lock-Up Stock Options Liquidity Agreement and the Appendix 3 hereto, in which case such updated Reduced Liquidity
Notification will replace and supersede the previous Reduced Liquidity Notification.
| 5. |
Option Underlying Shares Exchange and Cash Exchange |
In the event the Beneficiary
exercises any of his/her Stock Options during a period of sixty (60) calendar days as from the expiry of the applicable Lock-Up Period (the “Exercise Period”), all the Options Underlying Shares resulting from the exercise of
any Stock Option being within the scope of Article 3 above shall be automatically
2
exchanged by Nokia for Nokia Shares (the “Option Underlying Shares Exchange”) on the fifth (5th) business day following
the later of (i) the exercise date of these relevant Stock Options and (ii) a Reduced Liquidity Notification. In the event the Reduced Liquidity occurs in the five (5) last business days of the 60-day period referred to above, the
Exercise Period shall be extended by five (5) business days.
The Exchange Ratio of the Option Underlying Shares transferred by the
Beneficiary to Nokia pursuant to the Option Underlying Shares Exchange shall be determined by Nokia in accordance with the provisions of Article 6 below. In the event the application of the Exchange Ratio would entitle the Beneficiary to
receive Nokia fractional rights, he/she would receive in cash (in EUR, rounded up to the closest cent; 0.5 cent shall be rounded up to 1 cent), as an indemnity for those fractional rights, the relevant fraction of the Nokia Share price as of the
Option Underlying Shares Exchange Date.
Alternatively to the Option Underlying Shares Exchange, Nokia may choose to implement a payment
in cash in respect of the Option Underlying Shares, in its sole discretion (the “Cash Exchange”). The Cash Exchange would be applicable under the same conditions and requirements as the Option Underlying Shares Exchange except that
the consideration for the exchange would not be Nokia Shares but a cash consideration equal to the value of the Nokia Shares the Beneficiary would have been entitled to receive by exchanging his/her Option Underlying Shares for Nokia Shares
according to the Exchange Ratio. Such Nokia Shares value shall be based on the market value of a Nokia Share on the NASDAQ OMX Helsinki Ltd. at the closing of the last trading day preceding the Cash Exchange.
The Company and Nokia will have the option to proceed to the payments relating to the Cash Exchange and to the fractional rights
indemnification through the Beneficiary’s next payroll (where relevant and to the extent legally permitted) and in any case, as soon as administratively practicable, notwithstanding the 5-day period allocated for the completion of the Option
Underlying Shares Exchange.
| |
6.1 |
Exchange Ratio without adjustment |
Nokia shall deliver, for the Company Shares exchanged under
Article 5 above, a number of new and/or existing (at Nokia’s sole discretion) Nokia Shares calculated as follows and then rounded down to the next inferior whole number of Nokia Shares:
NNS = Exchange Ratio x NCS
|
|
|
| Where: |
|
“NNS” means the total number of Nokia Shares (rounded down to the next inferior whole number) to be delivered to the Beneficiary in exchange for his/her Company Shares; |
3
“Exchange Ratio” means the number of Nokia Shares to be delivered for one
Company Share in accordance with the terms of the Public Exchange Offers, i.e. 0.55; and
“NCS” means the
number of Company Shares to be exchanged under this Lock-Up Stock Options Liquidity Agreement.
Theoretical example of calculation of the number of
Nokia Shares to be received in exchange of Company Shares pursuant to this Lock-Up Stock Options Liquidity Agreement
Assumption: Transfer
of 200 Company Shares by the Beneficiary in January 2017 without any adjustment.
NNS = 0.55 x 200
NNS = 110
| |
6.2 |
Adjusted Exchange Ratio |
Upon certain financial transactions carried out by Nokia or the
Company affecting the value of their shares, the Exchange Ratio will be adjusted as described in Appendix 3.
For the avoidance of doubt,
no adjustment will be made to the Exchange Ratio in the event of issuance of new shares by Company or Nokia in relation to or as a result of the acceleration mechanisms mentioned herein, the grant of Company Shares in replacement of the 2014 stock
options plans, the grant of Company performance shares in 2015 or the performance of this Lock-Up Stock Options Liquidity Agreement.
Any claim of the Beneficiary with respect to the Exchange Ratio shall be
delivered by registered letter (with acknowledgement of the receipt) from the Beneficiary to Nokia, with a copy addressed to the Company, within five (5) business days as from the date the Company sent the Reduced Liquidity Notification to the
Beneficiary in accordance with Article 4. The reasons for any claim shall be detailed precisely in such claim.
Nokia and the Beneficiary
shall agree on an Exchange Ratio within five (5) business days as from the receipt by Nokia of the Beneficiary’s notification letter. If, after such period, Nokia and the Beneficiary have not been able to reach an agreement, the procedure
provided for in Article 8 below shall apply.
4
| 8. |
Third-Party Arbitrator |
In case Nokia and the Beneficiary disagree on the
Exchange Ratio, any person jointly selected by the Parties within ten (10) business days following the delivery of a claim made in accordance with Article 7 or, failing to do so within such timeframe, any other person appointed by the president
of the Paris Tribunal de Grande Instance on the application of the most diligent Party, acting as third-party arbitrator within the meaning of article 1592 of the French Civil Code (the “Third-Party Arbitrator”)
shall determine the Exchange Ratio, within twenty (20) business days as from the date it receives a registered letter with acknowledgment of receipt pursuant to which it has been appointed jointly by Nokia and the Beneficiary or by the
president of the Paris Tribunal de Grande Instance.
In case this request is sent by the Beneficiary, the Beneficiary
undertakes to send on the same day a copy of such letter to Nokia and the Company.
For the purpose of the performance of the Third-Party
Arbitrator’s assignment, the Company, Nokia and the Beneficiary undertake to provide it with any relevant information relating to the adjustment provided for in Article 6.2 of this Lock-Up Stock Options Liquidity Agreement, that would be
necessary for the Third Party Arbitrator to undertake its mission.
The Third-Party Arbitrator may request any such relevant and necessary
information from the Company, Nokia and the Beneficiary.
Nokia, the Company and the Beneficiary shall be informed of the Third-Party
Arbitrator’s conclusions as promptly as possible after completion of Third-Party Arbitrator’s assignment and no later than on the last day of the above-mentioned 20 business day period.
In the event the Third-Party Arbitrator fails to determine the Exchange Ratio within twenty (20) business days following the notification
of its appointment, another Third-Party Arbitrator shall be appointed in the conditions set forth in this Article 8 to determine the Exchange Ratio within twenty (20) business days following the notification of its appointment and the
previously appointed Third-Party Arbitrator shall be automatically revoked upon the appointment of the new Third-Party Arbitrator, and so on until a Third-Party Arbitrator effectively determines the Exchange Ratio.
Except in case of a manifest error (erreur manifeste), as interpreted by French courts, the Third-Party Arbitrator’s
conclusions shall be final and binding, and therefore non-appealable, upon Nokia, the Company and the Beneficiary.
Any fees,
charges and disbursements incurred for the purpose of the completion of the Third-Party Arbitrator’s assignment shall be borne by Nokia if the Third-Party Arbitrator gives right to the Beneficiary’s claim in full, and otherwise by the
Beneficiary.
5
| 9. |
Beneficiary’s undertakings |
By complying with the Acceptance Process, the
Beneficiary cumulatively undertakes vis-a-vis Nokia and the Company (except as provided for otherwise in writing by Nokia):
| |
• |
|
not to exercise his/her Stock Options before the end of the Lock-Up Period; |
| |
• |
|
not to sell, transfer, convey, alienate, mortgage, pledge or encumber his/her Option Underlying Shares or to dispose of them other than in accordance with this Lock-Up Stock Options Liquidity Agreement, or to Nokia,
until the end of the Exercise Period or, if a Reduced Liquidity Notification is made to the Beneficiary during such Exercise Period, until the Exchange Date; |
| |
• |
|
to hold in pure registered form his/her Option Underlying Shares until the end of the Exercise Period or, if a Reduced Liquidity Notification is made to the Beneficiary during such Exercise Period, until the Exchange
Date; |
| |
• |
|
not to revoke the power of attorney referred to in Article 16 below; and |
| |
• |
|
not to exercise his/her Stock Options if and for so long as he/she holds insider information regarding Nokia and/or the Company. |
| 10. |
Exercise of the Stock Options |
If the Beneficiary does not exercise his/her Stock
Options prior to the end of the Exercise Period, the Beneficiary accepts that his/her Stock Options will be irrevocably void and will forfeit and no longer be exercisable.
| 11. |
Exchange of the Company Shares pursuant to the Lock-Up Stock Options Liquidity Agreement |
Any Company Share to be delivered by the Beneficiary shall be transferred to Nokia or to any third party designated by Nokia with full
ownership including all of the rights pertaining thereto as of the effective date of transfer, free from any privilege, rights, charges, restrictions and any third party rights of any nature whatsoever.
Except as otherwise provided in this Lock-Up Stock Options
Liquidity Agreement, any correspondence to be addressed to the Beneficiary in relation to the Lock-Up Stock Options Liquidity Agreement shall be sent by email to the email address provided by the Company to Nokia. The Beneficiary hereby consents to
all disclosure and sharing of personal information relating to such Beneficiary if they are necessary or advisable for the performance of this Lock-Up Stock Options Liquidity Agreement
6
(including, without limitation, his/her name and email address). The Beneficiary will be entitled to exercise his or her rights pursuant to applicable data privacy laws and regulations, including
French Law n° 78-17 of January 6, 1978.
Except as otherwise provided in this Lock-Up Stock Options Liquidity Agreement, any
correspondence to be addressed to Nokia or to the Company in relation to the Lock-Up Stock Options Liquidity Agreement shall be sent by registered letter with acknowledgment of receipt at the following address:
Nokia Corporation
Human
Resources Department
Head of Compensation
Karaportti 3, P.O. Box 226
FI-00045 Nokia Group
Finland
Alcatel-Lucent
Direction des Ressources Humaines
148/152, Route de la Reine
92100
Boulogne-Billancourt
France
Neither Party may transfer or assign the benefit of all or any of its
rights or obligations under the Lock-Up Stock Options Liquidity Agreement, directly or indirectly and in any manner whatsoever, except (i) in the case of the Beneficiary, as a result of the death of the Beneficiary, in which case the Company
and Nokia shall be promptly advised thereof and provided that the Beneficiary’s successor shall be bound by the terms of this Lock-Up Stock Options Liquidity Agreement, to the extent not expressly prohibited under applicable law, and
(ii) in the case of Nokia, to an affiliate or to a financial institution appointed by Nokia or any of its affiliates.
| 14. |
Term of this Lock-Up Stock Options Liquidity Agreement |
This Lock-Up Stock
Options Liquidity Agreement shall be effective as of the date of its execution by all Parties (and in the case of the Beneficiary, as of the date he/she has completed the Acceptance Process as set out in Article 19) and shall be valid for a period
of ten (10) years from that date, without prejudice to the duration of the relevant Stock Options plans as described in such plans rules.
In the event that all of the Option Underlying Shares held by the Beneficiary are exchanged by the Beneficiary in compliance with this Lock-Up
Stock Options Liquidity Agreement, and that such Beneficiary no longer holds any Stock Option, the reciprocal undertakings of the Parties with regard to the said transferred Company Shares would expire.
7
| 15. |
Governing law and competent jurisdiction |
This Lock-Up Stock Options Liquidity
Agreement is governed by the laws of France, without regard to principles of conflicts of law. All disputes arising out of or in connection with this Lock-Up Stock Options Liquidity Agreement shall be submitted to the competent courts located within
the jurisdiction of the Versailles Court of Appeals.
The power of attorney granted hereby by the Beneficiary
to the Company in relation with this Lock-Up Stock Options Liquidity Agreement aims at ensuring the proper completion of the obligations of the Beneficiary and is irrevocable. This power of attorney is deemed to be a power of attorney entered into
in the interest of all the Parties (mandat d’intérêt commun).
The Beneficiary irrevocably and
unconditionally grants a power of attorney to the Company for the purpose of, in the name and on behalf of the Beneficiary, sending or receiving any notification, signing or receiving any form and carrying out any required formality for the
completion of the Exchanges set out in the Lock-Up Stock Options Liquidity Agreement and, in general, making any statement, delivering any certificate, signing any agreement, deed, or other document and generally taking, in the name and on behalf of
the Beneficiary, any action required for the completion of the Exchanges set out in the Lock-Up Stock Options Liquidity Agreement, in compliance with the choices made or deemed made by the Beneficiary upon acceptance of the Lock-Up Stock Options
Liquidity Agreement.
The Beneficiary also undertakes to approve any action taken by the Company pursuant to the said powers of attorney
in compliance with the choices he/she has made, subject to the above limitations.
The Beneficiary grants a power of attorney to the
Company to instruct the Administrator to, and the Company hereby undertakes to instruct the Administrator to, carry out the Option Underlying Shares Exchange or, as the case may be, the Cash Exchange, as well as any formality required for the
completion of the Exchanges, except if a claim has been delivered in accordance with Article 7 and specifying the nature and detailing the reasons of such claim, in which case the Option Underlying Shares Exchange Date or the Cash Exchange Date
shall occur five (5) business days as from the date on which the Beneficiary and Nokia will have reached an agreement on the Exchange Ratio or, as the case may be, the date on which the Third-Party Arbitrator will have rendered his conclusions.
Subject to the provisions of Articles 13 and 16, no third party to
this Lock-Up Stock Options Liquidity Agreement shall have any rights or obligations on the basis of, or shall rely on the terms and conditions of, this Lock-Up Stock Options Liquidity Agreement.
8
Except as otherwise provided herein, each Party shall pay all the costs
and expenses (including, but not limited to, financial advisory, accounting, legal and other professional or consulting fees and expenses) incurred by that Party or owed by it under applicable law, in connection with this Lock-Up Stock Options
Liquidity Agreement.
In particular, the Beneficiary would be subject to a Finnish transfer tax of 1.6% of the value of the Nokia treasury
shares if it receives Nokia treasury shares in exchange for its Option Underlying Shares.
| 19. |
Acceptance – Specific Performance |
If the Beneficiary wishes to enter
into this Lock-Up Stock Options Liquidity Agreement, he/she shall comply with the acceptance process on the website https://alcatel-lucent.assets.voxaly.com/ by the last day of the Initial Offering Period (the “Acceptance
Process”).
Otherwise, the Beneficiary shall be deemed to have waived his/her right to enter into this Lock-Up Stock
Options Liquidity Agreement.
The Beneficiary is the only person who may decide to enter (or not) into this Lock-Up Stock Options
Liquidity Agreement. In this respect, the Beneficiary is invited to consult its own specialized counsel if he/she wishes to obtain further information as to his/her rights and obligations hereunder.
If the Beneficiary complies with the Acceptance Process, the Beneficiary irrevocably undertakes vis-a-vis Nokia to transfer to Nokia (and
accept that the required instructions will be given to the Administrator) his/her Company Shares resulting from the exercise of his/her Stock Options during the Exercise Period and Nokia irrevocably undertakes vis-a-vis the Beneficiary to acquire
such Company Shares in the conditions described in this Lock-Up Stock Options Liquidity Agreement.
In the event of breach, in addition to
all other remedies which the non-breaching Party may have under applicable law, the non-breaching Party shall be entitled to specific performance (exécution forcée) and injunctive or equivalent relief in accordance with
applicable law, including article 1221 of the draft order of the French Ministry of Justice (if applicable on the relevant date). In addition, each of the Parties agree to waive the benefit of article 1142 of the French Civil Code in the event of
breach.
This Agreement is made in electronic form according to the provisions of article 1325 of the French Civil code.
[The rest of the page has been left blank intentionally]
9
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| Nokia |
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The Company |
| Represented by: |
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Represented by: Philippe Camus |
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| Represented by: |
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[Signature page for the Lock-Up Stock Options Liquidity Agreement]
10
Appendix 1
Definitions
The terms and expressions
below shall have the following meanings:
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| “Acceptance Process” |
|
As defined in Article 19 of this Lock-Up Stock Options Liquidity Agreement. |
|
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| “Administrator” |
|
Société Générale Securities Services. |
|
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| “AMF General Regulation” |
|
The general regulation of the Autorité des marchés financiers, the French stock exchange regulator, which is available in French and English at www.amf-france.org. |
|
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| “Article” |
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Unless specified otherwise herein, means the Article of this Lock-Up Stock Options Liquidity Agreement. |
|
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| “Beneficiary” |
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The person having become a party to this Lock-Up Stock Options Liquidity Agreement on the date indicated hereof. |
|
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| “business day” |
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A day other than Saturday or Sunday where the banks are open for business in Finland. |
|
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| “Cash Exchange” |
|
As defined in Article 5 of this Lock-Up Stock Options Liquidity Agreement. |
|
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| “Cash Exchange Date” |
|
The date on which the Cash Exchange occurs. |
|
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| “Company Extraordinary Distribution” |
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As defined in Appendix 3 to this Lock-Up Stock Options Liquidity Agreement. |
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| “Company Merger” |
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As defined in Appendix 3 to this Lock-Up Stock Options Liquidity Agreement. |
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| “Company Shares” |
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Ordinary shares issued by the Company and the American depository shares issued by the Company. |
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| “Exchange” |
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Means the Option Underlying Share Exchange or the Cash Exchange. |
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| “Exchange Date” |
|
Refers to the date on which the Exchange occurs. |
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| “Exchange Ratio” |
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As defined in Article 6 of this Lock-Up Stock Options Liquidity Agreement. |
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| “Exercise Period” |
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As defined in Article 5 of this Lock-Up Stock Options Liquidity Agreement. |
11
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| “Initial Offering Period” |
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Refers to the first offering period, as referred to in Article 232-2 of the AMF General Regulation, the result of which will determine whether a Subsequent Offering Period will be opened or not. |
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| “Lock-up Period” |
|
The date on which the Stock Options relating to the plans listed in Appendix 2 become vested and exercisable, as indicated in Appendix 2 to this Lock-Up Stock Options Liquidity Agreement. |
|
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| “Lock-Up Stock Options Liquidity Agreement” |
|
This agreement executed by Nokia, the Company and the Beneficiary, including its appendices. |
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| “Nokia Merger” |
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As defined in Appendix 3 to this Lock-Up Stock Options Liquidity Agreement. |
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| “Nokia Shares” |
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Ordinary shares issued by Nokia and the American depository shares issued by Nokia. |
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| “Option Underlying Shares” |
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Company Shares that have been or will be delivered by the Company to the Beneficiary in connection with his/her Stock Options. |
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| “Option Underlying Shares Exchange” |
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As defined in Article 5 of this Lock-Up Stock Options Liquidity Agreement. |
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| “Option Underlying Shares Exchange Date” |
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The date on which the Option Underlying Shares Exchange occurs. |
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| “Public Exchange Offers” |
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Public exchange offers in France and in the United States initiated by Nokia on the securities of the Company, as approved by the Autorité des marchés financiers in France and by the Securities and
Exchange Commission in the United States. |
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| “Reduced Liquidity” |
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As defined in Article 4 of this Lock-Up Stock Options Liquidity Agreement. |
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| “Reduced Liquidity Notification” |
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As defined in Article 4 of this Lock-Up Stock Options Liquidity Agreement. |
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| “Stock Options” |
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Any option to subscribe for or acquire Company Shares granted by the Company’s board of directors to a Beneficiary pursuant to the Share Plans. |
12
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| “Success Threshold” |
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Refers to the (i) ownership by Nokia, on the date of the settlement of the initial offering period of the Public Exchange Offers, of more than 50% of the shares of Alcatel Lucent on a fully diluted basis, in accordance with article
231-9-II of the AMF General Regulation or (ii) satisfaction, at Nokia’s sole discretion on the date of publication of the final results of the initial offering period of the Public Exchange Offers, that such ownership condition will be met, or
(iii) the express decision by Nokia’s board of directors, on or prior to the date of publication of the final results of the initial offering period of the Public Exchange Offers, to waive such voluntary minimum threshold and to establish the
success threshold as described in article 231-9-I of the AMF General Regulation, pursuant to which any public offer at the close of which the offeror does not hold a number of shares representing a fraction of more than 50% of the share capital or
voting rights, shall be null and void. |
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| “Third-Party Arbitrator” |
|
As defined in Article 8 of this Lock-Up Stock Options Liquidity Agreement. |
13
Appendix 2
Plans Subject to a Lock-Up Period
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| Plan n° |
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Plan date |
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End date of the Lock-Up Period |
| A0713COBE2 (If the Beneficiary is subject to a tax restriction period pursuant to this plan). |
|
Stock options plan dated July 12, 2013. |
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July 12, 2017 |
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| A0812NHFR2 |
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Stock options plan dated August 13, 2012. |
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August 13, 2016 |
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| A0312COFR2 A0312CPFR2
A0312NHFR2 |
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Stock options plan dated March 14, 2012. |
|
March 14, 2016 |
14
Appendix 3
Exchange Ratio Adjustments
In case of a merger of the Company into another company (the
“Company Merger”), the Option Underlying Shares Exchange and Cash Exchange will apply with respect to the shares of the absorbing entity received by the Beneficiary in exchange for Company Shares resulting from Stock Options which
are within the scope of Article 3 above. The Exchange Ratio will be adjusted as follows:
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| Exchange RatioAdjusted |
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= |
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Exchange Ratio |
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x |
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1 |
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| |
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RatioMerger |
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|
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of the absorbing company
shares in case of a Company Merger
Assumptions:
| |
• |
|
RatioMerger = 2 shares of the absorbing company for each Company Share |
| |
• |
|
Transfer of 200 shares of the absorbing company by the Beneficiary in January 2017 after the Company Merger |
Exchange RatioAdjusted = 0.55
x 1/2
Exchange
RatioAdjusted = 0.275
The number of Nokia Shares to
be received is: 200 x 0.275 = 55
In case of a merger of Nokia into another company (the “Nokia
Merger”), the Beneficiary will receive shares of the absorbing entity upon the Option Underlying Shares Exchange and will receive, in cash, the equivalent value of the absorbing entity shares pursuant to the Cash Exchange. The Exchange
Ratio will be adjusted as follows:
Exchange
RatioAdjusted = Exchange Ratio x RatioMerger
15
Theoretical example of calculation of the number of absorbing company shares to be received in exchange of
Company Shares in case of a Nokia Merger
Assumptions:
| |
• |
|
RatioMerger = 2 shares of the absorbing company for each Nokia Share |
| |
• |
|
Transfer of 200 Company Shares by the Beneficiary in January 2017 after the Nokia Merger |
Exchange
RatioAdjusted = 0.55 x 2
Exchange RatioAdjusted = 1.1
The number of the absorbing company shares to be received is: 200 x 1.1 = 220
| 2) |
Extraordinary distribution |
| |
A. |
Extraordinary distribution by Nokia |
If Nokia carries out a distribution of a special dividend,
as defined for purposes of Nokia’s then applicable stock option plans, the Exchange Ratio shall be adjusted in accordance with the then applicable stock option plans.
| |
B. |
Extraordinary distribution by the Company |
If the Company carries out a distribution of
an amount higher than the Company’s previous year net consolidated profit including a distribution of shares of a spin-off entity, (the “Company Extraordinary Distribution”) after the end of the Public Exchange Offers period,
the Exchange Ratio shall be adjusted as follows:
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| Exchange RatioAdjusted |
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= |
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(Exchange Ratio x PNokia) - EDAlcatel |
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PNokia |
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| Where: |
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“Exchange RatioAdjusted” means the number of Nokia Shares to be delivered for one Company Share after adjustment; |
“PNokia” means the price of a Nokia
Share on the day preceding the Company Extraordinary Distribution; and
“EDAlcatel” means the amount per share received by Company shareholder corresponding to the Company Extraordinary Distribution.
Such adjustment will only apply to the extent the Beneficiary (i) has received the relevant Company Extraordinary Distribution in respect
of Option Underlying Shares resulting from Stock Options that are already exercised or (ii) has
16
benefitted from a modification of the relevant plan due to the Company Extraordinary Distribution such as the adjustment provided in case of distribution of retained earnings under article
L.225-181 of the French Commercial Code.
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of Company
Shares in case of a Company Extraordinary Distribution
Assumptions:
| |
• |
|
Transfer of 200 Company Shares by the Beneficiary in January 2017 |
| |
• |
|
EDAlcatel = €1/Company Share |
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| Exchange RatioAdjusted |
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= |
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(0.55 x 8) - 1 |
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8 |
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| Exchange RatioAdjusted |
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= |
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0.425 |
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The number of Nokia Shares to be received is: 200 x 0.425 = 85
In the event that any other transaction specifically listed in
Article L. 225-181 of the French Commercial Code, or a stock split or a reverse stock split (i.e., share consolidation), is carried out by the Company, the Exchange Ratio shall be adjusted in order to allow the Beneficiary to obtain the same value
in Nokia Shares pursuant to the Option Underlying Shares Exchange or in cash pursuant to the Cash Exchange as the Beneficiary would have obtained assuming that the said transactions had not been carried out.
In the event that (i) a capital increase by way of incorporation of reserves (as defined in Article L. 225-181 of the French Commercial
Code), (ii) a capital increase with or without shareholders’ preferential subscription right issued, in each case, with a discount of more than 10% on the stock price (except (a) capital increases completed to finance an acquisition
where Nokia uses shares as payment, at a premium to the prevailing share price of the target company in the transaction, and (b) capital increases where equity shares or other securities are issued, offered, exercised, allotted, appropriated,
modified or granted to, or for the benefit of, employees or former employees, directors, non-executive directors or executives holding or formerly holding executive office or the personal service company of any such persons or their spouses or
relatives, in each case, of Nokia or any of its subsidiaries or any associated company or to a trustee or nominee to be held for the benefit of any such person), or (iii) a stock split or a reverse stock split (i.e., share consolidation) is
carried out by Nokia, the Exchange Ratio shall be adjusted in order to allow the Beneficiary to obtain the same value in Nokia Shares pursuant to the Option Underlying Shares Exchange or in cash pursuant to the Cash Exchange as the Beneficiary would
have obtained assuming the said transactions had not been carried out.
17
For example in case of share consolidation carried out by Nokia, the Exchange Ratio would be
adjusted as follows:
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| Exchange RatioAdjusted |
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= |
|
Exchange Ratio |
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x |
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Number of Nokia Shares composing the share capital after the consolidation |
| |
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|
|
Number of Nokia Shares composing the share capital prior to the consolidation |
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of Company Shares in case of
share consolidation carried out by Nokia
Assumptions:
| |
• |
|
Transfer of 200 Company Shares by the Beneficiary in January 2017 |
| |
• |
|
Share consolidation = 10 existing Nokia Shares become 1 new Nokia Share value |
| |
• |
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Number of shares before the consolidation = 3,678,181,540 |
| |
• |
|
Number of shares after the consolidation = 367,818,154 |
Exchange RatioAdjusted = 0.55 x (367,818,154 / 3,678,181,540)
Exchange RatioAdjusted = 0.055
The number of Nokia Shares to be received is: 200 x 0.055 = 11
| 4) |
Value of the Company Shares and Nokia Shares |
For the calculation of any adjustment
factor as described above, the value of the Company Shares or Nokia Shares at a specific date shall be equal to the weighted average of trading prices during the three trading days preceding such date. Failing this, the value shall be determined by
an expert with an international reputation, designated by Nokia or the Company, as the case may be, which opinion shall be irrevocable.
18
Exhibit (e)(4)
PERFORMANCE SHARES LIQUIDITY AGREEMENT
BETWEEN:
| |
• |
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Nokia Corporation, a corporation incorporated under the laws of Finland, with a share capital of EUR 245,896,461.96, which registered office is located Karaportti 3, 02610 Espoo, Finland, registered with
the Trade Register of the Finnish Patents and Registration Office under number 0112038-9, duly represented for the purposes hereof (“Nokia”) |
on the first part,
| |
• |
|
Alcatel-Lucent, a société anonyme incorporated under the laws of France, with a share capital of EUR 141,210,168.20, which registered office is located 148/152, Route de
la Reine – 92100 – Boulogne-Billancourt, France, registered with the Nanterre company registry under number 542.019.096, represented for the purposes hereof by Philippe Camus, duly authorized, (the “Company”)
|
on the second part,
AND
| |
• |
|
The beneficiary having complied with the Acceptance Process (the “Beneficiary”, and together with Nokia and the Company, the “Parties”), |
on the third part,
RECITALS:
In connection with the Public Exchange Offers, Nokia has undertaken under certain conditions to propose a mechanism that would ensure
the liquidity of certain Performance Shares if the liquidity of the Company Shares is significantly reduced as a result of the completion of the Public Exchange Offers (as further described below). The terms and conditions of this liquidity
mechanism are set forth in this agreement.
THEREFORE, IT HAS BEEN AGREED AS FOLLOWS:
| 1. |
Acceptance of the Performance Shares Liquidity Agreement |
The terms and
conditions of this liquidity agreement (the “Performance Shares Liquidity Agreement”) shall be applicable to and binding on the Beneficiary, Nokia and the Company, provided that (i) the Beneficiary complies with the Acceptance
Process at any time by the last day of the Initial Offering Period, (ii) Nokia reaches the Success Threshold following the Initial Offering Period and (iii) the resolutions required to implement the Public Exchange Offers are approved by
Nokia’s shareholders.
The definitions of the terms contained in this Performance Shares
Liquidity Agreement are set forth in Appendix 1 to this Performance Shares Liquidity Agreement.
| 3. |
Scope of the Performance Shares Liquidity Agreement |
This Performance Shares
Liquidity Agreement is applicable to the Performance Shares granted to the Beneficiary pursuant to any of the plans listed in Appendix 2.
| 4. |
Reduced Liquidity of Company Shares |
A reduced liquidity (a “Reduced
Liquidity”) of the Company Shares held by the Beneficiary shall occur if at least one of these conditions applies:
| |
• |
|
The Company Shares are no longer listed on a regulated stock market within the meaning of article L. 421-1 of the French monetary and financial code (Code monétaire et financier);
|
| |
• |
|
Nokia directly or indirectly holds at least 85% of the Company Shares; or |
| |
• |
|
the average daily volume of the Company Shares traded on Euronext Paris calculated on the last consecutive twenty (20) trading days preceding the relevant date falls below five million (5,000,000) Company
Shares. |
The Company shall notify to the Beneficiary and Nokia by email within 5 business days following the
expiry day of the applicable Lock-Up Period (the “Notification Period”), the occurrence of any Reduced Liquidity of the Company Shares (the “Reduced Liquidity Notification”). The Reduced Liquidity Notification shall
include an example of an Exchange Ratio calculation determined based on the assumption that the Performance Shares Exchange occurred on the business day preceding the date of the Reduced Liquidity Notification, and shall detail the adjustments, if
any, to be applied to the Exchange Ratio pursuant to this Performance Shares Liquidity Agreement. Unless a claim is made in accordance with the provisions of Article 7, the Exchange Ratio calculation and the adjustments (if any) as notified shall be
final and binding except if an updated Reduced Liquidity Notification is made before the Performance Shares Exchange Date, in accordance with Article 6.2 of this Performance Shares Liquidity Agreement and the Appendix 3 hereto, in which case such
updated Reduced Liquidity Notification will replace and supersede the previous Reduced Liquidity Notification.
| 5. |
Performance Shares Exchange |
The Beneficiary’s Performance Shares
that are within the scope of Article 3 above will be automatically exchanged by Nokia for Nokia Shares (the “Performance Shares Exchange”) on the fifth (5th) business
day following the Reduced Liquidity Notification, if any.
2
The Exchange Ratio of the Performance Shares transferred by the Beneficiary to Nokia pursuant to
the Performance Shares Exchange shall be determined by Nokia in accordance with the provisions of Article 6 below. In the event the application of the Exchange Ratio would entitle the Beneficiary to receive Nokia fractional rights, he/she would
receive in cash (in EUR, rounded up to the closest cent; 0.5 cent shall be rounded up to 1 cent), as an indemnity for those fractional rights, the relevant fraction of the Nokia Share price as of the Performance Shares Exchange Date.
Alternatively to the Performance Shares Exchange, Nokia may choose to implement a payment in cash in respect of the Performance Shares, in its
sole discretion (the “Cash Exchange”). The Cash Exchange would be applicable under the same conditions and requirements as the Performance Shares except that the consideration for the exchange would not be Nokia Shares but a cash
consideration equal to the value of the Nokia Shares the Beneficiary would have been entitled to receive by exchanging his/her Performance Shares for Nokia Shares according to the Exchange Ratio. Such Nokia Shares value shall be based on the market
value of a Nokia Share on the NASDAQ OMX Helsinki Ltd. at the closing of the last trading day preceding the Cash Exchange.
The Company
and Nokia will have the option to proceed to the payments relating to the Cash Exchange and to the fractional rights indemnification through the Beneficiary’s next payroll (where relevant and to the extent legally permitted) and in any case, as
soon as administratively practicable, notwithstanding the 5-day period allocated for the completion of the Performance Shares Exchange.
| |
6.1 |
Exchange Ratio without adjustment |
Nokia shall deliver, for the Company Shares exchanged under
Article 5 above, a number of new and/or existing (at Nokia’s sole discretion) Nokia Shares calculated as follows and then rounded down to the next inferior whole number of Nokia Shares:
NNS = Exchange Ratio x NCS
|
|
|
| Where: |
|
“NNS” means the total number of Nokia Shares (rounded down to the next inferior whole number) to be delivered to the Beneficiary in exchange for his/her Company Shares; |
“Exchange Ratio” means the number of Nokia Shares to be delivered for one Company Share in
accordance with the terms of the Public Exchange Offers, i.e. 0.55; and
“NCS” means the number of Company
Shares to be exchanged under this Performance Shares Liquidity Agreement.
3
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of Company
Shares pursuant to this Performance Shares Liquidity Agreement
Assumption: Transfer of 200 Company Shares by the Beneficiary in January
2017 without any adjustment.
NNS = 0.55 x 200
NNS = 110
| |
6.2 |
Adjusted Exchange Ratio |
Upon certain financial transactions carried out by Nokia or the
Company affecting the value of their shares, the Exchange Ratio will be adjusted as described in Appendix 3.
For the avoidance of doubt,
no adjustment will be made to the Exchange Ratio in the event of issuance of new shares by the Company or Nokia in relation to or as a result of the acceleration mechanisms mentioned herein, the grant of Company Shares in replacement of the 2014
stock options plans, the grant of Company performance shares in 2015 or the performance of this Performance Shares Liquidity Agreement.
Any claim of the Beneficiary with respect to the Exchange Ratio shall be
delivered by registered letter (with acknowledgement of the receipt) from the Beneficiary to Nokia, with a copy addressed to the Company, within five (5) business days as from the date the Company sent the Reduced Liquidity Notification to the
Beneficiary in accordance with Article 4. The reasons for any claim shall be detailed precisely in such claim.
Nokia and the Beneficiary
shall agree on an Exchange Ratio within five (5) business days as from the receipt by Nokia of the Beneficiary’s notification letter. If, after such period, Nokia and the Beneficiary have not been able to reach an agreement, the procedure
provided for in Article 8 below shall apply.
| 8. |
Third-Party Arbitrator |
In case Nokia and the Beneficiary disagree on the
Exchange Ratio, any person jointly selected by the Parties within ten (10) business days following the delivery of a claim made in accordance with Article 7 or, failing to do so within such timeframe, any other person appointed by the president
of the Paris Tribunal de Grande Instance on the application of the most diligent Party, acting as third-party arbitrator within the meaning of article 1592 of the French Civil Code (the “Third-Party Arbitrator”) shall
determine the Exchange Ratio, within twenty (20) business days as from the date it
4
receives a registered letter with acknowledgment of receipt pursuant to which it has been appointed jointly by Nokia and the Beneficiary or by the president of the Paris Tribunal de Grande
Instance.
In case this request is sent by the Beneficiary, the Beneficiary undertakes to send on the same day a copy of such letter
to Nokia and the Company.
For the purpose of the performance of the Third-Party Arbitrator’s assignment, the Company, Nokia and the
Beneficiary undertake to provide it with any relevant information relating to the adjustment provided for in Article 6.2 of this Performance Shares Liquidity Agreement, that would be necessary for the Third Party Arbitrator to undertake its
mission.
The Third-Party Arbitrator may request any such relevant and necessary information from the Company, Nokia and the Beneficiary.
Nokia, the Company and the Beneficiary shall be informed of the Third-Party Arbitrator’s conclusions as promptly as possible after
completion of Third-Party Arbitrator’s assignment and no later than on the last day of the above-mentioned 20 business day period.
In the event the Third-Party Arbitrator fails to determine the Exchange Ratio within twenty (20) business days following the notification
of its appointment, another Third-Party Arbitrator shall be appointed in the conditions set forth in this Article 8 to determine the Exchange Ratio within twenty (20) business days following the notification of its appointment and the
previously appointed Third-Party Arbitrator shall be automatically revoked upon the appointment of the new Third-Party Arbitrator, and so on until a Third-Party Arbitrator effectively determines the Exchange Ratio.
Except in case of a manifest error (erreur manifeste), as interpreted by French courts, the Third-Party Arbitrator’s
conclusions shall be final and binding, and therefore non-appealable, upon Nokia, the Company and the Beneficiary.
Any fees,
charges and disbursements incurred for the purpose of the completion of the Third-Party Arbitrator’s assignment shall be borne by Nokia if the Third-Party Arbitrator gives right to the Beneficiary’s claim in full, and otherwise by the
Beneficiary.
| 9. |
Beneficiary’s undertakings |
By complying with the Acceptance Process, the
Beneficiary cumulatively undertakes vis-a-vis Nokia and the Company (except as provided for otherwise in writing by Nokia):
| |
• |
|
not to sell, transfer, convey, alienate, mortgage, pledge or encumber his/her Performance Shares or to dispose of them other than in accordance with this Performance Shares Liquidity Agreement, or to Nokia, until the
end of the Notification Period or, if a Reduced Liquidity Notification is made to the Beneficiary during such Notification Period, until the Exchange Date; |
5
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• |
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to hold in pure registered form his/her Performance Shares until the end of the Notification Period or, if a Reduced Liquidity Notification is made to the Beneficiary during such Notification Period, until the Exchange
Date; |
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• |
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not to revoke the power of attorney referred to in Article 15 below; and |
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• |
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not to sell or otherwise transfer his/her Performance Shares if and for so long as he/she holds insider information regarding Nokia and/ or the Company. |
| 10. |
Exchange of the Company Shares pursuant to the Performance Shares Agreement |
Any
Company Share to be delivered by the Beneficiary shall be transferred to Nokia or to any third party designated by Nokia with full ownership including all of the rights pertaining thereto as of the effective date of transfer, free from any
privilege, rights, charges, restrictions and any third party rights of any nature whatsoever.
Except as otherwise provided in this Performance Shares Liquidity
Agreement, any correspondence to be addressed to the Beneficiary in relation to the Performance Shares Agreement shall be sent by email to the email address provided by the Company to Nokia. The Beneficiary hereby consents to all disclosure and
sharing of personal information relating to such Beneficiary if they are necessary or advisable for the performance of this Performance Shares Liquidity Agreement (including, without limitation, his/her name and email address). The Beneficiary will
be entitled to exercise his or her rights pursuant to applicable data privacy laws and regulations, including French Law n° 78-17 of January 6, 1978.
Except as otherwise provided in this Performance Shares Liquidity Agreement, any correspondence to be addressed to Nokia or to the Company in
relation to the Performance Shares Liquidity Agreement shall be sent by registered letter with acknowledgment of receipt at the following address:
Nokia Corporation
Human
Resources Department
Head of Compensation
Karaportti 3, P.O. Box 226
FI-00045 Nokia Group
Finland
Alcatel-Lucent
Direction des Ressources Humaines
148/152, Route de la Reine
92100
Boulogne-Billancourt
France
6
Neither Party may transfer or assign the benefit of all or any of its
rights or obligations under the Performance Shares Liquidity Agreement, directly or indirectly and in any manner whatsoever, except (i) in the case of the Beneficiary, as a result of the death of the Beneficiary, in which case the Company and
Nokia shall be promptly advised thereof and provided that the Beneficiary’s successor shall be bound by the terms of this Performance Shares Liquidity Agreement, to the extent not expressly prohibited under applicable law, and (ii) in the
case of Nokia, to an affiliate or to a financial institution appointed by Nokia or any of its affiliates.
| 13. |
Term of the Performance Shares Liquidity Agreement |
This Performance Shares
Liquidity Agreement shall be effective as of the date of its execution by all Parties (and in the case of the Beneficiary, as of the date he/she has completed the Acceptance Process as set out in Article 18) and shall be valid for a period of ten
(10) years from that date, without prejudice to the duration of the relevant Performance Shares plans as described in such plans rules.
In the event that all of the Performance Shares held by the Beneficiary are exchanged by the Beneficiary in compliance with this Performance
Shares Liquidity Agreement, and that such Beneficiary no longer holds any Performance Shares, the reciprocal undertakings of the Parties with regard to the said transferred Company Shares would expire.
| 14. |
Governing law and competent jurisdiction |
This Performance Shares Liquidity
Agreement is governed by the laws of France, without regard to principles of conflicts of law. All disputes arising out of or in connection with this Performance Shares Liquidity Agreement shall be submitted to the competent courts located within
the jurisdiction of the Versailles Court of Appeals.
The power of attorney granted hereby by the Beneficiary
to the Company in relation with the Performance Shares Liquidity Agreement aims at ensuring the proper completion of the obligations of the Beneficiary and is irrevocable. This power of attorney is deemed to be a power of attorney entered into in
the interest of all the Parties (mandat d’intérêt commun).
The Beneficiary irrevocably and
unconditionally grants a power of attorney to the Company for the purpose of, in the name and on behalf of the Beneficiary,
7
sending or receiving any notification, signing or receiving any form and carrying out any required formality for the completion of the Exchanges set out in the Performance Shares Liquidity
Agreement and, in general, making any statement, delivering any certificate, signing any agreement, deed, or other document and generally taking, in the name and on behalf of the Beneficiary, any action required for the completion of the Exchanges
set out in the Performance Shares Liquidity Agreement, in compliance with the choices made or deemed made by the Beneficiary upon acceptance of the Performance Shares Liquidity Agreement.
The Beneficiary also undertakes to approve any action taken by the Company pursuant to the said powers of attorney in compliance with the
choices he/she has made, subject to the above limitations.
The Beneficiary grants a power of attorney to the Company to instruct the
Administrator to, and the Company hereby undertakes to instruct the Administrator to, carry out the Performance Shares Exchange or, as the case may be, the Cash Exchange, as well as any formality required for the completion of the Exchanges, except
if a claim has been delivered in accordance with Article 7, in which case the Performance Shares Exchange Date or the Cash Exchange Date shall occur five (5) business days as from the date on which the Beneficiary and Nokia will have
reached an agreement on the Exchange Ratio or, as the case may be, the date on which the Third-Party Arbitrator will have rendered his conclusions.
Subject to the provisions of Articles 12 and 15, no third party to
this Performance Shares Liquidity Agreement shall have any rights or obligations on the basis of, or shall rely on the terms and conditions of, this Performance Shares Liquidity Agreement.
Except as otherwise provided herein, each Party shall pay all the costs
and expenses (including, but not limited to, financial advisory, accounting, legal and other professional or consulting fees and expenses) incurred by that Party or owed by it under applicable law, in connection with this Performance Shares
Liquidity Agreement.
In particular, the Beneficiary would be subject to a Finnish transfer tax of 1.6% of the value of the Nokia treasury
shares if it receives Nokia treasury shares in exchange for its Performance Shares.
If the Beneficiary wishes to enter into this Performance Shares
Liquidity Agreement, he/she shall comply with the acceptance process on the website https://alcatel-lucent.assets.voxaly.com/ by the last day of the Initial Offering Period (the “Acceptance Process”).
8
Otherwise, the Beneficiary shall be deemed to have waived his/her right to enter into this
Performance Shares Liquidity Agreement.
The Beneficiary is the only person who may decide to enter (or not) into this Performance Shares
Liquidity Agreement. In this respect, the Beneficiary is invited to consult its own specialized counsel if he/she wishes to obtain further information as to his/her rights and obligations hereunder.
If the Beneficiary complies with the Acceptance Process, the Beneficiary irrevocably undertakes vis-a-vis Nokia to transfer to Nokia (and
accept that the required instructions will be given to the Administrator) his/her Performance Shares following a Reduced Liquidity Notification and Nokia irrevocably undertakes vis-a-vis the Beneficiary to acquire such Performance Shares in the
conditions described in this Performance Shares Liquidity Agreement.
In the event of breach, in addition to all other remedies
which the non-breaching Party may have under applicable law, the non-breaching Party shall be entitled to specific performance (exécution forcée) and injunctive or equivalent relief in accordance with applicable law, including
article 1221 of the draft order of the French Ministry of Justice (if applicable on the relevant date). In addition, each of the Parties agree to waive the benefit of article 1142 of the French Civil Code in the event of breach.
This Performance Shares Liquidity Agreement is made in electronic form according to the provisions of article 1325 of the French Civil code.
