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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
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SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
3-D GEOPHYSICAL, INC.
(NAME OF SUBJECT COMPANY)
3-D GEOPHYSICAL, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
88553V107
(CUSIP NUMBER OF CLASS OF SECURITIES)
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JOEL FRIEDMAN
CHAIRMAN
3-D GEOPHYSICAL, INC.
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
(212) 317-1234
WITH COPY TO:
PETER S. KOLEVZON, ESQ.
KRAMER, LEVIN, NAFTALIS & FRANKEL
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 715-9100
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF
THE PERSON(S) FILING STATEMENT)
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is 3-D Geophysical, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 8226 Park Meadows Drive, Littleton, Colorado 80124. The title
of the class of equity securities to which this Statement relates is the Common
Stock, par value $.01 per share (the "Shares"), of the Company and the
associated Preferred Share Purchase Rights (the "Rights") issued pursuant to the
Rights Agreement, dated as of July 17, 1997, between the Company and American
Securities Transfer & Trust, Inc., as Rights Agent (as the same has heretofore
and may hereafter be amended, the "Rights Agreement").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to a tender offer by WAI Acquisition Corp., a
Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Western
Atlas Inc., a Delaware corporation ("Western"), disclosed in a Tender Offer
Statement on Schedule 14D-1, dated March 13, 1998, to purchase all outstanding
Shares at a purchase price of $9.65 per share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in an
Offer to Purchase dated March 13, 1998 (the "Offer") and pursuant to the
Agreement and Plan of Merger dated as of March 8, 1998 (the "Merger Agreement"),
among Western, Purchaser and the Company.
The bidders in the Offer are Western and Purchaser (the "Bidders"). The
principal executive offices of the Bidders are located at 10205 Westheimer Road,
Houston, Texas 77042.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above.
(b) (i) Certain contracts, agreements, arrangements or understandings
between the Company or its affiliates and certain of its directors and executive
officers are described in the sections entitled "Information Concerning
Directors and Nominees -- Directors Compensation," "Executive
Compensation -- Employment Agreements; Non-competition Agreements" and "Certain
Relationships and Related Transactions" in the Company's Proxy Statement for its
1997 Annual Meeting of Stockholders held on May 16, 1997 (the "1997 Proxy
Statement"). A copy of the relevant sections of the 1997 Proxy Statement has
been filed with the Securities and Exchange Commission (the "SEC" or the
"Commission") as Exhibit (c)(1) to this Statement and is incorporated herein by
reference. In January 1998, the Company entered into amended and restated
employment agreements with Messrs. Wayne P. Widynowski, Executive Vice President
and a director of the Company, and Ronald L. Koons, Chief Financial Officer of
the Company. These agreements are substantially the same as the prior agreements
between the Company and Messrs. Widynowski and Koons except they extend the term
of the agreements to December 31, 2000 and provide for severance equal to two
years of salary (plus bonus) in the case of Mr. Widynowski and one year of
salary (plus bonus) in the case of Mr. Koons if they are terminated without
cause or they leave for "good reason" (as defined) following a change in control
of the Company, are filed with the SEC as Exhibits (c)(2) and (c)(3) to this
Statement, respectively, and are incorporated herein by reference.
(ii) Except as indicated above, and except for the Merger Agreement,
the Support Agreements and the Consulting and Noncompetition Agreements
described below, which information to the extent it relates to this Item 3(b) is
incorporated by reference, there are no material contracts, agreements,
arrangements or understandings or actual or potential conflicts of interest
between the Company or its affiliates and (i) its executive officers, directors
or affiliates, or (ii) to the knowledge of the Company, the Bidders, their
executive officers, directors or affiliates.
MERGER AGREEMENT
THE OFFER. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to prior satisfaction or waiver
of the conditions of the Offer set forth in Annex I to the Merger Agreement (the
"Tender Offer Conditions"), the Purchaser will purchase all Shares validly
tendered
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pursuant to the Offer. The Merger Agreement provides that, without the prior
written consent of the Company, the Purchaser shall not (i) impose conditions to
the Offer other than the Tender Offer Conditions, (ii) modify or amend the
Tender Offer Conditions or any other term of the Offer in a manner adverse to
the holders of Shares pursuant to the Offer, (iii) reduce the number of Shares
subject to the Offer, (iv) reduce the amount offered per Share pursuant to the
Offer, (v) except as provided in the following sentence, extend the Offer if all
of the Tender Offer Conditions are satisfied or waived, or (vi) change the form
of consideration payable in the Offer. Notwithstanding the foregoing, the
Purchaser may, without the consent of the Company, extend the Offer at any time,
and from time to time, (i) if at the then scheduled Expiration Date (as defined
in the Merger Agreement) of the Offer any of the conditions to Purchaser's
obligation to accept for payment and pay for all Shares shall not have been
satisfied or waived; (ii) for any period required by any rule, regulation,
interpretation or position of the SEC or its staff applicable to the Offer; or
(iii) if all Tender Offer Conditions are satisfied or waived but the number of
Shares tendered is at least equal to 70%, but less than 90%, of the then
outstanding number of Shares, for an aggregate period of not more than 10
business days (for all such extensions) beyond the latest Expiration Date that
would be permitted under clause (i) or (ii).
The Offer is conditioned upon, among other things, at least a majority of
the total number of outstanding Shares on a fully diluted basis being validly
tendered prior to the Expiration Date and not properly withdrawn (the "Minimum
Condition"). The Offer is also subject to certain other terms and conditions.
The Offer will expire at 12:00 midnight, New York City time, on Thursday, April
9, 1998, unless extended.
RECOMMENDATION.
The Board of Directors of the Company (the "Company Board" or the "Board"),
at a meeting duly called and held, (i) determined by unanimous vote of its
directors that the Offer and the Merger are fair to and in the best interests of
the Company and its stockholders, and (ii) recommended acceptance of the Offer
and approval of the Merger Agreement by the Company's stockholders (if such
approval is required by applicable law).
The Merger Agreement provides that Western, upon the payment by Purchaser
for Shares pursuant to the Offer, and from time to time thereafter, is entitled
to designate such number of directors, rounded up to the next whole number, on
the Company Board as is equal to the product of the total number of directors on
the Company Board (determined after giving effect to the directors so elected
pursuant to such provision) multiplied by the percentage that the aggregate
number of Shares beneficially owned by Western or its affiliates bears to the
total number of Shares then outstanding. The Company shall, upon request of
Western, promptly take all actions necessary to cause Western's designees to be
so elected, including, if necessary, seeking the resignations of one or more
existing directors; provided, however, that prior to the time the Merger becomes
effective (the "Effective Time"), the Company Board shall always have at least
two members who are neither officers, directors, shareholders or designees of
Purchaser or any of its affiliates ("Purchaser Insiders"). If the number of
directors who are not Purchaser Insiders is reduced below two prior to the
Effective Time, the remaining director who is not a Purchaser Insider will be
entitled to designate a person to fill such vacancy who is not a Purchaser
Insider and who will be a director not deemed to be a Purchaser Insider for all
purposes of the Merger Agreement. Following the election or appointment of
Western's designees and prior to the Effective Time, any amendment or
termination of the Merger Agreement by the Company, any extension by the Company
of the time for performance of any of the obligations or other acts of Western
or the Purchaser or waiver of any of the Company's rights thereunder, will
require the concurrence of a majority of the directors of the Company then in
office who are not Purchaser Insiders (or in the case where there are two or
fewer directors who are not Purchaser Insiders, the concurrence of one director
who is not a Purchaser Insider) if such amendment, termination, extension or
waiver would have an adverse effect on the minority stockholders of the Company.
THE MERGER. The Merger Agreement provides that, at the Effective Time,
Purchaser will be merged with and into the Company. Following the Merger, the
separate corporate existence of the Purchaser will cease and the Company will
continue as the Surviving Corporation.
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The Company has agreed pursuant to the Merger Agreement that, if required
by applicable law in order to consummate the Merger, it will (i) convene a
special meeting of its stockholders as soon as practicable following the
acceptance for payment of and payment for Shares by the Purchaser pursuant to
the Offer for the purpose of considering and taking action upon the Merger
Agreement; (ii) prepare and file with the Commission a preliminary proxy
statement relating to the Merger Agreement, and use its reasonable best efforts
(x) to obtain and furnish the information required to be included by the
Commission in the Proxy Statement (as defined herein) and, after consultation
with Western, to respond as soon as practicable to any comments made by the
Commission with respect to the preliminary proxy statement and to cause a
definitive proxy statement (the "Proxy Statement") to be mailed to its
stockholders and (y) to obtain the necessary approvals of the Merger and
adoption of the Merger Agreement by its stockholders; and (iii) include in the
Proxy Statement the recommendation of the Company Board that stockholders of the
Company vote in favor of the approval and adoption of the Merger and the Merger
Agreement. Western has agreed in the Merger Agreement that it will vote, or
cause to be voted, all of the Shares then owned by it, the Purchaser or any of
its other subsidiaries in favor of the approval of the Merger and the Merger
Agreement.
The Merger Agreement further provides that, notwithstanding the foregoing,
if the Purchaser acquires at least 90% of the outstanding Shares of the Company
pursuant to the Offer, the parties to the Merger Agreement will take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after the acceptance for payment of and payment for the Shares by
the Purchaser pursuant to the Offer without a meeting of the stockholders of the
Company, in accordance with Section 253 of the Delaware General Corporation law
(the "GCL").
CHARTER, BYLAWS, DIRECTORS AND OFFICERS. The Certificate of Incorporation
of Purchaser, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation, until thereafter
amended in accordance with the provisions thereof and of the Merger Agreement
and applicable law. The By-Laws of Purchaser in effect at the time of the
Effective Time shall be the By-Laws of the Surviving Corporation until amended,
subject to the provisions of the Merger Agreement which provide that all rights
to indemnification now existing in favor of directors and officers of the
Company and its subsidiaries as provided in their respective charters or by-laws
shall survive the Merger and continue in effect for not less than six years
thereafter. Subject to applicable law, the directors of Purchaser immediately
prior to the Effective Time will be the initial directors, and the officers of
Purchaser immediately prior to the Effective Time will be the initial officers,
of the Surviving Corporation and will hold office until their respective
successors are duly elected and qualified, or their earlier death, resignation
or removal.
CONVERSION OF SECURITIES. By virtue of the Merger and without any action
on the part of the holders thereof, at the Effective Time, each Share issued and
outstanding immediately prior to the Effective Time (other than (i) any Shares
held by Western, the Purchaser, any wholly-owned subsidiary of Western or the
Purchaser, in the treasury of the Company or by any wholly-owned subsidiary of
the Company, which Shares, by virtue of the Merger and without any action on the
part of the holder thereof, will be canceled and retired and will cease to exist
with no payment being made with respect thereto and (ii) Shares, if any, held by
stockholders who perfect their appraisal rights under Delaware law ("Dissenting
Shares")) will be canceled and retired and will be converted into the right to
receive $9.65 net per Share in cash, payable to the holder thereof, without
interest thereon (the "Merger Price"), upon surrender of the certificate
formerly representing such Share. At the Effective Time, each share of common
stock of Purchaser, par value $.01 per share, issued and outstanding immediately
prior to the Effective Time will, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into and become one validly
issued, fully paid and non-assessable share of common stock, par value $.01 per
share, of the Surviving Corporation.
The Merger Agreement provides that, prior to the consummation of the Offer,
the Company Board (or, if appropriate, any committee thereof) shall adopt
appropriate resolutions and take all other actions necessary to provide for the
cancellation, effective at the Effective Time, of all the outstanding stock
options (the "Options") granted under any stock option or similar plan of the
Company (the "Stock Plans") or under any agreement, without any payment therefor
except as otherwise provided in the Merger Agreement. Immediately prior to the
Effective Time, all Options (whether vested or unvested) will be canceled (and
to the extent exercisable shall no longer be exercisable) and will entitle each
holder thereof, in cancellation and settlement
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therefor, to a payment, if any, in cash by the Company (less any applicable
withholding taxes), as soon as practicable following the Effective Time, equal
to the product of (i) the total number of Shares subject to such Option (whether
vested or unvested) and (ii) the excess, if any, of the Merger Price over the
exercise price per Common Share subject to such Option (the "Cash Payment").
REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Western and the
Purchaser with respect to, among other matters, its organization and
qualification, capitalization, authority, required filings, consents and
approvals, financial statements, public filings, litigation, compliance with
law, employee benefit plans, intellectual property, environmental matters,
material contracts, opinion of financial advisor, information to be included in
the Proxy Statement, tax status, condition of assets, relationships with
customers and employees and the absence of any material adverse effects on the
Company. Western and Purchaser have made customary representations and
warranties to the Company with respect to, among other matters, its
organization, qualifications, authority, required filings, consents and
approvals and availability of funds.
COVENANTS. The Merger Agreement obligates the Company and its
subsidiaries, from the date of the Merger Agreement until the Effective Time, to
conduct their operations only in the ordinary and usual course of business
consistent with past practice and obligates the Company and its subsidiaries to
use their reasonable best efforts to preserve intact their business
organizations, to keep available the services of their present officers and key
employees and to preserve the good will of those having business relationships
with them. The Merger Agreement also contains specific restrictive covenants as
to certain impermissible activities of the Company prior to the Effective Time,
which provide that the Company will not (and will not permit any of its
subsidiaries to) take certain actions without the prior written consent of
Western including, among other things, amendments to its certificate of
incorporation or by-laws, issuances or sales of its securities, changes in
capital structure, dividends and other distributions, repurchases or redemptions
of securities, material acquisitions or dispositions, increases in compensation
or adoption of new benefit plans and certain other material events or
transactions.
ACCESS TO INFORMATION. The Merger Agreement provides that, until the
Effective Time, the Company will give Western and the Purchaser and their
representatives full access, upon reasonable notice and during normal business
hours, to the offices and other facilities and to the books and records of the
Company and its subsidiaries.
EFFORTS. Subject to the terms and conditions provided in the Merger
Agreement, each of the Company, Western and the Purchaser shall cooperate and
use their respective reasonable commercial efforts to take or cause to be made
all filings reasonably necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
the Merger Agreement.
Each of the parties also has agreed to use its reasonable commercial
efforts to obtain as promptly as practicable all Consents (as defined in the
Merger Agreement) of any Governmental Entity (as defined in the Merger
Agreement) or any other person required in connection with, and waivers of any
Violations (as defined in the Merger Agreement) that may be caused by, the
consummation of the transactions contemplated by the Offer and the Merger
Agreement.
PUBLIC ANNOUNCEMENTS. The Merger Agreement provides that the Company, on
the one hand, and Western and the Purchaser, on the other hand, agree to consult
promptly with each other prior to issuing any press release or otherwise making
any public statement with respect to the Offer, the Merger and the other
transactions contemplated by the Merger Agreement, agree to provide to the other
party for review a copy of any such press release or statement, and shall not
issue any such press release or make any such public statement prior to such
consultation and review, unless required by applicable law or any listing
agreement with a securities exchange.
EMPLOYEE BENEFIT ARRANGEMENTS. With respect to employee benefit matters,
the Merger Agreement provides that the Company will, and Western will cause the
Company and, from and after the Effective Time, the Surviving Corporation to,
honor all obligations under specified employment and severance agreements.
Notwithstanding the foregoing, from and after the Effective Time, the Surviving
Corporation will have the
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right to amend, modify, alter or terminate any employee benefit plan, provided
that any such action will not affect any rights for which the agreement of the
other party or a beneficiary is required. The Merger Agreement also provides
that employees of the Surviving Corporation immediately following the Effective
Time who immediately prior to the Effective Time were employees of the Company
or any Company subsidiary will be given credit for purposes of eligibility and
vesting under each employee benefit plan, program, policy or arrangement of
Western or the Surviving Corporation in which such employees participate
subsequent to the Effective Time for all service with the Company and any
Company subsidiary prior to the Effective Time (to the extent such credit was
given by the Company or any Company subsidiary) for purposes of eligibility and
vesting. The Company has agreed that it will not take any action which could
prevent or impede the termination of the Company's 1995 Long-Term Incentive
Compensation Plan, as amended and restated, or 1997 Long-Term Stock Incentive
Plan, and all other Stock Plans (as defined in the Merger Agreement) and any
other plan, program or arrangement providing for the issuance or grant of any
other interest in respect of the capital stock of the Company or any subsidiary
of the Company in each case effective prior to the Effective Time. The Company
has agreed to take all necessary action so that none of Western, the Company or
any of their respective subsidiaries is or will be bound by any Options (as
defined in the Merger Agreement), other options, warrants, rights or agreements
which would entitle any person, other than Western or its affiliates, to own any
capital stock of the Surviving Corporation or any of its subsidiaries or to
receive any payment in respect thereof as of the Effective Time and to obtain
all necessary consents so that after the Effective Time, holders of Options will
have no rights other than the rights of the holders of Options to receive the
Cash Payment, if any, in cancellation and settlement thereof.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. Pursuant to the
Merger Agreement, Western has agreed that from and after the Effective Time all
rights to indemnification existing at the date of the Merger Agreement in favor
of directors or officers of the Company or any of its subsidiaries as set forth
in the Certificate of Incorporation or By-Laws of the Company and its
subsidiaries shall survive the Merger and shall continue in full force and
effect for a period of six years following the Effective Time. The Merger
Agreement further provides that Western shall cause the Company and, from and
after the Effective Time, the Surviving Corporation to maintain in effect for
not less than four years (except as provided below) from the Effective Time the
current policies of the directors' and officers' liability insurance maintained
by the Company; provided that the Surviving Corporation may substitute therefor
other policies not less advantageous (other than to a de minimus extent) to the
beneficiaries for the current policies and provided that such substitution shall
not result in any gaps or lapses in coverage with respect to matters occurring
prior to the Effective Time; and provided, further, that the Surviving
Corporation shall not be required to pay an annual premium in excess of 175% of
the last annual premium paid by the Company prior to the date hereof (which the
Company represented to be $100,000 for the 12-month period ending December 31,
1998) and if the Surviving Corporation is unable to obtain such insurance it
shall obtain as much comparable insurance as possible for an annual premium
equal to such maximum amount. Notwithstanding the foregoing, at any time on or
after the first anniversary of the Effective Time, Western may, at its election,
provide funds to the Surviving Corporation to the extent necessary so that the
Surviving Corporation may self-insure with respect to the level of insurance
coverage required in lieu of causing to remain in effect any directors' and
officers' liability insurance policy.
Any indemnified party under the Merger Agreement (an "Indemnified Party")
wishing to claim such indemnification, upon learning of any claim, action, suit,
proceeding or investigation, must promptly notify Western thereof (but any such
failure or delay will not relieve Western of liability except to the extent
Western is actually prejudiced as a result of such failure or delay). In the
event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) Western or the Surviving
Corporation will have the right, from and after the purchase of Shares pursuant
to the Offer, to assume the defense thereof and Western will not be liable to
such Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, (ii) the Indemnified Parties will cooperate in the defense
of any such matter and (iii) Western will not be liable for any settlement
effected without its prior written consent, provided that Western shall not have
any obligation hereunder to any indemnified party when and if a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final, that such person is not
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entitled to indemnification under applicable law. The Merger Agreement provides
that any Indemnified Party may retain its own separate counsel reasonably
satisfactory to Western if there is a conflict of interest requiring separate
representation under applicable principles of professional responsibility and
may participate in (but not, except with respect to matters relating to such
conflict, control) the defense of such claim, action, suit, proceeding or
investigation and the Indemnifying Party will be responsible for any reasonable
legal expenses or any other reasonable expenses subsequently incurred by such
Indemnified Party in connection with such participation or defense to the extent
such Indemnified Party is entitled to be indemnified therefrom. The Merger
Agreement further provides that Western will not settle any claim, action, suit,
proceeding or investigation unless the Indemnifying Party shall be fully
released and discharged.
NOTIFICATION OF CERTAIN MATTERS. Western and the Company have agreed to
promptly notify each other of (i) the occurrence or non-occurrence of any fact
or event which would be reasonably likely (A) to cause any representation or
warranty contained in the Merger Agreement to be untrue or inaccurate in any
material respect at any time prior to the Effective Time or (B) to cause any
covenant, condition or agreement under the Merger Agreement not to be complied
with or satisfied in any material respect and (ii) any failure of the Company or
Western, as the case may be, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it under the Merger Agreement
in any material respect, provided that no such notification will affect the
representations or warranties of any party or the conditions to the obligations
of any party. Each of the Company, Western and Purchaser is also required to
give prompt notice to the other parties of any notice or other communication
from any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by the Merger
Agreement.
RIGHTS AGREEMENT. The Company covenants and agrees in the Merger Agreement
that it will not (i) redeem the Rights, (ii) amend the Rights Agreement or (iii)
take any action which would allow any Person (as defined in the Rights
Agreement) other than Western or Purchaser to acquire beneficial ownership of
15% or more of the Shares without causing a Distribution Date or a Triggering
Event (as such terms are defined in the Rights Agreement) to occur.
STATE TAKEOVER LAWS. The Merger Agreement provides that the Company will,
upon the request of the Purchaser, take all reasonable steps to assist in any
challenge by the Purchaser to the validity or applicability to the transactions
contemplated by the Merger Agreement, including the Offer and the Merger, of any
state takeover law.
NO SOLICITATION. The Merger Agreement requires the Company, its affiliates
and their respective officers, directors, employees, representatives and agents
to immediately cease any existing discussions or negotiations with any parties
with respect to any acquisition or exchange of all or any material portion of
the assets of, or any equity interest in, the Company or any of its subsidiaries
or any business combination with the Company or any of its subsidiaries. The
Merger Agreement further provides that, prior to the Effective Time, the Company
will not authorize or permit any of its subsidiaries or any of its subsidiaries'
directors, officers, employees, agents or representatives, directly or
indirectly, to solicit, initiate, encourage or facilitate, or furnish or
disclose non-public information in furtherance of, any inquiries or the making
of any proposal with respect to any merger, liquidation, recapitalization,
consolidation or other business combination involving the Company or its
subsidiaries or acquisition of any capital stock or any material portion of the
assets of the Company or of its subsidiaries, or any combination of the
foregoing (an "Acquisition Transaction") or negotiate, explore or otherwise
engage in discussions with any person (other than Purchaser, Western or their
respective directors, officers, employees, agents and representatives) with
respect to any Acquisition Transaction or enter into any agreement, arrangement
or understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by the Merger Agreement, provided
that the Company may furnish information to, and negotiate or otherwise engage
in discussions with, any party who delivers a bona fide written proposal for an
Acquisition Transaction if the Company Board determines in good faith and on a
reasonable basis by a majority vote, after consultation with its outside legal
counsel and its financial advisor, Salomon Smith Barney, that (i) such
Acquisition Transaction is reasonably likely to be more favorable to the
stockholders of the Company from a financial point of view than the transactions
contemplated by the Merger Agreement and (ii) failing to take such action would
thus constitute a breach of the fiduciary duties of the Company Board. The
Merger Agreement further provides that, from and after the
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execution of the Merger Agreement, the Company will, as soon as practicable,
advise the Purchaser in writing of the receipt, directly or indirectly, of any
discussions, negotiations, proposals or substantive inquiries relating to an
Acquisition Transaction, identify the offeror and furnish to the Purchaser a
copy of any such proposal or inquiry, if it is in writing, or a written summary
of any oral proposal or inquiry relating to an Acquisition Transaction, and that
the Company will promptly advise Western in writing of any substantive
development relating to such proposal, including the results of any substantive
discussions or negotiations with respect thereto.
CONDITIONS TO CONSUMMATION OF THE MERGER. Pursuant to the Merger
Agreement, the respective obligations of Western, the Purchaser and the Company
to consummate the Merger are subject to the satisfaction, at or before the
Effective Time, of each of the following conditions: (i) the stockholders of the
Company shall have duly approved the transactions contemplated by the Merger
Agreement, if required by applicable law; (ii) the Purchaser shall have accepted
for payment and paid for Shares pursuant to the Offer in accordance with the
terms of the Merger Agreement; (iii) the consummation of the Merger is not
restrained, enjoined or prohibited by any order, judgment, decree, injunction or
ruling of a court of competent jurisdiction or any Governmental Entity and there
is not any statute, rule or regulation enacted, promulgated or deemed applicable
to the Merger by any Governmental Entity which prevents the consummation of the
Merger or has the effect of making the purchase of Shares illegal; and (iv) any
waiting period (and any extension thereof) under the HSR Act (as defined)
applicable to the Merger shall have expired or terminated.
TERMINATION. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, notwithstanding approval
thereof by the stockholders of the Company (with any termination by Western also
being an effective termination by Purchaser):
(a) by the mutual written consent of the Company, by action of its Board of
Directors and Western;
(b) by the Company if (i) Purchaser fails to commence the Offer by March
13, 1998, (ii) Purchaser has not accepted for payment and paid for the Shares
pursuant to the Offer in accordance with the terms of the Offer on or before
June 30, 1998, provided that if any applicable waiting period under the HSR Act
shall not have expired or been terminated prior to June 30, 1998, then the
Company may not terminate the Merger Agreement pursuant to this provision until
August 31, 1998 or (iii) Purchaser fails to purchase validly tendered Shares in
violation of the terms of the Merger Agreement;
(c) by Western or the Company if the Offer is terminated or withdrawn
pursuant to its terms without any Shares being purchased thereunder; provided,
however, that neither Western nor the Company may terminate the Merger Agreement
if such party shall have materially breached the Merger Agreement or, in the
case of Western, if it or Purchaser is in material violation of the terms of the
Offer;
(d) by Western or the Company if any court or other Governmental Entity
shall have issued an order, decree, judgment or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the acceptance for
payment of, or payment for, Shares pursuant to the Offer or the Merger and such
order, decree or ruling or other action shall have become final and
nonappealable;
(e) by the Company if, prior to the purchase of Shares pursuant to the
Offer in accordance with the terms of the Merger Agreement, the Company Board
approves an Acquisition Transaction, on terms which a majority of the members of
the Company Board have determined in good faith and on a reasonable basis, after
consultation with its outside counsel and Salomon Smith Barney, that (i) such
Acquisition Transaction is more favorable to the Company and its stockholders
from a financial point of view than the transactions contemplated by the Merger
Agreement and (ii) failure to approve such proposal and terminate the Merger
Agreement would thus constitute a breach of fiduciary duties of the Company
Board under applicable law; provided that the termination described in this
subparagraph (e) shall not be effective unless and until the Company shall have
paid to Western the Termination Fee, as described below under "Fees and
Expenses."
(f) by Western if the Company breaches its covenant in Section 6.08 of the
Merger Agreement (relating to the Rights Agreement);
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<PAGE> 9
(g) by Western prior to the purchase of the Shares pursuant to the Offer if
the Company Board shall have withdrawn or modified (including by amendment of
this Schedule 14D-9) in a manner adverse to the Purchaser its approval or
recommendation of the Offer, the Merger Agreement or the Merger, shall have
approved or recommended another offer or transaction, or shall have resolved to
effect any of the foregoing;
(h) by Western if any Management Stockholder (as defined) who is a party to
a Support Agreement shall have failed to perform or comply with any of his
obligations, covenants or agreements in any material respect under a Support
Agreement;
(i) by Western prior to the purchase of the Shares pursuant to the Offer if
the Minimum Condition shall not have been satisfied by the expiration date of
the Offer and on or prior to such date (A) a third party shall have made a
proposal or public announcement or communication to the Company with respect to
(i) the acquisition of the Company by merger, tender offer or otherwise; (ii)
the acquisition of 50% or more of the assets of the Company and its
subsidiaries, taken as a whole; (iii) the acquisition of 15% or more of the
outstanding Shares; (iv) the adoption by the Company of a plan of liquidation or
the declaration or payment of an extraordinary dividend; or (v) the repurchase
by the Company or any of its subsidiaries of 15% or more of the outstanding
Shares at a price in excess of the Offer Price or (B) any person (including the
Company or any of its affiliates or subsidiaries), other than Western or any of
its affiliates, shall have become the beneficial owner of more than 15% of the
Shares; or
(j) by Western if Purchaser shall not have accepted for payment and paid
for Shares pursuant to the Offer in accordance with the terms thereof on or
before June 30, 1998.
In the event of the termination of the Merger Agreement in accordance with
its terms, the Merger Agreement will become void and have no effect, without any
liability on the part of any party or its directors, officers, employees or
stockholders, other than certain specified provisions, which shall survive any
such termination, provided that no party shall be relieved from liability for
any breach of the Merger Agreement.
FEES AND EXPENSES. Except as provided below, whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Offer, the
Merger Agreement and the transactions contemplated by the Merger Agreement will
be paid by the party incurring such expenses. In the event that the Merger
Agreement is terminated pursuant to subparagraphs (e), (f), (g) or (h) of
"Termination" as described above (or is terminated pursuant to paragraph (c) as
a result of the failure to satisfy the conditions set forth in paragraph (d) of
Section 14 of the Offer) then the Company will within one business day after
such termination (except for a termination under subparagraph (e) in which case
payment is to be made upon or prior to such termination) pay Western a
termination fee of $5,500,000 (the "Termination Fee") in immediately available
funds by wire transfer to an account designated by Western. In the event that
the Merger Agreement is terminated pursuant to subparagraph (i) of "Termination"
and within six months of such termination the Company shall have entered into a
definitive agreement or a written agreement in principle providing for an
Acquisition Transaction, the Company shall pay Western the Termination Fee at or
prior to execution of such agreement or agreement in principle in immediately
available funds by wire transfer to an account designated by Western. In the
event the Merger Agreement is terminated pursuant to subparagraph (c) of
"Termination" as a result of the failure to satisfy the conditions set forth in
subparagraph (f) or (g)(1) of Section 14 of the Offer, then the Company shall
promptly (and in any event within one business day after such termination)
reimburse Western for the fees and expenses of Western and the Purchaser
(including reasonable printing fees, filing fees and reasonable fees and
expenses of its legal and financial advisors) related to the Offer, the Merger
Agreement, the transactions contemplated by the Merger Agreement and any related
financing up to a maximum of $1,500,000 (collectively "Expenses") in immediately
available funds by wire transfer to an account designated by Western. The
prevailing party in any legal action undertaken to enforce the Merger Agreement
or any provision thereof will be entitled to recover from the other party the
costs and expenses (including attorneys and expert witness fees) incurred in
connection with such action.
AMENDMENT; EXTENSION; WAIVER. The Merger Agreement may be amended by the
Company, Western and the Purchaser at any time before or after any approval of
the Merger Agreement by the stockholders of the Company but, after any such
approval, no amendment will be made which decreases the price to be paid
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<PAGE> 10
in the Merger, changes the consideration to be received or which otherwise
adversely affects the rights of the Company's stockholders thereunder without
the approval of such stockholders.
At any time prior to the Effective Time, the parties to the Merger
Agreement may (i) extend the time for the performance of any of the obligations
or other acts of any other party thereto, (ii) waive any inaccuracies in the
representations and warranties contained therein of any other party thereto or
in any document, certificate or writing delivered pursuant to the Merger
Agreement by any other party thereto or (iii) waive compliance with any of the
agreements of any other party or with any conditions to its own obligations.
The Merger Agreement provides that following the election or appointment of
Western's designees to the Company Board and prior to the Effective Time, any
amendment or termination of the Merger Agreement, or any extension by the
Company of the time for the performance of any of the obligations or other acts
of Western or the Purchaser or waiver of any of the Company's rights under the
Merger Agreement, will require the concurrence of a majority of the directors of
the Company then in office who are not Purchaser Insiders (or in the case where
there are two or fewer directors who are not Purchaser Insiders, the concurrence
of one director who is not a Purchaser Insider) if such extension or waiver
would have an adverse effect on the minority stockholders of the Company.
SUPPORT AGREEMENTS
Concurrently with the execution of the Merger Agreement, Western entered
into Support Agreements with each member of the Board of Directors of the
Company and one executive officer who is not a director. In the aggregate, such
stockholders owned 1,748,306 Shares (representing approximately 14.7% of the
Shares outstanding) as of March 8, 1998.
Pursuant to the Support Agreements the stockholder(s) have agreed to tender
(except for one officer-director who owns 3,000 Shares) and not withdraw their
Shares pursuant to the Offer. Each also agreed that, for so long as the Support
Agreement was in effect, at any meeting of the stockholders of the Company,
however called, he would vote his Shares in favor of the Merger, against any
action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement, and against any action or agreement that would
impede, interfere with, delay, postpone or attempt to discourage the Merger or
the Offer.
Each of these stockholders also granted representatives of Western an
irrevocable proxy to vote his Shares in favor of the Merger and other
transactions contemplated by the Merger Agreement, against any Acquisition
Transaction and otherwise as contemplated by the preceding paragraph.
In addition each of the stockholders who is a party to a Support Agreement
agreed not to (i) transfer any or all of his Shares (except for one
officer-director who owns 3,000 Shares and who may transfer his Shares to the
Company), (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of his Shares (except
for such officer-director who owns 3,000 Shares and who may enter into a
contract with the Company with respect to such Shares), (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to his Shares, (iv)
deposit his Shares into a voting trust or enter into a voting agreement or
arrangement with respect to his Shares or (v) take any other action that would
in any way restrict, limit or interfere with the performance of his obligations
under the Support Agreements or by the Merger Agreement or which would make any
representation or warranty of such stockholder under the Support Agreement
untrue or incorrect.
Each further agreed that he would not, and would not permit or authorize
any of his affiliates, representatives or agents to, directly or indirectly,
encourage, solicit, explore, participate in or initiate discussions or
negotiations with, or provide or disclose any information to, any corporation,
partnership, person or other entity or group (other than Western, Purchaser or
any of their affiliates or representatives) concerning any Acquisition
Transaction or enter into any agreement, arrangement or understanding requiring
the Company to abandon, terminate or fail to consummate the Merger or any other
transactions contemplated by the Merger Agreement. Each such stockholder also
agreed immediately to cease any existing activities, discussions or negotiations
with any parties with respect to any Acquisition Transaction and to immediately
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<PAGE> 11
advise Western in writing of the receipt, directly or indirectly, of any
inquiries, discussions, negotiations or proposals relating to an Acquisition
Transaction, identify the offeror and furnish to Western a copy of any such
proposal or inquiry, if it is in writing, or a written summary of any oral
proposal or inquiry relating to an Acquisition Transaction and to promptly
advise Western in writing of any development relating to such proposal,
including the results of any discussions or negotiations with respect thereto.
The Support Agreements provide, however, that any action taken by the Company or
any member of the Board of Directors of the Company (including, if applicable,
such stockholder acting in such capacity) in accordance with the proviso set
forth in the second sentence of "No Solicitation" will be deemed not to violate
the provisions described in this paragraph.
The agreements and proxy contained in each Support Agreement will terminate
on the earlier of payment for the Shares pursuant to the Offer and the
termination of the Merger Agreement in accordance with its terms.
CONSULTING AND NONCOMPETITION AGREEMENTS
Joel Friedman, the Chairman of the Board and Chief Executive Officer of the
Company, and Luis H. Ferran, the Executive Vice President for Latin American
Operations and a director of the Company, have each entered into consulting and
non-compete agreements with Western which will become effective upon
consummation of the Merger. The agreements with Messrs. Friedman and Ferran
provide for annual fees of $250,000 and $125,000, respectively, over a 4-year
term. During their consultancy, and until the later of the end of the 4-year
term or 12 months following the termination of their consultancy, each will be
prohibited from engaging in the Company's primary businesses of seismic data
acquisition and data processing and from soliciting employees and customers of
Western and its affiliates (including the Company).
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) At a special meeting held on March 8, 1998, the Company Board
unanimously determined that each of the Offer and the Merger is fair to, and in
the best interests of, the Company's stockholders and approved the Merger
Agreement and the transactions contemplated thereby. The Board hereby recommends
that the Company's stockholders accept the Offer and tender all of their Shares
pursuant to the Offer. Copies of a letter to stockholders is attached hereto as
Exhibit (a)(1) and is incorporated herein by reference.
(b) The reasons for the position stated in paragraph (a) of this Item 4 are
presented in the information furnished below in this Item 4(b).
BACKGROUND OF THE OFFER
Initial contacts between the Company and Western began in early July 1997
when Richard C. White, President of The Western Geophysical division of Western
Atlas International, Inc., a subsidiary of Western ("WAII"), telephoned Joel
Friedman, Chairman of the Board of the Company, to discuss the possibility of
meeting to explore a business combination. On July 15, 1997 Mr. Friedman met
with Mr. White and Jesse Perez, Senior Vice President of Finance and
Administration of WAII. Although specific terms were not discussed, the parties
entered into a confidentiality agreement relating to the exchange of
confidential information.
After signing the confidentiality agreement, the Company provided Western
with certain confidential information relating to the Company and its
businesses. Following several general discussions concerning possible structures
and potential valuations, both parties agreed that further discussions at such
time would not be pursued. On July 30, 1997, Mr. Perez sent a letter to Mr.
Friedman returning the confidential information which had previously been
provided.
During the fall of 1997, Mr. Friedman and other representatives of the
Company had preliminary discussions with several other companies with respect to
a possible business combination involving the Company. In connection with one
such discussion, the Company and the other party exchanged confidential
information, but determined not to proceed with a transaction.
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<PAGE> 12
In early November 1997, Mr. White contacted Mr. Friedman to reiterate
Western's continued interest in a possible transaction, and later that month
Salomon Smith Barney, which was acting as financial advisor to the Company with
respect to a possible transaction, at the direction of the Company contacted and
had further discussions with Mr. White. In early December 1997, Will
Honeybourne, a Senior Vice President of WAII, met with Mr. Friedman and Mr.
Ferran. The discussions at this meeting related primarily to the Company's and
the industry's outlook and each party's potential interest in pursuing a
business combination. On December 19, 1997 the Company and Western entered into
a new confidentiality agreement. The Company then provided Western with
additional financial and operational data and responded to Western's inquiries
in connection with its preliminary financial review.
On January 13, 1998, representatives of the Company and Western met to
discuss a possible transaction. At this meeting, Western's representatives
indicated that Western was willing to consider proposing an acquisition of the
Company for cash but that Western would need to conduct a detailed due diligence
investigation of the Company before it would be in a position to make or proceed
with any such proposal. Western's representatives said that, for Western to
continue with the necessary due diligence investigation, it would require the
Company to enter into an agreement obligating it to negotiate exclusively with
Western for a limited period of time during which Western would continue with
its due diligence. Western's representatives stated that their initial financial
analysis of the proposed transaction indicated a cash price of $10 per Share. As
a result of these discussions, the Company and Western entered into an
Exclusivity Agreement dated January 20, 1998 which initially provided that the
Company would negotiate exclusively with Western until February 11, 1998 (the
"Exclusivity Period").
Western continued its due diligence investigation through the remainder of
January, and in February representatives of Western and the Company held
numerous telephonic meetings to discuss the information learned through
Western's due diligence investigation. During the course of these discussions,
the Exclusivity Period was extended several times. On February 12, 1998,
representatives of Western met with Messrs. Friedman and Ferran, other senior
executives of the Company, three of its outside directors and a representative
of Salomon Smith Barney to discuss the results of Western's due diligence
investigation to such date.
Following the meeting on February 12, representatives of the Company and
Western held a number of telephonic meetings concerning the results of, and
concerns raised by, Western's due diligence and the impact of such results on
the price per Share Western would be willing to pay. As a result of these
discussions and negotiations, each party's representatives expressed their
willingness to recommend to their respective companies a compromise price of
$9.65 per Share, subject to negotiation and execution of definitive
documentation and board approval thereof. On February 25, 1998, Western
furnished the Company with a draft Merger Agreement. Additional meetings and
telephone discussions between Western, the Company and their respective advisors
occurred between February 25 and March 8 during which the significant terms of
the Merger Agreement, Support Agreements and consulting and non-compete
agreements were negotiated and substantially revised. On March 4, 1998 a form of
the Merger Agreement was presented to, and approved by, the Executive Committee
of the Board of Directors of Western (acting with the authority of the full
Board of Directors) and on March 8, 1998 the Merger Agreement was presented to
and unanimously approved by the Board of Directors of the Company.
Recommendation of the Board of Directors; Fairness of the Offer and the
Merger
In approving the Merger Agreement and recommending acceptance of the Offer
and adoption of the Merger Agreement, the Board considered a number of factors,
including, but not limited to, the following:
(i) The Company's business, financial condition, results of
operations, assets, liabilities, business strategy and prospects, as well
as various uncertainties associated with those prospects.
(ii) The Company's existing competition in the industry in which it
operates and future competition, the relative size of other participants in
the industry in which it operates and the available capital and other
resources of such other participants as compared to the available capital
and other resources of the Company.
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<PAGE> 13
(iii) A review of the possible alternatives to the Offer and the
Merger, including the possibility of continuing to operate the Company as
an independent entity and the timing and feasibility of those alternatives,
and the possible values to the Company's stockholders of such alternatives;
(iv) The historical and current market prices for the Shares.
(v) The opinion of Salomon Smith Barney dated March 8, 1998 (the
"Opinion") to the effect that, as of such date and based upon and subject
to certain matters stated in the Opinion, the $9.65 per Share cash
consideration to be received by holders of Shares (other than Western and
its affiliates) in the Offer and the Merger was fair, from a financial
point of view, to such holders. The full text of Salomon Smith Barney's
Opinion, which sets forth the assumptions made, matters considered and
limitations on the review undertaken by Salomon Smith Barney, is attached
hereto as Exhibit (a)(4) and is incorporated herein by reference. The
Opinion is directed only to the fairness, from a financial point of view,
of the cash consideration to be received in the Offer and the Merger by
holders of Shares (other than Western and its affiliates) and is not
intended to constitute, and does not constitute, a recommendation as to
whether any stockholder should tender Shares pursuant to the Offer. HOLDERS
OF SHARES ARE URGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY.
(vi) The fact that the Offer was not subject to a financing condition.
(vii) The financial and other terms and conditions of the Offer, the
Merger and the Merger Agreement, including, without limitation, the facts
that the terms of the Merger Agreement will not prevent other third parties
from making certain bona fide proposals subsequent to execution of the
Merger Agreement, will not prevent the Company Board from determining, in
the exercise of its fiduciary duties in accordance with the Merger
Agreement, to provide information to and engage in negotiations with such
third parties and will permit the Company, subject to the non-solicitation
provisions and the payment of the termination fee discussed above, to enter
into a transaction with a third party that would be more favorable to the
Company's stockholders from a financial point of view than the Offer and
the Merger.
(viii) The structure of the transaction, which is designed, among
other things, to result in receipt by the holders of Shares at the earliest
practicable time of the consideration to be paid in the Offer and the fact
that the consideration to be paid in the Offer and the Merger is the same.
(ix) The likelihood that the Offer and the Merger would be
consummated.
The foregoing discussion of the information and factors considered and
given weight by the Board is not intended to be exhaustive. In view of the wide
variety of factors considered in connection with its evaluation of the Offer and
the Merger, the Board found it impracticable to, and did not, quantify or
otherwise attempt to assign relative weights to the specific factors considered
in reaching its determination. The Board discussed in detail the matters
referenced above; however, individual members of the Board may have given
different weights to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained Smith Barney Inc. and Salomon Brothers Inc,
collectively doing business as Salomon Smith Barney, as its financial advisors
in connection with the Offer and the Merger. Pursuant to the terms of Salomon
Smith Barney's engagement, the Company has agreed to pay Salomon Smith Barney
for its services an aggregate financial advisory fee of $900,000, of which
$450,000 was paid in connection with the delivery of the Opinion and will be
credited against the advisory fee which is payable upon consummation of the
Offer. The Company also has agreed to reimburse Salomon Smith Barney for travel
and other out-of-pocket expenses, including legal fees and expenses, and to
indemnify Salomon Smith Barney and certain related parties against certain
liabilities, including liabilities under the federal securities laws, arising
out of Salomon Smith Barney's engagement. Salomon Smith Barney has in the past
provided investment banking services to the Company unrelated to the Offer and
the Merger, for which services Salomon Smith Barney has received compensation.
In December 1996, Smith Barney Inc. acted as the lead managing underwriter for
the Company's public offering of 3,500,000 Shares. In the ordinary course of
business, Salomon Smith Barney and
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<PAGE> 14
its affiliates (including Travelers Group Inc. and its affiliates) may actively
trade or hold the securities of the Company and Western for their own account or
for the account of customers and, accordingly, may at any time hold a long or
short position in such securities.
Neither the Company nor any person acting on its behalf currently intends
to employ, retain or compensate any person to make solicitations or
recommendations to security holders on its behalf concerning the Offer or the
Merger.
ITEM 6. RECENT TRANSACTIONS AND INTEREST WITH RESPECT TO SECURITIES.
(a) No transactions in Shares have been effected during the past 60 days by
the Company or, to the best of the Company's knowledge, by any executive
officer, director, subsidiary or affiliate of the Company.
(b) To the best of the Company's knowledge, each executive officer,
director and affiliate of the Company currently intends to tender to Purchaser
all Shares over which such person has sole dispositive power as of the
Expiration Date of the Offer, and each director and executive officer (except
one officer-director who owns 3,000 Shares) has entered into Support Agreements
pursuant to which they have agreed to do so. See Item 3 hereof.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Other than the Offer and the Merger, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (1) an
extraordinary transaction, such as a merger or reorganization, involving the
Company or any subsidiary of the Company; (2) a purchase, sale or transfer of a
material amount of assets of the Company or any subsidiary of the Company; (3) a
tender offer for or other acquisition of securities by or of the Company; or (4)
any material change in the present capitalization or dividend policy of the
Company.
(b) Except as set forth or as incorporated by reference in this Item 7 or
in Items 3 or 4 hereof, there are no transactions, Board resolutions, agreements
in principle or signed contracts in response to the Offer which relate to or
would result in one or more of the matters referred to in Item 7(a) hereof.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) Section 203 of the Delaware General Corporation Law
As a Delaware corporation, the Company is subject to Section 203 ("Section
203") of the Delaware General Corporation Law. Under Section 203, certain
"business combinations" between a Delaware corporation whose stock is publicly
traded or held on record by more than 2,000 stockholders and an "interested
stockholder" are prohibited for a three-year period following the date that such
a stockholder became an interested stockholder, unless (i) the corporation has
elected in its original certificate of incorporation not to be governed by
Section 203 (the Company did not make such an election), (ii) the transaction in
which the stockholder became an interested stockholder or the business
combination was approved by the board of directors of the corporation before the
other party to the business combination became an interested stockholder, (iii)
upon consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers or held in employee benefit plans in which
the employees do not have a confidential right to tender or vote stock held by
the plan) or (iv) the business combination was approved by the board of
directors of the corporation and ratified by 66 2/3% of the voting stock which
the interested stockholder did not own. The term "business combination" is
defined generally to include mergers or consolidations between a Delaware
corporation and an "interested stockholder," transactions with an "interested
stockholder" involving the assets or stock of the corporation or its
majority-owned subsidiaries and transactions which increase an "interested
stockholder's" percentage ownership of stock. The term "interested stockholder"
is defined generally as a stockholder who, together with affiliates and
associates, owns (or, within three years prior, did own) 15% or more of a
Delaware corporation's voting stock.
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<PAGE> 15
In accordance with the Merger Agreement and Section 203, the Company Board
approved the Offer and the Merger and, therefore, the restrictions of Section
203 are inapplicable to the Offer and the Merger.
(b) Amendment of the Rights Agreement
The Company has represented to Western in the Merger Agreement that the
Company Board, at a meeting duly called and held, has taken all necessary action
to render the Rights inapplicable to the Offer, the Merger and the Support
Agreements and to amend the Rights Agreement so that neither Bidder is an
Acquiring Person as a result of entering into the Merger Agreement or the
Support Agreements or making the Offer.
At its meeting on March 8, 1998, the Company Board approved, and the
Company entered into, the amendment to the Rights Agreement filed with the SEC
as Exhibit (c)(10) to this Statement.
(c) Litigation Relating to the Offer and Merger
On or about March 9, 1998, a putative class action complaint, on behalf of
the Company's stockholders, was filed in the Court of Chancery in the State of
Delaware in and for New Castle County against the Company, the members of the
Company Board, and Western (the "Chancery Court Action"). The complaint in the
Chancery Court Action alleges that the directors of the Company breached their
fiduciary duties by agreeing to the Merger contemplated by the Merger Agreement
without making the requisite effort to obtain the best offer possible. The
complaint seeks declaratory and injunctive relief, as well as unspecified
damages and attorneys' fees. The Company believes that the Chancery Court Action
is without merit and intends to defend such action vigorously.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
(a)(1) Letter to Stockholders of the Company dated March 13, 1998.
(a)(2) Joint Press Release of the Company and Western dated March
9, 1998.
(a)(3) Form of Summary Advertisement dated March 13, 1998.
(a)(4) Opinion of Salomon Smith Barney dated March 8, 1998.
(c)(1) Relevant Portions of 1997 Proxy Statement.
(c)(2) Form of Amended and Restated Employment Agreement dated
January 13, 1998 between the Company and Wayne P.
Widynowski.
(c)(3) Form of Amended and Restated Employment Agreement dated
January 13, 1998 between the Company and Ronald L. Koons.
(c)(4) Agreement and Plan of Merger dated as of March 8, 1998,
among the Company, Purchaser and Western.
(c)(5) Form of Support Agreement between Western and Robert P.
Andrews, Ralph M. Bahna, Douglas W. Brandrup, Richard Davis,
Arthur Emil, Luis H. Ferran, Joel Friedman, P. Dennis
O'Brien and Emir L. Tavella.
(c)(6) Form of Support Agreement between Western and Ronald L.
Koons.
(c)(7) Form of Support Agreement between Western and Wayne P.
Widynowski.
(c)(8) Consulting Agreement and Noncompetition Agreement, dated as
of March 8, 1998 among Western, Friedman Enterprises Inc.
and Joel Friedman.
(c)(9) Consulting Agreement and Noncompetition Agreement, dated as
of March 8, 1998 among Western, Luis H. Ferran Arroyo.
(c)(10) Rights Agreement, dated as of July 17, 1997, between the
Company and American Securities Transfer & Trust, Inc., as
Rights Agent, as amended.
(c)(11) Amended and Restated 1995 Long-Term Incentive Compensation
Plan of the Company.
(c)(12) 1997 Long-Term Stock Incentive Plan of the Company.
</TABLE>
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
3-D GEOPHYSICAL, INC.
By: /s/ JOEL FRIEDMAN
------------------------------------
Name: Joel Friedman
Title: Chairman
Dated: March 13, 1998
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Exhibit (a)(4)
[SALOMON SMITH BARNEY LETTERHEAD]
March 8, 1998
The Board of Directors
3-D Geophysical, Inc.
599 Lexington Avenue
New York, New York 10022
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of 3-D Geophysical, Inc. ("3-D
Geophysical") of the consideration to be received by such holders pursuant to
the terms and subject to the conditions set forth in the Agreement and Plan of
Merger, dated as of March 8, 1998 (the "Merger Agreement"), among Western Atlas
Inc. ("Western Atlas"), WAI Acquisition Corporation, a subsidiary of Western
Atlas ("Subsidiary"), and 3-D Geophysical. As more fully described in the Merger
Agreement, (i) Subsidiary will commence a tender offer to purchase all
outstanding shares of the common stock, par value $0.01 per share, of 3-D
Geophysical (the "3-D Common Stock" and, such tender offer, the "Tender Offer")
at a purchase price of $9.65 per share, net to the seller in cash (the "Cash
Consideration") and (ii) subsequent to the Tender Offer, Subsidiary will be
merged with and into 3-D Geophysical (the "Merger" and, together with the Tender
Offer, the "Transaction") and each outstanding share of 3-D Common Stock not
previously tendered will be converted into the right to receive the Cash
Consideration.
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of 3-D Geophysical and certain senior officers and other
representatives of Western Atlas concerning the business, operations and
prospects of 3-D Geophysical. We examined certain publicly available business
and financial information relating to 3-D Geophysical as well as certain
financial forecasts and other information and data for 3-D Geophysical which
were provided to or otherwise discussed with us by the management of 3-D
Geophysical. We reviewed the financial terms of the Merger as set forth in the
Merger Agreement in relation to, among other things: current and historical
market prices and trading volumes of 3-D Common Stock; the historical and
projected earnings and other operating data of 3-D Geophysical; and the
capitalization and financial condition of 3-D Geophysical. We considered, to the
extent publicly available, the financial terms of certain other similar
transactions recently effected which we considered relevant in evaluating the
Merger and analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations we
considered relevant in evaluating those of 3-D Geophysical. In addition to the
foregoing, we conducted such other analyses and examinations and considered such
other information and financial, economic and market criteria as we deemed
appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us, we have been
advised by the management of 3-D Geophysical that such forecasts and other
information and data were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of 3-D Geophysical
as to the future financial performance of 3-D Geophysical. We have not made or
been provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of 3-D Geophysical nor have we made any
physical inspection of the properties or assets of 3-D Geophysical. In
connection with our engagement, we were not requested to, and did not, solicit
third party indications of interest in a possible acquisition of 3-D
Geophysical, nor were we requested to consider, and our opinion does not
address, the relative merits of the Transaction
<PAGE> 18
The Board of Directors
3-D Geophysical, Inc.
March 8, 1998
Page 2
as compared to any alternative business strategies that might exist for 3-D
Geophysical or the effect of any other transaction in which 3-D Geophysical
might engage. Our opinion is necessarily based upon information available to
us, and financial, stock market and other conditions and circumstances existing
and disclosed to us, as of the date hereof.
Smith Barney Inc. and Salomon Brothers Inc (collectively doing business as
Salomon Smith Barney) have acted as financial advisors to 3-D Geophysical in
connection with the proposed Transaction and will receive a fee for such
services, a significant portion of which is contingent upon the consummation of
the Transaction. We also will receive a fee upon the delivery of this opinion.
In the ordinary course of our business, we and our affiliates may actively
trade or hold the securities of 3-D Geophysical and Western Atlas for our own
account or for the account of our customers and, accordingly, may at any time
hold a long or short position in such securities. We have in the past provided
investment banking services to 3-D Geophysical unrelated to the proposed
Transaction, for which services we have received compensation. In addition, we
and our affiliates (including Travelers Group Inc. and its affiliates) may
maintain relationships with 3-D Geophysical, Western Atlas and their respective
affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of 3-D Geophysical in its evaluation of
the proposed Transaction, and our opinion is not intended to be and does not
constitute a recommendation to any stockholder as to whether or not such
stockholder should tender shares of 3-D Common Stock in the Tender Offer or how
such stockholder should vote on the proposed Merger. Our opinion may not be
published or otherwise used or referred to, nor shall any public reference to
Salomon Smith Barney be made, without our prior written consent; provided, that
this opinion letter may be included in its entirety in the Solicitation/
Recommendation Statement of 3-D Geophysical relating to the proposed
Transaction.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Cash Consideration to be received in
the Transaction by the holders of 3-D Common Stock (other than Western Atlas
and its affiliates) is fair, from a financial point of view, to such holders.
Very truly yours,
/s/ Salomon Smith Barney
SALOMON SMITH BARNEY
<PAGE> 19
ANNEX II
3-D GEOPHYSICAL, INC.
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about March 13, 1998, as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") to holders of the Common Stock of 3-D Geophysical, Inc. (the
"Company"). Capitalized terms used and not otherwise defined herein shall have
the meanings set forth in the Schedule 14D-9. You are receiving this Information
Statement in connection with the possible election of persons (the "Parent
Designees") designated by Western Atlas Inc. (the "Parent") to a majority of the
seats on the Board of Directors of the Company.
Pursuant to the Merger Agreement, on March 13, 1998, Purchaser commenced
the Offer. The Offer is scheduled to expire at 12:00 Midnight on April 9, 1998,
unless otherwise extended.
The information contained in this Information Statement (including
information incorporated by reference) concerning Parent, Purchaser and the
Parent Designees has been furnished to the Company by Parent and Purchaser, a
wholly owned subsidiary of Parent, and the Company assumes no responsibility for
the accuracy or completeness of such information.
GENERAL INFORMATION REGARDING THE COMPANY
GENERAL
The common stock, par value $.01 per share ("Common Stock"), is the only
class of voting securities of the Company outstanding. Each share of Common
Stock has one vote. As of March 2, 1998, there were 11,916,666 shares of Common
Stock outstanding. The Company does not have any treasury shares. The Board of
Directors of the Company currently consists of ten members and there are
currently no vacancies on the Board. The Board has three classes and each
director serves a term of three years until his successor is duly elected and
qualified or until his earlier death, resignation or removal.
PARENT DESIGNEES
The Merger Agreement provides that, subject to compliance with applicable
law, promptly upon the payment by the Purchaser for Shares pursuant to the
Offer, and from time to time thereafter, Parent shall be entitled to designate
such number of directors, rounded up to the next whole number, on the Company
Board as is equal to the product of the total number of directors on the Company
Board (determined after giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Parent or its affiliates bears to the total number of
Shares then outstanding, and the Company shall, upon request of Parent, promptly
take all actions necessary to cause Parent's designees to be so elected,
including, if necessary, seeking the resignations of one or more existing
directors, provided that prior to the Effective Time the Company Board shall
always have at least two members who are neither officers, directors or
designees of the Purchaser or any of its affiliates ("Purchaser Insiders"). If
the number of directors who are not Purchaser Insiders is reduced below two
prior to the Effective Time, the remaining director who is not a Purchaser
Insider shall be entitled to designate a person to fill such vacancy who is not
a Purchaser Insider and who shall be a director not deemed to be a Purchaser
Insider for all purposes of the Merger Agreement.
1
<PAGE> 20
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The table below provides information concerning the directors and executive
officers of the Company, and sets forth their respective ages as of March 1,
1998 and the positions they hold with the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Mr. Joel Friedman (a)(b).................. 58 Chairman of the Board of Directors and
acting Chief Executive Officer
Mr. Wayne P. Widynowski (b)............... 52 Executive Vice President and Chief
Operating Officer and Director;
President of Northern Geophysical, Inc.,
a wholly owned subsidiary of the Company
("Northern")
Mr. Luis H. Ferran (b).................... 49 Executive Vice President -- Latin
American Operations and Director;
President of Geoevaluaciones, S.A. de
C.V. ("Geo"), Procesos Interactivos
Avanzados, S.A. de C.V. ("PIASA") and
3-D Geophysical of Latin America, Inc.
("3-D Latin America"), wholly owned
subsidiaries of the Company.
Mr. Ronald L. Koons....................... 50 Vice President, Chief Financial Officer,
Secretary and Treasurer
Mr. Robert P. Andrews (c)................. 42 Director
Mr. Ralph M. Bahna (c).................... 55 Director
Mr. Douglas W. Brandrup (a)(d)............ 57 Director
Mr. Richard D. Davis...................... 63 Director
Mr. Arthur D. Emil (c).................... 73 Director
Mr. P. Dennis O'Brien (a)(c)(d)........... 56 Director
Mr. Emir L. Tavella....................... 68 Director
</TABLE>
- ---------------
(a) Member of the Audit Committee
(b) Member of the Executive Committee
(c) Member of the Compensation Committee
(d) Member of the Stock Option Committee
Mr. Joel Friedman has served as Chairman of the Board of the Company since
February 1996 and as the acting Chief Executive Officer of the Company since
July 1997. He was President and Chief Executive Officer of the Company from
March 1995 until February 1996. From August 1994 to September 1997 Mr. Friedman
was a director of and from August 1994 to October 1996 he was the Chairman of
Consolidated Health Care Associates, Inc., and was the Chief Executive Officer
of that company from August 1994 until March 1996. Since 1969, he has been an
officer, director and shareholder of Founders Property Corporation and its
affiliated companies ("Founders"), a private real estate concern. From 1975 to
1986, Mr. Friedman was President and a director of Kenai Corporation, a
publicly-held company engaged in contract drilling for oil and natural gas,
wellhead equipment manufacturing and remanufacturing and oil and gas exploration
and production.
Mr. Wayne P. Widynowski has served as the Executive Vice President and
Chief Operating Officer of the Company and as President of Northern since
February 1996. From 1981 to February 1996, Mr. Widynowski was employed by
Northern's predecessors, most recently as Executive Vice President. Prior to
1981, Mr. Widynowski was employed as an operations manager by United
Geophysical, Inc., a subsidiary of the Bendix Corporation.
Mr. Luis H. Ferran has served as Executive Vice President -- Latin American
Operations of the Company and as President of Geo and PIASA since February 1996
and as President of 3-D Latin America since its formation by the Company in May
1996. Mr. Ferran was one of the founding shareholders of Geo in 1977 and has
been General Manager of Geo since 1982. Prior to forming Geo, Mr. Ferran was a
supervisor
2
<PAGE> 21
with Compania Mexicana de Exploraciones, S.A. de C.V., a Mexican company
associated with PEMEX, Mexico's national oil company.
