EXHIBIT 4
INPUT/OUTPUT, INC.
AND
▇▇▇▇▇▇ TRUST AND SAVINGS BANK
RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF JANUARY 17, 1997
TABLE OF CONTENTS
SECTION PAGE
------- ----
Section 1. Certain Definitions.......................................... 1
Section 2. Appointment of Rights Agent.................................. 7
Section 3. Issuance of Rights Certificates.............................. 7
(a) Distribution Date; Rights Certificates.......................... 7
(b) Common Stock Certificates; Summary of Rights.................... 8
(c) Legend.......................................................... 8
Section 4. Form of Rights Certificates.................................. 9
(a) Form; Date...................................................... 9
(b) Acquiring Person Legend......................................... 10
Section 5. Countersignature and Registration............................ 10
(a) Signatures...................................................... 10
(b) Registration and Transfer....................................... 11
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates................................................. 11
(a) Procedure....................................................... 11
(b) Issuance of New Rights Certificates............................. 12
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights 12
(a) Exercise........................................................ 12
(b) Purchase Price.................................................. 13
(c) Rights Agent Actions............................................ 13
(d) Partial Exercise................................................ 13
(e) Termination of Acquiring Person's Rights........................ 14
(f) Surrender of Rights Certificates; Identity of Beneficial Owner.. 14
Section 8. Cancellation and Destruction of Rights Certificates.......... 14
Section 9. Reservation and Availability of Capital Stock................ 15
(a) Reservation of Capital Stock.................................... 15
(b) Listing......................................................... 15
(c) Registration under the Act...................................... 15
(d) Covenant Regarding Capital Stock................................ 16
(e) Transfer Taxes and Charges...................................... 16
Section 10. Preferred Stock Record Date.................................. 16
(i)
Section 11. Adjustment of Purchase Price; Number and Kind of Shares or
Number of Rights............................................. 17
(a) Certain Adjustments............................................. 17
(b) Purchase Price Adjustment -- Capital Stock...................... 21
(c) Purchase Price Adjustment -- Cash, Assets, etc.................. 21
(d) Current Market Price............................................ 22
(e) Purchase Price Adjustment Threshold............................. 23
(f) Equivalent Adjustments. ........................................ 24
(g) Post-Adjustment Rights Issuances................................ 24
(h) Preferred Stock Anti-Dilution................................... 24
(i) Adjustment of Number of Rights.................................. 24
(j) Rights Certificates............................................. 25
(k) Adjustment Below Par Value...................................... 25
(l) Adjustment Effective as of Future Date; Exercise................ 25
(m) Tax Adjustments................................................. 26
(n) Restriction on Certain Transactions............................. 26
(o) Restriction Against Diminishing Benefits of the Rights.......... 27
(p) Common Stock Adjustments........................................ 27
Section 12. Certificate of Adjusted Purchase Price or Number of Shares... 27
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power................................................ 28
(a) Flip-over Event................................................. 28
(b) Principal Party................................................. 29
(c) Supplemental Agreement.......................................... 29
Section 14. Fractional Rights and Fractional Shares...................... 30
(a) Fractional Rights............................................... 30
(b) Fractional Shares of Preferred Stock............................ 31
(c) Fractional Shares of Common Stock............................... 31
(d) Waiver of Fractional Rights and Shares.......................... 32
Section 15. Rights of Action............................................. 32
Section 16. Agreement of Rights Holders.................................. 32
Section 17. Rights Certificate Holder Not Deemed a Stockholder........... 33
Section 18. Concerning the Rights Agent.................................. 33
(a) Compensation.................................................... 33
(b) Reliance........................................................ 34
(ii)
Section 19. Merger or Consolidation or Change of Name of Rights Agent.... 34
(a) Successor....................................................... 34
(b) Prior Countersignatures......................................... 34
Section 20. Duties of Rights Agent....................................... 34
(a) Legal Counsel................................................... 35
(b) Certification by the Company.................................... 35
(c) Liability for Negligence, etc................................... 35
(d) Statements of Fact or Recitals.................................. 35
(e) Agreement; Adjustments.......................................... 35
(f) Further Assurances.............................................. 36
(g) Instructions.................................................... 36
(h) Dealing in Rights............................................... 36
(i) Agents; Reasonable Care......................................... 36
(j) Expenses; Repayment Assurances.................................. 36
(k) Exercise of Rights; Consultation with Company................... 36
Section 21. Change of Rights Agent....................................... 37
Section 22. Issuance of New Rights Certificates.......................... 37
Section 23. Redemption and Termination................................... 38
(a) Redemption...................................................... 38
(b) Effect of Redemption; Procedure................................. 39
Section 24. Exchange..................................................... 39
(a) Right to Exchange............................................... 39
(b) Effect of Exchange; Procedure................................... 39
(c) Insufficient Common Stock....................................... 40
(d) Fractional Shares............................................... 40
Section 25. Notice of Certain Events..................................... 41
(a) Preferred Stock Transactions, etc............................... 41
(b) Other Transactions.............................................. 41
Section 26. Notices...................................................... 42
Section 27. Supplements and Amendments................................... 42
Section 28. Successors................................................... 43
Section 29. Determinations and Actions by the Board of Directors,
Disinterested Directors, etc................................. 43
Section 30. Benefits of this Agreement................................... 44
(iii)
Section 31. Severability................................................. 44
Section 32. Governing Law................................................ 45
Section 33. Counterparts................................................. 45
Section 34. Descriptive Headings......................................... 45
Exhibit 2 Certificate Of Designation, Preferences and Rights of Series A
Preferred Stock
Exhibit 3 Form of Rights Certificate
Exhibit 4 Letter to Stockholders
Exhibit 5 Press Release
(iv)
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of January 17, 1997, by and between
INPUT/OUTPUT, INC., a Delaware corporation (the "COMPANY"), and ▇▇▇▇▇▇ TRUST AND
SAVINGS BANK (the "RIGHTS AGENT").
RECITALS
On January 17, 1997 (the "RIGHTS DIVIDEND DECLARATION DATE"), the Board of
Directors of the Company authorized and declared a dividend distribution of one
Right for each share of Common Stock (as hereinafter defined) of the Company
outstanding at the close of business on January 27, 1997 (the "RECORD DATE"),
and has authorized the issuance of one Right (as such number may hereafter be
adjusted pursuant to the provisions of Section 11(p) (ADJUSTMENT OF PURCHASE
PRICE; NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS -- COMMON STOCK
ADJUSTMENTS)) for each share of Common Stock of the Company issued between the
Record Date (whether originally issued or delivered from the Company's treasury)
and the Distribution Date, each Right initially representing the right to
purchase one one-thousandth of a share of Series A Preferred Stock of the
Company having the rights, powers and preferences set forth in the form of
Certificate of Designation, Preferences and Rights attached hereto as Exhibit 1,
upon the terms and subject to the conditions hereinafter set forth (the
"RIGHTS");
AGREEMENT
In consideration of the premises and the mutual agreements herein set
forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "ACQUIRING PERSON" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
(as such term is hereinafter defined) of 20% or more of the shares of Common
Stock then outstanding, but shall not include (i) the Company, (ii) any
Subsidiary of the Company, (iii) any employee benefit plan of the Company or of
any Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan, or
(iv) any Person who becomes an Acquiring Person solely as a result of a
reduction in the number of shares of Common Stock outstanding due to the
repurchase of shares of Common Stock by the Company, unless and until such
Person shall purchase or otherwise become (as a result of actions taken by such
Person or its Affiliates or Associates) the Beneficial Owner of additional
shares of Common Stock constituting 1% or more of the then outstanding shares of
Common Stock; PROVIDED, HOWEVER, that if a Person shall become the Beneficial
Owner of 20% or more of the Common Stock of the Company
then outstanding by reason of share repurchases by the Company and shall,
after such share repurchases by the Company, become the Beneficial Owner of
any additional Common Stock of the Company, then such Person shall be deemed
to be an "Acquiring Person," unless upon the consummation of the acquisition
of such additional shares of Common Stock such Person does not beneficially
own 20% or more of the shares of Common Stock then outstanding.
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an Acquiring
Person, as defined pursuant to the foregoing provisions of this paragraph,
has become such inadvertently (including, without limitation, because (i)
such Person was unaware that it beneficially owned a percentage of Common
Stock that would otherwise cause such Person to be an Acquiring Person, or
(ii) such Person was aware of the extent of its Beneficial Ownership of
Common Stock but had no actual knowledge of the consequences of such
Beneficial Ownership under this Agreement) and without any intention of
changing or influencing control of the Company, and such Person divests as
promptly as practicable a sufficient number of shares of Common Stock so that
such Person would no longer be an Acquiring Person as defined pursuant to the
foregoing provisions of this paragraph, then such Person shall not be deemed
to be or to have become an Acquiring Person for any purposes of this
Agreement.
(b) "ACT" shall mean the Securities Act of 1933, as amended and in
effect from time to time.
(c) "ADJUSTMENT SHARES" shall have the meaning set forth in
Section 11(a)(ii) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS -- CERTAIN ADJUSTMENTS)
(d) "AFFILIATE" and "ASSOCIATE" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
(e) "AGREEMENT" shall mean this Rights Agreement as originally
executed or as it may from time to time be supplemented or amended pursuant to
the applicable provisions hereof.
(f) A Person shall be deemed the "BENEFICIAL OWNER" of, and shall be
deemed to "BENEFICIALLY OWN," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; PROVIDED, HOWEVER, that a Person shall not, for purposes of this
paragraph (i), be deemed the "Beneficial Owner" of or to "beneficially own," (A)
securities tendered pursuant to a tender or exchange offer made by such Person
or any of such
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Person's Affiliates or Associates until such tendered securities are accepted
for purchase or exchange, or (B) securities issuable upon exercise of Rights
at any time prior to the occurrence of a Triggering Event, or (C) securities
issuable upon exercise of Rights from and after the occurrence of a
Triggering Event, which Rights were acquired by such Person or any of such
Person's Affiliates or Associates prior to the Distribution Date or pursuant
to Section 3(a) (ISSUANCE OF RIGHTS CERTIFICATES -- DISTRIBUTION DATE; RIGHTS
CERTIFICATES) or Section 22 (ISSUANCE OF NEW RIGHTS CERTIFICATES) (the
"ORIGINAL RIGHTS") or pursuant to Section 11(i) (ADJUSTMENT OF PURCHASE
PRICE; NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS -- ADJUSTMENT OF NUMBER
OF RIGHTS) in connection with an adjustment made with respect to any Original
Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), including pursuant to any
agreement, arrangement or understanding, whether or not in writing; PROVIDED,
HOWEVER, that a Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," any security under this subparagraph (ii) as a result of an
agreement, arrangement or understanding to vote such security if such agreement,
arrangement or understanding: (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and Regulations
under the Exchange Act, and (B) is not also then reportable by such Person on a
Schedule 13D under the Exchange Act (or any comparable or successor report); or
(iii) which are "beneficially owned," directly or indirectly,
by any other Person (or any Affiliate or Associate thereof) with which such
Person (or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as described in
the proviso to subparagraph (ii) of this paragraph (f)) or disposing of any
voting securities of the Company;
PROVIDED, HOWEVER, that nothing in this paragraph (f) shall cause a person
engaged in business as an underwriter of securities to be the "Beneficial Owner"
of or to "beneficially own," any securities acquired through such person's
participation in good faith in a firm commitment underwriting until the
expiration of forty (40) calendar days after the date of such acquisition.
(g) "BOARD" means the Board of Directors of the Company.
(h) "BUSINESS DAY" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in the State of Texas or the State of New
York are authorized or obligated by law or executive order to close.
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(i) "CLOSE OF BUSINESS" on any given date shall mean 5:00 P.M.,
Houston, Texas time, on such date; PROVIDED, HOWEVER, that if such date is not a
Business Day it shall mean 5:00 P.M., Houston, Texas time, on the next
succeeding Business Day.
(j) "COMMON STOCK" shall mean the common stock, par value $0.01 per
share, of the Company, except that "Common Stock" when used with reference to
any Person other than the Company shall mean the capital stock of such Person
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
(k) "COMMON STOCK EQUIVALENTS" shall have the meaning set forth in
Section 11(a)(iii) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS -- CERTAIN ADJUSTMENTS).
(l) "COMPANY" shall mean the Person named as the "Company" in the
first paragraph of this Agreement until a successor corporation shall have
become such, or until a Principal Party shall assume, and thereafter be liable
for, all obligations and duties of the Company hereunder, pursuant to the
applicable provisions of this Agreement, and thereafter "Company" shall mean
such successor corporation or Principal Party.
(m) "CURRENT MARKET PRICE" shall have the meaning set forth in
Section 11(d) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF SHARES OR NUMBER
OF RIGHTS -- CURRENT MARKET PRICE).
(n) "CURRENT VALUE" shall have the meaning set forth in
Section 11(a)(iii) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS -- CERTAIN ADJUSTMENTS).
(o) "DISINTERESTED DIRECTOR" shall mean (i) any member of the Board,
while such Person is a member of the Board, who is not an Acquiring Person, or
an Affiliate or Associate of an Acquiring Person, or a representative or nominee
of an Acquiring Person or of any such Affiliate or Associate, and was a member
of the Board prior to the date of this Agreement, or (ii) any Person who
subsequently becomes a member of the Board, while such Person is a member of the
Board, who is not an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or a representative or nominee of an Acquiring Person or of
any such Affiliate or Associate, if such Person's nomination for election or
election to the Board is recommended or approved by a majority of the
Disinterested Directors.
(p) "DISTRIBUTION DATE" shall have the meaning set forth in
Section 3(a) (ISSUANCE OF RIGHTS CERTIFICATES -- DISTRIBUTION DATE; RIGHTS
CERTIFICATES).
