Exhibit 2.2
COMPANY STOCK OPTION AGREEMENT
COMPANY STOCK OPTION AGREEMENT dated as of June 3, 1999 between AVONDALE
INDUSTRIES, INC., a Louisiana corporation ("Issuer"), and XXXXXX INDUSTRIES,
INC., a Delaware corporation ("Grantee").
WHEREAS, Issuer and Grantee are parties to an Agreement and Plan of Merger,
dated as of the date hereof (the "Merger Agreement"; defined terms used but not
defined herein have the meanings set forth in the Merger Agreement), providing
for, among other things, the merger of a wholly owned subsidiary of Grantee with
and into Issuer;
WHEREAS, as a condition and inducement to Grantee's willingness to enter
into the Merger Agreement, Grantee has requested that Issuer agree, and Issuer
has agreed, to grant Grantee the Option (as defined below); and
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Grant of Option. Issuer hereby grants to Grantee an irrevocable
option (the "Option") to purchase up to 1,312,000 (as adjusted as set forth
herein) shares (the "Option Shares") of common stock, par value $1.00 per share
("Issuer Common Stock"), of Issuer at a purchase price of $39.50 (as adjusted as
set forth herein) per Option Share (the "Purchase Price"); provided, however,
that in no event shall the number of shares of Issuer Common Stock for which
this Option is exercisable exceed 9.9% of the issued and outstanding shares of
Issuer Common Stock, without giving effect to any shares subject to or issued
pursuant to the Option.
SECTION 2. Exercise of Option. (a) Grantee may exercise the Option, with
respect to any of or all the Option Shares at any one time, after any
termination of the Merger Agreement in connection with which Grantee is or may
be entitled to receive a termination fee pursuant to Section 6.7(b) of the
Merger Agreement (a "Purchase Event"); provided, however, that (i) 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 earlier to occur of (a) the
Effective Time and (b) 12 months after the first occurrence of a Purchase Event,
and (ii) any purchase of Option Shares upon exercise of the Option shall be
subject to there being (a) no preliminary or permanent or other order issued by
any federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Option Shares then in effect, (b) compliance
with the HSR Act and (C) the obtaining or making of any consents, approvals,
orders, notifications or authorizations, the failure of which to have been
obtained or made would have the effect of making the issuance of Option Shares
illegal. Notwithstanding the termination of the Option, Grantee 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 that by their
terms do not terminate or expire prior to or as of such termination.
(b) The exercise of the Option shall be effected by Grantee sending to
Issuer a written notice (an "Exercise Notice"; the date of which being herein
referred to as the "Notice Date") to that effect. An Exercise Notice shall
specify the number of Option Shares, if any,
Grantee wishes to purchase pursuant to the Option, the number of Option Shares,
if any, with respect to which Grantee wishes to exercise its Cash-Out Right (as
defined in Section 6(c)), the denominations of the certificate or certificates
evidencing the Option Shares that Grantee wishes to purchase pursuant to the
Option and a date (subject to compliance with the HSR Act) not earlier than
three business days nor later than 20 business days from the Notice Date for the
closing (the "Option Closing") of such purchase (the "Option Closing Date"). Any
Option Closing will be at an agreed location and time in New York, New York on
the applicable Option Closing Date or at such later date as may be necessary so
as to comply with Section 2(a).
SECTION 3. Payment and Delivery of Certificates. (a) At any Option Closing,
Grantee shall pay to Issuer in immediately available funds by wire transfer to a
bank account designated in writing by Issuer an amount equal to the Purchase
Price multiplied by the number of Option Shares to be purchased at such Option
Closing.
(b) At any Option Closing, simultaneously with the delivery of immediately
available funds as provided in Section 3(a), Issuer shall deliver to Grantee 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.
(c) Certificates for the Option Shares delivered at an Option Closing shall
have typed or printed thereon a restrictive legend, which will 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 reference to restrictions arising
under the Securities Act in the above legend will be removed by delivery of
substitute certificate(s) without such reference if such Option Shares have been
registered pursuant to the Securities Act, such Option Shares have been sold in
reliance on and in accordance with Rule 144 under the Securities Act or Grantee
has delivered to Issuer a copy of a letter from the staff of the SEC, or an
opinion of counsel in form and substance reasonably satisfactory to Issuer and
its counsel, to the effect that such legend is not required for purposes of the
Securities Act.