Mr. Ronald L. Koons has served as Vice President, Chief Financial Officer,
Secretary and Treasurer of the Company since September 30, 1996. Mr. Koons was
the Executive Vice President, Chief Financial Officer and Treasurer of Tuboscope
Vetco International Corp. ("Tuboscope"), an oilfield service company, from
October 1993 to April 1996 and Senior Vice President, Chief Financial Officer
and Treasurer of Tuboscope from November 1991 to October 1993. From August 1988
to November 1991, Mr. Koons was the Vice President, Chief Financial Officer and
Treasurer of Eastman Christensen Company ("Eastman"), an oilfield service
company. He served as Controller of Eastman from June 1987 to August 1988 and
Treasurer of Eastman from September 1986 to June 1987.
Mr. Robert P. Andrews has served as the President of The Andrews Group
International Inc., a Texas corporation which supplies goods and services to the
oil and gas industry in Central and South America, in particular Mexico, since
1987 and as the President of A.G.I. Mexicana, S.A. de C.V., a Mexican company
that sells goods and services relating to computer hardware and software for use
in the oil and gas industry in Mexico, since 1991. Until February 1996, Mr.
Andrews was also the President and Chairman of the Board of PIASA. A.G.I.
Mexicana conducts the business of The Andrews Group International, Inc. in
Mexico and acts as the exclusive representative for several companies in Mexico.
A.G.I. Mexicana also acts as a non-exclusive distributor for various
corporations in Mexico.
Mr. Ralph M. Bahna serves as President of Masterworks Development
Corporation ("Masterworks"), a company that he founded in 1990 to develop a
series of hotels called Club Quarters. Between 1981 and 1988, Mr. Bahna was
chief executive officer of Cunard Line Limited, which owns, among other cruise
liners and hotels, the Queen Elizabeth 2, and was also a divisional managing
director of Trafalgar House PLC, the parent company of Cunard Line Limited. From
1988 until he became President of Masterworks in 1990, he pursued investment and
non-profit endeavors.
Mr. Douglas W. Brandrup is a practicing attorney and senior partner at the
law firm of Griggs, Baldwin & Baldwin in New York City, where he has practiced
since 1974. Mr. Brandrup is Chairman of Equity Oil Company, a publicly-held oil
and gas production and exploration company, and has been a director of that
company since 1975.
Mr. Richard D. Davis served as President and Chief Executive Officer of the
Company from February 1996 until July 1997. From March 1994 to June 1996, Mr.
Davis was Vice President of Operations of Kemp Geophysical Inc., a wholly owned
subsidiary of the Company that was merged with Northern. From 1988 to March
1994, as President and sole owner of D-Cube International Inc., he was an
independent consultant to several major oil companies in the area of seismic
acquisition services. From 1983 to 1988, Mr. Davis was a director of Seismic
Enterprises, Inc. (now Seitel, Inc.) and President and Chief Operating Officer
of Triangle Geophysical Co. From 1979 to 1983, he was Executive Vice President
of Geo Seismic Services, Inc., which at one time operated 38 seismic data
acquisition crews.
Mr. Arthur D. Emil is a practicing attorney and currently of counsel to the
law firm of Kramer, Levin, Naftalis & Frankel in New York City. Between 1986 and
1993, he was a senior partner of and, upon retirement, of counsel to the law
firm of Jones, Day, Reavis & Pogue. He served as an executive officer, director
and chairman of the executive committee of North European Oil Company from 1955
to 1979. In addition, he served as general counsel for various companies,
including the New England Patriots and Bartell Media Corp., a communications
company. He is a trustee of various philanthropic institutions. Kramer, Levin,
Naftalis & Frankel provides legal services to the Company and received fees of
approximately $210,000 for such services in 1997. Mr. Emil was a general partner
of South Norwalk Redevelopment Limited Partnership ("SNRLP"), a Connecticut
limited partnership formed in 1981 to rehabilitate a portion of Norwalk,
Connecticut. On July 25, 1994, a creditor of SNRLP, Scirocco Partners ("SP"),
sought to foreclose on a SNRLP mortgage it held and SNRLP, seeking to avoid the
foreclosure, filed a voluntary petition for reorganization on August 15, 1994 in
the United States Bankruptcy Court, District of Connecticut (Case No. 94-51676).
In a related case, SP has sued Mr. Emil in connection with a personal guarantee
limited to interest and certain expenses he gave in connection with the
mortgage. The bankrutcy has been terminated
3
<PAGE> 22
and Mr. Emil has received a general release. In February 1998 Prudential
Associates, a limited partnership, of which Mr. Emil is one of three general
partners, owning a building in Buffalo, New York, filed a voluntary Chapter XI
petition in the Western District of New York to avoid a foreclosure. In a
related case, one of the mortgages sued the three general partners on a
guaranty. These cases are pending.
Mr. P. Dennis O'Brien served as the President and Chief Operating Officer
of Advance Geophysical Corp. ("Advance"), a company that develops software for
the geophysical industry, from 1988 to 1994. In March 1994, Advance merged with
a subsidiary of Landmark Graphics Corporation, a major software developer in the
geophysical industry. From April 1994 to June 1995, Mr. O'Brien served as the
Chief Operating Officer of Advance. Since July 1995, Mr. O'Brien has provided
consulting services to software development companies serving the petroleum
industry.
Mr. Emir L. Tavella is founder, and since May 1995 a partner and director,
of Sagoil S.A., an Argentinian petroleum supply company associated with Sagoil
Inc., a Canadian company. From February 1987 to April 1995, Mr. Tavella was the
general manager for exploration activities for PLUSPetrol S.A., an Argentinian
petroleum exploration and production company.
------------------------
Mr. Friedman has served as a Director of the Company since its inception;
Messrs. Bahna, Brandrup, Davis, Emil and Ferran have served as Directors since
October 1995; Messrs. Andrews and O'Brien have served as Directors since January
1996; and Mr. Tavella has served as a Director since April 1996.
There are no family relationships among any of the directors or executive
officers of the Company.
There has been no change in control of the Company since January 1, 1997.
The Offer will result in a change in control of the Company upon its
consummation (see Item 2 of the Schedule 14D-9).
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board has established an Executive Committee consisting of Messrs.
Ferran, Friedman and Widynowski. The Executive Committee has the authority to
exercise all the powers of the Board in the management of the business and
affairs of the Company, subject to certain limitations under the General
Corporation Law of the State of Delaware. The Executive Committee held six
meetings and acted by unanimous written consent in lieu of a meeting three times
in 1997.
The Board has established an Audit Committee consisting of Messrs.
Brandrup, Friedman and O'Brien. The Audit Committee annually recommends to the
Board the appointment of the independent public accountants to serve as auditors
for the Company. In addition, the Audit Committee discusses and reviews the
scope and fees of the annual audit and reviews the results with the auditors,
reviews compliance with existing major accounting and financial policies of the
Company, reviews the adequacy of the financial organization of the Company and
considers comments by the auditors regarding controls and accounting procedures
and management's response to those comments. The Audit Committee held one
meeting in 1997.
The Board has established a Compensation Committee consisting of Messrs.
Andrews, Bahna, Emil and O'Brien. The Compensation committee meets periodically
to determine the compensation of certain of the Company's executive officers and
other significant employees and the Company's personnel policies. The
Compensation Committee held three meetings in 1997.
The Board has established a Stock Option Committee consisting of Messrs.
Brandrup and O'Brien to administer the Company's Stock Option Plan and other
option plans approved by the Board of Directors and to grant options thereunder.
The Stock Option Committee acted by unanimous written consent in lieu of a
meeting five times in 1997.
The Company does not have a nominating committee. The functions customarily
performed by a nominating committee are performed by the Board of Directors as a
whole.
The Company's Board of Directors held three meetings and acted by unanimous
written consent in lieu of a meeting four times in 1997. During 1997, no
director or committee member attended fewer than 75% of the
4
<PAGE> 23
meetings of the Board or the respective committees on which he served during the
periods of his service as a director or committee member.
DIRECTOR COMPENSATION
Each member of the Board who is not an employee of the Company receives:
(i) an annual retainer of $10,000; (ii) $750 per meeting of the Board of
Directors or any committee thereof at which such director is present in person;
and (iii) reimbursement of all ordinary and necessary expenses incurred in
attending a meeting of the Board of Directors or committee thereof. Directors
who are full-time employees of the Company do not receive any compensation for
serving as directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Messrs. Andrews, Bahna,
Emil and O'Brien, who are each independent directors of the Company. None of
these individuals had any "interlock" relationship to report during 1997.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Section
16(a)"), requires the Company's directors and executive officers and persons who
beneficially own more than ten percent of the Company's Common Stock to report
their ownership of and transactions in the Company's Common Stock to the
Securities and Exchange Commission and The Nasdaq National Stock Market. Copies
of these reports are also required to be supplied to the Company. The Company
believes, based solely on a review of the copies of such reports received by the
Company, that during 1997 all applicable Section 16(a) reporting requirements
were complied with, except that Messrs. Bahna, Ferran, Friedman, Koons and
Widynowski inadvertently did not report the grant of options in November 1997,
and Mr. Widynowski inadvertently did not report the purchase of 3,000 shares of
Common Stock in December 1997, on a timely basis.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
No salaries were paid during 1995 by the Company. Compensation paid to the
Company's chief executive officer and the other most highly compensated
executive officers who made more than $100,000 during the fiscal year ended
December 31, 1997 (hereinafter, "1997") is disclosed below.
5
<PAGE> 24
Summary Compensation Table. The following table sets forth compensation
earned, whether paid or deferred, by the Company's Chief Executive Officer and
its other most highly compensated executive officers who made more than $100,000
(collectively, the "Named Executive Officers") for services rendered in all
capacities to the Company during 1997.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
---------------------------------------- ------------
ALL OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
SALARY BONUSES COMPENSATION OPTIONS/SARS COMPENSATION
YEAR ($) ($) ($) (#) ($)
---- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Joel Friedman................... 1997 125,000 0 82,800(1) 50,000 0
Chairman of the Board 1996 125,000 0 82,800(1) 75,000 0
Luis Ferran..................... 1997 140,000(2) 0 0 0 0
Executive Vice President 1996 140,000(2) 0 0 250,000(3) 0
Wayne P. Widynowski............. 1997 140,000 0 6,900 20,000 0
Executive Vice President 1996 140,000 0 0 120,000 0
Ronald L. Koons(4).............. 1997 125,000 0 7,800 20,000 0
Vice President and Chief 1996 31,250 0 1,950 30,000 0
Financial Officer
</TABLE>
- ---------------
(1) Consists of an annual office allowance of $75,000 and a monthly automobile
allowance totalling $7800.
(2) Includes $77,161 and $89,910 paid to Comercializadora y Arrendadora, a
consulting company owned by Mr. Ferran, in 1996 and 1997, respectively.
(3) Consists of stock options which were granted in January 1996 immediately
prior to the Company's initial public offering at an exercise price of $7.50
per share, equal to the price per share to the public in the initial public
offering.
(4) Mr. Koons commenced his employment with the Company on September 30, 1996.
EMPLOYMENT AGREEMENTS; NON-COMPETITION AGREEMENTS
Each of Messrs. Friedman, Ferran, Widynowski and Koons has entered into an
employment agreement with the Company; the agreement with Mr. Friedman expires
on December 31, 1998, and the agreements with Messrs. Ferran, Widynowski and
Koons, expire on December 31, 2000. The employment agreements provide for base
annual salaries as follows: Mr. Friedman: $125,000 plus an annual office
allowance of $75,000, a portion of which is being applied to payments under the
Company's New York City lease: Mr. Ferran: $140,000; Mr. Widynowski: $140,000;
Mr. Koons: $125,000. Certain of the Company's executive officers are entitled to
an automobile allowance, and, in addition, each executive officer is eligible
pursuant to his employment agreement for a bonus to be determined in the
discretion of the Board of Directors or a committee thereof. No bonuses were
paid in 1996 or 1997.
Each of the employment agreements with Messrs. Friedman, Ferran and Koons
contains a covenant not to compete during the employee's employment with the
Company or its subsidiaries and for one year thereafter unless the Company
terminates the employee's employment without cause. The agreement with Mr.
Widynowski contains a similar covenant not to complete but provides that upon
termination of the agreement, other than by the Company for cause (as defined in
the agreement) or by the employee without good reason (as defined in the
agreement), the employee's covenant not to compete will lapse unless the Company
pays the employee 80% of the employee's base salary in the year following such
termination. In connection with the acquisition by the Company of Geo, Mr.
Ferran and the other former stockholders of Geo entered into non-competition
agreements under which Mr. Ferran and such former stockholders were entitled to
certain additional consideration. In January 1998, the employment agreements of
Messrs. Widynowski and Koons were amended and restated as described in Item 3(b)
of the Schedule 14D-9.
6
<PAGE> 25
OPTION GRANTS
Shown below is information regarding grants of stock options during 1997 to
the Company's executive officers, including the Named Executive Officers. The
following table also shows the hypothetical value of the options granted at the
end of the option terms (ten years) if the price of the Company Common Stock
were to appreciate annually by 5% and 10%, respectively. These assumed rates of
growth are required by the Securities and Exchange Commission for illustrative
purposes only and are not intended to forecast possible future stock prices.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------
MARKET POTENTIAL REALIZABLE
PRICE OF VALUE OF ASSUMED
% OF TOTAL UNDERLYING ANNUAL RATES
OPTIONS SECURITIES OF STOCK PRICES
GRANTED ON THE DATE APPRECIATION FOR
NUMBER TO OF GRANT IF OPTION TERM(2)
OF EMPLOYEES EXERCISE HIGHER THAN ----------------------
OPTIONS IN FISCAL PRICE EXERCISE EXPIRATION 5% 10%
NAME GRANTED YEAR(1) ($) PRICE DATE ($) ($)
- ---- ------- ---------- -------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Joel Friedman................. 50,000(3) 14.8% 7.25 -- 11/10/2007 590,474.30 940,231.64
Wayne P. Widynowski(4)........ 20,000(3) 5.9% 7.25 -- 11/10/2007 236,189.72 376,092.66
Ronald L. Koons............... 20,000(3) 5.9% 7.25 -- 11/10/2007 236,189.72 376,092.66
</TABLE>
- ---------------
(1) The Company granted options to purchase an aggregate of 337,800 shares of
Common Stock to its employees in 1997, of which 287,800 were granted under
the 1997 Plan and 50,000 options were granted under the 1995 Plan.
(2) Represents the product of (i) the difference between (A) the per-share fair
market price at the time of the grant compounded annually at the assumed
rate of appreciation over the term of the option, and (B) the per-share
exercise price of the option, and (ii) the number of shares underlying the
grant at March 8, 1998.
(3) The option will become exercisable in four equal cumulative annual
installments commencing on November 10, 1998.
(4) On March 17, 1997 the Stock Option Committee amended the stock option to
purchase 75,000 shares of Common Stock at a purchase price of $12.3125 per
share granted to Mr. Widynowski on April 26, 1996 by changing the purchase
price thereof to $6.25 per share. Such option was "repriced" in order to
provide Mr. Widynowski with a significant additional incentive to further
align his interests with all of the Company's stockholders. No option held
by any other executive officer of the Company has ever been "repriced."
Aggregate Option Exercises and Year-End Option Values. Shown below is
information relating to the exercise of stock options during 1997 for the
Company's executive officers, including the Named Executive Officers, and the
value of unexercised options at March 8, 1998, assuming consummation of the
Merger.
<TABLE>
<CAPTION>
SHARES
ACQUIRED NUMBER OF SECURITIES VALUE OF UNEXERCISED
ON UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NAME EXERCISE VALUE REALIZED OPTIONS AT MARCH 8, 1997 AT MARCH 8, 1998(1)
---- ----------- -------------- ------------------------ --------------------
<S> <C> <C> <C> <C>
Joel Friedman................... 0 0 125,000 $120,000
Luis H. Ferran.................. 0 0 250,000 $537,500
Wayne P. Widynowski............. 0 0 140,000 $471,750
Ronald L. Koons................. 0 0 50,000 $ 90,000
</TABLE>
- ---------------
(1) Market value of underlying securities of $9.65 per share based on the price
payable in the Offer.
7
<PAGE> 26
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to beneficial
ownership of Common Stock as of March 1, 1998, by: (i) all persons known to the
Company to be the beneficial owner of 5% or more of the outstanding Common
Stock, (ii) each director, (iii) each executive officer of the Company, and (iv)
all executive officers and directors of the Company as a group:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
--------------------
NUMBER OF
SHARES PERCENT
--------- -------
<S> <C> <C>
Joel Friedman(1)............................................ 569,409 4.7%
599 Lexington Avenue
New York, New York 10022
Richard D. Davis(2)......................................... 138,588 1.2
Luis H. Ferran(3)........................................... 1,433,651 11.8
Ninos Heroes, No. 51
Col. Tepepan
Mexico, D.F.
Wayne P. Widynowski(4)...................................... 148,000 1.2
Ronald L. Koons(5).......................................... 62,500 *
Robert P. Andrews(6)........................................ 130,526 1.1
Ralph M. Bahna(6)(7)........................................ 28,719 *
Douglas W. Brandrup(6)...................................... 26,667 *
Arthur D. Emil(6)........................................... 24,456 *
Dennis O'Brien(6)........................................... 21,667 *
Emir L. Tavella(6).......................................... 16,667 *
All officers and directors as a group (11
persons)(1)(2)(3)(4)(5)(6)(7)............................. 2,600,850 20.4
Wellington Management(8).................................... 891,000 7.0
Company, LLP
75 State Street
Boston, Mass 02109
Heartland Advisor, Inc.(9).................................. 1,183,000 9.3
790 North Milwaukee Street
Milwaukee, WI 53202
</TABLE>
- ---------------
* Less than 1%
(1) Includes an aggregate of 109,540 shares of Common Stock, of which (a) 21,908
shares are owned by Friedman Enterprises, Inc., (b) 43,816 shares are owned
by Mr. Friedman's wife, in which shares Mr. Friedman disclaims any
beneficial ownership, and (c) 21,908 shares are owned by each of Mr.
Friedman's two adult children, in which shares Mr. Friedman disclaims any
beneficial ownership. Also includes 131,250 shares of Common Stock issuable
upon the exercise of stock options.
(2) Includes 125,000 shares of Common Stock issuable upon the exercise of stock
options.
(3) Includes 267,500 shares of Common Stock issuable upon the exercise of stock
options. Excludes 15,235 shares of Common Stock owned by Mr. Ferran's wife,
all of which shares are held in trust by a Mexican bank for her benefit, and
in which shares Mr. Ferran disclaims any beneficial ownership.
(4) Includes 145,000 shares of Common Stock issuable upon the exercise of stock
options.
(5) Includes 62,500 shares of Common Stock issuable upon the exercise of stock
options.
(6) Includes 16,667 shares of Common Stock issuable upon the exercise of stock
options.
(7) Includes 6,250 shares of Common Stock issuable upon the exercise of stock
options granted in connection with a loan transaction (see "Certain
Relationships and Related Transactions").
(8) Based on Schedule 13G dated January 17, 1998.
(9) Based on Schedule 13G dated February 2, 1998.
8
<PAGE> 27
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Andrews is the sole stockholder of The Andrews Group International,
Inc. ("Andrews Group") which, through its Mexican affiliate, A.G.I. Mexicana,
S.A. de C.V. ("A.G.I. Mexicana"), acts as the exclusive representative for
several companies in Mexico. Geo purchased goods and services from A.G.I.
Mexicana during 1997. Such purchases totalled approximately $619,000.
In October 1997, Messrs. Bahna, Friedman, Koons and Widynowski loaned an
aggregate of $600,000 to the Company at an annual interest rate of 12%. At the
same time, Mr. Ferran guaranteed borrowings by Geo in the principal amount of
$350,000. In connection with these loan transactions, the Company issued
five-year options to purchase an aggregate of 47,500 shares of Common Stock at
$6.50 per share. All of such loans were repaid in December 1997 in connection
with the refinancing of the Company's line of credit with a commercial bank.
In July 1997, the Company and Mr. Richard D. Davis entered into an
agreement to terminate Mr. Davis' employment agreement with the Company. In
connection with such termination, the Company paid Mr. Davis $80,000 plus
accrued vacation pay of $8,950 in a lump sum and agreed to pay Mr. Davis a
consulting fee of $155,000 for consulting services to be provided to the Company
for the 12 months ending June 30, 1998. In addition, the Company agreed to pay
Mr. Davis' moving expenses of $15,000, certain other relocation expenses and to
continue certain insurance benefits for Mr. Davis and his family through
December 31, 1998.
The Company leases space in New York City at an annual base rental of
$165,000. Mr. Friedman utilizes a portion of said space as his office and the
balance of the space is utilized by sub-tenants. Mr. Friedman has agreed to
reimburse the Company for any amounts under the lease that are payable with
respect to space that is not utilized by the Company and which have not been
paid by sub-tenants.
In connection with the recent award of a contract to the Company, the
Company has agreed to purchase certain seismic data owned by a company in which
Mr. Widynowski is an officer and has an equity interest of less than ten
percent. The purchase price for the data will be determined on the basis of an
appraisal, but could approximate $500,000.
For information concerning legal fees paid to Kramer, Levin, Naftalis &
Frankel, to which firm Mr. Emil is of counsel, see "Directors and Executive
Officers -- Directors and Executive Officers of the Company."
CERTAIN LITIGATION
For a description of certain litigation pending in connection with the
Offer and the Merger Agreement see Item 8(c) of the Schedule 14D-9.
9
<PAGE> 28
STOCK PERFORMANCE GRAPH
The following table depicts the cumulative total return on the Company's
Common Stock compared to the cumulative total return for the S&P 500 Index and
the Geophysical Index, which was selected by the Company on an industry and
line-of-business basis. The table assumes an investment of $100 on February 6,
1996, when the Company's stock was first traded in a public market. Reinvestment
of dividends is assumed in all cases.
10
<PAGE> 29
PARENT DESIGNEES
The table below provides information concerning the Parent Designees
furnished to the Company by Parent and Purchaser:
<TABLE>
<CAPTION>
POSITION WITH PARENT;
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AGE 5-YEAR EMPLOYMENT HISTORY
---- --- -----------------------------------
<S> <C> <C>
James E. Brasher....... 49 Senior Vice President and General Counsel of Parent since
October 1997. Prior thereto, Vice President of Parent from
1996 to 1997 and Vice President and Group Counsel of
Western Atlas International, Inc., ("WAII") from 1994 to
1997. Secretary and General Counsel of WAII from 1987 to
1994.
William H. Flores...... 44 Senior Vice President and Chief Financial Officer of Parent
since October 1997. Chief Financial Officer for WAII since
August 1997. Prior thereto, served as an officer of Marine
Drilling Companies, Inc. or its predecessors since 1980,
most recently as Executive Vice President and Chief
Financial Officer.
Lourdes T. Hernandez... 42 Director since 1998. Corporate Secretary of Parent since
September 1997. For more than five years prior thereto,
assistant general counsel of NL Industries, Inc., a
publicly traded international producer of titanium dioxide
pigments.
Will Honeybourne....... 46 Senior Vice President Marketing & Business Development of
WAII and Vice President of Parent since September 1996.
Prior thereto, President and Chief Executive Officer of
Computalog Ltd., Calgary from September 1993 through
November 1995, Vice President and General Manager of Baker
Hughes INTEQ from March 1993 through August 1993 and
President of EXLOG INC., a division of Baker Hughes Inc.,
from March 1984 through March 1993. Mr. Honeybourne is a
citizen of the United Kingdom and a permanent resident of
the United States.
Richard C. White....... 42 Senior Vice President of Parent since May 7, 1996 and
President of Western Geophysical division of WAII since
1995. Prior thereto, Vice President of Parent from 1995 to
1996. Senior Vice President of WAII since 1995. Chief
Operating Officer from 1994 to 1995 and Senior Vice
President of Western Geophysical since 1993.
</TABLE>
11
<PAGE> 30
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
(a)(1) Letter to Stockholders of the Company dated March 13, 1998.
(a)(2) Joint Press Release of the Company and Western dated March
9, 1998.
(a)(3) Form of Summary Advertisement dated March 13, 1998
(a)(4) Opinion of Salomon Smith Barney dated March 8, 1998.
(c)(1) Relevant Portions of 1997 Proxy Statement.
(c)(2) Form of Amended and Restated Employment Agreement dated
January 13, 1998 between the Company and Wayne P.
Widynowski.
(c)(3) Form of Amended and Restated Employment Agreement dated
January 13, 1998 between the Company and Ronald L. Koons.
(c)(4) Agreement and Plan of Merger dated as of March 8, 1998,
among the Company, Purchaser and Western.
(c)(5) Form of Support Agreement between Western and Robert P.
Andrews, Ralph M. Bahna, Douglas W. Brandrup, Richard Davis,
Arthur Emil, Joel Friedman, Luis H. Ferran, P. Dennis
O'Brien and Emir L. Tavella.
(c)(6) Form of Support Agreement between Western and Ronald L.
Koons.
(c)(7) Form of Support Agreement between Western and Wayne P.
Widynowski.
(c)(8) Consulting Agreement and Noncompetition Agreement, dated as
of March 8, 1998 among Western, Friedman Enterprises Inc.
and Joel Friedman.
(c)(9) Consulting Agreement and Noncompetition Agreement, dated as
of March 8, 1998 between Western and Luis H. Ferran Arroyo.
(c)(10) Rights Agreement, dated as of July 17, 1997, between the
Company and American Securities Transfer & Trust, Inc., as
Rights Agent, as amended.
(c)(11) Amended and Restated 1995 Long-Term Incentive Compensation
Plan of the Company.
(c)(12) 1997 Long-Term Stock Incentive Plan of the Company.
</TABLE>
<PAGE> 1
EXHIBIT (A)(1)
[LETTERHEAD OF 3-D GEOPHYSICAL, INC.]
March 13, 1998
To Our Stockholders:
We are pleased to inform you that on March 8, 1998, 3-D Geophysical, Inc.
(the "Company") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Western Atlas Inc. ("Western") and WAI Acquisition Corp.
("Purchaser"), an indirect, wholly-owned subsidiary of Western, pursuant to
which Purchaser has commenced a tender offer (the "Offer") to purchase all of
the outstanding shares of the Company's common stock, par value $0.01 per share
("Common Stock"), for a cash price of $9.65 per share. The Offer is conditioned
upon, among other things, the tender of at least a majority of the Common Stock
outstanding on a fully diluted basis. The Merger Agreement provides that
following consummation of the Offer, Purchaser will be merged (the "Merger")
with and into the Company, and those shares of Common Stock that are not
acquired in the Offer will be converted into the right to receive $9.65 per
share of Common Stock in cash.
The Company's Board of Directors (the "Board of Directors") has unanimously
approved the Merger Agreement, the Offer and the Merger and determined that the
terms of the Offer and the Merger are fair to, and in the best interests of, the
Company and its stockholders and unanimously recommends that the Company's
stockholders accept the Offer and tender their shares pursuant to the Offer. In
arriving at its recommendation, the Board of Directors considered the factors
described in the accompanying Schedule 14D-9, including the opinion of the
Company's financial advisor, Salomon Smith Barney, to the effect that, as of
March 8, 1998 and based upon and subject to certain matters stated in such
opinion, the cash consideration of $9.65 per share of Common Stock to be
received by the holders of Common Stock in the Offer and the Merger was fair,
from a financial point of view, to such holders of Common Stock. A copy of
Salomon Smith Barney's written opinion, which sets forth the assumptions made,
matters considered and the limitations on the review undertaken by Salomon Smith
Barney, is attached to the Schedule 14D-9 as Exhibit (a)(4) and should be read
carefully in its entirety.
The accompanying Offer to Purchase sets forth all of the terms of the
Offer. Additionally, the enclosed Schedule 14D-9 sets forth additional
information regarding the Offer and the Merger relevant to making an informed
decision. We urge you to read these materials carefully and in their entirety.
Very truly yours,
Joel Friedman
Chairman and Chief Executive Officer
<PAGE> 1
Exhibit (a)(2)
WESTERN ATLAS SIGNS MERGER AGREEMENT WITH 3-D GEOPHYSICAL
HOUSTON and LITTLETON, Colo., March 9 /PRNewswire/ -- Western Atlas Inc. (NYSE:
WAI-news) and 3-D Geophysical, Inc. (Nasdaq: TDGO - news) announced today that
they have signed a definitive merger agreement providing for Western Atlas to
acquire 3-D Geophysical, a Colorado-based supplier of seismic data acquisition
services.
Western Atlas will offer 3-D Geophysical shareholders $9.65 per common share in
an all-cash tender offer that will commence within the next five business days.
Following consummation of the tender offer, 3-D Geophysical shares not purchased
in the tender offer will be acquired for $9.65 per share in cash in a subsequent
merger. 3-D Geophysical has approximately 11.9 million outstanding shares.
The offer will be subject to the tender of a majority of 3-D Geophysical's
outstanding shares, expiration of the Hart-Scott-Rodino Act waiting period, and
other customary conditions. The tender offer and the merger have been
unanimously approved by 3-D Geophysical's Board of Directors, which has received
a fairness opinion from its financial advisor, Salomon Smith Barney. Revenues of
3-D Geophysical are expected to exceed $100 million for 1997. The company will
become part of the Western Geophysical division of Western Atlas Inc.
"The acquisition of 3-D Geophysical will accelerate the growth of Western Atlas
as a leading supplier of seismic services," said Western Atlas President and CEO
John Russell. "It will not impact Western Atlas' 1998 earnings, but will be
accretive for 1999 onward."
"3-D Geophysical has a strong presence in North America," said Richard White,
president of Western Geophysical. "The employees of 3-D Geophysical are highly
skilled and experienced, and we're pleased to be including them in Western
Geophysical. They will be a valued addition to our team. Bringing these two
organizations together increases our seismic data acquisition capabilities in
the U.S., strengthens our business in Alaska and certain areas in Latin America,
and expands our presence in Canada."
"We at 3-D Geophysical look forward to joining the Western team," said Joel
Friedman, chairman and CEO of 3-D Geophysical, Inc. "This combination with
Western satisfies our three primary goals: enhancing shareholder value,
providing the best service to our clients, and offering the most opportunity for
personal growth to our employees."
3-D Geophysical has 11 crews operating land-based and shallow-water seismic data
acquisition systems utilizing state-of-the-art recording equipment with
approximately 26,000 channels. The company also offers data processing services
in Mexico. Following its initial public offering in February 1996, the company
acquired several established seismic data acquisition businesses: Northern
Geophysical of America Inc., Geoevaluaciones, S.A. de C.V., Kemp Geophysical
Corporation, Paragon Geophysical, PIASA (a Mexican seismic data processing
company), and Calgary-based J.R.S. Exploration Co. Ltd., which extended the
company's services into Canada.
<PAGE> 2
Western Atlas Inc., based in Houston, Texas is one of the world's leading
oilfield services companies, providing seismic, well-logging, and reservoir
information services to the energy industry.
The statements in this release relating to matters that are not historical
facts, including, without limitations, statements regarding the demand for the
Company's services, are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Such forward-looking statements involve and
are dependent upon certain risks and uncertainties, including, but not limited
to, the following which are beyond the Company's control: dependence on energy
industry spending; worldwide prices and demand for oil and gas; the presence of
competitors with greater financial and other resources; technological changes
and developments; operating risks inherent in the oilfield services industry;
regulatory uncertainties; worldwide political stability and economic conditions;
operating risks associated with international activities; and other risks and
uncertainties described more fully in the Company's filings with the Securities
and Exchange Commission.
-2-
<PAGE> 1
EXHIBIT (a)(3)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase, dated March
13, 1998, and the related Letter of Transmittal, and is being made to all
holders of Shares. The Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Shares in any jurisdiction in
which the making of the Offer or the acceptance thereof would not
be in compliance with the laws of such jurisdiction. In any
jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of WAI Acquisition Corp. by one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
3-D GEOPHYSICAL, INC.
BY
WAI ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY
OF
WESTERN ATLAS INC.
AT
$9.65 NET PER SHARE
WAI Acquisition Corp. (the "Purchaser"), a Delaware corporation and a
wholly-owned subsidiary of Western Atlas Inc., a Delaware corporation
("Parent"), is offering to purchase all outstanding shares of Common Stock, par
value $.01 per share (the "Shares"), of 3-D Geophysical, Inc., a Delaware
corporation (the "Company"), and the associated preferred share purchase rights
(the "Rights") issued pursuant to the Rights Agreement, dated as of July 17,
1997, between the Company and American Securities Transfer & Trust, Inc., as
Rights Agent (as the same may be amended, the "Rights Agreement"), at a purchase
price of $9.65 per Share (and
<PAGE> 2
associated Right), net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
March 13, 1998 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which together constitute the "Offer"). Unless the context
otherwise requires, all references to Shares herein and in the Offer to Purchase
shall include the associated Rights.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT NEW YORK CITY
TIME, ON THURSDAY, APRIL 9, 1998, UNLESS THE OFFER IS EXTENDED.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of March 8, 1998 (the "Merger Agreement"), by and among the Company, the
Purchaser and Parent pursuant to which, following the consummation of the Offer
and the satisfaction of certain conditions, the Purchaser will be merged with
and into the Company (the "Merger"), with the Company continuing as the
surviving corporation. On the effective date of the Merger, each outstanding
Share (other than any Shares held by Parent, the Purchaser, any wholly-owned
subsidiary of Parent or the Purchaser, in the treasury of the Company or by any
wholly-owned subsidiary of the Company, and other than Shares, if any, held by
stockholders who perfect their appraisal rights under Delaware law) will be
converted into the right to receive an amount equal to $9.65 in cash (without
interest).
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT THE
OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND
ITS STOCKHOLDERS, HAS APPROVED THE OFFER AND ADOPTED THE MERGER AGREEMENT AND
RECOMMENDS ACCEPTANCE OF THE OFFER BY THE COMPANY'S STOCKHOLDERS.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, AT LEAST A MAJORITY OF
THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS ON THE DATE OF
PURCHASE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE
EXPIRATION OF THE OFFER. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND
CONDITIONS. SEE THE INTRODUCTION AND SECTIONS 1, 14 AND 15 OF THE OFFER TO
PURCHASE.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered and not withdrawn
as, if and when the Purchaser gives oral or written notice to the Depositary of
the Purchaser's acceptance of such Shares for payment pursuant to the Offer. In
all cases, upon the terms and subject to the conditions of the Offer, payment
for Shares purchased pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Purchaser
and transmitting payment to validly tendering stockholders. Under no
circumstances will interest on the purchase price for Shares be paid by the
Purchaser. In all cases, payment for Shares purchased pursuant to the Offer will
be made only after timely receipt by the Depositary of (i) certificates
representing Shares (the "Share Certificates") for such Shares or timely
confirmation of the book-entry transfer of such Shares into the Depositary's
account at The Depository Trust Company or Philadelphia Depository Trust Company
(collectively, the "Book-Entry Transfer Facilities") pursuant to the
-2-
<PAGE> 3
procedures set forth in Section 3 of the Offer to Purchase, (ii) the Letter of
Transmittal delivered with the Offer to Purchase (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees or
an Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry transfer of Shares and (iii) any other documents required by the
Letter of Transmittal.
The Purchaser expressly reserves the right, in its sole discretion
(subject to the terms and conditions of the Merger Agreement), at any time and
from time to time, to extend the period during which the Offer is open for any
reason, including the existence of any of the conditions specified in Section 14
of the Offer to Purchase, by giving oral or written notice of such extension to
the Depositary. Any such extension will be followed as promptly as practicable
by public announcement thereof, and such announcement will be made no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date (as defined below).
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time on or prior
to the Expiration Date and, unless theretofore accepted for payment as provided
in the Offer to Purchase, may also be withdrawn at any time after May 11, 1998.
The term "Expiration Date" means 12:00 midnight, New York City time, on
Thursday, April 9, 1998, unless and until the Purchaser, subject to the terms of
the Merger Agreement, shall have further extended the period of time for which
the Offer is open, in which event the term "Expiration Date" shall mean the time
and date at which the Offer, as so extended by the Purchaser, shall expire. In
order for a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of the Offer to Purchase. Any such notice
of withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn, and (if Share Certificates have
been tendered) the name of the registered holder of the Shares as set forth in
the Share Certificate, if different from that of the person who tendered such
Shares. If Share Certificates have been delivered or otherwise identified to the
Depositary, then prior to the physical release of such certificates, the
tendering stockholder must submit the serial numbers shown on the particular
certificates evidencing the Shares to be withdrawn and the signature on the
notice of withdrawal must be guaranteed by a firm that is a bank, broker,
dealer, credit union, savings association or other entity which is a member in
good standing of the Securities Transfer Agents Medallion Program (an "Eligible
Institution"), except in the case of Shares tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry transfer set forth in Section 3 of the Offer to Purchase, the
notice of withdrawal must specify the name and number of the account at the
appropriate Book-Entry Transfer Facility to be credited with the withdrawn
Shares, in which case a notice of withdrawal will be effective if delivered to
the Depositary by any method of delivery described in this paragraph. All
questions as to the form and validity (including time of receipt) of notices of
withdrawal will be determined by the Purchaser, in its sole discretion, whose
determination shall be final and binding. Any Shares properly withdrawn will be
deemed not validly tendered for purposes of the Offer, but may be tendered at
any subsequent time prior to the Expiration Date by following any of the
procedures described in Section 3 of the Offer to Purchase.
-3-
<PAGE> 4
The information required to be disclosed pursuant to Rule 14d-6(e)(1)(vii)
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended, is contained in the Offer to Purchase, and is incorporated herein by
reference.
The Company is providing the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase and the related Letter of Transmittal
and, if required, other relevant materials will be mailed to record holders of
Shares and will be furnished to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or who are listed as participants in a clearing
agency's security position listing for subsequent transmittal to beneficial
owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Information
Agent at the address and telephone number listed below. Additional copies of the
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery
and other related materials may be obtained at the Purchaser's expense from the
Information Agent or from brokers, dealers, commercial banks and trust
companies. Neither Parent nor the Purchaser will pay any fees or commissions to
any broker, dealer or other person for soliciting tenders of Shares pursuant to
the Offer.
The Information Agent for the Offer is:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800
ALL OTHERS CALL TOLL FREE (800) 223-2064
March 13, 1998
-4-
<PAGE> 1
Exhibit (a)(4)
[SALOMON SMITH BARNEY LETTERHEAD]
March 8, 1998
The Board of Directors
3-D Geophysical, Inc.
599 Lexington Avenue
New York, New York 10022
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of 3-D Geophysical, Inc. ("3-D
Geophysical") of the consideration to be received by such holders pursuant to
the terms and subject to the conditions set forth in the Agreement and Plan of
Merger, dated as of March 8, 1998 (the "Merger Agreement"), among Western Atlas
Inc. ("Western Atlas"), WAI Acquisition Corporation, a subsidiary of Western
Atlas ("Subsidiary"), and 3-D Geophysical. As more fully described in the Merger
Agreement, (i) Subsidiary will commence a tender offer to purchase all
outstanding shares of the common stock, par value $0.01 per share, of 3-D
Geophysical (the "3-D Common Stock" and, such tender offer, the "Tender Offer")
at a purchase price of $9.65 per share, net to the seller in cash (the "Cash
Consideration") and (ii) subsequent to the Tender Offer, Subsidiary will be
merged with and into 3-D Geophysical (the "Merger" and, together with the Tender
Offer, the "Transaction") and each outstanding share of 3-D Common Stock not
previously tendered will be converted into the right to receive the Cash
Consideration.
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of 3-D Geophysical and certain senior officers and other
representatives of Western Atlas concerning the business, operations and
prospects of 3-D Geophysical. We examined certain publicly available business
and financial information relating to 3-D Geophysical as well as certain
financial forecasts and other information and data for 3-D Geophysical which
were provided to or otherwise discussed with us by the management of 3-D
Geophysical. We reviewed the financial terms of the Merger as set forth in the
Merger Agreement in relation to, among other things: current and historical
market prices and trading volumes of 3-D Common Stock; the historical and
projected earnings and other operating data of 3-D Geophysical; and the
capitalization and financial condition of 3-D Geophysical. We considered, to the
extent publicly available, the financial terms of certain other similar
transactions recently effected which we considered relevant in evaluating the
Merger and analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations we
considered relevant in evaluating those of 3-D Geophysical. In addition to the
foregoing, we conducted such other analyses and examinations and considered such
other information and financial, economic and market criteria as we deemed
appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us, we have been
advised by the management of 3-D Geophysical that such forecasts and other
information and data were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of 3-D Geophysical
as to the future financial performance of 3-D Geophysical. We have not made or
been provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of 3-D Geophysical nor have we made any
physical inspection of the properties or assets of 3-D Geophysical. In
connection with our engagement, we were not requested to, and did not, solicit
third party indications of interest in a possible acquisition of 3-D
Geophysical, nor were we requested to consider, and our opinion does not
address, the relative merits of the Transaction
<PAGE> 2
The Board of Directors
3-D Geophysical, Inc.
March 8, 1998
Page 2
as compared to any alternative business strategies that might exist for 3-D
Geophysical or the effect of any other transaction in which 3-D Geophysical
might engage. Our opinion is necessarily based upon information available to
us, and financial, stock market and other conditions and circumstances existing
and disclosed to us, as of the date hereof.
Smith Barney Inc. and Salomon Brothers Inc (collectively doing business as
Salomon Smith Barney) have acted as financial advisors to 3-D Geophysical in
connection with the proposed Transaction and will receive a fee for such
services, a significant portion of which is contingent upon the consummation of
the Transaction. We also will receive a fee upon the delivery of this opinion.
In the ordinary course of our business, we and our affiliates may actively
trade or hold the securities of 3-D Geophysical and Western Atlas for our own
account or for the account of our customers and, accordingly, may at any time
hold a long or short position in such securities. We have in the past provided
investment banking services to 3-D Geophysical unrelated to the proposed
Transaction, for which services we have received compensation. In addition, we
and our affiliates (including Travelers Group Inc. and its affiliates) may
maintain relationships with 3-D Geophysical, Western Atlas and their respective
affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of 3-D Geophysical in its evaluation of
the proposed Transaction, and our opinion is not intended to be and does not
constitute a recommendation to any stockholder as to whether or not such
stockholder should tender shares of 3-D Common Stock in the Tender Offer or how
such stockholder should vote on the proposed Merger. Our opinion may not be
published or otherwise used or referred to, nor shall any public reference to
Salomon Smith Barney be made, without our prior written consent; provided, that
this opinion letter may be included in its entirety in the Solicitation/
Recommendation Statement of 3-D Geophysical relating to the proposed
Transaction.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Cash Consideration to be received in
the Transaction by the holders of 3-D Common Stock (other than Western Atlas
and its affiliates) is fair, from a financial point of view, to such holders.
Very truly yours,
/s/ Salomon Smith Barney
SALOMON SMITH BARNEY
<PAGE> 1
EXHIBIT (C)(1)
[. . . ]
DIRECTOR COMPENSATION
Each member of the Board who is not an employee of the Company
receives: (i) an annual retainer of $10,000; (ii) $750 per meeting of the Board
of Directors or any committee thereof at which such director is present in
person; and (iii) reimbursement of all ordinary and necessary expenses incurred
in attending a meeting of the Board of Directors or committee thereof. Directors
who are full-time employees of the Company do not receive any compensation for
serving as directors. Any newly elected or appointed non-employee director
automatically received a nonqualified option under the 1995 Plan to purchase
10,000 shares of Common Stock at an exercise price equal to the fair market
value of the Common Stock on the date of grant. Such option vests in cumulative
installments of one-third on each of the first, second and third anniversaries
of the date of grant and expires on the tenth anniversary of the date of such
grant.
On February 9, 1996, non-employee directors (Messrs. Andrews, Bahna,
Brandrup, Emil and O'Brien) were awarded nonqualified stock options to purchase
10,000 shares of Common Stock pursuant to the 1995 Plan. The exercise price of
these options was equal to the price to the public in the Company's initial
public offering of $7.50 per share. Upon joining the Board in April 1996, Mr.
Tavella was granted an option under the 1995 Plan to purchase 10,000 shares of
Common Stock at an exercise price of $12.3125 per share. On September 30, 1996,
each of such non-employee directors was granted an additional option to purchase
6,667 shares of Common Stock at $8.50 per share, the closing price of the Common
Stock on the date of grant. Such options vested in full on February 6, 1997 and
expire in September 2006. See Proposal 2.
[. . . ]
EMPLOYMENT AGREEMENTS; NON-COMPETITION AGREEMENTS
Each of Messrs. Friedman, Davis, Ferran, Widynowski, Koons and Kemp has
entered into an employment agreement with the Company that expires on December
31, 1998, except for the agreement with Mr. Koons, which expires on September
30, 1999, and for the agreement with Mr. Ferran, which expires on December 31,
2000. The employment agreements provide for base annual salaries as follows: Mr.
Friedman: $125,000 plus an annual office allowance of $75,000, a portion of
which is being applied to payments under the Company's New York City lease; Mr.
Davis: $155,000; Mr. Ferran: $140,000; Mr. Widynowski: $140,000; Mr. Koons:
$125,000; Mr. Kemp: $75,000. Certain of the Company's executive officers are
entitled to an automobile allowance, and, in addition, each executive officer is
eligible pursuant to his employment agreement for a bonus to be determined in
the discretion of the Board of Directors or a committee thereof. No bonuses were
paid in respect of 1996.
Each of the employment agreements with Messrs. Friedman, Ferran and
Koons contains a covenant not to compete during the employee's employment with
the Company or its subsidiaries and for one year thereafter unless the Company
terminates the employee's
<PAGE> 2
employment without cause. Each of the agreements with Messrs. Davis and
Widynowski contains a similar covenant not to compete but provides that upon
termination of the agreement, other than by the Company for cause (as defined in
the agreement) or by the employee without good reason (as defined in the
agreement), the employee's covenant not to compete will lapse unless the Company
pays the employee 80% of the employee's base salary in the year following such
termination. Mr. Davis' agreement also provides that upon termination under
certain circumstances he will receive a payment for certain relocation expenses
and the continuation of certain benefits for a one-year period. Mr. Kemp
receives a monthly payment of $4,167 for 36 months, ending in January 1999, in
consideration of the covenant not to compete contained in his employment
agreement. In connection with the acquisition by the Company of Geoevaluaciones,
Mr. Ferran and the other former stockholders of Geoevaluaciones entered into
non-competition agreements under which Mr. Ferran and such former stockholders
were entitled to certain additional consideration (see "Certain Relationships
and Related Transactions").
Until September 30, 1996, Mr. John D. White, Jr. served as the
Company's Executive Vice President and Chief Financial Officer under an
employment agreement that was to expire on December 31, 1998 and provided for a
base salary of $150,000. Upon his resignation as an officer of the Company, Mr.
White and the Company entered into an agreement terminating this employment
agreement (see "Certain Relationships and Related Transactions").
Option Grants
Shown below is information regarding grants of stock options Plan
during 1996 to the Company's executive officers, including the Named Executive
Officers. The following table also shows the hypothetical value of the options
granted at the end of the option terms (ten years) if the price of the Company
Common Stock were to appreciate annually by 5% and 10%, respectively. These
assumed rates of growth are required by the Securities and Exchange Commission
for illustrative purposes only and are not intended to forecast possible future
stock prices.
<PAGE> 3
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------------------------
Market Price
% of Total of Underlying
Number of Options Securities on
Securities Granted to the Date of Potential Realizable Value of
Underlying Employees Exercise Grant if Assumed Annual Rates of Stock
Options in Fiscal Price higher than Expiration Price Appreciation for Option
Name Granted Year (1) ($/Sh) Exercise Price Date Term (2)
- ---- ------- -------- ------ -------------- ---- --------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Luis H. Ferran......... 250,000 28.0% $7.50 - 2/9/06 $3,054,375.00 $4,863,750.00
Richard D. Davis....... 50,000(3) 5.6 7.50 - 2/9/06 610,875.00 972,750.00
75,000(4) 8.4 12.3125 4/26/06 1,504,279.69 2,395,396.88
Joel Friedman.......... 75,000(4) 8.4 12.3125 - 4/26/06 1,504,279.69 2,395,396.88
Wayne P. Widynowski.... 45,000(3) 5.0 7.50 - 2/9/06 549,787.50 875,475.00
75,000(4) 8.4 12.3125 4/26/06 1,504,279.69 2,395,396.88
Ronald L. Koons........ 30,000(5) 3.4 8.25 - 9/30/06 403,177.50 642,015.00
</TABLE>
- -------------
(1) The Company granted options to purchase an aggregate of 893,352 shares
of Common Stock to its employees in 1996, of which options to purchase
an aggregate of 628,350 shares of Common Stock were granted under the
1995 Plan.
(2) Represents the product of (i) the difference between (A) the per-share
fair market price at the time of the grant compounded annually at the
assumed rate of appreciation over the term of the option, and (B) the
per-share exercise price of the option, and (ii) the number of shares
underlying the grant at the fiscal year-end.
(3) The option became exercisable in three equal cumulative annual
installments commencing on February 9, 1997.
(4) On April 26, 1996 the Compensation Committee granted nonqualified
options to each of Messrs. Friedman, Davis and Widynowski to purchase
75,000 shares of Common Stock. These options, which were not granted
under the 1995 Plan, have an exercise price of $12.3125 per share, were
granted on the same terms and conditions as are provided for in the
1995 Plan, vest in cumulative installments of 18,750 shares on each of
the first four anniversaries of the date of grant and expire ten years
after the date of grant.
(5) The option becomes exercisable in three equal cumulative annual
installments commencing on September 30, 1997.
Aggregate Option Exercises and Year-End Option Values. Shown below is
information relating to the exercise of stock options during 1996 for
the Company's executive officers, including the Named Executive
Officers, and the year-end value of unexercised options.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Securities in-the-Money Options
Underlying Unexercised at Fiscal Year-End (1)
Shares Acquired Value Realized Options at Fiscal Year-End (Exercisable/
Name on Exercise (1) (Exercisable/Unexercisable) Unexercisable)
- ---- ----------- --- --------------------------- -------------
<S> <C> <C> <C> <C>
Joel Friedman.................. 0 0 0/75,000 $0/0
Richard D. Davis............... 0 0 0/125,000 0/75,000
Luis H. Ferran................. 0 0 0/250,000 0/375,000
Wayne P. Widynowski............ 0 0 0/120,000 0/67,500
Ronald L. Koons................ 0 0 0/30,000 0/22,500
G.C.L. Kemp.................... 0 0 0/0 0/0
</TABLE>
-----------------
<PAGE> 4
(1) Market value of underlying securities of $9.00 per share based on the
average of the high and low trading price of the Company's Common Stock
on December 31, 1996, minus the aggregate exercise price.
In addition, during 1996 the Compensation Committee and, after
September 1996 the Stock Option Committee, granted pursuant to the 1995 Plan
options to purchase an aggregate of 179,350 shares of Common Stock to other key
employees of the Company at prices ranging from $7.375 to $12.3125 per share.
Each of these options vests in cumulative installments of one-fourth of the
number of shares subject thereto on each of the first four anniversaries of the
grant date and expires in 2006.
The Compensation Committee of the Board of Directors made no
determination with respect to the 1996 cash compensation of any of the Company's
executive officers, all of whose cash compensation was paid pursuant to
employment agreements approved by the entire Board of Directors. Options granted
to executive officers prior to the Company's initial public offering were
granted by the entire Board of Directors pursuant to the 1995 Plan. Options
granted to executive officers after the Company's initial public offering were
granted by the Compensation Committee of the Board of Directors under the 1995
Plan or pursuant to authority granted to the Committee by the entire Board of
Directors.
[. . . ]
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was incorporated in March 1995 and conducted no operations
until February 1996, when it consummated its initial public offering (the
"Initial Public Offering") and acquired Northern, Geoevaluaciones, Kemp, Paragon
(the "Operating Subsidiaries") and PIASA. Simultaneously with the consummation
of the Initial Public Offering, the Company acquired in separate transactions,
in exchange for cash, notes and shares of Common Stock, the Operating
Subsidiaries and PIASA, as described below. Of the approximately $28.7 million
of net proceeds to the Company from the Initial Public Offering, (i)
approximately $13.8 million was used to pay the cash portion of the purchase
price to certain former stockholders of the Operating Subsidiaries and PIASA;
and (ii) approximately $5.9 million was used to repay indebtedness of the
Operating Subsidiaries, including approximately $1.9 million of indebtedness
that was guaranteed by or was owed to certain former stockholders of the
Operating Subsidiaries. In addition, the former stockholders of the Operating
Subsidiaries and PIASA received an aggregate of 1,599,319 shares of Common Stock
having a market value, based on the price to the public in the Initial Public
Offering of $7.50 per share, of approximately $12.0 million in the aggregate.
Under a stock purchase agreement (the "Geoevaluaciones Stock Purchase
Agreement"), the Company purchased from Mr. Ferran, his wife, his father-in-law
and his mother-in-law (collectively, the "Former Geoevaluaciones Stockholders")
all of the issued and outstanding shares of capital stock of Geoevaluaciones. In
connection with this acquisition, the Company entered into a separate
non-competition agreement with each of the Former Geoevaluaciones Stockholders
(collectively, the "Geoevaluaciones Non-Competition Agreement"). The
Geoevaluaciones Stock Purchase Agreement and the Geoevaluaciones Non-Competition
Agreement were entered into on the basis of arm's-length negotiations among the
Former Geoevaluaciones Stockholders and, on behalf of the Company, Messrs.
Friedman and White. Neither the Company nor the Former Geoevaluaciones
Stockholders obtained an appraisal of Geoevaluaciones or such non-competition
covenants in connection with this transaction; at September 30, 1995, the net
book value of Geoevaluaciones was approximately $2.1 million. Pursuant to the
Geoevaluaciones Stock Purchase Agreement, the Company paid to the Former
<PAGE> 5
Geoevaluaciones Stockholders: (i) $2.45 million in cash at closing; and (ii)
$1.0 million by delivery at closing of four promissory notes, payable in
installments at six, 12, 18 and 24 months after the closing in the following
aggregate amounts (which amounts include interest at 8% per annum): $290,000,
$280,000, $270,000 and $260,000, respectively. Pursuant to the Geoevaluaciones
Non-Competition Agreement, the Company paid to the Former Geoevaluaciones
Stockholders: (i) 100,000 shares of Common Stock that was issued at closing to
trusts with Mexican banks for the benefit of the Former Geoevaluaciones
Stockholders, and is to be released February 9, 1998; and (ii) $1.9 million,
reduced by the amount of any liabilities Geoevaluaciones had not disclosed to
the Company and by any amount paid by Geoevaluaciones to settle or otherwise in
connection with Geoevaluaciones' dispute with a supplier, such portion of the
consideration consisting of (a) $1.0 million in cash that was deposited at the
closing in a bank account, and which, subject to any such reduction, may be
disbursed only upon the approval of (1) either Mr. Ferran or another Former
Geoevaluaciones Stockholder, and (2) either Mr. Friedman or Mr. White; and (b)
117,647 shares of Common Stock that were delivered at closing to trusts with
Mexican banks for the benefit of the Former Geoevaluaciones Stockholders, and
which may not be released until June 30, 1997 and then only upon the approval of
a designated representative of the Former Geoevaluaciones Stockholders and Mr.
Friedman. Mr. Ferran entered into an employment agreement with the Company and
serves as Executive Vice President -- Latin American Operations, President of
Geoevaluaciones and a director of the Company. In addition, Mr. Ferran may
receive, pursuant to the Geoevaluaciones Non-Competition Agreement, as described
above, up to a maximum of 57,394 of the shares of Common Stock payable to the
Former Geoevaluaciones Stockholders. Of the amounts paid by the Company to the
Former Geoevaluaciones Stockholders, Mr. Ferran received, as described above,
$645,167 in cash, a note in the principal amount of $263,333, with interest of
8% per annum thereon payable over two years, and will receive up to $263,334 in
cash that may not be released until June 30, 1997 (see "-- Employment
Agreements; Non-Competition Agreements" and "Security Ownership of Certain
Beneficial Owners and Management").
Under a stock purchase agreement, the Company purchased from Messrs.
Andrews, Ferran and five other stockholders of PIASA all of the issued and
outstanding shares of capital stock of PIASA for approximately $300,000,
consisting of $60,000 in cash and approximately 28,235 shares of Common Stock.
The stock purchase agreement with the former stockholders of PIASA was entered
into on the basis of arm's-length negotiations among Mr. Andrews, the President
and Chairman of the Board of PIASA, and Mr. Ferran, a director and Secretary of
PIASA, on behalf of the former stockholders of PIASA, and Messrs. Friedman and
White, on behalf of the Company. Neither the Company nor PIASA obtained an
appraisal of PIASA in connection with this transaction; at September 30, 1995,
the net book value of PIASA was approximately $288,000. Mr. Ferran received
9,176 shares of Common Stock and $19,500 in connection with the sale of PIASA,
and Mr. Andrews received 10,588 shares of Common Stock and $22,500 in connection
with the sale of PIASA.
Under an asset purchase agreement between Northern's predecessor ("Old
Northern") and the Company, the Company purchased substantially all of Old
Northern's assets related to its land-based seismic data acquisition business.
Neither the Company nor Old Northern obtained an appraisal of the assets of Old
Northern to be acquired by the Company in connection with this transaction; at
September 30, 1995, the net book value of such assets was approximately $2.0
million. Such asset purchase agreement was the result of arm's-length
negotiations among representatives of the Company and representatives of Old
Northern. The
<PAGE> 6
aggregate consideration paid by the Company was $10.9 million in cash. Wayne P.
Widynowski, the Vice President of Marketing of Old Northern, entered into an
employment agreement with the Company and serves as Executive Vice President and
Chief Operating Officer of the Company and as President of Northern (see "--
Employment Agreements; Non-Competition Agreements," and "Security Ownership of
Certain Beneficial Owners and Management").
Under a merger agreement among Paragon, the Company and a subsidiary of
the Company, Paragon merged with the subsidiary with Paragon being the surviving
entity (the "Paragon Merger"). Mr. Friedman, two other individuals and members
of their respective immediate families (the "Former Paragon Stockholders" ) each
owned one-third of the issued and outstanding capital stock of Paragon. In
August 1994, Paragon purchased all of the net assets of Paragon Geophysical,
Inc., an Ohio corporation, for $1.1 million in cash and, in addition, assumed
long-term liabilities of $1.9 million. To finance the purchase, Paragon borrowed
$1.1 million from a commercial bank that was guaranteed by the Former Paragon
Stockholders and the Former Paragon Stockholders contributed approximately
$150,000 in cash. The Former Paragon Stockholders received approximately
1,314,261 shares of Common Stock in connection with the Paragon Merger. In
addition, the Company assumed an aggregate of $4.8 million of Paragon's debt, of
which $1.7 million had been personally guaranteed by Mr. Friedman and certain
other Former Paragon Stockholders. All of this debt was repaid upon consummation
of the Initial Public Offering with a portion of the net proceeds therefrom. The
terms of the Paragon Merger were not determined through arm's-length
negotiations and may have been significantly greater than would have resulted
from arm's-length negotiations. The Company did not obtain an appraisal of
Paragon in connection with the Paragon Merger; at September 30, 1995, the net
book value of Paragon was negative by approximately $496,000. Mr. Friedman, who,
prior to the Paragon Merger, was the President and Chief Executive Officer of
the Company and Chairman of the Board and Chief Executive Officer of Paragon,
together with members of his family, owns a total of 438,159 shares of Common
Stock as a result of the Paragon Merger. Mr. White, who, prior to the Paragon
Merger, was acting Chief Financial Officer of Paragon, served as Executive Vice
President, Chief Financial Officer, Secretary, Treasurer and a director of the
Company until September 30, 1996. In connection with the Paragon Merger, Messrs.
Friedman and White entered into employment agreements. Mr. White entered into a
termination agreement with the Company following his resignation in September
1996, as described below.
Under a stock purchase agreement among G.C.L. Kemp and his wife (the
"Former Kemp Stockholders") and the Company (the "Kemp Stock Purchase
Agreement"), the Company purchased all of the issued and outstanding shares of
capital stock of Kemp. The Kemp Stock Purchase Agreement was entered into on the
basis of arm's-length negotiations among G.C.L. Kemp, on behalf of the Former
Kemp Stockholders, and Messrs. Friedman and White, on behalf of the Company, and
the consideration payable to the Former Kemp Stockholders thereunder represents
the value the Former Kemp Stockholders deemed appropriate for their business.
Neither the Company nor the Former Kemp Stockholders obtained an appraisal of
Kemp in connection with this transaction; at September 30, 1995 the net book
value of Kemp was $422,000. The aggregate consideration paid by the Company to
the Former Kemp Stockholders, as modified by amendments in June 1996, was
approximately $919,000, consisting of $625,000 in cash and $294,000 paid by
delivery of 39,176 shares of Common Stock. In addition, the Company assumed and
repaid approximately $152,000 in debt owed by Kemp, of which $135,000 was
guaranteed by Mr. Kemp. In addition, the Company assumed $50,000 of debt
<PAGE> 7
owed by Kemp to Mr. Kemp, of which $25,000 was forgiven by Mr. Kemp in June
1996. Mr. Kemp entered into an employment agreement pursuant to which he serves
as a Vice President of the Company.
