EXHIBIT 2.2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT ("Option Agreement") dated October 8,
1998, between Cardinal Health, Inc., an Ohio corporation ("Cardinal"), and
Allegiance Corporation, a Delaware corporation ("Allegiance").
W I T N E S S E T H:
WHEREAS, the Board of Directors of Cardinal and the Board of
Directors of Allegiance have approved an Agreement and Plan of Merger dated as
of even date herewith (the "Merger Agreement") providing for the merger of a
wholly owned subsidiary of Cardinal with and into Allegiance;
WHEREAS, as a condition to Cardinal's entering into the Merger
Agreement, Cardinal has required that Allegiance agree, and Allegiance has
agreed, to grant to Cardinal the option set forth herein to purchase authorized
but unissued shares of Allegiance Common Stock;
NOW, THEREFORE, in consideration of the premises herein
contained, the parties agree as follows:
1. Definitions.
Capitalized terms used but not defined herein shall have the
same meanings as in the Merger Agreement.
2. Grant of Option.
Subject to the terms and conditions set forth herein,
Allegiance hereby grants to Cardinal an option (the "Option") to purchase up to
22,284,538 authorized and unissued shares of Allegiance Common Stock (the
"Option Shares") at a price per share equal to the lower of (x) $38.46 or (y)
the Exchange Ratio multiplied by the Closing Price (as defined below) of
Cardinal Common Shares on the date of exercise (the "Purchase Price") payable in
cash as provided in Section 4 hereof. As used herein, the term "Closing Price"
as of any date with respect to any Cardinal Common Shares means the average of
the closing prices (or, if such securities should not trade on any trading day,
the average of the bid and asked prices therefor on such day) of such Cardinal
Common Shares as reported on the NYSE Composite Tape during the five consecutive
trading days ending on (and including) the trading day immediately prior to such
date (or, if such Cardinal Common Shares are not traded on the NYSE, on such
other exchange or quotation system on which such Cardinal Common Shares are then
traded).
3. Exercise of Option.
(a) Cardinal may exercise the Option, in whole or in part, at
any time or from time to time if a Purchase Event (as defined below) shall have
occurred and the Merger Agreement shall have been terminated; provided, however,
that, to the extent the Option shall not have been exercised, it shall terminate
and be of no further force and effect upon the earliest to occur of:
(i) the Effective Time of the Merger;
(ii) if no Purchase Event has occurred and the Merger
Agreement is terminated in accordance with its terms pursuant to
Section 7.1(a), Section 7.1(b), Section 7.1(c) (if the termination is
by Allegiance because of a failure by Cardinal or an affiliate of
Cardinal to perform any material covenant or obligation under the
Merger Agreement, which failure has been the cause of, or resulted in,
the failure of the Merger to occur on or before May 15, 1999), Section
7.1(f), Section 7.1(i), Section 7.1(j), or Section 7.1(k) of the Merger
Agreement, then at the time of such termination;
(iii) if a Purchase Event has occurred pursuant to Section
3(b)(iv), hereof and the Merger Agreement is terminated in accordance
with its terms pursuant to Section 7.1(e) thereof, then at 5:00 p.m.
New York City time on the date which is twelve months after such
termination; or
(iv) if a Purchase Event occurs other than pursuant to Section
3(b)(iv) hereof, then at 5:00 p.m. New York City time, on the date that
is 135 days following the occurrence of the earliest Purchase Event;
and provided, further, that if the Option cannot be exercised before its date of
termination as a result of any injunction, order or similar restraint issued by
a court of competent jurisdiction, the Option shall expire on the tenth business
day after such injunction, order or restraint shall have been dissolved or when
such injunction, order or restraint shall have become permanent and no longer
subject to appeal, as the case may be, but in no event later than twelve months
after the occurrence of a Purchase Event.
