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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Input/Output, Inc.
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(Name of the Issuer)
Common Stock, par value $.01 per share
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(Title of Class of Securities)
457652105
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(CUSIP Number)
SCF-IV, L.P.
600 Travis, Suite 6600
Houston, Texas 77002
Attention: David C. Baldwin
(713) 227-7888
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
April 21, 1999
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(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box. [ ]
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1 NAMES OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
SCF-IV, L.P.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
OO
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER 7 SOLE VOTING POWER
OF
SHARES 5,000,000*
BENEFICIALLY ----------------------------------------------------
OWNED 8 SHARED VOTING POWER
BY None
EACH ----------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 5,000,000*
----------------------------------------------------
10 SHARED DISPOSITIVE POWER
None
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,000,000*
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12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [X]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.0%**
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14 TYPE OF REPORTING PERSON
PN
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* Represents shares of common stock issuable upon conversion of the
40,000 shares of Series B Preferred that the reporting person has
agreed to purchase from the Issuer pursuant to the Purchase
Agreement dated April 21, 1999 described herein, based on the
$8.00 fixed conversion price described herein. No assurance can
be given that the closing under such Purchase Agreement will
occur. Such shares of Series B Preferred Stock will not be
convertible into common stock until the earlier of the third
anniversary of the issuance of such shares or certain change of
control events, and as such the reporting person disclaims
beneficial ownership of such shares of common stock. The amount
indicated excludes an indeterminate number of additional shares
that may be acquired on conversion of the Series B Preferred
Stock if such shares are converted based on the market price
based conversion provisions rather than the fixed conversion
price, as described herein, or in respect of accrued and unpaid
dividends. The amount indicated also does not include shares of
common stock that may be acquired upon conversion of an
additional 15,000 shares of Series C Preferred Stock
(substantially similar to the Series B Preferred Stock except for
the conversion price), which the reporting person has an option
to purchase pursuant to the Purchase Agreement as described
herein, as the conversion price for such shares is not yet fixed.
** Based on information provided by the Issuer as of April 21, 1999.
2
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1 NAMES OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
SCF-IV, G.P., Limited Partnership
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
AF
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER 7 SOLE VOTING POWER
OF
SHARES 5,000,000*
BENEFICIALLY ----------------------------------------------------
OWNED 8 SHARED VOTING POWER
BY None
EACH ----------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 5,000,000*
----------------------------------------------------
10 SHARED DISPOSITIVE POWER
None
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,000,000*
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12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [X]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.0%**
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14 TYPE OF REPORTING PERSON
PN
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* Represents shares of common stock issuable upon conversion of the
40,000 shares of Series B Preferred that the reporting person has
agreed to purchase from the Issuer pursuant to the Purchase
Agreement dated April 21, 1999 described herein, based on the
$8.00 fixed conversion price described herein. No assurance can
be given that the closing under such Purchase Agreement will
occur. Such shares of Series B Preferred Stock will not be
convertible into common stock until the earlier of the third
anniversary of the issuance of such shares or certain change of
control events, and as such the reporting person disclaims
beneficial ownership of such shares of common stock. The amount
indicated excludes an indeterminate number of additional shares
that may be acquired on conversion of the Series B Preferred
Stock if such shares are converted based on the market price
based conversion provisions rather than the fixed conversion
price, as described herein, or in respect of accrued and unpaid
dividends. The amount indicated also does not include shares of
common stock that may be acquired upon conversion of an
additional 15,000 shares of Series C Preferred Stock
(substantially similar to the Series B Preferred Stock except for
the conversion price), which the reporting person has an option
to purchase pursuant to the Purchase Agreement as described
herein, as the conversion price for such shares is not yet fixed.
** Based on information provided by the Issuer as of April 21, 1999.
3
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1 NAMES OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
L.E. Simmons & Associates, Incorporated
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
AF
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER 7 SOLE VOTING POWER
OF
SHARES 5,000,000*
BENEFICIALLY ----------------------------------------------------
OWNED 8 SHARED VOTING POWER
BY None
EACH ----------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 5,000,000*
----------------------------------------------------
10 SHARED DISPOSITIVE POWER
None
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,000,000*
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12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [X]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.0%**
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14 TYPE OF REPORTING PERSON
CO
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* Represents shares of common stock issuable upon conversion of the
40,000 shares of Series B Preferred that the reporting person has
agreed to purchase from the Issuer pursuant to the Purchase
Agreement dated April 21, 1999 described herein, based on the
$8.00 fixed conversion price described herein. No assurance can
be given that the closing under such Purchase Agreement will
occur. Such shares of Series B Preferred Stock will not be
convertible into common stock until the earlier of the third
anniversary of the issuance of such shares or certain change of
control events, and as such the reporting person disclaims
beneficial ownership of such shares of common stock. The amount
indicated excludes an indeterminate number of additional shares
that may be acquired on conversion of the Series B Preferred
Stock if such shares are converted based on the market price
based conversion provisions rather than the fixed conversion
price, as described herein, or in respect of accrued and unpaid
dividends. The amount indicated also does not include shares of
common stock that may be acquired upon conversion of an
additional 15,000 shares of Series C Preferred Stock
(substantially similar to the Series B Preferred Stock except for
the conversion price), which the reporting person has an option
to purchase pursuant to the Purchase Agreement as described
herein, as the conversion price for such shares is not yet fixed.
** Based on information provided by the Issuer as of April 21, 1999.
4
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1 NAMES OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
L.E. Simmons
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
AF
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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NUMBER 7 SOLE VOTING POWER
OF
SHARES 5,000,000*
BENEFICIALLY ----------------------------------------------------
OWNED 8 SHARED VOTING POWER
BY None
EACH ----------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 5,000,000*
----------------------------------------------------
10 SHARED DISPOSITIVE POWER
None
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,000,000*
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12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [X]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.0%**
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14 TYPE OF REPORTING PERSON
IN
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* Represents shares of common stock issuable upon conversion of the
40,000 shares of Series B Preferred that the reporting person has
agreed to purchase from the Issuer pursuant to the Purchase
Agreement dated April 21, 1999 described herein, based on the
$8.00 fixed conversion price described herein. No assurance can
be given that the closing under such Purchase Agreement will
occur. Such shares of Series B Preferred Stock will not be
convertible into common stock until the earlier of the third
anniversary of the issuance of such shares or certain change of
control events, and as such the reporting person disclaims
beneficial ownership of such shares of common stock. The amount
indicated excludes an indeterminate number of additional shares
that may be acquired on conversion of the Series B Preferred
Stock if such shares are converted based on the market price
based conversion provisions rather than the fixed conversion
price, as described herein, or in respect of accrued and unpaid
dividends. The amount indicated also does not include shares of
common stock that may be acquired upon conversion of an
additional 15,000 shares of Series C Preferred Stock
(substantially similar to the Series B Preferred Stock except for
the conversion price), which the reporting person has an option
to purchase pursuant to the Purchase Agreement as described
herein, as the conversion price for such shares is not yet fixed.
** Based on information provided by the Issuer as of April 21, 1999.
5
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ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D relates to the common stock, par value
$.01 per share (the "Common Stock"), of Input/Output, Inc. a Delaware
corporation (the "Issuer"). The address of the principal executive offices of
the Issuer is 11104 West Airport Blvd., Stafford, Texas, 77477.
ITEM 2. IDENTITY AND BACKGROUND.
This statement is filed jointly by SCF-IV, L.P., SCF-IV G.P., Limited
Partnership, L.E. Simmons & Associates, Incorporated, and L.E. Simmons,
individually (collectively, the "Reporting Persons").
SCF-IV, L.P. is a limited partnership organized under the laws of the
State of Delaware ("SCF- IV"). SCF-IV's principal business is to invest in the
capital stock and other securities of entities engaged in the oil field service
and equipment industry (including new corporations or other entities formed to
purchase the assets of existing businesses). The limited partners of SCF-IV are
U.S. and foreign institutional investors, including certain tax exempt
entities. The address of the principal office of SCF-IV is 600 Travis, 6600
Chase Tower, Houston, Texas 77002-3007.
SCF-IV, G.P., Limited Partnership, a limited partnership organized
under the laws of the State of Delaware ("SCF-IV GP"), is the sole general
partner of SCF-IV and has the same principal office address as SCF-IV. The
principal business of SCF-IV GP is to acquire, own, sell and exchange
partnership interests in SCF-IV.
L.E. Simmons & Associates, Incorporated, a corporation organized under
the laws of the State of Delaware ("Simmons & Associates"), is the sole general
partner of SCF-IV G.P. The address of the principal office of Simmons &
Associates is the same as SCF-IV. The principal business of Simmons & Associates
is to seek and manage equity and similar investments in companies in the energy
services industry. The directors of Simmons & Associates are Russell Hawkins and
L.E. Simmons, who is also its President and sole stockholder. Mr. Simmons and
Mr. Hawkins are both citizens of the United States. Mr. Simmons' principal
business address is the same as SCF-IV. Mr. Hawkins' principal business address
is Two Houston Center, Suite 2907, Houston, Texas 77010. Mr. Simmons' and Mr.
Simmons' principal business is financial consulting.
During the last five years, none of the foregoing parties has been (i)
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to such
laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On April 21, 1999, SCF-IV and the Issuer entered into a Purchase
Agreement (the "Purchase Agreement") pursuant to which SCF-IV has agreed to
purchase from the Issuer 40,000 shares of Series B preferred stock, par value
$.01 per share (the "Series B Preferred Stock" or "the Initial Shares"), of the
Issuer, and the Issuer has granted to SCF-IV an option to purchase up to 15,000
additional shares of Series C preferred stock, par value $.01 per share (the
"Series C Preferred Stock" or the "Option
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Shares," and together with the Series B Preferred Stock, the "Shares"), of the
Issuer. The consideration to be paid by SCF-IV for the Initial Shares and
Option Shares is $40,000,000 and up to $15,000,000, respectively. SCF-IV will
obtain such consideration from its limited partners in the form of capital
contributions.
The Shares are convertible into Common Stock in certain circumstances.
Pursuant to the Purchase Agreement, the Issuer has agreed to enter into a
Registration Rights Agreement with SCF-IV at the closing of SCF-IV's purchase
of the Series B Preferred Stock. Subject to the satisfaction or waiver of the
conditions of the parties to effect the transactions contemplated by the
Purchase Agreement, the closing related to SCF-IV's purchase of the Initial
Shares (the "Initial Closing") will occur on the later of May 7, 1999, or the
third business day following the satisfaction or waiver of the conditions
contained in the Purchase Agreement, or on such other date as the parties
mutually agree (the "Initial Closing Date").
A more complete description of the Purchase Agreement, the Shares, the
Registration Rights Agreement and related matters are provided below in
response to Item 4.
ITEM 4. PURPOSE OF TRANSACTION.
The Purchase Agreement described in Item 3 above pursuant to which
SCF-IV has agreed to purchase the Series B Preferred Stock and has been granted
an option to purchase the Series C Preferred Stock resulted from negotiations
with the Issuer. The Shares, if acquired by SCF-IV, will be held for investment
purposes. If SCF-IV acquires the Shares, SCF-IV intends to review its
investment in the Issuer on a continuing basis and, depending upon the price
of, and other market conditions relating to, the Common Stock of the Issuer,
subsequent developments affecting the Issuer, the Issuer's business and
prospects, other investment and business opportunities available to SCF-IV,
general stock market and economic conditions, tax considerations and other
factors deemed relevant, SCF-IV may decide to increase or decrease the size of
its investment in the Issuer, subject to the terms of the Purchase Agreement.
The Purchase Agreement, the forms of Certificates of Designation
relating to the Series B Preferred Stock and the Series C Preferred Stock, and
the form of Registration Rights Agreement, are each incorporated by reference
as exhibits to this statement on Schedule 13D and incorporated herein by
reference, and the following summaries of the terms of such agreements or
instruments are qualified by reference to the actual agreements or instruments.
PURCHASE AGREEMENT.
General. As described in response to Item 3, SCF-IV has agreed to
purchase 40,000 shares of Series B Preferred Stock, subject to satisfaction of
certain customary closing conditions.
Option to Purchase Series C Preferred Stock. Following the Initial
Closing Date and within ninety days thereof (the "Option Period"), SCF-IV may,
at its sole option, deliver a written notice of
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its intention to purchase up to 15,000 shares of the Series C Preferred Stock
(the "Exercise Notice"). The purchase price payable for the Option Shares will
be $1,000 per share.
Board Representation. Pursuant to the Purchase Agreement, the Issuer
has agreed to use its best efforts to take, or cause to be taken, such action
as may be necessary or advisable to ensure that immediately following the later
of (i) the Initial Closing and (ii) the expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), the Issuer's Board of Directors will
be increased by one (if necessary) and an individual designated by SCF-IV will
be elected as a director of the Company in accordance with the terms of the
Shares as described below.
Anti-Takeover Provisions. In connection with the Purchase Agreement,
the Issuer has amended its Rights Agreement with Harris Trust and Savings Bank
as rights agent dated as of January 17, 1997, as amended to date (the "Rights
Plan"), to provide that neither SCF-IV nor any of its affiliates will be deemed
to be an Acquiring Person within the meaning of the Rights Plan by reason of
the transactions contemplated by the Purchase Agreement. The Issuer has agreed
that it will not further amend the Rights Plan, or adopt any similar agreement,
that conflicts with, or restricts SCF-IV to a greater extent than the
provisions contained in the Purchase Agreement. In addition, the Board of
Directors of the Issuer has duly approved SCF-IV and its affiliates becoming an
"interested stockholder" within the meaning of Section 203 of the Delaware
General Corporation Law (the "DGCL") and a "Related Person" within the meaning
of Article THIRTEENTH of the Issuer's Certificate of Incorporation by reason of
the acquisition by SCF-IV or any of its affiliates of (i) the Shares, (ii) any
shares issued to SCF-IV upon conversion of the Shares (the "Underlying
Shares"), (iii) any shares of Common Stock permitted to be acquired by SCF-IV
or any of its affiliates in accordance with the limitation set forth in
standstill agreement between the Issuer and SCF-IV (discussed below) or (iv)
any other securities (including shares of Common Stock issuable upon
conversion, exercise or exchange thereof pursuant to their terms) received by
SCF-IV or its affiliates pursuant to the Purchase Agreement (the "Share
Acquisitions"), and has otherwise taken all action necessary to exempt the
Share Acquisitions from the application of Section 203 of the DGCL, Article
THIRTEENTH of the Certificate of Incorporation, or any similar anti-takeover
provisions of law or otherwise that could adversely affect the rights of SCF-IV
or its affiliates with respect to their ownership of securities acquired by
means of such Share Acquisitions.
Restrictions on Transfer. In the Purchase Agreement, SCF-IV has agreed
that, without the prior written consent of the Issuer, it will not sell or
otherwise transfer any of the Shares to any other person or entity other than a
partner of SCF-IV, who, in any event, shall agree to be bound by the transfer
restrictions contained in the Purchase Agreement. SCF-IV has also agreed that,
without the prior written consent of the Issuer, it will not, prior to the
earlier of (i) the seventh anniversary of the Initial Closing, or (ii) the
occurrence of a Change of Control (defined as (i) an agreement providing for a
Business Combination (defined below) is approved by the Board of Directors of
the Issuer or a Business Combination is consummated, (ii) a Tender Offer for
Common Stock is approved or recommended by the Board of Directors of the Issuer
or (iii) there is a redemption, repurchase or reacquisition by the Company of
rights issued pursuant to the Rights Plan or any waiver of the
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application of the Rights Plan to any beneficial owner other than SCF-IV or its
affiliates except in the case of this clause (iii) as approved by SCF-IV's
representative to the Board of Directors of the Issuer), sell or otherwise
transfer the Underlying Shares in a single transaction or series of related
transactions involving a number of shares in the aggregate constituting in
excess of 1% of the Issuer's issued and outstanding shares of Common Stock at
the time of such sale or transfer (based on the Issuer's most recent report
filed with the Securities Exchange Commission under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), prior to such sale or transfer
disclosing such number of outstanding shares) to any entity which SCF-IV knows
competes to a material extent with the Issuer or is engaged to a material
extent in the energy services or equipment business, without first offering
such shares to the Issuer on the same terms and in the manner set forth in the
Purchase Agreement (subject to certain exceptions relating to an underwritten
public offering).
Limitation on Issuance of Parity Securities; Right of First Refusal or
Exchange. The Issuer has agreed that, from and after the date of the Purchase
Agreement, it will not issue any Permitted Parity Securities (as defined
below), except for (i) the issuance of the Option Shares to SCF-IV or its
affiliate pursuant to the Purchase Agreement, or (ii) the issuance of a number
of shares of Permitted Parity Securities issued at a price of $1,000 cash per
share in a single series within eighteen months of the Initial Closing equal to
35,000 less the number of Option Shares purchased under the Purchase Agreement
(or, if the Option Period shall not yet have expired, less the full 15,000
Option Shares); provided that if such Permitted Parity Securities are issued
after the first anniversary of the Initial Closing, then SCF-IV will be
entitled to prior written notice of such proposed issuance and the terms
thereof and shall have a right of first refusal option to purchase any or all
of such securities on the same terms as offered to the proposed purchaser.
The Issuer agrees that if it issues any Permitted Parity Securities
(other than Option Shares) pursuant to the foregoing that have terms that
SCF-IV reasonably believes to be more favorable to the purchaser of such shares
than the terms of the Initial Shares, then SCF-IV shall have the right to
exchange all of the Shares purchased under the Purchase Agreement (or, if such
issuance occurs prior to the expiration of the Option Period and the Option
Closing has not occurred, all of the Shares that may be purchased under the
Purchase Agreement if SCF-IV agrees to pay the applicable purchase price
therefor upon such exchange) on a share for share basis.
Standstill Agreement. By executing the Purchase Agreement, SCF-IV has
agreed that, for a period commencing on the date of the Purchase Agreement and
ending on the earlier of the third anniversary of the Initial Closing or the
occurrence of a Change of Control, it will not:
(a) directly or indirectly, take any action to acquire, in the
aggregate, beneficial ownership of more than 4% of the Issuer's outstanding
Common Stock or voting stock (based on the Issuer's most recent Exchange Act
report filed with the SEC prior to such acquisition disclosing such number of
outstanding shares), excluding from such ownership the Initial Shares and
Option Shares or the Underlying Shares or any other Common Stock or voting
stock acquired directly from the Issuer;
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(b) form or encourage the formation of a "group" within the meaning of
Section 13(d)(3) of the Exchange Act, to acquire, change or influence control
of the Issuer;
(c) solicit, or participate in any "solicitation" of "proxies" or
become a "participant" in any "election contest" or consent solicitation (as
such terms are defined or used under Regulation 14A under the Exchange Act)
with respect to the Issuer in opposition to the recommendation of a majority of
the Board of Directors of the Issuer;
(d) initiate, propose or otherwise solicit stockholders for the
approval of, one or more stockholder proposals with respect to the Issuer or
induce any person to initiate any stockholder proposal, in each case in
opposition to the recommendation of a majority of the Board of Directors of the
Issuer;
(e) deposit any voting stock in a voting trust or subject them to a
voting agreement or other agreement or arrangement with respect to the voting
of such voting stock, other than any such trust, agreement or other arrangement
involving no persons other than SCF-IV, its partners or affiliates; or
(f) solicit, propose or negotiate with any other person (including the
Issuer) with respect to any form of business combination or other extraordinary
transaction with the Issuer or any of its subsidiaries, in each case which
would result in a Change of Control, or solicit, make or propose or negotiate
with any other person with respect to or announce an intent to make, any tender
offer or exchange offer for any securities of the Issuer, in each case in
opposition to the recommendation of a majority of the Board of Directors of the
Issuer, or publicly disclose an intent, purpose, plan or proposal with respect
to the Issuer, any of its subsidiaries, or any securities or assets of the
Issuer, that would violate the provisions of this paragraph (f);
provided, however, that nothing in the foregoing paragraphs (a)-(f) shall be
deemed to limit in any way (i) the right of SCF-IV to exercise its voting
rights in any manner it sees fit with respect to the Shares, the Underlying
Shares or any other shares of voting stock acquired by SCF-IV in accordance
with the Purchase Agreement, or (ii) the right of any director elected to the
Board of Directors as a representative of the holders of the Shares to take any
action he believes necessary to fulfill his fiduciary duties.
Indemnification. The Company has agreed to indemnify SCF-IV and its
affiliates and hold SCF-IV and its affiliates harmless from and against any and
all liabilities, losses, damages, costs and expenses of any kind, which may be
incurred by SCF-IV or such affiliates as a result of any claims made against
SCF-IV or such affiliates by any person that relate to or arise out of (i) any
breach by the Issuer of any of its representations, warranties or covenants
contained in the Purchase Agreement or in the agreements related thereto, or
(ii) any litigation, investigation or proceeding instituted by any person with
respect to the Purchase Agreement or the Shares or the Underlying Shares
(excluding, however, any such litigation, investigation or proceeding which
arises solely from the acts or omissions of SCF-IV or its affiliates).
Notwithstanding anything to the contrary above, the Issuer will
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not be responsible for or assume any of the investment risk associated with any
securities purchased under the Purchase Agreement.
SERIES B PREFERRED STOCK.
General. The holders of Series B Preferred Stock are entitled to
receive cumulative cash dividends of $10.00 per annum (1% of the liquidation
preference) for each share of Series B Preferred Stock. The Series B Preferred
Stock is entitled to a liquidation preference of $1,000.00, plus all accrued
but unpaid dividends.
Conversion Rights. The Series B Preferred Stock is convertible at the
holder's option after the first to occur of any of the following (the "Initial
Conversion Date"): (i) the third anniversary of the original date of issuance
of such shares (the "Issue Date"), (ii) the approval by the Board of Directors
of the Issuer of an agreement relating to a Business Combination or the
consummation of a Business Combination, (iii) a tender offer for Common Stock
is approved or recommended by the Board of Directors of the Issuer or (iv) the
redemption, repurchase or reacquisition by the Issuer of rights issued pursuant
to the Rights Plan or any waiver of the application of the Rights Plan to any
beneficial owner other than SCF-IV or its affiliates (except as approved by
SCF-IV's representative on the Board of Directors of the Issuer). After the
Initial Conversion Date and prior to the Mandatory Conversion Date (defined
below), the holders of Series B Preferred Stock will be entitled to convert any
and all shares of Series B Preferred Stock into a number of fully paid and
nonassessable shares of Common Stock per share equal to the greater of the
following (such amount being referred to as the "Conversion Ratio"):
(a) $1,000.00 (plus any accrued and unpaid dividends through the
record date for determining shareholders entitled to vote) divided by the
Conversion Price of $8.00 (as adjusted from time to time in accordance with the
anti-dilution provisions in the Series B Preferred Stock's Certificate of
Designation) or
(b) $1,000.00 increased at an annual rate of eight percent from the
Issue Date, compounded quarterly, less the amount of cash dividends actually
paid through the applicable conversion date (the "Adjusted Stated Value"),
divided by the average market price for the Common Stock during the ten trading
day period prior to the date of conversion (the "Conversion Ratio").
A "Business Combination" means (i) any consolidation or merger of the
Issuer with or into any person or (ii) any Change of Control Stock Issuance
(defined below), or (iii) the sale, assignment conveyance, transfer, lease or
other disposition by the Issuer of all or substantially all of its assets
followed by a liquidation of the Issuer. A "Change of Control Stock Issuance"
generally means any issuance, in a single transaction or series of related
transactions, by the Issuer of shares of Common Stock or Common Stock
equivalents in connection with the acquisition of assets (including cash) or
securities by the Issuer or a subsidiary of the Issuer (including by way of a
merger of a subsidiary of the Issuer with or into a person), except where (i)
the shareholders of the Issuer immediately prior to such issuance own (in
substantially the same proportion relative to each other as such shareholders
owned the Common Stock or voting stock of the Issuer, as the case may be,
immediately prior to such
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consummation) (x) more than 50% of the voting stock of the Issuer immediately
after such issuance, and (y) more than 50% of the outstanding Common Stock
immediately after such issuance, (ii) the members of the Board of Directors of
the Issuer immediately prior to entering into the agreement relating to such
issuance (or if no such agreement is entered into, then immediately prior to
the consummation of such issuance) constitute at least a majority of the Board
of Directors of the Issuer immediately after such issuance, with no agreements
or arrangements in place immediately after such consummation that would result
in the members of the Board of Directors of the Issuer immediately prior to the
entering into the agreement relating to such issuance ceasing to constitute at
least a majority of the Board of Directors of the Issuer and (iii) no person or
group of persons immediately after such issuance is the beneficial owner of 40%
or more of the total outstanding voting stock of the Issuer or Common Stock.
Mandatory Conversion. On the fifth anniversary of the Issue Date (the
"Mandatory Conversion Date"), each outstanding share of Series B Preferred
Stock shall, without any action on the part of the holder, be converted
automatically into a number of fully paid and nonassessable shares of Common
Stock equal to the Conversion Ratio, provided the Shelf Registration Statement
(discussed below) contemplated by the Registration Rights Agreement is then in
effect.
Cash Redemption Option in Certain Circumstances. In the event of a
conversion of Series B Preferred Stock pursuant to which the Conversion Ratio
is determined using clause (b) above, then, provided that full cumulative
dividends have been paid or declared and set apart for payment upon all
outstanding shares of Series B Preferred Stock for all past dividend periods,
the Issuer may redeem for cash up to 50% (or such greater percentage as the
holders shall agree) of the shares of Series B Preferred Stock submitted for
conversion at a redemption price per share equal to the Adjusted Stated Value
(a "Redemption Offer"), in lieu of effecting such conversion.
New York Stock Exchange Limitation. If the Issuer ever issues Common
Stock upon conversion of the Series B Preferred Stock pursuant to which the
Conversion Ratio is calculated pursuant to clause (b) of the definition of
Conversion Ratio above the Issuer shall not be obligated to issue, in the
aggregate, a number of shares of Common Stock in excess of the NYSE Limitation
upon conversion of the Series B Preferred Stock. The "NYSE Limitation" shall
mean the maximum number of shares of Common Stock that could be issued by the
Issuer pursuant to the conversion of the Series B Preferred Stock and any
substantially similar series of Permitted Parity Securities issued to the
holder (including any Series C Preferred Stock) pursuant to the terms of the
Purchase Agreement without triggering a requirement to obtain the approval of
the Company's shareholders of such issuance pursuant to Section 312.03(c) of
the New York Stock Exchange Listed Company Manual as in effect on the Issue
Date. To the extent that any shares of Series B Preferred Stock are submitted
for conversion such that the NYSE Limitation would be exceeded, such excess
shares shall, in lieu of being converted into Common Stock, be redeemed in
exchange for a cash payment equal to the Adjusted Stated Value per share.
Voting Rights. Following the expiration or earlier termination of the
applicable waiting period under the HSR Act (the "HSR Expiration Date"),
holders of the Series B Preferred Stock will be
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entitled to vote upon all matters upon which the holders of Common Stock are
entitled to vote. The holders of Series B Preferred Stock, when voting together
with the Common Stock as a single class, will be entitled to cast a number of
votes equal to $1,000.00 (plus any accrued and unpaid dividends through the
record date for determining shareholders entitled to vote) divided by the
conversion price of $8.00 (as adjusted from time to time in accordance with the
Series B Preferred Stock's Certificate of Designation).
After the HSR Expiration Date, the holders of Series B Preferred
Stock, voting together with Permitted Parity Securities (which are defined as
up to 35,000 shares of preferred stock (including any Series C Preferred Stock
issued pursuant to the Purchase Agreement), each share of which (i) has a
liquidation preference of not more than $1,000 per share, (ii) has a dividend
rate of not more than one percent per annum, (iii) has no more than one vote
per share with respect to matters on which it votes together with the Series B
Preferred Stock and (iv) is pari passu with the Series B Preferred Stock with
respect to the payment of dividends and distributions upon liquidation) as a
separate class with one vote per share of Series B Preferred Stock, shall be
entitled to elect one member of the Board of Directors of the Issuer.
The consent of the holders of a majority of the Series B Preferred
Stock, voting together with Permitted Parity Securities as a single class with
one vote per share, will be necessary to (i) amend, alter or repeal the Series
B Preferred Stock Certificate of Designation to authorize, create or issue
parity securities (other than Permitted Parity Securities) or senior
securities, (ii) issue any parity or senior securities (other than Permitted
Parity Securities) or (iii) consummate any Business Combination. Further, the
consent of the holders of at least a majority of the Series B Preferred Stock,
voting separately as a single class with one vote per share, will be necessary
to amend, alter or repeal any of the provisions of (i) the Series B Preferred
Stock Certificate of Designation or any certificate of designation relating to
any parity securities, or (ii) the Certificate of Incorporation of the Issuer,
so as to adversely affect any of the rights, preferences or privileges of the
holders of Series B Preferred Stock.
SERIES C PREFERRED STOCK. The Series C Preferred Stock, if issued,
will have substantially the same terms as the Series B Preferred Stock, except
for the determination of the Conversion Price. The Conversion Price for the
Series C Preferred Stock will be equal to 125% of the average market price for
the ten trading days ending on and including the trading day prior to the date
on which SCF-IV notifies the Issuer that it wishes to exercise its option to
purchase some or all of the Series C Preferred Stock; provided, however, that
if such average is less than $4.80, then the initial Conversion Price shall be
$6.00 and if such average is higher than $6.80, the initial Conversion Price
shall be $8.50, subject to certain anti-dilution adjustments.
REGISTRATION RIGHTS AGREEMENT. Pursuant to the Purchase Agreement, the
Issuer has agreed to enter into a Registration Rights Agreement at the Initial
Closing.