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(q) "EQUIVALENT PREFERRED STOCK" shall have the meaning set forth in
Section 11(b) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF SHARES OR NUMBER
OF RIGHTS -- PURCHASE PRICE ADJUSTMENT -- CAPITAL STOCK).
(r) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended and in effect on the date of this Agreement.
(s) "EXCHANGE NUMBER" shall mean one-half of the number of (i) shares
of Common Stock, (ii) one-thousandths of a share of Preferred Stock, or (iii)
shares or other units of other property for which a Right is exercisable
immediately prior to the time of the action of the Board to exchange the Rights.
(t) "EXPIRATION DATE" shall have the meaning set forth in Section
7(a) (EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS --
EXERCISE).
(u) "FINAL EXPIRATION DATE" shall mean the Close of Business on
January 27, 2007.
(v) "FLIP-IN EVENT" shall mean any event described in Section
11(a)(ii) (A) or (B) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS -- CERTAIN ADJUSTMENTS).
(w) "FLIP-IN TRIGGER DATE" shall have the meaning set forth in
Section 11(a)(iii) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS -- CERTAIN ADJUSTMENTS).
(x) "FLIP-OVER EVENT" shall mean any event described in clauses (x),
(y) or (z) of Section 13(a) (CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS
OR EARNING POWER -- FLIP-OVER EVENT).
(y) "ORIGINAL RIGHTS" shall have the meaning set forth in
Section 1(f)(i) (CERTAIN DEFINITIONS).
(z) "PERSON" shall mean any individual, firm, corporation,
partnership or other entity.
(aa) "PREFERRED STOCK" shall mean shares of Series A Preferred Stock
par value $0.01 per share, of the Company, and, to the extent that there is not
a sufficient number of shares of Series A Preferred Stock authorized to permit
the full exercise of the Rights, any other series of Preferred Stock, par value
$0.01 per share, of the Company designated for such purpose containing terms
substantially similar to the terms of the Series A Preferred Stock.
(bb) "PRINCIPAL PARTY" shall have the meaning set forth in
Section 13(b) (CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER -- PRINCIPAL PARTY).
5
(cc) "PURCHASE PRICE" shall have the meaning set forth in Section 4(a)
(FORM OF RIGHTS CERTIFICATES -- FORM; DATE).
(dd) "RECORD DATE" shall have the meaning set forth in the Recitals at
the beginning of the Agreement.
(ee) "REDEMPTION DATE" shall have the meaning set forth in
Section 23(a) (REDEMPTION AND TERMINATION -- REDEMPTION).
(ff) "REDEMPTION PRICE" shall have the meaning set forth in
Section 23(a) (REDEMPTION AND TERMINATION -- REDEMPTION).
(gg) "RIGHTS" shall have the meaning set forth in the Recitals at the
beginning of the Agreement.
(hh) "RIGHTS AGENT" shall mean the Person named as the "Rights Agent"
in the first paragraph of this Agreement until a successor Rights Agent shall
have become such pursuant to the applicable provisions hereof and thereafter
"Rights Agent" shall mean such successor Rights Agent. If at any time there is
more than one Person appointed by the Company as Rights Agent pursuant to the
applicable provisions of this Agreement, "Rights Agent" shall mean and include
each such Person.
(ii) "RIGHTS CERTIFICATES" shall have the meaning set forth in
Section 3(a) (ISSUANCE OF RIGHTS CERTIFICATES -- DISTRIBUTION DATE; RIGHTS
CERTIFICATES).
(jj) "RIGHTS DIVIDEND DECLARATION DATE" shall have the meaning set
forth in the RECITALS at the beginning of the Agreement.
(kk) "SPREAD" shall have the meaning set forth in Section 11(a)(iii)
(ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS --
CERTAIN ADJUSTMENTS).
(ll) "STOCK ACQUISITION DATE" shall mean the first date of public
announcement by the Company (by any means) that a Person has become an Acquiring
Person.
(mm) "SUBSIDIARY" shall mean, with reference to any Person, any
corporation or other entity of which a majority of the voting power of equity
securities or majority of the equity interest is beneficially owned, directly or
indirectly, by such Person, or otherwise controlled by such Person.
(nn) "SUBSTITUTION PERIOD" shall have the meaning set forth in
Section 11(a)(iii) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS -- CERTAIN ADJUSTMENTS).
6
(oo) "TRADING DAY" shall have the meaning set forth in Section
11(d)(i) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF SHARES OR NUMBER OF
RIGHTS -- CURRENT MARKET PRICE).
(pp) "TRIGGERING EVENT" shall mean any Flip-in Event or any Flip-over
Event.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 (ISSUANCE OF RIGHTS CERTIFICATES), shall prior to
the Distribution Date also be the holders of the Common Stock) in accordance
with the terms and conditions hereof and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such Co-Rights Agents as
it may deem necessary or desirable.
Section 3. ISSUANCE OF RIGHTS CERTIFICATES.
(a) DISTRIBUTION DATE; RIGHTS CERTIFICATES. Until the earlier of (i)
the Stock Acquisition Date (or, if the Stock Acquisition Date occurs before the
Record Date, the Close of Business on the Record Date), or (ii) the Close of
Business on the tenth Business Day (or such later date as the Board shall
determine prior to such time as any Person becomes an Acquiring Person) after
the date that a tender or exchange offer by any Person (other than the Company,
any Subsidiary of the Company, any employee benefit plan of the Company or of
any Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan) is
first published or sent or given within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act, if upon consummation
thereof such Person would be the Beneficial Owner of 20% or more of the shares
of Common Stock then outstanding (the earlier of (i) and (ii) being herein
referred to as the "DISTRIBUTION DATE"), (x) the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company, except pursuant to
the provision of Section 23 (REDEMPTION AND TERMINATION)). As soon as
practicable after the Distribution Date, the Rights Agent will, at the expense
of the Company, send by first-class, insured, postage prepaid mail, to each
record holder of the Common Stock as of the Close of Business on the
Distribution Date, at the address of such holder shown on the records of the
Company, one or more rights certificates, in substantially the form of Exhibit 2
hereto (the "RIGHTS CERTIFICATES"), evidencing one Right for each share of
Common Stock so held, subject to adjustment as provided herein. In the event
that an adjustment in the number of Rights per share of Common Stock has been
made pursuant to Section 11(p) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF
SHARES OR NUMBER OF RIGHTS -- COMMON STOCK ADJUSTMENTS) at the time of
7
distribution of the Rights Certificates, the Company shall make the necessary
and appropriate rounding adjustments (in accordance with Section 14(a)
(FRACTIONAL RIGHTS AND FRACTIONAL SHARES -- FRACTIONAL RIGHTS)) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates.
(b) COMMON STOCK CERTIFICATES; SUMMARY OF RIGHTS. With respect to
certificates for the Common Stock outstanding as of the Record Date, until the
Distribution Date, the Rights associated with the Common Stock represented by
such certificates will be evidenced by such certificates alone and the
registered holders of such Common Stock shall also be the registered holders of
the associated Rights. Until the earlier of the Distribution Date or the
Expiration Date, the transfer of any certificates representing shares of Common
Stock in respect of which Rights have been issued shall also constitute the
transfer of the Rights associated with such shares of Common Stock. On the
Record Date, or as soon as practicable thereafter, the Company will send a copy
of a Summary of Rights to Purchase Preferred Stock, in substantially the form of
Exhibit 3 hereto (the "Summary of Rights"), by first-class, postage-prepaid
mail, to each record holder of shares of Common Stock as of the close of
business of the Record Date, at the address of such holder shown on the records
of the Company.
(c) LEGEND. Rights shall be issued in respect of all certificates
for shares of Common Stock which are issued (whether originally issued or from
the Company's treasury) after the Record Date but prior to the earliest of the
(i) Distribution Date, (ii) the Expiration Date, or (iii) the Redemption Date,
or, in certain circumstances provided in Section 22 (ISSUANCE OF NEW RIGHTS
CERTIFICATES) after the Distribution Date. Certificates representing such shares
of Common Stock shall also be deemed to be certificates for Rights, and shall
bear the following legend:
This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights
Agreement dated as of January 17, 1997, by and between
Input/Output, Inc. (the "Company") and ▇▇▇▇▇▇ Trust and
Savings Bank as Rights Agent (the "Rights Agreement"), the
terms of which are hereby incorporated herein by reference
and a copy of which is on file at the principal offices of
the Company. Under certain circumstances, as set forth in
the Rights Agreement, such Rights will be evidenced by
separate certificates and will no longer be evidenced by
this certificate. The Company will mail to the holder of
this certificate a copy of the Rights Agreement, as in
effect on the date of mailing, without charge promptly after
receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights
issued to, or held by, any Person who is, was or becomes an
8
Acquiring Person or any Affiliate or Associate thereof (as
such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any
subsequent holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
earliest of (i) the Distribution Date, (ii) the Expiration Date, and (iii) the
Redemption Date, (x) the Rights associated with the Common Stock represented by
such certificates shall be evidenced by such certificates alone, (y) the
registered holders of such Common Stock shall also be the registered holders of
the associated Rights, and (z) the transfer of any of such certificates shall
also constitute the transfer of the Rights associated with such shares of Common
Stock. In the event that the Company purchases or acquires any shares of Common
Stock after the Record Date but prior to the Distribution Date, any rights
associated with such shares of Common Stock shall be deemed canceled and retired
so that the Company shall not be entitled to exercise any Rights associated with
shares of Common Stock which are no longer outstanding.
Notwithstanding this paragraph (c), the omission of a legend shall not
affect the enforceability of any part of this Agreement or the rights of any
holder of the Rights.
Section 4. FORM OF RIGHTS CERTIFICATES.
(a) FORM; DATE. The Rights Certificates (and the forms of election
to purchase and of assignment to be printed on the reverse thereof) shall each
be substantially in the form set forth in Exhibit 2 hereto and may have such
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF
SHARES OR NUMBER OF RIGHTS) and Section 22 (ISSUANCE OF NEW RIGHTS
CERTIFICATES), the Rights Certificates, whenever distributed, shall be dated as
of the Record Date and on their face shall entitle the holders thereof to
purchase such number of one one-thousandths of a share of Preferred Stock as
shall be set forth therein at the price set forth therein (such exercise price
per one one-thousandth of a share is referred to herein as the "PURCHASE
PRICE"), but the amount and type of securities purchasable upon the exercise of
each Right and the Purchase Price thereof shall be subject to adjustment as
provided herein.
(b) ACQUIRING PERSON LEGEND. Any Rights Certificate issued pursuant
to Section 3(a) (ISSUANCE OF RIGHTS CERTIFICATES -- DISTRIBUTION DATE; RIGHTS
CERTIFICATES) or Section 22 (ISSUANCE OF NEW RIGHTS CERTIFICATES) that
represents Rights beneficially owned by (i) an Acquiring Person or any Associate
or Affiliate of
9
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person to holders of equity interests in such Acquiring Person or to any
Person with whom such Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a
transfer which the Disinterested Directors have determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of Section 7(e) (EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION
DATE OF RIGHTS --TERMINATION OF ACQUIRING PERSON'S RIGHTS) and any Rights
Certificate issued pursuant to Section 6 (TRANSFER, SPLIT UP, COMBINATION AND
EXCHANGE OF RIGHTS CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS
CERTIFICATES), Section 11 (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF
SHARES OR NUMBER OF RIGHTS) or Section 22 (ISSUANCE OF NEW RIGHTS
CERTIFICATES) upon transfer, exchange, replacement or adjustment of any other
Rights Certificate referred to in this sentence, shall contain (to the extent
feasible) the following legend:
The Rights represented by this Rights Certificate are or were beneficially
owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement dated as of January 17, 1997, by and between Input/Output, Inc.
and ▇▇▇▇▇▇ Trust and Savings Bank, as Rights Agent). Accordingly, this
Rights Certificate and the Rights represented hereby may become null and
void in the circumstances specified in Section 7(e) (EXERCISE OF RIGHTS;
PURCHASE PRICE; EXPIRATION DATE OF RIGHTS -- TERMINATION OF ACQUIRING
PERSON'S RIGHTS) of such Agreement.
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) SIGNATURES. The Rights Certificates shall be executed on behalf
of the Company by its Chairman of the Board, its President or any Vice
President, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or a facsimile thereof which shall be attested to by
the Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be countersigned by the
Rights Agent, either manually or by facsimile signature, and shall not be valid
for any purpose unless so countersigned. In case any officer of the Company who
shall have signed any of the Rights Certificates shall cease to be such officer
of the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the Company with
the same force and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificates may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall
10
be a proper officer of the Company to sign such Rights Certificate, although
at the date of the execution of this Rights Agreement any such person was not
such an officer.
(b) REGISTRATION AND TRANSFER. Following the Distribution Date, the
Rights Agent will keep or cause to be kept, at its principal office or offices
designated as the appropriate place for surrender of Rights Certificates upon
exercise or transfer, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates and the date of each of
the Rights Certificates.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) PROCEDURE. Subject to the provisions of Section 4(b) (FORM OF
RIGHTS CERTIFICATES -- ACQUIRING PERSON LEGEND), Section 7(e) (EXERCISE OF
RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS -- TERMINATION OF ACQUIRING
PERSON'S RIGHTS) and Section 14 (FRACTIONAL RIGHTS AND FRACTIONAL SHARES), at
any time after the Close of Business on the Distribution Date, and at or prior
to the Close of Business on the Expiration Date, any Rights Certificate or
Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Certificates, entitling the registered holder to purchase
a like number of one one-thousandths of a share of Preferred Stock (or,
following a Triggering Event, Common Stock, other securities, cash or other
assets, as the case may be) as the Rights Certificate or Certificates
surrendered then entitled such holder (or former holder in the case of a
transfer) to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Certificates to be transferred, split up, combined or exchanged
at the principal office or offices of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company shall be obligated to take any
action whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon, the
Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
(b) ISSUANCE OF NEW RIGHTS CERTIFICATES. Upon receipt by the Company
and the Rights Agent of evidence reasonably satisfactory to them of the
11
loss, theft, destruction or mutilation of a Rights Certificate, and, in case
of loss, theft or destruction, of indemnity or security reasonably
satisfactory to them, and reimbursement to the Company and the Rights Agent
of all reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Rights Certificate if mutilated, the
Company will execute and deliver a new Rights Certificate of like tenor to
the Rights Agent for countersignature and delivery to the registered owner in
lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) EXERCISE. Subject to Section 7(e) (EXERCISE OF RIGHTS; PURCHASE
PRICE; EXPIRATION DATE OF RIGHTS -- TERMINATION OF ACQUIRING PERSON'S RIGHTS),
the registered holder of any Rights Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein, including, without
limitation, the restrictions on exercisability set forth in Section 9(c)
(RESERVATION AND AVAILABILITY OF CAPITAL STOCK -- REGISTRATION UNDER THE ACT),
Section 11(a)(iii) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS -- CERTAIN ADJUSTMENTS), Section 23(a) (REDEMPTION AND
TERMINATION -- REDEMPTION), and Section 24(b) (EXCHANGE -- EFFECT OF EXCHANGE;
PROCEDURE)) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one one-thousandths of a share of Preferred Stock (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable and an amount equal to any applicable
transfer tax, at or prior to the earlier of (i) the Final Expiration Date, or
(ii) the Redemption Date (the earlier of (i) or (ii) being herein referred to as
the "EXPIRATION DATE"). The payment of the Purchase Price and the applicable
transfer tax, if any (as such amount may be reduced pursuant to Section
11(a)(iii) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF SHARES OR NUMBER OF
RIGHTS -- CERTAIN ADJUSTMENTS)), may be made (x) in cash, (y) by certified
check, cashier's check or money order payable to the order of the Company, or
(z) by delivery of a certificate or certificates (with appropriate stock powers
executed in blank attached thereto) evidencing a number of shares of Common
Stock equal to the then Purchase Price divided by the closing price (as
determined pursuant to Section 11(d) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND
KIND OF SHARES OR NUMBER OF RIGHTS -- CURRENT MARKET PRICE) per share of Common
Stock on the Trading Day immediately preceding the date of such exercise. In
the event that the Company is obligated to issue other securities (including
Common Stock) of the Company, pay cash and/or distribute other property pursuant
to Section 11(a), the Company will make all arrangements necessary so that such
other securities, cash and/or other property are available for distribution by
the Rights Agent, if and when appropriate. The Company reserves the right to
require prior to the occurrence of a Triggering Event that upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Preferred
Stock would be issued.
12
(b) PURCHASE PRICE. The Purchase Price for each one one-thousandth
of a share of Preferred Stock pursuant to the exercise of a Right shall
initially be $200, and shall be subject to adjustment from time to time as
provided in Section 11 (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF SHARES
OR NUMBER OF RIGHTS) and Section 13(a) (CONSOLIDATION, MERGER OR SALE OR
TRANSFER OF ASSETS OR EARNING POWER -- FLIP-OVER EVENT) and shall be payable in
accordance with paragraph (a) of this Section 7.
(c) RIGHTS AGENT ACTIONS. Upon receipt of a Rights Certificate
representing exercisable Rights and the compliance by the holder of such Rights
Certificate with paragraph (a) of this Section 7, the Rights Agent shall,
subject to Section 20(k) (DUTIES OF RIGHTS AGENT -- EXERCISE OF RIGHTS;
CONSULTATION WITH COMPANY), thereupon promptly (i)(A) requisition from any
transfer agent of the shares of Preferred Stock (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for the total
number of one one-thousandths of a share of Preferred Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, or (B) if the Company shall have elected to deposit the total
number of shares of Preferred Stock issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-thousandths of a share
of Preferred Stock as are to be purchased (in which case certificates for the
shares of Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 (FRACTIONAL RIGHTS AND FRACTIONAL SHARES), (iii)
after receipt thereof, deliver such certificates or depositary receipts to or
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, and (iv) after
receipt thereof, deliver such cash, if any, to or upon the order of the
registered holder of such Rights Certificate.
(d) PARTIAL EXERCISE. In case the registered holder of any Rights
Certificate shall exercise less than all the Rights evidenced thereby, a new
Rights Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to, or upon the
order of the registered holder of such Rights Certificate, registered in such
name or names as may be designated by such holder, subject to the provisions of
Section 14 (FRACTIONAL RIGHTS AND FRACTIONAL SHARES).
(e) TERMINATION OF ACQUIRING PERSON'S RIGHTS. Notwithstanding
anything in this Agreement to the contrary, from and after the first occurrence
of a Flip-in Event, any Rights beneficially owned by (i) an Acquiring Person, or
an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after such Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the
13
Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person
to holders of equity interests in such Acquiring Person or to any Person with
whom the Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the
Disinterested Directors have determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The
Company shall use all reasonable efforts to ensure that the provisions of
this Section 7(e) and Section 4(b) (FORM OF RIGHTS CERTIFICATES -- ACQUIRING
PERSON LEGEND) are complied with, but shall have no liability to any holder
of Rights Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or any of its respective
Affiliates, Associates or transferees hereunder.
(f) SURRENDER OF RIGHTS CERTIFICATES; IDENTITY OF BENEFICIAL OWNER.
Notwithstanding anything in this Agreement to the contrary, neither the Rights
Agent nor the Company shall be obligated to undertake any action with respect to
a registered holder upon the occurrence of any purported exercise as set forth
in this Section 7 unless such registered holder shall have (i) completed and
signed the certificate contained in the form of election to purchase set forth
on the reverse side of the Rights Certificate surrendered for such exercise, and
(ii) provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
(a) RESERVATION OF CAPITAL STOCK. Subject to the Company's rights
under Section 11(a)(iii) hereof to otherwise fulfill its obligations hereunder,
the Company will cause to be reserved and kept available out of its authorized
and unissued shares of Preferred Stock (and, following the occurrence of a
Triggering Event, out of its authorized and unissued shares of Common Stock
and/or other
14
securities or out of its authorized and issued shares of Common Stock held in
its treasury), the number of shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities) that,
as provided in this Agreement, including Section 11(a)(iii) (ADJUSTMENT OF
PURCHASE PRICE; NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS -- CERTAIN
ADJUSTMENTS), will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) LISTING. So long as the shares of Preferred Stock (and,
following the occurrence of a Triggering Event, Common Stock and/or other
securities) issuable and deliverable upon the exercise of the Rights may be
listed on any national securities exchange or inter-dealer quotation system, the
Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all shares reserved for such issuance to be listed on
such exchange or quotation system upon official notice of issuance upon such
exercise.
(c) REGISTRATION UNDER THE ACT. The Company will use its best
efforts to (i) file, as soon as practicable following the earliest date after
the first occurrence of a Flip-in Event on which the consideration to be
delivered by the Company upon exercise of the Rights has been determined in
accordance with Section 11(a)(iii) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND
KIND OF SHARES OR NUMBER OF RIGHTS -- CERTAIN ADJUSTMENTS), or as soon as is
required by law following the Distribution Date, as the case may be, a
registration statement on an appropriate form under the Act with respect to the
securities purchasable upon exercise of the Rights, (ii) use its best efforts to
cause such registration statement to become effective as soon as practicable
after such filing, and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the Act)
until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, and (B) the Expiration Date. The Company will
also take such action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed ninety (90) calendar days after the date set forth in
clause (i) of the first sentence of this Section 9(c), the exercisability of the
Rights in order to prepare and file such registration statement and permit it to
become effective. Upon any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect. In addition, if the Company shall determine that a
registration statement is required following the Distribution Date, the Company
may temporarily suspend the exercisability of the Rights until such time as a
registration statement has been declared effective. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction if the requisite qualification in such jurisdiction shall
not have been obtained, the exercise thereof shall not be permitted under
applicable law or a registration statement shall not have been declared
effective.
15
(d) COVENANT REGARDING CAPITAL STOCK. The Company will take all such
action as may be necessary to ensure that all one one-thousandths of a share of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(e) TRANSFER TAXES AND CHARGES. The Company will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Rights Certificates and of
any certificates for a number of one one-thousandths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) upon the
exercise of Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of a
number of one one-thousandths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in respect of a name other than,
that of the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
one one-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. PREFERRED STOCK RECORD DATE. Each Person in whose name any
certificate for a number of one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated as of, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; PROVIDED, HOWEVER, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
16
Section 11. ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) CERTAIN ADJUSTMENTS.
(i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in shares
of Preferred Stock, (B) subdivide or split the outstanding Preferred Stock, (C)
combine the outstanding Preferred Stock into a smaller number of shares, or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a) and Section 7(e) (EXERCISE OF
RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS -- TERMINATION OF ACQUIRING
PERSON'S RIGHTS), the Purchase Price in effect at the time of the record date
for such dividend or of the effective date of such subdivision, split,
combination or reclassification, and the number and kind of shares of Preferred
Stock or capital stock, as the case may be, issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive, upon payment of the aggregate adjusted
Purchase Price then in effect necessary to exercise a Right in full, the
aggregate number and kind of shares of Preferred Stock or capital stock, as the
case may be, which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Stock (or other capital stock, as the case
may be) transfer books of the Company were open, such holder would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, split, combination or reclassification. If an event occurs which
would require an adjustment under both this Section 11(a)(i) and
Section 11(a)(ii) the adjustment provided for in this Section 11(a)(i) shall be
in addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii).
(ii) In the event:
(A) (1) any Acquiring Person or any Associate or Affiliate
of any Acquiring Person, at any time after the date of this
Agreement, directly or indirectly, shall merge into the Company
or otherwise combine with the Company and the Company shall be
the continuing or surviving corporation of such merger or
combination and the Common Stock of the Company shall remain
outstanding and unchanged, or (2) subject to Section 23
(REDEMPTION AND TERMINATION), any Person (other than the Company,
any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any Person or
entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan), alone or
17
together with its Affiliates and Associates, shall, at any time
after the Rights Dividend Declaration Date, become an Acquiring
Person, unless the event causing such Person to become an
Acquiring Person is a Flip-over Event; or
(B) during such time as there is an Acquiring Person, there
shall be any reclassification of securities (including any
reverse stock split), or recapitalization of the Company, or any
merger or consolidation of the Company with any of its
Subsidiaries or any other transaction or series of transactions
involving the Company or any of its Subsidiaries, other than a
transaction or transactions to which the provisions of
Section 13(a) (CONSOLIDATION, MERGER OR SALE OR TRANSFER OF
ASSETS OR EARNING POWER -- FLIP-OVER EVENT) apply (whether or not
with or into or otherwise involving an Acquiring Person) which
has the effect, directly or indirectly, of increasing by more
than 1% the proportionate share of the outstanding shares of any
class of equity securities of the Company or any of its
subsidiaries which is directly or indirectly beneficially owned
by any Acquiring Person or any Associate or Affiliate of any
Acquiring Person,
then, promptly following the occurrence of any such Flip-in Event (whether
described in Section 11(a)(ii)(A) or (B)), proper provision shall be made so
that each holder of a Right (except as provided below and in Section 7(e)
(EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS -- TERMINATION OF
ACQUIRING PERSON'S RIGHTS)) shall thereafter have the right to receive, upon
exercise thereof at the then current Purchase Price in accordance with the terms
of this Agreement, in lieu of the number of one one-thousandths of a share of
Preferred Stock, such number of shares of Common Stock of the Company as shall
equal the result obtained by (x) multiplying the then current Purchase Price by
the then number of one one-thousandths of a share of Preferred Stock for which a
Right was exercisable immediately prior to the first occurrence of a Flip-in
Event, and (y) dividing that product (which, following such first occurrence,
shall thereafter be referred to as the "Purchase Price" for each Right and for
all purposes of this Agreement) by 50% of the Current Market Price per share of
Common Stock on the date of such first occurrence (such number of shares being
referred to as the "ADJUSTMENT SHARES").
(iii) In the event that the number of shares of Common Stock
that are authorized by the Company's Certificate of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights is not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section 11(a), the
Company shall: (A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (the "CURRENT VALUE") over (2) the
Purchase Price (such excess, the "SPREAD"), and (B) with respect to each Right,
make adequate provision to substitute for the Adjustment Shares, upon payment of
the applicable Purchase Price, (1) cash, (2) a reduction in
18
the Purchase Price, (3) Common Stock or other equity securities of the
Company (including, without limitation, shares, or units of shares, of
preferred stock which the Board has deemed to have the same value as shares
of Common Stock (such shares of preferred stock being referred to as "COMMON
STOCK EQUIVALENTS")), (4) debt securities of the Company, (5) other assets,
or (6) any combination of the foregoing, having an aggregate value equal to
the Current Value, where such aggregate value has been determined by the
Board based upon the advice of a recognized investment banking firm selected
by them; PROVIDED, HOWEVER, if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within thirty (30)
calendar days following the later of (x) the first occurrence of a Flip-in
Event and (y) the date on which the Company's right of redemption pursuant to
Section 23(a) (REDEMPTION AND TERMINATION -- REDEMPTION) expires (the later of
(x) and (y) being referred to herein as the "FLIP-IN TRIGGER DATE"), then the
Company shall be obligated to deliver, upon the surrender for exercise of a
Right and without requiring payment of the Purchase Price, shares of Common
Stock (to the extent available) and then, if necessary, cash, which shares
and/or cash have an aggregate value equal to the Spread. If the Board shall
determine in good faith that it is likely that sufficient additional shares
of Common Stock could be authorized for issuance upon exercise in full of the
Rights, the thirty (30) calendar day period set forth above may be extended
to the extent necessary, but not more than ninety (90) calendar days after
the Flip-in Trigger Date, in order that the Company may seek stockholder
approval for the authorization of such additional shares (such period, the
"SUBSTITUTION PERIOD"). To the extent that the Company determines that some
action need be taken pursuant to the first and/or second sentences of this
Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e)
(EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS -- TERMINATION
OF ACQUIRING PERSON'S RIGHTS), that such action shall apply uniformly to all
outstanding Rights, and (y) may suspend the exercisability of the Rights
until the expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii),
the value of the Common Stock shall be the Current Market Price per share of
the Common Stock on the Flip-in Trigger Date and the value of any Common
Stock Equivalent shall be deemed to have the same value as the Common Stock
on such date.