Mr. Andrews is the sole stockholder of The Andrews Group International,
Inc. ("Andrews Group") which, through its Mexican affiliate, A.G.I. Mexicana,
S.A. de C.V. ("A.G.I. Mexicana") (collectively, the "Andrews Companies"), acts
as the exclusive representative for several companies in Mexico, including
Input/Output, Inc. and Landmark Graphics Corporation. Geoevaluaciones and PIASA
purchase goods and services from A.G.I. Mexicana and during 1996 such purchases
totalled approximately $635,000. In addition, as of December 31, 1996 PIASA owed
A.G.I. Mexicana $65,000 for goods and services purchased prior to the Initial
Public Offering. The Company also leased approximately 1,000 channels of 3-D
seismic data acquisition equipment and geophones from Andrews Group under two
separate six-month lease agreements with automatic monthly renewals that
provided for deposits of approximately $293,000 and $77,000, respectively, and
for monthly payments of approximately $110,000 and $29,000, respectively. The
leases provided the Company with options to purchase the equipment for
approximately $2,445,000 and $642,000, respectively, subject to offsets of 80%
of the rental payments during the six months ended March 1, 1997 and a 10%
discount if the options were exercised during such period. The Company used a
portion of the proceeds of its December 1996 public offering to exercise such
options and purchase the equipment for $2,942,000. The Company anticipates that
it will continue to purchase goods and services from the Andrews Companies. The
Company believes that the past transactions with the Andrews Companies have
been, and that any future transactions with the Andrews Companies will be, on
terms no less favorable to the Company than could be obtained from an
unaffiliated third party.
The Company agreed to pay to a consulting company owned by Mr. White
$250,000 for financial advisory and other consulting services in connection with
the structuring, negotiation and consummation of the acquisitions of the
Operating Subsidiaries and PIASA, of which $125,000 was paid upon the
consummation the Initial Public Offering and $125,000 was paid on January 3,
1997. In connection with Mr. White's resignation as an executive officer of the
Company and the termination of his employment agreement on October 1, 1996, the
Company agreed to pay Mr. White $200,000 in January 1997 plus $5,000 per month
through December 31, 1998, the expiration date of the employment agreement, to
provide him with office space in the Company's New York City facility through
December 31, 1997, provided he does not serve as an officer of a competitor of
the Company during that period, and to provide him with certain insurance
benefits through December 31, 1998. In exchange therefor, Mr. White rendered
financial and advisory services to the Company in connection with its December
1996 public offering and the acquisition of J.R.S. Exploration Company, Limited.
The Company leases space in New York City at an annual base rental of
$165,000 to provide offices for Messrs. Friedman and White. Mr. Friedman has
agreed to reimburse the Company for any amounts under the lease that are payable
with respect to space that is not utilized by him and Mr. White and which have
not been paid by sub-lessees.
For information concerning legal fees paid to Kramer Levin, to which
firm Mr. Emil is of counsel, see "Information Concerning Directors and
Nominees".
<PAGE> 1
EXHIBIT (C)(2)
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement")
dated January 13, 1998 between 3-D Geophysical, Inc. (the "Company"), a Delaware
corporation, and Wayne P. Widynowski (the "Employee").
WHEREAS, the Employee is employed by the Company in a key
managerial capacity and the Employee's services are valuable to the conduct of
the business of the Company;
WHEREAS, the Company recognizes that circumstances may arise
in which a change in control of the Company occurs, through acquisition or
otherwise, thereby causing uncertainty about the Employee's future employment
with the Company without regard to the Employee's competence or past
contributions, which uncertainty may result in the loss of valuable services of
the Employee to the detriment of the Company and its stockholders, and the
Company and the Employee wish to provide reasonable security to the Employee as
an incentive for the continuation by Employee of his current relationship with
the Company;
WHEREAS, the Employee and the Company are parties to an
Employment Agreement dated January 31, 1996 (the "Prior Agreement") and wish to
amend and restate the terms and conditions of the Prior Agreement in their
entirety with the terms and conditions of this Agreement;
WHEREAS, the Company desires to continue to employ the
Employee on the terms
<PAGE> 2
and conditions provided in this Agreement; and
WHEREAS, the Employee desires to continue such employment and
to render services to the Company on the terms and conditions provided in this
Agreement.
NOW, THEREFORE, in consideration of the mutual agreements
herein contained, the Company and the Employee hereby agree as follows:
Section 1. Engagement. The Company hereby employs the Employee as
Executive Vice President and Chief Operating Officer of the Company, and the
Employee hereby accepts such employment, upon and subject to the terms and
conditions hereinafter set forth.
Section 2. Term. Unless sooner terminated as provided in this
Agreement, the term of the Employee's employment under this Agreement shall
commence on the date hereof (the "Effective Date") and shall end on December 31,
2000 (the "Term").
Section 3. Duties and Services.
3.1 The Employee shall render services to the Company as the Executive
Vice President and Chief Operating Officer of the Company, shall perform such
other duties and responsibilities (including, without limitation, service
otherwise consistent with the Employee's duties hereunder as an officer,
director or equivalent position of any subsidiary, affiliated company or venture
of the Company, without additional compensation) as may be assigned to the
Employee from time to time
- 2 -
<PAGE> 3
by the Board of Directors (the "Directors") or the Chief Executive Officer of
the
-3-
<PAGE> 4
Company and shall abide by the practices and policies of the Company governing
the conduct of employees. The Company and all such subsidiaries, affiliated
companies and ventures are herein collectively referred to as the "3-D
Companies".
3.2 During the Term, the Employee shall devote his full energy and time
(exclusive of normal holidays and vacation periods and periods of sickness and
disability) to the performance of the Employee's duties as defined herein and
shall promptly and faithfully perform all the duties which pertain to the
Employee's employment. The previous sentence shall not prohibit the Employee
from activities permitted pursuant to clause (iii) of Section 9.1 or from
activities in connection with ownership of an interest in the real property
owned by CBNC, Inc. ("Northern") in Grand Junction, Colorado, provided that such
activities do not interfere with the performance of Employee's duties hereunder.
Section 4. Compensation.
4.1 Annual Compensation. In consideration of all of the services to be
rendered by the Employee hereunder and the covenants of Employee herein, the
Company agrees to pay to the Employee, and the Employee agrees to accept, a
salary at the annual rate of $140,000, payable in accordance with the Company's
normal payroll practices.
4.2 Bonus Pool. The Company intends to create a bonus plan based upon
the earnings of the Company to provide incentives for certain employees of the
Company and its subsidiaries. The Employee shall be entitled to participate in
such plan on such terms as may be determined by the Board of Directors of the
Company or a duly constituted committee thereof, in its discretion.
-4-
<PAGE> 5
Nothing in this Agreement shall require the Company to pay any such bonus.
Section 5. Change in Control.
5.1 Definitions. As used in this Agreement, the
following terms shall have the following meanings:
(a) Change of Control. The term "Change of
Control" means an event which shall be deemed to have occurred if:
(i) any "person" as such term is used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (other than the Company, any trustee or other fiduciary
holding securities under any employee benefit plan of the Company, or any
company owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
30% or more of the combined voting power of the Company's then outstanding
securities; or
(ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Directors, and any new director (other than a director designated by a
person who has entered into an agreement with the Company to effect a
transaction described in clause (iii) or (iv) of this Section 5.1(a)) whose
election by the Board of Directors of
-5-
<PAGE> 6
the Company or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the Directors then still in
office who either were Directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute at least a majority of the Board of Directors of the
Company; or
(iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no person acquires more than 25% of the combined voting power of the
Company's then outstanding securities shall not constitute a Change of Control;
or
(iv) the stockholders of the Company
approve a plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of, or the Company sells or disposes of, all
or substantially all of the Company's assets, or any such sale or disposition is
effected through condemnation proceedings.
The Company's outside legal counsel shall notify the parties
to this Agreement whether and when a Change of Control has occurred. However,
the preceding sentence shall not
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<PAGE> 7
preclude any party to this Agreement from giving such notice.
(b) Code. The term "Code" means the Internal
Revenue Code of 1986, including any amendments thereto or successor tax codes
thereof. References to any section of the Code shall include any amended or
successor section of comparable import.
(c) Covered Termination. The term "Covered
Termination" means any termination of the Employee's employment for "Good
Reason" after a Change of Control of the Company which occurs prior to the end
of the Term.
(d) Good Reason. The Employee shall have a "Good
Reason" for termination of employment after a Change of Control of the Company
in the event of:
(i) a termination of the Employee's
employment by the Company for any reason other than Cause (as defined in Section
8(c) hereof); or
(ii) a good faith determination by the
Employee that there has been a significant adverse change, without the
Employee's express prior written consent, in the Employee's working conditions
or status with the Company from such working conditions or status in effect
immediately prior to the Change of Control of the Company, including but not
limited to (A) a significant change in the nature or scope of the Employee's
authority, powers, functions, duties or responsibilities or reporting
responsibilities, or (B) a significant reduction in the level of support
services, staff, secretarial and other assistance, office space and
accoutrements (regardless of
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<PAGE> 8
whether such reduction is part of a general reduction applicable to all senior
executive employees of the Company), or (C) a reduction in the salary or
benefits to which the Employee is entitled under this Agreement, or (D) a
relocation of the Employee's principal place of business to a location which is
more than 50 miles from its current location as of the Effective Date.
5.2 Benefits. If there is a Covered Termination, the
Employee shall be entitled to the following benefits:
(a) Accrued Benefits. The Employee shall be paid
the amount of the Employee's Accrued Benefits. For purposes of this Agreement,
the Employee's "Accrued Benefits" shall consist of the aggregate of the
following amounts, payable as described herein: (i) all base salary, and accrued
vacation pay, for the time period ending with the date of termination; (ii)
reimbursement for any and all monies or other reimbursable costs advanced in
connection with the Employee's employment for reasonable and necessary expenses
incurred by the Employee on behalf of the Company for the time period ending
with the date of termination; (iii) any and all other cash earned through the
date of termination and deferred at the election of the Employee or pursuant to
any deferred compensation plan then in effect, and any increments thereon as
determined under such plan; and (iv) a lump sum payment of the bonus or
incentive compensation otherwise payable to the Employee with respect to the
year in which termination occurs, or for the prior year, under all bonus or
incentive compensation plans in which the Employee is a participant. Payment of
Accrued Benefits shall be made promptly in accordance with the Company's
prevailing practice.
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<PAGE> 9
(b) Severance Payment. The Employee will be
entitled to cash compensation, calculated as described below, payable in one
lump sum within fifteen (15) days of the Company's receipt of notice of the
Covered Termination. The aggregate cash compensation will be calculated as two
times the Employee's annual rate of salary as provided for in Section 4.1 and
bonus. Cash compensation paid pursuant to this provision shall be subject to
appropriate payroll deductions.
(c) Payment Adjustment.
(i) Anything in this Agreement to the
contrary notwithstanding, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the Employee (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise) (a "Payment") would be nondeductible by the Company for
Federal income tax purposes because of Section 280G of the Code, then the
aggregate present value of amounts payable or distributable as severance
benefits hereunder shall be reduced to the Reduced Amount. The "Reduced Amount"
shall be an amount expressed in present value which maximizes the aggregate
present value of such severance benefits without causing any Payment to be
nondeductible by the Company because of Section 280G of the Code. Anything in
this Agreement to the contrary notwithstanding, if the Reduced Amount is zero
and it is determined further that any Payment which is not part of the severance
benefits payable hereunder would nevertheless be nondeductible by the Company
for Federal income tax purposes because of Section 280G of the Code, then the
aggregate present value of Payments which are not severance benefits under this
Agreement shall also be reduced (but not below zero) to an amount expressed in
present value which maximizes the aggregate present value of Payments without
causing any Payment to
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<PAGE> 10
be nondeductible by the Company because of Section 280G of the Code. For
purposes of this Section 5.2(c), present value shall be determined in accordance
with Section 280G(d)(4) of the Code.
(ii) All determinations required to be
made under this Section 5.2(c) shall be made by the Company's independent
auditors which shall provide detailed supporting calculations both to the
Company and the Employee within 15 business days of the date of termination or
such earlier time as is requested by the Company and, to the extent appropriate
under the circumstances, an opinion to the Employee that he has substantial
authority not to report any excise tax on his Federal income tax return with
respect to any Payments. Any such determination by the Company's independent
auditors shall be binding upon the Company and the Employee. The Employee shall
determine which and how much of the Payments shall be eliminated or reduced
consistent with the requirements of this Section 5.2(c), provided that, if the
Employee does not make such determination within ten business days of the
receipt of the calculations made by the Company's independent auditors, the
Company shall elect which and how much of the Payments shall be eliminated or
reduced consistent with the requirements of this Section 5.2(c) and shall notify
the Employee promptly of such election; and provided further that any Payments
which do not constitute gross income to the Employee shall not be reduced or
eliminated unless all other Payments have first been eliminated. Within five
business days thereafter, the Company shall pay to or distribute to or for the
benefit of the Employee such amounts as are then due to the Employee under this
Agreement.
(iii) As a result of the uncertainty in
the application of Section 280G of the Code at the time of the initial
determination by the Company's independent auditors
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<PAGE> 11
hereunder, it is possible that Payments will have been made by the Company which
should not have been made ("Overpayment") or that Payments will not have been
made by the Company which could have been made ("Underpayment"), in each case,
consistent with the calculations required to be made hereunder. In the event
that the Company's independent auditors, based upon the assertion of a
deficiency by the Internal Revenue Service against Employee or the Company which
the Company's independent auditors believe has a high probability of success,
determine that an Overpayment has been made, any such Overpayment paid or
distributed by the Company to or for the benefit of the Employee shall be
treated for all purposes as a loan ab initio to the Employee which the Employee
shall repay to the Company together with interest at the applicable Federal rate
provided for in Section 7872(f)(2) of the Code, compounded semiannually;
provided, however, that no such loan shall be deemed to have been made and no
amount shall be payable to the Company if and to the extent such deemed loan and
payment would not either reduce the amount on which the Employee is subject to
tax under Section 1 and Section 4999 of the Code or generate a refund of such
taxes. In the event that the Company's independent auditors, based upon
controlling precedent or other substantial authority, determine that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Employee together with interest at 120% of
the applicable Federal rate provided for in Section 7872(f)(2) of the Code,
compounded semiannually.
Section 6. Expenses and Reimbursement. The Employee shall be reimbursed
by the Company for reasonable and necessary out-of-pocket expenses incurred by
the Employee in performing his duties hereunder, provided such expenses are
approved in accordance with the procedures of the Company then in effect and are
presented for reimbursement in accordance with the Company's policies and
practices then in effect.
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<PAGE> 12
Section 7. Benefits. During the Term, the Company agrees to provide the
Employee, in addition to and not in limitation of the compensation set forth in
Section 4, the following benefits, which shall be determined in the sole
discretion of the Directors (or a duly constituted committee thereof):
(a) The Employee shall be entitled, subject to general
qualification requirements, to participate in any and all group insurance plans,
group health or medical insurance plans, group accidental and disability
insurance plans made generally available to the senior executive employees of
the Company, provided that in the event that this Agreement is terminated
pursuant to Section 8(b), the Company shall pay to the Employee during the
lesser of (A) six months following such termination and (B) the remainder of the
Term an amount equal to the Employee's salary pursuant to Section 4.1 less any
payments to Employee pursuant to any plan of disability insurance based on the
Employee's disability, if applicable. Except to the extent set forth in the
prior sentence, any payment owed by the Company pursuant to such sentence is in
addition to and not in lieu of any policy of disability insurance, and payments
owed by the Company pursuant to such sentence shall not be deemed co-insurance
but additional salary.
(b) The Employee shall be entitled to participate in the Company's
pension, profit-sharing, stock option, stock purchase and other employee benefit
programs made generally available to the senior executive employees of the
Company.
(c) The Employee shall be entitled to vacation, sick leave and
holidays in accordance with the Company's policies for senior executive
employees generally but in no case less than four weeks paid vacation per annum.
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<PAGE> 13
(d) During the term of employment under this Agreement, the
Company shall pay the Employee $575 per month as a non-accountable allowance for
lease payments, insurance and other expenses of an automobile leased by the
Employee. The Company shall provide all insurance for such vehicles required by
law or applicable lease terms.
Section 8. Termination. Subject to the provisions of Sections 5 and 9,
which shall survive the termination of this Agreement, this Agreement shall
terminate upon:
(a) The death of the Employee;
(b) Illness, disability or incapacity that prevents the Employee
from performing his duties hereunder for sixty (60) consecutive days, or for any
sixty (60) days within any one hundred and eighty (180) day period, and the
provision of written notice of such termination to the Employee by the Company;
(c) Upon written notice by the Company for "Cause", which shall
include: (i) the failure of the Employee to observe or perform any material term
of this Agreement for twenty (20) days after written notice thereof specifying
such failure; (ii) any act of illegality, dishonesty, moral turpitude or fraud
in connection with the Employee's employment; (iii) any course of action which
is materially detrimental to the business of the Company (other than good faith
actions of the Employee to fulfill his duties hereunder in the exercise of his
business judgment and not inconsistent with the direction of the Chief Executive
Officer or Directors of the Company); or (iv) the commission by the Employee of
any felony; or
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<PAGE> 14
(d) Upon written notice by the Employee to the Company for Good
Reason.
Section 9. Restrictive Covenants. In consideration of the undertakings
of the Company set forth herein, the Employee agrees as follows:
9.1 Covenant Not to Compete. The Employee will not in any way, directly
or indirectly, as an agent, employee, officer, director, stockholder, partner or
otherwise of any corporation, partnership or other venture or enterprise,
compete with the 3-D Companies in the provision of seismic data acquisition or
analysis services or any services related thereto (a "Competing Business") while
Employee is employed under this Agreement, and, unless this Agreement is
terminated by the Company without Cause or by the Employee for Good Reason, for
a period of one (1) year after the termination of this Agreement for any reason
whatsoever other than (i) due to the Employee's performance of his duties
hereunder during the Term; (ii) by ownership for investment purposes of no more
than 1% of the stock of a company which is traded on a national securities
exchange or interdealer quotation system; or (iii) the sale, use and licensing
by the Employee, directly or indirectly, in a manner which does not interfere
with the performance of Employee's duties hereunder, of seismic data retained by
Northern pursuant to the Asset Purchase Agreement dated as of November 8, 1995
by and between the Company and Northern and transferred to the Employee or an
entity in which the Employee has an interest (the "Seismic Data Library").
9.2 Non-Solicitation Covenant. During the Term and for a period of one
(1) year after the termination of this Agreement for any reason whatsoever,
unless this Agreement is terminated by
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<PAGE> 15
the Company without Cause or by the Employee for Good Reason, the Employee shall
not solicit, sell to or contract with, on behalf of the Employee or on behalf of
any Competing Business, any person or entity to which the 3-D Companies shall
have provided seismic data acquisition or analysis services at any time during
the Term. This Section 9.2 shall not prohibit the sale, use and licensing by the
Employee, directly or indirectly, in a manner which does not interfere with the
performance of Employee's duties hereunder, of the Seismic Data Library.
9.3 Covenant Not to Solicit Employees of the Company. During the Term
and for a period of one (1) year after the termination of this Agreement for any
reason whatsoever, the Employee shall not solicit for employment any sales,
engineering or other technical or management employee who was employed by the
3-D Companies during the six months prior to the conclusion of the Term.
9.4 Certain Payments. Upon the termination of this Agreement other than
by the Company for Cause or by the Employee without Good Reason, the provisions
of Sections 9.1, 9.2 and 9.3 shall lapse unless, during the year following such
termination, the Company pays to the Employee an amount equal to 80% of the
Employee's salary pursuant to Section 4.1 in equal monthly installments
commencing on the first day of the month following such termination. Such lapse
shall occur if the Company (i) fails to pay the first such installment within 20
days of notice from the Employee citing this Section or (ii) fails to make any
subsequent payment within seven days of notice from the Employee citing this
Section. In the event the Company makes the payment described in clause (i) of
the preceding sentence and the circumstances described in clause (ii) occur, the
remaining payments described in the preceding sentence shall become immediately
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<PAGE> 16
due and payable. The amounts owed pursuant to this Section 9.5 shall be reduced
(or if already paid shall be repaid by the Employee) to the extent that such
amounts plus any amounts earned by the Employee as an employee or independent
contractor during such year exceed 120% of the Employee's annual salary pursuant
to Section 4.1.
9.5 Non-Disclosure Covenant. The Employee recognizes and acknowledges
that, prior to and in the course of his employment, the Employee may have had
and shall have access to trade secrets and other confidential or proprietary
information of the 3-D Companies, including, but not limited to, information
acquired or developed by the 3-D Companies and Northern concerning seismic data,
marketing strategy, technology, techniques and know-how, customer specifications
and customer lists, cost figures, budgets, sales forecasts and business plans
(other than the Seismic Data Library). The Employee agrees that the disclosure
of any such trade secrets or information could be harmful to the interests of
the 3-D Companies and that, during the Employee's employment by the Company, the
Employee will take appropriate caution to safeguard such trade secrets and
information, and will not during the Term or thereafter use, disclose, divulge
or publish any such trade secrets or information except as required by law or as
the Employee's duties during the Employee's employment by the Company may
require or as the Company may in writing specifically consent.
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<PAGE> 17
9.6 Proprietary Information. The Employee recognizes and acknowledges
that all documents, manuals, letters, notebooks, reports, records, computer
programs or data banks and other evidences of trade secrets and other
confidential or proprietary information of the 3-D Companies, including copies
thereof, whether prepared by the Employee or others, are the sole property of
and belong exclusively to the 3-D Companies, and agrees that, during the
Employee's employment by the Company, the Employee will under no circumstances
remove any such material for use outside of his offices except in connection
with the business of the 3-D Companies during the course of the Employee's
employment. In the event of the termination of this Agreement for any reason
whatsoever, the Employee shall immediately return to the Company any and all
documents, manuals, letters, notebooks, reports, records, computer programs or
data banks or other evidence of trade secrets and other confidential or
proprietary information of the 3-D Companies (and all copies thereof) which are
the property of the 3-D Companies.
9.7 Remedies. The Employee further agrees that in the event of a breach
or threatened breach of any of the covenants contained in this Section 9, the
Company's remedy at law is likely to be inadequate and that accordingly the
Company will be entitled to obtain an injunction or other equitable relief with
regard thereto without proving damages or that damages would not constitute an
adequate remedy. If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 9 is invalid or
unenforceable, the parties hereto agree that the court making the determination
of invalidity or unenforceability shall have the power to, and is hereby
directed to, reduce the scope, duration or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid and unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the
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<PAGE> 18
expiration of the time within which the judgment may be appealed.
Section 10. Miscellaneous Provisions.
10.1 Notices. All notices and demands of any kind which any party
hereto may be required or desire to serve upon another party under the terms of
this Agreement shall be in writing and shall be served upon such other party:
(a) by personal service upon such other party at such other party's address set
forth below in this Section 10.1; (b) by mailing a copy thereof by certified or
registered mail, postage prepaid, with return receipt requested, addressed to
such other party at the address of such other party set forth below in this
Section 10.1; or (c) by sending a copy thereof by Federal Express or equivalent
courier service, addressed to such other party at the address of such other
party set forth below in this Section 10.1.
In case of service by Federal Express or equivalent courier
service or by personal service, such service shall be deemed complete upon
receipt. In the case of service by mail, such service shall be deemed complete
upon reasonable proof of receipt. The address to which, and person to whose
attention, notices and demands shall be delivered or sent may be changed from
time to time by notice served, as hereinabove provided, by any party upon the
other party.
The current addresses of the parties are:
If, to Employee: Wayne P. Widynowski
7763 South Elm Court
Littleton, Colorado 80122
copy to: Paul F. Lewis, Esq.
Moye, Giles, O'Keefe, Vermeire & Gorrell
1225 Seventeenth Street
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<PAGE> 19
29th Floor
Denver, Colorado 80202
If, to the Company: 3-D Geophysical, Inc.
599 Lexington Avenue
New York, New York 10022
Attention: Joel Friedman, Chairman
copy to: Peter S. Kolevzon, Esq.
919 Third Avenue
New York, New York 10022
10.2 Entire Agreement; Amendment. This Agreement contains the
entire agreement between the parties, expressly supersedes the Prior Agreement
in its entirety, which the parties hereto agree shall be of no further force and
effect, merges all prior negotiations, agreements and understandings, if any,
and states in full all representations, warranties and agreements which have
induced this Agreement. Each party agrees that in dealing with third parties no
contrary representations will be made. This Agreement may not be amended,
modified or otherwise changed orally but only by an agreement in writing signed
by the party against whom enforcement of any amendment, modification or change
is sought.
10.3 Assignment; Binding Nature; No Beneficiaries. This Agreement
may not be assigned by any party hereto without the written consent of the other
party. This Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, personal
representatives, legatees, successors and permitted assigns. This Agreement
shall not confer any rights or remedies upon any person other than the parties
hereto and their respective heirs, personal representatives, legatees,
successors, and permitted assigns.
10.4 Nonwaiver. No waiver by any party of any term, provision or
covenant contained in
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this Agreement (or any breach thereof) shall be effective unless it is in
writing executed by the party against which such waiver is to be enforced; no
waiver shall be deemed or construed as a further or continuing waiver of any
such term, provision or covenant (or breach) on any other occasion or as a
waiver of any other term, provision or covenant (or of the breach of any other
term, provision or covenant) contained in this Agreement on the same or any
other occasion.
10.5 Remedies. The remedies provided for or permitted by this
Agreement shall be cumulative and the exercise by any party of any remedy
provided for herein or otherwise available shall not preclude the assertion or
exercise by such party of any other right or remedy provided for herein or
otherwise available.
10.6 Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
10.7 Construction. In this Agreement (i) words denoting the
singular include the plural and vice versa, (ii) "it" or "its" or words denoting
any gender include all genders, (iii) any reference herein to a Section refers
to a Section of this Agreement, unless otherwise stated, (iv) when calculating
the period of time within or following which any act is to be done or steps
taken, the date which is the reference day in calculating such period shall be
excluded and if the last day of such period is not a business day, then the
period shall end on the next day which is a business day, and (v) all dollar
amounts are expressed in United States funds.
10.8 Governing Law; Arbitration. This Agreement shall be governed
by, and construed and enforced in accordance with, the laws of the State of
Delaware applicable to contracts made
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and to be entirely performed therein. Any controversy arising out of or relating
to this Agreement or the breach hereof shall be settled by arbitration in
Denver, Colorado before a single, neutral arbitrator who shall be a former state
or federal judge in accordance with the Commercial Arbitration rules of the
American Arbitration Association then existing and judgment upon the award
rendered may be entered in any court having jurisdiction thereof, except that in
the event of any controversy relating to any violation or alleged violation of
any provision of Section 9 hereof, the Company in its sole discretion shall be
entitled to seek injunctive relief from a court of competent jurisdiction
without any requirement to seek arbitration. The party (or aligned parties)
substantially prevailing in such arbitration or judicial proceeding shall
receive in addition to other relief afforded by the arbitrator or judge an award
of costs, expert witness fees and reasonable attorneys' fees.
10.9 Counterparts. For the convenience of the parties, any number
of counterparts hereof may be executed, each such executed counterpart shall be
deemed an original and all such counterparts together shall constitute one and
the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date and year first written above.
3-D GEOPHYSICAL, INC.
Attest: By______________________________
Name:
Title:
_____________________________
Name:
Title:
EMPLOYEE:
______________________________
Wayne P. Widynowski
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<PAGE> 1
Exhibit (c)(3)
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") dated
January 13, 1998 between 3-D Geophysical, Inc., a Delaware corporation (the
"Company"), and Ronald L. Koons (the "Employee").
WHEREAS, the Employee is employed by the Company in a key managerial
capacity and the Employee's services are valuable to the conduct of the business
of the Company;
WHEREAS, the Company recognizes that circumstances may arise in
which a change in control of the Company occurs, through acquisition or
otherwise, thereby causing uncertainty about the Employee's future employment
with the Company without regard to the Employee's competence or past
contributions, which uncertainty may result in the loss of valuable services of
the Employee to the detriment of the Company and its stockholders, and the
Company and the Employee wish to provide reasonable security to the Employee as
an incentive for the continuation by Employee of his current relationship with
the Company;
WHEREAS, the Employee and the Company are parties to an Employment
Agreement dated September 30, 1996 (the "Prior Agreement") and wish to amend and
restate the terms and conditions of the Prior Agreement in their entirety with
the terms
<PAGE> 2
and conditions of this Agreement;
WHEREAS, the Company desires to continue to employ the Employee on
the terms and conditions provided in this Agreement; and
WHEREAS, the Employee desires to continue such employment and to
render services to the Company on the terms and conditions provided in this
Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the Company and the Employee hereby agree as follows:
Section 1. Engagement. The Company hereby employs the Employee as Vice
President, Chief Financial Officer, Secretary and Treasurer of the Company, and
the Employee hereby accepts such employment, upon and subject to the terms and
conditions hereinafter set forth.
Section 2. Term. Unless sooner terminated as provided in this Agreement,
the term of the Employee's employment under this Agreement shall commence on the
date hereof (the "Effective Date") and shall end on December 31, 2000 (the
"Term").
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Section 3. Duties and Services.
3.1 The Employee shall render services to the Company as Vice President,
Chief Financial Officer, Secretary and Treasurer of the Company, shall perform
such other duties and responsibilities as may be assigned to the Employee from
time to time by the Board of Directors (the "Directors") or the Chief Executive
Officer of the Company and shall abide by the practices and policies of the
Company governing the conduct of employees.
3.2 During the Term, the Employee shall devote such energy and time
(exclusive of normal holidays and vacation periods and periods of sickness and
disability) as is reasonably necessary to perform the Employee's duties as
defined herein and shall promptly and faithfully perform all the duties which
pertain to the Employee's employment.
Section 4. Compensation.
4.1 Annual Compensation. In consideration of all of the services to be
rendered by the Employee hereunder and the covenants of Employee herein, the
Company agrees to pay to the Employee, and the Employee agrees to accept, a
salary at the annual rate of $125,000.00, payable in accordance with the
Company's normal payroll practices.
4.2 Bonus Pool. The Company intends to create a bonus plan based upon the
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<PAGE> 4
earnings of the Company to provide incentives for certain employees of the
Company and its subsidiaries. The Employee shall be entitled to participate in
such plan on such terms as may be determined by the Board of Directors of the
Company or a duly constituted committee thereof, in its discretion. Nothing in
this Agreement shall require the Company to pay any such bonus.
Section 5. Change in Control.
5.1 Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) Change of Control. The term "Change of Control" means an event
which shall be deemed to have occurred if:
(i) any "person" as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Company, any trustee or other fiduciary holding securities under
any employee benefit plan of the Company, or any company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding securities; or
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<PAGE> 5
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Directors, and any new
director (other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clause (iii) or
(iv) of this Section 5.1(a)) whose election by the Board of Directors of the
Company or nomination for election by the Company's stockholders was approved by
a vote of at least two-thirds (2/3) of the Directors then still in office who
either were Directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority of the Board of Directors of the Company; or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no person acquires more than 25% of the combined voting power of the
Company's then outstanding securities shall not constitute a Change of Control;
or
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(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of, or the Company sells or disposes of, all or substantially all
of the Company's assets, or any such sale or disposition is effected through
condemnation proceedings.
The Company's outside legal counsel shall notify the parties to this
Agreement whether and when a Change of Control has occurred. However, the
preceding sentence shall not preclude any party to this Agreement from giving
such notice.
(b) Code. The term "Code" means the Internal Revenue Code of 1986,
including any amendments thereto or successor tax codes thereof. References to
any section of the Code shall include any amended or successor section of
comparable import.
(c) Covered Termination. The term "Covered Termination" means any
termination of the Employee's employment for "Good Reason" after a Change of
Control of the Company which occurs prior to the end of the Term.
(d) Good Reason. The Employee shall have a "Good Reason" for
termination of employment after a Change of Control of the Company in the event
of:
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<PAGE> 7
(i) a termination of the Employee's employment by the Company
for any reason other than Cause (as defined in Section 8(c) hereof); or
(ii) a good faith determination by the Employee that there has
been a significant adverse change, without the Employee's express prior written
consent, in the Employee's working conditions or status with the Company from
such working conditions or status in effect immediately prior to the Change of
Control of the Company, including but not limited to (A) a significant change in
the nature or scope of the Employee's authority, powers, functions, duties or
responsibilities or reporting responsibilities, or (B) a significant reduction
in the level of support services, staff, secretarial and other assistance,
office space and accoutrements (regardless of whether such reduction is part of
a general reduction applicable to all senior executive employees of the
Company), or (C) a reduction in the salary or benefits to which the Employee is
entitled under this Agreement, or (D) a relocation of the Employee's principal
place of business to a location which is more than 50 miles from its current
location as of the Effective Date.
5.2 Benefits. If there is a Covered Termination, the Employee shall be
entitled to the following benefits:
(a) Accrued Benefits. The Employee shall be paid the amount of the
Employee's Accrued Benefits. For purposes of this Agreement, the Employee's
"Accrued Benefits" shall consist of the aggregate of the following amounts,
payable as
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described herein: (i) all base salary, and accrued vacation pay, for the time
period ending with the date of termination; (ii) reimbursement for any and all
monies or other reimbursable costs advanced in connection with the Employee's
employment for reasonable and necessary expenses incurred by the Employee on
behalf of the Company for the time period ending with the date of termination;
(iii) any and all other cash earned through the date of termination and deferred
at the election of the Employee or pursuant to any deferred compensation plan
then in effect, and any increments thereon as determined under such plan; and
(iv) a lump sum payment of the bonus or incentive compensation otherwise payable
to the Employee with respect to the year in which termination occurs, or for the
prior year, under all bonus or incentive compensation plans in which the
Employee is a participant. Payment of Accrued Benefits shall be made promptly in
accordance with the Company's prevailing practice.
(b) Severance Payment. The Employee will be entitled to cash
compensation, calculated as described below, payable in one lump sum within
fifteen (15) days of the Company's receipt of notice of the Covered Termination.
The aggregate cash compensation will be calculated as one times the Employee's
annual rate of salary as provided for in Section 4.1 and bonus. Cash
compensation paid pursuant to this provision shall be subject to appropriate
payroll deductions.
(c) Payment Adjustment.
(i) Anything in this Agreement to the contrary
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<PAGE> 9
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Employee (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise) (a "Payment") would be nondeductible by the Company for
Federal income tax purposes because of Section 280G of the Code, then the
aggregate present value of amounts payable or distributable as severance
benefits hereunder shall be reduced to the Reduced Amount. The "Reduced Amount"
shall be an amount expressed in present value which maximizes the aggregate
present value of such severance benefits without causing any Payment to be
nondeductible by the Company because of Section 280G of the Code. Anything in
this Agreement to the contrary notwithstanding, if the Reduced Amount is zero
and it is determined further that any Payment which is not part of the severance
benefits payable hereunder would nevertheless be nondeductible by the Company
for Federal income tax purposes because of Section 280G of the Code, then the
aggregate present value of Payments which are not severance benefits under this
Agreement shall also be reduced (but not below zero) to an amount expressed in
present value which maximizes the aggregate present value of Payments without
causing any Payment to be nondeductible by the Company because of Section 280G
of the Code. For purposes of this Section 5.2(c), present value shall be
determined in accordance with Section 280G(d)(4) of the Code.
(ii) All determinations required to be made under this Section
5.2(c) shall be made by the Company's independent auditors which shall provide
detailed supporting calculations both to the Company and the Employee within 15
business days of the date of termination or such earlier time as is requested by
the Company and, to the
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<PAGE> 10
extent appropriate under the circumstances, an opinion to the Employee that he
has substantial authority not to report any excise tax on his Federal income tax
return with respect to any Payments. Any such determination by the Company's
independent auditors shall be binding upon the Company and the Employee. The
Employee shall determine which and how much of the Payments shall be eliminated
or reduced consistent with the requirements of this Section 5.2(c), provided
that, if the Employee does not make such determination within ten business days
of the receipt of the calculations made by the Company's independent auditors,
the Company shall elect which and how much of the Payments shall be eliminated
or reduced consistent with the requirements of this Section 5.2(c) and shall
notify the Employee promptly of such election; and provided further that any
Payments which do not constitute gross income to the Employee shall not be
reduced or eliminated unless all other Payments have first been eliminated.
Within five business days thereafter, the Company shall pay to or distribute to
or for the benefit of the Employee such amounts as are then due to the Employee
under this Agreement.
(iii) As a result of the uncertainty in the application of
Section 280G of the Code at the time of the initial determination by the
Company's independent auditors hereunder, it is possible that Payments will have
been made by the Company which should not have been made ("Overpayment") or that
Payments will not have been made by the Company which could have been made
("Underpayment"), in each case, consistent with the calculations required to be
made hereunder. In the event that the Company's independent auditors, based upon
the assertion of a deficiency by the Internal Revenue Service against Employee
or the Company which the Company's independent
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<PAGE> 11
auditors believe has a high probability of success, determine that an
Overpayment has been made, any such Overpayment paid or distributed by the
Company to or for the benefit of the Employee shall be treated for all purposes
as a loan ab initio to the Employee which the Employee shall repay to the
Company together with interest at the applicable Federal rate provided for in
Section 7872(f)(2) of the Code, compounded semiannually; provided, however, that
no such loan shall be deemed to have been made and no amount shall be payable to
the Company if and to the extent such deemed loan and payment would not either
reduce the amount on which the Employee is subject to tax under Section 1 and
Section 4999 of the Code or generate a refund of such taxes. In the event that
the Company's independent auditors, based upon controlling precedent or other
substantial authority, determine that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Employee together with interest at 120% of the applicable Federal rate provided
for in Section 7872(f)(2) of the Code, compounded semiannually.
Section 6. Expenses and Reimbursement. The Employee shall be
reimbursed by the Company for reasonable and necessary out-of-pocket expenses
incurred by the Employee in performing his duties hereunder, provided such
expenses are approved in accordance with the procedures of the Company then in
effect and are presented for reimbursement in accordance with the Company's
policies and practices then in effect.
Section 7. Benefits. During the Term, the Company agrees to provide
the Employee, in addition to and not in limitation of the compensation set forth
in Section 4,
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<PAGE> 12
the following benefits, which shall be determined in the sole discretion of the
Directors (or a duly constituted committee thereof):
(a) The Employee shall be entitled, subject to qualification
requirements, to participate in any and all group insurance plans, group health
or medical insurance plans, group accidental and disability insurance plans made
generally available to the senior executive employees of the Company.
(b) The Employee shall be entitled to participate in the Company's
pension, profit-sharing, stock option, stock purchase and other employee benefit
programs made generally available to the senior executive employees of the
Company.
(c) The Employee shall be entitled to three weeks annual paid
vacation, as well as sick leave and holidays in accordance with the Company's
policies for senior executive employees generally.
(d) During the term of employment under this Agreement, the Company
shall pay the Employee, on a monthly basis, an amount equal to $650 per month as
a non-accountable allowance for lease payments, insurance and other expenses of
an automobile leased by the Employee.
Section 8. Termination. Subject to the provisions of Sections 5 and 9,
which shall survive the termination of this Agreement, this Agreement shall
terminate upon:
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<PAGE> 13
(a) The death of the Employee;
(b) Illness, disability or incapacity that prevents the Employee from
performing his duties hereunder for sixty (60) consecutive days, or for any
sixty (60) days within any one hundred and eighty (180) day period, and the
provision of written notice of such termination to the Employee by the Company;
(c) Upon written notice by the Company for "Cause", which shall
include, without limitation, (i) the failure of the Employee to observe or
perform any material term of this Agreement for twenty (20) days after written
notice thereof specifying such failure; (ii) any act of illegality, dishonesty,
moral turpitude, or fraud in connection with the Employee's employment; or (iii)
the commission by the Employee of any felony; or
(d) Upon written notice by the Employee to the Company for Good
Reason.
Section 9. Restrictive Covenants. In consideration of the undertakings
of the Company set forth herein, the Employee agrees as follows:
9.1 Covenant Not to Compete. The Employee will not in any way,
directly or indirectly, as an agent, employee, officer, director, stockholder,
partner or otherwise of any corporation, partnership or other venture or
enterprise compete with the Company or any of its subsidiaries in the provision
of seismic data acquisition or analysis services or
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<PAGE> 14
any services related thereto (a "Competing Business") during the Term, other
than due to the Employee's performance of his duties hereunder, and for a period
of one (1) year after the termination of this Agreement for any reason
whatsoever, unless this Agreement is terminated by the Company without Cause.
9.2 Non-Solicitation Covenant. During the Term and for a period of one
(1) year after the termination of this Agreement for any reason whatsoever, the
Employee shall not solicit, sell to or contract with, on behalf of the Employee
or on behalf of any Competing Business, any person or entity to which the
Company or any subsidiary of the Company shall have provided seismic data
acquisition or analysis services at any time during the Term.
9.3 Covenant Not to Solicit Employees of the Company. During the Term
and for a period of one (1) year after the termination of this Agreement for any
reason whatsoever, the Employee shall not solicit for employment any sales,
engineering or other technical or management employee who was employed by the
Company or any of its subsidiaries during the Term.
9.4 Non-Disclosure Covenant. The Employee recognizes and acknowledges
that, prior to and in the course of his employment, the Employee may have had
and shall have access to trade secrets and other confidential or proprietary
information of the Company and its subsidiaries, including, but not limited to,
information acquired or developed by the Company and its subsidiaries concerning
seismic data, marketing strategy,
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<PAGE> 15
technology, techniques and know-how, customer specifications and customer lists,
cost figures, budgets, sales forecasts and business plans. The Employee agrees
that the disclosure of any such trade secrets or information could be harmful to
the interests of the Company or its subsidiaries and that, during the Employee's
employment by the Company or its subsidiaries, the Employee will take
appropriate caution to safeguard such trade secrets and information, and will
not during the Term or thereafter use, disclose, divulge or publish any such
trade secrets or information except as required by law or as the Employee's
duties during the Employee's employment by the Company or its subsidiaries may
require or as the Company may in writing specifically consent.
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<PAGE> 16
9.5 Proprietary Information. The Employee recognizes and acknowledges
that all documents, manuals, letters, notebooks, reports, records, computer
programs or data banks and other evidences of trade secrets and other
confidential or proprietary information of the Company and its subsidiaries,
including copies thereof, whether prepared by the Employee or others, are the
sole property of and belong exclusively to the Company and its subsidiaries, and
agrees that, during the Employee's employment by the Company or its
subsidiaries, the Employee will under no circumstances remove any such material
for use outside of his offices except in connection with the business of the
Company during the course of the Employee's employment. In the event of the
termination of this Agreement for any reason whatsoever, the Employee shall
immediately return to the Company any and all documents, manuals, letters,
notebooks, reports, records, computer programs or data banks or other evidence
of trade secrets and other confidential or proprietary information of the
Company and its subsidiaries (and all copies thereof) which are the property of
the Company or any of its subsidiaries.
9.6 Remedies. The Employee further agrees that in the event of a
breach or threatened breach of any of the covenants contained in this Section 9,
the Company's remedy at law is likely to be inadequate and that accordingly the
Company will be entitled to obtain an injunction or other equitable relief with
regard thereto without proving damages or that damages would not constitute an
adequate remedy. If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 9 is invalid or
unenforceable, the parties hereto agree that the court making the determination
of invalidity or unenforceability shall have the power to, and is hereby
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<PAGE> 17
directed to, reduce the scope, duration or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid and unenforceable
term or provision, and this Agreement shall be enforceable as so modified.
Section 10. Miscellaneous Provisions.
10.1 Notices. All notices and demands of any kind which any party
hereto may be required or desire to serve upon another party under the terms of
this Agreement shall be in writing and shall be served upon such other party:
(a) by personal service upon such other party at such other party's address set
forth below in this Section 10.1; or (b) by mailing a copy thereof by certified
or registered mail, postage prepaid, with return receipt requested, addressed to
such other party at the address of such other party set forth below in this
Section 10.1; or (c) by sending a copy thereof by Federal Express or equivalent
courier service, addressed to such other party at the address of such other
party set forth below in this Section 10.1; or (d) by sending a copy thereof by
facsimile to such other party at the facsimile number, if any, of such other
party set forth below in this Section 10.1.
In case of service by Federal Express or equivalent courier service or
by facsimile or by personal service, such service shall be deemed complete upon
receipt. In the case of service by mail, such service shall be deemed complete
upon reasonable proof
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<PAGE> 18
of receipt. The address and facsimile number to which, and person to whose
attention, notices and demands shall be delivered or sent may be changed from
time to time by notice served, as hereinabove provided, by any party upon the
other party.
The current addresses and facsimile numbers of the parties are:
If to the Employee:
Ronald Koons
c/o 3-D Geophysical, Inc.
8226 Park Meadows Drive
Littleton, Colorado 80124
Telecopier No.: (303) 708-8941
If to the Company:
3-D Geophysical, Inc.
599 Lexington Avenue
Suite 4102
New York, New York 10022
Telecopier No.: (212) 317-9230
Attention: Joel Friedman, Chairman
with a copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Telecopier No.: (212) 715-8000
Attention: Peter S. Kolevzon, Esq.
10.2 Entire Agreement; Amendment. This Agreement contains the entire
agreement between the parties, expressly supersedes the Prior Agreement in its
entirety, which the parties hereto agree shall be of no further force and
effect, merges all prior negotiations, agreements and understandings, if any,
and states in full all representations,
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<PAGE> 19
warranties and agreements which have induced this Agreement. Each party agrees
that in dealing with third parties no contrary representations will be made.
This Agreement may not be amended, modified or otherwise changed orally but only
by an agreement in writing signed by the party against whom enforcement of any
amendment, modification or change is sought.
10.3 Assignment; Binding Nature; Assumption; No Beneficiaries. This
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties hereto and their respective heirs, personal representatives,
legatees, successors and permitted assigns. This Agreement shall not confer any
rights or remedies upon any person other than the parties hereto and their
respective heirs, personal representatives, legatees, successors and permitted
assigns. This Agreement may be assigned by the Company to any purchaser of all
or substantially all of the Company's business or assets, any successor to the
Company or any assignee thereof (whether direct or indirect, by purchase,
merger, consolidation or otherwise). The Company will require any such
purchaser, successor or assignee to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such purchase, succession or assignment had taken
place. This Agreement may not be assigned by the Employee without the prior
written consent of the Company.
10.4 Nonwaiver. No waiver by any party of any term, provision or
covenant contained in this Agreement (or any breach thereof) shall be effective
unless it is in
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<PAGE> 20
writing executed by the party against which such waiver is to be enforced; no
waiver shall be deemed or construed as a further or continuing waiver of any
such term, provision or covenant (or breach) on any other occasion or as a
waiver of any other term, provision or covenant (or of the breach of any other
term, provision or covenant) contained in this Agreement on the same or any
other occasion.
10.5 Remedies. The remedies provided for or permitted by this
Agreement shall be cumulative and the exercise by any party of any remedy
provided for herein or otherwise available shall not preclude the assertion or
exercise by such party of any other right or remedy provided for herein or
otherwise available.
10.6 Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
10.7 Construction. In this Agreement (i) words denoting the singular
include the plural and vice versa, (ii) "it" or "its" or words denoting any
gender include all genders, (iii) any reference herein to a Section refers to a
Section of this Agreement, unless otherwise stated, (iv) when calculating the
period of time within or following which any act is to be done or steps taken,
the date which is the reference day in calculating such period shall be excluded
and if the last day of such period is not a business day, then the period shall
end on the next day which is a business day, and (v) all dollar amounts are
expressed in United States funds.
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<PAGE> 21
10.8 Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware applicable to
contracts made and to be entirely performed therein.
10.9 Counterparts. For the convenience of the parties, any number of
counterparts hereof may be executed, each such executed counterpart shall be
deemed an original and all such counterparts together shall constitute one and
the same instrument.
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<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date and year first written above.
3-D GEOPHYSICAL, INC.
By
------------------------------
Attest: Name:
--------------------------------- Title:
Name:
Title:
EMPLOYEE:
------------------------------
Ronald L. Koons
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<PAGE> 1
Exhibit (c)(4)
AGREEMENT AND PLAN OF MERGER
by and among
WESTERN ATLAS INC.,
WAI ACQUISITION CORP.
and
3-D GEOPHYSICAL, INC.
dated as of
March 8, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
THE OFFER
SECTION 1.1. The Offer............................................ 2
SECTION 1.2. Company Actions...................................... 3
SECTION 1.3. Directors............................................ 4
ARTICLE II
THE MERGER
SECTION 2.1. The Merger........................................... 5
SECTION 2.2. Effective Time....................................... 5
SECTION 2.3. Effects of the Merger................................ 6
SECTION 2.4. Certificate of Incorporation and By-Laws
of the Surviving Corporation....................... 6
SECTION 2.5. Directors............................................ 6
SECTION 2.6. Officers............................................. 6
SECTION 2.7. Conversion of Common Shares.......................... 6
SECTION 2.8. Conversion of Purchaser Common Stock................. 6
SECTION 2.9. Options; Stock Plans................................. 7
SECTION 2.10. Stockholders' Meeting................................ 7
SECTION 2.11. Merger Without Meeting of Stockholders............... 8
ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES
SECTION 3.1. Dissenting Shares.................................... 8
SECTION 3.2. Payment for Common Shares............................ 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.1. Organization and Qualification; Subsidiaries......... 10
SECTION 4.2. Charter; By-Laws and Rights Agreement................ 10
SECTION 4.3. Capitalization; Subsidiaries......................... 11
SECTION 4.4. Authority............................................ 12
SECTION 4.5. No Conflict; Required Filings and Consents........... 12
SECTION 4.6. SEC Reports and Financial Statements................. 13
SECTION 4.7. Environmental Matters................................ 14
SECTION 4.8. Compliance with Applicable Laws...................... 16
SECTION 4.9. Change of Control.................................... 16
<PAGE> 3
Page
SECTION 4.10. Litigation........................................... 17
SECTION 4.11. Information.......................................... 17
SECTION 4.12. Certain Approvals.................................... 17
SECTION 4.13. Employee Benefit Plans............................... 18
SECTION 4.14. Intellectual Property................................ 20
SECTION 4.15. Taxes................................................ 21
SECTION 4.16. Absence of Certain Changes........................... 22
SECTION 4.17. Labor Matters........................................ 22
SECTION 4.18. Rights Agreement..................................... 23
SECTION 4.19. Condition of Assets.................................. 23
SECTION 4.20. Brokers.............................................. 23
SECTION 4.21. Opinion of Financial Advisor......................... 23
SECTION 4.22. Employees............................................ 24
SECTION 4.23. Customers............................................ 24
SECTION 4.24. Material Contracts................................... 24
SECTION 4.25. Affiliated Transactions.............................. 25
SECTION 4.26. Omission of Material Facts........................... 25
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
SECTION 5.1. Organization and Qualification....................... 25
SECTION 5.2. Authority............................................ 26
SECTION 5.3. No Conflict; Required Filings and Consents........... 26
SECTION 5.4. Information.......................................... 27
SECTION 5.5. Financing............................................ 27
ARTICLE VI
COVENANTS
SECTION 6.1. Conduct of Business of the Company................... 27
SECTION 6.2. Access to Information................................ 30
SECTION 6.3. Efforts.............................................. 30
SECTION 6.4. Public Announcements................................. 31
SECTION 6.5. Employee Benefit Arrangements........................ 31
SECTION 6.6. Indemnification...................................... 32
SECTION 6.7. Notification of Certain Matters...................... 33
SECTION 6.8. Rights Agreement..................................... 33
SECTION 6.9. State Takeover Laws.................................. 33
SECTION 6.10. No Solicitation...................................... 34
-ii-
<PAGE> 4
Page
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1. Conditions........................................... 35
ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
SECTION 8.1. Termination.......................................... 35
SECTION 8.2. Effect of Termination................................ 37
SECTION 8.3. Fees and Expenses.................................... 37
SECTION 8.4. Amendment............................................ 38
SECTION 8.5. Extension; Waiver.................................... 38
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Non-Survival of Representations and Warranties....... 38
SECTION 9.2. Entire Agreement; Assignment......................... 39
SECTION 9.3. Validity............................................. 39
SECTION 9.4. Notices.............................................. 39
SECTION 9.5. Governing Law........................................ 40
SECTION 9.6. Descriptive Headings................................. 40
SECTION 9.7. Counterparts......................................... 40
SECTION 9.8. Parties in Interest.................................. 40
SECTION 9.9. Certain Definitions.................................. 40
SECTION 9.10. Specific Performance................................. 41
Signatures ..................................................... 40
ANNEX I Conditions to the Offer
ANNEX II Form of Support Agreement
ANNEX III Form of Consulting and Noncompete Agreement
with Joel Friedman
ANNEX IV Form of Consulting and Noncompete Agreement
with Luis H. Ferran Arroyo
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<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of March 8,
1998, by and among Western Atlas Inc., a Delaware corporation ("Parent"), WAI
Acquisition Corp., a Delaware corporation and a subsidiary of Parent (the
"Purchaser"), and 3-D Geophysical, Inc., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, the Purchaser and
the Company have approved the acquisition of the Company on the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, pursuant to this Agreement the Purchaser has agreed to commence a
tender offer (the "Offer") to purchase all of the outstanding shares of the
Company's common stock, par value $.01 per share (the "Common Shares")
(including the associated preferred share purchase rights (the "Rights") issued
pursuant to the Share Purchase Rights Agreement, dated as of July 17, 1997,
between the Company and American Securities Transfer & Trust, Inc., as Rights
Agent (the "Rights Agreement"), which Rights together with the Common Shares are
hereinafter referred to as the "Shares"), at a price per Share of $9.65 net to
the seller in cash (the "Offer Price");
WHEREAS, the Board of Directors of the Company (the "Company Board") has
(i) approved the Offer and (ii) adopted and approved this Agreement and is
recommending that the Company's stockholders accept the Offer, tender their
Shares to the Purchaser and approve this Agreement;
WHEREAS, the respective Boards of Directors of the Purchaser and the
Company have approved the merger of the Purchaser with and into the Company, as
set forth below (the "Merger"), in accordance with the General Corporation Law
of Delaware (the "GCL") and upon the terms and subject to the conditions set
forth in this Agreement, whereby each of the issued and outstanding Common
Shares not owned directly or indirectly by Parent, the Purchaser or the Company
will be converted into the right to receive $9.65 in cash;
WHEREAS, as a condition and inducement to Parent's and the Purchaser's
willingness to enter into this Agreement, upon the execution and delivery of
this Agreement, Robert P. Andrews, Ralph M. Bahna, Douglas W. Brandrup, Richard
D. Davis, Arthur D. Emil, P. Dennis O'Brien and Emir L. Tavella (the "Director
Stockholders") and Luis H. Ferran Arroyo, Joel Friedman, Ronald L. Koons and
Wayne P. Widynowski (the "Management Stockholders") are simultaneously entering
into and delivering support agreements (the "Support Agreements") in the form
attached hereto as Annex II;
WHEREAS, as a condition and inducement to Parent's and the Purchaser's
willingness to enter into this Agreement, Joel Friedman and Luis H. Ferran
Arroyo are simultaneously entering into and delivering Consulting and Noncompete
Agreements in the forms of Annex III and IV attached hereto;
<PAGE> 6
WHEREAS, Parent, the Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Parent,
the Purchaser and the Company agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1. The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Article VIII hereof and none of the events set forth in Annex I
hereto (the "Tender Offer Conditions") shall have occurred, as promptly as
practicable but in no event later than the fifth business day from the date of
this Agreement, the Purchaser shall, and Parent shall cause Purchaser to,
commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended (including the rules and regulations promulgated thereunder,
the "Exchange Act")) an offer to purchase all outstanding Shares at the Offer
Price and shall file all necessary documents with the Securities and Exchange
Commission (the "SEC") in connection with the Offer (the "Offer Documents"). The
obligation of the Purchaser to accept for payment or pay for any Shares tendered
pursuant thereto will be subject only to the satisfaction of the conditions set
forth in Annex I hereto.
(b) Without the prior written consent of the Company, Purchaser shall not
(i) impose conditions to the Offer in addition to the Tender Offer Conditions,
(ii) modify or amend the Tender Offer Conditions or any other term of the Offer
in a manner adverse to the holders of Common Shares, (iii) reduce the number of
Shares subject to the Offer, (iv) reduce the Offer Price, (v) except as provided
in the following sentence, extend the Offer, if all of the Tender Offer
Conditions are satisfied or waived, or (vi) change the form of consideration
payable in the Offer. Notwithstanding the foregoing, Purchaser may, without the
consent of the Company, extend the Offer at any time, and from time to time, (i)
if at the then scheduled expiration date of the Offer any of the conditions to
Purchaser's obligation to accept for payment and pay for all Shares shall not
have been satisfied or waived; (ii) for any period required by any rule,
regulation, interpretation or position of the SEC or its staff applicable to the
Offer; or (iii) if all Tender Offer Conditions are satisfied or waived but the
number of Common Shares tendered is at least equal to 70%, but less than 90%, of
the then outstanding number of Common Shares, for an aggregate period of not
more than 10 business days (for all such extensions) beyond the latest
expiration date that would be permitted under clause (i) or (ii) of this
sentence. So long as this Agreement is in effect, the Offer has been commenced
and the Tender Offer Conditions have not been satisfied or waived, Purchaser
shall, and Parent shall cause Purchaser to, cause the Offer not to expire,
subject however to Purchaser's and Parent's rights of termination under this
Agreement.
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<PAGE> 7
Parent and Purchaser shall comply with the obligations respecting prompt payment
pursuant to Rule 14e-1(c) under the Exchange Act.
(c) Parent and Purchaser represent that the Offer Documents will comply in
all material respects with the provisions of applicable federal securities laws
and, on the date filed with the SEC and on the date first published, sent or
given to the Company's stockholders, shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by Parent or the Purchaser with respect to information
supplied by the Company in writing for inclusion in the Offer Documents. Each of
Parent and the Purchaser, on the one hand, and the Company, on the other hand,
agrees promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that it shall have become false or misleading in
any material respect and the Purchaser further agrees to take all steps
necessary to cause the Offer Documents as so corrected to be filed with the SEC
and to be disseminated to stockholders of the Company, in each case, as and to
the extent required by applicable federal securities laws.
SECTION 1.2. Company Actions.
(a) The Company shall file with the SEC and mail to the holders of Common
Shares, as promptly as practicable on the date of the filing by Parent and the
Purchaser of the Offer Documents, a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with any amendments or supplements thereto, the
"Schedule 14D-9") reflecting the recommendation of the Company Board that
holders of Shares tender their Shares pursuant to the Offer and shall
disseminate the Schedule 14D-9 as required by Rule 14d-9 promulgated under the
Exchange Act. The Schedule 14D-9 will set forth, and the Company hereby
represents, that the Company Board, at a meeting duly called and held, has (i)
determined by unanimous vote of its directors that the Offer and the Merger, is
fair to and in the best interests of the Company and its stockholders, (ii)
approved the Offer and adopted this Agreement in accordance with the GCL, (iii)
recommended acceptance of the Offer and approval of this Agreement by the
Company's stockholders (if such approval is required by applicable law), and
(iv) taken all other action necessary to render Section 203 of the GCL and the
Rights inapplicable to the Offer, the Merger and the Support Agreements;
provided, however, that such recommendation and approval may be withdrawn,
modified or amended to the extent that the Company Board determines in good
faith and on a reasonable basis, after consultation with its outside counsel,
that failure to take such action would be a breach of the Company Board's
fiduciary obligations under applicable law. The Company further represents that,
prior to the execution hereof, Salomon Smith Barney ("SSB"), the Company's
financial advisor, has delivered to the Company Board its opinion, and as of the
date hereof will deliver its written opinion, to the effect that, as of the date
of this Agreement, the cash consideration to be received by the holders of
Common Shares (other than Common Shares held by Parent or any of its affiliates,
in the treasury of the Company or by any wholly-owned subsidiary of the Company)
pursuant to the Offer and the Merger is fair to such holders from a financial
point of view. The Company further represents and warrants that it has been
authorized by SSB to permit, subject to prior review and consent by SSB (such
consent not to be unreasonably withheld), the inclusion of such opinion (or a
reference thereto) in the Offer Documents and
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<PAGE> 8
in the Schedule 14D-9. The Company hereby consents to the inclusion in the Offer
Documents of the recommendations of the Company Board described in this Section
1.2(a).
(b) The Company represents that the Schedule 14D-9 will comply in all
material respects with the provisions of applicable federal securities laws and,
on the date filed with the SEC and on the date first published, sent or given to
the Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or the Purchaser in writing for inclusion in the Schedule 14D-9. Each of
the Company, on the one hand, and Parent and the Purchaser, on the other hand,
agree promptly to correct any information provided by either of them for use in
the Schedule 14D-9 if and to the extent that it shall have become false or
misleading, and the Company further agrees to take all steps necessary to cause
the Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to the holders of Shares, in each case, as and to the extent
required by applicable federal securities law.