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The Registration Rights Agreement will entitle the holder or holders
of at least 25% of the then outstanding Registerable Securities (which subject
to certain limitations means the Underlying Shares and any other securities
issued or issuable with respect to the Underlying Shares) to, at any time on or
after the earlier of (i) the Initial Conversion Date or (ii) the date sixty
days prior to the third anniversary of the date of the initial issuance of the
Series B Preferred Stock, request a registration of the Issuer of any or all of
SCF-IV's Registerable Securities (a "Demand Registration"); provided, however,
that the number of Registerable Securities to be included in such a Demand
Registration must be at least 1,000,000 or such lesser number of Registerable
Securities as have an aggregate market price of at least $10,000,000 as of the
date of such request. The holders of Registerable Securities will be entitled to
request an aggregate of two Demand Registrations. The Registration Rights
Agreement also entitles the holders of Registerable Securities the right to have
such securities registered whenever the Issuer proposes to register any
securities under the Securities Act of 1933, as amended, (a "Piggyback
Registration"). As contemplated by the Registration Rights Agreement, the
ability of the holders of Registerable Securities to participate in Piggyback
Registration will depend on the individual circumstances and the nature of the
offering at issue. The Registration Rights Agreement obligates the Issuer to
file a shelf registration statement (the "Shelf Registration Statement")
relating to all of the Registerable Securities prior to the Mandatory Conversion
Date and to cause such Shelf Registration Statement to remain in effect for one
year (subject to certain suspension rights). The expenses of the holders of
Registerable Securities included in a Demand Registration will be borne by the
holders of Registerable Securities; the expenses of holders of Registerable
Securities included in a Piggyback Registration or the Shelf Registration will
be borne by the Issuer.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) and (b). Based upon information provided by the Issuer, 50,499,898
shares of Common Stock were issued and outstanding as of April 21, 1999. SCF-IV
may be deemed to beneficially own 5,000,000 shares of Common Stock based on its
right to acquire the 40,000 shares of Series B Preferred Stock pursuant to the
Purchase Agreement. The 5,000,000 shares of Common Stock represent shares
issuable to SCF-IV upon conversion of the Initial Shares based on the $8.00
fixed conversion price described above under the heading "Conversion Rights" in
response to Item 4. Such 5,000,000 shares of Common Stock would constitute
approximately 9.0% of the issued and outstanding Common Stock of the Issuer.
This amount excludes (i) an indeterminate number of additional shares of Common
Stock that may be acquired by SCF-IV upon conversion of the Initial Shares
pursuant to market price based conversions discussed under the heading
"Conversion Rights" above in response to Item 4, or in respect of accrued and
unpaid dividends and (ii) shares of Common Stock that may be acquired upon the
conversion of the Option Shares, since the conversion price for such shares has
not been established.
SCF-IV G.P. does not directly own any securities of the Issuer, but,
because it is the sole general partner of SCF-IV, it may be deemed to
beneficially own all of the shares of Common Stock of the Issuer SCF-IV is
deemed to beneficially own as described above. Simmons & Associates does not
directly own any securities of the Issuer, but, because it is the sole general
partner of SCF-IV G.P., it may be deemed to beneficially own all of the shares
of Common Stock of the Issuer SCF-IV G.P.
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is deemed to beneficially own. L.E. Simmons does not directly own any securities
of the Issuer, but, because he is the sole shareholder of Simmons & Associates,
he may be deemed to beneficially own all of the shares of Common Stock of the
Issuer Simmons & Associates is deemed to beneficially own.
No assurance can be given that the Initial Closing will occur.
Further, the Initial Shares will not be convertible into Common Stock until the
earlier of the Initial Conversion Date or certain change of control events
discussed under the heading "Conversion Rights" above in response to Item 4.
Thus, SCF-IV and the other Reporting Persons disclaim beneficial ownership of
such shares of Common Stock.
(c). Other than the transactions described herein, neither SCF-IV nor
any person identified in Item 2 has effected any transactions in the Common
Stock of the Issuer during the preceding sixty days.
(d) and (e). Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
Except as described in Items 3, 4 and 5, SCF-IV has no other
contracts, arrangements, understandings or relationships with respect to
securities of the Issuer that are required to be described herein.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
A. Purchase Agreement by and between Input/Ouput, Inc. and SCF-IV,
L.P., dated April 21, 1999.
B. Form of Certificate of Designation related to Series B Preferred
Stock.
C. Form of Certificate of Designation related to Series C Preferred
Stock.
D. Form of Registration Rights Agreement.
E. Joint Filing Agreement, dated as of April 30, 1999, by and among
SCF-IV, SCF-IV G.P., Simmons & Associates and L.E. Simmons.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: April 30, 1999
SCF-IV, L.P.
By: SCF-IV, G.P., Limited Partnership
By: L.E. Simmons & Associates,
Incorporated
By: /s/ L.E. Simmons
---------------------------
L.E. Simmons, President
SCF-IV, G.P., LIMITED PARTNERSHIP
By: L.E. Simmons & Associates,
Incorporated
By: /s/ L.E. Simmons
--------------------------------
L.E. Simmons, President
L.E. SIMMONS & ASSOCIATES, INCORPORATED
By: /s/ L.E. Simmons
-------------------------------------
L.E. Simmons, President
L.E. SIMMONS
/s/ L.E. Simmons
-----------------------
L.E. Simmons, individually
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EXHIBIT INDEX
A. Purchase Agreement by and between Input/Ouput, Inc. and SCF-IV, L.P.,
dated April 21, 1999.
B. Form of Certificate of Designation related to Series B Preferred
Stock.
C. Form of Certificate of Designation related to Series C Preferred
Stock.
D. Form of Registration Rights Agreement.
E. Joint Filing Agreement, dated as of April 30, 1999, by and among
SCF-IV, SCF-IV G.P., Simmons & Associates and L.E. Simmons.
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EXHIBIT A
PURCHASE AGREEMENT
BY AND BETWEEN
INPUT/OUTPUT, INC.
AND
SCF-IV, L.P.
SERIES B PREFERRED STOCK
AND
SERIES C PREFERRED STOCK
APRIL 21, 1999
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I.
DEFINITIONS
<TABLE>
<S> <C> <C>
Section 1.1 Definitions....................................................3
Section 1.2 References and Titles..........................................8
ARTICLE II.
PURCHASE OF THE SHARES
Section 2.1 Purchase of the Initial Shares.................................8
Section 2.2 Option to Purchase Option Shares...............................8
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization, Standing and Power...............................9
Section 3.2 Subsidiaries..................................................10
Section 3.3 Capital Structure.............................................10
Section 3.4 Authority; No Violations; Approvals...........................11
Section 3.5 SEC Documents.................................................12
Section 3.6 Absence of Certain Changes or Events..........................13
Section 3.7 No Undisclosed Material Liabilities...........................14
Section 3.8 No Default....................................................14
Section 3.9 Compliance with Applicable Laws...............................15
Section 3.10 Litigation....................................................15
Section 3.11 Certain Agreements............................................16
Section 3.12 Status of Shares..............................................16
Section 3.13 Intellectual Property; Year 2000..............................16
Section 3.14 Environmental Matters.........................................17
Section 3.15 No Brokers or Finders.........................................17
Section 3.16 Vote..........................................................17
Section 3.17 Related Party Transactions....................................18
Section 3.18 Certain Anti-Takeover Provisions; Rights Plan.................18
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 4.1 Organization, Standing and Power..............................18
Section 4.2 Authority; Approvals..........................................18
Section 4.3 Investment Intent.............................................19
Section 4.4 Purchaser Status..............................................19
Section 4.5 No Brokers or Finders.........................................19
Section 4.6 Access to Information.........................................20
ARTICLE V.
COVENANTS
Section 5.1 Affirmative Covenants of the Company..........................20
</TABLE>
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<TABLE>
<S> <C> <C>
Section 5.2 Negative Covenants of the Company..............................20
Section 5.3 Cooperation; Approvals.........................................21
Section 5.4 HSR Act Notification...........................................21
Section 5.5 Notification of Certain Matters................................21
Section 5.6 Board of Directors.............................................22
Section 5.7 Registration Rights Agreement..................................22
Section 5.8 Transfer Restrictions..........................................22
Section 5.9 Stock Exchange Listing.........................................24
Section 5.10 Access; Confidentiality........................................24
Section 5.11 Issuance of Additional Preferred Stock.........................24
Section 5.12 Standstill Agreement...........................................25
Section 5.13 Indemnification................................................26
Section 5.14 Rights Plan....................................................27
ARTICLE VI.
CONDITIONS PRECEDENT TO THE CLOSINGS
Section 6.1 Conditions Precedent to Each Party's Obligation................27
Section 6.2 Conditions Precedent to Obligation of Purchaser................27
Section 6.3 Conditions Precedent to Obligations of Company.................28
ARTICLE VII.
THE CLOSINGS
Section 7.1 The Closings...................................................29
Section 7.2 Actions to Occur at the Initial Closing........................29
Section 7.3 Actions to Occur at the Option Closing.........................30
ARTICLE VIII.
TERMINATION
Section 8.1 Termination....................................................30
Section 8.2 Effect of Termination..........................................31
ARTICLE IX.
RECOVERY OF FEES.................................31
ARTICLE X.
MISCELLANEOUS
Section 10.1 Survival of Provisions.........................................32
Section 10.2 No Waiver; Modification in Writing.............................32
Section 10.3 Specific Performance...........................................32
Section 10.4 Severability...................................................33
Section 10.5 Fees and Expenses..............................................33
Section 10.6 Parties in Interest............................................33
Section 10.7 Notices........................................................33
Section 10.8 Counterparts...................................................34
Section 10.9 Entire Agreement; Termination of Confidentiality Agreement.....34
</TABLE>
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<TABLE>
<S> <C> <C>
Section 10.10 Governing Law...........................................34
Section 10.11 Public Announcements....................................34
Section 10.12 Assignment..............................................35
Section 10.13 Headings................................................35
</TABLE>
Exhibit 1.1(a) Certificate of Designation relating to Series B
Preferred Stock
Exhibit 1.1(b) Certificate of Designation relating to Series C
Preferred Stock
Exhibit 5.7 Form of Registration Rights Agreement
Exhibits 6.2(e)(i) and (ii) Form of Company Counsel Opinions
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PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of April 21, 1999, by and between
Input/Output, Inc., a Delaware corporation (together with its successors, if
any, the "Company"), and SCF-IV, L.P., a Delaware limited partnership, (the
"Purchaser").
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Affiliate" means, with respect to any Person, any other Person
directly, or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person. For purposes of this
definition and this Agreement, the term "control" (and correlative terms
"controlling," "controlled by" and "under common control with") means
possession of the power, whether by contract, equity ownership or otherwise, to
direct the policies or management of a Person.
"Agreement" means this Purchase Agreement, as the same may be amended,
supplemented or modified from time to time in accordance with the terms hereof.
"Approval" means any approval, authorization, grant of authority,
consent, order, qualification, permit, license, variance, exemption, franchise,
concession, certificate, filing or registration or any waiver of the foregoing,
or any notice, statement or other communication required to be filed with,
delivered to or obtained from any Governmental Entity or any other Person.
"Board" means the Board of Directors of the Company.
"Business Combination" means (i) any consolidation, merger, share
exchange or similar business combination transaction involving the Company with
any Person or (ii) the sale, assignment, conveyance, transfer, lease or other
disposition by the Company of all or substantially all of its assets.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in Houston,
Texas generally are authorized or required by law or other government actions
to close.
"Bylaws" mean the Company's bylaws, as amended from time to time.
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"Capital Stock" means (i) with respect to any Person that is a
corporation or company, any and all shares, interests, participations or other
equivalents (however designated) of capital or capital stock of such Person and
(ii) with respect to any Person that is not a corporation or company, any and
all partnership or other equity interests of such Person.
"Certificates of Designation" shall mean the Certificates of
Designation for the Series B Preferred Stock and the Series C Preferred Stock
in substantially the form attached hereto as Exhibits 1.1(a) and 1.1(b), with
such changes as are contemplated by the terms thereof or this Agreement.
"Certificate of Incorporation" means the Company's Certificate of
Incorporation, as amended from time to time.
"Change of Control" means the occurrence of any event specified in
clauses (ii), (iii) or (iv) of the definition of "Initial Conversion Date" set
forth in the Certificate of Designation for the Series B Preferred Stock.
"Closing" has the meaning set forth in Section 7.1(b).
"Closing Date" has the meaning set forth in Section 7.1(b).
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations thereunder as in effect on the date hereof.
"Common Stock" means the Company's common stock, par value $.01 per
share, and any Capital Stock for or into which such Common Stock hereafter is
exchanged, converted, reclassified or recapitalized by the Company or pursuant
to an agreement or Business Combination to which the Company is a party.
"Company" has the meaning set forth in the introductory paragraph
hereof.
"Company Disclosure Schedule" has the meaning set forth in Article
III.
"Company 1998 Form 10-K" means the Report on Form 10-K filed by the
Company with the SEC for the year ended May 31, 1998.
"Company Options" has the meaning set forth in Section 3.3(c).
"Company SEC Documents" has the meaning set forth in Section 3.5.
"Contracts" means all agreements, contracts, or other binding
commitments, arrangements or plans, written or oral (including any amendments
and other modifications thereto), to which the Company or any of its
Subsidiaries is a party or is otherwise bound.
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"Current SEC Reports" means the Company 1998 Form 10-K, the proxy
statement for the Company's 1998 annual meeting of stockholders, and all
Company SEC Documents filed by the Company since the time of initial filing of
either documents.
"Environmental Laws" has the meaning set forth in Section 3.14.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Exercise Notice" has the meaning set forth in Section 2.2(a).
"GAAP" has the meaning set forth in Section 3.5(b).
"Governmental Entity" means any agency, bureau, commission, court,
authority, department, official, political subdivision, tribunal or other
instrumentality of any government, whether (i) regulatory, administrative or
otherwise, (ii) federal, state or local, or (iii) domestic or foreign.
"Hazardous Materials" has the meaning set forth in Section 3.14.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Initial Closing" has the meaning set forth in Section 7.1(a).
"Initial Closing Date" has the meaning set forth in Section 7.1(a).
"Initial Purchase Price" has the meaning set forth in Section 2.1(b).
"Initial Shares" means the 40,000 shares of Series B Preferred Stock
to be purchased by Purchaser pursuant to this Agreement.
"Intellectual Property" has the meaning set forth in Section 3.13.
"Knowledge" of any Person means the actual knowledge of such Person's
executive and financial officers and directors, in each case after reasonable
inquiry of such other officers of such Person with direct responsibility for
the Person's business relating to such knowledge.
"Law" means any constitutional provision, statute or other law,
ordinance, rule, regulation or interpretation of any thereof and any Order of
any Governmental Entity (including Environmental Laws) now in effect.
"Lien" means any mortgage, lien, pledge, encumbrance, easement, charge
or security interest of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement or any lease
in the nature thereof).
"Litigation" has the meaning set forth in Section 3.10.
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"Material Adverse Effect" or "Material Adverse Change" means any
effect, change, event or occurrence that is materially adverse to the business,
operations, properties, condition (financial or otherwise), results of
operations, assets, liabilities or prospects of the Company and its
Subsidiaries taken as a whole.
"Material Contracts" has the meaning set forth in Section 3.11(a).
"Option Closing" has the meaning set forth in Section 7.1(b).
"Option Closing Date" has the meaning set forth in Section 7.1(b).
"Option Purchase Price" has the meaning set forth in Section 2.2(c).
"Option Shares" means the up to 15,000 shares of Series C Preferred
Stock of the Company that may be purchased by Purchaser in accordance with
Section 2.2.
"Order" means any decree, injunction, judgment, settlement, order,
ruling, assessment or writ of a court.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, limited liability company, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Purchaser" has the meaning set forth in the introductory paragraph
hereto.
"Purchaser's Expenses" means all reasonable out-of-pocket fees, costs
and expenses incurred by Purchaser in connection with the transactions
contemplated by this Agreement and the other Transaction Documents and its due
diligence efforts in connection therewith, including (i) fees, costs and
expenses of its accountants, counsel and other similar advisors (including a
$25,000 fee to be paid to a technical advisor) and (ii) fees paid to any
Governmental Entity (including fees payable in connection with filings under
the HSR Act pursuant to Section 5.4).
"Registration Rights Agreement" means the Registration Rights
Agreement in the form of Exhibit 5.7.
"Rights Plan" has the meaning set forth in Section 3.3(a).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Series B Preferred Stock" means the Company's Series B Preferred
Stock, $.01 par value per share, which shall have the terms set forth in the
Certificate of Designation attached hereto as Exhibit 1.1(a).
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"Series C Preferred Stock" means the Company's Series C Preferred
Stock, $.01 par value per share, which shall have the terms set forth in the
Certificate of Designation attached hereto as Exhibit 1.1(b), except that the
initial "Conversion Price" set forth therein shall be equal to 125% of the
average Market Price (as defined in such Certificate of Designation) for the
ten Trading Days (as defined in such Certificate of Designation) ending on and
including the Trading Day prior to the Exercise Notice; provided, however, that
if such average is less than $4.80, then the initial Conversion Price shall be
$6.00 and if such average is higher than $6.80, the initial Conversion Price
shall be $8.50 (which dollar amounts shall be adjusted for events or actions
occurring prior to the date of the Exercise Notice, and which Conversion Price
shall be adjusted for events or actions occurring after the date of the
Exercise Notice and prior to the Option Closing, in each case in the same
manner as the Conversion Price would be adjusted as set forth in such
Certificate of Designation for events occurring after the Option Closing).
"Shares" means the Initial Shares and the Option Shares.
"Stock Plans" means the Company's stock option, stock incentive,
restricted stock, employee stock purchase or other similar plans.
"Subsidiary" means, (i) a corporation, a majority of whose stock with
voting power, under ordinary circumstances, to elect directors is at the time,
directly or indirectly, owned by the Company, by a Subsidiary of the Company or
by the Company and another Subsidiary, or (ii) any other Person (other than a
corporation) in which the Company, a Subsidiary or the Company and a
Subsidiary, directly or indirectly, at the date of determination thereof has at
least a majority ownership interest.
"Transaction Documents" means this Agreement, the Certificates of
Designation and the Registration Rights Agreement.
"Transfer" has the meaning set forth in Section 5.8.
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of the Shares in accordance with the terms thereof.
"Voting Stock" of a Person means Capital Stock of such Person of the
class or classes pursuant to which the holders thereof have the general voting
power under ordinary circumstances to vote in the election of the board of
directors, managers or trustees of such Person; provided that if such Person
has more than one class or series of Voting Stock, any calculation as to a
percentage of such Voting Stock shall be made with respect to the percentage of
aggregate votes entitled to be cast in respect of all such Voting Stock in such
circumstances.
Section 1.2 References and Titles. All references in this Agreement to
Exhibits, Schedules, Articles, Sections, subsections, and other subdivisions
refer to the corresponding Exhibits, Schedules, Articles, Sections,
subsections, and other subdivisions of this Agreement unless expressly provided
otherwise. Titles appearing at the beginning of any Articles, Sections,
subsections, or other subdivisions of this Agreement are for convenience only,
do not constitute any
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<PAGE> 10
part of such Articles, Sections, subsections or other subdivisions, and shall
be disregarded in construing the language contained therein. The words "this
Agreement," "herein," "hereby," "hereunder," and "hereof," and words of similar
import, refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited. The words "this Section," "this
subsection," and words of similar import, refer only to the Sections or
subsections hereof in which such words occur. The word "including" (in its
various forms) means "including without limitation." Pronouns in masculine,
feminine, or neuter genders shall be construed to state and include any other
gender and words, terms, and titles (including terms defined herein) in the
singular form shall be construed to include the plural and vice versa, unless
the context otherwise expressly requires. Unless the context otherwise
requires, all defined terms contained herein shall include the singular and
plural forms of such defined terms.
ARTICLE II.
PURCHASE OF THE SHARES
Section 2.1 Purchase of the Initial Shares.
(a) Subject to the terms and conditions herein set forth, at the
Initial Closing, the Company will sell to Purchaser, and Purchaser will
purchase from the Company, the Initial Shares.
(b) The aggregate purchase price payable for the Initial Shares shall
be $40 million (the "Initial Purchase Price").
(c) Delivery of the Initial Shares shall be made at the Initial
Closing by delivery to Purchaser, against payment of the Initial Purchase Price
therefor as provided herein, of one or more share certificates, registered in
the name of Purchaser, representing the Initial Shares.
(d) Payment of the Initial Purchase Price for the Initial Shares to be
purchased hereunder shall be made by or on behalf of Purchaser by wire transfer
of immediately available funds to an account of the Company (the number for
which account shall have been furnished to Purchaser at least two Business Days
prior to the Initial Closing Date).
Section 2.2 Option to Purchase Option Shares.
(a) Purchaser may, at its sole option, at any time prior to the
expiration of 90 days after the Initial Closing, deliver a written notice of
its intention to purchase up to 15,000 Option Shares (the "Exercise Notice") to
the Company. The Exercise Notice shall specify the number of Option Shares to
be purchased and a Business Day between 10 and 20 calendar days after such
notice upon which the Option Closing shall occur.
(b) If Purchaser delivers the Exercise Notice in accordance with
Section 2.2(a), then, subject to the terms and conditions herein set forth, at
the Option Closing, the Company will sell to Purchaser, and Purchaser will
purchase from the Company, the number of Option Shares to be purchased by the
Purchaser as specified in the Exercise Notice.
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<PAGE> 11
(c) The purchase price payable for the Option Shares shall be $1,000
per share (the aggregate amount of such purchase price being referred to herein
as the "Option Purchase Price").
(d) Delivery of the Option Shares shall be made at Option Closing by
delivery to Purchaser, against payment of the Option Purchase Price therefor as
provided herein, of one or more share certificates, registered in the name of
Purchaser, representing the Option Shares so purchased.
(e) Payment of the Option Purchase Price for the Option Shares to be
purchased hereunder shall be made by or on behalf of Purchaser by wire transfer
of immediately available funds to an account of the Company (the number for
which account shall have been furnished to Purchaser at least two Business Days
prior to the Option Closing Date).
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser as follows (in each
case as qualified by matters reflected on the disclosure schedule dated as of
the date of this Agreement by reference to the Section of this Agreement so
qualified and delivered by the Company to Purchaser prior to the date of this
Agreement (the "Company Disclosure Schedule") and made a part hereof by
reference):
Section 3.1 Organization, Standing and Power. Each of the Company and
each of its Subsidiaries is a corporation or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated or organized and has the requisite corporate or other
such entity power and authority to own its properties and carry on its business
as now being conducted. Each of the Company and each of its Subsidiaries is
duly qualified or licensed to transact business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed or to be in
good standing, individually or in the aggregate, has not had and could not
reasonably be expected to have a Material Adverse Effect. The Company has
delivered to Purchaser prior to the execution of this Agreement complete and
correct copies of its Certificate of Incorporation and Bylaws, each as amended
to date, and, in the case of the Company's Subsidiaries, made available similar
organizational documents in each case, as in effect on the date of this
Agreement.
Section 3.2 Subsidiaries. Except as set forth in the Current SEC
Reports, all the outstanding shares of Capital Stock of each Subsidiary of the
Company that would constitute a "significant subsidiary" within the meaning of
the SEC's Regulation S-X have been validly issued and are fully paid and
nonassessable (with respect to corporate Subsidiaries) and are owned directly
or indirectly by the Company, free and clear of all Liens other than Liens
securing obligations for money borrowed by the Company.
Section 3.3 Capital Structure.
(a) The authorized Capital Stock of the Company consists of
100,000,000 shares of Common Stock and 5,000,000 shares of preferred stock,
$.01 par value, which may be divided into
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and issued in one or more series upon the creation thereof by the Board. As of
the date of this Agreement, (A) 50,499,898 shares of Common Stock are issued
and outstanding (including the attached preferred share purchase rights issued
pursuant to the Rights Agreement dated as of January 17, 1997, as amended to
date, between the Company and Harris Trust and Savings Bank as rights agent
(the "Rights Plan")), (B) 7,991,161 shares of Common Stock have been authorized
and reserved for issuance under the Stock Plans, (C) 0 shares of Common Stock
are held by the Company in its treasury, (D) no shares of Common Stock are held
by any of the Company's Subsidiaries, and (E) an aggregate of 100,000 shares of
preferred stock have been designated as the Series A Preferred Stock. Except as
described in this Section 3.3, the Company has no authorized, issued or
outstanding shares or Capital Stock as of the date of this Agreement.
(b) There are no restrictions or limitations, contractual or
otherwise, binding upon the Company or any of its Subsidiaries or to which the
Company or any of its Subsidiaries is subject that prohibit or limit the
enforceability of the terms and provisions of the Certificates of Designation
or will prohibit or limit the right of a holder of Shares to convert the Shares
into shares of Common Stock in accordance with their terms; and the conversion
of any Shares into shares of Common Stock will not violate or result in or
constitute a default under any loan or credit agreement, note, bond, mortgage,
indenture, lease, permit, concession, franchise, license or any other contract,
agreement, arrangement or understanding to which the Company or any of its
Subsidiaries is a party or by which they or any of their properties or assets
are bound.
(c) There are no outstanding warrants, share or stock options, share
or stock appreciation rights or other rights to receive or purchase any Capital
Stock of the Company or any of its Subsidiaries granted under the Stock Plans
or otherwise except as set forth in Schedule 3.3(c) of the Company Disclosure
Schedule (such warrants, share or stock options, shares or stock appreciation
rights or other rights disclosed thereon, collectively, the "Company Options").
Except for the Company Options and except as provided in the Transaction
Agreements, there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company or any of its Subsidiaries is a party or by which any of them
is bound obligating the Company or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, any Capital Stock of the
Company or of any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. There
are no outstanding obligations of the Company or any of its Subsidiaries
(contingent or otherwise) to repurchase, redeem or otherwise acquire any
Capital Stock of the Company or any of its Subsidiaries or any security
exchangeable for or convertible into such Capital Stock.
(d) All outstanding Capital Stock of the Company and its Subsidiaries
are duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive or similar rights.
(e) Except as contemplated hereby or in the other Transaction
Documents or as set forth in the Current SEC Reports, there are not any
registration rights agreements, stockholder agreements, voting agreements or
trusts, proxies or other agreements or contractual obligations to which the
Company or any Subsidiary is a party or bound with respect to the registration
with any Government
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<PAGE> 13
Entity, or the voting or disposition of any Capital Stock of the Company or any
of its Subsidiaries and, to the Company's Knowledge there are no other
shareholder agreements, voting agreements or trusts, proxies or other
agreements or contractual obligations among the shareholders of the Company
with respect to the voting or disposition of any Capital Stock of the Company
or any of its Subsidiaries.
Section 3.4 Authority; No Violations; Approvals.
(a) The Board has approved this Agreement, the other Transaction
Documents and the transactions contemplated hereby and thereby, and declared
this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby to be in the best interests of the Company. The
Board has approved the acquisition of the Shares and, upon any conversion of
the Shares, the issuance of the Underlying Shares by Purchaser hereunder. The
Company has all requisite corporate power and authority to enter into this
Agreement and each of the other Transaction Documents and to consummate each of
the transactions and perform each of the obligations contemplated hereby and
thereby. The execution and delivery of this Agreement and each of the other
Transaction Documents and the consummation of each of the transactions and the
performance of each of the obligations contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been, and at or prior to the Initial Closing the
other Transaction Documents will be, duly executed and delivered by the Company
and the Certificates of Designation have been duly adopted by the Board of
Directors in accordance with applicable Law. Each of the Certificates of
Designation and, assuming this Agreement and each of the other Transaction
Documents to which Purchaser is a party constitute the valid and binding
obligations of Purchaser, this Agreement and each of the other Transaction
Documents constitutes a valid and binding obligation of the Company enforceable
in accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
(b) The execution and delivery of this Agreement and each of the other
Transaction Documents does not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions hereof and
thereof will not, conflict with, require the consent of any other Person to or
result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any material obligation or to the loss of any material benefit
under, or give rise to a right of purchase under, result in the creation of any
Lien upon any of the properties or assets of the Company or any of its
Subsidiaries under, any provision of (A) the Certificate of Incorporation or
Bylaws or any provision of the comparable organizational documents of any of
the Company's Subsidiaries, (B) any loan or credit agreement, note, bond,
mortgage, indenture, lease, instrument, permit, concession, franchise, license
or other contract or agreement, arrangement or understanding to which the
Company or any of its Subsidiaries is a party or otherwise is bound or by which
any of them or their respective properties are bound or any existing Approval
applicable to the Company or any of its Subsidiaries, (C) any joint venture or
other ownership arrangement to which the Company or any of its Subsidiaries is
a party or otherwise is bound or by which any of them or their respective
properties
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<PAGE> 14
are bound or (D) assuming the Approvals referred to in Section 3.4(c)
are duly and timely obtained or made, any Law or Order applicable to the
Company or any of its Subsidiaries or any of their respective properties or
assets, other than, in the case of clause (B) (other than with respect to any
material loan or credit agreement, note, bond, mortgage or indenture or any
Material Contract or any plan or agreement providing for the payment of any
benefit to directors, officers or employees of the Company or its
subsidiaries), (C) or (D), any such conflicts, violations, defaults, rights,
Liens or detriments, that, individually or in the aggregate, (x) have not had
and could not reasonably be expected to have a Material Adverse Effect, (y)
have not impaired and could not reasonably be expected to impair the ability of
the Company to perform its obligations under any of the Transaction Documents
in any material respect, and (z) have not and could not reasonably be expected
to delay in any material respect or prevent the consummation of any of the
transactions, or performance of the obligations, contemplated by any of the
Transaction Documents.
(c) No Approval from any Governmental Entity is required by or with
respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or any other Transaction Document by
the Company or the consummation by the Company of the transactions contemplated
hereby or thereby, except for: (A) the filing of a notification report by the
Company under the HSR Act and the expiration or termination of the applicable
waiting period with respect thereto (which filing and expiration or termination
are not required for the Initial Closing), (B) the filing of the Certificates
of Designation in accordance with Section 103 of the Delaware General
Corporation Law, and (C) any such Approvals the failure of which to be made or
obtained (1) has not had and could not reasonably be expected to have a
Material Adverse Effect, (2) has not impaired and could not reasonably be
expected to impair the ability of the Company to perform its obligations under
any of the Transaction Documents in any material respect and (3) have not and
could not reasonably be expected to delay in any material respect or prevent
the consummation of any of the transactions contemplated by any of the
Transaction Documents.
Section 3.5 SEC Documents.
(a) The Company has made available to Purchaser a true and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by the Company with the SEC since May 31, 1997 (the "Company
SEC Documents") including the Company 1998 Form 10-K, which are all the
documents (other than preliminary materials) that the Company was required to
file with the SEC since May 31, 1997. As of their respective dates, the Company
SEC Documents complied in all material respects with the requirements of the
Securities Act, or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Company SEC Documents, and
none of the Company SEC Documents contained as of their respective dates any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(b) The financial statements of the Company included in the Company
SEC Documents, including the notes and schedules thereto, complied as to form
in all material respects with the rules and regulations of the SEC with respect
thereto, were prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
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<PAGE> 15
involved (except as may be indicated in the notes thereto or, in the case of
the unaudited statements, as permitted by Rule 10-01 of Regulation S-X of the
SEC) and fairly present the consolidated financial position of the Company and
its consolidated Subsidiaries as of their respective dates and the consolidated
results of operations and the consolidated cash flows of the Company and its
consolidated Subsidiaries for the periods presented therein in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited
statements, to normal, recurring adjustments, none of which are material)
applied on a consistent basis during the periods presented.