(iv) If the rules of the national securities exchange, registered
as such pursuant to Section 6 of the Exchange Act, or of the national securities
association, registered as such pursuant to Section 15A of the Exchange Act, on
which the Common Stock is principally traded or quoted would prohibit such
exchange or association from listing or continuing to list, or from authorizing
for or continuing quotation and/or transaction reporting through an inter-dealer
quotation system, the Common Stock or other equity securities of the Company if
the Rights were to be exercised for shares of Common Stock in accordance with
subparagraph (ii) of this
19
Section 11(a) because such issuance would nullify, restrict or disparately
reduce the per share voting rights of holders of Common Stock, the Company
shall: (A) determine the Spread, and (B) with respect to each Right, make
adequate provision to substitute for the Adjustment Shares, upon payment of
the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase
Price, (3) equity securities of the Company, including, without limitation,
Common Stock Equivalents, other than securities which would have the effect
of nullifying, restricting or disparately reducing the per share voting
rights of holders of Common Stock, (4) debt securities of the Company, (5)
other assets, or (6) any combination of the foregoing, having an aggregate
value equal to the Current Value, where such aggregate value has been
determined by the Board based upon the advice of a recognized investment
banking firm selected by the Board; PROVIDED, HOWEVER, if the Company shall
not have made adequate provision to deliver value pursuant to clause (B)
above within thirty (30) calendar days following the Flip-in Trigger Date,
then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase Price, cash
having an aggregate value equal to the Spread. To the extent that the Company
determines that some action need be taken pursuant to the first sentence of
this Section 11(a)(iv), the Company (x) shall provide, subject to Section
7(e) (EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS --
TERMINATION OF ACQUIRING PERSON'S RIGHTS), that such action shall apply
uniformly to all outstanding Rights and (y) may suspend the exercisability of
the Rights, but not longer than ninety (90) calendar days after the Flip-in
Trigger Date, in order to decide the appropriate form of distribution to be
made pursuant to such first sentence and to determine the value thereof. In
the event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iv),
the value of the Common Stock shall be the Current Market Price per share of
the Common Stock on the Flip-in Trigger Date and the value of any Common
Stock Equivalent shall be deemed to have the same value as the Common Stock
on such date.
(b) PURCHASE PRICE ADJUSTMENT -- CAPITAL STOCK. In case the Company
shall fix a record date for the issuance of rights, options or warrants to all
holders of Preferred Stock entitling them to subscribe for or purchase (for a
period expiring within forty-five (45) calendar days after such record date)
Preferred Stock (or shares having the same rights, privileges and preferences as
the shares of Preferred Stock ("EQUIVALENT PREFERRED STOCK")) or securities
convertible into Preferred Stock or Equivalent Preferred Stock at a price per
share of Preferred Stock or per share of Equivalent Preferred Stock (or having a
conversion price per share, if a security convertible into Preferred Stock or
Equivalent Preferred Stock) less than the Current Market Price per share of
Preferred Stock on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of shares of Preferred Stock outstanding on such record
date, plus the number of shares of Preferred Stock which the aggregate offering
price
20
of the total number of shares of Preferred Stock and/or Equivalent Preferred
Stock so to be offered (and/or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at such Current
Market Price, and the denominator of which shall be the number of shares of
Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or Equivalent Preferred Stock to be
offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration part or all of
which may be in a form other than cash, the value of such consideration shall
be as determined in good faith by the Board, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on
the Rights Agent and the holders of the Rights. Shares of Preferred Stock
owned by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall be
made successively whenever such a record date is fixed, and in the event that
such rights or warrants are not so issued, the Purchase Price shall be
adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) PURCHASE PRICE ADJUSTMENT -- CASH, ASSETS, ETC. In case the
Company shall fix a record date for a distribution to all holders of Preferred
Stock (including any such distribution made in connection with a consolidation
or merger in which the Company is the continuing corporation) of evidences of
indebtedness, cash (other than a regular quarterly cash dividend out of the
earnings or retained earnings of the Company), assets (other than a dividend
payable in Preferred Stock, but including any dividend payable in stock other
than Preferred Stock) or subscription rights or warrants (excluding those
referred to in Section 11(b) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF
SHARES OR NUMBER OF RIGHTS PURCHASE PRICE ADJUSTMENT -- CAPITAL STOCK)), the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the Current Market Price per
share of Preferred Stock on such record date, less the fair market value (as
determined in good faith by the Board, whose determination shall be described in
a statement filed with the Rights Agent) of the portion of the cash, assets or
evidences of indebtedness so to be distributed or of such subscription rights or
warrants applicable to a share of Preferred Stock and the denominator of which
shall be such Current Market Price per share of Preferred Stock. Such
adjustments shall be made successively whenever such a record date is fixed, and
in the event that such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in effect if such record
date had not been fixed.
(d) CURRENT MARKET PRICE.
(i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) (ADJUSTMENT OF PURCHASE PRICE;
NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS -- CERTAIN ADJUSTMENTS) the
21
Current Market Price per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of such Common Stock for the
thirty (30) consecutive Trading Days immediately prior to such date, and for
purposes of computations made pursuant to Section 11(a)(iii) the Current Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the ten (10)
consecutive Trading Days immediately following such date; PROVIDED, HOWEVER,
that in the event that the Current Market Price per share of the Common Stock is
determined during a period following the announcement by the issuer of such
Common Stock of (A) a dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities convertible into shares of such Common
Stock (other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and prior to the expiration of the
requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth
above, after the ex-dividend date for such dividend or distribution, or the
record date for such subdivision, combination or reclassification, then, and in
each such case, the Current Market Price shall be properly adjusted to take into
account ex-dividend trading. The closing price for each Trading Day shall be
the last sale price, regular way, or, in case no such sale takes place on such
Trading Day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the shares of Common Stock are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System or such other system then
in use, or, if on any such date the shares of Common Stock are not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Common Stock selected by
the Board. If on any such date no market maker is making a market in the Common
Stock, the fair value of such shares on such date as determined in good faith by
the Board shall be used. The term "TRADING DAY" shall mean a day on which the
principal national securities exchange on which the shares of Common Stock are
listed or admitted to trading is open for the transaction of business or, if the
shares of Common Stock are not listed or admitted to trading on any national
securities exchange, a Business Day. If the Common Stock is not publicly held or
not so listed or traded, Current Market Price per share shall mean the fair
value per share as determined in good faith by the Board, whose determination
shall be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the Current
Market Price per share of Preferred Stock shall be determined in the same manner
as set forth above for the Common Stock in clause (i) of this Section 11(d)
(other than
22
the last sentence thereof). If the Current Market Price per share of
Preferred Stock cannot be determined in the manner provided above or if the
Preferred Stock is not publicly held or listed or traded in a manner
described in clause (i) of this Section 11(d), the Current Market Price per
share of Preferred Stock shall be conclusively deemed to be an amount equal
to 1,000 (as such number may be appropriately adjusted for such events as
stock splits, stock dividends and recapitalizations with respect to the
Common Stock occurring after the date of this Agreement) multiplied by the
Current Market Price per share of the Common Stock. If neither the Common
Stock nor the Preferred Stock is publicly held or so listed or traded,
Current Market Price per share of the Preferred Stock shall mean the fair
value per share as determined in good faith by the Board, whose determination
shall be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes. For all purposes of this Agreement, the Current
Market Price of one one-thousandth of a share of Preferred Stock shall be
equal to the Current Market Price of one share of Preferred Stock divided by
1,000.
(e) PURCHASE PRICE ADJUSTMENT THRESHOLD. Anything herein to the
contrary notwithstanding, no adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at least one
percent (1%) in the Purchase Price; PROVIDED HOWEVER, that any adjustments which
by reason of this Section 11(e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF SHARES
OR NUMBER OF RIGHTS) shall be made to the nearest cent or to the nearest
thousandth of a share of Common Stock or other share or one-millionth of a share
of Preferred Stock, as the case may be. Notwithstanding the first sentence of
this Section 11(e), any adjustment required by this Section 11 shall be made no
later than the earlier of (i) three (3) years from the date of the transaction
which mandates such adjustment, or (ii) the Expiration Date.
(f) EQUIVALENT ADJUSTMENTS. If as a result of an adjustment made
pursuant to Section 11(a)(ii) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF
SHARES OR NUMBER OF RIGHTS -- CERTAIN ADJUSTMENTS) or Section 13(a)
(CONSOLIDATION MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER -- FLIP-
OVER EVENT) the holder of any Right thereafter exercised shall become entitled
to receive any shares of capital stock other than Preferred Stock, thereafter
the number of such other shares so receivable upon exercise of any Right and the
Purchase Price thereof shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Stock contained in Sections 11(a), (b), (c), (e), (g),
(h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14
with respect to the Preferred Stock shall apply on like terms to any such other
shares.
(g) POST-ADJUSTMENT RIGHTS ISSUANCES. All Rights originally issued
by the Company subsequent to any adjustment made to the Purchase Price hereunder
shall evidence the right to purchase, at the adjusted Purchase Price, the number
of
23
one one-thousandths of a share of Preferred Stock purchasable from time to
time hereunder upon exercise of the Rights, all subject to further adjustment
as provided herein.
(h) PREFERRED STOCK ANTI-DILUTION. Unless the Company shall have
exercised its election as provided in Section 11(i) (ADJUSTMENT OF PURCHASE
PRICE; NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS -- ADJUSTMENT OF NUMBER
OF RIGHTS), upon each adjustment of the Purchase Price as a result of the
calculations made in Section 11(b) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND
KIND OF SHARES OR NUMBER OF RIGHTS -- PURCHASE PRICE ADJUSTMENT -- CAPITAL
STOCK) and Section 11(c) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF
SHARES OR NUMBER OF RIGHTS -- PURCHASE PRICE ADJUSTMENT -- CASH, ASSETS,
ETC.), each Right outstanding immediately prior to the making of such
adjustment shall thereafter evidence the right to purchase, at the adjusted
Purchase Price, that number of one one-thousandths of a share of Preferred
Stock (calculated to the nearest one-millionth) obtained by (i) multiplying
(x) the number of one one-thousandths of a share covered by a Right
immediately prior to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after
such adjustment of the Purchase Price.
(i) ADJUSTMENT OF NUMBER OF RIGHTS. The Company may elect on or
after the date of any adjustment of the Purchase Price to adjust the number of
Rights, in lieu of any adjustment in the number of one one-thousandths of a
share of Preferred Stock purchasable upon the exercise of a Right. Each of the
Rights outstanding after the adjustment in the number of Rights shall be
exercisable for the number of one one-thousandths of a share of Preferred Stock
for which a Right was exercisable immediately prior to such adjustment. Each
Right held of record prior to such adjustment of the number of Rights shall
become that number of Rights (calculated to the nearest one-ten-thousandth)
obtained by dividing the Purchase Price in effect immediately prior to
adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least ten (10) calendar days later than the date of the
public announcement. If Rights Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Rights Certificates on such record date Rights Certificates evidencing,
subject to Section 14 (FRACTIONAL RIGHTS AND FRACTIONAL SHARES) the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights
24
to which such holders shall be entitled after such adjustment. Rights
Certificates so to be distributed shall be issued, executed and countersigned
in the manner provided for herein (and may bear, at the option of the
Company, the adjusted Purchase Price) and shall be registered in the names of
the holders of record of Rights Certificates on the record date specified in
the public announcement.
(j) RIGHTS CERTIFICATES. Irrespective of any adjustment or change in
the Purchase Price or the number of one one-thousandths of a share of Preferred
Stock issuable upon the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the Purchase Price per
one one-thousandth of a share and the number of one one-thousandths of a share
which were expressed in the initial Rights Certificates issued hereunder.
(k) ADJUSTMENT BELOW PAR VALUE. Before taking any action that would
cause an adjustment reducing the Purchase Price below the then par or stated
value, if any, of the number of one one-thousandths of a share of Preferred
Stock issuable upon exercise of the Rights, the Company shall take any corporate
action which is or may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable such
number of one one-thousandths of a share of Preferred Stock at such adjusted
Purchase Price.
(l) ADJUSTMENT EFFECTIVE AS OF FUTURE DATE; EXERCISE. In any case
in which this Section 11 (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF
SHARES OR NUMBER OF RIGHTS) shall require that an adjustment in the Purchase
Price be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event the issuance to
the holder of any Right exercised after such record date the number of one
one-thousandths of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one one-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such
adjustment; PROVIDED, HOWEVER, that the Company shall deliver to such holder
a due ▇▇▇▇ or other appropriate instrument evidencing such holder's right to
receive such additional shares (fractional or otherwise) or securities upon
the occurrence of the event requiring such adjustment.
(m) TAX ADJUSTMENTS. Anything in this Section 11 (ADJUSTMENT OF
PURCHASE PRICE; NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS) to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in its good faith judgment the Board shall
determine to be advisable in order that any (i) consolidation or subdivision of
the Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred
Stock at less than the Current Market Price, (iii) issuance wholly for cash of
shares of Preferred Stock or securities which by their terms are convertible
into or exchangeable for shares of Preferred Stock, (iv) stock dividends or (v)
issuance of rights, options or
25
warrants referred to in this Section 11, hereafter made by the Company to
holders of its Preferred Stock shall not be taxable to such stockholders.
(n) RESTRICTION ON CERTAIN TRANSACTIONS. The Company shall not, at
any time after the Distribution Date, (i) consolidate with any other Person
(other than a Subsidiary of the Company in a transaction which complies with
Section 11(o) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF SHARES OR NUMBER
OF RIGHTS -- RESTRICTION AGAINST DIMINISHING BENEFITS OF THE RIGHTS)), (ii)
merge with or into any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o)), (iii) enter into a statutory
share exchange or similar transaction with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)),
or (iv) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets, cash flow or earning
power aggregating more than 50% of the assets, cash flow or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o)), if (x) at the time of
or immediately after such consolidation, merger, statutory share exchange or
similar transaction, or sale there are any rights, warrants or other instruments
or securities outstanding or agreements in effect which would substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights or (y) prior to, simultaneously with or immediately after such
consolidation, merger, statutory share exchange or similar transaction, or sale,
the stockholders of the Person who constitutes, or would constitute, the
"Principal Party" for purposes of Section 13(a) (CONSOLIDATION, MERGER OR SALE
OR TRANSFER OF ASSETS OR EARNING POWER -- FLIP-OVER EVENT) shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates.
(o) RESTRICTION AGAINST DIMINISHING BENEFITS OF THE RIGHTS. The
Company covenants and agrees that, after the Distribution Date, it will not,
except as permitted by Section 23 (REDEMPTION AND TERMINATION) or Section 27
(SUPPLEMENTS AND AMENDMENTS) take (or permit any Subsidiary to take) any action
if at the time such action is taken it is reasonably foreseeable that such
action will diminish substantially or otherwise eliminate the benefits intended
to be afforded by the Rights.
(p) COMMON STOCK ADJUSTMENTS. Anything in this Agreement to the
contrary notwithstanding, in the event that the Company shall at any time after
the Rights Dividend Declaration Date and prior to the Distribution Date (i)
declare a dividend on the outstanding shares of Common Stock payable in shares
of Common Stock, (ii) subdivide or split the outstanding shares of Common Stock,
or (iii) combine the outstanding shares of Common Stock into a smaller number of
shares, the number of Rights associated with each share of Common Stock then
outstanding, or issued or delivered thereafter but prior to the Distribution
Date, shall be proportionately adjusted so that the number of Rights thereafter
associated with each share of Common Stock following any such event shall equal
the result obtained by
26
multiplying the number of Rights associated with each share of Common Stock
immediately prior to such event by a fraction, the numerator of which shall
be the total number of shares of Common Stock outstanding immediately prior
to the occurrence of the event and the denominator of which shall be the
total number of shares of Common Stock outstanding immediately following the
occurrence of such event. The adjustments provided for in this Section 11(p)
shall be made successively whenever such a dividend is declared or paid or
such subdivision, combination or consolidation is effected.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 (ADJUSTMENT OF PURCHASE
PRICE; NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS) and Section 13
(CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER) the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent, and with each transfer agent for the Preferred Stock
and the Common Stock, a copy of such certificate, and (c) mail or cause the
Rights Agent to mail a brief summary thereof to each holder of a Rights
Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Common Stock) in accordance with Section 26
(NOTICES). The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.
(a) FLIP-OVER EVENT. In the event that, following the Stock
Acquisition Date, directly or indirectly, (x) the Company shall consolidate
with, or merge with and into, or enter into a statutory stock exchange or
similar transaction with, any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o)(ADJUSTMENT OF
PURCHASE PRICE; NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS -- RESTRICTION
AGAINST DIMINISHING BENEFITS OF THE RIGHTS)), and the Company shall not be the
continuing or surviving corporation of such consolidation, merger or statutory
share exchange or similar transaction, (y) any Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o)) shall
consolidate with, or merge with or into, or enter into a statutory stock
exchange or similar transaction with, the Company, and the Company shall be the
continuing or surviving corporation of such consolidation, merger or statutory
share exchange or similar transaction and, in connection with such
consolidation, merger or statutory share exchange or similar transaction, all or
part of the outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (z) the Company shall sell or otherwise transfer (or one or more of
its Subsidiaries shall sell or otherwise transfer), in one transaction or a
series of related transactions, assets, cash flow or earning power aggregating
more than 50% of the assets, cash flow or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any Subsidiary of the Company in one or more
27
transactions each of which complies with Section 11(o)), then, and in each
such case, (i) proper provision shall be made so that: each holder of a
Right, except as provided in Section 7(e) (EXERCISE OF RIGHTS; PURCHASE
PRICE; EXPIRATION DATE OF RIGHTS -- TERMINATION OF ACQUIRING PERSON'S RIGHTS)
shall thereafter have the right to receive, upon the exercise thereof at the
then current Purchase Price in accordance with the terms of this Agreement,
such number of validly authorized and issued, fully paid, nonassessable and
freely tradeable shares of Common Stock of the Principal Party, not subject
to any liens, encumbrances, rights of first refusal or other adverse claims,
as shall be equal to the result obtained by (A) multiplying the then current
Purchase Price by the number of one one-thousandths of a share of Preferred
Stock for which a Right is exercisable immediately prior to the first
occurrence of a Flip-over Event (or, if a Flip-in Event has occurred prior to
the first occurrence of a Flip-over Event, multiplying the number of such one
one-thousandths of a share for which a Right was exercisable immediately
prior to the first occurrence of a Flip-in Event by the Purchase Price in
effect immediately prior to such first occurrence), and (B) dividing that
product (which, following the first occurrence of a Flip-over Event, shall be
referred to as the "Purchase Price" for each Right and for all purposes of
this Agreement) by 50% of the Current Market Price per share of the Common
Stock of such Principal Party on the date of consummation of such Flip-over
Event; (ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Flip-over Event, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 (ADJUSTMENT OF PURCHASE PRICE;
NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS) shall apply only to such
Principal Party following the first occurrence of a Flip-over Event; (iv)
such Principal Party shall take such steps (including, but not limited to,
the reservation of a sufficient number of shares of its Common Stock) in
connection with the consummation of any such transaction as may be necessary
to assure that the provisions hereof shall thereafter be applicable, as
nearly as reasonably may be, in relation to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights; and (v) the
provisions of Section 11(a)(ii) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND
KIND OF SHARES OR NUMBER OF RIGHTS -- CERTAIN ADJUSTMENTS) hereof shall be of
no effect following the first occurrence of any Flip-over Event.
(b) PRINCIPAL PARTY. "PRINCIPAL PARTY" shall mean
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a) (CONSOLIDATION, MERGER OR SALE OR
TRANSFER OF ASSETS OR EARNING POWER -- FLIP-OVER EVENT), the Person that is the
issuer of any securities into which shares of Common Stock of the Company are
converted in such consolidation, merger or statutory share exchange or similar
transaction, and if no securities are so issued, the Person that is the other
party to such consolidation, merger or statutory share exchange or similar
transaction, and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a) (CONSOLIDATION, MERGER OR SALE OR TRANSFER
OF ASSETS OR
28
EARNING POWER -- FLIP-OVER EVENT), the Person that is the party receiving the
greatest portion of the assets, cash flow or earning power transferred
pursuant to such transaction or transactions;
PROVIDED, HOWEVER, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the total outstanding Common Stock having the greatest aggregate
market value.
(c) SUPPLEMENTAL AGREEMENT. The Company shall not consummate a
Flip-over Event unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved
for issuance to permit the exercise in full of the Rights in accordance with
this Section 13 (CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER) and unless prior thereto the Company and such Principal Party
shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the date
of such Flip-over Event, the Principal Party will
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Expiration Date; and
(ii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 (CONSOLIDATION, MERGER OR SALE OR TRANSFER OF
ASSETS OR EARNING POWER) shall similarly apply to successive consolidation,
mergers or statutory share exchanges or similar transactions or sales or other
transfers. In the event that a Flip-over Event shall occur at any time after the
occurrence of a Flip-in Event, the Rights which have not theretofore been
exercised shall thereafter become exercisable in the manner described in Section
13(a) (CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER --
FLIP-OVER EVENT).
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
29
(a) FRACTIONAL RIGHTS. The Company shall not be required to issue
fractions of Rights, except prior to the Distribution Date as provided in
Section 11(p) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS -- COMMON STOCK ADJUSTMENTS), or to distribute Rights
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Rights Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For purposes of this Section 14(a), the current market value of a whole
Right shall be the closing price of the Rights for the Trading Day immediately
prior to the date on which such fractional Rights would have been otherwise
issuable. The closing price of the Rights for any Trading Day shall be the last
sale price, regular way, or, in case no such sale takes place on such Trading
Day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading, or if the Rights
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board.
If on any such date no such market maker is making a market in the Rights, the
fair value of the Rights on such date as determined in good faith by the Board
shall be used.
(b) FRACTIONAL SHARES OF PREFERRED STOCK. The Company shall not be
required to issue fractions of shares of Preferred Stock (other than
fractions which are integral multiples of one one-thousandth of a share of
Preferred Stock which may at the option of the Company, be evidenced by
depositary receipts) upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Preferred Stock (other than
fractions which are integral multiples of one one-thousandth of a share of
Preferred Stock). Interests in fractions of Preferred Stock in integral
multiples of one one-thousandth of a share of Preferred Stock may, at the
election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it;
PROVIDED, HOWEVER, that such agreement shall provide that the holders of such
depositary receipts shall have all the rights, privileges and preferences to
which they are entitled as beneficial owners of the Preferred Stock
represented by such depositary receipts. In lieu of fractional shares of
Preferred Stock that are not integral multiples of one one-thousandth of a
share of Preferred Stock, the Company may pay to the registered holders of
Rights Certificates at the time such Rights are exercised as herein provided
an amount in cash equal to the same fraction of the current market value of
one one-
30
thousandth of a share of Preferred Stock. For purposes of this Section
14(b), the current market value of one one-thousandth of a share of Preferred
Stock shall be one one-thousandth of the closing price of a share of
Preferred Stock (as determined pursuant to Section 11(d)(ii) (ADJUSTMENT OF
PURCHASE PRICE; NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS -- CURRENT
MARKET PRICE) for the Trading Day immediately prior to the date of such
exercise.
(c) FRACTIONAL SHARES OF COMMON STOCK. Following the occurrence of a
Triggering Event, the Company shall not be required to issue fractions of shares
of Common Stock upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Common Stock. In lieu of fractional shares of
Common Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one (1) share
of Common Stock. For purposes of this Section 14(c), the current market value
of one share of Common Stock shall be the closing price of one share of Common
Stock (as determined pursuant to Section 11(d)(i) (ADJUSTMENT OF PURCHASE PRICE;
NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS -- CURRENT MARKET PRICE) for the
Trading Day immediately prior to the date of such exercise.
(d) WAIVER OF FRACTIONAL RIGHTS AND SHARES. The holder of a Right by
the acceptance of the Right expressly waives his right to receive any fractional
Rights or any fractional shares upon exercise of a Right, except as permitted by
this Section 14 (FRACTIONAL RIGHTS AND FRACTIONAL SHARES).
Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
31
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) (TRANSFER, SPLIT UP, COMBINATION AND
EXCHANGE OF RIGHTS CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS
CERTIFICATES -- PROCEDURE) and Section 7(f) (EXERCISE OF RIGHTS; PURCHASE PRICE;
EXPIRATION DATE OF RIGHTS -- SURRENDER OF RIGHTS CERTIFICATES; IDENTITY OF
BENEFICIAL OWNER), the Company and the Rights Agent may deem and treat the
person in whose name a Rights Certificate (or, prior to the Distribution Date,
the associated Common Stock certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Rights Certificates or the associated Common Stock
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent, subject to
the last sentence of Section 7(e) (EXERCISE OF RIGHTS; PURCHASE PRICE;
EXPIRATION DATE OF RIGHTS -- TERMINATION OF ACQUIRING PERSON'S RIGHTS), shall be
required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; PROVIDED, HOWEVER, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one
one-thousandths of a share of Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate,
as such, any of the rights of a stockholder of the Company or any right to
vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 (NOTICE OF CERTAIN EVENTS)),
or to receive dividends or
32
subscription rights, or otherwise, until the Right or Rights evidenced by such
Rights Certificate shall have been exercised in accordance with the provisions
hereof.
Section 18. CONCERNING THE RIGHTS AGENT.
(a) COMPENSATION. The Company shall pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from time
to time, on demand of the Rights Agent, its reasonable expenses and counsel fees
and other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
agrees to indemnify the Rights Agent for, and to hold it harmless against, any
loss, liability or expense, incurred without negligence or willful misconduct on
the part of the Rights Agent, for anything done or omitted to be done by the
Rights Agent in connection with the acceptance and administration of this
Agreement, including the reasonable costs and expenses of defending against or
investigating any claim of liability in the premises. Such costs and expenses
of enforcing this right of indemnification shall also be paid by the Company.
This right of indemnification shall survive the termination of this Agreement
and the resignation or removal of the Rights Agent.
(b) RELIANCE. The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted to be taken
by it in connection with its administration of this Agreement in reliance upon
any Rights Certificate or certificate for Common Stock or for other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons, or otherwise upon the advice of counsel as set forth in
Section 20 (DUTIES OF RIGHTS AGENT).
