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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 16, 1998
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Input/Output, Inc.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-13402 22-2286646
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(Commission File Number) (IRS Employer Identification No.)
11104 West Airport Blvd., Stafford, Texas 77477
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (281) 933-3339
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Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On November 16, 1998, Input/Output, Inc., a Delaware corporation (the
"Company"), pursuant to the terms of an Agreement and Plan of Merger (the
"Agreement") by and among the Company, I/O Marine, Inc., a Louisiana
corporation and wholly-owned subsidiary of the Company ("I/O Marine"),
DigiCourse, Inc., a Louisiana corporation ("DigiCourse"), and The Laitram
Corporation, a Louisiana corporation and the sole stockholder of DigiCourse
(the "Stockholder"), acquired, through the merger of I/O Marine with and into
DigiCourse, 100% of the issued and outstanding capital stock of DigiCourse
from the Stockholder. The consideration paid by the Company in exchange for
the DigiCourse stock in the merger was the issuance of 5,794,000 shares of
common stock, par value $0.01 per share, of the Company (the "Common Stock")
in a transaction exempt from registration under the Securities Act of 1933,
as amended (the "1933 Act"), pursuant to Section 4(2) thereof. As a result,
the number of shares beneficially owned by the Stockholder represents
approximately 11.7% of the outstanding Common Stock of the Company. The
Agreement provides for certain cash purchase price adjustments to be effected
following the closing of the acquisition.
DigiCourse and its wholly-owned subsidiary, DigiCourse Limited, a United
Kingdom corporation, design, manufacture and service marine positioning
systems for the seismic industry, including birds (which control streamer
cable depth during towing), compasses and acoustical devices. The Company
presently intends to continue operating the business and assets of DigiCourse
in a manner similar to that in which they were operated prior to the
acquisition.
The Company also granted registration rights to the Stockholder pursuant
to a Registration Rights Agreement, dated November 16, 1998. The
Registration Rights Agreement grants piggyback registration rights, which
allow the Stockholder to participate in underwritten public offerings
initiated by the Company after the closing date of the acquisition, subject
to certain limitations and conditions set forth therein. In addition, the
Registration Rights Agreement grants the Stockholder two demand registration
rights, subject to certain limitations and conditions, including the
requirement that each such demand registration shall not be made for less
than one million (1,000,000) shares of Common Stock. The Registration Rights
Agreement contains provisions whereby the Company has agreed to indemnify the
Stockholder against certain liabilities, including liabilities under the
1933 Act.
The terms of the Agreement provide that the acquisition shall be
accounted for as occurring effective as of September 30, 1998. The Company
will account for its acquisition of DigiCourse as a purchase business
combination for financial accounting purposes.
The foregoing, to the extent it summarizes terms of agreements, is
qualified in its entirety by reference to the full text of such documents,
copies of which have been filed herewith as exhibits and are incorporated
herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
99.1 Agreement and Plan of Merger by and among I/O Marine, Inc.,
Input/Output, Inc., DigiCourse, Inc. and The Laitram
Corporation, dated September 30, 1998. Filed as Exhibit 10.1
to the Company's Form 10-Q for the quarter ended August 31,
1998 and incorporated by reference herein.
Page 2 of 3
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99.2 Registration Rights Agreement, dated November 16, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INPUT/OUTPUT, INC.
By: /s/ RONALD A. HARRIS
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Ronald A. Harris
Vice President and Controller
Date: November 30, 1998
Page 3 of 3
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT and PLAN OF MERGER (the "Agreement") is made and entered
into as of September 30, 1998, by and among I/O Marine, Inc. ("I/O Marine"), a
Louisiana corporation; Input/Output, Inc. ("I/O"), a Delaware corporation and
the sole stockholder of I/O Marine; DigiCourse, Inc. ("DigiCourse"), a Louisiana
corporation; and The Laitram Corporation ("Stockholder"), a Louisiana
corporation and the sole stockholder of DigiCourse. I/O, I/O Marine, DigiCourse
and Stockholder are each a "party" and collectively are the "parties" to this
Agreement.
RECITALS
The Boards of Directors of each of the parties have each approved the
merger of I/O Marine with and into DigiCourse (the "Merger"), pursuant to the
terms and subject to the conditions of this Agreement. Each party desires to
make certain representations, warranties and agreements in connection with the
Contemplated Transactions (defined below). The parties intend, for federal
income Tax purposes, that the Contemplated Transactions shall qualify as a
reorganization under the provisions of Section 368 of the Internal Revenue Code
of 1986, as amended, and related rules and regulations ("Code").
It is the intent of the parties that, as of September 30, 1998, at 11:59
P.M., all economic benefits and risks of any kind and nature of DigiCourse are
transferred from Stockholder to the Surviving Corporation. To the extent any
provision of this Agreement and its exhibits is in conflict with this
aforementioned principle, the parties agree that this principle shall be
controlling.
NOW, THEREFORE, in consideration of the mutual benefits to be derived and
the representations and warranties, conditions, covenants and promises herein
contained, and other good and valuable consideration the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACCOUNTING PROCEDURES" are defined in the attached Exhibit 1.
"ACCOUNTS RECEIVABLE" is defined in Section 3.8.
"ACQUISITION" is defined in Section 9.29.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
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investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, liabilities,
obligations, liens, losses, expenses, and fees, including court costs and
attorneys' fees and expenses, that have a net adverse effect on the financial
position of a Person.
"AFFILIATE" means any person that, directly or indirectly, controls, or
is controlled by or under common control with, another person. For the purposes
of this definition, "CONTROL" (including the terms "CONTROLLED BY" and "UNDER
COMMON CONTROL WITH"), as used with respect to any person, means the power to
direct or cause the direction of the management and policies of the person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise.
"APPLICABLE CONTRACT" means any Contract under which, prior to the
Economic Closing Date, (a) DigiCourse or Limited has or may acquire any rights,
(b) DigiCourse or Limited has or may become subject to any obligation or
liability, or (c) any asset owned or used by DigiCourse or Limited is or may
become bound.
"BALANCE SHEET" is defined in Section 3.4.
"BREACH" means any material inaccuracy, breach, failure, claim,
occurrence, or circumstance that breaches a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to Section 2.4 of this Agreement. A "Breach" will be deemed to have
occurred if there is or has been any material inaccuracy in or material breach
of, or any material failure to perform or comply with, such representation,
warranty, covenant, obligation, or other provision.
"CERTIFICATE OF MERGER" is defined in Section 2.1.
"CLOSING" is defined in Section 2.4.
"CLOSING DATE" means the date on which the Closing actually takes place.
"ECONOMIC CLOSING NET WORKING CAPITAL" is defined in Section 2.5.
"CODE" is defined in the Recitals of this Agreement.
"CONSENT" means any approval, consent, ratification, waiver or other
authorization (including any Governmental Authorization).
"CONSTITUENT CORPORATIONS" is defined in Section 2.2.
"CONTEMPLATED TRANSACTIONS" means all of the transactions contemplated by
this Agreement, including:
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(a) the Merger and the delivery of the shares of I/O Common Stock in
accordance with Section 2 hereof; and
(b) the execution, delivery, and performance of all agreements
contemplated by this Agreement.
"CONTRACT" means any material agreement, contract, promise or undertaking
that is legally binding.
"COPYRIGHTS" is defined in Section 3.21.
"DEFICIT NET WORKING CAPITAL" is defined in Section 2.5.
"DIGICOURSE" is defined in the first paragraph of this Agreement.
"DISCLOSURE LETTER" means the disclosure letter delivered by DigiCourse
to I/O within fifteen (15) days after the date of the signing of this Agreement,
as it may be supplemented under Section 9.17.
"DOCUMENTATION" means all documents, other written material (including
user and support manuals, flowcharts and other supporting documentary,
architecture documents, design documents, requirements documents, specifications
documents and computer material), stored in any medium, and source codes which
have been created by or at the request of DigiCourse or Limited, or acquired by
DigiCourse or Limited, relating to, explaining or assisting in the use of
Products.
"ECONOMIC CLOSING DATE" means September 30, 1998.
"EFFECTIVE TIME" shall have the same meaning as defined in Section 2.1.
"ENCUMBRANCE" means any pledge, security interest or encumbrance of any
kind.
"ENVIRONMENT" means soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life and any other
environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" means any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law.
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"ENVIRONMENTAL LAW" means any Legal Requirement that relates to (a) the
control of any potential pollutant or protection of the air, water or land, (b)
solid, gaseous or liquid waste generation, handling, treatment, storage,
disposal or transportation, and (c) exposure to hazardous, toxic or other
substances alleged to be harmful.
"ERISA" means the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"EXCESS NET WORKING CAPITAL" is defined in Section 2.5.
"FACILITIES" means any real property, leaseholds, or other interests
currently or formerly owned or operated by DigiCourse or Limited and any
buildings, plants, structures, or equipment currently or formerly owned or
operated by DigiCourse or Limited.
"GAAP" means generally accepted United States accounting principles then
applicable.
"GOVERNMENTAL AUTHORIZATION" means any Consent or license made available
by or under the authority of any Governmental Body pursuant to any Legal
Requirement.
"GOVERNMENTAL BODY" means any:
(a) nation, state, county, parish, city, town, village, district, or
other governmental jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal); or
(d) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any governmental nature.
"HSR" is defined in Section 6.8.
"INDEMNIFIED PERSON" is defined in Section 8.4.
"INTELLECTUAL PROPERTY ASSETS" is as defined in Section 3.21.
"INTERIM BALANCE SHEET" is defined in Section 3.4.
"INVESTMENT LETTER" is defined in Section 2.4.
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"I/O" is defined in the Recitals of this Agreement.
"I/O COMMON STOCK" means the common stock of I/O, par value $0.01 per
share.
"I/O INDEMNIFIED PERSON" is defined in Section 8.2.
"I/O MARINE" is defined in the Recitals of this Agreement.
"I/O MARINE COMMON STOCK" is defined in Section 5.5.
"KMPG" means the public accounting firm of KMPG Peat Marwick LLP.
"KNOWLEDGE" or "KNOWN" means any fact that is actually known by any of
the following individuals:
(a) in the case of Stockholder and DigiCourse, the following
individuals - James M. Lapeyre, Jr., Roy Kelm, Lawrence P. Oertling,
Barry L. LaCour, James W. Evans, Robbert W. Vorhoff, James T. Cronvich or
Franck F. LaBiche; and
(b) in the case of I/O and I/O Marine, the following
individuals - Zeke Zeringue, Axel Sigmar, Gay Mayeux, Ronald Harris,
Chris Wolfe, George Gentry, Thomas Connolly or Robert Brindley.
"LBCL" means the Louisiana Business Corporation Law.
"LEGAL REQUIREMENT" means any legally binding order, constitution, law,
ordinance, regulation, statute, or treaty of a Governmental Body.
"LIMITATIONS" is defined in Section 3.6(b).
"LIMITED" is defined in Section 3.3.
"MARKS" is defined in Section 3.21.
"MERGER" is defined in the Recitals of this Agreement.
"MERGER CONSIDERATION" is defined in Section 2.3.
"NET WORKING CAPITAL" means DigiCourse's (a) Cash, plus Trade Receivables
(Net), plus Other Receivables, plus Other Current Assets, plus Inventories;
reduced by (b) Accounts Payable Trade, plus Other Accrued Liabilities (exclusive
of the liabilities listed in Section 2.6).
"NYSE" means The New York Stock Exchange Inc.
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"OCCUPATIONAL SAFETY AND HEALTH LAW" means any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards.
"ORDER" means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or, if binding, by any
arbitrator.
"ORDINARY COURSE OF BUSINESS" means an action taken by a Person if such
action is both consistent with the past practices of such Person and is taken in
the ordinary course of the normal day-to-day operations of such Person; and such
action is similar in nature and magnitude to actions customarily taken in the
ordinary course of the normal day-to-day operations of other Persons that are
similar in size and operations to the Person in question.
"ORGANIZATIONAL DOCUMENTS" means (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (c) any amendment to any of the foregoing.
"PATENTS" is defined in Section 3.21.
"PAYMENT DATE" is defined in Section 2.5.
"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLAN" or "PLANS" has the same meaning as defined in Section 3.13.
"PRIVATE PLACEMENT MEMORANDUM" means that certain private placement
memorandum, including all attachments, of I/O, dated September 30, 1998,
delivered to Stockholder.
"PROCEEDING" means any action, binding arbitration, audit, hearing,
formal investigation, litigation, or suit (whether civil, criminal or
administrative) commenced, brought, conducted, or heard by or before any
Governmental Body or arbitrator.
"PRODUCTS" means the devices and related Software manufactured and/or
assembled and marketed by DigiCourse and Limited.
"PROPRIETARY RIGHTS AGREEMENT" is defined in Section 3.20.
"REASONABLE EFFORTS" means the commercially reasonable efforts that a
prudent Person desirous of achieving a result would use and expend in similar
circumstances to
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undertake reasonably to ensure that such result is achieved expeditiously.
"REGISTRATION RIGHTS AGREEMENT" is defined in Section 2.4.
"RELEASE" is defined in Section 2.4.
"REPRESENTATIVE" with respect to a particular Person, means any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person with respect to a particular matter, including legal counsel,
accountants, and financial advisors with respect to a particular matter.
"RIGHTS" means the intellectual property and contract rights, related to
the Products, which are owned or licensed by DigiCourse or Limited in the
development, support, marketing, production, licensing or sale of the Products;
and all Intellectual Property Assets owned or licensed by DigiCourse or Limited
in connection with DigiCourse's or Limited's business. "RIGHTS" does not
include any of the Shared Software and Rights or any of the foregoing used as a
shared service described on Exhibit 2.7, with Stockholder or any Stockholder
Affiliate.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933 or any successor law,
and regulations and rules issued pursuant to that Act or any successor law.
"SHARES" means the 1,080,000 shares, no par value per share, of
DigiCourse common stock constituting all of the issued and outstanding capital
stock of DigiCourse.
"SHARED SOFTWARE AND RIGHTS" is defined in Section 2.12.
"SOFTWARE" means all computer programs, including firmware acquired by
DigiCourse (and whether written or created for DigiCourse by any present or
former consultant or employee of DigiCourse or otherwise commissioned by
DigiCourse), or licensed for sublicensing by DigiCourse, together with any
modifications, enhancements, additions or replacements. "SOFTWARE" does not
include Shared Software and Rights or any of the foregoing used as a shared
service described on Exhibit 2.7, with Stockholder or any Stockholder
Affiliates.
"STOCKHOLDER" is defined in the Recitals of this Agreement.
"STOCKHOLDER AFFILIATE" means Affiliates of Stockholder but excludes
DigiCourse and Limited.
"STOCKHOLDER INDEMNIFIED PERSON" is defined in Section 8.3.
"SUBSIDIARY" with respect to any specified Person, means any corporation
or other Person of which securities or other interests having the power to elect
a majority of that
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corporation's or other Person's board of directors or similar governing body,
or otherwise having the power to direct the business and policies of that
corporation or other Person (other than securities or other interests having
such power only upon the happening of a contingency that has not occurred)
are held by the specified Person or one or more of its subsidiaries.