[The rest of the page has been left blank intentionally]
9
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| Nokia |
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The Company |
| Represented by: |
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Represented by: |
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Philippe Camus |
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| Represented by: |
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[Signature page for the Performance Shares Liquidity Agreement]
10
Appendix 1
Definitions
The terms and expressions
below shall have the following meanings:
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| “Acceptance Process” |
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As defined in Article 18 of this Performance Shares Liquidity Agreement. |
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| “Administrator” |
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Société Générale Securities Services. |
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| “AMF General Regulation” |
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The general regulation of the Autorité des marchés financiers, the French stock exchange regulator, which is available in French and English at www.amf-france.org. |
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| “Article” |
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Unless specified otherwise herein, means the Article of this Performance Shares Liquidity Agreement. |
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| “Beneficiary” |
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The beneficiary of Performance Shares having become a party to this Performance Shares Liquidity Agreement on the date indicated hereof. |
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| “business day” |
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A day other than Saturday or Sunday where the banks are open for business in Finland. |
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| “Cash Exchange” |
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As defined in Article 5 of this Performance Shares Liquidity Agreement. |
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| “Company Extraordinary Distribution” |
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As defined in Appendix 3 to this Performance Shares Liquidity Agreement. |
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| “Company Merger” |
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As defined in Appendix 3 to this Performance Shares Liquidity Agreement. |
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| “Company Shares” |
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Ordinary shares issued by the Company and the American depository shares issued by the Company. |
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| “Reduced Liquidity” |
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As defined in Article 4 of this Performance Shares Liquidity Agreement. |
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| “Exchange” |
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Means the Performance Shares Exchange or the Cash Exchange. |
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| “Exchange Date” |
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Refers to the date on which the Exchange occurs. |
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| “Exchange Ratio” |
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As defined in Article 6 of this Performance Shares Liquidity Agreement. |
11
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| “Initial Offering Period” |
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Refers to the first offering period, as referred to in article 232-2 of the AMF General Regulation, the result of which will determine whether a Subsequent Offering Period will be opened or not. |
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| “Lock-up Period” |
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The date on which the Performance Shares relating to the plans listed in Appendix 2 hereto become vested and transferable. |
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| “Nokia Merger” |
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As defined in Appendix 3 to this Performance Shares Liquidity Agreement. |
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| “Nokia Shares” |
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Ordinary shares issued by Nokia and the American depository shares issued by Nokia. |
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| “Notification Period” |
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As defined in Article 4 of this Performance Shares Liquidity Agreement. |
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| “Performance Shares” |
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Any Company Share granted under various performance conditions by the Company’s board of directors to the Beneficiary pursuant to the Share Plans. |
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| “Performance Shares Exchange” |
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As defined in Article 5 of this Performance Shares Liquidity Agreement. |
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| “Performance Shares Exchange Date” |
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The date on which the Performance Shares Exchange occurs. |
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| “Performance Shares Liquidity Agreement” |
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This agreement executed by Nokia, the Company and the Beneficiary, including its Appendices and excluding any other document which may have been appended hereto. |
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| “Public Exchange Offers” |
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Public exchange offers in France and in the United States initiated by Nokia on the shares of the Company, as approved by the Autorité des Marchés Financiers in France and by the Securities and Exchange
Commission in the United States. |
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| “Reduced Liquidity” |
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As defined in Article 4 of this Performance Shares Liquidity Agreement. |
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| “Reduced Liquidity Notification” |
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As defined in Article 4 of this Performance Shares Liquidity Agreement. |
12
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| “Share Plans” |
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The plans listed in Appendix 2 to the Performance Shares Liquidity Agreement. |
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| “Success Threshold” |
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Refers to the (i) ownership by Nokia, on the date of the settlement of the initial offering period of the Public Exchange Offers, of more than 50% of the shares of Alcatel Lucent on a fully diluted basis, in accordance with article
231-9-II of the AMF General Regulation or (ii) satisfaction, at Nokia’s sole discretion on the date of publication of the final results of the initial offering period of the Public Exchange Offers, that such ownership condition will be met, or
(iii) the express decision by Nokia’s board of directors, on or prior to the date of publication of the final results of the initial offering period of the Public Exchange Offers, to waive such voluntary minimum threshold and to establish the
success threshold as described in article 231-9-I of the AMF General Regulation, pursuant to which any public offer at the close of which the offeror does not hold a number of shares representing a fraction of more than 50% of the share capital or
voting rights, shall be null and void. |
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| “Third-Party Arbitrator” |
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As defined in Article 8 of this Performance Shares Liquidity Agreement. |
13
Appendix 2
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| Plan n° |
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Share Plan date |
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End date of the Lock-Up Period |
| A0914RUROW A0914RPROW |
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Plan dated September 15, 2014 |
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September 15, 2018 |
14
Appendix 3
Exchange Ratio Adjustments
In case of a merger of the Company into another company (the
“Company Merger”), the Performance Shares Exchange and Cash Exchange will apply with respect to the shares of the absorbing entity received by the Beneficiary in exchange for Performance Shares which are within the scope of
Article 3 above. The Exchange Ratio will be adjusted as follows:
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Exchange RatioAdjusted |
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= |
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Exchange Ratio |
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x |
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1
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RatioMerger |
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Theoretical example of calculation of the number of Nokia Shares to be received in exchange of the absorbing company
shares in case of a Company Merger
Assumptions:
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RatioMerger = 2 shares of the absorbing company for each Company Share |
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Transfer of 200 shares of the absorbing company by the Beneficiary in January 2017 after the Company Merger |
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Exchange RatioAdjusted |
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= |
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0.55 |
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x |
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1/2 |
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Exchange RatioAdjusted |
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= |
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0.275 |
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The number of Nokia Shares to be received is: 200 x 0.275 = 55
In case of a merger of Nokia into another company (the “Nokia
Merger”), the Beneficiary will receive shares of the absorbing entity upon the Performance Shares Exchange and will receive, in cash, the equivalent value of the absorbing entity shares pursuant to the Cash Exchange. The Exchange Ratio will
be adjusted as follows:
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Exchange RatioAdjusted |
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= |
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Exchange Ratio |
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x |
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RatioMerger |
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15
Theoretical example of calculation of the number of absorbing company shares to be received in exchange of
Company Shares in case of a Nokia Merger
Assumptions:
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RatioMerger = 2 shares of the absorbing company for each Nokia Share |
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Transfer of 200 Company Shares by the Beneficiary in January 2017 after the Nokia Merger |
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Exchange RatioAdjusted |
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= |
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0.55 |
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x |
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2 |
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Exchange RatioAdjusted |
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= |
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1.1 |
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The number of the absorbing company shares to be received is: 200 x 1.1 = 220
| 2) |
Extraordinary distribution |
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A. |
Extraordinary distribution by Nokia |
If Nokia carries out a distribution of a special dividend,
as defined for purposes of Nokia’s then applicable performance shares plans, the Exchange Ratio shall be adjusted in accordance with the then applicable performance shares plans.
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B. |
Extraordinary distribution by the Company |
If the Company carries out a distribution of
an amount higher than the Company’s previous year net consolidated profit including a distribution of shares of a spin-off entity, (the “Company Extraordinary Distribution”) after the end of the Public Exchange Offers period,
the Exchange Ratio shall be adjusted as follows:
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Exchange RatioAdjusted |
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= |
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(Exchange Ratio x PNokia) - EDAlcatel
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PNokia |
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| Where: |
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“Exchange RatioAdjusted” means the number of Nokia Shares to be delivered for one Company Share after adjustment; |
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“PNokia” means the price of a Nokia Share on the day preceding the Company Extraordinary Distribution; and |
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“EDAlcatel” means the amount per share received by Company shareholder corresponding to the Company Extraordinary Distribution. |
Such adjustment will only apply to the extent the Beneficiary (i) has received the relevant Company
Extraordinary Distribution in respect of Performance Shares or (ii) has benefitted from a modification of the relevant plan due to the Company Extraordinary Distribution such as the adjustment provided in case of distribution of retained
earnings under article L.225-181 of the French Commercial Code.
16
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of Company
Shares in case of a Company Extraordinary Distribution
Assumptions:
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Transfer of 200 Company Shares by the Beneficiary in January 2017 |
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• |
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EDAlcatel = €1/Company Share |
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Exchange RatioAdjusted |
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= |
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(0.55 x 8) - 1
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8 |
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Exchange RatioAdjusted |
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0.425 |
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The number of Nokia Shares to be received is: 200 x 0.425 = 85
In the event that any other transaction specifically listed in
Article L. 225-181 of the French Commercial Code, or a stock split or a reverse stock split (i.e., share consolidation), is carried out by the Company, the Exchange Ratio shall be adjusted in order to allow the Beneficiary to obtain the same value
in Nokia Shares pursuant to the Performance Shares Exchange or in cash pursuant to the Cash Exchange as the Beneficiary would have obtained assuming that the said transactions had not been carried out.
In the event that (i) a capital increase by way of incorporation of reserves (as defined in Article L. 225-181 of the French Commercial
Code), (ii) a capital increase with or without shareholders’ preferential subscription right issued, in each case, with a discount of more than 10% on the stock price (except (a) capital increases completed to finance an acquisition
where Nokia uses shares as payment, at a premium to the prevailing share price of the target company in the transaction, and (b) capital increases where equity shares or other securities are issued, offered, exercised, allotted, appropriated,
modified or granted to, or for the benefit of, employees or former employees, directors, non-executive directors or executives holding or formerly holding executive office or the personal service company of any such persons or their spouses or
relatives, in each case, of Nokia or any of its subsidiaries or any associated company or to a trustee or nominee to be held for the benefit of any such person), or (iii) a stock split or a reverse stock split (i.e., share consolidation) is
carried out by Nokia, the Exchange Ratio shall be adjusted in order to allow the Beneficiary to obtain the same value in Nokia Shares pursuant to the Performance Shares Exchange or in cash pursuant to the Cash Exchange as the Beneficiary would have
obtained assuming the said transactions had not been carried out.
17
For example in case of share consolidation carried out by Nokia, the Exchange Ratio would be
adjusted as follows:
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Exchange RatioAdjusted |
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= |
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Exchange Ratio |
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x |
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Number of Nokia Shares composing the share capital after the
consolidation |
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Number of Nokia Shares composing the share capital prior to the consolidation |
|
|
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of Company Shares in case of
share consolidation carried out by Nokia
Assumptions:
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• |
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Transfer of 200 Company Shares by the Beneficiary in January 2017 |
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• |
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Share consolidation = 10 existing Nokia Shares become 1 new Nokia Share value |
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Number of shares before the consolidation = 3,678,181,540 |
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Number of shares after the consolidation = 367,818,154 |
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Exchange RatioAdjusted |
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= |
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0.55 |
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x |
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(367,818,154 / 3,678,181,540) |
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Exchange RatioAdjusted |
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= |
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0.055 |
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The number of Nokia Shares to be received is: 200 x 0.055 = 11
| 4) |
Value of the Company Shares and Nokia Shares |
For the calculation of any adjustment
factor as described above, the value of the Company Shares or Nokia Shares at a specific date shall be equal to the weighted average of trading prices during the three trading days preceding such date. Failing this, the value shall be determined by
an expert with an international reputation, designated by Nokia or the Company, as the case may be, which opinion shall be irrevocable.
18
Exhibit (e)(5)
2015 PERFORMANCE SHARES LIQUIDITY AGREEMENT
BETWEEN:
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Nokia Corporation, a corporation incorporated under the laws of Finland, with a share capital of EUR 245,896,461.96, which registered office is located Karaportti 3, 02610 Espoo, Finland, registered with the
Trade Register of the Finnish Patents and Registration Office under number 0112038-9, duly represented for the purposes hereof (“Nokia”) |
on the first part,
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Alcatel-Lucent, a société anonyme incorporated under the laws of France, with a share capital of EUR 141,210,168.20, which registered office is located 148/152, Route de la Reine – 92100
– Boulogne-Billancourt, France, registered with the Nanterre company registry under number 542.019.096, represented for the purposes hereof by Philippe Camus, duly authorized, (the “Company”) |
on the second part,
AND
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• |
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The beneficiary having complied with the Acceptance Process (the “Beneficiary”, and together with Nokia and the Company, the “Parties”), |
on the third part,
RECITALS:
In connection with the Public Exchange Offers, Nokia has undertaken under certain conditions to propose a mechanism that would ensure
the liquidity of certain Performance Shares if the liquidity of the Company Shares is significantly reduced as a result of the completion of the Public Exchange Offers (as further described below). The terms and conditions of this liquidity
mechanism are set forth in this agreement.
THEREFORE, IT HAS BEEN AGREED AS FOLLOWS:
| 1. |
Acceptance of the 2015 Performance Shares Liquidity Agreement |
The terms and
conditions of this liquidity agreement (the “2015 Performance Shares Liquidity Agreement”) shall be applicable to and binding on the Beneficiary, Nokia and the Company, provided that (i) the Beneficiary validly accepts the
Notification Letter, (ii) Nokia reaches the Success Threshold following the Initial Offering Period and (iii) the resolutions required to implement the Public Exchange Offers are approved by Nokia’s shareholders.
The definitions of the terms contained in this 2015 Performance
Shares Liquidity Agreement are set forth in Appendix 1 to this 2015 Performance Shares Liquidity Agreement.
| 3. |
Scope of the 2015 Performance Shares Liquidity Agreement |
This 2015 Performance
Shares Liquidity Agreement is applicable to the Performance Shares granted to the Beneficiary pursuant to any of the plans listed in Appendix 2.
| 4. |
Reduced Liquidity of Company Shares |
A reduced liquidity (a “Reduced
Liquidity”) of the Company Shares held by the Beneficiary shall occur if at least one of these conditions applies:
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• |
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The Company Shares are no longer listed on a regulated stock market within the meaning of article L. 421-1 of the French monetary and financial code (Code monétaire et financier);
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• |
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Nokia directly or indirectly holds at least 85% of the Company Shares; or |
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• |
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the average daily volume of the Company Shares traded on Euronext Paris calculated on the last consecutive twenty (20) trading days preceding the relevant date falls below five million (5,000,000) Company
Shares. |
The Company shall notify to the Beneficiary and Nokia by email within 5 business days following the
expiry day of the applicable Vesting Period (the “Notification Period”), the occurrence of any Reduced Liquidity of the Company Shares (the “Reduced Liquidity Notification”). The Reduced Liquidity Notification shall
include an example of an Exchange Ratio calculation determined based on the assumption that the Performance Shares Exchange occurred on the business day preceding the date of the Reduced Liquidity Notification, and shall detail the adjustments, if
any, to be applied to the Exchange Ratio pursuant to this 2015 Performance Shares Liquidity Agreement. Unless a claim is made in accordance with the provisions of Article 7, the Exchange Ratio calculation and the adjustments (if any) as notified
shall be final and binding except if an updated Reduced Liquidity Notification is made before the Performance Shares Exchange Date, in accordance with Article 6.2 of this Performance Shares Liquidity Agreement and the Appendix 3 hereto, in which
case such updated Reduced Liquidity Notification will replace and supersede the previous Reduced Liquidity Notification.
| 5. |
Performance Shares Exchange |
The Beneficiary’s Performance Shares
that are within the scope of Article 3 above will be automatically exchanged by Nokia for Nokia Shares (the “Performance Shares Exchange”) on the fifth (5th) business
day following the Reduced Liquidity Notification, if any.
2
The Exchange Ratio of the Performance Shares transferred by the Beneficiary to Nokia pursuant to
the Performance Shares Exchange shall be determined by Nokia in accordance with the provisions of Article 6 below. In the event the application of the Exchange Ratio would entitle the Beneficiary to receive Nokia fractional rights, he/she would
receive in cash (in EUR, rounded up to the closest cent; 0.5 cent shall be rounded up to 1 cent), as an indemnity for those fractional rights, the relevant fraction of the Nokia Share price as of the Performance Shares Exchange Date.
Alternatively to the Performance Shares Exchange, Nokia may choose to implement a payment in cash in respect of the Performance Shares, in its
sole discretion (the “Cash Exchange”). The Cash Exchange would be applicable under the same conditions and requirements as the Performance Shares except that the consideration for the exchange would not be Nokia Shares but a cash
consideration equal to the value of the Nokia Shares the Beneficiary would have been entitled to receive by exchanging his/her Performance Shares for Nokia Shares according to the Exchange Ratio. Such Nokia Shares value shall be based on the market
value of a Nokia Share on the NASDAQ OMX Helsinki Ltd. at the closing of the last trading day preceding the Cash Exchange.
The Company
and Nokia will have the option to proceed to the payments relating to the Cash Exchange and to the fractional rights indemnification through the Beneficiary’s next payroll (where relevant and to the extent legally permitted) and in any case, as
soon as administratively practicable, notwithstanding the 5-day period allocated for the completion of the Performance Shares Exchange.
| |
6.1 |
Exchange Ratio without adjustment |
Nokia shall deliver, for the Company Shares exchanged under
Article 5 above, a number of new and/or existing (at Nokia’s sole discretion) Nokia Shares calculated as follows and then rounded down to the next inferior whole number of Nokia Shares:
NNS = Exchange Ratio x NCS
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| Where: |
|
“NNS” means the total number of Nokia Shares (rounded down to the next inferior whole number) to be delivered to the Beneficiary in exchange for his/her Company Shares; |
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“Exchange Ratio” means the number of Nokia Shares to be delivered for one Company Share in accordance with the terms of the Public Exchange Offers, i.e. 0.55; and |
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“NCS” means the number of Company Shares to be exchanged under this 2015 Performance Shares Liquidity Agreement. |
3
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of Company
Shares pursuant to this 2015 Performance Shares Liquidity Agreement
Assumption: Transfer of 200 Company Shares by the Beneficiary in
January 2017 without any adjustment.
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NNS = 0.55 x 200 |
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NNS = 110 |
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6.2 |
Adjusted Exchange Ratio |
Upon certain financial transactions carried out by Nokia or the
Company affecting the value of their shares, the Exchange Ratio will be adjusted as described in Appendix 3.
For the avoidance of doubt,
no adjustment will be made to the Exchange Ratio in the event of issuance of new shares by the Company or Nokia in relation to or as a result of the acceleration mechanisms mentioned herein, the grant of Company Shares in replacement of the 2014
stock options plans, the grant of Company performance shares in 2015 or the performance of this 2015 Performance Shares Liquidity Agreement.
Any claim of the Beneficiary with respect to the Exchange Ratio shall be
delivered by registered letter (with acknowledgement of the receipt) from the Beneficiary to Nokia, with a copy addressed to the Company, within five (5) business days as from the date the Company sent the Reduced Liquidity Notification to the
Beneficiary in accordance with Article 4. The reasons for any claim shall be detailed precisely in such claim.
Nokia and the Beneficiary
shall agree on an Exchange Ratio within five (5) business days as from the receipt by Nokia of the Beneficiary’s notification letter. If, after such period, Nokia and the Beneficiary have not been able to reach an agreement, the procedure
provided for in Article 8 below shall apply.
| 8. |
Third-Party Arbitrator |
In case Nokia and the Beneficiary disagree on the
Exchange Ratio, any person jointly selected by the Parties within ten (10) business days following the delivery of a claim made in accordance with Article 7 or, failing to do so within such timeframe, any other person appointed by the president
of the Paris Tribunal de Grande Instance on the application of the most diligent Party, acting as third-party arbitrator within the meaning of article 1592 of the French Civil Code (the “Third-Party Arbitrator”)
shall determine the Exchange Ratio, within twenty (20) business days as from the date it
4
receives a registered letter with acknowledgment of receipt pursuant to which it has been appointed jointly by Nokia and the Beneficiary or by the president of the Paris Tribunal de Grande
Instance.
In case this request is sent by the Beneficiary, the Beneficiary undertakes to send on the same day a copy of such
letter to Nokia and the Company.
For the purpose of the performance of the Third-Party Arbitrator’s assignment, the Company, Nokia
and the Beneficiary undertake to provide it with any relevant information relating to the adjustment provided for in Article 6.2 of this 2015 Performance Shares Liquidity Agreement, that would be necessary for the Third Party Arbitrator to
undertake its mission.
The Third-Party Arbitrator may request any such relevant and necessary information from the Company, Nokia and the
Beneficiary.
Nokia, the Company and the Beneficiary shall be informed of the Third-Party Arbitrator’s conclusions as promptly as
possible after completion of Third-Party Arbitrator’s assignment and no later than on the last day of the above-mentioned 20 business day period.
In the event the Third-Party Arbitrator fails to determine the Exchange Ratio within twenty (20) business days following the notification
of its appointment, another Third-Party Arbitrator shall be appointed in the conditions set forth in this Article 8 to determine the Exchange Ratio within twenty (20) business days following the notification of its appointment and the
previously appointed Third-Party Arbitrator shall be automatically revoked upon the appointment of the new Third-Party Arbitrator, and so on until a Third-Party Arbitrator effectively determines the Exchange Ratio.
Except in case of a manifest error (erreur manifeste), as interpreted by French courts, the Third-Party Arbitrator’s conclusions
shall be final and binding, and therefore non-appealable, upon Nokia, the Company and the Beneficiary.
Any fees, charges and
disbursements incurred for the purpose of the completion of the Third-Party Arbitrator’s assignment shall be borne by Nokia if the Third-Party Arbitrator gives right to the Beneficiary’s claim in full, and otherwise by the Beneficiary.
| 9. |
Beneficiary’s undertakings |
By complying with the Acceptance Process, the
Beneficiary cumulatively undertakes vis-a-vis Nokia and the Company (except as provided for otherwise in writing by Nokia):
| |
• |
|
not to sell, transfer, convey, alienate, mortgage, pledge or encumber his/her Performance Shares or to dispose of them other than in accordance with this 2015 Performance Shares Liquidity Agreement, or to Nokia, until
the end of the Notification Period or, if a Reduced Liquidity Notification is made to the Beneficiary during such Notification Period, until the Exchange Date; |
5
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• |
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to hold in pure registered form his/her Performance Shares until the end of the Notification Period or, if a Reduced Liquidity Notification is made to the Beneficiary during such Notification Period, until the Exchange
Date; |
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• |
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not to revoke the power of attorney referred to in Article 15 below; and |
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• |
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not to sell or otherwise transfer his/her Performance Shares if and for so long as he/she holds insider information regarding Nokia and/ or the Company. |
| 10. |
Exchange of the Company Shares pursuant to the Performance Shares Agreement |
Any
Company Share to be delivered by the Beneficiary shall be transferred to Nokia or to any third party designated by Nokia with full ownership including all of the rights pertaining thereto as of the effective date of transfer, free from any
privilege, rights, charges, restrictions and any third party rights of any nature whatsoever.
Except as otherwise provided in this 2015 Performance Shares
Liquidity Agreement, any correspondence to be addressed to the Beneficiary in relation to the Performance Shares Agreement shall be sent by email to the email address provided by the Company to Nokia. The Beneficiary hereby consents to all
disclosure and sharing of personal information relating to such Beneficiary if they are necessary or advisable for the performance of this 2015 Performance Shares Liquidity Agreement (including, without limitation, his/her name and email address).
The Beneficiary will be entitled to exercise his or her rights pursuant to applicable data privacy laws and regulations, including French Law n° 78-17 of January 6, 1978.
Except as otherwise provided in this 2015 Performance Shares Liquidity Agreement, any correspondence to be addressed to Nokia or to the
Company in relation to the 2015 Performance Shares Liquidity Agreement shall be sent by registered letter with acknowledgment of receipt at the following address:
Nokia Corporation
Human
Resources Department
Head of Compensation
Karaportti 3, P.O. Box 226
FI-00045 Nokia Group
Finland
Alcatel-Lucent
Direction des Ressources Humaines
148/152, Route de la Reine
92100
Boulogne-Billancourt
France
6
Neither Party may transfer or assign the benefit of all or any of its
rights or obligations under the 2015 Performance Shares Liquidity Agreement, directly or indirectly and in any manner whatsoever, except (i) in the case of the Beneficiary, as a result of the death of the Beneficiary, in which case the Company
and Nokia shall be promptly advised thereof and provided that the Beneficiary’s successor shall be bound by the terms of this 2015 Performance Shares Liquidity Agreement, to the extent not expressly prohibited under applicable law, and
(ii) in the case of Nokia, to an affiliate or to a financial institution appointed by Nokia or any of its affiliates.
| 13. |
Term of the 2015 Performance Shares Liquidity Agreement |
This 2015 Performance
Shares Liquidity Agreement shall be effective as of the date of its execution by all Parties (and in the case of the Beneficiary, as of the date he/she has completed the Acceptance Process as set out in Article 18) and shall be valid for a period of
ten (10) years from that date, without prejudice to the duration of the relevant Performance Shares plans as described in such plans rules.
In the event that all of the Performance Shares held by the Beneficiary are exchanged by the Beneficiary in compliance with this 2015
Performance Shares Liquidity Agreement, and that such Beneficiary no longer holds any Performance Shares, the reciprocal undertakings of the Parties with regard to the said transferred Company Shares would expire.
| 14. |
Governing law and competent jurisdiction |
This 2015 Performance Shares Liquidity
Agreement is governed by the laws of France, without regard to principles of conflicts of law. All disputes arising out of or in connection with this 2015 Performance Shares Liquidity Agreement shall be submitted to the competent courts located
within the jurisdiction of the Versailles Court of Appeals.
The power of attorney granted hereby by the Beneficiary to the
Company in relation with the 2015 Performance Shares Liquidity Agreement aims at ensuring the proper completion of the obligations of the Beneficiary and is irrevocable. This power of attorney is deemed to be a power of attorney entered into in the
interest of all the Parties (mandat d’intérêt commun).
7
The Beneficiary irrevocably and unconditionally grants a power of attorney to the Company for the
purpose of, in the name and on behalf of the Beneficiary, sending or receiving any notification, signing or receiving any form and carrying out any required formality for the completion of the Exchanges set out in the 2015 Performance Shares
Liquidity Agreement and, in general, making any statement, delivering any certificate, signing any agreement, deed, or other document and generally taking, in the name and on behalf of the Beneficiary, any action required for the completion of the
Exchanges set out in the 2015 Performance Shares Liquidity Agreement, in compliance with the choices made or deemed made by the Beneficiary upon acceptance of the Notification Letter.
The Beneficiary also undertakes to approve any action taken by the Company pursuant to the said powers of attorney in compliance with the
choices he/she has made, subject to the above limitations.
The Beneficiary grants a power of attorney to the Company to instruct the
Administrator to, and the Company hereby undertakes to instruct the Administrator to, carry out the Performance Shares Exchange or, as the case may be, the Cash Exchange, as well as any formality required for the completion of the Exchanges, except
if a claim has been delivered in accordance with Article 7, in which case the Performance Shares Exchange Date or the Cash Exchange Date shall occur five (5) business days as from the date on which the Beneficiary and Nokia will have
reached an agreement on the Exchange Ratio or, as the case may be, the date on which the Third-Party Arbitrator will have rendered his conclusions.
Subject to the provisions of Articles 12 and 15, no third party to
this 2015 Performance Shares Liquidity Agreement shall have any rights or obligations on the basis of, or shall rely on the terms and conditions of, this 2015 Performance Shares Liquidity Agreement.
Except as otherwise provided herein, each Party shall pay all the costs
and expenses (including, but not limited to, financial advisory, accounting, legal and other professional or consulting fees and expenses) incurred by that Party or owed by it under applicable law, in connection with this 2015 Performance Shares
Liquidity Agreement.
In particular, the Beneficiary would be subject to a Finnish transfer tax of 1.6% of the value of the Nokia treasury
shares if it receives Nokia treasury shares in exchange for its Performance Shares.
This 2015 Performance Shares Liquidity Agreement shall enter into
full force and effect subject to the valid acceptance by the Beneficiary of the Notification Letter.
8
Otherwise, the Beneficiary shall be deemed to have waived his/her right to enter into this 2015
Performance Shares Liquidity Agreement.
The Beneficiary is the only person who may decide to enter (or not) into this 2015 Performance
Shares Liquidity Agreement. In this respect, the Beneficiary is invited to consult its own specialized counsel if he/she wishes to obtain further information as to his/her rights and obligations hereunder.
If the Beneficiary complies with the Acceptance Process, the Beneficiary irrevocably undertakes vis-a-vis Nokia to transfer to Nokia (and
accept that the required instructions will be given to the Administrator) his/her Performance Shares following a Reduced Liquidity Notification and Nokia irrevocably undertakes vis-a-vis the Beneficiary to acquire such Performance Shares in the
conditions described in this 2015 Performance Shares Liquidity Agreement.
In the event of breach, in addition to all other remedies which
the non-breaching Party may have under applicable law, the non-breaching Party shall be entitled to specific performance (exécution forcée) and injunctive or equivalent relief in accordance with applicable law, including article
1221 of the draft order of the French Ministry of Justice (if applicable on the relevant date). In addition, each of the Parties agree to waive the benefit of article 1142 of the French Civil Code in the event of breach.
This 2015 Performance Shares Liquidity Agreement is made in electronic form according to the provisions of article 1325 of the French Civil
code.
[The rest of the page has been left blank intentionally]
9
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| Nokia |
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The Company |
| Represented by: |
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Represented by: Philippe Camus |
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| Represented by: |
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[Signature page for the 2015 Performance Shares Liquidity Agreement]
10
Appendix 1
Definitions
The terms and expressions
below shall have the following meanings:
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| “Administrator” |
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Société Générale Securities Services. |
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| “AMF General Regulation” |
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The general regulation of the Autorité des marchés financiers, the French stock exchange regulator, which is available in French and English at www.amf-france.org. |
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| “Article” |
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Unless specified otherwise herein, means the Article of this 2015 Performance Shares Liquidity Agreement. |
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| “Beneficiary” |
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The beneficiary of Performance Shares having become a party to this 2015 Performance Shares Liquidity Agreement on the date indicated hereof. |
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| “business day” |
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A day other than Saturday or Sunday where the banks are open for business in Finland. |
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| “Cash Exchange” |
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As defined in Article 5 of this 2015 Performance Shares Liquidity Agreement. |
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| “Company Extraordinary Distribution” |
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As defined in Appendix 3 to this 2015 Performance Shares Liquidity Agreement. |
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| “Company Merger” |
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As defined in Appendix 3 to this 2015 Performance Shares Liquidity Agreement. |
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| “Company Shares” |
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Ordinary shares issued by the Company and the American depository shares issued by the Company. |
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| “Reduced Liquidity” |
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As defined in Article 4 of this 2015 Performance Shares Liquidity Agreement. |
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| “Exchange” |
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Means the Performance Shares Exchange or the Cash Exchange. |
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| “Exchange Date” |
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Refers to the date on which the Exchange occurs. |
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| “Exchange Ratio” |
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As defined in Article 6 of this 2015 Performance Shares Liquidity Agreement. |
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| “Initial Offering Period” |
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Refers to the first offering period, as referred to in article 232-2 of the AMF General Regulation, the result of which will determine whether a Subsequent Offering Period will be opened or
not. |
11
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| “Nokia Merger” |
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As defined in Appendix 3 to this 2015 Performance Shares Liquidity Agreement. |
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| “Nokia Shares” |
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Ordinary shares issued by Nokia and the American depository shares issued by Nokia. |
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| “Notification Letter” |
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Notification letter sent by the Company to the Beneficiary in respect of the grant of the 2015 Performance Shares plan. |
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| “Notification Period” |
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As defined in Article 4 of this 2015 Performance Shares Liquidity Agreement. |
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| “Performance Shares” |
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Any Company Share granted under various performance conditions by the Company’s board of directors to the Beneficiary pursuant to the Share Plans. |
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| “Performance Shares Exchange” |
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As defined in Article 5 of this 2015 Performance Shares Liquidity Agreement. |
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| “Performance Shares Exchange Date” |
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The date on which the Performance Shares Exchange occurs. |
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| “2015 Performance Shares Liquidity Agreement” |
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This agreement executed by Nokia, the Company and the Beneficiary, including its Appendices and excluding any other document which may have been appended hereto. |
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| “Public Exchange Offers” |
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Public exchange offers in France and in the United States initiated by Nokia on the shares of the Company, as approved by the Autorité des Marchés Financiers in France and by the Securities and Exchange
Commission in the United States. |
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| “Reduced Liquidity” |
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As defined in Article 4 of this 2015 Performance Shares Liquidity Agreement. |
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| “Reduced Liquidity Notification” |
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As defined in Article 4 of this 2015 Performance Shares Liquidity Agreement. |
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| “Share Plans” |
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The plans listed in Appendix 2 to the 2015 Performance Shares Liquidity Agreement. |
12
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| “Success Threshold” |
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Refers to the (i) ownership by Nokia, on the date of the settlement of the initial offering period of the Public Exchange Offers, of more than 50% of the shares of Alcatel Lucent on a fully diluted basis, in accordance with article
231-9-II of the AMF General Regulation or (ii) satisfaction, at Nokia’s sole discretion on the date of publication of the final results of the initial offering period of the Public Exchange Offers, that such ownership condition will be met, or
(iii) the express decision by Nokia’s board of directors, on or prior to the date of publication of the final results of the initial offering period of the Public Exchange Offers, to waive such voluntary minimum threshold and to establish the
success threshold as described in article 231-9-I of the AMF General Regulation, pursuant to which any public offer at the close of which the offeror does not hold a number of shares representing a fraction of more than 50% of the share capital or
voting rights, shall be null and void. |
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| “Third-Party Arbitrator” |
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As defined in Article 8 of this 2015 Performance Shares Liquidity Agreement. |
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| “Vesting Period” |
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The date on which the Performance Shares relating to the plans listed in Appendix 2 hereto become vested. |
13
Appendix 2
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| Plan n° |
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Share Plan date |
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End date of the Vesting Period |
| A0715RUROW
A0715RUNHA |
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Plan dated July 29, 2015 |
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July 29, 2019 |
14
Appendix 3
Exchange Ratio Adjustments
In case of a merger of the Company into another company (the
“Company Merger”), the Performance Shares Exchange and Cash Exchange will apply with respect to the shares of the absorbing entity received by the Beneficiary in exchange for Performance Shares which are within the scope of
Article 3 above. The Exchange Ratio will be adjusted as follows:
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Exchange RatioAdjusted |
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= |
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Exchange Ratio |
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x |
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1
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RatioMerger |
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Theoretical example of calculation of the number of Nokia Shares to be received in exchange of the absorbing company
shares in case of a Company Merger
Assumptions:
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RatioMerger = 2 shares of the absorbing company for each Company Share |
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• |
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Transfer of 200 shares of the absorbing company by the Beneficiary in January 2017 after the Company Merger |
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Exchange RatioAdjusted |
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= |
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0.55 |
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x |
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1/2 |
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Exchange RatioAdjusted |
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= |
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0.275 |
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The number of Nokia Shares to be received is: 200 x 0.275 = 55
In case of a merger of Nokia into another company (the “Nokia
Merger”), the Beneficiary will receive shares of the absorbing entity upon the Performance Shares Exchange and will receive, in cash, the equivalent value of the absorbing entity shares pursuant to the Cash Exchange. The Exchange Ratio will
be adjusted as follows:
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Exchange RatioAdjusted |
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= |
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Exchange Ratio |
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x |
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RatioMerger |
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15
Theoretical example of calculation of the number of absorbing company shares to be received in exchange of
Company Shares in case of a Nokia Merger
Assumptions:
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• |
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RatioMerger = 2 shares of the absorbing company for each Nokia Share |
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• |
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Transfer of 200 Company Shares by the Beneficiary in January 2017 after the Nokia Merger |
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Exchange RatioAdjusted |
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= |
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0.55 |
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x |
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2 |
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Exchange RatioAdjusted |
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= |
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1.1 |
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The number of the absorbing company shares to be received is: 200 x 1.1 = 220
| 2) |
Extraordinary distribution |
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A. |
Extraordinary distribution by Nokia |
If Nokia carries out a distribution of a special dividend,
as defined for purposes of Nokia’s then applicable performance shares plans, the Exchange Ratio shall be adjusted in accordance with the then applicable performance shares plans.
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B. |
Extraordinary distribution by the Company |
If the Company carries out a distribution of an
amount higher than the Company’s previous year net consolidated profit including a distribution of shares of a spin-off entity, (the “Company Extraordinary Distribution”) after the end of the Public Exchange Offers period, the
Exchange Ratio shall be adjusted as follows:
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Exchange RatioAdjusted |
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= |
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(Exchange Ratio x PNokia) - EDAlcatel
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PNokia |
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| Where: |
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“Exchange RatioAdjusted” means the number of Nokia Shares to be delivered for one Company Share after adjustment; |
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“PNokia” means the price of a Nokia Share on the day preceding the Company Extraordinary Distribution; and |
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“EDAlcatel” means the amount per share received by Company shareholder corresponding to the Company Extraordinary Distribution. |
Such adjustment will only apply to the extent the Beneficiary (i) has received the relevant Company
Extraordinary Distribution in respect of Performance Shares or (ii) has benefitted from a modification of the relevant plan due to the Company Extraordinary Distribution such as the adjustment provided in case of distribution of retained
earnings under article L.225-181 of the French Commercial Code.
16
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of Company
Shares in case of a Company Extraordinary Distribution
Assumptions:
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• |
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Transfer of 200 Company Shares by the Beneficiary in January 2017 |
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• |
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EDAlcatel = €1/Company Share |
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Exchange RatioAdjusted |
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= |
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(0.55 x 8) - 1
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8 |
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Exchange RatioAdjusted |
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= |
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0.425 |
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The number of Nokia Shares to be received is: 200 x 0.425 = 85
In the event that any other transaction specifically listed in
Article L. 225-181 of the French Commercial Code, or a stock split or a reverse stock split (i.e., share consolidation), is carried out by the Company, the Exchange Ratio shall be adjusted in order to allow the Beneficiary to obtain the same value
in Nokia Shares pursuant to the Performance Shares Exchange or in cash pursuant to the Cash Exchange as the Beneficiary would have obtained assuming that the said transactions had not been carried out.
In the event that (i) a capital increase by way of incorporation of reserves (as defined in Article L. 225-181 of the French Commercial
Code), (ii) a capital increase with or without shareholders’ preferential subscription right issued, in each case, with a discount of more than 10% on the stock price (except (a) capital increases completed to finance an acquisition
where Nokia uses shares as payment, at a premium to the prevailing share price of the target company in the transaction, and (b) capital increases where equity shares or other securities are issued, offered, exercised, allotted, appropriated,
modified or granted to, or for the benefit of, employees or former employees, directors, non-executive directors or executives holding or formerly holding executive office or the personal service company of any such persons or their spouses or
relatives, in each case, of Nokia or any of its subsidiaries or any associated company or to a trustee or nominee to be held for the benefit of any such person), or (iii) a stock split or a reverse stock split (i.e., share consolidation) is
carried out by Nokia, the Exchange Ratio shall be adjusted in order to allow the Beneficiary to obtain the same value in Nokia Shares pursuant to the Performance Shares Exchange or in cash pursuant to the Cash Exchange as the Beneficiary would have
obtained assuming the said transactions had not been carried out.
17
For example in case of share consolidation carried out by Nokia, the Exchange Ratio would be
adjusted as follows:
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Exchange RatioAdjusted |
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= |
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Exchange Ratio |
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x |
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Number of Nokia Shares composing the
share capital after the consolidation |
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Number of Nokia Shares composing the
share capital prior to the consolidation |
|
|
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of Company Shares in case of
share consolidation carried out by Nokia
Assumptions:
| |
• |
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Transfer of 200 Company Shares by the Beneficiary in January 2017 |
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• |
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Share consolidation = 10 existing Nokia Shares become 1 new Nokia Share value |
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• |
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Number of shares before the consolidation = 3,678,181,540 |
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• |
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Number of shares after the consolidation = 367,818,154 |
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Exchange RatioAdjusted |
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= |
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0.55 |
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x |
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(367,818,154 / 3,678,181,540) |
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Exchange RatioAdjusted |
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= |
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0.055 |
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The number of Nokia Shares to be received is: 200 x 0.055 = 11
| 4) |
Value of the Company Shares and Nokia Shares |
For the calculation of any adjustment
factor as described above, the value of the Company Shares or Nokia Shares at a specific date shall be equal to the weighted average of trading prices during the three trading days preceding such date. Failing this, the value shall be determined by
an expert with an international reputation, designated by Nokia or the Company, as the case may be, which opinion shall be irrevocable.
18
Exhibit (e)(6)
UNDERWATER STOCK OPTIONS LIQUIDITY AGREEMENT
BETWEEN:
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• |
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Nokia Corporation, a corporation incorporated under the laws of Finland, with a share capital of EUR 245,896,461.96, which registered office is located Karaportti 3, 02610 Espoo, Finland, registered with
the Trade Register of the Finnish Patents and Registration Office under number 0112038-9, duly represented for the purposes hereof (“Nokia”) |
on the first part,
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• |
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Alcatel-Lucent, a société anonyme incorporated under the laws of France, with a share capital of EUR 141,210,168.20, which registered office is located 148/152, Route de
la Reine – 92100 – Boulogne-Billancourt, France, registered with the Nanterre company registry under number 542.019.096, represented for the purposes hereof by Philippe Camus, duly authorized, (the “Company”)
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on the second part,
AND
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• |
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The beneficiary having complied with the Acceptance Process (the “Beneficiary”, and together with Nokia and the Company, the “Parties”), |
on the third part,
RECITALS:
In connection with the Public Exchange Offers, Nokia has undertaken under certain conditions to propose a mechanism that would ensure
the liquidity of certain Option Underlying Shares if the liquidity of the Company Shares is significantly reduced as a result of the completion of the Public Exchange Offers (as further described below). The terms and conditions of this liquidity
mechanism are set forth in this agreement.
THEREFORE, IT HAS BEEN AGREED AS FOLLOWS:
| 1. |
Acceptance of the Underwater Stock Options Liquidity Agreement |
The terms and
conditions of this liquidity agreement (the “Underwater Stock Options Liquidity Agreement”) shall be applicable to and binding on the Beneficiary, Nokia and the Company, provided that (i) the Beneficiary complies with the
Acceptance Process at any time by the last day of the Initial Offering Period, (ii) Nokia reaches the Success Threshold following the Initial Offering Period and (iii) the resolutions required to implement the Public Exchange Offers are
approved by Nokia’s shareholders.
The definitions of the terms contained in this Underwater Stock
Options Liquidity Agreement are set forth in Appendix 1 to this Underwater Stock Options Liquidity Agreement.
| 3. |
Scope of the Underwater Stock Options Liquidity Agreement |
If the Beneficiary has
accepted the Stock Options Acceleration Agreement, this Underwater Stock Options Liquidity Agreement is applicable to any of the Stock Options granted to the Beneficiary pursuant to the plans listed in Appendix 2 and subject to the cashless exercise
undertaking, provided that the Sale Price is lower than the sum of the Exercise Price of these Stock Options, the exercise commission and the trading fees applicable to the exercise of the Stock Options and sale transactions described in the Stock
Options Acceleration Agreement.
If the Beneficiary has not accepted the Stock Options Acceleration Agreement, this Underwater Stock
Options Liquidity Agreement is applicable to any of the vested Stock Options granted to the Beneficiary pursuant to the plans listed in Appendix 2 for which the sum of the Exercise Price, the exercise commission and the trading fees applicable to
the exercise and sale of the Option Underlying Shares exceeds 90% of the market value of a Company Share on Euronext Paris at the closing of the last day of the Subsequent Offering Period.
| 4. |
Reduced Liquidity of Company Shares |
A reduced liquidity (a “Reduced
Liquidity”) of the Company Shares held by the Beneficiary shall occur if at least one of these conditions applies:
| |
• |
|
The Company Shares are no longer listed on a regulated stock market within the meaning of article L. 421-1 of the French monetary and financial code (Code monétaire et financier);
|
| |
• |
|
Nokia directly or indirectly holds at least 85% of the Company Shares; or |
| |
• |
|
the average daily volume of the Company Shares traded on Euronext Paris calculated on the last consecutive twenty (20) trading days preceding the relevant date falls below five million (5,000,000) Company
Shares. |
The Company shall notify to the Beneficiary and Nokia by email, as from the last day of the Subsequent
Offering Period, the occurrence of any Reduced Liquidity of the Company Shares within 5 business days of such occurrence (the “Reduced Liquidity Notification”). The Reduced Liquidity Notification shall include an example of an
Exchange Ratio calculation determined based on the assumption that the Option Underlying Shares Exchange occurred on the business day preceding the date of the Reduced Liquidity Notification, and shall detail the adjustments, if any, to be applied
to the Exchange Ratio pursuant to this Underwater Stock Options Liquidity Agreement.
2
Unless a claim is made in accordance with the provisions of Article 7, the Exchange Ratio calculation and the adjustments (if any) as notified shall be final and binding except if an updated
Reduced Liquidity Notification is made before the Option Underlying Shares Exchange Date, in accordance with Article 6.2 of this Underwater Stock Options Liquidity Agreement and the Appendix 3 hereto, in which case such updated Reduced Liquidity
Notification will replace and supersede the previous Reduced Liquidity Notification.
| 5. |
Option Underlying Shares Exchange and Cash Exchange |
All the Options
Underlying Shares resulting from the exercise of any Stock Option being within the scope of Article 3 above shall be automatically exchanged by Nokia for Nokia Shares (the “Option Underlying Shares Exchange”) on the fifth (5th) business day following the exercise date of these relevant Stock Options (provided that the Beneficiary received a Reduced Liquidity Notification before the exercise of his/her Stock
Options).
In the event the Beneficiary would exercise his/her Stock Options being within the scope of Article 3 above before
having received a Reduced Liquidity Notification, he would not be entitled to benefit from any Exchange of his/her Option Underlying Shares.
The Exchange Ratio of the Option Underlying Shares transferred by the Beneficiary to Nokia pursuant to the Option Underlying Shares Exchange
shall be determined by Nokia in accordance with the provisions of Article 6 below. In the event the application of the Exchange Ratio would entitle the Beneficiary to receive Nokia fractional rights, he/she would receive in cash (in EUR,
rounded up to the closest cent; 0.5 cent shall be rounded up to 1 cent), as an indemnity for those fractional rights, the relevant fraction of the Nokia Share price as of the Option Underlying Shares Exchange Date.
Alternatively to the Option Underlying Shares Exchange, Nokia may choose to implement a payment in cash in respect of the Option Underlying
Shares, in its sole discretion (the “Cash Exchange”). The Cash Exchange would be applicable under the same conditions and requirements as the Option Underlying Shares Exchange except that the consideration for the exchange would not
be Nokia Shares but a cash consideration equal to the value of the Nokia Shares the Beneficiary would have been entitled to receive by exchanging his/her Option Underlying Shares for Nokia Shares according to the Exchange Ratio. Such Nokia Shares
value shall be based on the market value of a Nokia Share on the NASDAQ OMX Helsinki Ltd. at the closing of the last trading day preceding the Cash Exchange.
The Company and Nokia will have the option to proceed to the payments relating to the Cash Exchange and to the fractional rights
indemnification through the Beneficiary’s next payroll (where relevant and to the extent legally permitted) and in any case, as soon as administratively practicable, notwithstanding the 5-day delay allocated for the completion of the Option
Underlying Shares Exchange.
3
| |
6.1 |
Exchange Ratio without adjustment |
Nokia shall deliver, for the Company Shares exchanged under
Article 5 above, a number of new and/or existing (at Nokia’s sole discretion) Nokia Shares calculated as follows and then rounded down to the next inferior whole number of Nokia Shares:
NNS = Exchange
Ratio x NCS
|
|
|
| Where: |
|
“NNS” means the total number of Nokia Shares (rounded down to the next inferior whole number) to be delivered to the Beneficiary in exchange for his/her Company Shares; |
|
|
|
|
“Exchange Ratio” means the number of Nokia Shares to be delivered for one Company Share in accordance with the terms of the Public Exchange Offers, i.e. 0.55; and |
|
|
|
|
“NCS” means the number of Company Shares to be exchanged under this Underwater Stock Options Liquidity Agreement. |
|
|
|
| Theoretical example of calculation of the number of Nokia Shares to be received in exchange of Company Shares pursuant to
this Underwater Stock Options Liquidity Agreement Assumption: Transfer
of 200 Company Shares by the Beneficiary in January 2017 without any adjustment. |
|
|
|
|
|
|
|
|
|
| NNS |
|
= |
|
0.55 |
|
x |
|
200 |
|
|
|
|
|
| NNS |
|
= |
|
110 |
|
|
|
|
| |
6.2 |
Adjusted Exchange Ratio |
Upon certain financial transactions carried out by Nokia or the
Company affecting the value of their shares, the Exchange Ratio will be adjusted as described in Appendix 3.
For the avoidance of doubt,
no adjustment will be made to the Exchange Ratio in the event of issuance of new shares by the Company or Nokia in relation to or as a result of the acceleration mechanisms mentioned herein, the grant of Company shares in replacement of the 2014
stock options plans, the grant of Alcatel-Lucent performance shares in 2015 or the performance of this Underwater Stock Options Liquidity Agreement.
4
Any claim of the Beneficiary with respect to the Exchange Ratio shall be
delivered by registered letter (with acknowledgement of the receipt) from the Beneficiary to Nokia, with a copy addressed to the Company, within five (5) business days as from the date the Company sent the Reduced Liquidity Notification to the
Beneficiary in accordance with Article 4. The reasons for any claim shall be detailed precisely in such claim.
Nokia and the Beneficiary
shall agree on an Exchange Ratio within five (5) business days as from the receipt by Nokia of the Beneficiary’s notification letter. If, after such period, Nokia and the Beneficiary have not been able to reach an agreement, the procedure
provided for in Article 8 below shall apply.
| 8. |
Third-Party Arbitrator |
In case Nokia and the Beneficiary disagree on the
Exchange Ratio, any person jointly selected by the Parties within ten (10) business days following the delivery of a claim made in accordance with Article 7 or, failing to do so within such timeframe, any other person appointed by the president
of the Paris Tribunal de Grande Instance on the application of the most diligent Party, acting as third-party arbitrator within the meaning of article 1592 of the French Civil Code (the “Third-Party Arbitrator”)
shall determine the Exchange Ratio, within twenty (20) business days as from the date it receives a registered letter with acknowledgment of receipt pursuant to which it has been appointed jointly by Nokia and the Beneficiary or by the
president of the Paris Tribunal de Grande Instance.
In case this request is sent by the Beneficiary, the latter undertakes
to send on the same day a copy of such letter to Nokia and the Company.
For the purpose of the performance of the Third-Party
Arbitrator’s assignment, the Company, Nokia and the Beneficiary undertake to provide it with any relevant information relating to the adjustment provided for in Article 6.2 of this Underwater Stock Options Liquidity Agreement, that would
be necessary for the Third Party Arbitrator to undertake its mission.
The Third-Party Arbitrator may request any such relevant and
necessary information from the Company, Nokia and the Beneficiary.
Nokia, the Company and the Beneficiary shall be informed of the
Third-Party Arbitrator’s conclusions as promptly as possible after completion of Third-Party Arbitrator’s assignment and no later than on the last day of the above-mentioned 20 business day period.
In the event the Third-Party Arbitrator fails to determine the Exchange Ratio within twenty (20) business days following the notification
of its appointment, another Third-Party Arbitrator shall be appointed in the conditions set forth in this Article 8 to determine the Exchange Ratio within twenty (20) business days following the
5
notification of its appointment and the previously appointed Third-Party Arbitrator shall be automatically revoked upon the appointment of the new Third-Party Arbitrator, and so on until a
Third-Party Arbitrator effectively determines the Exchange Ratio.
Except in case of a manifest error (erreur manifeste), as
interpreted by French courts, the Third-Party Arbitrator’s conclusions shall be final and binding, and therefore non-appealable, upon Nokia, the Company and the Beneficiary.
Any fees, charges and disbursements incurred for the purpose of the completion of the Third-Party Arbitrator’s assignment shall be borne
by Nokia if the Third-Party Arbitrator gives right to the Beneficiary’s claim in full, and otherwise by the Beneficiary.
| 9. |
Beneficiary’s undertakings |
By complying with the Acceptance Process, the
Beneficiary cumulatively undertakes vis-a-vis Nokia and the Company (except as provided for otherwise in writing by Nokia):
| |
• |
|
not to sell, transfer, convey, alienate, mortgage, pledge or encumber his/her Option Underlying Shares or to dispose of them other than in accordance with this Underwater Stock Options Liquidity Agreement, or to Nokia,
between the date on which the Beneficiary receives a Reduced Liquidity Notification and until the Exchange; |
| |
• |
|
to hold in pure registered form his/her Option Underlying Shares as long as they are held by the Beneficiary; |
| |
• |
|
not to revoke the power of attorney referred to in Article 15 below; and |
| |
• |
|
not to exercise his/her Stock Options if and for so long as he/she holds insider information regarding Nokia and/ or the Company. |
| 10. |
Exchange of the Company Shares pursuant to the Underwater Stock Options Liquidity Agreement |
Any Company Share to be delivered by the Beneficiary shall be transferred to Nokia or to any third party designated by Nokia with full
ownership including all of the rights pertaining thereto as of the effective date of transfer, free from any privilege, rights, charges, restrictions and any third party rights of any nature whatsoever.
Except as otherwise provided in this Underwater Stock Options
Liquidity Agreement, any correspondence to be addressed to the Beneficiary in relation to the Underwater Stock Options Liquidity Agreement shall be sent by email to the email address provided by the Company to Nokia. The Beneficiary hereby consents
to all
6
disclosure and sharing of personal information relating to such Beneficiary if they are necessary or advisable for the performance of this Underwater Stock Options Liquidity Agreement (including,
without limitation, his/her name and email address). The Beneficiary will be entitled to exercise his or her rights pursuant to applicable data privacy laws and regulations, including French Law n° 78-17 of January 6, 1978.
Except as otherwise provided in this Underwater Stock Options Liquidity Agreement, any correspondence to be addressed to Nokia or to the
Company in relation to the Underwater Stock Options Liquidity Agreement shall be sent by registered letter with acknowledgment of receipt at the following address:
Nokia Corporation
Human
Resources Department
Head of Compensation
Karaportti 3, P.O. Box 226
FI-00045 Nokia Group
Finland
Alcatel-Lucent
Direction des Ressources Humaines
148/152, Route de la Reine
92100
Boulogne-Billancourt
France
Neither Party may transfer or assign the benefit of all or any of its
rights or obligations under the Underwater Stock Options Liquidity Agreement, directly or indirectly and in any manner whatsoever, except (i) in the case of the Beneficiary, as a result of the death of the Beneficiary, in which case the Company
and Nokia shall be promptly advised thereof and provided that the Beneficiary’s successor shall be bound by the terms of this Underwater Stock Options Liquidity Agreement, to the extent not expressly prohibited under applicable law, and
(ii) in the case of Nokia, to an affiliate or to a financial institution appointed by Nokia or any of its affiliates.
| 13. |
Term of this Underwater Stock Options Liquidity Agreement |
This Underwater Stock
Options Liquidity Agreement shall be effective as of the date of its execution by all Parties (and in the case of the Beneficiary, as of the date he/she has completed the Acceptance Process as set out in Article 18) and shall be valid for a period
of ten (10) years from that date, without prejudice to the duration of the relevant Stock Options plans as described in such plans rules.
In the event that all of the Option Underlying Shares held by the Beneficiary are exchanged by the Beneficiary in compliance with this
Underwater Stock Options Liquidity Agreement, and that such Beneficiary no longer holds any Stock Option, the reciprocal undertakings of the Parties with regard to the said transferred Company Shares would expire.
7
| 14. |
Governing law and competent jurisdiction |
This Underwater Stock Options Liquidity
Agreement is governed by the laws of France, without regard to principles of conflicts of law. All disputes arising out of or in connection with this Underwater Stock Options Liquidity Agreement shall be submitted to the competent courts located
within the jurisdiction of the Versailles Court of Appeals.
The power of attorney granted hereby by the Beneficiary
to the Company in relation with the Underwater Stock Options Liquidity Agreement aims at ensuring the proper completion of the obligations of the Beneficiary and is irrevocable. This power of attorney is deemed to be a power of attorney entered into
in the interest of all the Parties (mandat d’intérêt commun).
The Beneficiary irrevocably and
unconditionally grants a power of attorney to the Company for the purpose of, in the name and on behalf of the Beneficiary, sending or receiving any notification, signing or receiving any form and carrying out any required formality for the
completion of the Exchanges set out in the Underwater Stock Options Liquidity Agreement and, in general, making any statement, delivering any certificate, signing any agreement, deed, or other document and generally taking, in the name and on behalf
of the Beneficiary, any action required for the completion of the Exchanges set out in the Underwater Stock Options Liquidity Agreement, in compliance with the choices made or deemed made by the Beneficiary upon acceptance of the Underwater Stock
Options Liquidity Agreement.
The Beneficiary also undertakes to approve any action taken by the Company pursuant to the said powers of
attorney in compliance with the choices he/she has made, subject to the above limitations.
The Beneficiary grants a power of attorney to
the Company to instruct the Administrator to, and the Company hereby undertakes to instruct the Administrator to, carry out the Option Underlying Shares Exchange or, as the case may be, the Cash Exchange, as well as any formality required for the
completion of the Exchanges, except if a claim has been delivered in accordance with Article 7 and specifying the nature and detailing the reasons of such claim, in which case the Option Underlying Shares Exchange Date or the Cash Exchange Date
shall occur five (5) business days as from the date on which the Beneficiary and Nokia will have reached an agreement on the Exchange Ratio or, as the case may be, the date on which the Third-Party Arbitrator will have rendered his conclusions.
Subject to the provisions of Articles 12 and 15, no third party to
this Underwater Stock Options Liquidity Agreement shall have any rights or obligations on the basis of, or shall rely on the terms and conditions of, this Underwater Stock Options Liquidity Agreement.
8
Except as otherwise provided herein, each Party shall pay all the costs
and expenses (including, but not limited to, financial advisory, accounting, legal and other professional or consulting fees and expenses) incurred by that Party or owed by it under applicable law, in connection with this Underwater Stock Options
Liquidity Agreement.
In particular, the Beneficiary would be subject to a Finnish transfer tax of 1.6% of the value of the Nokia treasury
shares if it receives Nokia treasury shares in exchange for its Option Underlying Shares.
| 18. |
Acceptance – Specific Performance |
If the Beneficiary wishes to enter
into this Underwater Stock Options Liquidity Agreement, he/she shall comply with the acceptance process on the website https://alcatel-lucent.assets.voxaly.com/ (the “Acceptance Process”).
Otherwise, the Beneficiary shall be deemed to have waived his/her right to enter into this Underwater Stock Options Liquidity Agreement.
The Beneficiary is the only person who may decide to enter (or not) into this Underwater Stock Options Liquidity Agreement. In this respect,
the Beneficiary is invited to consult its own specialized counsel if he/she wishes to obtain further information as to his/her rights and obligations hereunder.
If the Beneficiary complies with the Acceptance Process, the Beneficiary irrevocably undertakes vis-a-vis Nokia to transfer to Nokia (and
accepts that the required instructions will be given to the Administrator) his/her Company Shares resulting from the exercise of his/her Stock Options which are in the scope of Article 3 of this Underwater Stock Options Liquidity Agreement and
provided that the exercised occurred after the Reduced Liquidity Notification and Nokia irrevocably undertakes vis-a-vis the Beneficiary to acquire such Company Shares in the conditions described in this Underwater Stock Options Liquidity Agreement.
In the event of breach, in addition to all other remedies which the non-breaching Party may have under applicable law, the
non-breaching Party shall be entitled to specific performance (exécution forcée) and injunctive or equivalent relief in accordance with applicable law, including article 1221 of the draft order of the French Ministry of Justice
(if applicable on the relevant date). In addition, each of the Parties agree to waive the benefit of article 1142 of the French Civil Code in the event of breach.
This Underwater Stock Options Liquidity Agreement is made in electronic form according to the provisions of article 1325 of the French Civil
code.
[The rest of the page has been left blank intentionally]
9
|
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| Nokia |
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|
|
The Company |
| Represented by: |
|
|
|
Represented by: Philippe Camus |
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| |
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| Represented by: |
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[Signature page for the Underwater Stock Options Liquidity Agreement]
10
Appendix 1
Definitions
|
|
|
| The terms and expressions below shall have the following meanings: |
|
|
| “Acceptance Process” |
|
As defined in Article 18 of this Underwater Stock Options Acceleration Agreement. |
|
|
| “Administrator” |
|
Société Générale Securities Services. |
|
|
| “AMF General Regulation” |
|
The general regulation of the Autorité des marchés financiers, the French stock exchange regulator, which is available in French and English at www.amf-france.org. |
|
|
| “Article” |
|
Unless specified otherwise herein, means the Article of this Underwater Stock Options Liquidity Agreement. |
|
|
| “Beneficiary” |
|
The person having become a party to this Underwater Stock Options Liquidity Agreement on the date indicated hereof. |
|
|
| “business day” |
|
A day other than Saturday or Sunday where the banks are open for business in Finland. |
|
|
| “Cash Exchange” |
|
As defined in Article 5 of this Underwater Stock Options Liquidity Agreement. |
|
|
| “Cash Exchange Date” |
|
The date on which the Cash Exchange occurs. |
|
|
| “Company Extraordinary Distribution” |
|
As defined in Appendix 3 to this Underwater Stock Options Liquidity Agreement. |
|
|
| “Company Merger” |
|
As defined in Appendix 3 to this Underwater Stock Options Liquidity Agreement. |
|
|
| “Company Shares” |
|
Ordinary shares issued by the Company and the American depository shares issued by the Company. |
|
|
| “Exchange” |
|
Means the Option Underlying Share Exchange or the Cash Exchange. |
|
|
| “Exchange Ratio” |
|
As defined in Article 6 of this Underwater Stock Options Liquidity Agreement. |
11
|
|
|
| “Exercise Price” |
|
The price to be paid upon exercise of the Stock Options. |
|
|
| “Initial Offering Period” |
|
Refers to the first offering period, as referred to in Article 232-2 of the AMF General Regulation, the result of which will determine whether a Subsequent Offering Period will be opened or not. |
|
|
| “Nokia Merger” |
|
As defined in Appendix 3 to this Underwater Stock Options Liquidity Agreement. |
|
|
| “Nokia Shares” |
|
Ordinary shares issued by Nokia and the American depository shares issued by Nokia. |
|
|
| “Option Underlying Shares” |
|
Company Shares that have been or will be delivered by the Company to the Beneficiary in connection with his/her Stock Options. |
|
|
| “Option Underlying Shares Exchange” |
|
As defined in Article 5 of this Underwater Stock Options Liquidity Agreement. |
|
|
| “Option Underlying Shares Exchange Date” |
|
The date on which the Option Underlying Shares Exchange occurs. |
|
|
| “Public Exchange Offers” |
|
Public exchange offers in France and in the United States initiated by Nokia on the securities of the Company, as approved by the Autorité des Marchés Financiers in France and by the Securities and
Exchange Commission in the United States. |
|
|
| “Reduced Liquidity” |
|
As defined in Article 4 of this Underwater Stock Options Liquidity Agreement. |
|
|
| “Reduced Liquidity Notification” |
|
As defined in Article 4 of this Underwater Stock Options Liquidity Agreement. |
|
|
| “Sale Price” |
|
As defined in the Stock Options Acceleration Agreement. |
|
|
| “Stock Options” |
|
Any option to subscribe for or acquire Company Shares granted by the Company’s board of directors to a Beneficiary pursuant to the Share Plans. |
|
|
| “Stock Options Acceleration Agreement” |
|
The Stock Options Acceleration Agreement this Underwater Stock Options Liquidity Agreement is appended to, entered into by between the Company, the Beneficiary and Nokia (for the need of Article 5 thereto). |
12
|
|
|
| “Subsequent Offering Period” |
|
Subsequent offering period for the French public exchange offer in accordance with article 232-4 of the AMF General Regulation. |
|
|
| “Success Threshold” |
|
Refers to the (i) ownership by Nokia, on the date of the settlement of the initial offering period of the Public Exchange Offers, of more than 50% of the shares of Alcatel Lucent on a fully diluted basis, in accordance with article
231-9-II of the AMF General Regulation or (ii) satisfaction, at Nokia’s sole discretion on the date of publication of the final results of the initial offering period of the Public Exchange Offers, that such ownership condition will be met, or
(iii) the express decision by Nokia’s board of directors, on or prior to the date of publication of the final results of the initial offering period of the Public Exchange Offers, to waive such voluntary minimum threshold and to establish the
success threshold as described in article 231-9-I of the AMF General Regulation, pursuant to which any public offer at the close of which the offeror does not hold a number of shares representing a fraction of more than 50% of the share capital or
voting rights, shall be null and void. |
|
|
| “Third-Party Arbitrator” |
|
As defined in Article 8 of this Underwater Stock Options Liquidity Agreement. |
|
|
| “Underwater Stock Options Liquidity Agreement” |
|
This agreement executed by Nokia, the Company and the Beneficiary, including its appendices. |
13
Appendix 2
The following plans are in the scope of this
Underwater Stock Options Liquidity Agreement
|
|
|
|
|
| Plan n° |
|
Plan date |
|
End of vesting period |
| A0713COBE2 (If the Beneficiary is not subject to any tax restriction period pursuant to this plan)
A0713CORO2 A0713CONH2
A0713COFR2 A0713NHNH2
A0713COIS2 |
|
Plan dated July 12, 2013 |
|
July 12, 2017 |
|
|
|
| A1212NHNH2 |
|
Plan dated December 17, 2012 |
|
December 17, 2016 |
|
|
|
| A0812NHRO2 A0812NHNH2 |
|
Plan dated August 13, 2012 |
|
August 13, 2016 |
|
|
|
| A0312CORO2 A0312COBE2
A0312CONH2 A0312NHNH2
A0312NHRO2 A0312COIS2 |
|
Plan dated March 14, 2012 |
|
March 14, 2016 |
|
|
|
| A1211NHNH2 A1211NHFR2
A1211NHIS2 |
|
Plan dated December 1, 2011 |
|
December 1, 2015 |
|
|
|
| A0911NHBE2 A0911NHFR2
A0911NHRO2 A0911NHIS2
A0911NHNH2 |
|
Plan dated September 1, 2011 |
|
September 1, 2015 |
|
|
|
| A0611NHNH2 A0611NHFR2
A0611NHRO2 A0611NHIS2 |
|
Plan dated June 1, 2011 |
|
June 1, 2015 |
|
|
|
| A0311CORO2 A0311COBE2
A0311COFR2 A0311CONH2
A0311CPFR2 A0311COIS2 |
|
Plan dated March 16, 2011 |
|
March 16, 2015 |
|
|
|
| A0311NHFR2 A0311NHNHA
A0311NHROW |
|
Plan dated March 1, 2011 |
|
March 1, 2015 |
14
|
|
|
|
|
| Plan n° |
|
Plan date |
|
End of vesting period |
| A1210NHNHA |
|
Plan dated December 9, 2010 |
|
December 9, 2014 |
|
|
|
| A1010NHNHA A1010NPFR2 |
|
Plan dated October 1, 2010 |
|
October 1, 2014 |
|
|
|
| A0710NHNHA A0710NHFR2 |
|
Plan dated July 1, 2010 |
|
July 1, 2014 |
|
|
|
| A0310COROW A0310CONHA
A0310COBEL A0310COFRA
A0310COISR A0310CPFRA
A0310NHNHA |
|
Plan dated March 17, 2010 |
|
March 17, 2014 |
|
|
|
| A1209NHNHA |
|
Plan dated December 1, 2009 |
|
December 1, 2013 |
|
|
|
| A1009NHFRA A1009NHNHA |
|
Plan dated October 1, 2009 |
|
October 1, 2013 |
|
|
|
| A0709NHNHA A0709NHFRA |
|
Plan dated July 1, 2009 |
|
July 1, 2013 |
|
|
|
| A0309EXROW A0309EXBEL
A0309EXFRA A0309EXNHA
A0309EXISR |
|
Plan dated March 18, 2009 |
|
March 18, 2013 |
|
|
|
| A0309COROW A0309CONHA
A0309COBEL A0309COFRA
A0309NHNHA A0309COISR
A0309CPFRA |
|
Plan dated March 18, 2009 |
|
March 18, 2013 |
|
|
|
| A1208NHNHA A1208NHFRA |
|
Plan dated December 31, 2008 |
|
December 31, 2012 |
|
|
|
| A0708NHROW A0708NHNHA
A0708NHFRA |
|
Plan dated July 1, 2008 |
|
July 1, 2012 |
|
|
|
| A0308COROW A0308COBEL
A0308COFRA A0308CONHA
A0308COISR |
|
Plan dated March 25, 2008 |
|
March 25, 2012 |
15
Appendix 3
Exchange Ratio Adjustments
In case of a merger of the Company into another company (the
“Company Merger”), the Option Underlying Shares Exchange and Cash Exchange will apply with respect to the shares of the absorbing entity received by the Beneficiary in exchange for Company Shares resulting from Stock Options which
are within the scope of Article 3 above. The Exchange Ratio will be adjusted as follows:
|
|
|
|
|
|
|
|
|
|
|
| Exchange RatioAdjusted |
|
= |
|
Exchange Ratio |
|
x |
|
1 |
|
|
| |
|
|
|
RatioMerger |
|
|
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of the absorbing company
shares in case of a Company Merger
Assumptions:
| |
• |
|
RatioMerger = 2 shares of the absorbing company for each Company Share |
| |
• |
|
Transfer of 200 shares of the absorbing company by the Beneficiary in January 2017 after the Company Merger |
Exchange RatioAdjusted = 0.55
x 1/2
Exchange RatioAdjusted = 0.275
The number of Nokia Shares to be received is: 200 x 0.275 = 55
In case of a merger of Nokia into another company (the “Nokia
Merger”), the Beneficiary will receive shares of the absorbing entity upon the Option Underlying Shares Exchange and will receive, in cash, the equivalent value of the absorbing entity shares pursuant to the Cash Exchange. The Exchange
Ratio will be adjusted as follows:
Exchange RatioAdjusted =
Exchange Ratio x RatioMerger
16
Theoretical example of calculation of the number of absorbing company shares to be received in exchange of
Company Shares in case of a Nokia Merger
Assumptions:
| |
• |
|
RatioMerger = 2 shares of the absorbing company for each Nokia Share |
| |
• |
|
Transfer of 200 Company Shares by the Beneficiary in January 2017 after the Nokia Merger |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange RatioAdjusted |
|
= |
|
0.55 |
|
x |
|
2 |
|
|
|
|
|
|
|
|
Exchange RatioAdjusted |
|
= |
|
1.1 |
|
|
|
|
The number of the absorbing company shares to be received is: 200 x 1.1 = 220
| 2) |
Extraordinary distribution |
| |
A. |
Extraordinary distribution by Nokia |
If Nokia carries out a distribution of a special dividend,
as defined for purposes of Nokia’s then applicable stock option plans, the Exchange Ratio shall be adjusted in accordance with the then applicable stock option plans.
| |
B. |
Extraordinary distribution by the Company |
If the Company carries out a distribution of
an amount higher than the Company’s previous year net consolidated profit including a distribution of shares of a spin-off entity, (the “Company Extraordinary Distribution”) after the end of the Public Exchange Offers period,
the Exchange Ratio shall be adjusted as follows:
|
|
|
|
|
|
|
|
|
|
|
Exchange RatioAdjusted |
|
= |
|
(Exchange Ratio x PNokia) - EDAlcatel
|
|
|
| |
|
|
PNokia |
|
|
|
|
|
| Where: |
|
“Exchange RatioAdjusted” means the number of Nokia Shares to be delivered for one Company Share after adjustment; |
|
|
|
|
“PNokia” means the price of a Nokia Share on the day preceding the Company Extraordinary Distribution; and |
|
|
|
|
“EDAlcatel” means the amount per share received by Company shareholder corresponding to the Company Extraordinary Distribution. |
Such adjustment will only apply to the extent the Beneficiary (i) has received the relevant Company
Extraordinary Distribution in respect of Option Underlying Shares resulting from Stock Options that are already exercised or (ii) has
17
benefitted from a modification of the relevant plan due to the Company Extraordinary Distribution such as the adjustment provided in case of distribution of retained earnings under article
L.225-181 of the French Commercial Code.
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of Company
Shares in case of a Company Extraordinary Distribution
Assumptions:
| |
• |
|
Transfer of 200 Company Shares by the Beneficiary in January 2017 |
| |
• |
|
EDAlcatel = €1/Company Share |
|
|
|
|
|
|
|
|
|
|
|
Exchange RatioAdjusted |
|
= |
|
(0.55 x 8) - 1
|
|
|
| |
|
|
8 |
|
|
|
|
|
|
|
|
|
Exchange RatioAdjusted |
|
= |
|
0.425 |
|
|
The number of Nokia Shares to be received is: 200 x 0.425 = 85
In the event that any other transaction specifically listed in
Article L. 225-181 of the French Commercial Code, or a stock split or a reverse stock split (i.e., share consolidation), is carried out by the Company, the Exchange Ratio shall be adjusted in order to allow the Beneficiary to obtain the same value
in Nokia Shares pursuant to the Option Underlying Shares Exchange or in cash pursuant to the Cash Exchange as the Beneficiary would have obtained assuming that the said transactions had not been carried out.
In the event that (i) a capital increase by way of incorporation of reserves (as defined in Article L. 225-181 of the French Commercial
Code), (ii) a capital increase with or without shareholders’ preferential subscription right issued, in each case, with a discount of more than 10% on the stock price (except (a) capital increases completed to finance an acquisition
where Nokia uses shares as payment, at a premium to the prevailing share price of the target company in the transaction, and (b) capital increases where equity shares or other securities are issued, offered, exercised, allotted, appropriated,
modified or granted to, or for the benefit of, employees or former employees, directors, non-executive directors or executives holding or formerly holding executive office or the personal service company of any such persons or their spouses or
relatives, in each case, of Nokia or any of its subsidiaries or any associated company or to a trustee or nominee to be held for the benefit of any such person), or (iii) a stock split or a reverse stock split (i.e., share consolidation) is
carried out by Nokia, the Exchange Ratio shall be adjusted in order to allow the Beneficiary to obtain the same value in Nokia Shares pursuant to the Option Underlying Shares Exchange or in cash pursuant to the Cash Exchange as the Beneficiary would
have obtained assuming the said transactions had not been carried out.
18
For example in case of share consolidation carried out by Nokia, the Exchange Ratio would be
adjusted as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange RatioAdjusted |
|
= |
|
Exchange Ratio |
|
x |
|
Number of Nokia Shares composing the share capital after the
consolidation |
|
|
| |
|
|
|
|
Number of Nokia Shares composing the share capital prior to the consolidation |
|
|
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of Company Shares in case of
share consolidation carried out by Nokia
Assumptions:
| |
• |
|
Transfer of 200 Company Shares by the Beneficiary in January 2017 |
| |
• |
|
Share consolidation = 10 existing Nokia Shares become 1 new Nokia Share value |
| |
• |
|
Number of shares before the consolidation = 3,678,181,540 |
| |
• |
|
Number of shares after the consolidation = 367,818,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange RatioAdjusted |
|
= |
|
0.55 |
|
x |
|
(367,818,154 / 3,678,181,540) |
|
|
|
|
|
|
|
|
|
|
|
Exchange RatioAdjusted |
|
= |
|
0.055 |
|
|
|
|
|
|
The number of Nokia Shares to be received is: 200 x 0.055 = 11
| 4) |
Value of the Company Shares and Nokia Shares |
For the calculation of any adjustment
factor as described above, the value of the Company Shares or Nokia Shares at a specific date shall be equal to the weighted average of trading prices during the three trading days preceding such date. Failing this, the value shall be determined by
an expert with an international reputation, designated by Nokia or the Company, as the case may be, which opinion shall be irrevocable.
19
Exhibit (e)(7)
STOCK OPTIONS ACCELERATION AGREEMENT
BETWEEN:
| |
• |
|
Alcatel-Lucent, a société anonyme incorporated under the laws of France, with a share capital of EUR 141,210,168.20, which registered office is located 148/152, Route de la Reine – 92100
– Boulogne-Billancourt, France, registered with the Nanterre company registry under number 542.019.096, represented for the purposes hereof by Monsieur Philippe Camus, duly authorized (the “Company”), |
on the first part,
| |
• |
|
The beneficiary having complied with the Acceptance Process (the “Beneficiary”), |
on the second part,
AND
| |
• |
|
Nokia Corporation, a corporation incorporated under the laws of Finland, with a share capital of EUR 245,896,461.96, which registered office is located Karaportti 3, 02610 Espoo, Finland, registered with
the Trade Register of the Finnish Patents and Registration Office under number 0112038-9, duly represented for the purposes hereof (“Nokia”, and together with the Company and the Beneficiary, the “Parties”), being a
Party to this agreement only for the purposes of Article 5 hereof (as further described therein), |
on
the third part,
RECITALS:
In
connection with the Public Exchange Offers, the Company has undertaken to propose an acceleration mechanism that would enable the Beneficiary to monetize his/her Stock Options for cash during the Public Exchange Offers. The terms and conditions of
such acceleration mechanism are set forth in this agreement.
THEREFORE, IT HAS BEEN AGREED AS FOLLOWS:
| 1. |
Acceptance of this Stock Options Acceleration Agreement |
The terms and conditions
of this stock options acceleration agreement (the “Stock Options Acceleration Agreement”) shall be applicable and binding to the Beneficiary and the Company provided that the Beneficiary complies with the Acceptance Process at any
time between the first day and the last day of the Initial Offering Period.
1
The definitions of the terms contained in this Stock Options
Acceleration Agreement are set forth in Appendix 1 to this Stock Options Acceleration Agreement.
| 3. |
Scope of the Stock Options Acceleration Agreement |
This Stock Options
Acceleration Agreement is applicable to (i) all unvested or unexercisable Stock Options granted to the Beneficiary pursuant to any of the plans listed in Appendix 2 (the “Accelerated Stock Options”) and (ii) all
vested and exercisable Stock Options granted to the Beneficiary pursuant to any of the plans listed in Appendix 2 (collectively with the Accelerated Stock Options, the “Eligible Stock Options”).
| 4. |
Acceleration of the Accelerated Stock Options |
Subject to the Conditions
Precedent and the Condition Subsequent, all vesting periods, vesting conditions, performance conditions, presence conditions and lock-up periods applying to the Beneficiary’s Accelerated Stock Options will be waived or accelerated (the
“Acceleration”) on a date determined by the Company:
| i. |
between the day of publication of the final results of the Public Exchange Offers following the Initial Offering Period (excluded) and the second French trading day preceding the last day of the Subsequent Offering
Period (included), provided that the Conditions Precedent are fulfilled and Nokia holds less than 95% of the Company’s share capital or voting rights; or |
| ii. |
between the twentieth (20th) French trading day preceding the Squeeze-Out (included) and the last day preceding the Squeeze-Out (included) provided that the
Conditions Precedent are fulfilled and Nokia comes to hold 95% or more of the Company’s share capital and voting rights following the Initial Offering Period, |
(the “Acceleration Date”).
In
the event that any of the Conditions Precedent would not be fulfilled, this Stock Options Acceleration Agreement would not become valid and the vesting periods, vesting conditions, performance conditions, presence conditions and lock-up periods and
all other conditions applying to the Beneficiary’s Accelerated Stock Options prior to the date hereof would remain unchanged.
The
number of Accelerated Stock Options eligible for Acceleration in respect of the Beneficiary shall be equal to the total number of Accelerated Stock Options granted to the Beneficiary as if all presence conditions and performance conditions (if any)
were fulfilled, provided however that in respect of conditions relating to periods ending prior to the last day of the Initial Offering Period, the Accelerated Stock Options will be exercisable to the extent such conditions have been fulfilled in
accordance with their terms.
2
| 5. |
Exercise of the Eligible Stock Options and sale of the Option Underlying Shares |
The Beneficiary hereby gives irrevocable mandate to the Company to instruct the Administrator to, and the Company hereby undertakes to instruct
the Administrator to, in his/her name and on his/her behalf:
| |
• |
|
exercise his/her Eligible Stock Options, provided however that the Eligible Stock Options for which the Sale Price is lower than the sum of the Exercise Price, the exercise commission and the trading fees applicable to
the exercise and sale transactions described herein, will not be exercised (the “Underwater Options”); |
| |
• |
|
sell the Option Underlying Shares at the Sale Price during the Sale Period; and |
| |
• |
|
transfer to the Beneficiary the Sale Price resulting from the sale of Option Underlying Shares reduced by the sum of the Exercise Price, the exercise commission, the trading fees and, in the jurisdictions where
applicable, the relevant local withholding taxes or charges. |
The Beneficiary hereby irrevocably undertakes, as from the
last day of the Initial Offering Period, not to, and not to attempt to, exercise his/her Eligible Stock Options or sell the Option Underlying Shares otherwise than as provided in this Stock Options Acceleration Agreement.
In the event the Beneficiary would not comply in full with his/her obligations under the Stock Options Acceleration Agreement, in particular
his/her commitments under Article 5 hereof (the “Condition Subsequent”), the acceleration and waiver would be automatically revoked and any exercise by the Beneficiary of Eligible Stock Options would be declared null and void,
without any obligation or liability of the other Parties towards the Beneficiary, in accordance with the provision of article 1183 of the French Civil Code. The Condition Subsequent is stipulated in the interest of the Company and therefore may be
waived by the Company only.
The Beneficiary hereby irrevocably accepts to be bound by the terms and conditions of the Underwater Stock
Options Liquidity Agreement appended hereto (Appendix 3) with respect to the Underwater Options.
It is expressly agreed that Nokia is a
Party to this Stock Options Acceleration Agreement solely for purposes of the immediately preceding paragraph of this Article 5, in order to record the valid and binding consent of Nokia, the Company and the Beneficiary to enter into the Underwater
Stock Options Liquidity Agreement set forth in Appendix 3. Nokia shall have no duty or liability of any nature whatsoever with respect to any other provisions of this Stock Options Acceleration Agreement.
The Parties agree that the liquidity mechanism referred to above may be adapted to comply with possible applicable statutory, regulatory or
other similar
3
constraints and will not be implemented if Nokia and the Company determine, at their full discretion but upon the advice of external legal counsel, that the formalities required under such
statutory, regulatory or other similar constraints are too cumbersome.
Subject to applicable local laws and regulations, the amounts
received by the Beneficiary under this Stock Options Acceleration Agreement will not be taken into account for the computation of his/her severance payment, if any.
Neither Party may transfer or assign the benefit of all or any of its
rights or obligations under this Stock Options Acceleration Agreement, directly or indirectly and in any manner whatsoever, except as a result of the death of the Beneficiary, in which case the Company shall be promptly advised thereof and provided
that the Beneficiary’s successor shall be bound by the terms of this Stock Options Acceleration Agreement, to the extent not expressly prohibited under applicable law.
| 7. |
Term of this Stock Options Acceleration Agreement |
This Stock Options
Acceleration Agreement shall be effective as of the date of its execution by all Parties (and in the case of the Beneficiary as of the date it has completed the Acceptance Process as set out in Article 11) and shall be valid for a period of ten
(10) years from that date.
In the event that all of the Beneficiary’s Option Underlying Shares are sold in compliance with the
Stock Options Acceleration Agreement prior to the date of settlement of the Public Exchange Offers (including pursuant to any Subsequent Offering Period), or, as the case may be, the Squeeze-Out, the reciprocal undertakings of the Parties hereunder
with regard to the said transferred Company Shares would expire.
Except as otherwise provided herein, each Party shall pay all the costs
and expenses (including, but not limited to, financial advisory, accounting, legal and other professional or consulting fees and expenses) incurred by that Party or owed by it under applicable law, in connection with this Stock Options Acceleration
Agreement.
| 9. |
Governing law and competent jurisdiction |
This Stock Options Acceleration
Agreement is governed by the laws of France, without regard to principles of conflicts of law. All disputes arising out of or in connection with this Stock Options Acceleration Agreement shall be submitted to the competent courts located within the
jurisdiction of the Versailles Court of Appeals.
The power of attorney granted hereby by the Beneficiary to the
Company to give instructions to the Administrator in relation with the Stock Options Acceleration
4
Agreement aims at ensuring the proper completion of the obligations of the Beneficiary and is irrevocable. This power of attorney is deemed to be a power of attorney entered into in the interests
of all the Parties (mandat d’intérêt commun).
The Beneficiary irrevocably and unconditionally grants a power of
attorney to the Company to give instructions to the Administrator for the purpose of, in the name and on behalf of the Beneficiary, (i) sending or receiving any notification, signing or receiving any form and carrying out any required formality
for the completion of his/her obligations under this Stock Options Acceleration Agreement and, in general, (ii) making any statement, delivering any certificate, signing any agreement, deed, or other document and (iii) taking, in the name
and on behalf of the Beneficiary, any action required for the completion of his/her obligations under this Stock Options Acceleration Agreement, in compliance with the choices made or deemed made by the Beneficiary upon acceptance of the Stock
Options Acceleration Agreement.
The Beneficiary also undertakes to approve any action taken by the Administrator on the instructions of
the Company pursuant to the said powers of attorney in compliance with the choices he/she has made, subject to the above limitations.
| 11. |
Acceptance – Specific Performance |
If the Beneficiary wishes to enter
into this Stock Options Acceleration Agreement, he/she shall comply with the acceptance process on the website https://alcatel-lucent.assets.voxaly.com/ by the last day of the Initial Offering Period (the “Acceptance
Process”).
Should the Beneficiary not enter into this Stock Options Acceleration Agreement in the manner and by the date
referred to above, the Beneficiary shall be deemed to have finally and irrevocably waived and forfeited his/her right to enter into this Stock Options Acceleration Agreement.
The Beneficiary is the only person who may decide to enter (or not) into this Stock Options Acceleration Agreement. In this respect, the
Beneficiary is invited to consult his/her own specialized counsel if he/she wishes to obtain further information as to his/her rights and obligations hereunder.
If the Beneficiary complies with the Acceptance Process, the Beneficiary (i) irrevocably undertakes to accept the Acceleration of the
Accelerated Stock Options, the exercise of the Eligible Stock Options and the sale at the Sale Price of the Option Underlying Shares, and (ii) irrevocably accepts to be bound by the Underwater Stock Option Liquidity Agreement, without any
further formality.
In the event of breach, in addition to all other remedies which the non-breaching Party may have under applicable law,
the non-breaching Party shall be entitled to specific performance (exécution forcée) and injunctive or equivalent relief in accordance with applicable law, including article 1221 of the draft order of the French Ministry of
Justice (if applicable on the relevant date). In addition, each of the Parties agree to waive the benefit of article 1142 of the French Civil Code in the event of breach.
5
This Agreement is made in electronic form according to the provisions of article 1325 of the
French Civil code.
[The rest of the page has been left blank intentionally]
6
|
| The Company |
| Represented by: Philippe Camus |
|
| Nokia |
| Represented by: |
|
| |
| Represented by: |
[Signature page for the Stock Options Acceleration Agreement]
7
Appendix 1
Definitions
The terms and expressions
below shall have the following meanings:
|
|
|
| “Accelerated Stock Options” |
|
As defined in Article 3 of this Stock Options Acceleration Agreement. |
|
|
| “Acceleration” |
|
As defined in Article 4 of this Stock Options Acceleration Agreement. |
|
|
| “Acceleration Date” |
|
As defined in Article 4 of this Stock Options Acceleration Agreement. |
|
|
| “Acceptance Process” |
|
As defined in Article 11 of this Stock Options Acceleration Agreement. |
|
|
| “Administrator” |
|
Société Générale Securities Services. |
|
|
| “AMF General Regulation” |
|
The general regulation of the Autorité des marchés financiers, the French stock exchange regulator, which is available in French and English at www.amf-france.org. |
|
|
| “Beneficiary” |
|
The person having accepted this Stock Option Acceleration Agreement. |
|
|
| “Company Shares” |
|
Ordinary shares issued by the Company and the American depository shares issued by the Company. |
|
|
| “Condition Subsequent” |
|
As defined in Article 5 of this Stock Options Acceleration Agreement. |
|
|
| “Conditions Precedent” |
|
Means (i) the satisfaction of the presence conditions by the Beneficiary as of the last day of the Initial Offering Period, (ii) the approval by Nokia’s shareholders of the resolutions required to implement the Offer, and (iii)
Nokia reaching the Success Threshold following the Initial Offering Period. |
|
|
| “Eligible Stock Options” |
|
As defined in Article 3 of this Stock Options Acceleration Agreement. |
|
|
| “Exercise Price” |
|
The price to be paid upon exercise of the Stock Options. |
8
|
|
|
| “Initial Offering Period” |
|
Refers to the first offering period, as referred to in Article 232-2 of the AMF General Regulation and as determined in a notice published by the Autorité des Marchés Financiers, the result of which will
determine whether a Subsequent Offering Period will be opened or not. |
|
|
| “Option Underlying Shares” |
|
Company Shares that will be delivered by the Company to the Beneficiary in connection with the exercise of his/her Eligible Stock Options that are effectively exercised pursuant to Article 5 of this Stock Options Acceleration
Agreement. |
|
|
| “Public Exchange Offers” |
|
Public exchange offers in France and in the United States initiated by Nokia on the securities of the Company, as approved by the Autorité des Marchés Financiers in France and by the Securities and Exchange
Commission in the United States. |
|
|
| “Sale Period” |
|
Shall mean the period determined by the Company between the date of publication of the final results of the Initial Offering Period (excluded) to (i) the second French trading day (included) preceding the last day of the Subsequent
Offering Period or, if there is no Subsequent Offering Period, (ii) the Squeeze-Out (included). |
|
|
| “Sale Price” |
|
The Sale Price shall be equal to the volume weighted average market sale price of all Company Shares sold by the Administrator during the Sale Period for all the relevant beneficiaries pursuant to (i) the acceleration mechanisms
including, for the Stock Options acceleration mechanism, the Company Shares resulting from the undertaking to exercise the relevant vested stock options, and (ii) the share plan granted in 2015 to replace the 2014 stock options plan. |
|
|
| “Squeeze-Out” |
|
Refers to the squeeze-out procedure (retrait obligatoire) that Nokia would launch on the Company Shares should it come to own 95% or more of the Company’s share capital and voting rights in accordance with articles
237-14 et seq. of the AMF General Regulation. |
9
|
|
|
| “Stock Options” |
|
Any option to subscribe for or acquire Company Shares granted by the Company’s board of directors to the Beneficiary. |
|
|
| “Stock Options Acceleration Agreement” |
|
This agreement executed by the Company and the Beneficiary, including its Appendices and excluding any other document which may have been appended hereto. |
|
|
| “Subsequent Offering Period” |
|
Subsequent offering period for the French public exchange offer in accordance with article 232-4 of the AMF General Regulation. |
|
|
| “Success Threshold” |
|
Refers to the (i) ownership by Nokia, on the date of the settlement of the initial offering period of the Public Exchange Offers, of more than 50% of the shares of Alcatel Lucent on a fully diluted basis, in accordance with article
231-9-II of the AMF General Regulation or (ii) satisfaction, at Nokia’s sole discretion on the date of publication of the final results of the initial offering period of the Public Exchange Offers, that such ownership condition will be met, or
(iii) the express decision by Nokia’s board of directors, on or prior to the date of publication of the final results of the Initial Offering Period of the Public Exchange Offers, to waive such voluntary minimum threshold and to establish the
success threshold as described in article 231-9-I of the AMF General Regulation, pursuant to which any public offer at the close of which the offeror does not hold a number of shares representing a fraction of more than 50% of the share capital or
voting rights, shall be null and void. |
|
|
| “Underwater Options” |
|
As defined in Article 5 of this Stock Options Acceleration Agreement. |
10
Appendix 2
The following plans are in the scope of this
Stock Options Acceleration Agreement
|
|
|
|
|
| Plan n° |
|
Plan date |
|
End of vesting period |
| A0713CORO2
A0713COBE2
A0713CONH2
A0713COFR2
A0713NHNH2
A0713COIS2 |
|
Plan dated July 12, 2013 |
|
July 12, 2017 |
|
|
|
| A1212NHNH2 |
|
Plan dated December 17, 2012 |
|
December 17, 2016 |
|
|
|
| A0812NHRO2
A0812NHFR2
A0812NHNH2 |
|
Plan dated August 13, 2012 |
|
August 13, 2016 |
|
|
|
| A0312CORO2
A0312COBE2
A0312CONH2
A0312NHNH2
A0312NHFR2
A0312CPFR2
A0312COFR2
A0312NHRO2
A0312COIS2 |
|
Plan dated March 14, 2012 |
|
March 14, 2016 |
|
|
|
| A1211NHNH2
A1211NHFR2
A1211NHIS2 |
|
Plan dated December 1, 2011 |
|
December 1, 2015 |
|
|
|
| A0911NHBE2
A0911NHFR2
A0911NHRO2
A0911NHIS2
A0911NHNH2 |
|
Plan dated September 1, 2011 |
|
September 1, 2015 |
|
|
|
| A0611NHNH2
A0611NHFR2
A0611NHRO2
A0611NHIS2 |
|
Plan dated June 1, 2011 |
|
June 1, 2015 |
|
|
|
| A0311CORO2
A0311COBE2
A0311COFR2
A0311CONH2
A0311CPFR2
A0311COIS2 |
|
Plan dated March 16, 2011 |
|
March 16, 2015 |
|
|
|
| A0311NHFR2
A0311NHNHA
A0311NHROW |
|
Plan dated March 1, 2011 |
|
March 1, 2015 |
11
|
|
|
|
|
| Plan n° |
|
Plan date |
|
End of vesting period |
| A1210NHNHA |
|
Plan dated December 9, 2010 |
|
December 9, 2014 |
|
|
|
| A1010NHNHA A1010NPFR2 |
|
Plan dated October 1, 2010 |
|
October 1, 2014 |
|
|
|
| A0710NHNHA A0710NHFR2 |
|
Plan dated July 1, 2010 |
|
July 1, 2014 |
|
|
|
| A0310COROW A0310CONHA
A0310COBEL A0310COFRA
A0310COISR A0310CPFRA
A0310NHNHA |
|
Plan dated March 17, 2010 |
|
March 17, 2014 |
|
|
|
| A1209NHNHA |
|
Plan dated December 1, 2009 |
|
December 1, 2013 |
|
|
|
| A1009NHFRA A1009NHNHA |
|
Plan dated October 1, 2009 |
|
October 1, 2013 |
|
|
|
| A0709NHNHA A0709NHFRA |
|
Plan dated July 1, 2009 |
|
July 1, 2013 |
|
|
|
| A0309EXROW A0309EXBEL
A0309EXFRA A0309EXNHA
A0309EXISR |
|
Plan dated March 18, 2009 |
|
March 18, 2013 |
|
|
|
| A0309COROW A0309CONHA
A0309COBEL A0309COFRA
A0309NHNHA A0309COISR
A0309CPFRA |
|
Plan dated March 18, 2009 |
|
March 18, 2013 |
|
|
|
| A1208NHNHA A1208NHFRA |
|
Plan dated December 31, 2008 |
|
December 31, 2012 |
|
|
|
| A0708NHROW A0708NHNHA
A0708NHFRA |
|
Plan dated July 1, 2008 |
|
July 1, 2012 |
|
|
|
| A0308COROW A0308COBEL
A0308COFRA A0308CONHA
A0308COISR |
|
Plan dated March 25, 2008 |
|
March 25, 2012 |
12
Appendix 3
Underwater Stock Options Liquidity Agreement
13
UNDERWATER STOCK OPTIONS LIQUIDITY AGREEMENT
BETWEEN:
| |
• |
|
Nokia Corporation, a corporation incorporated under the laws of Finland, with a share capital of EUR 245,896,461.96, which registered office is located Karaportti 3, 02610 Espoo, Finland, registered with
the Trade Register of the Finnish Patents and Registration Office under number 0112038-9, duly represented for the purposes hereof (“Nokia”) |
on the first part,
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• |
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Alcatel-Lucent, a société anonyme incorporated under the laws of France, with a share capital of EUR 141,210,168.20, which registered office is located 148/152, Route de
la Reine – 92100 – Boulogne-Billancourt, France, registered with the Nanterre company registry under number 542.019.096, represented for the purposes hereof by Philippe Camus, duly authorized, (the “Company”)
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on the second part,
AND
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• |
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The beneficiary having complied with the Acceptance Process of the Stock Options Acceleration Agreement (the “Beneficiary”, and together with Nokia and the Company, the
“Parties”), |
on the third part,
RECITALS:
In connection with the Public
Exchange Offers, Nokia has undertaken under certain conditions to propose a mechanism that would ensure the liquidity of certain Option Underlying Shares if the liquidity of the Company Shares is significantly reduced as a result of the completion
of the Public Exchange Offers (as further described below). The terms and conditions of this liquidity mechanism are set forth in this agreement.
THEREFORE, IT HAS BEEN AGREED AS FOLLOWS:
| 1. |
Acceptance of the Underwater Stock Options Liquidity Agreement |
The terms and
conditions of this liquidity agreement (the “Underwater Stock Options Liquidity Agreement”) shall be applicable to and binding on the Beneficiary, Nokia and the Company, provided that (i) Nokia reaches the Success Threshold
following the Initial Offering Period and (ii) the resolutions required to implement the Public Exchange Offers are approved by Nokia’s shareholders.
1
The definitions of the terms contained in this Underwater Stock
Options Liquidity Agreement are set forth in Appendix 1 to this Underwater Stock Options Liquidity Agreement.
| 3. |
Scope of the Underwater Stock Options Liquidity Agreement |
If the Beneficiary has
accepted the Stock Options Acceleration Agreement, this Underwater Stock Options Liquidity Agreement is applicable to any of the Stock Options granted to the Beneficiary pursuant to the plans listed in Appendix 2 and subject to the cashless exercise
undertaking provided for in the Stock Options Acceleration Agreement, provided that the Sale Price is lower than the sum of the Exercise Price of these Stock Options, the exercise commission and the trading fees applicable to the exercise of the
Stock Options and sale transactions described in the Stock Options Acceleration Agreement.
If the Beneficiary has not accepted the Stock
Options Acceleration Agreement, this Underwater Stock Options Liquidity Agreement is applicable to any of the vested Stock Options granted to the Beneficiary pursuant to the plans listed in Appendix 2 for which the sum of the Exercise Price, the
exercise commission and the trading fees applicable to the exercise and sale of the Option Underlying Shares exceeds 90% of the market value of a Company Share on Euronext Paris at the closing of the last day of the Subsequent Offering Period.
| 4. |
Reduced Liquidity of Company Shares |
A reduced liquidity (a “Reduced
Liquidity”) of the Company Shares held by the Beneficiary shall occur if at least one of these conditions applies:
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• |
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The Company Shares are no longer listed on a regulated stock market within the meaning of article L. 421-1 of the French monetary and financial code (Code monétaire et financier);
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• |
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Nokia directly or indirectly holds at least 85% of the Company Shares; or |
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• |
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the average daily volume of the Company Shares traded on Euronext Paris calculated on the last consecutive twenty (20) trading days preceding the relevant date falls below five million (5,000,000) Company
Shares. |
The Company shall notify to the Beneficiary and Nokia by email, as from the last day of the Subsequent
Offering Period, the occurrence of any Reduced Liquidity of the Company Shares within 5 business days of such occurrence (the “Reduced Liquidity Notification”). The Reduced Liquidity Notification shall include an example of an
Exchange Ratio calculation determined based on the assumption that the Option Underlying Shares Exchange occurred on the business day preceding the date of the Reduced Liquidity Notification, and shall detail the adjustments, if any, to be applied
to the Exchange Ratio pursuant to this Underwater Stock Options Liquidity Agreement.
2
Unless a claim is made in accordance with the provisions of Article 7, the Exchange Ratio calculation and the adjustments (if any) as notified shall be final and binding except if an updated
Reduced Liquidity Notification is made before the Option Underlying Shares Exchange Date, in accordance with Article 6.2 of this Underwater Stock Options Liquidity Agreement and the Appendix 3 hereto, in which case such updated Reduced Liquidity
Notification will replace and supersede the previous Reduced Liquidity Notification.
| 5. |
Option Underlying Shares Exchange and Cash Exchange |
All the Options
Underlying Shares resulting from the exercise of any Stock Option being within the scope of Article 3 above shall be automatically exchanged by Nokia for Nokia Shares (the “Option Underlying Shares Exchange”) on the fifth (5th) business day following the exercise date of these relevant Stock Options (provided that the Beneficiary received a Reduced Liquidity Notification before the exercise of his/her Stock
Options).
In the event the Beneficiary would exercise his/her Stock Options being within the scope of Article 3 above before
having received a Reduced Liquidity Notification, he/she would not be entitled to benefit from any Exchange of his/her Option Underlying Shares.
The Exchange Ratio of the Option Underlying Shares transferred by the Beneficiary to Nokia pursuant to the Option Underlying Shares Exchange
shall be determined by Nokia in accordance with the provisions of Article 6 below. In the event the application of the Exchange Ratio would entitle the Beneficiary to receive Nokia fractional rights, he/she would receive in cash (in EUR,
rounded up to the closest cent; 0.5 cent shall be rounded up to 1 cent), as an indemnity for those fractional rights, the relevant fraction of the Nokia Share price as of the Option Underlying Shares Exchange Date.
Alternatively to the Option Underlying Shares Exchange, Nokia may choose to implement a payment in cash in respect of the Option underlying
Shares, in its sole discretion (the “Cash Exchange”). The Cash Exchange would be applicable under the same conditions and requirements as the Option Underlying Shares Exchange except that the consideration for the exchange would not
be Nokia Shares but a cash consideration equal to the value of the Nokia Shares the Beneficiary would have been entitled to receive by exchanging his/her Option Underlying Shares for Nokia Shares according to the Exchange Ratio. Such Nokia Shares
value shall be based on the market value of a Nokia Share on the NASDAQ OMX Helsinki Ltd. at the closing of the last trading day preceding the Cash Exchange.
The Company and Nokia will have the option to proceed to the payments relating to the Cash Exchange and to the fractional rights
indemnification through the Beneficiary’s next payroll (where relevant and to the extent legally permitted) and in any case, as soon as administratively practicable, notwithstanding the 5-day period allocated for the completion of the Option
Underlying Shares Exchange.
3
| |
6.1 |
Exchange Ratio without adjustment |
Nokia shall deliver, for the Company Shares exchanged under
Article 5 above, a number of new and/or existing (at Nokia’s sole discretion) Nokia Shares calculated as follows and then rounded down to the next inferior whole number of Nokia Shares:
NNS = Exchange Ratio x NCS
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| Where: |
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“NNS” means the total number of Nokia Shares (rounded down to the next inferior whole number) to be delivered to the
Beneficiary in exchange for his/her Company Shares; “Exchange
Ratio” means the number of Nokia Shares to be delivered for one Company Share in accordance with the terms of the Public Exchange Offers, i.e. 0.55; and
“NCS” means the number of Company Shares to be exchanged under this
Underwater Stock Options Liquidity Agreement. |
|
| Theoretical example of calculation of the number of Nokia Shares to be received in exchange of Company Shares pursuant to this
Underwater Stock Options Liquidity Agreement Assumption: Transfer of
200 Company Shares by the Beneficiary in January 2017 without any adjustment.
NNS = 0.55 x 200
NNS = 110
|
| |
6.2 |
Adjusted Exchange Ratio |
Upon certain financial transactions carried out by Nokia or the
Company affecting the value of their shares, the Exchange Ratio will be adjusted as described in Appendix 3.
For the avoidance of doubt,
no adjustment will be made to the Exchange Ratio in the event of issuance of new shares by Company or Nokia in relation to or as a result of the acceleration mechanisms mentioned herein, the grant of Company Shares in replacement of the 2014 stock
options plans, the grant of Company performance shares in 2015 or the performance of this Underwater Stock Options Liquidity Agreement.
4
Any claim of the Beneficiary with respect to the Exchange Ratio shall be
delivered by registered letter (with acknowledgement of the receipt) from the Beneficiary to Nokia, with a copy addressed to the Company, within five (5) business days as from the date the Company sent the Reduced Liquidity Notification to the
Beneficiary in accordance with Article 4. The reasons for any claim shall be detailed precisely in such claim.
Nokia and the Beneficiary
shall agree on an Exchange Ratio within five (5) business days as from the receipt by Nokia of the Beneficiary’s notification letter. If, after such period, Nokia and the Beneficiary have not been able to reach an agreement, the procedure
provided for in Article 8 below shall apply.
| 8. |
Third-Party Arbitrator |
In case Nokia and the Beneficiary disagree on the
Exchange Ratio, any person jointly selected by the Parties within ten (10) business days following the delivery of a claim made in accordance with Article 7 or, failing to do so within such timeframe, any other person appointed by the president
of the Paris Tribunal de Grande Instance on the application of the most diligent Party, acting as third-party arbitrator within the meaning of article 1592 of the French Civil Code (the “Third-Party Arbitrator”)
shall determine the Exchange Ratio, within twenty (20) business days as from the date it receives a registered letter with acknowledgment of receipt pursuant to which it has been appointed jointly by Nokia and the Beneficiary or by the
president of the Paris Tribunal de Grande Instance.
In case this request is sent by the Beneficiary, the Beneficiary
undertakes to send on the same day a copy of such letter to Nokia and the Company.
For the purpose of the performance of the Third-Party
Arbitrator’s assignment, the Company, Nokia and the Beneficiary undertake to provide it with any relevant information relating to the adjustment provided for in Article 6.2 of this Underwater Stock Options Liquidity Agreement, that would
be necessary for the Third Party Arbitrator to undertake its mission.
The Third-Party Arbitrator may request any such relevant and
necessary information from the Company, Nokia and the Beneficiary.
Nokia, the Company and the Beneficiary shall be informed of the
Third-Party Arbitrator’s conclusions as promptly as possible after completion of Third-Party Arbitrator’s assignment and no later than on the last day of the above-mentioned 20 business day period.
In the event the Third-Party Arbitrator fails to determine the Exchange Ratio within twenty (20) business days following the notification
of its appointment, another Third-Party Arbitrator shall be appointed in the conditions set forth in this Article 8 to determine the Exchange Ratio within twenty (20) business days following the
5
notification of its appointment and the previously appointed Third-Party Arbitrator shall be automatically revoked upon the appointment of the new Third-Party Arbitrator, and so on until a
Third-Party Arbitrator effectively determines the Exchange Ratio.
Except in case of a manifest error (erreur manifeste), as
interpreted by French courts, the Third-Party Arbitrator’s conclusions shall be final and binding, and therefore non-appealable, upon Nokia, the Company and the Beneficiary.
Any fees, charges and disbursements incurred for the purpose of the completion of the Third-Party Arbitrator’s assignment shall be borne
by Nokia if the Third-Party Arbitrator gives right to the Beneficiary’s claim in full, and otherwise by the Beneficiary.
| 9. |
Beneficiary’s undertakings |
The Beneficiary hereby cumulatively undertakes
vis-a-vis Nokia and the Company (except as provided for otherwise in writing by Nokia):
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• |
|
not to sell, transfer, convey, alienate, mortgage, pledge or encumber his/her Option Underlying Shares or to dispose of them other than in accordance with this Underwater Stock Options Liquidity Agreement, or to Nokia,
between the date on which the Beneficiary receives a Reduced Liquidity Notification and until the Exchange Date; |
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• |
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to hold in pure registered form his/her Option Underlying Shares as long as they are held by the Beneficiary; |
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• |
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not to revoke the power of attorney referred to in Article 15 below; and |
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• |
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not to exercise his/her Stock Options if and for so long as he/she holds insider information regarding Nokia and/ or the Company. |
| 10. |
Exchange of the Company Shares pursuant to the Underwater Stock Options Liquidity Agreement |
Any Company Share to be delivered by the Beneficiary shall be transferred to Nokia or to any third party designated by Nokia with full
ownership including all of the rights pertaining thereto as of the effective date of transfer, free from any privilege, rights, charges, restrictions and any third party rights of any nature whatsoever.
Except as otherwise provided in this Underwater Stock Options
Liquidity Agreement, any correspondence to be addressed to the Beneficiary in relation to the Underwater Stock Options Liquidity Agreement shall be sent by email to the email address provided by the Company to Nokia. The Beneficiary hereby consents
to all disclosure and sharing of personal information relating to such Beneficiary if they are
6
necessary or advisable for the performance of this Underwater Stock Options Liquidity Agreement (including, without limitation, his/her name and email address). The Beneficiary will be entitled
to exercise his or her rights pursuant to applicable data privacy laws and regulations, including French Law n° 78-17 of January 6, 1978.
Except as otherwise provided in this Underwater Stock Options Liquidity Agreement, any correspondence to be addressed to Nokia or to the
Company in relation to the Underwater Stock Options Liquidity Agreement shall be sent by registered letter with acknowledgment of receipt at the following address:
Nokia Corporation
Human
Resources Department
Head of Compensation
Karaportti 3, P.O. Box 226
FI-00045 Nokia Group
Finland
Alcatel-Lucent
Direction des Ressources Humaines
148/152, Route de la Reine
92100
Boulogne-Billancourt
France
Neither Party may transfer or assign the benefit of all or any of its
rights or obligations under the Underwater Stock Options Liquidity Agreement, directly or indirectly and in any manner whatsoever, except (i) in the case of the Beneficiary, as a result of the death of the Beneficiary, in which case the Company
and Nokia shall be promptly advised thereof and provided that the Beneficiary’s successor shall be bound by the terms of this Underwater Stock Options Liquidity Agreement, to the extent not expressly prohibited under applicable law, and
(ii) in the case of Nokia, to an affiliate or to a financial institution appointed by Nokia or any of its affiliates.
| 13. |
Term of this Underwater Stock Options Liquidity Agreement |
This Underwater Stock
Options Liquidity Agreement shall be effective as of the date of its execution by all Parties (and in the case of the Beneficiary, as of the date he/she has completed the Acceptance Process of the Stock Options Acceleration Agreement) and shall be
valid for a period of ten (10) years from that date, without prejudice to the duration of the relevant Stock Options plans as described in such plans rules.
In the event that all of the Option Underlying Shares held by the Beneficiary are exchanged by the Beneficiary in compliance with this
Underwater Stock Options Liquidity Agreement, and that such Beneficiary no longer holds any Stock Option, the reciprocal undertakings of the Parties with regard to the said transferred Company Shares would expire.
7
| 14. |
Governing law and competent jurisdiction |
This Underwater Stock Options Liquidity
Agreement is governed by the laws of France, without regard to principles of conflicts of law. All disputes arising out of or in connection with this Underwater Stock Options Liquidity Agreement shall be submitted to the competent courts located
within the jurisdiction of the Versailles Court of Appeals.
The power of attorney granted hereby by the Beneficiary
to the Company in relation with the Underwater Stock Options Liquidity Agreement aims at ensuring the proper completion of the obligations of the Beneficiary and is irrevocable. This power of attorney is deemed to be a power of attorney entered into
in the interest of all the Parties (mandat d’intérêt commun).
The Beneficiary irrevocably and
unconditionally grants a power of attorney to the Company for the purpose of, in the name and on behalf of the Beneficiary, sending or receiving any notification, signing or receiving any form and carrying out any required formality for the
completion of the Exchanges set out in the Underwater Stock Options Liquidity Agreement and, in general, making any statement, delivering any certificate, signing any agreement, deed, or other document and generally taking, in the name and on behalf
of the Beneficiary, any action required for the completion of the Exchanges set out in the Underwater Stock Options Liquidity Agreement, in compliance with the choices made or deemed made by the Beneficiary upon acceptance of the Underwater Stock
Options Liquidity Agreement.
The Beneficiary also undertakes to approve any action taken by the Company pursuant to the said powers of
attorney in compliance with the choices he/she has made, subject to the above limitations.
The Beneficiary grants a power of attorney to
the Company to instruct the Administrator to, and the Company hereby undertakes to instruct the Administrator to, carry out the Option Underlying Shares Exchange or, as the case may be, the Cash Exchange, as well as any formality required for the
completion of the Exchanges, except if a claim has been delivered in accordance with Article 7 and specifying the nature and detailing the reasons of such claim, in which case the Option Underlying Shares Exchange Date or the Cash Exchange Date
shall occur five (5) business days as from the date on which the Beneficiary and Nokia will have reached an agreement on the Exchange Ratio or, as the case may be, the date on which the Third-Party Arbitrator will have rendered his conclusions.
Subject to the provisions of Articles 12 and 15, no third party to
this Underwater Stock Options Liquidity Agreement shall have any rights or obligations on the basis of, or shall rely on the terms and conditions of, this Underwater Stock Options Liquidity Agreement.
8
Except as otherwise provided herein, each Party shall pay all the costs
and expenses (including, but not limited to, financial advisory, accounting, legal and other professional or consulting fees and expenses) incurred by that Party or owed by it under applicable law, in connection with this Underwater Stock Options
Liquidity Agreement.
In particular, the Beneficiary would be subject to a Finnish transfer tax of 1.6% of the value of the Nokia treasury
shares if it receives Nokia treasury shares in exchange for its Option Underlying Shares.
| 18. |
Acceptance – Specific Performance |
If the Beneficiary complies with the
Acceptance Process of the Stock Options Acceleration Agreement, the Beneficiary irrevocably undertakes vis-a-vis Nokia to transfer to Nokia (and accepts that the required instructions will be given to the Administrator) his/her Company Shares
resulting from the exercise of his/her Stock Options which are in the scope of Article 3 of this Underwater Stock Options Liquidity Agreement and provided that the exercised occurred after the Reduced Liquidity Notification and Nokia irrevocably
undertakes vis-a-vis the Beneficiary to acquire such Company Shares in the conditions described in this Underwater Stock Options Liquidity Agreement.
In the event of breach, in addition to all other remedies which the non-breaching Party may have under applicable law, the non-breaching Party
shall be entitled to specific performance (exécution forcée) and injunctive or equivalent relief in accordance with applicable law, including article 1221 of the draft order of the French Ministry of Justice (if applicable on
the relevant date). In addition, each of the Parties agree to waive the benefit of article 1142 of the French Civil Code in the event of breach.
9
Appendix 1 to the Underwater Stock Options Liquidity Agreement
Definitions
The terms and expressions
below shall have the following meanings:
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| “Acceptance Process” |
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As defined in the Stock Options Acceleration Agreement. |
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| “Administrator” |
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Société Générale Securities Services. |
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| “AMF General Regulation” |
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The general regulation of the Autorité des marchés financiers, the French stock exchange regulator, which is available in French and English at www.amf-france.org. |
|
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| “Article” |
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Unless specified otherwise herein, means the Article of this Underwater Stock Options Liquidity Agreement. |
|
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| “Beneficiary” |
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The person having become a party to this Underwater Stock Options Liquidity Agreement on the date indicated hereof. |
|
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| “business day” |
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A day other than Saturday or Sunday where the banks are open for business in Finland. |
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| “Cash Exchange” |
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As defined in Article 5 of this Underwater Stock Options Liquidity Agreement. |
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| “Cash Exchange Date” |
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The date on which the Cash Exchange occurs. |
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| “Company Extraordinary Distribution” |
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As defined in Appendix 3 to this Underwater Stock Options Liquidity Agreement. |
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| “Company Merger” |
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As defined in Appendix 3 to this Underwater Stock Options Liquidity Agreement. |
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| “Company Shares” |
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Ordinary shares issued by the Company and the American depository shares issued by the Company. |
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| “Exchange” |
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Means the Option Underlying Share Exchange or the Cash Exchange. |
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| “Exchange Date” |
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Means the date on which the Exchange occurs. |
10
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| “Exchange Ratio” |
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As defined in Article 6 of this Underwater Stock Options Liquidity Agreement. |
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| “Exercise Price” |
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The price to be paid upon exercise of the Stock Options. |
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| “Initial Offering Period” |
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Refers to the first offering period, as referred to in Article 232-2 of the AMF General Regulation, the result of which will determine whether a Subsequent Offering Period will be opened or not. |
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| “Nokia Merger” |
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As defined in Appendix 3 to this Underwater Stock Options Liquidity Agreement. |
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| “Nokia Shares” |
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Ordinary shares issued by Nokia and the American depository shares issued by Nokia. |
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| “Option Underlying Shares” |
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Company Shares that have been or will be delivered by the Company to the Beneficiary in connection with his/her Stock Options. |
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| “Option Underlying Shares Exchange” |
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As defined in Article 5 of this Underwater Stock Options Liquidity Agreement. |
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| “Option Underlying Shares Exchange Date” |
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The date on which the Option Underlying Shares Exchange occurs. |
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| “Public Exchange Offers” |
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Public exchange offers in France and in the United States initiated by Nokia on the securities of the Company, as approved by the Autorité des marchés financiers in France and by the Securities and
Exchange Commission in the United States. |
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| “Reduced Liquidity” |
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As defined in Article 4 of this Underwater Stock Options Liquidity Agreement. |
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| “Reduced Liquidity Notification” |
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As defined in Article 4 of this Underwater Stock Options Liquidity Agreement. |
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| “Sale Price” |
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As defined in the Stock Options Acceleration Agreement. |
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| “Stock Options” |
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Any option to subscribe for or acquire Company Shares granted by the Company’s board of directors to a Beneficiary pursuant to the Share Plans. |
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| “Stock Options Acceleration Agreement” |
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The Stock Options Acceleration Agreement this Underwater Stock Options Liquidity Agreement is |
11
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appended to, entered into between the Company, the Beneficiary and Nokia (only for purposes of Article 5 thereto and as further described therein). |
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| “Underwater Stock Options Liquidity Agreement” |
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This agreement executed by Nokia, the Company and the Beneficiary, including its appendices. |
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| “Subsequent Offering Period” |
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Subsequent offering period for the French public exchange offer in accordance with article 232-4 of the AMF General Regulation. |
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| “Success Threshold” |
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Refers to the (i) ownership by Nokia, on the date of the settlement of the initial offering period of the Public Exchange Offers, of more than 50% of the shares of Alcatel Lucent on a fully diluted basis, in accordance with article
231-9-II of the AMF General Regulation or (ii) satisfaction, at Nokia’s sole discretion on the date of publication of the final results of the initial offering period of the Public Exchange Offers, that such ownership condition will be met, or
(iii) the express decision by Nokia’s board of directors, on or prior to the date of publication of the final results of the initial offering period of the Public Exchange Offers, to waive such voluntary minimum threshold and to establish the
success threshold as described in article 231-9-I of the AMF General Regulation, pursuant to which any public offer at the close of which the offeror does not hold a number of shares representing a fraction of more than 50% of the share capital or
voting rights, shall be null and void. |
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| “Third-Party Arbitrator” |
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As defined in Article 8 of this Underwater Stock Options Liquidity Agreement. |
12
Appendix 2 to the Underwater Stock Options Liquidity Agreement
The following plans are in the scope of this
Underwater Stock Options Liquidity Agreement
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| Plan n° |
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Plan date |
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End of vesting period |
| A0713CORO2 A0713COBE2
A0713CONH2 A0713COFR2
A0713NHNH2 A0713COIS2 |
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Plan dated July 12, 2013 |
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July 12, 2017 |
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| A1212NHNH2 |
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Plan dated December 17, 2012 |
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December 17, 2016 |
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| A0812NHRO2 A0812NHFR2
A0812NHNH2 |
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Plan dated August 13, 2012 |
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August 13, 2016 |
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| A0312CORO2 A0312COBE2
A0312CONH2 A0312NHNH2
A0312NHFR2 A0312CPFR2
A0312COFR2 A0312NHRO2
A0312COIS2 |
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Plan dated March 14, 2012 |
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March 14, 2016 |
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| A1211NHNH2 A1211NHFR2
A1211NHIS2 |
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Plan dated December 1, 2011 |
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December 1, 2015 |
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| A0911NHBE2 A0911NHFR2
A0911NHRO2 A0911NHIS2
A0911NHNH2 |
|
Plan dated September 1, 2011 |
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September 1, 2015 |
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| A0611NHNH2 A0611NHFR2
A0611NHRO2 A0611NHIS2 |
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Plan dated June 1, 2011 |
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June 1, 2015 |
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| A0311CORO2 A0311COBE2
A0311COFR2 A0311CONH2
A0311CPFR2 A0311COIS2 |
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Plan dated March 16, 2011 |
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March 16, 2015 |
|
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| A0311NHFR2 A0311NHNHA
A0311NHROW |
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Plan dated March 1, 2011 |
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March 1, 2015 |
13
|
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| Plan n° |
|
Plan date |
|
End of vesting period |
| A1210NHNHA |
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Plan dated December 9, 2010 |
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December 9, 2014 |
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| A1010NHNHA A1010NPFR2 |
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Plan dated October 1, 2010 |
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October 1, 2014 |
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| A0710NHNHA A0710NHFR2 |
|
Plan dated July 1, 2010 |
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July 1, 2014 |
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| A0310COROW A0310CONHA
A0310COBEL A0310COFRA
A0310COISR A0310CPFRA
A0310NHNHA |
|
Plan dated March 17, 2010 |
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March 17, 2014 |
|
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| A1209NHNHA |
|
Plan dated December 1, 2009 |
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December 1, 2013 |
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| A1009NHFRA A1009NHNHA |
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Plan dated October 1, 2009 |
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October 1, 2013 |
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| A0709NHNHA A0709NHFRA |
|
Plan dated July 1, 2009 |
|
July 1, 2013 |
|
|
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| A0309EXROW A0309EXBEL
A0309EXFRA A0309EXNHA
A0309EXISR |
|
Plan dated March 18, 2009 |
|
March 18, 2013 |
|
|
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| A0309COROW A0309CONHA
A0309COBEL A0309COFRA
A0309NHNHA A0309COISR
A0309CPFRA |
|
Plan dated March 18, 2009 |
|
March 18, 2013 |
|
|
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| A1208NHNHA A1208NHFRA |
|
Plan dated December 31, 2008 |
|
December 31, 2012 |
|
|
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| A0708NHROW A0708NHNHA
A0708NHFRA |
|
Plan dated July 1, 2008 |
|
July 1, 2012 |
|
|
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| A0308COROW A0308COBEL
A0308COFRA A0308CONHA
A0308COISR |
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Plan dated March 25, 2008 |
|
March 25, 2012 |
14
Appendix 3 to the Underwater Stock Options Liquidity Agreement
Exchange Ratio Adjustments
In case of a merger of the Company into another company (the
“Company Merger”), the Option Underlying Shares Exchange and Cash Exchange will apply with respect to the shares of the absorbing entity received by the Beneficiary in exchange for Company Shares resulting from Stock Options which
are within the scope of Article 3 above. The Exchange Ratio will be adjusted as follows:
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| Exchange RatioAdjusted |
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= |
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Exchange Ratio |
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x |
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1 |
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|
RatioMerger |
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of the absorbing company
shares in case of a Company Merger
Assumptions:
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• |
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RatioMerger = 2 shares of the absorbing company for each Company Share |
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• |
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Transfer of 200 shares of the absorbing company by the Beneficiary in January 2017 after the Company Merger |
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| Exchange RatioAdjusted |
|
= |
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0.55 |
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x |
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1/2 |
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| Exchange RatioAdjusted |
|
= |
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0.275 |
|
|
|
|
The number of Nokia Shares to be received is: 200 x 0.275 = 55
In case of a merger of Nokia into another company (the “Nokia
Merger”), the Beneficiary will receive shares of the absorbing entity upon the Option Underlying Shares Exchange and will receive, in cash, the equivalent value of the absorbing entity shares pursuant to the Cash Exchange. The Exchange
Ratio will be adjusted as follows:
|
|
|
|
|
|
|
|
|
| Exchange RatioAdjusted |
|
= |
|
Exchange Ratio |
|
x |
|
RatioMerger |
| |
|
|
|
15
|
| Theoretical example of calculation of the number of absorbing company shares to be received in exchange of Company Shares in case of a
Nokia Merger Assumptions:
• RatioMerger = 2 shares of the absorbing company for each Nokia Share
• Transfer of 200 Company Shares by the Beneficiary in January 2017 after the Nokia
Merger |
|
|
|
|
|
|
|
|
|
| Exchange RatioAdjusted |
|
= |
|
0.55 |
|
x |
|
2 |
|
|
|
|
|
| Exchange RatioAdjusted |
|
= |
|
1.1 |
|
|
|
|
The number of the absorbing company shares to be received is: 200 x 1.1 = 220
| 2) |
Extraordinary distribution |
| |
A. |
Extraordinary distribution by Nokia |
If Nokia carries out a distribution of a special dividend,
as defined for purposes of Nokia’s then applicable stock option plans, the Exchange Ratio shall be adjusted in accordance with the then applicable stock option plans.
| |
B. |
Extraordinary distribution by the Company |
If the Company carries out a distribution of
an amount higher than the Company’s previous year net consolidated profit including a distribution of shares of a spin-off entity, (the “Company Extraordinary Distribution”) after the end of the Public Exchange Offers period,
the Exchange Ratio shall be adjusted as follows:
|
|
|
|
|
| Exchange RatioAdjusted |
|
= |
|
(Exchange Ratio x PNokia) - EDAlcatel
|
| |
|
PNokia |
|
|
|
| Where: |
|
“Exchange RatioAdjusted” means the number of Nokia Shares to be delivered for one Company Share after adjustment; |
|
|
|
|
“PNokia” means the price of a Nokia Share on the day preceding the Company Extraordinary Distribution; and |
|
|
|
|
“EDAlcatel” means the amount per share received by Company shareholder corresponding to the Company Extraordinary Distribution. |
Such adjustment will only apply to the extent the Beneficiary (i) has received the relevant Company
Extraordinary Distribution in respect of Option Underlying Shares resulting from Stock Options that are already exercised or (ii) has
16
benefitted from a modification of the relevant plan due to the Company Extraordinary Distribution such as the adjustment provided in case of distribution of retained earnings under article
L.225-181 of the French Commercial Code.
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of Company
Shares in case of a Company Extraordinary Distribution
Assumptions:
| |
• |
|
Transfer of 200 Company Shares by the Beneficiary in January 2017 |
| |
• |
|
EDAlcatel = €1/Company Share |
|
|
|
|
|
| Exchange RatioAdjusted |
|
= |
|
(0.55 x 8) - 1 |
| |
|
8 |
|
|
|
| Exchange RatioAdjusted |
|
= |
|
0.425 |
The number of Nokia Shares to be received is: 200 x 0.425 = 85
In the event that any other transaction specifically listed in
Article L. 225-181 of the French Commercial Code, or a stock split or a reverse stock split (i.e., share consolidation), is carried out by the Company, the Exchange Ratio shall be adjusted in order to allow the Beneficiary to obtain the same value
in Nokia Shares pursuant to the Option Underlying Shares Exchange or in cash pursuant to the Cash Exchange as the Beneficiary would have obtained assuming that the said transactions had not been carried out.
In the event that (i) a capital increase by way of incorporation of reserves (as defined in Article L. 225-181 of the French Commercial
Code), (ii) a capital increase with or without shareholders’ preferential subscription right issued, in each case, with a discount of more than 10% on the stock price (except (a) capital increases completed to finance an acquisition
where Nokia uses shares as payment, at a premium to the prevailing share price of the target company in the transaction, and (b) capital increases where equity shares or other securities are issued, offered, exercised, allotted, appropriated,
modified or granted to, or for the benefit of, employees or former employees, directors, non-executive directors or executives holding or formerly holding executive office or the personal service company of any such persons or their spouses or
relatives, in each case, of Nokia or any of its subsidiaries or any associated company or to a trustee or nominee to be held for the benefit of any such person), or (iii) a stock split or a reverse stock split (i.e., share consolidation) is
carried out by Nokia, the Exchange Ratio shall be adjusted in order to allow the Beneficiary to obtain the same value in Nokia Shares pursuant to the Option Underlying Shares Exchange or in cash pursuant to the Cash Exchange as the Beneficiary would
have obtained assuming the said transactions had not been carried out.
17
For example in case of share consolidation carried out by Nokia, the Exchange Ratio would be
adjusted as follows:
|
|
|
|
|
|
|
|
|
| Exchange RatioAdjusted |
|
= |
|
Exchange Ratio |
|
x |
|
Number of Nokia Shares composing the
share capital after the consolidation |
| |
|
|
|
Number of Nokia Shares composing the
share capital prior to the consolidation |
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of Company Shares in case of
share consolidation carried out by Nokia
Assumptions:
| |
• |
|
Transfer of 200 Company Shares by the Beneficiary in January 2017 |
| |
• |
|
Share consolidation = 10 existing Nokia Shares become 1 new Nokia Share value |
| |
• |
|
Number of shares before the consolidation = 3,678,181,540 |
| |
• |
|
Number of shares after the consolidation = 367,818,154 |
|
|
|
|
|
|
|
|
|
| Exchange RatioAdjusted |
|
= |
|
0.55 |
|
x |
|
(367,818,154 / 3,678,181,540) |
|
|
|
|
|
| Exchange RatioAdjusted |
|
= |
|
0.055 |
|
|
|
|
The number of Nokia Shares to be received is: 200 x 0.055 = 11
| 4) |
Value of the Company Shares and Nokia Shares |
For the calculation of any adjustment
factor as described above, the value of the Company Shares or Nokia Shares at a specific date shall be equal to the weighted average of trading prices during the three trading days preceding such date. Failing this, the value shall be determined by
an expert with an international reputation, designated by Nokia or the Company, as the case may be, which opinion shall be irrevocable.
18
LONG FORM STOCK OPTIONS ACCELERATION AGREEMENT
BETWEEN:
| |
• |
|
Alcatel-Lucent, a société anonyme incorporated under the laws of France, with a share capital of EUR 141,210,168.20, which registered office is located 148/152, Route de la Reine – 92100
– Boulogne-Billancourt, France, registered with the Nanterre company registry under number 542.019.096, represented for the purposes hereof by Monsieur Philippe Camus, duly authorized (the “Company”), |
on the first part,
| |
• |
|
The beneficiary having complied with the Acceptance Process (the “Beneficiary”), |
on the second part,
AND
| |
• |
|
Nokia Corporation, a corporation incorporated under the laws of Finland, with a share capital of EUR 245,896,461.96, which registered office is located Karaportti 3, 02610 Espoo, Finland, registered with the
Trade Register of the Finnish Patents and Registration Office under number 0112038-9, duly represented for the purposes hereof (“Nokia”, and together with the Company and the Beneficiary, the “Parties”), being a
Party to this agreement only for the purposes of Article 5 hereof (as further described therein), |
on the
third part,
RECITALS:
In connection
with the Public Exchange Offers, the Company has undertaken to propose an acceleration mechanism that would enable the Beneficiary to monetize his/her Stock Options for cash during the Public Exchange Offers. The terms and conditions of such
acceleration mechanism are set forth in this agreement.
THEREFORE, IT HAS BEEN AGREED AS FOLLOWS:
| 1. |
Acceptance of this Stock Options Acceleration Agreement |
The terms and conditions
of this stock options acceleration agreement (the “Stock Options Acceleration Agreement”) shall be applicable and binding to the Beneficiary and the Company provided that the Beneficiary complies with the Acceptance Process at any
time between the first day and the last day of the Initial Offering Period.
19
The definitions of the terms contained in this Stock Options
Acceleration Agreement are set forth in Appendix 1 to this Stock Options Acceleration Agreement.
| 3. |
Scope of the Stock Options Acceleration Agreement |
This Stock Options
Acceleration Agreement is applicable to (i) all unvested Stock Options granted to the Beneficiary pursuant to any of the plans listed in Appendix 2 which excludes the Stock Options which are subject to a tax holding period or other
restrictions under French or Belgian laws (the “Accelerated Stock Options”) and (ii) all vested Stock Options granted to the Beneficiary pursuant to any of the plans listed in Appendix 2 which excludes the Stock
Options which are subject to a tax holding period or other restrictions under French or Belgian laws (collectively with the Accelerated Stock Options, the “Eligible Stock Options”).
| 4. |
Acceleration of the Accelerated Stock Options |
Subject to the Conditions
Precedent and the Condition Subsequent, all vesting periods, vesting conditions, performance conditions, presence conditions and lock-up periods applying to the Beneficiary’s Accelerated Stock Options will be waived or accelerated (the
“Acceleration”) on a date determined by the Company:
| i. |
between the day of publication of the final results of the Public Exchange Offers following the Initial Offering Period (excluded) and the second French trading day preceding the last day of the Subsequent Offering
Period (included), provided that the Conditions Precedent are fulfilled and Nokia holds less than 95% of the Company’s share capital or voting rights; or |
| ii. |
between the twentieth (20th) French trading day preceding the Squeeze-Out (included) and last day preceding the Squeeze-Out (included) provided that the
Conditions Precedent are fulfilled and Nokia comes to hold 95% or more of the Company’s share capital and voting rights following the Initial Offering Period, |
(the “Acceleration Date”).
In the event that any of the Conditions Precedent would not be fulfilled, this Stock Options Acceleration Agreement would not become valid and
the vesting periods, vesting conditions, performance conditions, presence conditions and lock-up periods and all other conditions applying to the Beneficiary’s Accelerated Stock Options prior to the date hereof would remain unchanged.
The number of Accelerated Stock Options eligible for Acceleration in respect of the Beneficiary shall be equal to the total number of
Accelerated Stock Options granted to the Beneficiary as if all presence conditions and performance conditions (if any) were fulfilled, provided however that in respect of conditions relating to periods ending prior to the last day of the Initial
Offering Period, the Accelerated Stock Options will be exercisable to the extent such conditions have been fulfilled in accordance with their terms.
20
| 5. |
Exercise of the Eligible Stock Options and sale of the Option Underlying Shares |
The Beneficiary hereby gives irrevocable mandate to the Company to instruct the Administrator to, and the Company hereby undertakes to instruct
the Administrator to, in his/her name and on his/her behalf:
| |
• |
|
exercise his/her Eligible Stock Options, provided however that the Eligible Stock Options for which the Sale Price is lower than the sum of the Exercise Price, the exercise commission and the trading fees
applicable to the exercise and sale transactions described herein, will not be exercised (the “Underwater Options”); |
| |
• |
|
sell the Option Underlying Shares at the Sale Price during the Sale Period; and |
| |
• |
|
transfer to the Beneficiary the Sale Price resulting from the sale of Option Underlying Shares reduced by the sum of the Exercise Price, the exercise commission, the trading fees and, in the jurisdictions where
applicable, the relevant local withholding taxes or charges. |
The Beneficiary hereby irrevocably undertakes, as from the
last day of the Initial Offering Period, not to, and not to attempt to, exercise his/her Eligible Stock Options or sell the Options Underlying Shares otherwise than as provided in this Stock Options Acceleration Agreement.
In the event the Beneficiary would not comply in full with his/her obligations under the Stock Options Acceleration Agreement, in particular
his/her commitments under Article 5 hereof (the “Condition Subsequent”), the acceleration and waiver would be automatically revoked and any exercise by the Beneficiary of Eligible Stock Options would be declared null and void,
without any obligation or liability of the other Parties towards the Beneficiary, in accordance with the provision of article 1183 of the French Civil Code. The Condition Subsequent is stipulated in the interest of the Company and therefore may be
waived by the Company only.
The Beneficiary hereby irrevocably accepts to be bound by the terms and conditions of the Underwater Stock
Options Liquidity Agreement appended hereto (Appendix 3) with respect to the Underwater Options.
The Beneficiary hereby also irrevocably
accepts to be bound by the terms and conditions of the Lock-Up Stock Options Liquidity Agreement appended hereto (Appendix 4) with respect to any Stock Options which are subject to a tax holding period or other restrictions under French or Belgian
laws, listed in schedule 2 to such Lock-Up Stock Options Liquidity Agreement, except if the Beneficiary accepts an acceleration agreement in respect of these Stock Options.
21
It is expressly agreed that Nokia is a Party to this Stock Option Acceleration Agreement solely
for purposes of the two immediately preceding paragraphs of this Article 5, in order to record the valid and binding consent of Nokia, the Company and the Beneficiary to enter into the Underwater Stock Option Liquidity Agreement and the Lock-Up
Stock Options Liquidity Agreement set forth in Appendix 3 and Appendix 4 respectively. Nokia shall have no duty or liability of any nature whatsoever with respect to any other provisions of this Stock Options Acceleration Agreement.
The Parties agree that the liquidity mechanisms referred to above may be adapted to comply with possible applicable statutory, regulatory or
other similar constraints and will not be implemented if Nokia and the Company determine, at their full discretion but upon the advice of external legal counsel, that the formalities required under such statutory, regulatory or other similar
constraints are too cumbersome.
Subject to applicable local laws and regulations, the amounts received by the Beneficiary under this
Stock Options Acceleration Agreement will not be taken into account for the computation of his/her severance payment, if any.
Neither Party may transfer or assign the benefit of all or any of its
rights or obligations under this Stock Options Acceleration Agreement, directly or indirectly and in any manner whatsoever, except as a result of the death of the Beneficiary, in which case the Company shall be promptly advised thereof and provided
that the Beneficiary’s successor shall be bound by the terms of this Stock Options Acceleration Agreement, to the extent not expressly prohibited under applicable law.
| 7. |
Term of this Stock Options Acceleration Agreement |
This Stock Options
Acceleration Agreement shall be effective as of the date of its execution by all Parties (and in the case of the Beneficiary as of the date it has completed the Acceptance Process as set out in Article 11) and shall be valid for a period of ten
(10) years from that date.
In the event that all of the Beneficiary’s Option Underlying Shares are sold in compliance with the
Stock Options Acceleration Agreement prior to the date of settlement of the Public Exchange Offers (including pursuant to any Subsequent Offering Period), or, as the case may be, the Squeeze-Out, the reciprocal undertakings of the Parties hereunder
with regard to the said transferred Company Shares would expire.
Except as otherwise provided herein, each Party shall pay all the costs
and expenses (including, but not limited to, financial advisory, accounting, legal and other professional or consulting fees and expenses) incurred by that Party or owed by it under applicable law, in connection with this Stock Options Acceleration
Agreement.
22
| 9. |
Governing law and competent jurisdiction |
This Stock Options Acceleration
Agreement is governed by the laws of France, without regard to principles of conflicts of law. All disputes arising out of or in connection with this Stock Options Acceleration Agreement shall be submitted to the competent courts located within the
jurisdiction of the Versailles Court of Appeals.
The power of attorney granted hereby by the Beneficiary
to the Company to give instructions to the Administrator in relation with the Stock Options Acceleration Agreement aims at ensuring the proper completion of the obligations of the Beneficiary and is irrevocable. This power of attorney is deemed to
be a power of attorney entered into in the interests of all the Parties (mandat d’intérêt commun).
The
Beneficiary irrevocably and unconditionally grants a power of attorney to the Company to give instructions to the Administrator for the purpose of, in the name and on behalf of the Beneficiary, (i) sending or receiving any notification, signing
or receiving any form and carrying out any required formality for the completion of his/her obligations under this Stock Options Acceleration Agreement and, in general, (ii) making any statement, delivering any certificate, signing any
agreement, deed, or other document and (iii) taking, in the name and on behalf of the Beneficiary, any action required for the completion of his/her obligations under this Stock Options Acceleration Agreement, in compliance with the choices
made or deemed made by the Beneficiary upon acceptance of the Stock Options Acceleration Agreement.
The Beneficiary also undertakes to
approve any action taken by the Administrator on the instructions of the Company pursuant to the said powers of attorney in compliance with the choices he/she has made, subject to the above limitations.
| 11. |
Acceptance – Specific Performance |
If the Beneficiary wishes to enter
into this Stock Options Acceleration Agreement, he/she shall comply with the acceptance process on the website https://alcatel-lucent.assets.voxaly.com/ by the last day of the Initial Offering Period (the “Acceptance
Process”).
Should the Beneficiary not enter into this Stock Options Acceleration Agreement in the manner and by the date
referred to above, the Beneficiary shall be deemed to have finally and irrevocably waived and forfeited his/her right to enter into this Stock Options Acceleration Agreement.
The Beneficiary is the only person who may decide to enter (or not) into this Stock Options Acceleration Agreement. In this respect, the
Beneficiary is invited to consult his/her own specialized counsel if he/she wishes to obtain further information as to his/her rights and obligations hereunder.
23
If the Beneficiary complies with the Acceptance Process, the Beneficiary (i) irrevocably
undertakes to accept the Acceleration of the Accelerated Stock Options, the exercise of the Eligible Stock Options and the sale at the Sale Price of the Option Underlying Shares, and (ii) irrevocably accepts to be bound by the Underwater Stock
Option Liquidity Agreement and the Lock Up Stock Option Liquidity Agreement, without any further formality.
In the event of breach, in
addition to all other remedies which the non-breaching Party may have under applicable law, the non-breaching Party shall be entitled to specific performance (exécution forcée) and injunctive or equivalent relief in accordance
with applicable law, including article 1221 of the draft order of the French Ministry of Justice (if applicable on the relevant date). In addition, each of the Parties agree to waive the benefit of article 1142 of the French Civil Code in the event
of breach.
This Agreement is made in electronic form according to the provisions of article 1325 of the French Civil code.
[The rest of the page has been left blank intentionally]
24
|
| The Company |
| Represented by: Philippe Camus |
|
| Nokia |
| Represented by: |
|
| |
| Represented by: |
[Signature page for the Long Form Stock Options Acceleration Agreement]
25
Appendix 1
Definitions
The terms and expressions
below shall have the following meanings:
|
|
|
| “Accelerated Stock Options” |
|
As defined in Article 3 of this Stock Options Acceleration Agreement. |
|
|
| “Acceleration” |
|
As defined in Article 4 of this Stock Options Acceleration Agreement. |
|
|
| “Acceleration Date” |
|
As defined in Article 4 of this Stock Options Acceleration Agreement. |
|
|
| “Acceptance Process” |
|
As defined in Article 11 of this Stock Options Acceleration Date. |
|
|
| “Administrator” |
|
Société Générale Securities Services. |
|
|
| “AMF General Regulation” |
|
The general regulation of the Autorité des marchés financiers, the French stock exchange regulator, which is available in French and English at www.amf-france.org. |
|
|
| “Beneficiary” |
|
The person having accepted this Stock Option Acceleration Agreement. |
|
|
| “Company Shares” |
|
Ordinary shares issued by the Company and the American depository shares issued by the Company. |
|
|
| “Condition Subsequent” |
|
As defined in Article 5 of this Stock Options Acceleration Agreement. |
|
|
| “Conditions Precedent” |
|
Means (i) the satisfaction of the presence conditions by the Beneficiary as of the last day of the Initial Offering Period, (ii) the approval by Nokia’s shareholders of the resolutions required to implement the Offer, and (iii)
Nokia reaching the Success Threshold following the Initial Offering Period. |
|
|
| “Eligible Stock Options” |
|
As defined in Article 3 of this Stock Options Acceleration Agreement. |
|
|
| “Exercise Price” |
|
The price to be paid upon exercise of the Stock Options. |
26
|
|
|
|
|
| “Initial Offering Period” |
|
Refers to the first offering period, as referred to in article 232-2 of the AMF General Regulation and as determined in a notice published by the Autorité des Marchés Financiers, the result of which will
determine whether a Subsequent Offering Period will be opened or not. |
|
|
| “Option Underlying Shares” |
|
Company Shares that will be delivered by the Company to the Beneficiary in connection with the exercise of his/her Eligible Stock Options that are effectively exercised pursuant to Article 5 of this Stock Options Acceleration
Agreement. |
|
|
| “Public Exchange Offers” |
|
Public exchange offers in France and in the United States initiated by Nokia on the securities of the Company, as approved by the Autorité des Marchés Financiers in France and by the Securities and
Exchange Commission in the United States. |
|
|
| “Sale Period” |
|
Shall mean the period determined by the Company between the date of publication of the final results of the Initial Offering Period (excluded) to (i) the second French trading day (included) preceding the last day of the Subsequent
Offering Period or, if there is no Subsequent Offering Period, (ii) the Squeeze-out (included). |
|
|
| “Sale Price” |
|
The Sale Price shall be equal to the volume weighted average market sale price of all Company Shares sold by the Administrator during the Sale Period for all the relevant beneficiaries pursuant to (i) the acceleration mechanisms
including, for the Stock Options acceleration mechanism, the Company Shares resulting from the undertaking to exercise the relevant vested stock options, and (ii) the share plan granted in 2015 to replace the 2014 stock options plan. |
|
|
| “Squeeze-Out” |
|
Refers to the squeeze-out procedure (retrait obligatoire) that Nokia would launch on the Company Shares should it come to own 95% or more of the Company’s share capital and voting rights in accordance with
articles 237-14 et seq. of the AMF General Regulation. |
27
|
|
|
|
|
| “Stock Options” |
|
Any option to subscribe for or acquire Company Shares granted by the Company’s board of directors to the Beneficiary. |
|
|
| “Stock Options Acceleration Agreement” |
|
This agreement executed by the Company and the Beneficiary, including its appendices. |
|
|
| “Subsequent Offering Period” |
|
Subsequent offering period for the French public exchange offer in accordance with article 232-4 of the AMF General Regulation. |
|
|
| “Success Threshold” |
|
Refers to the (i) ownership by Nokia, on the date of the settlement of the initial offering period of the Public Exchange Offers, of more than 50% of the shares of Alcatel Lucent on a fully diluted basis, in accordance with article
231-9-II of the AMF General Regulation or (ii) satisfaction, at Nokia’s sole discretion on the date of publication of the final results of the initial offering period of the Public Exchange Offers, that such ownership condition will be met, or
(iii) the express decision by Nokia’s board of directors, on or prior to the date of publication of the final results of the Initial Offering Period of the Public Exchange Offers, to waive such voluntary minimum threshold and to establish the
success threshold as described in article 231-9-I of the AMF General Regulation, pursuant to which any public offer at the close of which the offeror does not hold a number of shares representing a fraction of more than 50% of the share capital or
voting rights, shall be null and void. |
|
|
| “Underwater Options” |
|
As defined in Article 5 of this Stock Options Acceleration Agreement. |
28
Appendix 2
The following plans are in the scope of this
Stock Options Acceleration Agreement
|
|
|
|
|
| Plan n° |
|
Plan date |
|
End of vesting period |
| A0713COBE2 (only if the Beneficiary is not subject to a tax restriction period pursuant to this plan)
A0713CORO2 A0713CONH2
A0713COFR2 A0713NHNH2
A0713COIS2 |
|
Plan dated July 12, 2013 |
|
July 12, 2017 |
|
|
|
| A1212NHNH2 |
|
Plan dated December 17, 2012 |
|
December 17, 2016 |
|
|
|
| A0812NHRO2 A0812NHNH2 |
|
Plan dated August 13, 2012 |
|
August 13, 2016 |
|
|
|
| A0312CORO2 A0312COBE2
A0312CONH2 A0312NHNH2
A0312NHRO2 A0312COIS2 |
|
Plan dated March 14, 2012 |
|
March 14, 2016 |
|
|
|
| A1211NHNH2 A1211NHFR2
A1211NHIS2 |
|
Plan dated December 1, 2011 |
|
December 1, 2015 |
|
|
|
| A0911NHBE2 A0911NHFR2
A0911NHRO2 A0911NHIS2
A0911NHNH2 |
|
Plan dated September 1, 2011 |
|
September 1, 2015 |
|
|
|
| A0611NHNH2 A0611NHFR2
A0611NHRO2 A0611NHIS2 |
|
Plan dated June 1, 2011 |
|
June 1, 2015 |
|
|
|
| A0311CORO2 A0311COBE2
A0311COFR2 A0311CONH2
A0311CPFR2 A0311COIS2 |
|
Plan dated March 16, 2011 |
|
March 16, 2015 |
|
|
|
| A0311NHFR2 A0311NHNHA
A0311NHROW |
|
Plan dated March 1, 2011 |
|
March 1, 2015 |
29
|
|
|
|
|
| Plan n° |
|
Plan date |
|
End of vesting period |
| A1210NHNHA |
|
Plan dated December 9, 2010 |
|
December 9, 2014 |
|
|
|
| A1010NHNHA A1010NPFR2 |
|
Plan dated October 1, 2010 |
|
October 1, 2014 |
|
|
|
| A0710NHNHA A0710NHFR2 |
|
Plan dated July 1, 2010 |
|
July 1, 2014 |
|
|
|
| A0310COROW A0310CONHA
A0310COBEL A0310COFRA
A0310COISR A0310CPFRA
A0310NHNHA |
|
Plan dated March 17, 2010 |
|
March 17, 2014 |
|
|
|
| A1209NHNHA |
|
Plan dated December 1, 2009 |
|
December 1, 2013 |
|
|
|
| A1009NHFRA A1009NHNHA |
|
Plan dated October 1, 2009 |
|
October 1, 2013 |
|
|
|
| A0709NHNHA A0709NHFRA |
|
Plan dated July 1, 2009 |
|
July 1, 2013 |
|
|
|
| A0309EXROW A0309EXBEL
A0309EXFRA A0309EXNHA
A0309EXISR |
|
Plan dated March 18, 2009 |
|
March 18, 2013 |
|
|
|
| A0309COROW A0309CONHA
A0309COBEL A0309COFRA
A0309NHNHA A0309COISR
A0309CPFRA |
|
Plan dated March 18, 2009 |
|
March 18, 2013 |
|
|
|
| A1208NHNHA A1208NHFRA |
|
Plan dated December 31, 2008 |
|
December 31, 2012 |
|
|
|
| A0708NHROW A0708NHNHA
A0708NHFRA |
|
Plan dated July 1, 2008 |
|
July 1, 2012 |
|
|
|
| A0308COROW A0308COBEL
A0308COFRA A0308CONHA
A0308COISR |
|
Plan dated March 25, 2008 |
|
March 25, 2012 |
30
Appendix 3
Underwater Stock Options Liquidity Agreement
31
UNDERWATER STOCK OPTIONS LIQUIDITY AGREEMENT
BETWEEN:
| |
• |
|
Nokia Corporation, a corporation incorporated under the laws of Finland, with a share capital of EUR 245,896,461.96, which registered office is located Karaportti 3, 02610 Espoo, Finland, Finland,
registered with the Trade Register of the Finnish Patents and Registration Office under number 0112038-9, duly represented for the purposes hereof (“Nokia”) |
on the first part,
| |
• |
|
Alcatel-Lucent, a société anonyme incorporated under the laws of France, with a share capital of EUR 141,210,168.20, which registered office is located 148/152, Route de
la Reine – 92100 – Boulogne-Billancourt, France, registered with the Nanterre company registry under number 542.019.096, represented for the purposes hereof by Philippe Camus, duly authorized, (the “Company”)
|
on the second part,
AND
| |
• |
|
The beneficiary having complied with the Acceptance Process of the Stock Options Acceleration Agreement (the “Beneficiary”, and together with Nokia and the Company, the
“Parties”), |
on the third part,
RECITALS:
In connection with the Public
Exchange Offers, Nokia has undertaken under certain conditions to propose a mechanism that would ensure the liquidity of certain Option Underlying Shares if the liquidity of the Company Shares is significantly reduced as a result of the completion
of the Public Exchange Offers (as further described below). The terms and conditions of this liquidity mechanism are set forth in this agreement.
THEREFORE, IT HAS BEEN AGREED AS FOLLOWS:
| 1. |
Acceptance of the Underwater Stock Options Liquidity Agreement |
The terms and
conditions of this liquidity agreement (the “Underwater Stock Options Liquidity Agreement”) shall be applicable to and binding on the Beneficiary, Nokia and the Company, provided that (i) Nokia reaches the Success Threshold
following the Initial Offering Period and (ii) the resolutions required to implement the Public Exchange Offers are approved by Nokia’s shareholders.
1
The definitions of the terms contained in this Underwater Stock
Options Liquidity Agreement are set forth in Appendix 1 to this Underwater Stock Options Liquidity Agreement.
| 3. |
Scope of the Underwater Stock Options Liquidity Agreement |
If the Beneficiary has
accepted the Stock Options Acceleration Agreement, this Underwater Stock Options Liquidity Agreement is applicable to any of the Stock Options granted to the Beneficiary pursuant to the plans listed in Appendix 2 and subject to the cashless exercise
undertaking provided for in the Stock Options Acceleration Agreement, provided that the Sale Price is lower than the sum of the Exercise Price of these Stock Options, the exercise commission and the trading fees applicable to the exercise of the
Stock Options and sale transactions described in the Stock Options Acceleration Agreement.
If the Beneficiary has not accepted the Stock
Options Acceleration Agreement, this Underwater Stock Options Liquidity Agreement is applicable to any of the vested Stock Options granted to the Beneficiary pursuant to the plans listed in Appendix 2 for which the sum of the Exercise Price, the
exercise commission and the trading fees applicable to the exercise and sale of the Option Underlying Shares exceeds 90% of the market value of a Company Share on Euronext Paris at the closing of the last day of the Subsequent Offering Period.
| 4. |
Reduced Liquidity of Company Shares |
A reduced liquidity (a “Reduced
Liquidity”) of the Company Shares held by the Beneficiary shall occur if at least one of these conditions applies:
| |
• |
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The Company Shares are no longer listed on a regulated stock market within the meaning of article L. 421-1 of the French monetary and financial code (Code monétaire et financier);
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| |
• |
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Nokia directly or indirectly holds at least 85% of the Company Shares; or |
| |
• |
|
the average daily volume of the Company Shares traded on Euronext Paris calculated on the last consecutive twenty (20) trading days preceding the relevant date falls below five million (5,000,000) Company
Shares. |
The Company shall notify to the Beneficiary and Nokia by email, as from the last day of the Subsequent Offering
period, of the occurrence of any Reduced Liquidity of the Company Shares within 5 business days of such occurrence (the “Reduced Liquidity Notification”). The Reduced Liquidity Notification shall include an example of an Exchange
Ratio calculation determined based on the assumption that the Option Underlying Shares Exchange occurred on the business day preceding the date of the Reduced Liquidity Notification, and shall detail the adjustments, if any, to be applied to the
Exchange Ratio pursuant to this Underwater Stock Options Liquidity Agreement.
2
Unless a claim is made in accordance with the provisions of Article 7, the Exchange Ratio calculation and the adjustments (if any) as notified shall be final and binding except if an updated
Reduced Liquidity Notification is made before the Option Underlying Shares Exchange Date, in accordance with Article 6.2 of this Underwater Stock Options Liquidity Agreement and the Appendix 3 hereto, in which case such updated Reduced Liquidity
Notification will replace and supersede the previous Reduced Liquidity Notification.
| 5. |
Option Underlying Shares Exchange and Cash Exchange |
All the Options
Underlying Shares resulting from the exercise of any Stock Option being within the scope of Article 3 above shall be automatically exchanged by Nokia for Nokia Shares (the “Option Underlying Shares Exchange”) on the fifth (5th) business day following the exercise date of these relevant Stock Options (provided that the Beneficiary received a Reduced Liquidity Notification before the exercise of his/her Stock
Options).
In the event the Beneficiary would exercise his/her Stock Options being within the scope of Article 3 above before
having received a Reduced Liquidity Notification, he/she would not be entitled to benefit from any Exchange of his/her Option Underlying Shares.
The Exchange Ratio of the Option Underlying Shares transferred by the Beneficiary to Nokia pursuant to the Option Underlying Shares Exchange
shall be determined by Nokia in accordance with the provisions of Article 6 below. In the event the application of the Exchange Ratio would entitle the Beneficiary to receive Nokia fractional rights, he/she would receive in cash (in EUR,
rounded up to the closest cent; 0.5 cent shall be rounded up to 1 cent), as an indemnity for those fractional rights, the relevant fraction of the Nokia Share price as of the Option Underlying Shares Exchange Date.
Alternatively to the Option Underlying Shares Exchange, Nokia may choose to implement a payment in cash in respect of the Option underlying
Shares, in its sole discretion (the “Cash Exchange”). The Cash Exchange would be applicable under the same conditions and requirements as the Option Underlying Shares Exchange except that the consideration for the exchange would not
be Nokia Shares but a cash consideration equal to the value of the Nokia Shares the Beneficiary would have been entitled to receive by exchanging his/her Option Underlying Shares for Nokia Shares according to the Exchange Ratio. Such Nokia Shares
value shall be based on the market value of a Nokia Share on the NASDAQ OMX Helsinki Ltd. at the closing of the last trading day preceding the Cash Exchange.
The Company and Nokia will have the option to proceed to the payments relating to the Cash Exchange and to the fractional rights
indemnification through the Beneficiary’s next payroll (where relevant and to the extent legally permitted) and in any case, as soon as administratively practicable, notwithstanding the 5-day period allocated for the completion of the Option
Underlying Shares Exchange.
3
| |
6.1 |
Exchange Ratio without adjustment |
Nokia shall deliver, for the Company Shares exchanged under
Article 5 above, a number of new and/or existing (at Nokia’s sole discretion) Nokia Shares calculated as follows and then rounded down to the next inferior whole number of Nokia Shares:
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| NNS |
|
= |
|
Exchange Ratio |
|
x |
|
NCS |
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| Where: |
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“NNS” means the total number of Nokia Shares (rounded down to the next inferior whole number) to be delivered to the Beneficiary in exchange for his/her Company Shares; |
|
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“Exchange Ratio” means the number of Nokia Shares to be delivered for one Company Share in accordance with the terms of the Public Exchange Offers, i.e. 0.55; and |
|
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“NCS” means the number of Company Shares to be exchanged under this Underwater Stock Options Liquidity Agreement. |
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of Company Shares pursuant
to this Underwater Stock Options Liquidity Agreement
Assumption: Transfer of 200 Company Shares by the Beneficiary in January 2017 without
any adjustment.
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| NNS |
|
= |
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0.55 |
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x |
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200 |
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| NNS |
|
= |
|
110 |
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| |
6.2 |
Adjusted Exchange Ratio |
Upon certain financial transactions carried out by Nokia or the
Company affecting the value of their shares, the Exchange Ratio will be adjusted as described in Appendix 3.
For the avoidance of doubt,
no adjustment will be made to the Exchange Ratio in the event of issuance of new shares by the Company or Nokia in relation to or as a result of the acceleration mechanisms mentioned herein, the grant of Company Shares in replacement of the 2014
stock options plans, the grant of Company performance shares in 2015 or the performance of this Underwater Stock Options Liquidity Agreement.
4
Any claim of the Beneficiary with respect to the Exchange Ratio shall be
delivered by registered letter (with acknowledgement of the receipt) from the Beneficiary to Nokia, with a copy addressed to the Company, within five (5) business days as from the date the Company sent the Reduced Liquidity Notification to the
Beneficiary in accordance with Article 4. The reasons for any claim shall be detailed precisely in such claim.
Nokia and the Beneficiary
shall agree on an Exchange Ratio within five (5) business days as from the receipt by Nokia of the Beneficiary’s notification letter. If, after such period, Nokia and the Beneficiary have not been able to reach an agreement, the procedure
provided for in Article 8 below shall apply.
| 8. |
Third-Party Arbitrator |
In case Nokia and the Beneficiary disagree on the
Exchange Ratio, any person jointly selected by the Parties within ten (10) business days following the delivery of a claim made in accordance with Article 7 or, failing to do so within such timeframe, any other person appointed by the president
of the Paris Tribunal de Grande Instance on the application of the most diligent Party, acting as third-party arbitrator within the meaning of article 1592 of the French Civil Code (the “Third-Party Arbitrator”)
shall determine the Exchange Ratio, within twenty (20) business days as from the date it receives a registered letter with acknowledgment of receipt pursuant to which it has been appointed jointly by Nokia and the Beneficiary or by the
president of the Paris Tribunal de Grande Instance.
In case this request is sent by the Beneficiary, the Beneficiary
undertakes to send on the same day a copy of such letter to Nokia and the Company.
For the purpose of the performance of the Third-Party
Arbitrator’s assignment, the Company, Nokia and the Beneficiary undertake to provide it with any relevant information relating to the adjustment provided for in Article 6.2 of this Underwater Stock Options Liquidity Agreement, that would
be necessary for the Third Party Arbitrator to undertake its mission.
The Third-Party Arbitrator may request any such relevant and
necessary information from the Company, Nokia and the Beneficiary.
Nokia, the Company and the Beneficiary shall be informed of the
Third-Party Arbitrator’s conclusions as promptly as possible after completion of Third-Party Arbitrator’s assignment and no later than on the last day of the above-mentioned 20 business day period.
In the event the Third-Party Arbitrator fails to determine the Exchange Ratio within twenty (20) business days following the notification
of its appointment, another Third-Party Arbitrator shall be appointed in the conditions set forth in this Article 8 to determine the Exchange Ratio within twenty (20) business days following the
5
notification of its appointment and the previously appointed Third-Party Arbitrator shall be automatically revoked upon the appointment of the new Third-Party Arbitrator, and so on until a
Third-Party Arbitrator effectively determines the Exchange Ratio.
Except in case of a manifest error (erreur manifeste), as
interpreted by French courts, the Third-Party Arbitrator’s conclusions shall be final and binding, and therefore non-appealable, upon Nokia, the Company and the Beneficiary.
Any fees, charges and disbursements incurred for the purpose of the completion of the Third-Party Arbitrator’s assignment shall be borne
by Nokia if the Third-Party Arbitrator gives right to the Beneficiary’s claim in full, and otherwise by the Beneficiary.
| 9. |
Beneficiary’s undertakings |
The Beneficiary hereby cumulatively undertakes
vis-a-vis Nokia and the Company (except as provided for otherwise in writing by Nokia):
| |
• |
|
not to sell, transfer, convey, alienate, mortgage, pledge or encumber his/her Option Underlying Shares or to dispose of them other than in accordance with this Underwater Stock Options Liquidity Agreement, or to Nokia,
between the date on which the Beneficiary receives a Reduced Liquidity Notification and until the Exchange Date; |
| |
• |
|
to hold in pure registered form his/her Option Underlying Shares as long as they are held by the Beneficiary; |
| |
• |
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not to revoke the power of attorney referred to in Article 15 below; and |
| |
• |
|
not to exercise his/her Stock Options if and for so long as he/she holds insider information regarding Nokia and/ or the Company. |
| 10. |
Exchange of the Company Shares pursuant to the Underwater Stock Options Liquidity Agreement |
Any Company Share to be delivered by the Beneficiary shall be transferred to Nokia or to any third party designated by Nokia with full
ownership including all of the rights pertaining thereto as of the effective date of transfer, free from any privilege, rights, charges, restrictions and any third party rights of any nature whatsoever.
Except as otherwise provided in this Underwater Stock Options
Liquidity Agreement, any correspondence to be addressed to the Beneficiary in relation to the Underwater Stock Options Liquidity Agreement shall be sent by email to the email address provided by the Company to Nokia. The Beneficiary hereby consents
to all disclosure and sharing of personal information relating to such Beneficiary if they are
6
necessary or advisable for the performance of this Underwater Stock Options Liquidity Agreement (including, without limitation, his/her name and email address). The Beneficiary will be entitled
to exercise his or her rights pursuant to applicable data privacy laws and regulations, including French Law n° 78-17 of January 6, 1978.
Except as otherwise provided in this Underwater Stock Options Liquidity Agreement, any correspondence to be addressed to Nokia or to the
Company in relation to the Underwater Stock Options Liquidity Agreement shall be sent by registered letter with acknowledgment of receipt at the following address:
Nokia Corporation
Human
Resources Department
Head of Compensation
Karaportti 3, P.O. Box 226
FI-00045 Nokia Group
Finland
Alcatel-Lucent
Direction des Ressources Humaines
148/152, Route de la Reine
92100
Boulogne-Billancourt
France
Neither Party may transfer or assign the benefit of all or any of its
rights or obligations under the Underwater Stock Options Liquidity Agreement, directly or indirectly and in any manner whatsoever, except (i) in the case of the Beneficiary, as a result of the death of the Beneficiary, in which case the Company
and Nokia shall be promptly advised thereof and provided that the Beneficiary’s successor shall be bound by the terms of this Underwater Stock Options Liquidity Agreement, to the extent not expressly prohibited under applicable law, and
(ii) in the case of Nokia, to an affiliate or to a financial institution appointed by Nokia or any of its affiliates.
| 13. |
Term of this Underwater Stock Options Liquidity Agreement |
This Underwater Stock
Options Liquidity Agreement shall be effective as of the date of its execution by all Parties (and in the case of the Beneficiary, as of the date he/she has completed the Acceptance Process of the Stock Options Acceleration Agreement) and shall be
valid for a period of ten (10) years from that date, without prejudice to the duration of the relevant Stock Options plans as described in such plans rules.
In the event that all of the Option Underlying Shares held by the Beneficiary are exchanged by the Beneficiary in compliance with this
Underwater Stock Options Liquidity Agreement, and that such Beneficiary no longer holds any Stock Option, the reciprocal undertakings of the Parties with regard to the said transferred Company Shares would expire.
7
| 14. |
Governing law and competent jurisdiction |
This Underwater Stock Options Liquidity
Agreement is governed by the laws of France, without regard to principles of conflicts of law. All disputes arising out of or in connection with this Underwater Stock Options Liquidity Agreement shall be submitted to the competent courts located
within the jurisdiction of the Versailles Court of Appeals.
The power of attorney granted hereby by the Beneficiary
to the Company in relation with the Underwater Stock Options Liquidity Agreement aims at ensuring the proper completion of the obligations of the Beneficiary and is irrevocable. This power of attorney is deemed to be a power of attorney entered into
in the interest of all the Parties (mandat d’intérêt commun).
The Beneficiary irrevocably and
unconditionally grants a power of attorney to the Company for the purpose of, in the name and on behalf of the Beneficiary, sending or receiving any notification, signing or receiving any form and carrying out any required formality for the
completion of the Exchanges set out in the Underwater Stock Options Liquidity Agreement and, in general, making any statement, delivering any certificate, signing any agreement, deed, or other document and generally taking, in the name and on behalf
of the Beneficiary, any action required for the completion of the Exchanges set out in the Underwater Stock Options Liquidity Agreement, in compliance with the choices made or deemed made by the Beneficiary upon acceptance of the Underwater Stock
Options Liquidity Agreement.
The Beneficiary also undertakes to approve any action taken by the Company pursuant to the said powers of
attorney in compliance with the choices he/she has made, subject to the above limitations.
The Beneficiary grants a power of attorney to
the Company to instruct the Administrator to, and the Company hereby undertakes to instruct the Administrator to, carry out the Option Underlying Shares Exchange or, as the case may be, the Cash Exchange, as well as any formality required for the
completion of the Exchanges, except if a claim has been delivered in accordance with Article 7 and specifying the nature and detailing the reasons of such claim, in which case the Option Underlying Shares Exchange Date or the Cash Exchange Date
shall occur five (5) business days as from the date on which the Beneficiary and Nokia will have reached an agreement on the Exchange Ratio or, as the case may be, the date on which the Third-Party Arbitrator will have rendered his conclusions.
Subject to the provisions of Articles 12 and 15, no third party to
this Underwater Stock Options Liquidity Agreement shall have any rights or obligations on the basis of, or shall rely on the terms and conditions of, this Underwater Stock Options Liquidity Agreement.
8
Except as otherwise provided herein, each Party shall pay all the costs
and expenses (including, but not limited to, financial advisory, accounting, legal and other professional or consulting fees and expenses) incurred by that Party or owed by it under applicable law, in connection with this Underwater Stock Options
Liquidity Agreement.
In particular, the Beneficiary would be subject to a Finnish transfer tax of 1.6% of the value of the Nokia treasury
shares if it receives Nokia treasury shares in exchange for its Option Underlying Shares.
| 18. |
Acceptance – Specific Performance |
If the Beneficiary complies with the
Acceptance Process of the Stock Options Acceleration Agreement, the Beneficiary irrevocably undertakes vis-a-vis Nokia to transfer to Nokia (and accepts that the required instructions will be given to the Administrator) his/her Company Shares
resulting from the exercise of his/her Stock Options which are in the scope of Article 3 of this Underwater Stock Options Liquidity Agreement and provided that the exercised occurred after the Reduced Liquidity Notification and Nokia irrevocably
undertakes vis-a-vis the Beneficiary to acquire such Company Shares in the conditions described in this Underwater Stock Options Liquidity Agreement.
In the event of breach, in addition to all other remedies which the non-breaching Party may have under applicable law, the non-breaching Party
shall be entitled to specific performance (exécution forcée) and injunctive or equivalent relief in accordance with applicable law, including article 1221 of the draft order of the French Ministry of Justice (if applicable on
the relevant date). In addition, each of the Parties agree to waive the benefit of article 1142 of the French Civil Code in the event of breach.
9
Appendix 1 to the Underwater Stock Options Liquidity Agreement
Definitions
The terms and expressions
below shall have the following meanings:
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| “Acceptance Process” |
|
As defined in the Stock Options Acceleration Agreement. |
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| “Administrator” |
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Société Générale Securities Services. |
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| “AMF General Regulation” |
|
The general regulation of the Autorité des marchés financiers, the French stock exchange regulator, which is available in French and English at www.amf-france.org. |
|
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| “Article” |
|
Unless specified otherwise herein, means the Article of this Underwater Stock Options Liquidity Agreement. |
|
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| “Beneficiary” |
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The person having become a party to this Underwater Stock Options Liquidity Agreement on the date indicated hereof. |
|
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| “business day” |
|
A day other than Saturday or Sunday where the banks are open for business in Finland. |
|
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| “Cash Exchange” |
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As defined in Article 5 of this Underwater Stock Options Liquidity Agreement. |
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| “Cash Exchange Date” |
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The date on which the Cash Exchange occurs. |
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| “Company Extraordinary Distribution” |
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As defined in Appendix 3 to this Underwater Stock Options Liquidity Agreement. |
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| “Company Merger” |
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As defined in Appendix 3 to this Underwater Stock Options Liquidity Agreement. |
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| “Company Shares” |
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Ordinary shares issued by the Company and the American depository shares issued by the Company. |
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| “Exchange” |
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Means the Option Underlying Share Exchange or the Cash Exchange. |
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| “Exchange Date” |
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Means the date on which the Exchange occurs.
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10
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| “Exchange Ratio” |
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As defined in Article 6 of this Underwater Stock Options Liquidity Agreement. |
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| “Exercise Price” |
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The price to be paid upon exercise of the Stock Options. |
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| “Initial Offering Period” |
|
Refers to the first offering period, as referred to in article 232-2 of the AMF General Regulation, the result of which will determine whether a Subsequent Offering Period will be opened or not. |
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| “Nokia Merger” |
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As defined in Appendix 3 to this Underwater Stock Options Liquidity Agreement. |
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| “Nokia Shares” |
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Ordinary shares issued by Nokia and the American depository shares issued by Nokia. |
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| “Option Underlying Shares” |
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Company Shares that have been or will be delivered by the Company to the Beneficiary in connection with his/her Stock Options. |
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| “Option Underlying Shares Exchange” |
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As defined in Article 5 of this Underwater Stock Options Liquidity Agreement. |
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| “Option Underlying Shares Exchange Date” |
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The date on which the Option Underlying Shares Exchange occurs. |
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| “Public Exchange Offers” |
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Public exchange offers in France and in the United States initiated by Nokia on the securities of the Company, as approved by the Autorité des Marchés Financiers in France and by the Securities and
Exchange Commission in the United States. |
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| “Reduced Liquidity” |
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As defined in Article 4 of this Underwater Stock Options Liquidity Agreement. |
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| “Reduced Liquidity Notification” |
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As defined in Article 4 of this Underwater Stock Options Liquidity Agreement. |
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| “Sale Price” |
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As defined in the Stock Options Acceleration Agreement. |
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| “Stock Options” |
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Any option to subscribe for or acquire Company Shares granted by the Company’s board of directors to a Beneficiary pursuant to the Share
Plans. |
11
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| “Stock Options Acceleration Agreement” |
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The Stock Options Acceleration Agreement this Underwater Stock Options Liquidity Agreement is appended to, entered into between the Company, the Beneficiary and Nokia (only for purposes of Article 5 thereto and as further described
therein). |
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| “Underwater Stock Options Liquidity Agreement” |
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This agreement executed by Nokia, the Company and the Beneficiary, including its appendices. |
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| “Subsequent Offering Period” |
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Subsequent offering period for the French public exchange offer in accordance with article 232-4 of the AMF General Regulation. |
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| “Success Threshold” |
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Refers to the (i) ownership by Nokia, on the date of the settlement of the initial offering period of the Public Exchange Offers, of more than 50% of the shares of Alcatel Lucent on a fully diluted basis, in accordance with article
231-9-II of the AMF General Regulation or (ii) satisfaction, at Nokia’s sole discretion on the date of publication of the final results of the initial offering period of the Public Exchange Offers, that such ownership condition will be met, or
(iii) the express decision by Nokia’s board of directors, on or prior to the date of publication of the final results of the initial offering period of the Public Exchange Offers, to waive such voluntary minimum threshold and to establish the
success threshold as described in article 231-9-I of the AMF General Regulation, pursuant to which any public offer at the close of which the offeror does not hold a number of shares representing a fraction of more than 50% of the share capital or
voting rights, shall be null and void. |
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| “Third-Party Arbitrator” |
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As defined in Article 8 of this Underwater Stock Options Liquidity Agreement. |
12
Appendix 2 to the Underwater Stock Options Liquidity Agreement
The following plans are in the scope of this
Underwater Stock Options Liquidity Agreement
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| Plan n° |
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Plan date |
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End of vesting period |
| A0713COBE2 (only if the Beneficiary is not subject to any tax restriction period pursuant to this plan)
A0713CORO2 A0713CONH2
A0713COFR2 A0713NHNH2
A0713COIS2 |
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Plan dated July 12, 2013 |
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July 12, 2017 |
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| A1212NHNH2 |
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Plan dated December 17, 2012 |
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December 17, 2016 |
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| A0812NHRO2 A0812NHNH2 |
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Plan dated August 13, 2012 |
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August 13, 2016 |
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| A0312CORO2 A0312COBE2
A0312CONH2 A0312NHNH2
A0312NHRO2 A0312COIS2 |
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Plan dated March 14, 2012 |
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March 14, 2016 |
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| A1211NHNH2 A1211NHFR2
A1211NHIS2 |
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Plan dated December 1, 2011 |
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December 1, 2015 |
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| A0911NHBE2 A0911NHFR2
A0911NHRO2 A0911NHIS2
A0911NHNH2 |
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Plan dated September 1, 2011 |
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September 1, 2015 |
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| A0611NHNH2 A0611NHFR2
A0611NHRO2 A0611NHIS2 |
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Plan dated June 1, 2011 |
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June 1, 2015 |
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| A0311CORO2 A0311COBE2
A0311COFR2 A0311CONH2
A0311CPFR2 A0311COIS2 |
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Plan dated March 16, 2011 |
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March 16, 2015 |
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| A0311NHFR2 A0311NHNHA
A0311NHROW |
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Plan dated March 1, 2011 |
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March 1, 2015 |
13
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| Plan n° |
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Plan date |
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End of vesting period |
| A1210NHNHA |
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Plan dated December 9, 2010 |
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December 9, 2014 |
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| A1010NHNHA A1010NPFR2 |
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Plan dated October 1, 2010 |
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October 1, 2014 |
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| A0710NHNHA A0710NHFR2 |
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Plan dated July 1, 2010 |
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July 1, 2014 |
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| A0310COROW A0310CONHA
A0310COBEL A0310COFRA
A0310COISR A0310CPFRA
A0310NHNHA |
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Plan dated March 17, 2010 |
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March 17, 2014 |
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| A1209NHNHA |
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Plan dated December 1, 2009 |
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December 1, 2013 |
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| A1009NHFRA A1009NHNHA |
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Plan dated October 1, 2009 |
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October 1, 2013 |
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| A0709NHNHA A0709NHFRA |
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Plan dated July 1, 2009 |
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July 1, 2013 |
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| A0309EXROW A0309EXBEL
A0309EXFRA A0309EXNHA
A0309EXISR |
|
Plan dated March 18, 2009 |
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March 18, 2013 |
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| A0309COROW A0309CONHA
A0309COBEL A0309COFRA
A0309NHNHA A0309COISR
A0309CPFRA |
|
Plan dated March 18, 2009 |
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March 18, 2013 |
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| A1208NHNHA A1208NHFRA |
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Plan dated December 31, 2008 |
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December 31, 2012 |
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| A0708NHROW A0708NHNHA
A0708NHFRA |
|
Plan dated July 1, 2008 |
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July 1, 2012 |
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| A0308COROW A0308COBEL
A0308COFRA A0308CONHA
A0308COISR |
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Plan dated March 25, 2008 |
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March 25, 2012 |
14
Appendix 3 to the Underwater Stock Options Liquidity Agreement
Exchange Ratio Adjustments
In case of a merger of the Company into another company (the
“Company Merger”), the Option Underlying Shares Exchange and Cash Exchange will apply with respect to the shares of the absorbing entity received by the Beneficiary in exchange for Company Shares resulting from Stock Options which
are within the scope of Article 3 above. The Exchange Ratio will be adjusted as follows:
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Exchange RatioAdjusted |
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= |
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Exchange Ratio |
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x |
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1
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RatioMerger |
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Theoretical example of calculation of the number of Nokia Shares to be received in exchange of the absorbing company
shares in case of a Company Merger
Assumptions:
| |
• |
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RatioMerger = 2 shares of the absorbing company for each Company Share |
| |
• |
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Transfer of 200 shares of the absorbing company by the Beneficiary in January 2017 after the Company Merger |
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|
|
|
|
|
|
|
Exchange RatioAdjusted |
|
= |
|
0.55 |
|
x |
|
1/2 |
|
|
|
|
|
|
|
|
Exchange RatioAdjusted |
|
= |
|
0.275 |
|
|
|
|
The number of Nokia Shares to be received is: 200 x 0.275 = 55
In case of a merger of Nokia into another company (the “Nokia
Merger”), the Beneficiary will receive shares of the absorbing entity upon the Option Underlying Shares Exchange and will receive, in cash, the equivalent value of the absorbing entity shares pursuant to the Cash Exchange. The Exchange
Ratio will be adjusted as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange RatioAdjusted |
|
= |
|
Exchange Ratio |
|
x |
|
RatioMerger |
|
|
15
Theoretical example of calculation of the number of absorbing company shares to be received in exchange of
Company Shares in case of a Nokia Merger
Assumptions:
| |
• |
|
RatioMerger = 2 shares of the absorbing company for each Nokia Share |
| |
• |
|
Transfer of 200 Company Shares by the Beneficiary in January 2017 after the Nokia Merger |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange RatioAdjusted |
|
= |
|
0.55 |
|
x |
|
2 |
|
|
|
|
|
|
|
|
Exchange RatioAdjusted |
|
= |
|
1.1 |
|
|
|
|
The number of the absorbing company shares to be received is: 200 x 1.1 = 220
| 6) |
Extraordinary distribution |
| |
A. |
Extraordinary distribution by Nokia |
If Nokia carries out a distribution of a special dividend,
as defined for purposes of Nokia’s then applicable stock option plans, the Exchange Ratio shall be adjusted in accordance with the then applicable stock option plans.
| |
B. |
Extraordinary distribution by the Company |
If the Company carries out a distribution of
an amount higher than the Company’s previous year net consolidated profit including a distribution of shares of a spin-off entity, (the “Company Extraordinary Distribution”) after the end of the Public Exchange Offers period,
the Exchange Ratio shall be adjusted as follows:
|
|
|
|
|
|
|
|
|
|
|
Exchange RatioAdjusted |
|
= |
|
(Exchange Ratio x PNokia) - EDAlcatel
|
|
|
| |
|
|
PNokia |
|
|
|
|
|
| Where: |
|
“Exchange RatioAdjusted” means the number of Nokia Shares to be delivered for one Company Share after adjustment; |
|
|
|
|
“PNokia” means the price of a Nokia Share on the day preceding the Company Extraordinary Distribution; and |
|
|
|
|
“EDAlcatel” means the amount per share received by Company shareholder corresponding to the Company Extraordinary Distribution. |
Such adjustment will only apply to the extent the Beneficiary (i) has received the relevant Company
Extraordinary Distribution in respect of Option Underlying Shares resulting from Stock Options that are already exercised or (ii) has
16
benefitted from a modification of the relevant plan due to the Company Extraordinary Distribution such as the adjustment provided in case of distribution of retained earnings under article
L.225-181 of the French Commercial Code.
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of Company
Shares in case of a Company Extraordinary Distribution
Assumptions:
| |
• |
|
Transfer of 200 Company Shares by the Beneficiary in January 2017 |
| |
• |
|
EDAlcatel = €1/Company Share |
|
|
|
|
|
|
|
|
|
|
|
Exchange RatioAdjusted |
|
= |
|
(0.55 x 8) - 1
|
|
|
| |
|
|
8 |
|
|
|
|
|
|
|
|
|
Exchange RatioAdjusted |
|
= |
|
0.425 |
|
|
The number of Nokia Shares to be received is: 200 x 0.425 = 85
In the event that any other transaction specifically listed in
Article L. 225-181 of the French Commercial Code, or a stock split or a reverse stock split (i.e., share consolidation), is carried out by the Company, the Exchange Ratio shall be adjusted in order to allow the Beneficiary to obtain the same value
in Nokia Shares pursuant to the Option Underlying Shares Exchange or in cash pursuant to the Cash Exchange as the Beneficiary would have obtained assuming that the said transactions had not been carried out.
In the event that (i) a capital increase by way of incorporation of reserves (as defined in Article L. 225-181 of the French Commercial
Code), (ii) a capital increase with or without shareholders’ preferential subscription right issued, in each case, with a discount of more than 10% on the stock price (except (a) capital increases completed to finance an acquisition
where Nokia uses shares as payment, at a premium to the prevailing share price of the target company in the transaction, and (b) capital increases where equity shares or other securities are issued, offered, exercised, allotted, appropriated,
modified or granted to, or for the benefit of, employees or former employees, directors, non-executive directors or executives holding or formerly holding executive office or the personal service company of any such persons or their spouses or
relatives, in each case, of Nokia or any of its subsidiaries or any associated company or to a trustee or nominee to be held for the benefit of any such person), or (iii) a stock split or a reverse stock split (i.e., share consolidation) is
carried out by Nokia, the Exchange Ratio shall be adjusted in order to allow the Beneficiary to obtain the same value in Nokia Shares pursuant to the Option Underlying Shares Exchange or in cash pursuant to the Cash Exchange as the Beneficiary would
have obtained assuming the said transactions had not been carried out.
17
For example in case of share consolidation carried out by Nokia, the Exchange Ratio would be
adjusted as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange RatioAdjusted |
|
= |
|
Exchange Ratio |
|
x |
|
Number of Nokia Shares composing the share capital after the
consolidation |
|
|
| |
|
|
|
|
Number of Nokia Shares composing the share capital prior to the consolidation |
|
|
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of Company Shares in case of
share consolidation carried out by Nokia
Assumptions:
| |
• |
|
Transfer of 200 Company Shares by the Beneficiary in January 2017 |
| |
• |
|
Share consolidation = 10 existing Nokia Shares become 1 new Nokia Share value |
| |
• |
|
Number of shares before the consolidation = 3,678,181,540 |
| |
• |
|
Number of shares after the consolidation = 367,818,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange RatioAdjusted |
|
= |
|
0.55 |
|
x |
|
(367,818,154 / 3,678,181,540) |
|
|
|
|
|
|
|
|
|
|
|
Exchange RatioAdjusted |
|
= |
|
0.055 |
|
|
|
|
|
|
The number of Nokia Shares to be received is: 200 x 0.055 = 11
| 8) |
Value of the Company Shares and Nokia Shares |
For the calculation of any adjustment
factor as described above, the value of the Company Shares or Nokia Shares at a specific date shall be equal to the weighted average of trading prices during the three trading days preceding such date. Failing this, the value shall be determined by
an expert with an international reputation, designated by Nokia or the Company, as the case may be, which opinion shall be irrevocable.
18
Appendix 4
Lock-Up Stock Options Liquidity Agreement
13
LOCK-UP STOCK OPTIONS LIQUIDITY AGREEMENT
BETWEEN:
| |
• |
|
Nokia Corporation, a corporation incorporated under the laws of Finland, with a share capital of EUR 245,896,461.96, which registered office is located Karaportti 3, 02610 Espoo, Finland, Finland, registered with
the Trade Register of the Finnish Patents and Registration Office under number 0112038-9, duly represented for the purposes hereof (“Nokia”) |
on the first part,
| |
• |
|
Alcatel-Lucent, a société anonyme incorporated under the laws of France, with a share capital of EUR 141,210,168.20, which registered office is located 148/152, Route de la Reine – 92100
– Boulogne-Billancourt, France, registered with the Nanterre company registry under number 542.019.096, represented for the purposes hereof by Philippe Camus, duly authorized, (the “Company”) |
on the second part,
AND
| |
• |
|
The beneficiary having complied with the Acceptance Process of the Stock Options Acceleration Agreement (the “Beneficiary”, and together with Nokia and the Company, the “Parties”),
|
on the third part,
RECITALS:
In connection with the Public
Exchange Offers, Nokia has undertaken under certain conditions to propose a mechanism that would ensure the liquidity of certain Option Underlying Shares if the liquidity of the Company Shares is significantly reduced as a result of the completion
of the Public Exchange Offers (as further described below). The terms and conditions of this liquidity mechanism are set forth in this agreement.
THEREFORE, IT HAS BEEN AGREED AS FOLLOWS:
| 1. |
Acceptance of the Lock-Up Stock Options Liquidity Agreement |
The terms and
conditions of this liquidity agreement (the “Lock-Up Stock Options Liquidity Agreement”) shall be applicable to and binding on the Beneficiary, Nokia and the Company, provided that (i) Nokia reaches the Success Threshold
following the Initial Offering Period and (ii) the resolutions required to implement the Public Exchange Offers are approved by Nokia’s shareholders.
1
The definitions of the terms contained in this Lock-Up Stock Options
Liquidity Agreement are set forth in Appendix 1 to this Lock-Up Stock Options Liquidity Agreement.
| 3. |
Scope of the Lock-Up Stock Options Liquidity Agreement |
This Lock-Up Stock
Options Liquidity Agreement is applicable to the Option Underlying Shares delivered to the Beneficiary upon exercise of the Stock Options granted to the Beneficiary pursuant to any of the plans listed in Appendix 1.
| 4. |
Reduced Liquidity of Company Shares |
A reduced liquidity (a “Reduced
Liquidity”) of the Company Shares held by the Beneficiary shall occur if at least one of these conditions applies:
| |
• |
|
The Company Shares are no longer listed on a regulated stock market within the meaning of article L. 421-1 of the French monetary and financial code (Code monétaire et financier); |
| |
• |
|
Nokia directly or indirectly holds at least 85% of the Company Shares; or |
| |
• |
|
the average daily volume of the Company Shares traded on Euronext Paris calculated on the last consecutive twenty (20) trading days preceding the relevant date falls below five million (5,000,000) Company
Shares. |
The Company shall notify to the Beneficiary and Nokia by email during the Exercise Period (as defined below) of the
occurrence of any Reduced Liquidity of the Company Shares within 5 business days of such occurrence (the “Reduced Liquidity Notification”). The Reduced Liquidity Notification shall include an example of an Exchange Ratio calculation
determined based on the assumption that the Option Underlying Shares Exchange occurred on the business day preceding the date of the Reduced Liquidity Notification, and shall detail the adjustments, if any, to be applied to the Exchange Ratio
pursuant to this Lock-Up Stock Options Liquidity Agreement. Unless a claim is made in accordance with the provisions of Article 7, the Exchange Ratio calculation and the adjustments (if any) as notified shall be final and binding except if an
updated Reduced Liquidity Notification is made before the Option Underlying Shares Exchange, in accordance with Article 6.2 of this Lock-Up Stock Options Liquidity Agreement and the Appendix 3 hereto, in which case such updated Reduced Liquidity
Notification will replace and supersede the previous Reduced Liquidity Notification.
| 5. |
Option Underlying Shares Exchange and Cash Exchange |
In the event the Beneficiary
exercises any of his/her Stock Options during a period of sixty (60) calendar days as from the expiry of the applicable Lock-Up Period (the “Exercise Period”), all the Options Underlying Shares resulting from the exercise of
any Stock Option being within the scope of Article 3 above shall be automatically
2
exchanged by Nokia for Nokia Shares (the “Option Underlying Shares Exchange”) on the fifth (5th) business day following
the later of (i) the exercise date of these relevant Stock Options and (ii) a Reduced Liquidity Notification. In the event the Reduced Liquidity occurs in the five (5) last business days of the 60-day period referred to above, the
Exercise Period shall be extended by five (5) business days.
The Exchange Ratio of the Option Underlying Shares transferred by the
Beneficiary to Nokia pursuant to the Option Underlying Shares Exchange shall be determined by Nokia in accordance with the provisions of Article 6 below. In the event the application of the Exchange Ratio would entitle the Beneficiary to
receive Nokia fractional rights, he/she would receive in cash (in EUR, rounded up to the closest cent; 0.5 cent shall be rounded up to 1 cent), as an indemnity for those fractional rights, the relevant fraction of the Nokia Share price as of the
Option Underlying Shares Exchange Date.
Alternatively to the Option Underlying Shares Exchange, Nokia may choose to implement a payment
in cash in respect of the Option underlying Shares, in its sole discretion (the “Cash Exchange”). The Cash Exchange would be applicable under the same conditions and requirements as the Option Underlying Shares Exchange except that
the consideration for the exchange would not be Nokia Shares but a cash consideration equal to the value of the Nokia Shares the Beneficiary would have been entitled to receive by exchanging his/her Option Underlying Shares for Nokia Shares
according to the Exchange Ratio. Such Nokia Shares value shall be based on the market value of a Nokia Share on the NASDAQ OMX Helsinki Ltd. at the closing of the last trading day preceding the Cash Exchange.
The Company and Nokia will have the option to proceed to the payments relating to the Cash Exchange and to the fractional rights
indemnification through the Beneficiary’s next payroll (where relevant and to the extent legally permitted) and in any case, as soon as administratively practicable, notwithstanding the 5-day period allocated for the completion of the Option
Underlying Shares Exchange.
| |
6.1 |
Exchange Ratio without adjustment |
Nokia shall deliver, for the Company Shares exchanged under
Article 5 above, a number of new and/or existing (at Nokia’s sole discretion) Nokia Shares calculated as follows and then rounded down to the next inferior whole number of Nokia Shares:
NNS = Exchange Ratio x NCS
|
|
|
| Where: |
|
“NNS” means the total number of Nokia Shares (rounded down to the next inferior whole number) to be delivered to the Beneficiary in exchange for his/her Company Shares; |
3
“Exchange Ratio” means the number of Nokia Shares to be delivered for one
Company Share in accordance with the terms of the Public Exchange Offers, i.e. 0.55; and
“NCS” means the
number of Company Shares to be exchanged under this Lock-Up Stock Options Liquidity Agreement.
Theoretical example of calculation of the number of
Nokia Shares to be received in exchange of Company Shares pursuant to this Lock-Up Stock Options Liquidity Agreement
Assumption: Transfer
of 200 Company Shares by the Beneficiary in January 2017 without any adjustment.
NNS = 0.55 x 200
NNS = 110
| |
6.2 |
Adjusted Exchange Ratio |
Upon certain financial transactions carried out by Nokia or the
Company affecting the value of their shares, the Exchange Ratio will be adjusted as described in Appendix 3.
For the avoidance of doubt,
no adjustment will be made to the Exchange Ratio in the event of issuance of new shares by the Company or Nokia in relation to or as a result of the acceleration mechanisms mentioned herein, the grant of Company Shares in replacement of the 2014
stock options plans, the grant of Company performance shares in 2015 or the performance of this Lock-Up Stock Options Liquidity Agreement.
Any claim of the Beneficiary with respect to the Exchange Ratio shall be
delivered by registered letter (with acknowledgement of the receipt) from the Beneficiary to Nokia, with a copy addressed to the Company, within five (5) business days as from the date the Company sent the Reduced Liquidity Notification to the
Beneficiary in accordance with Article 4. The reasons for any claim shall be detailed precisely in such claim.
Nokia and the Beneficiary
shall agree on an Exchange Ratio within five (5) business days as from the receipt by Nokia of the Beneficiary’s notification letter. If, after such period, Nokia and the Beneficiary have not been able to reach an agreement, the procedure
provided for in Article 8 below shall apply.
4
| 8. |
Third-Party Arbitrator |
In case Nokia and the Beneficiary disagree on the
Exchange Ratio, any person jointly selected by the Parties within ten (10) business days following the delivery of a claim made in accordance with Article 7 or, failing to do so within such timeframe, any other person appointed by the president
of the Paris Tribunal de Grande Instance on the application of the most diligent Party, acting as third-party arbitrator within the meaning of article 1592 of the French Civil Code (the “Third-Party Arbitrator”) shall
determine the Exchange Ratio, within twenty (20) business days as from the date it receives a registered letter with acknowledgment of receipt pursuant to which it has been appointed jointly by Nokia and the Beneficiary or by the president of
the Paris Tribunal de Grande Instance.
In case this request is sent by the Beneficiary, the latter undertakes to send on the same
day a copy of such letter to Nokia and the Company.
For the purpose of the performance of the Third-Party Arbitrator’s assignment,
the Company, Nokia and the Beneficiary undertake to provide it with any relevant information relating to the adjustment provided for in Article 6.2 of this Lock-Up Stock Options Liquidity Agreement, that would be necessary for the Third Party
Arbitrator to undertake its mission.
The Third-Party Arbitrator may request any such relevant and necessary information from the Company,
Nokia and the Beneficiary.
Nokia, the Company and the Beneficiary shall be informed of the Third-Party Arbitrator’s conclusions as
promptly as possible after completion of Third-Party Arbitrator’s assignment and no later than on the last day of the above-mentioned 20 business day period.
In the event the Third-Party Arbitrator fails to determine the Exchange Ratio within twenty (20) business days following the notification
of its appointment, another Third-Party Arbitrator shall be appointed in the conditions set forth in this Article 8 to determine the Exchange Ratio within twenty (20) business days following the notification of its appointment and the
previously appointed Third-Party Arbitrator shall be automatically revoked upon the appointment of the new Third-Party Arbitrator, and so on until a Third-Party Arbitrator effectively determines the Exchange Ratio.
Except in case of a manifest error (erreur manifeste), as interpreted by French courts, the Third-Party Arbitrator’s conclusions
shall be final and binding, and therefore non-appealable, upon Nokia, the Company and the Beneficiary.
Any fees, charges and
disbursements incurred for the purpose of the completion of the Third-Party Arbitrator’s assignment shall be borne by Nokia if the Third-Party Arbitrator gives right to the Beneficiary’s claim in full, and otherwise by the Beneficiary.
5
| 9. |
Beneficiary’s undertakings |
The Beneficiary hereby cumulatively undertakes
vis-a-vis Nokia and the Company (except as provided for otherwise in writing by Nokia):
| |
• |
|
not to exercise his/her Stock Options before the end of the Lock-Up Period; |
| |
• |
|
not to sell, transfer, convey, alienate, mortgage, pledge or encumber his/her Option Underlying Shares or to dispose of them other than in accordance with this Lock-Up Stock Options Liquidity Agreement, or to Nokia,
until the end of the Exercise Period or, if a Reduced Liquidity Notification is made to the Beneficiary during such Exchange Period, until the Exchange Date; |
| |
• |
|
to hold in pure registered form his/her Option Underlying Shares until the end of the Exercise Period or, if a Reduced Liquidity Notification is made to the Beneficiary during such Exchange Period, until the Exchange
Date; |
| |
• |
|
not to revoke the power of attorney referred to in Article 16 below; and |
| |
• |
|
not to exercise his/her Stock Options if and for so long as he/she holds insider information regarding Nokia and/ or the Company. |
| 10. |
Exercise of the Stock Options |
If the Beneficiary does not exercise his/her Stock
Options prior to the end of the Exercise Period, the Beneficiary accepts that his/her Stock Options will be irrevocably void and will forfeit and no longer be exercisable.
| 11. |
Exchange of the Company Shares pursuant to the Lock-Up Stock Options Liquidity Agreement |
Any Company Share to be delivered by the Beneficiary shall be transferred to Nokia or to any third party designated by Nokia with full
ownership including all of the rights pertaining thereto as of the effective date of transfer, free from any privilege, rights, charges, restrictions and any third party rights of any nature whatsoever.
Except as otherwise provided in this Lock-Up Stock Options
Liquidity Agreement, any correspondence to be addressed to the Beneficiary in relation to this Lock-Up Stock Options Liquidity Agreement shall be sent by email to the email address provided by the Company to Nokia. The Beneficiary hereby consents to
all disclosure and sharing of personal information relating to such Beneficiary if they are necessary or advisable for the performance of this Lock-Up Stock Options Liquidity Agreement (including, without limitation, his/her name and email address).
The Beneficiary will be entitled to exercise his or her rights pursuant to applicable data privacy laws and regulations, including French Law n° 78-17 of January 6, 1978.
6
Except as otherwise provided in this Lock-Up Stock Options Liquidity Agreement, any
correspondence to be addressed to Nokia or to the Company in relation to the Lock-Up Stock Options Liquidity Agreement shall be sent by registered letter with acknowledgment of receipt at the following address:
Nokia Corporation
Human
Resources Department
Head of Compensation
Karaportti 3, P.O. Box 226
FI-00045 Nokia Group
Finland
Alcatel-Lucent
Direction des Ressources Humaines
148/152, Route de la Reine
92100
Boulogne-Billancourt
France
Neither Party may transfer or assign the benefit of all or any of its
rights or obligations under the Lock-Up Stock Options Liquidity Agreement, directly or indirectly and in any manner whatsoever, except (i) in the case of the Beneficiary, as a result of the death of the Beneficiary, in which case the Company
and Nokia shall be promptly advised thereof and provided that the Beneficiary’s successor shall be bound by the terms of this Lock-Up Stock Options Liquidity Agreement, to the extent not expressly prohibited under applicable law, and
(ii) in the case of Nokia, to an affiliate or to a financial institution appointed by Nokia or any of its affiliates.
| 14. |
Term of this Lock-Up Stock Options Liquidity Agreement |
This Lock-Up Stock
Options Liquidity Agreement shall be effective as of the date of its execution by all Parties (and in the case of the Beneficiary, as of the date he/she has completed the Acceptance Process of the Stock Options Acceleration Agreement) and shall be
valid for a period of ten (10) years from that date, without prejudice to the duration of the relevant Stock Options plans as described in such plans rules.
In the event that all of the Option Underlying Shares held by the Beneficiary are exchanged by the Beneficiary in compliance with this Lock-Up
Stock Options Liquidity Agreement, and that such Beneficiary no longer holds any Stock Option, the reciprocal undertakings of the Parties with regard to the said transferred Company Shares would expire.
7
| 15. |
Governing law and competent jurisdiction |
This Lock-Up Stock Options Liquidity
Agreement is governed by the laws of France, without regard to principles of conflicts of law. All disputes arising out of or in connection with this Lock-Up Stock Options Liquidity Agreement shall be submitted to the competent courts located within
the jurisdiction of the Versailles Court of Appeals.
The power of attorney granted hereby by the Beneficiary to the
Company in relation with this Lock-Up Stock Options Liquidity Agreement aims at ensuring the proper completion of the obligations of the Beneficiary and is irrevocable. This power of attorney is deemed to be a power of attorney entered into in the
interest of all the Parties (mandat d’intérêt commun).
The Beneficiary irrevocably and unconditionally grants a
power of attorney to the Company for the purpose of, in the name and on behalf of the Beneficiary, sending or receiving any notification, signing or receiving any form and carrying out any required formality for the completion of the Exchanges set
out in the Lock-Up Stock Options Liquidity Agreement and, in general, making any statement, delivering any certificate, signing any agreement, deed, or other document and generally taking, in the name and on behalf of the Beneficiary, any action
required for the completion of the Exchanges set out in the Lock-Up Stock Options Liquidity Agreement, in compliance with the choices made or deemed made by the Beneficiary upon acceptance of the Lock-Up Stock Options Liquidity Agreement.
The Beneficiary also undertakes to approve any action taken by the Company pursuant to the said powers of attorney in compliance with the
choices he/she has made, subject to the above limitations.
The Beneficiary grants a power of attorney to the Company to instruct the
Administrator to, and the Company hereby undertakes to instruct the Administrator to, carry out the Option Underlying Shares Exchange or, as the case may be, the Cash Exchange, as well as any formality required for the completion of the Exchanges,
except if a claim has been delivered in accordance with Article 7 and specifying the nature and detailing the reasons of such claim, in which case the Option Underlying Shares Exchange Date or the Cash Exchange Date shall occur five
(5) business days as from the date on which the Beneficiary and Nokia will have reached an agreement on the Exchange Ratio or, as the case may be, the date on which the Third-Party Arbitrator will have rendered his conclusions.
Subject to the provisions of Articles 13 and 16, no third party to
this Lock-Up Stock Options Liquidity Agreement shall have any rights or obligations on the basis of, or shall rely on the terms and conditions of, this Lock-Up Stock Options Liquidity Agreement.
8
Except as otherwise provided herein, each Party shall pay all the costs
and expenses (including, but not limited to, financial advisory, accounting, legal and other professional or consulting fees and expenses) incurred by that Party or owed by it under applicable law, in connection with this Lock-Up Stock Options
Liquidity Agreement.
In particular, the Beneficiary would be subject to a Finnish transfer tax of 1.6% of the value of the Nokia treasury
shares if it receives Nokia treasury shares in exchange for its Option Underlying Shares.
| 19. |
Acceptance – Specific Performance |
If the Beneficiary complies with the
Acceptance Process of the Stock Options Acceleration Agreement, the Beneficiary irrevocably undertakes vis-a-vis Nokia to transfer to Nokia (and accept that the required instructions will be given to the Administrator) his/her Company Shares
resulting from the exercise of his/her Stock Options during the Exercise Period and Nokia irrevocably undertakes vis-a-vis the Beneficiary to acquire such Company Shares in the conditions described in this Lock-Up Stock Options Liquidity Agreement.
In the event of breach, in addition to all other remedies which the non-breaching Party may have under applicable law, the non-breaching
Party shall be entitled to specific performance (exécution forcée) and injunctive or equivalent relief in accordance with applicable law, including article 1221 of the draft order of the French Ministry of Justice (if applicable
on the relevant date). In addition, each of the Parties agree to waive the benefit of article 1142 of the French Civil Code in the event of breach.
9
Appendix 1 to the Lock-Up Stock Options Liquidity Agreement
Definitions
The terms and expressions
below shall have the following meanings:
|
|
|
| “Acceptance Process” |
|
As defined in the Stock Options Acceleration Agreement. |
|
|
| “Administrator” |
|
Société Générale Securities Services. |
|
|
| “AMF General Regulation” |
|
The general regulation of the Autorité des marchés financiers, the French stock exchange regulator, which is available in French and English at www.amf-france.org. |
|
|
| “Article” |
|
Unless specified otherwise herein, means the Article of this Lock-Up Stock Options Liquidity Agreement. |
|
|
| “Beneficiary” |
|
The person having become a party to this Lock-Up Stock Options Liquidity Agreement on the date indicated hereof. |
|
|
| “business day” |
|
A day other than Saturday or Sunday where the banks are open for business in Finland. |
|
|
| “Cash Exchange” |
|
As defined in Article 5 of this Lock-Up Stock Options Liquidity Agreement. |
|
|
| “Cash Exchange Date” |
|
The date on which the Cash Exchange occurs. |
|
|
| “Company Extraordinary Distribution” |
|
As defined in Appendix 3 to this Lock-Up Stock Options Liquidity Agreement. |
|
|
| “Company Merger” |
|
As defined in Appendix 3 to this Lock-Up Stock Options Liquidity Agreement. |
|
|
| “Company Shares” |
|
Ordinary shares issued by the Company and the American depository shares issued by the Company. |
|
|
| “Exchange” |
|
Means the Option Underlying Share Exchange or the Cash Exchange. |
|
|
| “Exchange Date” |
|
Refers to the date on which the Exchange occurs. |
|
|
| “Exchange Ratio” |
|
As defined in Article 6 of this Lock-Up Stock Options Liquidity Agreement. |
10
|
|
|
|
|
| “Exercise Period” |
|
As defined in Article 5 of this Lock-Up Stock Options Liquidity Agreement. |
|
|
| “Initial Public Offering Period” |
|
Refers to the first offering period, as referred to in Article 232-2 of the AMF General Regulation, the result of which will determine whether a Subsequent Offering Period will be opened or not. |
|
|
| “Lock-Up Period” |
|
The date on which the Stock Options relating to the plans listed in Appendix 2 become vested and exercisable, as indicated in Appendix 2 to this Lock-Up Stock Options Liquidity Agreement. |
|
|
| “Lock-Up Stock Options Liquidity Agreement” |
|
This agreement executed by Nokia, the Company and the Beneficiary, including its appendices. |
|
|
| “Nokia Merger” |
|
As defined in Appendix 3 to this Lock-Up Stock Options Liquidity Agreement. |
|
|
| “Nokia Shares” |
|
Ordinary shares issued by Nokia and the American depository shares issued by Nokia. |
|
|
| “Option Underlying Shares” |
|
Company Shares that have been or will be delivered by the Company to the Beneficiary in connection with his/her Stock Options. |
|
|
| “Option Underlying Shares Exchange” |
|
As defined in Article 5 of this Lock-Up Stock Options Liquidity Agreement. |
|
|
| “Option Underlying Shares Exchange Date” |
|
The date on which the Option Underlying Shares Exchange occurs. |
|
|
| “Public Exchange Offers” |
|
Public exchange offers in France and in the United States initiated by Nokia on the securities of the Company, as approved by the Autorité des Marchés Financiers in France and by the Securities and Exchange
Commission in the United States. |
|
|
| “Reduced Liquidity” |
|
As defined in Article 4 of this Lock-Up Stock Options Liquidity Agreement. |
|
|
| “Reduced Liquidity Notification” |
|
As defined in Article 4 of this Lock-Up Stock Options Liquidity Agreement. |
|
|
| “Stock Options” |
|
Any option to subscribe for or acquire Company Shares granted by the Company’s board of directors to a Beneficiary pursuant to the Share Plans. |
11
|
|
|
|
|
| “Stock Options Acceleration Agreement” |
|
The Stock Options Acceleration Agreement this Underwater Stock Options Liquidity Agreement is appended to, entered into by and between the Company, Nokia (only for purposes of Article 5 thereto and as further described
therein). |
|
|
| “Success Threshold” |
|
Refers to the (i) ownership by Nokia, on the date of the settlement of the initial offering period of the Public Exchange Offers, of more than 50% of the shares of Alcatel Lucent on a fully diluted basis, in accordance with article
231-9-II of the AMF General Regulation or (ii) satisfaction, at Nokia’s sole discretion on the date of publication of the final results of the initial offering period of the Public Exchange Offers, that such ownership condition will be met, or
(iii) the express decision by Nokia’s board of directors, on or prior to the date of publication of the final results of the initial offering period of the Public Exchange Offers, to waive such voluntary minimum threshold and to establish the
success threshold as described in article 231-9-I of the AMF General Regulation, pursuant to which any public offer at the close of which the offeror does not hold a number of shares representing a fraction of more than 50% of the share capital or
voting rights, shall be null and void. |
|
|
| “Third-Party Arbitrator” |
|
As defined in Article 8 of this Lock-Up Stock Options Liquidity Agreement. |
12
Appendix 2 to the Lock-Up Stock Options Liquidity Agreement
Plans Subject to a Lock-Up Period
|
|
|
|
|
| Plan n° |
|
Plan |
|
End date of the Lock-Up Period |
| A0713COBE2 (Only if the Beneficiary is subject to a tax restriction period pursuant to this plan) |
|
Stock options plan dated July 12, 2013. |
|
July 12, 2017 |
|
|
|
| A0812NHFR2 |
|
Stock options plan dated August 13, 2012. |
|
August 13, 2016 |
|
|
|
| A0312COFR2 A0312CPFR2
A0312NHFR2 |
|
Stock options plan dated March 14, 2012. |
|
March 14, 2016 |
13
Appendix 3 to the Lock-Up Stock Options Liquidity Agreement
Exchange Ratio Adjustments
In case of a merger of the Company into another company (the
“Company Merger”), the Option Underlying Shares Exchange and Cash Exchange will apply with respect to the shares of the absorbing entity received by the Beneficiary in exchange for Company Shares resulting from Stock Options which
are within the scope of Article 3 above. The Exchange Ratio will be adjusted as follows:
|
|
|
|
|
|
|
|
|
| Exchange RatioAdjusted |
|
= |
|
Exchange Ratio |
|
x |
|
1 |
| |
|
|
|
RatioMerger |
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of the absorbing company
shares in case of a Company Merger
Assumptions:
| |
• |
|
RatioMerger = 2 shares of the absorbing company for each Company Share |
| |
• |
|
Transfer of 200 shares of the absorbing company by the Beneficiary in January 2017 after the Company Merger |
Exchange RatioAdjusted = 0.55
x 1/2
Exchange RatioAdjusted
= 0.275
The number of Nokia Shares to be received is: 200 x 0.275 = 55
In case of a merger of Nokia into another company (the “Nokia
Merger”), the Beneficiary will receive shares of the absorbing entity upon the Option Underlying Shares Exchange and will receive, in cash, the equivalent value of the absorbing entity shares pursuant to the Cash Exchange. The Exchange
Ratio will be adjusted as follows:
Exchange RatioAdjusted
= Exchange Ratio x RatioMerger
14
Theoretical example of calculation of the number of absorbing company shares to be received in exchange of
Company Shares in case of a Nokia Merger
Assumptions:
| |
• |
|
RatioMerger = 2 shares of the absorbing company for each Nokia Share |
| |
• |
|
Transfer of 200 Company Shares by the Beneficiary in January 2017 after the Nokia Merger |
Exchange RatioAdjusted = 0.55
x 2
Exchange RatioAdjusted
= 1.1
The number of the absorbing company shares to be received is: 200 x 1.1 = 220
| 2) |
Extraordinary distribution |
| |
A. |
Extraordinary distribution by Nokia |
If Nokia carries out a distribution of a special dividend,
as defined for purposes of Nokia’s then applicable stock option plans, the Exchange Ratio shall be adjusted in accordance with the then applicable stock option plans.
| |
B. |
Extraordinary distribution by the Company |
If the Company carries out a distribution of an
amount higher than the Company’s previous year net consolidated profit including a distribution of shares of a spin-off entity, (the “Company Extraordinary Distribution”) after the end of the Public Exchange Offers period, the
Exchange Ratio shall be adjusted as follows:
|
|
|
|
|
| Exchange RatioAdjusted |
|
= |
|
(Exchange Ratio x PNokia) - EDAlcatel |
| |
|
PNokia |
|
|
|
| Where: |
|
“Exchange RatioAdjusted” means the number of Nokia Shares to be delivered for one Company Share after adjustment; |
“PNokia” means the price of a Nokia
Share on the day preceding the Company Extraordinary Distribution; and
“EDAlcatel” means the amount per share received by Company shareholder
corresponding to the Company Extraordinary Distribution.
Such adjustment will only apply to the extent the Beneficiary (i) has
received the relevant Company Extraordinary Distribution in respect of Option Underlying Shares resulting from Stock Options that are already exercised or (ii) has
15
benefitted from a modification of the relevant plan due to the Company Extraordinary Distribution such as the adjustment provided in case of distribution of retained earnings under article
L.225-181 of the French Commercial Code.
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of Company
Shares in case of a Company Extraordinary Distribution
Assumptions:
| |
• |
|
Transfer of 200 Company Shares by the Beneficiary in January 2017 |
| |
• |
|
EDAlcatel = €1/Company Share |
|
|
|
|
|
|
|
| Exchange RatioAdjusted |
|
= |
|
(0.55 x 8) - 1 |
|
|
| |
|
8 |
|
|
|
|
|
|
| Exchange RatioAdjusted |
|
= |
|
0.425 |
|
|
The number of Nokia Shares to be received is: 200 x 0.425 = 85
In the event that any other transaction specifically listed in
Article L. 225-181 of the French Commercial Code, or a stock split or a reverse stock split (i.e., share consolidation), is carried out by the Company, the Exchange Ratio shall be adjusted in order to allow the Beneficiary to obtain the same value
in Nokia Shares pursuant to the Option Underlying Shares Exchange or in cash pursuant to the Cash Exchange as the Beneficiary would have obtained assuming that the said transactions had not been carried out.
In the event that (i) a capital increase by way of incorporation of reserves (as defined in Article L. 225-181 of the French Commercial
Code), (ii) a capital increase with or without shareholders’ preferential subscription right issued, in each case, with a discount of more than 10% on the stock price (except (a) capital increases completed to finance an acquisition
where Nokia uses shares as payment, at a premium to the prevailing share price of the target company in the transaction, and (b) capital increases where equity shares or other securities are issued, offered, exercised, allotted, appropriated,
modified or granted to, or for the benefit of, employees or former employees, directors, non-executive directors or executives holding or formerly holding executive office or the personal service company of any such persons or their spouses or
relatives, in each case, of Nokia or any of its subsidiaries or any associated company or to a trustee or nominee to be held for the benefit of any such person), or (iii) a stock split or a reverse stock split (i.e., share consolidation) is
carried out by Nokia, the Exchange Ratio shall be adjusted in order to allow the Beneficiary to obtain the same value in Nokia Shares pursuant to the Option Underlying Shares Exchange or in cash pursuant to the Cash Exchange as the Beneficiary would
have obtained assuming the said transactions had not been carried out.
16
For example in case of share consolidation carried out by Nokia, the Exchange Ratio would be
adjusted as follows:
|
|
|
|
|
|
|
|
|
| Exchange RatioAdjusted |
|
= |
|
Exchange Ratio |
|
x |
|
Number of Nokia Shares composing the share capital after the consolidation |
| |
|
|
|
Number of Nokia Shares composing the share capital prior to the consolidation |
Theoretical example of calculation of the number of Nokia Shares to be received in exchange of Company Shares in case of
share consolidation carried out by Nokia
Assumptions:
| |
• |
|
Transfer of 200 Company Shares by the Beneficiary in January 2017 |
| |
• |
|
Share consolidation = 10 existing Nokia Shares become 1 new Nokia Share value |
| |
• |
|
Number of shares before the consolidation = 3,678,181,540 |
| |
• |
|
Number of shares after the consolidation = 367,818,154 |
Exchange RatioAdjusted = 0.55 x (367,818,154 / 3,678,181,540)
Exchange RatioAdjusted = 0.055
The number of Nokia Shares to be received is: 200 x 0.055 = 11
| 4) |
Value of the Company Shares and Nokia Shares |
For the calculation of any adjustment
factor as described above, the value of the Company Shares or Nokia Shares at a specific date shall be equal to the weighted average of trading prices during the three trading days preceding such date. Failing this, the value shall be determined by
an expert with an international reputation, designated by Nokia or the Company, as the case may be, which opinion shall be irrevocable.
17
Exhibit(e)(8)
PERFORMANCE SHARES ACCELERATION AGREEMENT
BETWEEN:
| |
• |
|
Alcatel-Lucent, a société anonyme incorporated under the laws of France, with a share capital of EUR 141,210,168.20, which registered office is located 148/152, Route de
la Reine – 92100 – Boulogne-Billancourt, France, registered with the Nanterre company registry under number 542.019.096, represented for the purposes hereof by Philippe Camus, duly authorized, (the “Company”)
|
on the first part,
AND
| |
• |
|
The beneficiary having complied with the Acceptance Process (the “Beneficiary”, and together with the Company and the Administrator, the “Parties”), |
on the second part,
RECITALS:
In connection with the Public
Exchange Offers, the Company has undertaken to propose an acceleration mechanism that would enable the Beneficiary to monetize his/her Performance Shares for cash during the Public Exchange Offers. The terms and conditions of such acceleration
mechanism are set forth in this agreement.
THEREFORE, IT HAS BEEN AGREED AS FOLLOWS:
| 1. |
Acceptance of the Performance Shares Acceleration Agreement |
The terms and
conditions of this performance shares acceleration agreement (the “Performance Shares Acceleration Agreement”) shall be applicable and binding to the Beneficiary and the Company provided that the Beneficiary complies with the
Acceptance Process at any time between the first day and the last day of the Initial Offering Period.
The definitions of the terms contained in this Performance Shares
Acceleration Agreement are set forth in Appendix 1 to this Performance Shares Acceleration Agreement.
| 3. |
Scope of the Performance Shares Acceleration Agreement |
This Performance Shares
Acceleration Agreement is applicable to the Performance Shares granted to the Beneficiary pursuant to any of the plans listed in Appendix 2.
| 4. |
Acceleration of the Performance Shares |
Subject to the Conditions Precedent and
the Condition Subsequent, (i) the Beneficiary hereby waives his/her rights under existing Performance Shares which are within the scope of Article 3 above; and (ii) in consideration for such waiver, the Company shall deliver Company Shares
to the Beneficiary, without any presence or performance conditions, (the “Acceleration”) on a date determined by the Company:
| i. |
between the day of publication of the final results of Public Exchange Offers following the Initial Offering Period (excluded) and the second French trading day preceding the last day of the Subsequent Offering Period
(included), provided that the Conditions Precedent are fulfilled and Nokia holds less than 95% of the Company’s share capital or voting rights; or |
| ii. |
between the twentieth (20th) day preceding the Squeeze-Out (included) and the last day preceding the Squeeze-Out (included) provided that the Conditions
Precedent are fulfilled and Nokia comes to hold 95% or more of the Company’s share capital and voting rights following the Initial Offering Period. |
(the “Acceleration Date”).
In
the event that any of the Conditions Precedent would not be fulfilled, this Performance Shares Acceleration Agreement would not become valid, the Beneficiary’s rights under existing Performance Shares will not be waived and the presence and
performance conditions and all other conditions applying to the Beneficiary’s Performance Shares prior to the date hereof would remain unchanged.
The number of Company Shares to be delivered to the Beneficiary shall be equal to the difference between (i) the total number of
Performance Shares which would be granted to the Beneficiary if all presence and performance conditions were fulfilled, provided however that in respect of conditions relating to periods ending prior to the last day of the Initial Offering Period,
the Beneficiary will be entitled to receive Company Shares to the extent such conditions have been fulfilled in accordance with their terms and (ii) in the jurisdictions where applicable, the number of Company Shares to be sold in order to
cover the relevant local withholding taxes.
2
The Beneficiary hereby gives irrevocable and unconditional mandate to the Company to instruct the
Administrator to, and the Company hereby undertakes to instruct the Administrator, in his/her name and on his/her behalf:
| |
• |
|
sell his/her Company Shares received pursuant to the waiver of his/her rights under existing Performance Shares at the Sale Price during the Sale Period; and |
| |
• |
|
transfer to the Beneficiary the Sale Price resulting from the sale of Company Shares reduced by the trading fees and, in the jurisdictions where applicable, by the relevant local withholding taxes or charges.
|
The Beneficiary undertakes not to, or not to attempt to, sell his/her Company Shares received pursuant to the waiver of
his/her rights under existing Performance Shares otherwise as provided in this Performance Shares Acceleration Agreement.
In the
event the Beneficiary would not comply in full with his/her obligations under the Performance Shares Acceleration Agreement, in particular his/her commitments under this Article 4 (the “Condition Subsequent”), the Acceleration would
be automatically revoked and any delivery of Company Shares to the Beneficiary would be declared null and void, without any obligation or liability of the other Parties towards the Beneficiary, in accordance with the provision of article 1183 of the
French Civil Code. The Condition Subsequent is stipulated in the interest of the Company and therefore may be waived by the Company only.
Subject to applicable local laws and regulations, the amounts received by the Beneficiary under this Performance Shares Acceleration Agreement
will not be taken into account for the computation of his/her severance payment, if any.
Neither Party may transfer or assign the benefit of all or any of its
rights or obligations under this Performance Shares Acceleration Agreement, directly or indirectly and in any manner whatsoever, except as a result of the death of the Beneficiary, in which case the Company shall be promptly advised thereof and
provided that the Beneficiary’s successor shall be bound by the terms of this Performance Shares Acceleration Agreement, to the extent not expressly prohibited under applicable law.
| 6. |
Term of this Performance Shares Acceleration Agreement |
This Performance Shares
Acceleration Agreement shall be effective as of the date of its execution by all Parties (and in the case of the Beneficiary as of the date it has completed the Acceptance Process as set out in Article 10) and shall be valid for a period of ten
(10) years from that date.
In the event that all of the Company Shares resulting from the Acceleration are sold prior to the date of
settlement of the Public Exchange Offers (including pursuant to any Subsequent Offering Period) or, as the case may be, the Squeeze-Out, the reciprocal undertakings of the Parties hereunder with regard to the said transferred Company Shares would
expire.
3
Except as otherwise provided herein, each Party shall pay all the costs
and expenses (including, but not limited to, financial advisory, accounting, legal and other professional or consulting fees and expenses) incurred by that Party or owed by it under applicable law, in connection with this Performance Shares
Acceleration Agreement.
| 8. |
Governing law and competent jurisdiction |
This Performance Shares Acceleration
Agreement is governed by the laws of France, without regard to principles of conflicts of law. All disputes arising out of or in connection with this Performance Shares Acceleration Agreement shall be submitted to the competent courts located within
the jurisdiction of the Versailles Court of Appeals.
The power of attorney granted hereby by the Beneficiary
to the Company to give instructions to the Administrator in relation with the Performance Shares Acceleration Agreement aims at ensuring the proper completion of the obligations of the Beneficiary and is irrevocable. This power of attorney is deemed
to be a power of attorney entered into in the interests of all the Parties (mandat d’intérêt commun).
The
Beneficiary irrevocably and unconditionally grants a power of attorney to the Company to give instruction to the Administrator for the purpose of, in the name and on behalf of the Beneficiary, (i) sending or receiving any notification, signing
or receiving any form and carrying out any required formality for the completion of his/her obligations under this Performance Shares Acceleration Agreement and, in general, (ii) making any statement, delivering any certificate, signing any
agreement, deed, or other document and (iii) taking, in the name and on behalf of the Beneficiary, any action required for the completion of his/her obligations under this Performance Shares Acceleration Agreement, in compliance with the
choices made or deemed made by the Beneficiary upon acceptance of the Performance Shares Acceleration Agreement.
The Beneficiary also
undertakes to approve any action taken by the Administrator on the instruction of the Company pursuant to the said powers of attorney in compliance with the choices he/she has made, subject to the above limitations.
| 10. |
Acceptance – Specific Performance |
If the Beneficiary wishes to enter
into this Performance Shares Acceleration Agreement, he/she shall comply with the acceptance process on the website https://alcatel-lucent.assets.voxaly.com/ by the last day of the Initial Offering Period (the “Acceptance
Process”).
Should the Beneficiary not enter into this Performance Shares Acceleration Agreement in the manner and by the
date referred to above, the Beneficiary shall be deemed to have finally and irrevocably waived and forfeited his/her right to enter into this Performance Shares Acceleration Agreement.
4
The Beneficiary is the only person who may decide to enter (or not) into this Performance Shares
Acceleration Agreement. In this respect, the Beneficiary is invited to consult his/her own specialized counsel if he/she wishes to obtain further information as to his/her rights and obligations hereunder.
In the event of breach, in addition to all other remedies which the non-breaching Party may have under applicable law, the non-breaching Party
shall be entitled to specific performance (exécution forcée) and injunctive or equivalent relief in accordance with applicable law, including article 1221 of the draft order of the French Ministry of Justice (if applicable on
the relevant date). In addition, each of the parties agree to waive the benefit of article 1142 of the French Civil Code in the event of breach.
This Agreement is made in electronic form according to the provisions of article 1325 of the French Civil code.
[The rest of the page has been left blank intentionally]
5
|
| The Company |
| Represented by: Philippe Camus |
[Signature page for the Performance Shares Acceleration Agreement]
6
Appendix 1
Definitions
The terms and expressions
below shall have the following meanings:
|
|
|
| “Acceleration” |
|
As defined in Article 4 of the Performance Shares Acceleration Agreement. |
|
|
| “Acceleration Date” |
|
As defined in Article 4 of the Performance Shares Acceleration Agreement. |
|
|
| “Acceptance Process” |
|
As defined in Article 9 of this Performance Shares Acceleration Agreement. |
|
|
| “Administrator” |
|
Société Générale Securities Services. |
|
|
| “AMF General Regulation” |
|
The general regulation of the Autorité des marchés financiers, the French stock exchange regulator, which is available in French and English at www.amf-france.org. |
|
|
| “Beneficiary” |
|
The person having accepted this Performance Shares Acceleration Agreement. |
|
|
| “Company Shares” |
|
Ordinary shares issued by the Company and American depository shares issued by the Company. |
|
|
| “Condition Subsequent” |
|
As defined in Article 4 of this Performance Shares Acceleration Agreement. |
|
|
| “Conditions Precedent” |
|
Means (i) the satisfaction of the presence conditions by the Beneficiary as of the last day of the Initial Offering Period, (ii) the approval by Nokia’s shareholders of the resolutions required to implement the Offer, and (iii)
Nokia reaching the Success Threshold following the Initial Offering Period. |
|
|
| “Initial Offering Period” |
|
Refers to the first offering period, as referred to in Article 232-2 of the AMF General Regulation and as determined in a notice published by the Autorité des Marchés Financiers, the result of which will
determine whether a Subsequent Offering Period will be opened or not. |
7
|
|
|
|
|
| “Performance Shares” |
|
Performance shares to be delivered to the Beneficiary pursuant to the Share Plans listed in Appendix 2. |
|
|
| “Performance Shares Acceleration Agreement” |
|
This agreement executed by the Company, the Administrator and the Beneficiary, including its Appendices and excluding any other document which may have been appended hereto. |
|
|
| “Public Exchange Offers” |
|
Public exchange offers in France and in the United States initiated by Nokia on the securities of the Company, as approved by the Autorité des marchés financiers in France and by the Securities and
Exchange Commission in the United States. |
|
|
| “Sale Period” |
|
Shall mean the period determined by the Company between the date of publication of the final results of the Initial Offering Period (excluded) to (i) the second French trading day (included) preceding the last day of the Subsequent
Offering Period or, if there is no Subsequent Offering Period, (ii) the Squeeze-Out (included). |
|
|
| “Sale Price” |
|
The Sale Price shall be equal to the volume weighted average market sale price of all Company Shares sold by the Administrator during the Sale Period for all the relevant beneficiaries pursuant to (i) the acceleration mechanisms
including, for the stock options acceleration mechanism, the Company Shares resulting from the undertaking to exercise the relevant vested stock options, and (ii) the share plan granted in 2015 replacing the 2014 stock options plan. |
|
|
| “Squeeze-Out” |
|
Refers to the squeeze-out procedure (retrait obligatoire) that Nokia would launch on the Company Shares should it come to own 95% or more of the Company’s share capital and voting rights in accordance with
articles 237-14 et seq. of the AMF General Regulation. |
|
|
| “Subsequent Offering Period” |
|
Subsequent offering period for the French public exchange offer in accordance with article 232-4 of the AMF General Regulation. |
8
|
|
|
|
|
| “Success Threshold” |
|
Refers to the (i) ownership by Nokia, on the date of the settlement of the Initial Offering Period of the Public Exchange Offers, of more than 50% of the shares of Alcatel Lucent on a fully diluted basis, in accordance with article
231-9-II of the AMF General Regulation or (ii) satisfaction, at Nokia’s sole discretion on the date of publication of the final results of the Initial Offering Period of the Public Exchange Offers, that such ownership condition will be met, or
(iii) the express decision by Nokia’s board of directors, on or prior to the date of publication of the final results of the Initial Offering Period of the Public Exchange Offers, to waive such voluntary minimum threshold and to establish the
success threshold as described in article 231-9-I of the AMF General Regulation, pursuant to which any public offer at the close of which the offeror does not hold a number of shares representing a fraction of more than 50% of the share capital or
voting rights, shall be null and void. |
9
Appendix 2
The following plans are in the scope of this
Performance Shares Acceleration Agreement
|
|
|
|
|
| Plan n° |
|
Plan date |
|
End of acquisition period |
| A0914RUROW A0914RUNHA
A0914RPROW A0914RPNHA |
|
Performance shares plan dated September 15, 2014 |
|
September 15, 2018 |
|
|
|
| A0713RUROW A0713RUNHA
Only for non-French beneficiaries. |
|
Performance shares plan dated July 12, 2013 |
|
July 12, 2017 |
|
|
|
| A0312RUROW A0312RUNHA
Only for non-French beneficiaries. |
|
Performance shares plan dated March 14, 2012 |
|
March 14, 2016 |
10
Exhibit (e)(9)
REPLACEMENT SHARE GRANT NOTIFICATION
Personal & Confidential
UPI: [●]
Dear Sir or Madam,
In 2014, we had announced that we
would grant stock-options to certain employees, including you. In the context of the public exchange offer launched by Nokia for Alcatel Lucent’s securities, we have decided to grant Alcatel Lucent free shares instead of stock-options,
according to the ratio of one (1) Alcatel Lucent share in lieu of two (2) Alcatel Lucent stock-options (the “Replacement Share Grant”). Through this award, we want to recognize your contribution to the success of our
company and fulfil the commitment made to you.
|
|
Alcatel Lucent shares grant
([A031[●]]): |
Number of Alcatel Lucent shares
granted:
[●]
The acceptance of the Replacement Share Grant
will become final only once you have complied with the acceptance process on the website https://alcatel-lucent.assets.voxaly.com/ (the “Acceptance Process”). The Replacement Share Grant shall become effective and final as of the
date you complete the Acceptance Process. If you do not accept the grant by the last day of the initial offering period of the exchange offer launched by Nokia, your award will be forfeited.
By accepting this Replacement Share Grant, you hereby irrevocably and unconditionally give mandate to the Company to instruct Société
Générale Securities Services, the administrator of this Replacement Share Grant, to sell the Alcatel Lucent shares granted to you upon this Replacement Share Grant between the date of the final results of the initial offering period
(excluded) and (i) the second French trading day preceding the last day of the reopened offering period of the exchange offer (included) launched by Nokia in accordance with Article 232-4 of the AMF General Regulation or, if there is no
subsequent offering period, (ii) the squeeze-out (included) launched in accordance with articles 237-14 et seq of the AMF General Regulation, and to transfer to you the sale price resulting from such sale, minus the applicable commission
and trading fees and, in the jurisdictions where applicable, the relevant local withholding taxes or charges. Such mandate is deemed to be a power of attorney entered into in the interests of all the Parties (mandat d’intérêt
commun).
The sale price referred to above will be equal to the volume weighted average market sale price of all Alcatel
Lucent shares sold by Société Générale Securities Service (the administrator of the plans) during the sale period for all the relevant beneficiaries pursuant to (i) the acceleration mechanisms including, for the
stock options acceleration mechanism, the Alcatel Lucent shares resulting from the undertaking to exercise the relevant vested stock options, and (ii) this Replacement Share Grant.
The sale period referred to above refers to the period from the date of publication of the final results of the initial offer (excluded) to (i) the
second French trading day preceding the last day of the subsequent offering period (included) or, if there is no subsequent offering period, (ii) the squeeze-out (included).
The Replacement Share Grant is not subject to any performance conditions, vesting or lock-up period. Nevertheless, the Replacement Share Grant is subject to a
presence condition pursuant to which you must maintain your position as employee or corporate officer of Alcatel Lucent or a company controlled by Alcatel Lucent pursuant to Article L. 233-16 of the French Commercial Code until the last day of the
initial offering period of the exchange offer. Also, the Replacement Share Grant will be implemented only if Nokia shareholders approve the resolutions required to implement the public exchange offer and Nokia reaches the success threshold, i.e.
the ownership by Nokia, on the date of settlement of the initial public exchange offer, of more than 50% of the Alcatel Lucent shares on a fully diluted basis (or, if such condition is waived by Nokia in its sole discretion, more than 50% of the
share capital or voting rights of Alcatel Lucent in accordance with Article 231-9-I of the AMF General Regulation).
You irrevocably undertake not to, or
not to attempt to, sell your Company Shares received pursuant to this Replacement Share Grant otherwise as provided in this Replacement Share Grant Notification.
Subject to applicable local laws and regulations, the amounts received by the beneficiaries under this Replacement Share Grant will not be taken into account
for the computation of their severance payment, if any.
The Replacement Share Grant is governed by the laws of France.
In the event of breach, in addition to all other remedies which we may have under applicable law, we shall be entitled to specific performance
(exécution forcée) and injunctive or equivalent relief in accordance with applicable law, including article 1221 of the draft order of the French Ministry of Justice (if applicable on the relevant date). In addition, you waive
the benefit of Article 1142 of the French Civil Code in the event of breach.
This Replacement Share Grant is made in electronic form according to the
provisions of article 1325 of the French Civil code.
Exhibit (e)(10)
|
|
|
|
|
|
|
|
|
Rules applicable to
Performance Shares |
|
Page
1
of 12 |
|
Effective on:
July 29, 2015 |
The purpose of this Plan is to define the terms and conditions applicable to the award of performance shares to employees,
whose employment contracts are in force at the Grant Date, of Alcatel Lucent or companies affiliated to Alcatel Lucent within the meaning of article L. 225-197-2 of the French Commercial Code.
This award of performance shares is governed by the provisions of articles L. 225-197-1 et seq. of the French Commercial Code, articles 212-4 and 212-5
of the General Rules of the Autorités des Marchés Financiers, and the provisions hereof.
This award occurs while Alcatel-Lucent is
under a project of a Public Exchange Offer by the Company Nokia. This plan document includes some changes of terms and conditions in case of success of this offer.
SUMMARY
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| 1 – Definitions |
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2 |
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| 2 – Grant of Performance Shares |
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4 |
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| 2.1. |
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Beneficiaries |
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4 |
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| 2.2. |
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Method of grant |
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4 |
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| 3 – Vesting period |
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5 - 10 |
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| 3.1. |
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Duration of the vesting period |
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5 |
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| 3.2. |
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Rights of the Beneficiary during the vesting period |
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5 |
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| 3.3. |
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Vesting of Shares |
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5 – 8 |
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| 3.4. |
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Death or disability of the Beneficiary during the vesting period |
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9 |
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| 3.5. |
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Status of the Beneficiary’s Rights in the event of a change affecting the situation of the Company |
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9 - 10 |
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| 3.6. |
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Delivery of shares |
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10 |
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| 3.7. |
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Source of shares |
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10 |
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| 4 – Status of shares at the end of the holding period |
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10 - 11 |
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| 4.1. |
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Rights of the Beneficiary |
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10 |
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| 4.2. |
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Transferability of shares |
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11 |
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| 4.3. |
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Periods when the transfer of shares is prohibited |
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11 |
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| 4.4. |
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Listing of the new shares |
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11 |
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| 5 – Amendments |
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11 |
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| 6 – Tax and social security contributions |
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11 |
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| 6.1. |
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Payment |
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11 |
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| 6.2. |
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Filing obligations |
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11 |
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| 7 – Duration |
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12 |
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| 8 – Governing Law |
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12 |
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| 9 – List of Telecommunications equipment providers composing the Panel |
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12 |
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Rules applicable to
Performance Shares |
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Page
2
of 12 |
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Effective on:
July 29, 2015 |
1. DEFINITIONS
The following words and expressions used in this Plan with a capital initial shall have the meaning given below:
Award of Performance Shares means the award of free shares, under conditions, decided by the Board of Directors of the Company pursuant to the
authorization given to it by the shareholders’ extraordinary general meeting of May 26, 2015, and pursuant to the provisions of articles L. 225-197-1 et seq. of the French Commercial Code and this Plan;
Beneficiary means an employee of the Company or of an Subsidiary who is awarded Performance Shares;
Company means Alcatel Lucent;
Conditions means the conditions to which the Vesting of Shares is subject, in accordance with the provisions of paragraph 3.3.1 of this Plan;
Grant Date means July 29, 2015, date on which the Board of Directors of the Company decided upon the Award of Performance Shares;
Group means the Company and its Subsidiaries;
Panel has the meaning set forth in paragraph 3.3.1 b) of this Plan;
Performance Ratio has the meaning set forth in paragraph 3.3.1 b) of this Plan;
Period 1 has the meaning set forth in paragraph 3.3.1 b) of this Plan;
Period 2 has the meaning set forth in paragraph 3.3.1 b) of this Plan;
Plan means this document;
Reduced
Liquidity refers to the occurrence of at least one of these conditions:
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• |
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The Company Shares are no longer listed on a regulated stock market within the meaning of article L. 421-1 of the French monetary and financial code (Code monétaire et financier); |
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• |
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Nokia directly or indirectly holds at least 85% of the Company Shares; or |
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• |
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the average daily volume of the Company Shares traded on Euronext Paris calculated on the last consecutive twenty (20) trading days preceding the relevant date falls below five million (5,000,000) Company
Shares. |
Right means the right to Vesting of Shares subject to the fulfillment of the Conditions;
Share means one ordinary share of the Company;
Subsidiary means any company or economic interest grouping (groupement d’intérêt économique), at least 50% of
the share capital or voting rights of which are held directly or indirectly by the Company;
Trading Day means any day on which NYSE
Euronext Paris market is open for trading;
Trigger Point has the meaning set forth in paragraph 3.3.1 b) of this Plan;
Vesting Date means the first business day following the end of the Vesting Period;
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Rules applicable to
Performance Shares |
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Page
3
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Effective on:
July 29, 2015 |
Vesting of Performance Shares means the transfer of the ownership of Shares to the Beneficiary
at the Vesting Date;
Vesting Period means the period starting from the Grant Date and ending on the fourth anniversary date of the Grant
Date.
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Rules applicable to
Performance Shares |
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Page
4
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Effective on:
July 29, 2015 |
2. GRANT OF PERFORMANCE SHARES
2.1. Beneficiaries
The Beneficiaries of
Performance Shares shall be bound to the Company or one of its Subsidiaries by an employment contract which is effective at the Grant Date. When the Performance Shares are granted in respect with this Plan, Beneficiaries shall not be persons
fulfilling a social mandate within the Company.
The list of Beneficiaries selected by the Board of Directors is annexed to the minutes of the Board
meeting at which the Award of Performance Shares was decided, and is held by the Secretary of the Board of Directors under the form of a listing signed by the President and the Secretary of the Compensation Committee. An electronic copy (CD-Rom) of
the list that is authenticated by the Secretary of the Board of Directors may also be created.
Awards of Performance Shares and, if required, issuance of
Shares pursuant to this Plan are made to each employee Beneficiary subject to the approval of the competent authorities (notably the regulatory and market surveillance authorities, exchange control and foreign investment or tax authorities) of the
country in which the employer has its registered office and with regard to applicable legal and regulatory provisions, notably exchange regulations.
2.2. Method of grant
Each Beneficiary shall be informed by an individual letter of the specific terms and
conditions applicable to the Award of Performance Shares, and in particular:
| (a) |
the number of Performance Shares to be awarded to him/her; |
| (c) |
the duration of the Vesting Period; |
| (d) |
the Conditions to which the Vesting of Performance Shares at the Vesting Date is subject; |
| (e) |
the procedure in order to accept or reject the Award of Performance Shares. |
The complete version of this Plan
is available on the Company’s intranet for consultation and download.
| 2.2.2 |
Acceptance or rejection |
Each Beneficiary shall expressly accept or reject the terms and conditions of
the Award of Performance Shares by following the process for this purpose as described on the Company’s intranet and within 40 days of the individual notice.
Acceptance will be deemed to include in particular acceptance by the Beneficiary of the terms of the Plan, the conditions stipulated in the individual notice
and all tax or social security consequences attached to the Award of Performance Shares or Vesting of Shares. In case of success of Nokia’s Public Exchange Offer, the acceptance will be deemed to include as well acceptance of the liquidity
agreement , part of the individual notification, allowing the conversion of Alcatel-Lucent shares into Nokia shares at the time of the vesting.
Any
Beneficiary who does not formally express his/her acceptance of the Award of Performance Shares and the liquidity agreement in the conditions set forth above will be deemed to have permanently forfeited his rights to the Award of Performance Shares,
without being able to claim any compensation or indemnity from his/her employer, the Company or any of its Subsidiaries.
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Rules applicable to
Performance Shares |
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Page
5
of 12 |
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Effective on:
July 29, 2015 |
3. VESTING PERIOD
3.1. Duration of the Vesting Period
Pursuant to
the shareholders’ authorization given to the Board of Directors at the general meeting on May 28, 2014, the Board of Directors hereby sets the duration of the Vesting Period to four years from the Grant Date, i.e. until July 29, 2019.
3.2. Rights of the Beneficiary during the Vesting Period
| 3.2.1 |
Non-transferability of Rights |
The Rights are personally granted to the Beneficiary and may not be
transferred in any way whatsoever, or be pledged in any way.
Any action taken in violation of the provisions of this paragraph 3.2.1 produces no effect
towards, and may not be invoked against, the Company and will render the Rights that were affected null and void. The Beneficiary shall not be entitled to any compensation or indemnity of any kind in relation to the Rights that will be nullified as
a result of the preceding sentence.
| 3.2.2 |
Preservation of the Beneficiary’s rights in the event of a financial transaction |
In the event of
financial transactions affecting the Company’s equity during the Vesting Period, the Board of Directors of the Company will have full powers to make any adjustment to the maximum number of Shares that may be delivered to the Beneficiary at the
Vesting Date, provided that the Conditions are met, so that the Beneficiary is no better-off no worse-off as a result of such financial transactions.
Since the sole purpose of any such adjustment is to preserve the rights of the Beneficiary, any additional Rights awarded as a result of such an adjustment
will be subject to the same Conditions as the initial Rights hereunder. In particular, such additional Rights will be subject to the remaining Vesting Period as of the date of the adjustment and the Vesting of additional Shares will be subject to
the same Conditions.
The Beneficiary will be informed of the terms of this adjustment and its impact on his/her Award of Performance Shares.
As a result of the above-mentioned adjustments, it is possible that a Beneficiary will no longer meet the conditions that allow him to enjoy the applicable
tax and social security regime. Should this occur, the Beneficiary shall bear the consequences for him/her and the non-applicability of the tax and social security regime with no recourse against his/her employer, the Company, or any of its
Subsidiaries.
3.3. Vesting of Shares
| 3.3.1 |
Conditions to the Vesting of Shares |
Vesting of Shares by the Beneficiary will take place on the Vesting
Date, subject to the fulfillment of the following performance and presence Conditions at the end of 2 periods:
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• |
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at the end of a 2-year period from the Grant Date for 50% of the initial grant of performance shares (Period 1), |
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• |
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at the end of a 4-year period from the Grant Date for the remaining 50% of the performance shares (Period 2). |
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Rules applicable to
Performance Shares |
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Page
6
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Effective on:
July 29, 2015 |
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i. |
At the end of Period 1 |
The vesting of 50% of the shares for the initial grant is subject to the
presence of the Beneficiary at the end of Period 1. In the event of termination or transfer of the Beneficiary’s employment contract to an unaffiliated entity before the working day following the second anniversary of the Grant Date,
there shall be no Vesting of Performance Shares to the benefit of the Beneficiary. In such case, 100% of such Beneficiary’s Performance Shares shall be null and void and forfeited immediately. The same consequence shall be applied to the
concerned Beneficiaries of any entity which would cease to be a Subsidiary under the Plan before the working day following the second anniversary of the Grant Date.
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ii. |
At the end of Period 2 |
The vesting of 50% of remaining Shares is subject to the presence of the
Beneficiary at the end of Period 2. In the event of termination or transfer to an unaffiliated entity of the Beneficiary’s employment contract between the working day following the second anniversary of the Grant Date and the Vesting Date,
the Vesting of Performance Shares by the Beneficiary concern 50% of such Beneficiary’s Performance Shares, subject to the fulfillment of the performance condition stated in paragraph b) below. In such case, the remaining 50% shall be null and
void and forfeited immediately.
The same consequence shall be applied to the concerned Beneficiaries of any entity which would cease to be a Subsidiary
under the Plan between the working day following the second anniversary of the Grant Date and the Vesting Date. The termination date, or the date of transfer, or the date when an entity ceased to be a Subsidiary, is the date at which the employment
agreement (or corporate office) of the Beneficiary is effectively terminated or transferred, or the effective exit of the Group of the entity, without regards to any potential challenge by the Beneficiary of its termination or transfer, or the cause
or legal grounds thereof and any court decision that would question the validity or the reasons of the termination, transfer, or the effective exit of the Group of the entity.
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iii. |
Specific situation for Chinese employees |
By application of the Chinese regulation, the vesting of the
shares by the beneficiaries, employees of a Chinese legal unit and Chinese citizen, is subject to the presence of the beneficiary at the end of Period 2. In case of its termination before the end of the vesting period, 100% of the rights shall be
null and void and forfeited immediately.
The Chief Executive Officer may grant a waiver and deem the presence condition satisfied
notwithstanding the realization of the events above. The exception may be individual or collective. In any event, the performance condition set out in paragraph b) hereunder shall continue to apply.
The determination of the performance condition will depend on the stock market
performance of the Company share, compared to those of a representative selection of solutions and services providers in the telecommunications equipment sector, such list being set out in paragraph 9 (the “Panel”), which has been adopted
by the Board of Directors.
If during the Vesting Period, any change in the nature of the Company’s activities occurs such that less than half of its
sales is derived from solutions and services linked to the telecommunications equipment sector, the Board of Directors will revise the performance condition during its first meeting following evidence of this situation. If, during the Vesting
Period, the Panel is modified as a result of a change of activities or corporate transactions (such as a merger or spin-off) affecting one or several companies listed therein, the Board of Directors shall be entitled to revise such list.
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Rules applicable to
Performance Shares |
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Page
7
of 12 |
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Effective on:
July 29, 2015 |
| i. |
Determination of the Performance Ratio for Periods 1 and 2: |
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• |
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The reference initial stock price shall be calculated on the Grant Date. It shall be equal to the average of the opening price of the Alcatel Lucent share on the NYSE Euronext Paris stock market over the 20 trading days
preceding the Grant Date, rounded up to the nearest cent of a Euro (the “Initial Reference Stock Price”). The reference stock market price of the other issuers composing the Panel shall be calculated on the same basis and the same rounding
rules on their respective main listing stock market and in their corresponding local currency; |
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• |
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Following Periods 1 and 2, the reference stock price shall be calculated on the same basis for Alcatel Lucent and the other issuers composing the Panel, i.e. the average of the 20 opening prices preceding the end of the
comparison period (the “Final Reference Stock Price”); |
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• |
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For Alcatel Lucent on the one hand, and for any other issuer included in the above-mentioned Panel on the other hand, the Performance Ratio enabling the appreciation of the stock performance shall be calculated by
dividing the Final Reference Stock Price by the Initial Reference Stock Price. |
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• |
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In case of Reduced Liquidity occurring during Period 1 or 2, the following changes will be made: |
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• |
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“Initial Reference Stock Price”: Alcatel-Lucent Initial Reference stock price multiplied by the exchange ratio defined by the public exchange offer launched by Nokia. |
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• |
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“Final Reference Stock Price”: Nokia Final Reference Stock Price. |
| ii. |
Assessment at the end of Periods 1 and 2 |
The level of realization of the Performance condition will be
subject to a comparison of the Performance Ratio of Alcatel Lucent with the median of the Panel’s Performance Ratio and the Trigger Point, determined as follows:
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• |
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If the Performance Ratio of Alcatel Lucent is inferior to the Trigger Point, i.e. 60% to the median of the Panel’s Performance Ratios, there shall be no Rights in connection with such Period;
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• |
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If the Performance Ratio of Alcatel Lucent is superior to the median of the Panel’s Performance Ratios, 100% of the Rights related to the considered Period will be vested subject to the final revision at the
end of Period 2; |
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• |
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Between those two bounds, the number of Rights in connection with the considered Period shall be linearly calculated subject to the final revision at the end of Period 2 (see chart below). |
At the end of each period 1 and 2, an adviser firm, appointed by the Board of Directors, will provide an analysis on the
level of realization of the Performance condition. This analysis will be communicated to the Chief Financial & Legal Officer of the Group who will acknowledge the fulfilment or not of the performance condition, who will then inform the
Board of Directors at its next meeting.
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Rules applicable to
Performance Shares |
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Page
8
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Effective on:
July 29, 2015 |
| iii. |
Final revision at the end of Period 2 |
The determination of the definitive number of Shares vested will
take place at the end of Period 2, for all the Beneficiaries that were present or not on the Vesting Date, by comparison of the level of realization of the performance condition evidenced at the end of Periods 1 and 2 as follows:
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• |
|
If the level of realization of the performance condition at the end of Period 2 is superior to the one at the end of Period 1, the level of realization of the performance condition at the end of Period 2 shall apply to
the whole Vesting of Performance Shares; |
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• |
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If the level of realization of the performance condition at the end of Period 2 is inferior to the Trigger Point, i.e. 60% to the median of the Panel’s Performance Ratios, no Shares shall be vested in connection
with the two periods considered; |
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• |
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If the level of realization of the performance condition at the end of Period 2 is inferior to the one at the end of Period 1, but still superior to the above-mentioned Trigger Point, the level of realization of the
performance condition at the end of each Period shall be taken respectively for such Period. |
This can be summarized in the chart below, in
which:
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• |
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a) corresponds to the level of realization of the performance condition at the end of Period 1, |
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• |
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b) corresponds to the level of realization of the performance condition at the end of Period 2. |
3.3.2 Consequences of non-compliance with the Conditions
The Vesting of Performance Shares shall only concern the Performance Shares for which the Conditions are considered (totally or partially, according to the
provisions herein) satisfied in compliance with the provisions of paragraphs 3.3.1(a) and (b).
The absence of the Vesting of Performance Shares because
all or part of the Shares are null and void resulting from the non-compliance with the Conditions shall not give right to any indemnification of, or compensation to, such Beneficiary.
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Rules applicable to
Performance Shares |
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Page
9
of 12 |
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Effective on:
July 29, 2015 |
3.4. Death or disability of the Beneficiary during the Vesting Period
Notwithstanding the foregoing, in the event of death of the Beneficiary during the Vesting Period, his/her heirs may request the Vesting of Performance Shares
within six months of the date of death. The vesting shall occur in relation to 100% of all such Performance Shares without applying the terms of the performance condition set in paragraph 3.3.1 b) above.
The Shares so delivered are freely transferable.
When the
above-mentioned six-month period following the death expires, the Performance Shares will become null and void, and the Beneficiary’s heirs may no longer request the Vesting of Performance Shares to their benefit.
In case of disability of 2nd or 3rd category of the Beneficiary, as defined in article L.341-4 of the French Social Security Code, Vesting of Performance
Shares for such Beneficiary will take place as soon as such event is notified to the Company. The vesting shall occur in relation to 100% of all such Performance Shares without applying the terms of the performance condition set in paragraph 3.3.1
b) above.
The Shares so delivered are freely transferable.
3.5 Status of Beneficiaries’ Rights in the event of a change affecting the situation of Company
3.5.1 Events impacting the situation of the Company
Should one of the following events occurs before the end of the Vesting Period
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(a) |
a merger, demerger or spin-off of the Company, or |
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(b) |
a change of control of the Company (“control” having the meaning ascribed to such term in article L. 223-3, I of the French Commercial Code), or |
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(c) |
a takeover bid or exchange offer for all the shares of the Company such that, if the offer is successful, the bidder would obtain control over the Company, |
the Board of Directors of the Company may, in its sole discretion, decide what position to take with respect to the Performance Shares.
In particular, the Board of Directors of the Company may, as the case may be:
| |
(i) |
agree with the new company, successor or buyer(s) that such company shall either: (x) take over all rights and obligations of the Company pursuant to this Plan or (y) replace Performance Shares granted
hereunder by granting the Beneficiary new Performance Shares, which it shall deem in good faith to be of the same value. Accordingly, the Beneficiary may, in the event of a merger and if the general meeting of shareholders of the merging company
agrees to uphold the provisions hereof, be allotted Performance Shares of the merging company under the conditions set by its general shareholders’ meetings, after adjustment, as necessary, based on the exchange ratio applied under the merger
agreement. Generally, in the event of share exchanges in connection with a merger, demerger or spin-off conducted in accordance with applicable regulations, the Vesting Period will remain applicable to Performance Shares then received for the
remainder of its duration at date of the exchange, according to article L. 225-197-1, III of the French Commercial Code; or |
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(ii) |
indemnify the Beneficiary for the loss resulting from the forfeiture of their Performance Shares or the waiver of such Performance Shares upon the request of the Company. |
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Rules applicable to
Performance Shares |
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10
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Effective on:
July 29, 2015 |
3.5.2. Tax and social security consequences
As a result of the events and transactions above, the Beneficiary could cease to meet the conditions that would otherwise enable him/her to enjoy the tax and
social security regime applicable to him/her in light of his/her personal circumstances. Should this occur, the Beneficiary will bear the consequences as an employee of the non-applicability of the initial tax and social security regime with no
recourse against his/her employer, the Company, or any of its Subsidiaries.
3.6 Delivery of Shares
On the Vesting Date of the Performance Shares, subject to the provisions of paragraphs 3.4 and 3.5, the Company will transfer to each Beneficiary the number of
Shares to which he is entitled, as determined in accordance with this Plan.
The delivery of Shares conveys full ownership of the Shares to the
Beneficiary or, as the case may be, his/her legal heirs.
3.7 Source of Shares
The Shares to be transferred to the Beneficiary at the Vesting Date will be new shares issued of a share capital increase. No later than the Vesting Date, the
Board of Directors of the Company shall have the ability to modify its choice and to decide to transfer treasury Shares repurchased by the Company pursuant to articles L.225-208 and L.225-209 of the French Commercial Code.
In case of death or invalidity of a Beneficiary during the Vesting Period, the Shares that will be transferred, shall be existing Shares.
4. STATUS OF SHARES AT THE END OF THE HOLDING PERIOD
4.1. Rights of the Beneficiary
4.1.1. Rights
attached to Shares
Shares transferred upon Vesting of Performance Shares shall be identical to the Company’s ordinary shares at that date, in
particular with regard to voting rights, rights to dividend and payment of any reserves, the right to attend shareholders’ meetings, rights of communication, and preferential subscription rights attached to each Share. They shall be subject to
all the provisions of the by-laws, and all decisions of shareholders’ meetings shall be binding upon each Beneficiary.
4.1.2. Effective date of
shareholders’ rights
In the event that Shares transferred to the Beneficiary as a result of the Vesting of Performance Shares are existing
Shares, such Shares will enjoy shareholders’ rights starting on the date of their registration.
In the event that Shares transferred to the
Beneficiary as a result of the Vesting of Performance Shares are newly issued Shares, such Shares will have current enjoyment. They will be assimilated to the existing shares as soon as they are issued and will confer the same rights.
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Rules applicable to
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Page
11
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Effective on:
July 29, 2015 |
4.2. Transferability of Shares
Accordingly to the applicable legal and regulatory provisions and to the authorization of the shareholders dated May 28, 2014, the Board of Directors has
decided that the Beneficiary shall not be subject to any holding requirement or period, as from the Vesting Period.
As a consequence, as from the Vesting
Date, Shares shall be available and may be freely transferred by the Beneficiary in compliance with applicable law, subject to the provisions of paragraph 4.3.
4.3. Periods when the transfer of Shares is prohibited
Each Beneficiary shall comply with the Code of Conduct adopted by Alcatel Lucent in regards to the prevention of insider dealing and which may be consulted on
the Company’s intranet.
In addition, given that the Shares are granted for free as part of a performance shares plan and in accordance with
applicable laws, Shares may not be transferred during the following periods:
| (a) |
the ten Trading Sessions preceding and following the dates on which the consolidated financial statements of the Company are disclosed to the public; and |
| (b) |
the ten Trading Sessions following the date on which information which could have a significant effect on the Company’s share price is disclosed to the public. |
4.4 Listing of the new Shares
The admission of
the new Alcatel Lucent shares resulting from an issue of Shares, if any, in accordance herewith, will be requested for listing on NYSE Euronext Paris market.
5. AMENDMENTS
The Board of Directors of the Company may
at any time make amendments to the terms and conditions hereof that will allow the Beneficiary or the Company or its Subsidiaries to enjoy a favorable tax and social security regime in effect in any country where the Plan is applicable, or avoid any
unfavorable effects that new legal, tax, accounting, or social security provisions may have on the Company or its financial statements. These amendments may take the form of sub-plan applicable only for certain Beneficiaries.
6. TAX AND SOCIAL SECURITY CONTRIBUTIONS
6.1.
Payment
The Beneficiary must conform to the terms and conditions imposed by the Company, its Subsidiaries, or any other person appointed by the
Company or its Subsidiaries for the payment (including withholding taxes or disposals of a portion of shares to cover this payment) of any social security contributions (including the employee social security contributions) or taxes in the country
where the Beneficiary resides, in relation to his/her Performance Shares.
6.2. Filing obligations
The Beneficiary, the Company, and the Subsidiaries will respect all filing obligations with the tax and social security authorities to which they may be
subject.
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Rules applicable to
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12
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Effective on:
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7. DURATION
The terms and conditions herein shall apply as long as necessary for the performance of the obligations set forth herein.
8. GOVERNING LAW
The terms and conditions herein shall
be construed and interpreted in accordance with French law.
9. LIST OF TELECOMMUNICATIONS EQUIPMENT PROVIDERS COMPOSING THE PANEL
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Currency |
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Xx/ 2015 |
| Adtran |
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USD |
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| Alcatel Lucent |
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EUR |
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| Amdocs |
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USD |
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| Arris |
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USD |
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| Ciena |
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USD |
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| Cisco |
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USD |
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| CommScope |
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USD |
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| Ericsson (ORD) |
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SEK |
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| Juniper |
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USD |
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| Nokia (ORD) |
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EUR |
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| ZTE |
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HKD |
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In case of Reduced Liquidity, for the application of the performance conditions, the structure of the panel will be adapted to
take into account this evolution, Nokia being withdrawn from such panel.
Exhibit (e)(11)
Alcatel-Lucent
3 avenue Octave Gréard
75007 Paris
France
+33 1 40 76 10 10
December 23rd 2013
To:
Dear ,
The Company needs your full engagement and support to turn around our business and your full support to execute the Shift plan.
For that purpose the Board has agreed to implement a change of control clause for members of the Leadership team.
The purpose of this clause is to maintain a stable and effective management team essential to protecting and enhancing the best interests of the Company and
its shareholders
This clause is split into various compensation components:
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1. |
Severance package for a defined period of time |
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2. |
Equity Grants (Stock options), |
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1. |
The change of control severance benefits consist of a cash payment equal to the severance policy applicable in the home country of the EXCOM member with a minimum 1.5 times (i.e. 18 months) the executive’s
annual Total Target Compensation (base salary plus target bonus) for the fiscal year in which the change of control or the executive’s termination occurs. |
This clause applies if the beneficiary is terminated without cause or there is any material reduction of the duties within 12 months following
the change of control.
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2. |
For Equity Grants (past stock options not yet vested): Each outstanding award will vest in full without any performance conditions to be fulfilled and, become immediately exercisable in the event of a change of
control |
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3. |
For the performance shares: An exception to the 2 year presence condition will be granted and as such the continued employment condition will be deemed satisfied notwithstanding any termination of your employment
contract prior the expiration of the Vesting Period. Performance Share conditions will either be redefined, or the performance shares will be replaced or cancelled. If cancelled, new performance shares will be granted or compensation in lieu of will
be provided. |
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4. |
For Phantom Units: Each outstanding award of Phantom units will vest in full without any performance conditions to be fulfilled and, become immediately acquired and at his disposal (no more escrow account) in the
event of a change of control. The value of each phantom unit will be equal to the average of the last 20 quotations days before the event occurs (i.e. before acceleration of the vesting). |
Again, thank you. I am happy to count you as a valued member of the team.
Regards,
Michel Combes
CEO
Exhibit (e)(12)
Important Note: The following is an unofficial English translation of the original French version and has been prepared for informational
purposes only. In the event of any inconsistency between the English and French versions, the French version shall prevail.
[Letterhead of Alcatel]
Mr. Philippe KERYER
Paris, March
29, 2006
Dear Sir,
Our Group is currently considering
several strategic options. They require strong support from the principal collaborators of the Group, as well as certain security for their future.
By
the present letter, I wish to specify that in the case where the ties that unite you to the Alcatel Group would come to an end, regardless of the date and for whatever reason that it might be, except, of course, for serious or gross misconduct or on
your part, you would be paid, as damages, an indemnity for the termination of your employment contract equal to twice the total gross amount of your annual salary, in order to take into account any loss that you might suffer from as a result of this
termination.
This indemnity is in addition to the amounts due at your departure, pursuant to legal, regulatory or contractual provisions or corresponding
to the indemnity for dismissal.
The annual gross salary taken as reference is the one that is chosen for the application of the provisions of the
Collective Agreement of Executive Engineers in Metallurgy (“Convention Collective des Ingénieurs Cadres de la Métallurgie”) relating to the termination of an employment contract by the employer.
The provisions previously adopted in your favor relating to any additional indemnity for termination on the initiative of Alcatel, if any, are annulled and
replaced by the provisions above.
Please give your consent to the content of the present letter by returning the copy attached hereto (along with the
statement “Signed and agreed”).
Yours sincerely,
/s/ Serge TCHURUK
Serge TCHURUK
Exhibit (e)(16)
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Rules Applicable to Corporate
Stock Subscription Options Plan |
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1
of 11 |
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Effective on: |
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with
performance conditions |
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ANNEX A1i |
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14 March 2012 |
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for beneficiary employees
of French companies |
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This document is an unofficial English-language translation from the French-language “Règles applicables aux
Plans Corporate d’Options de souscription d’actions ordinaires sous conditions de performance pour les bénéficiaires salariés de sociétés françaises “ applied by Alcatel Lucent. This
translation has been prepared for convenience purposes only. While this English-language version represents an acceptable translation of the plan, the stock options described herein are governed by the original French-language plan. In the event of
any inconsistency between this translation and the original French-language text, the French-language text will govern. You may obtain a copy of the French-language text upon request.
The purpose of this plan is to define the terms and conditions, including the performance conditions, applicable to the Stock Subscription Options Plan
adopted by the Board of Directors of Alcatel Lucent.
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Rules Applicable to Corporate
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ANNEX A1i |
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14 March 2012 |
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for beneficiary employees
of French companies |
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SUMMARY
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| 1. |
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DEFINITIONS |
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3 |
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GENERAL CONDITIONS |
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4 |
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2.1 |
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Beneficiaries and Companies Concerned |
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2.2 |
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Method of Grant |
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2.2.1 |
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Individual notification |
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2.2.2 |
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Formal acceptance or rejection of grant |
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2.3 |
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Beneficiaries’ Rights |
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2.3.1 |
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Vesting Period for rights |
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2.3.2 |
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Performance conditions |
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2.3.3 |
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Status of employee or corporate officer |
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2.3.4 |
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Consequences of not satisfying the conditions |
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2.4 |
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Conditions for the Exercise of Options |
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2.4.1 |
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Exercise and unavailability Periods |
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2.4.2 |
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Subscription Price |
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2.4.3 |
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Exercise Conditions |
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2.5 |
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Status of Options in the Case of Termination or Transfer of the Employment Contract |
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2.5.1 |
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General Principles |
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2.5.2 |
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Death and disability |
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Exceptions |
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The express decision of the Chief Executive Officer |
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2.5.3.2 |
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Exemptions in case of merger |
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ADDITIONAL INFORMATION |
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3.1 |
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Share Form and Entitlement |
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8 |
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3.2 |
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Upholding of the Rights of Beneficiaries – Adjustments to Option Prices and to the Number of Shares that can be
obtained |
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Suspension of the Exercise of Options |
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Acknowledgment of Increases in Share Capital |
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Consequence of Options Not Exercised |
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3.6 |
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Rules Concerning Privileged Information and Insider Trading |
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3.7 |
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Amendments |
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10 |
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3.8 |
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Taxes and social security contributions |
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10 |
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3.9 |
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Governing law |
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EXAMPLE OF THE IMPLEMENTATION OF THE CONDITIONS |
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11 |
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Rules Applicable to Corporate
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3
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Effective on: |
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with
performance conditions |
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ANNEX A1i |
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14 March 2012 |
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for beneficiary employees
of French companies |
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In this Plan, the following words and expressions have the following meaning:
Acquisition Period means the period starting on Grant Date and finishing on the fourth anniversary of the Grant Date;
Beneficiary means a member of the Management Committee of the Company who is an employee of the Company or one its Subsidiaries headquartered in
France and who benefits from an Option Grant;
Company means Alcatel Lucent;
Grant Date means the date of the Board of Directors deciding the Option Grant or any later date fixed by it;
Group means the Company and its Subsidiaries;
Option means a right to subscribe for one share in the Company at the price fixed at the Grant Date, subject to any adjustment required by law;
Option Grant means the award of options for the subscription of shares as decided by the Board of Directors of the Company pursuant to an
authorization which was granted to it by the shareholders of the Company at the extraordinary general meeting of June 1, 2010, and in accordance with Articles L. 225-177 and Seq. of the Commercial Code and this Plan;
Plan means this document;
Share
means an ordinary share of the Company;
Subscription Price means the price to be paid to subscribe for one Share in exercise of an Option;
Subsidiary means any economic interest grouping or any company in which at least 50% of the share capital or voting rights are held
directly or indirectly by the Company.
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Rules Applicable to Corporate
Stock Subscription Options Plan |
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Effective on: |
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with
performance conditions |
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ANNEX A1i |
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14 March 2012 |
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for beneficiary employees
of French companies |
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2.1 |
Beneficiaries and Companies Concerned |
Beneficiaries are the members of the Executive Committee of the
Company who are employees of the Company or any of its Subsidiaries headquartered in France.
The list of Beneficiaries as well as the number of Options
granted to each Beneficiary is approved by the Board of Directors of the Company.
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2.2.1 |
Individual notification |
Each Beneficiary will be informed individually by mail of the conditions which
govern the Option Grant, in particular:
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(a) |
the number of Options awarded; |
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(c) |
the duration of the exercise period; |
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(d) |
the procedure for acceptance or rejection of the Option Grant. |
The full version of this Plan will be enclosed
with the letter of grant.
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2.2.2 |
Formal acceptance or rejection of grant |
Each Beneficiary must expressly accept or reject in writing the
terms and conditions of the Option Grant within 80 days of the individual notification.
Acceptance will be deemed to include in particular acceptance by
the Beneficiary of the terms of the Plan, the conditions stipulated in the individual notification and all tax or social security consequences attached to the Option Grant.
Any Beneficiary who has not explicitly accepted the Option Grant under the conditions described in the first paragraph above shall be deemed to have waived
permanently it, without being able to claim any compensation from his employer, the Company or any of its Subsidiaries.
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2.3 |
Beneficiaries’ Rights |
Subject to the instance described in paragraph 2.5.2 or, where appropriate,
the application of paragraph 2.5.3, the rights attached to the Options will definitively vest in the Beneficiaries provided that, at the expiration date of each of the periods defined below: the performance conditions are
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Stock Subscription Options Plan |
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ANNEX A1i |
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14 March 2012 |
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for beneficiary employees
of French companies |
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fulfilled and the Beneficiaries maintain their position as employees (or as the case may base have become corporate officers) of the Company or a company controlled by it pursuant to Article L.
233-16 of the Commercial Code.
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2.3.1 |
Vesting Period for rights |
Beneficiaries’ rights will vest, subject to fulfillment of conditions of
performance and presence listed below in accordance with a calendar covering a four-year period as from the Grant Date by the Board of Directors. The vesting of the rights will be in 3 periods at a rate of up to 50% of the total Options awarded
after a period of two years from the Grant Date and then at the rate of a maximum of 25% of total Options granted at the end of each of the following two years.
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2.3.2 |
Performance conditions |
For each of the 3 periods above, the vesting of half the total number of Options
awarded will be subject to a performance condition relating to the “Free Cash Flow”. The “Free Cash Flow” corresponds to the cash flow excluding impacts resulting from the agreements within the framework of the RPX contract.
The achievement of the performance condition will be assessed for each period by reference to the “Free Cash Flow” for one or more accounting
periods of 12 months as follows: (i) for the first period the financial year during which the Option grant process was carried out and the following financial year will be considered and (ii) for the two subsequent periods (i.e. the 2nd
and 3rd periods), the two following financial years respectively will be taken into account.
The Board of Directors shall decide, prior to the vesting
date for each of the three periods (and thus for the corresponding accounting periods), the score in accordance with the schedule below, calculating a performance score ranging from 0% to 100% for the “Free Cash Flow” performance criteria,
depending on the achievement of goals set for each financial year.
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| Performance criteria |
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Scores and performance levels for the performance criteria chosen |
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Below the
minimum |
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Achievment
Level 1 |
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Achievment
Level 2 |
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Achievment
Level 3 |
| “Free Cash Flow” |
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0 % |
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50 % |
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75 % |
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100% |
If the “Free Cash Flow” amount for each financial year is between two performance levels, the performance score for
this period will be calculated by linear interpolation. The score calculated for the first period will be equal to the average of the two scores corresponding to the first two financial years.
The application of the performance criteria for “Free Cash Flow” is measured by reference to a stable definition of the Group. In case of change in
the Group size, the performance levels above shall be adjusted on the basis of published proforma accounts.
The acquisition of Options for the first
period will cover 50% and for each of the two subsequent periods, 25% of the total number of Options multiplied by the performance score found for this period.
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Rules Applicable to Corporate
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with
performance conditions |
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ANNEX A1i |
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14 March 2012 |
| |
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for beneficiary employees
of French companies |
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| |
2.3.3 |
Status of employee or corporate officer |
Subject to the satisfaction of the performance conditions set
out above, and except as provided in paragraphs 2.5.2 and 2.5.3, Options will permanently vest in Beneficiaries on expiry of each period relating to each period as defined in paragraph 2.3.1, provided that, on that date, Beneficiaries are still
employed (or, where appropriate, have become corporate officers) of the Company or any company it controls the meaning of Article L. 233-16 of the Commercial Code.
As more fully described in paragraph 2.5.1, any termination or transfer outside the Group of a Beneficiary’s employment contract before each expiry date
(i.e. for the first period, the second anniversary of the Grant Date, and for the second and third periods, respectively the third and fourth anniversaries of the Grant Date) prevents the Beneficiary from the vesting of Options with respect to that
and subsequent periods, whatever the circumstances of his departure, whether at the initiative of the employer or employee except in the case of death, disability and cases referred to in paragraph 2.5.3.
For the avoidance of doubt, for each period, all the Options relating to that period are subject to the condition of presence at the end of the corresponding
period.
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2.3.4 |
Consequences of not satisfying the conditions |
The non-acquisition of rights to the Options as a result
of either partial or total failure to satisfy the performance condition or resulting from lack of compliance with the presence condition shall in no case give rise to a right to compensation by the Beneficiary.
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2.4 |
Conditions for the Exercise of Options |
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2.4.1 |
Exercise and unavailability Periods |
A Beneficiary may exercise his or her Options at any time following
vesting of the Options, during a period of eight years from the Grant Date, subject to the specific deadlines to exercise when the vesting results from the acceleration provided in paragraphs 2.5.2 and 2.5.3.
However, and by way of exception to the above, Beneficiaries who are employees of a company whose registered office is located in France may not exercise
their Options before the expiration of a period of unavailability set by Article 163 bis C of the French General Tax Code, which currently, is four years from the Grant Date, except in cases of death and disability referred to in paragraph
2.5.2.
Any Option not exercised at the expiration date of the exercise period of the Options as described in the first paragraph above, will lapse.
The Subscription Price of the Shares is equal, for each Option giving a right to one
Share, to the average of opening prices of the Alcatel-Lucent Share on the NYSE Euronext Paris market during the 20 trading days preceding the date of the meeting of the Board which is deciding on an Option Grant, rounded up to the nearest one tenth
of a euro. The Subscription Price must be paid in full upon exercise of the Option.
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with
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ANNEX A1i |
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14 March 2012 |
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for beneficiary employees
of French companies |
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The subscription price per Alcatel Lucent share is equal to 2 Euros, equivalent to the nominal value of the
share, after considering that the average opening price of the Alcatel-Lucent share on the NYSE Euronext Paris stock market over the 20 trading days from February 15 to March 13, 2012, namely 1.84 euro per share, is lower than the nominal
value of the share. The subscription price is 8% over the said average price.
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2.4.3 |
Exercise Conditions |
The Options may only be exercised by the Beneficiary up to a maximum level of the
number of rights definitively vested pursuant to the provisions of paragraph 2.3.2 above or, in the event of acceleration, in accordance with the terms of paragraphs 2.5.2 or 2.5.3.
Options will be exercised by sending a duly signed and dated subscription form by any means, addressed either to the Company or to an agent appointed by the
Company, together with the payment corresponding to the Subscription Price for the Shares subscribed for through the Options.
In case of successive
allotments of Options to the same Beneficiary, his rights and the conditions for the exercise of the Options will be separate, according to the date at which said Options were granted and the conditions of the applicable plan. These rights and
conditions will be governed by the respective plans under which they were granted.
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2.5 |
Status of Options in the Case of Termination or Transfer of the Employment Contract |
Rights to Options definitively vested at the effective date of the termination of
the employment contract may be exercised within a reduced period of 12 months, as from the end of the period of unavailability in accordance with paragraph 2.4.1, provided that the exercise of the said Options may never take place after the
expiration date of the exercise period set out in that paragraph.
Options which have not definitively vested at the effective date of the termination or
transfer of the employment contract may no longer be exercised and become null and void as from the effective end date of the employment contract.
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2.5.2 |
Death and disability |
In the event of a Beneficiary’s death or disability corresponding to the 2nd
or 3rd category, as defined in section L. 314-4 of the French social security code, the Options granted by the Board of Directors shall be maintained in full in favour of the Beneficiary (and in case of death in favour of the deceased’s heirs)
whether or not the corresponding rights have vested (taking into account the performance conditions set out in paragraph 2.3.2 above) at the date of death or the effective date of the termination of his responsibilities being the date at which the
Company is notified of the disability, whichever is the case.
The benefit of Options not vested will be maintained (at 100%) for the Beneficiary or his
heirs without applying the provisions set out in paragraph 2.3.2. The Beneficiary or the deceased’s heirs must exercise their rights before the end of a six-month period following the death or date of notification of the disability to the
Company, provided that the exercise of these Options may never occur after the termination of the exercise period.
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with
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ANNEX A1i |
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14 March 2012 |
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for beneficiary employees
of French companies |
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After the termination of the exercise period, the Beneficiary will no longer be entitled to exercise the
Options that have lapsed.
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2.5.3.1 |
The express decision of the Chief Executive Officer |
Notwithstanding the principle stated in 2.5.1, in
case of a termination or transfer to a company outside the Group of a Beneficiary’s employment contract, the Chief Executive Officer may approve an accelerated vesting of rights of the Beneficiaries. In this case, the Beneficiary shall exercise
its rights (accelerated or not) before the end of a period of 12 months following the effective date of the termination or transfer of his employment contract or, where appropriate, following the end of the applicable period of unavailability in
accordance with paragraph 2.4.1, provided that the exercise of those Options can never occur after the date of expiry of the exercise period established in that paragraph.
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2.5.3.2 |
Exemptions in case of merger |
By way of exception to the preceding terms and conditions, in the event
of the merger by absorption of the Company by another company, of a public offer for the Company’s Shares or, in any case, the launch of proceedings aimed at withdrawing the Company from official trading on the Paris stock exchange, the Board
of Directors is entitled to decide:
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• |
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That the Options will become definitively vested in their Beneficiaries (without application of the provisions relating to the performance condition referred to in paragraph 2.3.2), in so far as the latter have not lost
the right to exercise their Options by previous termination of their employment contract and they are not directors or officers of the Company (on the Grant Date or on the date of the above decision of the Board). |
The vesting will therefore be effective as of the date of the resolution of the Board of Directors, or as of any other date determined on this
occasion. The Company must inform the Beneficiary by any appropriate means.
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• |
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That, once the Options have been vested, the Options may be exercised at any time as from vesting and up until their expiry, notwithstanding any potential periods of unavailability referred to above in paragraph 2.4.1.
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In the event of termination of the Beneficiary’s employment contract, the terms and conditions of paragraph 2.5.1
above, relating to cases where the Options are vested, will apply.
| 3. |
ADDITIONAL INFORMATION |
| |
3.1 |
Share Form and Entitlement |
Each Option gives the right to subscribe for one Alcatel Lucent share of a
par value of EUR 2 each, subject to any adjustments required by law and applicable regulation.
8/11
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Rules Applicable to Corporate
Stock Subscription Options Plan |
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9
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Effective on: |
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with
performance conditions |
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ANNEX A1i |
|
14 March 2012 |
| |
|
for beneficiary employees
of French companies |
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Shares received by the Beneficiaries through the exercise of Options will be issued in nominative or bearer
form, at the choice of their owners, within the terms and conditions of the by-laws. They will be subject to all conditions imposed by law and by the Company by-laws, and will be entitled to dividends and benefits as from the first day of the fiscal
year during which they are subscribed.
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3.2 |
Upholding of the Rights of Beneficiaries – Adjustments to Option Prices and to the Number of Shares that can be obtained |
Pursuant to article L. 225-181 of the Commercial Code, the upholding of the rights of Beneficiaries of Options will be preserved in the event of transactions
concerning the Company’s share capital by adjustments made to the Option exercise price and the number of Shares that can be subscribed for through the Options in the conditions provided by Articles L. 228-99 and R. 225-137 to 225-143 of the
Commercial Code.
| |
3.3 |
Suspension of the Exercise of Options |
The Board of Directors reserves the right to suspend the right to
exercise Options during a period of no longer than three months, in the event of financial transactions requiring prior knowledge of the exact number of Shares making up the share capital, or in the event of the completion of transactions entailing
an adjustment. This will be the case notably in the event of an increase in share capital or an issuance of securities giving access to share capital, of the distribution of reserves in cash or in portfolio shares, of a merger or disposal, and of a
reduction in share capital following losses. In this case, a letter will be sent to each Beneficiary.
| |
3.4 |
Acknowledgment of Increases in Share Capital |
The Board of Directors or the Chairman of the Board of
Directors shall, each year, in the conditions and within the deadlines defined by the law in force, acknowledge the number and price of the Shares issued during the previous fiscal year or period following the exercise of share Options, and will
make all corresponding amendments to the bylaws.
| |
3.5 |
Consequence of Options Not Exercised |
Vested Options will lapse if not exercised:
| |
• |
|
after a period of 12 months from the end of the period of unavailability if the termination of the employment contract as defined in paragraph 2.5.1 occurs before the end of the period of unavailability referred to in
paragraph 2.4.1; |
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• |
|
after a period of 12 months from the effective date of termination of the employment contract as defined in paragraph 2.5.1 if the termination occurs later than the end of the unavailability period described in
paragraph 2.4.1; |
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• |
|
after a period of 12 months from the end of the unavailability period described in paragraph 2.4.1, following a specific decision by the Chief Executive Officer as defined in paragraph 2.5.3.1; |
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• |
|
after a period of 6 months from the death of the Beneficiary or the date of notification of the Beneficiary’s disability to the Company, as those cases are defined in paragraph 2.5.2; |
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• |
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in any event after the expiration date of the exercise period referred to in paragraph 2.4.1. |
9/11
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ANNEX A1i |
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14 March 2012 |
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for beneficiary employees
of French companies |
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Options whose rights are not vested because of previous termination or transfer of the employment contract of
one or more Beneficiaries within the 24 months following the Grant Date will be null and void only with regard to the Beneficiary concerned. The Board of Directors may dispose of such Options for a new grant to be decided by it pursuant to the
shareholders’ authorization of June 1, 2010. In particular, this new grant will be decided only in so far as the shareholder’s authorization of June 1, 2010 has not expired and that the grant falls within the thresholds
fixed by the aforementioned authorization. The Subscription Price must to be fixed by the board of directors during the new grant pursuant to the terms and conditions defined by the shareholders’ authorization of June 1, 2010.
| |
3.6 |
Rules Concerning Privileged Information and Insider Trading |
Alcatel Lucent publishes its Insider
Trading Policy.
The purpose of this Policy is to preserve the confidentiality of all material non-public information relating to the Group and its
business partners, and to prevent trading in Alcatel Lucent securities or the securities of Alcatel Lucent partners by Company directors, officers, certain employees and their family members while in possession of such information and insofar as
they are “insiders”.
This policy completed by the annual calendar of the transactions period are available on the Intranet site under Corporate
Functions and Legal department sections.
The Board of Directors of the Company may at any time make amendments to the terms and
conditions hereof that will allow the Beneficiaries or the Company or its Subsidiaries to enjoy a favorable tax and social security regime in effect, or avoid any unfavorable effects that new legal, tax, accounting, or social security provisions may
have on the Company or its financial statements. These amendments may take the form of sub-plan applicable only for certain Beneficiaries only.
| |
3.8 |
Taxes and social security contributions |
The Beneficiaries must conform to the terms and conditions
imposed by the Company, its Subsidiaries, or any other person appointed by the Company or its Subsidiaries for the payment (including withholding taxes) of any social security contributions (including the employee social security contributions) or
taxes in the country where the Beneficiary resides or any other country in relation to the Options (or Shares subscribed by the exercise of Options).
The
Beneficiaries, the Company, and its Subsidiaries will respect all filing obligations with the tax and social security authorities to which they may be subject.
The terms and conditions herein shall be construed and interpreted in accordance with
French law.
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ANNEX A1i |
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14 March 2012 |
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for beneficiary employees
of French companies |
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| 4. |
EXAMPLE OF THE IMPLEMENTATION OF THE CONDITIONS |
11/11
Exhibit (e)(18)
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Rules Applicable to Corporate Stock
Subscription Options Plan |
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Page
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companies |
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13 August 2012 |
This document is an unofficial English-language translation from the French-language “Règles applicables aux
Plans Corporate d’Options de souscription d’actions ordinaires sous conditions de performance pour les bénéficiaires salariés de sociétés françaises “ applied by Alcatel Lucent. This
translation has been prepared for convenience purposes only. While this English-language version represents an acceptable translation of the plan, the stock options described herein are governed by the original French-language plan. In the event of
any inconsistency between this translation and the original French-language text, the French-language text will govern. You may obtain a copy of the French-language text upon request.
The purpose of this plan is to define the terms and conditions applicable to the Stock Subscription Options Plan adopted by the Board of Directors of Alcatel
Lucent.
****
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SUMMARY
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| 1. |
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DEFINITIONS |
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3 |
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| 2. |
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GENERAL CONDITIONS |
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4 |
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2.1 |
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Beneficiaries and Companies Concerned |
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4 |
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2.2 |
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Method of Grant |
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4 |
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2.2.1 |
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Individual notification |
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2.2.2 |
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Formal acceptance or rejection of grant |
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2.3 |
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Beneficiaries’ Rights |
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5 |
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2.4 |
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Conditions for the Exercise of Options |
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5 |
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2.4.1 |
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Exercise and unavailability Periods |
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5 |
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2.4.2 |
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Subscription Price |
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5 |
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2.4.3 |
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Exercise Conditions |
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6 |
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2.5 |
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Status of Options in the Case of Termination or Transfer of the Employment Contract |
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6 |
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2.5.1 |
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General Principles |
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6 |
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2.5.2 |
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Death and disability |
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6 |
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2.5.3 |
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Exceptions |
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7 |
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2.5.3.1 |
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The express decision of the Chief Executive Officer |
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2.5.3.2 |
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Exemptions in case of merger |
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7 |
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| 3. |
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ADDITIONAL INFORMATION |
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7 |
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3.1 |
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Share Form and Entitlement |
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7 |
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3.2 |
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Upholding of the Rights of Beneficiaries – Adjustments to Option Prices and to the Number of Shares that can be
Obtained |
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8 |
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3.3 |
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Suspension of the Exercise of Options |
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8 |
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3.4 |
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Acknowledgment of Increases in Share Capital |
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8 |
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3.5 |
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Consequence of Options Not Exercised |
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8 |
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3.6 |
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Rules Concerning Privileged Information and Insider Trading |
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9 |
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3.7 |
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Amendments |
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9 |
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3.8 |
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Taxes and social security contributions |
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9 |
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3.9 |
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Governing law |
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9 |
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2/9
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Subscription Options Plan |
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13 August 2012 |
In this Plan, the following words and expressions have the following meaning:
Acquisition Period means the period starting on Grant Date and finishing on the fourth anniversary of the Grant Date;
Beneficiary means an employee of the Company or one its Subsidiaries headquartered in France and who benefits from an Option Grant;
Company means Alcatel Lucent;
Grant
Date means the date of the Board of Directors deciding the Option Grant or any later date fixed by it;
Group means the Company and
its Subsidiaries;
Option means a right to subscribe for one share in the Company at the price fixed at the Grant Date, subject to any
adjustment required by law;
Option Grant means the award of options for the subscription of shares as decided by the Board of Directors of
the Company pursuant to an authorization which was granted to it by the shareholders of the Company at the extraordinary general meeting of June 1, 2010, and in accordance with Articles L. 225-177 and Seq. of the Commercial Code and this
Plan;
Plan means this document;
Share means an ordinary share of the Company;
Subscription Price means the price to be paid to subscribe for one Share in exercise of an Option;
Subsidiary means any economic interest grouping or any company in which at least 50% of the share capital or voting rights are held directly or
indirectly by the Company.
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2.1 |
Beneficiaries and Companies Concerned |
The Beneficiaries must be related to the Company or a Subsidiary
located in France by an employment contract or relationship having come into force and in effect as of the Grant Date. Directors or officers of the Company and members or future members of the Management Committee cannot be Beneficiaries of Options
granted by virtue of this plan.
The list of Beneficiaries in the Plan as well as the number of Options granted to each Beneficiary is approved by the
Board of Directors of the Company.
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2.2.1 |
Individual notification |
Each Beneficiary will be informed individually by mail of the conditions which
govern the Option Grant, in particular:
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(a) |
the number of Options awarded; |
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(c) |
the duration of the exercise period; |
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(d) |
the procedure for acceptance or rejection of the Option Grant. |
The full version of this Plan is available on
the Company intranet to read or to download.
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2.2.2 |
Formal acceptance or rejection of grant |
Each Beneficiary must expressly accept or reject the terms and
conditions of the Option Grant by following the procedure provided for this purpose on the Company intranet within 80 days of the individual notification.
Acceptance will be deemed to include in particular acceptance by the Beneficiary of the terms of the Plan, the conditions stipulated in the individual
notification and all tax or social security consequences attached to the Option Grant.
Any Beneficiary who does not follow this procedure for acceptance
or rejection will permanently forfeit his rights to the Option Grant, without being able to claim any compensation or indemnity from his employer, the Company or any of its Subsidiaries.
4/9
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Subscription Options Plan |
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for beneficiary employees of French
companies |
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13 August 2012 |
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2.3 |
Beneficiaries’ Rights |
Subject to the instances described in paragraph 2.5.2 or, where
appropriate, the application of paragraph 2.5.3, the rights attached to the Options will definitively vest in the Beneficiaries provided that, at the expiration date of each of the periods defined below, the Beneficiaries maintain their position as
employees of the Company or a company controlled by it pursuant to Article L. 233-16 of the Commercial Code.
Beneficiaries’ rights will vest,
subject to fulfillment of condition of presence listed below in accordance with a calendar covering a four-year period as from the Grant Date by the Board of Directors. The vesting of the rights will be in 3 periods at a rate of up to 50% of the
total Options awarded after a period of two years from the Grant Date and then at the rate of a maximum of 25% of total Options granted at the end of each of the following two years.
In certain instances of termination or transfer of employment contract listed below, non-vested rights may, via the effect of an exceptional acceleration,
become vested in the Beneficiaries of the Options on the conditions described at paragraphs 2.5.3.
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2.4 |
Conditions for the Exercise of Options |
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2.4.1 |
Exercise and unavailability Periods |
A Beneficiary may exercise his or her Options at any time
following vesting of the Options, during a period of eight years from the Grant Date, subject to the specific deadlines to exercise when the vesting results from the acceleration provided in paragraphs 2.5.2 and 2.5.3.
However, and by way of exception to the above, Beneficiaries who are employees of a company whose registered office is located in France may not exercise
their Options before the expiration of a period of unavailability set by Article 163 bis C of the French General Tax Code, which currently, is four years from the Grant Date, except in cases of death and disability referred to in paragraph
2.5.2.
Any Option not exercised at the expiration date of the exercise period of the Options as described in the first paragraph above, will lapse.
The Subscription Price of the Shares is equal, for each Option giving a right to one
Share, to the average of opening prices of the Alcatel-Lucent Share on the NYSE Euronext Paris market during the 20 trading days preceding the date of the meeting of the Board which is deciding on an Option Grant, rounded up to the nearest one tenth
of a euro. The Subscription Price must be paid in full upon exercise of the Option.
The subscription price per Alcatel Lucent share is equal to 2 Euros,
equivalent to the nominal value of the share, after considering that the average opening price of the Alcatel-Lucent share on the NYSE Euronext Paris stock market over the 20 trading days from July 16 to August 10, 2012, namely 1 euro per
share, is lower than the nominal value of the share. The subscription price is 100% over the said average price.
5/9
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for beneficiary employees of French
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13 August 2012 |
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2.4.3 |
Exercise Conditions |
The Options may only be exercised by the Beneficiary up to a maximum level of the
number of rights definitively vested pursuant to the provisions of paragraph 2.3 above or, in the event of acceleration, in accordance with the terms of paragraphs 2.5.2 or 2.5.3.
Options will be exercised by sending a duly signed and dated subscription form by any means, addressed either to the Company or to an agent appointed by the
Company, together with the payment corresponding to the Subscription Price for the Shares subscribed for through the Options.
In case of successive
allotments of Options to the same Beneficiary, his rights and the conditions for the exercise of the Options will be separate, according to the date at which said Options were granted and the conditions of the applicable plan. These rights and
conditions will be governed by the respective plans under which they were granted.
| |
2.5 |
Status of Options in the Case of Termination or Transfer of the Employment Contract |
Rights to Options definitively vested at the effective date of the termination of
the employment contract may be exercised within a reduced period of 12 months, as from the end of the period of unavailability in accordance with paragraph 2.4.1, provided that the exercise of the said Options may never take place after the
expiration date of the exercise period set out in that paragraph.
Options which have not definitively vested at the effective date of the termination or
transfer of the employment contract may no longer be exercised and become null and void as from the effective end date of the employment contract.
| |
2.5.2 |
Death and disability |
In the event of a Beneficiary’s death or disability corresponding to the 2nd
or 3rd category, as defined in section L. 314-4 of the French social security code, the Options granted by the Board of Directors shall be maintained in full in favour of the Beneficiary (and in case of death in favour of the deceased’s heirs)
whether or not the corresponding rights have vested at the date of death or the effective date of the termination of his responsibilities being the date at which the Company is notified of the disability, whichever is the case.
The Beneficiary or the deceased’s heirs must exercise their rights before the end of a six-month period following the death or date of notification of
the disability to the Company, provided that the exercise of these Options may never occur after the termination of the exercise period.
After the
termination of the exercise period, the Beneficiary will no longer be entitled to exercise the Options that have lapsed.
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13 August 2012 |
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2.5.3.1 |
The express decision of the Chief Executive Officer |
Notwithstanding the principle stated in 2.5.1, in
case of a termination or transfer to a company outside the Group of a Beneficiary’s employment contract, the Chief Executive Officer may approve an accelerated vesting of rights of the Beneficiaries. In this case, the Beneficiary shall exercise
its rights (accelerated or not) before the end of a period of 12 months following the effective date of the termination or transfer of his employment contract or, where appropriate, following the end of the applicable period of unavailability in
accordance with paragraph 2.4.1, provided that the exercise of those Options can never occur after the date of expiry of the exercise period established in that paragraph.
| |
2.5.3.2 |
Exemptions in case of merger |
By way of exception to the preceding terms and conditions, in the event of
the merger by absorption of the Company by another company, of a public offer for the Company’s Shares or, in any case, the launch of proceedings aimed at withdrawing the Company from official trading on the Paris stock exchange, the Board of
Directors is entitled to decide:
| |
• |
|
That the Options will become definitively vested in their Beneficiaries, in so far as the latter have not lost the right to exercise their Options by previous termination of their employment contract and they are not
directors or officers of the Company (on the Grant Date or on the date of the above decision of the Board). |
The vesting will
therefore be effective as of the date of the resolution of the Board of Directors, or as of any other date determined on this occasion. The Company must inform the Beneficiary by any appropriate means.
| |
• |
|
That, once the Options have been vested, the Options may be exercised at any time as from vesting and up until their expiry, notwithstanding any potential periods of unavailability referred to above in paragraph 2.4.1.
|
In the event of termination of the Beneficiary’s employment contract, the terms and conditions of paragraph 2.5.1
above, relating to cases where the Options are vested, will apply.
| 3. |
ADDITIONAL INFORMATION |
| |
3.1 |
Share Form and Entitlement |
Each Option gives the right to subscribe for one Alcatel Lucent share of a
par value of EUR 2 each, subject to any adjustments required by law and applicable regulation.
Shares received by the Beneficiaries through the exercise
of Options will be issued in nominative or bearer form, at the choice of their owners, within the terms and conditions of the by-laws. They will be subject to all conditions imposed by law and by the Company by-laws, and will be entitled to
dividends and benefits as from the first day of the fiscal year during which they are subscribed.
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for beneficiary employees of French
companies |
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13 August 2012 |
| |
3.2 |
Upholding of the Rights of Beneficiaries – Adjustments to Option Prices and to the Number of Shares that can be Obtained |
Pursuant to article L. 225-181 of the Commercial Code, the upholding of the rights of Beneficiaries of Options will be preserved in the event of transactions
concerning the Company’s share capital by adjustments made to the Option exercise price and the number of Shares that can be subscribed for through the Options in the conditions provided by Articles L. 228-99 and R. 225-137 to 225-143 of the
Commercial Code.
| |
3.3 |
Suspension of the Exercise of Options |
The Board of Directors reserves the right to suspend the right to
exercise Options during a period of no longer than three months, in the event of financial transactions requiring prior knowledge of the exact number of Shares making up the share capital, or in the event of the completion of transactions entailing
an adjustment. This will be the case notably in the event of an increase in share capital or an issuance of securities giving access to share capital, of the distribution of reserves in cash or in portfolio shares, of a merger or disposal, and of a
reduction in share capital following losses. In this case, a letter will be sent to each Beneficiary.
| |
3.4 |
Acknowledgment of Increases in Share Capital |
The Board of Directors or the Chairman of the Board of
Directors shall, each year, in the conditions and within the deadlines defined by the law in force, acknowledge the number and price of the Shares issued during the previous fiscal year or period following the exercise of share Options, and will
make all corresponding amendments to the bylaws.
| |
3.5 |
Consequence of Options Not Exercised |
Vested Options will lapse if not exercised:
| |
• |
|
after a period of 12 months from the end of the period of unavailability if the termination of the employment contract as defined in paragraph 2.5.1 occurs before the end of the period of unavailability referred to in
paragraph 2.4.1; |
| |
• |
|
after a period of 12 months from the effective date of termination of the employment contract as defined in paragraph 2.5.1 if the termination occurs later than the end of the unavailability period described in
paragraph 2.4.1; |
| |
• |
|
after a period of 12 months from the end of the unavailability period described in paragraph 2.4.1, following a specific decision by the Chief Executive Officer as defined in paragraph 2.5.3.1; |
| |
• |
|
after a period of 6 months from the death of the Beneficiary or the date of notification of the Beneficiary’s disability to the Company, as those cases are defined in paragraph 2.5.2; |
| |
• |
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in any event after the expiration date of the exercise period referred to in paragraph 2.4.1. |
8/9
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Rules Applicable to Corporate Stock
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Effective on: |
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13 August 2012 |
Options whose rights are not vested because of previous termination or transfer of the employment contract of
one or more Beneficiaries within the 24 months following the Grant Date will be null and void only with regard to the Beneficiary concerned. The Board of Directors may dispose of such Options for a new grant to be decided by it pursuant to the
shareholders’ authorization of June 1, 2010. In particular, this new grant will be decided only in so far as the shareholder’s authorization of June 1, 2010 has not expired and that the grant falls within the thresholds
fixed by the aforementioned authorization. The Subscription Price must to be fixed by the board of directors during the new grant pursuant to the terms and conditions defined by the shareholders’ authorization of June 1, 2010.
| |
3.6 |
Rules Concerning Privileged Information and Insider Trading |
Alcatel Lucent publishes its Insider
Trading Policy.
The purpose of this Policy is to preserve the confidentiality of all material non-public information relating to the Group and its
business partners, and to prevent trading in Alcatel Lucent securities or the securities of Alcatel Lucent partners by Company directors, officers, certain employees and their family members while in possession of such information and insofar as
they are “insiders”.
This policy completed by the annual calendar of the transactions period are available on the Intranet site under Corporate
Functions and Legal department sections.
The Board of Directors of the Company may at any time make amendments to the terms and
conditions hereof that will allow the Beneficiaries or the Company or its Subsidiaries to enjoy a favourable tax and social security regime in effect, or avoid any unfavourable effects that new legal, tax, accounting, or social security provisions
may have on the Company or its financial statements. These amendments may take the form of sub-plan applicable only for certain Beneficiaries only.
| |
3.8 |
Taxes and social security contributions |
The Beneficiaries must conform to the terms and conditions
imposed by the Company, its Subsidiaries, or any other person appointed by the Company or its Subsidiaries for the payment (including withholding taxes) of any social security contributions (including the employee social security contributions) or
taxes in the country where the Beneficiary resides or any other country in relation to the Options (or Shares subscribed by the exercise of Options).
The
Beneficiaries, the Company, and its Subsidiaries will respect all filing obligations with the tax and social security authorities to which they may be subject.
The terms and conditions herein shall be construed and interpreted in accordance with
French law.
9/9
Exhibit (e)(21)
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Rules Applicable to Corporate
Stock Subscription Options |
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Page
1
of 9 |
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Effective on: |
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Plan for beneficiary employees of
French companies |
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July 12th, 2013 (decision of the Board
of Directors of June 30,
2013) |
This document is an unofficial English-language translation from the French-language “Règles applicables aux
Plans Corporate d’Options de souscription d’actions ordinaires pour les bénéficiaires salariés des sociétés françaises” applied by Alcatel Lucent. This translation has been prepared for
convenience purposes only. While this English-language version represents an acceptable translation of the plan, the stock options described herein are governed by the original French-language plan. In the event of any inconsistency between this
translation and the original French-language text, the French-language text will govern. You may obtain a copy of the French-language text upon request.
Below you will find the common rules regarding the Corporate Stock Subscription Options Plan (the “Plan”) decided by the Board of Directors of
Alcatel Lucent.
****
1/9
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Rules Applicable to Corporate
Stock Subscription Options |
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Page
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of 9 |
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Effective on: |
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Plan for beneficiary employees of
French companies |
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July 12th, 2013 (decision of the Board
of Directors of June 30,
2013) |
SUMMARY
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| 1. |
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DEFINITIONS |
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3 |
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| 2. |
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GENERAL CONDITIONS |
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4 |
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2.1 |
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Beneficiaries and Companies Concerned |
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4 |
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2.2 |
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Method of Grant |
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4 |
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2.2.1 |
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Individual notification |
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4 |
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2.2.2 |
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Formal acceptance or rejection of grant |
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4 |
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2.3 |
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Beneficiaries’ Rights |
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5 |
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2.4 |
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Conditions for the Exercise of Options |
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5 |
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2.4.1 |
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Exercise Period |
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5 |
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2.4.2 |
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Subscription Price |
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5 |
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2.4.3 |
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Exercise Conditions |
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5 |
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2.5 |
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Status of Options in the Case of Termination or Transfer of the Employment Contract |
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6 |
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2.5.1 |
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General Principles |
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6 |
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2.5.2 |
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Death and disability |
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6 |
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2.5.3 |
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Exceptions |
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6 |
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2.5.3.1 |
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The express decision of the Chief Executive Officer |
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6 |
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2.5.3.2 |
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Exemptions in case of merger |
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7 |
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| 3. |
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ADDITIONAL INFORMATION |
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7 |
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3.1 |
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Share Form and Entitlement |
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7 |
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3.2 |
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Upholding of the Rights of Beneficiaries – Adjustments to Option Prices and to the Number of Shares that can be
Obtained |
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7 |
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3.3 |
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Suspension of the Exercise of Options |
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7 |
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3.4 |
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Acknowledgment of Increases in Share Capital |
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8 |
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3.5 |
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Consequence of Options Not Exercised |
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8 |
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3.6 |
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Rules Concerning Privileged Information and Insider Trading |
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8 |
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3.7 |
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Amendments |
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9 |
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3.8 |
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Taxes and social security contributions |
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9 |
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3.9 |
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Governing law |
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9 |
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2/9
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Rules Applicable to Corporate
Stock Subscription Options |
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Page
3
of 9 |
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Effective on: |
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Plan for beneficiary employees of
French companies |
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July 12th, 2013 (decision of the Board
of Directors of June 30,
2013) |
In this Plan, the following words and expressions have the following meaning:
Acquisition Period means the period starting on Grant Date and finishing on the fourth anniversary of the Grant Date;
Beneficiary means an employee of the Company or one its Subsidiaries headquartered in France and who benefits from an Option Grant;
Company means Alcatel Lucent;
Grant
Date means the date enforcement of the decision of the Board of Directors fixed on July 12th, 2013;
Group means the Company and its Subsidiaries;
Option means a right to subscribe for one share in the Company at the price fixed at the Grant Date, subject to any adjustment required by law;
Option Grant means the award of options for the subscription of shares as decided by the Board of Directors pursuant to an authorization
granted to the Board of Directors by the Company’s extraordinary shareholders’ meeting held on June 1, 2010, and in accordance with Articles L. 225-177 et seq. of the Commercial Code and this Plan;
Plan means this document;
Share
means an ordinary share of the Company;
Subscription Price means the price to be paid to subscribe for one Share in exercise of an Option;
Subsidiary means any economic interest grouping or any company in which at least 50% of the share capital or voting rights are held
directly or indirectly by the Company.
3/9
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Rules Applicable to Corporate
Stock Subscription Options |
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Page
4
of 9 |
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Effective on: |
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Plan for beneficiary employees of
French companies |
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July 12th, 2013 (decision of the Board
of Directors of June 30,
2013) |
| |
2.1 |
Beneficiaries and Companies Concerned |
The Beneficiaries must be bound to the Company or to a
Subsidiary whose registered office is located in France, by an employment contract having come into force and become effective as of the Grant date. Directors or officers of the Company and members or future members of the Leadership Team cannot be
Beneficiaries of Options granted by virtue of this plan.
The list of Beneficiaries as well as the number of Options granted to each Beneficiary is
approved by the Board of Directors of the Company.
Awards are made to each Beneficiary subject to the approval of the competent authorities (notably the
regulatory and market surveillance authorities, exchange control and foreign investment or tax authorities).
| |
2.2.1 |
Individual notification |
Each Beneficiary will be informed individually by mail of the conditions which
govern the Option Grant, in particular:
| |
(a) |
the number of Options awarded; |
| |
(c) |
the duration of the exercise period; |
| |
(d) |
the procedure for acceptance or rejection of the Option Grant. |
The full version of this Plan is available on
the Company intranet to read or to download.
| |
2.2.2 |
Formal acceptance or rejection of grant |
Each Beneficiary must expressly accept or reject the terms and
conditions of the Option Grant by following the procedure provided for this purpose on the Company intranet within 80 days of the individual notification.
Acceptance will be deemed to include in particular acceptance by the Beneficiary of the terms of the Plan, the conditions stipulated in the individual
notification and all tax or social security consequences attached to the Option Grant.
Any Beneficiary who does not follow this procedure for acceptance
or rejection will permanently forfeit his rights to the Option Grant, without being able to claim any compensation or indemnity from his employer, the Company or any of its Subsidiaries.
4/9
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Rules Applicable to Corporate
Stock Subscription Options |
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Page
5
of 9 |
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Effective on: |
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Plan for beneficiary employees of
French companies |
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July 12th, 2013 (decision of the Board
of Directors of June 30,
2013) |
| |
2.3 |
Beneficiaries’ Rights |
Subject to the instances described in paragraph 2.5.2 or, where appropriate,
the application of paragraph 2.5.3, the rights attached to the Options will definitively vest in the Beneficiaries provided that, at the expiration date of each of the periods defined below, the Beneficiaries maintain their position as employees of
the Company or a company controlled by it pursuant to Article L. 233-16 of the Commercial Code.
Beneficiaries’ rights will vest, subject to the
fulfilment of the condition of presence listed below in accordance with a calendar covering a four-year period as from the Grant Date by the Board of Directors. The vesting of the rights will be in 3 periods at a rate of up to 50% of the total
Options awarded after a period of two years from the Grant Date and then at the rate of a maximum of 25% of total Options granted at the end of each of the following two years.
In certain instances of termination or transfer of employment contract listed below, non-vested rights may, via the effect of an exceptional acceleration,
become vested in the Beneficiaries of the Options on the conditions described at paragraphs 2.5.3.
| |
2.4 |
Conditions for the Exercise of Options |
A Beneficiary may exercise his or her Options at any time following vesting of the
Options, during a period of eight years from the Grant Date, subject to the specific deadlines to exercise when the vesting results from the acceleration provided in paragraphs 2.5.2 and 2.5.3.
Any Option not exercised at the expiration date of the exercise period of the Options as described in the first paragraph above, will lapse.
The subscription price will be equal to the average of opening prices of the Alcatel
Lucent share price on NYSE Euronext Paris market during the 20 trading days preceding the Grant Date of the Options (from June 13th, 2013 to July 11th, 2013), rounded up to the nearest one tenth of a euro. The Subscription Price must be paid in full upon exercise of the Option.
| |
2.4.3 |
Exercise Conditions |
The Options may only be exercised by the Beneficiary up to a maximum level of the
number of rights definitively vested pursuant to the provisions of paragraph 2.3 above or, in the event of acceleration, in accordance with the terms of paragraphs 2.5.2 or 2.5.3.
Options will be exercised by sending a duly signed and dated subscription form by any means, addressed either to the Company or to an agent appointed by the
Company, together with the payment corresponding to the Subscription Price for the Shares subscribed for through the Options.
5/9
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Rules Applicable to Corporate
Stock Subscription Options |
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Page
6
of 9 |
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Effective on: |
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Plan for beneficiary employees of
French companies |
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July 12th, 2013 (decision of the Board
of Directors of June 30,
2013) |
In case of successive allotments of Options to the same Beneficiary, his rights and the conditions for the
exercise of the Options will be separate, according to the date at which said Options were granted and the conditions of the applicable plan. These rights and conditions will be governed by the respective plans under which they were granted.
| |
2.5 |
Status of Options in the Case of Termination or Transfer of the Employment Contract |
Rights to Options definitively vested at the effective date of the termination or
transfer of the employment contract may be exercised within a reduced period of 12 months, as from the effective date of the termination or transfer of the employment contract, provided that the exercise of the said Options may never take place
after the expiration date of the exercise period set out in paragraph 2.4.1.
Options which have not definitively vested at the effective date of the
termination or transfer of the employment contract may no longer be exercised and become null and void as from the effective end date of the employment contract.
| |
2.5.2 |
Death and disability |
In the event of a Beneficiary’s death or disability corresponding to the 2nd
or 3rd category, as defined in section L. 314-4 of the French social security code, the Options granted by the Board of Directors shall be maintained in full in favour of the Beneficiary (and in case of death in favour of the deceased’s heirs)
whether or not the corresponding rights have vested at the date of death or the effective date of the termination of his responsibilities being the date at which the Company is notified of the disability, whichever is the case.
The Beneficiary or the deceased’s heirs must exercise their rights before the end of a six-month period following the death or date of notification of
the disability to the Company, provided that the exercise of these Options may never occur after the termination of the exercise period.
After the
termination of the exercise period, the Beneficiary will no longer be entitled to exercise the Options that have lapsed.
| |
2.5.3.1 |
The express decision of the Chief Executive Officer |
Notwithstanding the principle stated in 2.5.1, in
case of a termination or transfer to a company outside the Group of a Beneficiary’s employment contract, the Chief Executive Officer may approve an accelerated vesting of rights of the Beneficiaries. In this case, the Beneficiary shall exercise
its rights (accelerated or not) before the end of a period of 12 months following the effective date of the termination or transfer of his employment contract, provided that the exercise of those Options can never occur after the date of expiry of
the exercise period established in paragraph 2.4.1.
6/9
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Rules Applicable to Corporate
Stock Subscription Options |
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Page
7
of 9 |
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Effective on: |
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Plan for beneficiary employees of
French companies |
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|
July 12th, 2013 (decision of the Board
of Directors of June 30,
2013) |
| |
2.5.3.2 |
Exemptions in case of merger |
By way of exception to the preceding terms and conditions, in the event
of the merger by absorption of the Company by another company, of a public offer for the Company’s Shares or, in any case, the launch of proceedings aimed at withdrawing the Company from official trading on the Paris stock exchange, the Board
of Directors is entitled to decide:
| |
• |
|
That the Options will become definitively vested in their Beneficiaries, in so far as the latter have not lost the right to exercise their Options by previous termination of their employment contract and they are not
directors or officers of the Company (on the Grant Date or on the date of the above decision of the Board). |
The vesting will
therefore be effective as of the date of the resolution of the Board of Directors, or as of any other date determined on this occasion. The Company must inform the Beneficiary by any appropriate means.
| |
• |
|
That, once the Options have been vested, the Options may be exercised at any time as from vesting and up until their expiry. |
In the event of termination of the Beneficiary’s employment contract, the terms and conditions of paragraph 2.5.1 above, relating to cases
where the Options are vested, will apply.
| 3. |
ADDITIONAL INFORMATION |
| |
3.1 |
Share Form and Entitlement |
Each Option gives the right to subscribe for one Alcatel Lucent at the
nominal value, subject to any adjustments required by law and applicable regulation.
Shares received by the Beneficiaries through the exercise of Options
will be issued in nominative or bearer form, at the choice of their owners, within the terms and conditions of the by-laws. They will be subject to all conditions imposed by law and by the Company by-laws, and will be entitled to dividends and
benefits as from the first day of the fiscal year during which they are subscribed.
| |
3.2 |
Upholding of the Rights of Beneficiaries – Adjustments to Option Prices and to the Number of Shares that can be Obtained |
Pursuant to article L. 225-181 of the Commercial Code, the upholding of the rights of Beneficiaries of Options will be preserved in the event of transactions
concerning the Company’s share capital by adjustments made to the Option exercise price and the number of Shares that can be subscribed for through the Options in the conditions provided by Articles L. 228-99 and R. 225-137 to 225-143 of the
Commercial Code.
| |
3.3 |
Suspension of the Exercise of Options |
The Board of Directors reserves the right to suspend the right to
exercise Options during a period of no longer than three months, in the event of financial transactions requiring prior knowledge of the exact
7/9
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Rules Applicable to Corporate
Stock Subscription Options |
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Page
8
of 9 |
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Effective on: |
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Plan for beneficiary employees of
French companies |
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July 12th, 2013 (decision of the Board
of Directors of June 30,
2013) |
number of Shares making up the share capital, or in the event of the completion of transactions entailing an adjustment. This will be the case notably in the event of an increase in share capital
or an issuance of securities giving access to share capital, of the distribution of reserves in cash or in portfolio shares, of a merger or disposal, and of a reduction in share capital following losses. In this case, a letter will be sent to each
Beneficiary.
| |
3.4 |
Acknowledgment of Increases in Share Capital |
The Board of Directors or the Chairman of the Board of
Directors or the Chief Executive Officer shall, each year, in the conditions and within the deadlines defined by the law in force, acknowledge the number and price of the Shares issued during the previous fiscal year or period following the exercise
of share Options, and will make all corresponding amendments to the bylaws.
| |
3.5 |
Consequence of Options Not Exercised |
Vested Options will lapse if not exercised:
| |
• |
|
after a period of 12 months from the termination of the employment contract as defined in paragraph 2.5.1; |
| |
• |
|
after a period of 12 months from the effective date of the termination or transfer of the employment contract following a specific decision by the Chief Executive Officer as defined in paragraph 2.5.3.1;
|
| |
• |
|
after a period of 6 months from the death of the Beneficiary or the date of notification of the Beneficiary’s disability to the Company, as those cases are defined in paragraph 2.5.2; |
| |
• |
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in any event after the expiration date of the exercise period referred to in paragraph 2.4.1. |
Options whose
rights are not vested because of previous termination or transfer of the employment contract of one or more Beneficiaries within the 24 months following the Grant Date will be null and void only with regard to the Beneficiary concerned. The Board of
Directors may dispose of such Options for a new grant to be decided by it pursuant to the shareholders’ authorization of June 1, 2010. In particular, this new grant will be decided only in so far as the shareholder’s authorization of
June 1, 2010 has not expired and that the grant falls within the thresholds fixed by the aforementioned authorization. The Subscription Price must to be fixed by the board of directors during the new grant pursuant to the terms and
conditions defined by the shareholders’ authorization of June 1, 2010.
| |
3.6 |
Rules Concerning Privileged Information and Insider Trading |
Alcatel Lucent publishes its Insider
Trading Policy.
The purpose of this Policy is to preserve the confidentiality of all material non-public information relating to the Group and its
business partners, and to prevent trading in Alcatel Lucent securities or the securities of Alcatel Lucent partners by Company directors, officers, certain employees and their family members while in possession of such information and insofar as
they are “insiders”.
This policy completed by the annual calendar of the transactions period are available on the Intranet site under Corporate
Functions and Legal department sections.
8/9
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Rules Applicable to Corporate
Stock Subscription Options |
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Page
9
of 9 |
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Effective on: |
| |
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Plan for beneficiary employees of
French companies |
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|
|
July 12th, 2013 (decision of the Board
of Directors of June 30,
2013) |
The Board of Directors of the Company may at any time make amendments to the terms and
conditions hereof that will allow the Beneficiaries or the Company or its Subsidiaries to enjoy a favourable tax and social security regime in effect, or avoid any unfavourable effects that new legal, tax, accounting, or social security provisions
may have on the Company or its financial statements. These amendments may take the form of sub-plan applicable only for certain Beneficiaries only.
| |
3.8 |
Taxes and social security contributions |
The Beneficiaries must conform to the terms and conditions
imposed by the Company, its Subsidiaries, or any other person appointed by the Company or its Subsidiaries for the payment (including withholding taxes) of any social security contributions (including the employee social security contributions) or
taxes in the country where the Beneficiary resides or any other country in relation to the Options (or Shares subscribed by the exercise of Options).
The
Beneficiaries, the Company, and its Subsidiaries will respect all filing obligations with the tax and social security authorities to which they may be subject.
The terms and conditions herein shall be construed and interpreted in accordance with
French law.
9/9
Exhibit (e)(23)
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Rules applicable to
Performance Shares granted to
beneficiaries employed by
French companies |
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Page
1
of 12 |
|
Effective on: July 12th, 2013 |
This document is an unofficial English-language translation from the French-language “Règles applicables au
Plan d’actions de performance attribuées aux bénéficiaires, salariés des sociétés françaises” applied by Alcatel Lucent. This translation has been prepared for convenience purposes only.
While this English-language version represents an acceptable translation of the plan, the performance shares described herein are governed by the original French-language plan. In the event of any inconsistency between this translation and the
original French-language text, the French-language text will govern. You may obtain a copy of the French-language text upon request.
***************
The purpose of this Plan is to
define the terms and conditions applicable to the award of performance shares to employees, whose contracts of employment are in force at the Grant Date, of Alcatel Lucent or companies affiliated to Alcatel-Lucent within the meaning of article L.
225-197-2 of the French Commercial Code whose registered office is located in France.
This award of performance shares is governed by the provisions of
articles L.225-197-1 et seq. of the French Commercial Code, articles 212-4 and 212-5 of the General Rules of the Autorité des Marchés Financiers, and the provisions hereof.
1/12
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Rules applicable to
Performance Shares granted to
beneficiaries employed by
French companies |
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Page
2
of 12 |
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Effective on: July 12th, 2013 |
SUMMARY
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| 1 – Definitions |
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3 |
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| 2 – Grant of Performance Shares |
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4 |
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| 2.1. Beneficiaries |
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4 |
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| 2.2. Terms of the awards |
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4 |
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| 3 – Vesting period |
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5 |
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| 3.1. Duration of the vesting period |
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5 |
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| 3.2. Rights of the Beneficiary during the vesting period |
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5 |
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| 3.3. Vesting of the Performance Shares |
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5 |
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| 3.4. Death or invalidity of the Beneficiary during the vesting period |
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8 |
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| 3.5. Status of the beneficiary’s rights in the event of a change in the legal unit status of the Company |
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8 |
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| 3.6. Delivery of shares |
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9 |
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| 3.7. Source of shares |
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9 |
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| 3.8. Rights of the Beneficiary |
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9 |
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| 3.9. Listing of the new shares |
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10 |
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| 4 – Holding period |
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10 |
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| 4.1. Temporary non-transferability of shares |
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10 |
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| 4.2. Exceptions to non-transferability of shares |
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10 |
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| 4.3. Holding conditions |
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10 |
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| 5 – Status of shares at the end of the holding period |
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10 |
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| 5.1. Transferability of shares |
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10 |
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| 5.2. Periods when the transfer of shares is prohibited |
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10 |
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| 6 – Amendments |
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11 |
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| 7 – Tax and social security contributions |
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11 |
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| 7.1. Payment |
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11 |
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| 7.2. Filing obligations |
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11 |
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| 8 – Duration |
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11 |
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| 9 – Governing law |
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11 |
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| 10 – List of selected Telecommunications equipment providers |
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|
12 |
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2/12
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Rules applicable to
Performance Shares granted to
beneficiaries employed by
French companies |
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Page
3
of 12 |
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Effective on: July 12th, 2013 |
1. DEFINITIONS
The following words and expressions used in these Rules with a capital initial shall have the meaning given below:
Affiliate means any company or economic interest grouping (groupement d’intérêt économique), at least 50% of the
share capital or voting rights of which are held directly or indirectly by the Company;
Award of Performance Shares means the award of
shares for no consideration, under performance conditions, decided by the Board of Directors of the Company pursuant to the authorization given to it by the shareholders’ meeting of June 1, 2010, and pursuant to the provisions of articles
L. 225-197-1 et seq. of the French Commercial Code and these Rules;
Beneficiary means an employee or senior officer
(mandataire social) listed in article L. 225-197-1 of the French Commercial Code of the Company or an Affiliate who is awarded Performance Shares by the Board of Directors of the Company;
Company means Alcatel Lucent;
Conditions means the conditions to which the Vesting of Shares is subject, in accordance with the provisions of paragraph 3.3;
Grant Date means the date enforcement of the decision of the Board of Directors fixed on July 12th, 2013;
Group means the Company and its Affiliates;
Holding Period means the period starting from the Vesting Date and ending on the day of the second anniversary of the Vesting Date
Performance Shares means an award representing the right to receive one Share per performance shares at the expiration of the Vesting Period,
provided that the Conditions are met;
Rules means this document;
Share means one ordinary share of the Company;
Trading Day means any day on which NYSE Euronext Paris market is open for trading;
Vesting Date means the first business day following the second anniversary of the Grant Date;
Vesting of Performance Shares means the conversion of the Performance Shares into Shares and the transfer of the ownership of such Shares to the
Beneficiary at the expiration of the Vesting Period, provided that the Conditions are met;
Vesting Period means the period starting from
the Grant Date and ending on the day of the second anniversary of the Grant Date.
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2. GRANT OF PERFORMANCE SHARES
2.1. Beneficiaries
The Beneficiaries shall be
designated by the Board of Directors of the Company among the employees and senior officers (mandataires sociaux) listed in article L. 225-197-1 of the French Commercial Code of the Company or its Affiliates whose registered office is
located in France.
The list of Beneficiaries selected by the Board of Directors of the Company is annexed to the minutes of the Board meeting at which
the Award of Performance Shares was decided, and is held by the Secretary of the Board of Directors and signed by the President and the Secretary of the Compensation committee. An electronic copy (CD-Rom) of the list that is authenticated by the
Secretary of the Board of Directors may also be created.
2.2. Terms of the awards
Each Beneficiary shall be informed by an individual letter of the particular
Conditions applicable to his Award of Performance Shares, and in particular:
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a) |
the number of Performance Shares to be awarded to him and therefore, the maximum number of Shares that might be transferred to him; |
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c) |
the duration of the Vesting Period; |
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d) |
the Conditions to which the Vesting of Performance Shares at the Vesting Date is subject; |
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e) |
the Duration of the Holding Period, and the prohibition to transfer Shares before the expiration of the Holding Period |
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f) |
the procedure in order to accept or refuse the Award of Performance Shares. |
The complete version of these
Rules is available on the Company’s intranet for consultation and download.
| 2.2.2 |
Acceptance or refusal |
The Beneficiary shall expressly accept or refuse the terms and conditions of the
Award of Performance Shares by following the process for this purpose as described on the Company’s website and within 80 days of the individual notice.
Acceptance will prevail, particularly acceptance by the Beneficiary to the terms of these Rules, the conditions stipulated in the individual notice (and in
particular the prohibition to transfer shares before the expiration of the Holding Period) and any tax or social security consequences of the Award of Performance Shares or Vesting of Performance Shares.
Any Beneficiary that does not follow this process to expressly accept or refuse the Award Performance Shares shall be deemed to have waived absolutely
any and all rights under the Award of Performance Shares, without being able to claim any compensation or indemnification from his/her employer, the Company or any of its Affiliates.
| 2.2.3 |
No payment required from the Beneficiary |
The Beneficiary of any Award of Performance Shares in
accordance with these Rules shall not be required to make any payment to the Company either on the Grant Date or on the Vesting Date or at a later date, subject to the provisions of paragraph 7.1 below regarding the fulfillment of their tax and
social obligations.
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3. VESTING PERIOD
3.1. Duration of the Vesting Period
Pursuant to
the shareholders’ authorization given on June 1, 2010, the Board of Directors of the Company hereby sets the duration of the Vesting Period to two years from the Grant Date.
3.2. Rights of the Beneficiary during the Vesting Period
| 3.2.1 |
Non-transferability of Performance Shares |
Performance Shares are granted to the Beneficiary in
consideration of his own person and may not be transferred in any way whatsoever, or be pledged in any way, before the expiration of the Vesting Period.
Any action taken in violation of the provisions of this paragraph 3.2.1 produces no effect towards and may not be invoked against the Company and will render
the Performance Shares that were affected null and void. The Beneficiary shall not be entitled to any compensation or indemnity of any kind in relation to the Performance Shares that will be nullified as a result of the preceding sentence.
| 3.2.2 |
Preservation of the Beneficiary’s rights in the event of a financial transaction |
In the event of
financial transactions affecting the Company’s equity during the Vesting Period, the Board of Directors of the Company will have full powers to make any adjustment to the maximum number of Shares that may be delivered to the Beneficiary at the
expiration of the Vesting Period, provided that the Conditions are met, so that the Beneficiary is no better-off no worse-off as a result of such financial transactions.
Since the sole purpose of any such adjustment is to preserve intact the rights of the Beneficiary, any additional Performance Shares awarded as a result of
such an adjustment will be subject to the same conditions as the initial Performance Shares hereunder. In particular, such additional Performance Shares will be subject to the remaining Vesting Period as of the date of the adjustment and the Vesting
of additional Shares will be subject to the same Conditions.
The Beneficiary will be informed of the terms of this adjustment and its effect on his Award
of Performance Shares.
As a result of the above-mentioned adjustments, it is possible that a Beneficiary will no longer meet the conditions that allow
him to enjoy the applicable tax and social security regime. Should this occur, the Beneficiary shall bear the consequences for him of the non-applicability of the tax and social security regime with no recourse against the employer, the Company, or
any of its Affiliates.
3.3. Vesting of the Performance Shares
| 3.3.1 |
Conditions to Vesting of Performance Shares |
Vesting of Performance Shares will take place on the
Vesting Date, subject to the fulfillment of the following performance and continued-employment Conditions:
The performance condition shall be measured on the whole duration of the Vesting
Period, i.e. on a period of two years from the Grant Date.
For the purposes of determining this performance condition, the performance of Alcatel-Lucent
share price shall be compared with those of a representative selection of solutions and services providers in the telecommunications equipment sector, such list being set out in paragraph 10, having been established by the Board of Directors.
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If during the Vesting Period, the nature of the Company’s activities changes such that less than half of
its sales is based on solutions and services provided in the telecommunications equipment sector, the Board of Directors will revise the performance condition during its first meeting following evidence of this situation. Where, during the Vesting
Period, the list set out in paragraph 10 is modified as a result of a change of activities or a corporate transaction (such as a merger or spin-off) affecting one or several companies listed therein, the Board of Directors shall be entitled to
revise the said list.
The reference share price shall be equal to the average of the opening price of the Alcatel Lucent share on the NYSE Euronext Paris
stock market over the 20 trading days preceding the term of each annual period (counted from the Grant Date), rounded up to the nearest one tenth of a Euro. The reference stock market price of the other issuers, part of the above-mentioned
representative selection, shall be calculated on the same basis on their respective main listing stock market and in their corresponding local currency.
The performance of Alcatel Lucent’s share price and of the other issuers in the selection shall be determined on each of the first two anniversary dates
of the Grant Date. A ranking for the Company and the other issuers according to share price performance shall be established.
The number of Performance
Shares vested in connection with the 1st year shall be calculated as follows:
Maximum
number of Performance Shares that may be vested in a 1st tranche: 50% of the total number of Performance Shares,
Vesting ratio of the 1st tranche: the vesting ratio is equal to 100%, 75%, 50% or 0%
depending on the ranking of the Company as compared to other issuers belonging to the panel (see chart below)
Maximum number of Performance Shares for 1st tranche x Vesting ratio
of the 1st tranche
If at the end of the first year, the performance condition is not satisfied or is satisfied only in part, the number of
Performance Shares that have not vested in relation to 1st tranche shall be added to the number of Performance Shares of the second year (equal to 50% of the total number of Performance Shares) in
order to calculate the rights in relation to the 2nd tranche.
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Accordingly, the number of Performance Shares vested in connection with the 2nd year shall be calculated as follows:
Maximum number of Performance Shares that may be
vested in a 2nd tranche: 50% of the total number of Performance Shares + number of Performance Shares that have not vested in relation to the
1st Tranche,
Vesting ratio of the
2nd tranche: the vesting ratio is equal to 100%, 75%, 50% or 0% depending on the ranking of the Company as compared to other issuers belonging to the panel (see chart previous page)
Maximum number of Performance Shares for 2nd tranche x Vesting ratio
of the 2nd tranche
At the end of the vesting period, a number of Performance Shares equal
to the sum of the number of Performance Shares vested in connection with the 1st year and the number of Performance Shares vested in connection with the 2nd year shall be finally vested, subject to satisfaction of the continued-employment condition as set out in paragraph b) below.
At the end of each period, an adviser firm, appointed by the Board of Directors, will provide an analysis on the fulfillment or not of the performance
condition. This analysis will be communicated to the Group Secretary General who will acknowledge the fulfilment or not of the performance condition, who will then inform the Board of Directors at its next meeting.
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b) |
Continued-employment of the Beneficiary |
In addition to the satisfaction of the performance condition set out
in paragraph a) above, a presence condition shall be required over the whole duration of the Vesting Period, i.e. a period of two years from the Grant Date.
Accordingly, Vesting of Performance Shares may only take place at the expiration of the vesting Period if a Beneficiary is an employee or senior officer
(mandataire social) of the Company or one of its Affiliates on the second anniversary date of the Grant Date.
In the event of termination of the
employment contract the Beneficiary before the expiration of the Vesting Period, there shall be no Vesting of Performance Shares to the benefit of the Beneficiary who will not receive Shares. In this situation, 100% of such Beneficiary’s
Performance Shares shall be null and void and forfeited immediately. The termination date is the date at which the employment agreement (or corporate office) of the Beneficiary is effectively terminated, without regards to any potential challenge by
the Beneficiary of its termination or the cause or legal grounds thereof and any court decision that would question the validity or the reasons of the termination.
The Chief Executive Officer may grant an exception to the principles above and deem the continued-employment condition satisfied notwithstanding the
termination of a Beneficiary’s employment contract before the expiration of the Vesting Period. The exception may be individual or collective. In any event, the performance condition set out in paragraph b) above shall continue to apply.
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3.3.2 |
Consequences of non-compliance with the Conditions |
If the continued-employment Condition set in
paragraph 3.3.1(b) above is not met, the Beneficiary shall not be entitled to the Performance Shares and such Performance Shares will not be delivered to him. In such case, the Performances Shares are forfeited immediately.
If the continued-employment Condition set in paragraph 3.3.1(b) above is met but the financial performance Condition is only achieved in part (or not achieved
at all), each Beneficiary shall receive such number of Shares as determined in accordance with the provisions of paragraph 3.3.1(a) and the balance of his Performance Shares shall be forfeited forthwith.
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The partial or total forfeiture of Performance Shares resulting from the non-compliance with the
continued-employment Condition or non-satisfaction or partial satisfaction only of the performance Condition shall not entitle the Beneficiary concerned to any indemnification or compensation of any kind.
3.4. Death or invalidity of the Beneficiary during the Vesting Period
Notwithstanding the foregoing, in the event that the Beneficiary dies during the Vesting Period, his heirs may request the Vesting of Performance Shares and
the delivery of the Shares within six months of the date of death. The number of Shares delivered to the heirs shall be determined in accordance with the terms of the performance condition set in paragraph 3.3.1(a) above. With respect to the
Performance Shares that are not vested yet at the date of death, vesting shall occur in relation to 100% of all such unvested Performance Shares without applying the terms of the performance condition set in paragraph 3.3.1(a) above.
The Shares so delivered are freely transferable.
When the
above-mentioned six-month period following the death expires, the Performance Shares will become null and void, and the Beneficiary’s heirs may no longer request the Performance Shares and the delivery of the Shares.
In the event of disability of 2nd or 3rd category,
as defined in article L.341-4 of the French Social Security Code, Vesting of Performance Shares for the disabled Beneficiary will take place as soon as the Company is notified of the disability. The number of Shares delivered to the Beneficiary
shall be determined in accordance with the terms of the performance condition set in paragraph 3.3.1(a) above. With respect to the Performance Shares that are not vested yet at the date when the Company is notified of the disability, vesting shall
occur in relation to 100% of all such unvested Performance Shares without applying the terms of the performance condition set in paragraph 3.3.1(a) above.
The Shares so delivered are freely transferable.
3.5.
Status of Beneficiaries’ rights in the event of a change in the legal status of the Company
| 3.5.1 |
Merger, change of control or public takeover bid |
Should one of the following events occur before the
end of the Vesting Period:
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(a) |
a merger, demerger or spin-off of the Company; or |
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(b) |
a change of control of the Company (“control” having the meaning ascribed to it in article L. 233-3, I of the French Commercial Code); or |
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(c) |
a public takeover bid or exchange offer for all shares of the Company such that, if it goes through, the bidder would obtain control over the Company, |
The Board of Directors of the Company may, in its sole discretion, decide what position to take with respect to the Performance Shares.
In particular, the Board of Directors of the Company may, as the case may be:
| (i) |
agree with the new company, successor or buyer(s) that such company shall (x) take over all rights and obligations of the Company pursuant to
these Rules or (y) replace Performance Shares granted hereunder by granting the Beneficiary new performance shares, which it shall deem in good faith to be of the same value. Accordingly, the Beneficiary may, in the event of a merger and if the
general meeting of shareholders of the merging company agrees to uphold the provisions hereof, be allotted performance shares over the merging company’s shares under the conditions set by its general
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shareholders’ meeting, after adjustment, as necessary, based on the exchange ratio applied under the merger agreements. Generally, in the event of share exchanges in a merger, demerger or
spin-off conducted in accordance with applicable regulations, the Vesting Period will remain applicable to performance shares then received for the remainder of its duration at date of the exchange; or |
| (ii) |
compensate the Beneficiary for the loss resulting from the forfeiture of their Performance Shares or the waiver of such Performance Shares upon the request of the Company. |
| 3.5.2 |
Tax and social security consequences |
As a result of the events and transactions above, the Beneficiary
could cease to meet the conditions that would otherwise enable him to enjoy the tax and social security regime applicable to him in light of his personal circumstances. Should this occur, the Beneficiary will bear the consequences as an employee of
the non-applicability of the initial tax and social security regime with no recourse against his employer, the Company, or any of its Affiliates.
3.6. Delivery of Shares
On the Vesting Date of
the Performance Shares, subject to the provisions of paragraphs 3.4 and 3.5, the Company will transfer to each Beneficiary the number of Shares to which he is entitled, as determined in accordance with these Rules.
This delivery of Shares conveys full ownership of the Shares to the Beneficiary or, as the case may be, his legal heirs.
3.7. Source of Shares
No later than the Vesting
Date, the Board of Directors of the Company will determine if the Shares to be transferred to the Beneficiary will be existing Shares bought back by the Company according to articles L.225-208 and L.225-209 of the French Commercial Code or new
Shares issued as part of a share capital increase.
In case of death or invalidity of a Beneficiary during the Vesting Period, the Shares that will be
transferred, shall be existing Shares.
3.8. Rights of the Beneficiary
| 3.8.1 |
Rights attached to Shares |
Subject to the temporary non-transferability set fort in paragraph 4, Shares
transferred upon Vesting of Performance Shares shall be identical to the Company’s ordinary shares at that date, in particular with regard to voting rights, rights to dividend and payment of any reserves, the right to attend shareholders’
meetings, rights of communication, and pre-emptive subscription rights attached to each Share. They shall be subject to all the provisions of the by-laws, and all decisions of shareholders’ meetings shall be binding on the Beneficiary.
| 3.8.2 |
Effective date of shareholder rights |
In the event that Shares transferred to the Beneficiary as a
result of Vesting of Performance Shares are existing Shares, such Shares will enjoy shareholder rights starting on the date of their registration.
In the
event that Shares transferred to the Beneficiary as a result of Vesting of Performance Shares are newly issued Shares, such Shares will have current enjoyment. They will be assimilated to the existing shares as soon as they are issued and will
confer the same rights.
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3.9. Listing of the new Shares
The admission for listing on NYSE Euronext Paris market of the new Alcatel-Lucent shares resulting from an issue of Shares, if any, in accordance herewith,
will be requested.
4. HOLDING PERIOD
4.1.
Temporary non-transferability of Shares
Pursuant to shareholders’ authorization of June 1, 2010, the Board of Directors hereby decides
that the Holding Period shall be two years.
The Beneficiary must hold his Shares for the entire Holding Period, as from the Vesting Date.
Consequently, no transfer of property, either for consideration (sale) or at no cost (donation), loan, or rental may be made, nor may any pledge be granted on
these Shares during the Holding Period.
4.2. Exceptions to the non-transferability of Shares
| 4.2.1 |
Death or serious invalidity of the Beneficiary |
Notwithstanding the foregoing, (i) in the event of
the death of the Beneficiary during the Holding Period and (ii) in the event of invalidity of the Beneficiary corresponding to the 2nd or 3rd category in Article L.341-1 of the Social Security Code during the Holding Period, the Shares shall be
freely transferable by the Beneficiary or his heirs, as the case may be.
| 4.2.2 |
Equalization payments for Shares |
Equalization payments for Shares resulting from a public offer,
merger, split, division, or regrouping carried out in accordance with applicable regulations in effect may take place during the Holding Period. Accordingly, the Holding Period will be applicable to shares received in exchange for the remainder of
their term starting from the date of the exchange.
4.3. Holding Conditions
Shares transferred upon Vesting shall be registered in an individual account in the name of the Beneficiary to be opened in the books of the account holder
responsible for the management of Shares granted hereunder. Such individual registered account must include a legend on the non-transferability of the Shares until the end of the Holding Period.
5. STATUS OF SHARES AT THE END OF THE HOLDING PERIOD
5.1. Transferability of Shares
Following the
expiration of the Holding Period, Shares shall be available and may be freely transferred by the Beneficiary under the conditions allowed by law, subject to the provisions of paragraph 5.2.
5.2. Periods when the transfer of Shares is prohibited
Each Beneficiary shall comply with the Code of Conduct drafted by Alcatel-Lucent as regard to the prevention of insider dealing offense which may be consulted
on the Company’s intranet.
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In addition, given that the Shares are granted as part of a performance shares plan and in accordance with
applicable laws, Shares may not be transferred during the following periods:
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(a) |
the ten Trading Sessions preceding and following the dates on which the consolidated financial statements of the Company are made public; and |
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(b) |
the ten Trading Sessions following the date on which information which could have a significant effect on the Company’s share price is made public. |
Beneficiaries may find the dates of such transfer-restricted periods on the Company’s intranet.
6. AMENDMENTS
The Board of Directors of the Company may
at any time make amendments to the terms and conditions hereof that will allow the Beneficiary or the Company or its Affiliates to enjoy a favorable tax and social security regime in effect in France or any other country of relevance, or avoid any
unfavorable effects that new legal, tax, accounting, or social security provisions may have on the Company or its financial statements. These amendments may take the form of sub-plan applicable only for certain Beneficiaries.
7. TAXES AND SOCIAL SECURITY CONTRIBUTIONS
7.1.
Payment
The Beneficiary must conform to the terms and conditions imposed by the Company, its Affiliates, or any other person appointed by the
Company or its Affiliate for the payment (including withholding taxes or disposals of a portion of shares to cover this payment) of any social security contributions (including the employee social security contributions) or taxes in the country
where the Beneficiary resides, in relation to his Performance Shares.
7.2. Filing obligations
The Beneficiary, the Company, and the Affiliates will respect all filing obligations with the tax and social security authorities to which they may be subject.
8. DURATION
The terms and conditions herein shall
apply as long as necessary for the performance of the obligations set forth herein.
9. GOVERNING LAW
The terms and conditions herein shall be construed and interpreted in accordance with French law.
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10. LIST OF SELECTED TELECOMMUNICATIONS EQUIPMENT PROVIDERS
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