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) SUCCESSOR. Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or stock transfer business of the Rights Agent
or any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto; PROVIDED, HOWEVER, that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 (CHANGE OF RIGHTS AGENT). In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the Rights Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of a predecessor
Rights Agent and deliver such Rights Certificates so countersigned; and in case
at that time any of the Rights Certificates shall not have been countersigned,
any successor Rights Agent may countersign such Rights
33
Certificates either in the name of the predecessor or in the name of the
successor Rights Agent; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
(b) PRIOR COUNTERSIGNATURES. In case at any time the name of the
Rights Agent shall be changed and at such time any of the Rights Certificates
shall have been countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall not
have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) LEGAL COUNSEL. The Rights Agent may consult with legal counsel
(who may be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent as
to any action taken or omitted to be taken by it in good faith and in accordance
with such opinion.
(b) CERTIFICATION BY THE COMPANY. Whenever in the performance of its
duties under this Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter (including, without limitation, the identity
of any Acquiring Person and the determination of Current Market Price) be proved
or established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate signed by the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) LIABILITY FOR NEGLIGENCE, ETC. The Rights Agent shall be liable
hereunder only for its own negligence or willful misconduct.
(d) STATEMENTS OF FACT OR RECITALS. The Rights Agent shall not be
liable for or by reason of any of the statements of fact or recitals contained
in this Agreement or in the Rights Certificates or be required to verify the
same (except as to its countersignature on such Rights Certificates), but all
such statements and recitals are and shall be deemed to have been made by the
Company only.
34
(e) AGREEMENT; ADJUSTMENTS. The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except its
countersignature); nor shall it be responsible for any breach by the Company of
any covenant or condition contained in this Agreement or in any Rights
Certificate; nor shall it be responsible for any adjustment required under the
provisions of Section 11 (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF
SHARES OR NUMBER OF RIGHTS) or Section 13 (CONSOLIDATION, MERGER OR SALE OR
TRANSFER OF ASSETS OR EARNING POWER) or responsible for the manner, method or
amount of any such adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such adjustment);
nor shall it be required to take notice or be deemed to have notice of any fact,
event or determination, including, without limitation, any dates or events
defined in this Agreement or the designation of any Person as an Acquiring
Person, Affiliate, Associate or Subsidiary under this Agreement unless and until
the Rights Agent shall be specifically notified in writing by the Company of
such fact, event or determination; nor shall it by any act hereunder be deemed
to make any representation or warranty as to the authorization or reservation of
any shares of Common Stock or Preferred Stock to be issued pursuant to this
Agreement or any Rights Certificate or as to whether any shares of Common Stock
or Preferred Stock will, when so issued, be validly authorized and issued, fully
paid and nonassessable.
(f) FURTHER ASSURANCES. The Company will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) INSTRUCTIONS. The Rights Agent is hereby authorized and directed
to accept instructions with respect to the performance of its duties hereunder
from the President, any Vice President, the Secretary, any Assistant Secretary,
the Treasurer or any Assistant Treasurer of the Company and to apply to such
persons for advice or instructions in connection with its duties, and it shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with the instructions of any such person.
(h) DEALING IN RIGHTS. The Rights Agent and any stockholder,
director, officer or employee of the Rights Agent may buy, sell or deal in any
of the Rights or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested, or
contract with or lend money to the Company or otherwise act as fully and freely
as though it were not Rights Agent under this Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other capacity for the Company or
for any other legal entity.
35
(i) AGENTS; REASONABLE CARE. The Rights Agent may execute and
exercise any of the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or agents, and the Rights
Agent shall not be answerable or accountable for any act, default, neglect or
misconduct of any such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect or misconduct; PROVIDED, HOWEVER,
reasonable care was exercised in the selection and continued employment thereof.
(j) EXPENSES; REPAYMENT ASSURANCES. No provision of this Agreement
shall require the Rights Agent to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder
or in the exercise of its rights if there shall be reasonable grounds for
believing that repayment of such funds or adequate indemnification against such
risk or liability is not reasonably assured to it.
(k) EXERCISE OF RIGHTS; CONSULTATION WITH COMPANY. If, with respect
to any Rights Certificate surrendered to the Rights Agent for exercise or
transfer, the certificate attached to the form of assignment or form of election
to purchase, as the case may be, has either not been completed or indicates an
affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not
take any further action with respect to such requested exercise of transfer
without first consulting with the Company.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) calendar days' notice in writing mailed to the Company, and to
each transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent
upon thirty (30) calendar days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Stock and Preferred Stock, by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of thirty (30) calendar days after
giving notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then the registered holder of
any Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (a) a corporation
organized and doing business under the laws of the United States or of any State
of the United States, in good standing, which is authorized under such laws to
exercise stock transfer or corporate trust powers, is subject to supervision or
examination by federal or state authority and has at the time of its appointment
as Rights Agent a
36
combined capital and surplus of at least $100,000,000 or (b) an Affiliate of
a corporation described in clause (a) of this sentence. After appointment,
the successor Rights Agent shall be vested with the same powers, rights,
duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time
held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the
effective date of any such appointment, the Company shall file notice thereof
in writing with the predecessor Rights Agent and each transfer agent of the
Common Stock and the Preferred Stock, and mail a notice thereof in writing to
the registered holders of the Rights Certificates. Failure to give any
notice provided for in this Section 21 (CHANGE OF RIGHTS AGENT), or any
defect therein, shall not affect the legality or validity of the resignation
or removal of the Rights Agent or the appointment of the successor Rights
Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by the Board to reflect any adjustment or change in the
Purchase Price and the number or kind or class of shares or other securities or
property purchasable under the Rights Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or
sale of shares of Common Stock following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company (a) shall, with respect to
shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereinafter issued by the Company, and
(b) may, in any other case, if deemed necessary or appropriate by the Board,
issue Rights Certificates representing the appropriate number of Rights in
connection with such issuance or sale; PROVIDED, HOWEVER, that (i) no such
Rights Certificate shall be issued if, and to the extent that, the Company shall
be advised by counsel that such issuance would create a significant risk of
material, adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
Section 23. REDEMPTION AND TERMINATION.
(a) REDEMPTION. The Company may, at its option, at any time prior to
the earlier of (i) the Stock Acquisition Date (or, if the Stock Acquisition Date
shall have occurred prior to the Record Date, the Record Date), or (ii) the
Final Expiration Date, redeem (the date of such redemption being referred to
herein as the "REDEMPTION DATE") all but not less than all of the then
outstanding Rights at a redemption price of $0.001 per Right, as such amount may
be appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption
37
Price"); PROVIDED, HOWEVER, that any redemption after the Stock Acquisition
Date must be authorized by a majority of the Disinterested Directors;
PROVIDED FURTHER, HOWEVER, that if, following the occurrence of a Stock
Acquisition Date and following the expiration of the right of redemption
hereunder but prior to any Triggering Event, (i) a Person who is an Acquiring
Person shall have transferred or otherwise disposed of a number of shares of
Common Stock in one transaction or series of transactions, not directly or
indirectly involving the Company or any of its Subsidiaries, which did not
result in the occurrence of a Triggering Event such that such Person is
thereafter a Beneficial Owner of 10% or less of the outstanding shares of
Common Stock, and (ii) there are not other Persons, immediately following the
occurrence of the event described in clause (i), who are Acquiring Persons,
then the right of redemption shall be reinstated and thereafter be subject to
the provisions of this Section 23. Notwithstanding anything contained in
this Agreement to the contrary, the Rights shall not be exercisable after the
first occurrence of a Flip-in Event until such time as the Company's right of
redemption hereunder has expired. The redemption of the Rights by the
Company may be made effective at such time, on such basis and with such
conditions as the Board in its sole discretion or the Disinterested Directors
in their sole discretion, as applicable, may establish. The Company may, at
its option, pay the Redemption Price in cash, shares of Common Stock (based
on the Current Market Price of the Common Stock at the time of redemption) or
any other form of consideration deemed appropriate by Board or the
Disinterested Directors, as applicable.
(b) EFFECT OF REDEMPTION; PROCEDURE. Immediately upon the action of
the Company ordering the redemption of the Rights and without any further action
and without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. Promptly after the Redemption Date,
the Company shall (i) give notice of such redemption to the Rights Agent, (ii)
give public notice of such redemption; PROVIDED, HOWEVER, that the failure to
give, or any defect in, such notice shall not affect the validity of such
redemption, and (iii) mail notice of such redemption to the holders of the then
outstanding Rights at their last addresses as they appear upon the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the Transfer Agent for the Common Stock. Any notice which is mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made. Amounts payable shall be
rounded down to the nearest $0.01.
Section 24. EXCHANGE.
(a) RIGHT TO EXCHANGE. The Company may, at its option, at any time
and from time to time after the first occurrence of a Flip-in Event, exchange
all or part of the then outstanding and exercisable Rights (other than Rights
which have become void as provided in Section 7(e) (EXERCISE OF RIGHTS; PURCHASE
PRICE; EXPIRATION DATE OF RIGHTS -- TERMINATION OF ACQUIRING PERSON'S RIGHTS))
for the
38
Exchange Number of shares of Common Stock, shares or units of Preferred Stock
which the Board has determined to be a Common Stock Equivalent, units of
other property or any combination thereof as determined by the Board.
Notwithstanding the foregoing, the Company shall not be empowered to effect
such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any
such Subsidiary or any entity holding shares of Common Stock for or pursuant
to any such plan), together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of 50% or more of the shares of Common
Stock then outstanding. The exchange of the Rights by the Company may be made
effective at such time, on such basis and with such conditions as the Board
in its sole discretion may establish.
(b) EFFECT OF EXCHANGE; PROCEDURE. Immediately upon the action of
the Company ordering the exchange of any Rights pursuant to paragraph (a) of
this Section 24, evidence of which shall have been filed with the Rights Agent
and without any further action and without any notice, the right to exercise
such Rights will terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of shares of Common Stock, Common Stock
Equivalents or units of other property equal to the number of such Rights held
by such holder multiplied by the Exchange Number. Promptly after the action of
the Company ordering the exchange of the Rights, the Company shall (i) file
evidence of such action with the Rights Agent, (ii) give public notice of such
exchange; PROVIDED, HOWEVER, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange, and (iii) mail notice of
such exchange to the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by which
the exchange will be effected and, in the event of any partial exchange, the
number of Rights which will be exchanged. Any partial exchange shall be effected
pro rata based on the number of Rights (other than Rights which have become void
as provided in Section 7(e) (EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION
DATE OF RIGHTS -- TERMINATION OF ACQUIRING PERSON'S RIGHTS)) held by each holder
of Rights.
(c) INSUFFICIENT COMMON STOCK. In the event that the number of
shares of Common Stock which are authorized by the Company's Certificate of
Incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights is not sufficient to permit any exchange of
Rights in accordance with this Section 24, the Company may, at its option, take
all such action as may be necessary to authorize additional shares of Common
Stock for issuance upon such exchange.
(d) FRACTIONAL SHARES. Upon the action of the Company ordering the
exchange of any Rights pursuant to paragraph (a) of this Section 24, the Company
shall not be required to issue fractions of shares or to distribute certificates
which evidence fractional shares. In lieu of such fractional shares, the Company
may pay to the registered holders of the Rights Certificates with regard to
which such
39
fractional shares would otherwise be issuable an amount in cash equal to the
same fraction of the current market value of one share of Common Stock. For
purposes of this Section 24, the current market value of one share of Common
Stock shall be the closing price of one share of Common Stock (as determined
pursuant to Section 11(d)(i) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND
OF SHARES OR NUMBER OF RIGHTS -- CURRENT MARKET PRICE)) for the Trading Day
immediately prior to the date of exchange pursuant to this Section 24, and
the value of any Common Stock Equivalent shall be deemed to have the same
current market value as the Common Stock on such date.
Section 25. NOTICE OF CERTAIN EVENTS.
(a) PREFERRED STOCK TRANSACTIONS, ETC. In case the Company shall
propose, at any time after the Distribution Date, (i) to pay any dividend
payable in stock of any class to the holders of Preferred Stock or to make any
other distribution to the holders of Preferred Stock (other than a regular
quarterly cash dividend out of earnings or retained earnings of the Company);
(ii) to offer to the holders of Preferred Stock rights or warrants to subscribe
for or to purchase any additional shares of Preferred Stock or shares of stock
of any class or any other securities, rights or options; (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification involving
only the subdivision of outstanding shares of Preferred Stock); (iv) to effect
any consolidation with, merger into or with, or statutory share exchange or
similar transaction with, any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) (ADJUSTMENT OF
PURCHASE PRICE; NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS -- RESTRICTION
AGAINST DIMINISHING BENEFITS OF THE RIGHTS)), or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one transaction or a series of related transactions, of more
than 50% of the assets, cash flow or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o)); (v) to effect the liquidation, dissolution or
winding up of the Company, or (vi) to declare or pay any dividend on the shares
of Common Stock payable in Common Stock or to effect a subdivision, combination
or consolidation of the shares of Common Stock (by reclassification or otherwise
than by payment of dividends in Common Stock), then, in each such case, the
Company shall give to each holder of a Rights Certificate, to the extent
feasible and in accordance with Section 26 (NOTICES), a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, statutory share exchange or similar
transaction, sale, transfer, liquidation, dissolution, or winding up is to take
place and the date of participation therein by the holders of the shares of
Preferred Stock, if any such date is to be fixed, and such notice shall be so
given in the case of any action covered by clause (i) or (ii) above at least
twenty (20) calendar days prior to the record date for determining holders of
the shares of Preferred Stock for purposes of such action, and in the case of
any such other action, at least twenty (20) calendar
40
days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Preferred Stock,
whichever shall be the earlier.
(b) OTHER TRANSACTIONS. In case any of the events set forth in
Section 11(a)(ii) (ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS -- CERTAIN ADJUSTMENTS) shall occur, then, in any such case,
(i) the Company shall as soon as practicable thereafter give to each holder of a
Rights Certificate, to the extent feasible and in accordance with Section 26
(NOTICES), a notice of the occurrence of such event, which shall specify the
event and the consequences of the event to holders of Rights under
Section 11(a)(ii), and (ii) all references in the preceding paragraph to
Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if
appropriate, other securities.
Section 26. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by telecopier
(with receipt confirmed) or by first-class mail, postage prepaid, addressed
(until another address is filed in writing with the Rights Agent) as follows:
Input/Output, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Subject to the provisions of Section 21 (CHANGE OF RIGHTS AGENT), any notice or
demand authorized by this Agreement to be given or made by the Company or by the
holder of any Rights Certificate to or on the Rights Agent shall be sufficiently
given or made if sent by telecopier (with receipt confirmed) or by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Company) as follows:
▇▇▇▇▇▇ Trust and Savings Bank
c/▇ ▇▇▇▇▇▇ Trust Company of New York
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid,
41
addressed to such holder at the address of such holder as shown on the
registry books of the Company.
Section 27. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date
and subject to the penultimate sentence of this Section 27, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any provision
of this Agreement without the approval of any holders of certificates
representing shares of Common Stock; PROVIDED, HOWEVER, that any supplement or
amendment of this Agreement after the Stock Acquisition Date must be approved by
a majority of the Disinterested Directors. From and after the Distribution Date
and subject to the penultimate sentence of this Section 27, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder or (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Rights Certificates (other than an Acquiring Person or an Affiliate
or Associate of any such Person); PROVIDED, HOWEVER, this Agreement may not be
supplemented or amended to lengthen, pursuant to clause (iii) of this sentence,
(A) a time period relating to when the Rights may be redeemed at such time as
the Rights are not then redeemable, or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the rights
of, and/or the benefits to, the holders of Rights. Upon the delivery of a
certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this
Section 27, the Rights Agent shall execute such supplement or amendment.
Notwithstanding anything contained in this Agreement to the contrary, no
supplement or amendment shall be made which changes the Redemption Price, the
Final Expiration Date, the Purchase Price, or the number of one one-thousandths
of a share of Preferred Stock for which a right is exercisable; PROVIDED,
HOWEVER, that at any time prior to (i) the Stock Acquisition Date or (ii) the
date that a tender or exchange offer by any person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any
Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan) is
first published or sent or given within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act, if upon consummation
thereof, such Person would be the Beneficial Owner of 20% or more of the shares
of Common Stock then outstanding, the Board may amend this Agreement to increase
the Purchase Price or extend the Final Expiration Date. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock.
Section 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
42
Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS,
DISINTERESTED DIRECTORS, ETC. For all purposes of this Agreement, any
calculation of the number of shares of Common Stock outstanding at any
particular time, including for purposes of determining the particular
percentage of such outstanding shares of Common Stock of which any Person is
the Beneficial Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange
Act. The Board (with, where specifically provided for herein, the concurrence
or approval of the Disinterested Directors) shall have the exclusive power
and authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Board (with, where specifically provided
for herein, the concurrence or approval of the Disinterested Directors) or to
the Company, or as may be necessary or advisable in the administration of
this Agreement, including, without limitation, the right and power to (i)
interpret the provisions of this Agreement, and (ii) make all determinations
deemed necessary or advisable for the administration of this Agreement
(including a determination to redeem or not redeem the Rights or to amend the
Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions
with respect to the foregoing) which are done or made by the Board (with,
where specifically provided for herein, the concurrence or approval of the
Disinterested Directors) in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights and all
other parties, and (y) not subject the Board or the Disinterested Directors
to any liability to the holders of the Rights.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to
the Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the Rights Agent
and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock).
Section 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
PROVIDED, HOWEVER, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board determines
in its good faith judgment that severing the invalid language from this
Agreement would adversely affect the purpose or effect of this Agreement, the
right of redemption set forth in Section 23 (REDEMPTION AND TERMINATION) shall
be reinstated and shall not expire until the Close of Business on the tenth
Business Day following the date of such determination by the Board. Without
limiting the
43
foregoing, if any provision requiring a majority of the Board to be
Disinterested Directors to act is held by any court of competent jurisdiction
or other authority to be invalid, void or unenforceable, such determination
shall then be made by the Board in accordance with applicable law and the
Company's Certificate of Incorporation and By-Laws.
Section 32. GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts
made and to be performed entirely within such State.
Section 33. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
44
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: INPUT/OUTPUT, INC.
By: By:
----------------------------- --------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇, President and
------------------------ Chief Executive Officer
Title:
-----------------------
▇▇▇▇▇▇ TRUST AND SAVINGS BANK
By: By:
----------------------------- --------------------------------
Name: Name:
----------------------- -----------------------
Title: Title:
---------------------- ----------------------
45
CERTIFICATE OF
DESIGNATION, PREFERENCES AND RIGHTS OF
SERIES A PREFERRED STOCK
OF
INPUT/OUTPUT, INC.
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware
We, ▇▇▇▇ ▇. ▇▇▇▇▇, President and Chief Executive Officer, and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, Senior Vice President, Chief Financial Officer and Secretary of
Input/Output, Inc. (the "Corporation"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, in accordance
with the provisions of Section 103 of the General Corporation Law of the
State of Delaware, DO HEREBY CERTIFY:
That Article Fourth of the Corporation's Restated Certificate of
Incorporation, as amended, authorizes a total of 105,000,000 shares of capital
stock, consisting of 100,000,000 shares of common stock, par value $0.01 per
share ("Common Stock"), and 5,000,000 shares of preferred stock, par value $0.01
per share ("Preferred Stock"); and
That pursuant to the authority conferred upon the Board of Directors (the
"Board") by the Restated Certificate of Incorporation of the Corporation, as
amended, the said Board on January 17, 1997, adopted the following resolutions
creating a series of 100,000 shares of Preferred Stock, par value $0.01 per
share, designated as Series A Preferred Stock:
RESOLVED, that, pursuant to the authority vested in the Board in accordance
with the provisions of its Restated Certificate of Incorporation, as amended,
the Board does hereby create, authorize and provide for the issuance upon the
exercise of the Corporation's Preferred Stock Purchase Rights, of a series of
Preferred Stock of the Corporation, and does hereby fix and state that the
designations, amounts, powers, preferences and relative and other special rights
and the qualifications, limitations or restrictions thereof are as follows:
1
SERIES A PREFERRED STOCK
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as Series A Preferred Stock, and the number of shares constituting
such series shall be 100,000.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Preferred Stock with respect to dividends, the holders of
shares of Series A Preferred Stock shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available for
that purpose, quarterly dividends payable in cash on the 15th day of March,
June, September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $0.01 or (b)
subject to the provisions for adjustment hereinafter set forth, one thousand
(1,000) times the aggregate per share amount of all cash dividends, and one
thousand (1,000) times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable
in shares of the Common Stock of the Corporation or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock, since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share of
Series A Preferred Stock. In the event the Corporation shall at any time
after January 17, 1997 (the "Rights Declaration Date") (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior
to such event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) above immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during
the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $0.01 per share on
the Series A Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
2
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Preferred Stock, unless the date of issue of such shares is prior to the
record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly
Dividend Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Preferred Stock in an amount less
than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of Directors may fix a record
date for the determination of holders of shares of Series A Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than thirty (30) days prior to the date
fixed for the payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to one
thousand (1,000) votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the number of votes per share to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation. Except as otherwise provided herein or by law,
the holders of the shares of Series A Preferred Stock shall not be entitled to
vote as a separate class on any matters submitted to a vote of the stockholders.
(C) (i) If at any time dividends on any Series A Preferred Stock
shall be in arrears in an amount equal to six (6) quarterly dividends thereon,
the holders of the Series A Preferred Stock, voting as a separate series from
all other
3
series of Preferred Stock and classes of capital stock, shall be entitled to
elect two members of the Board of Directors in addition to any directors
elected by any other series, class or classes of securities, and the
authorized number of directors will automatically be increased by two.
Promptly thereafter, the Board of Directors of this Corporation shall, as
soon as may be practicable, call a special meeting of holders of Series A
Preferred Stock for the purpose of electing such members of the Board of
Directors. Said special meeting shall in any event be held within 45 days of
the occurrence of such arrearage.
(ii) During any period when the holders of Series A Preferred
Stock, voting as a separate series, shall be entitled and shall have exercised
their right to elect two directors, then and during such time as such right
continues (a) the then authorized number of directors shall be increased by two,
and the holders of Series A Preferred Stock, voting as a separate series, shall
be entitled to elect the additional directors so provided for, and (b) each such
additional director shall not be a member of any existing class of the Board of
Directors, but shall serve until the next annual meeting of stockholders for the
election of directors, or until his successor shall be elected and shall
qualify, or until his right to hold such office terminates pursuant to the
provisions of this Section 3(C).
(iii) A director elected pursuant to the terms hereof may be
removed with or without cause by the holders of Series A Preferred Stock
entitled to vote in an election of such Director.
(iv) If during any interval between annual meetings of
stockholders for the election of directors and while the holders of Series A
Preferred Stock shall be entitled to elect two directors, there is no such
director in office by reason of resignation, death or removal, then, promptly
thereafter, the Board of Directors shall call a special meeting of the holders
of Series A Preferred Stock for the purpose of filling such vacancy and such
vacancy shall be filled at such special meeting. Such special meeting shall in
any event be held within 90 days of the occurrence of such vacancy, unless an
annual meeting of stockholders is scheduled during such 90-day period.
(v) At such time as the arrearage is fully cured, and all
dividends accumulated and unpaid on any shares of Series A Preferred Stock
outstanding are paid, and, in addition thereto, at least one regular dividend
has been paid subsequent to curing such arrearage, the term of office of any
directors elected pursuant to this Section 3(C), or his successor, shall
automatically terminate, and the authorized number of directors shall
automatically decrease by two, the rights of the holders of the shares of the
Series A Preferred Stock to vote as provided in this Section 3(C) shall cease,
subject to renewal from time to time upon the same terms and conditions, and the
holders of shares of the Series A Preferred Stock shall have only the limited
voting rights elsewhere herein set forth.
4
(D) Except as set forth herein, holders of Series A Preferred Stock
shall have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Common Stock as
set forth herein) for taking any corporate action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to, the Series A Preferred Stock;
(ii) declare or pay dividends on, or make any other distributions
on, any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or winding up)
to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares
of Series A Preferred Stock, or any shares of stock ranking on a parity with the
Series A Preferred Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
5
Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock unless, prior
thereto, the holders of shares of Series A Preferred Stock shall have received
$1,000 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Liquidation Preference"). Following the payment of the full amount of
the Series A Liquidation Preference, no additional distributions shall be made
to the holders of shares of Series A Preferred Stock unless, prior thereto, the
holders of shares of Common Stock shall have received an amount per share (the
"Common Adjustment") equal to the quotient obtained by dividing (i) the Series A
Liquidation Preference by (ii) one thousand (1,000) (as appropriately adjusted
as set forth in paragraph (C) of this Section to reflect such events as stock
splits, stock dividends and recapitalizations with respect to the Common Stock)
(such number in clause (ii) immediately above being referred to as the
"Adjustment Number"). Notwithstanding any provision of the Restated Certificate
of Incorporation, as amended, to the contrary, following the payment of the full
amount of the Series A Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series A Preferred Stock and Common Stock,
respectively, holders of Series A Preferred Stock and holders of shares of
Common Stock shall receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of the Adjustment Number to one
(1) with respect to such Preferred Stock and Common Stock, on a per share basis,
respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series A Preferred Stock, then such remaining
assets shall be distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences. In the event, however,
that there are not sufficient assets available to permit payment in full of the
Common Adjustment, then such remaining assets shall be distributed ratably to
the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
6
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock,
securities, cash or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to one thousand (1,000) times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preferred Stock shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 8. REDEMPTION. The outstanding shares of Series A Preferred
Stock may be redeemed at the option of the Board of Directors as a whole, but
not in part, at any time, or from to time to time, at a cash price per share
equal to one hundred five percent (105%) of (i) the product of the Adjustment
Number times the Average Market Value (as such term is hereinafter defined) of
the Common Stock, plus (ii) all dividends which on the redemption date have
accrued on the shares to be redeemed and have not been paid, or declared and a
sum sufficient for the payment thereof set apart, without interest. The "Average
Market Value" is the average of the closing sale prices of the Common Stock
during the thirty (30) day period immediately preceding the date before the
redemption date on the Composite Tape for New York Stock Exchange Listed Stocks,
or, if such stock is not quoted on the Composite Tape, on the New York Stock
Exchange, or, if such stock is not listed on such Exchange, on the principal
United States securities exchange registered under the Securities Exchange Act
of 1934, as amended, on which such stock is listed, or, if such stock is not
listed on any such exchange, the average of the closing sale prices with respect
to a share of Common Stock during such thirty (30) day period, as quoted on the
National Association of Securities Dealers, Inc. Automated Quotations System or
any system then in use, or if no such quotations are available, the fair market
value of the Common Stock as determined by the Board of Directors in good faith.
7
Section 9. RANKING. The Series A Preferred Stock shall rank junior to
all other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
Section 10. AMENDMENT. Except as otherwise provided in the Restated
Certificate of Incorporation, as amended, or by law, the Restated Certificate of
Incorporation, as amended, of the Corporation shall not be further amended in
any manner which would materially alter or change the powers, preferences or
special rights of the Series A Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority or more of the
outstanding shares of Series A Preferred Stock, voting separately as a class.
Section 11. FRACTIONAL SHARES. At the Corporation's sole discretion,
Series A Preferred Stock may be issued in fractions of a share which shall
entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series A Preferred Stock.
* * * * *
8
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm the foregoing as true as of January ___, 1997.