SECTION 4. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee as follows:
(a) Authorized Stock. Issuer has taken all necessary corporate and other
action to authorize and reserve and, subject to the expiration or termination of
any required waiting period under the HSR Act, to permit it to issue, and, at
all times from the date hereof until the obligation to deliver Option Shares
upon the exercise of the Option terminates, shall have reserved for issuance,
upon exercise of the Option, shares of Issuer Common Stock sufficient for
Grantee to exercise the Option in full, and Issuer shall take all necessary
corporate action to authorize and reserve for issuance all additional shares of
Issuer Common Stock or other securities which may be issued pursuant to Section
6 upon exercise of the Option. The
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shares of Issuer Common Stock to be issued upon due exercise of the Option,
including all additional shares of Issuer Common Stock or other securities which
may be issuable upon exercise of the Option or any other securities which may be
issued pursuant to Section 6, upon issuance pursuant hereto, will be duly and
validly issued, fully paid and nonassessable, and will be delivered free and
clear of all Liens, including any preemptive rights of any shareholder of
Issuer.
(b) Authorization. The execution, delivery and performance by Issuer of
this Agreement and the consummation of the transactions contemplated hereby (i)
are within Issuer's corporate powers and (ii) have been duly authorized by all
necessary corporate action. This Agreement has been duly executed and delivered
by Issuer and constitutes a valid and binding obligation of Issuer.
SECTION 5. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer as follows:
(a) Disposition of Shares. Any Option Shares or other securities acquired
by Grantee upon exercise of the Option will not be transferred or otherwise
disposed of except in a transaction registered, or exempt from registration,
under the Securities Act.
(b) Authorization. The execution, delivery and performance by Grantee of
this Agreement and the consummation of the transaction contemplated hereby (i)
are within Grantee's corporate powers and (ii) have been duly authorized by all
necessary corporate action. This Agreement has been duly executed and delivered
by Grantee and constitutes a valid and binding obligation of Grantee.
SECTION 6. Adjustment upon Changes in Capitalization, Etc. (a) In the event
of any change in Issuer Common 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 thereof, shall be adjusted appropriately, and proper
provision will be made in the agreements governing such transaction, so that
Grantee shall receive upon exercise of the Option the number and class of shares
or other securities or property that Grantee would have received in respect of
Issuer Common Stock if the Option had been exercised immediately prior to such
event or the record date therefor, as applicable. Subject to Section 1, and
without limiting the parties' relative rights and obligations under the Merger
Agreement, if any additional shares of Issuer Common Stock are issued after the
date of this Agreement (other than pursuant to an event described in the first
sentence of this Section 6(a)), the number of shares of Issuer Common Stock
subject to the Option shall be adjusted so that, after such issuance, it equals
9.9% of the number of shares of Issuer Common Stock then issued and outstanding,
without giving effect to any shares subject to or issued pursuant to the Option.
(b) Without limiting the parties' relative rights and obligations under the
Merger Agreement, in the event that Issuer enters into an agreement (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and Issuer will not be the continuing or surviving corporation in
such consolidation or merger, (ii) to permit any person,
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other than Grantee or one of its subsidiaries, to merge into Issuer and Issuer
will be the continuing or surviving corporation, but in connection with such
merger, the shares of Issuer Common Stock outstanding immediately prior to the
consummation of such merger will be changed into or exchanged for stock or other
securities of Issuer or any other person or cash or any other property, or the
shares of Issuer Common Stock outstanding immediately prior to the consummation
of such merger will, after such merger, represent less than 50% of the
outstanding voting securities of the merged company, or (iii) to sell or
otherwise transfer all or substantially all its assets to any person, other than
Grantee or one of its subsidiaries, then, in each such case, the agreement
governing such transaction will make proper provision so that the Option will,
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 stock or other
securities or cash or other property that Grantee would have received in respect
of Issuer Common Stock if the Option had been exercised immediately prior to
such consolidation, merger, sale, or transfer, or the record date therefor, as
applicable and make any other necessary adjustments. Issuer shall take such
steps in connection with such consolidation, merger, liquidation or other such
transaction as may be reasonably necessary to assure that the provisions hereof
shall thereafter apply as nearly as possible to any securities or property
thereafter deliverable upon exercise of the Option.