Section 3.6 Absence of Certain Changes or Events.
(a) Except as disclosed in the Current SEC Reports filed prior to the
date of this Agreement or Schedule 3.6 of the Company Disclosure Schedule, or
except as contemplated by this Agreement, since May 31, 1998, each of the
Company and its Subsidiaries have conducted their business only in the ordinary
course of business consistent with past practice, and there has not been: (i)
any declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any Capital Stock of the
Company; (ii) any split, combinations, reclassification or amendment of any
term of any outstanding Capital Stock or other security of the Company or any
of its Subsidiaries or (other than issuance of Common Stock upon the exercise
of any Company Options) any issuance or the authorization of the issuance of
any securities of the Company or any of its Subsidiaries, other than in
connection with the transactions contemplated hereby; (iii) any repurchase,
redemption or other acquisition by the Company or any Subsidiary of the Company
of any outstanding Capital Stock or other securities of the Company or any
Subsidiary of the Company, except as contemplated by the Stock Plans; (iv) (A)
any grant by the Company or any of its Subsidiaries to any officer of the
Company or any of its Subsidiaries of any increase in compensation, except for
increases in the ordinary course of business consistent with past practice or
as required under employment or other agreements or benefit arrangements in
effect as of May 31, 1998, or (B) any grant by the Company or any of its
Subsidiaries to any such officer of any increase in severance or termination
pay, except as was required or provided for under any employment, severance,
termination or other agreements or benefit arrangements in effect as of May 31,
1998; (v) except as required by a change in GAAP, any material change in
accounting methods, principles or practices by the Company or any of its
Subsidiaries; and (vi) any material casualties affecting the Company and its
Subsidiaries, taken as a whole, or any material loss, damage or destruction to
any of their properties or assets, whether covered by insurance or not.
(b) Except as disclosed in the Company's consolidated financial
statements included in the Company 1998 Form 10-K, and the notes thereto, or as
disclosed in the other Current SEC Reports, since May 31, 1998, there has not
been any event, circumstance or fact that (x) has had or could reasonably be
expected to have a Material Adverse Effect, (y) has impaired or could
reasonably be expected to impair the ability of the Company to perform its
obligations under any of the Transaction Documents in any material respect, or
(z) could reasonably be expected to delay in any material respect or prevent
the consummation of any of the transactions contemplated by any of the
Transaction Documents.
Section 3.7 No Undisclosed Material Liabilities. Except as disclosed
in Schedule 3.7 of the Company Disclosure Schedule or the Company's financial
statements included in the Company
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1998 Form 10-K, and the notes thereto, or as disclosed in the other Current SEC
Reports, there are no liabilities or obligations of the Company or any of its
Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, other than: (i) liabilities adequately
provided for on the balance sheet of the Company dated as of May 31, 1998
(including the notes thereto) contained in the Company 1998 Form 10-K; (ii)
liabilities incurred in the ordinary course of business consistent with past
practice since May 31, 1998, which liabilities, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect;
(iii) liabilities arising under the Transaction Documents; and (iv) liabilities
not required by GAAP to be recognized or disclosed on a consolidated balance
sheet of the Company and its consolidated Subsidiaries or in the notes thereto,
which liabilities, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
Section 3.8 No Default. Except as disclosed in Schedule 3.8 of the
Company Disclosure Schedule or in the Current SEC Reports, neither the Company
nor any of its Subsidiaries is in default or violation (and no event has
occurred which, with notice or the lapse of time or both, would constitute a
default or violation) of any term, condition or provision of (i) the
Certificate of Incorporation or Bylaws of the Company or the comparable
organizational documents of any of its Subsidiaries, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease, instrument, permit,
concession, franchise, license or any other contract, agreement, arrangement or
understanding to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or any of their respective
properties or assets is bound, or (iii) any Order or Law applicable to the
Company or any of its Subsidiaries, except in the case of clause (ii) and
(iii), for violations or defaults that, individually or in the aggregate, (x)
have not had and could not reasonably be expected to have a Material Adverse
Effect, (y) have not impaired and could not reasonably be expected to impair
the ability of the Company to perform its obligations under any of the
Transaction Documents in any material respect, and (z) have not and could not
reasonably be expected to delay in any material respect or prevent the
consummation of any of the transactions contemplated by any of the Transaction
Documents. Except as disclosed in Schedule 3.8 of the Company Disclosure
Schedule or in the Current SEC Reports, the Company and its Subsidiaries (i)
are not in breach of or default under any covenant, including financial
covenants, under agreements relating to money borrowed in excess of $5 million,
and (ii) do not believe that it is reasonably likely that they will be in
breach of or default under any covenant under any such agreement as of the next
date on which they are required to be in compliance with any such covenants.
Section 3.9 Compliance with Applicable Laws.
(a) The Company and each of its Subsidiaries has in effect all
Approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses, and there has occurred no default or violation
(and no event has occurred which, with notice or the lapse of time or both,
would constitute a default or violation) under any such Approval, except for
failures to obtain, or for defaults or violations under, Approvals which
failures, defaults or violations, individually or in the aggregate, (i) have
not had and could not reasonably be expected to have a Material Adverse Effect,
(ii) have not impaired and could not reasonably be expected to impair the
ability of the Company to perform its obligations under any of the Transaction
Documents in any
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<PAGE> 17
material respect, and (iii) could not reasonably be expected to delay in any
material respect or prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents.
(b) Except as otherwise disclosed in the Current SEC Reports, the
Company and its Subsidiaries are in compliance with all applicable Laws and
Orders, except for possible noncompliance which, individually or in the
aggregate, (i) has not had and could not reasonably be expected to have a
Material Adverse Effect, (ii) has not impaired and could not reasonably be
expected to impair the ability of the Company to perform its obligations under
any of the Transaction Documents in any material respect, and (iii) could not
reasonably be expected to delay in any material respect or prevent the
consummation of any of the transactions contemplated by any of the Transaction
Documents.
(c) No investigation or review by any Governmental Entity with respect
to the Company, any of its Subsidiaries or the transactions contemplated by
this Agreement and the other Transaction Documents is pending or, to the
Knowledge of the Company, threatened, nor has any Governmental Entity notified
the Company or any of its Subsidiaries in writing or, to the Company's
Knowledge, otherwise of any intention to conduct the same, other than those the
outcome of which, individually or in the aggregate, (i) have not had and could
not reasonably be expected to have a Material Adverse Effect, (ii) have not
impaired and could not reasonably be expected to impair the ability of the
Company to perform its obligations under any of the Transaction Documents in
any material respect, or (iii) could not reasonably be expected to delay in any
material respect or prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents.
Section 3.10 Litigation. Except as disclosed in the Current SEC
Reports or Schedule 3.10 of the Company Disclosure Schedule, there is no suit,
action, proceeding or indemnification claim, at law or in equity, pending
before any Governmental Entity or arbitrator, or, to the Knowledge of the
Company, threatened, against or affecting the Company, any Subsidiary of the
Company or any of its Material Contracts ("Litigation"), and neither the
Company nor any Subsidiary is a party to any Litigation, that (i) has had or
could reasonably be expected to have a Material Adverse Effect, (ii) has
impaired or reasonably could be expected to impair the ability of the Company
to perform its obligations under any of the Transaction Documents in any
material respect, or (iii) reasonably could be expected to delay in any
material respect or prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents, nor is there any Order of any
Governmental Entity or arbitrator outstanding against or binding upon the
Company or any Subsidiary of the Company or any of its Material Contracts which
(i) has had or could reasonably be expected to have a Material Adverse Effect,
(ii) has impaired or reasonably could be expected to impair the ability of the
Company to perform its obligations under any of the Transaction Documents in
any material respect, or (iii) reasonably could be expected to delay in any
material respect or prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents.
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Section 3.11 Certain Agreements.
(a) Except as disclosed in the Current SEC Reports and Schedule
3.11(a) of the Company Disclosure Schedule, there are no, whether in oral or
written form, Contracts that are material to the Company and its Subsidiaries,
taken as a whole, or their respective business, (such Contracts disclosed or
required to be disclosed herein, in the Current SEC Reports or in the Company
Disclosure Schedule, the "Material Contracts"). Each Material Contract is a
valid and binding obligation of the Company or one of its Subsidiaries and, to
the Company's Knowledge, of each other party thereto, enforceable in accordance
with its terms, and is in full force and effect.
(b) The Company or the relevant Subsidiary and, to the Company's
Knowledge, each other party to the Material Contracts has performed in all
material respects the obligations required to be performed by it under the
Material Contracts and is not (with or without lapse of time or the giving of
notice, or both) in breach or default thereunder. No party to any Material
Contract has given written or, to the Company's Knowledge, oral notice of any
action to terminate, cancel, rescind or procure a judicial reformation thereof.
Section 3.12 Status of Shares. The issuance and sale of the Shares and
the reservation and issuance of the Underlying Shares have been duly authorized
by all necessary corporate action on the part of the Company (other than the
filing of the respective Certificates of Designation with the Secretary of
State of the State of Delaware) and the Shares, when delivered to Purchaser at
the Initial Closing or Option Closing, as applicable, against payment therefor
as provided herein, and the Underlying Shares, when issued upon conversion of
the Shares in accordance with the terms thereof, will be validly issued, fully
paid and non-assessable and the issuance and sale of the Shares and the
issuance of the Underlying Shares are not and will not be subject to preemptive
rights of any Person.
Section 3.13 Intellectual Property; Year 2000. The Company and the
Subsidiaries own, possess or license, or, to the Company's Knowledge can
acquire on reasonable terms, adequate patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other intellectual
property (collectively, "Intellectual Property") necessary to carry on the
business now operated by them, and neither the Company nor any of the
Subsidiaries has received any notice or is otherwise aware of any infringement
of or conflict with asserted rights of others with respect to any Intellectual
Property (including Intellectual Property which is licensed) or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of the Subsidiaries
therein, and which infringement or conflict (if the subject of any unfavorable
decision, ruling or finding) or invalidity or inadequacy, singly or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
The Company and its Subsidiaries have reviewed the areas within their business
and operations and products (including computer software and hardware) which
could be adversely affected by, and have developed or are developing programs
to address on a timely basis, any "Year 2000 Problem" (that is, the risk that
computer hardware or software used by the Company and its Subsidiaries may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999). Based on such
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<PAGE> 19
review and program, the Company reasonably believes that any such "Year 2000
Problem" caused by its products or operations will not have a Material Adverse
Effect.
Section 3.14 Environmental Matters. Except for such matters as could
not, singly or in the aggregate, reasonably be expected to result in a Material
Adverse Effect, (A) neither the Company nor any of the Subsidiaries is in
violation of any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, policy or rule of common law or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent, decree or judgment, relating to pollution or protection of
human health, the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or wildlife,
including, without limitation, laws and regulations relating to the release or
threatened release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (B) the Company and
the Subsidiaries have all permits, authorizations and approvals required under
any applicable Environmental Laws and are each in compliance with their
requirements, (C) there are no pending or, to the Company's Knowledge or any of
the Subsidiaries, threatened administrative, regulatory or judicial actions,
suits, demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental Law
against the Company or any of the Subsidiaries and (D) there are no events or
circumstances known to the Company or any of the Subsidiaries that might
reasonably be expected to form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company or any of the
Subsidiaries relating to Hazardous Materials or Environmental Laws.
Section 3.15 No Brokers or Finders. No agent, broker, finder or
investment or commercial banker, or other Person or firm engaged by or acting
on behalf of the Company or its Subsidiaries in connection with the
negotiation, execution or performance of this Agreement is or will be entitled
to any brokerage or finder's or similar fee or other commission as a result of
this Agreement, the other Transaction Documents or the transactions
contemplated hereby or thereby, other than any such fees or commissions that
have been disclosed to Purchaser and as to which the Company shall have full
responsibility.
Section 3.16 Vote. There are no approvals required of the holders of
any class or series of shares or stock of the Company necessary to approve this
Agreement or any other Transaction Documents and the transactions contemplated
hereby or thereby.
Section 3.17 Related Party Transactions. No relationship, direct or
indirect, exists between or among any of the Company, the Subsidiaries or any
affiliate of the Company, on the one hand, and any director, officer,
stockholder, customer or supplier of any of them, on the other hand, which
would be required by the Exchange Act or by the rules and regulations enacted
thereunder to be described in the Company's proxy statement for the election of
directors in 1999 which is not described in the Current SEC Reports or Schedule
3.17 of the Company Disclosure Schedule.
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Section 3.18 Certain Anti-Takeover Provisions; Rights Plan. The Board
of Directors of the Company has duly approved the Purchaser and its Affiliates
becoming an "interested stockholder" within the meaning of Section 203 of the
Delaware General Corporation Law and a "Related Person" within the meaning of
Article THIRTEENTH of the Certificate of Incorporation by reason of the
acquisition by Purchaser or any of its Affiliates of (i) the Shares, (ii) the
Underlying Shares, (iii) any shares of Common Stock permitted to be acquired by
Purchaser or any of its Affiliates in accordance with the limitation set forth
in Section 5.12(a) or (iv) any securities (including shares of Common Stock
issuable upon conversion, exercise or exchange thereof pursuant to their terms)
received by Purchaser or its Affiliates pursuant to Section 5.11 (collectively,
the "Share Acquisitions"), and has otherwise taken all action necessary to
exempt the Share Acquisitions from the application of Section 203 of the
Delaware General Corporation Law, Article THIRTEENTH of the Certificate of
Incorporation, or any similar anti-takeover provisions of Law or otherwise that
could adversely affect the rights of the Purchaser or its Affiliates with
respect to their ownership of securities acquired by means of such Share
Acquisitions. In addition, the Company has amended the Rights Plan to provide
that neither Purchaser nor any of its Affiliates will be deemed to be an
Acquiring Person within the meaning of the Rights Plan by reason of the Share
Acquisitions.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company as follows:
Section 4.1 Organization, Standing and Power. Purchaser is a limited
partnership duly organized, validly existing, and in good standing under the
laws of Delaware and has all requisite partnership power and authority to own,
lease, and operate its properties and to carry on its business as now being
conducted and to execute and deliver this Agreement and the other Transaction
Documents to which Purchaser is a party and consummate the transactions
contemplated hereby and thereby.
Section 4.2 Authority; Approvals.
(a) (i) The execution and delivery of this Agreement and the other
Transaction Documents to which it is a party and the purchase of the Shares to
be purchased by it have been duly and properly authorized by all necessary
partnership action on the part of Purchaser, (ii) this Agreement and the other
Transaction Documents to which it is a party have been duly executed and
delivered by it or on its behalf and, assuming the accuracy of the
representations and warranties of the Company in Section 3.4 hereof, constitute
the valid and legally binding obligations of Purchaser, enforceable against it
in accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditors' rights and to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law); (iii) the purchase of the Shares to be purchased by it does
not conflict with or violate (1) its organizational documents or any other
material agreement to which it is a party or to which its properties are
subject or (2) assuming the approvals referred to in Section 4.2(b) are duly
and timely made or obtained, any Law applicable to it, in each case in a manner
that could reasonably be expected to materially hinder or impair the completion
of any of
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<PAGE> 21
the transactions contemplated hereby; and (iv) the purchase of Shares to be
purchased by it does not impose any penalty or other onerous condition on
Purchaser that could reasonably be expected to materially hinder or impact the
completion of any of the transactions contemplated hereby.
(b) No Approval from any Governmental Entity is required by or with
respect to Purchaser in connection with the execution and delivery by Purchaser
of this Agreement or any other Transaction Document to which it is a party or
the consummation by Purchaser of the transactions contemplated hereby or
thereby, except for: (A) the filing of a notification report by Purchaser under
the HSR Act, and the expiration or termination of the applicable waiting period
with respect thereto (which filing and expiration or termination are not
required for the Initial Closing); and (B) any such Approval the failure of
which to be made or obtained (1) has not impaired and could not reasonably be
expected to impair the ability of Purchaser to perform its obligations under
any of the Transaction Documents in any material respect and (2) could not
reasonably be expected to delay in any material respect or prevent the
consummation of any of the transactions contemplated by any of the Transaction
Documents.
Section 4.3 Investment Intent. The Shares to be acquired by it
hereunder and any Underlying Shares to be acquired upon the conversion of such
Shares are being, or in the case of the Underlying Shares, will be, acquired
for its own account for investment and with no intention of distributing or
reselling such Shares or Underlying Shares or any part thereof or interest
therein in any transaction which would be in violation of the securities Laws
of the United States of America or any applicable state or any foreign country
or jurisdiction.
Section 4.4 Purchaser Status. Purchaser represents and warrants to,
and covenants and agrees with the Company that (i) at the time it was offered
the Shares, it was, (ii) at the date hereof, it is, and (iii) at the Initial
Closing Date and the Option Closing Date (if any), it will be, an accredited
investor as defined in Rule 501(a) under the Securities Act, and has such
knowledge, sophistication and experience in business and financial matters so
as to be capable of evaluating the Company and an investment in the Shares, and
is able to bear the economic risk of such investment.
Section 4.5 No Brokers or Finders. No agent, broker, finder or
investment or commercial banker, or other Person or firm engaged by or acting
on behalf of Purchaser in connection with the negotiation, execution or
performance of this Agreement is or will be entitled to any brokerage or
finder's or similar fee or other commission as a result of this Agreement,
other than any such fees or commissions that have been disclosed to the Company
and as to which Purchaser shall have full responsibility.
Section 4.6 Access to Information. Purchaser represents and
acknowledges that it (a) has had access to and the opportunity to review the
Company's properties, assets, financial statements, contracts and other books
and records and has made such investigation with respect thereto as it deems
necessary to enter into the transactions contemplated hereby, (b) has been
afforded the opportunity to ask appropriate representatives of the Company
questions concerning the business, assets, financial condition and prospects of
the Company and (c) has been solely responsible for its own due diligence
investigation of the Company and its business, for its own analysis of the
merits and risks of an investment in the Shares, and for its own analysis of
the terms of the investment in
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<PAGE> 22
the Shares. Anything herein to the contrary notwithstanding, the provisions of
this Section 4.6 shall not in any way limit any of the representations and
warranties of the Company set forth in this Agreement or in any Schedule
delivered pursuant hereto by the Company or its authorized representatives or
the rights of Purchaser with respect to any breach of any such representations
and warranties.
ARTICLE V.
COVENANTS
Section 5.1 Affirmative Covenants of the Company. The Company hereby
covenants and agrees that, until the earlier of the Initial Closing or the
termination of this Agreement, unless otherwise expressly contemplated by this
Agreement or consented to in writing by Purchaser (such consent not to be
unreasonably withheld), the Company will and will cause each of its
Subsidiaries to operate its business in the usual and ordinary course
consistent with past practices except as contemplated by this Agreement and
except as set forth in Schedule 5.1 of the Company Disclosure Schedule.
Section 5.2 Negative Covenants of the Company.
(a) Except as expressly contemplated by this Agreement or otherwise
consented to in writing by Purchaser, from the date of this Agreement until
earlier of the Initial Closing or the termination of this Agreement, the
Company shall not do, and shall not permit any of its Subsidiaries to do, any
of the following:
(i) adopt or propose to adopt any amendments to the Company's
Certificate of Incorporation or Bylaws, adopt resolutions authorizing
a liquidation, dissolution, merger, consolidation, restructuring,
recapitalization, or other reorganization of the Company or any
Subsidiary or make any other changes in the Company's capital
structure;
(ii) declare or pay any dividend or make any other distribution
(whether in cash, stock or property) with respect to its Capital
Stock, other than dividends paid by any Subsidiary to the Company or
another Subsidiary in the ordinary and usual course of the Company's
business, or take any other action that, if taken after the issuance
of the Shares, would result in an adjustment to the number of shares
acquirable upon conversion of the Shares;
(iii) take any action that will, or is reasonably likely to cause,
the condition in Section 6.2(a) not to be satisfied; or
(iv) agree in writing or otherwise to do any of the foregoing.
Section 5.3 Cooperation; Approvals. The Company and Purchaser each
agrees to cooperate and use all commercially reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement, including cooperating fully with
the other parties
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<PAGE> 23
to obtain (and will promptly prepare all registrations, filings and
applications, requests and notices preliminary to) all Approvals that may be
necessary or which may be reasonably requested by the Company or Purchaser to
consummate the transactions contemplated by this Agreement and the other
Transaction Documents. In case at any time after the date hereof any further
action is necessary or desirable to carry out the purposes of this Agreement,
the parties shall take all such necessary action.
Section 5.4 HSR Act Notification. Each of the parties hereto shall (a)
file or cause to be filed, as promptly as practicable after the execution and
delivery of this Agreement, with the Federal Trade Commission and the United
States Department of Justice, all reports and other documents required to be
filed by such party under the HSR Act concerning the transactions contemplated
hereby and (b) promptly comply with or cause to be complied with any requests
by the Federal Trade Commission or the United States Department of Justice for
additional information concerning the transactions contemplated by this
Agreement, in each case so that the waiting period applicable to this Agreement
and the transaction contemplated hereby under the HSR Act shall expire as soon
as practicable after the execution and delivery of this Agreement. Each party
hereto agrees to request, and to cooperate with the other party or parties in
requesting, early termination of any applicable waiting period under the HSR
Act. If after the Initial Closing or Option Closing and until the date on which
the Shares are fully converted in accordance with their terms, further filings
are required under the HSR Act so that Purchaser may acquire the Underlying
Shares or otherwise acquire securities pursuant to the Transaction Documents,
the Company will upon the written request of Purchaser, and Purchaser will upon
the written request of the Company, (i) file or cause to be filed, as promptly
as practicable after the receipt of such notice and in no event later than
fifteen Business Days after the receipt of such notice with the Federal Trade
Commission and the United States Department of Justice, all reports and other
documents required to be filed by such party under the HSR Act concerning the
transactions contemplated in such notice, (ii) promptly comply with or cause to
be complied with any requests by the Federal Trade Commission or the United
States Department of Justice for additional information so that the waiting
period applicable thereto under the HSR Act shall expire as soon as
practicable, and (iii) cooperate with the other Parties in requesting, early
termination of any applicable waiting period under the HSR Act. The Company
will reimburse Purchaser for any filing fees in connection with such filings by
Purchaser.
Section 5.5 Notification of Certain Matters. The Company shall give
prompt notice to Purchaser, and Purchaser shall give prompt notice to the
Company, of (a) the occurrence, or failure to occur, of any event that causes
any representation or warranty contained in any Transaction Document to be
untrue or inaccurate in any material respect at any time from the date of this
Agreement to the Initial Closing Date and (b) any failure of the Company or
Purchaser to comply with or satisfy, in any material respect, any covenant,
condition or agreement to be complied with or satisfied by it under any
Transaction Document. The provisions of this Section 5.5 shall survive for so
long as any representation, warranty, covenant, or agreement shall survive
hereunder.
Section 5.6 Board of Directors. The Company shall use its best efforts
to take, or cause to be taken, such action as may be necessary or advisable to
ensure that immediately following the later of (i) the Initial Closing and (ii)
the expiration or termination of the applicable waiting period under the HSR
Act, the Board shall be increased by one (if necessary) and the individual
identified
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<PAGE> 24
by Purchaser to the Company shall be elected as a director of the Company in
accordance with the terms of the Shares.
Section 5.7 Registration Rights Agreement. At the Closing, the Company
agrees to enter into a Registration Rights Agreement in substantially the form
attached hereto as Exhibit 5.7.
Section 5.8 Transfer Restrictions. (a) If Purchaser should decide to
dispose of any of the Shares to be purchased by it or any Underlying Shares to
be issued to it upon the conversion of such Shares, Purchaser understands and
agrees that it may do so only pursuant to an effective registration statement
under the Securities Act or pursuant to an exemption from registration under
the Securities Act. In connection with any offer, resale, pledge or other
transfer (individually and collectively, a "Transfer") of any Shares or
Underlying Shares other than pursuant to an effective registration statement,
the Company may require that the transferor of such Shares or Underlying Shares
provide to the Company an opinion of counsel which opinion shall be reasonably
satisfactory in form and substance to the Company, to the effect that such
Transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act and any
applicable state or foreign securities Laws. Purchaser agrees to the
imprinting, so long as appropriate, of substantially the following legend on
certificates representing the Shares and any Underlying Shares:
THE SECURITIES (THE "SECURITIES") EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER AGREES THAT IT WILL NOT OFFER, RESELL, PLEDGE OR OTHERWISE
TRANSFER (INDIVIDUALLY AND COLLECTIVELY, A "TRANSFER") THE SECURITIES
EVIDENCED HEREBY, EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, OR (B) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT. IF THE PROPOSED TRANSFER
IS TO BE MADE OTHER THAN PURSUANT TO CLAUSE (A) ABOVE, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY AND THE TRANSFER
AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR ANY STATE OR
FOREIGN SECURITIES LAW.
The legend set forth above may be removed if and when the Shares or
Underlying Shares, as the case may be, represented by such certificate are
disposed of pursuant to an effective registration statement under the
Securities Act or the opinion of counsel referred to above has been provided to
the Company. The Share certificates shall also bear any additional legends
required by applicable federal, state or foreign securities Laws, which legends
may be removed when, in the opinion of counsel to the Company, the same are no
longer required under the applicable requirements of such securities Laws.
Purchaser agrees that, in connection with any Transfer of Shares by it pursuant
to an effective registration statement under the Securities Act, it will comply
with all prospectus delivery requirements of the Securities Act. The Company
makes no representation, warranty or agreement as to the availability of any
exemption from registration under the Securities Act with respect to any resale
of Shares or Underlying Shares.
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<PAGE> 25
(b) Purchaser agrees that, without the prior written consent of the
Company, it will not sell or otherwise transfer any Shares to any other person
or entity other than a partner of Purchaser, who, in any event, shall agree to
be bound by this Section 5.8(b), it being understood that the foregoing
provision shall not apply to Underlying Shares. Purchaser agrees to the
imprinting of the following legend on certificates representing the Shares to
indicate the foregoing restriction:
THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER SET FORTH IN THE PURCHASE AGREEMENT DATED AS
OF [DATE] AMONG THE COMPANY AND SCF-IV, L.P., A COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICES OF THE COMPANY.
(c) Purchaser agrees that, without the prior written consent of the
Company, it will not, prior to the earlier of (i) the seventh anniversary of
the Initial Closing, or (ii) the occurrence of a Change of Control, sell or
otherwise transfer any Underlying Shares in a single transaction or series of
related transactions involving a number of shares in the aggregate constituting
in excess of 1% of the Company's issued and outstanding shares of Common Stock
at the time of such sale or transfer (based on the Company's most recent
Exchange Act report filed with the SEC prior to such sale or transfer
disclosing such number of outstanding shares) to any entity which Purchaser
knows competes to a material extent with the Company or is engaged to a
material extent in the energy services or equipment business (an "Industry
Party"), without first offering such shares to the Company on the same terms;
provided that if the Purchaser is selling such shares pursuant to an
underwritten offering, such sale shall be deemed to comply with the foregoing
limitation so long as the managing underwriter advises the Purchaser and the
Company that, based on a reasonable inquiry of all persons to whom shares are
being sold in an amount exceeding the 1% limitation described above (other than
financial or insurance institutions, pension plans or funds or registered
investment companies), no such proposed purchaser is an Industry Party. If,
upon receiving an offer pursuant to the foregoing sentence, the Company does
not notify Purchaser that it wishes to purchase the offered shares within 20
Business Days of receiving such offer, Purchaser may sell such shares on the
terms set forth in the offer within six months thereof, provided that the
purchaser thereof agrees to a standstill agreement substantially similar to
that set forth in Section 5.12 with an 18 month term from the date of such
purchaser's acquisition. If the Company does notify Purchaser that it intends
to purchase the offered shares, it shall deliver payment for such shares
(against delivery of the certificates therefor) within five Business Days of
giving such notice.
Section 5.9 Stock Exchange Listing. Prior to the time the Shares
become convertible in accordance with their terms, the Company shall, at its
expense, procure the listing of the Underlying Shares on all stock exchanges on
which the Common Stock is then listed.
Section 5.10 Access; Confidentiality.
(a) At all times during normal business hours from and after the date
hereof until all of the outstanding Shares have been converted in accordance
with their terms, the Company shall afford Purchaser and its counsel and other
authorized representatives reasonable access to the properties, employees and
officers of the Company and to all books, accounts, tax returns, financial and
other records, including audit work papers, correspondence and contracts of
every kind of the Company as Purchaser may reasonably request.
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<PAGE> 26
(b) Purchaser shall, and shall cause its representatives to, hold
confidential all information relating to the Company or its Subsidiaries it has
received prior to the Initial Closing from the Company or any of its
representatives, or information, if any, it receives after the Initial Closing
from the Company or any of its representatives as a result of or in connection
with Section 5.10(a) hereof or Purchaser's ownership of the Shares; provided,
however, that the foregoing shall not apply to (i) information that is or
becomes generally available to the public other than as a result of a
disclosure by Purchaser or any of its Affiliates or representatives in
violation of this Section 5.10(b), (ii) information that is or becomes
available to Purchaser or any of its representatives on a nonconfidential basis
from a source other than the Company or its Affiliates or representatives,
provided that such source is not known by Purchaser to be bound by a
confidentiality agreement with or other obligation of secrecy to the Company or
any other party, or (iii) information that is required to be disclosed by
Purchaser or any of its representatives as a result of any applicable Law;
provided further, however, that in the event information is required to be
disclosed pursuant to clause (iii), the Person proposing such disclosure shall
provide the Company to the extent practicable an opportunity, reasonably in
advance of any such disclosure, to review and comment on the form and content
of such proposed disclosure. The provisions of this Section 5.10(b) shall
terminate on the first anniversary of the date that all of the outstanding
Shares have been converted in accordance with their terms.
Section 5.11 Issuance of Additional Preferred Stock.
