EXHIBIT 10.1
STOCK OPTION AGREEMENT dated as of May 28, 1999 (the
"Agreement"), by and between SKYTEL COMMUNICATIONS, INC., a
Delaware corporation ("Issuer"), and MCI WORLDCOM, INC., a
Georgia corporation ("Grantee").
RECITALS
A. Grantee, Empire Merger Inc., a wholly owned Subsidiary of Grantee
("Sub"), and Issuer have entered into 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 Issuer with and into Sub, with Sub as the
surviving corporation in the Merger and becoming a wholly owned Subsidiary of
Grantee; and
B. 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).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Issuer
and Grantee agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth
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herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 7,500,000 (as adjusted as set forth herein) shares (the "Option
Shares") of common stock, par value $.01 per share ("Issuer Common Stock"), of
Issuer at a purchase price of $21.23 (as adjusted as set forth herein) per
Option Share (the "Purchase Price").
2. Exercise of Option. (a) Grantee may exercise the Option, with
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respect to any or all of the Option Shares at any time or times, subject to the
provisions of Section 2(c), after the occurrence of any event as a result of
which Grantee is entitled to receive the Termination Fee pursuant to Section
5.09(b) of the Merger Agreement (a "Purchase Event"); provided, however, that
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(i) except as provided in the last sentence of this Section 2(a), the Option
will terminate and be of no further force and effect upon the earliest to occur
of (A) the Effective Time, (B) 12 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
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Event, unless, in the case of clause (C), Grantee has the right to receive a
Termination Fee following such termination upon the occurrence of certain
events, in which case the Option will not terminate until the later of (x) six
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, and (ii) any purchase of Option Shares upon exercise of the
Option will be subject to compliance with the HSR Act and the obtaining or
making of any consents, approvals, orders, notifications, filings or
authorizations, the failure of which to have obtained or made would have the
effect of making the issuance of Option Shares to Grantee illegal (the
"Regulatory Approvals"). Notwithstanding the termination of the Option, Grantee
will 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 here under which by their
terms do not terminate or expire prior to or as of such termination.
(b) In the event that Grantee is entitled to and 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 also specifies the number of Option Shares, if any,
Grantee wishes to purchase pursuant to this Section 2(b), the number of Option
Shares, if any, with respect to which Grantee wishes to exercise its Cash-Out
Right (as defined herein) pursuant to Section 6(c), 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 (an "Option Closing Date"),
subject to the following sentence, 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"). 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)(ii).
(c) Notwithstanding anything to the contrary contained herein, any
exercise of the Option and purchase of Option Shares shall be subject to
compliance with applicable laws and regulations, which may prohibit the purchase
of all the Option Shares specified in the Exercise Notice without first
obtaining or making certain Regulatory Approvals. In such event, if the Option
is otherwise exercisable and Grantee wishes to exercise the Option, the Option
may be
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exercised in accordance with Section 2(b) and Grantee shall acquire the maximum
number of Option Shares specified in the Exercise Notice that Grantee is then
permitted to acquire under the applicable laws and regulations, and if Grantee
thereafter obtains the Regulatory Approvals to acquire the remaining balance of
the Option Shares specified in the Exercise Notice, then Grantee shall be
entitled to acquire such remaining balance. Issuer agrees to use its reasonable
efforts to assist Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives official notice that a Regulatory
Approval required for the purchase of any Option Shares will not be issued or
granted or (ii) such Regulatory Approval has not been issued or granted within
six months of the date of the Exercise Notice, Grantee shall have the right to
exercise its Cash-Out Right pursuant to Section 6(c) with respect to the Option
Shares for which such Regulatory Approval will not be issued or granted or has
not been issued or granted.
3. Payment and Delivery of Certificates. (a) At any Option Closing,
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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 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 will 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. If at the time of issuance of Option Shares pursuant to an exercise
of the Option hereunder, Issuer shall have outstanding any securities similar to
rights under a stockholder rights plan, 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 such stockholder rights plan then in effect.