(b) As used herein, a "Purchase Event" shall mean any of the
following events:
(i) any person (other than Cardinal or any of its
subsidiaries) shall (A) become the Beneficial Owner (as defined below),
or shall acquire the right to become the Beneficial Owner, of 15% or
more of either the then-outstanding Allegiance Common Stock or any
class of then-outstanding voting securities of Allegiance or any of its
subsidiaries, or (B) purchase, lease or otherwise acquire 30% or more
of the assets of Allegiance and its subsidiaries, taken as a whole
(except that the inadvertent acquisition by any person of Beneficial
Ownership (as defined below) of 15% or more of the Allegiance Common
Stock shall not be a Purchase Event if such person divests as promptly
as practicable (but in any event, within ten business days of notice
from
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Allegiance to such person) a sufficient number of shares of Allegiance
Common Stock so that such person would then be the Beneficial Owner of
less than 15% of the then-outstanding Allegiance Common Stock);
(ii) Allegiance or any of its subsidiaries shall enter into,
authorize, recommend, propose or publicly announce an intention to
enter into, any agreement, arrangement or understanding with any person
(other than Cardinal or any of its subsidiaries) pursuant to which such
person shall (A) become the Beneficial Owner, or shall acquire the
right to become the Beneficial Owner, of 15% or more of either the
then-outstanding Allegiance Common Stock or any class of
then-outstanding voting securities of Allegiance or any of its
subsidiaries, or (B) purchase, lease or otherwise acquire 30% or more
of the assets of Allegiance and its subsidiaries, taken as a whole;
(iii) the Board of Directors of Allegiance shall withdraw,
modify or change the Allegiance Board Recommendation in a manner
adverse to Cardinal, shall approve or recommend any Competing
Transaction;
(iv) the Merger Agreement shall be terminated pursuant to
Section 7.1(e) thereof and at any time prior to such termination there
shall have been made to Allegiance or publicly disclosed a Competing
Transaction with respect to Allegiance; or
(v) the Merger Agreement shall have been terminated pursuant
to Section 7.1(c) (if the termination is by Cardinal because of a
failure by Allegiance or an affiliate of Allegiance to perform any
material covenant or obligation under the Merger Agreement which
failure has been the cause of or resulted in the failure of the Merger
to occur on or before May 15, 1999), Section 7.1(d), Section 7.1(g), or
Section 7.1(h) of the Merger Agreement.
(c) As used herein, the terms "Beneficial Ownership",
"Beneficial Owner" and "Beneficially Own" shall have the meanings ascribed to
them in Rule 13d-3 under the Exchange Act. As used herein, "person" shall have
the meaning specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Cardinal wishes to exercise the Option, it
shall deliver to Allegiance a written notice (the date of receipt of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares it intends to purchase pursuant to such exercise and (ii) a place and
date not earlier than five business days nor later than 60 calendar days from
the Notice Date for the closing of such purchase (the "Closing Date"); provided
that if the closing of the purchase and sale pursuant to the Option (the
"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, provided further that, without
limiting the foregoing, if prior notification to or approval of any regulatory
authority is required in connection with such purchase, Cardinal and, if
applicable, Allegiance shall promptly file the required notice or application
for approval and shall expeditiously process the same (and
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Allegiance shall cooperate with Cardinal in the filing of any such notice or
application and the obtaining of any such approval), 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, (i) any required notification period has expired or
been terminated or (ii) such approval has been obtained, and in either event,
any requisite waiting period has passed.
(e) In the event (i) Cardinal receives official notice that an
approval of any regulatory authority required for the purchase of the Option
Shares would not be issued or granted or (ii) a Closing Date shall not have
occurred within twelve months after the related Notice Date due to the failure
to obtain any such required approval, Cardinal shall be entitled to exercise its
right as set forth in Section 7 hereof or, to the extent legally permitted, to
exercise the Option in connection with the resale of Allegiance Common Stock or
other securities pursuant to a registration statement as provided in Section 9
hereof. The provisions of this Section 3 and Section 6 hereof shall apply with
appropriate adjustments to any such exercise.
