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EXHIBIT 2.2
STOCK OPTION AGREEMENT
This is a Stock Option Agreement (the "Agreement") dated March 14,
2000 between LHS Group Inc. (the "Company"), a Delaware corporation, and Sema
Group plc ("Sema"), an English company, relating to an option granted by the
Company to Sema.
The Company is granting Sema the Option which is the subject of this
Agreement in order to induce Sema to enter into a Plan and Agreement of Merger
(the "Merger Agreement") dated the same date as this Agreement among the
Company, Sema and SG Acquisition Corporation, a Delaware corporation.
The Option is granted on the following terms:
1. Grant of Options. The Company hereby grants to Sema
an irrevocable option (the "Option") to purchase up to 10,141,250 shares of
common stock, par value $.01 per share, of the Company ("Company Common
Stock"), or such other number of shares as are 17.5% of the shares of Company
Common Stock which are outstanding on the first day on which the Option is
exercised (the shares of Company Common Stock which may be purchased by
exercising the Option being "Option Shares"). The purchase price which Sema
will pay for each Option Share as to which the Option is exercised (the
"Exercise Price") will be the amount equal to the Market Value of 2.6 ordinary
shares of Sema ("Sema Ordinary Shares") on the day the Option is exercised. For
the purposes of this Agreement, the Market Value of a Sema Ordinary Share on a
day will be the average of the closing price of a Sema Ordinary Share on The
London Stock Exchange Limited (the "LSE") on each of the ten consecutive LSE
trading days ending with, and including, the LSE trading day before that day.
The Option Shares are subject to adjustment as provided in Paragraph 6.
2. Expiration of Option. Sema may exercise the Option,
in whole or in part, and from time to time, at any time prior to the time (the
"Expiration Time") which is 5:00 p.m., Atlanta, Georgia time, on the earlier of
(i) the day on which the Merger Agreement is terminated and (ii) the Effective
Time of the Merger, except that if on, or within 10 business days before, the
day on which the Option would otherwise expire, there is a judgment, order or
decree of a court or governmental agency which prevents Sema from exercising
the Option or the Company from issuing shares upon exercise of the Option, the
Expiration Time will be extended until 5:00 p.m. Atlanta, Georgia time, on the
day which is 10 business days after the day on which that impediment to
exercise or issuance has been removed.
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3. Manner of Exercise. In order to exercise the Option,
Sema must give the Company a written notice (an "Exercise Notice") prior to the
Expiration Time specifying (i) the total number of Option Shares Sema intends
to purchase through exercise of the Option and (ii) a place and date (a
"Closing Date"), not earlier than three business days nor later than ten
business days after the day on which the Exercise Notice is given, for the
closing of the purchase of the Option Shares as to which the Option is being
exercised (a "Closing"), except that if holding the Closing within that time
period would violate applicable law (including the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act")), the Closing Date will be adjourned
to the day which is the business day after the earliest day on which the
Closing could be held without violating applicable law.
4. Payment and Delivery of Certificates. (a) On each
Closing Date, (i) Sema will (x) deliver to the Company evidence that Sema has
made a wire transfer of immediately available funds to a bank account
designated by the Company in an amount equal to the par value of the Option
Shares being purchased on that Closing Date and (y) deliver to the Company a
note (a "Purchase Note"), which will mature one year after the Closing Date,
will bear interest, payable quarterly, at the rate from time to time which is
the prime rate reported in The Wall Street Journal, and will be secured by a
security interest in the Option Shares for which it is part of the payment, in
the principal amount equal to the amount by which (A) the Exercise Price
multiplied by (B) the number of Option Shares being purchased on that Closing
Date exceeds (C) the par value of those Option Shares, and (ii) the Company
will deliver to Sema certificates, registered in Sema's name, representing the
Option Shares which are being purchased at the Closing. Sema will take all
steps (including delivering to the Company the certificates representing Option
Shares) which are necessary to give the Company a perfected security interest
in the Option Shares securing a Purchase Note, which will be prior to any
security interests Sema might grant in those Option Shares.
(b) At each Closing, Sema will deliver to the
Company a letter stating that Sema is acquiring the Option Shares for
investment, and not with a view to their resale or distribution.
(c) Certificates representing the Option Shares
which are delivered at a Closing may bear a legend substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE
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SOLD OR TRANSFERRED OTHER THAN IN A TRANSACTION WHICH IS
REGISTERED UNDER THAT ACT OR IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THAT ACT. THE SHARES ARE ALSO SUBJECT TO THE
TERMS OF A STOCK OPTION AGREEMENT DATED MARCH 14, 2000
BETWEEN LHS GROUP INC. AND SEMA GROUP PLC.
The Company will deliver substitute certificates representing Option Shares
which do not bear a legend at any time when (i) all the Option Shares may be
sold without registration under the Securities Act of 1933, as amended (the
"Securities Act") and (ii) the Company Purchase Option described in Paragraph
13 has expired.
5. Company's Representation and Warranty. The Company
represents and warrants to Sema that (a) the Company has taken all necessary
corporate and other action to authorize the grant of the Option and has
reserved from its authorized but unissued shares the maximum number of shares
the Company may be required to issue upon exercise of the Option and (b) when
Option Shares are issued upon exercise of the Option, they will be duly
authorized, validly issued, fully paid and non-assessable shares of Company
Common Stock, and will not be subject to any liens, encumbrances, pre-emptive
rights or claims of any persons.
6. Adjustments of Option Shares. (a) If after the date
of this Agreement, the Company splits, consolidates or reclassifies the Company
Common Stock, enters into a merger or other transaction, or makes a
distribution to holders of the Company Common Stock of additional Company
Common Stock or other securities, cash or other assets (other than payment by
the Company of cash dividends permitted by the Merger Agreement), so that
holders of record of Company Common Stock on a day before the Option expires
receive additional Company Common Stock or other securities, cash or other
assets, or a combination of them, instead of, or in addition to, the Company
Common Stock as it exists on the date of this Agreement, upon exercise of this
Option after any of those occurrences, Sema will receive with regard to each
Option Share as to which the Option is exercised (upon payment of the Exercise
Price for that Option Share) the securities, cash and other assets which a
person who held a share of Company Common Stock immediately before the first of
those occurrences would have owned or been entitled to receive on the day the
Option is exercised if the person had retained the share of Company Common
Stock and had not disposed of anything the person received as a result of the
split, share consolidation, share reclassification, merger or other
transaction, or distribution.
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(b) If, because of this Paragraph 6, Sema
becomes entitled to receive on exercise of the Option securities, cash or other
assets in addition to, or instead of, shares of Company Common Stock, the term
"Option Shares" will be deemed to include those securities, that cash or those
other assets.
7. Sema will not, as holder of the Option, be entitled
to vote, to receive dividends or to have any other of the rights of a
shareholder of the Company, before the Option is exercised. When the Option is
exercised, the persons in whose names the Option Shares purchased through
exercise of the Option are to be issued will be deemed to be the holders of
record of those Option Shares for all purposes, and to have all the rights of
the holders of record of those Option Shares, even if certificates representing
those Option Shares are not issued.
8. Reservation and Listing of Shares. (a) The Company
will at all times reserve and keep available for issuance upon exercise of the
Option a number of shares of Company Common Stock equal to the maximum number
of shares of Company Common Stock the Company may be required to issue upon
exercise of the Option.
(b) The Company will take all steps which are
necessary so that all the shares of Company Common Stock (or other securities)
which the Company may be required to issue on exercise of the Option will, upon
issuance, be listed on each securities exchange and quoted on each automated
quotation system on which the Company Common Stock is (or those other
securities are) listed or quoted.
9. Fractional Shares. The Company will not be required
to issue any fraction of a share upon exercise of the Option. In any case in
which Sema would, except for the provisions of this Paragraph, be entitled to
receive a fraction of a share upon exercise of the Option, the Company will,
upon exercise of the Option, issue the maximum number of whole shares it is
required to issue, and the Company will pay Sema cash in lieu of the fraction
of a share based upon the last reported sale price (or if there is none, the
mean of the high bid and low asked prices) of the Company Common Stock on the
day the Option is exercised.
10. Regulatory Requirements. The Company and Sema each
will, as promptly as practicable, do all things in its power to enable the
Option to be exercised without violating any law or regulation of any
governmental agency, including making any required filings under the HSR Act
and any other applicable law, supplying as promptly as practicable any other
additional information which may be requested by the Federal Trade Commission
or the Department of Justice in connection with the filing under the HSR Act,
or by any other
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governmental agency in connection with any filing under any applicable law, and
taking all reasonable actions which are necessary to cause the waiting periods
under the HSR Act and any other applicable law to expire or be terminated as
soon as practicable.
11. Limitation of Profit. (a) Under no circumstances may
Sema's Total Profit (as defined below) exceed $105 million (the "Maximum
Profit"). If Sema's Total Profit would exceed the Maximum Profit, Sema will pay
to the Company in cash the difference between Sema's Total Profit and the
Maximum Profit, so that Sema's realized Total Profit will not exceed the
Maximum Profit.
(b) As used in this Agreement, the term "Total
Profit" means (i) the total of any amount by which the cash and the fair market
value of any other property received by Sema upon sale of Option Shares (or
securities into which they are converted or exchanged) exceeds (x) the total
amount paid by Sema for those Option Shares (or other securities), valuing
Purchase Notes at their principal amounts, plus (y) any amounts received by
Sema from the Company for canceling the Option in whole in part, plus (z) any
sum that is paid by the Company to Sema pursuant to Paragraph 8.1(a), (b) or
(c) of the Merger Agreement, minus (ii) any amounts previously paid by Sema to
the Company pursuant to this Paragraph 11.
(c) Nothing in this Paragraph 11, or any place
else in this Agreement, will affect Sema's right to receive, or affect the
Company's obligation to pay, any sum required to be paid under Paragraph
8.1(a), (b) or (c) of the Merger Agreement, except to the extent this Paragraph
11 would require Sema to repay to the Company the amount by which a payment
under Paragraph 8.1(a), (b) or (c) would cause the Total Profit realized by
Sema when it receives the payment, including the amount of the payment, to
exceed the Maximum Profit.
(d) For the purposes of this Agreement, the
fair market value of property other than cash will be as agreed upon by the
Company and Sema or, if they cannot agree, as determined in good faith by an
independent nationally recognized investment banking firm selected by Sema and
reasonably acceptable to the Company.
(e) This Paragraph 11 will not apply to any
sale of Option Shares (or securities into which they are converted or
exchanged) which takes place after the Company Purchase Option described in
Paragraph 12 expires.
12. Company Purchase Option. (a) the Company will have
the option (the "Company Purchase Option"), which will be exercisable by a
notice given to Sema not earlier
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than the date provided in Paragraph 2 on which the Option expires (whether or
not the Option has been exercised before that date) and not later than the
ninetieth day after that Option expiration date, to purchase all (but not less
than all) the Option Shares which Sema purchased through exercise of the Option
for the sum per Option Share such that Sema's Total Profit if the Company
Purchase Option were exercised with regard to all the Option Shares would be
the Maximum Profit.
(b) The Company will pay the exercise price of
the Company Purchase Option (i) by crediting it against the principal sum of,
and accrued but unpaid interest on, the Purchase Notes and (ii) to the extent
there is any excess, by wire transfer of immediately available funds to an
account specified by Sema.
(c) On a day specified by the Company in the
notice of exercise of the Company Option, which will be not fewer than three
nor more than ten business days after the day on which that notice is given,
(i) the Company will deliver to Sema a document acknowledging the credits
against the Purchase Notes, and evidence of any required wire transfers,
constituting payment of the exercise price of the Company Purchase Option, and
(ii) Sema will deliver to the Company properly endorsed certificates
representing all the Option Shares, or whatever other documents are necessary
to transfer ownership of the Option Shares to the Company.
(d) Sema will not sell or transfer any Option
Shares (other than to a subsidiary which agrees to hold the Option Shares
subject to this Paragraph 12) until the Company Purchase Option expires, except
that if somebody makes a tender offer or exchange offer for at least 50% of the
outstanding shares of Company Common Stock which is recommended by the
Company's Board of Directors, (i) Sema may tender Option Shares in response to
that tender offer or exchange offer, (ii) when the tendered Option Shares are
accepted by the person who makes the tender offer or exchange offer, they will
no longer be subject to the Company Purchase Option, and (iii) the proceeds
received by Sema as a result of the tender of Option Shares in response to the
tender offer or exchange offer will not be subject to the Company Purchase
Option (but will be subject to Paragraph 12 of this Agreement).
13. Registration. (a) The Company will, at the request
of Sema or any subsidiary of Sema which owns Option Shares (together "Owners"),
at any time or times within two years after the Closing of an exercise of
Option, as promptly as practicable prepare and file with the Securities and
Exchange Commission up to two registration statements under the
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Securities Act relating to Option Shares or other securities issued with regard
to them, if registration is necessary with regard to a sale or other
disposition of any or all of the Option Shares or other securities that are
held by the Owners, and the Company will use all reasonable efforts to cause
those Option Shares or other securities to be qualified under any applicable
state securities laws. The Company will use all reasonable efforts to cause
each registration statement which it files to become effective as promptly as
practicable and to keep each of those registration statements effective for at
least 90 days after the day on which it first becomes effective, or until such
earlier date as all the Option Shares or other securities which are the subject
of the registration statement have been sold. The obligation of the Company to
file a registration statement under this Paragraph and maintain its
effectiveness may be suspended for a period not exceeding 90 days in total if
the Board of Directors of the Company determines in good faith that the filing
of the registration statement or the maintenance of its effectiveness would
require a disclosure of non-public information that would materially and
adversely effect the Company (but in no event may the Company exercise this
right more than once in any 12 month period). The Company will pay all expenses
of the preparation and filing of the registration statements required by this
Paragraph, but the Company will not be required to pay any underwriting
discounts, commissions, brokers fees, or fees and disbursements of the Owners'
counsel with regard to any registration. The Owners will provide all
information reasonably requested by the Company for inclusion in any
registration statement required by this Paragraph.