(c) Certificates for the Option Shares delivered at an Option Closing
will 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
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AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT DATED AS OF MAY 28,
1999, A COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF SKYTEL
COMMUNICATIONS, INC. AT ITS PRINCIPAL EXECUTIVE OFFICES."
It is understood and agreed that (i) 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 and (ii) the reference to restrictions pursuant to this Agreement
in the above legend will be removed by delivery of substitute certificate(s)
without such reference if the Option Shares evidenced by certificate(s)
containing such reference have been sold or transferred in compliance with the
provisions of this Agreement under circumstances that do not require the
retention of such reference.
4. Representations and Warranties of Issuer. Issuer hereby represents
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and warrants to Grantee as follows:
Authorized Stock. Issuer has taken all necessary corporate and other
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action to authorize and reserve and, subject to the expiration or
termination of any required waiting period under the HSR Act and any other
Regulatory Approvals, 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
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nonassessable, and will be delivered free and clear of all Liens, including
without limitation any preemptive rights of any stockholder of Issuer.
5. Representations and Warranties of Grantee. Grantee hereby
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represents and warrants to Issuer that:
Purchase Not for Distribution. Any Option Shares or other securities
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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
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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, will be adjusted appropriately, and proper
provision will be made in the agreements governing such transaction, so that
Grantee will 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 (i) any option, warrant, or other
right outstanding as of the date of this Agreement pursuant to which the Issuer
has an obligation to issue additional shares of Issuer Common Stock or (ii) an
event described in the first sentence of this Section 6(a)) or if the number of
outstanding shares of Issuer Common Stock is reduced, the number of shares of
Issuer Common Stock subject to the Option will be adjusted so that it equals the
same percentage of the aggregate number of shares of Issuer Common Stock issued
and outstanding after giving effect to such issuance as immediately prior to
such issuance, in each case 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, other than Grantee
or one of its Subsidiaries, to merge into Issuer and Issuer will be the
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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 surviving 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 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 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 and make any other necessary adjustments.
(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 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 such number
of Option Shares multiplied by the difference between (i) the average closing
price, for the 10 trading days commencing on the 12th trading day immediately
preceding the Notice Date, per share of Issuer Common Stock as reported on The
Nasdaq National Market (or, if not listed on The Nasdaq National Market, as
reported on any other national securities exchange or national securities
quotation system on which the Issuer Common Stock is listed or quoted, as
reported in The Wall Street Journal (Northeast edition), or, if not reported
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thereby, any other authoritative source) (the "Closing Price") and (ii) the
Purchase Price. Notwithstanding the termination of the Option, Grantee will 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.
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7. Registration Rights. Issuer will, if requested by Grantee at any
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time and from time to time within two 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 will use its reasonable efforts to
qualify such shares or other 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 so that upon consummation thereof no purchaser or transferee
will own beneficially more than 4.9% of the then-outstanding voting power of
Issuer. Issuer will 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. Any
registration statement prepared and filed under this Section 7, and any sale
covered thereby, will 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 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 will allow Grantee the
right to participate in such
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registration, and such participation will not affect the obligation of Issuer to
effect demand registration statements for Grantee under this Section 7; provided
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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 will include the shares requested to be included therein by
Grantee pro rata with the shares intended to be included therein by Issuer. In
connection with any registration pursuant to this Section 7, Issuer and Grantee
will provide each other and any underwriter of the offering with customary
representations, warranties, covenants, indemnification, and contribution in
connection with such registration.