4. Payment and Delivery of Certificates.
(a) At the Closing, referred to in Section 3 hereof, on the
Closing Date, Cardinal shall pay to Allegiance the aggregate Purchase Price for
the shares of Allegiance Common Stock purchased pursuant to the exercise of the
Option in immediately available funds by wire transfer to a bank account
designated not later than one business day prior to such Closing Date by
Allegiance.
(b) At such Closing, simultaneously with the delivery of cash
as provided in Section 4(a), Allegiance shall deliver to Cardinal a certificate
or certificates representing the number of shares of Allegiance Common Stock
purchased by Cardinal, registered in the name of Cardinal or a nominee
designated in writing by Cardinal, which shares shall be fully paid and
non-assessable and free and clear of all liens, claims, charges and encumbrances
of any kind whatsoever.
(c) If at the time of issuance of any Allegiance Common Stock
pursuant to any exercise of the Option Allegiance shall have issued any share
purchase rights or similar securities to holders of Allegiance Common Stock,
then each such share of Allegiance Common Stock shall also represent rights with
terms substantially the same as and at least as favorable to Cardinal as those
issued to other holders of Allegiance Common Stock.
(d) Certificates for Allegiance Common Stock delivered at any
Closing hereunder shall be endorsed with a restrictive legend which shall read
substantially as follows:
"The shares represented by this certificate are subject to
certain provisions of an agreement between the registered
holder hereof and Allegiance Corporation, a copy of which is
on file at the principal office of Allegiance Corporation and
to resale restrictions arising under the Securities Act of
1933, as amended, and any applicable state securities laws. A
copy of such agreement will be provided to the
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holder hereof without charge upon receipt by Allegiance
Corporation of a written request therefor."
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend in connection with a transfer
or sale if (i) Allegiance has been furnished with an opinion of counsel
reasonably satisfactory to Allegiance, in a form reasonably satisfactory to
counsel for Allegiance, that such transfer or sale will not violate the
Securities Act or applicable securities laws of any state or (ii) such transfer
or sale shall have been registered and qualified pursuant to the Securities Act
and any applicable state securities laws.
5. Authorization, etc.
(a) Allegiance hereby represents and warrants to Cardinal
that:
(i) Allegiance has full corporate authority to execute and
deliver this Option Agreement and to consummate the transactions
contemplated hereby;
(ii) such execution, delivery and consummation have been
authorized by the Board of Directors of Allegiance, and no other
corporate proceedings are necessary therefor;
(iii) this Option Agreement has been duly and validly executed
and delivered by Allegiance and represents a valid and legally binding
obligation of Allegiance, enforceable against Allegiance in accordance
with its terms; and
(iv) Allegiance has taken all necessary corporate action to
authorize and reserve and permit it to issue and, at all times from the
date hereof through the date of the exercise in full or the expiration
or termination of the Option, shall have reserved for issuance upon
exercise of the Option, 22,284,538 shares of Allegiance Common Stock
(subject to adjustment as provided herein), all of which, upon issuance
in accordance with the terms of this Option Agreement, shall be duly
authorized, validly issued, fully paid and nonassessable, and shall be
delivered free and clear of all claims, liens, encumbrances and
security interests and not subject to any preemptive rights of any
stockholder of Allegiance.
(b) Allegiance hereby agrees that, prior to the termination of
the Option pursuant to Section 3(a) hereof, Allegiance shall not take, or allow
to be taken, any action that could result in the representations and warranties
set forth in Section 5(a) hereof becoming false or inaccurate.