(a) The Company agrees that, from and after the date of this
Agreement, it will not issue any Permitted Parity Securities (as defined in the
Certificate of Designation for the Series B Preferred Stock), except for (i)
the issuance of the Option Shares to Purchaser or its Affiliate pursuant to
this Agreement, or (ii) the issuance of a number of shares of Permitted Parity
Securities issued at a price of $1,000 cash per share in a single series within
eighteen months of the Initial Closing equal to 35,000 less the number of
Option Shares purchased hereunder (or, if the option period referred to in
Section 2.2(a) shall not yet have expired, less the full 15,000 Option Shares);
provided that if such Permitted Parity Securities are issued after the first
anniversary of the Initial Closing, then Purchaser shall be entitled to prior
written notice of such proposed issuance and the terms thereof and shall have a
right of first refusal option to purchase any or all of such securities on the
same terms as offered to the proposed purchaser, which option may be exercised
by Purchaser by notice to the Company at any time during the 20 Business Days
following the receipt of the Company's notice. If Purchaser elects to exercise
such option, the closing for such purchase shall be at a time to be mutually
agreed between the Company and Purchaser but not later than the 15th day
following the receipt of any required regulatory approvals. If Purchaser does
not elect to exercise such option within the 20 Business Day period (or the
closing of the exercise of such option does not occur within the period
described in the previous sentence for any reason not caused by the Company),
the Company may sell such securities on the terms set forth in its notice, but
only until the expiration of the eighteen month period specified in clause (ii)
above.
(b) The Company agrees that if it issues any Permitted Parity
Securities (other than Option Shares) pursuant to the foregoing that have terms
that the Purchaser reasonably believes to be more favorable to the purchaser
thereof than the terms of the Initial Shares, then the Purchaser shall have the
right to exchange all of the Shares purchased hereunder (or, if such issuance
occurs
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prior to the expiration of the option period specified in Section 2.2(a) and
the Option Closing has not occurred, all of the Shares that may be purchased
hereunder if Purchaser agrees to pay the applicable purchase price therefor
upon such exchange) on a share for share basis.
Section 5.12 Standstill Agreement. Purchaser hereby agrees that, for a
period commencing on the date hereof and ending on the earlier of the third
anniversary of the Initial Closing or the occurrence of a Change of Control, it
will not:
(a) directly or indirectly, take any action to acquire, in the
aggregate, beneficial ownership of more than 4% of the Company's outstanding
Common Stock or Voting Stock (based on the Company's most recent Exchange Act
report filed with the SEC prior to such acquisition disclosing such number of
outstanding shares), excluding from such ownership the Shares or the Underlying
Shares or any other Common Stock or Voting Stock acquired directly from the
Company;
(b) form or encourage the formation of a "group" within the meaning of
Section 13(d)(3) of the Exchange Act to acquire, change or influence control of
the Company;
(c) solicit, or participate in any "solicitation" of "proxies" or
become a "participant" in any "election contest" or consent solicitation (as
such terms are defined or used under Regulation 14A under the Exchange Act)
with respect to the Company in opposition to the recommendation of a majority
of the Board;
(d) initiate, propose or otherwise solicit stockholders for the
approval of, one or more stockholder proposals with respect to the Company or
induce any Person to initiate any stockholder proposal, in each case in
opposition to the recommendation of a majority of the Board;
(e) deposit any Voting Stock in a voting trust or subject them to a
voting agreement or other agreement or arrangement with respect to the voting
of such Voting Stock, other than any such trust, agreement or other arrangement
involving no Persons other than the Purchaser, its partners or Affiliates of
Purchaser; or
(f) solicit, propose or negotiate with any other Person (including the
Company) with respect to any form of Business Combination or other
extraordinary transaction with the Company or any of its Subsidiaries, in each
case which would result in a Change of Control, or solicit, make or propose or
negotiate with any other Person with respect to or announce an intent to make,
any tender offer or exchange offer for any securities of the Company, in each
case in opposition to the recommendation of a majority of the Board, or
publicly disclose an intent, purpose, plan or proposal with respect to the
Company, any of its Subsidiaries, or any securities or assets of the Company,
that would violate the provisions of this Section 5.12(f);
provided, however, that nothing in this Section 5.12 shall be deemed to limit
in any way (i) the right of Purchaser to exercise its voting rights in any
manner it sees fit with respect to the Shares, the Underlying Shares or any
other shares of Voting Stock acquired by Purchaser in accordance with
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this Agreement, or (ii) the right of any director elected to the Board as a
representative of the holders of the Shares to take any action he believes
necessary to fulfill his fiduciary duties.
Section 5.13 Indemnification.
(a) The Company agrees to indemnify the Purchaser and its Affiliates
and hold the Purchaser and its Affiliates harmless from and against any and all
liabilities, losses, damages, costs and expenses of any kind (including,
without limitation, the reasonable fees and disbursements of Purchaser's
counsel in connection with any investigative, administrative or judicial
proceeding), which may be incurred by Purchaser or such Affiliates as a result
of any claims made against Purchaser or such Affiliates by any Person that
relate to or arise out of (i) any breach by the Company of any of its
representations, warranties or covenants contained in this Agreement or in the
Transaction Documents, or (ii) any litigation, investigation or proceeding
instituted by any Person with respect to this Agreement or the Shares or
Underlying Shares (excluding, however, any such litigation, investigation or
proceeding which arises solely from the acts or omissions of Purchaser or its
Affiliates). Notwithstanding anything to the contrary above, it is expressly
understood between the parties hereto that the Company pursuant to this Section
5.13 shall not be responsible for or assume any of the investment risk
associated with any securities purchased hereunder.
(b) Any Person entitled to indemnification hereunder will (i) give
prompt notice to the Company of any claim with respect to which it seeks
indemnification (but omission of such notice shall not relieve the Company from
liability hereunder except to the extent it is actually prejudiced by such
failure to give notice) and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest may exist between such indemnified party and
the Company with respect to such claim, permit the Company to assume the
defense of such claim with counsel reasonably satisfactory to the indemnified
party. If such defense is not assumed by the Company, the Company will not be
subject to any liability for any settlement made without its consent (but such
consent will not be unreasonably withheld). The Company will not consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of an unconditional release from all liability in respect to
such claim or litigation. If the Company elects not to or is not entitled to
assume the defense of a claim, it will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified with respect to
such claim, unless an actual conflict of interest exists between such
indemnified party and any other of such indemnified parties with respect to
such claim, in which event the Company will be obligated to pay the fees and
expenses of such additional counsel or counsels.
Section 5.14 Rights Plan. The Company will not further amend the
Rights Plan, or adopt any similar rights plan or rights agreement, in a manner
that conflicts with, or restricts the Purchaser to a greater extent than, the
provisions hereof, including the representation set forth in Section 3.18.
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ARTICLE VI.
CONDITIONS PRECEDENT TO THE CLOSINGS
Section 6.1 Conditions Precedent to Each Party's Obligation. The
respective obligations of Purchaser and the Company to effect the transactions
contemplated hereby at each Closing are subject to the satisfaction on or prior
to the applicable Closing Date of the following conditions:
(a) Approvals. All Approvals of, or expirations of waiting periods
imposed by, any Governmental Entity necessary for the consummation of the
transactions contemplated by this Agreement at such Closing shall have been
filed, occurred, or been obtained, as applicable.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction, or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated hereby shall be in effect.
(c) No Action. No action shall have been taken nor any statute, rule,
or regulation shall have been enacted by any Governmental Entity that makes the
consummation of the transactions contemplated hereby illegal.
Section 6.2 Conditions Precedent to Obligation of Purchaser. The
obligation of Purchaser to effect the transactions contemplated by this
Agreement at each Closing is subject to the satisfaction of the following
conditions unless waived, in whole or in part, by Purchaser:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement that are qualified by a materiality
standard or a Material Adverse Effect qualification shall be true and correct
in all respects and the representations and warranties of the Company set forth
in this Agreement that are not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of the
applicable Closing Date as though made on and as of the applicable Closing
Date, and Purchaser shall have received a certificate to the foregoing effect
signed on behalf of the Company and its Subsidiaries by the chief executive
officer or by the chief financial officer of the Company.
(b) Performance of Obligations. The Company and its Subsidiaries shall
have performed in all material respects all obligations required to be
performed by it or them under this Agreement prior to the applicable Closing
Date, and Purchaser shall have received a certificate to such effect signed on
behalf of the Company and its Subsidiaries by the chief executive officer or by
the chief financial officer of the Company.
(c) No Adverse Action or Decision. There shall be no action, suit,
investigation or proceeding, pending or threatened, against or affecting the
Company or any of its Subsidiaries or any of their respective properties or
rights, or any of their Affiliates, officers or directors, before any court,
arbitrator or administrative or governmental body which (i) seeks to restrain,
enjoin or prevent the consummation of or otherwise affect the transactions
contemplated by this Agreement or the
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other Transaction Documents or (ii) questions the validity or legality of any
such transaction or seeks to recover damages or to obtain other relief in
connection with any such transaction.
(d) Consents Under Agreements. Purchaser shall have been furnished
with evidence of all consents or approvals required to be obtained by the
Company or any of its Subsidiaries with respect to the consummation of each of
the transactions contemplated by this Agreement the failure of which to obtain
reasonably could be expected to result in a Material Adverse Effect, and each
such consent or approval shall be unconditional.
(e) Legal Opinions. At the Initial Closing, Purchaser shall have
received from Haynes and Boone, LLP an opinion dated the Initial Closing Date,
in the form of Exhibit 6.2(e)(i) and, at the Option Closing, Purchaser shall
have received from Haynes and Boone, LLP, an opinion dated the Option Closing
Date, in the form of Exhibit 6.2(e)(ii).
(f) HSR Filings. The Company shall have filed all reports required to
be filed by the Company under the HSR Act concerning the transactions
contemplated hereby.
(g) Closing Deliveries. All documents, instruments, certificates or
other items required to be delivered by the Company pursuant to Section 7.2(b),
in the case of the Initial Closing, or Section 7.3(b), in the case of the
Option Closing, shall have been delivered.
(h) Certificate of Designation. The Certificate of Designation
relating to the Series B Preferred Stock, in the case of the Initial Closing,
and the Series C Preferred Stock, in the case of the Option Closing, shall have
been filed with the Delaware Secretary of State.
Section 6.3 Conditions Precedent to Obligations of Company. The
obligation of the Company to effect the transactions contemplated by this
Agreement at each Closing is subject to the satisfaction of the following
conditions unless waived, in whole or in part, by the Company:
(a) Representations and Warranties. The representations and warranties
of Purchaser set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the applicable
Closing Date as though made on and as of the applicable Closing Date, and the
Company shall have received a certificate to the foregoing effect signed on
behalf of Purchaser by its general partner.
(b) Performance of Obligations of Purchaser. Purchaser shall have
performed in all material respects the obligations required to be performed by
it under this Agreement prior to the applicable Closing Date, and the Company
shall have received a certificate to such effect signed on behalf of Purchaser
by its general partner.
(c) Closing Deliveries. All documents, instruments, certificates or
other items required to be delivered by Purchaser pursuant to Section 7.2(a),
in the case of the Initial Closing, or Section 7.3(a), in the case of the
Option Closing, shall have been delivered.
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(d) HSR Filings. The Purchaser shall have filed all reports required
to be filed by the Purchaser under the HSR Act concerning the transactions
contemplated hereby.
ARTICLE VII.
THE CLOSINGS
Section 7.1 The Closings.
(a) Subject to the satisfaction or waiver of the conditions set forth
in Article VI, the purchase and sale of the Initial Shares to be purchased by
Purchaser hereunder (the "Initial Closing") will take place at the offices of
Vinson & Elkins L.L.P., 1001 Fannin, Houston, Texas, 77002, at 10:00 a.m.,
local time, on the later of the May 7, 1999 or the third Business Day following
the satisfaction or waiver (subject to applicable Law) of each of the
conditions to the obligations of the parties to effect the transactions to
occur at the Initial Closing as set forth in Article VI, or on such other date
as mutually agreed to by the parties hereto. The date on which the Initial
Closing occurs is herein referred to as the "Initial Closing Date." All closing
transactions at the Initial Closing shall be deemed to have occurred
simultaneously.
(b) Subject to the satisfaction or waiver of the conditions set forth
in Article VI, the purchase and sale of the Option Shares to be purchased by
Purchaser hereunder (the "Option Closing") will take place at the offices of
Vinson & Elkins L.L.P., 1001 Fannin, Houston, Texas, 77002, at 10:00 a.m.,
local time, on the Business Day specified in the Exercise Notice, or on such
other date as mutually agreed to by the parties hereto. The date on which the
Option Closing occurs is herein referred to as the "Option Closing Date". All
closing transactions at the Option Closing shall be deemed to have occurred
simultaneously. The Initial Closing and the Option Closing are sometimes
referred to herein as the "Closings" or individually as a "Closing" and the
Initial Closing Date and the Option Closing Date are sometimes referred to
herein as the "Closing Dates" or individually as a "Closing Date".
Section 7.2 Actions to Occur at the Initial Closing.
(a) At the Initial Closing, Purchaser shall deliver to the Company the
following:
(i) Purchase Price. An amount equal to the Initial Purchase Price
for the Initial Shares in accordance with Article II.
(ii) Certificates. The certificates described in Sections 6.3(a)
and 6.3(b).
(iii) Registration Rights Agreement. The Registration Rights
Agreement, duly executed by Purchaser.
(b) At the Initial Closing, the Company shall deliver to Purchaser the
following:
(i) Share Certificates. Certificates representing the Initial
Shares.
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(ii) Registration Rights Agreement. The Registration Rights
Agreement, duly executed.
(iii) Certificates. The certificates described in Sections 6.2(a)
and 6.2(b).
(iv) Consents Under Agreements. The original of each consent or
approval, if any, pursuant to Section 6.2(d).
(v) Legal Opinions. The opinion of counsel referred to in Section
6.2(e).
Section 7.3 Actions to Occur at the Option Closing.
(a) At the Option Closing, Purchaser shall deliver to the Company the
following:
(i) Purchase Price. An amount equal to the Option Purchase Price
for the Option Shares being purchased in accordance with Article II.
(ii) Certificates. The certificates described in Sections 6.3(a)
and 6.3(b).
(b) At the Option Closing, the Company shall deliver to Purchaser the
following:
(i) Share Certificates. Certificates representing the Option
Shares being purchased.
(ii) Certificates. The certificates described in Sections 6.2(a)
and 6.2(b).
(iii) Legal Opinions. The opinion of counsel referred to in
Section 6.2(e).
ARTICLE VIII.
TERMINATION
Section 8.1 Termination. This Agreement may be terminated prior to the
Initial Closing:
(a) by mutual consent of Purchaser and the Company;
(b) by either Purchaser or the Company:
(i) in the event of a breach by the other party of any
representation, warranty, covenant or agreement contained in this
Agreement which (A) would give rise to the failure of a condition set
forth in Section 6.2 or 6.3, and (B) cannot be cured or, if curable,
has not been cured within 20 days following receipt by the breaching
party of written notice of such breach;
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(ii) if a court of competent jurisdiction or other Governmental
Entity shall have issued an order, decree, or ruling or taken any
other action (which order, decree, or ruling Purchaser and the Company
shall use all commercially reasonable efforts to lift), in each case
permanently restraining, enjoining, or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree,
ruling, or other action shall have become final and nonappealable;
provided, however, that the right to terminate this Agreement under
this clause (ii) shall not be available to any party whose breach of
this Agreement has been the cause of, or resulted in, such order,
decree, ruling or other action; or
(iii) if the Initial Closing shall not have occurred by May 14,
1999, provided, however, that the right to terminate this Agreement
under this clause (iii) shall not be available to any party whose
breach of this Agreement has been the cause of, or resulted in, the
failure of the Initial Closing to occur on or before such date.
The right of any party hereto to terminate this Agreement pursuant to
this Section 8.1 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers, directors,
employees, accountants, consultants, legal counsel, agents, or other
representatives whether prior to or after the execution of this Agreement.
Section 8.2 Effect of Termination. In the event of the termination of
this Agreement, written notice thereof shall forthwith be given to the other
party specifying the provision hereof pursuant to which such termination is
made, and this Agreement shall forthwith become null and void, except for
liability of a party arising out of a willful breach of, or misrepresentation
under, this Agreement prior to such termination (but in no event shall any
party hereto be entitled to recover punitive, consequential, special or
exemplary damages).
ARTICLE IX.
RECOVERY OF FEES
Any party who shall obtain a final judgment in a court of competent
jurisdiction for the payment of damages by another party for a breach of this
Agreement or any other Transaction Document shall be entitled to recover
reasonable attorneys' fees and court costs incurred in connection with the
obtaining of such judgment.
ARTICLE X.
MISCELLANEOUS
Section 10.1 Survival of Provisions.
(a) The representations and warranties of the Company and Purchaser
made herein or in any other Transaction Document and the covenants of the
Company and Purchaser to be complied with on or prior to the Closings shall
remain operative and in full force and effect pursuant to their terms,
regardless of (x) any investigation made by or on behalf of Purchaser or the
Company, as the case may be, or (y) acceptance of any of the Shares and payment
by Purchaser therefor, until the date
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which is 18 months following the Initial Closing; provided that the
representations and warranties contained in Sections 3.1, 3.3, 3.4, 3.12 and
3.18 shall survive until the sixth anniversary of the Initial Closing; and
provided, further, that such representations and warranties shall survive as to
any claim or demand made prior to their termination date until such claim or
demand is fully paid or otherwise resolved by the parties hereto in writing or
otherwise.
(b) The covenants and agreements of the Company and Purchaser
contained in this Agreement that, by their terms, are to be performed or
complied with after either Closing Date will survive until the period specified
herein with respect to such covenant or agreement; and provided, further, that
such covenants and agreements shall survive as to any claim or demand made
prior to their termination date until such claim or demand is fully paid or
otherwise resolved by the parties hereto in writing or otherwise.
Section 10.2 No Waiver; Modification in Writing. No failure or delay
on the part of the Company or Purchaser in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The provisions of this Agreement, including the provisions of this sentence,
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given without the written
consent of the Company and Purchaser. Any amendment, supplement or modification
of or to any provision of this Agreement, or any waiver of any provision of
this Agreement, shall be effective only in the specific instance and for the
specific purpose for which made or given. Except where notice is specifically
required by this Agreement, no notice to or demand on any party hereto in any
case shall entitle the other party to any other or further notice or demand in
similar or other circumstances.
Section 10.3 Specific Performance. The parties recognize that in the
event the Company or Purchaser should refuse to perform under the provisions of
this Agreement or any other Transaction Document, monetary damages alone will
not be adequate. Purchaser or the Company, as the case may be, shall therefore
be entitled, in addition to any other remedies which may be available,
including money damages, to obtain specific performance of the terms of this
Agreement. In the event of any action to enforce this Agreement or any other
Transaction Document specifically, the Company and Purchaser hereby waive the
defense that there is an adequate remedy at law.
Section 10.4 Severability. If any term or other provision of this
Agreement is invalid, illegal, or incapable of being enforced by any rule of
applicable law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated herein are not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal, or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated herein are consummated as originally contemplated to the fullest
extent possible.
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<PAGE> 35
Section 10.5 Fees and Expenses. Within 30 days after the Initial
Closing, the Company shall pay to Purchaser an amount equal to Purchaser's
Expenses through the Initial Closing Date (the amount of such costs and
expenses shall have been furnished to the Company at least within 25 days after
the Initial Closing Date), and within 30 days after the Option Closing, the
Company shall pay to Purchaser an amount equal to Purchaser's Expenses through
the Option Closing Date that have not been reimbursed pursuant to the preceding
sentence (the amount of such costs and expenses shall have been furnished to
the Company at least within 25 days after the Option Closing Date); provided,
however, that all such Purchaser's Expenses to be paid by the Company pursuant
to the foregoing (other than fees payable in connection with filings under the
HSR Act pursuant to Section 5.4) shall not in the aggregate exceed $150,000.
Section 10.6 Parties in Interest. This Agreement shall be binding upon
and, except as provided below, inure solely to the benefit of each party hereto
and their successors and assigns, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
Section 10.7 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
facsimile or mailed by registered or certified mail (return receipt requested)
or Federal Express or another recognized overnight courier to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) If to Purchaser, to:
SCF-IV, L.P.
600 Travis, Suite 6600
Houston, Texas 77002
Attention: David C. Baldwin
Facsimile: (713) 227-7850
(b) If to the Company, to:
Input/Output, Inc.
11104 West Airport Boulevard
Stafford, Texas 77477
Attention: Chairman
Facsimile: (281) 879-3652
Any of the above addresses may be changed at any time by notice given
as provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered, on the date of receipt, if telecopied, three Business Days
after the date of mailing, if mailed by registered or certified mail, return
receipt requested, and one Business Day after the date of sending, if sent by
Federal Express or other recognized overnight courier.
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<PAGE> 36
Section 10.8 Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
Section 10.9 Entire Agreement; Termination of Confidentiality
Agreement. This Agreement (which term shall be deemed to include the Exhibits
and Schedules hereto and the other certificates, documents and instruments
delivered hereunder) and the other Transaction Documents constitute the entire
agreement of the parties hereto with respect to the subject matter hereof and
thereof and supersede all prior agreements, letters of intent and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and thereof. There are no representations or warranties,
agreements, or covenants of the parties with respect to the subject matter
hereof and thereof other than those expressly set forth in this Agreement and
the other Transaction Documents. The parties hereby agree that the terms of
this Agreement supersede and terminate the provisions of the Confidentiality
and Standstill Agreement dated as of February 24, 1999 between the Company and
SCF Partners, provided that if this Agreement is terminated prior to the
Initial Closing, such agreement shall be reinstated pursuant to its terms.
Section 10.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING
EFFECT TO ANY CONFLICTS OF LAW PROVISIONS.
Section 10.11 Public Announcements. The Company and Purchaser shall
consult with each other before issuing any press release or otherwise making
any public statements with respect to this Agreement or the transactions
contemplated hereby, except for statements required by Law or by any listing
agreements with or rules of any national securities exchange or made in
disclosures reasonably determined as required to be filed pursuant to the
Securities Act or the Exchange Act.
Section 10.12 Assignment. Neither this Agreement nor any of the
rights, interests, or obligations hereunder shall be assigned by any of the
parties hereto, whether by operation of Law or otherwise.
Section 10.13 Headings. The headings of this Agreement are for
convenience of reference only and are not part of the substance of this
Agreement.
[The remainder of this page is intentionally left blank.]
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<PAGE> 37
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer as of the date first
written above.
INPUT/OUTPUT, INC.
By: /s/ W.J. Zeringue
------------------------------------------
Name: W.J. Zeringue
----------------------------------------
Title: Chief Executive Officer
---------------------------------------
SCF-IV, L.P.
By: SCF-IV, G.P., Limited Partnership,
its General Partner
By: L. E. Simmons & Associates, Incorporated,
its General Partner
By: /s/ David C. Baldwin
------------------------------------------
Name: David C. Baldwin
----------------------------------------
Title: Managing Director
---------------------------------------
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<PAGE> 1
EXHIBIT B
FORM OF
CERTIFICATE OF DESIGNATION
OF
SERIES B PREFERRED STOCK
OF
INPUT/OUTPUT, INC.
Pursuant to Section 151(g) of the Delaware General Corporation Law,
Input/Output, Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Company"), hereby certifies that the following
resolution was duly adopted by the Board of Directors of the Company on April
21, 1999, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Company (the "Certificate of
Incorporation"), which authorizes the issuance of up to 5,000,000 shares of
preferred stock, $0.01 par value.
RESOLVED, that pursuant to authority expressly granted to and vested
in the Board of Directors of the Company and pursuant to the provisions of the
Certificate of Incorporation, the Board of Directors hereby creates a series of
preferred stock, herein designated and authorized as the Series B Preferred
Stock, $0.01 par value per share, which shall consist of 40,000 of the
5,000,000 shares of preferred stock which the Company now has authority to
issue, and the Board of Directors hereby fixes the powers, designations,
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations and restrictions
thereof as follows:
1. Number and Rank. The number of shares constituting the Series B
Preferred Stock shall be 40,000. The Series B Preferred Stock shall rank senior
to the Company's Series A Preferred Stock with respect to the payment of
dividends and distributions on Liquidation.
2. Definitions. Unless the context otherwise requires, when used
herein the following terms shall have the meaning indicated.
"Adjusted Stated Value" with respect to each share of Series B
Preferred Stock means the Stated Value (a) increased at an annual rate of 8%
thereof, compounded quarterly, less (b) the amount of cash dividends actually
paid with respect to such share, in each case commencing on the Issue Date and
accruing through the applicable Conversion Date, or, in the case of a
redemption being effected pursuant to Sections 6(H) or 6(I), through the date
of payment of the redemption price.
"Affiliate" means with respect to any Person, any other Person
directly, or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person. For purposes of this
definition, the term "control" (and correlative terms "controlling,"
"controlled
<PAGE> 2
by" and "under common control with") means possession of the power, whether by
contract, equity ownership or otherwise, to direct the policies or management
of a Person.
"Average Market Price" means, for a given security, the average Market
Price for such security for the ten Trading Day period ending on and including
the Trading Day prior to the date of determination; provided, however, that if
during such period the Company takes any action or an action becomes effective
that would require an adjustment to the Conversion Price pursuant to Section 7
hereof, then such Average Market Price shall be appropriately adjusted to
reflect such action in a manner consistent with the adjustments set forth in
Section 7.
"Beneficially Own" or "Beneficial Ownership" has the meaning set forth
in Rules 13d-3 and 13d-5 of the Exchange Act.
"Board" means the Board of Directors of the Company.
"Business Combination" means (i) any consolidation or merger of the
Company with or into any Person or (ii) any Change of Control Stock Issuance,
or (iii) the sale, assignment conveyance, transfer, lease or other disposition
by the Company of all or substantially all of its assets followed by a
liquidation of the Company.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in Houston,
Texas generally are authorized or required by law or other governmental actions
to close.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated) of capital or capital stock of such Person and (ii) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Certificate" means the Certificate of Incorporation of the Company,
as amended (including any certificate of designation establishing a series of
preferred stock).
"Certificate of Designation" means this Certificate of Designation of
the Series B Preferred Stock.
"Change of Control Stock Issuance" shall mean any issuance, in a
single transaction or series of related transactions, by the Company of shares
of Common Stock or Common Stock Equivalents in connection with the acquisition
of assets (including cash) or securities by the Company or a Subsidiary of the
Company (including by way of a merger of a Subsidiary of the Company with or
into a Person), except where (i) the shareholders of the Company immediately
prior to such issuance own (in substantially the same proportion relative to
each other as such shareholders owned the Common Stock or Voting Stock of the
Company, as the case may be, immediately prior to such consummation) (x) more
than 50% of the Voting Stock of the Company immediately after such issuance,
and (y) more than 50% of the outstanding Common Stock immediately after such
issuance, (ii) the members of the Board immediately prior to entering into the
agreement relating to such
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<PAGE> 3
issuance (or if no such agreement is entered into, then immediately prior to
the consummation of such issuance) constitute at least a majority of the Board
immediately after such issuance, with no agreements or arrangements in place
immediately after such consummation that would result in the members of the
Board immediately prior to the entering into the agreement relating to such
issuance ceasing to constitute at least a majority of the Board and (iii) no
Person or Group of Persons immediately after such issuance is the Beneficial
Owner of 40% or more of the total outstanding Voting Stock of the Company or
Common Stock. In calculating the percentage of the Voting Stock of the Company
owned by the shareholders of the Company immediately prior to an issuance of
Common Stock or Common Stock Equivalents in which there is more than one class
or series of Voting Stock, the percentage of the Voting Stock shall be
calculated based on the number of votes eligible to be cast in the election of
the directors of the Company generally. In calculating the percentages of
Voting Stock and Common Stock owned for purposes of this definition, such
calculation shall be calculated on a basis assuming the exercise or conversion
in full of all Common Stock Equivalents and on a basis disregarding all Common
Stock Equivalents, and the percentage which results in the lower percentage
owned by the shareholders of the Company shall apply in the application of
clause (i) above.
"Common Stock" means the Company's common stock, par value $.01 per
share, and any Capital Stock for or into which such Common Stock hereafter is
exchanged, converted, reclassified or recapitalized by the Company or pursuant
to a Business Combination to which the Company is a party.
"Common Stock Equivalents" means (without duplication with any other
Common Stock or Common Stock Equivalents) rights, warrants, options,
convertible securities or exchangeable securities, exercisable for or
convertible or exchangeable into, directly or indirectly, Common Stock, whether
at the time of issuance or upon the passage of time or the occurrence of some
future event.
"Company" means Input/Output, Inc. a Delaware corporation.
"Conversion Date" is defined in Section 6(D).
"Conversion Price" means $8.00, as adjusted from time to time in
accordance with Section 7.
"Conversion Ratio" is defined in Section 6(C).
"DGCL" means the General Corporation Law of the State of Delaware, as
amended, or any successor statute or other legislation.
"Dividend Payment Date" is defined in Section 3(A).
"Dividend Period" is defined in Section 3(A).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute, and the rules and regulations promulgated thereunder.
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<PAGE> 4
"Excluded Stock" means (i) shares of Common Stock issued by the
Company as a stock dividend payable in shares of Common Stock, or upon any
subdivision or split-up of the outstanding shares of Capital Stock in each case
which is subject to Section 7(B), or upon conversion of shares of Capital Stock
(but not the issuance of such Capital Stock which will be subject to the
provisions of Section 7(A)(iii)), (ii) shares of Common Stock to be issued to
employees, directors, consultants and advisors of the Company pursuant to Stock
Plans in accordance with their respective terms.
"Group" means a group as contemplated by Section 13(d)(3) of the
Exchange Act.
"Holder" means a holder of record of Series B Preferred Stock.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"HSR Expiration Date" shall mean the expiration or earlier termination
of the applicable waiting period under the HSR Act relating to the transaction
described in the filings referred to in Section 5.4 of the Purchase Agreement.
"Initial Conversion Date" means the first to occur of any of the
following: (i) _____________, 2002 [third anniversary of the Issue Date], (ii)
an agreement providing for a Business Combination is approved by the Board or a
Business Combination is consummated, (iii) a Tender Offer for Common Stock is
approved or recommended by the Board or (iv) there is a redemption, repurchase
or reacquisition by the Company of Rights issued pursuant to the Rights
Agreement or any waiver of the application of the Rights Agreement to any
Beneficial Owner other than Purchaser or its Affiliates except in the case of
this clause (iv) as approved by the Purchaser's representative to the Board.
"Issue Date" means with respect to any shares of Series B Preferred
Stock the original date of issuance of such shares of Series B Preferred Stock.
"Junior Securities" means Capital Stock that, with respect to
dividends and distributions upon Liquidation, ranks junior to the Series B
Preferred Stock.
