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EXHIBIT 5
UNITED MERIDIAN CORPORATION
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 22, 1997 (the
"Agreement"), between UNITED MERIDIAN CORPORATION, a Delaware corporation
("Issuer"), and OCEAN ENERGY, INC., a Delaware corporation ("Grantee").
RECITALS
WHEREAS, Issuer, Grantee and OEI Holding Corporation, a Delaware
corporation ("Newco"), have entered into an Agreement and Plan of Merger, dated
as of the date hereof (the "Merger Agreement"; defined terms used but not
otherwise defined herein have the meanings set forth in the Merger Agreement),
providing for, among other things, the merger of (i) Newco with Grantee and
(ii) Issuer with Grantee;
WHEREAS, as a condition and inducement to Grantee's willingness to
enter into the Merger Agreement and the OEI Option Agreement (as defined
below), Grantee has requested that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below); and
WHEREAS, as a condition and inducement to Issuer's willingness to
enter into the Merger Agreement and this Agreement, Issuer has requested that
Grantee agree, and Grantee has agreed to, grant Issuer an option to purchase
shares of Grantee's common stock on substantially the same terms as the Option
(the "OEI Option Agreement").
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained in this
Agreement, the parties hereto agree as follows:
1. Grant of Option. Subject to the terms and conditions set
forth herein, Issuer hereby grants to Grantee an irrevocable option (the
"Option") to purchase up to 3,543,000 (as adjusted as set forth herein) shares
(the "Option Shares") of common stock, par value $0.01 per share ("Issuer
Common Stock"), of Issuer at a purchase price of $32-3/16 (as adjusted as set
forth herein) per Option Share (the "Purchase Price").
2. Exercise of Option. (a) Grantee may exercise the Option, in
whole but not in part, at any one time after the occurrence of any event as a
result of which Grantee is entitled to receive the Termination Fee pursuant to
the Merger Agreement (a "Purchase 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, (B) 18 months after the first occurrence of a Purchase Event,
and (C) termination of the Merger Agreement in accordance with its terms prior
to the occurrence of a Purchase Event, unless Grantee has the right to receive
a Termination Fee following such termination upon the occurrence of certain
events, in which case the Option shall not terminate until the later of (x) six
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months following the time such Termination Fee becomes payable and (y) the
expiration of the period in which Grantee has such right to receive a
Termination Fee. 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 will not affect any rights hereunder which by
their terms do not terminate or expire prior to or as of such termination.
(b) In the event that Grantee wishes to exercise the Option, it
will send to Issuer a written notice (an "Exercise Notice"; the date of which
being herein referred to as the "Notice Date") to that effect, which Exercise
Notice shall specify the number of Option Shares, if any, Grantee wishes to
purchase pursuant to this Section 2(b), the denominations of the certificate or
certificates evidencing the Option Shares which Grantee wishes to purchase
pursuant to this Section 2(b) and a date not earlier than three business days
nor later than 20 business days from the Notice Date for the closing of such
purchase (an "Option Closing Date"); provided, however, that (i) if a closing
of the 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 related to such Option Closing 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 any such purchase,
Grantee and Issuer 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 with respect to any Option Closing, 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. 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 the provisions of this Section 2(b).
3. Payment and Delivery of Certificates. (a) At any Option
Closing, Grantee will 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.
(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 will be free and clear of
all liens, claims, charges and encumbrances of any kind whatsoever. If at the
time of issuance of Option Shares pursuant to an exercise of the Option
hereunder, Issuer shall have issued and outstanding rights under a shareholder
rights plan or similar securities, then each Option Share issued pursuant to
such exercise will also represent such a corresponding right with terms
substantially the same as and at least as favorable to Grantee as are provided
under any Issuer shareholder rights agreement or any similar agreement then in
effect.
(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:
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"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.
4. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee as follows:
(a) Corporate Authorization. Issuer has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of Issuer, and
no other corporate proceedings on the part of Issuer are necessary to
authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by
Issuer, and assuming this Agreement constitutes a valid and binding
agreement of Grantee, this Agreement constitutes a valid and binding
agreement of Issuer, enforceable against Issuer in accordance with its
terms (except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies).