(c) Cardinal hereby represents and warrants to Allegiance
that:
(i) Cardinal has full corporate authority to execute and
deliver this Option Agreement and to consummate the transactions
contemplated hereby;
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(ii) such execution, delivery and consummation have been
authorized by all requisite corporate action by Cardinal, and no other
corporate proceedings are necessary therefor;
(iii) this Option Agreement has been duly and validly executed
and delivered by Cardinal and represents a valid and legally binding
obligation of Cardinal, enforceable against Cardinal in accordance with
its terms; and
(iv) any Allegiance Common Stock acquired by Cardinal upon
exercise of the Option will be acquired for its own account and not be
taken with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in compliance with the
Securities Act.
(d) Cardinal hereby agrees that, prior to the termination of
the Option pursuant to Section 3(a) hereof, Cardinal shall not take, or allow to
be taken, any action that could result in the representations and warranties set
forth in Section 5(c) hereof becoming false or inaccurate.
6. Adjustment upon Changes in Capitalization.
In the event of any change in Allegiance Common Stock by
reason of stock dividends, split-ups, recapitalizations or the like, the type
and number of Option Shares, and the purchase price per share, as the case may
be, shall be adjusted appropriately. In the event that any additional shares of
Allegiance Common Stock are issued after the date of this Option Agreement
(other than pursuant to an event described in the preceding sentence or pursuant
to this Option Agreement or options granted under employee benefit plans), the
number of Option Shares shall be adjusted so that, after such issuance, it
equals at least 19.9% of the number of shares of Allegiance Common Stock then
issued and outstanding (without considering any shares subject to or issued
pursuant to the Option).
7. Repurchase.
(a) At the request of Cardinal, at any time from and after the
occurrence of a Purchase Event and ending 135 days immediately thereafter (the
"Cardinal Repurchase Period"), Allegiance (or any successor entity thereof)
shall repurchase the Option from Cardinal together with all (but not less than
all) shares of Allegiance Common Stock purchased by Cardinal pursuant thereto
with respect to which Cardinal then has Beneficial Ownership, at a price (when
calculated on a per-share basis, the "Per Share Repurchase Price") equal to the
sum of:
(i) The difference between (A) the "Market/Tender Offer Price"
for shares of Allegiance Common Stock (defined as the higher of (x) the
highest price per share at which a tender or exchange offer has been
made for shares of Allegiance Common Stock or (y) the highest closing
price per share of Allegiance Common Stock as reported by the NYSE
Composite Tape for any day within that portion of the Cardinal
Repurchase Period that precedes the date Cardinal gives notice of the
required repurchase under this Section
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7) and (B) the Purchase Price (subject to adjustment as provided in
Section 6 hereof), multiplied by the number of shares of Allegiance
Common Stock with respect to which the Option has not been exercised,
but only if such Market/Tender Offer Price is greater than such
exercise price;
(ii) The exercise price paid by Cardinal for any shares of
Allegiance Common Stock acquired pursuant to the Option; and
(iii) The difference between the Market/Tender Offer Price and
the exercise price paid by Cardinal for any shares of Allegiance Common
Stock purchased pursuant to the exercise of the Option, multiplied by
the number of shares so purchased, but only if such Market/Tender Offer
Price is greater than such exercise price.
(b) In the event Cardinal exercises its rights under this
Section 7, Allegiance shall, within 10 business days thereafter, pay the
required amount to Cardinal by wire transfer of immediately available funds to
an account designated by Cardinal and Cardinal shall surrender to Allegiance the
Option and the certificates evidencing the shares of Allegiance Common Stock
purchased thereunder with respect to which Cardinal then has Beneficial
Ownership.
(c) In determining the Market/Tender Offer Price, the value of
any consideration other than cash shall be determined by an independent
nationally recognized investment banking firm selected by Cardinal.