(c) In connection with the Offer, the Company will promptly furnish the
Purchaser with mailing labels, security position listings, any non-objecting
beneficial owner lists and any available listing or computer list containing the
names and addresses of the record holders of the Common Shares as of the most
recent practicable date and shall furnish the Purchaser with such additional
information (including, but not limited to, updated lists of holders of Common
Shares and their addresses, mailing labels and lists of security positions and
non-objecting beneficial owner lists) and such other assistance as the Purchaser
or its agents may reasonably request in communicating the Offer to the Company's
record and beneficial stockholders.
SECTION 1.3. Directors.
(a) Subject to compliance with applicable law, promptly upon the payment
by the Purchaser for the Common Shares pursuant to the Offer, and from time to
time thereafter, Parent shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Company Board as is equal to the
product of the total number of directors on the Company Board (determined after
giving effect to the directors elected pursuant to this sentence) multiplied by
the percentage that the aggregate number of Common Shares beneficially owned by
Parent or its affiliates bears to the total number of Common Shares then
outstanding, and the Company shall, upon request of Parent, promptly take all
actions necessary to cause Parent's designees to be so elected, including, if
necessary, seeking the resignations of one or more existing directors; provided,
however, that prior to the Effective Time (as defined herein), the Company Board
shall always have at least two members who are neither officers, directors or
designees of the Purchaser or any of its affiliates ("Purchaser Insiders"). If
the number of directors who are not Purchaser Insiders is reduced below two
prior to the Effective Time, the remaining director who is not a Purchaser
Insider shall be entitled to designate a person to fill such vacancy who is not
a Purchaser Insider and who shall be a director not deemed to be a Purchaser
Insider for all purposes of this Agreement.
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<PAGE> 9
(b) The Company's obligations to appoint Parent's designees to the Company
Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
thereunder. The Company shall promptly take all actions required pursuant to
such Section and Rule in order to fulfill its obligations under this Section 1.3
and shall include in the Schedule 14D-9 such information with respect to the
Company and its officers and directors as is required under such Section and
Rule in order to fulfill its obligations under this Section 1.3. Parent will
supply any information with respect to itself, and its officers, directors and
affiliates required by such Section and Rule to the Company.
(c) Following the election or appointment of Parent's designees pursuant
to this Section 1.3 and prior to the Effective Time (as defined herein), any
amendment or termination of this Agreement by the Company, any extension by the
Company of the time for the performance of any of the obligations or other acts
of Parent or the Purchaser or waiver of any of the Company's rights hereunder,
will require the concurrence of a majority of the directors of the Company then
in office who are not Purchaser Insiders (or in the case where there are two or
fewer directors who are not Purchaser Insiders, the concurrence of one director
who is not a Purchaser Insider) if such amendment, termination, extension or
waiver would have an adverse effect on the minority stockholders of the Company.
ARTICLE II
THE MERGER
SECTION 2.1. The Merger. Upon the terms and subject to the satisfaction or
waiver of the conditions hereof, and in accordance with the applicable
provisions of this Agreement and the GCL, at the Effective Time the Purchaser
shall be merged with and into the Company. Following the Merger, the separate
corporate existence of the Purchaser shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation").
SECTION 2.2. Effective Time. As soon as practicable after the satisfaction
of the conditions set forth in Sections 7.1(a) and 7.1(b), but subject to
Sections 7.1(c) and 7.1(d), the Company shall execute, in the manner required by
the GCL, and deliver to the Secretary of State of the State of Delaware a duly
executed and verified certificate of merger, and the parties shall take such
other and further actions as may be required by law to make the Merger
effective. The time the Merger becomes effective in accordance with applicable
law is referred to as the "Effective Time."
SECTION 2.3. Effects of the Merger. The Merger shall have the effects set
forth in the GCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the properties, rights, privileges, powers
and franchises of the Company and the Purchaser shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and the
Purchaser shall become the debts, liabilities and duties of the Surviving
Corporation.
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<PAGE> 10
SECTION 2.4. Certificate of Incorporation and By-Laws of the Surviving
Corporation.
(a) The Certificate of Incorporation of the Purchaser, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with the provisions thereof and hereof and applicable law.
(b) Subject to the provisions of Section 6.6 of this Agreement, the
By-Laws of the Purchaser in effect at the Effective Time shall be the By-Laws of
the Surviving Corporation until amended in accordance with the provisions
thereof and applicable law.
SECTION 2.5. Directors. Subject to applicable law, the directors of the
Purchaser immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation and shall hold office until their respective
successors are duly elected and qualified, or their earlier death, resignation
or removal.
SECTION 2.6. Officers. The officers of the Purchaser immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation
and shall hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
SECTION 2.7. Conversion of Common Shares. At the Effective Time, by virtue
of the Merger and without any action on the part of the holders thereof, each
Common Share issued and outstanding immediately prior to the Effective Time
(other than (i) any Common Shares held by Parent, the Purchaser, any wholly
owned subsidiary of Parent or the Purchaser, in the treasury of the Company or
by any wholly owned subsidiary of the Company, which Common Shares, by virtue of
the Merger and without any action on the part of the holder thereof, shall be
cancelled and retired and shall cease to exist with no payment being made with
respect thereto and (ii) Dissenting Shares (as defined herein)), shall be
cancelled and retired and shall be converted into the right to receive $9.65 in
cash (the "Merger Price"), payable to the holder thereof, without interest
thereon, upon surrender of the certificate formerly representing such Common
Share.
SECTION 2.8. Conversion of Purchaser Common Stock. The Purchaser has
outstanding 1,000 shares of common stock, par value $.01 per share, all of which
are entitled to vote with respect to approval and adoption of this Agreement. At
the Effective Time, each share of common stock, par value $.01 per share, of the
Purchaser issued and outstanding immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and become one validly issued, fully paid and
non-assessable share of common stock, par value $.01 per share, of the Surviving
Corporation.
SECTION 2.9. Options; Stock Plans. Prior to the consummation of the Offer,
the Company Board (or, if appropriate, any committee thereof) shall adopt
appropriate resolutions and take all other actions necessary to provide for the
cancellation, effective at the Effective Time, of all the outstanding stock
options (the "Options") heretofore granted under any stock option or similar
plan of the Company (the "Stock Plans") or under any agreement, without any
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<PAGE> 11
payment therefor except as otherwise provided in this Section 2.9. Immediately
prior to the Effective Time, all Options (whether vested or unvested) which are
listed in Section 4.3 of the disclosure schedule delivered to Parent by the
Company prior to the date hereof (the "Company Disclosure Schedule") (or were
inadvertently omitted from such schedule and for which the related Cash Payments
are de minimus in the aggregate) shall be cancelled (and to the extent formerly
so exercisable shall no longer be exercisable) and shall entitle each holder
thereof, in cancellation and settlement therefor, to a payment, if any, in cash
by the Company (less any applicable withholding taxes), at the Effective Time,
equal to the product of (i) the total number of Common Shares subject to such
Option (whether vested or unvested) and (ii) the excess, if any, of the Merger
Price over the exercise price per Common Share subject to such Option (the "Cash
Payments"). The Company represents and warrants that the Company Board has taken
all necessary action to terminate the Company's 1995 Long-Term Incentive
Compensation Plan, as amended, the Company's 1997 Long-Term Stock Incentive Plan
and all other Stock Plans and any other plan, program or arrangement providing
for the issuance or grant of any other interest in respect of the capital stock
of the Company or any subsidiary in each case effective prior to the Effective
Time.
SECTION 2.10. Stockholders' Meeting.
(a) If required by applicable law in order to consummate the Merger, the
Company, acting through the Company Board, shall, in accordance with applicable
law:
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Special Meeting") as soon as practicable following
the acceptance for payment of and payment for Common Shares by the
Purchaser pursuant to the Offer for the purpose of considering and taking
action upon this Agreement;
(ii) prepare and file with the SEC a preliminary proxy statement
relating to this Agreement, and use reasonable best efforts (A) to obtain
and furnish the information required to be included by the SEC in the
Proxy Statement (as hereinafter defined) and, after consultation with
Parent, to respond as soon as practicable to any comments made by the SEC
with respect to the preliminary proxy statement and cause a definitive
proxy statement (the "Proxy Statement") to be mailed to its stockholders
and (B) to obtain the necessary approvals of the Merger and adoption of
this Agreement by its stockholders; and
(iii) include in the Proxy Statement the recommendation of the
Company Board that stockholders of the Company vote in favor of the
approval and adoption of the Merger and of this Agreement.
(b) Parent agrees that it will vote, or cause to be voted, all of the
Common Shares then owned by it, the Purchaser or any of its other subsidiaries
in favor of the approval of the Merger and of this Agreement.
SECTION 2.11. Merger Without Meeting of Stockholders. Notwithstanding
Section 2.10, in the event that the Purchaser shall acquire at least 90% of the
outstanding Com-
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<PAGE> 12
mon Shares pursuant to the Offer, the parties hereto agree to take all necessary
and appropriate action to cause the Merger to become effective as soon as
practicable after the acceptance for payment of and payment for Common Shares by
the Purchaser pursuant to the Offer without a meeting of stockholders of the
Company, in accordance with Section 253 of the GCL.
ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES
SECTION 3.1. Dissenting Shares. Notwithstanding Section 2.7, Common Shares
outstanding immediately prior to the Effective Time and held by a holder who has
not voted in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Common Shares in accordance with the GCL
("Dissenting Shares") shall not be converted into a right to receive the Merger
Price, unless such holder fails to perfect or withdraws or otherwise loses such
holder's right to appraisal. If after the Effective Time such holder fails to
perfect or withdraws or loses such holder's right to appraisal, such Common
Shares shall be treated as if they had been converted as of the Effective Time
into a right to receive the Merger Price. The Company shall give Parent prompt
notice of any demands received by the Company for appraisal of Common Shares,
and Parent shall have the right to participate in all negotiations and
proceedings with respect to such demands. The Company shall not, except with the
prior written consent of Parent, make any payment with respect to, or settle or
offer to settle, or otherwise negotiate, any such demands.
SECTION 3.2. Payment for Common Shares.
(a) From and after the Effective Time, The Bank of New York or such other
bank or trust company as shall be mutually acceptable to Parent and the Company
shall act as paying agent (the "Paying Agent") in effecting the payment of the
Merger Price in respect of certificates (the "Certificates") that, prior to the
Effective Time, represented Common Shares entitled to payment of the Merger
Price pursuant to Section 2.7. At the Effective Time, Parent or the Purchaser
shall deposit, or cause to be deposited, in trust with the Paying Agent the
aggregate Merger Price to which holders of Common Shares shall be entitled at
the Effective Time pursuant to Section 2.7.
(b) Promptly after the Effective Time, the Paying Agent shall mail to each
record holder of Certificates a form of letter of transmittal which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Paying Agent and instructions for use in surrendering such Certificates and
receiving the Merger Price in respect thereof. Upon the surrender of each such
Certificate, the Paying Agent shall pay the holder of such Certificate the
Merger Price multiplied by the number of Common Shares formerly represented by
such Certificate, in consideration therefor, and such Certificate shall
forthwith be cancelled. Until so surrendered, each such Certificate (other than
Certificates representing Common Shares held by Parent or the Purchaser, any
wholly owned subsidiary of Parent or the Purchaser, in the treasury of the
Company or by any wholly owned subsidiary of the Company or Dissenting Shares)
shall represent solely the right to receive the
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<PAGE> 13
aggregate Merger Price relating thereto. No interest or dividends shall be paid
or accrued on the Merger Price. If the Merger Price (or any portion thereof) is
to be delivered to any person other than the person in whose name the
Certificate surrendered is registered, it shall be a condition to such right to
receive such Merger Price that the Certificate so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the person
surrendering such Common Shares shall pay to the Paying Agent any transfer or
other taxes required by reason of the payment of the Merger Price to a person
other than the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Paying Agent that such taxes have been paid
or are not applicable. In the event any Certificate shall have been lost, stolen
or destroyed, the Paying Agent shall be required to pay the full Merger Price in
respect of any Common Shares represented by such Certificate; however, Parent
may require the owner of such lost, stolen or destroyed Certificate to execute
and deliver to the Paying Agent a form of affidavit claiming such Certificate to
be lost, stolen or destroyed in form and substance reasonably satisfactory to
Parent and the posting by such owner of a bond in such amount as Parent may
determine is reasonably necessary as indemnity against any claim that may be
made against Parent or the Paying Agent.
(c) Promptly following the date which is 180 days after the Effective
Time, the Paying Agent shall deliver to the Surviving Corporation all cash,
Certificates and other documents in its possession relating to the transactions
described in this Agreement, and the Paying Agent's duties shall terminate.
Thereafter, each holder of a Certificate may surrender such Certificate to the
Surviving Corporation and (subject to applicable abandoned property, escheat and
similar laws) receive in consideration therefor the aggregate Merger Price
relating thereto, without any interest or dividends thereon. Notwithstanding the
foregoing, none of Parent, the Purchaser, the Company or the Paying Agent shall
be liable to any person in respect of any cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered immediately prior to such date on
which any payment pursuant to this Article III would otherwise escheat to or
become the property of any Governmental Entity, the cash payment in respect of
such Certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interests
of any person previously entitled thereto.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Common Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the Paying
Agent, they shall be surrendered and cancelled in return for the payment of the
aggregate Merger Price relating thereto, as provided in this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser that
except as set forth in the Company Disclosure Schedule:
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<PAGE> 14
SECTION 4.1. Organization and Qualification; Subsidiaries. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of the Company's subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. The Company and each of its
subsidiaries has the requisite corporate power and authority to own, operate or
lease its properties and to carry on its business as it is now being conducted,
and is duly qualified or licensed to do business, and is in good standing, in
each jurisdiction in which the nature of its business or the properties owned,
operated or leased by it makes such qualification, licensing or good standing
necessary, except where the failure to have such power or authority, or the
failure to be so qualified, licensed or in good standing, would not reasonably
be expected, individually or in the aggregate, to result in a Material Adverse
Effect. The term "Material Adverse Effect," as used in this Agreement, means any
change in or effect on the business, assets, liabilities, financial condition,
results of operations or prospects of the Company or any of its subsidiaries
that would reasonably be expected to be materially adverse to the Company and
its subsidiaries taken as a whole (except for changes or effects that (i) affect
the seismic exploration or oilfield service industries as a whole or (ii) result
from performance by the Company or any of its subsidiaries pursuant to and in
compliance with the terms of the agreement between the Company and Maxus Bolivia
as set forth in the accepted proposal dated December 18, 1997 (other than losses
or liabilities resulting from any breach of contract, negligence or violation of
law in connection with performance of such contract).
SECTION 4.2. Charter; By-Laws and Rights Agreement. The Company has
heretofore made available to Parent and the Purchaser a complete and correct
copy of the certificate of incorporation and the by-laws or comparable
organizational documents, each as amended to the date hereof, of the Company and
each of its subsidiaries and a complete and correct copy of the Rights Agreement
as amended to the date hereof.
SECTION 4.3. Capitalization; Subsidiaries. The authorized capital stock of
the Company consists of 25,000,000 Common Shares and 1,000,000 shares of
Preferred Stock, par value $.01 per share (the "Preferred Stock"), of which
100,000 shares are designated Series A Junior Participating Preferred Stock, par
value $.01 per share (the "Junior Preferred Stock"). As of the close of business
on March 2, 1998, 11,916,666 Common Shares were issued and outstanding, all of
which are entitled to vote on this Agreement, and no Common Shares were held in
treasury. As of the close of business on March 2, 1998 there were no shares of
Preferred Stock issued and outstanding. The Company has no shares reserved for
issuance, except that, as of March 2, 1998, there were 790,002 Common Shares
reserved for issuance pursuant to outstanding Options and rights granted under
the Stock Plans or agreements providing for the grant of Options and 100,000
shares of Junior Preferred Stock reserved for issuance upon exercise of the
Rights. Section 4.3 of the Company Disclosure Schedule sets forth the holders of
all outstanding Options and the number, exercise prices and expiration dates of
each grant to such holders. Since September 30, 1997, the Company has not issued
any shares of capital stock except pursuant to the exercise of Options
outstanding as of such date and except pursuant to the exchange of exchangeable
non-voting shares (the "Exchangeable Shares") of 3-D Geophysical Canada, Inc.
("3-D Canada") outstanding as of such date for Common Shares. All the
outstanding Common Shares are, and all the Common Shares which may be issued
pursuant to the exercise of out-
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<PAGE> 15
standing Options will be, when issued in accordance with the respective terms
thereof, duly authorized, validly issued, fully paid and nonassessable and are
not subject to, nor were they issued in violation of, any preemptive rights.
There are no bonds, debentures, notes or other indebtedness having general
voting rights (or convertible into securities having such rights) ("Voting
Debt") of the Company or any of its subsidiaries issued and outstanding. Except
as set forth above or in Section 4.3 of the Company Disclosure Schedule or for
the Rights and except for the transactions contemplated by this Agreement, there
are no existing options, warrants, calls, subscriptions or other rights,
agreements, arrangements or commitments of any character, relating to the issued
or unissued capital stock of the Company or any of its subsidiaries, obligating
the Company or any of its subsidiaries to issue, transfer or sell or cause to be
issued, transferred or sold any shares of capital stock or Voting Debt of, or
other equity interest in, the Company or any of its subsidiaries or securities
convertible into or exchangeable for such shares or equity interests and neither
the Company nor any of its subsidiaries is obligated to grant, extend or enter
into any such option, warrant, call, subscription or other right, agreement,
arrangement or commitment. Except as contemplated by this Agreement or the
Rights Agreement, there are no outstanding contractual obligations of the
Company or any of its subsidiaries to repurchase, redeem or otherwise acquire
any Common Shares or the capital stock of the Company or any of its
subsidiaries. Each of the outstanding shares of capital stock of each of the
Company's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and such shares of the Company's subsidiaries are owned by the
Company or by a subsidiary of the Company in each case free and clear of any
lien, claim, option, charge, security interest, limitation, encumbrance and
restriction of any kind (any of the foregoing being a "Lien") except as set
forth in Section 4.3 of the Company Disclosure Schedule. Set forth in Section
4.3 of the Company Disclosure Schedule is a complete and correct list of each
subsidiary (direct or indirect) of the Company and any joint ventures,
partnerships or similar arrangements in which the Company or any of its
subsidiaries has an interest (and the amount and percentage of any such
interest). No entity in which the Company or any of its subsidiaries owns,
directly or indirectly, less than a 50% equity interest is, individually or when
taken together with all such other entities, material to the business of the
Company and its subsidiaries taken as a whole.
SECTION 4.4. Authority. The Company has all necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized and approved by the
Company Board and no other corporate proceedings on the part of the Company are
necessary to authorize or approve this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval and adoption of this Agreement by the affirmative vote of the holders
of a majority of the then outstanding Common Shares entitled to vote thereon, to
the extent required by applicable law). This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due and valid
authorization, execution and delivery of this Agreement by Parent and the
Purchaser, constitutes a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
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SECTION 4.5. No Conflict; Required Filings and Consents.
(a) Assuming (i) the filings required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), are made and the
waiting periods thereunder have been terminated or have expired, (ii) the
requirements of the Exchange Act and any applicable state securities, "blue sky"
or takeover law are met, (iii) the filing of the certificate of merger and other
appropriate merger documents, if any, as required by the GCL, is made and (iv)
approval of this agreement by the holders of a majority of the Common Shares, if
required by the GCL, is received, none of the execution and delivery of this
Agreement by the Company, the consummation by the Company of the transactions
contemplated hereby or compliance by the Company with any of the provisions
hereof will (i) conflict with or violate the Certificate of Incorporation or
By-Laws of the Company or the comparable organizational documents of any of its
subsidiaries, (ii) except as disclosed in the SEC Reports (as hereinafter
defined) or specifically disclosed in Section 4.5(a) of the Company Disclosure
Schedule, result in a breach or violation of, a default under or the triggering
of any payment or the increase in any other obligations pursuant to, any of the
Company's existing Employee Benefit Arrangements (as hereinafter defined) or any
grant or award made under any of the foregoing, (iii) conflict with or violate
any statute, ordinance, rule, regulation, order, judgment, decree, permit or
license applicable to the Company or any of its subsidiaries, or by which any of
them or any of their respective properties or assets may be bound or affected,
or (iv) except as disclosed in Section 4.5(a) of the Company Disclosure
Schedule, result in a violation or breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in any loss of any benefit, the triggering of any
payment by, or the increase in any other obligation of, the Company or any of
its subsidiaries or the creation of any material Lien on any of the property or
assets of the Company or any of its subsidiaries (any of the foregoing referred
to in clause (ii), (iii) or this clause (iv) being a "Violation") pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or any of their respective properties may be bound or affected,
except in the case of clauses (ii), (iii) and (iv) where such Violations would
not reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect.
(b) None of the execution and delivery of this Agreement by the Company,
the consummation by the Company and its subsidiaries of the transactions
contemplated hereby or compliance by the Company and it subsidiaries with any of
the provisions hereof will require any consent, waiver, approval, authorization
or permit of, or registration or filing with or notification to (any of the
foregoing being a "Consent"), any government or subdivision thereof, domestic,
foreign or supranational or any administrative, governmental or regulatory
authority, agency, commission, tribunal or body, domestic, foreign or
supranational (a "Governmental Entity"), except for (i) compliance with any
applicable requirements of the Exchange Act, (ii) the filing of a certificate of
merger pursuant to the GCL, (iii) compliance with the HSR Act, and (iv) such
filings, authorizations, orders and approvals, if any, as set forth in Section
4.5(b) of the Company Disclosure Schedule, as are required under foreign laws
except in the case of clause (iv) for fil-
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<PAGE> 17
ings, authorizations, orders and approvals the failure of which to make or
obtain would not reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect.
SECTION 4.6. SEC Reports and Financial Statements.
(a) The Company and its subsidiaries have filed with the SEC all forms,
reports, schedules, registration statements and definitive proxy statements
required to be filed by them with the SEC since February 9, 1996 (as amended
since the time of their filing, collectively, the "SEC Reports") and has
heretofore made available to Parent complete and correct copies of all such
forms, reports, schedules, registration statements, and proxy statements. As of
their respective dates, the SEC Reports (including, but not limited to, any
financial statements or schedules included or incorporated by reference therein)
complied in all material respects with the requirements of the Exchange Act or
the Securities Act of 1933, as amended, including the rules and regulations of
the SEC promulgated thereunder (the "Securities Act") applicable, as the case
may be, to such SEC Reports, and none of the SEC Reports contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(b) The (i) consolidated balance sheets as of December 31, 1996 (the
"12/31/96 Balance Sheet") and December 31, 1995 and the consolidated statements
of operations, stockholders' equity and cash flows for each of the three years
in the period ended December 31, 1996 (including the related notes and schedules
thereto) of the Company (or its predecessors) contained in the Company's Form
10-K for the fiscal year ended December 31, 1996 and (ii) the unaudited
consolidated balance sheet as of September 30, 1997 (the "9/30/97 Balance
Sheet") and the unaudited consolidated statements of operations, stockholders'
equity and cash flows for the three- and nine-month periods ended September 30,
1997 of the Company contained in the Company's Form 10-Q for the three-month
period ended September 30, 1997 present fairly the consolidated financial
position and the consolidated results of operations and cash flows of the
Company and its subsidiaries as of the dates or for the periods presented
therein and were prepared in accordance with United States generally accepted
accounting principles ("GAAP") consistently applied during the periods involved
except as otherwise disclosed therein (subject, in the case of unaudited
statements, to recurring audit adjustments normal in nature and amount).
(c) Except as reflected or reserved against in the 9/30/97 Balance Sheet
or as disclosed in the notes thereto or as set forth in Section 4.6(c) of the
Company Disclosure Schedule, as of the date hereof, neither the Company nor any
of its subsidiaries have any liabilities or obligations (absolute, accrued,
fixed, contingent or otherwise) that are material to the Company and its
subsidiaries taken as a whole, other than liabilities incurred in the ordinary
course of business consistent with past practice since September 30, 1997.
(d) The Company has heretofore furnished to Parent a complete and correct
copy of any amendments or modifications which have not yet been filed with the
SEC to agreements, documents or other instruments which previously had been
filed by the Company with the SEC pursuant to the Securities Act or the Exchange
Act.
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SECTION 4.7. Environmental Matters.
(a) Except as set forth in Section 4.7 of the Company Disclosure Schedule,
the operations of the Company and its subsidiaries comply with all applicable
material Environmental Laws, except for such failures to comply which would not
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect. The Company and its subsidiaries have obtained all
Environmental Permits necessary for the operation of the business, and all such
Environmental Permits are in good standing and the Company and its subsidiaries
are in compliance with all material terms and conditions of such Environmental
Permits, except for such failures to obtain or comply which would not reasonably
be expected, individually or in the aggregate, to result in a Material Adverse
Effect. Neither the Company nor any of its subsidiaries is subject to any
ongoing investigation by, order from or written claim by any Person (including
without limitation any current or prior owner or operator of any of the Company
Property) respecting (i) any Environmental Law, (ii) any Remedial Action or
(iii) any claim, demand, complaint or other action arising from the Release or
threatened Release of a Hazardous Material into the environment which
individually or in the aggregate would reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any of its subsidiaries is
subject to any judicial or administrative proceeding, or outstanding order,
judgment, decree or settlement alleging or addressing a violation of or
liability under any Environmental Law, which upon resolution would reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect.
(b) There have been no Releases by the Company or any of its subsidiaries
of any Hazardous Materials (i) into, on or under any Company Property, or (ii)
into, on or under any other properties, including landfills in which Hazardous
Materials have been Released or properties on or under which the Company or any
of its subsidiaries has performed services, in any case in such a way as to
create any material unpaid liability (including the costs of required
remediation) under any applicable Environmental Law. As used in this Agreement,
the term "Knowledge" means the actual Knowledge of the officers and directors of
the Company. Except as set forth in Section 4.7(b) of the Company Disclosure
Schedule, no Company Property has been used at any time as a landfill or as a
treatment, storage or disposal facility for any Hazardous Material. To the
Knowledge of the Company there is no, and there has not been, any underground
storage tank, surface impoundment, landfill, waste pile or leachfield on or in
any Company Property.
(c) Any asbestos-containing material which is on or part of any Company
Property does not create any unpaid material liability (including the costs of
required remediation) under any applicable Environmental Law. No claims have
been made, and no suits or proceedings are pending or, to the Knowledge of the
Company, threatened by any employee against the Company or any of its
subsidiaries that are premised on exposure to asbestos or asbestos-containing
material, which would reasonably be expected, individually or in the aggregate,
to result in a Material Adverse Effect.
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<PAGE> 19
(d) For purposes of this Section:
(i) "Company Property" means any real or personal property, plant,
building, facility, structure, underground storage tank, equipment, fixture or
unit, or other asset owned, leased or operated by the Company or any of its
subsidiaries.
(ii) "CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, and any rules and regulations
promulgated thereunder.
(iii) "Environmental Law" means all applicable United States
federal, state and local laws or regulations and all foreign laws or regulations
governing the protection of the environment, and employee health or safety,
including but not limited to CERCLA, OSHA and RCRA and any state or foreign
equivalent thereof.
(iv) "Hazardous Materials" means, collectively, (a) any petroleum or
petroleum products, flammable explosives, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation,
transformers or other equipment that contain dielectric fluid containing levels
of polychlorinated biphenyls, and radon gas; and (b) any chemicals, materials,
substances or wastes which are defined as or included in the definition of
"hazardous materials," "hazardous wastes" or "toxic substances" under applicable
Environmental Law.
(v) "Environmental Permits" means all approvals, authorizations,
consents, permits, licenses, registrations and certificates required by any
applicable Environmental Law.
(vi) "OSHA" means the Occupational Safety and Health Act, as
amended, and any rules and regulations promulgated thereunder.
(vii) "RCRA" means the Resource Conservation and Recovery Act, as
amended, and any rules and regulations promulgated thereunder.
(viii) "Release" means release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of
Hazardous Materials into the environment or into or out of any Company Property,
including the movement of Hazardous Materials through or in the air, soil,
surface water, groundwater or Company Property.
(ix) "Remedial Action" means all actions required to (a) clean up,
remove, treat or in any other way remediate any Hazardous Material; (b) prevent
the release of Hazardous Materials so that they do not migrate or endanger or
threaten to endanger public health or welfare or the environment; or (c) perform
studies, investigations and care related to any such Hazardous Material.
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<PAGE> 20
SECTION 4.8. Compliance with Applicable Laws. Except with respect to
Environmental Laws which are covered in Section 4.7, the Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities (the "Permits") except for such Permits
as would not reasonably be expected, individually or in the aggregate, to result
in a Material Adverse Effect. The Company and its subsidiaries are in compliance
with the terms of the Permits which it holds except for such Permits as would
not reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect. Except with respect to Environmental Laws which are
covered in Section 4.7, the operations of the Company and its subsidiaries have
been conducted in compliance with all laws, ordinances and regulations of any
Governmental Entity (except where lack of compliance would not reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect).
SECTION 4.9. Change of Control. Except as set forth in Section 4.09 of the
Company Disclosure Schedule, the transactions contemplated by this Agreement
will not constitute a "change of control" under, require the consent from or the
giving of notice to a third party pursuant to, cause termination pursuant to the
terms thereof or permit a third party to terminate or accelerate vesting or
repurchase rights under the terms, conditions or provisions of any (i) note,
bond, mortgage, indenture, license, lease, contract, agreement or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which any of them or any of their properties or assets may be bound,
(ii) Permit, except for such Permits as would not reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect, or
(iii) employment, compensation, termination or severance agreement, instrument,
obligation or other Plan (as defined in Section 4.13(a)) of the Company or any
of its subsidiaries. The total amounts payable to the executives identified in
Section 4.9 of the Company Disclosure Schedule, as a result of the transactions
contemplated by this Agreement and/or any subsequent employment termination
(including any cash-out or acceleration of options and restricted stock and any
other payments with respect thereto or in connection therewith), based on
compensation data applicable as of the date hereof, calculated assuming
effective tax rates of 39.6%, will not exceed the amount set forth on such
schedule.
SECTION 4.10. Litigation. Except as set forth in Section 4.10 of the
Company Disclosure Schedule or Section 4.7, there is no suit, claim, action,
proceeding or investigation pending or, to the Knowledge of the Company,
threatened, against the Company or any of its subsidiaries, which, if adversely
determined, would, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect or could prevent or materially delay the
consummation of the transactions contemplated by this Agreement. Except as set
forth in Section 4.10 of the Company Disclosure Schedule neither the Company nor
any of its subsidiaries is subject to any outstanding order, writ, injunction or
decree which, individually or in the aggregate, would reasonably be expected to
result in a Material Adverse Effect or could prevent or materially delay the
consummation of the transactions contemplated hereby.
SECTION 4.11. Information. None of the information supplied by the Company
for inclusion or incorporation by reference in (i) the Offer Documents, (ii) the
Proxy Statement or (iii) any other document to be filed with the SEC or any
other Governmental Entity in connection with the transactions contemplated by
this Agreement (the "Other Filings") will, at
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<PAGE> 21
the respective times filed with the SEC or other Governmental Entity and, in
addition, in the case of the Proxy Statement, at the date it or any amendment or
supplement is mailed to stockholders, at the time of the Special Meeting and at
the Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading. The Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act, except that no
representation is made by the Company with respect to statements made therein
based on information supplied by Parent or the Purchaser in writing specifically
for inclusion in the Proxy Statement.
SECTION 4.12. Certain Approvals. The Company Board has taken any and all
necessary and appropriate action to render inapplicable to the Offer, the Merger
and the transactions contemplated by this Agreement and the Support Agreements
the provisions of Section 203 of the GCL. No other state takeover statute or
similar domestic or foreign statute or regulation applies or purports to apply
to the Offer, the Merger or the transactions contemplated by this Agreement or
the Support Agreements.
SECTION 4.13. Employee Benefit Plans.
(a) Section 4.13(a) of the Company Disclosure Schedule includes a complete
list of all employee benefit plans, programs, agreements and other arrangements
providing benefits to any former or current employee, officer or director of the
Company or any of its subsidiaries or any beneficiary or dependent thereof,
whether or not written, and whether covering one person or more than one person,
sponsored or maintained by the Company or any of its subsidiaries or to which
the Company or any of its subsidiaries contributes or is obligated to contribute
("Plans"). Without limiting the generality of the foregoing, the term "Plans"
includes all employee welfare benefit plans within the meaning of Section 3(1)
of the Employee Retirement Income Security Act of 1974, as amended, and the
regulations promulgated thereunder ("ERISA") and all employee pension benefit
plans within the meaning of Section 3(2) of ERISA and all other employee
benefit, employment, bonus, incentive, profit sharing, thrift, compensation,
restricted stock, retirement, savings, deferred compensation, stock purchase,
stock option, termination, severance, change in control, fringe benefit and
other similar plans, programs, agreements or arrangements.
(b) With respect to each Plan, the Company has made available to Parent a
true, correct and complete copy of: (i) each writing constituting a part of such
Plan, including, without limitation, all plan documents, benefit schedules,
trust agreements, and insurance contracts and other funding vehicles; (ii) the
most recent Annual Report (Form 5500 Series) and accompanying schedule, if any;
(iii) the current summary plan description (and any material modification to
such description), if any; (iv) the most recent annual financial report, if any;
(v) the most recent actuarial report, if any; and (vi) the most recent
determination letter from the Internal Revenue Service (the "IRS"), if any.
Except as specifically provided in the foregoing documents made available to
Parent, there are no material amendments to any Plan (or the establishment of
any new Plan), other than those required by law, that have been adopted or
approved nor has the Company or any of its subsidiaries undertaken or committed
to make any such material amend-
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<PAGE> 22
ments or to adopt or approve any new Plans, except any such amendment to a Plan
or establishment of a new Plan, which would not reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect.
(c) Section 4.13(c) of the Company Disclosure Schedule identifies each
Plan that is intended to be a "qualified plan" within the meaning of Section
401(a) of the Internal Revenue Code of 1986, as amended, and the Treasury
Regulations thereunder (the "Code") ("Qualified Plans"). Except as provided in
Section 4.13(c) of the Company Disclosure Schedule, the IRS has issued a
favorable determination letter with respect to each Qualified Plan that has not
been revoked, and there are no existing circumstances nor any events that have
occurred that could adversely affect the qualified status of any Qualified Plan
or the related trust. No Plan is intended to meet the requirements of Section
501(c)(9) of the Code.
(d) Except as provided in Section 4.13(d) of the Company Disclosure
Schedule, all contributions required to be made to any Plan by applicable law or
regulation or by any plan document or other contractual undertaking, and all
premiums due or payable with respect to insurance policies funding any Plan have
been timely made or paid in full or, to the extent not required to be made or
paid on or before the date hereof, have been fully reflected in the financial
statements of the Company included in the SEC Reports to the extent required
under GAAP.
(e) Except as provided in Section 4.13(e) of the Company Disclosure
Schedule, (i) the Company and each of its subsidiaries have complied, and are
now in compliance, in all material respects, with all provisions of ERISA, the
Code and all laws and regulations applicable to the Plans; (ii) there is not
now, nor do any circumstances exist that could give rise to, any requirement for
the posting of security with respect to a Plan or the imposition of any Lien on
the assets of the Company or any of its subsidiaries under ERISA or the Code;
and (iii) no prohibited transaction has occurred with respect to any Plan,
except for such noncompliance, requirements for the posting of security, liens
or prohibited transactions which would not reasonably be expected, individually
or in the aggregate, to result in a Material Adverse Effect.
(f) (i) No Plan is subject to Title IV or Section 302 of ERISA or Section
412 or 4971 of the Code; and (ii) without limiting the generality of the
foregoing, no Plan is a "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA (a "Multiemployer Plan") or a plan that has two or more
contributing sponsors at least two of whom are not under common control, within
the meaning of Section 4063 of ERISA and which is subject to Title IV of ERISA
(a "Multiple Employer Plan"), nor has the Company or any of its subsidiaries, or
any of their respective ERISA Affiliates (as defined herein), in the preceding
five years contributed to or been obligated to contribute to any Multiemployer
Plan or Multiple Employer Plan. An "ERISA Affiliate" means any entity, trade or
business that is a member of a group described in Section 414(b), (c) or (m) of
the Code or Section 4001(b)(1) of ERISA that includes the Company or any of its
subsidiaries, or that is a member of the same "controlled group" as the Company
or any of its subsidiaries, pursuant to Section 4001(a)(14) of ERISA.
(g) Except as provided in Section 4.13(g) of the Company Disclosure
Schedule, there does not now exist, nor do any circumstances exist, that could
result in, any liability under
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<PAGE> 23
(i) Title IV of ERISA (other than ordinary course premium payments, if any, to
the Pension Benefit Guaranty Corporation which have been or will be made on a
timely basis, if applicable), (ii) Section 302 of ERISA, (iii) Sections 412 and
4971 of the Code, or (iv) the continuation coverage requirements of Section 601
et seq. of ERISA and Section 4980B of the Code that would be a liability of the
Company or any of its subsidiaries following the Effective Time which would
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect. Without limiting the generality of the foregoing, none
of the Company, its subsidiaries nor any ERISA Affiliate of the Company or any
of its subsidiaries has engaged in any transaction described in Section 4069,
4204 or 4212(c) of ERISA.
(h) Except as provided in Section 4.13(h) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries has any liability for
life, health, medical or other welfare benefits to former employees or
beneficiaries or dependents thereof, except for health continuation coverage as
required by Section 4980B of the Code or Part 6 of Title I of ERISA which would
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect.
(i) Except as provided in Section 4.13(i) of the Company Disclosure
Schedule, there are no pending or, to the Knowledge of the Company, threatened
claims (other than claims for benefits in the ordinary course), lawsuits,
arbitrations or other alternate dispute resolution proceedings which have been
asserted or instituted against the Plans, any fiduciaries thereof with respect
to their duties to the Plans or the assets of any of the trusts under any of the
Plans which would reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect.
(j) Except as provided in Section 4.13(j) of the Company Disclosure
Schedule, all Plans covering foreign employees of the Company or any of its
subsidiaries comply in all material respects with applicable local law
(including any qualification or registration requirements) and, to the extent
applicable, the fair market value of the assets and/or the book reserve
established for each such Plan that is a funded or book reserved Plan is
sufficient to provide for the liability for accrued benefits under such Plans
(based upon reasonable actuarial assumptions) except where any failure to
maintain sufficient assets or liabilities would not reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect.
SECTION 4.14. Intellectual Property.
(a) Set forth in Section 4.14(a) of the Company Disclosure Schedule is a
list and description of all material patents, patent applications, patent
disclosures, assumed names, trade names, trademarks, trademark registrations and
trademark applications, service marks, service mark registrations and service
mark applications, certification marks, certification mark registrations and
certification mark applications, copyrights, copyright registrations and
copyright registration applications, chip registrations and chip registration
applications, both domestic and foreign, which are owned by the Company or any
of its subsidiaries. The assets described in Section 4.14(a) of the Company
Disclosure Schedule and all computer software (and related documentation)
("Software"), trade secrets, know-how, industrial property, technology or other
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<PAGE> 24
proprietary rights which are owned or used by the Company or any of its
subsidiaries are referred to as the "Intellectual Property." Except as otherwise
indicated in Section 4.14(a) of the Company Disclosure Schedule, the Company and
its subsidiaries own all right, title and interest in and to the Intellectual
Property free and clear of all Liens, with the sole and exclusive right to use
the same, subject to those licenses listed on Section 4.14(b) of the Company
Disclosure Schedule except for such liens as would not reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect.
(b) Set forth in Section 4.14(b) of the Company Disclosure Schedule is a
list and description of (i) all material licenses, assignments and other
transfers of Intellectual Property granted to others by the Company or any of
its subsidiaries, and (ii) all material licenses, assignments and other
transfers of patents, trade names, trademarks, service marks, copyrights, chip
registrations, Software, trade secrets, know-how, technology or other
proprietary rights granted to the Company or any of its subsidiaries by others.
Except as set forth in Section 4.14(b) of the Company Disclosure Schedule, none
of the licenses described above is subject to termination or cancellation or
change in its terms or provisions as a result of this Agreement or the
transactions provided for in this Agreement except where such termination,
cancellation or change in terms would not reasonably be expected, individually
or in the aggregate, to result in a Material Adverse Effect.
(c) To the Knowledge of the Company, no Person or entity is infringing, or
has misappropriated, any material Intellectual Property.
(d) Except as disclosed in Section 4.14(d) of the Company Disclosure
Schedule, no material claims with respect to the Intellectual Property or with
respect to the manufacture, sale or use of any product or process or the
furnishing of any services, have been asserted or, to the Knowledge of the
Company, are threatened by any Person (i) to the effect that the manufacture,
sale or use of any product or process or the furnishing of any service as
previously used, now used or offered or proposed for use or sale by the Company
infringes on any copyright, trade secret, patent, tradename or other
intellectual property right of any Person, (ii) against the use by the Company
or any of its subsidiaries of any Intellectual Property, or (iii) challenging
the ownership, validity or effectiveness of any Intellectual Property. To the
Company's Knowledge, all granted and issued patents and all registered
trademarks and service marks listed in Section 4.14(a) of the Company Disclosure
Schedule and all copyrights held by the Company or any of its subsidiaries are
valid, enforceable and subsisting.
(e) No Intellectual Property is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting in any manner the
licensing thereof by the Company or any of its subsidiaries. Neither the Company
nor any of its subsidiaries has entered into any agreement to indemnify any
other person against any charge of infringement of any Intellectual Property,
except standard infringement indemnities agreed to in the ordinary course of
business included as part of the Company's license or source agreements. Neither
the Company nor any of its subsidiaries has entered into any agreement granting
any third party the right to bring infringement actions with respect to, or
otherwise to enforce rights with respect to, any Intellectual
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<PAGE> 25
Property. The Company and its subsidiaries have the exclusive right to file,
prosecute and maintain all applications and registrations with respect to
Intellectual Property.
SECTION 4.15. Taxes.
(a) Except as set forth in Section 4.15 of the Company Disclosure
Schedule, the Company and each of its subsidiaries has duly filed all federal,
state, local and foreign income and other Tax Returns (as hereinafter defined)
required to be filed by it, and has duly paid or caused to be paid all Taxes (as
hereinafter defined) shown to be due on such Tax Returns in respect of the
periods covered by such returns and has made adequate provision in the Company's
financial statements for payment of all Taxes anticipated to be payable in
respect of all taxable periods or portions thereof ending on or before the date
hereof, except for such as would not reasonably be expected, individually or in
the aggregate, to result in a Material Adverse Effect. Section 4.15 of the
Company Disclosure Schedule lists the periods through which the Tax Returns
required to be filed by the Company or its subsidiaries have been examined by
the IRS or other appropriate taxing authority, or the period during which any
assessments may be made by the IRS or other appropriate taxing authority has
expired. All deficiencies and assessments asserted as a result of such
examinations or other audits by federal, state, local or foreign taxing
authorities have been paid, fully settled or adequately provided for in the
Company's financial statements, and no material issue or claim has been asserted
in writing for Taxes by any taxing authority for any prior period, except for
such as would not reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect, other than those heretofore paid or
adequately provided for in the Company's financial statements. There are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any Tax Return of the Company or any of its subsidiaries. Neither
the Company nor any of its subsidiaries has filed a consent pursuant to Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(2) of the Code) owned by the Company or any of its subsidiaries. Neither
the Company nor any of its subsidiaries is a party to any agreement, contract or
arrangement that could result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Section 280G of the Code
or that would not be deductible pursuant to the terms of Section 162(a)(l),
162(m) or 162(n) of the Code. Neither the Company nor any of its subsidiaries
(i) has been a member of a group filing consolidated returns for federal income
tax purposes, or (ii) is a party to a tax sharing or tax indemnity agreement or
any other agreement of a similar nature that remains in effect, except that the
Company and its subsidiaries organized under the laws of the United States or
any state file as consolidated entities.
(b) For purposes of this Agreement, the term "Taxes" means all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, excise, property, sales, use, transfer, license,
payroll, withholding, export, import, and customs duties, capital stock and
franchise taxes, imposed by the United States or any state, local or foreign
government or subdivision or agency thereof, including any interest, penalties
or additions thereto. For purposes of this Agreement, the term "Tax Return"
means any report, return or other information or document required to be
supplied to a taxing authority in connection with Taxes.
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SECTION 4.16. Absence of Certain Changes. Except as disclosed in Section
4.16 of the Company Disclosure Schedule, since September 30, 1997 (i) there has
not been any Material Adverse Effect; (ii) the businesses of the Company and
each of its subsidiaries have been conducted only in the ordinary course and in
a manner consistent with past practice; (iii) neither the Company nor any of its
subsidiaries has engaged in any material transaction or entered into any
material agreement or commitments outside the ordinary course of business; (iv)
neither the Company nor any of its subsidiaries has taken any action referred to
in Section 6.1 hereof except as permitted thereby; and (v) there has not been
any revaluation by the Company or any of its subsidiaries of any of its material
assets, including but not limited to writing down the value of inventory or
writing off notes or accounts receivable other than in the ordinary course of
business.
SECTION 4.17. Labor Matters. No work stoppage involving the Company or any
of its subsidiaries is pending or threatened and neither the Company nor any of
its subsidiaries is involved in, or to the Company's Knowledge, threatened with
or affected by any material labor dispute, arbitration, lawsuit or
administrative proceeding. None of the employees of the Company or of any of its
subsidiaries are represented by any labor union or any collective bargaining
organization and, to the Knowledge of the Company, no labor union is attempting
to organize employees of the Company or any of its subsidiaries.
SECTION 4.18. Rights Agreement. The Company and the Company Board have
taken all necessary action to amend the Rights Agreement (without redeeming the
Rights) so that none of the execution or delivery of this Agreement and the
Support Agreements, the making of the Offer, the acquisition of Common Shares
pursuant to the Offer or the consummation of the Merger will (i) cause any
Rights issued pursuant to the Rights Agreement to become exercisable or to
separate from the stock certificates to which they are attached, (ii) cause
Parent, the Purchaser or any of their Affiliates or Associates to be an
Acquiring Person (as each such term is defined in the Rights Agreement) or (iii)
trigger other provisions of the Rights Agreement, including giving rise to a
Distribution Date or a Triggering Event (as each such term is defined in the
Rights Agreement).
SECTION 4.19. Condition of Assets. The properties and assets, including
the equipment, supplies and other consumables, owned, leased or used by the
Company and its subsidiaries in the operation of their respective business are
in good operating condition and repair, ordinary wear and tear excepted, are
reasonably suitable for the purposes for which they are used, are reasonably
adequate and sufficient for the Company's and its subsidiaries' current
operations and are directly related to the business of the Company and its
subsidiaries.
SECTION 4.20. Brokers. Except for the engagement of SSB, none of the
Company, any of its subsidiaries, or any of their respective officers, directors
or employees has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finder's fees in connection with the transactions
contemplated by this Agreement. The Company has previously delivered to Parent a
copy of the Company's engagement letter with SSB. The aggregate fees and
expenses payable to the Company's legal and financial advisors in connection
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with the Offer, the Merger and the transactions contemplated by this Agreement
will not exceed the amount set forth in Section 4.20 of the Company Disclosure
Schedule.
SECTION 4.21. Opinion of Financial Advisor. The Company Board has received
the opinion, and as of the date hereof will receive the written opinion, of SSB,
the Company's financial advisor, to the effect that, as of the date of this
Agreement, the cash consideration to be received in the Offer and the Merger by
the holders of Common Shares (other than Parent and its affiliates) is fair to
such holders from a financial point of view. The Company will deliver to Parent
a copy of SSB's written opinion promptly upon receipt thereof.
SECTION 4.22. Employees. As of the date hereof, to the Company's
Knowledge, its relationship with its employees is satisfactory.
SECTION 4.23. Customers. Section 4.23(a) of the Company Disclosure
Schedule sets forth (a) the names of all customers of Company that accounted for
more than 5% of the Company's consolidated revenues during the twelve-month
period ended December 31, 1997 and (b) the amount for which each such customer
was invoiced during such period. The Company has not received any notice that
any such customer of the Company (i) has ceased, or will cease, to use the
products, goods or services of the Company and its subsidiaries, (ii) has
substantially reduced or will substantially reduce, the use of products, goods
or services of the Company and its subsidiaries or (iii) has sought, or is
seeking, to substantially reduce the price it will pay for products, goods or
services of the Company and its subsidiaries, including in each case after the
consummation of the transactions contemplated hereby. Section 4.23(b) of the
Company Disclosure Schedule sets forth the term, price, any "change in control"
provisions and geographic dimensions of any currently outstanding bids or
proposals of the Company in excess of $1,000,000.
SECTION 4.24. Material Contracts. Except as set forth in Section 4.24 of
the Company Disclosure Schedule, or filed as exhibits to the SEC Reports,
neither the Company nor any of its subsidiaries is a party to or bound by (i)
any "material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC); (ii) any non-competition agreement or any other
agreement or obligation which purports to limit in any respect the manner in
which, or the localities in which, the business of the Company and its
subsidiaries (including, for purposes of this Section 4.24 Parent and its
subsidiaries, assuming the Merger has taken place), is or would be conducted;
(iii) any employment or consulting agreement requiring payments in the aggregate
in excess of $100,000; (iv) any joint venture, partnership or other similar
agreement; (v) any agreement that grants a right of first refusal with respect
to any asset or property of the Company or any of its subsidiaries; (vi) any
agreement, entered into other than in the ordinary course, for the purchase or
sale of goods, supplies, equipment, services or other assets that provides for
payments by or to the Company or any of its subsidiaries in the aggregate in
excess of $200,000 or, with respect to contracts for the sale of goods,
supplies, equipment, other assets or services, if entered into in the ordinary
course, in excess of $1,000,000; (vii) any agreement relating to indebtedness
for borrowed money or deferred purchase price of property in excess of $200,000
(in either case, whether incurred, assumed, guaranteed or secured); (viii) any
other contract, agreement or arrangement, entered into other than in the
ordinary course of business,
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requiring future payments in the aggregate in excess of $100,000; or (ix) any
contract or other agreement which would prohibit or materially delay the
consummation of the transactions contemplated by this Agreement (all contracts
of the type described in clauses (i) through (ix) being referred to herein as
"Company Material Contracts"). Each Company Material Contract is valid and
binding on the Company (or, to the extent a subsidiary of the Company is a
party, such subsidiary) and is in full force and effect, and the Company and
each subsidiary of the Company have in all material respects performed all
obligations required to be performed by them to date under each Company Material
Contract, except for such instances which would not reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect. The
Company does not have Knowledge, nor has it or any of its subsidiaries received
written notice of, any violation or default under nor, to the Knowledge of the
Company, does there exist any condition which with the passage of time or the
giving of notice or both would result in such violation or default under any
Company Material Contract, except in such instances which would not reasonably
be expected, individually or in the aggregate, to result in a Material Adverse
Effect.
SECTION 4.25. Affiliated Transactions. Except as set forth in Section 4.25
of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries nor any of their respective officers, directors, employees or
affiliates (nor any individual related by blood, marriage or adoption to any
such individual), is a party to any agreement, contract, commitment, transaction
or understanding with or binding upon the Company or any of its subsidiaries or
any of their respective assets or has engaged in any transaction with any of the
foregoing within the last twelve months except for customary payments to
employees, officers or directors in the ordinary course of business consistent
with past practice for services rendered in their capacity as employees,
officers or directors.
SECTION 4.26. Omission of Material Facts. No statements of the Company
contained in this Agreement or in the Company Disclosure Schedule or any
certificate or opinion delivered or to be delivered pursuant hereto omits or
will omit to state a material fact necessary in order to make any such
statement, in light of the circumstances under which it was made, not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company as follows:
SECTION 5.1. Organization and Qualification. Each of Parent and the
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the state of Delaware. Each of Parent and the Purchaser has
the requisite corporate power and authority to own, operate or lease its
properties and to carry on its business as it is now being conducted, and is
duly qualified or licensed to do business, and is in good standing, in each
jurisdiction in which the nature of its business or the properties owned,
operated or leased by it makes such qualification, licensing or good standing
necessary, except where the failure to have such
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power or authority, or the failure to be so qualified, licensed or in good
standing, would not have a Material Adverse Effect on Parent. The term "Material
Adverse Effect on Parent," as used in this Agreement, means any change in or
effect on the business, assets, liabilities, financial condition, results of
operation or prospects of Parent or any of its subsidiaries that would be
materially adverse to Parent and its subsidiaries taken as a whole.
SECTION 5.2. Authority. Each of Parent and the Purchaser has all necessary
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and the Purchaser and the consummation by Parent and
the Purchaser of the transactions contemplated hereby have been duly and validly
authorized and approved by the respective Boards of Directors of Parent and the
Purchaser and by Parent as sole stockholder of the Purchaser and no other
corporate proceedings on the part of Parent or the Purchaser are necessary to
authorize or approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by each
of Parent and the Purchaser and, assuming the due and valid authorization,
execution and delivery by the Company, constitutes a valid and binding
obligation of each of Parent and the Purchaser enforceable against each of them
in accordance with its terms.
SECTION 5.3. No Conflict; Required Filings and Consents
(a) Assuming (i) the filings required under the HSR Act are made and the
waiting periods thereunder have terminated or have expired, (ii) the
requirements of the Exchange Act and any applicable state securities, "blue sky"
or takeover law are met and (iii) the filing of the certificate of merger and
other appropriate merger documents, if any, as required by the GCL, is made,
none of the execution and delivery of this Agreement by Parent or the Purchaser,
the consummation by Parent or the Purchaser of the transactions contemplated
hereby or compliance by Parent or the Purchaser with any of the provisions
hereof will (i) conflict with or violate the organizational documents of Parent
or the Purchaser, (ii) conflict with or violate any statute, ordinance, rule,
regulation, order, judgment, decree, permit or license applicable to Parent or
the Purchaser or any of their subsidiaries, or by which any of them or any of
their respective properties or assets may be bound or affected, or (iii) result
in a violation pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or the Purchaser or any of their subsidiaries is a party or by
which Parent or the Purchaser or any of their subsidiaries or any of their
respective properties or assets may be bound or affected.
(b) None of the execution and delivery of this Agreement by Parent and the
Purchaser, the consummation by Parent and the Purchaser of the transactions
contemplated hereby or compliance by Parent and the Purchaser with any of the
provisions hereof will require any Consent of any Governmental Entity, except
for (i) compliance with any applicable requirements of the Exchange Act and any
state securities, "blue sky" or takeover law, (ii) the filing of a certificate
of merger pursuant to the GCL, (iii) compliance with the HSR Act and (iv) such
Consents that become applicable solely as a result of the business, operations
or regulatory status of the Company or any of its subsidiaries.
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SECTION 5.4. Information. None of the information supplied or to be
supplied by Parent and the Purchaser for inclusion in (i) the Schedule 14D-9,
(ii) the Proxy Statement or (iii) the Other Filings will, at the respective
times filed with the SEC or such other Governmental Entity and, in addition, in
the case of the Proxy Statement, at the date it or any amendment or supplement
is mailed to stockholders, at the time of the Special Meeting and at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.
SECTION 5.5. Financing. Parent and Purchaser collectively have and will
have at the closing of the Offer and the Effective Time and Parent will make
available to Purchaser sufficient funds available to enable Purchaser to
purchase all Common Shares, on a fully diluted basis, and to pay all fees and
expenses related to the transactions contemplated by this Agreement payable by
them.
ARTICLE VI
COVENANTS
SECTION 6.1. Conduct of Business of the Company. Except as contemplated by
this Agreement or otherwise with the prior written consent of Parent, during the
period from the date of this Agreement to the Effective Time, the Company will,
and will cause each of its subsidiaries to, conduct its operations only in the
ordinary and usual course of business consistent with past practice and will use
its reasonable best efforts, and will cause each of its subsidiaries to use its
reasonable best efforts, to preserve intact the business organization of the
Company and each of its subsidiaries, to keep available the services of its and
their present officers and employees, and to preserve the good will of those
having business relationships with it, including, without limitation,
maintaining satisfactory relationships with licensors, suppliers, customers and
others having business relationships with the Company and its subsidiaries.
Without limiting the generality of the foregoing, and except as otherwise
contemplated by this Agreement, the Company will not, and will not permit any of
its subsidiaries to, prior to the Effective Time, without the prior written
consent of Parent:
(a) adopt any amendment to its certificate of incorporation or by-laws or
comparable organizational documents or the Rights Agreement or adopt a plan of
merger, consolidation, reorganization, dissolution or liquidation;
(b) sell, pledge or encumber any stock owned by it in any of its
subsidiaries;
(c) (i) issue, reissue or sell, or authorize the issuance, reissuance or
sale of (A) additional shares of capital stock of any class, or securities
convertible into capital stock of any class, or any rights, warrants or options
to acquire any convertible securities or capital stock, other than the issuance
of Common Shares (and the related Rights), in accordance with the terms of the
instruments governing such issuance on the date hereof, pursuant to the exercise
or conversion of Options and any Exchangeable Shares outstanding on the date
hereof, or (B) any other
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securities in respect of, in lieu of, or in substitution for, Common Shares or
any other capital stock of any class outstanding on the date hereof or (ii) make
any other changes in its capital structure;
(d) declare, set aside or pay any dividend or other distribution (whether
in cash, securities or property or any combination thereof) in respect of any
class or series of its capital stock other than between any of the Company and
any of its wholly owned subsidiaries;
(e) split, combine, subdivide, reclassify or redeem, purchase or otherwise
acquire, or propose to redeem or purchase or otherwise acquire, any shares of
its capital stock, or any of its other securities (except as disclosed in
Section 6.1(e) of the Company Disclosure Schedule);
(f) increase the compensation or fringe benefits payable or to become
payable to its directors, officers or, except in the ordinary course of business
consistent with past practice, employees (whether from the Company or any of its
subsidiaries), or pay or award any benefit not required by any existing plan or
arrangement to any officer, director or employee (including, without limitation,
the granting of stock options, stock appreciation rights, shares of restricted
stock or performance units pursuant to the Stock Plans or otherwise), or grant
any severance or termination pay to any officer, director or other employee of
the Company or any of its subsidiaries (other than as required by existing
agreements or policies described in Section 6.01 of the Company Disclosure
Schedule), or enter into any employment or severance agreement with, any
director, officer or other employee of the Company or any of its subsidiaries or
establish, adopt, enter into, amend, or waive any performance or vesting
criteria under any Plan for the benefit or welfare of any current or former
directors, officers or employees of the Company or its subsidiaries or their
beneficiaries or dependents (any of the foregoing being an "Employee Benefit
Arrangement"), except, in each case, to the extent required by applicable law or
regulation;
(g) acquire, mortgage, encumber, sell, pledge, lease, license or dispose
of any assets (including Intellectual Property) or securities, except pursuant
to existing contracts or commitments entered into in the ordinary course of
business consistent with past practice, or enter into any contract, arrangement,
commitment or transaction outside the ordinary course of business consistent
with past practice other than transactions between a wholly owned subsidiary of
the Company and the Company or another wholly owned subsidiary of the Company;
(h) (i) incur, assume or prepay any long-term debt or incur or assume any
short-term debt, except that the Company and its subsidiaries may incur or
prepay debt in the ordinary course of business in amounts and for purposes
consistent with past practice under existing lines of credit, (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except in the
ordinary course of business consistent with past practice, (iii) pay, discharge
or satisfy any claims, liabilities or obligations (absolute, accrued, contingent
or otherwise), except in the ordinary course of business consistent with past
practice, (iv) make any loans, advances or capital contributions to, or
investments in, any other person or entity, except for loans, advances, capital
contributions or investments between any wholly owned subsidiary of the Company
and the
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Company or another wholly owned subsidiary of the Company, (v) authorize or make
capital expenditures in excess of $50,000, (vi) materially accelerate or delay
collection of notes or accounts receivable in advance of or beyond their regular
due dates or the dates when the same would have been collected in the ordinary
course of business consistent with past practice, (vii) materially delay or
accelerate payment of accounts payable beyond or in advance of its due date or
the date such liability would have been paid in the ordinary course of business
consistent with past practice, or (viii) vary the Company's inventory practices
in any material respect from the Company's past practices;
(i) settle or compromise any suit or claim or threatened suit or claim
where the amount involved is greater than $50,000;
(j) other than in the ordinary course of business consistent with past
practice, (i) modify, amend or terminate any material contract, (ii) waive,
release, relinquish or assign any contract (or any of the rights of the Company
or any of its subsidiaries thereunder), right or claim, or (iii) cancel or
forgive any indebtedness (other than with respect to indebtedness which is de
minimus in the aggregate) owed to the Company or any of its subsidiaries;
provided, however, that neither the Company nor any of its subsidiaries may
under any circumstance waive or release any of its rights under any
confidentiality agreement to which it is a party;
(k) make any tax election not required by law or settle or compromise any
tax liability;
(l) cancel or terminate any insurance policy naming it as a beneficiary or
a loss payable payee, except in the ordinary course of business consistent with
past practice;
(m) acquire (by merger, consolidation, acquisition of stock or assets,
combination or other similar transaction) any material corporation, partnership
or other business organization or division or assets thereof;
(n) except as may be required as a result of a change in law or in GAAP or
the rules of the SEC, make any change in its methods of accounting, including
tax accounting policies and procedures;
(o) enter into any agreement of a nature that would be required to be
filed as an exhibit to Form 10-K under the Exchange Act or make or submit any
bids or proposals in excess of $1,000,000 with respect to any services proposed
to be rendered in any location in Latin America, or in excess of $3,000,000 with
respect to any services proposed to be rendered in any location outside of Latin
America, provided that Parent agrees not to unreasonably withhold or delay its
consent with respect to such bids or proposals and provided further that Parent
agrees that any information provided by the Company relating to such bids or
proposals shall (i) be treated confidentially, (ii) shall not be disclosed to
any employees of Parent or its subsidiaries who are involved in preparing or
substantively analyzing a bid or proposal on behalf of Parent or any of its
subsidiaries relating to such services at the applicable location and (iii)
shall not be used to the detriment of the Company in connection with such bid or
proposal;
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(p) take, or agree to commit to take, any action that would or is
reasonably likely to result in any of the conditions to the Offer set forth in
Annex I or any of the conditions to the Merger set forth in Article VII not
being satisfied, or would make any representation or warranty of the Company
contained herein, when read without any exception or qualification as to
materiality or Material Adverse Effect, inaccurate in any respect at, or as of
any time prior to, the Effective Time except for such inaccuracies which would
not be reasonably expected to, individually or in the aggregate, result in a
Material Adverse Effect, or that would impair the ability of the Company to
consummate the Merger in accordance with the terms hereof or delay such
consummation; or
(q) agree in writing or otherwise to take any of the foregoing actions
prohibited under this Section 6.1.