(c) If, at any time during the period commencing on a Purchase Event and
ending on the termination of the Option in accordance with Section 2, Grantee
sends to Issuer an Exercise Notice indicating Grantee's election to exercise its
right (the "Cash-Out Right") pursuant to this Section 6(c), then Issuer shall
(subject to Section 7) pay to Grantee, on the Option Closing Date, in exchange
for the cancellation of the Option with respect to such number of Option Shares
as Grantee specifies in the Exercise Notice, an amount in cash equal to the
greater of (i) $2.00 per Option Share the subject of such Exercise Notice and
(ii) the Spread (as hereinafter defined) multiplied by such
number of Option Shares specified in the Exercise Notice. As used
herein, "Spread" shall mean the excess, if any, over the Purchase
Price of the higher of (x) if applicable, the highest price per share
of Issuer Common Stock paid or proposed to be paid by any Person
pursuant to any Company Takeover Proposal (the "Alternative Purchase
Price") and (y) the average closing price, for the ten trading days
commencing on the 12th trading day immediately preceding the Notice
Date, per share of Issuer Common Stock as reported on the Nasdaq Stock
Market, as reported in The Wall Street Journal (Northeast edition),
or, if not reported thereby, any other authoritative source (the
"Closing Price"). If the Alternative Purchase Price includes any
property other than cash, the Alternative Purchase Price shall be the
sum of (i) the fixed cash amount, if any, included in the Alternative
Purchase Price plus (ii) the fair market value (as hereinafter
defined) of such other property. Any cash payment made by Issuer
pursuant to this Section 6(c) shall be referred to herein as a
"Cash-Out Closing Payment." Upon exercise of its right pursuant to
this Section 6(c) and the receipt by Grantee of the applicable
Cash-Out Closing Payment, the obligations of Issuer to deliver Option
Shares pursuant to Section 3(b) shall be terminated with respect to
the number of
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Option Shares for which Grantee shall have elected to be paid pursuant
to its Cash-Out Right. The Spread shall be appropriately adjusted, if
applicable, to give effect to Section 6(a). Notwithstanding the
termination of the Option, Grantee shall be entitled to exercise its
rights under this Section 6(c) if it has exercised such rights in
accordance with the terms hereof prior to the termination of the
Option.
SECTION 7. Profit Limitations. (a) Notwithstanding any other provision of
this Agreement, this Option may not be exercised for a number of shares of
Issuer Common Stock (including any exercise of the Cash-Out Right pursuant to
Section 6(c)) that would, as of the applicable Notice Date, result in the
Notional Total Option Profit (as hereinafter defined) that would exceed in the
aggregate $14,000,000 (the "Profit Limit") and, if it otherwise would exceed
such amount, Grantee, at its sole election, shall on or prior to the applicable
Option Closing Date (i) reduce the number of shares of Issuer Common Stock
subject to such exercise, (ii) deliver to Issuer for cancellation Option Shares
previously purchased by Grantee, (iii) pay cash to Issuer, (iv) reduce the size
of any Cash-Out Closing Payment, (v) revoke in whole or in part any exercise of
the Option or (vi) any combination thereof, so that the Notional Total Option
Profit as of the Notice Date shall not exceed the Profit Limit after taking into
account the foregoing actions. If, on any Notice Date, the Option cannot be
exercised in full because of this Section 7(a), then (notwithstanding anything
in this Agreement to the contrary) the Option may be exercised in part on such
Notice Date and from time to time in part on later dates (subject, in the case
of any subsequent exercise, to the proviso to the first sentence of Section 2(a)
and to this Section 7(a)). This Section 7(a) shall not restrict any exercise of
the Option that is not prohibited hereby on any subsequent date.
(b) As used herein, the term "Notional Total Option Profit" as of any
Notice Date (including any Notice Date arising out of the exercise of the
Cash-Out Right pursuant to Section 6(c)) shall be the aggregate of (i) the Total
Option Profit as of such Notice Date, (ii) the Cash-Out Closing Payment, if any,
due in connection with any exercise of the Cash-Out Right on such Notice Date
and (iii) the product of (a) the number of Option Shares for which the Option is
being exercised on such Notice Date (other than any exercise pursuant to Section
6(c)) plus all other Option Shares held by Grantee and its affiliates as of such
date and (b) the excess, if any, over the Purchase Price of the closing price
for Issuer Common Stock as of the close of business on the preceding trading day
(less customary brokerage commissions or underwriting discounts).
(c) As used herein, the term "Total Option Profit" as of any Notice Date
shall mean the aggregate amount (before taxes) of the following: (i) any amount
previously received by Grantee pursuant to the Cash-Out Right and (ii) (x) the
net consideration, if any, previously received by Grantee pursuant to the sale
of Option Shares (or any other securities into which such Option Shares are
converted or exchanged) to any unaffiliated party, valuing any non-cash
consideration at its fair market value, less (y) the aggregate Purchase Price
for such shares and any cash previously paid by Grantee to Issuer pursuant to
Section 7(a)(iii).
(d) As used herein, the "fair market value" of any non-cash consideration
consisting of:
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(i) securities listed on a national securities exchange or traded
on NASDAQ shall be equal to the average closing price per share of
such security as reported on such exchange or NASDAQ for the five
trading days after the date of determination; and
(ii) consideration which is other than cash or securities of the
form specified in clause (i) above shall be determined by a nationally
recognized independent investment banking firm mutually agreed upon by
the parties within five business days of the event requiring selection
of such banking firm, provided that if the parties are unable to agree
within two business days after the date of such event as to the
investment banking firm, then the parties shall each select one firm,
and those firms shall select a third nationally recognized independent
investment banking firm, which third firm shall make such
determination.