"SURVIVING CORPORATION" means DigiCourse, as survivor of the Merger.
"TAX" or "TAXES" mean any federal, state, local or foreign income, sales,
real or personal property or other taxes, assessments, levies, imposts, duties,
or other charges of any nature whatsoever commonly referred to as a "tax"
(including without limitation interest and penalties) imposed by any law, rule
or regulation.
"TAX RETURN" means any return (including any information return), report,
statement, schedule, notice, form, or other document or information submitted to
any Governmental Body in connection with the determination, assessment,
collection, or payment of any Tax.
"THREATENED" means a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any written demand or statement has
been received or any written notice has been received or any Known action has
been taken by a Claimant that would lead a prudent Person having that Knowledge
to conclude that such a claim, Proceeding, dispute, action, or other matter will
be asserted, commenced, taken, or otherwise pursued in the future against a
specified Person.
"TRADE SECRETS" is defined in Section 3.21.
"TRANSFER PLAN" is defined in Exhibit 2.11.
2. THE MERGER
2.1 EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this
Agreement, the certificate of merger in the form of EXHIBIT 2.1 (the
"Certificate of Merger") shall be executed and acknowledged as required by the
LBCL and delivered to the Office of the Secretary of State of the State of
Louisiana for filing, pre-positioned in New Orleans for immediate filing, and
then filed as soon as practicable on or after the Closing Date. The Merger
shall become effective upon the filing of the Certificate of Merger with the
Secretary of State of the State of Louisiana or at such time thereafter as is
provided in the Certificate of Merger (the "Effective Time").
2.2 EFFECTS OF THE MERGER.
(a) At the Effective Time, the separate existence of I/O Marine shall
cease, and I/O Marine shall be merged with and into DigiCourse (DigiCourse and
I/O Marine are sometimes referred to herein as the "Constituent Corporations");
the Articles of Incorporation of DigiCourse as in effect immediately prior to
the Effective Time shall be amended and restated in the Certificate of Merger
and shall be the Articles of Incorporation of the Surviving
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Corporation until thereafter amended; the Bylaws of DigiCourse shall be
amended and restated immediately prior to the Effective Time and shall be the
Bylaws of the Surviving Corporation until thereafter amended; the duly
elected and incumbent Board of Directors of I/O Marine as constituted
immediately prior to the Effective Time shall be the Board of Directors of
the Surviving Corporation, and shall serve until their successors are duly
elected and qualified; and the duly elected and incumbent officers of I/O
Marine as in office immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, and shall serve until the Board of
Directors of Surviving Corporation takes action in respect of such service.
(b) At and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises, whether of a public
or a private nature, and be subject to all the restrictions, disabilities and
duties, of each of the Constituent Corporations; and all of the rights,
privileges, powers and franchises of each of the Constituent Corporations, and
all property, real, personal and mixed, and all debts due to either of the
Constituent Corporations on whatever account, shall be vested in the Surviving
Corporation and all contractual rights, property, rights, privileges, powers and
franchises, and all and every other interest shall thereafter be the property of
the Surviving Corporation as they were of the respective Constituent
Corporations, and the title to any real estate vested by deed or otherwise in
either of the Constituent Corporations shall not revert or be in any way
impaired; but all rights of creditors and all liens upon any property of either
of the Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the respective Constituent Corporations shall
thenceforth attach to the Surviving Corporation, and may be enforced against it
to the same extent as if said debts and liabilities had been incurred or
contracted by it.
2.3 SHARE CONVERSIONS. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any of the Shares of
DigiCourse:
(a) COMMON STOCK OF I/O MARINE. The Merger will automatically convert
each share of common stock of I/O Marine into one share of common stock of
DigiCourse.
(b) CONVERSION OF THE SHARES. The Shares shall be converted into the
right to receive from the Surviving Corporation in exchange for said Shares a
total of 5,794,000 fully paid and non-assessable shares of I/O Common Stock (the
"Merger Consideration"). At the Effective Time, each of the Shares, when so
converted, shall no longer be deemed to be outstanding and shall automatically
be canceled and retired and shall cease to exist, and the holder of a
certificate representing any such Shares shall cease to have any rights with
respect thereto, except the Merger Consideration, upon the surrender of such
certificate, without interest.
2.4 CLOSING. The closing of the Contemplated Transactions (the
"Closing") provided for in this Agreement will take place at the offices of
Haynes and Boone, L.L.P., 1000 Louisiana, Suite 4300, Houston, Texas 77002, upon
such time and date as the parties may agree; or, if they cannot or have not
agreed, such specified date of which any party shall have notified the others by
notice given at least five business days in advance of the specified date, but
in no event prior
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to (i) consent under the HSR Act, (ii) the expiration of five days after the
delivery by I/O of the Private Placement Memorandum, (iii) the expiration of
five days after delivery of the Disclosure Letter by DigiCourse, or (iv) the
expiration of two days after the delivery of any supplement to the Disclosure
Letter. Either I/O or DigiCourse (or on occasion each) may delay the Closing
Date up to and including November 30, 1998, if necessary to permit conditions
to become satisfied that are not satisfied at the time such delay is
effected. At the Closing:
(a) Stockholder will deliver to I/O:
(i) an investment letter in the form of EXHIBIT 2.4(a)(i)
executed by the Stockholder ("Investment Letter");
(ii) the certificates representing the Shares, with appropriate
stock powers duly executed by Stockholder and signatures Medallion
guaranteed;
(iii) the Registration Rights Agreement ("Registration Rights
Agreement") in the form of the attached Exhibit 2.4(a)(iii), executed
by the Stockholder;
(iv) the Non-Competition Agreement ("Non-Competition Agreement")
in the form of the attached Exhibit 2.4(a)(iv) executed by Stockholder;
and
(v) the Stockholder's Release in the form of the attached
Exhibit 2.4(a)(v) executed by Stockholder (the "Release').
(b) I/O and/or I/O Marine will deliver to Stockholder:
(i) certificates for the shares of I/O Common Stock properly
signed by those Representatives of I/O whose signatures are required for
the validity of the Merger Consideration constituting the Merger
Consideration, registered in the name of the Stockholder;
(ii) the Registration Rights Agreement executed by I/O; and
(iii) the Non-Competition Agreement executed by I/O.
2.5 DETERMINATION OF ECONOMIC CLOSING NET WORKING CAPITAL. During the
sixty (60) days following the Economic Closing Date, KPMG will determine Net
Working Capital of DigiCourse as of the Economic Closing Date ("Economic Closing
Net Working Capital"). Economic Closing Net Working Capital will be
determined by KPMG, the outside accountants of all parties, applying the
accounting procedures in the attached Exhibit 1. The parties stipulate that the
component of Inventory acquired from Syntron has a fair market value of
$1,525,000 for financial accounting purposes. "Excess Net Working Capital"
shall exist if, and to the extent that, Economic Closing Net Working Capital is
greater than $11,500,000 ("Base
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Amount"). "Deficit Net Working Capital" shall exist if, and to the extent
that, Economic Closing Net Working Capital is less than Base Amount.
(a) In the event there is Excess Net Working Capital:
(i) The Surviving Corporation shall, to the extent of the
Excess Net Working Capital, pay to the Stockholder an amount equal to the
liabilities identified in Section 2.6(b) by the date ("Payment Date")
that is five business days after the determination of Economic Closing
Net Working Capital. I/O shall, in accordance with this Agreement,
transfer to the Surviving Corporation an amount of cash equal to, and to
be used to pay, the liabilities identified in Section 2.6(b) in
accordance with the previous sentence.
(ii) To the extent said Excess Net Working Capital exceeds the
liabilities identified in Section 2.6(b), I/O shall, in accordance with
this Agreement transfer to the Surviving Corporation to pay to the
Stockholder by the Payment Date as additional consideration an amount of
cash, equal to the Excess Net Working Capital less the liabilities
identified in Section 2.6(b) paid pursuant to Section 2.5(a)(i).
(iii) If the liabilities identified in Section 2.6(b) exceed the
Excess Net Working Capital, then to the extent of such excess,
Stockholder will be deemed, as a capital contribution, to automatically
assume on the Payment Date and agree to pay, perform and discharge when
due and payable, the liabilities and obligations of DigiCourse identified
in Section 2.6(b) (after the payment referred to in Section 2.5(a)(i)
above), whether due and payable or accrued for future payment but only to
the extent such liabilities exceed Excess Net Working Capital.
(b) If there is Deficit Net Working Capital, the Stockholder will, as
a capital contribution, pay to the Surviving Corporation by the Payment Date an
amount equal to said deficit. Furthermore, Stockholder will be deemed, as a
capital contribution, to automatically assume and agree to pay, perform and
discharge, when due and payable, the liabilities and obligations of DigiCourse
identified in Section 2.6, whether due and payable or accrued for future
payment.
(c) Any payment due under this Section 2.5 will be paid by the Payment
Date and shall include interest thereon from the first to occur of (i) 30 days
after the Economic Closing Date or (ii) the Payment Date, through the date of
payment, at a floating rate equal to the prime rate of interest shown from time
to time in the "Money Rates" section of The Wall Street Journal.
The Net Working Capital adjustment is outside of and is not subject to
any of the limitations set forth in the indemnification provisions of Section 8.
2.6 LIABILITIES. For purposes of Section 2.5, the identified
liabilities, whether due and payable or accrued for future payment, are as
follows:
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(a) all Tax obligations attributable to periods preceding the Economic
Closing Date; and
(b) all amounts originally owed to Stockholder or Stockholder
Affiliates (whether assigned after origination) arising on or before the
Economic Closing Date.
Surviving Corporation shall be responsible for the liabilities identified
in this Section 2.6 to the extent, and only to the extent, of any Excess Net
Working Capital. In all other respects, Surviving Corporation and I/O shall
have no obligation or commitment to discharge the obligations identified in this
Section 2.6, and such obligations shall be solely the responsibility of
Stockholder.
2.7 CONTINUED SERVICES. Stockholder agrees to provide to the
Surviving Corporation and to Limited, effective from the Economic Closing Date,
the shared support services listed, for the consideration, and for the time,
described, in the agreement attached as Exhibit 2.7.
2.8 CANCELLATION. Stockholder, on behalf of itself and Stockholder
Affiliates, agrees upon Closing to cancel all Contracts between DigiCourse and
Limited, on the one hand, and Stockholder and Stockholder Affiliates on the
other hand, except for this Agreement and those agreements entered into pursuant
to this Agreement.
2.9 DIRECTOR. Immediately following Closing, I/O will elect James M.
Lapeyre, Jr. to the I/O Board of Directors with a term expiring at the I/O
annual stockholder meeting in the calendar year 2000.
2.10 LEASED FACILITIES. At the Economic Closing Date, Stockholder
agrees to lease, or to cause the lease of, to Surviving Corporation, certain
facilities historically used by DigiCourse, that are described in Exhibit 2.10,
on the terms and conditions, and for the consideration, provided in the attached
Exhibit 2.10.
2.11 WORKFORCE. Transfer of the DigiCourse workforce from
Stockholder's corporate group and benefit regime to I/O's corporate group and
benefit regime will be carried out according to the Transfer Plan, attached as
Exhibit 2.11. All DigiCourse salary and benefit expenses after the Economic
Closing Date shall be for the account of, and borne by, the Surviving
Corporation.
2.12 SHARED SOFTWARE AND RIGHTS. As used in this Agreement, "Shared
Software and Rights" means all items that constitute Software or Rights as
defined in this Agreement owned or licensed by Stockholder or a Stockholder
Affiliate and shared by DigiCourse or Limited. Stockholder agrees that, to the
extent it can do so without expense (other than nominal expense) or
inconvenience or reduction of the number of licenses owned by Stockholder or any
Stockholder Affiliate, it will license the Surviving Corporation to use the
Shared
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Software and Rights and, otherwise, will upon request by the Surviving
Corporation use Reasonable Efforts to assist it in obtaining the necessary
license to use the Shared Software and Rights.
2.13 POST ECONOMIC CLOSING. DigiCourse shall continue to operate
in the Ordinary Course of Business through the Closing. However, upon Closing,
DigiCourse will be stipulated to have been operated from the Economic Closing
Date through the Closing Date, for the benefit, risk and burden, and at the
expense of, Surviving Corporation. After the Economic Closing Date, Stockholder
will render the services, lease space and otherwise perform all as set forth in
accordance with the Exhibits attached to this Agreement. Furthermore,
Stockholder will continue to charge DigiCourse for all services, expenses,
charges and allocations (other than those set forth in the previous sentence) in
accordance with the practice and procedures utilized by Stockholder and
DigiCourse during the preceding twelve (12) month period. (Included, without
limitation, in said allocations shall be DigiCourse's share of Tax.
DigiCourse's share of income taxes incurred after the Economic Closing Date
shall be calculated by applying a rate of thirty-four percent (34%) for federal
income tax purposes and a rate of eight percent (8%) for state income tax
purposes to net income incurred by DigiCourse after the Economic Closing Date.)
Said services, expenses, charges and allocations shall be reflected in an
intercompany account as a debt owed by DigiCourse to Stockholder. Surviving
Corporation shall be responsible to pay and shall assume (i) any DigiCourse
intercompany debt incurred after the Economic Closing Date, and (ii) any other
debt or charge either (a) incurred by Stockholder for the account of DigiCourse
after the Economic Closing Date or (b) incurred by DigiCourse after the Economic
Closing Date. Promptly following Closing, Surviving Corporation shall reimburse
Stockholder for all of the foregoing incurred by or for the benefit of
DigiCourse after the Economic Closing Date. Except as set forth above,
Surviving Corporation shall retain all DigiCourse revenues received after the
Economic Closing Date and prior to Closing.
3. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER AND DIGICOURSE
Stockholder, but only with respect to Section 3.1 below as it relates to
Stockholder, and DigiCourse, with respect to all other matters in this Article
3, represent and warrant to I/O, except as set forth in the Disclosure Letter,
as follows:
3.1 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of DigiCourse and the Stockholder, enforceable against DigiCourse and
the Stockholder in accordance with its terms.
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
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(i) contravene, conflict with, or result in a violation of
(A) any provision of the Organizational Documents of DigiCourse, or
(B) any resolution adopted by the board of directors or the Stockholder
of DigiCourse;
(ii) contravene, conflict with, or result in a violation of any
Order to which DigiCourse or Stockholder, or any of the assets owned or
used by DigiCourse, may be subject;
(iii) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable
Contract over $60,000 in any twelve (12) month period; or
(iv) result in the imposition or creation, pursuant to an
Applicable Contract over $60,000 in any twelve (12) month period, of any
Encumbrance upon or with respect to any of the assets owned or used by
DigiCourse.
Except for satisfaction of HSR requirements, DigiCourse and Stockholder
are not required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
(c) Stockholder is acquiring the shares of I/O Common Stock for its
own account and not with a view to their distribution within the meaning of
Section 2(11) of the Securities Act. Prior to the date of this Agreement, the
Stockholder has received a copy of the Private Placement Memorandum and has had
an adequate opportunity to review and understand the Private Placement
Memorandum, and to ask questions of and receive answers from I/O and I/O Marine.