"Liquidation" means the voluntary or involuntary liquidation,
dissolution or winding up of the Company; provided, however, that a merger or
consolidation shall not be deemed a Liquidation nor shall the sale of assets
not requiring shareholder approval be deemed to be a Liquidation.
"Liquidation Preference" is defined in Section 5.
"Mandatory Conversion Date" is defined in Section 6(B).
"Market Price" means, with respect to a particular security, on any
given day, the last reported sale price regular way or, in case no such
reported sale takes place on such day, the average of the last closing bid and
asked prices regular way, in either case on the principal national securities
exchange on which the applicable security is listed or admitted to trading, or
if not listed or admitted to trading on any national securities exchange, (i)
the closing sale price for such day reported by the
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Nasdaq Stock Market if such security is traded over-the-counter and quoted in
the Nasdaq Stock Market, or (ii) if such security is so traded, but not so
quoted, the average of the closing reported bid and asked prices of such
security as reported by the Nasdaq Stock Market or any comparable system, or
(iii) if such security is not listed on the Nasdaq Stock Market or any
comparable system but is actively traded, the average of the closing bid and
asked prices as furnished by two members of the National Association of
Securities Dealers, Inc. selected from time to time by the Company for that
purpose. If such security is not listed and traded in a manner that the
quotations referred to above are available for the period required hereunder,
the Market Price shall be deemed to be the fair value per share of such
security as determined by a nationally recognized investment banking firm
selected by the Board and reasonably acceptable to the Holders of a majority of
the outstanding shares of Series B Preferred Stock.
"Ordinary Cash Dividends" means any cash dividend or distribution
which, when combined on a per share of Common Stock basis with the per share
amounts of all other cash dividends and distributions paid on the Common Stock
during the 365-day period ending on the date of declaration of such dividend or
distribution (as adjusted to appropriately reflect any of the events referred
to in Section 7 and excluding cash dividends or distributions that resulted in
an adjustment to the Conversion Price), does not exceed 5% of the Market Price
of a share of Common Stock on the Trading Day immediately preceding the date of
declaration of such dividend or distribution.
"Parity Securities" means Capital Stock that, with respect to
dividends or distributions upon Liquidation, is pari passu with the Series B
Preferred Stock.
"Permitted Parity Securities" means up to 35,000 shares of Preferred
Stock of the Company constituting no more than two series of Preferred Stock,
each share of which (i) has a liquidation preference of not more than $1,000
per share exclusive of accrued and unpaid dividends, (ii) has a dividend rate
of not more than one percent per annum, (iii) has no more than one vote per
share with respect to matters on which it votes together with the Series B
Preferred Stock and other Permitted Parity Securities as a single class and
(iv) is pari passu with the Series B Preferred Stock with respect to the
payment of dividends and distributions upon Liquidation. The Series C Preferred
Stock that may be issued pursuant to the Purchase Agreement shall be considered
Permitted Parity Securities for purposes of the foregoing.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, limited liability company, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Pro Rata Repurchase" means any purchase of shares of Common Stock by
the Company or any Affiliate thereof pursuant to any tender offer or exchange
offer subject to Section 13(e) of the Exchange Act, or pursuant to any other
offer available to substantially all holders of Common Stock, whether for cash,
shares of capital stock of the Company, other securities of the Company,
evidences of indebtedness of the Company or any other person or any other
property (including, without limitation, shares of capital stock, other
securities or evidences of indebtedness of a subsidiary of the Company), or any
combination thereof; provided, however, that "Pro Rata Repurchase" shall not
include any purchase of shares by the Company or any Affiliate thereof made in
accordance with
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the requirements of Rule 10b-18 as in effect under the Exchange Act. The
"effective date" of a Pro Rata Repurchase shall mean the date of acceptance of
shares for purchase or exchange under any tender or exchange offer which is a
Pro Rata Repurchase or the date of purchase with respect to any Pro Rata
Repurchase that is not a tender or exchange offer.
"Purchase Agreement" means the Purchase Agreement dated as of April
21, 1999 between the Company and the Purchaser providing for the purchase by
the Purchaser of 40,000 shares of Series B Preferred Stock and up to 15,000
shares of Series C Preferred Stock from the Company, including all schedules
and exhibits thereto.
"Purchaser" means SCF-IV, L.P., a Delaware limited partnership.
"Record Date" is defined in Section 3(A).
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the date of the Initial Closing under the Purchase
Agreement between the Company and the Purchaser providing for certain
registration rights under the Securities Act with respect to the Common Stock
into which the Series B Preferred Stock and Series C Preferred Stock may be
converted.
"Rights Agreement" has the meaning set forth in Section 6(G).
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.
"Senior Securities" means Capital Stock that, with respect to
dividends or distributions upon Liquidation, ranks senior to the Series B
Preferred Stock.
"Series C Preferred Stock" means the Series C Preferred Stock of the
Company that may be issued to Purchaser pursuant to the Purchase Agreement.
"Stated Value" is an amount equal to $1,000.00 per share of Series B
Preferred Stock.
"Stock Plans" means the Company's stock option, stock incentive,
restricted stock, employee stock purchase or other similar plans, in each case
that have been approved by the Company's shareholders.
"Subsidiary" of a Person means (i) a corporation, a majority of whose
stock with voting power, under ordinary circumstances, to elect directors is at
the time of determination, directly or indirectly, owned by such Person or by
one or more Subsidiaries of such Person, or (ii) any other entity (other than a
corporation) in which such Person or one or more Subsidiaries of such Person,
directly or indirectly, at the date of determination thereof has a majority
ownership interest or, with respect to a limited partnership, is a general
partner of such limited partnership.
"Tender Offer" means any transaction to which Regulation 14D of the
Exchange Act applies.
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"Trading Day" means a day on which the principal market with respect
to the security in question is regularly scheduled to be open for trading, or
if there is not such principal market, then a day on which the New York Stock
Exchange is regularly scheduled to be open for trading.
"Voting Stock" of a Person means Capital Stock of such Person of the
class or classes pursuant to which the holders thereof have the general voting
power under ordinary circumstances to vote in the election of the board of
directors, managers or trustees of such Person.
The foregoing definitions will be equally applicable to both the
singular and plural forms of the defined terms.
3. Dividends and Distributions.
(A) The holders of Series B Preferred Stock shall be entitled
to receive out of the assets of the Company legally available for that
purpose, cumulative preferential cash dividends at a rate per annum of
one percent (1%) of the Stated Value (equivalent to $10 per annum or
$2.50 per quarter) for each share of Series B Preferred Stock, and,
except as provided in Section 3(B), no more, to be paid in accordance
with the terms of this Section 3. Such dividends shall be cumulative
from the Issue Date and shall be payable in arrears, when and as
declared by the Board, on March 31, June 30, September 30 and December
31 of each year (each such date being herein referred to as a
"Dividend Payment Date"), commencing on June 30, 1999; provided that
if any Dividend Payment Date shall not be a Business Day, then the
Dividend Payment Date shall be on the next succeeding day that is a
Business Day. The period from the Issue Date to the next Dividend
Payment Date and each quarterly period between consecutive Dividend
Payment Dates shall hereinafter be referred to as "Dividend Periods."
Dividends for the initial Dividend Period shall be pro rated on a
daily basis commencing on and including the Issue Date on the basis of
a 360-day year. Each such dividend shall be paid to the holders of
record of the Series B Preferred Stock as their names appear on the
share register of the Company on the corresponding Record Date. As
used above, the term "Record Date" means, with respect to the dividend
payable on March 31, June 30, September 30 and December 31,
respectively, of each year, the preceding March 15, June 15, September
15 and December 15, or such other record date designated by the Board
with respect to the dividend payable on such respective Dividend
Payment Date not exceeding 30 days preceding such Dividend Payment
Date. Dividends on account of arrears for any past Dividend Periods
may be declared and paid, together with any accrued but unpaid
interest thereon to and including the date of payment, at any time,
without reference to any Dividend Payment Date, to holders of record
on a date designated by the Board, not exceeding 30 days preceding the
payment date thereof, as may be fixed by the Board.
(B) If, on any Dividend Payment Date, the Company fails to
pay dividends, then until the dividends that were scheduled to be paid
on such date are paid, such dividends shall cumulate and shall accrue
additional dividends with respect to such unpaid dividends to and
including the date of payment thereof at the rate of one percent (1%)
per annum, compounded on a quarterly basis. Dividends for any period
less than a full quarterly
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<PAGE> 8
Dividend Period or for a period commencing on a Dividend Payment Date
and ending on a Conversion Date shall cumulate on a day-to-day basis
and shall be computed on the basis of a 360-day year.
(C) So long as any shares of the Series B Preferred Stock
shall be outstanding, (i) the Company shall not declare or pay any
dividend whatsoever, whether in cash, property or otherwise, set aside
any cash or property for the payment of dividends, or make any other
distribution on any Junior Securities (except a dividend or
distribution payable solely in shares of Junior Securities), (ii) the
Company shall not declare or pay any dividend whatsoever, whether in
cash, property or otherwise, set aside any cash or property for the
payment of dividends, or make any other distribution on any Parity
Securities ranking on parity with the Series B Preferred Stock with
respect to dividends or distributions (except a dividend or
distribution payable solely in shares of Junior Securities), unless
declared and paid pro rata with the Series B Preferred Stock in
proportion to the full amount to which they would otherwise be
respectively entitled, and (iii) the Company shall not and shall cause
its Subsidiaries not to repurchase, redeem or otherwise acquire or set
aside any cash or property for the repurchase or redemption of any
Junior Securities or Parity Securities, unless in each such case all
dividends to which the holders of the Series B Preferred Stock shall
have been entitled for all previous Dividend Periods shall have been
paid or declared and a sum of money sufficient for the payment thereof
shall have been set aside.
4. Voting Rights. The Holders shall have the following voting rights
with respect to the Series B Preferred Stock:
(A) Subject to applicable law, the shares of Series B
Preferred Stock shall have no voting rights other than as set forth in
this Section 4.
(B) After the HSR Expiration Date, but only after the HSR
Expiration Date, Holders of shares of the Series B Preferred Stock
shall be entitled to vote upon all matters upon which holders of
Common Stock have the right to vote, and Holders shall have that
number of votes on all such matters as is equal to the Conversion
Ratio that would apply if such Holder's shares of Series B Preferred
Stock were to be converted pursuant to Section 6(A) (using the
calculation of such Conversion Ratio specified in Section 6(C)(i) and
not Section 6(C)(ii) for such purpose) as of the record date for the
determination of the shareholders entitled to vote on such matters,
or, if no such record date is established as of the date such vote is
taken or any written consent of shareholders is solicited, such votes
to be counted together with all other shares of capital stock having
general voting powers and not separately as a class. Fractional votes
shall not, however, be permitted and any fractional voting rights
resulting from the above formula (after aggregating all shares into
which shares of Series B Preferred Stock held by each Holder could be
converted) shall be rounded up to the nearest whole number.
(C) After the HSR Expiration Date, but only after the HSR
Expiration Date, the Holders of the Series B Preferred Stock, voting
together with Permitted Parity Securities as a separate class with one
vote per share of Series B Preferred Stock, shall be entitled to elect
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<PAGE> 9
one member of the Board at each meeting or pursuant to each consent of
the Company's shareholders for the election of directors (unless the
term of the director previously elected by the Holders pursuant to
this Section 4(C) would continue after such election). If the director
so elected by the Holders shall cease to serve as director before his
term shall expire, the Holders may, at a special meeting of such
Holders, elect a successor to hold office for the unexpired term of
such director. The Secretary of the Company may call, and upon written
request of the Holders of ten percent (10%) or more of the outstanding
Series B Preferred Stock addressed to him at the principal office of
the Company shall call, such a special meeting of the Holders for the
election of such director as provided herein. Such meeting shall be
held within fifty (50) days after delivery of such request to such
Secretary, at the place and upon the notice provided by law and in the
Bylaws of the Company for the holding of meetings of its shareholders.
Any director who shall have been elected pursuant to this Section
4(C), may be removed during the aforesaid term of office, with or
without cause, only by the affirmative vote of a majority votes
entitled to be cast by the Holders of Series B Preferred Stock and the
holders of then outstanding Permitted Parity Securities.
(D) (i) The consent of the Holders of at least a majority of
the Series B Preferred Stock, voting together with Permitted Parity
Securities as a single class with one vote per share, in person or by
proxy, either in writing without a meeting or at an annual or a
special meeting of shareholders called for the purpose, shall be
necessary to:
(A) amend, alter or repeal, by way of merger or
otherwise, any of the provisions of the Certificate, so
as to authorize, create or issue any shares of Parity
Securities (other than Permitted Parity Securities) or
Senior Securities (or amend the provisions of any
existing class of Capital Stock to make such class of
Capital Stock a class of Parity Securities or Senior
Securities),
(B) issue any Parity Securities (other than Permitted
Parity Securities) or Senior Securities, or
(C) consummate any Business Combination.
(ii) The consent of the Holders of at least a majority of
the Series B Preferred Stock, voting separately as a single
class with one vote per share, in person or by proxy, either
in writing without a meeting or at an annual or a special
meeting of shareholders called for the purpose, shall be
necessary to amend, alter or repeal, by way of merger or
otherwise, any of the provisions of (x) the Certificate of
Designation or any certificate of designation of terms of any
Parity Securities, or (y) the Certificate, so as to affect
adversely any of the rights, preferences or privileges of
Holders.
5. Liquidation Preference. In the event of any Liquidation, after
payment or provision for payment by the Company of the debts and other
liabilities of the Company and the liquidation preference of any Senior
Securities that rank senior to the Series B Preferred Stock with respect to
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distributions on Liquidation, each Holder shall be entitled to receive an
amount in cash for each share of the then outstanding Series B Preferred Stock
held by such Holder equal to the Stated Value per share, plus an amount equal
to all accrued but unpaid dividends thereon, whether or not earnings are
available in respect of such dividends or such dividends have been declared, to
and including the date full payment is tendered to the Holders with respect to
such Liquidation, and no more (such amount being referred to herein as the
"Liquidation Preference"), before any distribution shall be made to the holders
of any Junior Securities upon the Liquidation of the Company. In case the
assets of the Company available for payment to the Holders upon a Liquidation
are insufficient to pay the full Liquidation Preference on all outstanding
shares of the Series B Preferred Stock and all outstanding Senior Securities or
Parity Securities, in each case ranking on parity with the Series B Preferred
Stock as to distributions on Liquidation, in the amounts to which the holders
of such shares are entitled, then the entire assets of the Company available
for payment to the Holders of Series B Preferred Stock and holders of such
Senior Securities or Parity Securities will be distributed ratably among the
Holders of the Series B Preferred Stock and the holders of such Senior
Securities or Parity Securities, based upon the aggregate amount due on such
shares upon Liquidation. Written notice of any Liquidation of the Company,
stating a payment date and the place where the distributable amounts shall be
payable, shall be given by mail, postage prepaid, not less than 30 days prior
to the payment date stated therein, to the Holders of record of the Series B
Preferred Stock at their respective addresses as the same shall appear on the
books of the Company.
6. Conversion Rights. The Series B Preferred Stock shall be
convertible as follows:
(A) Conversion at Holder's Option. The Holder of any shares
of Series B Preferred Stock shall have the right at such Holder's
option, at any time after the Initial Conversion Date and prior to the
Mandatory Conversion Date and without the payment of any additional
consideration, to convert any or all of such shares of Series B
Preferred Stock into a number of fully paid and nonassessable shares
of Common Stock for each such share of Series B Preferred Stock equal
to the Conversion Ratio, upon the terms hereinafter set forth.
(B) Mandatory Conversion. On _______________, 2004 [fifth
anniversary of the Issue Date] (the "Mandatory Conversion Date"), each
outstanding share of Series B Preferred Stock shall, without any
action on the part of the Holder of such share, be converted
automatically into a number of fully paid and nonassessable shares of
Common Stock equal to the Conversion Ratio, upon the terms hereinafter
set forth; provided, however, that if the shares of Common Stock
issuable upon conversion of the Series B Preferred Stock are not
immediately freely transferrable under the Securities Act by the
Holders thereof, the Mandatory Conversion Date shall be delayed until
such time as the resale of the Common Stock issuable upon conversion
of such Series B Preferred Stock has been registered under the
Securities Act in accordance with the terms of the Registration Rights
Agreement.
(C) Conversion Ratio. In the event of a conversion pursuant
to Section 6(A) or 6(B), the Conversion Ratio shall be a number of
shares of Common Stock calculated using either of the following
methods at the option of the Holder as may be specified by the Holder
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<PAGE> 11
at the time of conversion, or, if no such specification is made, using
the method that results in the highest number:
(i) the amount determined by dividing (a) the Stated
Value plus any accrued and unpaid dividends to and including
the applicable Conversion Date by (b) the Conversion Price in
effect on the applicable Conversion Date; or
(ii) the amount determined by dividing (a) the Adjusted
Stated Value as of the applicable Conversion Date by (b) the
Average Market Price determined as of the applicable
Conversion Date (but not less than the lesser of $.01 or the
par value per share of the Common Stock at the time of
conversion).
(D) Mechanics of Conversion. The Holder of any shares of
Series B Preferred Stock may exercise the conversion right specified
in Section 6(A) by surrendering to the Company or any transfer agent
of the Company the certificate or certificates representing the shares
of Series B Preferred Stock to be converted, accompanied by written
notice specifying the number of such shares to be converted. If the
certificates representing shares of Common Stock issuable upon
conversion of shares of Series B Preferred Stock are to be issued in a
name other than the name on the face of the certificates representing
such shares of Series B Preferred Stock, such certificates shall be
accompanied by such evidence of the assignment and such evidence of
the signatory's authority with respect thereto as deemed appropriate
by the Company or its transfer agent. Conversion shall be deemed to
have been effected (i) with respect to conversions pursuant to Section
6(A), on the date when the notice of an election to convert pursuant
to Section 6(A) and certificates representing the shares being
converted are actually received by the Company or any transfer agent
of the Company, or (ii) with respect to mandatory conversion pursuant
to Section 6(B), on the Mandatory Conversion Date. Such dates that the
conversion shall be deemed to be effective shall be referred to herein
as the "Conversion Date." Subject to the provisions of Section 7(G),
as promptly as practicable after the Conversion Date, the Company
shall issue and deliver to or upon the written order of such Holder a
certificate or certificates for the number of shares of Common Stock
to which such Holder is entitled upon such conversion and a check or
cash with respect to any fractional interest in a share of Common
Stock, as provided in Section 6(E). The person in whose name the
certificate or certificates for shares of Common Stock are to be
issued shall be deemed to have become a holder of record of such
shares of Common Stock on the applicable Conversion Date. Upon
conversion of only a portion of the shares covered by a certificate
representing shares of Series B Preferred Stock surrendered for
conversion pursuant to Section 6(A), the Company shall issue and
deliver to or upon the written order of the Holder of the certificate
so surrendered for conversion, at the expense of the Company, a new
certificate representing the number of shares of Series B Preferred
Stock representing the unconverted portion of the certificate so
surrendered.
(E) Fractional Shares. No fractional shares of Common Stock
or scrip shall be issued upon conversion of shares of Series B
Preferred Stock. If more than one share of Series B Preferred Stock
shall be surrendered for conversion at any one time by the same
Holder, the number of shares of Common Stock issuable upon conversion
thereof shall be
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<PAGE> 12
computed on the basis of the aggregate number of shares of Series B
Preferred Stock so surrendered. Instead of any fractional share of
Common Stock which would otherwise be issuable upon conversion of any
shares of Series B Preferred Stock, the Company shall pay a cash
adjustment in respect of such fractional interest in an amount equal
to that fractional interest of the Market Price of the Common Stock on
the Conversion Date.
(F) Authorization and Issuance. The Company covenants and
agrees that:
(i) the shares of Common Stock issuable upon any
conversion of any shares of Series B Preferred Stock will be
deemed to have been issued to the Person exercising such
conversion rights set forth herein on the Conversion Date,
and the Person exercising such conversion rights will be
deemed for all purposes to have become the record holder of
such shares of Common Stock on the Conversion Date;
(ii) all shares of Common Stock which may be issued upon
any conversion of any Series B Preferred Stock will, upon
issuance, be fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issue thereof;
(iii) the Company will take all such action as may be
necessary to assure that all shares of Common Stock issuable
upon conversion of shares of Series B Preferred Stock may be
issued without violation of any applicable law or regulation
or of any requirements of any domestic securities exchange
upon which securities of the same class may be listed and
shall endeavor to list the shares of Common Stock required to
be delivered upon conversion of the shares of Series B
Preferred Stock, prior to such delivery, upon each national
securities exchange, if any, upon which the outstanding
Common Stock is listed at the time of such delivery;
(iv) the Company will not take any action which would
result in any adjustment of the Conversion Price if the total
number of shares of Common Stock issuable after such action
upon conversion of all shares of Series B Preferred Stock,
together with all shares of Common Stock then outstanding and
all shares of Common Stock then issuable upon the exercise of
all outstanding Common Stock Equivalents, would exceed the
total number of shares of Common Stock then authorized by the
Certificate of Incorporation;
(v) the Company will at all times reserve and keep
available, out of its authorized but unissued shares of
Common Stock or out of shares of Common Stock held in its
treasury, the full number of shares of Common Stock into
which all shares of the Series B Preferred Stock having
conversion privileges from time to time outstanding are
convertible; and
(vi) the Company will at no time close its transfer books
against the transfer of the Series B Preferred Stock or of
any share of Common Stock issued or
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issuable upon the conversion of the Series B Preferred Stock
in any manner which interferes with the timely conversion of
the Series B Preferred Stock.
(G) Rights. Whenever the Company issues shares of Common
Stock upon conversion of Series B Preferred Stock, the Company will
issue, together with each such share of Common Stock, one right to
purchase Series A Preferred Stock of the Company (or other securities
in lieu thereof) pursuant to the Rights Agreement dated as of January
17, 1997 by and between the Company and Harris Trust and Savings Bank,
as amended (the "Rights Agreement"), or any similar rights, if any,
issued to holders of Common Stock in addition thereto or in the
replacement therefor (such rights, together with any additional or
replacement rights, being collectively referred to as the "Rights"),
whether or not such rights shall be exercisable at such time, but only
if such Rights are issued and outstanding and held by other holders of
Common Stock (or are evidenced by outstanding share certificates
representing Common Stock) at such time and have not expired or been
redeemed.
(H) Cash Redemption Option. Notwithstanding the provisions of
Sections 6(A) or 6(B), in the event of a conversion of Series B
Preferred Stock pursuant to which the Conversion Ratio is determined
using Section 6(C)(ii) (rather than Section 6(C)(i)), then, provided
that full cumulative dividends shall have been paid or declared and
set apart for payment upon all outstanding shares of Series B
Preferred Stock for all past dividend periods, the Company may offer
to redeem for cash any or all of such shares of Series B Preferred
Stock at a redemption price per share equal to the Adjusted Stated
Value (a "Redemption Offer"), in lieu of effecting such conversion. To
effect a Redemption Offer, the Company must give notice of such
election, specifying the redemption price, (a "Redemption Offer
Notice") to the Holder of such shares of Series B Preferred Stock (i)
with respect to conversions pursuant to Section 6(A), within three
Business Days after the notice of an election to convert pursuant to
Section 6(A) is received by the Company or any transfer agent of the
Company, or (ii) with respect to mandatory conversion pursuant to
Section 6(B), on the Mandatory Conversion Date. If the Company fails
to give a Redemption Offer Notice within the foregoing time periods,
it may not make a Redemption Offer. If the Company has given a
Redemption Offer Notice with respect to more than 50% of the shares of
Series B Preferred Stock to be converted, then within three Business
Days following receipt of a Redemption Offer Notice, the Holder may
give notice to the Company declining the Company's offer to redeem up
to 50% of the shares of Series B Preferred Stock to be converted, in
which event the Company will not be entitled to redeem such shares as
specified and must convert such shares into Common Stock in accordance
with the terms hereof effective as of the Conversion Date. The Company
shall be entitled to redeem all of the shares subject to the
Redemption Offer Notice at the redemption price set forth above to the
extent the Holder does not properly decline such redemption in
accordance with the prior sentence. The Company shall make any such
redemption payment by wire transfer to an account specified by the
Holder on the first Business Day following the expiration of the three
Business Day period after the Holder's receipt of the Redemption Offer
Notice, failing which payment the Company shall not be entitled to
redeem such shares but shall be obligated to convert all of such
Shares into Common Stock in accordance with the terms hereof.
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<PAGE> 14
(I) Limitation on Number of Conversion Shares.
Notwithstanding the provisions of Sections 6(A) or 6(B), if the
Company ever issues Common Stock upon conversion of Series B Preferred
Stock pursuant to which the Conversion Ratio is calculated pursuant to
Section 6(C)(ii) rather than Section 6(C)(i), the Company shall not be
obligated to issue, in the aggregate, a number of shares of Common
Stock in excess of the NYSE Limitation upon conversion of the Series B
Preferred Stock. The "NYSE Limitation" shall mean the maximum number
of shares of Common Stock that could be issued by the Company pursuant
to the conversion of the Series B Preferred Stock and any
substantially similar series of Permitted Parity Securities issued to
the Holder pursuant to the terms of the Purchase Agreement without
triggering a requirement to obtain the approval of the Company's
shareholders of such issuance pursuant to Section 312.03(c) of the New
York Stock Exchange Listed Company Manual as in effect on the Issue
Date. To the extent that any shares of Series B Preferred Stock are
submitted for conversion such that the NYSE Limitation would be
exceeded, such excess shares shall, in lieu of being converted into
Common Stock, be redeemed in exchange for a cash payment equal to the
Adjusted Stated Value per share. The Company shall make any such
redemption payment by wire transfer to an account specified by the
Holder on the second Business Day following the Conversion Date on
which the shares of Series B Preferred Stock would otherwise be
converted into Common Stock.
7. Conversion Price Adjustments. The Conversion Price shall be subject
to adjustment from time to time as follows:
(A) Common Stock Issued at Less than Market Price or
Conversion Price. If the Company issues or sells any Common Stock
other than Excluded Stock without consideration or for a consideration
per share less than the Market Price per share of Common Stock, on the
Trading Day immediately preceding such issuance or sale or less than
the Conversion Price in effect immediately prior to such issuance or
sale, the Conversion Price in effect immediately prior to each such
issuance or sale will immediately (except as provided below) be
reduced to the price determined by multiplying the Conversion Price in
effect immediately prior to such issuance or sale, by a fraction, (1)
the numerator of which shall be (i) the number of shares of Common
Stock outstanding immediately prior to such issuance or sale plus (ii)
the number of shares of Common Stock which the aggregate consideration
received by the Company for the total number of such additional shares
of Common Stock so issued or sold would purchase at the higher of (x)
the Market Price per share of Common Stock on the Trading Day
immediately preceding such issuance or sale and (y) the Conversion
Price in effect immediately prior to such issuance or sale and (2) the
denominator of which shall be the number of shares of Common Stock
outstanding immediately after such issue or sale. For the purposes of
any adjustment of the Conversion Price pursuant to this Section 7(A),
the following provisions shall be applicable:
(i) in the case of the issuance of Common Stock for cash,
the amount of the consideration received by the Company shall
be deemed to be the amount of the cash proceeds received by
the Company for such Common Stock before deducting
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<PAGE> 15
therefrom any discounts or commissions allowed, paid or
incurred by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof;
(ii) in the case of the issuance of Common Stock
(otherwise than upon the conversion of shares of Capital
Stock or other securities of the Company) for a consideration
in whole or in part other than cash, including securities
acquired in exchange therefor (other than securities by their
terms so exchangeable), the consideration other than cash
shall be deemed to be the fair value thereof as reasonably
determined by the Board, irrespective of any accounting
treatment; provided, however, that such fair value as
determined by the Board shall not exceed the aggregate Market
Price of the shares of Common Stock being issued as of the
date the Board authorizes the issuance of such shares;
(iii) in the case of the issuance of (a) options,
warrants or other rights to purchase or acquire Common Stock
(whether or not at the time exercisable), (b) securities by
their terms convertible into or exchangeable for Common Stock
(whether or not at the time so convertible or exchangeable)
or options, warrants or rights to purchase such convertible
or exchangeable securities (whether or not at the time
exercisable):
(1) the aggregate maximum number of shares of
Common Stock deliverable upon exercise of such
options, warrants or other rights to purchase
or acquire Common Stock shall be deemed to
have been issued at the time such options,
warrants or rights are issued and for a
consideration equal to the consideration
(determined in the manner provided in Section
7(A)(i) and (ii)), if any, received by the
Company upon the issuance of such options,
warrants or rights plus the minimum purchase
price provided in such options, warrants or
rights for the Common Stock covered thereby;
(2) the aggregate maximum number of shares of
Common Stock deliverable upon conversion of or
in exchange for any such convertible or
exchangeable securities, or upon the exercise
of options, warrants or other rights to
purchase or acquire such convertible or
exchangeable securities and the subsequent
conversion or exchange thereof, shall be
deemed to have been issued at the time such
securities were issued or such options,
warrants or rights were issued and for a
consideration equal to the consideration, if
any, received by the Company for any such
securities and related options, warrants or
rights (excluding any cash received on account
of accrued interest or accrued dividends),
plus the additional consideration (determined
in the manner provided in Section 7(A)(i) and
(ii)), if any, to be received by the Company
upon
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<PAGE> 16
the conversion or exchange of such securities,
or upon the exercise of any related options,
warrants or rights to purchase or acquire such
convertible or exchangeable securities and the
subsequent conversion or exchange thereof;
(3) on any change in the number of shares of
Common Stock deliverable upon exercise of any
such options, warrants or rights or conversion
or exchange of such convertible or
exchangeable securities or any change in the
consideration to be received by the Company
upon such exercise, conversion or exchange,
but excluding changes resulting from the
anti-dilution provisions thereof (to the
extent comparable to the anti-dilution
provisions contained herein), the Conversion
Price as then in effect shall forthwith be
readjusted to such Conversion Price as would
have been obtained had an adjustment been made
upon the issuance of such options, warrants or
rights not exercised prior to such change, or
of such convertible or exchangeable securities
not converted or exchanged prior to such
change, upon the basis of such change;
(4) on the expiration or cancellation of any such
options, warrants or rights (without
exercise), or the termination of the right to
convert or exchange such convertible or
exchangeable securities (without exercise), if
the Conversion Price shall have been adjusted
upon the issuance thereof, the Conversion
Price shall forthwith be readjusted to such
Conversion Price as would have been obtained
had an adjustment been made upon the issuance
of such options, warrants, rights or such
convertible or exchangeable securities on the
basis of the issuance of only the number of
shares of Common Stock actually issued upon
the exercise of such options, warrants or
rights, or upon the conversion or exchange of
such convertible or exchangeable securities;
and
(5) if the Conversion Price shall have been
adjusted upon the issuance of any such
options, warrants, rights or convertible or
exchangeable securities, no further adjustment
of the Conversion Price shall be made for the
actual issuance of Common Stock upon the
exercise, conversion or exchange thereof;
provided, however, that no increase in the Conversion Price
shall be made pursuant to subclauses (1) or (2) of this
Section 7(A)(iii).