8. Limitation on Profit. (a) Notwithstanding any other provision of
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this Agreement, in no event shall the Grantee's Total Profit (as defined below)
plus any Termination Fee paid to Grantee pursuant to Section 5.09(b) of the
Merger Agreement exceed in the aggregate $43.75 million and, if the total amount
that otherwise would be received by Grantee would exceed such amount, the
Grantee, at its sole election, shall either (i) reduce the number of shares of
Issuer Common Stock subject to the Option, (ii) deliver to the Issuer for
cancellation Option Shares previously purchased by Grantee against the refund of
the Purchase Price therefore, (iii) pay cash to the Issuer or (iv) any
combination thereof, so that Grantee's actually realized Total Profit, when
aggregated with such Termination Fee so paid to Grantee, shall not exceed $43.75
million after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Option
may not be exercised for a number of Option Shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below) that, together
with any Termination Fee theretofore paid to Grantee, would exceed $43.75
million; provided, that nothing in this sentence shall restrict any exercise of
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the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof) pursuant
to Section 6(c), (ii)(x) the net cash amounts or the fair market value of any
property 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, but in no case less than the fair market
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value of such Option Shares, less (y) the Grantee's purchase price of such
Option Shares, and (iii) the net cash amounts received by Grantee on the
transfer (in accordance with Section 12(g) hereof) of the Option (or any portion
thereof) to any unaffiliated party.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of Option Shares as to which Grantee may propose to exercise the
Option shall be the Total Profit determined as of the date of such proposal
assuming for such purpose that the Option were exercised on such date for such
number of Option Shares and assuming that such Option Shares, together with all
other Option Shares held by Grantee and its affiliates as of such date, were
sold for cash at the closing market price on The Nasdaq National Market for the
Issuer Common Stock as of the close of business on the preceding trading day
(less customary brokerage commissions.)
9. Transfers. The Option Shares may not be sold, assigned,
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transferred, or otherwise disposed of except (i) in an underwritten public
offering as provided in Section 7 or (ii) to any purchaser or transferee who
would not, to the knowledge of Grantee after reasonable inquiry immediately
following such sale, assignment, transfer or disposal, beneficially own more
than 4.9% of the then-outstanding voting power of the Issuer; provided, however,
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that Grantee shall be permitted to sell any Option Shares if such sale is made
pursuant to a tender or exchange offer that has been approved or recommended by
a majority of the members of the Board of Directors of Issuer (which majority
shall include a majority of directors who were directors as of the date hereof).
10. Quotation. If Issuer Common Stock or any other securities to be
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acquired upon exercise of the Option are then listed on The Nasdaq National
Market (or any other national securities exchange or national securities
quotation system), Issuer, upon the request of Grantee, will 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 Nasdaq National Market (or any such
other national securities exchange or national securities quotation system) and
will use reasonable efforts to obtain approval of such listing as promptly as
practicable.
11. Loss or Mutilation. Upon receipt by Issuer of evidence
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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
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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.
12. Miscellaneous. (a) Expenses. Except as otherwise provided in
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this Agreement or 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
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instrument in writing signed on behalf of each of the parties.
(c) Extension; Waiver. Any agreement on the part of a party to waive
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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,
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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 8.06 of the Merger Agreement, are not intended to confer
upon any Person other than the parties any rights or remedies.
(e) Governing Law. This Agreement will be governed by, and construed
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in accordance with, the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflict of laws
thereof.
(f) Notices. All notices, requests, claims, demands, and other
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communications under this Agreement shall be sent in the manner and to the
addresses set forth in the Merger Agreement.
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(g) Assignment. Neither this Agreement, the Option nor any of the
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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, in its sole discretion, any of or all its rights, interests and
obligations under this Agreement to any direct or indirect wholly owned
Subsidiary of Grantee, but no such assignment shall relieve Grantee of any of
its obligations hereunder. Any assignment or delegation in violation of the
preceding sentence will be void. Subject to the first and second sentences of
this Section 12(g), this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
(h) Further Assurances. In the event of any exercise of the Option
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by Grantee, Issuer and Grantee will 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.
(i) Enforcement. The parties agree that irreparable damage would
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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 (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 will
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 will not bring
any action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a
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Federal court sitting in the State of Delaware or a Delaware state court.
(j) Severability. If any term or other provision of this Agreement
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is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
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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 written above.
SKYTEL COMMUNICATIONS, INC.,
by /s/ Xxxx X. Xxxxxx
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Name: Xxxx X. Xxxxxx
Title: President and Chief Executive Officer
MCI WORLDCOM, INC.,
by /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