SECTION 6.2. Access to Information. From the date of this Agreement until
the Effective Time, the Company will, and will cause its subsidiaries, and each
of their respective officers, directors, employees, counsel, advisors and
representatives (collectively, the "Company Representatives") to, give Parent
and the Purchaser and their respective officers, employees, counsel, advisors
and representatives (collectively, the "Parent Representatives") full access,
upon reasonable notice and during normal business hours, to the offices and
other facilities and to the books and records of the Company and its
subsidiaries and will cause the Company Representatives and the Company's
subsidiaries to furnish Parent, the Purchaser and the Parent Representatives to
the extent available with such financial and operating data and such other
information with respect to the business and operations of the Company and its
subsidiaries as Parent and the Purchaser may from time to time request subject,
in each case, to the continuing obligations of the parties under the
Confidentiality Agreement between Parent and the Company dated December 19,
1997, which agreement shall survive until termination pursuant to the terms
thereof. The Company shall furnish promptly to Parent and the Purchaser a copy
of each report, schedule, registration statement and other document filed by it
or its subsidiaries during such period pursuant to the requirements of federal
or state or foreign securities laws.
SECTION 6.3. Efforts.
(a) Subject to the terms and conditions provided herein, each of the
Company, Parent and the Purchaser shall, and the Company shall cause each of its
subsidiaries to, cooperate and use their respective reasonable commercial
efforts to take, or cause to be made, all filings reasonably necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including but not
limited to cooperation in the preparation and filing of the Offer Documents, the
Schedule 14D-9, the Proxy Statement, any required filings under the HSR Act, or
other foreign filings and any amendments to any thereof.
In addition, if at any time prior to the Effective Time any event or
circumstance relating to either the Company or Parent or the Purchaser or any of
their respective subsidiaries should be discovered by the Company or Parent, as
the case may be, which should be set forth in
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an amendment to the Offer Documents or Schedule 14D-9, the discovering party
will promptly inform the other party of such event or circumstance.
(b) Each of the parties will use its reasonable commercial efforts to
obtain as promptly as practicable all Consents of any Governmental Entity or any
other person required in connection with, and waivers of any Violations that may
be caused by, the consummation of the transactions contemplated by the Offer and
this Agreement.
SECTION 6.4. Public Announcements. The Company, on the one hand, and
Parent and the Purchaser, on the other hand, agree to consult promptly with each
other prior to issuing any press release or otherwise making any public
statement with respect to the Offer, the Merger and the other transactions
contemplated hereby, agree to provide to the other party for review a copy of
any such press release or statement, and shall not issue any such press release
or make any such public statement prior to such consultation and review, unless
required by applicable law or any listing agreement with a securities exchange.
SECTION 6.5. Employee Benefit Arrangements.
(a) The Company shall, and Parent agrees to cause the Company to, honor
and, from and after the Effective Time, the Surviving Corporation to honor, all
obligations under the employment and severance agreements to which the Company
or any of its subsidiaries is presently a party which are listed in Section 6.05
of the Company Disclosure Schedule. Notwithstanding the foregoing, from and
after the Effective Time, the Surviving Corporation shall have the right to
amend, modify, alter or terminate any Plan, provided that any such action shall
not affect any rights for which the agreement or consent of the other party or a
beneficiary is required. Employees of the Surviving Corporation immediately
following the Effective Time who immediately prior to the Effective Time were
employees of the Company or any Company subsidiary shall be given credit for
purposes of eligibility and vesting under each employee benefit plan, program,
policy or arrangement of the Parent or the Surviving Corporation in which such
employees participate subsequent to the Effective Time for all service with the
Company and any Company subsidiary prior to the Effective Time (to the extent
such credit was given by the Company or any Company subsidiary) for purposes of
eligibility and vesting.
(b) The Company will not take any action which could prevent or impede the
termination of the 1995 Long-Term Incentive Compensation Plan, as amended, the
1997 Long-Term Incentive Compensation Plan Stock Incentive Plan and all other
Stock Plans and any other plans, programs or arrangements providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any subsidiary of the Company in each case effective prior to the
Effective Time. The Company will take all necessary action to (i) ensure that
none of Parent, the Company or any of their respective subsidiaries is or will
be bound by any Options, other options, warrants, rights or agreements which
would entitle any Person, other than Parent or its affiliates, to own any
capital stock of the Surviving Corporation or any of its subsidiaries or to
receive any payment in respect thereof as of the Effective Time and (ii) obtain
all necessary consents so that after the Effective Time, holders of Options will
have no rights other
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than the rights of the holders of Options to receive the Cash Payment, if any,
in cancellation and settlement thereof.
SECTION 6.6. Indemnification.
(a) Parent agrees that all rights to indemnification now existing in favor
of any director or officer of the Company and its subsidiaries (the "Indemnified
Parties") as provided in their respective charters or by-laws shall survive the
Merger and shall continue in full force and effect for a period of not less than
six years from the Effective Time. After the Effective Time, Parent agrees to
cause the Surviving Corporation to honor all rights to indemnification referred
to in the preceding sentence.
(b) Parent agrees to cause the Company, and from and after the Effective
Time, the Surviving Corporation to maintain in effect for not less than four
years (except as provided in the last sentence of this Section 6.6(b)) from the
Effective Time the current policies of the directors' and officers' liability
insurance maintained by the Company; provided that the Surviving Corporation may
substitute therefor other policies not less advantageous (other than to a de
minimus extent) to the beneficiaries of the current policies and provided that
such substitution shall not result in any gaps or lapses in coverage with
respect to matters occurring prior to the Effective Time; and provided, further,
that the Surviving Corporation shall not be required to pay an annual premium in
excess of 175% of the last annual premium paid by the Company prior to the date
hereof (which the Company represents to be $100,000 for the 12-month period
ending December 31, 1998) and if the Surviving Corporation is unable to obtain
the insurance required by this Section 6.6(b) it shall obtain as much comparable
insurance as possible for an annual premium equal to such maximum amount.
Notwithstanding the foregoing, at any time on or after the first anniversary of
the Effective Time, Parent may, at its election, provide funds to the Surviving
Corporation to the extent necessary so that the Surviving Corporation may
self-insure with respect to the level of insurance coverage required under this
Section 6.6(b) in lieu of causing to remain in effect any directors' and
officers' liability insurance policy.
(c) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 6.6, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Parent thereof (but any such
failure or delay shall not relieve Parent of liability except to the extent
Parent is actually prejudiced as a result of such failure or delay). In the
event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) Parent or the Surviving
Corporation shall have the right, from and after the purchase of Common Shares
pursuant to the Offer, to assume the defense thereof and Parent shall not be
liable to such Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, (ii) the Indemnified Parties will cooperate
in the defense of any such matter and (iii) Parent shall not be liable for any
settlement effected without its prior written consent, provided that Parent
shall not have any obligation hereunder to any Indemnified Party when and if a
court of competent jurisdiction shall ultimately determine, and such
determination shall have become final, that such person is not entitled to
indemnification under applicable law. Any Indemnified Party may retain its own
separate counsel reasonably satisfactory to Parent if there is a
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conflict of interest requiring separate representation under applicable
principles of professional responsibility and may participate in (but not,
except with respect to matters relating to such conflict, control) the defense
of such claim, action, suit, proceeding or investigation and the Indemnifying
Party shall be responsible for any reasonable legal expenses or any other
reasonable expenses subsequently incurred by such Indemnified Party in
connection with such participation or defense to the extent such Indemnified
Party is entitled to be indemnified therefrom pursuant to this Section 6.6.
Parent shall not settle any claim, action, suit, proceeding or investigation
unless the Indemnified Party shall be fully released and discharged.
SECTION 6.7. Notification of Certain Matters. Parent and the Company shall
promptly notify each other of (i) the occurrence or non-occurrence of any fact
or event which would be reasonably likely (A) to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Effective Time or (B) to cause
any covenant, condition or agreement under this Agreement not to be complied
with or satisfied in any material respect and (ii) any failure of the Company or
Parent, as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder in any material
respect; provided, however, that no such notification shall affect the
representations or warranties of any party or the conditions to the obligations
of any party hereunder. Each of the Company, Parent and the Purchaser shall give
prompt notice to the other parties hereof of any notice or other communication
from any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement.
SECTION 6.8. Rights Agreement. The Company covenants and agrees that it
will not (i) redeem the Rights, (ii) amend the Rights Agreement or (iii) take
any action which would allow any Person (as defined in the Rights Agreement)
other than Parent or the Purchaser to acquire beneficial ownership of 15% or
more of the Common Shares without causing a Distribution Date or a Triggering
Event to occur.
SECTION 6.9. State Takeover Laws. The Company shall, upon the request of
the Purchaser, take all reasonable steps to assist in any challenge by the
Purchaser to the validity or applicability to the transactions contemplated by
this Agreement, including the Offer and the Merger, of any state takeover law.
SECTION 6.10. No Solicitation.
(a) The Company, its affiliates and their respective officers, directors,
employees, representatives and agents shall immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore with
respect to any acquisition or exchange of all or any material portion of the
assets of, or any equity interest in, the Company or any of its subsidiaries or
any business combination with the Company or any of its subsidiaries. The
Company agrees that, prior to the Effective Time, it shall not, and shall not
authorize or permit any of its subsidiaries or any of its or its subsidiaries'
directors, officers, employees, agents or representatives, directly or
indirectly, to solicit, initiate, encourage or facilitate, or furnish or
disclose non-public information in furtherance of, any inquiries or the making
of any proposal with respect to
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any merger, liquidation, recapitalization, consolidation or other business
combination involving the Company or its subsidiaries or acquisition of any
capital stock or any material portion of the assets of the Company or its
subsidiaries, or any combination of the foregoing (an "Acquisition
Transaction"), or negotiate, explore or otherwise engage in discussions with any
person (other than the Purchaser, Parent or their respective directors,
officers, employees, agents and representatives) with respect to any Acquisition
Transaction or enter into any agreement, arrangement or understanding requiring
it to abandon, terminate or fail to consummate the Merger or any other
transactions contemplated by this Agreement; provided that the Company may
furnish information to, and negotiate or otherwise engage in discussions with,
any party who delivers a bona fide written proposal for an Acquisition
Transaction if the Company Board determines in good faith and on a reasonable
basis by a majority vote, after consultation with its outside legal counsel and
SSB, that (i) such Acquisition Transaction is reasonably likely to be more
favorable to the stockholders of the Company from a financial point of view than
the transactions contemplated by this Agreement and (ii) that failing to take
such action would thus constitute a breach of the fiduciary duties of the
Company Board.
(b) From and after the execution of this Agreement, the Company shall, as
soon as practicable, advise the Purchaser in writing of the receipt, directly or
indirectly, of any discussions, negotiations, proposals or substantive inquiries
relating to an Acquisition Transaction, identify the offeror and furnish to the
Purchaser a copy of any such proposal or substantive inquiry, if it is in
writing, or a written summary of any oral proposal or substantive inquiry
relating to an Acquisition Transaction. The Company shall as soon as practicable
advise Parent in writing of any substantive development relating to such
proposal, including the results of any substantive discussions or negotiations
with respect thereto.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1. Conditions. The respective obligations of Parent, the
Purchaser and the Company to consummate the Merger are subject to the
satisfaction, at or before the Effective Time, of each of the following
conditions:
(a) Stockholder Approval. The stockholders of the Company shall have duly
approved the transactions contemplated by this Agreement, if required by
applicable law.
(b) Purchase of Common Shares. The Purchaser shall have accepted for
payment and paid for Common Shares pursuant to the Offer in accordance with the
terms hereof.
(c) Injunctions; Illegality. The consummation of the Merger shall not be
restrained, enjoined or prohibited by any order, judgment, decree, injunction or
ruling of a court of competent jurisdiction or any Governmental Entity and there
shall not have been any statute, rule or regulation enacted, promulgated or
deemed applicable to the Merger by any Governmental Entity which prevents the
consummation of the Merger or has the effect of making the purchase of Common
Shares illegal.
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<PAGE> 38
(d) HSR Act. Any waiting period (and any extension thereof) under the HSR
Act applicable to the Merger shall have expired or terminated.
ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
SECTION 8.1. Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company (with any
termination by Parent also being an effective termination by the Purchaser):
(a) by the mutual written consent of the Company, by action of its Board
of Directors and Parent;
(b) by the Company if (i) the Purchaser fails to commence the Offer as
provided in Section 1.1 hereof, (ii) the Purchaser shall not have accepted for
payment and paid for Common Shares pursuant to the Offer in accordance with the
terms thereof on or before June 30, 1998, provided that if any applicable
waiting period under the HSR Act shall not have expired or been terminated prior
to June 30, 1998, then the Company may not terminate this Agreement pursuant to
this Section 8.1(c)(ii) until August 31, 1998 or (iii) the Purchaser fails to
purchase validly tendered Common Shares in violation of the terms of this
Agreement;
(c) by Parent or the Company if the Offer is terminated or withdrawn
pursuant to its terms without any Common Shares being purchased thereunder;
provided, however, that neither Parent nor the Company may terminate this
Agreement pursuant to this Section 8.1(c) if such party shall have materially
breached this Agreement or, in the case of Parent, if it or the Purchaser is in
material violation of the terms of the Offer;
(d) by Parent or the Company if any court or other Governmental Entity
shall have issued an order, decree, judgment or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the acceptance for
payment of, or payment for, Common Shares pursuant to the Offer or the Merger
and such order, decree or ruling or other action shall have become final and
nonappealable;
(e) by the Company if, prior to the purchase of Common Shares pursuant to
the Offer in accordance with the terms of this Agreement, the Company Board
approves an Acquisition Transaction, on terms which a majority of the members of
the Company Board have determined in good faith and on a reasonable basis, after
consultation with its outside counsel and SSB, that (i) such Acquisition
Transaction is more favorable to the Company and its stockholders from a
financial point of view than the transactions contemplated by this Agreement and
(ii) failure to approve such proposal and terminate this Agreement would thus
constitute a breach of fiduciary duties of the Company Board under applicable
law; provided that the termination described in this Section 8.1(e) shall not be
effective unless and until the Company shall have paid to Parent the Termination
Fee (as defined in Section 8.3(b));
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<PAGE> 39
(f) by Parent if the Company breaches its covenant in Section 6.8;
(g) by Parent prior to the purchase of Common Shares pursuant to the
Offer, if the Company Board shall have withdrawn or modified (including by
amendment of the Schedule 14D-9) in a manner adverse to the Purchaser its
approval or recommendation of the Offer, this Agreement or the Merger, shall
have approved or recommended another offer or transaction, or shall have
resolved to effect any of the foregoing;
(h) by Parent if any Management Stockholder shall have failed to perform
or to comply with any of his obligations, covenants or agreements in any
material respect under a Support Agreement;
(i) by Parent prior to the purchase of Common Shares pursuant to the Offer
if the Minimum Condition (as defined in Annex I) shall not have been satisfied
by the expiration date of the Offer and on or prior to such date (A) a third
party shall have made a proposal or public announcement or communication to the
Company with respect to (i) the acquisition of the Company by merger, tender
offer or otherwise; (ii) the acquisition of 50% or more of the assets of the
Company and its subsidiaries, taken as a whole; (iii) the acquisition of 15% or
more of the outstanding Common Shares; (iv) the adoption by the Company of a
plan of liquidation or the declaration or payment of an extraordinary dividend;
or (v) the repurchase by the Company or any of its subsidiaries of 15% or more
of the outstanding Common Shares at a price in excess of the Offer Price or (B)
any person (including the Company or any of its affiliates or subsidiaries),
other than Parent or any of its affiliates, shall have become the beneficial
owner of more than 15% of the Common Shares; or
(j) by Parent if Purchaser shall not have accepted for payment and paid
for Common Shares pursuant to the Offer in accordance with the terms thereof on
or before June 30, 1998.
SECTION 8.2. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.1, this Agreement shall forthwith become
void and have no effect, without any liability on the part of any party or its
directors, officers, employees or stockholders, other than the provisions of
this Section 8.2 and Section 8.3, which shall survive any such termination.
Nothing contained in this Section 8.2 or elsewhere in this Agreement shall
relieve any party from liability for any breach of this Agreement.
SECTION 8.3. Fees and Expenses.
(a) Whether or not the Merger is consummated, except as otherwise
specifically provided herein, all costs and expenses incurred in connection with
the Offer, this Agreement and the transactions contemplated by this Agreement
shall be paid by the party incurring such expenses.
(b) In the event that this Agreement is terminated pursuant to Section
8.1(e), (f), (g), or (h) or pursuant to Section 8.1(c) as a result of the
failure to satisfy any of the conditions set forth in paragraph (d) of Annex I,
then the Company shall within one business day after such
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<PAGE> 40
termination pay Parent (except in the case of termination pursuant to Section
8.1(e) in which case payment shall be made upon or prior to such termination) a
termination fee of $5,500,000 (the "Termination Fee") in immediately available
funds by wire transfer to an account designated by Parent. In the event that
this Agreement is terminated pursuant to Section 8.1(i) and within six months of
such termination the Company shall have entered into a definitive agreement or a
written agreement in principle providing for an Acquisition Transaction, the
Company shall pay Parent the Termination Fee at or prior to execution of such
agreement or agreement in principle in immediately available funds by wire
transfer to an account designated by Parent. In the event this Agreement is
terminated pursuant to Section 8.1(c) as a result of the failure to satisfy the
conditions set forth in paragraphs (f) or (g)(1) of Annex I, then the Company
shall promptly (and in any event within one business day after such termination
and receipt of notice by Parent specifying, in reasonable detail, such fees and
expenses) reimburse Parent for the fees and expenses of Parent and the Purchaser
(including reasonable printing fees, filing fees and reasonable fees and
expenses of its legal and financial advisors) related to the Offer, this
Agreement, the transactions contemplated hereby and any related financing up to
a maximum of $1,500,000 (collectively "Expenses") in immediately available funds
by wire transfer to an account designated by Parent.
(c) The prevailing party in any legal action undertaken to enforce this
Agreement or any provision hereof shall be entitled to recover from the other
party the costs and expenses (including attorneys' and expert witness fees)
incurred in connection with such action.
SECTION 8.4. Amendment. This Agreement may be amended by the Company,
Parent and the Purchaser at any time before or after any approval of this
Agreement by the stockholders of the Company but, after any such approval, no
amendment shall be made which decreases the Merger Price, changes the
consideration to be received or which otherwise adversely affects the rights of
the Company's stockholders hereunder without the approval of such stockholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of all the parties. Any amendment to this Agreement following the
election or appointment of Parent's designees pursuant to Section 1.3 shall be
made only in accordance with Section 1.3(c).
SECTION 8.5. Extension; Waiver. Subject to Section 1.3(c), at any time
prior to the Effective Time, the parties hereto may (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein by any other party or in any document, certificate or writing delivered
pursuant hereto by any other party or (iii) waive compliance with any of the
agreements of any other party or with any conditions to its own obligations. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
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<PAGE> 41
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Non-Survival of Representations and Warranties. The
representations and warranties made in this Agreement shall not survive beyond
the Effective Time. Notwithstanding the foregoing, the agreements set forth in
Article III and Sections 6.5(a) and 6.6 shall survive the Effective Time
indefinitely (except to the extent a shorter period of time is explicitly
specified therein).
SECTION 9.2. Entire Agreement; Assignment.
(a) This Agreement (including the documents and the instruments referred
to herein) constitute the entire agreement and supersede all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof and thereof.
(b) Neither this Agreement nor any of the rights, interests or obligations
hereunder will be assigned by any of the parties hereto (whether by operation of
law or otherwise) without the prior written consent of each other party (except
that Parent may assign its rights and the Purchaser may assign its rights,
interest and obligations to any affiliate or direct or indirect subsidiary of
Parent without the consent of the Company provided that no such assignment shall
relieve Parent of any liability for any breach by such assignee). Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
SECTION 9.3. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and
effect.
SECTION 9.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by overnight courier or facsimile to the
respective parties as follows:
If to Parent or the Purchaser:
Western Atlas Inc.
10205 Westheimer Road
Houston, Texas 77042-3115
Attention: James E. Brasher, Esq.
Fax: (713) 266-1717
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<PAGE> 42
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Daniel A. Neff, Esq.
Fax: (212) 403-2000
If to the Company:
3-D Geophysical, Inc.
599 Lexington Avenue
Suite 4102
New York, New York 10022
Attention: Joel Friedman
Fax: (212) 317-9230
with a copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Peter S. Kolevzon, Esq.
Fax: (212) 715-8000
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above;
provided that notice of any change of address shall be effective only upon
receipt thereof.
SECTION 9.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.6. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 9.7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 9.8. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, except with respect to
Sections 6.5(a) and 6.6, nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
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<PAGE> 43
SECTION 9.9. Certain Definitions. As used in this Agreement:
(a) the term "affiliate", as applied to any Person, shall mean any other
person directly or indirectly controlling, controlled by, or under common
control with, that Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract or otherwise;
(b) the term "Person" or "person" shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include a
"group" as such term is defined in Section 13(d)(3) of the Exchange Act); and
(c) the term "subsidiary" or "subsidiaries" means, with respect to Parent,
the Company or any other person, any corporation, partnership, joint venture or
other legal entity of which Parent, the Company or such other person, as the
case may be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, stock or other equity interests the holders of
which are generally entitled to 50% or more of the vote for the election of the
board of directors or other governing body of such corporation or other legal
entity.
SECTION 9.10. Specific Performance. 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 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, without posting any bond
or proving that damages would be inadequate.
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<PAGE> 44
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its respective officer thereunto duly authorized, all
as of the day and year first above written.
WESTERN ATLAS INC.
By: /s/ Richard White
---------------------------------
Name: Richard White
Title:
WAI ACQUISITION CORP.
By: /s/ Richard White
---------------------------------
Name: Richard White
Title:
3-D GEOPHYSICAL, INC.
By: /s/ Joel Friedman
---------------------------------
Name: Joel Friedman
Title:
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<PAGE> 45
Annex I
The capitalized terms used in this Annex I shall have the meanings set
forth in the Agreement and Plan of Merger to which this Annex is attached,
except that the term "Merger Agreement" shall be deemed to refer to such
Agreement and Plan of Merger.
Conditions to the Offer. Notwithstanding any other provisions of the
Offer, the Purchaser shall not be required to accept for payment or pay for any
tendered Common Shares and may terminate or, subject to the terms of the Merger
Agreement, amend the Offer, if (i) there shall not be validly tendered and not
properly withdrawn prior to the expiration date for the Offer (the "Expiration
Date") that number of Common Shares which represents at least a majority of the
total number of outstanding Common Shares on a fully diluted basis on the date
of purchase (not taking into account the Rights) (the "Minimum Condition"), (ii)
any applicable waiting period under the HSR Act shall not have expired or been
terminated, or (iii) at any time on or after March 8, 1998 and prior to the time
of payment for any Common Shares, any of the following exist:
(a) there shall be any action taken, or any statute, rule,
regulation, legislation, interpretation, ruling, judgment, order or
injunction enacted, enforced, promulgated, amended, issued or deemed
applicable to the Offer, by any legislative body, court, government or
governmental, administrative or regulatory authority or agency, domestic
or foreign, that would reasonably be expected to, directly or indirectly:
(1) make illegal or otherwise prohibit or materially delay consummation of
the Offer or the Merger or seek to obtain material damages or make
materially more costly the making of the Offer, (2) prohibit or materially
limit the ownership or operation by Parent or the Purchaser of all or any
portion of the business or assets of the Company or any of its
subsidiaries that is material to the Company and its subsidiaries, taken
as a whole, or compel Parent or the Purchaser to dispose of or hold
separately all or any portion of the business or assets of Parent or the
Purchaser or the Company or any of its subsidiaries that is material to
the Company and its subsidiaries, taken as a whole, or impose any material
limitation on the ability of Parent or the Purchaser to conduct its
business or own such assets, (3) impose material limitations on the
ability of Parent or the Purchaser effectively to acquire, hold or
exercise full rights of ownership of the Common Shares, including, without
limitation, the right to vote any Common Shares acquired or owned by the
Purchaser or Parent on all matters properly presented to the Company's
stockholders, (4) require divestiture by Parent or the Purchaser of any
Common Shares, or (5) result in a Material Adverse Effect; or
(b) there shall be instituted or pending any action or proceeding by
any Governmental Entity seeking, or by any third party that would
reasonably be expected to result in, any of the consequences referred to
in clauses (1) through (5) of paragraph (a) above; or
(c) any change shall have occurred or been threatened (or any
development shall have occurred or been threatened involving prospective
change) in the business, assets, liabilities, financial condition, results
of operations or prospects of the Company or any of its subsidiaries that
has, or would reasonably be expected to have, a Material Adverse Effect;
or
<PAGE> 46
(d) (1) it shall have been publicly disclosed or the Purchaser shall
have otherwise learned that beneficial ownership (determined for the
purposes of this paragraph (d) as set forth in Rule 13d-3 promulgated
under the Exchange Act) of 50% or more of the outstanding Common Shares
has been acquired by any person (including the Company or any of its
subsidiaries or affiliates) or group (as defined in Section 13(d)(3) under
the Exchange Act), (2) the Company Board or any committee thereof shall
have withdrawn, or shall have modified or amended in a manner adverse to
Parent or the Purchaser, the approval, adoption or recommendation, as the
case may be, of the Offer or the Merger Agreement, or approved or
recommended any other takeover proposal or other acquisition of Common
Shares other than the Offer and the Merger, (3) a third party shall have
entered into a definitive agreement or a written agreement in principle
with the Company with respect to the acquisition of a majority of the
Company's assets, a tender offer or exchange offer to be made to holders
of Common Shares or a merger, consolidation or other business combination
with or involving the Company or any of its subsidiaries, or (4) the
Company Board or any committee thereof shall have resolved to do any of
the foregoing; or
(e) the Company and the Purchaser and Parent shall have reached an
agreement that the Offer or the Merger Agreement be terminated, or the
Merger Agreement shall have been terminated in accordance with its terms;
or
(f) any of the representations and warranties of the Company set
forth in the Merger Agreement, when read without any exception or
qualification as to materiality or Material Adverse Effect, shall not be
true and correct, as if such representations and warranties were made at
the time of such determination (except as to any such representation or
warranty which speaks as of a specific date, which must be untrue or
incorrect as of such specific date), except where the failure or failures
to be so true and correct would not, individually or in the aggregate,
reasonably be expected to (i) have a Material Adverse Effect, (ii) prevent
or materially delay the consummation of the Offer, or (iii) materially
increase the cost of the Offer to the Purchaser; or
(g) (1) the Company shall have failed to perform or to comply with
any of its obligations, covenants or agreements under the Merger Agreement
in any material respect or (2) any Management Stockholder shall have
failed to perform or to comply in any material respect with any of his
obligations, covenants or agreements under a Support Agreement; or
(h) any Consent set forth in Section 4.05 of the Company Disclosure
and identified thereon as a "required Consent" shall not have been filed
or obtained or shall not have occurred, as the case may be; or
(i) there shall have occurred, and continued to exist, (1) any
general suspension of, or limitation on prices for, trading in securities
on the New York Stock Exchange or in the NASDAQ National Market System,
(2) any decline of at least 25% in either the Dow Jones Average of
Industrial Stocks or the Standard & Poor's 500 Index from the
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<PAGE> 47
close of business on the last trading day immediately preceding the date
of the Merger Agreement, (3) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (4) a
commencement of a war, armed hostilities or other national or
international crisis directly or indirectly involving the United States,
with the exception of any military action directed against the nation of
Iraq, or a material limitation (whether or not mandatory) by any
Governmental Entity on the extension of credit by banks or other lending
institutions, or (5) in the case of any of the foregoing clauses (1)
through (4) existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof.
The foregoing conditions (including those set forth in clauses (i) and
(ii) of the initial paragraph) are for the benefit of Parent and the Purchaser
and may be asserted by Parent or the Purchaser regardless of the circumstances
giving rise to any such conditions and may be waived by Parent or the Purchaser,
in whole or in part, at any time and from time to time in their reasonable
discretion, in each case, subject to the terms of the Merger Agreement. The
failure by Parent or the Purchaser at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time.
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<PAGE> 1
Exhibit (c)(5)
SUPPORT AGREEMENT (this "Agreement"), dated as of March 8, 1998, by and
between Western Atlas Inc., a Delaware corporation ("Parent"), and
________________________ ("Seller").
WHEREAS, concurrently herewith, Parent, WAI Acquisition Corp. (the
"Purchaser"), a Delaware corporation and a subsidiary of Parent, and 3-D
Geophysical, Inc. (the "Company"), a Delaware corporation, are entering into an
Agreement and Plan of Merger of even date herewith (the "Merger Agreement",
which term shall not include any amendment to such Agreement which decreases the
Offer Price or changes the form of consideration payable in the Offer, unless
Seller consents to the inclusion of such amendment in such term). Capitalized
terms used but not defined herein shall have the meanings set forth in the
Merger Agreement, pursuant to which the Purchaser agrees to make a tender offer
(the "Offer") for all outstanding shares of common stock, par value $.01 per
share (the "Shares"), of the Company, at $9.65 per share (the "Offer Price") net
to the seller in cash, to be followed by a merger (the "Merger") of the
Purchaser with and into the Company;
WHEREAS, as of the date hereof, Seller beneficially owns directly
______________ Shares (the "Owned Shares");
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement and make the Offer, Parent and the Purchaser have required that Seller
agree, and Seller hereby agrees, (i) to tender pursuant to the Offer the Owned
Shares, together with any Shares acquired after the date hereof and prior to the
termination of the Offer, whether upon the exercise of options, conversion of
convertible securities or otherwise (collectively, the "Tender Shares") on the
terms and subject to the conditions provided for in this Agreement and (ii) to
enter into the other agreements set forth herein; and
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration given to each party hereto, the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Agreement to Tender and Vote.
1.1 Tender. Seller hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), pursuant to and in accordance with the
terms of the Offer, as soon as practicable after commencement of the Offer but
in no event later than five business days after the date of commencement of the
Offer, the Tender Shares by physical delivery of the certificates therefor and
to not withdraw such Tender Shares, except following termination of this
Agreement pursuant to Section 2 hereof. Seller hereby acknowledges and agrees
that Parent's and the Purchaser's obligation to accept for payment and pay for
the Tender Shares is subject to the terms and conditions of the Offer. Seller
hereby permits Parent and the Purchaser to publish and disclose in the Offer
Documents and, if approval of the Company's stockholders is required under
applicable law, the Proxy Statement (including all documents and schedules filed
with the Securities and Exchange Commission) his identity and ownership of the
Tender Shares and the nature of his commitments, arrangements and understandings
under this Agreement.
<PAGE> 2
1.2 Voting. Seller hereby agrees that, during the time this Agreement is
in effect, at any meeting of the shareholders of the Company, however called,
Seller shall (a) vote the Tender Shares in favor of the Merger; (b) vote the
Tender Shares against any action or agreement that would result in a breach of
any covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement; and (c) vote the Tender Shares against
any action or agreement (other than the Merger Agreement or the transactions
contemplated thereby) that would impede, interfere with, delay, postpone or
attempt to discourage the Merger or the Offer, including, but not limited to:
(i) any extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or any of its subsidiaries;
(ii) a sale or transfer of a material amount of assets of the Company or any of
its subsidiaries or a reorganization, recapitalization or liquidation of the
Company and its subsidiaries; (iii) any change in the management or board of
directors of the Company, except as otherwise agreed to in writing by the
Purchaser; (iv) any material change in the present capitalization or dividend
policy of the Company; or (v) any other material change in the Company's
corporate structure or business. Seller hereby revokes any proxy previously
granted by him with respect to the Tender Shares.
1.3 Grant of Irrevocable Proxy; Appointment of Proxy.
(i) Seller hereby irrevocably grants to, and appoints, William H. Flores
and James E. Brasher, or either of them, in their respective capacities as
officers or directors of Parent, and any individual who shall hereafter succeed
to any such office or directorship of Parent, and each of them individually,
Seller's proxy and attorney-in-fact (with full power of substitution), for and
in the name, place and stead of Seller, to vote the Tender Shares in favor of
the Merger and other transactions contemplated by the Merger Agreement, against
any Acquisition Transaction and otherwise as contemplated by Section 1.2.
(ii) Seller represents that any proxies heretofore given in respect of the
Tender Shares are not irrevocable, and that any such proxies are hereby revoked.
(iii) Seller understands and acknowledges that Parent is entering into the
Merger Agreement in reliance upon Seller's execution and delivery of this
Agreement. Seller hereby affirms that the irrevocable proxy set forth in this
Section 1.3 is given in connection with the execution of the Merger Agreement,
and that such irrevocable proxy is given to secure the performance of the duties
of Seller under this Agreement. Seller hereby further affirms that the
irrevocable proxy is coupled with an interest and may under no circumstances be
revoked. Seller hereby ratifies and confirms all that such irrevocable proxy may
lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is
executed and intended to be irrevocable in accordance with the provisions of
Section 212(e) of the Delaware General Corporation Law.
1.4 No Inconsistent Arrangements. Seller hereby covenants and agrees that,
except as contemplated by this Agreement and the Merger Agreement, it shall not
(i) transfer (which term shall include, without limitation, any sale, gift,
pledge or other disposition), or consent to any transfer of, any or all of the
Tender Shares or any interest therein, (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all
-2-
<PAGE> 3
of the Tender Shares or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to the Tender
Shares, (iv) deposit the Tender Shares into a voting trust or enter into a
voting agreement or arrangement with respect to the Tender Shares or (v) take
any other action that would in any way restrict, limit or interfere with the
performance of his obligations hereunder or the transactions contemplated hereby
or by the Merger Agreement or which would make any representation or warranty of
Seller hereunder untrue or incorrect.
1.5 No Solicitation. Seller hereby agrees that Seller shall not, and shall
not permit or authorize any of his affiliates, representatives or agents to,
directly or indirectly, encourage, solicit, explore, participate in or initiate
discussions or negotiations with, or provide or disclose any information to, any
corporation, partnership, person or other entity or group (other than Parent,
the Purchaser or any of their affiliates or representatives) concerning any
Acquisition Transaction or enter into any agreement, arrangement or
understanding requiring the Company to abandon, terminate or fail to consummate
the Merger or any other transactions contemplated by the Merger Agreement.
Seller will immediately cease any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Transaction. From and after the execution of this Agreement, Seller
shall immediately advise Parent in writing of the receipt, directly or
indirectly, of any inquiries, discussions, negotiations or proposals relating to
an Acquisition Transaction, identify the offeror and furnish to Parent a copy of
any such proposal or inquiry, if it is in writing, or a written summary of any
oral proposal or inquiry relating to an Acquisition Transaction. Seller shall
promptly advise Parent in writing of any development relating to such proposal,
including the results of any discussions or negotiations with respect thereto.
Any action taken by the Company or any member of the Board of Directors of the
Company including, if applicable, Seller acting in such capacity, in accordance
with the proviso to the second sentence of Section 6.10(a) of the Merger
Agreement shall be deemed not to violate this Section 1.5.
1.6 Reasonable Best Efforts. Subject to the terms and conditions of this
Agreement, Seller hereby agrees to use all reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger Agreement. Seller shall promptly consult with Parent and provide
any necessary information and material with respect to all filings made by
Seller with any Governmental Entity in connection with this Agreement and the
Merger Agreement and the transactions contemplated hereby and thereby.
1.7 Waiver of Appraisal Rights. Seller hereby waives any rights of
appraisal or rights to dissent from the Merger that he may have.
2. Expiration. This Agreement and Seller's obligation to tender provided
hereto shall terminate on the earlier of the payment for the Shares pursuant to
the Offer and the termination of the Merger Agreement in accordance with its
terms.
-3-
<PAGE> 4
3. Representation and Warranties. Seller hereby represents and warrants to
Parent as follows:
(a) Title. Seller has good and valid title to the Tender Shares,
free and clear of any lien, pledge, charge, encumbrance or claim of
whatever nature and, upon the purchase of the Tender Shares by the
Purchaser, Seller will deliver good and valid title to the Tender Shares,
free and clear of any lien, charge, encumbrance or claim of whatever
nature.
(b) Ownership of Shares. On the date hereof, the Owned Shares are
owned of record or beneficially by Seller and, on the date hereof, the
Owned Shares constitute all of the Shares owned of record or beneficially
by Seller. Seller has sole voting power and sole power of disposition with
respect to all of the Owned Shares, with no restrictions, subject to
applicable federal securities laws, on Seller's rights of disposition
pertaining thereto.
(c) Power; Binding Agreement. Seller has the legal capacity, power
and authority to enter into and perform all of his obligations under this
Agreement. The execution, delivery and performance of this Agreement by
Seller will not violate any other agreement to which Seller is a party
including, without limitation, any voting agreement, stockholders
agreement or voting trust. This Agreement has been duly and validly
executed and delivered by Seller and constitutes a valid and binding
agreement of Seller, enforceable against Seller in accordance with its
terms.
(d) No Conflicts. Other than in connection with or in compliance
with the provisions of the Exchange Act and the HSR Act, no authorization,
consent or approval of, or filing with, any court or any public body or
authority is necessary for the consummation by Seller of the transactions
contemplated by this Agreement. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated
hereby will not constitute a breach, violation or default (or any event
which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration under, or
result in the creation of any lien, encumbrance, pledge, charge or claim
upon any of the properties or assets of Seller under, any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument to which Seller is a party or by which his properties or assets
are bound.
(e) No Finder's Fees. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on
behalf of Seller.
-4-
<PAGE> 5
4. Additional Shares. Seller hereby agrees, while this Agreement is in
effect, to promptly notify Parent of the number of any new Shares acquired by
Seller, if any, after the date hereof.
5. Further Assurances. From time to time, at the Parent's request and
without further consideration, Seller shall execute and deliver such additional
documents and take all such further action as may be reasonably necessary or
desirable to consummate and make effective the transactions contemplated by
Section 1 of this Agreement.
6. Miscellaneous.
6.1 Non-Survival. The representations and warranties made herein shall
terminate upon Seller's sale of the Tender Shares to the Purchaser in the Offer,
other than Seller's representation and warranty in Section 3.2(a), which shall
survive the sale of the Tender Shares and the termination of this Agreement
following such sale.
6.2 Entire Agreement; Assignment. This Agreement (i) constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and (ii)
shall not be assigned by operation of law or otherwise, provided that Parent may
assign its rights and obligations hereunder to any direct or indirect wholly
owned subsidiary of Parent, but no such assignment shall relieve Parent of its
obligations hereunder if such assignee does not perform such obligations.
6.3 Amendments. This Agreement may not be modified, amended, altered or
supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
6.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand
delivery, telegram, telex or telecopy or by any courier service, such as Federal
Express, providing proof of delivery. All communications hereunder shall be
delivered to the respective parties at the following addresses:
If to Seller:
copy to Seller's Counsel:
-5-
<PAGE> 6
If to Parent:
Western Atlas Inc.
10205 Westheimer Road
Houston, Texas 77042-3115
Attention: James E. Brasher, Esq.
Fax: (713) 266-1717
copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Daniel A. Neff, Esq.
Fax: (212) 403-2000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
6.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
6.6 Specific Performance. Seller recognizes and acknowledges that a breach
by him of any covenants or agreements contained in this Agreement will cause
Parent to sustain damages for which it would not have an adequate remedy at law
for money damages, and therefore Seller agrees that in the event of any such
breach Parent shall be entitled to the remedy of specific performance of such
covenants and agreements and injunctive and other equitable relief in addition
to any other remedy to which it may be entitled, at law or in equity.
6.7 Counterparts. This Agreement may be executed in two counterparts, each
of which shall be deemed to be an original, but both of which shall constitute
one and the same Agreement.
6.8 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
6.9 Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
-6-
<PAGE> 7
IN WITNESS WHEREOF, Parent and Seller have caused this Agreement to be
duly executed as of the day and year first above written.
WESTERN ATLAS INC.
By:
---------------------------------
Name:
Title:
SELLER
----------------------------
Name:
-7-
<PAGE> 1
Exhibit (c)(6)
SUPPORT AGREEMENT (this "Agreement"), dated as of March 8,
1998, by and between Western Atlas Inc., a Delaware corporation ("Parent"), and
Ronald L. Koons ("Seller").
WHEREAS, concurrently herewith, Parent, WAI Acquisition Corp.
(the "Purchaser"), a Delaware corporation and a subsidiary of Parent, and 3-D
Geophysical, Inc. (the "Company"), a Delaware corporation, are entering into an
Agreement and Plan of Merger of even date herewith (the "Merger Agreement",
which term shall not include any amendment to such Agreement which decreases the
Offer Price or changes the form of consideration payable in the Offer, unless
Seller consents to the inclusion of such amendment in such term). Capitalized
terms used but not defined herein shall have the meanings set forth in the
Merger Agreement, pursuant to which the Purchaser agrees to make a tender offer
(the "Offer") for all outstanding shares of common stock, par value $.01 per
share (the "Shares"), of the Company, at $9.65 per share (the "Offer Price") net
to the seller in cash, to be followed by a merger (the "Merger") of the
Purchaser with and into the Company;
WHEREAS, as of the date hereof, Seller beneficially owns
directly ______________ Shares (the "Owned Shares");
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement and make the Offer, Parent and the Purchaser have required that
Seller agree, and Seller hereby agrees, (i) to tender pursuant to the Offer the
Owned Shares, together with any Shares acquired after the date hereof and prior
to the termination of the Offer, whether upon the exercise of options,
conversion of convertible securities or otherwise (collectively, the "Tender
Shares") on the terms and subject to the conditions provided for in this
Agreement and (ii) to enter into the other agreements set forth herein; and
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration given to each party hereto, the receipt of which
is hereby acknowledged, the parties agree as follows:
1. Agreement to Tender and Vote.
1.1 Tender. Seller hereby agrees to validly tender (or cause
the record owner of such shares to validly tender), pursuant to and in
accordance with the terms of the Offer, as soon as practicable after
commencement of the Offer but in no event later than five business days after
the date of commencement of the Offer, the Tender Shares by physical delivery of
the certificates therefor and to not withdraw such Tender Shares, except
following termination of this Agreement pursuant to Section 2 hereof. Seller
hereby acknowledges and agrees that Parent's and the Purchaser's obligation to
accept for payment and pay for the Tender Shares is subject to the terms and
conditions of the Offer. Seller hereby permits Parent and the Purchaser to
publish and disclose in the Offer Documents and, if approval of the Company's
stockholders is required under applicable law, the Proxy Statement (including
all documents and schedules filed with the Securities and Exchange Commission)
his identity and ownership of the Tender Shares and the nature of his
commitments, arrangements and understandings under this Agreement.
<PAGE> 2
1.2 Voting. Seller hereby agrees that, during the time this
Agreement is in effect, at any meeting of the shareholders of the Company,
however called, Seller shall (a) vote the Tender Shares in favor of the Merger;
(b) vote the Tender Shares against any action or agreement that would result in
a breach of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement; and (c) vote the Tender
Shares against any action or agreement (other than the Merger Agreement or the
transactions contemplated thereby) that would impede, interfere with, delay,
postpone or attempt to discourage the Merger or the Offer, including, but not
limited to: (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or any of its
subsidiaries; (ii) a sale or transfer of a material amount of assets of the
Company or any of its subsidiaries or a reorganization, recapitalization or
liquidation of the Company and its subsidiaries; (iii) any change in the
management or board of directors of the Company, except as otherwise agreed to
in writing by the Purchaser; (iv) any material change in the present
capitalization or dividend policy of the Company; or (v) any other material
change in the Company's corporate structure or business. Seller hereby revokes
any proxy previously granted by him with respect to the Tender Shares.
1.3 Grant of Irrevocable Proxy; Appointment of Proxy.
(i) Seller hereby irrevocably grants to, and appoints,
William H. Flores and James E. Brasher, or either of them, in their respective
capacities as officers or directors of Parent, and any individual who shall
hereafter succeed to any such office or directorship of Parent, and each of them
individually, Seller's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of Seller, to vote the
Tender Shares in favor of the Merger and other transactions contemplated by the
Merger Agreement, against any Acquisition Transaction and otherwise as
contemplated by Section 1.2.
(ii) Seller represents that any proxies heretofore given in
respect of the Tender Shares are not irrevocable, and that any such proxies are
hereby revoked.
(iii) Seller understands and acknowledges that Parent is
entering into the Merger Agreement in reliance upon Seller's execution and
delivery of this Agreement. Seller hereby affirms that the irrevocable proxy set
forth in this Section 1.3 is given in connection with the execution of the
Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of Seller under this Agreement. Seller hereby further
affirms that the irrevocable proxy is coupled with an interest and may under no
circumstances be revoked. Seller hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such
irrevocable proxy is executed and intended to be irrevocable in accordance with
the provisions of Section 212(e) of the Delaware General Corporation Law.
1.4 No Inconsistent Arrangements. Seller hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
it shall not (i) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of the Tender Shares or any interest therein, (ii) enter into any contract,
option or other agreement or understanding with respect to any transfer of any
or all
-2-
<PAGE> 3
of the Tender Shares or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to the Tender
Shares, (iv) deposit the Tender Shares into a voting trust or enter into a
voting agreement or arrangement with respect to the Tender Shares or (v) take
any other action that would in any way restrict, limit or interfere with the
performance of his obligations hereunder or the transactions contemplated hereby
or by the Merger Agreement or which would make any representation or warranty of
Seller hereunder untrue or incorrect.
1.5 No Solicitation. Seller hereby agrees that Seller shall
not, and shall not permit or authorize any of his affiliates, representatives or
agents to, directly or indirectly, encourage, solicit, explore, participate in
or initiate discussions or negotiations with, or provide or disclose any
information to, any corporation, partnership, person or other entity or group
(other than Parent, the Purchaser or any of their affiliates or representatives)
concerning any Acquisition Transaction or enter into any agreement, arrangement
or understanding requiring the Company to abandon, terminate or fail to
consummate the Merger or any other transactions contemplated by the Merger
Agreement. Seller will immediately cease any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Transaction. From and after the execution of this Agreement, Seller
shall immediately advise Parent in writing of the receipt, directly or
indirectly, of any inquiries, discussions, negotiations or proposals relating to
an Acquisition Transaction, identify the offeror and furnish to Parent a copy of
any such proposal or inquiry, if it is in writing, or a written summary of any
oral proposal or inquiry relating to an Acquisition Transaction. Seller shall
promptly advise Parent in writing of any development relating to such proposal,
including the results of any discussions or negotiations with respect thereto.
1.6 Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, Seller hereby agrees to use all reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement and the Merger Agreement. Seller shall promptly consult with
Parent and provide any necessary information and material with respect to all
filings made by Seller with any Governmental Entity in connection with this
Agreement and the Merger Agreement and the transactions contemplated hereby and
thereby.
1.7 Waiver of Appraisal Rights. Seller hereby waives any
rights of appraisal or rights to dissent from the Merger that he may have.
2. Expiration. This Agreement and Seller's obligation to
tender provided hereto shall terminate on the earlier of the payment for the
Shares pursuant to the Offer and the termination of the Merger Agreement in
accordance with its terms.
3. Representation and Warranties. Seller hereby represents
and warrants to Parent as follows:
(a) Title. Seller has good and valid title to the Tender Shares,
free and clear of any lien, pledge, charge, encumbrance or
claim of whatever nature and, upon the purchase of the Tender
Shares by the Purchaser, Seller will deliver
-3-
<PAGE> 4
good and valid title to the Tender Shares, free and clear of
any lien, charge, encumbrance or claim of whatever nature.
(b) Ownership of Shares. On the date hereof, the
Owned Shares are owned of record or beneficially by Seller
and, on the date hereof, the Owned Shares constitute all of
the Shares owned of record or beneficially by Seller. Seller
has sole voting power and sole power of disposition with
respect to all of the Owned Shares, with no restrictions,
subject to applicable federal securities laws, on Seller's
rights of disposition pertaining thereto.
(c) Power; Binding Agreement. Seller has the legal
capacity, power and authority to enter into and perform all of
his obligations under this Agreement. The execution, delivery
and performance of this Agreement by Seller will not violate
any other agreement to which Seller is a party including,
without limitation, any voting agreement, stockholders
agreement or voting trust. This Agreement has been duly and
validly executed and delivered by Seller and constitutes a
valid and binding agreement of Seller, enforceable against
Seller in accordance with its terms.
(d) No Conflicts. Other than in connection with or in
compliance with the provisions of the Exchange Act and the HSR
Act, no authorization, consent or approval of, or filing with,
any court or any public body or authority is necessary for the
consummation by Seller of the transactions contemplated by
this Agreement. The execution, delivery and performance of
this Agreement and the consummation of the transactions
contemplated hereby will not constitute a breach, violation or
default (or any event which, with notice or lapse of time or
both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or
result in the creation of any lien, encumbrance, pledge,
charge or claim upon any of the properties or assets of Seller
under, any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument to which Seller
is a party or by which his properties or assets are bound.
(e) No Finder's Fees. No broker, investment banker,
financial advisor or other person is entitled to any broker's,
finder's, financial adviser's or other similar fee or
commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of Seller.
4. Additional Shares. Seller hereby agrees, while this
Agreement is in effect, to promptly notify Parent of the number of any new
Shares acquired by Seller, if any, after the date hereof.
5. Further Assurances. From time to time, at the Parent's
request and without further consideration, Seller shall execute and deliver such
additional documents and take all such further action as may be reasonably
necessary or desirable to consummate and make effective the transactions
contemplated by Section 1 of this Agreement.
-4-
<PAGE> 5
6. Miscellaneous.
6.1 Non-Survival. The representations and warranties made
herein shall terminate upon Seller's sale of the Tender Shares to the Purchaser
in the Offer, other than Seller's representation and warranty in Section 3.2(a),
which shall survive the sale of the Tender Shares and the termination of this
Agreement following such sale.
6.2 Entire Agreement; Assignment. This Agreement (i)
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof
and (ii) shall not be assigned by operation of law or otherwise, provided that
Parent may assign its rights and obligations hereunder to any direct or indirect
wholly owned subsidiary of Parent, but no such assignment shall relieve Parent
of its obligations hereunder if such assignee does not perform such obligations.
6.3 Amendments. This Agreement may not be modified, amended,
altered or supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereto.
6.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand
delivery, telegram, telex or telecopy or by any courier service, such as Federal
Express, providing proof of delivery. All communications hereunder shall be
delivered to the respective parties at the following addresses:
If to Seller:
copy to Seller's Counsel:
If to Parent:
Western Atlas Inc.
10205 Westheimer Road
Houston, Texas 77042-3115
-5-
<PAGE> 6
Attention: James E. Brasher, Esq.
Fax: (713) 266-1717
copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Daniel A. Neff, Esq.
Fax: (212) 403-2000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
6.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
6.6 Specific Performance. Seller recognizes and acknowledges
that a breach by him of any covenants or agreements contained in this Agreement
will cause Parent to sustain damages for which it would not have an adequate
remedy at law for money damages, and therefore Seller agrees that in the event
of any such breach Parent shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity.
6.7 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original, but both of which
shall constitute one and the same Agreement.
6.8 Descriptive Headings. The descriptive headings used herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
6.9 Severability. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
IN WITNESS WHEREOF, Parent and Seller have caused this
Agreement to be duly executed as of the day and year first above written.
-6-
<PAGE> 7
WESTERN ATLAS INC.
By:
------------------------------------------
Name:
Title:
SELLER
------------------------------------------
Name:
-7-
<PAGE> 1
Exhibit (c)(7)
SUPPORT AGREEMENT (this "Agreement"), dated as of March 8,
1998, by and between Western Atlas Inc., a Delaware corporation ("Parent"), and
Wayne P. Widynowski ("Seller").
WHEREAS, concurrently herewith, Parent, WAI Acquisition Corp.
(the "Purchaser"), a Delaware corporation and a subsidiary of Parent, and 3-D
Geophysical, Inc. (the "Company"), a Delaware corporation, are entering into an
Agreement and Plan of Merger of even date herewith (the "Merger Agreement",
which term shall not include any amendment to such Agreement which decreases the
Offer Price or changes the form of consideration payable in the Offer, unless
Seller consents to the inclusion of such amendment in such term). Capitalized
terms used but not defined herein shall have the meanings set forth in the
Merger Agreement, pursuant to which the Purchaser agrees to make a tender offer
(the "Offer") for all outstanding shares of common stock, par value $.01 per
share (the "Shares"), of the Company, at $9.65 per share (the "Offer Price") net
to the seller in cash, to be followed by a merger (the "Merger") of the
Purchaser with and into the Company;
WHEREAS, as of the date hereof, Seller beneficially owns
directly ______________ Shares (the "Owned Shares", and together with any Shares
acquired after the date hereof and prior to the termination of the Offer,
whether upon the exercise of options, conversion of convertible securities or
otherwise, the "Tender Shares");
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement and make the Offer, Parent and the Purchaser have required that
Seller agree, and Seller hereby agrees, to enter into this Agreement; and
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration given to each party hereto, the receipt of which
is hereby acknowledged, the parties agree as follows:
1. Agreement to Vote.
1.1 Voting. Seller hereby agrees that, during the time this
Agreement is in effect, at any meeting of the shareholders of the Company,
however called, Seller shall (a) vote the Tender Shares in favor of the Merger;
(b) vote the Tender Shares against any action or agreement that would result in
a breach of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement; and (c) vote the Tender
Shares against any action or agreement (other than the Merger Agreement or the
transactions contemplated thereby) that would impede, interfere with, delay,
postpone or attempt to discourage the Merger or the Offer, including, but not
limited to: (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or any of its
subsidiaries; (ii) a sale or transfer of a material amount of assets of the
Company or any of its subsidiaries or a reorganization, recapitalization or
liquidation of the Company and its subsidiaries; (iii) any change in the
management or board of directors of the Company, except as otherwise agreed to
in writing by the Purchaser; (iv) any material change in the present
capitalization or dividend policy of the Company; or (v) any other material
change in the Company's corporate structure or business. Seller hereby revokes
any proxy previously granted
<PAGE> 2
by him with respect to the Tender Shares. Seller hereby permits Parent and the
Purchaser to publish and disclose in the Offer Documents and, if approval of the
Company's stockholders is required under applicable law, the Proxy Statement
(including all documents and schedules filed with the Securities and Exchange
Commission) his identity and ownership of the Tender Shares and the nature of
his commitments, arrangements and understandings under this Agreement.
1.2 Grant of Irrevocable Proxy; Appointment of Proxy.
(i) Seller hereby irrevocably grants to, and appoints,
William H. Flores and James E. Brasher, or either of them, in their respective
capacities as officers or directors of Parent, and any individual who shall
hereafter succeed to any such office or directorship of Parent, and each of them
individually, Seller's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of Seller, to vote the
Tender Shares in favor of the Merger and other transactions contemplated by the
Merger Agreement, against any Acquisition Transaction and otherwise as
contemplated by Section 1.2.
(ii) Seller represents that any proxies heretofore given in
respect of the Tender Shares are not irrevocable, and that any such proxies are
hereby revoked.
(iii) Seller understands and acknowledges that Parent is
entering into the Merger Agreement in reliance upon Seller's execution and
delivery of this Agreement. Seller hereby affirms that the irrevocable proxy set
forth in this Section 1.2 is given in connection with the execution of the
Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of Seller under this Agreement. Seller hereby further
affirms that the irrevocable proxy is coupled with an interest and may under no
circumstances be revoked. Seller hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such
irrevocable proxy is executed and intended to be irrevocable in accordance with
the provisions of Section 212(e) of the Delaware General Corporation Law.
1.3 No Inconsistent Arrangements. Seller hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
it shall not (i) except to the Company, transfer (which term shall include,
without limitation, any sale, gift, pledge or other disposition), or consent to
any transfer of, any or all of the Tender Shares or any interest therein, (ii)
except with the Company, enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of the Tender Shares or
any interest therein, (iii) grant any proxy, power-of-attorney or other
authorization in or with respect to the Tender Shares, (iv) deposit the Tender
Shares into a voting trust or enter into a voting agreement or arrangement with
respect to the Tender Shares or (v) take any other action that would in any way
restrict, limit or interfere with the performance of his obligations hereunder
or the transactions contemplated hereby or by the Merger Agreement or which
would make any representation or warranty of Seller hereunder untrue or
incorrect.
1.4 No Solicitation. Seller hereby agrees that Seller shall
not, and shall not permit or authorize any of his affiliates, representatives or
agents to, directly or indirectly, encourage, solicit, explore, participate in
or initiate discussions or negotiations with, or provide or disclose any
information to, any corporation, partnership, person or other entity or group
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<PAGE> 3
(other than Parent, the Purchaser or any of their affiliates or representatives)
concerning any Acquisition Transaction or enter into any agreement, arrangement
or understanding requiring the Company to abandon, terminate or fail to
consummate the Merger or any other transactions contemplated by the Merger
Agreement. Seller will immediately cease any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Transaction. From and after the execution of this Agreement, Seller
shall immediately advise Parent in writing of the receipt, directly or
indirectly, of any inquiries, discussions, negotiations or proposals relating to
an Acquisition Transaction, identify the offeror and furnish to Parent a copy of
any such proposal or inquiry, if it is in writing, or a written summary of any
oral proposal or inquiry relating to an Acquisition Transaction. Seller shall
promptly advise Parent in writing of any development relating to such proposal,
including the results of any discussions or negotiations with respect thereto.
Any action taken by the Company or any member of the Board of Directors of the
Company including, if applicable, Seller acting in such capacity, in accordance
with the proviso to the second sentence of Section 6.10(a) of the Merger
Agreement shall be deemed not to violate this Section 1.5.
1.5 Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, Seller hereby agrees to use all reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement and the Merger Agreement. Seller shall promptly consult with
Parent and provide any necessary information and material with respect to all
filings made by Seller with any Governmental Entity in connection with this
Agreement and the Merger Agreement and the transactions contemplated hereby and
thereby.
1.6 Waiver of Appraisal Rights. Seller hereby waives any
rights of appraisal or rights to dissent from the Merger that he may have.
2. Expiration. This Agreement and Seller's obligation to
tender provided hereto shall terminate on the earlier of the payment for the
Shares pursuant to the Offer and the termination of the Merger Agreement in
accordance with its terms.
3. Representation and Warranties. Seller hereby represents
and warrants to Parent as follows:
(a) Title. Seller has good and valid title to the
Tender Shares, free and clear of any lien, pledge, charge,
encumbrance or claim of whatever nature and, upon the purchase
of the Tender Shares by the Purchaser, Seller will deliver
good and valid title to the Tender Shares, free and clear of
any lien, charge, encumbrance or claim of whatever nature.
(b) Ownership of Shares. On the date hereof, the
Owned Shares are owned of record or beneficially by Seller
and, on the date hereof, the Owned Shares constitute all of
the Shares owned of record or beneficially by Seller. Seller
has sole voting power and sole power of disposition with
respect to all of
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<PAGE> 4
the Owned Shares, with no restrictions, subject to applicable
federal securities laws, on Seller's rights of disposition
pertaining thereto.
(c) Power; Binding Agreement. Seller has the legal
capacity, power and authority to enter into and perform all of
his obligations under this Agreement. The execution, delivery
and performance of this Agreement by Seller will not violate
any other agreement to which Seller is a party including,
without limitation, any voting agreement, stockholders
agreement or voting trust. This Agreement has been duly and
validly executed and delivered by Seller and constitutes a
valid and binding agreement of Seller, enforceable against
Seller in accordance with its terms.