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<PAGE> 17
(B) Stock Splits, Subdivisions, Reclassifications or
Combinations. If the Company shall (1) declare a dividend or make a
distribution on its Common Stock in shares of Common Stock, (2)
subdivide or reclassify the outstanding shares of Common Stock into a
greater number of shares, or (3) combine or reclassify the outstanding
Common Stock into a smaller number of shares, the Conversion Price in
effect at the time of the record date for such dividend or
distribution or the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the Holder
of any shares of Series B Preferred Stock surrendered for conversion
or exchange after such date shall be entitled to receive the number of
shares of Common Stock which such holder would have owned or been
entitled to receive after such date had such Series B Preferred Stock
been converted or exchanged immediately prior to such date. Successive
adjustments in the Conversion Price shall be made whenever any event
specified above shall occur.
(C) Other Distributions. In case the Company shall fix a
record date for the making of a distribution to all holders of shares
of its Common Stock (1) of shares of any class other than its Common
Stock or (2) of evidence of indebtedness of the Company or any
Subsidiary or (3) of assets (including cash but excluding Ordinary
Cash Dividends, and dividends or distributions referred to in Section
7(B)), or (4) of rights or warrants, then in each such case the
Conversion Price in effect immediately prior thereto shall be reduced
to the price determined by multiplying the Conversion Price in effect
immediately prior to such record date by a fraction, (i) the numerator
of which shall be an amount equal to the difference resulting from (A)
the number of shares of Common Stock outstanding on such record date
multiplied by the Market Price per share of Common Stock on such
record date, less (B) the fair market value (as reasonably determined
by the Board) of said shares or evidences of indebtedness or assets or
rights or warrants to be so distributed, and (ii) the denominator of
which shall be equal to the number of shares of Common Stock
outstanding on such record date multiplied by the Market Price per
share of Common Stock on such record date. Such adjustment shall be
made successively whenever such a record date is fixed. In the event
that such distribution is not so made, the Conversion Price then in
effect shall be readjusted, effective as of the date when the Board
determines not to distribute such shares, evidences of indebtedness,
assets, rights or warrants, as the case may be, to the Conversion
Price that would then be in effect if such record date had not been
fixed.
(D) Certain Repurchases of Common Stock. In case the Company
effects a Pro Rata Repurchase of Common Stock, then the Conversion
Price shall be reduced to the price determined by multiplying the
Conversion Price in effect immediately prior to the effective date of
such Pro Rata Repurchase by a fraction of which (1) the numerator
shall be (i) the product of (x) the number of shares of Common Stock
outstanding immediately before such Pro Rata Repurchase and (y) the
Market Price per share of Common Stock on the Trading Day immediately
preceding the first public announcement of the intent to effect such
Pro Rata Repurchase, minus (ii) the aggregate purchase price of the
Pro Rata Repurchase, and of which (2) the denominator shall be the
product of (a) the number of shares of Common Stock outstanding
immediately prior to such Pro Rata Repurchase minus the number of
shares of Common Stock so repurchased and (b) the Market Price per
share of Common
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<PAGE> 18
Stock on the Trading Day immediately preceding the first public
announcement of such Pro Rata Repurchase.
(E) Business Combinations. In case of any Business
Combination in which the holders of shares of Common Stock are
entitled to receive stock, securities or property by virtue of their
ownership of Common Stock or a reclassification of Common Stock (other
than a reclassification of Common Stock referred to in Section 7(B)),
each share of Series B Preferred Stock shall after the date of such
Business Combination or reclassification be convertible into the
number of shares of stock or other securities or property (including
cash) to which the Common Stock issuable upon conversion of such share
of Series B Preferred Stock immediately prior to such Business
Combination or reclassification would have been entitled upon such
Business Combination or reclassification; and in any such case, if
necessary, the provisions set forth herein with respect to the rights
and interests thereafter of the Holders of the shares of Series B
Preferred Stock shall be appropriately adjusted so as to be
applicable, as nearly as may reasonably be, to any shares of stock or
other securities or property thereafter deliverable on the conversion
of the shares of Series B Preferred Stock. In determining the kind and
amount of stock, securities or the property receivable upon
consummation of such Business Combination, if the holders of Common
Stock have the right to elect the kind or amount of consideration
receivable upon consummation of such Business Combination, then the
Holder of the Series B Preferred Stock shall have the right to make a
similar election as of the Conversion Date with respect to the number
of shares of stock or other securities or property into which the
Series B Preferred Stock shall be convertible.
(F) Rounding of Calculations; Minimum Adjustments. All
calculations under this Section 7 shall be made to the nearest one
tenth (1/10th) of a cent or to the nearest one hundredth (1/100th) of
a share, as the case may be. Any provision of this Section 7 to the
contrary notwithstanding, no adjustment in the Conversion Price shall
be made if the amount of such adjustment would be less than $0.01, but
any such amount shall be carried forward and an adjustment with
respect thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate $0.01 or more.
In addition, in no event shall be Conversion Price be adjusted to less
than the lesser of $.01 per share or the par value of the Common
Stock.
(G) Timing of Issuance of Additional Common Stock Upon
Certain Adjustments. In any case in which the provisions of this
Section 7 shall require that an adjustment shall become effective
immediately after a record date for an event, the Company may defer
until the occurrence of such event (1) issuing to the Holder of any
share of Series B Preferred Stock converted after such record date and
before the occurrence of such event the additional shares of Common
Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the shares of Common Stock
issuable upon such conversion before giving effect to such adjustment
and (B) paying to such Holder any amount of cash in lieu of a
fractional share of such Common Stock; provided, however, that the
Company upon request shall deliver to such Holder a due bill or other
appropriate instrument
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<PAGE> 19
evidencing such Holder's right to receive such additional shares, and
such cash, upon the occurrence of the event requiring such adjustment.
(H) Statement Regarding Adjustments. Whenever the Conversion
Price shall be adjusted as provided in Section 7 the Company shall
forthwith file, at the office of any transfer agent for the Series B
Preferred Stock and at the principal office of the Company a statement
showing in reasonable detail the facts requiring such adjustment and
the Conversion Price that shall be in effect after such adjustment and
the Company shall also cause a copy of such statement to be sent by
mail, first class postage prepaid, to each Holder at its address
appearing in the Company's records.
(I) Notices. In the event that the Company shall propose to
take any action of the type described in Section 7 (but only if the
action of the type described in Section 7 would result in an
adjustment in the Conversion Price or a change in the type of
securities or property to be delivered upon a conversion or exchange
of Series B Preferred Stock), the Company shall give notice to each
Holder, in the manner set forth in Section 7(H), which notice shall
specify the record date, if any, with respect to any such action and
the approximate date on which such action is to take place. Such
notice shall also set forth the facts with respect thereto as shall be
reasonably necessary to indicate the effect on the Conversion Price
and the number, kind or class of shares or other securities or
property which shall be deliverable upon conversion of shares of the
Series B Preferred Stock. In the case of any action which would
require the fixing or a record date, such notice shall be given at
least 10 days prior to the date so fixed, and in case of all other
action, such notice shall be given at least 15 days prior to the
taking of such proposed action. Failure to give such notice, or any
defect therein, shall not affect the legality or validity of any such
action.
(J) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of Sections 6
and 7 and in taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the Holders
of the Series B Preferred Stock against impairment.
(K) No Duplication of Adjustments. If any action would
require adjustment of the Conversion Price pursuant to more than one
of the provisions of this Section 7, only one adjustment shall be made
and such adjustment shall be the adjustment that results in the lowest
Conversion Price after giving effect to such adjustment.
8. Limitations on Series B Preferred Stock. No share or shares of
Series B Preferred Stock the Company acquires through redemption, option,
exchange or otherwise will be reissued as Series B Preferred Stock, and all
such shares will be canceled, retired and eliminated from the shares of Series
B Preferred Stock which the Company will be authorized to issue, and will be
restored to the status of authorized but undesignated preferred stock of the
Company eligible for designation
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<PAGE> 20
and reissuance subject to the terms hereof and the Certificate. The Company
will not issue any further shares of Series B Preferred Stock.
9. Waivers. With the written consent of Holders of a Majority of the
Series B Preferred Stock, the obligations of the Company and the rights of the
Holders under this Certificate of Designation may be waived (either generally
or in a particular instance, either retroactively or prospectively and either
for a specified period of time or indefinitely). Upon the effectuation of each
such waiver, the Company will promptly give written notice thereof to the
Holders who have not previously consented thereto in writing.
10. Redemption. Except as expressly set forth herein, the Company
shall have no right or obligation to redeem the Series B Preferred Stock.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
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<PAGE> 21
IN WITNESS WHEREOF, this Certificate has been signed on behalf of the
Company by its President and attested to by its Secretary, all as of the _____
day of May, 1999.
INPUT/OUTPUT, INC.
By:
-------------------------------------
President
ATTEST:
By:
------------------------------------
Secretary
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<PAGE> 1
EXHIBIT C
FORM OF
CERTIFICATE OF DESIGNATION
OF
SERIES C PREFERRED STOCK
OF
INPUT/OUTPUT, INC.
Pursuant to Section 151(g) of the Delaware General Corporation Law,
Input/Output, Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Company"), hereby certifies that the following
resolution was duly adopted by the Board of Directors of the Company on April
___, 1999, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Company (the "Certificate of
Incorporation"), which authorizes the issuance of up to 5,000,000 shares of
preferred stock, $0.01 par value.
RESOLVED, that pursuant to authority expressly granted to and vested
in the Board of Directors of the Company and pursuant to the provisions of the
Certificate of Incorporation, the Board of Directors hereby creates a series of
preferred stock, herein designated and authorized as the Series C Preferred
Stock, $0.01 par value per share, which shall consist of [insert number up to
15,000] of the 5,000,000 shares of preferred stock which the Company now has
authority to issue, and the Board of Directors hereby fixes the powers,
designations, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof as follows:
1. Number and Rank. The number of shares constituting the Series C
Preferred Stock shall be [insert number up to 15,000]. The Series C Preferred
Stock shall rank senior to the Company's Series A Preferred Stock with respect
to the payment of dividends and distributions on Liquidation and on parity with
the Series B Preferred Stock with respect to the payment of dividends and
distributions on Liquidation.
2. Definitions. Unless the context otherwise requires, when used
herein the following terms shall have the meaning indicated.
"Adjusted Stated Value" with respect to each share of Series C
Preferred Stock means the Stated Value (a) increased at an annual rate of 8%
thereof, compounded quarterly, less (b) the amount of cash dividends actually
paid with respect to such share, in each case commencing on the Issue Date and
accruing through the applicable Conversion Date, or, in the case of a
redemption being effected pursuant to Sections 6(H) or 6(I), through the date
of payment of the redemption price.
"Affiliate" means with respect to any Person, any other Person
directly, or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person.
<PAGE> 2
For purposes of this definition, the term "control" (and correlative terms
"controlling," "controlled by" and "under common control with") means
possession of the power, whether by contract, equity ownership or otherwise, to
direct the policies or management of a Person.
"Average Market Price" means, for a given security, the average Market
Price for such security for the ten Trading Day period ending on and including
the Trading Day prior to the date of determination; provided, however, that if
during such period the Company takes any action or an action becomes effective
that would require an adjustment to the Conversion Price pursuant to Section 7
hereof, then such Average Market Price shall be appropriately adjusted to
reflect such action in a manner consistent with the adjustments set forth in
Section 7.
"Beneficially Own" or "Beneficial Ownership" has the meaning set forth
in Rules 13d-3 and 13d-5 of the Exchange Act.
"Board" means the Board of Directors of the Company.
"Business Combination" means (i) any consolidation or merger of the
Company with or into any Person or (ii) any Change of Control Stock Issuance,
or (iii) the sale, assignment conveyance, transfer, lease or other disposition
by the Company of all or substantially all of its assets followed by a
liquidation of the Company.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in Houston,
Texas generally are authorized or required by law or other governmental actions
to close.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated) of capital or capital stock of such Person and (ii) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Certificate" means the Certificate of Incorporation of the Company,
as amended (including any certificate of designation establishing a series of
preferred stock).
"Certificate of Designation" means this Certificate of Designation of
the Series C Preferred Stock.
"Change of Control Stock Issuance" shall mean any issuance, in a
single transaction or series of related transactions, by the Company of shares
of Common Stock or Common Stock Equivalents in connection with the acquisition
of assets (including cash) or securities by the Company or a Subsidiary of the
Company (including by way of a merger of a Subsidiary of the Company with or
into a Person), except where (i) the shareholders of the Company immediately
prior to such issuance own (in substantially the same proportion relative to
each other as such shareholders owned the Common Stock or Voting Stock of the
Company, as the case may be, immediately prior to such consummation) (x) more
than 50% of the Voting Stock of the Company immediately after such issuance,
and (y) more than 50% of the outstanding Common Stock immediately after such
issuance,
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<PAGE> 3
(ii) the members of the Board immediately prior to entering into the agreement
relating to such issuance (or if no such agreement is entered into, then
immediately prior to the consummation of such issuance) constitute at least a
majority of the Board immediately after such issuance, with no agreements or
arrangements in place immediately after such consummation that would result in
the members of the Board immediately prior to the entering into the agreement
relating to such issuance ceasing to constitute at least a majority of the
Board and (iii) no Person or Group of Persons immediately after such issuance
is the Beneficial Owner of 40% or more of the total outstanding Voting Stock of
the Company or Common Stock. In calculating the percentage of the Voting Stock
of the Company owned by the shareholders of the Company immediately prior to an
issuance of Common Stock or Common Stock Equivalents in which there is more
than one class or series of Voting Stock, the percentage of the Voting Stock
shall be calculated based on the number of votes eligible to be cast in the
election of the directors of the Company generally. In calculating the
percentages of Voting Stock and Common Stock owned for purposes of this
definition, such calculation shall be calculated on a basis assuming the
exercise or conversion in full of all Common Stock Equivalents and on a basis
disregarding all Common Stock Equivalents, and the percentage which results in
the lower percentage owned by the shareholders of the Company shall apply in
the application of clause (i) above.
"Common Stock" means the Company's common stock, par value $.01 per
share, and any Capital Stock for or into which such Common Stock hereafter is
exchanged, converted, reclassified or recapitalized by the Company or pursuant
to a Business Combination to which the Company is a party.
"Common Stock Equivalents" means (without duplication with any other
Common Stock or Common Stock Equivalents) rights, warrants, options,
convertible securities or exchangeable securities, exercisable for or
convertible or exchangeable into, directly or indirectly, Common Stock, whether
at the time of issuance or upon the passage of time or the occurrence of some
future event.
"Company" means Input/Output, Inc. a Delaware corporation.
"Conversion Date" is defined in Section 6(D).
"Conversion Price" means $____, as adjusted from time to time in
accordance with Section 7. [Note - this is to be determined as set forth in the
definition of Series C Preferred Stock in the Purchase Agreement]
"Conversion Ratio" is defined in Section 6(C).
"DGCL" means the General Corporation Law of the State of Delaware, as
amended, or any successor statute or other legislation.
"Dividend Payment Date" is defined in Section 3(A).
"Dividend Period" is defined in Section 3(A).
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<PAGE> 4
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute, and the rules and regulations promulgated thereunder.
"Excluded Stock" means (i) shares of Common Stock issued by the
Company as a stock dividend payable in shares of Common Stock, or upon any
subdivision or split-up of the outstanding shares of Capital Stock in each case
which is subject to Section 7(B), or upon conversion of shares of Capital Stock
(but not the issuance of such Capital Stock which will be subject to the
provisions of Section 7(A)(iii)), (ii) shares of Common Stock to be issued to
employees, directors, consultants and advisors of the Company pursuant to Stock
Plans in accordance with their respective terms.
"Group" means a group as contemplated by Section 13(d)(3) of the
Exchange Act.
"Holder" means a holder of record of Series C Preferred Stock.
["HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"HSR Expiration Date" shall mean the expiration or earlier termination
of the applicable waiting period under the HSR Act relating to the transaction
described in the filings referred to in Section 5.4 of the Purchase Agreement.]
[Delete if not applicable]
"Initial Conversion Date" means the first to occur of any of the
following: (i) _____________, 2002 [third anniversary of the Issue Date for the
Series B Preferred Stock], (ii) an agreement providing for a Business
Combination is approved by the Board or a Business Combination is consummated,
(iii) a Tender Offer for Common Stock is approved or recommended by the Board
or (iv) there is a redemption, repurchase or reacquisition by the Company of
Rights issued pursuant to the Rights Agreement or any waiver of the application
of the Rights Agreement to any Beneficial Owner other than Purchaser or its
Affiliates except in the case of this clause (iv) as approved by the
Purchaser's representative to the Board.
"Issue Date" means with respect to any shares of Series C Preferred
Stock the original date of issuance of such shares of Series C Preferred Stock.
"Junior Securities" means Capital Stock that, with respect to
dividends and distributions upon Liquidation, ranks junior to the Series C
Preferred Stock.
"Liquidation" means the voluntary or involuntary liquidation,
dissolution or winding up of the Company; provided, however, that a merger or
consolidation shall not be deemed a Liquidation nor shall the sale of assets
not requiring shareholder approval be deemed to be a Liquidation.
"Liquidation Preference" is defined in Section 5.
"Mandatory Conversion Date" is defined in Section 6(B).
"Market Price" means, with respect to a particular security, on any
given day, the last reported sale price regular way or, in case no such
reported sale takes place on such day, the average
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<PAGE> 5
of the last closing bid and asked prices regular way, in either case on the
principal national securities exchange on which the applicable security is
listed or admitted to trading, or if not listed or admitted to trading on any
national securities exchange, (i) the closing sale price for such day reported
by the Nasdaq Stock Market if such security is traded over-the-counter and
quoted in the Nasdaq Stock Market, or (ii) if such security is so traded, but
not so quoted, the average of the closing reported bid and asked prices of such
security as reported by the Nasdaq Stock Market or any comparable system, or
(iii) if such security is not listed on the Nasdaq Stock Market or any
comparable system but is actively traded, the average of the closing bid and
asked prices as furnished by two members of the National Association of
Securities Dealers, Inc. selected from time to time by the Company for that
purpose. If such security is not listed and traded in a manner that the
quotations referred to above are available for the period required hereunder,
the Market Price shall be deemed to be the fair value per share of such
security as determined by a nationally recognized investment banking firm
selected by the Board and reasonably acceptable to the Holders of a majority of
the outstanding shares of Series C Preferred Stock.
"Ordinary Cash Dividends" means any cash dividend or distribution
which, when combined on a per share of Common Stock basis with the per share
amounts of all other cash dividends and distributions paid on the Common Stock
during the 365-day period ending on the date of declaration of such dividend or
distribution (as adjusted to appropriately reflect any of the events referred
to in Section 7 and excluding cash dividends or distributions that resulted in
an adjustment to the Conversion Price), does not exceed 5% of the Market Price
of a share of Common Stock on the Trading Day immediately preceding the date of
declaration of such dividend or distribution.
"Parity Securities" means Capital Stock that, with respect to
dividends or distributions upon Liquidation, is pari passu with the Series C
Preferred Stock.
"Permitted Parity Securities" means up to 35,000 shares of Preferred
Stock of the Company (less the number of shares of Series C Preferred Stock
issued in accordance the Purchase Agreement) constituting no more than one
series of Preferred Stock, each share of which (i) has a liquidation preference
of not more than $1,000 per share exclusive of accrued and unpaid dividends,
(ii) has a dividend rate of not more than one percent per annum, (iii) has no
more than one vote per share with respect to matters on which it votes together
with the Series C Preferred Stock and Series B Preferred Stock and other
Permitted Parity Securities as a single class and (iv) is pari passu with the
Series C Preferred Stock and Series B Preferred Stock with respect to the
payment of dividends and distributions upon Liquidation.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, limited liability company, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Pro Rata Repurchase" means any purchase of shares of Common Stock by
the Company or any Affiliate thereof pursuant to any tender offer or exchange
offer subject to Section 13(e) of the Exchange Act, or pursuant to any other
offer available to substantially all holders of Common Stock, whether for cash,
shares of capital stock of the Company, other securities of the Company,
evidences of indebtedness of the Company or any other person or any other
property (including, without
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<PAGE> 6
limitation, shares of capital stock, other securities or evidences of
indebtedness of a subsidiary of the Company), or any combination thereof;
provided, however, that "Pro Rata Repurchase" shall not include any purchase of
shares by the Company or any Affiliate thereof made in accordance with the
requirements of Rule 10b-18 as in effect under the Exchange Act. The "effective
date" of a Pro Rata Repurchase shall mean the date of acceptance of shares for
purchase or exchange under any tender or exchange offer which is a Pro Rata
Repurchase or the date of purchase with respect to any Pro Rata Repurchase that
is not a tender or exchange offer.
"Purchase Agreement" means the Purchase Agreement dated as of April
___, 1999 between the Company and the Purchaser providing for the purchase by
the Purchaser of 40,000 shares of Series B Preferred Stock and up to 15,000
shares of Series C Preferred Stock from the Company, including all schedules
and exhibits thereto.
"Purchaser" means SCF-IV, L.P., a Delaware limited partnership.
"Record Date" is defined in Section 3(A).
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of April ___, 1999 between the Company and the Purchaser
providing for certain registration rights under the Securities Act with respect
to the Common Stock into which the Series B Preferred Stock and Series C
Preferred Stock may be converted.
"Rights Agreement" has the meaning set forth in Section 6(G).
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.
"Senior Securities" means Capital Stock that, with respect to
dividends or distributions upon Liquidation, ranks senior to the Series C
Preferred Stock.
"Series B Preferred Stock" means the Series B Preferred Stock of the
Company issued to Purchaser pursuant to the Purchase Agreement.
"Stated Value" is an amount equal to $1,000.00 per share of Series C
Preferred Stock.
"Stock Plans" means the Company's stock option, stock incentive,
restricted stock, employee stock purchase or other similar plans, in each case
that have been approved by the Company's shareholders.
"Subsidiary" of a Person means (i) a corporation, a majority of whose
stock with voting power, under ordinary circumstances, to elect directors is at
the time of determination, directly or indirectly, owned by such Person or by
one or more Subsidiaries of such Person, or (ii) any other entity (other than a
corporation) in which such Person or one or more Subsidiaries of such Person,
directly or indirectly, at the date of determination thereof has a majority
ownership interest or, with respect to a limited partnership, is a general
partner of such limited partnership.
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<PAGE> 7
"Tender Offer" means any transaction to which Regulation 14D of the
Exchange Act applies.
"Trading Day" means a day on which the principal market with respect
to the security in question is regularly scheduled to be open for trading, or
if there is not such principal market, then a day on which the New York Stock
Exchange is regularly scheduled to be open for trading.
"Voting Stock" of a Person means Capital Stock of such Person of the
class or classes pursuant to which the holders thereof have the general voting
power under ordinary circumstances to vote in the election of the board of
directors, managers or trustees of such Person.
The foregoing definitions will be equally applicable to both the
singular and plural forms of the defined terms.
3. Dividends and Distributions.
(A) The holders of Series C Preferred Stock shall be entitled to
receive out of the assets of the Company legally available for that
purpose, cumulative preferential cash dividends at a rate per annum of
one percent (1%) of the Stated Value (equivalent to $10 per annum or
$2.50 per quarter) for each share of Series C Preferred Stock, and,
except as provided in Section 3(B), no more, to be paid in accordance
with the terms of this Section 3. Such dividends shall be cumulative
from the Issue Date and shall be payable in arrears, when and as
declared by the Board, on March 31, June 30, September 30 and December
31 of each year (each such date being herein referred to as a
"Dividend Payment Date"), commencing on the first such Dividend
Payment Date following the Issue Date; provided that if any Dividend
Payment Date shall not be a Business Day, then the Dividend Payment
Date shall be on the next succeeding day that is a Business Day. The
period from the Issue Date to the next Dividend Payment Date and each
quarterly period between consecutive Dividend Payment Dates shall
hereinafter be referred to as "Dividend Periods." Dividends for the
initial Dividend Period shall be pro rated on a daily basis commencing
on and including the Issue Date on the basis of a 360-day year. Each
such dividend shall be paid to the holders of record of the Series C
Preferred Stock as their names appear on the share register of the
Company on the corresponding Record Date. As used above, the term
"Record Date" means, with respect to the dividend payable on March 31,
June 30, September 30 and December 31, respectively, of each year, the
preceding March 15, June 15, September 15 and December 15, or such
other record date designated by the Board with respect to the dividend
payable on such respective Dividend Payment Date not exceeding 30 days
preceding such Dividend Payment Date. Dividends on account of arrears
for any past Dividend Periods may be declared and paid, together with
any accrued but unpaid interest thereon to and including the date of
payment, at any time, without reference to any Dividend Payment Date,
to holders of record on a date designated by the Board, not exceeding
30 days preceding the payment date thereof, as may be fixed by the
Board.
(B) If, on any Dividend Payment Date, the Company fails to pay
dividends, then until the dividends that were scheduled to be paid on
such date are paid, such dividends shall cumulate and shall accrue
additional dividends with respect to such unpaid dividends to and
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<PAGE> 8
including the date of payment thereof at the rate of one percent (1%)
per annum, compounded on a quarterly basis. Dividends for any period
less than a full quarterly Dividend Period or for a period commencing
on a Dividend Payment Date and ending on a Conversion Date shall
cumulate on a day-to-day basis and shall be computed on the basis of a
360-day year.
(C) So long as any shares of the Series C Preferred Stock shall be
outstanding, (i) the Company shall not declare or pay any dividend
whatsoever, whether in cash, property or otherwise, set aside any cash
or property for the payment of dividends, or make any other
distribution on any Junior Securities (except a dividend or
distribution payable solely in shares of Junior Securities), (ii) the
Company shall not declare or pay any dividend whatsoever, whether in
cash, property or otherwise, set aside any cash or property for the
payment of dividends, or make any other distribution on any Parity
Securities ranking on parity with the Series C Preferred Stock with
respect to dividends or distributions (except a dividend or
distribution payable solely in shares of Junior Securities), unless
declared and paid pro rata with the Series C Preferred Stock in
proportion to the full amount to which they would otherwise be
respectively entitled, and (iii) the Company shall not and shall cause
its Subsidiaries not to repurchase, redeem or otherwise acquire or set
aside any cash or property for the repurchase or redemption of any
Junior Securities or Parity Securities, unless in each such case all
dividends to which the holders of the Series C Preferred Stock shall
have been entitled for all previous Dividend Periods shall have been
paid or declared and a sum of money sufficient for the payment thereof
shall have been set aside.
4. Voting Rights. The Holders shall have the following voting rights
with respect to the Series C Preferred Stock:
(A) Subject to applicable law, the shares of Series C Preferred
Stock shall have no voting rights other than as set forth in this
Section 4.
(B) [After the HSR Expiration Date, but only after the HSR
Expiration Date][delete if not applicable], Holders of shares of the
Series C Preferred Stock shall be entitled to vote upon all matters
upon which holders of Common Stock have the right to vote, and Holders
shall have that number of votes on all such matters as is equal to the
Conversion Ratio that would apply if such Holder's shares of Series C
Preferred Stock were to be converted pursuant to Section 6(A) (using
the calculation of such Conversion Ratio specified in Section 6(C)(i)
and not Section 6(C)(ii) for such purpose) as of the record date for
the determination of the shareholders entitled to vote on such
matters, or, if no such record date is established as of the date such
vote is taken or any written consent of shareholders is solicited,
such votes to be counted together with all other shares of capital
stock having general voting powers and not separately as a class.
Fractional votes shall not, however, be permitted and any fractional
voting rights resulting from the above formula (after aggregating all
shares into which shares of Series C Preferred Stock held by each
Holder could be converted) shall be rounded up to the nearest whole
number.
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<PAGE> 9
(C) [After the HSR Expiration Date, but only after the HSR
Expiration Date, the Holders of the Series C Preferred Stock][delete
if not applicable], voting together with the Series B Preferred Stock
and any Permitted Parity Securities as a separate class with one vote
per share of Series C Preferred Stock, shall be entitled to elect one
member of the Board at each meeting or pursuant to each consent of the
Company's shareholders for the election of directors (unless the term
of the director previously elected by the Holders pursuant to this
Section 4(C) would continue after such election). If the director so
elected by the Holders shall cease to serve as director before his
term shall expire, the Holders may, at a special meeting of such
Holders, elect a successor to hold office for the unexpired term of
such director. The Secretary of the Company may call, and upon written
request of the Holders of ten percent (10%) or more of the outstanding
Series C Preferred Stock addressed to him at the principal office of
the Company shall call, such a special meeting of the Holders for the
election of such director as provided herein. Such meeting shall be
held within fifty (50) days after delivery of such request to such
Secretary, at the place and upon the notice provided by law and in the
Bylaws of the Company for the holding of meetings of its shareholders.
Any director who shall have been elected pursuant to this Section
4(C), may be removed during the aforesaid term of office, with or
without cause, only by the affirmative vote of a majority votes
entitled to be cast by the Holders of Series C Preferred Stock, the
Series B Preferred Stock and the holders of then outstanding Permitted
Parity Securities.
(D) (i) The consent of the Holders of at least a majority of the
Series C Preferred Stock, voting together with the Series B Preferred
Stock and the Permitted Parity Securities as a single class with one
vote per share, in person or by proxy, either in writing without a
meeting or at an annual or a special meeting of shareholders called
for the purpose, shall be necessary to:
(A) amend, alter or repeal, by way of merger or otherwise,
any of the provisions of the Certificate, so as to authorize,
create or issue any shares of Parity Securities (other than
Permitted Parity Securities) or Senior Securities (or amend the
provisions of any existing class of Capital Stock to make such
class of Capital Stock a class of Parity Securities or Senior
Securities),
(B) issue any Parity Securities (other than Permitted
Parity Securities) or Senior Securities, or
(C) consummate any Business Combination.