SECTION 8. Registration Rights. Issuer shall, if requested by Grantee at
any time and from time to time within three years of the exercise of the Option,
as expeditiously as possible prepare and file up to three registration
statements under the Securities Act if such registration is necessary in order
to permit the sale or other disposition of any or all shares of securities that
have been acquired by or are issuable to Grantee upon exercise of the Option in
accordance with the intended method of sale or other disposition stated by
Grantee, including a "shelf" registration statement under Rule 415 under the
Securities Act or any successor provision, and Issuer shall use its best efforts
to qualify such shares or other securities under any applicable state securities
laws; provided, however, that Issuer shall not be required to qualify to do
business in, or consent to general service of process in, any jurisdiction.
Issuer shall use reasonable 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 180 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 Issuer hereunder to file a
registration statement and to maintain its effectiveness may be suspended for up
to 60 calendar days in the aggregate if the Board of Directors of Issuer shall
have determined that the filing of such registration statement or the
maintenance of its effectiveness would require premature disclosure of material
nonpublic information that would materially and adversely affect Issuer or
otherwise interfere with or adversely affect any pending or proposed offering of
securities of Issuer or any other material transaction involving Issuer. All
expenses relating to or in connection with any registration statement prepared
and filed under this Section 8, and any sale covered thereby, shall be at
Issuer's expense except for underwriting discounts or commissions, brokers' fees
and the fees and disbursements of Grantee's counsel related thereto. Grantee
will provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If, during the time periods
referred to in the first sentence of this Section 8, Issuer effects a
registration under the Securities Act of Issuer Common Stock for its own account
or for any other shareholders of Issuer (other than on Form S-4 or Form S-8, or
any successor form), it shall notify Grantee in writing not less than 10 days
prior to filing such registration statement and shall allow Grantee the right to
participate in such registration, and such participation shall not affect the
obligation of Issuer to effect demand registration statements for Grantee under
this Section 8;
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provided, however, that, if the managing underwriters of such offering advise
Issuer in writing that in their opinion the number of shares of Issuer Common
Stock requested to be included in such registration exceeds the number which can
be sold in such offering, Issuer shall include the shares requested to be
included therein by Grantee pro rata with the shares intended to be included
therein by Issuer. If Grantee wishes to have any portion of its Option Shares
included in such registration statement, it shall advise Issuer to that effect
within two business days following receipt of Issuer's notice. In connection
with any registration pursuant to this Section 8, Issuer and Grantee shall enter
into a customary underwriting agreement and shall provide each other and any
underwriter of the offering with customary representations, warranties,
covenants, indemnification, and contribution in connection with such
registration.
SECTION 9. Loss or Mutilation. Upon receipt by Issuer 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, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered will constitute an
additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed, or mutilated shall at any time be
enforceable by anyone.
Section 10. Miscellaneous. (a) Expenses. Except as otherwise provided in
the Merger Agreement, each of the parties hereto will bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
(b) Amendment. This Agreement may not be amended, except by an instrument
in writing signed on behalf of each of the parties. This Agreement, together
with the Merger Agreement (including any exhibits and schedules thereto),
contains the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior and contemporaneous agreements
and understandings, oral or written, with respect to such transactions.
(c) Extension; Waiver. Any agreement on the part of a party to waive any
provision of this Agreement, or to extend the time for performance, will be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise will not constitute a waiver of such rights.
(d) No Third-Party Beneficiaries. This Agreement is not intended to confer
upon any person other than the parties and their successors and permitted
assigns any rights or remedies.
(e) Governing Law. This Agreement will be governed by, and construed in
accordance with, the laws of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of conflict of laws thereof.
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(f) Notices. All notices, requests, claims, demands, and other
communications under this Agreement shall be given in accordance with Section
9.02 of the Merger Agreement.
(g) Assignment. Neither this Agreement, the Option nor any of the rights,
interests, or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise, by Issuer or Grantee without
the prior written consent of the other, except that Grantee may assign all its
rights under Section 8 to any person who acquires from Grantee any Option
Shares. Any assignment or delegation in violation of the preceding sentence
shall be void. Subject to the first and second sentences of this Section 10(g),
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and permitted
assigns.
(h) Further Assurances. In the event of any exercise of the Option by
Grantee, Issuer and Grantee shall execute and deliver all other documents and
instruments and take all other actions that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
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IN WITNESS WHEREOF, Issuer and Grantee have duly executed this
Agreement, all as of the day and year first written above.
XXXXXX INDUSTRIES, INC.,
by Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title: Senior Vice President and
General Counsel
AVONDALE INDUSTRIES, INC.,
by Xxxxxx X. Kitchen
Name: Xxxxxx X. Kitchen
Title: Corporate Vice President & Chief
Financial Officer
[Signature Page to Company Stock Option Agreement]