---------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, President and Chief Executive
Officer
Attest:
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Senior Vice President, Chief
Financial Officer and Secretary
9
[FORM OF RIGHTS CERTIFICATE]
Certificate No. R____ ______ Rights
NOT EXERCISABLE AFTER THE EARLIER OF JANUARY 27, 2007, OR SUCH DATE AS THE
RIGHTS REPRESENTED HEREBY ARE REDEEMED BY INPUT/OUTPUT, INC. (THE
"CORPORATION"). THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE SUBJECT
TO REDEMPTION, AT THE OPTION OF THE CORPORATION, AT $0.001 PER RIGHT ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT DATED AS OF JANUARY 17, 1997, BY AND
BETWEEN THE CORPORATION AND ▇▇▇▇▇▇ TRUST AND SAVINGS BANK, AS RIGHTS AGENT (THE
"RIGHTS AGREEMENT"). UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY
AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) (EXERCISE OF
RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS -- TERMINATION OF ACQUIRING
PERSON'S RIGHTS) OF SUCH AGREEMENT.](1)
RIGHTS CERTIFICATE
INPUT/OUTPUT, INC.
This certifies that _______________________________________________________,
or its, his or her registered assigns, is the registered owner of the number
of rights set forth above, each of which entitles the owner thereof, subject
to the terms, provisions and conditions of the Rights Agreement, dated as of
January 17, 1997 (the "Rights Agreement"), between Input/Output, Inc., a
Delaware corporation (the "Corporation"), and ▇▇▇▇▇▇ Trust and Savings Bank
(the "Rights Agent"), to purchase from the Corporation at any time prior to
5:00 P.M. (Houston, Texas time) on January 27, 2007 at the office or offices
of the Rights Agent designated for such purpose, or its successors as Rights
Agent, one one-thousandth (1/1,000) of a fully
------------------------------
(1) The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
1
paid, nonassessable share of Series A Preferred Stock (the "Preferred Stock") of
the Corporation, at a purchase price of $200 per one one-thousandth (1/1,000) of
a share (the "Purchase Price"), upon presentation and surrender of this Rights
Certificate with the Form of Election to Purchase and related Certificate duly
executed. The number of Rights evidenced by this Rights Certificate (and the
number of shares which may be purchased upon exercise thereof) set forth above,
and the Purchase Price set forth above, are the number and Purchase Price as of
_____________, ______, based on the Preferred Stock as constituted at such date.
Upon the occurrence of a Flip-in Event (as such term is defined in the
Rights Agreement), if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate or
any such Person (as such terms are defined in the Rights Agreement), (ii) a
transferee of an Acquiring Person or its Associate or Affiliate who becomes a
transferee after such Acquiring Person or its Associate or Affiliate becomes
such, or (iii) under certain circumstances specified in the Rights Agreement, a
transferee of an Acquiring Person or its Associate or Affiliate who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such,
such Rights shall become null and void and no holder hereof shall have any right
with respect to such Rights from and after the occurrence of such Flip-in Event.
As provided in the Rights Agreement, the Purchase Price and the number and
kind of shares of Preferred Stock or other securities, which may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events, including
Triggering Events (as such term is defined in the Rights Agreement).
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Corporation and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-thousandths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights
2
Certificate or Rights Certificates for the number of whole Rights for which
this Rights Certificate is not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate (i) may be redeemed by the Corporation at its option at a
redemption price of $0.001 per Right at any time prior to the earlier of (a) the
Stock Acquisition Date (as such term is defined in the Rights Agreement) (as
such time period may be extended pursuant to the Rights Agreement) or (b) the
Final Expiration Date (as such term is defined in the Rights Agreement) and (ii)
may be exchanged in whole or in part for Preferred Stock, shares of the
Corporation's Common Stock, par value $0.01 per share, other property or any
combination thereof.
No fractional shares of Preferred Stock will be issued upon the exercise of
any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth (1/1,000) of a share of Preferred Stock, which
may, at the election of the Corporation, be evidenced by depositary receipts),
but a cash payment will be made in lieu thereof, as provided in the Rights
Agreement.
No holder of this Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of shares of Preferred Stock
or of any other securities of the Corporation which may at any time be issuable
on the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a stockholder of the Corporation or any right to vote for the election of
directors or upon any matter submitted to stockholders of the Corporation at any
meeting thereof, or to give or withhold consent to any corporate action or to
receive notice of meetings or other actions affecting stockholders of the
Corporation (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
3
WITNESS the facsimile signature of the proper officers of the Corporation
and its corporate seal.
Dated as of
---------------------
ATTEST: INPUT/OUTPUT, INC.
By:
--------------------------------- ------------------------------
Secretary Title:
------------------------
Countersigned:
RIGHTS AGENT
▇▇▇▇▇▇ TRUST AND SAVINGS BANK
By:
-----------------------------
Authorized Signature
4
[FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED,___________________________________________________________
hereby sells, assigns and transfers unto _____________________________________
______________________________________________________________________________
(PLEASE PRINT NAME AND ADDRESS OF TRANSFEREE)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint__________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Corporation, with full power of substitution.
Dated:
--------------------------------- ---------------------------------
Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.
Dated:
--------------------------------- ---------------------------------
Signature
Signature Guaranteed:
5
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
6
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: INPUT/OUTPUT, INC.
The undersigned hereby irrevocably elects to exercise _______________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Corporation or of any other person which may be issuable upon
the exercise of the Rights) and requests that certificates for such shares be
issued in the name of and delivered to:
Please insert social security or
other identifying number
-------------------------------------------------------------------------------
(PLEASE PRINT NAME AND ADDRESS)
-------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security or
other identifying number
-------------------------------------------------------------------------------
(PLEASE PRINT NAME AND ADDRESS)
-------------------------------------------------------------------------------
Dated:
---------------------------- -------------------------------------
Signature
Signature Guaranteed:
7
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being acquired or exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Person (as such terms
are defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
any such Person.
Dated:
---------------------------- -------------------------------------
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
8
[Letter to Stockholders]
JANUARY 17, 1997
Dear Fellow Stockholder:
On January 17, 1997, your Board of Directors adopted a Stockholder Rights
Plan designed to prevent a potential acquiror from gaining control of the
Company without fairly compensating all of the Company's stockholders.
The Rights will initially trade with shares of the Company's Common Stock
and will have no impact on the way in which the Company's shares are traded.
There are no separate certificates or market for the Rights.
The Rights will not become exercisable and trade separately from the Common
Stock until the earlier of (1) the date of a public announcement by the Company
that a person has acquired 20% or more of the Common Stock of the Company or (2)
ten business days (or any later date determined by the Company's Board of
Directors) after a person makes a tender or exchange offer for 20% or more of
the Company's Common Stock.
Many other public companies have adopted similar plans, indicating
widespread agreement that such plans can help Directors deflect coercive and
inadequate offers.
A summary of the terms of the Rights is included with this letter.
Sincerely,
▇▇▇▇ ▇. ▇▇▇▇▇,
President and Chief
Executive Officer
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On January 17, 1997, the Board of Directors of Input/Output, Inc. (the
"Company") declared a dividend distribution of one Right for each outstanding
share of the Company's common stock, $0.01 par value (the "Common Stock"), to
stockholders of record at the close of business on January 27, 1997. Each Right
entitles the registered holder to purchase from the Company one one-thousandth
(1/1,000) of a share of Series A Preferred Stock, par value $0.01 per share (the
"Preferred Stock"), at a Purchase Price of $200 per one one-thousandth (1/1,000)
of a share, subject to adjustment. The description and terms of the Rights are
set forth in a Rights Agreement (the "Rights Agreement") between the Company and
▇▇▇▇▇▇ Trust and Savings Bank, as Rights Agent (the "Rights Agent").
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock upon the earlier
of (i) the date of a public announcement by the Company that a person or group
of affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of twenty percent (20%) or
more of the outstanding shares of Common Stock (the "Stock Acquisition Date"),
or (ii) ten (10) business days (or such later date as the Board of Directors
shall determine) following the commencement of a tender or exchange offer that
would result in a person or group beneficially owning twenty percent (20%) or
more of such outstanding shares of Common Stock. The date the Rights separate
is referred to as the "Distribution Date."
Until the Distribution Date, (i) the Rights will be evidenced by the Common
Stock certificates and will be transferred with and only with such Common Stock
certificates, (ii) new Common Stock certificates issued after January 27, 1997
will contain a notation incorporating the Rights Agreement by reference, and
(iii) the surrender for transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificates.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on January 27, 2007, unless earlier redeemed by the
Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates will represent the Rights. Except in connection with shares of
Common Stock issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangements, or upon the exercise, conversion or
exchange of securities hereinafter issued by the Company,
or as otherwise determined by the Board of Directors, only shares of Common
Stock issued prior to the Distribution Date will be issued with Rights.
In the event that (i) the Company is the surviving corporation in a merger
or other business combination with an Acquiring Person (or any associate or
affiliate thereof) and its Common Stock remains outstanding and unchanged,
(ii) any person shall acquire beneficial ownership of more than twenty percent
(20%) of the outstanding shares of Common Stock (except pursuant to certain
consolidations or mergers involving the Company or sales or transfers of the
combined assets, cash flow or earning power of the Company and its
subsidiaries), or (iii) there occurs a reclassification of securities, a
recapitalization of the Company or any of certain business combinations or other
transactions (other than certain consolidations and mergers involving the
Company and sales or transfers of the combined assets, cash flow or earning
power of the Company and its subsidiaries) involving the Company or any of its
subsidiaries which has the effect of increasing by more than one percent (1%)
the proportionate share of any class of the outstanding equity securities of the
Company or any of its subsidiaries beneficially owned by an Acquiring Person (or
any associate or affiliate thereof), each holder of a Right (other than the
Acquiring Person and certain related parties) will thereafter have the right to
receive, upon exercise, Common Stock (or, in certain circumstances, cash,
property or other securities of the Company) having a value equal to two times
the Purchase Price of the Right. Notwithstanding any of the foregoing,
following the occurrence of any of the events described in this paragraph, all
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and
void.
For example, at a Purchase Price of $200 per Right, each Right not owned by
an Acquiring Person (or by certain related parties or transferees) following an
event set forth in the preceding paragraph would entitle its holder to purchase
$400 worth of Common Stock (or other consideration, as noted above) for $200.
Assuming that the Common Stock had a per share market price of $50 at such time,
the holder of each valid Right would be entitled to purchase eight shares of
Common Stock for $200.
In the event that, at any time following the Stock Acquisition Date,
(i) the Company shall enter into a merger or other business combination
transaction in which the Company is not the surviving corporation, (ii) the
Company is the surviving corporation in a consolidation, merger or similar
transaction pursuant to which all or part of the outstanding shares of Common
Stock are changed into or exchanged for stock or other securities of any other
person or cash or any other property or (iii) more than 50% of the combined
assets, cash flow or earning power of the Company and its subsidiaries is sold
or transferred (in each case other than certain consolidations with, mergers
with and into, or sales of assets, cash flow or earning power by or to
subsidiaries of the Company as specified in the Rights Agreement), each holder
of a Right (except Rights which previously have been voided as set forth above)
shall thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the Purchase Price
2
of the Right. The events described in this paragraph and in the second
preceding paragraph are referred to as the "Triggering Events."
The Purchase Price payable, the number and kind of shares covered by each
Right and the number of Rights outstanding are subject to adjustment from time
to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Stock, (ii) if
holders of the Preferred Stock are granted certain rights, options or warrants
to subscribe for Preferred Stock or securities convertible into Preferred Stock
at less than the current market price of the Preferred Stock, or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness,
cash (excluding regular quarterly cash dividends), assets (other than dividends
payable in Preferred Stock) or subscription rights or warrants (other than those
referred to in (ii) immediately above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least one percent (1%) of the
Purchase Price. No fractional shares of Preferred Stock are required to be
issued (other than fractions which are integral multiples of one one-thousandth
(1/1,000) of a share of Preferred Stock) and, in lieu thereof, the Company may
make an adjustment in cash based on the market price of the Preferred Stock on
the trading date immediately prior to the date of exercise.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of fifty percent (50%) or more of the
outstanding shares of Common Stock, the Board of Directors of the Company may,
without payment of the Purchase Price by the holder, exchange the Rights (other
than Rights owned by such person or group, which will become void), in whole or
in part, for shares of Common Stock at an exchange ratio of one-half (1/2) the
number of shares of Common Stock (or in certain circumstances Preferred Stock)
for which a Right is exercisable immediately prior to the time of the Company's
decision to exchange the Rights (subject to adjustment).
At any time following the Stock Acquisition Date, the Company may redeem
the Rights in whole, but not in part, at a price of $0.001 per Right (payable in
cash, shares of Common Stock or other consideration deemed appropriate by the
Board of Directors). Immediately upon the action of the Board of Directors
ordering redemption of the Rights, the Rights will terminate and the only right
of the holders of Rights will be to receive the $0.001 redemption price.
The term "Disinterested Director" means any member of the Board of
Directors of the Company who was a member of the Board prior to the date of the
Rights Agreement, and any person who is subsequently elected to the Board if
such person is recommended or approved by a majority of the Disinterested
Directors, but shall not include an Acquiring Person, or an affiliate or
associate of an Acquiring Person, or any representative of the foregoing
entities.
3
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of an acquiring company as set forth above or in the event that the
Rights are redeemed.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date; PROVIDED, that
any amendments after the Stock Acquisition Date must be approved by a majority
of the Disinterested Directors. After the Distribution Date, the provisions of
the Rights Agreement may be amended by the Board in order to cure any ambiguity,
inconsistency or defect, to make changes which do not adversely affect the
interest of holders of Rights (excluding the interest of any Acquiring Person)
or to shorten or lengthen any time period under the Rights Agreement; PROVIDED,
HOWEVER, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A filed
on January 24, 1997. A copy of the Rights Agreement is available free of charge
from the Rights Agent. This summary description of the Rights does not purport
to be complete and is qualified in its entirety by reference to the Rights
Agreement, which is incorporated herein by reference.
4