(ii) The consent of the Holders of at least a majority of the
Series C Preferred Stock, voting separately as a single class with one
vote per share, in person or by proxy, either in writing without a
meeting or at an annual or a special meeting of shareholders called
for the purpose, shall be necessary to amend, alter or repeal, by way
of merger or otherwise, any of the provisions of (x) the Certificate
of Designation or any certificate of designation of terms of any
Parity Securities, or (y)
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<PAGE> 10
the Certificate, so as to affect adversely any of the rights,
preferences or privileges of Holders.
5. Liquidation Preference. In the event of any Liquidation, after
payment or provision for payment by the Company of the debts and other
liabilities of the Company and the liquidation preference of any Senior
Securities that rank senior to the Series C Preferred Stock with respect to
distributions on Liquidation, each Holder shall be entitled to receive an
amount in cash for each share of the then outstanding Series C Preferred Stock
held by such Holder equal to the Stated Value per share, plus an amount equal
to all accrued but unpaid dividends thereon, whether or not earnings are
available in respect of such dividends or such dividends have been declared, to
and including the date full payment is tendered to the Holders with respect to
such Liquidation, and no more (such amount being referred to herein as the
"Liquidation Preference"), before any distribution shall be made to the holders
of any Junior Securities upon the Liquidation of the Company. In case the
assets of the Company available for payment to the Holders upon a Liquidation
are insufficient to pay the full Liquidation Preference on all outstanding
shares of the Series C Preferred Stock and all outstanding Senior Securities or
Parity Securities, in each case ranking on parity with the Series C Preferred
Stock as to distributions on Liquidation, in the amounts to which the holders
of such shares are entitled, then the entire assets of the Company available
for payment to the Holders of Series C Preferred Stock and holders of such
Senior Securities or Parity Securities will be distributed ratably among the
Holders of the Series C Preferred Stock and the holders of such Senior
Securities or Parity Securities, based upon the aggregate amount due on such
shares upon Liquidation. Written notice of any Liquidation of the Company,
stating a payment date and the place where the distributable amounts shall be
payable, shall be given by mail, postage prepaid, not less than 30 days prior
to the payment date stated therein, to the Holders of record of the Series C
Preferred Stock at their respective addresses as the same shall appear on the
books of the Company.
6. Conversion Rights. The Series C Preferred Stock shall be
convertible as follows:
(A) Conversion at Holder's Option. The Holder of any shares of
Series C Preferred Stock shall have the right at such Holder's option,
at any time after the Initial Conversion Date and prior to the
Mandatory Conversion Date and without the payment of any additional
consideration, to convert any or all of such shares of Series C
Preferred Stock into a number of fully paid and nonassessable shares
of Common Stock for each such share of Series C Preferred Stock equal
to the Conversion Ratio, upon the terms hereinafter set forth.
(B) Mandatory Conversion. On _______________, 2004 [insert fifth
anniversary of the Issue Date for the Series B Preferred Stock] (the
"Mandatory Conversion Date"), each outstanding share of Series C
Preferred Stock shall, without any action on the part of the Holder of
such share, be converted automatically into a number of fully paid and
nonassessable shares of Common Stock equal to the Conversion Ratio,
upon the terms hereinafter set forth; provided, however, that if the
shares of Common Stock issuable upon conversion of the Series C
Preferred Stock are not immediately freely transferrable under the
Securities Act by the Holders thereof, the Mandatory Conversion Date
shall be delayed until such time as the resale of the Common Stock
issuable upon conversion of such Series C
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<PAGE> 11
Preferred Stock has been registered under the Securities Act in
accordance with the terms of the Registration Rights Agreement.
(C) Conversion Ratio. In the event of a conversion pursuant to
Section 6(A) or 6(B), the Conversion Ratio shall be a number of shares
of Common Stock calculated using either of the following methods at
the option of the Holder as may be specified by the Holder at the time
of conversion, or, if no such specification is made, using the method
that results in the highest number:
(i) the amount determined by dividing (a) the Stated Value plus
any accrued and unpaid dividends to and including the applicable
Conversion Date by (b) the Conversion Price in effect on the
applicable Conversion Date; or
(ii) the amount determined by dividing (a) the Adjusted Stated
Value as of the applicable Conversion Date by (b) the Average
Market Price determined as of the applicable Conversion Date (but
not less than the lesser of $.01 or the par value per share of the
Common Stock at the time of conversion).
(D) Mechanics of Conversion. The Holder of any shares of Series C
Preferred Stock may exercise the conversion right specified in Section
6(A) by surrendering to the Company or any transfer agent of the
Company the certificate or certificates representing the shares of
Series C Preferred Stock to be converted, accompanied by written
notice specifying the number of such shares to be converted. If the
certificates representing shares of Common Stock issuable upon
conversion of shares of Series C Preferred Stock are to be issued in a
name other than the name on the face of the certificates representing
such shares of Series C Preferred Stock, such certificates shall be
accompanied by such evidence of the assignment and such evidence of
the signatory's authority with respect thereto as deemed appropriate
by the Company or its transfer agent. Conversion shall be deemed to
have been effected (i) with respect to conversions pursuant to Section
6(A), on the date when the notice of an election to convert pursuant
to Section 6(A) and certificates representing the shares being
converted are actually received by the Company or any transfer agent
of the Company, or (ii) with respect to mandatory conversion pursuant
to Section 6(B), on the Mandatory Conversion Date. Such dates that the
conversion shall be deemed to be effective shall be referred to herein
as the "Conversion Date." Subject to the provisions of Section 7(G),
as promptly as practicable after the Conversion Date, the Company
shall issue and deliver to or upon the written order of such Holder a
certificate or certificates for the number of shares of Common Stock
to which such Holder is entitled upon such conversion and a check or
cash with respect to any fractional interest in a share of Common
Stock, as provided in Section 6(E). The person in whose name the
certificate or certificates for shares of Common Stock are to be
issued shall be deemed to have become a holder of record of such
shares of Common Stock on the applicable Conversion Date. Upon
conversion of only a portion of the shares covered by a certificate
representing shares of Series C Preferred Stock surrendered for
conversion pursuant to Section 6(A), the Company shall issue and
deliver to or upon the written order of the Holder of the certificate
so surrendered for conversion, at the expense of the Company,
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<PAGE> 12
a new certificate representing the number of shares of Series C
Preferred Stock representing the unconverted portion of the
certificate so surrendered.
(E) Fractional Shares. No fractional shares of Common Stock or
scrip shall be issued upon conversion of shares of Series C Preferred
Stock. If more than one share of Series C Preferred Stock shall be
surrendered for conversion at any one time by the same Holder, the
number of shares of Common Stock issuable upon conversion thereof
shall be computed on the basis of the aggregate number of shares of
Series C Preferred Stock so surrendered. Instead of any fractional
share of Common Stock which would otherwise be issuable upon
conversion of any shares of Series C Preferred Stock, the Company
shall pay a cash adjustment in respect of such fractional interest in
an amount equal to that fractional interest of the Market Price of the
Common Stock on the Conversion Date.
(F) Authorization and Issuance. The Company covenants and agrees
that:
(i) the shares of Common Stock issuable upon any conversion of
any shares of Series C Preferred Stock will be deemed to have been
issued to the Person exercising such conversion rights set forth
herein on the Conversion Date, and the Person exercising such
conversion rights will be deemed for all purposes to have become
the record holder of such shares of Common Stock on the Conversion
Date;
(ii) all shares of Common Stock which may be issued upon any
conversion of any Series C Preferred Stock will, upon issuance, be
fully paid and non-assessable and free from all taxes, liens and
charges with respect to the issue thereof;
(iii) the Company will take all such action as may be necessary
to assure that all shares of Common Stock issuable upon conversion
of shares of Series C Preferred Stock may be issued without
violation of any applicable law or regulation or of any
requirements of any domestic securities exchange upon which
securities of the same class may be listed and shall endeavor to
list the shares of Common Stock required to be delivered upon
conversion of the shares of Series C Preferred Stock, prior to such
delivery, upon each national securities exchange, if any, upon
which the outstanding Common Stock is listed at the time of such
delivery;
(iv) the Company will not take any action which would result in
any adjustment of the Conversion Price if the total number of
shares of Common Stock issuable after such action upon conversion
of all shares of Series C Preferred Stock, together with all shares
of Common Stock then outstanding and all shares of Common Stock
then issuable upon the exercise of all outstanding Common Stock
Equivalents, would exceed the total number of shares of Common
Stock then authorized by the Certificate of Incorporation;
(v) the Company will at all times reserve and keep available,
out of its authorized but unissued shares of Common Stock or out of
shares of Common Stock
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<PAGE> 13
held in its treasury, the full number of shares of Common Stock
into which all shares of the Series C Preferred Stock having
conversion privileges from time to time outstanding are
convertible; and
(vi) the Company will at no time close its transfer books
against the transfer of the Series C Preferred Stock or of any
share of Common Stock issued or issuable upon the conversion of the
Series C Preferred Stock in any manner which interferes with the
timely conversion of the Series C Preferred Stock.
(G) Rights. Whenever the Company issues shares of Common Stock upon
conversion of Series C Preferred Stock, the Company will issue,
together with each such share of Common Stock, one right to purchase
Series A Preferred Stock of the Company (or other securities in lieu
thereof) pursuant to the Rights Agreement dated as of January 17, 1997
by and between the Company and Harris Trust and Savings Bank, as
amended (the "Rights Agreement"), or any similar rights, if any,
issued to holders of Common Stock in addition thereto or in the
replacement therefor (such rights, together with any additional or
replacement rights, being collectively referred to as the "Rights"),
whether or not such rights shall be exercisable at such time, but only
if such Rights are issued and outstanding and held by other holders of
Common Stock (or are evidenced by outstanding share certificates
representing Common Stock) at such time and have not expired or been
redeemed.
(H) Cash Redemption Option. Notwithstanding the provisions of
Sections 6(A) or 6(B), in the event of a conversion of Series C
Preferred Stock pursuant to which the Conversion Ratio is determined
using Section 6(C)(ii) (rather than Section 6(C)(i)), then, provided
that full cumulative dividends shall have been paid or declared and
set apart for payment upon all outstanding shares of Series C
Preferred Stock for all past dividend periods, the Company may offer
to redeem for cash any or all of such shares of Series C Preferred
Stock at a redemption price per share equal to the Adjusted Stated
Value (a "Redemption Offer"), in lieu of effecting such conversion. To
effect a Redemption Offer, the Company must give notice of such
election, specifying the redemption price, (a "Redemption Offer
Notice") to the Holder of such shares of Series C Preferred Stock (i)
with respect to conversions pursuant to Section 6(A), within three
Business Days after the notice of an election to convert pursuant to
Section 6(A) is received by the Company or any transfer agent of the
Company, or (ii) with respect to mandatory conversion pursuant to
Section 6(B), on the Mandatory Conversion Date. If the Company fails
to give a Redemption Offer Notice within the foregoing time periods,
it may not make a Redemption Offer. If the Company has given a
Redemption Offer Notice with respect to more than 50% of the shares of
Series C Preferred Stock to be converted, then within three Business
Days following receipt of a Redemption Offer Notice, the Holder may
give notice to the Company declining the Company's offer to redeem up
to 50% of the shares of Series C Preferred Stock to be converted, in
which event the Company will not be entitled to redeem such shares as
specified and must convert such shares into Common Stock in accordance
with the terms hereof effective as of the Conversion Date. The Company
shall be entitled to redeem all of the shares subject to the
Redemption Offer Notice at the redemption price set forth above to the
extent the Holder does not properly decline such redemption in
accordance with the prior
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<PAGE> 14
sentence. The Company shall make any such redemption payment by wire
transfer to an account specified by the Holder on the first Business
Day following the expiration of the three Business Day period after
the Holder's receipt of the Redemption Offer Notice, failing which
payment the Company shall not be entitled to redeem such shares but
shall be obligated to convert all of such Shares into Common Stock in
accordance with the terms hereof.
(I) Limitation on Number of Conversion Shares. Notwithstanding the
provisions of Sections 6(A) or 6(B), if the Company ever issues Common
Stock upon conversion of Series C Preferred Stock pursuant to which
the Conversion Ratio is calculated pursuant to Section 6(C)(ii) rather
than Section 6(C)(i), the Company shall not be obligated to issue, in
the aggregate, a number of shares of Common Stock in excess of the
NYSE Limitation upon conversion of the Series C Preferred Stock. The
"NYSE Limitation" shall mean the maximum number of shares of Common
Stock that could be issued by the Company pursuant to the conversion
of the Series B Preferred Stock, the Series C Preferred Stock and any
substantially similar series of Permitted Parity Securities issued to
the Holder pursuant to the terms of the Purchase Agreement without
triggering a requirement to obtain the approval of the Company's
shareholders of such issuance pursuant to Section 312.03(c) of the New
York Stock Exchange Listed Company Manual as in effect on the Issue
Date. To the extent that any shares of Series C Preferred Stock are
submitted for conversion such that the NYSE Limitation would be
exceeded, such excess shares shall, in lieu of being converted into
Common Stock, be redeemed in exchange for a cash payment equal to the
Adjusted Stated Value per share. The Company shall make any such
redemption payment by wire transfer to an account specified by the
Holder on the second Business Day following the Conversion Date on
which the shares of Series C Preferred Stock would otherwise be
converted into Common Stock.
7. Conversion Price Adjustments. The Conversion Price shall be subject
to adjustment from time to time as follows:
(A) Common Stock Issued at Less than Market Price or Conversion
Price. If the Company issues or sells any Common Stock other than
Excluded Stock without consideration or for a consideration per share
less than the Market Price per share of Common Stock, on the Trading
Day immediately preceding such issuance or sale or less than the
Conversion Price in effect immediately prior to such issuance or sale,
the Conversion Price in effect immediately prior to each such issuance
or sale will immediately (except as provided below) be reduced to the
price determined by multiplying the Conversion Price in effect
immediately prior to such issuance or sale, by a fraction, (1) the
numerator of which shall be (i) the number of shares of Common Stock
outstanding immediately prior to such issuance or sale plus (ii) the
number of shares of Common Stock which the aggregate consideration
received by the Company for the total number of such additional shares
of Common Stock so issued or sold would purchase at the higher of (x)
the Market Price per share of Common Stock on the Trading Day
immediately preceding such issuance or sale and (y) the Conversion
Price in effect immediately prior to such issuance or sale and (2) the
denominator of which shall be the number of shares of Common Stock
outstanding
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<PAGE> 15
immediately after such issue or sale. For the purposes of any
adjustment of the Conversion Price pursuant to this Section 7(A), the
following provisions shall be applicable:
(i) in the case of the issuance of Common Stock for cash, the
amount of the consideration received by the Company shall be deemed
to be the amount of the cash proceeds received by the Company for
such Common Stock before deducting therefrom any discounts or
commissions allowed, paid or incurred by the Company for any
underwriting or otherwise in connection with the issuance and sale
thereof;
(ii) in the case of the issuance of Common Stock (otherwise
than upon the conversion of shares of Capital Stock or other
securities of the Company) for a consideration in whole or in part
other than cash, including securities acquired in exchange therefor
(other than securities by their terms so exchangeable), the
consideration other than cash shall be deemed to be the fair value
thereof as reasonably determined by the Board, irrespective of any
accounting treatment; provided, however, that such fair value as
determined by the Board shall not exceed the aggregate Market Price
of the shares of Common Stock being issued as of the date the Board
authorizes the issuance of such shares;
(iii) in the case of the issuance of (a) options, warrants or
other rights to purchase or acquire Common Stock (whether or not at
the time exercisable), (b) securities by their terms convertible
into or exchangeable for Common Stock (whether or not at the time
so convertible or exchangeable) or options, warrants or rights to
purchase such convertible or exchangeable securities (whether or
not at the time exercisable):
(1) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options,
warrants or other rights to purchase or acquire
Common Stock shall be deemed to have been issued at
the time such options, warrants or rights are issued
and for a consideration equal to the consideration
(determined in the manner provided in Section 7(A)(i)
and (ii)), if any, received by the Company upon the
issuance of such options, warrants or rights plus the
minimum purchase price provided in such options,
warrants or rights for the Common Stock covered
thereby;
(2) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange
for any such convertible or exchangeable securities,
or upon the exercise of options, warrants or other
rights to purchase or acquire such convertible or
exchangeable securities and the subsequent conversion
or exchange thereof, shall be deemed to have been
issued at the time such securities were issued or
such options, warrants or rights were issued and for
a
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<PAGE> 16
consideration equal to the consideration, if any,
received by the Company for any such securities and
related options, warrants or rights (excluding any
cash received on account of accrued interest or
accrued dividends), plus the additional consideration
(determined in the manner provided in Section 7(A)(i)
and (ii)), if any, to be received by the Company upon
the conversion or exchange of such securities, or
upon the exercise of any related options, warrants or
rights to purchase or acquire such convertible or
exchangeable securities and the subsequent conversion
or exchange thereof;
(3) on any change in the number of shares of Common Stock
deliverable upon exercise of any such options,
warrants or rights or conversion or exchange of such
convertible or exchangeable securities or any change
in the consideration to be received by the Company
upon such exercise, conversion or exchange, but
excluding changes resulting from the anti-dilution
provisions thereof (to the extent comparable to the
anti-dilution provisions contained herein), the
Conversion Price as then in effect shall forthwith be
readjusted to such Conversion Price as would have
been obtained had an adjustment been made upon the
issuance of such options, warrants or rights not
exercised prior to such change, or of such
convertible or exchangeable securities not converted
or exchanged prior to such change, upon the basis of
such change;
(4) on the expiration or cancellation of any such
options, warrants or rights (without exercise), or
the termination of the right to convert or exchange
such convertible or exchangeable securities (without
exercise), if the Conversion Price shall have been
adjusted upon the issuance thereof, the Conversion
Price shall forthwith be readjusted to such
Conversion Price as would have been obtained had an
adjustment been made upon the issuance of such
options, warrants, rights or such convertible or
exchangeable securities on the basis of the issuance
of only the number of shares of Common Stock actually
issued upon the exercise of such options, warrants or
rights, or upon the conversion or exchange of such
convertible or exchangeable securities; and
(5) if the Conversion Price shall have been adjusted upon
the issuance of any such options, warrants, rights or
convertible or exchangeable securities, no further
adjustment of the Conversion Price shall be made for
the actual issuance of
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<PAGE> 17
Common Stock upon the exercise, conversion or
exchange thereof;
provided, however, that no increase in the Conversion Price shall
be made pursuant to subclauses (1) or (2) of this Section
7(A)(iii).
(B) Stock Splits, Subdivisions, Reclassifications or Combinations.
If the Company shall (1) declare a dividend or make a distribution on
its Common Stock in shares of Common Stock, (2) subdivide or
reclassify the outstanding shares of Common Stock into a greater
number of shares, or (3) combine or reclassify the outstanding Common
Stock into a smaller number of shares, the Conversion Price in effect
at the time of the record date for such dividend or distribution or
the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the Holder
of any shares of Series C Preferred Stock surrendered for conversion
or exchange after such date shall be entitled to receive the number of
shares of Common Stock which such holder would have owned or been
entitled to receive after such date had such Series C Preferred Stock
been converted or exchanged immediately prior to such date. Successive
adjustments in the Conversion Price shall be made whenever any event
specified above shall occur.
(C) Other Distributions. In case the Company shall fix a record
date for the making of a distribution to all holders of shares of its
Common Stock (1) of shares of any class other than its Common Stock or
(2) of evidence of indebtedness of the Company or any Subsidiary or
(3) of assets (including cash but excluding Ordinary Cash Dividends,
and dividends or distributions referred to in Section 7(B)), or (4) of
rights or warrants, then in each such case the Conversion Price in
effect immediately prior thereto shall be reduced to the price
determined by multiplying the Conversion Price in effect immediately
prior to such record date by a fraction, (i) the numerator of which
shall be an amount equal to the difference resulting from (A) the
number of shares of Common Stock outstanding on such record date
multiplied by the Market Price per share of Common Stock on such
record date, less (B) the fair market value (as reasonably determined
by the Board) of said shares or evidences of indebtedness or assets or
rights or warrants to be so distributed, and (ii) the denominator of
which shall be equal to the number of shares of Common Stock
outstanding on such record date multiplied by the Market Price per
share of Common Stock on such record date. Such adjustment shall be
made successively whenever such a record date is fixed. In the event
that such distribution is not so made, the Conversion Price then in
effect shall be readjusted, effective as of the date when the Board
determines not to distribute such shares, evidences of indebtedness,
assets, rights or warrants, as the case may be, to the Conversion
Price that would then be in effect if such record date had not been
fixed.
(D) Certain Repurchases of Common Stock. In case the Company
effects a Pro Rata Repurchase of Common Stock, then the Conversion
Price shall be reduced to the price determined by multiplying the
Conversion Price in effect immediately prior to the effective date of
such Pro Rata Repurchase by a fraction of which (1) the numerator
shall be (i) the product of (x) the number of shares of Common Stock
outstanding immediately before such Pro Rata Repurchase and (y) the
Market Price per share of Common Stock on the Trading
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<PAGE> 18
Day immediately preceding the first public announcement of the intent
to effect such Pro Rata Repurchase, minus (ii) the aggregate purchase
price of the Pro Rata Repurchase, and of which (2) the denominator
shall be the product of (a) the number of shares of Common Stock
outstanding immediately prior to such Pro Rata Repurchase minus the
number of shares of Common Stock so repurchased and (b) the Market
Price per share of Common Stock on the Trading Day immediately
preceding the first public announcement of such Pro Rata Repurchase.
(E) Business Combinations. In case of any Business Combination in
which the holders of shares of Common Stock are entitled to receive
stock, securities or property by virtue of their ownership of Common
Stock or a reclassification of Common Stock (other than a
reclassification of Common Stock referred to in Section 7(B)), each
share of Series C Preferred Stock shall after the date of such
Business Combination or reclassification be convertible into the
number of shares of stock or other securities or property (including
cash) to which the Common Stock issuable upon conversion of such share
of Series C Preferred Stock immediately prior to such Business
Combination or reclassification would have been entitled upon such
Business Combination or reclassification; and in any such case, if
necessary, the provisions set forth herein with respect to the rights
and interests thereafter of the Holders of the shares of Series C
Preferred Stock shall be appropriately adjusted so as to be
applicable, as nearly as may reasonably be, to any shares of stock or
other securities or property thereafter deliverable on the conversion
of the shares of Series C Preferred Stock. In determining the kind and
amount of stock, securities or the property receivable upon
consummation of such Business Combination, if the holders of Common
Stock have the right to elect the kind or amount of consideration
receivable upon consummation of such Business Combination, then the
Holder of the Series C Preferred Stock shall have the right to make a
similar election as of the Conversion Date with respect to the number
of shares of stock or other securities or property into which the
Series C Preferred Stock shall be convertible.
(F) Rounding of Calculations; Minimum Adjustments. All calculations
under this Section 7 shall be made to the nearest one tenth (1/10th)
of a cent or to the nearest one hundredth (1/100th) of a share, as the
case may be. Any provision of this Section 7 to the contrary
notwithstanding, no adjustment in the Conversion Price shall be made
if the amount of such adjustment would be less than $0.01, but any
such amount shall be carried forward and an adjustment with respect
thereto shall be made at the time of and together with any subsequent
adjustment which, together with such amount and any other amount or
amounts so carried forward, shall aggregate $0.01 or more. In
addition, in no event shall be Conversion Price be adjusted to less
than the lesser of $.01 per share or the par value of the Common
Stock.
(G) Timing of Issuance of Additional Common Stock Upon Certain
Adjustments. In any case in which the provisions of this Section 7
shall require that an adjustment shall become effective immediately
after a record date for an event, the Company may defer until the
occurrence of such event (1) issuing to the Holder of any share of
Series C Preferred Stock converted after such record date and before
the occurrence of such event the additional
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<PAGE> 19
shares of Common Stock issuable upon such conversion by reason of the
adjustment required by such event over and above the shares of Common
Stock issuable upon such conversion before giving effect to such
adjustment and (B) paying to such Holder any amount of cash in lieu of
a fractional share of such Common Stock; provided, however, that the
Company upon request shall deliver to such Holder a due bill or other
appropriate instrument evidencing such Holder's right to receive such
additional shares, and such cash, upon the occurrence of the event
requiring such adjustment.
(H) Statement Regarding Adjustments. Whenever the Conversion Price
shall be adjusted as provided in Section 7 the Company shall forthwith
file, at the office of any transfer agent for the Series C Preferred
Stock and at the principal office of the Company a statement showing
in reasonable detail the facts requiring such adjustment and the
Conversion Price that shall be in effect after such adjustment and the
Company shall also cause a copy of such statement to be sent by mail,
first class postage prepaid, to each Holder at its address appearing
in the Company's records.
(I) Notices. In the event that the Company shall propose to take
any action of the type described in Section 7 (but only if the action
of the type described in Section 7 would result in an adjustment in
the Conversion Price or a change in the type of securities or property
to be delivered upon a conversion or exchange of Series C Preferred
Stock), the Company shall give notice to each Holder, in the manner
set forth in Section 7(H), which notice shall specify the record date,
if any, with respect to any such action and the approximate date on
which such action is to take place. Such notice shall also set forth
the facts with respect thereto as shall be reasonably necessary to
indicate the effect on the Conversion Price and the number, kind or
class of shares or other securities or property which shall be
deliverable upon conversion of shares of the Series C Preferred Stock.
In the case of any action which would require the fixing or a record
date, such notice shall be given at least 10 days prior to the date so
fixed, and in case of all other action, such notice shall be given at
least 15 days prior to the taking of such proposed action. Failure to
give such notice, or any defect therein, shall not affect the legality
or validity of any such action.
(J) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of Sections 6
and 7 and in taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the Holders
of the Series C Preferred Stock against impairment.
(K) No Duplication of Adjustments. If any action would require
adjustment of the Conversion Price pursuant to more than one of the
provisions of this Section 7, only one adjustment shall be made and
such adjustment shall be the adjustment that results in the lowest
Conversion Price after giving effect to such adjustment.
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<PAGE> 20
8. Limitations on Series C Preferred Stock. No share or shares of
Series C Preferred Stock the Company acquires through redemption, option,
exchange or otherwise will be reissued as Series C Preferred Stock, and all
such shares will be canceled, retired and eliminated from the shares of Series
C Preferred Stock which the Company will be authorized to issue, and will be
restored to the status of authorized but undesignated preferred stock of the
Company eligible for designation and reissuance subject to the terms hereof and
the Certificate. The Company will not issue any further shares of Series C
Preferred Stock.
9. Waivers. With the written consent of Holders of a Majority of the
Series C Preferred Stock, the obligations of the Company and the rights of the
Holders under this Certificate of Designation may be waived (either generally
or in a particular instance, either retroactively or prospectively and either
for a specified period of time or indefinitely). Upon the effectuation of each
such waiver, the Company will promptly give written notice thereof to the
Holders who have not previously consented thereto in writing.
10. Redemption. Except as expressly set forth herein, the Company
shall have no right or obligation to redeem the Series C Preferred Stock.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
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<PAGE> 21
IN WITNESS WHEREOF, this Certificate has been signed on behalf of the
Company by its President and attested to by its Secretary, all as of the _____
day of _________, 1999.
INPUT/OUTPUT, INC.
By:
-------------------------------------
President
ATTEST:
By:
--------------------------------
Secretary
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<PAGE> 1
EXHIBIT D
===============================================================================
FORM OF
REGISTRATION RIGHTS AGREEMENT
by and between
INPUT/OUTPUT, INC.
and
SCF-IV, L.P.
===============================================================================
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into this ____ day of ____________, by and between Input/Output Inc., a
Delaware corporation (the "Company") and SCF-IV, L.P., a Delaware limited
partnership (the "Purchaser").
RECITALS:
This Agreement is made pursuant to the Purchase Agreement, dated April
21, 1999 between the Company and the Purchaser (the "Purchase Agreement"). In
order to induce the Purchaser to enter into the Purchase Agreement, the Company
has agreed to provide the registration rights set forth in this Agreement. The
execution of this Agreement is a condition to the closing under the Purchase
Agreement.
AGREEMENT:
The parties hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms will have the
following meanings:
"Demand Registration" has the meaning set forth in Section 3(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Initial Registration Date" has the meaning set forth in Section 3(a).
"Majority" means 51% or more.
"Person" means any individual, partnership, corporation, limited
liability company, trust or unincorporated organization or association, or a
government or agency or political subdivision thereof.
"Piggyback Registration" has the meaning set forth in Section 4(a).
"Registration Expenses" has the meaning set forth in Section 8(a).
"Registrable Securities" means the Underlying Shares and any other
securities issued or issuable with respect to the Underlying Shares by way of
stock dividend or stock split or in connection with a combination of shares,
reclassification, recapitalization, merger, consolidation or other
reorganization; provided, however, that a Registrable Security shall cease to
be a Registrable Security to the extent provided in Section 2(a).
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<PAGE> 3
"Rule 144" means Rule 144 under the Securities Act (or any similar
provisions then in force).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Series B Preferred Stock" means shares of the Company's Series B
Preferred Stock, par value $.01 per share.
"Series C Preferred Stock" means shares of the Company's Series C
Preferred Stock, par value $.01 per share.
"Shares" means all shares of Series B Preferred Stock or Series C
Preferred Stock that are issued and sold pursuant to the Purchase Agreement.
"Shelf Registration" has the meaning set forth in Section 5.
"Underlying Shares" means all Underlying Shares (as defined in the
Purchase Agreement) issuable upon conversion of the Shares.
"Underwritten registration" or "underwritten offering" means any
registration in which securities of the Company are sold pursuant to a firm
commitment underwriting.
(b) All undefined capitalized terms used herein shall have the meaning
set forth in the Purchase Agreement.
2. SECURITIES SUBJECT TO THIS AGREEMENT.
(a) Registrable Securities. The securities entitled to the benefits of
this Agreement are the Registrable Securities but, with respect to any
particular Registrable Security, only so long as such security continues to be
a Registrable Security. A Registrable Security shall cease to be a Registrable
Security when (i) it has been disposed of in a transaction effectively
registered under the Securities Act, (ii) has been sold pursuant to Rule 144,
(iii) it is held by a Person not entitled to the benefits of registration
rights under this Agreement by virtue of Section 12(f) hereof, (iv) if the
holder thereof is an "affiliate" of the Company within the meaning of Rule 144,
at such time as the Registrable Securities held by such holder constitute less
than 1% of the then outstanding shares of Common Stock of the Company and such
Registrable Securities could be sold without registration pursuant to Rule 144,
(v) if the holder thereof is not an "affiliate" of the Company within the
meaning of Rule 144, at such time as the Registrable Securities held by such
holder constitute less than 4% of the then outstanding shares of Common Stock
of the Company and such Registrable Securities could be sold freely pursuant to
paragraph (k) of Rule 144, or (vi) it has otherwise been transferred and a new
certificate or other evidence of ownership for it not bearing the legend set
forth in Section 5.8(a) of the Purchase Agreement (or other legend of similar
import) has been delivered
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<PAGE> 4
(not subject to any stop transfer order) by or on behalf of the Company and no
other restriction on transfer exists.