(d) No Conflicts. Other than in connection with or in
compliance with the provisions of the Exchange Act and the HSR
Act, no authorization, consent or approval of, or filing with,
any court or any public body or authority is necessary for the
consummation by Seller of the transactions contemplated by
this Agreement. The execution, delivery and performance of
this Agreement and the consummation of the transactions
contemplated hereby will not constitute a breach, violation or
default (or any event which, with notice or lapse of time or
both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or
result in the creation of any lien, encumbrance, pledge,
charge or claim upon any of the properties or assets of Seller
under, any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument to which Seller
is a party or by which his properties or assets are bound.
(e) No Finder's Fees. No broker, investment banker,
financial advisor or other person is entitled to any broker's,
finder's, financial adviser's or other similar fee or
commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of Seller.
4. Additional Shares. Seller hereby agrees, while this
Agreement is in effect, to promptly notify Parent of the number of any new
Shares acquired by Seller, if any, after the date hereof.
5. Further Assurances. From time to time, at the Parent's
request and without further consideration, Seller shall execute and deliver such
additional documents and take all such further action as may be reasonably
necessary or desirable to consummate and make effective the transactions
contemplated by Section 1 of this Agreement.
6. Miscellaneous.
6.1 Non-Survival. The representations and warranties made
herein shall terminate upon Seller's sale of the Tender Shares to the Purchaser
in the Offer, other than Seller's representation and warranty in Section 3.2(a),
which shall survive the sale of the Tender Shares and the termination of this
Agreement following such sale.
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<PAGE> 5
6.2 Entire Agreement; Assignment. This Agreement (i)
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof
and (ii) shall not be assigned by operation of law or otherwise, provided that
Parent may assign its rights and obligations hereunder to any direct or indirect
wholly owned subsidiary of Parent, but no such assignment shall relieve Parent
of its obligations hereunder if such assignee does not perform such obligations.
6.3 Amendments. This Agreement may not be modified, amended,
altered or supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereto.
6.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand
delivery, telegram, telex or telecopy or by any courier service, such as Federal
Express, providing proof of delivery. All communications hereunder shall be
delivered to the respective parties at the following addresses:
If to Seller:
copy to Seller's Counsel:
If to Parent:
Western Atlas Inc.
10205 Westheimer Road
Houston, Texas 77042-3115
Attention: James E. Brasher, Esq.
Fax: (713) 266-1717
copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Daniel A. Neff, Esq.
Fax: (212) 403-2000
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<PAGE> 6
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
6.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
6.6 Specific Performance. Seller recognizes and acknowledges
that a breach by him of any covenants or agreements contained in this Agreement
will cause Parent to sustain damages for which it would not have an adequate
remedy at law for money damages, and therefore Seller agrees that in the event
of any such breach Parent shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity.
6.7 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original, but both of which
shall constitute one and the same Agreement.
6.8 Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
6.9 Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable law but if any provision or portion
of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision had
never been contained herein.
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<PAGE> 7
IN WITNESS WHEREOF, Parent and Seller have caused this
Agreement to be duly executed as of the day and year first above written.
WESTERN ATLAS INC.
By:
-----------------------------------
Name:
Title:
SELLER
-----------------------------------
Name:
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<PAGE> 1
Exhibit (c)(8)
CONSULTING AND NON-COMPETE AGREEMENT
AGREEMENT, dated as of March 8, 1998, by and between Western
Atlas Inc., a Delaware corporation (the "Parent"), Friedman Enterprises Inc., a
New York corporation ("FEI") and Joel Friedman (the "Consultant").
WHEREAS, the Consultant is the Chairman of the Board of
Directors of 3-D Geophysical, Inc., a Delaware corporation, (collectively with
its subsidiaries, the "Company");
WHEREAS, the Parent has entered into an Agreement and Plan of
Merger with the Company and WAI Acquisition Corp., dated as of March 8, 1998
(the "Merger Agreement");
WHEREAS, the Consultant will terminate employment with the
Company effective as of the "Effective Time" (as defined in the Merger
Agreement) of the merger contemplated by the Merger Agreement (the "Merger");
and
WHEREAS, the Consultant is the President and sole shareholder
of FEI; and
WHEREAS, the Parent desires to provide for the Consultant to
perform services for the Parent and the Company following the Merger and FEI
desires to make Consultant available to perform such services.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the Parent and the
Consultant hereby agree as follows:
1. Consulting Services. Subject to the effectiveness of the
Merger, the Consultant hereby agrees to provide such consulting services to the
Parent and to the Company as the President of the Western Geophysical Division
of Western Atlas International, Inc. or his designee shall reasonably request
for not more than 20 hours per month. Such consulting services may be rendered
in New York, New York, or at any other mutually agreeable place. FEI hereby
agrees to make Consultant available to provide such service.
2. Term. The period of consultancy under this Agreement shall
be for a period commencing on the Effective Time and ending on the fourth
anniversary of the Effective Time (the "Term").
3. Consulting Fee. The Parent shall pay to FEI, in
consideration of the consulting services, a consulting fee (the "Consulting
Fee") at an annual rate of $250,000 payable in substantially equal monthly
installments during the Term.
4. Expenses. The Parent will reimburse FEI for all authorized
reasonable and necessary out-of-pocket expenses incurred by the Consultant in
the performance of his duties hereunder upon the presentation of appropriate
documentation. Such expenses shall be submitted to Parent, at P.O. Box 1407,
Houston, TX 77251-1407, Attn.: J. Perez, on Parent's standard
<PAGE> 2
expense report forms in accordance with Parent's expense reimbursement policy in
effect from time to time during the Term.
5. Termination of Consultancy. The Consultant's consultancy
hereunder shall terminate prior to the scheduled end of the Term upon the first
to occur of:
(a) the death of the Consultant; or
(b) the Consultant's illness, disability or incapacity
("Disability") that prevents the Consultant from performing his duties hereunder
for sixty (60) consecutive days, or for any sixty (60) days within any one
hundred and eighty (180) day period, and the provision of written notice of such
termination to the Consultant; or
(c) written notice by the Parent to the Consultant of
termination of the Consultant's consultancy by the Parent for "Cause," which
shall include, without limitation, (i) the failure of the Consultant to perform
his duties hereunder after at least 30 days' written notice thereof specifying
such failure and the Consultant's failure to remedy same within such 30-day
period; (ii) any act of illegality, dishonesty, moral turpitude, or fraud in
connection with the Consultant's consultancy; (iii) any course of action by the
Consultant which is materially detrimental to the business of the Parent or any
of its affiliates (including without limitation any violation of Sections 7, 8
or 9 of this Agreement); or (iv) the commission by the Consultant of any felony;
or
(d) written notice by the Parent to the Consultant of
termination of the Consultant's consultancy without Cause; or
(e) written notice by the Consultant to the Parent of
termination of his consultancy.
The date of termination of the Consultant's consultancy shall be the date
written notice is given or such later date (within thirty (30) days following
such notice) specified in the written notice.
6. Termination Payments. In the event of the termination of
the Consultant's consultancy pursuant to Section 5, the Parent shall make the
payments to FEI set forth below and have no further obligation to the Consultant
or FEI hereunder.
(a) In the event of the termination of the Consultant's
consultancy by the Parent for Cause pursuant to Section 5(c) of this Agreement
or the termination of the Consultant's consultancy by the Consultant pursuant to
Section 5(e) of this Agreement, the Parent shall pay to FEI the Consulting Fee
previously earned but not paid as of the date of termination.
(b) In the event of the termination of the Consultant's
consultancy by the Parent without Cause (and not for death or Disability)
pursuant to Section 5(d) of this Agreement, the Parent shall continue to pay FEI
the full Consulting Fee contemplated by Section 3 of this Agreement in monthly
installments through the scheduled end of the Term, subject to the Consultant's
and FEI's compliance with Sections 7, 8 and 9 of this Agreement.
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<PAGE> 3
(c) In the event of the Consultant's death or termination for
Disability pursuant to Section 5(b) of this Agreement during the Term, the
Parent shall continue to pay to FEI the Consulting Fee contemplated by Section 3
in monthly installments for the lesser of (i) six months following such date of
termination or (ii) the number of months remaining in the Term, subject to the
Consultant's and FEI's compliance with Section 7, 8 and 9 of this Agreement.
7. Covenant Not to Compete. During the Term and until the
later of (a) 12 months after the Consultant's termination of consultancy with
the Parent for any reason or (b) the end of the scheduled Term (the
"Noncompetition Period"), the Consultant will not, directly or indirectly
(whether as sole proprietor, partner or venturer, stockholder, director,
officer, employee or consultant or in any other capacity as principal or agent
or through any person, subsidiary or employee acting as nominee or agent):
(a) Conduct or engage in or have an interest in or be
associated with any person, firm, association, partnership, corporation or other
entity which conducts or engages in the business of seismic data acquisition or
data processing (the "Business"), which are the primary businesses of the
Company;
(b) Take any action, directly or indirectly, to finance,
guarantee or provide any other material assistance to any person, firm,
association, partnership, corporation or other entity which conducts or engages
in the Business;
(c) Influence or attempt to influence any person, firm,
association, partnership, corporation or other entity which is a contracting
party with the Parent at any time during the Noncompetition Period to terminate
any agreement with the Parent except to the extent the Consultant is acting on
behalf, and at the direction, of the Parent in good faith;
(d) Hire or attempt to hire for employment any person who is
employed by the Parent or attempt to influence any such person to terminate
employment with the Parent, except to the extent the Consultant is acting on
behalf, and at the direction, of the Parent in good faith; or
(e) Call on, solicit or take away as a client or customer or
attempt to call on, solicit or take away as a client or customer any person,
firm, association, partnership, corporation or other entity that is or was a
client or customer of the Parent, including actively sought prospective
customers, during the Term or the Consultant's prior employment with the
Company.
The restrictive provisions of this Agreement shall not
prohibit the Consultant from having an equity interest in the securities of any
corporation engaged in the Business, which securities are listed on a recognized
securities exchange or traded in the over-the-counter market to the extent that
such interest does not exceed 3% of the value or voting power of such
corporation and does not constitute control of such corporation. For purposes of
this Section 7 and Sections 8 and 9 of this Agreement, the term "Parent" shall
include the Parent and the Company, and each of their affiliates, and the term
"Consultant" shall include the Consultant and FEI.
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<PAGE> 4
8. Confidential Information; Ownership Rights. (a) The
Consultant acknowledges and agrees that all nonpublic information concerning the
Parent's business including, without limitation, information relating to its
products, customer lists, pricing, trade secrets, patents, business methods,
financial and cost data, business plans and strategies (collectively, the
"Confidential Information") is and shall remain the property of the Parent. The
Consultant recognizes and agrees that all of the Confidential Information,
whether developed by the Consultant or made available to the Consultant, other
than information that is generally known to the public, is a unique asset of the
business of the Parent, the disclosure of which would be damaging to the Parent.
Accordingly, the Consultant agrees to hold such Confidential Information in a
fiduciary capacity for the benefit of the Parent. The Consultant agrees that he
will not at any time during or after the Consultant's consultancy with the
Parent for any reason, directly or indirectly, disclose to any person any
Confidential Information of the Parent, other than information that is already
known to the public, except as may be required in the ordinary course of
business of the Parent or as may be required by law. Promptly upon the
termination of this Agreement for any reason, the Consultant agrees to return to
the Parent any and all documents, memoranda, drawings, notes and other papers
and items (including all copies thereof, whether electronic or otherwise)
embodying any Confidential Information of the Parent which are in the possession
or control of the Consultant. Information concerning the Parent's business that
becomes public as a result of the Consultant's breach of this Section 8 shall be
treated as Confidential Information under this Section 8.
(b) The Consultant hereby assigns to the Parent all right,
title and interest in and to any ideas, inventions, original works or
authorship, developments, improvements or trade secrets with respect to the
Business which the Consultant solely or jointly has conceived or reduced to
practice, or will conceive or reduce to practice, or cause to be conceived or
reduced to practice, during the Term or his prior employment with the Company.
All original works or authorship which are made by Consultant (solely or jointly
with others) within the scope of Consultant's services hereunder or for the
Company and which are protectable by copyright are "works made for hire," as
that term is defined in the United States Copyright Act.
9. Disparagement. During the Term and thereafter, the
Consultant agrees not to (a) criticize, denigrate or speak adversely of, or (b)
disclose negative information about, the operations, management or performance
of the Parent or about any director, officer, employee or agent of the Parent,
except as may be required by law.
10. Breach of Certain Provisions. The Consultant acknowledges
that a violation on the Consultant's part of any of the covenants contained in
Sections 7, 8 or 9 of this Agreement would cause immeasurable and irreparable
damage to the Parent and the Company. Accordingly, the Consultant agrees that
the Parent shall be entitled to injunctive relief in any court of competent
jurisdiction for any actual or threatened violation of any such covenant in
addition to any other remedies it may have. The Consultant agrees that in the
event that any court of competent jurisdiction shall finally hold that any
provision of Section 7, 8 or 9 hereof is void or constitutes an unreasonable
restriction against the Consultant, the provisions of such Section shall not be
rendered void but shall apply to such extent as such court may determine
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<PAGE> 5
constitutes a reasonable restriction under the circumstances. Sections 7, 8 and
9 shall survive the termination of this Agreement.
11. Independent Contractor. Nothing herein shall be construed
to create an employer-employee, agency, master and servant or joint venture
relationship or other association between the Parent or the Company and FEI or
the Consultant, and the Consultant shall not be deemed to be an employee of the
Parent or the Company for any purpose, including without limitation for the
purpose of participating in any employee benefit plan of the Parent or the
Company. The Consultant agrees that he is an independent contractor and will not
hold himself out to be an employee of the Parent or the Company. FEI and the
Consultant shall perform all services under this Agreement as, and shall remain,
independent contractors. All persons performing or assisting FEI or the
Consultant with any part of the services under this Agreement for the Company or
the Parent shall be employees or agents of FEI. FEI's employees and personnel
are not employees, agents or representatives of the Company or the Parent, or
their shareholders, affiliates or co-venturers, notwithstanding that any such
employees or personnel may be construed to be borrowed servants of the Company
or the Parent at any time or from time to time. FEI shall not hold its employees
or personnel out as employees, representatives or agents of the Company or the
Parent or make any representations to create such impression. The Consultant,
FEI, and its employees and personnel shall have no authority, express or
implied, to make any contract or agreement for, or on behalf of, or otherwise
commit the Company or the Parent, or their shareholders, affiliates or
coventurers to any contract, commitment, obligation, or liability binding on the
Company or the Parent, and the Parent and the Company do not assume any
responsibility for proposals, guarantees, or contracts entered into by FEI or
the Consultant with others.
12. Risk of Loss. The Consultant assumes all risk of personal
injury or death to himself and all risk of damage to or loss of personal
property furnished by the Consultant in connection with the services to be
performed by the Consultant under this Agreement. The Consultant will abide by
the safety and security regulations of the Parent and the Company while on the
respective properties of the Parent and the Company.
13. Warranty. The Consultant and FEI warrant that entering
into this Agreement and performance of services hereunder will not conflict with
any obligation of the Consultant arising under any other contract or by
operation of law. The Consultant warrants that he has the right to disclose all
information transmitted to the Parent or the Company pursuant to this Agreement,
and that the services to be performed by the Consultant under this Agreement do
not violate or in any way infringe upon the rights of third parties, including
property, contractual, employment, trade secrets, proprietary information, and
nondisclosure rights, or any trademark, copyright or patent rights, and that
Consultant will not enter into any agreements or arrangements with third persons
that would result in the performance of such services violating or infringing
the rights of such persons.
14. Assignment. This agreement is a contract for the personal
services of the Consultant, and neither FEI nor the Consultant may assign this
Agreement or subcontract any services without first obtaining the written
consent of the Parent. The Parent may assign this
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<PAGE> 6
Agreement to any subsidiary or affiliated company or to any third party together
with the business to which it pertains.
15. Governing Law. This Agreement is governed by, and is to be
construed and enforced in accordance with, the laws of the State of Delaware.
If, under such law, any portion of this Agreement is at any time deemed to be in
conflict with any applicable statute, rule, regulation or ordinance, such
portion shall be deemed to be modified or altered to conform thereto or, if that
is not possible, to be omitted from this Agreement; and the invalidity of any
such portion shall not affect the force, effect and validity of the remaining
portion hereof. The parties agree that all actions or proceedings initiated by
any party hereto and arising directly or indirectly out of this Agreement which
are brought pursuant to judicial proceedings shall be litigated in the State
courts of Delaware.
16. Notices. All notices hereunder shall be in writing and
shall be given (and shall be deemed to have been duly received if so given) by
hand delivery, telegram, telex or telecopy, or by mail (registered or certified
mail, postage prepaid, return receipt requested) or by any courier service, such
as Federal Express, providing proof of delivery. All communications hereunder
shall be delivered to the respective parties at the following addresses:
If to the Parent, to:
Western Atlas Inc.
10205 Westheimer Road
Houston, Texas 77042-3115
Attention: General Counsel
Fax: 713-266-1717
If to the Consultant, to:
Joel Friedman
11 Reimer Road
Scarsdale, NY 10583
If to FEI, to:
11 Reimer Road
Scarsdale, NY 10583
Attention: Joel Friedman
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
17. Miscellaneous. The Consultant shall terminate from
employment with the Company as of the Effective Time. This Agreement constitutes
the entire understanding between the Parent and the Consultant and FEI relating
to the consulting services to be rendered by the Consultant to the Parent and
the Company and cancels all prior written and oral agreements and
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<PAGE> 7
understandings with respect to the subject matter of this Agreement between the
Company and the Consultant, and the Consultant hereby waives any further
payments, under the Employment Agreement, dated February 1, 1996, between the
Company and the Consultant, and any severance payments under any plan or
agreement. This Agreement may be amended only by a subsequent written agreement
of the parties hereto. This Agreement shall be binding upon and shall inure to
the benefit of FEI, its successors and permitted assigns, and the Consultant,
his heirs, executors, administrators, beneficiaries and permitted assigns and
shall be binding upon and shall inure to the benefit of the Parent and its
successors and permitted assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this
agreement as of the year and day first above written.
WESTERN ATLAS INC.
By: /s/ Richard White
---------------------------------------
Richard White
/s/ Joel Friedman
---------------------------------------
Joel Friedman
FRIEDMAN ENTERPRISES INC.
By: /s/ Joel Friedman
---------------------------------------
Joel Friedman, President
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Exhibit (c)(9)
CONSULTING AND NON-COMPETE AGREEMENT
AGREEMENT, dated as of March 8, 1998, by and between Western
Atlas Inc., a Delaware corporation (the "Parent"), and Luis H. Ferran Arroyo
(the "Consultant").
WHEREAS, the Consultant is the Executive Vice President for
Latin American Operations of 3-D Geophysical, Inc., a Delaware corporation,
(collectively with its subsidiaries, the "Company");
WHEREAS, the Parent has entered into an Agreement and Plan of
Merger with the Company and WAI Acquisition Corp., dated as of March 8, 1998
(the "Merger Agreement");
WHEREAS, the Consultant will terminate employment with the
Company effective as of the "Effective Time" (as defined in the Merger
Agreement) of the merger contemplated by the Merger Agreement (the "Merger");
and
WHEREAS, the Parent desires to provide for the Consultant to
perform services for the Parent and the Company following the Merger.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the Parent and the
Consultant hereby agree as follows:
1. Consulting Services. Subject to the effectiveness of the
Merger, the Consultant hereby agrees to provide such consulting services to the
Parent and to the Company as the President of the Western Geophysical Division
of Western Atlas International, Inc. or his designee shall reasonably request,
including without limitation consulting services with respect to Petroleos
Mexicanos, for not more than 32 hours per month. Such consulting services may be
rendered in person at the corporate offices of the Parent or the Company or one
of their affiliates, or at any other mutually agreeable place.
2. Term. The period of consultancy under this Agreement shall
be for a period commencing on the Effective Time and ending on the fourth
anniversary of the Effective Time (the "Term").
3. Consulting Fee. The Parent shall pay to the Consultant, in
consideration of his consulting services, a consulting fee (the "Consulting
Fee") at an annual rate of $125,000 payable in substantially equal monthly
installments during the Term.
4. Expenses. The Parent will reimburse the Consultant for all
authorized reasonable and necessary out-of-pocket expenses incurred by him in
the performance of his duties hereunder upon the presentation of appropriate
documentation. Such expenses shall be submitted to Parent, at P.O. Box 1407,
Houston, TX 77251-1407, Att: J. Perez, on Parent's standard expense report forms
in accordance with Parent's expense reimbursement policy in effect from time to
time during the Term.
<PAGE> 2
5. Termination of Consultancy. The Consultant's consultancy
hereunder shall terminate prior to the scheduled end of the Term upon the first
to occur of:
(a) the death of the Consultant; or
(b) the Consultant's illness, disability or incapacity
("Disability") that prevents the Consultant from performing his duties hereunder
for sixty (60) consecutive days, or for any sixty (60) days within any one
hundred and eighty (180) day period, and the provision of written notice of such
termination to the Consultant; or
(c) written notice by the Parent to the Consultant of
termination of the Consultant's consultancy by the Parent for "Cause," which
shall include, without limitation, (i) the failure of the Consultant to perform
his duties hereunder after at least 30 days' written notice thereof specifying
such failure and the Consultant's failure to remedy same within such 30-day
period; (ii) any act of illegality, dishonesty, moral turpitude, or fraud in
connection with the Consultant's consultancy; (iii) any course of action by the
Consultant which is materially detrimental to the business of the Parent or any
of its affiliates (including without limitation any violation of Sections 7, 8
or 9 of this Agreement); or (iv) the commission by the Consultant of any felony;
or
(d) written notice by the Parent to the Consultant of
termination of the Consultant's consultancy without Cause; or
(e) written notice by the Consultant to the Parent of
termination of his consultancy.
The date of termination of the Consultant's consultancy shall be the date
written notice is given or such later date (within thirty (30) days following
such notice) specified in the written notice.
6. Termination Payments. In the event of the termination of
the Consultant's consultancy pursuant to Section 5, the Parent shall make the
payments to the Consultant set forth below and have no further obligation to the
Consultant hereunder.
(a) In the event of the termination of the Consultant's
consultancy by the Parent for Cause pursuant to Section 5(c) of this Agreement
or the termination of the Consultant's consultancy by the Consultant pursuant to
Section 5(e) of this Agreement, the Parent shall pay the Consultant the
Consulting Fee previously earned but not paid as of the date of termination.
(b) In the event of the termination of the Consultant's
consultancy by the Parent without Cause (and not for Disability) pursuant to
Section 5(d) of this Agreement, the Parent shall continue to pay the Consultant
the full Consulting Fee contemplated by Section 3 of this Agreement in monthly
installments through the scheduled end of the Term, subject to the Consultant's
compliance with Sections 7, 8 and 9 of this Agreement.
(c) In the event of the Consultant's death or termination for
Disability pursuant to Section 5(b) of this Agreement during the Term, the
Parent shall continue to pay to Consultant (or to his estate or beneficiary in
the event of his death) the Consulting Fee contemplated by
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<PAGE> 3
Section 3 in monthly installments for the lesser of (i) six months following
such date of termination or (ii) the number of months remaining in the Term,
subject to, in the event of termination for Disability, the Consultant's
compliance with Sections 7, 8 and 9 of this Agreement.
7. Covenant Not to Compete. During the Term and until the
later of (a) 12 months after the Consultant's termination of consultancy with
the Parent for any reason or (b) the end of the scheduled Term (the
"Noncompetition Period"), the Consultant will not, directly or indirectly
(whether as sole proprietor, partner or venturer, stockholder, director,
officer, employee or consultant or in any other capacity as principal or agent
or through any person, subsidiary or employee acting as nominee or agent):
(a) Conduct or engage in or have an interest in or be
associated with any person, firm, association, partnership, corporation or other
entity which conducts or engages in the business of seismic data acquisition or
data processing (the "Business"), which are the primary businesses of the
Company;
(b) Take any action, directly or indirectly, to finance,
guarantee or provide any other material assistance to any person, firm,
association, partnership, corporation or other entity which conducts or engages
in the Business;
(c) Influence or attempt to influence any person, firm,
association, partnership, corporation or other entity which is a contracting
party with the Parent at any time during the Noncompetition Period to terminate
any agreement with the Parent except to the extent the Consultant is acting on
behalf, and at the direction, of the Parent in good faith;
(d) Hire or attempt to hire for employment any person who is
employed by the Parent or attempt to influence any such person to terminate
employment with the Parent, except to the extent the Consultant is acting on
behalf, and at the direction, of the Parent in good faith; or
(e) Call on, solicit or take away as a client or customer or
attempt to call on, solicit or take away as a client or customer any person,
firm, association, partnership, corporation or other entity that is or was a
client or customer of the Parent, including actively sought prospective
customers, during the Term or the Consultant's prior employment with the
Company.
The restrictive provisions of this Agreement shall not
prohibit the Consultant from having an equity interest in the securities of any
corporation engaged in the Business, which securities are listed on a recognized
securities exchange or traded in the over-the-counter market to the extent that
such interest does not exceed 1% of the value or voting power of such
corporation and does not constitute control of such corporation. For purposes of
this Section 7 and Sections 8 and 9 of this Agreement, the term "Parent" shall
include the Parent and the Company, and each of their affiliates.
8. Confidential Information; Ownership Rights. (a) The
Consultant acknowledges and agrees that all nonpublic information concerning the
Parent's business including,
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<PAGE> 4
without limitation, information relating to its products, customer lists,
pricing, trade secrets, patents, business methods, financial and cost data,
business plans and strategies (collectively, the "Confidential Information") is
and shall remain the property of the Parent. The Consultant recognizes and
agrees that all of the Confidential Information, whether developed by the
Consultant or made available to the Consultant, other than information that is
generally known to the public, is a unique asset of the business of the Parent,
the disclosure of which would be damaging to the Parent. Accordingly, the
Consultant agrees to hold such Confidential Information in a fiduciary capacity
for the benefit of the Parent. The Consultant agrees that he will not at any
time during or after the Consultant's consultancy with the Parent for any
reason, directly or indirectly, disclose to any person any Confidential
Information of the Parent, other than information that is already known to the
public, except as may be required in the ordinary course of business of the
Parent or as may be required by law. Promptly upon the termination of this
Agreement for any reason, the Consultant agrees to return to the Parent any and
all documents, memoranda, drawings, notes and other papers and items (including
all copies thereof, whether electronic or otherwise) embodying any Confidential
Information of the Parent which are in the possession or control of the
Consultant. Information concerning the Parent's business that becomes public as
a result of the Consultant's breach of this Section 8 shall be treated as
Confidential Information under this Section 8.
(b) The Consultant hereby assigns to the Parent all right,
title and interest in and to any ideas, inventions, original works or
authorship, developments, improvements or trade secrets with respect to the
Business which the Consultant solely or jointly has conceived or reduced to
practice, or will conceive or reduce to practice, or cause to be conceived or
reduced to practice, during the Term or his prior employment with the Company.
All original works or authorship which are made by Consultant (solely or jointly
with others) within the scope of Consultant's services hereunder or for the
Company and which are protectable by copyright are "works made for hire," as
that term is defined in the United States Copyright Act.
9. Disparagement. During the Term and thereafter, the
Consultant agrees not to (a) criticize, denigrate or speak adversely of, or (b)
disclose negative information about, the operations, management or performance
of the Parent or about any director, officer, employee or agent of the Parent,
except as may be required by law.
10. Breach of Certain Provisions. The Consultant acknowledges
that a violation on the Consultant's part of any of the covenants contained in
Sections 7, 8 or 9 of this Agreement would cause immeasurable and irreparable
damage to the Parent and the Company. Accordingly, the Consultant agrees that
the Parent shall be entitled to injunctive relief in any court of competent
jurisdiction for any actual or threatened violation of any such covenant in
addition to any other remedies it may have. The Consultant agrees that in the
event that any court of competent jurisdiction shall finally hold that any
provision of Section 7, 8 or 9 hereof is void or constitutes an unreasonable
restriction against the Consultant, the provisions of such Section shall not be
rendered void but shall apply to such extent as such court may determine
constitutes a reasonable restriction under the circumstances. Sections 7, 8 and
9 shall survive the termination of this Agreement.
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11. Independent Contractor. Nothing herein shall be construed
to create an employer-employee, agency, master and servant or joint venture
relationship or other association between the Parent or the Company and the
Consultant, and the Consultant shall not be deemed to be an employee of the
Parent or the Company for any purpose, including without limitation for the
purpose of participating in any employee benefit plan of the Parent or the
Company. The Consultant agrees that he will not hold himself out to be an
employee of the Parent or the Company. The Consultant shall perform all services
under this Agreement as, and shall remain, an independent contractor. The
Consultant shall have no authority, express or implied, to make any contract or
agreement for, or on behalf of, or otherwise commit the Company or the Parent,
or their shareholders, affiliates or coventurers to any contract, commitment,
obligation, or liability binding on the Company or the Parent, and the Parent
and the Company do not assume any responsibility for proposals, guarantees, or
contracts entered into by the Consultant with others.
12. Risk of Loss. The Consultant assumes all risk of personal
injury or death to himself and all risk of damage to or loss of personal
property furnished by the Consultant in connection with the services to be
performed by the Consultant under this Agreement. The Consultant will abide by
the safety and security regulations of the Parent and the Company while on the
respective properties of the Parent and the Company.
13. Warranty. The Consultant warrants that entering into this
Agreement and performance of service hereunder will not conflict with any
obligation of the Consultant arising under any other contract or by operation of
law. The Consultant warrants that he has the right to disclose all information
transmitted to the Parent or the Company under this Agreement, and that the
services to be performed by the Consultant under this Agreement do not violate
or in any way infringe upon the rights of third parties, including property,
contractual, employment, trade secrets, proprietary information, and
nondisclosure rights, or any trademark, copyright or patent rights, and that
Consultant will not enter into any agreements or arrangements with third persons
that would result in the performance of such services violating or infringing
the rights of such persons.
14. Assignment. This agreement is a contract for the personal
services of the Consultant, and the Consultant may not assign this Agreement or
subcontract any services without first obtaining the written consent of the
Parent. The Parent may assign this Agreement to any subsidiary or affiliated
company or to any third party together with the business to which it pertains.
15. Governing Law. This Agreement is governed by, and is to be
construed and enforced in accordance with, the laws of the State of Delaware.
If, under such law, any portion of this Agreement is at any time deemed to be in
conflict with any applicable statute, rule, regulation or ordinance, such
portion shall be deemed to be modified or altered to conform thereto or, if that
is not possible, to be omitted from this Agreement; and the invalidity of any
such portion shall not affect the force, effect and validity of the remaining
portion hereof. The parties agree that all actions or proceedings initiated by
any party hereto and arising directly or indirectly out of this Agreement which
are brought pursuant to judicial proceedings shall be litigated in the State
courts of Delaware.
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16. Notices. All notices hereunder shall be in writing and
shall be given (and shall be deemed to have been duly received if so given) by
hand delivery, telegram, telex or telecopy, or by mail (registered or certified
mail, postage prepaid, return receipt requested) or by any courier service, such
as Federal Express, providing proof of delivery. All communications hereunder
shall be delivered to the respective parties at the following addresses:
If to the Parent, to:
Western Atlas Inc.
10205 Westheimer Road
P.O. Box 1407
Houston, Texas 77251
Attention: General Counsel
Houston, Texas 77042-3115
Attention: General Counsel
Fax: 713-266-1717
If to the Consultant, to:
Luis H. Ferran Arroyo
Avenida La Malinche No. 320
Colonia Colinas del Basques
Deleg, Tialplan, Mexico, D.F
Fax: (525) 532-5700
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
17. Miscellaneous. The Consultant shall terminate from
employment with the Company as of the Effective Time. This Agreement constitutes
the entire understanding between the Parent and the Consultant relating to the
consulting services to be rendered by the Consultant to the Parent and the
Company and cancels all prior written and oral agreements and understandings
with respect to the subject matter of this Agreement between the Company and the
Consultant, and the Consultant hereby waives any further payments under the
Employment Agreement, dated February 1, 1996, between the Company and the
Consultant, and any severance payments under any plan or agreement. This
Agreement may be amended only by a subsequent written agreement of the
Consultant and the Parent. This Agreement shall be binding upon and shall inure
to the benefit of the Consultant, his heirs, executors, administrators,
beneficiaries and permitted assigns and shall be binding upon and shall inure to
the benefit of the Parent and its successors and permitted assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this
agreement as of the year and day first above written.
WESTERN ATLAS INC.
By: /s/ Richard White
----------------------------------------
Richard White
/s/ Luis H. Ferran Arroyo
----------------------------------------
Luis H. Ferran Arroyo
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<PAGE> 1
Exhibit (c)(10)
RIGHTS AGREEMENT
Rights Agreement (this "Agreement") dated as of July 17, 1997, between 3-D
Geophysical, Inc., a Delaware corporation (the "Company"), and American
Securities Transfer & Trust, Inc. (the "Rights Agent").
R E C I T A L S
The Board of Directors of the Company has authorized and declared the
payment of a dividend of one preferred share purchase right (the "Right") for
each share of Common Stock (as defined in Section 1) outstanding on the Record
Date (as defined in Section 1) and has authorized the issuance of one Right for
each share of Common Stock issued between the Record Date and the Distribution
Date (as defined in Section 1), and, in certain cases following the Distribution
Date. Each Right represents, as of the Record Date, the right to purchase one
one-thousandth of a share of Preferred Stock (as defined in Section 1) upon the
terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth in this Agreement, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) (i) "Acquiring Person" means any Person who or which, together with
all Affiliates and Associates of such Person, is (or has previously been, at any
time after the date of this Agreement, whether or not such Person(s) continues
to be) the Beneficial Owner of 15% or more of the Common Stock then outstanding
(determined without taking into account any securities exercisable or
exchangeable for, or convertible into, Common Stock, other than any such
securities beneficially owned by the Acquiring Person and Affiliates and
Associates of such Person). However, "Acquiring Person" shall not include any
Exempt Person.
(ii) A Person does not become an "Acquiring Person" solely as the result
of (A) an acquisition of Common Stock by the Company or any of its Subsidiaries
which, by reducing the number of shares outstanding, increases the proportionate
number of shares beneficially owned by such Person to 15% or more of the Common
Stock then outstanding as determined pursuant to Section 1(a)(i), or (B) such
Person becoming the Beneficial Owner of 15% or more of the Common Stock then
outstanding as determined pursuant to Section 1(a)(i) solely as a result of an
Exempt Event; provided, however, that if a Person becomes the Beneficial Owner
of 15% or more of the Common Stock then outstanding as determined pursuant to
Section 1(a)(i) solely by reason of such a share acquisition by the Company or
the occurrence of such an Exempt Event and such Person shall, after becoming the
Beneficial Owner of such Common Stock, become the Beneficial Owner of additional
shares of Common Stock constituting 1% or more of the then outstanding shares of
Common Stock by any means whatsoever (other than as a result of the subsequent
occurrence of an Exempt Event, a stock dividend or a subdivision of the Common
Stock into a larger number of shares or a similar transaction), then such Person
shall be deemed to be an "Acquiring Person; or (C) the inadvertent acquisition
of beneficial ownership of 15% or more of the
<PAGE> 2
Common Stock of the Company if the Board of Directors determines in good faith
that such acquisition was inadvertent and such Person immediately divests itself
of a sufficient number of shares of Common Stock so that such Person could no
longer be an "Acquiring Person"; or (D), if such Person is an Institutional
Investor, such Institutional Investor becoming the Beneficial Owner of 15% or
more of the Common Stock then outstanding as determined pursuant to Section
1(a)(i) solely by reason of such Institutional Investor's Regular Trading
Activities; provided, however, that if an Institutional Investor becomes the
Beneficial Owner of 20% or more of the Common Stock other than solely as the
result of the events described in clause (B) or (C) of this Section 1(a)(ii)
(and in the case of clause (C), such Institutional Investor immediately divests
itself of a sufficient number of shares of Common Stock as that it is no longer
the Beneficial Owner of 20% or more of the Common Stock), then such
Institutional Investor shall be deemed an "Acquiring Person."
(b) "Affiliate" of a Person has the meaning given to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act, as in effect
on the date of this Agreement.
(c) "Associate" of a Person has the meaning given to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act, as in effect
on the date of this Agreement.
(d) Except as provided below, a Person is the "Beneficial Owner" of, and
"beneficially owns," any securities:
(i) which such Person or any Affiliate or Associate of such Person
beneficially owns, directly or indirectly;
(ii) which such Person or any Affiliate or Associate of such Person
has, directly or indirectly, the right or obligation (whether or not then
exercisable or effective) to acquire pursuant to any agreement, arrangement or
understanding (whether or not in writing), or upon the exercise of conversion
rights, exchange rights, rights (other than these Rights), warrants or options,
or otherwise; provided, however, that a Person will not be deemed the Beneficial
Owner of, or to beneficially own, securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any Affiliate or Associate
of such Person until such tendered securities are accepted for purchase or
exchange; and provided further, that prior to the occurrence of a Triggering
Event, a Person will not be deemed the Beneficial Owner of, or to beneficially
own, securities obtainable upon exercise of the Rights;
(iii) which such Person or any Affiliate or Associate of such Person
has, directly or indirectly, the right (whether or not then exercisable or
effective) to vote, or to direct the voting of, pursuant to any agreement,
arrangement or understanding (whether or not in writing); provided, however,
that a Person shall not be deemed the Beneficial Owner of, or to beneficially
own, any security pursuant to this clause (iii) if the agreement, arrangement or
understanding to vote, or to direct the voting of, such security (A) arises
solely from a revocable proxy or consent given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the Exchange Act
and applicable rules and regulations thereunder and (B) is not also then
<PAGE> 3
reportable on Schedule 13D under the Exchange Act (or any comparable or
successor schedule or report);
(iv) which such Person or any Affiliate or Associate of such Person
has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act or any successor
provision); or
(v) which are beneficially owned, directly or indirectly, by any
other Person or any Affiliate or Associate of such other Person with whom such
Person or any Affiliate or Associate of such Person has any agreement,
arrangement or understanding (whether or not in writing) for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as described in
subparagraph (iii) of this Section 1(d)) or disposing of any securities of the
Company.
Nothing in this Section 1(d) causes a Person engaged in business as an
underwriter of securities to be the "Beneficial Owner" of, or to "beneficially
own," any securities acquired through such Person's participation in good faith
in a firm commitment underwriting until the expiration of 40 days after the date
of such acquisition.
Notwithstanding anything in this Agreement to the contrary, for purposes
of this Agreement, no Person is to be treated as the "Beneficial Owner" of, or
to "beneficially own," any securities owned by any other Person that is an
Exempt Person.
(e) "Board of Directors" means the Board of Directors of the Company, as
the same is constituted from time to time, or if the Company ceases to exist as
a result of a Business Combination or otherwise, the board of directors of the
Company's successor, if any.
(f) "Business Combination" has the meaning set forth in Section 13(a).
(g) "Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in the States of New York or Colorado are authorized
or obligated by law or executive order to close.
(h) "Close of Business" on any given date means 5:00 p.m., Denver,
Colorado time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 p.m., Denver, Colorado time, on the next
succeeding Business Day.
(i) "Common Stock" when used in any context applicable prior to a Business
Combination means the Common Stock, par value $.01 per share, of the Company (as
the same may be changed by reason of any combination, subdivision or
reclassification of the Common Stock). "Common Stock" when used with reference
to any Person (other than the Company prior to a Business Combination) means
shares of capital stock of such Person (if such Person is a corporation) of any
class or series, or units of equity interests in such Person (if such Person is
not a corporation) of any class or series, the terms of which shares or units do
not limit (as a fixed amount and not merely in proportional terms) the amount of
dividends or income payable or distributable on such shares or units or the
amount of assets distributable on such
<PAGE> 4
shares or units upon any voluntary or involuntary liquidation, dissolution or
winding up of such Person and do not provide that such shares or units are
subject to redemption at the option of such Person, or any shares of capital
stock or units of equity interests into which the foregoing shall be
reclassified or changed; provided, however, that if at any time there are more
than one such class or series of capital stock of or equity interests in such
Person, "Common Stock" of such Person will include all such classes and series
substantially in the proportion of the total number of shares or other units of
each such class or series outstanding at such time.
(j) "Current Market Price" per share of Common Stock, Preferred Stock or
Equivalent Shares on any date is the average of the daily closing prices per
share of such Common Stock, Preferred Stock or Equivalent Shares for the 30
consecutive Trading Days (as such term is hereinafter defined) ending on the
last Trading Day immediately prior to such date for the purpose of any
computation under this Agreement except computations made pursuant to Section
11(a)(iv), and for the last Trading Day immediately prior to such date for the
purpose of any computation under Section 11(a)(iv); provided, however, that in
the event that the Current Market Price per share of Common Stock, Preferred
Stock or Equivalent Shares is determined during a period following the
announcement by the issuer of such Common Stock, Preferred Stock or Equivalent
Shares of (i) a dividend or distribution on such Common Stock, Preferred Stock
or Equivalent Shares other than a regular quarterly cash dividend, or (ii) any
subdivision, combination or reclassification of such Common Stock, Preferred
Stock or Equivalent Shares, and prior to the expiration of 30 Trading Days after
the "ex-dividend" date for such dividend or distribution or the record date for
such subdivision, combination or reclassification, then, and in each such case,
the "Current Market Price" must be appropriately adjusted to take into account
such dividend, distribution, subdivision, combination or reclassification. The
closing price for each Trading Day shall be the last sale price, regular way, on
such day, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, on such day, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the National Association of
Securities Dealers, Inc. Automated Quotation System ("Nasdaq") National Market
or, if the Common Stock, Preferred Stock or Equivalent Shares are not listed or
admitted to trading on the Nasdaq National Market, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal United States national securities exchange on which the Common
Stock, Preferred Stock or Equivalent Shares are listed or admitted to trading
or, if the Common Stock, Preferred Stock or Equivalent Shares are not listed or
admitted to trading on any United States national securities exchange, the last
quoted sale price on such day or, if not so quoted, the average of the high bid
and low asked prices in the over-the-counter market on such day, as reported by
Nasdaq or such other system then in use. If on any such day the Common Stock,
Preferred Stock or Equivalent Shares are not quoted by any such organization,
the average of the closing bid and asked prices on such day as furnished by a
professional market maker making a market in the Common Stock, Preferred Stock
or Equivalent Shares selected by a majority of the Board of Directors shall be
used. If no such market maker is making a market, the fair market value of such
shares on such day as determined in good faith by a majority of the Board of
Directors or the Board of Directors of the issuer of such Common Stock,
Preferred Stock or Equivalent Shares must be used, which determination must be
described in a
<PAGE> 5
statement filed with the Rights Agent and shall be final, binding and conclusive
for all purposes. The term "Trading Day" means a day on which the principal
United States national securities exchange on which the Common Stock, Preferred
Stock or Equivalent Shares are listed or admitted to trading is open for the
transaction of business or, if the Common Stock, Preferred Stock of Equivalent
Shares are not listed or admitted to trading on any United States national
securities exchange, but are traded in the over-the-counter market and reported
by Nasdaq, then any day for which Nasdaq reports the high bid and low asked
prices in the over-the-counter market, or if the Common Stock, Preferred Stock
or Equivalent Shares are not traded in the over-the-counter market and reported
by Nasdaq, then a Business Day. If the Common Stock, Preferred Stock or
Equivalent Shares have not been so listed or admitted to trading for 30 or more
Trading Days or traded in the over-the-counter market and reported by Nasdaq for
30 or more Trading Days, "Current Market Price" per share means the fair market
value per share as determined in good faith by a majority of the Board of
Directors, whose determination must be described in a statement filed with the
Rights Agent and shall be final, binding and conclusive for all purposes.
(k) "Distribution Date" means the earlier of (i) the day after the
Company's right to redeem the Rights pursuant to Section 23(a)(i) expires, and
(ii) the tenth Business Day after the Tender Offer Date. The Board of Directors
may, at its election, defer the date set forth in clause (ii) of the preceding
sentence to a specified later date or to an unspecified later date to be
determined by a subsequent action or event.
(l) "Equivalent Shares" means any class or series of capital stock of the
Company, other than the Preferred Stock, which is entitled to participate on a
proportional basis with the Preferred Stock in dividends and other
distributions, including distributions upon the liquidation, dissolution or
winding up of the Company. In calculating the number of any class or series of
Equivalent Shares for purposes of Section 11, the number of shares, or fractions
of a share, of such class or series of capital stock that is entitled to the
same dividend or distribution as a whole share of Preferred Stock shall be
deemed to be one share.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor statute.
(n) "Exchange Date" means the time at which the Rights are exchanged
pursuant to Section 11(a)(iv).
(o) "Exempt Event" means with respect to any Person, the acquisition by
such Person of Beneficial Ownership of Common Stock of the Company solely as a
result of the occurrence of a Triggering Event and the effect of such Triggering
Event on the last proviso of clause (ii) of the definition of Beneficial Owner,
other than a Triggering Event in which such Person becomes an Acquiring Person.
(p) "Exempt Person" means (i) the Company, (ii) any Subsidiary of the
Company, (ii) any employee benefit plan of the Company or of any Subsidiary of
the Company, and (iv) any Person holding Common Stock for any such employee
benefit plan or for employees of the Company or of any Subsidiary of the Company
pursuant
<PAGE> 6
to the terms of any such employee benefit plan.
(q) "Expiration Date" means the Close of Business on July 17, 2007.
(r) "Institutional Investor" shall mean a Person who is principally
engaged in the business of managing investment funds for unaffiliated securities
investors and, as part of such Person's duties as agent for fully managed
accounts, holds or exercises voting or dispositive power over shares of Common
Stock.
(s) "Person" means any individual, firm, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization or other entity, and shall include any "group" as that term is used
in Rule 13d-5(b) under the Exchange Act (or any successor provision).
(t) "Preferred Stock" means the Company's Junior Participating Preferred
Stock, par value $.01 per share, having the rights and preferences set forth in
the Certificate of Designation, Preferences and Rights of Junior Participating
Preferred Stock attached hereto as Exhibit A.
(u) "Principal Party" means (i) in the case of any Business Combination
described in clause (i), (ii) or (iii) of the first sentence of Section 13(a),
(A) the Person that is the issuer of any securities into which shares of Common
Stock of the Company are converted or for which they are exchanged in such
Business Combination or, if there is more than one such issuer, the issuer of
the Common Stock which has the greatest aggregate market value or (B) if no
securities are so issued, the Person that survives or results from such Business
Combination or, if there is more than one such Person, the Person the Common
Stock of which has the greatest aggregate market value; and (ii) in the case of
any Business Combination described in clause (iv) of the first sentence in
Section 13(a), the Person that receives the greatest portion of the assets or
earning power transferred pursuant to such Business Combination or, if each
Person that is a party to such Business Combination receives the same portion of
the assets or earning power so transferred or if the Person receiving the
greatest portion of the assets or earning power cannot reasonably be determined,
whichever of such Persons is the issuer of the Common Stock which has the
greatest aggregate market value; provided, however, that in any such case, if
the Common Stock of such Person is not at such time and has not been
continuously over the preceding 12-month period registered under Section 12 of
the Exchange Act and such Person is a direct or indirect Subsidiary of one or
more other Persons, then (x) "Principal Party" refers to whichever of such other
Persons has Common Stock that is and has been continuously over the preceding
12-month period registered under Section 12 of the Exchange Act; (y) if the
Common Stocks of two or more of such other Persons are and have been so
registered, "Principal Party" refers to whichever of such other Persons is the
issuer of the Common Stock which has the greatest aggregate market value; or (z)
if the Common Stock of none of such other Persons has been so registered,
"Principal Party" refers to whichever of such other Persons (other than an
individual) is the Person which has the equity securities with the greatest
aggregate market value. In case such Person is owned, directly or indirectly, by
a joint venture formed by two or more Persons that are not owned, directly or
indirectly, by the same Person, the rules set forth above apply to each of the
chains of ownership having an interest in such joint venture as if such Person
were a
<PAGE> 7
Subsidiary of both or all of such joint venturers and the Principal Parties in
each such chain shall bear the obligations set forth in Section 13 in the same
ratio as their direct or indirect interests in such Person bear to the total of
such interests.
(v) "Purchase Price" with respect to each Right is initially $50.00 per
one one-thousandth of a share of Preferred Stock, shall be subject to adjustment
from time to time as provided in Sections 11 and 13, and shall be payable in
lawful money of the United States of America in cash or by certified check or
bank draft payable to the order of the Company.
(w) "Record Date" means the Close of Business on July 18, 1997.
(x) "Redemption Date" means the time at which the Rights are scheduled to
be redeemed as provided in Section 23.
(y) "Redemption Price" has the meaning given to such term in Section 23.
(z) "Regular Trading Activities" means trading activities undertaken in
the Institutional Investor's normal course of business and not for the purpose
of exercising, either alone or in concert with any other Person, power to direct
or cause the direction of the management and policies of the Company.
(aa) "Rights Agent" means American Securities Transfer & Trust, Inc. or
any Co-Rights Agent or Successor Rights Agent appointed by the Company pursuant
to Section 2.
(bb) "Securities Act" means the Securities Act of 1933, as amended, and
any successor statute.
(cc) "Stock Acquisition Date" means the first date (including, without
limitation, any such date which is on or after the date of this Agreement and
prior to the issuance of the Rights) of public disclosure by the Company, an
Acquiring Person or otherwise that a Person has become an Acquiring Person.
(dd) "Subsidiary" has the meaning given to such term in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on the date
of this Agreement.
(ee) "Tender Offer Date" means the date of commencement or public
disclosure of an intention to commence (including any such commencement or
public disclosure which occurs on or after the date of this Agreement and prior
to the issuance of the Rights) a tender offer or exchange offer by a Person if,
after acquiring the maximum number of securities sought pursuant to such offer,
such Person, or any Affiliate or Associate of such Person, would be an Acquiring
Person.
(ff) "Triggering Event" occurs when a Person becomes an Acquiring Person.
<PAGE> 8
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issuance of Rights Certificates.
(a) Until the Distribution Date: (i) the Rights shall be issued in respect
of and shall be evidenced by the certificates representing the shares of Common
Stock issued and outstanding on the Record Date and shares of Common Stock
issued or which become outstanding after the Record Date and prior to the
earliest of the Distribution Date, the Redemption Date, the Exchange Date and
the Expiration Date (which certificates for Common Stock shall be deemed to also
be certificates evidencing the Rights), and not by separate certificates; (ii)
the registered holders of such shares of Common Stock shall also be the
registered holders of the Rights associated with such shares; and (iii) the
Rights shall be transferable only in connection with the transfer of shares of
Common Stock and the surrender for transfer of any certificate for such shares
of Common Stock shall also constitute the surrender for transfer of the Rights
associated with the shares of Common Stock represented thereby. As soon as
practicable after the Company has notified the Rights Agent of the occurrence of
the Distribution Date, the Company will prepare and execute, and the Company
will deliver to the Rights Agent to be countersigned, which the Rights Agent
shall do, and the Rights Agent shall mail, by first-class, insured, postage
prepaid mail, to each record holder of the Common Stock as of the Close of
Business on the Distribution Date, as shown by the records of the Company, at
the address of such holder shown on such records, one or more certificates
evidencing the Rights ("Rights Certificates"), in substantially the form of
Exhibit B hereto, evidencing one Right (as adjusted from time to time pursuant
to this Agreement) for each share of Common Stock so held. From and after the
Distribution Date, the Rights will be evidenced solely by such Rights
Certificates. In the event that an adjustment in the number of Rights per share
of Common Stock has been made pursuant to Section 11(o), at the time of
distribution of the Rights Certificates, the Company may make the necessary and
appropriate adjustments (in accordance with Section 14(a)) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights.
(b) On the Record Date, or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to Purchase Preferred Stock, in
substantially the form of Exhibit C hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of Common Stock as of
the close of business on the Record Date (other than any Acquiring Person or any
Associate or Affiliate of any Acquiring Person), at the address of such holder
shown on the records of the Company. With respect to certificates for Common
Stock outstanding as of the Record Date, until the Distribution Date, the Rights
will be evidenced by such certificates registered in the names of the holders
thereof together with the Summary of Rights. Until the Distribution Date (or the
earlier of the Redemption Date and the Expiration Date), the surrender for
transfer of any certificate for Common Stock outstanding on the Record Date,
with or without a copy of the Summary of Rights, shall
<PAGE> 9
also constitute the transfer of the Rights associated with the Common Stock
represented thereby.
(c) Rights shall be issued in respect of all shares of Common Stock which
are issued or sold by the Company after the Record Date but prior to the
earliest of the Distribution Date, the Redemption Date, the Exchange Date or the
Expiration Date. In addition, in connection with the issuance or sale of Common
Stock by the Company following the Distribution Date and prior to the earliest
of the Redemption Date, the Exchange Date or the Expiration Date, the Company
shall, with respect to Common Stock so issued or sold pursuant to (i) the
exercise of stock options issued prior to the Distribution Date or under any
employee plan or arrangement created prior to the Distribution Date, or (ii)
upon the exercise, conversion or exchange of securities issued by the Company
prior to the Distribution Date, issue Rights and Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (x) no such Rights and Rights Certificates
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Rights Certificates
would be issued; and (y) no such Rights and Rights Certificates shall be issued,
if, and to the extent that, appropriate adjustment shall otherwise have been
made in lieu of the issuance thereof. Certificates issued after the Record Date
representing shares of Common Stock outstanding on the Record Date or shares of
Common Stock issued after the Record Date but prior to the earliest of the
Distribution Date, the Redemption Date, the Exchange Date and the Expiration
Date shall have impressed, printed, or written on, or otherwise affixed to them
a legend substantially in the following form:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between 3-D Geophysical,
Inc. and American Securities Transfer & Trust, Inc., as Rights Agent,
dated as of July 17, 1997 (the "Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a copy of which is on file at
the principal executive offices of 3-D Geophysical, Inc. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. 3-D Geophysical, Inc. will mail to the holder of this
certificate a copy of the Rights Agreement without charge after receipt of
a written request therefor. Under certain circumstances, as set forth in
the Rights Agreement, Rights that were, are or become beneficially owned
by Acquiring Persons or their Associates or Affiliates (as such terms are
defined in the Rights Agreement) may become null and void and the holder
of any of such Rights (including any subsequent holder) shall not have any
right to exercise such Rights.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the form of election to purchase shares
and form of assignment to be printed on the reverse thereof) shall be in
substantially the form of Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem
<PAGE> 10
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Rights may from time to time be listed or any securities association on
whose interdealer quotation system the Rights may be from time to time
authorized for quotation, or to conform to usage. Subject to the provisions of
this Agreement, the Rights Certificates, whenever issued, shall be dated as of
the Distribution Date, and on their face shall entitle the holders thereof to
purchase such number of shares of Preferred Stock as shall be set forth therein
at the Purchase Price set forth therein, but the number and kind of such
securities and the Purchase Price shall be subject to adjustment as provided in
this Agreement.
(b) Notwithstanding any other provision of this Agreement, (i) any Rights
Certificate issued pursuant to this Agreement that represents Rights
beneficially owned or formerly beneficially owned, on or after the earlier of
the Distribution Date and the Stock Acquisition Date, by a Person known by the
Company to be: (A) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person; (B) a direct or indirect transferee of an Acquiring Person (or
of an Associate or Affiliate of such Acquiring Person) who becomes or becomes
entitled to be a transferee after the Acquiring Person becomes such; or (C) a
direct or indirect transferee of an Acquiring Person (or of an Associate or
Affiliate of such Acquiring Person) who becomes or becomes entitled to be a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (x) a direct or indirect transfer
(whether or not for consideration) from the Acquiring Person (or from an
Associate or Affiliate of such Acquiring Person) to holders of equity interests
in such Acquiring Person (or to holders of equity interests in an Associate or
Affiliate of such Acquiring Person) or to any Person with whom such Acquiring
Person (or an Associate or Affiliate of such Acquiring Person) has any
continuing agreement, arrangement or understanding regarding the transferred
Rights, or (y) a direct or indirect transfer which a majority of the Board of
Directors has determined is part of a plan, arrangement or understanding which
has as a primary purpose or effect the avoidance of Section 7(e); or (ii) any
Rights Certificate issued pursuant to this Agreement upon transfer, exchange,
replacement or adjustment of any other Rights Certificate beneficially owned by
a Person referred to in this Section 4(b), shall contain (to the extent
feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are defined
in the Rights Agreement). Accordingly, this Rights Certificate and the
Rights represented hereby may become null and void in the circumstances
specified in Section 7(e) of the Rights Agreement.
Section 5. Execution, Countersignature and Registration.
(a) Each Rights Certificate shall be executed on behalf of the Company by
the Company's Chairman, Chief Executive Officer, President or any Vice
President, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or a facsimile thereof which shall be attested by the
Company's Secretary or an
<PAGE> 11
Assistant Secretary, either manually or by facsimile signature. Each Rights
Certificate shall be countersigned by the Rights Agent either manually or, if
permitted by the Company, by facsimile signature and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed a Rights Certificate shall cease to be such officer of the Company
before countersignature by the Rights Agent and issuance and delivery by the
Company, such Rights Certificate nevertheless may be countersigned by the Rights
Agent and issued and delivered with the same force and effect as though the
Person who signed such Rights Certificate had not ceased to be such officer of
the Company; and any Rights Certificate may be signed on behalf of the Company
by any Person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Agreement any such
Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent shall keep or cause
to be kept, at its principal corporate trust office, books for registration and
transfer of the Rights Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Rights Certificates, the
number of Rights evidenced by each Rights Certificate, and the certificate
number and the date of issuance of each Rights Certificate.
Section 6. Transfer, Division, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 14, at any time after the Close
of Business on the Distribution Date and at or prior to the Close of Business on
the earliest of the Redemption Date, the Exchange Date or the Expiration Date,
any Rights Certificate or Rights Certificates may be transferred, divided,
combined or exchanged for another Rights Certificate or Rights Certificates,
entitling the registered holder to purchase a like number of shares of Preferred
Stock (or, following a Triggering Event or a Business Combination, other
securities, cash or other property, as the case may be) as the Rights
Certificate or Rights Certificates surrendered then entitled such holder to
purchase. Any registered holder desiring to transfer, divide, combine or
exchange any Rights Certificate shall make such request in writing delivered to
the Rights Agent, and shall surrender the Rights Certificate or Rights
Certificates to be transferred, divided, combined or exchanged at the principal
corporate office of the Rights Agent. Thereupon the Rights Agent shall
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. As a condition to such
transfer, division, combination or exchange, the Company may require payment by
the surrendering holder of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection therewith. Neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder
shall have duly completed and executed the form of assignment on the reverse
side of such Rights Certificate and shall have provided such additional evidence
of the identity of the Beneficial Owner (or such former or proposed Beneficial
Owner) thereof or such Beneficial Owner's Affiliates or Associates as the
Company shall reasonably request.
(b) Upon receipt by the Company and the Rights Agent of evidence
<PAGE> 12
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will make and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature by the Rights Agent and delivery
to the registered owner in lieu of the Rights Certificate so lost, stolen,
destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Each Right shall entitle (except as otherwise provided in this
Agreement) the registered holder thereof, upon the exercise thereof as provided
in this Agreement, to purchase, for the Purchase Price, at any time after the
Distribution Date and prior to the earliest of the Expiration Date, the Exchange
Date or the Redemption Date, one one-thousandth (1/1000) of a share of Preferred
Stock (or, following a Triggering Event or a Business Combination, other
securities, cash or other assets, as the case may be), subject to adjustment
from time to time as provided in Sections 11 and 13.
(b) The registered holder of any Rights Certificate may exercise the
Rights evidenced thereby (except as otherwise provided in this Agreement) in
whole or in part (except that no fraction of a Right may be exercised) at any
time after the Distribution Date and prior to the earliest of the Expiration
Date, the Exchange Date or the Redemption Date, by surrendering the Rights
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal corporate trust office of
the Rights Agent, together with payment of the Purchase Price for each one
one-thousandth of a share of Preferred Stock (or, following a Triggering Event
or a Business Combination, other securities, cash or other assets, as the case
may be) as to which the Rights are exercised.
(c) Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase duly executed, accompanied by payment of
the Purchase Price for each one one-thousandth of a share of Preferred Stock
(or, following a Triggering Event or a Business Combination, other securities,
cash or other assets, as the case may be) to be purchased and an amount in cash,
certified bank check or bank draft payable to the order of the Company equal to
any applicable transfer tax required to be paid by the surrendering holder
pursuant to Section 9(d), the Rights Agent shall, subject to the provisions of
this Agreement, thereupon promptly (i)(A) requisition from any transfer agent
for the Preferred Stock (or make available, if the Rights Agent is the transfer
agent for the Preferred Stock) certificates for the total number of one
one-thousandths of a share of Preferred Stock to be purchased (and the Company
hereby irrevocably authorizes its transfer agent to comply with all such
requests), or (B) if the Company shall have elected to deposit the total number
of shares of Preferred Stock issuable upon exercise of the Rights with a
depositary agent, requisition from the depositary agent depositary receipts
representing such number of one one-thousandths of a share of Preferred Stock as
are to be purchased (in which case certificates for the Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company shall direct the depositary agent to
<PAGE> 13
comply with such request; (ii) after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder; and (iii) if appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional shares
in accordance with Section 14 and, promptly after receipt thereof, cause the
same to be delivered to or upon the order of the registered holder of such
Rights Certificate. In the event that the Company is obligated to issue other
securities (including shares of Common Stock) of the Company, pay cash and/or
distribute other property pursuant to this Agreement, the Company will make all
arrangements necessary so that such other securities, cash and/or other property
are available for distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights Certificate shall exercise
less than all the Rights evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to, or upon the order of, the registered holder of
such Rights Certificate or to his duly authorized assigns, subject to the
provisions of Section 6 and Section 14.