(d) The Stockholder is, and on the Closing Date will be, the record
and beneficial owner and holder of all of the Shares, free and clear of all
Encumbrances.
3.2 ORGANIZATION AND GOOD STANDING. DigiCourse is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Louisiana, with full corporate power and authority to conduct its business as it
is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under Applicable
Contracts. Part 3.2 of the Disclosure Letter contains an accurate list of
the other jurisdictions in which DigiCourse is authorized to transact
business. DigiCourse is duly qualified to transact business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction in which failure to qualify or be in good standing could have a
material adverse effect on DigiCourse.
3.3 CAPITALIZATION. The authorized equity securities of DigiCourse
consist of 2,500,000 shares of common stock, no par value, of which 1,080,000
shares are issued and
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outstanding and constitute the Shares. All of the outstanding equity
securities of DigiCourse have been duly authorized and validly issued and are
fully paid and nonassessable. Except for this Agreement, there is no Contract
relating to the issuance, sale, or transfer of any equity securities or other
securities of DigiCourse. The outstanding equity securities or other
securities of DigiCourse were issued in compliance with all Legal
Requirements. At Closing, DigiCourse will own beneficially and of record all
equity interests in Limited. DigiCourse Limited, a United Kingdom
corporation ("Limited"), is beneficially owned 100% by DigiCourse even though
Stockholder is the record owner of one-half of Limited. However, pursuant to
a Declaration of Nomineeship dated May 18, 1992, Stockholder declared that
it holds a 50% interest in Limited in Trust for the benefit of DigiCourse all
in accordance with said declaration. At or prior to Closing, Stockholder
will execute any and all documents required to establish that DigiCourse owns
100% of Limited. Limited is a company duly organized, validly existing and in
good standing under the laws of United Kingdom with full corporate power and
authority to conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use and to perform all
its obligations under Applicable Contracts. DigiCourse does not own, nor
does it have any Contract to acquire, any other equity securities or other
securities of any Person or any direct or indirect equity or ownership
interest in any other business and is not a party to any joint venture,
teaming agreement, partnership or similar entity or enterprise. Except as
stated above, there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements or commitments to issue or to
sell any shares of capital stock or other securities of Limited or any of its
subsidiaries or any securities or obligations convertible or exchangeable
into or exercisable for, or giving any Person a right to subscribe for or
acquire, any securities of Limited and no securities or obligation evidencing
such rights are authorized, issued or outstanding. Limited does not have
outstanding any bonds, debentures, notes or other obligations the holders of
which have the right to vote (or convertible into or exercisable for
securities having the right to vote) with the stockholder of Limited on any
matter.
3.4 FINANCIAL STATEMENTS. DigiCourse has delivered to I/O and will
attach to the Disclosure Letter: (a) unaudited financial statements consisting
of statements of assets, liabilities and stockholder's equity of DigiCourse as
of March 31 for each of the years 1994 through 1998, and the related unaudited
statement of revenues and expenses, and cash flow, for each of the fiscal years
then ended, (b) an unaudited balance sheet of DigiCourse as of June 30, 1998
(the "Balance Sheet"), and the related unaudited statement of income for the
three months then ended, (c) an unaudited balance sheet of DigiCourse as of
August 31, 1998 and an unaudited balance sheet of Limited as of August 31, 1998
(together, the "Interim Balance Sheets") and the related unaudited statements of
income for the five months then ended for DigiCourse and Limited and (d) audited
financial statements for the three past fiscal years of Limited. Such financial
statements substantially and fairly present the financial condition and the
results of operations of DigiCourse and Limited as at the respective dates of
and for the periods referred to in such financial statements, reflecting the
consistent application of accounting principles, in accordance with GAAP,
except, in the case of unaudited financial statements, for the absence of
footnote disclosures throughout the periods involved, and subject
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to audit adjustments that either would not have been material in amount or
would involve intercompany accounts and charges. The Interim Balance Sheets
reflect appropriate reserves to satisfy the warranty obligations of
DigiCourse and Limited in accordance with GAAP.
3.5 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of DigiCourse and Limited, all of which have
been made available to I/O, to DigiCourse's Knowledge are complete and correct
and have been maintained in accordance with sound business practices, including
the maintenance of an adequate system of internal controls. The minute books of
DigiCourse and Limited contain accurate and complete records of all meetings
held of, and corporate actions taken by, the Stockholder in its capacity as a
shareholder, the Boards of Directors of DigiCourse and Limited, and committees
of the Boards of Directors of DigiCourse and Limited, respectively. At the
Closing, all books and records of DigiCourse and Limited since January 1, 1992,
and all minute books and stock records, will be in the possession of DigiCourse.
Stockholder will promptly deliver to the Surviving Corporation those DigiCourse
or Limited records that Stockholder subsequently discovers in archive.
Stockholder shall have the right to retain a copy of these books and records.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES.
(a) Part 3.6 of the Disclosure Letter contains a complete and accurate
list of all real property leaseholds of DigiCourse or Limited. DigiCourse and
Limited own all the properties and assets (whether real, personal, or mixed and
whether tangible or intangible) reflected in the Interim Balance Sheets (except
for assets held under capitalized leases disclosed, or not required to be
disclosed, in Part 3.6 of the Disclosure Letter and personal property sold since
the date of the Interim Balance Sheets, as the case may be, in the Ordinary
Course of Business), and all of the properties and assets purchased or otherwise
acquired by DigiCourse or Limited since the date of the Interim Balance Sheets
(except for personal property acquired and sold since the date of the Interim
Balance Sheets in the Ordinary Course of Business).
(b) Except as disclosed on Part 3.6 of the Disclosure Letter, all
material properties and assets reflected in the Interim Balance Sheets are free
and clear of all Encumbrances and are not subject to any building use
restrictions, exceptions, variances, reservations, or limitations of any nature
(collectively, "Limitations") except, with respect to all such properties and
assets, (i) security interests shown on the Interim Balance Sheets with respect
to which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (ii) security interests incurred in connection
with the purchase of property or assets after the date of the Interim Balance
Sheets (such security interests being limited to the property or assets so
acquired), with respect to which no default (or event that, with notice or lapse
of time or both, would constitute a default) exists, (iii) liens for current
Taxes not yet due, or Encumbrances that are not material to DigiCourse or
Limited and (iv) Encumbrances and Limitations on real property that do not
materially interfere with DigiCourse's or Limited's use of such real property.
3.7 CONDITION AND SUFFICIENCY OF ASSETS. The leasehold structures and
equipment
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of DigiCourse and Limited are adequate for the uses to which they are being
put. None of such structures or equipment is in need of maintenance or
repairs except for ordinary, routine maintenance. The leasehold structures
and equipment of DigiCourse and Limited are sufficient leasehold structures
and equipment for the continued conduct of DigiCourse's and Limited's
business immediately after the Economic Closing Date in substantially the
same manner as conducted immediately prior to the Economic Closing Date.
3.8 ACCOUNTS RECEIVABLE. All accounts receivable of DigiCourse and
Limited that are reflected on the Interim Balance Sheets or on the accounting
records of DigiCourse or Limited as of the Economic Closing Date (collectively,
the "Accounts Receivable") represent or will represent valid obligations arising
from sales actually made or services actually performed in the Ordinary Course
of Business. To DigiCourse's Knowledge, unless paid prior to the Economic
Closing Date, the Accounts Receivable are or will be as of the Economic Closing
Date current and collectible net of the respective reserves shown on the Interim
Balance Sheets or on the accounting records of DigiCourse and Limited as of the
Economic Closing Date (which reserves are adequate and calculated consistent
with past practice). There is no contest, claim, or right of set-off, other
than returns in the Ordinary Course of Business, under any Contract with any
obligor of an Accounts Receivable relating to the amount or validity of such
Accounts Receivable. Part 3.8 of the Disclosure Letter contains a complete and
accurate aged list of all Accounts Receivable as of the date of the Interim
Balance Sheets, which list sets forth the aging of such Accounts Receivable.
3.9 INVENTORY. All inventory of DigiCourse and Limited reflected in
the Interim Balance Sheets consists, and reflected on the accounting records at
the Economic Closing Date will consist of, a quality and quantity usable and
salable in the Ordinary Course of Business, except for obsolete items and items
of below-standard quality, all of which have been written off or written down to
net realizable value in the Interim Balance Sheets. To DigiCourse's Knowledge,
the quantities of inventory are reasonable in the present circumstances of
DigiCourse and Limited.
3.10 NO UNDISCLOSED LIABILITIES. DigiCourse and Limited have no
material liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Interim Balance Sheets,
liabilities incurred in the Ordinary Course of Business since the date of the
Interim Balance Sheets and liabilities not required to be reflected or reserved
against under GAAP.
3.11 TAXES. DigiCourse and Limited have each filed or caused to be
filed all Tax Returns that are or were required to be filed by or with respect
to them pursuant to applicable Legal Requirements. DigiCourse and Limited have
paid, or made provision for the payment of, all Taxes that have or may have
become due pursuant to those Tax Returns. The charges, accruals, and reserves
with respect to Taxes on the books of DigiCourse are adequate under applicable
Legal Requirements of taxing authorities and are at least equal to the liability
for Taxes as determined under such Legal Requirements. All Taxes that each of
DigiCourse and
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Limited is or was required by Legal Requirements to withhold or collect have
been duly withheld or collected and, to the extent required, have been paid
to the proper Governmental Body or other Person. All Tax Returns filed on a
consolidated basis on behalf of DigiCourse are true, correct, and complete in
all material respects. There is no Tax sharing agreement that will require
any payment by DigiCourse or Limited after the date of this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE. Since the date of the Interim Balance
Sheets, there has not been any material adverse change in the business,
operations, properties, assets, or financial condition of DigiCourse or Limited
through the date of this Agreement, and no event has occurred or circumstance
exists through the date of this Agreement that may result in such a material
adverse change other than those generally affecting DigiCourse's industry.
3.13 EMPLOYEE PLANS AND AGREEMENTS. Part 3.13 of the Disclosure Letter
lists all of the profit sharing plans and all of the retirement, stock option,
stock purchase, bonus, life, medical, vision, health, disability or accident
plans, deferred compensation plans, severance agreements, and other employee
compensation or benefit plans, agreements and arrangements, including, without
limitation, all "plans" as defined in Section 3(3) of ERISA, relating to
officers or employees (including former officers or employees) of DigiCourse or
Limited pursuant to which DigiCourse or Limited has any liability (contingent or
otherwise) (collectively, the "Plans" and individually, a "Plan"). DigiCourse
and Limited have complied with all Legal Requirements governing, and terms and
conditions of, the Plans. Since April 1, 1998, DigiCourse has maintained
workers' compensation coverage as required by applicable state law through
purchase of insurance and not by self-insurance, and DigiCourse has no
liabilities for prior workers' compensation self-insurance.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
To the Knowledge of DigiCourse, DigiCourse and Limited are, and at all times
since January 1, 1994 have been, in full compliance with each Legal Requirement
that is or was applicable to them or to the conduct or operation of their
business or the ownership or use of any of their assets that could have material
Adverse Consequences to DigiCourse or Limited; and to the Knowledge of
DigiCourse, no event has occurred or circumstance exists that (with or without
notice or lapse of time) constitutes a material violation by DigiCourse or
Limited of, or a material failure on the part of DigiCourse or Limited to comply
with, any Legal Requirement. To DigiCourse's Knowledge, Part 3.14 of the
Disclosure Letter contains a complete and accurate list of each license or
permit from a Governmental Body that is held by DigiCourse or Limited the
absence of which would have a material Adverse Consequence to DigiCourse or
Limited.
3.15 LEGAL PROCEEDINGS; ORDERS. Except as set forth in Part 3.15 of
the Disclosure Letter, there is no pending Proceeding:
(a) that has been commenced by or against DigiCourse or Limited or
that involves claims against or by DigiCourse or Limited; or
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(b) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the Contemplated
Transactions.
To the Knowledge of DigiCourse, no such Proceeding has been Threatened.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Since the date of the
Interim Balance Sheets, DigiCourse and Limited have each conducted its business
only in the Ordinary Course of Business, except for this Agreement.
3.17 CONTRACTS; NO DEFAULTS. Part 3.17 of the Disclosure Letter
contains an accurate list of each Applicable Contract that involves an amount in
excess of $60,000 in any 12 month period. Each Contract identified or required
to be identified in Part 3.17 of the Disclosure Letter is in full force and
effect, without breach to DigiCourse's Knowledge, and is valid and enforceable
in accordance with its terms (subject to debtors' protection laws and equitable
principles).
3.18 INSURANCE. DigiCourse has delivered to I/O true and complete
copies of all policies of insurance to which DigiCourse or Limited is a party or
under which DigiCourse or Limited, or any officer or director of DigiCourse or
Limited, is or has been covered since March 31, 1996, related to the business of
DigiCourse or Limited. All policies to which DigiCourse is a party or that
provide coverage to DigiCourse or Limited, or any director or officer of
DigiCourse or Limited related to the business of DigiCourse or Limited are
valid, outstanding, and enforceable; and do not provide for any retrospective
premium adjustment or other experienced-based liability on the part of
DigiCourse or Limited. Following the Merger, the Surviving Corporation will no
longer be covered by insurance arranged through Stockholder.
3.19 ENVIRONMENTAL MATTERS. DigiCourse and Limited are, and at all
times have been, in full compliance with, and has not been and is not in
violation of or liable under, any Environmental Law. Through the Economic
Closing Date there will be no pending or, to the Knowledge of DigiCourse,
Threatened claims resulting from any Environmental, Health, and Safety
Liabilities or arising under or pursuant to any Environmental Law, with respect
to or affecting any of the Facilities or other DigiCourse or Limited operations,
properties and assets.
3.20 EMPLOYEES. DigiCourse has delivered to I/O a complete and
accurate list, as of the date of this Agreement, of the following information
for each employee of DigiCourse or Limited, including each employee on leave of
absence or layoff status: name; job title; current compensation paid or payable
and any change in compensation since January 1, 1996; vacation accrued; and
service credited for purposes of vesting and eligibility to participate under
DigiCourse's or Limited's Plans. To DigiCourse's Knowledge, no employee of
DigiCourse or Limited is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, noncompetition, or proprietary
rights agreement, between such employee and any other Person ("Proprietary
Rights Agreement") that in any way adversely affects or will affect the
performance of his duties as an employee of DigiCourse or Limited. To
DigiCourse's Knowledge, on the date of this Agreement and on the Economic
Closing Date, no officer, or
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employee directly reporting to an officer, or other employee with an annual
base compensation of $50,000 per year, of DigiCourse or Limited intends to
terminate his employment with DigiCourse or Limited.