(b) If at any time within two years after the
first Closing of an exercise of the Option, the Company registers any of its
Common Stock under the Securities Act (other than on Form S-4 or Form S-8, or
any successor form), it will give the Owners at least 20 days prior notice of
its intention to file the registration statement, and will permit the owners to
include Option Shares or other securities they acquire on exercise of the
Option in the securities to which the registration statement relates, except
that if the managing underwriters of an offering by the Company inform the
Company in writing that in their opinion the number of Option Shares or other
securities the owners asked to include in the registration exceeds the number
which can be sold in the offering without adversely affecting the offering
price, the owners will reduce the Option Shares or other securities which are
included in the registration statement to the maximum number the managing
underwriter believes can be included without adversely affecting the offering
price. A registration under this Subparagraph (b) will not affect the right of
the Owners to registrations under Subparagraph (a).
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(c) In connection with any registration of
Option Shares, the Owners and the Company will provide each other and any
underwriter with customary representations, warranties, covenants,
indemnifications and contribution.
14. Change of Meeting Record Date. If Sema exercises the
Option at any time before the latest to occur of (i) the business day after the
day on which the Registration Statement (as that term is defined in the Merger
Agreement) becomes effective, (ii) the tenth day after the day on which the
Company gives Sema a notice under Paragraph 4.6(d) of the Merger Agreement,
(iii) the tenth day after the day on which the Company gives Sema a notice
under Paragraph 4.6(e) of the Merger Agreement, (iv) the tenth day after the
day on which the Company notifies Sema that its Board of Directors has
determined that it is required by its fiduciary duties to state that it no
longer recommends that the stockholders of the Company vote in favor of the
Merger or related matters, the Company will, at Sema's request made when Sema
exercises the Option, change the record date for the Company Merger
Shareholders Meeting to a day which is not earlier than the day after the day
on which Sema becomes the record owner of the Option Shares which Sema
purchases through its first exercise of the Option.
15. Enforcement. The parties agree that irreparable
damage would occur if either of them fails to perform in all material respects
all its obligations under this Agreement, including, but not limited to, the
Company's obligations under Paragraph 14. Accordingly, each party agrees that
the other of them will be entitled to specific performance of the terms of this
Agreement, in addition to any other remedy to which it is entitled. Each party
also waives any requirement that the other party secure or post a bond in
connection with its obtaining any equitable relief.
16. Captions. The captions of the Paragraphs of this
Agreement are for convenience only, and do not affect the meeting or
interpretation of this Agreement.
17. Restrictions on Share Acquisitions. The Company
waives any restrictions in any agreement on Sema's acquiring Company Common
Stock or other securities of the Company to the extent necessary to permit Sema
to exercise the Option and purchase the Option Shares or other securities as
provided in this Agreement.
18. Assignments. Sema may not assign the Option or any
other of its rights under this Agreement, other than to a wholly owned
subsidiary of Sema, without the prior written consent of the Company, and any
attempted assignment not permitted by this Paragraph will be void. If Sema
assigns its rights under this Agreement, (i) the assignment will not be
effective
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until the assignee delivers to the Company a document in which the assignee
notifies the Company of the assignment and agrees to be bound by the provisions
of this Agreement, including the Company Purchase Option, and (ii) after the
assignment becomes effective, also references in this Agreement to "Sema" will
be deemed to refer to the assignee.
19. Miscellaneous. Paragraphs 9.8 through 9.11 of the
Merger Agreement will apply to this Agreement to the same extent as though they
were set forth in their entirety in this Agreement.
IN WITNESS WHEREOF, the Company and Sema have executed this Agreement,
intending to be legally bound by it, on the date set forth on the first page.
LHS GROUP INC.
By:
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Name:
Title:
SEMA GROUP plc
By:
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Name:
Title:
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