EXHIBIT 2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of January 17, 2000 (this
"Agreement"), by and between The Coastal Corporation, a Delaware
corporation (the "Company"), and El Paso Energy Corporation, a Delaware
corporation ("Parent").
RECITALS
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A. The Company, Parent and a wholly owned subsidiary of Parent
("Merger Sub") have entered into an Agreement and Plan of Merger, dated as
of the date hereof (the "Merger Agreement"), providing for, among other
things, the merger of Merger Sub with and into the Company.
B. As a condition and inducement to Parent's willingness to enter
into the Merger Agreement, Parent has requested that the Company agree, and
the Company has agreed, to grant Parent the option contemplated hereby.
C. Capitalized terms not defined herein shall have the meanings
set forth in the Merger Agreement.
D. This Agreement and the Merger Agreement are being entered into
simultaneously.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the Company and Parent agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth
herein, the Company hereby grants to Parent an irrevocable option (the
"Option") to purchase up to 31,834,515 (as adjusted as set forth herein)
shares (the "Option Shares") of the Company's Common Stock, par value $.33
1/3 per share ("Company Stock"), at a purchase price of $34.14375 (as
adjusted as set forth herein) per Option Share (the "Purchase Price").
2. Exercise of Option. (a) Parent may exercise the Option, in
whole or in part, at any time or from time to time after the occurrence of
any event as a result of which Parent is entitled to receive the Company
Termination Fee pursuant to Section 8.2 of the Merger Agreement and the
Merger Agreement is being or has been terminated (an "Exercise Event");
provided, however, that except as provided in the last sentence of this
Section 2(a), the Option shall terminate and be of no further force and
effect upon the earliest to occur of (A) the Effective Time and (B) nine
months after the first occurrence of an Exercise Event. Notwithstanding the
termination of the Option, Parent shall be entitled to purchase the Option
Shares if it has exercised the Option in accordance with the terms hereof
prior to the termination of the Option and the termination of the Option
shall not affect any rights hereunder which by their terms do not terminate
or expire prior to or as of such termination.
(b) Notice of Exercise. In the event that Parent wishes to
exercise the Option, it shall send to the Company a written notice (the
date of each such notice being herein referred to as a "Notice Date") to
that effect, which notice also specifies a date not earlier than three
business days nor later than 30 business days from the Notice Date for the
closing of such purchase (an "Option Closing Date"); provided, however,
that (i) if the closing of a purchase and sale pursuant to the Option (an
"Option Closing") cannot be consummated by reason of any applicable
judgment, decree, order, law or regulation, the period of time that
otherwise would run pursuant to this sentence shall run instead from the
date on which such restriction on consummation has expired or been
terminated and (ii) without limiting the foregoing, if prior notification
to or approval of any regulatory authority is required in connection with
such purchase, Parent and the Company shall promptly file the required
notice or application for approval and shall cooperate in the expeditious
filing of such notice or application, and the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on
which, as the case may be, (A) any required notification period has expired
or been terminated or (B) any required approval has been obtained, and in
either event, any requisite waiting period has expired or been terminated.
Each of Parent and the Company agrees to use commercially reasonable
efforts to cooperate with and provide information to the other, for the
purpose of any required notice or application for approval. Any exercise of
the Option shall be deemed to occur on the Notice Date relating thereto.
The place of any Option Closing shall be at the offices of Fried, Frank,
Harris, Xxxxxxx & Xxxxxxxx, One New York Plaza, New York, New York, and the
time of the Option Closing shall be 10:00 a.m. (Eastern Time) on the
applicable Option Closing Date.
3. Payment and Delivery of Certificates. (a) At any Option
Closing, Parent shall pay to the Company in immediately available funds by
wire transfer to a bank account designated in writing by the Company an
amount equal to the Purchase Price multiplied by the number of Option
Shares for which the Option is being exercised; provided, that failure or
refusal of the Company to designate a bank account shall not preclude
Parent from exercising the Option, in whole or in part.
(b) At any Option Closing, simultaneously with the delivery
of immediately available funds as provided in Section 3(a), the Company
shall deliver to Parent a certificate or certificates representing the
Option Shares to be purchased at such Option Closing, which Option Shares
shall be free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever. If at the time of issuance of the Option Shares
pursuant to the exercise of the Option hereunder, the Company shall have
issued, and not redeemed. "poison pill" rights or similar securities rights
("Company Rights"), then each Option Share issued pursuant to such exercise
shall be accompanied by a corresponding Company Right.