8. Repurchase at Option of Allegiance.
Except to the extent that Cardinal shall have previously
exercised its rights under Section 7, at the request of Allegiance during the
six-month period commencing 135 days following the first occurrence of a
Purchase Event, Allegiance may repurchase from Cardinal, and Cardinal shall sell
to Allegiance, all (but not less than all) of the Allegiance Common Stock
acquired by Cardinal pursuant to the Option and with respect to which Cardinal
has Beneficial Ownership at the time of such repurchase at a price per share
equal to the greater of (i) 110% of the Market/Tender Offer Price per share
(calculated in the manner set forth in Section 7(a)(i) hereof but utilizing the
period beginning on the occurrence of a Purchase Event and ending on the date
Allegiance exercises its repurchase right pursuant to this Section 8), (ii) the
Per Share Repurchase Price or (iii) the sum of (A) the aggregate Purchase Price
of the shares so repurchased, plus (B) interest on the aggregate Purchase Price
paid for the shares so repurchased from the date of purchase by Cardinal to the
date of repurchase at the highest rate of interest announced by Bank One,
Columbus, NA as its prime or base lending or reference rate during such period,
less any dividends received on the shares so repurchased. Any repurchase under
this Section 8 shall be consummated in accordance with Section 7(b) hereof.
9. Registration Rights.
At any time after a Closing, Allegiance shall, if requested by
any holder or Beneficial Owner of shares of Allegiance Common Stock issued upon
exercise of the Option
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(each a "Holder"), as expeditiously as possible file a registration statement on
a form for general use under the Securities Act if necessary in order to permit
the sale or other disposition of the shares of Allegiance Common Stock that have
been acquired upon exercise of the Option in accordance with the intended method
of sale or other disposition requested by any such Holder. Each such Holder
shall provide all information reasonably requested by Allegiance for inclusion
in any registration statement to be filed hereunder. Allegiance shall use its
reasonable best efforts to cause such registration statement first to become
effective and then to remain effective for such period not in excess of 135 days
from the day such registration statement first becomes effective as may be
reasonably necessary to effect such sales or other dispositions. The
registration effected under this Section 9 shall be at Allegiance's expense
except for underwriting commissions and the fees and disbursements of such
Holders' counsel attributable to the registration of such Allegiance Common
Stock. In no event shall Allegiance be required to effect more than two
registrations hereunder. The filing of any registration statement required
hereunder may be delayed for such period of time (not to exceed 90 days) as may
reasonably be required to facilitate any public distribution by Allegiance of
Allegiance Common Stock, if a special audit of Allegiance would otherwise be
required in connection therewith, or at a time during which Allegiance is in
possession of material information concerning it, its business affairs or a
material transaction, in each case, the public disclosure of which could have a
material adverse effect on Allegiance or significantly disrupt such material
transaction. If requested by any such Holder in connection with such
registration, Allegiance shall become a party to any underwriting agreement
relating to the sale of such shares on terms and including obligations and
indemnities that are customary for parties similarly situated. Upon receiving
any request for registration under this Section 9 from any Holder, Allegiance
agrees to send a copy thereof to any other person known to Allegiance to be
entitled to registration rights under this Section 9, in each case, by promptly
mailing the same, postage prepaid, to the address of record of the persons
entitled to receive such copies.
10. Listing.
If Allegiance 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, Allegiance, upon the request of Cardinal, will
promptly file an application to list the shares of Allegiance Common Stock or
other securities to be acquired upon exercise of the Option on the NYSE or such
other exchange and will use its best efforts to obtain approval of such listings
as soon as practicable.
11. Severability.
Any term, provision, covenant or restriction contained in this
Option Agreement held by a court or other Governmental Authority of competent
jurisdiction to be invalid, void or unenforceable, shall be ineffective to the
extent of such invalidity, voidness or unenforceability, but neither the
remaining terms, provisions, covenants or restrictions contained in this Option
Agreement nor the validity or enforceability thereof in any other jurisdiction
shall be affected or impaired thereby. Any term, provision, covenant or
restriction contained in this Option
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Agreement that is so found to be so broad as to be unenforceable shall be
interpreted to be as broad as is enforceable.