(e) Notwithstanding anything in this Agreement to the contrary, any Rights
that are or were formerly beneficially owned on or after the earlier of the
Distribution Date and the Stock Acquisition Date by (i) an Acquiring Person or
any Associate or Affiliate of an Acquiring Person; (ii) a direct or indirect
transferee of an Acquiring Person (or of an Associate or Affiliate of such
Acquiring Person) who becomes or becomes entitled to be a transferee after the
Acquiring Person becomes such; or (iii) a direct or indirect transferee of an
Acquiring Person (or of an Associate or Affiliate of such Acquiring Person) who
becomes or becomes entitled to be a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either (A) a
direct or indirect transfer (whether or not for consideration) from the
Acquiring Person (or from an Associate or Affiliate of such Acquiring Person) to
holders of equity interests in such Acquiring Person (or to holders of equity
interests in any Associate or Affiliate of such Acquiring Person) or to any
Person with whom the Acquiring Person (or an Associate or Affiliate of such
Acquiring Person) has any continuing agreement, arrangement or understanding
regarding the transferred Rights, or (B) a direct or indirect transfer which a
majority of the Board of Directors determines is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall, immediately upon the occurrence of a Triggering Event and
without any further action, be null and void and no holder of such Rights shall
have any rights whatsoever with respect to such Rights whether under this
Agreement or otherwise; provided, however, that, in the case of transferees
described in clause (ii) or clause (iii) of this Section 7(e), any Rights
beneficially owned by such transferee shall be null and void only if and to the
extent such Rights were formerly beneficially owned by a Person who was, at the
time such Person beneficially owned such Rights, or who later became, an
Acquiring Person or an Affiliate or Associate of such Acquiring Person. The
Company shall use all reasonable efforts to ensure that the provisions of this
Section 7(e) and Section 4(b) are complied with, but shall have no liability to
any holder of a Rights Certificate or to any other Person as a result of the
Company's failure to make, or any delay in making (including any such failure or
delay by the Board of Directors), any determinations with respect to an
Acquiring Person or its Affiliates, Associates or transferees under this Section
7(e) or
<PAGE> 14
any other provision of this Agreement.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to the registered holder of a Rights Certificate upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former or proposed Beneficial Owner)
thereof or the Affiliates or Associates of such Beneficial Owner (or former or
proposed Beneficial Owner) as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All Rights
Certificates surrendered for the purpose of exercise, transfer, division,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu therefor except as expressly permitted by
the provisions of this Agreement. The Company shall deliver to the Rights Agent
for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Preferred Stock.
(a) The Company covenants and agrees that it will cause to be reserved and
kept available at all times out of its authorized and unissued shares of
Preferred Stock or its authorized and issued shares of Preferred Stock held in
its treasury (and, following the occurrence of a Triggering Event or a Business
Combination, out of its authorized and unissued shares of Common Stock and/or
other securities or out of its authorized and issued shares of Common Stock
and/or other securities held in its treasury) free from preemptive rights or any
right of first refusal, a sufficient number of shares of Preferred Stock (and,
following the occurrence of a Triggering Event or a Business Combination, shares
of Common Stock and/or other securities) to permit the exercise in full of all
Rights from time to time outstanding.
(b) The Company further covenants and agrees, so long as the Preferred
Stock (and, following the occurrence of a Triggering Event or a Business
Combination, shares of Common Stock and/or other securities) issuable upon the
exercise of Rights may be listed on any United States national securities
exchange or quoted on any automated quotation system, to use its best efforts to
cause, from and after the time that the Rights become exercisable, all such
shares and/or other securities reserved for such issuance to be listed on such
exchange or quoted on such automated quotation system upon official notice of
issuance upon such exercise.
(c) The Company further covenants and agrees that it will take all such
<PAGE> 15
action as may be necessary to ensure that all shares of Preferred Stock (and,
following the occurrence of a Triggering Event or a Business Combination, shares
of Common Stock and/or other securities) delivered upon the exercise of Rights
shall, at the time of delivery of the certificates for such shares and/or such
other securities (subject to payment of the Purchase Price), be duly and validly
authorized and issued, fully paid, nonassessable, freely tradeable, not subject
to liens or encumbrances, and free of preemptive rights, rights of first refusal
or any other restrictions or limitations on the transfer or ownership thereof,
of any kind or nature whatsoever.
(d) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the original issuance or delivery of the Rights
Certificates or of any certificates for shares of Preferred Stock (or Common
Stock and/or other securities, as the case may be) upon the exercise of Rights.
The Company shall not, however, be required to (i) pay any transfer tax which
may be payable in respect of any transfer involved in the issuance or delivery
of any Rights Certificates or the issuance or delivery of any certificates for
shares of Preferred Stock (or Common Stock and/or other securities as the case
may be) to a Person other than, or in a name other than that of, the registered
holder of the Rights Certificate evidencing Rights surrendered for exercise; or
(ii) transfer or deliver any Rights Certificate or issue or deliver any
certificates for shares of Preferred Stock (or Common Stock and/or other
securities as the case may be) upon the exercise of any Rights until any such
tax shall have been paid (any such tax being payable by the holder of such
Rights Certificate at the time of surrender) or until it has been established to
the Company's satisfaction that no such tax is due.
(e) The Company shall use its best efforts (i) as soon as practicable
following a Triggering Event (provided the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii)), or as soon as is required by law following the Distribution
Date, as the case may be, to prepare and file a registration statement on an
appropriate form under the Securities Act with respect to the securities
purchasable upon exercise of the Rights; (ii) to cause such registration
statement to become effective as soon as practicable after such filing; and
(iii) to cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Securities Act) until
the earlier of (A) the date as of which Rights are no longer exercisable for
such securities or (B) the Expiration Date. The Company shall also use its best
efforts to take such action as may be necessary or appropriate under, or to
ensure compliance with, the securities or "blue sky" laws of the various states
in connection with the exercise of the Rights. The Company may temporarily
suspend, for a period of time not to exceed 90 days after the date of a
Triggering Event, the exercisability of the Rights in order to prepare and file
such registration statement and permit it to become effective. Upon any such
suspension, the Company shall make a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained and until a registration statement
has been declared effective under the Securities Act.
<PAGE> 16
Section 10. Preferred Stock Record Date. Each Person in whose name any
certificate for shares of Preferred Stock (or Common Stock and/or other
securities, as the case may be) is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Preferred
Stock (or Common Stock and/or other securities, as the case may be) represented
thereby on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and any applicable transfer taxes) was made; provided, however,
that if the date of such surrender and payment is a date upon which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares (or Common Stock and/or such other
securities, as the case may be) on, and such certificate shall be dated, the
next succeeding Business Day on which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are open.
Section 11. Adjustments to Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number and kind of securities, cash and other
property obtainable upon exercise of each Right and the number of Rights
outstanding shall be subject to adjustment from time to time as provided in this
Section 11.
(a) (i) In the event the Company shall at any time on or after the date of
this Agreement (A) pay a dividend or make a distribution on the Preferred Stock
payable in shares of Preferred Stock, (B) subdivide (by a stock split or
otherwise) the outstanding Preferred Stock into a larger number of shares, (C)
combine (by a reverse stock split or otherwise) the outstanding Preferred Stock
into a smaller number of shares, or (D) issue any securities in a
reclassification of the Preferred Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the surviving
corporation), then in each such event the Purchase Price and the Redemption
Price set forth in Section 23, as each is in effect at the time of the record
date for such dividend or distribution, or of the effective date of such
subdivision, combination or reclassification, shall be proportionately adjusted
by multiplying the Purchase Price and such Redemption Price by a fraction the
numerator of which shall be the total number of shares of Preferred Stock
outstanding immediately prior to the occurrence of such event and the
denominator of which shall be the total number of shares of Preferred Stock
outstanding immediately following the occurrence of such event. If an event
occurs which would require an adjustment under both this Section 11(a)(i) and
Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall be
in addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii).
(ii) Upon the first occurrence of a Triggering Event, proper
provision shall be made so that each holder of a Right, except as otherwise
provided in this Agreement, shall thereafter have the right to receive, and the
Company shall issue, upon exercise thereof at the then-current Purchase Price
required to be paid in order to exercise a Right in accordance with the terms of
this Agreement, in lieu of the number of one one-thousandths of a share of
Preferred Stock or other securities receivable upon exercise of a Right prior to
the occurrence of the Triggering Event, such number of shares of Common Stock of
the Company as shall equal the result obtained by (x)
<PAGE> 17
multiplying the then-current Purchase Price by the number of one-thousandths of
a share of Preferred Stock or other securities for which a Right was then
exercisable (without giving effect to such Triggering Event) and (y) dividing
that product by 50% of the Current Market Price per share of Common Stock on the
date of the occurrence of the Triggering Event (such number of shares being
referred to as the "Adjustment Shares"); provided, however, that if the
transaction or event that would otherwise give rise to the foregoing adjustment
is also subject to the provisions of Section 13, then only the provisions of
Section 13 shall apply and no adjustment shall be made pursuant to this Section
11(a)(ii). Upon the occurrence of such Triggering Event, the Purchase Price
required to be paid in order to exercise a Right shall be unchanged, and the
Purchase Price shall be appropriately adjusted to reflect, and shall thereafter
mean, the amount required to be paid per share of Common Stock upon exercise of
a Right.
(iii) In lieu of issuing shares of Common Stock in accordance with
Section 11(a)(ii), the Company may, if a majority of the Board of Directors
determines that such action is necessary or appropriate and not contrary to the
interests of holders of Rights (and, in the event that the number of shares of
Common Stock which are authorized by the Company's certificate of incorporation,
but which are not outstanding or reserved for issuance for purposes other than
upon exercise of the Rights, are not sufficient to permit the exercise in full
of the Rights in accordance with Section 11(a)(ii), the Company shall) take one
or more of the following actions: (A) reduce (but in no event less than the
Current Market Price per share of Common Stock) the Purchase Price required to
be paid in order to exercise a Right by any amount (the "Reduction Amount"), in
which event the number of Adjustment Shares and/or the amount of any Substitute
Consideration (as hereinafter defined) issuable in respect of each Right (the
Adjustment Shares, if any, and the Substitute Consideration, if any, issuable in
respect of a Right are herein collectively referred to as the "Total
Consideration") shall be reduced so that the aggregate value of the Total
Consideration issuable in respect of each Right is equal to the Current Value
(as hereinafter defined) less the Reduction Amount (such difference, the
"Adjusted Current Value"); and/or (B) make adequate provision with respect to
each Right to substitute for all or part of the Adjustment Shares otherwise
obtainable upon exercise of a Right: (1) cash, (2) other equity securities of
the Company (including, without limitation, shares, or units of shares, of
preferred stock which a majority of the Board of Directors have determined
(which determination shall be final, binding and conclusive for all purposes) to
have the same value as shares of Common Stock (such shares or units of preferred
stock being referred to as "Common Stock Equivalents")), (3) debt securities of
the Company, (4) other assets, or (5) any combination of the foregoing
(collectively, "Substitute Consideration") having an aggregate value which, when
added to the value of the Adjustment Shares (if any) in respect of which no
substitution is being made, is equal to the Adjusted Current Value. If a
majority of the Board of Directors determines to issue or deliver any equity
securities (other than Common Stock or Common Stock Equivalents), debt
securities and/or other assets pursuant to this Section 11(a)(iii), the value of
such securities and/or assets shall be determined by a majority of the Board of
Directors based upon the advice of a nationally recognized investment banking
firm selected by a majority of the Board of Directors (which determination shall
be final, binding and conclusive for all purposes). If the Company is required
to make adequate provision to deliver value pursuant to the first sentence of
this Section 11(a)(iii) and the Company shall not have made such adequate
provision to deliver value within ninety (90) days following the
<PAGE> 18
first occurrence of a Triggering Event (the "Substitution Period"), then
notwithstanding any provision of Section 11(a)(ii) or this Section 11(a)(iii) to
the contrary, the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase Price, shares
of Common Stock (to the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the excess of the Current
Value over the Purchase Price. If both Common Stock and cash are to be delivered
pursuant to the preceding sentence, amounts of both Common Stock and cash shall
be delivered upon surrender of each Right in a ratio of Common Stock to cash
that bears the same ratio as the total value of all Common Stock to be delivered
(as determined pursuant to this Section 11(a)(iii)) bears to the total value of
all cash to be delivered; provided, however, that the Company may adjust such
ratio to avoid issuing any fractional shares of Common Stock so long as the
method of adjustment is applied consistently to each holder of Rights entitled
to receive value thereon pursuant to this Section 11(a)(iii). To the extent that
the Company determines that some action is to be taken pursuant to the first
and/or third sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Rights, and (y) may suspend the exercisability of the Rights
but in no event to a time later than the expiration of the Substitution Period.
In the event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect. Upon any change in the Adjustment Shares obtainable upon
exercise of a Right pursuant to this Section 11(a)(iii), the Purchase Price
shall thereafter mean the amount, if any, required to be paid upon exercise of a
Right for the Adjustment Shares, if any, and the Substitute Consideration, if
any, then issuable or deliverable upon exercise of a Right, and a majority of
the Board of Directors shall make any necessary provisions to ensure that the
provisions of Section 11(e) shall thereafter apply as appropriate to the Total
Consideration. For purposes of this Section 11(a)(iii), (A) "Current Value"
shall be the product derived by multiplying (x) the number of Adjustment Shares
issuable in respect of each Right determined under Section 11(a)(ii), by (y) the
Current Market Price per share of Common Stock on the date of the Triggering
Event; and (B) the value of each share of Common Stock and each share or unit of
any "Common Stock Equivalent" shall be deemed conclusively to be equal to the
Current Market Price per share of the Common Stock on the date of the Triggering
Event.
(iv) A majority of the Board of Directors may, at its option, at any
time and from time to time after the first occurrence of a Triggering Event,
cause the Company to exchange, for all or part of the then-outstanding and
exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 7(e)), shares of Common Stock or Common
Stock Equivalents at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date of this Agreement (such exchange ratio
being hereinafter referred to as the "Exchange Ratio"). Any partial exchange
shall be effected on a pro rata basis based on the number of Rights (other than
Rights which have become void pursuant to the provisions of Section 7(e)) held
by each holder of Rights.
Immediately upon the action of a majority of the Board of Directors
<PAGE> 19
ordering the exchange of any Rights pursuant to this Section 11(a)(iv) and
without any further action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of shares of Common Stock and/or Common Stock
Equivalents equal to the number of such Rights held by such holder multiplied by
the Exchange Ratio. The Company shall promptly give public notice of any such
exchange and, in addition, the Company shall promptly mail a notice of any such
exchange to all of the holders of such Rights in accordance with Section 25;
provided, however, that the failure to give, any delay in giving or any defect
in, such notice shall not affect the validity of such exchange. Each such notice
of exchange will state the method by which the exchange of the Common Stock or
Common Stock Equivalents for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. In the event
that the number of shares of Common Stock which is authorized but not
outstanding or reserved for issuance for a purpose other than exercise of the
Rights is not sufficient to permit any exchange of Rights as contemplated in
accordance with this Section 11(a)(iv), the Board of Directors shall take all
such action within its power as may be necessary to authorize additional shares
of Common Stock for issuance upon exchange of the Rights. The Company shall not
be required to issue fractions of shares of Common Stock or Common Stock
Equivalents or to distribute certificates which evidence fractional shares of
Common Stock or Common Stock Equivalents. In lieu of such fractional shares of
Common Stock or Common Stock Equivalents, the Company shall pay to the
registered holders of the Rights Certificates with regard to which such
fractional shares of Common Stock or Common Stock Equivalents would otherwise be
issuable an amount in cash equal to the product derived by multiplying (x) the
subject fraction, by (y) the last sale price of the Common Stock on the fifth
Trading Day following the public announcement of the exchange by the Company,
or, in case no such sale takes place on such day, the average of the closing bid
and asked prices on such day, in either case on a when issued basis (taking into
account the exchange), as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on the
Nasdaq National Market (or, if the Company's Common Stock is not so listed or
traded, then as determined in the manner provided under the definition of
"Current Market Price," adjusted to take into account the exchange). For the
purposes of this Section 11(a)(iv), the value of any Common Stock Equivalent on
any date shall be the same as the value of the Common Stock, as determined
pursuant to the previous sentence, on such date.
(b) If the Company shall at any time on or after the date of this
Agreement fix a record date for the issuance of rights, options or warrants to
holders of Preferred Stock entitling them to subscribe for or purchase Preferred
Stock or Equivalent Shares (or securities convertible into or exchangeable for
Preferred Stock or Equivalent Shares) at a price per share of Preferred Stock or
Equivalent Shares (or, in the case of a convertible or exchangeable security,
having a conversion or exchange price per share of Preferred Stock or Equivalent
Shares) less than the Current Market Price per share of Preferred Stock on such
record date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of shares
of Preferred Stock and Equivalent Shares (if any) outstanding on such record
date, plus the number of shares of Preferred Stock or Equivalent Shares, as the
case may be, which the aggregate exercise, conversion and/or exchange price for
the
<PAGE> 20
total number of shares of Preferred Stock or Equivalent Shares, as the case may
be, which are obtainable upon exercise, conversion and/or exchange of such
rights, options, warrants or convertible or exchangeable securities would
purchase at such Current Market Price, and the denominator of which shall be the
number of shares of Preferred Stock and Equivalent Shares (if any) outstanding
on such record date, plus the number of additional shares of Preferred Stock or
Equivalent Shares, as the case may be, which may be obtained upon exercise,
conversion and/or exchange of such rights, options, warrants or convertible or
exchangeable securities. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by a majority of the
Board of Directors, whose determination shall be described in a statement filed
with the Rights Agent and shall be final, binding and conclusive for all
purposes. Preferred Stock and Equivalent Shares owned by or held for the account
of the Company or any Subsidiary shall not be deemed outstanding for the purpose
of any such computation. Such adjustment shall be made successively whenever
such a record date is fixed; and in the event that such rights, options or
warrants are not issued following such adjustment, the Purchase Price shall be
readjusted to be the Purchase Price that would have been in effect if such
record date had not been fixed.
(c) In case the Company shall at any time after the date of this Agreement
fix a record date for the making of a distribution to holders of Preferred Stock
(including any such distribution made in connection with a reclassification of
the Preferred Stock or a consolidation or merger in which the Company is the
surviving corporation) of securities (other than Preferred Stock and rights,
options, warrants or convertible or exchangeable securities referred to in
Section 11(b)), cash (other than a regular periodic cash dividend at an annual
rate not in excess of: (x) 125% of the annual rate of the regular cash dividend
paid on the Preferred Stock during the immediately preceding fiscal year (or, if
the Preferred Stock was not outstanding during such preceding fiscal year, then
125% of the annual rate of the regular cash dividend paid on the Common Stock
during such year), or (y) in the event that a regular cash dividend was not paid
on the Preferred Stock (or Common Stock) during such preceding fiscal year, 5%
of the Current Market Value of the Preferred Stock on the date such regular cash
dividend was first declared), property, evidences of indebtedness, or assets,
the Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the Current Market Price per
share of Preferred Stock on such record date, less the fair market value (as
determined in good faith by a majority of the Board of Directors, whose
determination shall be described in a statement filed with the Rights Agent and
shall be final, binding and conclusive for all purposes) of the portion of such
securities, cash, property, evidences of indebtedness or assets to be so
distributed in respect of one share of Preferred Stock, and the denominator of
which shall be such Current Market Price per share of Preferred Stock on such
record date. Such adjustments shall be made successively whenever such a record
date is fixed; and in the event that such distribution is not made following
such adjustment, the Purchase Price shall be readjusted to be the Purchase Price
that would have been in effect if such record date had not been fixed.
(d) Except as provided below, no adjustment in the Purchase Price shall be
required unless such adjustment would require an increase or decrease of at
<PAGE> 21
least 1% in the Purchase Price; provided, however, that any adjustments which by
reason of this Section 11(d) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 shall be made to the nearest cent, to the nearest one
hundred-thousandth of a share of Common Stock, or to the nearest one
hundred-thousandths of a share of Preferred Stock. Notwithstanding the first
sentence of this Section 11(d), any adjustment required by this Section 11 shall
be made no later than the earlier of (i) three years from the date of the
transaction which requires such adjustment and (ii) the Expiration Date.
(e) If, as a result of an adjustment made pursuant to Section 11(a) or
Section 13(a), the holder of any Right thereafter exercised shall become
entitled to receive any securities of the Company other than shares of Preferred
Stock, thereafter the Purchase Price and the number of such other securities so
receivable upon exercise of any Right shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the shares of Preferred Stock contained in this
Section 11 and the provisions of Sections 7, 9, 10, 12, 13, 14 and 24 with
respect to the shares of Preferred Stock shall apply on like terms to any such
other securities.
(f) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of shares of Preferred
Stock or other securities, cash or other property purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided in this Agreement.
(g) Unless the Company shall have exercised its election as provided in
Section 11(h), upon each adjustment of the Purchase Price as a result of any
calculation made pursuant to Sections 11(a)(i), 11(b) and 11(c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-thousandths of a share of Preferred Stock (calculated to the nearest one
hundred-thousandths of a share of Preferred Stock) obtained by (i) multiplying
the number of one one-thousandths of a share of Preferred Stock covered by a
Right immediately prior to adjustment pursuant to this Section 11(g) by the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(h) The Company may elect, on or after the date of any adjustment of the
Purchase Price or any adjustment to the number of shares of Preferred Stock for
which a Right may be exercised, to adjust the number of Rights, in lieu of an
adjustment in the number of one one-thousandths of a share of Preferred Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one one-thousandths of a share of Preferred Stock for which a Right was
exercisable immediately prior to such adjustment. Each Right outstanding prior
to such adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one hundred-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to such adjustment by the Purchase
Price in effect immediately after such adjustment. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
<PAGE> 22
the record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least 10 days after the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(h) the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date a new Rights Certificate evidencing, subject to
Section 14, the additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record, in substitution and replacement for the
Rights Certificates held by such holders prior to the date of adjustment and
upon surrender thereof (if required by the Company), new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates to be so distributed shall be issued, executed
and countersigned in the manner provided for in this Agreement (and may bear, at
the option of the Company, the adjusted Purchase Price) and shall be registered
in the names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(i) Irrespective of any adjustment or change in the Purchase Price or the
number or kind of shares issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per one one-thousandth of a share of Preferred Stock and the
number of shares of Preferred Stock which were expressed in the initial Rights
Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, of one one-thousandth of a
share of Preferred Stock issuable upon exercise of the Rights, the Company shall
take any corporate action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue fully paid and
nonassessable one one-thousandth shares of such Preferred Stock at such adjusted
Purchase Price.
(k) In any case in which this Section 11 shall require that an adjustment
be made effective as of a record date for a specified event, the Company may
elect to defer until the occurrence of such event the issuance to the holder of
any Right exercised after such record date the shares of Preferred Stock and
other securities, cash or property of the Company, if any, issuable upon such
exercise over and above the shares of Preferred Stock and other securities, cash
or property of the Company, if any, issuable upon such exercise on the basis of
the Purchase Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) or other securities, cash or property upon the
occurrence of the event requiring such adjustment.
(l) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that the Board of Directors in its sole discretion shall determine to
be advisable in order that any combination or subdivision of the Preferred
Stock, issuance wholly for cash of any
<PAGE> 23
Preferred Stock at less than the Current Market Price per share of Preferred
Stock, issuance wholly for cash of Preferred Stock or securities which by their
terms are convertible into or exchangeable or exercisable for Preferred Stock,
stock dividends or issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock,
shall not be taxable to such stockholders.
(m) The Company covenants and agrees that it shall not (i) consolidate
with, (ii) merge with or into, or (iii) directly or indirectly sell, lease or
otherwise transfer or dispose of (in one transaction or a series of related
transactions) assets or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries taken as a whole, to any other
Person if (A) at the time of or immediately after such consolidation, merger,
sale, lease, transfer or disposition there are any rights, warrants, securities
or other instruments outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights; (B) prior to, simultaneously with or immediately after
such consolidation, merger, sale, lease, transfer or disposition the
stockholders (or equity holders) of the Person who constitutes, or would
constitute, the Principal Party in such transaction shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
or Associates; or (C) the form or nature of organization of the Principal Party
would preclude or limit the exercisability of the Rights. The Company shall not
consummate any such consolidation, merger, sale, lease, transfer or disposition
unless prior thereto the Company and such other Person shall have executed and
delivered to the Rights Agent a supplemental agreement evidencing compliance
with this Section 11(m).
(n) The Company covenants and agrees that, after the Stock Acquisition
Date, it will not, except as permitted by Section 11(a)(iv), 26 or 29(b), take
(or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will, directly or
indirectly, diminish or otherwise eliminate the benefits intended to be afforded
by the Rights.
(o) Anything in this Agreement to the contrary notwithstanding, if the
Company shall at any time prior to the Distribution Date (i) pay a dividend or
distribution on the outstanding shares of Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then the number of
Rights associated with each share of Common Stock then outstanding, or issued or
delivered thereafter but prior to the Distribution Date, and the Purchase Price
under, and the number of one one-thousandths of a share of Preferred Stock
issuable in respect of, the Rights, shall be proportionately adjusted, so that
following such event one Right (with the Purchase Price and the number of one
one-thousandths of a share of Preferred Stock proportionately adjusted
thereunder) shall thereafter be associated with each share of Common Stock then
outstanding, or issued or delivered thereafter but prior to the Distribution
Date. For example, if the Company effects a two-for-one stock split at a time
when each Right (if it becomes exercisable) would entitle the holder to purchase
one one-thousandth of a share of Preferred Stock for a Purchase Price of $"Z",
then following such stock split each previous Right would be split into two
current Rights and thereafter each such current Right, upon becoming
exercisable, would (subject to further adjustment) entitle the holder to
purchase one one-thousandth of a share of
<PAGE> 24
Preferred Stock at a Purchase Price of 1/2 x $"Z".
Section 12. Certification of Adjustments. Whenever an adjustment is made
as provided in Section 11 or 13, the Company shall (a) promptly prepare a
certificate setting forth such adjustment and a brief statement of the facts
accounting for such adjustment, (b) promptly file with the Rights Agent and with
each transfer agent for the Preferred Stock a copy of such certificate, and (c)
mail or cause the Rights Agent to mail a brief summary thereof to each holder of
a Rights Certificate (or, if no Rights Certificates have been issued, to each
holder of a certificate representing shares of Common Stock) in accordance with
Section 25. Notwithstanding the foregoing sentence, the failure of the Company
to give such notice shall not affect the validity of or the force or effect of
or the requirement for such adjustment. Any adjustment to be made pursuant to
Section 11 or 13 shall be effective as of the date of the event giving rise to
such adjustment.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
(a) A "Business Combination" shall be deemed to occur in the event that,
on or following a Triggering Event, (i) the Company shall, directly or
indirectly, consolidate with, or merge with and into, any other Person (other
than a Subsidiary of the Company in a transaction that complies with Section
11(m) and Section 11(n)) in a transaction in which the Company is not the
continuing, resulting or surviving corporation of such merger or consolidation;
(ii) any Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(m) and Section 11(n)) shall, directly or indirectly,
consolidate with the Company, or shall merge with and into the Company, in a
transaction in which the Company is the continuing, resulting or surviving
corporation of such merger or consolidation and, in connection with such merger
or consolidation, all or part of the Common Stock shall be changed (including,
without limitation, any conversion into or exchange for securities of the
Company or of any other Person, cash or any other property); (iii) the Company
shall, directly or indirectly, effect a share exchange in which all or part of
the Common Stock shall be changed (including, without limitation, any conversion
into or exchange for securities of any other Person, cash or any other
property); or (iv) the Company shall, directly or indirectly, sell, lease,
exchange, mortgage, pledge (other than pledges in the ordinary course of the
Company's financing activities) or otherwise transfer or dispose of (or one or
more of its Subsidiaries shall directly or indirectly sell, lease, exchange,
mortgage, pledge (other than pledges in the ordinary course of the Company's
financing activities) or otherwise transfer or dispose of), in one transaction
or a series of related transactions, assets or earning power aggregating more
than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person (other than the Company or any of its
Subsidiaries in one or more transactions each and all of which comply with
Section 11(m) and Section 11(n)).
In the event of a Business Combination, proper provision shall be made so
that each holder of a Right (except as otherwise provided in this Agreement)
shall thereafter have the right to receive, upon the exercise thereof at the
Purchase Price immediately prior to the first occurrence of a Triggering Event
multiplied by the number of one one-thousandths of a share of Preferred Stock
for which a Right was
<PAGE> 25
exercisable immediately prior to the first occurrence of a Triggering Event
(without giving effect to the Triggering Event) in accordance with the terms of
this Agreement, such number of shares of Common Stock of the Principal Party as
shall be equal to the result obtained by (x) multiplying the Purchase Price
immediately prior to the first occurrence of a Triggering Event by the number of
one one-thousandths of a share of Preferred Stock for which a Right was
exercisable immediately prior to the first occurrence of a Triggering Event
(without giving effect to the Triggering Event), and (y) dividing that product
by 50% of the Current Market Price per share of the Common Stock of such
Principal Party immediately prior to the consummation of such Business
Combination. All shares of Common Stock of any Person for which any Right may be
exercised after consummation of a Business Combination as provided in this
Section 13(a) shall, when issued upon exercise thereof in accordance with this
Agreement, be duly and validly authorized and issued, fully paid, nonassessable,
freely tradeable, not subject to liens or encumbrances, and free of preemptive
rights, rights of first refusal or any other restrictions or limitations on the
transfer or ownership thereof of any kind or nature whatsoever.
(b) After consummation of any Business Combination, (i) the Principal
Party shall be liable for, and shall assume, by virtue of such Business
Combination and without the necessity of any further act, all the obligations
and duties of the Company pursuant to this Agreement, (ii) the term "Company" as
used in this Agreement shall thereafter be deemed to refer to such Principal
Party, and (iii) such Principal Party shall take all steps (including, but not
limited to, the reservation of a sufficient number of shares of its Common Stock
in accordance with Section 9) in connection with such Business Combination as is
necessary to ensure that the provisions of this Agreement shall thereafter be
applicable, as nearly equivalent as practicable, in relation to the shares of
its Common Stock thereafter deliverable upon the exercise of the Rights.
(c) The Company shall not consummate any Business Combination unless prior
thereto (i) the Principal Party shall have a sufficient number of authorized
shares of its Common Stock which have not been issued or reserved for issuance
(other than shares reserved for issuance pursuant to this Agreement to the
holders of Rights) to permit the exercise in full of the Rights in accordance
with this Section 13; (ii) the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement providing
for the fulfillment of the Principal Party's obligations and the terms as set
forth in paragraphs (a) and (b) of this Section 13 and further providing that,
as soon as practicable on or after the date of such Business Combination, the
Principal Party, at its own expense, shall (A) prepare and file, if necessary, a
registration statement on an appropriate form under the Securities Act with
respect to the Rights and the securities purchasable upon exercise of the
Rights; (B) use its best efforts to cause such registration statement to become
effective as soon as practicable after such filing and remain effective (with a
prospectus at all times meeting the requirements of the Securities Act) until
the Expiration Date; (C) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 (or any successor
form) under the Exchange Act; (D) use its best efforts to qualify or register
the Rights and the securities purchasable upon exercise of the Rights under the
state securities or "blue sky" laws of such jurisdictions as may be necessary or
appropriate; (E) use its best efforts to list the Rights and the securities
purchasable upon
<PAGE> 26
exercise of the Rights on a United States national securities exchange; and (F)
obtain waivers of any rights of first refusal or preemptive rights in respect of
the Common Stock of the Principal Party subject to purchase upon exercise of
outstanding Rights; (iii) the Company and the Principal Party shall have
furnished to the Rights Agent an opinion of independent counsel stating that
such supplemental agreement is a legal, valid and binding agreement of the
Principal Party enforceable against the Principal Party in accordance with its
terms; and (iv) the Company and the Principal Party shall have filed with the
Rights Agent a certificate of a nationally recognized firm of independent
accountants setting forth the number of shares of Common Stock of such issuer
which may be purchased upon the exercise of each Right after the consummation of
such Business Combination.
(d) The provisions of this Section 13 shall similarly apply to successive
Business Combinations. In the event a Business Combination shall be consummated
at any time after the occurrence of a Triggering Event, the Rights which have
not theretofore been exercised shall thereafter be exercisable for the
consideration and in the manner described in Section 13(a). Following a Business
Combination, the provisions of Section 11(a)(ii) shall be of no effect.
(e) Notwithstanding any other provision of this Agreement, no adjustment
to the number of shares of Preferred Stock (or fractions of a share) or other
securities, cash or other property for which a Right is exercisable or the
number of Rights outstanding or associated with each share of Common Stock or
any similar or other adjustment shall be made or be effective if such adjustment
would have the effect of reducing or limiting the benefits the holders of the
Rights would have had absent such adjustment, including, without limitation, the
benefits under Sections 11 and 13, unless the terms of this Agreement are
amended so as to preserve such benefits.
(f) The Company covenants and agrees that it shall not effect any Business
Combination if at the time of, or immediately after such Business Combination,
there are any rights, options, warrants or other instruments outstanding which
would diminish or otherwise eliminate the benefits intended to be afforded by
the Rights.
(g) Without limiting the generality of this Section 13, in the event the
nature of the organization of any Principal Party shall preclude or limit the
acquisition of Common Stock of such Principal Party upon exercise of the Rights
as required by Section 13(a) as a result of a Business Combination, it shall be
a condition to such Business Combination that such Principal Party shall take
such steps (including, but not limited to, a reorganization) as may be necessary
to ensure that the benefits intended to be derived under this Section 13 upon
the exercise of the Rights are assured to the holders thereof.
(h) In addition to, and without limiting, any other provision of this
Section 13, in case the Principal Party which is to be a party to a transaction
referred to in this Section 13 has provision in any of its authorized securities
or in its certificate of incorporation or by-laws or other instrument governing
its corporate affairs, which provision would have the effect of (i) causing such
Principal Party to issue (other than to holders of Rights pursuant to this
Section 13), in connection with, or as a consequence
<PAGE> 27
of, the consummation of a transaction referred to in this Section 13, Common
Stock of such Principal Party at less than the then Current Market Price per
share or securities exercisable for, or convertible into, Common Stock of such
Principal Party at less than such then Current Market Price, or (ii) providing
for any special payment, tax or similar provisions in connection with the
issuance of the Common Stock of such Principal Party pursuant to the provisions
of this Section 13, then, in such event, the Company hereby agrees with each
holder of Rights that it shall not consummate any such transaction unless prior
thereto the Company and such Principal Party shall have executed and delivered
to the Rights Agent a supplemental agreement providing that the provision in
question of such Principal Party shall have been cancelled, waived or amended,
or that the authorized securities shall be redeemed, so that the applicable
provision will have no effect in connection with, or as a consequence of, the
consummation of the proposed transaction.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractional Rights or to
distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, the Company may at its option pay to the registered holders
of the Rights Certificates with respect to which such fractional Rights would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of a Right
for the Trading Day immediately prior to the date on which such fractional
Rights otherwise would have been issuable. The closing price for any Trading Day
shall be the last sale price on such day, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, on such day, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the Nasdaq National Market or, if the Rights are not
listed or admitted to trading on the Nasdaq National Market, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal United States national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any United States national securities exchange, the last
quoted sale price on such day or, if not so quoted, the average of the high bid
and low asked prices on such day in the over-the-counter market, as reported by
Nasdaq or such other system then in use or, if on such day the Rights are not
quoted by any such system, the average of the closing bid and asked prices on
such day as furnished by a professional market maker making a market in the
Rights selected by a majority of the Board of Directors. If on such day no such
market maker is making a market in the Rights, the current market value of the
Rights on such day shall be determined in good faith by a majority of the Board
of Directors, whose determination shall be described in a statement filed with
the Rights Agent and shall be final, binding and conclusive for all purposes.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred
<PAGE> 28
Stock). Fractions of shares of Preferred Stock may, at the election of the
Company, be evidenced by depositary receipts pursuant to an appropriate
agreement between the Company and a depositary selected by it, provided that
such agreement shall provide that the holders of such depositary receipts shall
have all the rights, privileges and preferences to which they are entitled as
beneficial owners of the Preferred Stock. In lieu of fractional shares of
Preferred Stock that are not integral multiples of one one-thousandth of a share
of Preferred Stock, the Company may at its option (i) issue scrip or warrants in
registered form (either represented by a certificate or uncertificated) or in
bearer form (represented by a certificate) which shall entitle the holder to
receive a full one one-thousandth of a share of Preferred Stock upon the
surrender of such scrip or warrants aggregating a full one one-thousandth of a
share of Preferred Stock, or (ii) pay to the registered holders of Rights
Certificates at the time such Rights Certificates are exercised as provided in
this Agreement an amount in cash equal to the same fraction of the current
market value of a share of Preferred Stock. For purposes of this Section 14(b),
the current market value of a share of Preferred Stock shall be the closing
price of a share of Preferred Stock (as determined pursuant to the second
sentence of the definition of "Current Market Price" in Section 1) for the
Trading Day immediately prior to the date of such exercise.
(c) The Company shall not be required to issue fractions of shares of
Common Stock or Common Stock Equivalents or to distribute certificates which
evidence fractional shares of Common Stock or Common Stock Equivalents. In lieu
of such fractional shares of Common Stock or Common Stock Equivalents, the
Company shall pay to the registered holders of the Rights Certificates with
regard to which such fractional shares of Common Stock or Common Stock
Equivalents would otherwise be issuable an amount in cash equal to the product
derived by multiplying (x) the subject fraction, by (y) Current Market Price of
the Company's Common Stock.
(d) The holder of a Right by his acceptance thereof expressly waives any
right to receive any fractional Rights or any fractional shares upon exercise of
a Right (except as otherwise provided in this Agreement).
Section 15. Rights of Action. Except as otherwise provided, all rights of
action in respect of this Agreement are vested in the respective registered
holders of the Rights Certificates (and, prior to the Distribution Date, any
registered holders of associated Common Stock); and any registered holder of any
Rights Certificate (or, prior to the Distribution Date, any share of associated
Common Stock), without the consent of the Rights Agent or of the holder of any
other Right, may, on his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company or any
Principal Party to enforce, or otherwise act in respect of, his rights pursuant
to this Agreement. Without limiting the foregoing or any remedies available to
the holders of Rights, it is specifically acknowledged that the holders of
Rights would not have an adequate remedy at law for any breach of this Agreement
and will be entitled to specific performance of the obligations under, and
injunctive relief against any actual or threatened violation of the obligations
of any Person subject to, this Agreement.
Section 16. Agreement of Rights Holders Concerning Transfer and Ownership
of Rights. Every holder of a Right by accepting the same consents and
<PAGE> 29
agrees with the Company and the Rights Agent and with every other holder of a
Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates will be
transferable on the registry books of the Rights Agent only if surrendered at
the principal corporate trust office of the Rights Agent, duly endorsed or
accompanied by a proper instrument of transfer;
(c) the Company and the Rights Agent may deem and treat the Person in
whose name a Rights Certificate (or, prior to the Distribution Date, the
associated Common Stock certificate) is registered as the absolute owner thereof
and of the Rights evidenced thereby (notwithstanding any notations of ownership
or writing on the Rights Certificate or the associated Common Stock certificate
made by anyone other than the Company, the transfer agent for the Common Stock
or the Rights Agent) for all purposes whatsoever, and neither the Company nor
the Rights Agent shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Holder Not Deemed a Stockholder. No holder, as such, of
any Rights Certificate shall be entitled to vote or to receive dividends or
distributions or shall be deemed for any purpose the holder of Preferred Stock
or any other securities, cash or other property which may at any time be
issuable on the exercise of the Rights represented thereby, nor shall anything
contained in this Agreement or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company, including, without limitation, any right (i) to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, (ii) to give or withhold consent to any corporate action,
(iii) to receive notice of meetings or other actions affecting stockholders
(except as provided in Section 24), (iv) to receive dividends, distributions or
subscription rights, (v) to institute, as a holder of Preferred Stock or other
securities issuable on exercise of the Rights represented by any Rights
Certificate, any derivative action on behalf of the Company, or otherwise, until
and only to the extent that the Right or Rights evidenced by such Rights
Certificate shall have been exercised in accordance with the provisions of this
Agreement.
Section 18. Concerning the Rights Agent. The Company agrees to pay to
<PAGE> 30
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense incurred without gross
negligence, bad faith, willful misconduct or breach of this Agreement on the
part of the Rights Agent for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability in the
premises. This indemnification shall survive the termination of this Agreement.
The Rights Agent shall be protected and shall incur no liability for or in
respect of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any Rights Certificate or
certificate for Preferred Stock or Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement or other
paper or document reasonably believed by it to be genuine and to be signed,
executed and, when necessary, verified or acknowledged, by the proper Person or
Persons, or otherwise upon the advice of counsel as set forth in Section 20.
Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the corporate trust
business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any document or any further act on the part of any of the parties
hereto, provided that such corporation would be eligible for appointment as a
successor Rights Agent under Section 21. In case at the time such successor
Rights Agent shall succeed to the agency created by this Agreement any of the
Rights Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Rights Certificate so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Rights Certificate either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Rights Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, the Rights Agent
may countersign such Rights Certificates either in its prior name or in its
changed name; and in all such cases such Rights Certificates shall have the full
force provided in the Rights Certificates and in this Agreement.
<PAGE> 31
Section 20. Duties of Rights Agent. The Rights Agent undertakes and agrees
to perform the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted to be taken by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person or any
Affiliate or Associate of an Acquiring Person or the determination of Current
Market Price) be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be specifically prescribed in this Agreement) may be deemed to
be conclusively proved and established by a certificate signed by the Chairman,
the President, the Chief Executive Officer, any Vice President, the Treasurer or
the Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or omitted by it in good faith under this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for the gross
negligence, bad faith, willful misconduct or breach of this Agreement by it or
its attorneys or agents.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery of this Agreement
(except the due execution and delivery of this Agreement by the Rights Agent) or
in respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any change in the
transferability or exercisability of the Rights or any change or adjustment in
the terms of the Rights (including the manner, method or amount thereof)
provided for in Section 3, 11, 13 or 23 or any other provision of this Agreement
or the ascertaining of the existence of facts that would require any such change
or adjustment (except with respect to the exercise of Rights evidenced by Rights
Certificates after actual notice of any change or adjustment is required); nor
shall it by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any shares of Preferred Stock, Common
Stock or other securities to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Preferred Stock, Common Stock or
other securities will, when
<PAGE> 32
issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performance by the Rights Agent of
its duties and obligations under this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman, the Chief Executive Officer, the President, any Vice President, the
Secretary or the Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken or omitted to be taken by it in good faith in accordance
with instructions of any such officer or for any delay in acting while waiting
for such instructions. When applying to any such officer for instructions, the
Rights Agent may set forth in writing (i) any proposed action or omission of the
Rights Agent with respect to its duties or obligations under this Agreement and
(ii) the date on or after which the Rights Agent proposes such action will be
taken or omitted. Such date shall not be less than three Business Days after any
such officer receives such application for instructions from the Rights Agent.
Unless the Rights Agent has received written instructions from the Company
(including any such officer) with respect to such proposed action or omission
prior to such date (or, if longer, in the case of a proposed action to be taken,
prior to the Rights Agent actually taking such action), the Rights Agent shall
not be liable for the actions or omissions set forth in such application,
provided that such action or omission does not violate any express provision of
this Agreement.
(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though the Rights Agent were not serving as
such under this Agreement. Nothing in this Agreement shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of such attorney or
agent, provided that the Rights Agent exercised reasonable care in the selection
and continued employment of such attorney or agent.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights
hereunder if there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnification against such risk or liability is not
reasonably assured to the Rights Agent.
<PAGE> 33
(k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Stock or Preferred Stock by registered or certified mail, and to
the holders of the Rights Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Stock or Preferred Stock by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. Notwithstanding any other provision of this Agreement, in no
event shall the resignation or removal of a Rights Agent be effective until a
successor Rights Agent shall have been appointed and have accepted such
appointment. If the Company shall fail to make such appointment within a period
of 30 days after such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
any holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then the incumbent Rights
Agent or the registered holder of any Rights Certificate may apply to any court
of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United
States or any state of the United States so long as such corporation is
authorized to conduct a corporate trust or banking business under the laws of
such state and is in good standing, which is authorized under such laws to
exercise corporate trust powers and is subject to supervision or examination by
federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $100,000,000. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed but the predecessor Rights Agent shall deliver
and transfer to the successor Rights Agent any property at the time held by it
hereunder and execute and deliver any further assurance, conveyance, act or deed
necessary for such purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock or
Preferred Stock and mail a notice thereof in writing to the registered holders
of the Rights Certificates. Neither the failure to give any notice provided for
in this Section 21, however, nor any defect therein, shall affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights Certificates to the contrary,
the Company may, at its option, issue new Rights Certificates evidencing new
Rights in
<PAGE> 34
such form as may be approved by a majority of the Board of Directors of the
Company to reflect any adjustment or change in the Purchase Price per share and
the number or kind or class of securities, cash or other property purchasable
under the Rights Certificates made in accordance with the provisions of this
Agreement. In addition, in connection with the issuance or sale of Common Stock
following the Distribution Date and prior to the earlier of the Redemption Date
and the Expiration Date, the Company may with respect to Common Stock so issued
or sold pursuant to (i) the exercise of stock options, (ii) under any employee
plan or arrangement, (iii) upon the exercise, conversion or exchange of
securities notes or debentures issued by the Company or (iv) a contractual
obligation of the Company, in each case existing prior to the Distribution Date,
issue Rights Certificates representing the appropriate number of Rights in
connection with such issuance or sale.
Section 23. Redemption
(a) The Board of Directors may, at its option, at any time prior to the
earlier of (i) the Stock Acquisition Date and (ii) the Expiration Date, redeem
all but not less than all of the then-outstanding Rights at a redemption price
of $.01 per Right (the "Redemption Price") appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date of
this Agreement. The Company may, at its option, pay the Redemption Price in
cash, shares (including fractional shares) of Common Stock (based on the Current
Market Price of the Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors.
<PAGE> 35
(b) At the time and date of effectiveness set forth in any resolution of
the Board of Directors ordering the redemption of the Rights (the "Redemption
Date"), without any further action and without any further notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price; provided, however, that such
resolution of the Board of Directors may be revoked, rescinded or otherwise
modified at any time prior to the time and date of effectiveness set forth in
such resolution, in which event the right to exercise will not terminate at the
time and date originally set for such termination by the Board of Directors. As
soon as practicable after the action of the Board of Directors ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the Rights Agent and to the holders of the then-outstanding Rights by mailing
such notice to all such holders at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the issuance of Rights
Certificates, on the registry books of the transfer agent for the Common Stock.
Any notice which is mailed in the manner provided in this Agreement shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made. In any case, failure to give such notice by mail, or any defect in
the notice, to any particular holder of Rights shall not affect the sufficiency
of the notice to other holders of Rights. In the case of a redemption permitted
under this Section 23, the Company may, at its option, discharge all of its
obligations with respect to the Rights by (i) issuing a press release announcing
the manner of redemption of the Rights and (ii) mailing payment of the
Redemption Price to the registered holders of the Rights at their last addresses
as they appear on the registry books of the Rights Agent or, prior to the
issuance of the Rights Certificates, on the registry books of the transfer agent
for the Common Stock, and upon such action, all outstanding Rights Certificates
shall be null and void without any further action by the Company. Neither the
Company nor any of its Affiliates or Associates may redeem, acquire or purchase
for value any Rights at any time in any manner other than as specifically set
forth in this Section 23, and other than in connection with the purchase of
shares of Common Stock prior to the earlier of the Distribution Date and the
Expiration Date.
Section 24. Notice of Certain Events. In case the Company, on or after the
Distribution Date, shall propose to (a) pay any dividend payable in stock of any
class to the holders of its Preferred Stock or to make any other distribution to
the holders of its Preferred Stock (other than a regular periodic cash dividend
at an annual rate not in excess of 125% of the annual rate of the cash dividend
paid on the Preferred Stock during the immediately preceding fiscal year, or if
the Preferred Stock was not outstanding during such preceding fiscal year, then
125% of the annual rate of the cash dividend paid on the Common Stock during
such year); or (b) offer to the holders of its Preferred Stock rights, options
or warrants to subscribe for or to purchase any additional shares of Preferred
Stock or shares of stock of any class or any other securities, rights or
options; or (c) effect any reclassification of the Preferred Stock (other than a
reclassification involving only the subdivision of outstanding shares of
Preferred Stock, a change in the par value of such Preferred Stock or a change
from par value to no par value); or (d) directly or indirectly effect any
consolidation or merger into or with, or effect any sale, lease, exchange or
other transfer or disposition (or to permit one or more of its Subsidiaries to
effect any sale, lease, exchange or other transfer or disposition), in one
transaction or a series of related transactions, of more than 50% of
<PAGE> 36
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to, any other Person; or (e) effect the liquidation, dissolution or
winding up of the Company, then, in each such case, the Company shall give to
each holder of a Right, in accordance with Section 25, a notice of such proposed
action, which shall specify any record date for the purposes of such stock
dividend, distribution or rights, or the date on which such reclassification,
consolidation, merger, sale, lease, exchange, transfer, disposition,
liquidation, dissolution, or winding up is to take place and if such holders
will or may participate therein, the date of participation therein by the
holders of Common Stock and/or Preferred Stock, if any such date is to be fixed,
and such notice shall be so given in the case of any action covered by clause
(a) or (b) above at least 20 days prior to the record date for determining
holders of the Preferred Stock for purposes of such action, and in the case of
any such other action, at least 20 days prior to the date of the taking of such
proposed action or the date of participation therein, if any, by the holders of
Preferred Stock, whichever shall be the earlier.
In case any Triggering Event or Business Combination shall occur, then, in
any such case, the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, in accordance with Section 25, notice of the
occurrence of such Triggering Event or Business Combination, which shall specify
the Triggering Event or Business Combination and include a description of the
consequences of such event to holders of Rights under Section 11(a)(ii) or 13.
The failure to give notice as required by this Section 24 or any defect
therein shall not affect the legality or validity of the action taken by the
Company or the vote upon any such action.
Section 25. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address (or another person's
attention) is filed in writing with the Rights Agent) as follows:
3-D Geophysical, Inc.
8226 Park Meadows Drive
Littleton, CO 80124
Attention: Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address (or
another person's attention) is filed in writing with the Company) as follows:
American Securities
Transfer & Trust, Inc.
1825 Lawrence Street, Suite 444
Denver, CO 80202
<PAGE> 37
Attention: Kathy Heagerty
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company (or, if no Rights Certificates have been issued, if sent by
first-class mail, postage prepaid, addressed to the holder of a certificate
representing shares of Common Stock at the address of such holder as shown on
the Company's Common Stock registry books).
Section 26. Amendments and Supplements. This Agreement may not be amended
or supplemented except as permitted in Section 26(a) or 26(b) or as contemplated
by Section 11(a)(iii).
(a) At any time prior to the Distribution Date, a majority of the Board of
Directors may, and the Rights Agent shall, if so directed, amend or supplement
any provision of this Agreement without the approval of any holders of Rights.
(b) From and after the Distribution Date, a majority of the Board of
Directors may, and the Rights Agent shall, if so directed, amend or supplement
this Agreement without the approval of any holders of Rights Certificates (i) to
cure any ambiguity, (ii) to correct or supplement any provision contained in
this Agreement which may be defective or inconsistent with any other provision
of this Agreement, or (iii) to change or supplement the provisions hereunder in
any manner which the Company may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Rights Certificates (other than
an Acquiring Person or an Affiliate or Associate of an Acquiring Person).
(c) Immediately upon the action of a majority of the Board of Directors
providing for any amendment or supplement pursuant to this Section 26, and
without any further action and without notice, such amendment or supplement
shall be deemed effective. Promptly following the adoption of any amendment or
supplement pursuant to this Section 26, the Company shall deliver to the Rights
Agent a copy, certified by the Secretary or any Assistant Secretary of the
Company, of resolutions of a majority of the Board of Directors adopting such
amendment or supplement. Upon such delivery, the amendment or supplement shall
be administered by the Rights Agent as part of this Agreement in accordance with
the terms of this Agreement, as so amended or supplemented.
Section 27. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 28. Benefits of this Agreement; Determinations and Actions by the
Board of Directors. Nothing in this Agreement shall be construed to give to any
Person other than the Company, the Rights Agent and the registered holders of
Rights any legal or equitable right, remedy or claim under this Agreement; and
this Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the
<PAGE> 38
registered holders of the Rights.
For purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act (or any successor provision); provided, however, that any
such calculation made for purposes of determining the particular percentage of
outstanding shares of Common Stock of which any Person is the Beneficial Owner
shall also include any such other securities not then actually issued and
outstanding which such Person would be deemed to be the Beneficial Owner of, or
to "beneficially own," pursuant to Section 1(d). The Board of Directors of the
Company shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board of Directors of the Company or the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights, to exchange or not exchange the Rights for Common Stock or
other securities of the Company, or to amend or supplement this Agreement). All
such actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which
are done or made by the Board of Directors in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other Persons, and (y) not subject the Board of Directors to any
liability to the holders of the Rights.
Section 29. Severability.
(a) If any term, provision, covenant or restriction of this Agreement or
the application thereof to any Person or to any circumstance is held by a court
of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
(b) If legal counsel to the Company delivers to the Company a written
opinion to the effect that, as a result of changes in federal law or Delaware
law, any term, provision, covenant or restriction of this Agreement may be
invalid, void or unenforceable, then, notwithstanding any other provision of
this Agreement, the Company and the Rights Agent may amend this Agreement to
modify, revise or delete such term, provision, covenant or restriction to the
extent necessary to comply with such law as so changed.
Section 30. Governing Law. This Agreement and each Rights Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the internal laws of such state applicable to contracts to be
made and performed entirely within such State.
Section 31. Counterparts. This Agreement may be executed in counterparts
and each of such counterparts shall for all purposes be deemed to be an
<PAGE> 39
original, and both such counterparts shall together constitute but one and the
same instrument.
Section 32. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions of this
Agreement.
Section 33. Grammatical Construction. Throughout this Agreement, where
such meanings would be appropriate, (a) any pronouns used herein shall include
the corresponding masculine, feminine or neuter forms (e.g., references to "he"
shall also include "she" and "it" and references to "who" and "whom" shall also
include "which"), (b) the plural form of nouns and pronouns shall include the
singular and vice-versa, (c) reference to a Section means a Section of this
Agreement, and (d) the word "including" means "including, without limitation,"
whether expressly stated or not.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
3-D GEOPHYSICAL, INC.
Attest:
/s/ John Wilkie By: /s/ Joel Friedman
- ----------------------------- -----------------------------
Name: Joel Friedman
Title: Chairman
AMERICAN SECURITIES TRANSFER
& TRUST, INC.
Attest:
/s/ K. Watson By: /s/ Kathy Heagerty
- ----------------------------- -----------------------------
Name: Kathy Heagerty
Title: Operations Officer
<PAGE> 40
FIRST AMENDMENT
TO
RIGHTS AGREEMENT
FIRST AMENDMENT dated as of March 6, 1998 ("this Amendment") between
3-D Geophysical, Inc., a Delaware corporation (the "Company"), and American
Securities Transfer & Trust, Inc., as Rights Agent.
WHEREAS, the above-mentioned parties have previously entered into that
certain Rights Agreement dated as of July 17, 1997 (the "Rights Agreement")
governing certain preferred stock purchase rights (the "Rights") of the
Company's stockholders;
WHEREAS, the Company proposes to enter into an Agreement and Plan of
Merger (the "Merger Agreement"), dated as of March 8, 1998, by and among the
Company, Western Atlas Inc., a Delaware corporation ("Parent"), and WAI
Acquisition Corp., a Delaware corporation and a subsidiary of Parent ("WAI"),
whereby WAI will make a tender offer (the "Tender Offer") to purchase all
outstanding shares of Common Stock of the Company for cash and upon consummation
of the Tender Offer WAI will merge with and into the Company (the "Merger") upon
the terms and subject to the conditions set forth in the Merger Agreement;
WHEREAS, upon the execution and delivery of the Merger Agreement,
certain directors and officers of the Company will simultaneously enter into and
deliver, support agreements (each a "Support Agreement") in substantially the
form attached to the Merger Agreement as Annex II;
WHEREAS, the Board of Directors deems it desirable and in the best
interests of its stockholders that the transactions contemplated by the Merger
Agreement be consummated;
WHEREAS, Section 4.18 of the Merger Agreement provides that prior to
the Effective Time (as defined in the Merger Agreement), the Company shall amend
the Rights Agreement (without redeeming the Rights) so that none of the
transaction contemplated by the Merger Agreement will (i) cause any Rights
issued pursuant to the Rights Agreement to become exercisable or to separate
from the stock certificates to which they are attached, (ii) cause Parent, WAI
or any of their Affiliates or Associates to be an Acquiring Person (as each such
term is defined in the Rights Agreement), or (iii) trigger other provisions of
the Rights Agreement, including giving rise to a Distribution Date or a
Triggering Event (as each such term is defined in the Rights Agreement).
WHEREAS, such parties wish to amend the Rights Agreement in the manner
set forth below.
NOW, THEREFORE, the parties hereto agree as follows:
34. All capitalized terms used herein, unless otherwise defined herein,
shall have the meanings given them in the Rights Agreement, and each reference
in the Rights Agreement to
<PAGE> 41
"this Agreement," "hereof," "herein," "hereunder" or "hereby" and each other
similar reference shall be deemed to refer to the Rights Agreement as amended
hereby. All references to the Rights Agreement in any other agreement between or
among any of the parties hereto relating to the transactions contemplated by the
Rights Agreement shall be deemed to refer to the Rights Agreement as amended
hereby.
35. The definition of "Acquiring Person" in Section 1 is hereby amended by
adding the following provision to the end of paragraph (a)(i) of such
definition:
"and neither Parent nor WAI shall become an Acquiring Person by reason or
as a result of the execution or delivery of any Support Agreement or the Merger
Agreement or the consummation of the Tender Offer or of the Merger or any other
transaction contemplated by the Merger Agreement."
36. The definition of "Distribution Date" in Section 1 is hereby amended
by adding the following provision to the end of such definition:
"; provided that no Distribution Date shall occur by reason or as a result
of the execution or delivery of any Support Agreement or the Merger Agreement or
the consummation of the Tender Offer or Merger or any other transaction
contemplated by the Merger Agreement."
37. The following definitions are hereby added to Section 1:
""Merger" means the merger of WAI with and into the Company upon the terms
and conditions set forth in the Merger Agreement."
""Merger Agreement" means the Agreement and Plan of Merger, dated as of
March 8, among the Company, WAI and Parent."
""Parent" means Western Atlas Inc., a Delaware corporation."
""Support Agreement" means the Support Agreement in the form of Annex II
to the Merger Agreement, dated as of the date of the Merger Agreement and
executed by certain directors and officers of the Company."
""Tender Offer" means the offer by WAI to purchase all of the outstanding
shares of Common Stock (including the Right associated with each share of Common
Stock) pursuant to Article I of the Merger Agreement.
""WAI" means WAI Acquisition Corp., a Delaware corporation and a direct,
wholly owned subsidiary of Parent."
38. This Amendment shall be governed by and construed in accordance with
the internal laws of the State of Delaware applicable to contracts made and
performed entirely in Delaware.
41
<PAGE> 42
39. This Amendment may be signed in any number of counterparts, each of
which shall be deemed an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
40. Except as expressly amended hereby, the Rights Agreement shall remain
in full force and effect.
42
<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
3-D GEOPHYSICAL, INC.
Attest:
/s/ John M. Wilkie, Jr. By: /s/ Joel Friedman
- ----------------------------- -----------------------------
Name: Joel Friedman
Title: Chairman
AMERICAN SECURITIES TRANSFER
& TRUST, INC.