(c) Restrictive Legend. Certificates for the Option Shares
delivered at any Option Closing shall have typed or printed thereon a
restrictive legend which shall read substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY IF
SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION
IS AVAILABLE."
It is understood and agreed that the foregoing legend shall be removed by
delivery of substitute certificate(s) without such legend upon the sale of
the Option Shares pursuant to a registered public offering or Rule 144
under the Securities Act or any other sale as a result of which such legend
is no longer required.
4. Adjustment upon Changes in Capitalization, Etc. (a) In the
event of any change in Company Stock by reason of a stock dividend,
split-up, merger, recapitalization, combination, exchange of shares or
similar transaction, the type and number of shares or securities subject to
the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements
governing such transaction, so that Parent shall receive upon exercise of
the Option the number and class of shares or other securities or property
that Parent would have received in respect of Company Stock if the Option
had been exercised immediately prior to such event or the record date
therefor, as applicable.
(b) Without limiting the parties' relative rights and
obligations under the Merger Agreement, in the event that the Company
enters into an agreement (i) to consolidate with or merge into any Person,
other than Parent or one of its Subsidiaries, and the Company shall not be
the continuing or surviving corporation in such consolidation or merger,
(ii) to permit any Person, other than Parent or one of its Subsidiaries, to
merge into or consolidate with the Company and the Company shall be the
continuing or surviving corporation, but in connection with such merger or
consolidation, the shares of Company Stock outstanding immediately prior to
the consummation of such merger or consolidation shall be changed into or
exchanged for stock or other securities of the Company or any other person
or cash or any other property, or the shares of Company Stock outstanding
immediately prior to the consummation of such merger or consolidation
shall, after such merger or consolidation, represent less than 50% of the
outstanding voting securities of the merged or consolidated company, or
(iii) to sell or otherwise transfer all or substantially all of its assets
to any person, other than Parent or one of its subsidiaries, then, and in
each such case, the agreement governing such transaction shall make proper
provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be
converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or other
securities, cash or property that Parent would have received in respect of
Company Stock if the Option had been exercised immediately prior to such
consolidation, merger, sale or transfer, or the record date therefor, as
applicable.
(c) If, prior to the termination of the Option in accordance
with Section 2, the Company enters into any agreement (x) pursuant to which
all outstanding shares of Company Stock are to be purchased for, or
converted into the right to receive in whole or in part (other than in
respect of fractional shares) cash or (y) with respect to any transaction
described in clauses (i), (ii) and (iii) of paragraph (b) (each of (x) and
(y), a "Transaction"), in the case of each of clauses (x) and (y), the
Option is then exercisable, the Company covenants that proper provision
shall be made in such agreement to provide that, if the Option shall not
theretofore have been exercised, then upon the consummation of the
Transaction (which in the case of a Transaction involving a tender offer
shall be when shares of Company Stock are accepted for payment), Parent
shall have the right, at its election, by not less than two business days'
prior written notice to the Company, to receive in exchange for the
cancellation of the Option an amount in cash equal to the Spread. For
purposes of this Agreement, the term "Spread" means the number of Option
Shares multiplied by the excess of (A) the higher of (i) the average of the
closing prices of the shares of Company Stock on the principal securities
exchange or quotation system on which the Company Stock is then listed or
traded as reported by The Wall Street Journal over the ten-trading day
period beginning on the trading day immediately following the announcement
of such agreement or (ii) the average of the closing prices of the shares
of Company Stock on the principal securities exchange or quotation system
on which the Company Stock is then listed or traded as reported by The Wall
Street Journal over the ten-trading day period ending on the trading day
immediately prior to the consummation of such Transaction, over (B) the
Purchase Price. Notwithstanding the foregoing, the amount of the Spread,
when added to any Company Termination Fee paid or payable to Parent and
Offset Amounts (as defined in Section 4(d)(i) below), shall not exceed $325
million.