(b) Holders of Registrable Securities. A Person is deemed to be a
holder of Registrable Securities whenever such Person owns Registrable
Securities or has the right to acquire such Registrable Securities (whether
upon conversion, exercise or exchange of other securities or otherwise),
disregarding any legal restrictions upon the exercise of such right, whether or
not such acquisition has actually been effected.
3. DEMAND REGISTRATION.
(a) Requests for Registration. Subject to the provisions of Section
3(b), at any time on or after the earlier of (i) the Initial Conversion Date as
defined in the Certificate of Designation for the Series B Preferred Stock, or
(ii) the date 60 days prior to the third anniversary of the date of the
original issuance of the Series B Preferred Stock pursuant to the Purchase
Agreement (such earlier date being referred to herein as the "Initial
Registration Date"), any holder or holders of at least 25% of the then
outstanding Registrable Securities may request at any time a registration by
the Company under the Securities Act of all or part of their Registrable
Securities (a "Demand Registration"); provided, however that the number of
Registrable Securities to be included in such Demand Registration must be at
least 1,000,000 (such number of shares to be appropriately adjusted in the
event of any stock dividend or stock split or in connection with a combination
of shares, recapitalization, reclassification, merger, consolidation or other
reorganization) or such lesser number of Registrable Securities as have an
aggregate Market Price (as defined in the Certificate of Designation for the
Series B Preferred Stock) of at least $10,000,000 as of the date of such
request. Within ten days after receipt of such request, the Company will serve
written notice by overnight courier of such registration request to all holders
of Registrable Securities and will, subject to the provisions of Section 3(b),
include in such registration all Registrable Securities with respect to which
the Company has received written requests for inclusion therein within 15
business days after distribution to the applicable holder of the Company's
notice. All requests made pursuant to this Section 3(a) will specify the amount
of Registrable Securities to be registered and will also specify the intended
method of disposition thereof; provided, however, that such method of
disposition will be limited to an underwritten offering if requested by the
holders of a Majority of the Registrable Securities requested to be included in
such registration.
(b) Number of Registrations. The holders of Registrable Securities
will be entitled to request an aggregate of two Demand Registrations. A
registration initiated as a Demand Registration will not constitute a Demand
Registration for the purposes of the foregoing (i) unless such registration has
been declared effective by the SEC and remains effective for the period set
forth in Section 7(a)(iii); provided, however, that, if more than 15% of the
Registrable Securities requested to be included in a Demand Registration which
is an underwritten registration can be excluded therefrom by reason of the
provisions of Section 3(e), the holders of Registrable Securities will be
entitled to one additional Demand Registration or (ii) if after such
registration has been declared effective by the SEC it is subject to any stop
order, injunction or other adverse order or action of the SEC or other
governmental authority.
(c) Intentionally Omitted.
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<PAGE> 5
(d) No Rights of Company or Other Securityholders to Piggyback on
Demand Registrations. Neither the Company nor any of its securityholders (other
than the holders of Registrable Securities in such capacity) has any right to
include any of the Company's securities in a registration statement initiated
as a Demand Registration under this Section 3, unless (i) such securities are
of the same class as the Registrable Securities being registered, (ii) the
holders of a Majority of the Registrable Securities being registered in such
registration consent to such inclusion in writing, subject to Section 3(e),
(iii) if such Demand Registration is an underwritten offering, the managing
underwriters agree that some or all of such securities can be included without
adversely affecting such offering or offering price and (iv) the Company or the
selling securityholders, as applicable, agree to sell their securities on the
same terms and conditions as apply to Registrable Securities and the holders of
such Registrable Securities. If any securityholders of the Company (other than
the holders of Registrable Securities in such capacity) register securities of
the Company pursuant to a Demand Registration hereunder in accordance with the
provisions of this Section 3(d), such securityholders will pay the fees and
expenses of counsel to such securityholders and their pro rata share of the
Registration Expenses if such pro rata share of the Registration Expenses for
such registration are not paid by the Company for any reason.
(e) Priority on Demand Registrations. If a Demand Registration is an
underwritten offering and the managing underwriters advise the Company and the
selling holders of the Registrable Securities in writing that in their opinion
the number of Registrable Securities requested to be included exceeds the
number of securities which can be sold in such offering without adversely
affecting the proposed offering or the offering price, the Company will include
in such registration the number of Registrable Securities which in the opinion
of such underwriters can be sold without adversely affecting the proposed
offering or the offering price, and such securities will be allocated pro rata
among the holders of Registrable Securities on the basis of the number of the
Registrable Securities requested to be included in such registration by their
respective holders. If securities (other than Registrable Securities) are
proposed to be included by the Company or its other securityholders in a Demand
Registration which is an underwritten offering (subject to and in accordance
with the provisions of Section 3(d)) and the managing underwriters advise the
Company and the selling holders of Registrable Securities in writing that fewer
than all of said other securities can be sold, in addition to all of the
Registrable Securities being registered, without adversely affecting the
proposed offering or the offering price in such underwritten offering, those
other securities which are permitted to be included will be allocated among the
Company and the other securityholders in such proportions as such
securityholders and the Company may agree.
(f) Selection of Underwriters. If any Demand Registration is an
underwritten offering, or a best efforts underwritten offering, the investment
banker or investment bankers and manager or managers that will administer the
offering will be selected by the Company; provided, however, such investment
bankers and managers must be reasonably satisfactory to the holders of a
Majority of the Registrable Securities requested to be included in such
offering.
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<PAGE> 6
(g) Other Registration Rights Agreements. Without the prior written
consent of the holders of a Majority of the Registrable Securities, the Company
will not enter into any new registration rights agreements that affect in any
material respect the rights of the holders of the Registrable Securities.
4. PIGGYBACK REGISTRATIONS.
(a) Right to Piggyback. On or after the Initial Registration Date,
whenever the Company proposes to register any securities under the Securities
Act (excluding registrations on Form S-4 or S-8 or equivalent forms), other
than pursuant to a Demand Registration under Section 3 (a "Piggyback
Registration"), the Company will give written notice to all holders of
Registrable Securities of its intention to effect such a registration not later
than the earlier to occur of (i) the tenth day following receipt by the Company
of notice of exercise of other demand registration rights or (ii) 30 days prior
to the anticipated filing date. Subject to the provisions of Sections 4(c) and
(d), the Company will include in such Piggyback Registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within ten business days after the receipt by the applicable
holder of Registrable Securities of the Company's notice. The holders of
Registrable Securities will be permitted to withdraw all or any part of such
holder's Registrable Securities from a Piggyback Registration at any time prior
to the date such Piggyback Registration becomes effective with the SEC,
provided that, in the case of an underwritten offering, such withdrawal is
consistent with customary and reasonable restrictions agreed upon by the
managing underwriter. If a Piggyback Registration is an underwritten offering
effected under (i) Section 4(c), all Persons whose securities are included in
the Piggyback Registration will be obligated to sell their securities on the
same terms and conditions as apply to the securities being issued and sold by
the Company or (ii) Section 4(d), all Persons whose securities are included in
the Piggyback Registration will be obligated to sell their securities on the
same terms and conditions as apply to the securities being sold by the Person
or Persons who initiated the Piggyback Registration under Section 4(d).
Notwithstanding the foregoing, if, at any time after giving written notice of a
Piggyback Registration but prior to the effective date of the registration
statement filed in connection therewith, the Company shall determine for any
reason not to register such securities, the Company may, at its election give
written notice of such determination to the holders of Registrable Securities
and thereupon shall be relieved of its obligation to register any Registrable
Securities in such registration.
(b) Piggyback Expenses. The Registration Expenses of the holders of
Registrable Securities included in a Piggyback Registration will be paid by the
Company.
(c) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the total
number or dollar amount of securities requested to be included in such
registration exceeds the number or dollar amount of securities which can be
sold in such offering without adversely affecting the offering or the offering
price, the Company will include in such registration: (i) first, all securities
the Company proposes to sell, (ii) second, up to the full number or dollar
amount of Registrable Securities requested to be included in such registration
in excess of the number or dollar amount of securities the Company proposes to
sell which, in the opinion of such underwriters, can be sold without adversely
affecting the offering or the offering price (allocated pro rata among the
holders of such Registrable Securities on the basis of the dollar
-5-
<PAGE> 7
amount or number of Securities requested to be included therein by each such
holder) and (iii) third, such other securities (provided such securities are of
the same class as the securities being sold by the Company) as are requested to
be included in such registration equal to the balance, if any, allocated among
the holders of such securities in such proportions as the Company and such
holders may agree.
(d) Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the Company's
securities (other holders of Registrable Securities in their capacity as such),
and the managing underwriters advise the Company in writing that in their
opinion the dollar amount or number of securities requested to be included in
such registration exceeds the dollar amount or number of securities which can
be sold in such offering without adversely affecting the offering or the
offering price, the Company will include in such registration (i) first, the
number or dollar amount of securities which in the opinion of such underwriters
can be sold without adversely affecting the offering or the offering price of
the securities intended to be included therein on behalf of the other holders
of the Company's securities, allocated among the holders of such securities in
such proportions as the Company and such holders may agree, and (ii) to the
extent of the balance, if any, the Registrable Securities requested to be
included in such registration, allocated pro rata among the holders of such
Registrable Securities on the basis of the dollar amount or number of
securities requested to be included therein by each such holder.
(e) Underwritten Offering of Different Classes of Securities.
Notwithstanding anything to the contrary in this Section 4, if a Piggyback
Registration is an underwritten offering of a class of securities of the
Company different from the Registrable Securities proposed to be included in
such offering and the managing underwriters advise that in their opinion
Registrable Securities of a different class cannot be included in such offering
without adversely affecting the offering or the offering price, then the
holders of the Registrable Securities shall not be entitled to include
Registrable Securities in such registration.
(f) Selection of Underwriters. If any Piggyback Registration is an
underwritten offering, as between the Company and the holders of Registrable
Securities, the Company will have the right to select the investment banker or
investment bankers and manager or managers to administer the offering.
5. SHELF REGISTRATION.
On or prior to the 60th day prior to the fifth anniversary of the date
of original issuance of the Series B Preferred Stock pursuant to the Purchase
Agreement, the Company shall file a registration statement on Form S-3 (or any
similar short form registration), if the Company and the transaction then
qualify for the use of such short form registration, to register for resale
from time to time pursuant to Rule 415 under the Securities Act (or any similar
or successor rule) (the "Shelf Registration") all then outstanding Registrable
Securities (unless any holder thereof instructs the Company otherwise with
respect to his Registrable Securities) and shall use its reasonable best
efforts to cause such Shelf Registration to become effective as soon as
practicable after such filing and to maintain the effectiveness of such Shelf
Registration until the first anniversary of the Mandatory Conversion Date as
defined in the Certificate of Designation for the Series B Preferred
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<PAGE> 8
Stock or such earlier date when all the Registrable Securities covered by such
registration statement are sold or cease to be Registrable Securities. All
Registration Expenses in connection with the Shelf Registration shall be borne
by the Company. The Company and other holders of securities of the Company may
not register securities under a registration statement filed pursuant to this
Section 5, without the consent of at least a Majority of the Registrable
Securities included in such Shelf Registration.
6. DEFERRAL OF FILING; SUSPENSION OF SHELF REGISTRATION STATEMENT.
Notwithstanding anything to the contrary in this Agreement:
(a) The Company may defer the filing (but not the preparation) of a
registration statement required by Section 3 or Section 5 until a date not
later than 60 days (less the number of days during the previous twelve months
that the use of a prospectus was suspended pursuant to this Section 6 or
Section 12(a)) after the date of receipt by the Company of a request for a
Demand Registration (or after the required filing date in the case of a
registration required to be filed pursuant to Section 5) if at the time the
Company receives such request it is engaged in confidential negotiations or
other confidential business activities, disclosure of which would be required
in such registration statement (but would not be required if such registration
statement were not filed) and the Company determines in good faith that such
disclosure would be materially detrimental to the Company and its shareholders.
Any registration statement the filing of which is deferred pursuant to the
foregoing shall be filed forthwith if the negotiations or other activities are
disclosed or terminated. In order to defer the filing of a registration
statement pursuant to this Section 6, the Company shall promptly, upon
determining to seek such deferral, deliver to each requesting holder (or, in
the case of a registration pursuant to Section 5, each holder) a certificate
signed by the President or Chief Financial Officer of the Company stating that
the Company is deferring such filing in accordance with this Section 6(a).
Within 20 days after receiving such certificate, the requesting holder may
withdraw such request by giving notice to the Company, and, if withdrawn, the
request for a Demand Registration shall be deemed not to have been made for all
purposes of this Agreement, provided that the Company may defer the filing of a
registration statement pursuant to the foregoing not more than once during any
twelve month period; and
(b) If the Company has effected the Shelf Registration pursuant to
Section 5, the Company may, at any time following the 30th day after the
effectiveness thereof and subject to the last sentence of this Section 6, give
notice to the holders of Registrable Securities directing that all sales under
such shelf registration statement must be deferred and not made for up to 30
days (less the number of days during the previous twelve months that the use of
a prospectus was suspended pursuant to this Section 6 or Section 12(a)) if at
the time the Company gives such notice, the Company is engaged in confidential
negotiations or other confidential business activities, disclosure of which
would be required to be made in the prospectus included in such shelf
registration statement (but would not be required if such sale were not made)
in order to prevent such prospectus from containing any untrue statement of a
material fact or omitting to state any material fact necessary to make the
statements therein not misleading and the Company determines in good faith that
such disclosure would be materially detrimental to the Company. Any such notice
given pursuant to this Section 6(b) shall be accompanied by a certificate
signed by the President or Chief Financial Officer of the Company stating that
the Company is deferring such filing in accordance
-7-
<PAGE> 9
with this Section 6(b). A suspension of the Shelf Registration pursuant to this
Section 6(b) shall be lifted immediately if the negotiations or other
activities are disclosed or terminated. The Company may suspend the use of the
Shelf Registration pursuant to this Section 6(b) not more than once during any
twelve month period.
7. REGISTRATION PROCEDURES.
(a) Whenever the Company is obligated to register any Registrable
Securities in accordance with the terms and conditions of this Agreement, the
Company will use its best efforts to effect the registration and to permit the
sale of such Registrable Securities in accordance with the intended method of
disposition thereof, and pursuant thereto the Company will as expeditiously as
possible:
(i) prepare and file with the SEC, not later than 60 days after
receipt of a request to file a registration statement with respect to
such Registrable Securities (or on or prior to the required filing
date specified in Section 5 with respect to the Shelf Registration), a
registration statement with respect to such Registrable Securities,
and use its best efforts to cause such registration statement to
become effective; provided, however, that before filing a registration
statement or prospectus or any amendments or supplements thereto, the
Company will furnish to the counsel selected by the holders of a
Majority of the Registrable Securities being registered in such
registration statement copies of all such documents proposed to be
filed, which documents will be subject to the review of such counsel;
each such registration statement will be on a form for which the
Company then qualifies, which is available for the sale of the
Registrable Securities in accordance with the intended method of
disposition thereof and which is reasonably satisfactory to the
holders of a Majority of the Registrable Securities being registered
(or the managing underwriters in the case of a firm or best efforts
underwriting offering);
(ii) notify each seller of Registrable Securities of any stop
order issued by the SEC and take all reasonable actions required to
prevent the entry of such stop order or to remove it at the earliest
possible time if entered;
(iii) prepare and file with the SEC 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 for a period of not less than 90 days, or such
shorter period as may be required if all Registrable Securities
covered by such registration statement are sold prior to the
expiration of such 90-day period (except in connection with an
underwritten offering, in which case such registration statement shall
be kept effective as long as the underwriters reasonably request in
the underwriting agreement and except in the case of the Shelf
Registration, which shall be kept effective for the applicable period
specified in Section 5), 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;
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<PAGE> 10
(iv) furnish to each seller of Registrable Securities such number
of copies of such registration statement, each amendment and
supplement thereto (in each case including all exhibits thereto), the
prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller;
(v) use all commercially reasonable efforts to register or qualify
such Registrable Securities under such other securities or blue sky
laws of such jurisdictions as any seller reasonably requests and do
any and all other acts and things which may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such seller;
provided, however, 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 7(a)(v),
(ii) subject itself to taxation in any such jurisdiction or (iii)
consent to general service of process in any such jurisdiction;
(vi) use all commercially reasonable efforts to cause the
Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers
thereof to consummate the disposition of such Registrable Securities;
(vii) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event as a result of
which the prospectus included in such registration statement or any
document incorporated therein by reference contains an untrue
statement of a material fact or omits to state any material fact
necessary to make the statements therein not misleading, and prepare
and file promptly with the SEC a supplement or amendment to such
prospectus or any such document incorporated therein by reference so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(viii) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company
are then listed;
(ix) provide a transfer agent and registrar for all Registrable
Securities and a CUSIP number for all such Registrable Securities, in
each case not later than the effective date of such registration
statement;
(x) enter into such customary agreements (including an
underwriting agreement in customary form with customary lock-up
provisions not to exceed 180 days) and take all such other actions in
connection therewith as the holders of a Majority of the Registrable
Securities being registered or the managing underwriters, if any,
reasonably request in order to expedite or facilitate the disposition
of such Registrable Securities;
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<PAGE> 11
(xi) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant
to such registration statement, and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and
other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such
registration statement;
(xii) obtain a cold comfort letter from the Company's independent
public accountants in customary form and covering such matters of the
type customarily covered by cold comfort letters as the holders of a
Majority of the Registrable Securities being registered or the
managing underwriters reasonably request; and
(xiii) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC, and make available to
its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not more
than eighteen months, beginning with the first month after the
effective date of the Registration Statement, which earnings statement
will satisfy the provisions of Section 11(a) of the Securities Act.
(b) 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 the distribution of such securities as the Company may
from time to time reasonably request.
8. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws (including reasonable fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities), printing expenses, messenger, telephone and delivery expenses, and
fees and disbursements of counsel for the Company and of all independent
certified public accountants (including the expenses of any special audit or
"cold comfort" letters required by or incident to such performance), fees and
expenses of underwriters customarily paid by the issuer of securities
(excluding discounts and commissions), the reasonable fees and expenses of any
special experts retained by the Company or at the request of the managing
underwriters in connection with such registration and fees and expenses of
other Persons retained by the Company (all such expenses being herein called
"Registration Expenses"), will be borne by the Company; provided; however, that
all out of pocket Registration Expenses incurred by the Company pursuant to
Section 3 shall be borne by the Sellers of Registrable Securities and other
persons (including the Company) selling Common Stock pursuant to the applicable
registration statement on a pro rata basis based on the number of shares of
Common Stock to be sold pursuant to such registration statement. (b) In
connection with each registration hereunder, the holders of the Registrable
Securities included therein shall be responsible for all fees and expenses of
their counsel and for all underwriting discounts and commissions payable in
respect of any sales of Registrable Securities.
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<PAGE> 12
9. INDEMNIFICATION; CONTRIBUTION.
(a) Indemnification by Company. In the event of any registration of
Registrable Securities hereunder, the Company agrees to indemnify to the full
extent permitted by law, each holder of Registrable Securities, its officers,
directors and partners and each Person who controls such holder (within the
meaning of the Securities Act and the Exchange Act) against all losses, claims,
damages, liabilities and expenses (or actions in respect thereof) arising out
of or based upon any untrue or alleged untrue statement of a material fact
contained in any registration statement, prospectus or preliminary prospectus
relating to the registration of such Registrable Securities or 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, except insofar as
the same are contained in any information furnished in writing to the Company
by such holder expressly for use therein. The Company will reimburse each
holder of Registrable Securities, its officers, directors, constituent partners
and controlling Persons for any legal and other expenses as incurred in
connection with investigating or defending any such losses, claims, damages,
liabilities, expenses or actions. In connection with a firm commitment or best
efforts underwritten offering, the Company will indemnify the underwriters or
agents, their officers, directors, partners and each Person who controls such
underwriters (within the meaning of the Securities Act and the Exchange Act) or
agents to the same extent as provided above (or such greater extent as may be
customarily required by the managing underwriters) with respect to the
indemnification of the holders of Registrable Securities.
(b) Indemnification by Holder of Registrable Securities. In connection
with any registration statement in which a holder of Registrable Securities is
participating, each such holder will furnish to the Company in writing such
information and affidavits as the Company reasonably requests for use in
connection with any such registration statement or prospectus and agrees to
indemnify, to the extent permitted by law, the Company, its directors and
officers and each Person who controls the Company (within the meaning of the
Securities Act and the Exchange Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
of a material fact or any omission or alleged omission of a material fact
required to be stated in the registration statement or prospectus or any
amendment thereof or supplement thereto or necessary to make the statements
therein not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any written information or affidavit
furnished by such holder specifically for such registration statement and then
only to the extent of the net proceeds received by such holder from the sale of
Registrable Securities pursuant to such registration statement in reliance upon
such information. The holders of Registrable Securities will reimburse, to the
extent of the net proceeds received by the holders of Registrable Securities,
the Company, its officers, directors and controlling persons for any legal and
other expenses as incurred in connection with investigation or defending any
such losses, claims, damages, liabilities, expenses or actions.
(c) Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder will (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification (but omission of
such notice shall not relieve the indemnifying party from liability hereunder
except to the extent such indemnifying party is actually prejudiced by such
failure to give notice) and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest may exist between such indemnified and
indemnifying parties with respect to such claim, permit such indemnifying party
to assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is not assumed by the indemnifying party,
the indemnifying party will not be subject to any liability for any settlement
made without its consent (but such
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<PAGE> 13
consent will not be unreasonably withheld). No indemnifying party will consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of an unconditional release from all liability in respect to
such claim or litigation. An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless an actual conflict of
interest exists between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event the indemnifying
party will be obligated to pay the fees and expenses of such additional counsel
or counsels.
(d) Contribution. If the indemnification provided for in Section 9(a)
is unavailable or insufficient to hold harmless each of the indemnified parties
against any losses, claims, damages, liabilities and expenses (or actions in
respect thereof) to which such persons may become subject under the Securities
Act, then the indemnifying party shall, in lieu of indemnifying each party
entitled to indemnification hereunder, contribute to the amount paid or payable
by such party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and such indemnified persons on the
other in connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages, liabilities or
expenses. The relative fault of such persons shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact, or omission or alleged omission to state a material fact,
relates to information supplied by or concerning the indemnifying party on the
one hand, or by such indemnified person on the other, and such person's
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The parties hereto agree that it would not
be just and equitable if contribution pursuant to this Section 9(d) were
determined by pro rata allocation or by any other allocation that does not take
into account the equitable considerations referred to in this Section 9(d). No
person guilty of fraudulent misrepresentation within the meaning of the Act
shall be entitled to contribution from any person that is not guilty of such
fraudulent misrepresentation.
10. RULE 144.
The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder (or, if the Company is not required
to file such reports, it will, upon the request of any holder of Registrable
Securities, make publicly available such information), and it will take such
further action as any holder of Registrable Securities may reasonably request,
all to the extent required from time to time to enable such holder to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (ii) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement that it has complied with such requirements.
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<PAGE> 14
11. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS; LOCKUP.
No Person may participate in any underwritten registration hereunder
unless such Person (i) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (ii) completes and executes all
customary questionnaires, powers of attorney, underwriting agreements and other
documents required under the terms of such underwriting arrangements. If a
holder of Registrable Securities is participating in a Piggyback Registration
that is an underwritten registration, such holder will (if requested by the
managing underwriter) enter into an agreement not to sell or otherwise transfer
or dispose of any Registrable Securities or other securities of the Company
held by such holder for a specified period of time (not to exceed 120 days)
following the effective date of the registration statement. Such agreement
shall be in writing in a form reasonably satisfactory to the holder, the
Company and the managing underwriter. The Company 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.
12. MISCELLANEOUS.
(a) Right to Suspend. The Company may, by notice in writing to each
holder of Registrable Securities, require the holder of Registrable Securities
to suspend use of any prospectus included in a registration statement filed
hereunder if the Company reasonably determines that it contains an untrue
statement of a material fact or omits to state any material fact necessary to
make the statements therein not misleading or that any transaction in which the
Company is engaged or proposes to engage would require an amendment to such
registration statement or a supplement to such prospectus (including any such
amendment or supplement made through incorporation by reference to a report
filed under Section 13 of the Exchange Act). Each holder of Registrable
Securities agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in this Section 12(a), such holder
will forthwith discontinue disposition of Registrable Securities pursuant to
the registration statement covering such Registrable Securities until such
holder's receipt of the copies of a properly supplemented or amended
prospectus, and, if so directed by the Company, such holder will deliver to the
Company all copies, other than permanent file copies, then in such holder's
possession, of the most recent prospectus covering such Registrable Securities
at the time of receipt of such notice. In the event the Company gives any such
notice, the time period mentioned in Section 7(a)(iii), if applicable, will be
extended by the number of days during the period from and including the date of
the giving of such notice to and including the date when each seller of
Registrable Securities covered by such registration statement has received the
copies of such supplemented or amended prospectus. The Company agrees to use
its reasonable best efforts to cause any suspension of use of any prospectus
pursuant to this paragraph to be as short a period of time as possible.
(b) Remedies. Each holder of Registrable Securities, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given unless the Company has obtained the
written consent of at least a Majority of the outstanding Registrable
Securities.
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<PAGE> 15
(d) Registrable Securities Held by the Company or its Affiliates.
Whenever the consent or approval of holders of all or any specified percentage
of Registrable Securities is required hereunder, Registrable Securities held by
the Company or any of its affiliates (other than a Purchaser if it is such an
affiliate) will not be counted in determining whether such consent or approval
was given by such holders.
(e) Notices. All notices hereunder shall be in writing and shall be
effective (a) on the day on which delivered if delivered personally or
transmitted by telex or telegram or telecopier with evidence of receipt, (b)
one business day after the date on which the same is delivered to a nationally
recognized overnight courier service with evidence of receipt, or (c) five
business days after the date on which the same is deposited, postage prepaid,
in the U.S. mail, sent by certified or registered mail, return receipt
requested, and addressed to the party to be notified at the address set forth
in the Purchase Agreement for the Company, or at the address for the holder of
the Registrable Securities set forth in a registry maintained by the Company,
or at such other address and/or telecopy or telex number and/or to the
attention of such other person as the Company or the holder of the Registrable
Securities may designate by ten-day advance written notice.
(f) Successors and Assigns; Transfer of Registration Rights. This
Agreement will inure to the benefit of and be binding upon the successors and
assigns of each of the parties; provided however that the registration rights
granted by this Agreement may be transferred only (i) by operation of law, or
(ii) to any Person to whom the Purchaser sells or otherwise transfers
Registrable Securities who (x) upon such transfer, will hold 1,000,000 or more
Registrable Securities (such number of shares to be appropriately adjusted in
the event of any stock dividend or stock split or in connection with a
combination of shares, recapitalization, reclassification, merger,
consolidation or other reorganization) and (y) agrees to be bound by the terms
and conditions of this Agreement and signs an addendum to this Agreement to
such effect.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed will be deemed to be an original and all of which taken
together will constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and will not limit or otherwise affect the meaning hereof.
(i) Governing Law; Jurisdiction. This Agreement will be governed by
and construed in accordance with the laws of the State of Texas, without giving
effect to conflict of law principles. Any holder of Registrable Securities may
bring any action or proceeding to enforce or arising out of this Agreement or
in the instruments and agreements annexed hereto in any court of competent
jurisdiction.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein will not be affected or impaired thereby.
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<PAGE> 16
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the securities sold pursuant to the Purchase Agreement. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(l) Attorney's Fees. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof or thereof is
validly asserted as a defense, the successful party will be entitled to recover
reasonable attorney's fees in addition to any other available remedy.
(m) Exchange Securities. If any securities are issued in exchange for
the Shares pursuant to the provisions of Section 5.11 of the Purchase
Agreement, this Agreement shall be interpreted to provide for registration
rights equivalent to those provided hereunder with respect to any shares of
common stock (or any securities into which such common stock is exchanged,
converted, reclassified or recapitalized) of the Company issuable upon
conversion, exercise or exchange of such securities.
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<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
INPUT/OUTPUT INC.
By:
--------------------------------------
Name:
Title:
SCF-IV, L.P.
By: SCF-IV, G.P., Limited Partnership,
its General Partner
By: L. E. Simmons & Associates,
Incorporated, its General Partner
By:
--------------------------------------
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<PAGE> 1
EXHIBIT E
JOINT FILING AGREEMENT
The undersigned each agree as follows: (i) that certain statement on
Schedule 13D relating to the Common Stock, par value $.01 per share, of
Input/Output, Inc., a Delaware corporation, is filed on behalf of each of them,
(ii) such Statement on Schedule 13D is adopted by each of them, (iii) all
future amendments to such Statement on Schedule 13D will, unless written notice
to the contrary is delivered as described below, be jointly filed on behalf of
each of them, and (iv) the provisions of Rule 13d-1(f)(1) under the Securities
Exchange Act of 1934, as amended, apply to each of them. This Agreement may be
terminated with respect to the obligation to file jointly future amendments to
such Statement on Schedule 13D as to any of the undersigned upon such person
giving written notice thereof to each of the other persons signatory hereto, at
the principal office thereof.
EXECUTED as of April 30, 1999.
SCF-IV, L.P.
By: SCF-IV G.P., Limited Partnership
By: L.E. Simmons & Associates,
Incorporated
By: /s/ L.E. Simmons
------------------------------
L.E. Simmons, President
SCF-IV, G.P., LIMITED PARTNERSHIP
By: L.E. Simmons & Associates, Incorporated
By: /s/ L.E. Simmons
-----------------------------------
L.E. Simmons, President
L.E. SIMMONS & ASSOCIATES, INCORPORATED
By: /s/ L.E. Simmons
----------------------------------------
L.E. Simmons, President
L.E. SIMMONS
/s/ L.E. Simmons
-----------------------
L.E. Simmons, individually
18