3.21 INTELLECTUAL PROPERTY.
(a) INTELLECTUAL PROPERTY ASSETS. The term "Intellectual Property
Assets" includes DigiCourse's and Limited's:
(i) name, and any fictional business names, trading names,
registered and unregistered trademarks, service marks, and trademarks or
service mark applications listed in Part 3.21(a)(i) of the Disclosure
Letter (collectively, "Marks");
(ii) those patents, patent applications, and inventions and
discoveries that may be patentable listed in Part 3.21(a)(i) of the
Disclosure Letter (collectively, "Patents");
(iii) all copyrights in both material published works and
material unpublished works (collectively, "Copyrights");
(iv) all know-how, trade secrets, confidential information,
customer lists, technical information, data, process technology, plans,
drawings, and blue prints that have been protected (collectively, "Trade
Secrets") or are owned or licensed by DigiCourse or Limited as licensee
or licensor; and
(v) all material Software and Rights owned or licensed by
DigiCourse or Limited as licensee or licensor.
(b) AGREEMENTS. Part 3.21(b) of the Disclosure Letter contains a
complete and accurate list of all Contracts relating to the Intellectual
Property Assets to which DigiCourse or Limited is a party or by which DigiCourse
or Limited is bound, except for (i) any perpetual license implied by the sale of
a product and (ii) each paid-up license for commonly available software programs
with a value of less than $50,000 under which DigiCourse is the licensee. There
are no outstanding and, to DigiCourse's Knowledge, no Threatened disputes or
disagreements with respect to any listed Contract. DigiCourse and Stockholder
have not granted and are not obligated to grant a license, assignment or other
right in respect of any item of Intellectual Property Assets, except as
disclosed on Part 3.21(b) to the Disclosure Letter.
(c) KNOW-HOW NECESSARY FOR THE BUSINESS.
(i) The Intellectual Property Assets are all those necessary
for the operation of DigiCourse's businesses as they are currently
conducted other than Intellectual Property Assets that are Shared
Software and Rights or that are used as a shared service described on
Exhibit 2.7 with Stockholder or Stockholder Affiliates. DigiCourse is
the
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owner or licensee of all right, title, and interest in and to each of
the Intellectual Property Assets, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse claims, and
has the right to use without payment to a third party all of the
Intellectual Property Assets, unless listed in Part 3.21(c)(i) of the
Disclosure Letter.
(ii) No past or present employee or consultant of DigiCourse has
any ownership interest or any other rights in and to any Intellectual
Property Asset. No Contract exists between DigiCourse and any third
party which would impede or prevent the continued use of such right,
title and interest of DigiCourse in and to the Intellectual Property
Assets as DigiCourse had prior to the Economic Closing Date and used in
the conduct of its business, subject to the rights of licensors and
licensees pursuant to existing Contracts listed on Part 3.21(b) to the
Disclosure Letter.
(d) PATENTS.
(i) Part 3.21(a)(ii) of the Disclosure Letter contains a
complete and accurate list of all issued Patents. At the time of the
Economic Closing Date, DigiCourse will be the owner of all right, title,
and interest in and to each of the issued Patents, free and clear of any
Encumbrances, and Stockholder will take steps in an orderly and prompt
fashion to transfer ownership of record to all issued foreign Patents to
Surviving Corporation.
(ii) All of the issued U.S. Patents are currently in compliance
with formal legal requirements (including payment of filing, examination,
and maintenance fees).
(iii) To DigiCourse's Knowledge, no issued Patent is involved in
any interference, reissue, reexamination, or opposition proceeding. To
DigiCourse's Knowledge, there is no interfering patent or patent
application of any third party to any issued Patent.
(iv) To DigiCourse's Knowledge, no issued Patent has been
Threatened. To DigiCourse's Knowledge, none of the Products infringes or
is alleged to infringe any patent or other proprietary right of any other
Person.
(e) MARKS.
(i) Part 3.21(e) of Disclosure Letter contains a complete and
accurate list of all registered Marks. At the time of the Economic
Closing Date, DigiCourse will be the owner of all right, title, and
interest in and to each of the U.S. Marks, free and clear of all
Encumbrances and Stockholder will take steps in an orderly and timely
fashion to transfer ownership of record to all registered foreign Marks.
(ii) All Marks that have been registered with the United States
Patent and
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Trademark Office are currently in compliance with all formal legal
requirements (including the timely post-registration filing of
affidavits of use and incontestability and renewal applications).
(iii) To DigiCourse's Knowledge, no registered Mark or pending
trademark application is now involved in any opposition, invalidation, or
cancellation.
(f) COPYRIGHTS.
(i) Part 3.21(f) of the Disclosure Letter contains a complete
and accurate list of all registered Copyrights. DigiCourse is the owner
of all right, title, and interest in and to each of the registered
Copyrights, free and clear of all Encumbrances.
(ii) All registered Copyrights are currently in compliance with
formal legal requirements.
(iii) To DigiCourse's Knowledge, no Copyright is infringed or
Threatened.
(g) TRADE SECRETS. To DigiCourse's Knowledge, with respect to
material Trade Secrets, the documentation relating to such Trade Secret is
reasonably current and sufficient in detail and content to identify and explain
it and to allow its full and proper use without reliance on the knowledge or
memory of any single individual.
(h) RIGHTS.
(i) Part 3.21(h) of the Disclosure Letter contains a complete
and accurate list of all Products. DigiCourse is the owner of all right,
title, and interest in and to the Rights, free and clear of all
Encumbrances and the Rights may be used by the Surviving Corporation to
produce and market all of the Products following the Economic Closing
Date in the same manner as such were used prior to the Economic Closing
Date without the payment of additional fees.
(ii) To DigiCourse's Knowledge, the Products perform in all
material respects in accordance with the Documentation.
(iii) DigiCourse will have delivered to I/O in written form, and
scheduled in the Disclosure Letter, all material Products (A) that are
non-standard Products under development for a particular customer, (b)
that require non-standard support, (C) that have a non-standard warranty,
and (D) that have non-standard delivery obligations. To DigiCourse's
Knowledge, neither DigiCourse nor Limited has requested additional
equipment, development tools or technical personnel indicating that they
are needed to satisfy and discharge these obligations.
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(iv) DigiCourse has made available to I/O and I/O Marine
documentation identifying, to DigiCourse's Knowledge, all bugs in
Products together with documentation of all fixes implemented, in
development or planned for those bugs.
(v) Except for changes to be made in the Ordinary Course of
Business which will not have material Adverse Consequences on
DigiCourse's business, to DigiCourse's Knowledge, no currently available
or announced technological advance or release will result in any
Product's obsolescence within the next twelve (12) months.
(vi) Except as disclosed in writing to I/O, to DigiCourse's
Knowledge performance of the Products will not be adversely affected in
any material respect solely as a result of the date change from December
31, 1999 to January 1, 2000.
3.22 DISCLOSURE. To DigiCourse's Knowledge, no representation or
warranty of Stockholder in this Agreement and no statement in the Disclosure
Letter omits to state a material fact necessary to make the statements herein
or therein, in light of the circumstances in which they were made, not
misleading.
3.23 BROKERS OR FINDERS. DigiCourse and Limited have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement.
3.24 YEAR 2000 COMPLIANCE. Part 3.24 of the Disclosure Letter
contains DigiCourse's and Limited's Year 2000 action plans and status
reports. DigiCourse's and Limited's operations as currently conducted, upon
execution of these Year 2000 action plans, to DigiCourse's Knowledge, will
not suffer a material Adverse Consequence determined applying the British
Standards Institute definition of Year 2000 compliant.
4. REPRESENTATIONS AND WARRANTIES OF I/O
I/O and I/O Marine jointly and severally represent and warrant to
Stockholder as follows:
4.1 ORGANIZATION AND GOOD STANDING. I/O is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Delaware with full corporate power and authority to conduct its business
as it is now being conducted, to own and use the properties and assets that
it purports to own or use and to perform all its obligations under all
Contracts to which it is a party.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of I/O, enforceable against I/O in accordance with its terms. I/O
has the absolute and unrestricted right, power, and authority to execute and
deliver this Agreement and to perform its obligations under this Agreement.
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(b) Neither the execution and delivery of this Agreement by I/O nor
the consummation or performance of any of the Contemplated Transactions by
I/O will, directly or indirectly (with or without notice or the lapse of
time), contravene, conflict with or result in a violation of:
(i) any provision of I/O's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of I/O;
(iii) any Legal Requirement or Order to which I/O or any of its
assets may be subject; or
(iv) any Contract to which I/O is a party or by which I/O or any
of its assets may be bound; or result in the imposition or creation of
any Encumbrance upon or with respect to any of such assets.
Except for satisfaction of HSR requirements and as set forth in Schedule 4.2,
I/O is not and will not be required to obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
4.3 CERTAIN PROCEEDINGS. There is no pending Proceeding that has
been commenced against I/O and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of
the Contemplated Transactions or that involves material claims not disclosed
in the I/O SEC Reports against I/O or I/O Affiliates. To I/O's Knowledge, no
such Proceeding has been Threatened.
4.4 BROKERS OR FINDERS. Except for fees payable by I/O to
Schnitzius & Vaughan, I/O and its officers and agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement and will indemnify and hold Stockholder harmless from any such
payment alleged to be due from Stockholder by or through I/O as a result of
the action of I/O or its officers or Representatives. This indemnity is not
subject to the ceiling or threshold of Section 8.
4.5 I/O CAPITALIZATION.
(a) The authorized capital stock of I/O consists of 100,000,000
shares of I/O Common Stock, of which 44,586,434 shares were outstanding as of
the close of business on September 21, 1998, and 5,000,000 shares of
preferred stock, par value $0.01 per share, of which no shares were
outstanding as of September 21, 1998. All of the outstanding shares of I/O
Common Stock have been duly authorized and are validly issued, fully paid and
nonassessable. I/O does not have outstanding any bonds, debentures, notes or
other obligations the holders of which have
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the right to vote (or, except stock options, convertible into or exercisable
for securities having the right to vote) with the stockholders of I/O on any
matter.
(b) Prior to the Closing, I/O will have taken all necessary action
to permit it to issue to Stockholder the number of shares of I/O Common Stock
required to be issued pursuant to Section 2. Such I/O Common Stock, when
issued, will be validly issued, fully paid and nonassessable and will be
"Restricted Stock" within the meaning of SEC Rule 144 promulgated under the
Securities Act.
4.6 I/O SEC REPORTS. I/O has delivered to the Stockholder the
Private Placement Memorandum and each registration statement, report, press
releases or proxy statement prepared by it since May 31, 1998, and all
exhibits filed or incorporated by reference thereto including (i) I/O's
Annual Report on Form 10-K for the year ended May 31, 1998, (ii) I/O's
Quarterly Report on Form 10-Q for its fiscal quarter ended August 31, 1998
and (iii) I/O's definitive proxy statement prepared in connection with its
annual meeting of stockholders to be held on September 28, 1998, all in the
form (including any amendments thereto) as filed with the SEC and all reports
and proxy materials filed by I/O with the SEC at any time after May 31, 1998
(collectively, the "I/O SEC Reports"). As of their respective dates, the I/O
SEC Reports did not, and any I/O SEC Reports filed with the SEC subsequent to
the date hereof, and prior to the Effective Time will not, and the Private
Placement Memorandum does not, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
in which they were made, not misleading; to I/O's Knowledge, all such I/O SEC
Reports complied as to form, in all material respects, with all applicable
Legal Requirements. Since the filing of I/O's latest current report on Form
10-Q, there has been no material adverse change in the business or financial
prospects of I/O that has not been disclosed through press releases issued by
I/O. Each of the consolidated balance sheets included in or incorporated by
reference into the I/O SEC Reports (including the related notes and
schedules) fairly presents the consolidated financial position of I/O and its
subsidiaries as of its date and each of the consolidated statements of income
and of cash flow included in or incorporated by reference into the I/O SEC
Reports (including any related notes and schedules) fairly presents the
results of operations, retained earnings and changes in cash flow, as the
case may be, of I/O and its subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to notes and normal year end
audit adjustments that will not be material in amount or effect), in each
case in accordance with GAAP consistently applied during the periods
involved, except as may be noted therein.
4.7 INVESTMENT REPRESENTATIONS.
(a) I/O is an "accredited investor" within the meaning of
Regulation D under the Securities Act. I/O will acquire the shares of
DigiCourse pursuant to the Merger solely for the purpose of investment, for
its own account, and not with a view to any distribution thereof within the
meaning of Section 2(11) of the Securities Act.
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(b) I/O understands that the shares of DigiCourse will not have
been registered under the Securities Act, that there is no established market
for the shares of DigiCourse, and that the shares of DigiCourse must be held
indefinitely and cannot be transferred unless an exemption from such
registration is available with respect to such transfer.
(c) I/O, alone or in conjunction with its advisors, has such
knowledge and experience in financial and business matters that it is capable
of evaluating the merits and risks of an investment in the shares of
DigiCourse and of making an informed investment decision with respect thereto.
(d) I/O is able to bear the economic risk of an investment in the
shares of DigiCourse.
(e) I/O and its advisors have been given access to all documents,
books and additional information concerning DigiCourse and Limited which they
have requested. I/O has been represented by legal counsel and investment
bankers in this transaction and such advisors have been given the opportunity
to ask questions of, and receive answers from, the officers of DigiCourse and
Limited concerning the affairs and business and financial condition of
DigiCourse and Limited. I/O has conducted such investigations in making a
decision to enter into this Agreement and the Contemplated Transactions as
I/O and its advisors have deemed necessary and advisable.
4.8 TAX REPRESENTATIONS.
(a) I/O Marine was formed solely for the purpose of merging into
DigiCourse in accordance with this Agreement.
(b) Except for assets transferred by I/O to I/O Marine pursuant to
this Agreement, prior to the Effective Time, I/O Marine will have no
historical assets or liabilities, and except for this Agreement, and no
Contracts. Accordingly, DigiCourse will assume no liabilities of I/O Marine
and I/O Marine will not transfer to DigiCourse any assets subject to
liabilities.
(c) Assets transferred for purposes of this Agreement by I/O to I/O
Marine, or by I/O to the Surviving Corporation, were transferred pursuant to
this Agreement and Plan of Merger for the purpose set forth in Treasury
Regulations Section 1.368-2(j)(3).
(d) All of the issued and outstanding shares of stock of I/O Marine
are owned by I/O such that I/O Marine is a 100% owned subsidiary of I/O; I/O
has been and immediately prior to the Merger will be in control of I/O Marine
within the meaning of Section 368 of the Code.
(e) Following the Merger of I/O Marine into DigiCourse pursuant to
the terms of this Agreement and Merger, DigiCourse will hold substantially
all of the properties of I/O Marine and DigiCourse, other than the Merger
Consideration, all within the meaning of Code Section 368(a)(2)(E).
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(f) Merger Consideration transferred to the Stockholder in exchange
for the Shares will be voting common stock of I/O within the meaning of Code
Section 368(a)(2)(E) (aside from any Net Working Capital adjustment payments
under Section 2.5(a)(ii))
(g) After the completion of the Agreement, I/O will control
DigiCourse within the meaning of Code Section 368(c).
(h) I/O has no present plan or intention to liquidate DigiCourse;
to merge DigiCourse with or into another corporation; to sell or otherwise
dispose of the stock of DigiCourse except for transfers of stock to
corporations controlled by I/O; or to cause DigiCourse to sell or otherwise
dispose of any of its assets or any of the assets acquired from I/O Marine,
except for dispositions made in the Ordinary Course of Business or transfers
of assets to a corporation controlled by DigiCourse.