(b) 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 necessary for Grantee to
exercise the Option, and Issuer will 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 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, claims, charges and
encumbrances of any kind or nature whatsoever, including without
limitation any preemptive rights of any stockholder of Issuer.
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5. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that:
(a) Corporate Authorization. Grantee has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of Grantee, and
no other corporate proceedings on the part of Grantee are necessary to
authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by
Grantee, and assuming this Agreement constitutes a valid and binding
agreement of Issuer, this Agreement constitutes a valid and binding
agreement of Grantee, enforceable against Grantee in accordance with
its terms (except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, or by principles
governing the availability of equitable remedies).
(b) Purchase Not for Distribution. 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.
6. Adjustment upon Changes in Capitalization, Etc. (a) In the
event of any changes in Issuer Common Stock by reason of a stock dividend,
stock split, reverse stock split, 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 Grantee shall receive upon exercise of the
Option the number and class of shares or other securities or property that
Grantee would have received with respect to Issuer Common 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 Issuer enters into an
agreement (i) to consolidate with or merge into any person, other than Grantee
or one of its subsidiaries, and Issuer shall not be the continuing or surviving
corporation in such consolidation or merger, (ii) to permit any person, other
than Grantee or one of its subsidiaries, to merge into Issuer and Issuer shall
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 shall 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 of its assets to any person, other
than Grantee or one of its subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision so that the
Option
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shall, upon the consummation of any such transaction and upon the terms and
condition 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 or 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.
(c) If, prior to the termination of the Option in accordance with
Section 2, Issuer enters into any agreement (x) pursuant to which all
outstanding shares of Issuer Common 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 Section 6(b) (each of (x) and (y), a
"Transaction"), the Issuer 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 Issuer Common
Stock are accepted for payment), Grantee shall have the right, at its election,
by not less than two business days' prior written notice to Issuer, to receive
in exchange for cancellation of the remaining 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 closing sales price per
share of Issuer Common Stock on the principal securities exchange or quotation
system on which Issuer Common Stock is then listed or traded, as reported by
The Wall Street Journal, on the 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 Termination Fee paid or payable to
Grantee, shall not exceed $50 million.
(d) Following exercise of the Option by Grantee, in the event that
Grantee sells, pledges or otherwise disposes of (including, without limitation,
by merger or exchange) any of the Option Shares (a "Sale"), then;
(i) any Termination Fee due and payable by Issuer
following such time shall be reduced by an amount, if any, equal to
the excess of (1) the total of (A) the Termination Fee and (B) the
excess of (w) the aggregate amounts received (whether in cash,
securities or otherwise) by Grantee 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) $50
million;
(ii) if Issuer has paid to Grantee the Termination Fee
prior to a Sale, then Grantee shall immediately remit to Issuer, as
additional Purchase Price for the Option Shares, the excess, if any,
of (y) the total of the Termination Fee and the Offset Amounts of all
Sales over (z) $50 million; and
(iii) if a Sale or Sales occur prior to the payment of the
Termination Fee to Grantee by Issuer, and the aggregate amount
received (whether in cash, securities or otherwise) by Grantee in such
Sales exceeds $50 million, Grantee shall remit to Issuer the aggregate
amount received in excess of $50 million and deliver to Issuer for
cancellation any remaining Option Shares owned by Grantee.
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(e) Notwithstanding anything to the contrary in this Agreement or
the Merger Agreement, in no event shall the aggregate of any Termination Fee,
all Offset Amounts and the Spread exceed $50 million, and to the extent such
items would otherwise exceed $50 million, Grantee, at its sole election, shall
either (i) reduce the number of Option Shares subject to the Option, (ii)
deliver to Issuer for cancellation Option Shares previously purchased by
Grantee, (iii) pay cash to issuer or (iv) take a combination of any of the
foregoing actions.
7. Registration Rights. Issuer shall, if requested by Grantee at
any time and from time to time within two years after the date of the exercise
of an 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 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 securities under any applicable state securities laws.