(d) Following exercise of the Option by Parent, in the event
that Parent sells, pledges or otherwise disposes of (including, without
limitation, by merger or exchange) any of the Option Shares (a "Sale"),
then:
(i) any Company Termination Fee due and payable by the
Company following such time shall be reduced by an amount, if any, equal to
the excess of (1) the total of (A) the Company Termination Fee, (B) the
excess of (w) the aggregate amounts received (whether in cash, securities
or otherwise) by Parent in all Sales, over (x) the aggregate Purchase Price
of the Option Shares sold in such Sales (such excess in this sub-clause (B)
being the "Offset Amounts") and (C) cash received pursuant to Section 4(c),
over (2) $325 million.
(ii) if the Company has paid to Parent the Company
Termination Fee prior to the Sale, then Parent shall immediately remit to
the Company, as additional Purchase Price for the Option Shares, the
excess, if any, of (y) the total of the Company Termination Fee, the Offset
Amounts of all Sales and cash received pursuant to Section 4(c) over (z)
$325 million.
(e) Notwithstanding anything to the contrary in this
Agreement or the Merger Agreement, in no event shall the aggregate of any
Company Termination Fee, all Offset Amounts and cash received pursuant to
Section 4(c) exceed $325 million.
5. Covenants of the Company and Parent. (a) The Company covenants
(i) to maintain, free from preemptive rights, sufficient authorized but
unissued or treasury shares of Company Stock so that the Option may be
fully exercised without additional authorization of Company Stock after
giving effect to all other options, warrants, convertible securities and
other rights of third parties to purchase shares of Company Stock; (ii) not
to seek to avoid the observance or performance of any of the covenants,
agreements or conditions to be observed or performed hereunder by the
Company and not to take any action which would cause any of its
representations or warranties not to be true; and (iii) not to engage in
any action or omit to take any action which would have the effect of
preventing or disabling the Company from delivering the Option Shares to
the Parent upon exercise of the Option or otherwise performing its
obligations under this Agreement.
(b) Parent covenants not to sell, assign, transfer or
otherwise dispose of the Option, any part thereof, or any of its other
rights hereunder to any third party without the prior written consent of
the Company which consent shall not be unreasonably withheld or delayed.
Parent may offer or sell Option Shares only pursuant to a registration
under the Securities Act or an exemption therefrom.
6. Listing. If Company Stock or any other securities to be
acquired upon exercise of the Option are then listed on the NYSE (or any
other national securities exchange or national securities quotation
system), the Company, upon the request of Parent, shall promptly file an
application to list the shares of Company Stock or other securities to be
acquired upon exercise of the Option on the NYSE (and any such other
national securities exchange or national securities quotation system) and
shall use reasonable best efforts to obtain approval of such listing as
promptly as practicable.
7. Loss or Mutilation. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, the Company shall execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not the Agreement so
lost, stolen, destroyed, or mutilated shall at any time be enforceable by
anyone.
8. Registration Rights. The Company shall, if requested by Parent
at any time and from time to time within two years after the date of first
exercise of the Option, as expeditiously as possible prepare and file up to
two registration statements under the Securities Act if such registration
is necessary in order to permit the sale or other disposition of any or all
securities that have been acquired by exercise by Parent of the Option, in
accordance with the intended method of sale or other disposition stated by
Parent, including a "shelf" registration statement under Rule 415 under the
Securities Act or any successor provision; and the Company shall use
commercially reasonable efforts to qualify such securities under any
applicable state securities laws. Parent agrees to use reasonable best
efforts to cause, and to cause any underwriters of any sale or other
disposition to cause, any sale or other disposition pursuant to such
registration statement to be effected on a widely distributed basis. The
Company shall use reasonable best efforts to cause each such registration
statement to become effective, to obtain all consents or waivers of other
parties which are required therefor, and to keep such registration
statement effective for such period not in excess of 90 calendar days from
the day such registration statement first becomes effective as may be
reasonably necessary to effect such sale or other disposition. The
obligations of the Company to file a registration statement and to maintain
its effectiveness may be suspended for one or more periods of time not
exceeding 90 calendar days in the aggregate with respect to any
registration statement if the Board of Directors of the Company shall have
determined that the filing of such registration statement or the
maintenance of its effectiveness would require disclosure of nonpublic
information that would materially and adversely affect the Company or would
interfere with a planned merger, sale of material assets, recapitalization
or other significant corporate action (other than the issuance of equity
securities). Any registration statement prepared and filed under this
Section 8, and any sale covered thereby, shall be at the Company's expense
except for underwriting discounts or commissions and brokers' fees, which
shall be borne solely by Parent. Parent shall provide in writing all
information reasonably requested by the Company for inclusion in any
registration statement to be filed hereunder. If, during the time periods
referred to in the first sentence of this Section, the Company effects a
registration under the Securities Act of the Company's equity securities
for its own account or for any other of its stockholders (other than on
Form S-4 or Form S-8, or any successor form), it shall allow Parent the
right to participate in such registration; provided however, that, if the
managing underwriters of such offering advise the Company that in their
opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering on a
commercially reasonable basis, priority shall be given to the securities
intended to be included therein by the Company for its own account and,
thereafter, the Company shall include the securities requested to be
included therein by Parent pro rata with the securities intended to be
included therein by other stockholders of the Company. In connection with
any registration pursuant to this Section, Parent and the Company shall
provide each other and any underwriter of the offering with customary
representations, warranties, covenants, indemnification, and contribution
in connection with such registration.