(i) Following the Merger, DigiCourse will continue its historic
business.
4.9 RELIANCE. I/O and I/O Marine acknowledge, warrant, represent,
and agree that neither of them has relied or will rely, in connection with
the transactions contemplated by this Agreement, upon any representation,
warranty, fact or statement (or failure to make any statement) of or by the
Stockholder except the Stockholder's representations and warranties expressly
set forth in this Agreement. Nothing contained in this Agreement constitutes
an acknowledgment by Stockholder that it has offered or sold to I/O any
"securities," as such term is defined in the Securities Act and applicable
state securities laws.
5. REPRESENTATIONS AND WARRANTIES OF I/O MARINE
I/O and I/O Marine, jointly and severally, represent and warrant to
Stockholder as follows:
5.1 ORGANIZATION AND GOOD STANDING. I/O Marine is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Louisiana with full corporate power and authority to conduct its
business as it is now conducted, to own and use the properties and assets
that it purports to own or use and to perform all its obligations under all
Contracts to which it is a party.
5.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of I/O Marine, enforceable against I/O Marine in accordance with
its terms. I/O Marine has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and to perform its
obligations under this Agreement.
(b) Neither the execution and delivery of this Agreement by I/O
Marine nor the consummation or performance of any of the Contemplated
Transactions by I/O Marine will,
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directly or indirectly (with or without notice or the lapse of time),
contravene, conflict with or result in a violation of:
(i) any provision of I/O Marine's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
shareholders of I/O Marine;
(iii) any Legal Requirement or Order to which I/O Marine or any
of its assets may be subject; or
(iv) any Contract to which I/O Marine is a party or by which I/O
Marine or any of its assets may be bound.
Except for satisfaction of the HSR requirements, I/O Marine is not and will
not be required to obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance
of any of the Contemplated Transactions.
5.3 CERTAIN PROCEEDINGS. There is no pending Proceeding that has
been commenced against I/O Marine and that challenges, or may have the effect
of preventing, delaying, making illegal, or otherwise interfering with, any
of the Contemplated Transactions or that involves material claims not
disclosed in the I/O SEC Reports against I/O or I/O Affiliates. To I/O
Marine's Knowledge, no such Proceeding has been Threatened.
5.4 BROKERS OR FINDERS. I/O Marine and its officers and agents
have incurred no obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with this Agreement and will indemnify and hold Stockholder
harmless from any such payment alleged to be due from Stockholder by or
through I/O Marine as a result of the action of I/O Marine or its officers or
Representatives.
5.5 I/O MARINE CAPITALIZATION. The authorized capital stock of I/O
Marine consists of 1,000 shares of common stock ("I/O Marine Common Stock"),
all of which is issued to and owned by I/O, free of any Encumbrances. All of
the outstanding shares of I/O Marine Common Stock have been duly authorized
and are validly issued, fully paid and nonassessable. Except as stated
above, there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements or commitments to issue or to
sell any shares of capital stock or other securities of I/O Marine or any
securities or obligations convertible or exchangeable into or exercisable
for, or giving any Person a right to subscribe for or acquire, any securities
of I/O Marine and no securities or obligation evidencing such rights are
authorized, issued or outstanding. I/O Marine does not have outstanding any
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or convertible into or exercisable for securities having the
right to vote) with the stockholder of I/O Marine on any matter.
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5.6 ASSETS AND LIABILITIES. Prior to and at the Closing, I/O
Marine will have no material assets or liabilities, no Affiliates that are
subsidiaries and, except for this Agreement, no Contracts.
6. CONDITIONS PRECEDENT TO I/O'S AND I/O MARINE'S OBLIGATION TO CLOSE
The obligation of each of I/O and I/O Marine to consummate the
Contemplated Transactions, and to take the other actions required to be taken
by I/O and I/O Marine at the Closing is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions (any of which may
be waived, if permitted by law, by I/O and I/O Marine, in whole or in part):
6.1 ACCURACY OF REPRESENTATIONS. All of Stockholder's and
DigiCourse's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must be accurate in all material respects as of the date of
this Agreement and as of the Economic Closing Date.
6.2 STOCKHOLDER'S PERFORMANCE. All of the covenants and
obligations that Stockholder is required to perform or to comply with
pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered
individually), must have been duly performed and complied with in all
material respects.
6.3 ADDITIONAL DOCUMENTS. Each of the following documents must
have been delivered to I/O and I/O Marine:
(a) the Certificate of Merger, duly executed and acknowledged by
Stockholder and DigiCourse to the extent required by the LBCL;
(b) certificates of the Secretary of State and the taxing
authorities of Louisiana dated not more than ten days prior to the Closing
Date, attesting to the organization and good standing of DigiCourse, and to
the payment of all state taxes due and owing thereby, if Louisiana issues
such a certificate;
(c) copies, certified by the Secretary of State of Louisiana as of
a date not more than five days prior to the Closing Date, of the articles of
incorporation of DigiCourse, and all amendments thereto;
(d) copies, certified by the Secretary of DigiCourse as of the
Closing Date, of the bylaws of DigiCourse, and all amendments thereto; and
(e) copies, certified by the Secretary of DigiCourse as of the
Closing Date, of resolutions duly adopted by the Stockholder and Board of
Directors of DigiCourse, authorizing the execution and delivery by
DigiCourse of this Agreement and all other agreements attached
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hereto as exhibits or contemplated herein, the consummation of the Merger,
and the taking of all such other corporate action as shall have been required
as a condition to or in connection with the consummation of the Contemplated
Transactions.
6.4 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There
must not have been made or Threatened by any Person any claim asserting that
such Person (a) is the holder or the beneficial owner of, or has the right to
acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in DigiCourse, or (b) is entitled to
all or any portion of the Merger Consideration.
6.5 NO PROHIBITION. Neither the consummation nor the performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause I/O or any Person affiliated with
I/O to suffer any material Adverse Consequences under, (a) any applicable
Legal Requirement or Order, or (b) any Legal Requirement or Order that has
been published, introduced, or otherwise proposed by or before any
Governmental Body.
6.6 NO MATERIAL ADVERSE CHANGE. There shall not have been, since
the date of the Interim Balance Sheets through the Economic Closing Date, any
material adverse change in the business, operations, properties, assets, or
financial condition of DigiCourse or Limited.
6.7 OPINIONS OF COUNSEL. I/O shall have received, in a form
satisfactory to it in its reasonable commercial discretion, opinions,
addressed to it, of (i) its counsel to the effect that this Agreement, and
the Registration Rights Agreement are enforceable against Stockholder in
accordance with their respective terms; and (ii) Correro Fishman Haygood
Phelps Walmsley & Casteix, L.L.P., to the effect that the shares of
DigiCourse and Limited (relying upon British counsel's opinion as necessary
regarding Limited) to be delivered to I/O under this Agreement are, at the
Closing, duly and validly authorized and issued and fully paid and
nonassessable.
6.8 HSR CLEARANCE. Closing shall not occur until the receipt of any
required Government Authorization, including Government Authorization
(whether by lapse of requisite waiting period or otherwise) following filings
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (as amended)
("HSR"). I/O agrees to pay the entire HSR filing fee.
6.9 EMPLOYMENT ARRANGEMENT. I/O and Roy Kelm shall have agreed
upon post-Closing employment terms and conditions acceptable to I/O.
6.10 RELEASE OF GUARANTY. DigiCourse shall have been released as a
guarantor (and from any similar obligation) with respect to any indebtedness
of Stockholder or any Stockholder Affiliates.
6.11 DUE DILIGENCE. I/O shall have completed its due diligence
investigation of DigiCourse, Limited and the Contemplated Transactions, with
results satisfactory to I/O, and shall have received and timely reviewed
(five days after receipt) the Disclosure Letter.
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7. CONDITIONS PRECEDENT TO STOCKHOLDER'S AND DIGICOURSE'S OBLIGATION TO
CLOSE
The obligation of DigiCourse and the Stockholder to consummate the
Contemplated Transactions and to take the other actions required to be taken
by Stockholder and DigiCourse at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Stockholder and DigiCourse, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. All of I/O's and I/O Marine's
representations and warranties in this Agreement (considered collectively),
and each of these representations and warranties (considered individually),
must be accurate in all material respects as of the date of this Agreement
and as of the Closing Date.
7.2 I/O'S PERFORMANCE.
(a) All of the covenants and obligations that I/O and I/O Marine
are required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these covenants
and obligations (considered individually), must have been performed and
complied with in all material respects.
(b) I/O must have delivered each of the documents required to be
delivered by I/O pursuant to Section 2.4 and must have delivered the Merger
Consideration.
7.3 ADDITIONAL DOCUMENTS. I/O must have caused the following
documents to be delivered to Stockholder:
(a) the Certificate of Merger, duly executed by each of I/O and I/O
Marine, to the extent required by the LBCL;
(b) certificates of the Secretary of State and the taxing
authorities of Delaware or Louisiana, as applicable, dated not more than ten
days prior to the Closing Date, attesting to the organization and good
standing of each of I/O and I/O Marine as a corporation in its jurisdiction
of incorporation, and to the payment of all state taxes due and owing thereby
(if available in Louisiana);
(c) copies, certified by the Secretary of State of Delaware or
Louisiana, as applicable, as of a date not more than ten days prior to the
Closing Date of the articles or certificate of incorporation of each of I/O
and I/O Marine, and all amendments thereto;
(d) copies, certified by the Secretary of I/O as of the Closing
Date, of the bylaws of each of I/O and I/O Marine, and all amendments thereto;
(e) copies, certified by a certificate of the Secretary of I/O and
I/O Marine as of the Closing Date, of resolutions duly adopted by the boards
of directors of each of I/O and I/O
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Marine, and by I/O as sole stockholder of I/O Marine, authorizing the
execution and delivery by I/O and I/O Marine of this Agreement and all other
agreements attached hereto as Exhibits or contemplated herein, the
consummation of the Merger, and the taking of all such other corporate action
as shall have been required as a condition to, or in connection with the
consummation of the Contemplated Transactions.
7.4 NO PROHIBITION. Neither the consummation nor the performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Stockholder or any Person
affiliated with Stockholder to suffer any material Adverse Consequences
under, (a) any applicable Legal Requirement or Order, or (b) any Legal
Requirement or Order that has been published, introduced, or otherwise
proposed by or before any Governmental Body.
7.5 NYSE LISTING. The shares of I/O Common Stock issuable to the
Stockholder pursuant to this Agreement shall have been approved for listing
on the NYSE upon and subject to official notice of issuance.
7.6 OPINIONS OF COUNSEL. Stockholder shall have received, in a
form satisfactory to it in its reasonable commercial discretion, opinions,
addressed to the Stockholder, of (i) its special Delaware counsel to the
effect that this Agreement and the Registration Rights Agreement are
enforceable against I/O in accordance with their respective terms; (ii) its
tax counsel, to the effect that the Merger will for tax purposes constitute a
reorganization under Section 368(a)(2)(E) of the Code and that, accordingly,
the Stockholder will not incur any recognized gain or loss by reason of its
receipt of shares of I/O capital stock pursuant to the Merger; and (iii)
Haynes and Boone, L.L.P. to the effect that the shares of I/O Common Stock to
be delivered to the Stockholder under this Agreement are, at the Closing,
duly and validly authorized and issued and fully paid and nonassessable.
7.7 SECTION 2.5 PAYMENT. Stockholder shall have no reasonable
expectation that any payment that may become due to it pursuant to Section
2.5 of this Agreement might exceed in amount 19% of the aggregate value of
the Merger Consideration.
7.8 FAIRNESS OPINION. DigiCourse and the Stockholder shall have
received the opinion of NationsBanc Montgomery Securities, LLP, addressed to
DigiCourse and the Stockholder, in form satisfactory to each of them in its
reasonable commercial discretion, to the effect that the Merger Consideration
is fair to the Stockholder from a financial point of view.
7.9 NO MATERIAL ADVERSE CHANGE. There shall not have been, since
September 1, 1998, any material adverse change in the business, operation,
properties, assets, or financial condition of I/O, other than those factors
generally affecting I/O's industry.
7.10 HSR CLEARANCE. Closing shall not occur until the receipt of any
required Government Authorization, including Government Authorization
(whether by lapse of requisite
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waiting period or otherwise) following filings under the HSR. I/O agrees to
pay the entire HSR filing fee.
8. INDEMNIFICATION; REMEDIES
8.1 SURVIVAL. All representations, warranties, covenants, and
obligations contained in this Agreement, the Disclosure Letter, and any other
certificate or document delivered pursuant to this Agreement will survive the
Closing Date, but solely to support a timely claim for indemnification
pursuant to Section 8 thereto; PROVIDED, HOWEVER, that claims for
indemnification in respect of Breaches relating to the Environment, ERISA and
Taxes representations and warranties may be made until six (6) years after
the Economic Closing Date and indemnification for claims against title to the
Shares or the Merger Consideration shall survive without expiration, but all
other claims for indemnification for Breaches of this Agreement must be made
within eighteen (18) months after the Economic Closing Date. Stockholder has
the option of performing, at its expense, in a safe manner not disrupting
Surviving Corporation's operations, Environment remediation for any
indemnified claim that is related to the Environment.
8.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY STOCKHOLDER.
(a) Stockholder will indemnify and hold harmless I/O, I/O Marine,
and their respective Representatives, stockholders, controlling persons, and
affiliates (collectively, the "I/O Indemnified Persons") for, and will pay to
the I/O Indemnified Persons the amount of Adverse Consequences, arising,
directly or indirectly, from or in connection with (i) any Breach of any
representation, warranty or covenant made by DigiCourse or Stockholder in
this Agreement other than the performance of DigiCourse with respect to
post-Closing covenants, the Disclosure Letter, or any other certificate or
document delivered by Stockholder at the Closing pursuant to this Agreement
and (ii) the Yardney lithium batteries that were incorporated into DigiCourse
products and any litigation of claims in connection therewith (the "Yardney
Litigation").
(b) The amount of Adverse Consequences payable by the Stockholder
pursuant to this Section 8.2 will not exceed $30,000,000 in the aggregate,
except for claims to rights in the Shares which shall not be subject to any
ceiling amount.
(c) I/O Indemnified Persons shall not be entitled to assert any
claim for indemnification under this Section 8.2 unless and until such time
as all claims of I/O Indemnified Persons for indemnification exceed
$1,000,000 in the aggregate, at which time any and all claims of I/O for
indemnification may be asserted.
8.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY I/O.
(a) I/O and I/O Marine will, jointly and severally, indemnify and
hold harmless Stockholder and Stockholder's Representatives ("Stockholder
Indemnified Persons"), and will
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pay to Stockholder Indemnified Persons, the amount of any Adverse
Consequences arising, directly or indirectly, from or in connection with (i)
any Breach of any representation or warranty made by I/O or I/O Marine in
this Agreement or in any certificate delivered by I/O or I/O Marine pursuant
to this Agreement, (ii) any Breach by I/O or I/O Marine of any covenant or
obligation of I/O or I/O Marine in this Agreement, (iii) any post-Closing
performance obligations of the Surviving Corporation required by this
Agreement, or (iv) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with I/O (or any Person acting on
its behalf) in connection with any of the Contemplated Transactions.
(b) Stockholder Indemnified Persons shall not be entitled to assert
any claim for indemnification under this Section 8.3 unless and until such
time as all claims of Stockholder Indemnified Persons for indemnification
exceed $1,000,000 in the aggregate, at which time any and all claims of
Stockholder Indemnified Persons for indemnification may be asserted.
(c) The amount of Adverse Consequences payable pursuant to this
Section 8.3 by I/O and/or I/O Marine will exceed not $30,000,000 in the
aggregate, except for claims to rights in the I/O Common Stock delivered to
Stockholder under this Agreement, which shall not be subject to any ceiling
amount.
8.4 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
(a) Promptly after receipt by a I/O Indemnified Person or
Stockholder Indemnified Person ("Indemnified Person") under Section 8.2 or
Section 8.3 of notice of the commencement of any Proceeding against it, such
Indemnified Person will, if a claim is to be made against an indemnifying
party under such Section, give notice to the indemnifying party of the
commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to
any Indemnified Person, except to the extent that the indemnifying party
demonstrates that the defense of such action is prejudiced by the Indemnified
Person's failure to give such notice, or the notice is outside the time
limitations of Section 8.1.
(b) If any Proceeding referred to in Section 8.4(a) is brought
against an Indemnified Person and the Indemnified Person gives timely notice
to the indemnifying party of the commencement of such Proceeding, the
indemnifying party will be entitled to participate in such Proceeding and, to
the extent that it wishes to assume the defense of such Proceeding with
counsel satisfactory to the Indemnified Person and, after notice from the
indemnifying party to the Indemnified Person of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the Indemnified Person under
this Section 8 for any fees of other counsel or any other expenses with
respect to the defense of such Proceeding, in each case subsequently incurred
by the Indemnified Person in connection with the defense of such Proceeding,
other than reasonable costs of investigation. If the indemnifying party
assumes the defense of a Proceeding, (i) no compromise or settlement of such
claims may be effected by the indemnifying party without the Indemnified
Person's consent unless (A) there is no finding or admission of any violation
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of Legal Requirements or any violation of the rights of any Person and no
effect on any other claims that may be made against the Indemnified Person,
and (B) the sole relief provided is monetary damages that are paid in full by
the indemnifying party; and (ii) the Indemnified Person will have no
liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of
the commencement of any Proceeding and the indemnifying party does not,
within thirty days after the Indemnified Person's notice is given, give
notice to the Indemnified Person of its election to assume the defense of
such Proceeding, the indemnifying party will be bound by any determination
made in such Proceeding or any compromise or settlement effected by the
Indemnified Person.
(c) Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
Indemnified Person may, by notice to the indemnifying party, assume the
exclusive right to defend, compromise, or settle such Proceeding, but the
indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which
may not be unreasonably withheld).
8.5 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be
asserted by notice to the party from whom indemnification is sought within
the Section 8.1 time limits.
8.6 CALCULATION OF ADVERSE CONSEQUENCES. The parties shall make
appropriate adjustments for tax benefits and insurance coverage and shall
take into account the time cost of money in determining the amount of
indemnified Adverse Consequences. Indemnified Adverse Consequences will be
without duplication with respect to Stockholder Indemnified Persons, on one
hand, and I/O Indemnified Persons, on the other hand.
8.7 KNOWLEDGE LIMITATION. If I/O had Knowledge, prior to Closing,
of facts that would give rise to a Breach by Stockholder, DigiCourse or
Limited of a representation, warranty or covenant upon Closing, then
Stockholder shall have no duty to indemnify that specific claim of Adverse
Consequences, except to the extent that Stockholder, DigiCourse or Limited
also had Knowledge, a duty to disclose under this Agreement and failed to
disclose these facts.
If Stockholder or DigiCourse had Knowledge, prior to closing, of facts
that would give rise to a Breach by I/O or I/O Marine of a representation,
warranty or covenant upon Closing, then I/O and I/O Marine shall have no duty
to indemnify that specific claim of Adverse Consequences except to the extent
that I/O also had Knowledge, a duty to disclose under this Agreement, and
failed to disclose these facts.
If a party has Knowledge of any Breach of another party's
representations and warranties given in this Agreement prior to Closing, the
party with Knowledge shall, prior to Closing, give notice to the potentially
breaching party of those facts.
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8.8 EXCLUSIVE REMEDY. Following the Closing, except as
specifically excluded from Section 8 elsewhere in this Agreement, the
indemnification provisions in this Section 8 are the sole and exclusive
remedy (except for any injunctive remedy that may be available) any party may
have for Breach of representation, warranty or covenant of the Agreement or
any other matters provided for in this Agreement.
8.9 NO THIRD PARTY BENEFICIARIES. The foregoing indemnification is
given solely for the purpose of protecting the parties to this Agreement and
the Indemnified Persons and shall not be deemed extended to, or interpreted
in a manner to confer any benefit, right or cause of action upon, any other
Person.
9. GENERAL PROVISIONS
9.1 EXPENSES. Each of Stockholder and I/O will bear its respective
expenses incurred in connection with the preparation, execution, and
performance of this Agreement and the Contemplated Transactions, including
all fees and expenses of agents, representatives, counsel, and accountants.
I/O will pay all amounts payable to Schnitzius & Vaughan in connection with
this Agreement and the Contemplated Transactions. Stockholder will pay all
fees payable to NationsBanc Montgomery Securities, LLP and to counsel and
accountants to DigiCourse and to Stockholder with respect to legal,
financial, accounting or other professional services in connection with this
Agreement and the Contemplated Transactions. Stockholder will cause
DigiCourse not to incur any out-of-pocket expenses in connection with this
Agreement.
9.2 PUBLIC ANNOUNCEMENTS. Except under Legal Requirements, no
information concerning Stockholder will be publicized by I/O without
Stockholder's prior consent, which consent shall not be unreasonably
withheld. Any public announcement or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at all, at such
time and in such manner as I/O determines with 24 hour advance written notice
to Stockholder, giving Stockholder an opportunity to review the proposed
release, subject to Legal Requirements deadlines. Unless consented to by I/O
in advance or required by Legal Requirements, prior to the Closing,
Stockholder shall use reasonable efforts, and shall cause DigiCourse to use
reasonable efforts, to keep this Agreement strictly confidential and may not
make any disclosure of this Agreement to any Person. Stockholder and I/O will
consult with each other concerning the means by which DigiCourse's employees,
customers, and suppliers and others having dealings with DigiCourse will be
informed of the Contemplated Transactions, and I/O will have the right to be
present for any such communication.
9.3 CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, the parties will maintain in confidence, and will cause their
directors, officers, employees, agents, and advisors to maintain in
confidence, and not use to the detriment, except as contemplated by this
Agreement, of another party hereto any written, oral, or other information
obtained in confidence from such other party in connection with this
Agreement or the Contemplated Transactions, unless (a) such information is
already known to such party (other than through delivery by the proprietor
party in connection with the Contemplated Transactions) or to others
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not bound by a duty of confidentiality or such information becomes publicly
available through no fault of such party, (b) the use of such information is
necessary or required in making any filing or obtaining any consent or
approval required for the consummation of the Contemplated Transactions, or
(c) the furnishing or use of such information is required by an Order in
connection with legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
request.
Whether the Closing takes place, each party waives any cause of
action, right, or claim arising out of the access of a recipient party or its
representatives to any trade secrets or other confidential information of the
disclosing party except for the intentional competitive misuse by the
recipient party of such trade secrets or confidential information.
9.4 NOTICES. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested,
or (c) when received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such
other addresses and telecopier numbers as a party may designate by notice to
the other parties):
STOCKHOLDER:
The Laitram Corporation
220 Laitram Lane
Harahan, La. 70123
Attn: General Counsel
Facsimile No.: (504) 734-5233
I/O:
Input/Output, Inc.
11104 West Airport Boulevard, Suite 200
Stafford, Texas 77477
Attn: General Counsel
Facsimile No.: (281) 879-3649
9.5 FURTHER ASSURANCES. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things,
all as another party may reasonably request for the
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purpose of carrying out the intent of this Agreement and the documents
referred to in this Agreement.
9.6 WAIVER. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any
delay by any party in exercising any right, power, or privilege under this
Agreement or the documents referred to in this Agreement will operate as a
waiver of such right, power, or privilege, and no single or partial exercise
of any such right, power, or privilege will preclude any other or further
exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable
law, (a) no waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (b) no notice to or demand
on one party will be deemed to be a waiver of any obligation of such party or
of the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement or the documents
referred to in this Agreement.
9.7 ENTIRE AGREEMENT AND MODIFICATION. Except for the existing
confidentiality agreement between the parties dated June 4, 1998, this
Agreement supersedes all prior agreements between the parties with respect to
its subject matter and constitutes (along with the documents referred to in
this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the
parties. There are no representations or warranties of the parties given
with respect to the Contemplated Transactions except for those expressly
given in this Agreement, and any and all implied representations or
warranties are expressly disclaimed.
9.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD PARTY RIGHTS. No party
may assign any of its rights under this Agreement without the prior consent
of the other parties, which will not be unreasonably withheld. Subject to
the preceding sentence, this Agreement will apply to, be binding in all
respects upon, and inure to the benefit of the successors and permitted
assigns of the parties. Nothing expressed or referred to in this Agreement
will be construed to give any Person other than the parties to this Agreement
any legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their permitted successors and assigns.
9.9 SEVERABILITY. If any court of competent jurisdiction holds any
provision of this Agreement, or any agreement provided for by this Agreement,
invalid or unenforceable, the unaffected provisions of this Agreement or that
agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
9.10 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in
this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections"
refer to the corresponding Section or Sections of this
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Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
9.11 TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
9.12 GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OF
THE STATE OF DELAWARE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
9.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
9.14 DISPUTE RESOLUTION. If a disagreement under this Agreement
arises between Stockholder and I/O, prior to sending a formal demand letter
from counsel or demanding arbitration, Stockholder and I/O will seek in good
faith to resolve the dispute. Resolution will not be considered
unachieveable until the matter has been turned over to an executive officer
of Stockholder and I/O respectively, and they are unable to resolve the
matter. Unreasonable delay on the part of an officer to attend to a dispute
will indicate that agreement is unachieveable. Resolution between
Stockholder and I/O in a dispute may include disposition of the matter,
agreement to submit the dispute to arbitration, or agreement upon another
conciliatory method of resolution. All parties agree to submit to mandatory
and binding arbitration under American Arbitration Association Rules of
Commercial Arbitration (i) any disputes not resolved in accordance with the
foregoing procedure of Section 9.14 or (ii) if KPMG fails to determine the
Economic Closing Net Working Capital within sixty (60) days after the
Economic Closing Date. Arbitration under (i) will be before three
arbitrators. Arbitration under (ii) will be held before a single arbitrator
who must be a CPA. Arbitration will take place in a location or locations
specified by the arbitrators.
9.15 CONSTRUCTION. All parties participated in drafting this
Agreement. The rule of constructing contracts against the drafting party
shall have no application to this Agreement.
9.16 NO RAIDING OF EMPLOYEES. Without prior written approval from
I/O, Stockholder and Stockholder Affiliates will not, for a period of six
months after Closing, employ an employee of any of I/O or the I/O Affiliates.
Thereafter, without prior written approval from I/O, for a period of an
additional 18 months, Stockholder and Stockholder Affiliates will not (a)
solicit for employment an employee of I/O or I/O Affiliates (other than by
normal and customary advertising and recruiting procedures) or (b) employ any
of the persons listed on Exhibit 9.16A. Without prior written approval of
Stockholder, I/O and I/O Affiliates will not, for a period of six months
after Closing, employ an employee of any of Stockholder or Stockholder
Affiliates. Thereafter, without prior written approval of Stockholder, for a
period of an additional 18 months, I/O and I/O Affiliates will not (a)
solicit for employment an employee of Stockholder
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or the Stockholder Affiliates (other than by normal and customary advertising
and recruitment procedures) or (b) employ any of the persons listed on
Exhibit 9.16B.
9.17 DISCLOSURE LETTERS. The disclosures in the Disclosure Letter,
and those in any supplement thereto, shall expressly refer to a Section of
this Agreement; provided, however, that disclosures in the Disclosure Letter
expressly referring to a Section of this Agreement may incorporate by
reference the disclosures in any other Section of the Disclosure Letter by
express reference to that other Section or if the facts and circumstances
clearly apply the disclosure to another Section. Stockholder shall deliver
to I/O a Supplement to Stockholder's Disclosure Letter promptly after
Stockholder becomes aware of any event which changes any representation or
warranty made by Stockholder in this Agreement or any statement made in
Stockholder's Disclosure Letter or in any Supplement. Closing will not occur
until two days after delivery of a Supplement.
9.18 SHARE ADJUSTMENTS. The I/O shares constituting the Merger
Consideration will be equitably adjusted for any stock dividends, splits or
any distributions to I/O stockholders with a record date prior to the
Effective Time.
9.19 TAX PROCEDURES. Tax Procedures are contained in the attached
Exhibit 9.19.
9.20 INVESTIGATIONS.
(a) Between the date of this Agreement and the Closing, (i)
Stockholder, DigiCourse and Limited shall give to I/O and its advisors such
access to the premises, books and records of DigiCourse and Limited and cause
the officers, employees and accountants of DigiCourse and Limited to furnish
such financial and operating data and other information with respect to
DigiCourse and Limited as I/O shall from time to time reasonably request; and
(ii) I/O shall give to Stockholder such access to the premises, books and
records of I/O and cause the officers, employees and accountants of I/O to
furnish such financial and operating data and other information with respect
to I/O as Stockholder shall from time to time reasonably request.
(b) In connection with the Contemplated Transactions, in addition
to, and not by way of limitation of, any other obligations of the parties
under or pursuant to any other agreement, whether written or oral, with
Stockholder or any other obligations of I/O at law or in equity, all
confidential information furnished to another party will be kept confidential
by the recipient party's Representatives prior to the Closing Date, or in the
event the Closing does not occur, for a period of five (5) years following
termination of this Agreement. During such time, the recipient will hold and
will cause its Representatives to hold in strict confidence, unless compelled
to disclose by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law, all confidential documents and
information in connection with the Transaction (with prior notice given to
the parties whose information is to be disclosed).
9.21 TERMINATION OF THIS AGREEMENT. The parties may terminate this
Agreement as provided below:
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(a) Stockholder and I/O may terminate this Agreement by mutual
written consent at any time prior to the Closing.
(b) Stockholder may terminate this Agreement upon a material Breach
of any representation, warranty, covenant or agreement on the part of I/O or
I/O Marine set forth in this Agreement, or if any representation or warranty
of I/O or I/O Marine shall have become untrue, in either case such that the
conditions set forth in Section 7 would be incapable of being satisfied by
November 30, 1998, unless I/O and Stockholder extend the time period by
written mutual consent.
(c) I/O may terminate this Agreement upon a material Breach of any
representation, warranty, covenant or agreement on the part of the
Stockholder or DigiCourse as set forth in this Agreement, or if any
representation or warranty of the Stockholder or DigiCourse shall have become
untrue, in either case such that the conditions set forth in Section 6 herein
would be incapable of being satisfied by November 30, 1998, unless I/O and
Stockholder extend the time period by written mutual consent.
(d) I/O or Stockholder may terminate this Agreement if there shall
be any Order preventing the consummation of the Contemplated Transactions,
except if the party relying on such Order to terminate this Agreement has not
complied with its obligations under this Agreement.
(e) Either I/O or Stockholder may terminate this Agreement, if the
Exhibits to this Agreement have not been agreed upon, and attached to this
Agreement, by the parties by October 15, 1998, or if the Closing shall not
have been consummated before November 30, 1998.
(f) Stockholder may terminate this Agreement during the five (5)
calendar days following delivery to Stockholder of the Private Placement
Memorandum.
(g) I/O may terminate this Agreement during the five (5) calendar
days following delivery of the Disclosure Letter or two (2) calendar days
following delivery of any Supplement to the Disclosure Letter.
9.22 EFFECT OF TERMINATION. If any party terminates this Agreement
pursuant to Section 9.21, all rights and obligations of the parties hereunder
shall terminate without any liability, under any theory, of one party to any
other party; and Sections 9.1, 9.3, 9.4, 9.6 through 9.16 and 9.22 shall
survive termination of this Agreement.
9.23 EFFORTS TO CONSUMMATE. Each party shall use its Reasonable
Efforts to cause the conditions of the obligations of the parties contained
in this Agreement to be satisfied to the extent that the satisfaction of such
conditions can be controlled or influenced by that party or its Affiliates.
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9.24 EMPLOYEE MATTERS. DigiCourse employees who are employed by
DigiCourse immediately before the Effective Time will remain employees of the
Surviving Corporation, subject to all employment policies of I/O.
9.25 DIGICOURSE BENEFIT PLANS. Provisions concerning the
disposition of accounts in Plans in which DigiCourse employees participated
prior to the Closing are contained in the Transfer Plan.
9.26 RECORDS.
(a) Following Closing, Surviving Corporation shall give to
Stockholder free and unrestricted access to (and the right to make copies at
the expense of Stockholder) of DigiCourse pre-Closing records held by the
Surviving Corporation, but any access pursuant to this Section 9.26 shall be
conducted in such manner as not to interfere unreasonably with the operations
of the Surviving Corporation.
(b) Following the Effective Time of Closing, Stockholder shall give
to Surviving Corporation free and unrestricted access to (and the right to
make copies at the expense of Surviving Corporation) DigiCourse's pre-Closing
records held by Stockholder, but any access pursuant to this Section 9.26
shall be conducted in such manner as not to interfere unreasonably with the
operations of the business of Stockholder.
(c) Any access to Records pursuant to this Section shall be subject
to the confidentiality obligations stated in Section 9.3.
9.27 RECORDS RETENTION. I/O agrees to cause the Surviving
Corporation, for a period of eight (8) years after the Closing, to preserve,
retain and permit access to and copying by the Stockholder, and its
representatives, of all pre-Closing books, records, accounts, purchase
orders, invoices and other material documents of or relating to DigiCourse
together with all minute books, seals, share certificate, share ledgers and
other corporate records and material of DigiCourse held by Surviving
Corporation.
9.28 CONDUCT OF BUSINESS. Until the earlier of (i) the Effective
Time or (ii) termination of this Agreement, each party will conduct its
business only in the Ordinary Course of Business.
9.29 CERTAIN ACTIONS. Stockholder and DigiCourse shall have no
obligation to consummate the Contemplated Transactions unless and until the
I/O Board of Directors approves the following provision: Prior to February
1, 1999, I/O will not, without the written consent of Stockholder, take any
action in furtherance of I/O being acquired by any Person (an "Acquisition")
except an action that is required by Legal Requirements (other than under
Contracts) of any Governmental Body. I/O warrants and represents to
Stockholder that I/O, its Board of Directors, management, or Representatives
are not engaged in discussions with any Person concerning an Acquisition.
Since January 1, 1998, I/O has taken no action in
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furtherance of an Acquisition.
9.30 EXHIBITS. References in this Agreement to Exhibits shall mean
and refer to those Exhibits (except those Exhibits which are attached hereto)
to be agreed upon by the parties and attached hereto and made a part hereof
on or prior to October 15, 1998. The parties shall use Reasonable Efforts to
complete the Exhibits prior to October 15, 1998.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above:
DIGICOURSE, INC. I/O MARINE, INC.
a Louisiana Corporation a Louisiana Corporation
By: /s/ ROY KELM By: /s/ W. J. ZERINGUE
------------------------------- ---------------------------
Director Director
By: /s/ BARRY L. LACOUR By: /s/ AXEL M. SIGMAR
------------------------------- ---------------------------
Director Director
By: /s/ JAMES M. LAPEYRE, JR.
-------------------------------
Director
By: /s/ LAWRENCE P. OERTLING
-------------------------------
Director
By: /s/ ROBBERT VORHOFF
-------------------------------
Director
THE LAITRAM CORPORATION INPUT/OUTPUT, INC.
a Louisiana Corporation a Delaware Corporation
By: /s/ JAMES M. LAPEYRE, JR. By: /s/ W. J. ZERINGUE
------------------------------- ---------------------------
James M. Lapeyre, Jr., Chairman W. J. Zeringue, Chairman
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CERTIFICATE OF SECRETARIES
The undersigned Secretary of DigiCourse, Inc., a Louisiana
corporation, and the undersigned Secretary of I/O Marine, Inc., a Louisiana
corporation, each hereby certify with respect to the corporation of which
they serve in such capacity that this Agreement has been approved by the sole
shareholder of such corporation in the manner required by law.
Dated: September 30, 1998 /s/ LAWRENCE P. OERTLING
-------------------------------------
Lawrence P. Oertling, Secretary
DigiCourse, Inc.
a Louisiana Corporation
Dated: September 30, 1998 /s/ CHRIS E. WOLFE
-------------------------------------
Chris E. Wolfe, Secretary
I/O Marine, Inc.
a Louisiana Corporation
Pursuant to Section 112 of the Louisiana Business Corporation Law, the
undersigned corporations have caused this Agreement and Plan of Merger to be
executed by their respective presidents.
Dated: September 30, 1998 DIGICOURSE, INC.
By: /s/ ROY KELM
----------------------------------
Name: Roy Kelm
Title: President
Dated: September 30, 1998 I/O MARINE, INC.
By: /s/ AXEL M. SIGMAR
----------------------------------
Name: Axel M. Sigmar
Title: President
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ACKNOWLEDGMENT
STATE OF TEXAS
COUNTY OF HARRIS
BE IT KNOWN, that on this 1st day of October, 1998, before me, the
undersigned Notary, duly commissioned, qualified and sworn within and for the
State and County aforesaid, personally came and appeared Axel M. Sigmar,
appearing herein in his capacity as the President of I/O Marine, Inc., to me
personally known to be the identical person whose name is subscribed to the
foregoing instrument as the said officer of the said corporation, and
declared and acknowledged to me, Notary, in the presence of the undersigned
competent witnesses, that he executed the same on behalf of the said
corporation with full authority of its Board of Directors, and that the said
instrument is the free act and deed of the said corporation and was executed
for the uses, purposes and benefits therein expressed.
WITNESS 1: PRESIDENT:
/s/ CHRIS E. WOLFE /s/ AXEL M. SIGMAR
- ------------------------- -------------------------
Axel M. Sigmar
WITNESS 2:
/s/ TERRY M. PRUITT
- -------------------------
/s/ MICHELLE LYLES
- -------------------------
NOTARY PUBLIC
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ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF JEFFERSON
BE IT KNOWN, that on this 1st of October, 1998, before me, the
undersigned Notary, duly commissioned, qualified and sworn within and for the
State and Parish aforesaid, personally came and appeared Roy Kelm, appearing
herein in his capacity as the President of DigiCourse, Inc., to me personally
known to be the identical person whose name is subscribed to the foregoing
instrument as the said officer of the said corporation, and declared and
acknowledged to me, Notary, in the presence of the undersigned competent
witnesses, that he executed the same on behalf of the said corporation with
full authority of its Board of Directors, and that the said instrument is the
free act and deed of the said corporation and was executed for the uses,
purposes and benefits therein expressed.
WITNESSES: PRESIDENT:
/s/ DEBORAH T. PRYPOLATO /s/ ROY KELM
- ------------------------- -------------------------
Roy Kelm
/s/ MARY T. BECENL
- -------------------------
/s/ FRED F. ZEPHER
- -------------------------
NOTARY PUBLIC
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is made and entered into
as of November 16, 1998, by and between Input/Output, Inc., a Delaware
corporation ("I/O" or the "Company"), and The Laitram Corporation, a Louisiana
corporation ("Stockholder"). I/O and Stockholder are each a "party" and
together the "parties" to this Agreement.
RECITALS
Stockholder, I/O, I/O Marine, Inc., a Louisiana corporation and
wholly-owned subsidiary of I/O ("I/O Marine"), and DigiCourse, Inc., a
Louisiana corporation ("DigiCourse") and wholly-owned subsidiary of
Stockholder have entered into an Agreement and Plan of Merger dated as of
September 30, 1998 ("Merger Agreement"), pursuant to which I/O Marine has
been merged with and into DigiCourse and 100% of the issued and outstanding
capital stock of DigiCourse has been converted into shares of I/O's common
stock, par value $0.01 per share (the "Common Stock").
As a result of the consummation of the transactions contemplated by the
Merger Agreement, the Stockholder owns 5,794,000 shares of Common Stock
("Shares").
I/O wishes to grant the Stockholder certain registration rights in the
Shares.
NOW, THEREFORE, in consideration of the mutual promises and covenants that
follow, the parties agree as follows:
1. CERTAIN DEFINITIONS. Terms used in this Agreement shall have the following
meanings:
"COMMISSION" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"REGISTRABLE SECURITIES" means (i) the Shares and any and all shares
of Common Stock issued or issuable at any time or from time to time in
respect of which I/O has previously or may in the future grant in writing
registration rights (collectively, the "Registrable Common"); and (ii) any
Common Stock issued or issuable at any time or from time to time in respect
of the Shares or the Registrable Common upon a stock split, stock dividend,
recapitalization or other similar event involving I/O; PROVIDED, HOWEVER,
that shares of Common Stock which are Registrable Securities shall cease to
be Registrable Securities upon any sale pursuant to a Registration
Statement, Section 4(1) of the Securities Act or
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Rule 144 under the Securities Act, or any sale in any manner to a person
or entity which, by virtue of Section 3.2 of this Agreement, is not
entitled to the rights provided by this Agreement.
The terms "REGISTER," "REGISTERED", and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering by the
Commission of the effectiveness of such registration statement.
"REGISTRATION EXPENSES" means all expenses, other than Selling
Expenses (as defined below), incurred by I/O in complying with Section 2 of
this Agreement, but excluding the compensation of regular employees of I/O
which shall be paid in any event by I/O.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations promulgated by the
Commission, all as in effect at the time.
"SELLING EXPENSES" means only the underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities
registered by the Stockholder and all fees and disbursements of counsel for
the Stockholder.
"STOCKHOLDER" means The Laitram Corporation and any transferee
pursuant to the terms of Section 3.2.
"UNDERWRITTEN PUBLIC OFFERING" means a public offering in which the
Common Stock is offered and sold on a firm commitment basis through one or
more underwriters, all pursuant to an underwriting agreement to which I/O
and the underwriters, among others, are parties.
2. REGISTRATION RIGHTS.
2.1 PIGGYBACK REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time during the term of this
Agreement, I/O registers any of its Common Stock for its own account or for
the account of any other stockholders relating to an Underwritten Public
Offering, I/O shall:
(i) promptly, but in any event at least twenty (20) days before
I/O files a registration statement pursuant to an Underwritten Public
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Offering, give to the Stockholder written notice; and
(ii) subject to Section 2.9 hereof, include in such registration
(and any related blue sky laws qualification) the Registrable
Securities as the Stockholder requests in a writing delivered to I/O
within (ten) 10 days after receipt of I/O's written notice delivered
pursuant to Section 2.1(a)(i) above. I/O shall have no obligation to
include in the registration any Registrable Securities of the
Stockholder from whom a written request was not timely received.
Notwithstanding the forgoing to the contrary, in the event that the
Stockholder requests inclusion of Registrable Securities in an
Underwritten Public Offering prepared by I/O for the account of
another stockholder, I/O shall only have the obligation to include
such Registerable Securities, if any, as I/O shall have the right
(contractual or otherwise) to include in such Underwritten Public
Offering.
(b) RIGHT TO TERMINATE REGISTRATION. I/O shall have the right to
terminate or withdraw any registration initiated by I/O under this Section
2.1 prior to the effectiveness of the registration whether the Stockholder
has elected to include its Registrable Securities in the registration;
PROVIDED, HOWEVER, that in such event, I/O shall promptly pay all
reasonable out-of-pocket costs and expenses of the Stockholder incurred in
connection with the terminated registration.
2.2 DEMAND REGISTRATIONS. At any time from and after the effective date
of this Agreement and during the term of this Agreement, the Stockholder may
make up to two written requests for registration under the Securities Act,
pursuant to this Section 2.2 of all or part of its Registrable Securities (each
a "Demand Registration"). Each such request will specify the number of shares
of Registrable Securities proposed to be sold and will also specify the intended
method of disposition thereof. The Company shall not be required to effect more
than two Demand Registrations pursuant to this Section 2.2, and each such Demand
Registration shall not be made for less than one million (1,000,000) shares of
Registrable Securities. If a registration has become effective but is withdrawn
before completion of the offering contemplated thereby, then such registration
shall not count as either of the Demand Registrations contemplated by this
Section 2.2.
(a) UNDERWRITTEN PUBLIC OFFERING. If a Demand Registration is in the
form of an underwritten offering, the Stockholder shall select the
underwriter for such offering subject to the approval of the Company (which
approval shall not be unreasonably withheld), and the Company shall enter
into an underwriting agreement with such underwriter containing
representations, warranties,
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indemnities and agreements then customarily included by an issuer in
underwriting agreements with respect to secondary distributions. The
Company shall not cause the registration under the Securities Act of any
other shares of its Common Stock to become effective (other than
registration of an employee stock plan, or registration in connection
with any Rule 145 or similar transaction) during the effectiveness of a
registration requested hereunder for an underwritten public offering if,
in the judgment of the underwriter or underwriters, such registration
would adversely affect the offering of the Registrable Securities
subject to the Demand Registration.
(b) INCLUSION OF ADDITIONAL SHARES. The Company may include in a
registration pursuant to this Section 2.2 securities for its own account or
for the account of other third parties (including officers and employees of
the Company), in amounts as determined by the Company's Board of Directors
("Additional Shares") so long as the inclusion thereof does not in any way
exclude or otherwise impair the rights of the Stockholder who has requested
registration pursuant to Section 2.2 above to include in such registration
all Registrable Securities so requested. Notwithstanding any other
provision of this Agreement to the contrary, if the underwriter managing
the offering determines that, because of marketing factors, all of the
Registrable Securities and Additional Shares requested to be registered may
not be included in the offering, then all or a portion of the Additional
Shares shall be excluded to the extent so required by such limitation,
prior to the exclusion, if any, of Registrable Securities of the
Stockholder. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriters may round the number of
shares allocated to any person to the nearest 100 shares.
2.3 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with registrations pursuant to (i) Section 2.1 piggyback
registrations shall be borne by I/O, and (ii) Section 2.2 demand registrations
shall be borne by the Stockholder. All Selling Expenses relating to securities
registered on behalf of the Stockholder pursuant to Sections 2.1 and 2.2 shall
be borne by the Stockholder.
2.4 I/O'S OBLIGATIONS IN REGISTRATION. Whenever the Stockholder has
requested that any Registrable Securities be registered pursuant to this
Agreement, the Company will use its reasonable best efforts to effect the
registration and the sale of such Registrable Securities under the Securities
Act, as provided herein, and as expeditiously as possible:
(a) prepare and file with the Commission as soon as practicable but in no
event later than sixty (60) days after receipt of a request to file a
registration statement with
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respect to Registrable Securities, a registration statement on any form for
which the Company then qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the sale of such issue of
Registrable Securities in accordance with the intended method of distribution
thereof, and use its best efforts to cause such registration statement to
become effective as promptly as practicable thereafter; PROVIDED, that if the
Company shall furnish to the Stockholders a certificate signed by the Chief
Executive Officer of the Company stating that in the good faith reasonable
judgment of the Board of Directors it would be significantly disadvantageous
to the Company and its stockholders for such a registration statement to be
filed on or before the date filing would be required or to become effective,
the Company shall have an additional period of not more than one-hundred
fifty (150) days within which to file (or before which it requests the
effectiveness of) such registration statement; and PROVIDED, FURTHER, that
before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company will (i) furnish to counsel selected by each
seller of Registrable Securities copies of all such documents proposed to be
filed and (ii) notify each seller of Registrable Securities of any stop order
issued or threatened by the Commission and take all actions required to
prevent the entry of such stop order or to remove it if entered;
(b) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective (and such
prospectus current as required by the Securities Act) for a period of not less
than 80 days or such shorter period which will terminate when all Registrable
Securities covered by such registration statement have been sold (but not before
the expiration of the applicable period referred to in Section 4(3) of the
Securities Act and Rule 174 thereunder, if applicable), and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) furnish to each seller of Registrable Securities to be included in a
registration statement copies of such registration statement as filed and each
amendment and supplement thereto (in each case including all exhibits thereto),
the prospectus included in such registration statement (including each
preliminary prospectus) and each amendment and supplement thereto and such other
documents as such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
(d) use its reasonable best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller
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reasonably requests and do any and all other acts and things which may be
necessary or advisable to enable such seller to consummate the disposition in
such jurisdictions of the Registrable Securities owned by such seller;
PROVIDED, that the Company will not be required to (i) qualify generally to
do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 2.4(d), (ii) subject itself to taxation in any
such jurisdiction or (iii) consent to general service of process in any such
jurisdiction, but the Company will be required to consent to service of
process in actions arising out of or in connection with the sale of the
Registrable Securities or any violation of state securities laws;
(e) use its reasonable best efforts to cause the Registrable Securities
covered by such registration statement to be registered with or approved by any
other governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the seller or sellers thereof
to consummate the disposition of such Registrable Securities;
(f) enter into customary agreements (including an underwriting agreement
in customary form) and take such other actions as are required in order to
expedite or facilitate the disposition of such Registrable Securities; and
(g) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed, provided that the applicable listing requirements are satisfied.
The Company may require each seller of Registrable Securities as to which
any registration is being effected to furnish to the Company such information
regarding matters relating to such seller's Registrable Securities as are
customary and as the Company may from time to time reasonably request in
writing.
In addition, the management of I/O will, without unduly interfering with
the business and operations of I/O, cooperate to a commercially reasonable
degree in connection with any Stockholder request that Registrable Securities be
registered pursuant to this Agreement, including customary "road show"
presentations.
2.5 INDEMNIFICATION.
(a) To the extent permitted by law, I/O will indemnify and hold
harmless Stockholder, each of its directors and officers and each person
who controls Stockholder within the meaning of Section 15 of the Securities
Act, with respect to registration, qualification or compliance which has
been effected pursuant to this Agreement, against all expenses, claims,
losses, actions, damages
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or liabilities to the extent to which each such person is subject,
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, to the extent such expenses, claims, losses,
damages or liabilities (or proceedings in respect thereof) arise out of
or are based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus,
offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance,
or arise out of or are based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by I/O of the
Securities Act or any rule or regulation promulgated under the
Securities Act applicable to I/O in connection with any such
registration, qualification or compliance, and I/O will reimburse the
indemnified persons, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any
such claim, loss, damage, liability or action, PROVIDED, HOWEVER, that
the indemnity contained herein shall not apply to amounts paid in
settlement of any claim, loss, damage, liability or expense if
settlement is effected without the consent of I/O (which consent shall
not unreasonably be withheld); PROVIDED, FURTHER, that I/O will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement
or omission or alleged untrue statement or omission, made in reliance
upon and in conformity with information furnished to I/O expressly for
inclusion in such registration by the Stockholder. Notwithstanding the
foregoing, insofar as the foregoing indemnity relates to any such untrue
statement (or alleged untrue statement) or omission (or alleged
omission) made in the preliminary prospectus but eliminated or remedied
in the amended prospectus on file with the Commission at the time the
registration statement becomes effective or in the final prospectus
filed with the Commission pursuant to the applicable rules of the
Commission or in any supplement or addendum thereto, the indemnity
agreement herein shall not inure to the benefit of Stockholder if a copy
of the final prospectus filed pursuant to such rules, together with all
supplements and addenda thereto, was not furnished to the person or
entity asserting the loss, liability, claim or damage at or prior to the
time such furnishing is required by the Securities Act.
(b) To the extent permitted by law, the Stockholder will, if
securities held by the Stockholder are included in the securities as to
which the registration, qualification or compliance is being effected
pursuant to the terms of this Agreement, indemnify and hold harmless I/O,
each of its directors and officers, each person who controls I/O within the
meaning of Section 15 of the Securities Act, and each other person selling
I/O's securities covered by such registration
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<PAGE>
statement, each of such person's officers and directors and each person
controlling such persons within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or
actions in respect thereof) to the extent to which such person or entity
is subject, arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or arising
out of or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by the Stockholder
of any rule or regulation promulgated under the Securities Act
applicable to the Stockholder and relating to action or inaction
required of the Stockholder in connection with any such registration,
qualification or compliance, and will reimburse I/O, such other persons,
such directors, officers, persons or control persons for any legal or
other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each
case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made
in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with information furnished
to I/O by the Stockholder expressly for inclusion in such registration;
PROVIDED, HOWEVER, that the indemnity contained herein shall not apply
to amounts paid in settlement of any claim, loss, damage, liability or
expense if settlement is effected without the consent of the Stockholder
(which consent shall not be unreasonably withheld). Notwithstanding the
foregoing, the liability of the Stockholder under this subsection (b)
shall be limited in an amount equal to the net proceeds from the sale of
the Shares sold by the Stockholder, unless such liability arises out of
or is based on intentional misconduct or an intentional omission by the
Stockholder, in which case such limitation shall not apply.
(c) Each party entitled to indemnification under this Section 2.5
(the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any action or proceeding
commenced against, or written demand made on any such party in respect of
which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting therefrom,
provided that counsel for the Indemnifying Party, who shall conduct the
defense of such claim or litigation, shall be approved by the Indemnified
Party (whose approval shall not unreasonably be withheld), and the
Indemnified Party may participate in such defense at such party's expense,
and provided further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the
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Indemnifying Party of its obligations under this Agreement unless the
failure to give such notice is materially prejudicial to an Indemnifying
Party's ability to defend such action and provided further, that the
Indemnifying Party shall not assume the defense for matters as to which
there is a conflict of interest or as to which the Indemnifying Party is
asserting separate or different defenses, which defenses are
inconsistent with the defenses of the Indemnified Party. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except
with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such
claim or litigation. No Indemnified Party shall consent to entry of any
judgment or enter into any settlement without the consent of each
Indemnifying Party.
(d) If the indemnification provided for in this Section 2.5 is
unavailable to an Indemnified Party in respect of any otherwise indemnified
losses, claims, damages or liabilities, then each Indemnifying Party, in
lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to
reflect the relative fault of I/O on the one hand and the Stockholder on
the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative fault of I/O on the one hand and the
Stockholder on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of material fact or
the omission or alleged omission to state a material fact relates to
information supplied by I/O or by the Stockholder and the parties' relevant
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. I/O and the Stockholder agree that it
would not be just and equitable if contribution pursuant to this Section
2.5(d) were based solely upon the number of entities from whom contribution
was requested or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section
2.5(d). The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to above in this
Section 2.5(d) shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim, subject to the
provisions of Section 2.5(c) hereof. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act).
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2.6 CERTAIN INFORMATION. The Stockholder agrees, with respect to any
Registrable Securities included in any registration, to furnish to I/O that
information regarding the Stockholder, the Registrable Securities and the
distribution proposed by the Stockholder as I/O may reasonably request in
writing and as shall be required in connection with any registration,
qualification or compliance.
2.7 "LOCK-UP" AGREEMENT. With respect to any registration under Section
2.1, the Stockholder, if requested by I/O and/or the managing underwriter of
Common Stock or other securities of I/O, shall agree not to sell or otherwise
transfer or dispose of any Registrable Securities or other securities of I/O
held by the Stockholder within 14 days prior to, and for a specified period of
time (not to exceed 120 days) following, the effective date of a registration
statement. Such agreement shall be in writing in a form reasonably satisfactory
to the Stockholder, I/O and such underwriter. I/O may impose stop transfer
instructions with respect to the Registrable Securities or other securities
subject to the foregoing restriction until the end of the lock-up period.
2.8 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities ("Restricted Securities" is defined for
purposes of this Agreement as defined in Rule 144 under the Securities Act) to
the public without registration, I/O agrees, during the term of this Agreement,
to use its best lawful efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times
during which I/O is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act");
(b) File with the Commission in a timely manner all reports and other
documents required of I/O under the Securities Act and the Exchange Act (at
all times during which I/O is subject to such reporting requirements); and
(c) So long as the Stockholder owns any Restricted Securities, to
furnish to the Stockholder upon request a written statement by I/O as to
its compliance with the reporting requirements of Rule 144 and with regard
to the Securities Exchange Act of 1934 (at all times during which I/O is
subject to such reporting requirements), a copy of the most recent annual
or quarterly report of I/O, and such other reports and documents of I/O and
other information in the possession of or reasonably obtainable by I/O as
the Stockholder may reasonably request in availing itself of any rule or
regulation of the Commission allowing the Stockholder to sell securities
without registration.
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2.9 UNDERWRITING. The right of the Stockholder to registration under this
Agreement under Section 2.1 shall be conditioned upon the Stockholder's
participation in the underwriting. The inclusion of Stockholder's Registrable
Securities in the underwriting may be limited. The Stockholder shall (together
with I/O and the other holders distributing their securities through the
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter(s) selected for the underwriting by I/O. If the managing
underwriter(s) determines that marketing factors require a limitation of the
number of shares to be underwritten, the managing underwriter(s) may limit some
or all of the Registrable Securities that may be included in the registration
and underwriting as follows: the number of Registrable Securities that may be
included in the registration and underwriting by the Stockholder shall be
determined by multiplying the number of shares of Registrable Securities of all
selling stockholders of I/O which the managing underwriter(s) is willing to
include in the registration and underwriting, times a fraction, the numerator of
which is the number of Registrable Securities requested to be included in the
registration and underwriting by the Stockholder, and the denominator of which
is the total number of Registrable Securities which all selling stockholders of
I/O have requested to have included in the registration and underwriting. I/O
may round the number of shares allocable to any such person to the nearest 100
shares.
3. MISCELLANEOUS.
3.1 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS BY THE
INTERNAL LAWS OF THE STATE OF DELAWARE.
3.2 NO TRANSFER; TERMINATION. These registration rights are not
transferable, except by operation of law, and shall not inure to the benefit of
any person other than the Stockholder; PROVIDED, HOWEVER, that the Stockholder
may transfer the registration rights granted hereunder or any portion thereof to
any transferee who (i) holds 1,000,000 or more Registerable Securities after
giving effect to such transaction and (ii) agrees to be bound by the terms and
conditions of this Agreement and signs an addendum to this agreement to such
effect. After such a transfer, both the Stockholder and each such transferee
shall be entitled to the notice provided in Section 2.1 and the piggyback rights
provided in Section 2, including piggyback rights upon the registration of
Registrable Securities as a result of a Demand Registration pursuant to Section
2.2. The rights and provisions of this Agreement shall terminate on the
earliest to occur of (i) such time as the Stockholder remains an "affiliate" of
the Company under Rule 144 and can sell its remaining Registrable Securities
under Rule 144 within any three (3) month period or (ii) such time as the
Stockholder ceases to be an "affiliate" of the Company under Rule 144 and all of
its Registrable Securities may be sold pursuant to
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Rule 144(k) under the Securities Act.
3.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
Agreement's subject matter. Any provision of this Agreement may be amended,
waived, discharged or terminated only upon the written consent of I/O and
Stockholder.
3.4 NOTICES. All notices or other communications which are required or
may be given under this Agreement shall be in writing and shall be deemed to
have been duly given when delivered in person, transmitted by telecopier and
confirmed, or mailed by registered or certified first class mail, postage
prepaid, return receipt requested to the parties hereto at the address set forth
below (as the same may be changed from time to time by notice similarly given)
or the last known business or residence address of such other person as may be
designated by either party hereto in writing.
If to the Stockholder:
The Laitram Corporation
220 Laitram Lane
Harahan, La. 70123
Attention: General Counsel
If to I/O:
Input/Output, Inc.
11104 West Airport Blvd., Suite 200
Stafford, Texas 77477
Attention: General Counsel
3.5 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any party to this
Agreement shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies either under this Agreement or by law or otherwise afforded to any
party to this Agreement, shall be cumulative and not alternative.
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3.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
3.7 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
3.8 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not considered in construing or
interpreting this Agreement.
3.9 NO THIRD PARTY RIGHTS. Except as otherwise provided in Sections 2.5
and 3.2, this Agreement shall not create benefits on behalf of any Person who is
not a party to this Agreement, and this Agreement shall be effective only as
between the parties hereto, their successors and permitted assigns.
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IN WITNESS WHEREOF, the undersigned or each of their respective duly
authorized officers or representatives have executed this agreement effective
upon the date first set forth above.
INPUT/OUTPUT, INC.
By: /s/ ZEKE ZERINGUE
------------------------------------
Zeke Zeringue, Chairman
THE LAITRAM CORPORATION
By: /s/ JAMES M. LAPEYRE, JR.
------------------------------------
James M. Lapeyre, Jr., Chairman
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