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EXHIBIT B
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 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 21,899,515 (as adjusted as set forth herein)
shares (the "Option Shares") of the Company's Common Stock, par value $1.00
per share ("Company Stock"), at a purchase price of $27.238 (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
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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 not have redeemed the
rights issued pursuant to the Company Rights Agreement (the "Company
Rights"), or shall have issued any similar securities, then each Option
Share issued pursuant to such exercise shall be accompanied by a
corresponding Company Right or new rights with terms substantially the same
as and at least as favorable to Parent as are provided under the Company
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 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
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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"), and, 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 the closing sales price per share 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, on
the day (i) the average of the closing prices of the shares of Company
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 Company 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
Company Termination Fee paid or payable to Parent, shall not exceed $175
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 and (B) the
excess of (w) the aggregate amounts received (whether in cash,
securities or otherwise) by Parent 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 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 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 Company
Termination Fee, all Offset Amounts and the Spread exceed $175 million.
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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, 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
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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 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.
(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
Attention: Xxxxxxx Xxxxx, Xx., Esq.
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, 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.
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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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