Attest:
/s/ Kimberly Hammond By: /s/ Kellie Gwinn
- ----------------------------- -----------------------------
Name: Kellie Gwinn
Title: Senior Vice President
43
<PAGE> 1
EXHIBIT (C)(11)
3-D GEOPHYSICAL 1995 LONG-TERM
INCENTIVE COMPENSATION PLAN
Amended and Restated January 5, 1996
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
GENERAL
1.1 Purpose................................................................................. 1
1.2 Administration.......................................................................... 1
1.3 Persons Eligible for Awards............................................................. 3
1.4 Types of Awards Under Plan.............................................................. 3
1.5 Shares Available for Awards............................................................. 4
1.6 Definitions of Certain Terms............................................................ 5
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards............................................................ 8
2.2 Grant of Stock Options, Stock Appreciation
Rights ............................................................................... 8
2.3 Grant of Stock Options to Non-Employee
Directors ............................................................................ 11
2.4 Exercise of Options and Stock Appreciation
Rights................................................................................ 12
2.5 Termination of Employment; Death........................................................ 15
2.6 Grant of Restricted Stock............................................................... 17
ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan; Modification
of Awards............................................................................. 20
3.2 Restrictions............................................................................ 21
3.3 Nonassignability........................................................................ 22
3.4 Requirement of Notification of Election
Under Section 83(b) of the Code....................................................... 22
3.5 Requirement of Notification Upon
Disqualifying Disposition Under
Section 421(b) of the Code............................................................ 23
3.6 Right of Discharge Reserved............................................................. 23
3.7 Nature of Payments...................................................................... 23
3.8 Non-Uniform Determinations.............................................................. 24
3.9 Other Payments or Awards................................................................ 24
3.10 Section Headings........................................................................ 25
3.11 Effective Date and Term of Plan......................................................... 25
3.12 Governing Law........................................................................... 25
</TABLE>
-i-
<PAGE> 3
ARTICLE I
GENERAL
1.1 Purpose
The purpose of the 3-D Geophysical 1995 Long-Term Incentive
Plan (the "Plan") is to provide for directors, officers and key employees of,
and consultants to, 3-D Geophysical, Inc. (the "Company") and its subsidiaries
an incentive (a) to enter into and remain in the service of the Company or its
subsidiaries, (b) to enhance the long-term performance of the Company and its
subsidiaries, and (c) to acquire a proprietary interest in the success of the
Company and its subsidiaries.
1.2 Administration
1.2.1 Subject to Section 1.2.6, the Plan shall be administered
by the Compensation Committee (the "Committee") of the board of directors of the
Company (the "Board"), which shall consist of not less than two directors. The
members of the Committee shall be appointed by, and serve at the pleasure of,
the Board. To the extent required for transactions under the Plan to qualify for
the exemptions available under Rule 16b-3 ("Rule 16b-3") promulgated under the
Securities Exchange Act of 1934 (the "1934 Act"), no person may serve on the
Committee if, during the year preceding such service, he was granted or awarded
equity securities of the Company (including options on such
<PAGE> 4
securities) under the Plan or any other plan of the Company or any affiliate
thereof (other than a grant pursuant to Section 2.3 hereof).
1.2.2 The Committee shall have the authority (a) to exercise
all of the powers granted to it under the Plan, (b) to construe, interpret and
implement the Plan and any Plan Agreements executed pursuant to Section 2.1, (c)
to prescribe, amend and rescind rules and regulations relating to the Plan,
including rules governing its own operations, (d) to make all determinations
necessary or advisable in administering the Plan, (e) to correct any defect,
supply any omission and reconcile any inconsistency in the Plan, and (f) to
amend the Plan to reflect changes in applicable law.
1.2.3 Actions of the Committee shall be taken by the vote of a
majority of its members. Any action may be taken by a written instrument signed
by a majority of the Committee members, and action so taken shall be fully as
effective as if it had been taken by a vote at a meeting.
1.2.4 The determination of the Committee on all matters
relating to the Plan or any Plan Agreement shall be final, binding and
conclusive.
1.2.5 No member of the Committee shall be liable for
-2-
<PAGE> 5
any action or determination made in good faith with respect to the Plan or any
award thereunder.
1.2.6 Notwithstanding anything to the contrary contained
herein: (a) until the Board shall appoint the members of the Committee, the Plan
shall be administered by the Board; and (b) the Board may, in its sole
discretion, at any time and from time to time, resolve to administer the Plan.
In either of the foregoing events, the term "Committee" as used herein shall be
deemed to mean the Board.
1.3 Persons Eligible for Awards
Awards under the Plan may be made to such officers, directors,
and executive, administrative, technical or professional employees of, and
consultants to, the Company and its subsidiaries (collectively, "key persons")
as the Committee shall in its sole discretion select. Awards to directors who
are not employees of the Company or a subsidiary shall be made only pursuant to
Section 2.3.
1.4 Types of Awards Under Plan
Awards may be made under the Plan in the form of (a) incentive
stock options, (b) nonqualified stock options, (c) stock appreciation rights and
(d) restricted stock, all as more fully set forth in Article II. The term
"award" means any
-3-
<PAGE> 6
of the foregoing. No incentive stock option may be granted to a person who is
not an employee of the Company on the date of grant.
1.5 Shares Available for Awards
1.5.1 The total number of shares of common stock of the
Company, par value $0.01 per share ("Common Stock"), with respect to which
awards may be granted pursuant to the Plan shall not exceed 720,000 shares. Such
shares may be authorized but unissued Common Stock or authorized and issued
Common Stock held in the Company's treasury or acquired by the Company for the
purposes of the Plan. The Committee may direct that any stock certificate
evidencing shares issued pursuant to the Plan shall bear a legend setting forth
such restrictions on transferability as may apply to such shares pursuant to the
Plan.
1.5.2 If there is any change in the outstanding shares of
Common Stock by reason of a stock dividend or distribution, stock split-up,
recapitalization, combination or exchange of shares, or by reason of any merger,
consolidation, spinoff or other corporate reorganization in which the Company is
the surviving corporation, the number of shares available for issuance both in
the aggregate and with respect to each outstanding award, and the purchase price
per share under outstanding awards, shall be equitably adjusted by the
Committee, whose determination
-4-
<PAGE> 7
shall be final, binding and conclusive. After any adjustment made pursuant to
this Section 1.5.2, the number of shares subject to each outstanding award shall
be rounded to the nearest whole number.
1.5.3 The following shares of Common Stock shall become
available for further awards under the Plan: any shares subject to an award
under the Plan that remain unissued upon the cancellation or termination of such
award for any reason whatsoever; any shares of restricted stock forfeited
pursuant to Section 2.5.5; any shares in respect of which a stock appreciation
right is settled for cash; and any shares tendered in payment upon the exercise
of an option or stock appreciation right. Except as provided in Section 2.2.8,
there shall be no limit on the number or the value of the shares of Common Stock
that may be subject to awards to any individual under the Plan.
1.6 Definitions of Certain Terms
1.6.1 The "Fair Market Value" of a share of Common Stock on
any day shall be determined as follows.
(a) If the principal market for the Common Stock (the
"Market") is a national securities exchange or the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") National Market, the
last sale price or, if no report-
-5-
<PAGE> 8
ed sales take place on the applicable date, the average of the high bid and low
asked price of Common Stock as reported for such Market on such date or, if no
such quotation is made on such date, on the next preceding day on which there
were quotations, provided that such quotations shall have been made within the
ten (10) business days preceding the applicable date;
(b) If the Market is the NASDAQ National List, the
NASDAQ Supplemental List or another market, the average of the high bid and low
asked price for Common Stock on the applicable date, or, if no such quotations
shall have been made on such date, on the next preceding day on which there were
quotations, provided that such quotations shall have been made within the ten
(10) business days preceding the applicable date; or,
(c) In the event that neither paragraph (a) nor (b)
shall apply, the Fair Market Value of a share of Common Stock on any day shall
be determined in good faith by the Committee.
1.6.2 The term "incentive stock option" means an option that
is intended to qualify for special federal income tax treatment pursuant to
sections 421 and 422 of the Internal Revenue Code of 1986 (the "Code"), as now
constituted or subsequently amended, or pursuant to a successor provision of the
Code, and which is so designated in the applicable Plan Agreement. Any option
that is not specifically designated as an
-6-
<PAGE> 9
incentive stock option shall under no circumstances be considered an incentive
stock option. Any option that is not an incentive stock option is referred to
herein as a "nonqualified stock option."
1.6.3 The term "employment" means, in the case of a grantee of
an award under the Plan who is not an employee of the Company or a subsidiary,
the grantee's membership on the Board or status as a consultant to the Company
or a subsidiary.
1.6.4 A grantee shall be deemed to have a "termination of
employment" upon ceasing to be employed by the Company and all of its
subsidiaries or by a corporation assuming awards in a transaction to which
section 425(a) of the Code applies. The Committee may in its discretion
determine whether any leave of absence constitutes a termination of employment
for purposes of the Plan and the impact, if any, of any such leave of absence on
awards theretofore made under the Plan. The Committee shall have the right to
determine whether the termination of a grantee's employment is a dismissal for
cause and the date of termination in such case, which date the Committee may
retroactively deem to be the date of the action that is cause for dismissal.
Such determinations of the Committee shall be final, binding and conclusive.
-7-
<PAGE> 10
1.6.5 The terms "parent corporation" and "subsidiary
corporation" have the meanings given them in section 425(e) and (f) of the Code,
respectively.
-8-
<PAGE> 11
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards
Each award granted under the Plan shall be evidenced by a
written agreement ("Plan Agreement") which shall contain such provisions as the
Committee may in its sole discretion deem necessary or desirable. By accepting
an award pursuant to the Plan, a grantee thereby agrees that the award shall be
subject to all of the terms and provisions of the Plan and the applicable Plan
Agreement.
2.2 Grant of Stock Options and Stock
Appreciation Rights
2.2.1 The Committee may grant incentive stock options and
nonqualified stock options (collectively, "options") to purchase shares of
Common Stock from the Company, to such key persons, and in such amounts and
subject to such terms and conditions, as the Committee shall determine in its
sole discretion, subject to the provisions of the Plan.
2.2.2 The Committee may grant stock appreciation rights to
such key persons, and in such amounts and subject to such terms and conditions,
as the Committee shall determine in its sole discretion, subject to the
provisions of the Plan. Stock appreciation rights may be granted in connection
with all
-9-
<PAGE> 12
or any part of, or independently of, any option granted under the Plan. A stock
appreciation right granted in connection with a nonqualified stock option may be
granted at or after the time of grant of such option. A stock appreciation right
granted in connection with an incentive stock option may be granted only at the
time of grant of such option.
2.2.3 The grantee of a stock appreciation right shall have the
right, subject to the terms of the Plan and the applicable Plan Agreement, to
receive from the Company an amount equal to (a) the excess of the Fair Market
Value of a share of Common Stock on the date of exercise of the stock
appreciation right over (b) the Fair Market Value of a share of Common Stock on
the date of grant (or over the option exercise price if the stock appreciation
right is granted in connection with an option), multiplied by (c) the number of
shares with respect to which the stock appreciation right is exercised. Payment
upon exercise of a stock appreciation right shall be in cash or in shares of
Common Stock (valued at their Fair Market Value on the date of exercise of the
stock appreciation right) or both, all as the Committee shall determine in its
sole discretion. Upon the exercise of a stock appreciation right granted in
connection with an option, the number of shares subject to the option shall be
reduced by the number of shares with respect to which the stock appreciation
right is exercised. Upon the exercise of an option
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<PAGE> 13
in connection with which a stock appreciation right has been granted, the number
of shares subject to the stock appreciation right shall be reduced by the number
of shares with respect to which the option is exercised.
2.2.4 Each Plan Agreement with respect to an option shall set
forth the amount (the "option exercise price") payable by the grantee to the
Company upon exercise of the option evidenced thereby. The option exercise price
per share shall be determined by the Committee in its sole discretion; provided,
however, that the exercise price of an incentive stock option shall be at least
100% of the Fair Market Value of a share of Common Stock on the date the option
is granted, and provided further that in no event shall the option exercise
price be less than the par value of a share of Common Stock.
2.2.5 Each Plan Agreement with respect to an option or stock
appreciation right shall set forth the periods during which the award evidenced
thereby shall be exercisable, whether in whole or in part. Such periods shall be
determined by the Committee in its sole discretion; provided, however, that no
incentive stock option (or a stock appreciation right granted in connection with
an incentive stock option) shall be exercisable more than 10 years after the
date of grant.
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<PAGE> 14
2.2.6 To the extent that the aggregate Fair Market Value
(determined as of the time the option is granted) of the stock with respect to
which incentive stock options are first exercisable by any employee during any
calendar year shall exceed $100,000, or such higher amount as may be permitted
from time to time under section 422 of the Code, such options shall be treated
as nonqualified stock options.
2.2.7 Notwithstanding the provisions of Sections 2.2.4 and
2.2.5, an incentive stock option may not be granted under the Plan to an
individual who, at the time the option is granted, owns stock possessing more
than 10% of the total combined voting power of all classes of stock of his
employer corporation or of its parent or subsidiary corporations (as such
ownership may be determined for purposes of section 422(b)(6) of the Code)
unless (a) at the time such incentive stock option is granted the option
exercise price is at least 110% of the Fair Market Value of the shares subject
thereto and (b) the incentive stock option by its terms is not exercisable after
the expiration of 5 years from the date it is granted.
2.3 Grant of Stock Options to Non-Employee Directors.
2.3.1 This Section 2.3 sets forth the provisions pursuant to
which nonqualified stock options shall be granted to those directors of the
Company who are not employees of the Com-
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<PAGE> 15
pany or a subsidiary. The terms of such options as set forth herein may not be
varied other than by amendment of this Section 2.3 in accordance with Section
3.1. To the extent that any administrative action is required in connection with
this Section 2.3, such action shall be taken by the Board, whose determination
in such case shall be conclusive.
2.3.2 Nonqualified stock options shall be granted under this
Section 2.3 only to persons who are members of the Board and are not employees
of the Company or any subsidiary thereof ("Eligible Directors").
2.3.3 On the effective date of the initial public offering of
the Common Stock, each person who then satisfies the definition of Eligible
Director shall be granted a nonqualified stock option for 10,000 shares of
Common Stock at the price established for such public offering. Thereafter, upon
the initial election to the Board of any other person who satisfies the
definition of Eligible Director, such person shall be granted an option to
purchase 10,000 shares of Common Stock at the Fair Market Value on the date of
such person's election to the Board.
2.3.4 Each option granted under this Section 2.3 shall have a
term of 10 years, and shall become exercisable as to one-third of the shares
subject thereto on each of the first, second
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and third anniversaries of the date of grant. An option may be exercised from
time to time for all or part of the shares as to which it is then exercisable.
2.4 Exercise of Options and Stock Appreciation Rights
Subject to the provisions of this Article II, each option or
stock appreciation right granted under the Plan shall be exercisable as follows:
2.4.1 Unless the applicable Plan Agreement otherwise provides,
an option or stock appreciation right shall become exercisable in four
substantially equal installments, the first of which shall become exercisable on
the first anniversary of the date of grant and the remaining three of which
shall become exercisable, respectively, on the second, third and fourth
anniversaries of the date of grant.
2.4.2 Unless the applicable Plan Agreement otherwise provides,
once an installment becomes exercisable, it shall remain exercisable until
expiration, cancellation or termination of the award.
2.4.3 Unless the applicable Plan Agreement otherwise provides,
an option or stock appreciation right may be exercised from time to time as to
all or part of the shares as to which such award is then exercisable. A stock
appreciation right
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granted in connection with an option may be exercised at any time when, and to
the same extent that, the related option may be exercised.
2.4.4 An option or stock appreciation right shall be exercised
by the filing of a written notice with the Company, on such form and in such
manner as the Committee shall in its sole discretion prescribe. In the case of a
grantee of a stock appreciation right whose transactions in Common Stock are
subject to Section 16(b) of the 1934 Act, an election to exercise the stock
appreciation right in whole or in part shall, to the extent required to conform
to applicable interpretations of Rule 16b-3, be subject to the approval of the
Committee in its sole discretion, occur no sooner than six months after the
grant thereof, and be made irrevocably at least six months prior to such
exercise unless both the election and the exercise are made in a single "window
period" of 10 business days beginning on the third day following release of the
Company's quarterly or annual summary statement of sales and earnings.
2.4.5 Any written notice of exercise of an option shall be
accompanied by payment for the shares being purchased. Such payment shall be
made: (a) by certified or official bank check (or the equivalent thereof
acceptable to the Company) for the full option exercise price; or (b) with the
consent of the Committee (except that such consent shall not be required in the
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case of an option granted pursuant to Section 2.3), by delivery of shares of
Common Stock acquired at least six months prior to the option exercise date and
having a Fair Market Value (determined as of the exercise date) equal to all or
part of the option exercise price and a certified or official bank check (or the
equivalent thereof acceptable to the Company) for any remaining portion of the
full option exercise price; or (c) except in the case of an option granted
pursuant to Section 2.3, at the discretion of the Committee and to the extent
permitted by law, by such other provision as the Committee may from time to time
prescribe.
2.4.6 Each Plan Agreement evidencing an option (other than an
option granted pursuant to Section 2.3) shall provide that, upon the filing of
the notice described in Section 2.4.4, the Committee may in its discretion
determine that the Company shall make a payment to the grantee in lieu of
exercise of the option, which payment shall be equal to (a) the excess of the
Fair Market Value of a share of Common Stock on the date of such notice over (b)
the option exercise price, multiplied by (c) the number of shares with respect
to which the grantee proposes to exercise the option. Such payment shall be made
to the grantee in cash or in shares of Common Stock (valued at their Fair Market
Value on the notice date) or both, as the Committee shall determine in its sole
discretion.
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<PAGE> 19
2.4.7 Promptly after receiving payment of the full option
exercise price, or after receiving notice of the exercise of a stock
appreciation right for which payment will be made partly or entirely in shares,
or after a determination by the Committee to make a payment in lieu of exercise
partly or entirely in shares, the Company shall, subject to the provisions of
Section 3.2, deliver to the grantee or to such other person as may then have the
right to exercise the award, a certificate or certificates for the shares of
Common Stock for which the award has been exercised. If the method of payment
employed upon option exercise so requires, and if applicable law permits, an
optionee may direct the Company to deliver the certificate(s) to the optionee's
stockbroker.
2.4.8 No grantee of an option or stock appreciation right (or
other person having the right to exercise such award) shall have any of the
rights of a stockholder of the Company with respect to shares subject to such
award until the issuance of a stock certificate to such person for such shares.
Except as otherwise provided in Section 1.5.2, no adjustment shall be made for
dividends, distributions or other rights (whether ordinary or extraordinary, and
whether in cash, securities or other property) for which the record date is
prior to the date such stock certificate is issued.
2.5 Termination of Employment; Death
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2.5.1 Except to the extent otherwise provided in Section 2.5.2
or 2.5.3 or in the applicable Plan Agreement, all options and stock appreciation
rights not theretofore exercised shall terminate upon termination of the
grantee's employment (which, in the case of an Eligible Director, shall mean his
membership on the Board) for any reason (including death).
2.5.2 If a grantee's employment terminates for any reason
other than death or dismissal for cause, the grantee may exercise any
outstanding option or stock appreciation right on the following terms and
conditions: (a) exercise may be made only to the extent that the grantee was
entitled to exercise the award on the date of employment termination; and (b)
exercise must occur within three months after employment terminates, except that
the three-month period shall be increased to one year if termination is by
reason of disability, but in no event after the expiration date of the award as
set forth in the Plan Agreement.
2.5.3 If a grantee dies while employed by the Company or any
subsidiary, or after employment termination but during the period in which the
grantee's awards are exercisable pursuant to Section 2.5.2, any outstanding
option or stock appreciation right shall be exercisable on the following terms
and conditions:
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<PAGE> 21
(a) exercise may be made only to the extent that the grantee was entitled to
exercise the award on the date of death; and (b) exercise must occur by the
earlier of the first anniversary of the grantee's death or the expiration date
of the award. Any such exercise of an award following a grantee's death shall be
made only by the grantee's executor or administrator, unless the grantee's will
specifically disposes of such award, in which case such exercise shall be made
only by the recipient of such specific disposition. If a grantee's personal
representative or the recipient of a specific disposition under the grantee's
will shall be entitled to exercise any award pursuant to the preceding sentence,
such representative or recipient shall be bound by all the terms and conditions
of the Plan and the applicable Plan Agreement which would have applied to the
grantee.
2.6 Grant of Restricted Stock
2.6.1 The Committee may grant restricted shares of Common
Stock to such key persons, in such amounts, and subject to such terms and
conditions as the Committee shall determine in its sole discretion, subject to
the provisions of the Plan. Restricted stock awards may be made independently of
or in connection with any other award under the Plan. A grantee of a restricted
stock award shall have no rights with respect to such award unless such grantee
accepts the award within such period as the Committee shall specify by executing
a Plan Agreement in such
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<PAGE> 22
form as the Committee shall determine and, if the Committee shall so require,
makes payment to the Company by certified or official bank check (or the
equivalent thereof acceptable to the Company) in such amount as the Committee
may determine.
2.6.2 Promptly after a grantee accepts a restricted stock
award, the Company shall issue in the grantee's name a certificate or
certificates for the shares of Common Stock covered by the award. Upon the
issuance of such certificate(s), the grantee shall have the rights of a
stockholder with respect to the restricted stock, subject to the
nontransferability restrictions and Company repurchase rights described in
Sections 2.6.4 and 2.6.5, subject also to such other restrictions and conditions
as the Committee in its discretion may include in the applicable Plan Agreement.
2.6.3 Unless the Committee shall otherwise determine, any
certificate issued evidencing shares of restricted stock shall remain in the
possession of the Company until such shares are free of any restrictions
specified in the applicable Plan Agreement.
2.6.4 Shares of restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided in this Plan or the applicable Plan Agreement. The
Committee at the time of grant
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<PAGE> 23
shall specify the date or dates (which may depend upon or be related to the
attainment of performance goals and other conditions) on which the
nontransferability of the restricted stock shall lapse. Unless the applicable
Plan Agreement provides otherwise, additional shares of Common Stock or other
property distributed to the grantee in respect of shares of restricted stock, as
dividends or otherwise, shall be subject to the same restrictions applicable to
such restricted stock.
2.6.5 During the 90 days following termination of the
grantee's employment for any reason, the Company shall have the right to require
the return of any shares to which restrictions on transferability apply, in
exchange for which the Company shall repay to the grantee (or the grantee's
estate) any amount paid by the grantee for such shares.
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<PAGE> 24
ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan; Modification of Awards
3.1.1 The Board may from time to time suspend, discontinue,
revise or amend the Plan in any respect whatsoever, except that no such
amendment shall materially impair any rights or materially increase any
obligations under any award theretofore made under the Plan without the consent
of the grantee (or, after the grantee's death, the person having the right to
exercise the award). Notwithstanding the foregoing, Sections 2.3.2, 2.3.3 and
2.3.4 may not be amended more than once every six months except as may be
necessary to comply with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act, or the regulations thereunder.
3.1.2 Shareholder approval shall be required with respect to
any amendment (a) which increases the aggregate number of shares which may be
issued pursuant to incentive stock options or changes the class of employees
eligible to receive such options or (b) for which approval is required for
compliance with Rule 16b-3.
3.1.3 The Committee may amend any outstanding Plan Agreement
other than one evidencing an award under Section 2.3,
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<PAGE> 25
including, without limitation, by amendment which would (a) accelerate the time
or times at which the award becomes unrestricted or may be exercised, or (b)
waive or amend any goals, restrictions or conditions set forth in the Agreement,
or (c) waive or amend the operation of Section 2.5 with respect to the
termination of the award at termination of employment. However, any such or
amendment that materially impairs the rights or materially increases the
obligations of a grantee under an outstanding award shall be made only with the
consent of the grantee (or, upon the grantee's death, the person having the
right to exercise the award).
3.2 Restrictions
3.2.1 If the Committee shall at any time determine that any
Consent (as hereinafter defined) is necessary or desirable as a condition of, or
in connection with, the granting of any award under the Plan, the issuance or
purchase of shares or other rights thereunder, or the taking of any other action
thereunder (each such action being hereinafter referred to as a "Plan Action"),
then such Plan Action shall not be taken, in whole or in part, unless and until
such Consent shall have been effected or obtained to the full satisfaction of
the Committee.
3.2.2 The term "Consent" as used herein with respect to any
Plan Action means (a) any and all listings, registrations
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or qualifications in respect thereof upon any securities exchange or under any
federal, state or local law, rule or regulation, (b) any and all written
agreements and representations by the grantee with respect to the disposition of
shares, or with respect to any other matter, which the Committee shall deem
necessary or desirable to comply with the terms of any such listing,
registration or qualification or to obtain an exemption from the requirement
that any such listing, qualification or registration be made and (c) any and all
consents, clearances and approvals in respect of a Plan Action by any
governmental or other regulatory bodies.
3.3 Nonassignability
To the extent necessary to comply with section 422 of the Code
and with applicable interpretations of Rule 16b-3, no award or right granted to
any person under the Plan shall be assignable or transferable other than by will
or by the laws of descent and distribution, and all such awards and rights shall
be exercisable during the life of the grantee only by the grantee or the
grantee's legal representative. No assignment or transfer shall be made without
consent of the Committee.
3.4 Requirement of Notification of
Election Under Section 83(b) of the Code
If any grantee shall, in connection with the acquisi-
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tion of shares of Common Stock under the Plan, make the election permitted under
section 83(b) of the Code (i.e., an election to include in gross income in the
year of transfer the amounts specified in section 83(b)), such grantee shall
notify the Company of such election within 10 days of filing notice of the
election with the Internal Revenue Service, in addition to any filing and
notification required pursuant to regulations issued under the authority of Code
section 83(b).
3.5 Requirement of Notification Upon Disqualifying
Disposition Under Section 421(b) of the Code
Each Plan Agreement with respect to an incentive stock option
shall require the grantee to notify the Company of any disposition of shares of
Common Stock issued pursuant to the exercise of such option under the
circumstances described in section 421(b) of the Code (relating to certain
disqualifying dispositions), within 10 days of such disposition.
3.6 Right of Discharge Reserved
Nothing in the Plan or in any Plan Agreement shall confer upon
any grantee the right to continue in the employ of the Company or any subsidiary
thereof or affect any right which the Company may have to terminate such
employment.
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<PAGE> 28
3.7 Nature of Payments
3.7.1 Any and all grants of awards and issuances of shares of
Common Stock under the Plan shall be in consideration of services performed for
the Company or a subsidiary by the grantee.
3.7.2 All such grants and issuances shall constitute a special
incentive payment to the grantee and shall not be taken into account in
computing the amount of salary or compensation of the grantee for the purpose of
determining any benefits under any pension, retirement, profit-sharing, bonus,
life insurance or other benefit plan of the Company or a subsidiary or under any
agreement between the Company or a subsidiary and the grantee, unless such plan
or agreement specifically provides otherwise.
3.8 Non-Uniform Determinations
The Committee's determinations under the Plan need not be
uniform and may be made by it selectively among persons who receive, or are
eligible to receive, awards under the Plan (whether or not such persons are
similarly situated). Without limiting the generality of the foregoing, the
Committee shall be entitled, among other things, to make non-uniform and
selective determinations, and to enter into non-uniform and selective Plan
agreements, as to (a) the persons to receive awards under the Plan, (b) the
terms and provisions of awards under the Plan, and
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(c) the treatment of leaves of absence pursuant to Section 1.6.4. 3.9 Other
Payments or Awards
Nothing contained in the Plan shall be deemed in any way to
limit or restrict the Company and its subsidiaries from making any award or
payment to any person under any other plan, arrangement or understanding,
whether now existing or hereafter in effect.
3.10 Section Headings
The section headings contained herein are for the purpose of
convenience only and are not intended to define or limit the contents of the
sections.
3.11 Effective Date and Term of Plan
3.11.1 The Plan was adopted by the Board on November 10, 1995,
subject to approval by the Company's shareholders. All awards under the Plan
prior to such shareholder approval are subject in their entirety to such
approval. If such approval is not obtained prior to the first anniversary of the
date of adoption of the Plan, the Plan and all awards thereunder shall terminate
on that date.
3.11.2 Unless sooner terminated by the Board, the Plan shall
terminate on the tenth anniversary of its adoption by the
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<PAGE> 30
Board. All awards made under the Plan prior to its termination shall remain in
effect until such awards have been satisfied or terminated in accordance with
the terms and provisions of the Plan and the applicable Plan Agreements.
3.12 Governing Law
All rights and obligations under the Plan shall be construed
and interpreted in accordance with the laws of the State of [New York], without
giving effect to principles of conflict of laws.
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<PAGE> 1
Exhibit (C)(12)
3-D GEOPHYSICAL, INC.
1997 LONG-TERM STOCK INCENTIVE PLAN
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
ARTICLE I
GENERAL
<S> <C>
1.1 Purpose................................................................................. 1
1.2 Administration.......................................................................... 1
1.3 Persons Eligible for Awards............................................................. 3
1.4 Types of Awards Under Plan.............................................................. 3
1.5 Shares Available for Awards............................................................. 4
1.6 Definitions of Certain Terms............................................................ 5
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards............................................................ 9
2.2 No Rights as a Shareholder.............................................................. 9
2.3 Grant of Stock Options, Stock Appreciation
Rights and Dividend Equivalent Rights................................................. 10
2.4 Exercise of Options and Stock Appreciation
Rights................................................................................ 13
2.5 Termination of Employment; Death........................................................ 15
2.6 Grant of Restricted Stock............................................................... 16
2.7 Grant of Restricted Stock Units......................................................... 18
2.8 Other Stock-Based Awards................................................................ 19
2.9 Grant of Dividend Equivalent Rights..................................................... 20
2.10 Right of Recapture...................................................................... 20
ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan; Modification
of Awards............................................................................. 22
3.2 Tax Withholding......................................................................... 23
3.3 Restrictions............................................................................ 24
3.4 Nonassignability........................................................................ 24
3.5 Requirement of Notification of Election
Under Section 83(b) of the Code....................................................... 25
3.6 Requirement of Notification Upon
Disqualifying Disposition Under
Section 421(b) of the Code............................................................ 25
3.7 Change in Control....................................................................... 25
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
3.8 Right of Discharge Reserved............................................................. 28
3.9 Nature of Payments...................................................................... 28
3.10 Non-Uniform Determinations.............................................................. 29
3.11 Other Payments or Awards................................................................ 29
3.12 Section Headings........................................................................ 29
3.13 Effective Date and Term of Plan......................................................... 29
3.14 Governing Law........................................................................... 30
</TABLE>
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<PAGE> 4
ARTICLE I
GENERAL
1.1 Purpose
The purpose of the 3-D Geophysical 1997 Long-Term Stock
Incentive Plan (the "Plan") is to provide for officers, other employees and
directors of, and consultants to, 3-D Geophysical, Inc.. (the "Company") and its
subsidiaries an incentive (a) to enter into and remain in the service of the
Company or its subsidiaries, (b) to enhance the long-term performance of the
Company and its subsidiaries, and (c) to acquire a proprietary interest in the
success of the Company and its subsidiaries.
1.2 Administration
1.2.1 Subject to Section 1.2.6, the Plan shall be administered
by the Compensation Committee (the "Committee") of the board of directors of the
Company (the "Board"), which shall consist of not less than two directors. The
members of the Committee shall be appointed by, and serve at the pleasure of,
the Board. To the extent required for transactions under the Plan to qualify for
the exemptions available under Rule 16b-3 ("Rule 16b-3") promulgated under the
Securities Exchange Act of 1934 (the "1934 Act"), all actions relating to awards
to persons subject to Section 16 of the 1934 Act shall be taken by the Board
unless each person who serves on the Committee is a "non-employee director"
within the meaning of Rule 16b-3 or such actions are taken by a sub-committee of
the Committee (or the Board) comprised solely of "non-employee directors". To
the extent required for compensation realized from awards under the Plan to be
deductible by the Company pursuant to section 162(m) of the Internal Revenue
Code
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<PAGE> 5
of 1986 (the "Code"), the members of the Committee shall be "outside directors"
within the meaning of section 162(m).
1.2.2 The Committee shall have the authority (a) to exercise
all of the powers granted to it under the Plan, (b) to construe, interpret and
implement the Plan and any Plan Agreements executed pursuant to Section 2.1, (c)
to prescribe, amend and rescind rules and regulations relating to the Plan,
including rules governing its own operations, (d) to make all determinations
necessary or advisable in administering the Plan, (e) to correct any defect,
supply any omission and reconcile any inconsistency in the Plan, and (f) to
amend the Plan to reflect changes in applicable law.
1.2.3 Actions of the Committee shall be taken by the vote of a
majority of its members. Any action may be taken by a written instrument signed
by a majority of the Committee members, and action so taken shall be fully as
effective as if it had been taken by a vote at a meeting.
1.2.4 The determination of the Committee on all matters
relating to the Plan or any Plan Agreement shall be final, binding and
conclusive.
1.2.5 No member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any award
thereunder.
1.2.6 Notwithstanding anything to the contrary contained
herein: (a) until the Board shall appoint the members of the Committee, the Plan
shall be administered by the Board; and (b) the Board may, in its sole
discretion, at any time and from time to time, grant awards or resolve to
administer the Plan. In either of the foregoing events, the Board shall have all
of the
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authority and responsibility granted to the Committee herein.
1.3 Persons Eligible for Awards
Awards under the Plan may be made to such directors, officers
and other employees of the Company and its subsidiaries (including prospective
employees conditioned on their becoming employees), and to such consultants to
the Company and its subsidiaries (collectively, "key persons") as the Committee
shall in its discretion select.
1.4 Types of Awards Under Plan
Awards may be made under the Plan in the form of (a) incentive
stock options (within the meaning of section 422 of the Code), (b) nonqualified
stock options, (c) stock appreciation rights, (d) dividend equivalent rights,
(e) restricted stock, (f) restricted stock units and (g) other stock-based
awards, all as more fully set forth in Article II. The term "award" means any of
the foregoing. No incentive stock option may be granted to a person who is not
an employee of the Company on the date of grant.
1.5 Shares Available for Awards
1.5.1 The total number of shares of common stock of the
Company, par value $0.01 per share ("Common Stock"), which may be transferred
pursuant to awards granted under the Plan shall not exceed 750,000 shares. Such
shares may be authorized but unissued Common Stock or authorized and issued
Common Stock held in the Company's treasury or acquired by the Company for the
purposes of the Plan. The Committee may direct that any stock certificate
evidencing shares issued pursuant to the Plan shall bear a legend setting forth
such restrictions on transferability as may apply to such shares pursuant to the
Plan.
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<PAGE> 7
1.5.2 Subject to any required action by the shareholders of
the Company, the number of shares of Common Stock covered by each outstanding
award, the number of shares available for awards, the number of shares that may
be subject to awards to any one employee, and the price per share of Common
Stock covered by each such outstanding award shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an award.
After any adjustment made pursuant to this Section 1.5.2, the number of shares
subject to each outstanding award shall be rounded to the nearest whole number.
1.5.3 Except as provided in this Section 1.5 and in Section
2.2.8, there shall be no limit on the number or the value of the shares of
Common Stock that may be subject to awards to any individual under the Plan.
1.6 Definitions of Certain Terms
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<PAGE> 8
1.6.1 The "Fair Market Value" of a share of Common Stock on
any day shall be determined as follows.
(a) If the principal market for the Common Stock (the
"Market") is a national securities exchange or the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") National Market, the
last sale price or, if no reported sales take place on the applicable date, the
average of the high bid and low asked price of Common Stock as reported for such
Market on such date or, if no such quotation is made on such date, on the next
preceding day on which there were quotations, provided that such quotations
shall have been made within the ten (10) business days preceding the applicable
date;
(b) If the Market is the NASDAQ National List, the
NASDAQ Supplemental List or another market, the average of the high bid and low
asked price for Common Stock on the applicable date, or, if no such quotations
shall have been made on such date, on the next preceding day on which there were
quotations, provided that such quotations shall have been made within the ten
(10) business days preceding the applicable date; or,
(c) In the event that neither paragraph (a) nor (b)
shall apply, the Fair Market Value of a share of Common Stock on any day shall
be determined in good faith by the Committee.
1.6.2 The term "incentive stock option" means an option that
is intended to qualify for special federal income tax treatment pursuant to
sections 421 and 422 of the Code, as now constituted or subsequently amended, or
pursuant to a successor provision of the Code, and which is so designated in the
applicable Plan Agreement. Any option that is not specifically
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designated as an incentive stock option shall under no circumstances be
considered an incentive stock option. Any option that is not an incentive stock
option is referred to herein as a "nonqualified stock option."
1.6.3 The term "employment" means, in the case of a grantee of
an award under the Plan who is not an employee of the Company, the grantee's
association with the Company or a subsidiary as a director, consultant or
otherwise.
1.6.4 A grantee shall be deemed to have a "termination of
employment" upon ceasing to be employed by the Company and all of its
subsidiaries or by a corporation assuming awards in a transaction to which
section 425(a) of the Code applies. The Committee may in its discretion
determine (a) whether any leave of absence constitutes a termination of
employment for purposes of the Plan, (b) the impact, if any, of any such leave
of absence on awards theretofore made under the Plan, and (c) when a change in a
non-employee's association with the Company constitutes a termination of
employment for purposes of the Plan. The Committee shall have the right to
determine whether the termination of a grantee's employment is a dismissal for
cause and the date of termination in such case, which date the Committee may
retroactively deem to be the date of the action that is cause for dismissal.
Such determinations of the Committee shall be final, binding and conclusive.
1.6.5 The term "cause," when used in connection with
termination of a grantee's employment, shall have the meaning set forth in any
then-effective employment agreement between the grantee and the Company or a
subsidiary thereof. In the absence of such an employment agreement, "cause"
means: (a) conviction of any crime (whether or not involving
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the Company) constituting a felony in the jurisdiction involved; (b) engaging in
any substantiated act involving moral turpitude; (c) engaging in any act which,
in each case, subjects, or if generally known would subject, the Company to
public ridicule or embarrassment; (d) material violation of the Company's
policies, including, without limitation, those relating to sexual harassment or
the disclosure or misuse of confidential information; (e) serious neglect or
misconduct in the performance of the grantee's duties for the Company or a
subsidiary or willful or repeated failure or refusal to perform such duties; in
each case as determined by the Committee, which determination shall be final,
binding and conclusive.
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ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards
Each award granted under the Plan (except an award of
unrestricted stock) shall be evidenced by a written agreement ("Plan Agreement")
which shall contain such provisions as the Committee in its discretion deems
necessary or desirable. By accepting an award pursuant to the Plan, a grantee
thereby agrees that the award shall be subject to all of the terms and
provisions of the Plan and the applicable Plan Agreement.
2.2 No Rights as a Shareholder
No grantee of an option or stock appreciation right (or other
person having the right to exercise such award) shall have any of the rights of
a shareholder of the Company with respect to shares subject to such award until
the issuance of a stock certificate to such person for such shares. Except as
otherwise provided in Section 1.5.3, no adjustment shall be made for dividends,
distributions or other rights (whether ordinary or extraordinary, and whether in
cash, securities or other property) for which the record date is prior to the
date such stock certificate is issued.
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2.3 Grant of Stock Options, Stock Appreciation
Rights and Dividend Equivalent Rights
2.3.1 The Committee may grant incentive stock options and
nonqualified stock options (collectively, "options") to purchase shares of
Common Stock from the Company, to such key persons, in such amounts and subject
to such terms and conditions, as the Committee shall determine in its
discretion, subject to the provisions of the Plan.
2.3.2 The Committee may grant stock appreciation rights to
such key persons, in such amounts and subject to such terms and conditions, as
the Committee shall determine in its discretion, subject to the provisions of
the Plan. Stock appreciation rights may be granted in connection with all or any
part of, or independently of, any option granted under the Plan. A stock
appreciation right granted in connection with a nonqualified stock option may be
granted at or after the time of grant of such option. A stock appreciation right
granted in connection with an incentive stock option may be granted only at the
time of grant of such option.
2.3.3 The grantee of a stock appreciation right shall have the
right, subject to the terms of the Plan and the applicable Plan Agreement, to
receive from the Company an amount equal to (a) the excess of the Fair Market
Value of a share of Common Stock on the date of exercise of the stock
appreciation right over (b) the exercise price of such right as set forth in the
Plan Agreement (or over the option exercise price if the stock appreciation
right is granted in connection with an option), multiplied by (c) the number of
shares with respect to which the stock appreciation right is exercised. Payment
upon exercise of a stock appreciation right shall be in cash or in shares of
Common Stock (valued at their Fair Market Value on the date of exercise of the
stock appreciation right) or both, all as the Committee shall determine in its
discretion. Upon the exercise of a stock appreciation right granted in
connection with an
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option, the number of shares subject to the option shall be correspondingly
reduced by the number of shares with respect to which the stock appreciation
right is exercised. Upon the exercise of an option in connection with which a
stock appreciation right has been granted, the number of shares subject to the
stock appreciation right shall be correspondingly reduced by the number of
shares with respect to which the option is exercised.
2.3.4 Each Plan Agreement with respect to an option shall set
forth the amount (the "option exercise price") payable by the grantee to the
Company upon exercise of the option evidenced thereby. The option exercise price
per share shall be determined by the Committee in its discretion; provided,
however, that the option exercise price of an incentive stock option shall be at
least 100% of the Fair Market Value of a share of Common Stock on the date the
option is granted, and provided further that in no event shall the option
exercise price be less than the par value of a share of Common Stock.
2.3.5 Each Plan Agreement with respect to an option or stock
appreciation right shall set forth the periods during which the award evidenced
thereby shall be exercisable, whether in whole or in part. Such periods shall be
determined by the Committee in its discretion; provided, however, that no
incentive stock option (or a stock appreciation right granted in connection with
an incentive stock option) shall be exercisable more than 10 years after the
date of grant.
2.3.6 The Committee may in its discretion include in any Plan
Agreement with respect to an option (the "original option") a provision that an
additional option (the "additional option") shall be granted to any grantee who,
pursuant to Section 2.4.3(b), delivers shares of Common Stock in partial or full
payment of the exercise price of the original option. The
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additional option shall be for a number of shares of Common Stock equal to the
number thus delivered, shall have an exercise price equal to the Fair Market
Value of a share of Common Stock on the date of exercise of the original option,
and shall have an expiration date no later than the expiration date of the
original option. In the event that a Plan Agreement provides for the grant of an
additional option, such Agreement shall also provide that the exercise price of
the original option be no less than the Fair Market Value of a share of Common
Stock on its date of grant, and that any shares that are delivered pursuant to
Section 2.4.3(b) in payment of such exercise price shall have been held for at
least six months.
2.3.7 To the extent that the aggregate Fair Market Value
(determined as of the time the option is granted) of the stock with respect to
which incentive stock options granted under this Plan and all other plans of the
Company and any subsidiary are first exercisable by any employee during any
calendar year shall exceed the maximum limit (currently, $100,000), if any,
imposed from time to time under section 422 of the Code, such options shall be
treated as nonqualified stock options.
2.3.8 Notwithstanding the provisions of Sections 2.3.4 and
2.3.5, to the extent required under section 422 of the Code, an incentive stock
option may not be granted under the Plan to an individual who, at the time the
option is granted, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of his employer corporation or of its
parent or subsidiary corporations (as such ownership may be determined for
purposes of section 422(b)(6) of the Code) unless (a) at the time such incentive
stock option is granted the option exercise price is at least 110% of the Fair
Market Value of the shares subject thereto and (b) the incentive stock option by
its terms is not exercisable after the expiration of 5 years from
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the date it is granted.
2.4 Exercise of Options and Stock Appreciation Rights
Subject to the provisions of this Article II, each option or
stock appreciation right granted under the Plan shall be exercisable as follows:
2.4.1 Unless the applicable Plan Agreement otherwise provides,
an option or stock appreciation right shall become exercisable in four
substantially equal installments, on each of the first, second, third and fourth
anniversaries of the date of grant, and each installment, once it becomes
exercisable, shall remain exercisable until expiration, cancellation or
termination of the award.
2.4.2 Unless the applicable Plan Agreement otherwise provides,
an option or stock appreciation right may be exercised from time to time as to
all or part of the shares as to which such award is then exercisable (but, in
any event, only for whole shares). A stock appreciation right granted in
connection with an option may be exercised at any time when, and to the same
extent that, the related option may be exercised. An option or stock
appreciation right shall be exercised by the filing of a written notice with the
Company, on such form and in such manner as the Committee shall prescribe.
2.4.3 Any written notice of exercise of an option shall be
accompanied by payment for the shares being purchased. Such payment shall be
made: (a) by certified or official bank check (or the equivalent thereof
acceptable to the Company) for the full option exercise price; or (b) unless the
applicable Plan Agreement provides otherwise, by delivery of
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<PAGE> 16
shares of Common Stock acquired at least six months prior to the option exercise
date and having a Fair Market Value (determined as of the exercise date) equal
to all or part of the option exercise price and a certified or official bank
check (or the equivalent thereof acceptable to the Company) for any remaining
portion of the full option exercise price; or (c) at the discretion of the
Committee and to the extent permitted by law, by such other provision as the
Committee may from time to time prescribe.
2.4.4 Promptly after receiving payment of the full option
exercise price, or after receiving notice of the exercise of a stock
appreciation right for which payment will be made partly or entirely in shares,
the Company shall, subject to the provisions of Section 3.3 (relating to certain
restrictions), deliver to the grantee or to such other person as may then have
the right to exercise the award, a certificate or certificates for the shares of
Common Stock for which the award has been exercised. If the method of payment
employed upon option exercise so requires, and if applicable law permits, an
optionee may direct the Company to deliver the certificate(s) to the optionee's
stockbroker.
2.5 Termination of Employment; Death
2.5.1 Except to the extent otherwise provided in Section 2.5.2
or 2.5.3 or in the applicable Plan Agreement, all options and stock appreciation
rights not theretofore exercised shall terminate upon termination of the
grantee's employment for any reason (including death).
2.5.2 If a grantee's employment terminates for any reason
other than death or dismissal for cause, the grantee may exercise any
outstanding option or stock appreciation right on the following terms and
conditions: (a) exercise may be made only to the extent that
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the grantee was entitled to exercise the award on the date of employment
termination; and (b) exercise must occur within three months after employment
terminates, except that the three-month period shall be increased to one year if
the termination is by reason of disability, but in no event after the expiration
date of the award as set forth in the Plan Agreement. In the case of an
incentive stock option, the term "disability" for purposes of the preceding
sentence shall have the meaning given to it by section 422(c)(7) of the Code.
2.5.3 If a grantee dies while employed by the Company or any
subsidiary, or after employment termination but during the period in which the
grantee's awards are exercisable pursuant to Section 2.5.2, any outstanding
option or stock appreciation right shall be exercisable on the following terms
and conditions: (a) exercise may be made only to the extent that the grantee was
entitled to exercise the award on the date of death; and (b) exercise must occur
by the earlier of the first anniversary of the grantee's death or the expiration
date of the award. Any such exercise of an award following a grantee's death
shall be made only by the grantee's executor or administrator, unless the
grantee's will specifically disposes of such award, in which case such exercise
shall be made only by the recipient of such specific disposition. If a grantee's
personal representative or the recipient of a specific disposition under the
grantee's will shall be entitled to exercise any award pursuant to the preceding
sentence, such representative or recipient shall be bound by all the terms and
conditions of the Plan and the applicable Plan Agreement which would have
applied to the grantee including, without limitation, the provisions of Sections
3.3 and 3.7 hereof.
2.6 Grant of Restricted Stock
2.6.1 The Committee may grant restricted shares of Common
Stock to such key
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persons, in such amounts, and subject to such terms and conditions as the
Committee shall determine in its discretion, subject to the provisions of the
Plan. Restricted stock awards may be made independently of or in connection with
any other award under the Plan. A grantee of a restricted stock award shall have
no rights with respect to such award unless such grantee accepts the award
within such period as the Committee shall specify by executing a Plan Agreement
in such form as the Committee shall determine and, if the Committee shall so
require, makes payment to the Company by certified or official bank check (or
the equivalent thereof acceptable to the Company) in such amount as the
Committee may determine.
2.6.2 Promptly after a grantee accepts a restricted stock
award, the Company shall issue in the grantee's name a certificate or
certificates for the shares of Common Stock covered by the award. Upon the
issuance of such certificate(s), the grantee shall have the rights of a
shareholder with respect to the restricted stock, subject to the
nontransferability restrictions and Company repurchase rights described in
Sections 2.6.4 and 2.6.5 and to such other restrictions and conditions as the
Committee in its discretion may include in the applicable Plan Agreement.
2.6.3 Unless the Committee shall otherwise determine, any
certificate issued evidencing shares of restricted stock shall remain in the
possession of the Company until such shares are free of any restrictions
specified in the applicable Plan Agreement.
2.6.4 Shares of restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided in this Plan or the applicable Plan Agreement. The
Committee at the time of grant shall specify the date or dates (which may depend
upon or be related to the attainment of performance goals and other condi-
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tions) on which the nontransferability of the restricted stock shall lapse.
Unless the applicable Plan Agreement provides otherwise, additional shares of
Common Stock or other property distributed to the grantee in respect of shares
of restricted stock, as dividends or otherwise, shall be subject to the same
restrictions applicable to such restricted stock.
2.6.5 During the 120 days following termination of the
grantee's employment for any reason, the Company shall have the right to require
the return of any shares to which restrictions on transferability apply, in
exchange for which the Company shall repay to the grantee (or the grantee's
estate) any amount paid by the grantee for such shares.
2.7 Grant of Restricted Stock Units
2.7.1 The Committee may grant awards of restricted stock units
to such key persons, in such amounts, and subject to such terms and conditions
as the Committee shall determine in its discretion, subject to the provisions of
the Plan. Restricted stock units may be awarded independently of or in
connection with any other award under the Plan.
2.7.2 At the time of grant, the Committee shall specify the
date or dates on which the restricted stock units shall become fully vested and
nonforfeitable, and may specify such conditions to vesting as it deems
appropriate. In the event of the termination of the grantee's employment by the
Company and its subsidiaries for any reason, restricted stock units that have
not become nonforfeitable shall be forfeited and cancelled. The Committee at
any time may accelerate vesting dates and otherwise waive or amend any
conditions of an award of restricted stock units.
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2.7.3 At the time of grant, the Committee shall specify the
maturity date applicable to each grant of restricted stock units, which may be
determined at the election of the grantee. Such date may be later than the
vesting date or dates of the award. On the maturity date, the Company shall
transfer to the grantee one unrestricted, fully transferable share of Common
Stock for each restricted stock unit scheduled to be paid out on such date and
not previously forfeited. The Committee shall specify the purchase price, if
any, to be paid by the grantee to the Company for such shares of Common Stock.
2.8 Other Stock-Based Awards
The Board may authorize other types of stock-based awards
(including the grant of unrestricted shares), which the Committee may grant to
such key persons, and in such amounts and subject to such terms and conditions,
as the Committee shall in its discretion determine, subject to the provisions of
the Plan. Such awards may entail the transfer of actual shares of Common Stock
to Plan participants, or payment in cash or otherwise of amounts based on the
value of shares of Common Stock.
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2.9 Grant of Dividend Equivalent Rights
The Committee may in its discretion include in the Plan
Agreement with respect to any award a dividend equivalent right entitling the
grantee to receive amounts equal to the ordinary dividends that would be paid,
during the time such award is outstanding and unexercised, on the shares of
Common Stock covered by such award if such shares were then outstanding. In the
event such a provision is included in a Plan Agreement, the Committee shall
determine whether such payments shall be made in cash, in shares of Common Stock
or in another form, whether they shall be conditioned upon the exercise of the
award to which they relate, the time or times at which they shall be made, and
such other terms and conditions as the Committee shall deem appropriate.
2.10 Right of Recapture
If at any time within one year after the date on which a
participant exercises an option or stock appreciation right, or on which
restricted stock vests, or which is the maturity date of restricted stock units,
or on which income is realized by a participant in connection with any other
stock-based award (each of which events is a "Realization Event"), the
participant (a) is terminated for cause or (b) engages in any activity
determined in the discretion of the Committee to be in competition with any
activity of the Company, or otherwise inimical, contrary or harmful to the
interests of the Company (including, but not limited to, accepting employment
with or serving as a consultant, adviser or in any other capacity to an entity
that is in competition with or acting against the interests of the Company),
then any gain ("Gain") realized by the participant from the Realization Event
shall be paid by the participant to the Company upon notice from the Company.
Such Gain shall be determined as of the date of the Realization
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Event, without regard to any subsequent change in the Fair Market Value of a
share of Common Stock. The Company shall have the right to offset such Gain
against any amounts otherwise owed to the participant by the Company (whether as
wages, vacation pay, or pursuant to any benefit plan or other compensatory
arrangement).
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ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan; Modification of Awards
3.1.1 The Board may from time to time suspend, discontinue,
revise or amend the Plan in any respect whatsoever, except that no such
amendment shall materially impair any rights or materially increase any
obligations under any award theretofore made under the Plan without the consent
of the grantee (or, after the grantee's death, the person having the right to
exercise the award). For purposes of this Section 3.1, any action of the Board
or the Committee that alters or affects the tax treatment of any award shall not
be considered to materially impair any rights of any grantee.
3.1.2 Shareholder approval of any amendment shall be obtained
to the extent necessary to comply with section 422 of the Code (relating to
incentive stock options) or other applicable law or regulation.
3.1.3 The Committee may amend any outstanding Plan Agreement,
including, without limitation, by amendment which would accelerate the time or
times at which the award becomes unrestricted or may be exercised, or waive or
amend any goals, restrictions or conditions set forth in the Agreement. However,
any such amendment (other than an amendment pursuant to Section 3.7.2, relating
to change in control) that materially impairs the rights or materially increases
the obligations of a grantee under an outstanding award shall be made only with
the consent of the grantee (or, upon the grantee's death, the person having the
right to exercise the award).
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3.2 Tax Withholding
3.2.1 As a condition to the receipt of any shares of Common
Stock pursuant to any award or the lifting of restrictions on any award, or in
connection with any other event that gives rise to a federal or other
governmental tax withholding obligation on the part of the Company relating to
an award (including, without limitation, FICA tax), the Company shall be
entitled to require that the grantee remit to the Company an amount sufficient
in the opinion of the Company to satisfy such withholding obligation.
3.2.2 If the event giving rise to the withholding obligation
is a transfer of shares of Common Stock, then, unless otherwise specified in the
applicable Plan Agreement, the grantee may satisfy the withholding obligation
imposed under Section 3.2.1 by electing to have the Company withhold shares of
Common Stock having a Fair Market Value equal to the amount of tax to be
withheld. For this purpose, Fair Market Value shall be determined as of the date
on which the amount of tax to be withheld is determined (and any fractional
share amount shall be settled in cash).
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3.3 Restrictions
3.3.1 If the Committee shall at any time determine that any
consent (as hereinafter defined) is necessary or desirable as a condition of, or
in connection with, the granting of any award under the Plan, the issuance or
purchase of shares or other rights thereunder, or the taking of any other action
thereunder (each such action being hereinafter referred to as a "plan action"),
then such plan action shall not be taken, in whole or in part, unless and until
such consent shall have been effected or obtained to the full satisfaction of
the Committee.
3.3.2 The term "consent" as used herein with respect to any
plan action means (a) any and all listings, registrations or qualifications in
respect thereof upon any securities exchange or under any federal, state or
local law, rule or regulation, (b) any and all written agreements and
representations by the grantee with respect to the disposition of shares, or
with respect to any other matter, which the Committee shall deem necessary or
desirable to comply with the terms of any such listing, registration or
qualification or to obtain an exemption from the requirement that any such
listing, qualification or registration be made and (c) any and all consents,
clearances and approvals in respect of a plan action by any governmental or
other regulatory bodies.
3.4 Nonassignability
Except to the extent otherwise provided in the applicable Plan
Agreement, no award or right granted to any person under the Plan shall be
assignable or transferable other than by will or by the laws of descent and
distribution, and all such awards and rights shall be
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exercisable during the life of the grantee only by the grantee or the grantee's
legal representative.
3.5 Requirement of Notification of
Election Under Section 83(b) of the Code
If any grantee shall, in connection with the acquisition of
shares of Common Stock under the Plan, make the election permitted under section
83(b) of the Code (that is, an election to include in gross income in the year
of transfer the amounts specified in section 83(b)), such grantee shall notify
the Company of such election within 10 days of filing notice of the election
with the Internal Revenue Service, in addition to any filing and notification
required pursuant to regulations issued under the authority of Code section
83(b).
3.6 Requirement of Notification Upon Disqualifying
Disposition Under Section 421(b) of the Code
If any grantee shall make any disposition of shares of Common
Stock issued pursuant to the exercise of an incentive stock option under the
circumstances described in section 421(b) of the Code (relating to certain
disqualifying dispositions), such grantee shall notify the Company of such
disposition within 10 days thereof.
3.7 Change in Control
3.7.1 For purposes of this Section 3.7, a "change in control"
shall have occurred if:
(a) any "person", as such term is used in Sections
13(d) and 14(d) of the 1934 Act (other than (i) the Company or any 80% owned
subsidiary of the Company, (ii) any
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trustee or other fiduciary holding securities under an employee benefit plan of
the Company, or (iii) any company owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as their
ownership of stock of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities
of the Company representing 50% or more of the combined voting power of the
Company's then outstanding securities; or
(b) during any period of twenty-four (24) consecutive
months, individuals who at the effective date of this Plan constitute the Board
of Directors of the Company and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (a), (c) or (d) of this Section 3.7.1)
whose election by the Board of Directors or nomination for election by the
Company shareholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the effective date
of this Plan or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority thereof;
(c) the shareholders of the Company approve a merger
or consolidation of the Company with any other company (other than a
wholly-owned subsidiary of the Company), other than (i) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) 50% or more of the combined voting power of voting securities
of the Company or such
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surviving entity outstanding immediately after such merger or consolidation or
(ii) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no "person" (as defined in Section
3.7.1(a) above with the exceptions noted in section 3.7.1(a)) acquires 50% or
more of the combined voting power of the Company's then outstanding securities);
or
(d) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets (or any
transaction having a similar effect).
3.7.2 Upon the happening of a change in control:
(a) notwithstanding any other provision of this Plan,
any option or stock appreciation right then outstanding shall become fully
vested and immediately exercisable upon the subsequent termination of employment
of the grantee by the Company or it successors without cause unless the
applicable Plan Agreement expressly provides otherwise; (b) to the fullest
extent permitted by law, the Committee may, in its sole discretion, amend any
Plan Agreement in such manner as it deems appropriate, including, without
limitation, by amendments that advance the dates upon which any or all
outstanding awards of any type shall terminate.
3.7.3 Whenever deemed appropriate by the Committee, any action
referred to in Section 3.7.2(b) may be made conditional upon the consummation of
the applicable Change in Control transaction.
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3.8 Right of Discharge Reserved
Nothing in the Plan or in any Plan Agreement shall confer upon
any grantee the right to continue in the employ of the Company or affect any
right which the Company may have to terminate such employment.
3.9 Nature of Payments
3.9.1 Any and all grants of awards and issuances of shares of
Common Stock under the Plan shall be in consideration of services performed for
the Company by the grantee.
3.9.2 All such grants and issuances shall constitute a special
incentive payment to the grantee and shall not be taken into account in
computing the amount of salary or compensation of the grantee for the purpose of
determining any benefits under any pension, retirement, profit-sharing, bonus,
life insurance or other benefit plan of the Company or under any agreement
between the Company and the grantee, unless such plan or agreement specifically
provides otherwise.
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3.10 Non-Uniform Determinations
The Committee's determinations under the Plan need not be
uniform and may be made by it selectively among persons who receive, or are
eligible to receive, awards under the Plan (whether or not such persons are
similarly situated). Without limiting the generality of the foregoing, the
Committee shall be entitled, among other things, to make non-uniform and
selective determinations, and to enter into non-uniform and selective Plan
agreements, as to (a) the persons to receive awards under the Plan, (b) the
terms and provisions of awards under the Plan, and (c) the treatment of leaves
of absence pursuant to Section 1.6.4.
3.11 Other Payments or Awards
Nothing contained in the Plan shall be deemed in any way to
limit or restrict the Company from making any award or payment to any person
under any other plan, arrangement or understanding, whether now existing or
hereafter in effect.
3.12 Section Headings
The section headings contained herein are for the purpose of
convenience only and are not intended to define or limit the contents of the
sections.
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3.13 Effective Date and Term of Plan
3.13.1 The Plan was adopted by the Board on February 3, 1997.
To the extent provided in the applicable Plan Agreement, an award may be subject
to approval of the Plan by the Company's shareholders, in which case, if such
approval is not obtained within one year of such date of adoption by the Board,
the award shall terminate on that date.
3.13.2 Unless sooner terminated by the Board, the provisions
of the Plan respecting the grant of incentive stock options shall terminate on
the day before the tenth anniversary of the adoption of the Plan by the Board,
and no incentive stock option awards shall thereafter be made under the Plan.
All awards made under the Plan prior to its termination shall remain in effect
until such awards have been satisfied or terminated in accordance with the terms
and provisions of the Plan and the applicable Plan Agreements.
3.14 Governing Law
All rights and obligations under the Plan shall be construed
and interpreted in accordance with the laws of the State of Delaware, without
giving effect to principles of conflict of laws.
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