Grantee agrees to use reasonable 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. 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 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 Issuer
hereunder 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 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. Any
registration statement prepared and filed under this Section 7, 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 shall 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 7, Issuer effects a registration under the Securities Act of
Issuer Common Stock for its own account or for any other stockholders of Issuer
(other than on Form S-4 or Form S-8, or any successor form), it shall allow
Grantee the right to participate in such registration, and such participation
will not affect the obligation of Issuer to effect demand registration
statements for Grantee under this Section 7; provided 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, priority
shall be given to the securities intended to be included therein by the Issuer
for its own account and, thereafter, Issuer will include the securities
requested to be included therein by Grantee pro rata with the securities
intended to be included therein by other security holders of the Issuer. In
connection with any registration pursuant to this Section 7, Issuer and Grantee
shall provide each other and any underwriter of the offering with customary
representations, warranties, covenants, indemnification, and contribution in
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connection with such registration. The registration rights set forth in this
Section 7 are subject to any other registration rights in effect on the date
hereof.
8. Listing. If Issuer Common 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), Issuer,
upon the request of Grantee, shall promptly file an application to list the
shares of Issuer Common 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 efforts to
obtain approval of such listing as promptly as practicable.
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 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 Issuer, whether
or not the Agreement so lost, stolen, destroyed, or mutilated shall at any time
be enforceable by anyone.
10. Miscellaneous. (a) Expenses. Except as otherwise provided
herein or in the Merger Agreement, each of the parties hereto will 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.
(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) Entire Agreement; No Third-Party Beneficiaries. This
Agreement, the OEI Option Agreement, the Merger Agreement (including the
documents and instruments attached thereto as exhibits or schedules or
delivered in connection therewith) and the Confidentiality Agreement (i)
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter of this Agreement, and (ii) except as provided in Section 9.9 of
the Merger Agreement, are not intended to confer upon any person other than the
parties hereto any rights or remedies.
(e) Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of laws thereof.
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(f) Notices. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and will be deemed given
if delivered personally, telecopied (which is confirmed), or sent by overnight
courier (providing proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
To Issuer:
United Meridian Corporation
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Chairman and Chief Executive Officer
Telecopy: (000) 000-0000
copy to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, P.C.
Telecopy: (000) 000-0000
To Grantee:
Ocean Energy, Inc.
0000 Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxx 00000
Attention: Chairman and Chief Executive Officer
Telecopy: (000) 000-0000
copy to:
Xxxxxxx & Xxxxx L.L.P.
0000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
(g) Assignment. Neither this Agreement, the Option nor any of the
rights, interests, or obligations under this Agreement may be assigned,
transferred 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.
Any assignment, transfer or delegation in violation of the preceding sentence
will be void. Subject to the first and second sentences of this Section 10(g),
this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and permitted
assigns.
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(h) Further Assurances. In the event of any exercise of the Option
by Grantee, Issuer and Grantee will execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(i) ENFORCEMENT. THE PARTIES AGREE THAT IRREPARABLE DAMAGE WOULD
OCCUR AND THAT THE PARTIES WOULD NOT HAVE ANY ADEQUATE REMEDY AT LAW 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 THE PARTIES WILL BE ENTITLED TO AN INJUNCTION OR
INJUNCTIONS TO PREVENT BREACHES OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY
THE TERMS AND PROVISIONS OF THIS AGREEMENT IN ANY FEDERAL COURT LOCATED IN THE
STATE OF DELAWARE OR IN DELAWARE STATE COURT, THE FOREGOING BEING IN ADDITION
TO ANY OTHER REMEDY TO WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY. IN
ADDITION, EACH OF THE PARTIES HERETO (A) 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, (B) AGREES THAT IT
WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR
OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT, AND (C) AGREES THAT IT WILL 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.
(j) Counterparts; Effectiveness. This Agreement may be executed in
two or more counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered (by telecopy or otherwise) to the other
parties.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to
be signed by their respective officers thereunto duly authorized as of the day
and year first above written.
UNITED MERIDIAN CORPORATION
By: /s/ Xxxx X. Xxxxx
-------------------------------
Name: Xxxx X. Xxxxx
Title: Chairman of the Board and
Chief Executive Officer
OCEAN ENERGY, INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chairman of the Board,
President, and Chief
Executive Officer