12. Miscellaneous.
(a) Expenses. Each of the parties hereto shall 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) Entire Agreement. This Option Agreement, the Support
Agreements, the Merger Agreement (including the documents and the instruments
referred to therein) and the Confidentiality Agreement constitute the entire
agreement among the parties and supersede all prior agreements and
understandings, agreements or representations by or among the parties, written
and oral, with respect to the subject matter hereof and thereof.
(c) Successors; No Third-Party Beneficiaries. The terms and
conditions of this Option Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Option Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and assigns, any rights, remedies, obligations, or liabilities under or by
reason of this Option Agreement, except as expressly provided herein.
(d) Notices. All notices or other communications that are
required or permitted hereunder shall be in writing and sufficient if delivered
in accordance with Section 8.2 of the Merger Agreement (which is incorporated
herein by reference).
(e) Counterparts. This Option Agreement may be executed in
counterparts, and each such counterpart shall be deemed to be an original
instrument, but both such counterparts together shall constitute but one
agreement.
(f) Further Assurances. In the event of any exercise of the
Option by Cardinal, Allegiance and Cardinal shall 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.
(g) Specific Performance. The parties hereto agree that if for
any reason Cardinal or Allegiance shall have failed to perform its obligations
under this Option Agreement, then either party hereto seeking to enforce this
Option Agreement against such non-performing party shall be entitled to specific
performance and injunctive and other equitable relief, and the parties hereto
further agree to waive any requirement for the securing or posting of any bond
in connection with the obtaining of any such injunctive or other equitable
relief. This provision is without prejudice to any other rights that either
party hereto may have against the other party hereto for any failure to perform
its obligations under this Option Agreement.
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(h) Governing Law. Except to the extent that the laws of the
jurisdiction of organization of any party hereto, or any other jurisdiction, are
mandatorily applicable to matters arising under or in connection with this
Option Agreement, this Option Agreement shall be governed by the laws of the
State of Delaware. All actions and proceedings arising out of or relating to
this Option Agreement shall be heard and determined in any Delaware state or
federal court sitting in the City of Wilmington, Delaware.
(i) Consent to Jurisdiction; Venue.
(i) Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the state courts of Delaware and to the
jurisdiction of the United States District Court for the District of
Delaware, for the purpose of any action or proceeding arising out of or
relating to this Option Agreement and each of the parties hereto
irrevocably agrees that all claims in respect to such action or
proceeding may be heard and determined exclusively in any Delaware
state or federal court sitting in the City of Wilmington, Delaware.
Each of the parties hereto agrees that a final judgment in any action
or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided
by law.
(ii) Each of the parties hereto irrevocably consents to the
service of any summons and complaint and any other process in any other
action or proceeding relating hereto, on behalf of itself or its
property, by the personal delivery of copies of such process to such
party. Nothing in this Section 12(i) shall affect the right of any
party hereto to serve legal process in any other manner permitted by
law.
(j) Regulatory Approvals; Section 16(b). If, in connection
with the exercise of the Option under Section 3 hereof, prior notification to or
approval of any Governmental Authority is required, then the required notice or
application for approval shall be promptly filed and/or expeditiously processed
by Allegiance, and periods of time that otherwise would run pursuant hereto (if
any) shall run instead from the date on which any such required notification
period has expired or been terminated or such approval has been obtained, and in
either event, any requisite waiting period shall have passed. Cardinal shall use
reasonable efforts to cooperate with Allegiance in giving any such prior
notification or obtaining any such approval of any Government Authority. Periods
of time that otherwise would run pursuant to Section 3, 7 or 8 hereof shall also
be extended to the extent necessary to avoid liability under Section 16(b) of
the Exchange Act.
(k) Waiver and Amendment. Any provision of this Option
Agreement may be waived at any time by the party that is entitled to the
benefits of such provision. This Option Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
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IN WITNESS WHEREOF, each of the parties hereto has executed
this Option Agreement as of the date first written above.
CARDINAL HEALTH, INC.
By:/s/Xxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxx
Title:
ALLEGIANCE CORPORATION
By:/s/ Xxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxx
Title:
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