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EXHIBIT C
AMENDED AND RESTATED
STOCK OPTION AGREEMENT
AMENDED AND RESTATED STOCK OPTION AGREEMENT, dated as of March 13, 1999
(this "Agreement"), by and between SONAT INC., a Delaware corporation (the
"Company"), and EL PASO ENERGY CORPORATION, a Delaware corporation ("Parent").
RECITALS
A. The Company and Parent have entered into an Agreement and Plan of
Reorganization and Merger, dated as of the date hereof (the "Merger Agreement"),
providing for, among other things, a business combination between Parent and the
Company.
B. As a condition and inducement to the Company's willingness to enter into
the Merger Agreement, the Company has requested that Parent agree, and Parent
has agreed, to grant the Company 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, Parent hereby grants to the Company an irrevocable option (the
"Option") to purchase up to 24,349,638 (as adjusted as set forth herein)
shares (the "Option Shares") of Parent's Common Stock, par value $3.00 per
share ("Parent Stock"), at a purchase price of $37.725 (as adjusted as set
forth herein) per Option Share (the "Purchase Price").
2. Exercise of Option. (a) The Company 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 the Company is entitled to receive the
Parent Termination Fee pursuant to Section 8.2 of the Merger Agreement if
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, the Company 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 the Company wishes to
exercise the Option, it shall send to Parent 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
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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,
the Company shall pay to Parent in immediately available funds by wire
transfer to a bank account designated in writing by Parent 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 Parent
to designate a bank account shall not preclude the Company 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), Parent shall
deliver to the Company 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 Parent shall not have
redeemed the rights issued pursuant to the Parent Rights Agreement (the
"Parent Rights"), or shall have issued any similar securities, then each
Option Share issued pursuant to such exercise shall be accompanied by a
corresponding Parent Right or new rights with terms substantially the same
as and at least as favorable to the Company as are provided under the
Parent Rights Agreement or any similar agreement then in effect.
(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 Parent 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 the Company shall receive upon exercise of the Option the number and
class of shares or other securities or property that the Company would have
received in respect of Parent 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 Parent enters into an
agreement (i) to consolidate with or merge into any person, other than the
Company or one of its subsidiaries, and Parent shall not be the continuing
or surviving corporation in such consolidation or merger, (ii) to permit
any person, other than the Company or one of its subsidiaries, to merge
into or consolidate with Parent and Parent shall be the continuing or
surviving corporation, but in connection with such merger or consolidation,
the shares of Parent Stock outstanding immediately prior to the
consummation of such merger or consolidation shall be changed into or
exchanged for stock or other securities of Parent or any other person or
cash or any other
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property, or the shares of Parent 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 the Company 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 the Company would have received in respect of Parent 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, Parent enters into any agreement (x) pursuant to which all
outstanding shares of Parent 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"), and, in the case of each of clauses (x) and (y), the Option
is then exercisable, Parent 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
Parent Stock are accepted for payment), the Company shall have the right,
at its election, by not less than two business days' prior written notice
to Parent, 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 the closing sales price per share of Parent Stock on the
principal securities exchange or quotation system on which the Parent Stock
is then listed or traded, as reported by The Wall Street Journal, on the
day (i) the average of the closing prices of the shares of Parent Stock 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 Parent
Stock 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 Parent Termination
Fee paid or payable to the Company, shall not exceed $175 million.
(d) Following exercise of the Option by the Company, in the event that
the Company sells, pledges or otherwise disposes of (including, without
limitation, by merger or exchange) any of the Option Shares (a "Sale"),
then:
(i) any Parent Termination Fee due and payable by Parent following
such time shall be reduced by an amount, if any, equal to the excess of
(1) the total of (A) the Parent Termination Fee and (B) the excess of
(w) the aggregate amounts received (whether in cash, securities or
otherwise) by the Company in all such 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") over (2) $175 million;
and
(ii) if Parent has paid to the Company the Parent Termination Fee
prior to the Sale, then the Company shall immediately remit to Parent,
as additional Purchase Price for the Option Shares, the excess, if any,
of (y) the total of the Parent Termination Fee and the Offset Amounts of
all Sales over (z) $175 million.
(e) Notwithstanding anything to the contrary in this Agreement or the
Merger Agreement, in no event shall the aggregate of any Parent Termination
Fee, all Offset Amounts and the Spread exceed $175 million.
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5. Covenants of the Company and Parent. (a) Parent covenants (i) to
maintain, free from preemptive rights, sufficient authorized but unissued
or treasury shares of Parent Stock so that the Option may be fully
exercised without additional authorization of Parent Stock after giving
effect to all other options, warrants, convertible securities and other
rights of third parties to purchase shares of Parent 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 Parent
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
Parent from delivering the Option Shares to the Company upon exercise of
the Option or otherwise performing its obligations under this Agreement.
(b) The Company 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 Parent
which consent shall not be unreasonably withheld or delayed. The Company
may offer or sell Option Shares only pursuant to a registration under the
Securities Act or an exemption therefrom.
6. Listing. If Parent 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),
Parent, upon the request of the Company, shall promptly file an application
to list the shares of Parent 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 Parent 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, Parent 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 Parent,
whether or not the Agreement so lost, stolen, destroyed, or mutilated shall
at any time be enforceable by anyone.
8. Registration Rights. Parent shall, if requested by the Company 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 the Company of the
Option, in accordance with the intended method of sale or other disposition
stated by the Company, including a "shelf" registration statement under
Rule 415 under the Securities Act or any successor provision; and Parent
shall use reasonable best efforts to qualify such securities under any
applicable state securities laws. The Company 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. Parent
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
Parent 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 Parent 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 Parent 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, and any sale covered thereby, shall
be at Parent's expense except for underwriting discounts or commissions and
brokers' fees, which shall be borne solely by the Company. The Company
shall provide in writing all information reasonably requested by Parent for
inclusion in any
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registration statement to be filed hereunder. If, during the time periods
referred to in the first sentence of this Section, Parent effects a
registration under the Securities Act of Parent'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 the Company the right to
participate in such registration; provided that, if the managing
underwriters of such offering advise Parent 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 Parent for its own account and, thereafter, Parent shall include
the securities requested to be included therein by the Company pro rata
with the securities intended to be included therein by other stockholders
of Parent. 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.
(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:
Sonat Inc.
AmSouth-Sonat Tower
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
With a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
If to Parent:
El Paso Energy Corporation
0000 Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Telecopy No: (000) 000-0000
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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.
Telecopy 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, express 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
the Company, 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 Parent'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.
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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.
SONAT INC.
By: /s/ XXXXXX X. XXXXX, XX.
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Name: Xxxxxx X. Xxxxx, Xx.
Title: Chairman, President and
Chief Executive Officer
EL PASO ENERGY CORPORATION
By:
/s/ XXXXXXX XXXXX XX.
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Name: Xxxxxxx Xxxxx Xx.
Title: Executive Vice President
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