9. Miscellaneous.
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(a) Fees and Expenses. Except as otherwise provided in the
Merger Agreement, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne by the
party incurring such expenses.
(b) Amendment. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties.
(c) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO ITS CONFLICT OF LAWS RULES OR PRINCIPLES.
(d) Notices. All notices or other communications under this
Agreement shall be in writing and shall be given (and shall be deemed to
have been duly given upon receipt) by delivery in person, by cable,
telegram, telex or other standard form of telecommunications, or by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to the Company:
The Coastal Corporation
Coastal Tower
Nine Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
With a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
Facsimile No.: (000) 000-0000
If to Parent:
El Paso Energy Corporation
El Paso Energy Building
0000 Xxxxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx Xxxxx Xx.
Facsimile No.: (000) 000-0000
With a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxxxxx, Esq.
Xxxxxx xx Xxxx, Esq.
Facsimile No.: (000) 000-0000
or to such other address as any party may have furnished to the other
parties in writing in accordance with this Section.
(e) Assignment; Binding Effect; No Third Party
Beneficiaries. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be sold, assigned, disposed of or otherwise
transferred by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties. Subject
to the preceding sentence, this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors
and assigns. Notwithstanding anything contained in this Agreement to the
contrary, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
(f) Further Assurances. In the event of any exercise of the
Option by Parent, the Company and Parent shall execute and deliver all such
documents and instruments and take all such further action that may be
reasonably necessary in order to consummate the transactions provided for
by such exercise.
(g) Survival. All the Company's representations, warranties
and covenants contained herein shall survive each Option Closing.
(h) ENFORCEMENT. THE PARTIES HERETO AGREE THAT IRREPARABLE
DAMAGE WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS
AGREEMENT WERE NOT PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR
WERE OTHERWISE BREACHED. IT IS ACCORDINGLY AGREED THAT SUBJECT TO THE NEXT
SENTENCE, THE PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR INJUNCTIONS TO
PREVENT BREACHES OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY THE TERMS
AND PROVISIONS HEREOF IN ANY COURT OF THE UNITED STATES OR ANY STATE HAVING
JURISDICTION, THIS BEING IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY ARE
ENTITLED AT LAW OR IN EQUITY. EACH OF THE PARTIES HERETO (I) CONSENTS TO
SUBMIT ITSELF TO THE PERSONAL JURISDICTION OF ANY FEDERAL COURT LOCATED IN
THE STATE OF DELAWARE OR ANY DELAWARE STATE COURT IN THE EVENT ANY DISPUTE
ARISES OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT, (II) AGREES THAT IT SHALL NOT ATTEMPT TO DENY OR DEFEAT
SUCH PERSONAL JURISDICTION BY MOTION OR OTHER REQUEST FOR LEAVE FROM ANY
SUCH COURT, AND (III) AGREES THAT IT SHALL NOT BRING ANY ACTION RELATING TO
THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT IN
ANY COURT OTHER THAN A FEDERAL COURT SITTING IN THE STATE OF DELAWARE OR A
DELAWARE STATE COURT.
(i) Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed
by all of the parties hereto.
IN WITNESS WHEREOF, the Company and Parent have caused this
Agreement to be signed by their respective officers thereunto duly
authorized as of the day and year first written above.
THE COASTAL CORPORATION
By:
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Name:
Title:
EL PASO ENERGY CORPORATION
By:
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Name:
Title:
