PURCHASE AGREEMENT
BY AND BETWEEN
INPUT/OUTPUT, INC.
AND
SCF-IV, L.P.
SERIES B PREFERRED STOCK
AND
SERIES C PREFERRED STOCK
APRIL 21, 1999
TABLE OF CONTENTS
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.2 References and Titles . . . . . . . . . . . . . . . . . . . . 8
ARTICLE II.
PURCHASE OF THE SHARES
Section 2.1 Purchase of the Initial Shares. . . . . . . . . . . . . . . . 8
Section 2.2 Option to Purchase Option Shares. . . . . . . . . . . . . . . 8
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization, Standing and Power. . . . . . . . . . . . . . . 9
Section 3.2 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . .10
Section 3.3 Capital Structure . . . . . . . . . . . . . . . . . . . . . .10
Section 3.4 Authority; No Violations; Approvals . . . . . . . . . . . . .11
Section 3.5 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . .12
Section 3.6 Absence of Certain Changes or Events. . . . . . . . . . . . .13
Section 3.7 No Undisclosed Material Liabilities . . . . . . . . . . . . .14
Section 3.8 No Default. . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 3.9 Compliance with Applicable Laws . . . . . . . . . . . . . . .15
Section 3.10 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . .15
Section 3.11 Certain Agreements. . . . . . . . . . . . . . . . . . . . . .16
Section 3.12 Status of Shares. . . . . . . . . . . . . . . . . . . . . . .16
Section 3.13 Intellectual Property; Year 2000. . . . . . . . . . . . . . .16
Section 3.14 Environmental Matters . . . . . . . . . . . . . . . . . . . .17
Section 3.15 No Brokers or Finders . . . . . . . . . . . . . . . . . . . .17
Section 3.16 Vote. . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Section 3.17 Related Party Transactions. . . . . . . . . . . . . . . . . .18
Section 3.18 Certain Anti-Takeover Provisions; Rights Plan . . . . . . . .18
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 4.1 Organization, Standing and Power. . . . . . . . . . . . . . .18
Section 4.2 Authority; Approvals. . . . . . . . . . . . . . . . . . . . .18
Section 4.3 Investment Intent . . . . . . . . . . . . . . . . . . . . . .19
Section 4.4 Purchaser Status. . . . . . . . . . . . . . . . . . . . . . .19
Section 4.5 No Brokers or Finders . . . . . . . . . . . . . . . . . . . .19
Section 4.6 Access to Information . . . . . . . . . . . . . . . . . . . .20
ARTICLE V.
COVENANTS
Section 5.1 Affirmative Covenants of the Company. . . . . . . . . . . . .20
Section 5.2 Negative Covenants of the Company . . . . . . . . . . . . . .20
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Section 5.3 Cooperation; Approvals. . . . . . . . . . . . . . . . . . . .21
Section 5.4 HSR Act Notification. . . . . . . . . . . . . . . . . . . . .21
Section 5.5 Notification of Certain Matters . . . . . . . . . . . . . . .21
Section 5.6 Board of Directors. . . . . . . . . . . . . . . . . . . . . .22
Section 5.7 Registration Rights Agreement . . . . . . . . . . . . . . . .22
Section 5.8 Transfer Restrictions . . . . . . . . . . . . . . . . . . . .22
Section 5.9 Stock Exchange Listing. . . . . . . . . . . . . . . . . . . .24
Section 5.10 Access; Confidentiality . . . . . . . . . . . . . . . . . . .24
Section 5.11 Issuance of Additional Preferred Stock. . . . . . . . . . . .24
Section 5.12 Standstill Agreement. . . . . . . . . . . . . . . . . . . . .25
Section 5.13 Indemnification . . . . . . . . . . . . . . . . . . . . . . .26
Section 5.14 Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . .27
ARTICLE VI.
CONDITIONS PRECEDENT TO THE CLOSINGS
Section 6.1 Conditions Precedent to Each Party's Obligation . . . . . . .27
Section 6.2 Conditions Precedent to Obligation of Purchaser . . . . . . .27
Section 6.3 Conditions Precedent to Obligations of Company. . . . . . . .28
ARTICLE VII.
THE CLOSINGS
Section 7.1 The Closings. . . . . . . . . . . . . . . . . . . . . . . . .29
Section 7.2 Actions to Occur at the Initial Closing . . . . . . . . . . .29
Section 7.3 Actions to Occur at the Option Closing. . . . . . . . . . . .30
ARTICLE VIII.
TERMINATION
Section 8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . .30
Section 8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . .31
ARTICLE IX.
RECOVERY OF FEES. . . . . . . . . . . . . . . . . . . . . . .31
ARTICLE X.
MISCELLANEOUS
Section 10.1 Survival of Provisions. . . . . . . . . . . . . . . . . . . .32
Section 10.2 No Waiver; Modification in Writing. . . . . . . . . . . . . .32
Section 10.3 Specific Performance. . . . . . . . . . . . . . . . . . . . .32
Section 10.4 Severability. . . . . . . . . . . . . . . . . . . . . . . . .33
Section 10.5 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . .33
Section 10.6 Parties in Interest . . . . . . . . . . . . . . . . . . . . .33
Section 10.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Section 10.8 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . .34
Section 10.9 Entire Agreement; Termination of Confidentiality Agreement. .34
Section 10.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . .34
Section 10.11 Public Announcements. . . . . . . . . . . . . . . . . . . . .34
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Section 10.12 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . .35
Section 10.13 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . .35
Exhibit 1.1(a) Certificate of Designation relating to Series B
Preferred Stock
Exhibit 1.1(b) Certificate of Designation relating to Series C
Preferred Stock
Exhibit 5.7 Form of Registration Rights Agreement
Exhibits 6.2(e)(i) and (ii) Form of Company Counsel Opinions
PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of April 21, 1999, by and between
Input/Output, Inc., a Delaware corporation (together with its successors, if
any, the "COMPANY"), and SCF-IV, L.P., a Delaware limited partnership, (the
"PURCHASER").
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1 DEFINITIONS. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"AFFILIATE" means, with respect to any Person, any other Person
directly, or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person. For purposes of this
definition and this Agreement, the term "CONTROL" (and correlative terms
"CONTROLLING," "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means
possession of the power, whether by contract, equity ownership or otherwise,
to direct the policies or management of a Person.
"AGREEMENT" means this Purchase Agreement, as the same may be amended,
supplemented or modified from time to time in accordance with the terms
hereof.
"APPROVAL" means any approval, authorization, grant of authority,
consent, order, qualification, permit, license, variance, exemption,
franchise, concession, certificate, filing or registration or any waiver of
the foregoing, or any notice, statement or other communication required to be
filed with, delivered to or obtained from any Governmental Entity or any
other Person.
"BOARD" means the Board of Directors of the Company.
"BUSINESS COMBINATION" means (i) any consolidation, merger, share
exchange or similar business combination transaction involving the Company
with any Person or (ii) the sale, assignment, conveyance, transfer, lease or
other disposition by the Company of all or substantially all of its assets.
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in Houston,
Texas generally are authorized or required by law or other government actions
to close.
"BYLAWS" mean the Company's bylaws, as amended from time to time.
"CAPITAL STOCK" means (i) with respect to any Person that is a
corporation or company, any and all shares, interests, participations or
other equivalents (however designated) of capital or capital
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stock of such Person and (ii) with respect to any Person that is not a
corporation or company, any and all partnership or other equity interests of
such Person.
"CERTIFICATES OF DESIGNATION" shall mean the Certificates of
Designation for the Series B Preferred Stock and the Series C Preferred Stock
in substantially the form attached hereto as EXHIBITS 1.1(a) AND 1.1(b), with
such changes as are contemplated by the terms thereof or this Agreement.
"CERTIFICATE OF INCORPORATION" means the Company's Certificate of
Incorporation, as amended from time to time.
"CHANGE OF CONTROL" means the occurrence of any event specified in
clauses (ii), (iii) or (iv) of the definition of "Initial Conversion Date"
set forth in the Certificate of Designation for the Series B Preferred Stock.
"CLOSING" has the meaning set forth in SECTION 7.1(b).
"CLOSING DATE" has the meaning set forth in SECTION 7.1(b).
"CODE" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations thereunder as in effect on the date hereof.
"COMMON STOCK" means the Company's common stock, par value $.01 per
share, and any Capital Stock for or into which such Common Stock hereafter is
exchanged, converted, reclassified or recapitalized by the Company or
pursuant to an agreement or Business Combination to which the Company is a
party.
"COMPANY" has the meaning set forth in the introductory paragraph
hereof.
"COMPANY DISCLOSURE SCHEDULE" has the meaning set forth in Article III.
"COMPANY 1998 FORM 10-K" means the Report on Form 10-K filed by the
Company with the SEC for the year ended May 31, 1998.
"COMPANY OPTIONS" has the meaning set forth in SECTION 3.3(c).
"COMPANY SEC DOCUMENTS" has the meaning set forth in SECTION 3.5.
"CONTRACTS" means all agreements, contracts, or other binding
commitments, arrangements or plans, written or oral (including any amendments
and other modifications thereto), to which the Company or any of its
Subsidiaries is a party or is otherwise bound.
"CURRENT SEC REPORTS" means the Company 1998 Form 10-K, the proxy
statement for the Company's 1998 annual meeting of stockholders, and all
Company SEC Documents filed by the Company since the time of initial filing
of either documents.
"ENVIRONMENTAL LAWS" has the meaning set forth in SECTION 3.14.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"EXERCISE NOTICE" has the meaning set forth in SECTION 2.2(a).
"GAAP" has the meaning set forth in SECTION 3.5(b).
"GOVERNMENTAL ENTITY" means any agency, bureau, commission, court,
authority, department, official, political subdivision, tribunal or other
instrumentality of any government, whether (i) regulatory, administrative or
otherwise, (ii) federal, state or local, or (iii) domestic or foreign.
"HAZARDOUS MATERIALS" has the meaning set forth in SECTION 3.14.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended.
"INITIAL CLOSING" has the meaning set forth in SECTION 7.1(a).
"INITIAL CLOSING DATE" has the meaning set forth in SECTION 7.1(a).
"INITIAL PURCHASE PRICE" has the meaning set forth in SECTION 2.1(b).
"INITIAL SHARES" means the 40,000 shares of Series B Preferred Stock
to be purchased by Purchaser pursuant to this Agreement.
"INTELLECTUAL PROPERTY" has the meaning set forth in SECTION 3.13.
"KNOWLEDGE" of any Person means the actual knowledge of such Person's
executive and financial officers and directors, in each case after reasonable
inquiry of such other officers of such Person with direct responsibility for
the Person's business relating to such knowledge.
"LAW" means any constitutional provision, statute or other law,
ordinance, rule, regulation or interpretation of any thereof and any Order of
any Governmental Entity (including Environmental Laws) now in effect.
"LIEN" means any mortgage, lien, pledge, encumbrance, easement, charge
or security interest of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement or any
lease in the nature thereof).
"LITIGATION" has the meaning set forth in SECTION 3.10.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means any
effect, change, event or occurrence that is materially adverse to the
business, operations, properties, condition (financial or otherwise), results
of operations, assets, liabilities or prospects of the Company and its
Subsidiaries taken as a whole.
"MATERIAL CONTRACTS" has the meaning set forth in SECTION 3.11(a).
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"OPTION CLOSING" has the meaning set forth in SECTION 7.1(b).
"OPTION CLOSING DATE" has the meaning set forth in SECTION 7.1(b).
"OPTION PURCHASE PRICE" has the meaning set forth in SECTION 2.2(c).
"OPTION SHARES" means the up to 15,000 shares of Series C Preferred
Stock of the Company that may be purchased by Purchaser in accordance with
SECTION 2.2.
"ORDER" means any decree, injunction, judgment, settlement, order,
ruling, assessment or writ of a court.
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, limited liability company, joint
venture, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"PURCHASER" has the meaning set forth in the introductory paragraph
hereto.
"PURCHASER'S EXPENSES" means all reasonable out-of-pocket fees, costs
and expenses incurred by Purchaser in connection with the transactions
contemplated by this Agreement and the other Transaction Documents and its
due diligence efforts in connection therewith, including (i) fees, costs and
expenses of its accountants, counsel and other similar advisors (including a
$25,000 fee to be paid to a technical advisor) and (ii) fees paid to any
Governmental Entity (including fees payable in connection with filings under
the HSR Act pursuant to SECTION 5.4).
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement in the form of EXHIBIT 5.7.
"RIGHTS PLAN" has the meaning set forth in SECTION 3.3(a).
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"SERIES B PREFERRED STOCK" means the Company's Series B Preferred
Stock, $.01 par value per share, which shall have the terms set forth in the
Certificate of Designation attached hereto as EXHIBIT 1.1(a).
"SERIES C PREFERRED STOCK" means the Company's Series C Preferred
Stock, $.01 par value per share, which shall have the terms set forth in the
Certificate of Designation attached hereto as EXHIBIT 1.1(b), except that the
initial "Conversion Price" set forth therein shall be equal to 125% of the
average Market Price (as defined in such Certificate of Designation) for the
ten Trading Days (as defined in such Certificate of Designation) ending on
and including the Trading Day prior to the Exercise Notice; PROVIDED,
HOWEVER, that if such average is less than $4.80, then the initial Conversion
Price shall be $6.00 and if such average is higher than $6.80, the initial
Conversion Price shall be
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$8.50 (which dollar amounts shall be adjusted for events or actions occurring
prior to the date of the Exercise Notice, and which Conversion Price shall be
adjusted for events or actions occurring after the date of the Exercise
Notice and prior to the Option Closing, in each case in the same manner as
the Conversion Price would be adjusted as set forth in such Certificate of
Designation for events occurring after the Option Closing).
"SHARES" means the Initial Shares and the Option Shares.
"STOCK PLANS" means the Company's stock option, stock incentive,
restricted stock, employee stock purchase or other similar plans.
"SUBSIDIARY" means, (i) a corporation, a majority of whose stock with
voting power, under ordinary circumstances, to elect directors is at the time,
directly or indirectly, owned by the Company, by a Subsidiary of the Company or
by the Company and another Subsidiary, or (ii) any other Person (other than a
corporation) in which the Company, a Subsidiary or the Company and a Subsidiary,
directly or indirectly, at the date of determination thereof has at least a
majority ownership interest.
"TRANSACTION DOCUMENTS" means this Agreement, the Certificates of
Designation and the Registration Rights Agreement.
"TRANSFER" has the meaning set forth in SECTION 5.8.
"UNDERLYING SHARES" means the shares of Common Stock issuable upon
conversion of the Shares in accordance with the terms thereof.
"VOTING STOCK" of a Person means Capital Stock of such Person of the
class or classes pursuant to which the holders thereof have the general voting
power under ordinary circumstances to vote in the election of the board of
directors, managers or trustees of such Person; provided that if such Person has
more than one class or series of Voting Stock, any calculation as to a
percentage of such Voting Stock shall be made with respect to the percentage of
aggregate votes entitled to be cast in respect of all such Voting Stock in such
circumstances.
Section 1.2 REFERENCES AND TITLES. All references in this Agreement
to Exhibits, Schedules, Articles, Sections, subsections, and other subdivisions
refer to the corresponding Exhibits, Schedules, Articles, Sections, subsections,
and other subdivisions of this Agreement unless expressly provided otherwise.
Titles appearing at the beginning of any Articles, Sections, subsections, or
other subdivisions of this Agreement are for convenience only, do not constitute
any part of such Articles, Sections, subsections or other subdivisions, and
shall be disregarded in construing the language contained therein. The words
"THIS AGREEMENT," "HEREIN," "HEREBY," "HEREUNDER," and "HEREOF," and words of
similar import, refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited. The words "THIS SECTION," "THIS
SUBSECTION," and words of similar import, refer only to the Sections or
subsections hereof in which such words occur. The word "INCLUDING" (in its
various forms) means "including without limitation." Pronouns in masculine,
feminine, or neuter genders shall be construed to state and include any other
gender and words, terms, and titles (including terms defined herein) in the
singular form shall be construed to include the plural and vice
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versa, unless the context otherwise expressly requires. Unless the context
otherwise requires, all defined terms contained herein shall include the
singular and plural forms of such defined terms.
ARTICLE II.
PURCHASE OF THE SHARES
Section 2.1 PURCHASE OF THE INITIAL SHARES.
(a) Subject to the terms and conditions herein set forth, at the
Initial Closing, the Company will sell to Purchaser, and Purchaser will
purchase from the Company, the Initial Shares.
(b) The aggregate purchase price payable for the Initial Shares
shall be $40 million (the "INITIAL PURCHASE PRICE").
(c) Delivery of the Initial Shares shall be made at the Initial
Closing by delivery to Purchaser, against payment of the Initial Purchase
Price therefor as provided herein, of one or more share certificates,
registered in the name of Purchaser, representing the Initial Shares.
(d) Payment of the Initial Purchase Price for the Initial Shares
to be purchased hereunder shall be made by or on behalf of Purchaser by wire
transfer of immediately available funds to an account of the Company (the
number for which account shall have been furnished to Purchaser at least two
Business Days prior to the Initial Closing Date).
Section 2.2 OPTION TO PURCHASE OPTION SHARES.
(a) Purchaser may, at its sole option, at any time prior to the
expiration of 90 days after the Initial Closing, deliver a written notice of
its intention to purchase up to 15,000 Option Shares (the "EXERCISE NOTICE")
to the Company. The Exercise Notice shall specify the number of Option
Shares to be purchased and a Business Day between 10 and 20 calendar days
after such notice upon which the Option Closing shall occur.
(b) If Purchaser delivers the Exercise Notice in accordance with
Section 2.2(a), then, subject to the terms and conditions herein set forth,
at the Option Closing, the Company will sell to Purchaser, and Purchaser will
purchase from the Company, the number of Option Shares to be purchased by the
Purchaser as specified in the Exercise Notice.
(c) The purchase price payable for the Option Shares shall be
$1,000 per share (the aggregate amount of such purchase price being referred
to herein as the "OPTION PURCHASE PRICE").
(d) Delivery of the Option Shares shall be made at Option Closing
by delivery to Purchaser, against payment of the Option Purchase Price
therefor as provided herein, of one or more share certificates, registered
in the name of Purchaser, representing the Option Shares so purchased.
(e) Payment of the Option Purchase Price for the Option Shares to
be purchased hereunder shall be made by or on behalf of Purchaser by wire
transfer of immediately available funds
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to an account of the Company (the number for which account shall have been
furnished to Purchaser at least two Business Days prior to the Option Closing
Date).
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser as follows (in each
case as qualified by matters reflected on the disclosure schedule dated as of
the date of this Agreement by reference to the Section of this Agreement so
qualified and delivered by the Company to Purchaser prior to the date of this
Agreement (the "COMPANY DISCLOSURE SCHEDULE") and made a part hereof by
reference):
Section 3.1 ORGANIZATION, STANDING AND POWER. Each of the Company
and each of its Subsidiaries is a corporation or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated or organized and has the requisite corporate or
other such entity power and authority to own its properties and carry on its
business as now being conducted. Each of the Company and each of its
Subsidiaries is duly qualified or licensed to transact business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so
qualified or licensed or to be in good standing, individually or in the
aggregate, has not had and could not reasonably be expected to have a
Material Adverse Effect. The Company has delivered to Purchaser prior to the
execution of this Agreement complete and correct copies of its Certificate of
Incorporation and Bylaws, each as amended to date, and, in the case of the
Company's Subsidiaries, made available similar organizational documents in
each case, as in effect on the date of this Agreement.
Section 3.2 SUBSIDIARIES. Except as set forth in the Current SEC
Reports, all the outstanding shares of Capital Stock of each Subsidiary of
the Company that would constitute a "significant subsidiary" within the
meaning of the SEC's Regulation S-X have been validly issued and are fully
paid and nonassessable (with respect to corporate Subsidiaries) and are owned
directly or indirectly by the Company, free and clear of all Liens other than
Liens securing obligations for money borrowed by the Company.
Section 3.3 CAPITAL STRUCTURE.
(a) The authorized Capital Stock of the Company consists of
100,000,000 shares of Common Stock and 5,000,000 shares of preferred stock,
$.01 par value, which may be divided into and issued in one or more series
upon the creation thereof by the Board. As of the date of this Agreement,
(A) 50,499,898 shares of Common Stock are issued and outstanding (including
the attached preferred share purchase rights issued pursuant to the Rights
Agreement dated as of January 17, 1997, as amended to date, between the
Company and ▇▇▇▇▇▇ Trust and Savings Bank as rights agent (the "RIGHTS
PLAN")), (B) 7,991,161 shares of Common Stock have been authorized and
reserved for issuance under the Stock Plans, (C) 0 shares of Common Stock are
held by the Company in its treasury, (D) no shares of Common Stock are held
by any of the Company's Subsidiaries, and (E) an aggregate of 100,000 shares
of preferred stock have been designated as the Series A Preferred Stock.
Except as described in this SECTION 3.3, the Company has no authorized,
issued or outstanding shares or Capital Stock as of the date of this
Agreement.
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(b) There are no restrictions or limitations, contractual or
otherwise, binding upon the Company or any of its Subsidiaries or to which
the Company or any of its Subsidiaries is subject that prohibit or limit the
enforceability of the terms and provisions of the Certificates of Designation
or will prohibit or limit the right of a holder of Shares to convert the
Shares into shares of Common Stock in accordance with their terms; and the
conversion of any Shares into shares of Common Stock will not violate or
result in or constitute a default under any loan or credit agreement, note,
bond, mortgage, indenture, lease, permit, concession, franchise, license or
any other contract, agreement, arrangement or understanding to which the
Company or any of its Subsidiaries is a party or by which they or any of
their properties or assets are bound.
(c) There are no outstanding warrants, share or stock options,
share or stock appreciation rights or other rights to receive or purchase any
Capital Stock of the Company or any of its Subsidiaries granted under the
Stock Plans or otherwise except as set forth in SCHEDULE 3.3(c) of the
Company Disclosure Schedule (such warrants, share or stock options, shares or
stock appreciation rights or other rights disclosed thereon, collectively,
the "COMPANY OPTIONS"). Except for the Company Options and except as provided
in the Transaction Agreements, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company or any of its Subsidiaries is a
party or by which any of them is bound obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, any Capital Stock of the Company or of any of its Subsidiaries or
obligating the Company or any of its Subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. There are no outstanding obligations
of the Company or any of its Subsidiaries (contingent or otherwise) to
repurchase, redeem or otherwise acquire any Capital Stock of the Company or
any of its Subsidiaries or any security exchangeable for or convertible into
such Capital Stock.
(d) All outstanding Capital Stock of the Company and its
Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive or similar rights.
(e) Except as contemplated hereby or in the other Transaction
Documents or as set forth in the Current SEC Reports, there are not any
registration rights agreements, stockholder agreements, voting agreements or
trusts, proxies or other agreements or contractual obligations to which the
Company or any Subsidiary is a party or bound with respect to the
registration with any Government Entity, or the voting or disposition of any
Capital Stock of the Company or any of its Subsidiaries and, to the Company's
Knowledge there are no other shareholder agreements, voting agreements or
trusts, proxies or other agreements or contractual obligations among the
shareholders of the Company with respect to the voting or disposition of any
Capital Stock of the Company or any of its Subsidiaries.
Section 3.4 AUTHORITY; NO VIOLATIONS; APPROVALS.
(a) The Board has approved this Agreement, the other Transaction
Documents and the transactions contemplated hereby and thereby, and declared
this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby to be in the best interests of the Company.
The Board has approved the acquisition of the Shares and, upon any conversion
of the Shares, the issuance of the Underlying Shares by Purchaser hereunder.
The Company has all requisite
-11-
corporate power and authority to enter into this Agreement and each of the
other Transaction Documents and to consummate each of the transactions and
perform each of the obligations contemplated hereby and thereby. The
execution and delivery of this Agreement and each of the other Transaction
Documents and the consummation of each of the transactions and the
performance of each of the obligations contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been, and at or prior to the Initial Closing the
other Transaction Documents will be, duly executed and delivered by the
Company and the Certificates of Designation have been duly adopted by the
Board of Directors in accordance with applicable Law. Each of the
Certificates of Designation and, assuming this Agreement and each of the
other Transaction Documents to which Purchaser is a party constitute the
valid and binding obligations of Purchaser, this Agreement and each of the
other Transaction Documents constitutes a valid and binding obligation of the
Company enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization, moratorium and
other similar laws of general applicability relating to or affecting
creditors' rights and to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
(b) The execution and delivery of this Agreement and each of the
other Transaction Documents does not, and the consummation of the
transactions contemplated hereby and thereby and compliance with the
provisions hereof and thereof will not, conflict with, require the consent of
any other Person to or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any material obligation or to
the loss of any material benefit under, or give rise to a right of purchase
under, result in the creation of any Lien upon any of the properties or
assets of the Company or any of its Subsidiaries under, any provision of (A)
the Certificate of Incorporation or Bylaws or any provision of the comparable
organizational documents of any of the Company's Subsidiaries, (B) any loan
or credit agreement, note, bond, mortgage, indenture, lease, instrument,
permit, concession, franchise, license or other contract or agreement,
arrangement or understanding to which the Company or any of its Subsidiaries
is a party or otherwise is bound or by which any of them or their respective
properties are bound or any existing Approval applicable to the Company or
any of its Subsidiaries, (C) any joint venture or other ownership arrangement
to which the Company or any of its Subsidiaries is a party or otherwise is
bound or by which any of them or their respective properties are bound or (D)
assuming the Approvals referred to in SECTION 3.4(c) are duly and timely
obtained or made, any Law or Order applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets, other than, in
the case of clause (B) (other than with respect to any material loan or
credit agreement, note, bond, mortgage or indenture or any Material Contract
or any plan or agreement providing for the payment of any benefit to
directors, officers or employees of the Company or its subsidiaries), (C) or
(D), any such conflicts, violations, defaults, rights, Liens or detriments,
that, individually or in the aggregate, (x) have not had and could not
reasonably be expected to have a Material Adverse Effect, (y) have not
impaired and could not reasonably be expected to impair the ability of the
Company to perform its obligations under any of the Transaction Documents in
any material respect, and (z) have not and could not reasonably be expected
to delay in any material respect or prevent the consummation of any of the
transactions, or performance of the obligations, contemplated by any of the
Transaction Documents.
(c) No Approval from any Governmental Entity is required by or with
respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement
-12-
or any other Transaction Document by the Company or the consummation by the
Company of the transactions contemplated hereby or thereby, except for: (A)
the filing of a notification report by the Company under the HSR Act and the
expiration or termination of the applicable waiting period with respect
thereto (which filing and expiration or termination are not required for the
Initial Closing), (B) the filing of the Certificates of Designation in
accordance with Section 103 of the Delaware General Corporation Law, and (C)
any such Approvals the failure of which to be made or obtained (1) has not
had and could not reasonably be expected to have a Material Adverse Effect,
(2) has not impaired and could not reasonably be expected to impair the
ability of the Company to perform its obligations under any of the
Transaction Documents in any material respect and (3) have not and could not
reasonably be expected to delay in any material respect or prevent the
consummation of any of the transactions contemplated by any of the
Transaction Documents.
Section 3.5 SEC DOCUMENTS.
(a) The Company has made available to Purchaser a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by the Company with the SEC since May 31, 1997 (the
"COMPANY SEC DOCUMENTS") including the Company 1998 Form 10-K, which are all
the documents (other than preliminary materials) that the Company was
required to file with the SEC since May 31, 1997. As of their respective
dates, the Company SEC Documents complied in all material respects with the
requirements of the Securities Act, or the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such
Company SEC Documents, and none of the Company SEC Documents contained as of
their respective dates any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) The financial statements of the Company included in the
Company SEC Documents, including the notes and schedules thereto, complied as
to form in all material respects with the rules and regulations of the SEC
with respect thereto, were prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as permitted by Rule
10-01 of Regulation S-X of the SEC) and fairly present the consolidated
financial position of the Company and its consolidated Subsidiaries as of
their respective dates and the consolidated results of operations and the
consolidated cash flows of the Company and its consolidated Subsidiaries for
the periods presented therein in accordance with applicable requirements of
GAAP (subject, in the case of the unaudited statements, to normal, recurring
adjustments, none of which are material) applied on a consistent basis during
the periods presented.
Section 3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as disclosed in the Current SEC Reports filed prior to
the date of this Agreement or SCHEDULE 3.6 of the Company Disclosure
Schedule, or except as contemplated by this Agreement, since May 31, 1998,
each of the Company and its Subsidiaries have conducted their business only
in the ordinary course of business consistent with past practice, and there
has not been: (i) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to
any Capital Stock of the Company; (ii) any split, combinations,
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reclassification or amendment of any term of any outstanding Capital Stock or
other security of the Company or any of its Subsidiaries or (other than
issuance of Common Stock upon the exercise of any Company Options) any
issuance or the authorization of the issuance of any securities of the
Company or any of its Subsidiaries, other than in connection with the
transactions contemplated hereby; (iii) any repurchase, redemption or other
acquisition by the Company or any Subsidiary of the Company of any
outstanding Capital Stock or other securities of the Company or any
Subsidiary of the Company, except as contemplated by the Stock Plans; (iv)
(A) any grant by the Company or any of its Subsidiaries to any officer of the
Company or any of its Subsidiaries of any increase in compensation, except
for increases in the ordinary course of business consistent with past
practice or as required under employment or other agreements or benefit
arrangements in effect as of May 31, 1998, or (B) any grant by the Company or
any of its Subsidiaries to any such officer of any increase in severance or
termination pay, except as was required or provided for under any employment,
severance, termination or other agreements or benefit arrangements in effect
as of May 31, 1998; (v) except as required by a change in GAAP, any material
change in accounting methods, principles or practices by the Company or any
of its Subsidiaries; and (vi) any material casualties affecting the Company
and its Subsidiaries, taken as a whole, or any material loss, damage or
destruction to any of their properties or assets, whether covered by
insurance or not.
(b) Except as disclosed in the Company's consolidated financial
statements included in the Company 1998 Form 10-K, and the notes thereto, or
as disclosed in the other Current SEC Reports, since May 31, 1998, there has
not been any event, circumstance or fact that (x) has had or could reasonably
be expected to have a Material Adverse Effect, (y) has impaired or could
reasonably be expected to impair the ability of the Company to perform its
obligations under any of the Transaction Documents in any material respect,
or (z) could reasonably be expected to delay in any material respect or
prevent the consummation of any of the transactions contemplated by any of
the Transaction Documents.
Section 3.7 NO UNDISCLOSED MATERIAL LIABILITIES. Except as
disclosed in SCHEDULE 3.7 of the Company Disclosure Schedule or the Company's
financial statements included in the Company 1998 Form 10-K, and the notes
thereto, or as disclosed in the other Current SEC Reports, there are no
liabilities or obligations of the Company or any of its Subsidiaries of any
kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, other than: (i) liabilities adequately provided
for on the balance sheet of the Company dated as of May 31, 1998 (including
the notes thereto) contained in the Company 1998 Form 10-K; (ii) liabilities
incurred in the ordinary course of business consistent with past practice
since May 31, 1998, which liabilities, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect; (iii)
liabilities arising under the Transaction Documents; and (iv) liabilities not
required by GAAP to be recognized or disclosed on a consolidated balance
sheet of the Company and its consolidated Subsidiaries or in the notes
thereto, which liabilities, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
Section 3.8 NO DEFAULT. Except as disclosed in SCHEDULE 3.8 of the
Company Disclosure Schedule or in the Current SEC Reports, neither the
Company nor any of its Subsidiaries is in default or violation (and no event
has occurred which, with notice or the lapse of time or both, would
constitute a default or violation) of any term, condition or provision of (i)
the Certificate of Incorporation or Bylaws of the Company or the comparable
organizational documents of any of its
-14-
Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease, instrument, permit, concession, franchise, license or any
other contract, agreement, arrangement or understanding to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective properties or assets is bound, or
(iii) any Order or Law applicable to the Company or any of its Subsidiaries,
except in the case of clause (ii) and (iii), for violations or defaults that,
individually or in the aggregate, (x) have not had and could not reasonably
be expected to have a Material Adverse Effect, (y) have not impaired and
could not reasonably be expected to impair the ability of the Company to
perform its obligations under any of the Transaction Documents in any
material respect, and (z) have not and could not reasonably be expected to
delay in any material respect or prevent the consummation of any of the
transactions contemplated by any of the Transaction Documents. Except as
disclosed in SCHEDULE 3.8 of the Company Disclosure Schedule or in the
Current SEC Reports, the Company and its Subsidiaries (i) are not in breach
of or default under any covenant, including financial covenants, under
agreements relating to money borrowed in excess of $5 million, and (ii) do
not believe that it is reasonably likely that they will be in breach of or
default under any covenant under any such agreement as of the next date on
which they are required to be in compliance with any such covenants.
Section 3.9 COMPLIANCE WITH APPLICABLE LAWS.
(a) The Company and each of its Subsidiaries has in effect all
Approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses, and there has occurred no default or violation
(and no event has occurred which, with notice or the lapse of time or both,
would constitute a default or violation) under any such Approval, except for
failures to obtain, or for defaults or violations under, Approvals which
failures, defaults or violations, individually or in the aggregate, (i) have
not had and could not reasonably be expected to have a Material Adverse
Effect, (ii) have not impaired and could not reasonably be expected to impair
the ability of the Company to perform its obligations under any of the
Transaction Documents in any material respect, and (iii) could not reasonably
be expected to delay in any material respect or prevent the consummation of
any of the transactions contemplated by any of the Transaction Documents.
(b) Except as otherwise disclosed in the Current SEC Reports, the
Company and its Subsidiaries are in compliance with all applicable Laws and
Orders, except for possible noncompliance which, individually or in the
aggregate, (i) has not had and could not reasonably be expected to have a
Material Adverse Effect, (ii) has not impaired and could not reasonably be
expected to impair the ability of the Company to perform its obligations
under any of the Transaction Documents in any material respect, and (iii)
could not reasonably be expected to delay in any material respect or prevent
the consummation of any of the transactions contemplated by any of the
Transaction Documents.
(c) No investigation or review by any Governmental Entity with
respect to the Company, any of its Subsidiaries or the transactions
contemplated by this Agreement and the other Transaction Documents is pending
or, to the Knowledge of the Company, threatened, nor has any Governmental
Entity notified the Company or any of its Subsidiaries in writing or, to the
Company's Knowledge, otherwise of any intention to conduct the same, other
than those the outcome of which, individually or in the aggregate, (i) have
not had and could not reasonably be expected to have a Material Adverse
Effect, (ii) have not impaired and could not reasonably be expected to impair
the ability of the
-15-
Company to perform its obligations under any of the Transaction Documents in
any material respect, or (iii) could not reasonably be expected to delay in
any material respect or prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents.
Section 3.10 LITIGATION. Except as disclosed in the Current SEC
Reports or SCHEDULE 3.10 of the Company Disclosure Schedule, there is no
suit, action, proceeding or indemnification claim, at law or in equity,
pending before any Governmental Entity or arbitrator, or, to the Knowledge of
the Company, threatened, against or affecting the Company, any Subsidiary of
the Company or any of its Material Contracts ("LITIGATION"), and neither the
Company nor any Subsidiary is a party to any Litigation, that (i) has had or
could reasonably be expected to have a Material Adverse Effect, (ii) has
impaired or reasonably could be expected to impair the ability of the Company
to perform its obligations under any of the Transaction Documents in any
material respect, or (iii) reasonably could be expected to delay in any
material respect or prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents, nor is there any Order of
any Governmental Entity or arbitrator outstanding against or binding upon the
Company or any Subsidiary of the Company or any of its Material Contracts
which (i) has had or could reasonably be expected to have a Material Adverse
Effect, (ii) has impaired or reasonably could be expected to impair the
ability of the Company to perform its obligations under any of the
Transaction Documents in any material respect, or (iii) reasonably could be
expected to delay in any material respect or prevent the consummation of any
of the transactions contemplated by any of the Transaction Documents.
Section 3.11 CERTAIN AGREEMENTS.
(a) Except as disclosed in the Current SEC Reports and SCHEDULE
3.11(a) of the Company Disclosure Schedule, there are no, whether in oral or
written form, Contracts that are material to the Company and its
Subsidiaries, taken as a whole, or their respective business, (such Contracts
disclosed or required to be disclosed herein, in the Current SEC Reports or
in the Company Disclosure Schedule, the "MATERIAL CONTRACTS"). Each Material
Contract is a valid and binding obligation of the Company or one of its
Subsidiaries and, to the Company's Knowledge, of each other party thereto,
enforceable in accordance with its terms, and is in full force and effect.
(b) The Company or the relevant Subsidiary and, to the Company's
Knowledge, each other party to the Material Contracts has performed in all
material respects the obligations required to be performed by it under the
Material Contracts and is not (with or without lapse of time or the giving of
notice, or both) in breach or default thereunder. No party to any Material
Contract has given written or, to the Company's Knowledge, oral notice of any
action to terminate, cancel, rescind or procure a judicial reformation
thereof.
Section 3.12 STATUS OF SHARES. The issuance and sale of the Shares
and the reservation and issuance of the Underlying Shares have been duly
authorized by all necessary corporate action on the part of the Company
(other than the filing of the respective Certificates of Designation with the
Secretary of State of the State of Delaware) and the Shares, when delivered
to Purchaser at the Initial Closing or Option Closing, as applicable,
against payment therefor as provided herein, and the Underlying Shares, when
issued upon conversion of the Shares in accordance with the terms thereof,
will be validly issued, fully paid and non-assessable and the issuance and
sale of the Shares and the issuance of the Underlying Shares are not and will
not be subject to preemptive rights of any Person.
-16-
Section 3.13 INTELLECTUAL PROPERTY; YEAR 2000. The Company and the
Subsidiaries own, possess or license, or, to the Company's Knowledge can
acquire on reasonable terms, adequate patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "INTELLECTUAL PROPERTY") necessary to
carry on the business now operated by them, and neither the Company nor any
of the Subsidiaries has received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect to
any Intellectual Property (including Intellectual Property which is licensed)
or of any facts or circumstances which would render any Intellectual Property
invalid or inadequate to protect the interest of the Company or any of the
Subsidiaries therein, and which infringement or conflict (if the subject of
any unfavorable decision, ruling or finding) or invalidity or inadequacy,
singly or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. The Company and its Subsidiaries have reviewed the
areas within their business and operations and products (including computer
software and hardware) which could be adversely affected by, and have
developed or are developing programs to address on a timely basis, any "Year
2000 Problem" (that is, the risk that computer hardware or software used by
the Company and its Subsidiaries may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any
date after December 31, 1999). Based on such review and program, the Company
reasonably believes that any such "Year 2000 Problem" caused by its products
or operations will not have a Material Adverse Effect.
Section 3.14 ENVIRONMENTAL MATTERS. Except for such matters as
could not, singly or in the aggregate, reasonably be expected to result in a
Material Adverse Effect, (A) neither the Company nor any of the Subsidiaries
is in violation of any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, policy or rule of common law or any judicial or
administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata)
or wildlife, including, without limitation, laws and regulations relating to
the release or threatened release of chemicals, pollutants, contaminants,
wastes, toxic substances, hazardous substances, petroleum or petroleum
products (collectively, "HAZARDOUS MATERIALS") or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials (collectively, "ENVIRONMENTAL LAWS"), (B) the
Company and the Subsidiaries have all permits, authorizations and approvals
required under any applicable Environmental Laws and are each in compliance
with their requirements, (C) there are no pending or, to the Company's
Knowledge or any of the Subsidiaries, threatened administrative, regulatory
or judicial actions, suits, demands, demand letters, claims, liens, notices
of noncompliance or violation, investigation or proceedings relating to any
Environmental Law against the Company or any of the Subsidiaries and (D)
there are no events or circumstances known to the Company or any of the
Subsidiaries that might reasonably be expected to form the basis of an order
for clean-up or remediation, or an action, suit or proceeding by any private
party or governmental body or agency, against or affecting the Company or any
of the Subsidiaries relating to Hazardous Materials or Environmental Laws.
Section 3.15 NO BROKERS OR FINDERS. No agent, broker, finder or
investment or commercial banker, or other Person or firm engaged by or acting on
behalf of the Company or its Subsidiaries in connection with the negotiation,
execution or performance of this Agreement is or will be entitled to
-17-
any brokerage or finder's or similar fee or other commission as a result of
this Agreement, the other Transaction Documents or the transactions
contemplated hereby or thereby, other than any such fees or commissions that
have been disclosed to Purchaser and as to which the Company shall have full
responsibility.
Section 3.16 VOTE. There are no approvals required of the holders
of any class or series of shares or stock of the Company necessary to approve
this Agreement or any other Transaction Documents and the transactions
contemplated hereby or thereby.
Section 3.17 RELATED PARTY TRANSACTIONS. No relationship, direct or
indirect, exists between or among any of the Company, the Subsidiaries or any
affiliate of the Company, on the one hand, and any director, officer,
stockholder, customer or supplier of any of them, on the other hand, which
would be required by the Exchange Act or by the rules and regulations enacted
thereunder to be described in the Company's proxy statement for the election
of directors in 1999 which is not described in the Current SEC Reports or
SCHEDULE 3.17 of the Company Disclosure Schedule.
Section 3.18 CERTAIN ANTI-TAKEOVER PROVISIONS; RIGHTS PLAN. The
Board of Directors of the Company has duly approved the Purchaser and its
Affiliates becoming an "interested stockholder" within the meaning of Section
203 of the Delaware General Corporation Law and a "Related Person" within the
meaning of Article THIRTEENTH of the Certificate of Incorporation by reason
of the acquisition by Purchaser or any of its Affiliates of (i) the Shares,
(ii) the Underlying Shares, (iii) any shares of Common Stock permitted to be
acquired by Purchaser or any of its Affiliates in accordance with the
limitation set forth in SECTION 5.12(a) or (iv) any securities (including
shares of Common Stock issuable upon conversion, exercise or exchange thereof
pursuant to their terms) received by Purchaser or its Affiliates pursuant to
SECTION 5.11 (collectively, the "SHARE ACQUISITIONS"), and has otherwise
taken all action necessary to exempt the Share Acquisitions from the
application of Section 203 of the Delaware General Corporation Law, Article
THIRTEENTH of the Certificate of Incorporation, or any similar anti-takeover
provisions of Law or otherwise that could adversely affect the rights of the
Purchaser or its Affiliates with respect to their ownership of securities
acquired by means of such Share Acquisitions. In addition, the Company has
amended the Rights Plan to provide that neither Purchaser nor any of its
Affiliates will be deemed to be an Acquiring Person within the meaning of the
Rights Plan by reason of the Share Acquisitions.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company as follows:
Section 4.1 ORGANIZATION, STANDING AND POWER. Purchaser is a
limited partnership duly organized, validly existing, and in good standing
under the laws of Delaware and has all requisite partnership power and
authority to own, lease, and operate its properties and to carry on its
business as now being conducted and to execute and deliver this Agreement and
the other Transaction Documents to which Purchaser is a party and consummate
the transactions contemplated hereby and thereby.
-18-
Section 4.2 AUTHORITY; APPROVALS.
(a) (i) The execution and delivery of this Agreement and the other
Transaction Documents to which it is a party and the purchase of the Shares
to be purchased by it have been duly and properly authorized by all necessary
partnership action on the part of Purchaser, (ii) this Agreement and the
other Transaction Documents to which it is a party have been duly executed
and delivered by it or on its behalf and, assuming the accuracy of the
representations and warranties of the Company in SECTION 3.4 hereof,
constitute the valid and legally binding obligations of Purchaser,
enforceable against it in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general applicability relating to or affecting creditors' rights and to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); (iii) the purchase of the
Shares to be purchased by it does not conflict with or violate (1) its
organizational documents or any other material agreement to which it is a
party or to which its properties are subject or (2) assuming the approvals
referred to in SECTION 4.2(b) are duly and timely made or obtained, any Law
applicable to it, in each case in a manner that could reasonably be expected
to materially hinder or impair the completion of any of the transactions
contemplated hereby; and (iv) the purchase of Shares to be purchased by it
does not impose any penalty or other onerous condition on Purchaser that
could reasonably be expected to materially hinder or impact the completion of
any of the transactions contemplated hereby.
(b) No Approval from any Governmental Entity is required by or
with respect to Purchaser in connection with the execution and delivery by
Purchaser of this Agreement or any other Transaction Document to which it is
a party or the consummation by Purchaser of the transactions contemplated
hereby or thereby, except for: (A) the filing of a notification report by
Purchaser under the HSR Act, and the expiration or termination of the
applicable waiting period with respect thereto (which filing and expiration
or termination are not required for the Initial Closing); and (B) any such
Approval the failure of which to be made or obtained (1) has not impaired and
could not reasonably be expected to impair the ability of Purchaser to
perform its obligations under any of the Transaction Documents in any
material respect and (2) could not reasonably be expected to delay in any
material respect or prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents.
Section 4.3 INVESTMENT INTENT. The Shares to be acquired by it
hereunder and any Underlying Shares to be acquired upon the conversion of
such Shares are being, or in the case of the Underlying Shares, will be,
acquired for its own account for investment and with no intention of
distributing or reselling such Shares or Underlying Shares or any part
thereof or interest therein in any transaction which would be in violation of
the securities Laws of the United States of America or any applicable state
or any foreign country or jurisdiction.
Section 4.4 PURCHASER STATUS. Purchaser represents and warrants
to, and covenants and agrees with the Company that (i) at the time it was
offered the Shares, it was, (ii) at the date hereof, it is, and (iii) at the
Initial Closing Date and the Option Closing Date (if any), it will be, an
accredited investor as defined in Rule 501(a) under the Securities Act, and
has such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the Company and an investment in
the Shares, and is able to bear the economic risk of such investment.
-19-
Section 4.5 NO BROKERS OR FINDERS. No agent, broker, finder or
investment or commercial banker, or other Person or firm engaged by or acting
on behalf of Purchaser in connection with the negotiation, execution or
performance of this Agreement is or will be entitled to any brokerage or
finder's or similar fee or other commission as a result of this Agreement,
other than any such fees or commissions that have been disclosed to the
Company and as to which Purchaser shall have full responsibility.
Section 4.6 ACCESS TO INFORMATION. Purchaser represents and
acknowledges that it (a) has had access to and the opportunity to review the
Company's properties, assets, financial statements, contracts and other books
and records and has made such investigation with respect thereto as it deems
necessary to enter into the transactions contemplated hereby, (b) has been
afforded the opportunity to ask appropriate representatives of the Company
questions concerning the business, assets, financial condition and prospects
of the Company and (c) has been solely responsible for its own due diligence
investigation of the Company and its business, for its own analysis of the
merits and risks of an investment in the Shares, and for its own analysis of
the terms of the investment in the Shares. Anything herein to the contrary
notwithstanding, the provisions of this SECTION 4.6 shall not in any way
limit any of the representations and warranties of the Company set forth in
this Agreement or in any Schedule delivered pursuant hereto by the Company or
its authorized representatives or the rights of Purchaser with respect to any
breach of any such representations and warranties.
ARTICLE V.
COVENANTS
Section 5.1 AFFIRMATIVE COVENANTS OF THE COMPANY. The Company
hereby covenants and agrees that, until the earlier of the Initial Closing or
the termination of this Agreement, unless otherwise expressly contemplated by
this Agreement or consented to in writing by Purchaser (such consent not to
be unreasonably withheld), the Company will and will cause each of its
Subsidiaries to operate its business in the usual and ordinary course
consistent with past practices except as contemplated by this Agreement and
except as set forth in SCHEDULE 5.1 of the Company Disclosure Schedule.
Section 5.2 NEGATIVE COVENANTS OF THE COMPANY.
(a) Except as expressly contemplated by this Agreement or
otherwise consented to in writing by Purchaser, from the date of this
Agreement until earlier of the Initial Closing or the termination of this
Agreement, the Company shall not do, and shall not permit any of its
Subsidiaries to do, any of the following:
(i) adopt or propose to adopt any amendments to the Company's
Certificate of Incorporation or Bylaws, adopt resolutions authorizing a
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization, or other reorganization of the Company or any
Subsidiary or make any other changes in the Company's capital structure;
(ii) declare or pay any dividend or make any other
distribution (whether in cash, stock or property) with respect to its
Capital Stock, other than dividends paid by any Subsidiary to the
Company or another Subsidiary in the ordinary and usual course of the
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Company's business, or take any other action that, if taken after the
issuance of the Shares, would result in an adjustment to the number of
shares acquirable upon conversion of the Shares;
(iii) take any action that will, or is reasonably likely to
cause, the condition in Section 6.2(a) not to be satisfied; or
(iv) agree in writing or otherwise to do any of the foregoing.
Section 5.3 COOPERATION; APPROVALS. The Company and Purchaser each
agrees to cooperate and use all commercially reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement, including cooperating fully with
the other parties to obtain (and will promptly prepare all registrations,
filings and applications, requests and notices preliminary to) all Approvals
that may be necessary or which may be reasonably requested by the Company or
Purchaser to consummate the transactions contemplated by this Agreement and
the other Transaction Documents. In case at any time after the date hereof
any further action is necessary or desirable to carry out the purposes of
this Agreement, the parties shall take all such necessary action.
Section 5.4 HSR ACT NOTIFICATION. Each of the parties hereto shall
(a) file or cause to be filed, as promptly as practicable after the execution
and delivery of this Agreement, with the Federal Trade Commission and the
United States Department of Justice, all reports and other documents required
to be filed by such party under the HSR Act concerning the transactions
contemplated hereby and (b) promptly comply with or cause to be complied with
any requests by the Federal Trade Commission or the United States Department
of Justice for additional information concerning the transactions
contemplated by this Agreement, in each case so that the waiting period
applicable to this Agreement and the transaction contemplated hereby under
the HSR Act shall expire as soon as practicable after the execution and
delivery of this Agreement. Each party hereto agrees to request, and to
cooperate with the other party or parties in requesting, early termination of
any applicable waiting period under the HSR Act. If after the Initial
Closing or Option Closing and until the date on which the Shares are fully
converted in accordance with their terms, further filings are required under
the HSR Act so that Purchaser may acquire the Underlying Shares or otherwise
acquire securities pursuant to the Transaction Documents, the Company will
upon the written request of Purchaser, and Purchaser will upon the written
request of the Company, (i) file or cause to be filed, as promptly as
practicable after the receipt of such notice and in no event later than
fifteen Business Days after the receipt of such notice with the Federal Trade
Commission and the United States Department of Justice, all reports and other
documents required to be filed by such party under the HSR Act concerning the
transactions contemplated in such notice, (ii) promptly comply with or cause
to be complied with any requests by the Federal Trade Commission or the
United States Department of Justice for additional information so that the
waiting period applicable thereto under the HSR Act shall expire as soon as
practicable, and (iii) cooperate with the other Parties in requesting, early
termination of any applicable waiting period under the HSR Act. The Company
will reimburse Purchaser for any filing fees in connection with such filings
by Purchaser.
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Section 5.5 NOTIFICATION OF CERTAIN MATTERS. The Company shall
give prompt notice to Purchaser, and Purchaser shall give prompt notice to
the Company, of (a) the occurrence, or failure to occur, of any event that
causes any representation or warranty contained in any Transaction Document
to be untrue or inaccurate in any material respect at any time from the date
of this Agreement to the Initial Closing Date and (b) any failure of the
Company or Purchaser to comply with or satisfy, in any material respect, any
covenant, condition or agreement to be complied with or satisfied by it under
any Transaction Document. The provisions of this SECTION 5.5 shall survive
for so long as any representation, warranty, covenant, or agreement shall
survive hereunder.
Section 5.6 BOARD OF DIRECTORS. The Company shall use its best
efforts to take, or cause to be taken, such action as may be necessary or
advisable to ensure that immediately following the later of (i) the Initial
Closing and (ii) the expiration or termination of the applicable waiting
period under the HSR Act, the Board shall be increased by one (if necessary)
and the individual identified by Purchaser to the Company shall be elected as
a director of the Company in accordance with the terms of the Shares.
Section 5.7 REGISTRATION RIGHTS AGREEMENT. At the Closing, the
Company agrees to enter into a Registration Rights Agreement in substantially
the form attached hereto as EXHIBIT 5.7.
Section 5.8 TRANSFER RESTRICTIONS. (a) If Purchaser should decide
to dispose of any of the Shares to be purchased by it or any Underlying
Shares to be issued to it upon the conversion of such Shares, Purchaser
understands and agrees that it may do so only pursuant to an effective
registration statement under the Securities Act or pursuant to an exemption
from registration under the Securities Act. In connection with any offer,
resale, pledge or other transfer (individually and collectively, a
"TRANSFER") of any Shares or Underlying Shares other than pursuant to an
effective registration statement, the Company may require that the transferor
of such Shares or Underlying Shares provide to the Company an opinion of
counsel which opinion shall be reasonably satisfactory in form and substance
to the Company, to the effect that such Transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and any applicable state or foreign
securities Laws. Purchaser agrees to the imprinting, so long as appropriate,
of substantially the following legend on certificates representing the Shares
and any Underlying Shares:
THE SECURITIES (THE "SECURITIES") EVIDENCED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF,
THE HOLDER AGREES THAT IT WILL NOT OFFER, RESELL, PLEDGE OR OTHERWISE
TRANSFER (INDIVIDUALLY AND COLLECTIVELY, A "TRANSFER") THE SECURITIES
EVIDENCED HEREBY, EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, OR (B) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT. IF THE PROPOSED TRANSFER
IS TO BE MADE OTHER THAN PURSUANT TO CLAUSE (A) ABOVE, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY AND THE TRANSFER
AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR ANY STATE OR
FOREIGN SECURITIES LAW.
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The legend set forth above may be removed if and when the Shares or
Underlying Shares, as the case may be, represented by such certificate are
disposed of pursuant to an effective registration statement under the
Securities Act or the opinion of counsel referred to above has been provided
to the Company. The Share certificates shall also bear any additional
legends required by applicable federal, state or foreign securities Laws,
which legends may be removed when, in the opinion of counsel to the Company,
the same are no longer required under the applicable requirements of such
securities Laws. Purchaser agrees that, in connection with any Transfer of
Shares by it pursuant to an effective registration statement under the
Securities Act, it will comply with all prospectus delivery requirements of
the Securities Act. The Company makes no representation, warranty or
agreement as to the availability of any exemption from registration under the
Securities Act with respect to any resale of Shares or Underlying Shares.
(b) Purchaser agrees that, without the prior written consent of
the Company, it will not sell or otherwise transfer any Shares to any other
person or entity other than a partner of Purchaser, who, in any event, shall
agree to be bound by this SECTION 5.8(b), it being understood that the
foregoing provision shall not apply to Underlying Shares. Purchaser agrees
to the imprinting of the following legend on certificates representing the
Shares to indicate the foregoing restriction:
THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER SET FORTH IN THE PURCHASE AGREEMENT DATED AS
OF [DATE] AMONG THE COMPANY AND SCF-IV, L.P., A COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICES OF THE COMPANY.
(c) Purchaser agrees that, without the prior written consent of
the Company, it will not, prior to the earlier of (i) the seventh anniversary
of the Initial Closing, or (ii) the occurrence of a Change of Control, sell
or otherwise transfer any Underlying Shares in a single transaction or series
of related transactions involving a number of shares in the aggregate
constituting in excess of 1% of the Company's issued and outstanding shares
of Common Stock at the time of such sale or transfer (based on the Company's
most recent Exchange Act report filed with the SEC prior to such sale or
transfer disclosing such number of outstanding shares) to any entity which
Purchaser knows competes to a material extent with the Company or is engaged
to a material extent in the energy services or equipment business (an
"Industry Party"), without first offering such shares to the Company on the
same terms; PROVIDED that if the Purchaser is selling such shares pursuant to
an underwritten offering, such sale shall be deemed to comply with the
foregoing limitation so long as the managing underwriter advises the
Purchaser and the Company that, based on a reasonable inquiry of all persons
to whom shares are being sold in an amount exceeding the 1% limitation
described above (other than financial or insurance institutions, pension
plans or funds or registered investment companies), no such proposed
purchaser is an Industry Party. If, upon receiving an offer pursuant to the
foregoing sentence, the Company does not notify Purchaser that it wishes to
purchase the offered shares within 20 Business Days of receiving such offer,
Purchaser may sell such shares on the terms set forth in the offer within six
months thereof, provided that the purchaser thereof agrees to a standstill
agreement substantially similar to that set forth in SECTION 5.12 with an 18
month term from the date of such purchaser's acquisition. If the Company
does notify Purchaser that it intends to purchase the offered shares, it
shall deliver payment for such shares (against delivery of the certificates
therefor) within five Business Days of giving such notice.
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Section 5.9 STOCK EXCHANGE LISTING. Prior to the time the Shares
become convertible in accordance with their terms, the Company shall, at its
expense, procure the listing of the Underlying Shares on all stock exchanges
on which the Common Stock is then listed.
Section 5.10 ACCESS; CONFIDENTIALITY.
(a) At all times during normal business hours from and after the
date hereof until all of the outstanding Shares have been converted in
accordance with their terms, the Company shall afford Purchaser and its
counsel and other authorized representatives reasonable access to the
properties, employees and officers of the Company and to all books, accounts,
tax returns, financial and other records, including audit work papers,
correspondence and contracts of every kind of the Company as Purchaser may
reasonably request.
(b) Purchaser shall, and shall cause its representatives to, hold
confidential all information relating to the Company or its Subsidiaries it
has received prior to the Initial Closing from the Company or any of its
representatives, or information, if any, it receives after the Initial
Closing from the Company or any of its representatives as a result of or in
connection with SECTION 5.10(a) hereof or Purchaser's ownership of the
Shares; PROVIDED, HOWEVER, that the foregoing shall not apply to (i)
information that is or becomes generally available to the public other than
as a result of a disclosure by Purchaser or any of its Affiliates or
representatives in violation of this SECTION 5.10(b), (ii) information that
is or becomes available to Purchaser or any of its representatives on a
nonconfidential basis from a source other than the Company or its Affiliates
or representatives, provided that such source is not known by Purchaser to be
bound by a confidentiality agreement with or other obligation of secrecy to
the Company or any other party, or (iii) information that is required to be
disclosed by Purchaser or any of its representatives as a result of any
applicable Law; PROVIDED FURTHER, however, that in the event information is
required to be disclosed pursuant to clause (iii), the Person proposing such
disclosure shall provide the Company to the extent practicable an
opportunity, reasonably in advance of any such disclosure, to review and
comment on the form and content of such proposed disclosure. The provisions
of this SECTION 5.10(b) shall terminate on the first anniversary of the date
that all of the outstanding Shares have been converted in accordance with
their terms.
Section 5.11 ISSUANCE OF ADDITIONAL PREFERRED STOCK.
(a) The Company agrees that, from and after the date of this
Agreement, it will not issue any Permitted Parity Securities (as defined in
the Certificate of Designation for the Series B Preferred Stock), except for
(i) the issuance of the Option Shares to Purchaser or its Affiliate pursuant
to this Agreement, or (ii) the issuance of a number of shares of Permitted
Parity Securities issued at a price of $1,000 cash per share in a single
series within eighteen months of the Initial Closing equal to 35,000 less the
number of Option Shares purchased hereunder (or, if the option period
referred to in SECTION 2.2(a) shall not yet have expired, less the full
15,000 Option Shares); PROVIDED that if such Permitted Parity Securities are
issued after the first anniversary of the Initial Closing, then Purchaser
shall be entitled to prior written notice of such proposed issuance and the
terms thereof and shall have a right of first refusal option to purchase any
or all of such securities on the same terms as offered to the proposed
purchaser, which option may be exercised by Purchaser by notice to the
Company at any time during the 20 Business Days following the receipt of the
Company's notice. If Purchaser elects to exercise such option, the closing
for such purchase shall be at a time to be mutually agreed
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between the Company and Purchaser but not later than the 15th day following
the receipt of any required regulatory approvals. If Purchaser does not
elect to exercise such option within the 20 Business Day period (or the
closing of the exercise of such option does not occur within the period
described in the previous sentence for any reason not caused by the Company),
the Company may sell such securities on the terms set forth in its notice,
but only until the expiration of the eighteen month period specified in
clause (ii) above.
(b) The Company agrees that if it issues any Permitted Parity
Securities (other than Option Shares) pursuant to the foregoing that have
terms that the Purchaser reasonably believes to be more favorable to the
purchaser thereof than the terms of the Initial Shares, then the Purchaser
shall have the right to exchange all of the Shares purchased hereunder (or,
if such issuance occurs prior to the expiration of the option period
specified in SECTION 2.2(a) and the Option Closing has not occurred, all of
the Shares that may be purchased hereunder if Purchaser agrees to pay the
applicable purchase price therefor upon such exchange) on a share for share
basis.
Section 5.12 STANDSTILL AGREEMENT. Purchaser hereby agrees that,
for a period commencing on the date hereof and ending on the earlier of the
third anniversary of the Initial Closing or the occurrence of a Change of
Control, it will not:
(a) directly or indirectly, take any action to acquire, in the
aggregate, beneficial ownership of more than 4% of the Company's outstanding
Common Stock or Voting Stock (based on the Company's most recent Exchange Act
report filed with the SEC prior to such acquisition disclosing such number of
outstanding shares), excluding from such ownership the Shares or the
Underlying Shares or any other Common Stock or Voting Stock acquired directly
from the Company;
(b) form or encourage the formation of a "group" within the
meaning of Section 13(d)(3) of the Exchange Act to acquire, change or
influence control of the Company;
(c) solicit, or participate in any "solicitation" of "proxies" or
become a "participant" in any "election contest" or consent solicitation (as
such terms are defined or used under Regulation 14A under the Exchange Act)
with respect to the Company in opposition to the recommendation of a majority
of the Board;
(d) initiate, propose or otherwise solicit stockholders for the
approval of, one or more stockholder proposals with respect to the Company or
induce any Person to initiate any stockholder proposal, in each case in
opposition to the recommendation of a majority of the Board;
(e) deposit any Voting Stock in a voting trust or subject them to
a voting agreement or other agreement or arrangement with respect to the
voting of such Voting Stock, other than any such trust, agreement or other
arrangement involving no Persons other than the Purchaser, its partners or
Affiliates of Purchaser; or
(f) solicit, propose or negotiate with any other Person (including
the Company) with respect to any form of Business Combination or other
extraordinary transaction with the Company or any of its Subsidiaries, in
each case which would result in a Change of Control, or solicit, make or
propose or negotiate with any other Person with respect to or announce an
intent to make, any
-25-
tender offer or exchange offer for any securities of the Company, in each
case in opposition to the recommendation of a majority of the Board, or
publicly disclose an intent, purpose, plan or proposal with respect to the
Company, any of its Subsidiaries, or any securities or assets of the Company,
that would violate the provisions of this SECTION 5.12(f);
PROVIDED, however, that nothing in this SECTION 5.12 shall be deemed to limit
in any way (i) the right of Purchaser to exercise its voting rights in any
manner it sees fit with respect to the Shares, the Underlying Shares or any
other shares of Voting Stock acquired by Purchaser in accordance with this
Agreement, or (ii) the right of any director elected to the Board as a
representative of the holders of the Shares to take any action he believes
necessary to fulfill his fiduciary duties.
Section 5.13 INDEMNIFICATION.
(a) The Company agrees to indemnify the Purchaser and its
Affiliates and hold the Purchaser and its Affiliates harmless from and
against any and all liabilities, losses, damages, costs and expenses of any
kind (including, without limitation, the reasonable fees and disbursements of
Purchaser's counsel in connection with any investigative, administrative or
judicial proceeding), which may be incurred by Purchaser or such Affiliates
as a result of any claims made against Purchaser or such Affiliates by any
Person that relate to or arise out of (i) any breach by the Company of any of
its representations, warranties or covenants contained in this Agreement or
in the Transaction Documents, or (ii) any litigation, investigation or
proceeding instituted by any Person with respect to this Agreement or the
Shares or Underlying Shares (excluding, however, any such litigation,
investigation or proceeding which arises solely from the acts or omissions of
Purchaser or its Affiliates). Notwithstanding anything to the contrary
above, it is expressly understood between the parties hereto that the Company
pursuant to this SECTION 5.13 shall not be responsible for or assume any of
the investment risk associated with any securities purchased hereunder.
(b) Any Person entitled to indemnification hereunder will (i)
give prompt notice to the Company of any claim with respect to which it seeks
indemnification (but omission of such notice shall not relieve the Company
from liability hereunder except to the extent it is actually prejudiced by
such failure to give notice) and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest may exist between such indemnified
party and the Company with respect to such claim, permit the Company to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is not assumed by the Company, the
Company will not be subject to any liability for any settlement made without
its consent (but such consent will not be unreasonably withheld). The
Company will not consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of an unconditional
release from all liability in respect to such claim or litigation. If the
Company elects not to or is not entitled to assume the defense of a claim, it
will not be obligated to pay the fees and expenses of more than one counsel
for all parties indemnified with respect to such claim, unless an actual
conflict of interest exists between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the
Company will be obligated to pay the fees and expenses of such additional
counsel or counsels.
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Section 5.14 RIGHTS PLAN. The Company will not further amend the
Rights Plan, or adopt any similar rights plan or rights agreement, in a
manner that conflicts with, or restricts the Purchaser to a greater extent
than, the provisions hereof, including the representation set forth in
SECTION 3.18.
ARTICLE VI.
CONDITIONS PRECEDENT TO THE CLOSINGS
Section 6.1 CONDITIONS PRECEDENT TO EACH PARTY'S OBLIGATION. The
respective obligations of Purchaser and the Company to effect the
transactions contemplated hereby at each Closing are subject to the
satisfaction on or prior to the applicable Closing Date of the following
conditions:
(a) APPROVALS. All Approvals of, or expirations of waiting
periods imposed by, any Governmental Entity necessary for the consummation of
the transactions contemplated by this Agreement at such Closing shall have
been filed, occurred, or been obtained, as applicable.
(b) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction, or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated hereby shall be in effect.
(c) NO ACTION. No action shall have been taken nor any statute,
rule, or regulation shall have been enacted by any Governmental Entity that
makes the consummation of the transactions contemplated hereby illegal.
Section 6.2 CONDITIONS PRECEDENT TO OBLIGATION OF PURCHASER. The
obligation of Purchaser to effect the transactions contemplated by this
Agreement at each Closing is subject to the satisfaction of the following
conditions unless waived, in whole or in part, by Purchaser:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company set forth in this Agreement that are qualified by a
materiality standard or a Material Adverse Effect qualification shall be true
and correct in all respects and the representations and warranties of the
Company set forth in this Agreement that are not so qualified shall be true
and correct in all material respects, in each case as of the date of this
Agreement and as of the applicable Closing Date as though made on and as of
the applicable Closing Date, and Purchaser shall have received a certificate
to the foregoing effect signed on behalf of the Company and its Subsidiaries
by the chief executive officer or by the chief financial officer of the
Company.
(b) PERFORMANCE OF OBLIGATIONS. The Company and its Subsidiaries
shall have performed in all material respects all obligations required to be
performed by it or them under this Agreement prior to the applicable Closing
Date, and Purchaser shall have received a certificate to such effect signed
on behalf of the Company and its Subsidiaries by the chief executive officer
or by the chief financial officer of the Company.
(c) NO ADVERSE ACTION OR DECISION. There shall be no action,
suit, investigation or proceeding, pending or threatened, against or
affecting the Company or any of its Subsidiaries or any of their respective
properties or rights, or any of their Affiliates, officers or directors,
before any
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court, arbitrator or administrative or governmental body which (i) seeks to
restrain, enjoin or prevent the consummation of or otherwise affect the
transactions contemplated by this Agreement or the other Transaction
Documents or (ii) questions the validity or legality of any such transaction
or seeks to recover damages or to obtain other relief in connection with any
such transaction.
(d) CONSENTS UNDER AGREEMENTS. Purchaser shall have been
furnished with evidence of all consents or approvals required to be obtained
by the Company or any of its Subsidiaries with respect to the consummation of
each of the transactions contemplated by this Agreement the failure of which
to obtain reasonably could be expected to result in a Material Adverse
Effect, and each such consent or approval shall be unconditional.
(e) LEGAL OPINIONS. At the Initial Closing, Purchaser shall have
received from ▇▇▇▇▇▇ and ▇▇▇▇▇, LLP an opinion dated the Initial Closing
Date, in the form of EXHIBIT 6.2(e)(i) and, at the Option Closing, Purchaser
shall have received from ▇▇▇▇▇▇ and ▇▇▇▇▇, LLP, an opinion dated the Option
Closing Date, in the form of EXHIBIT 6.2(e)(ii).
(f) HSR FILINGS. The Company shall have filed all reports
required to be filed by the Company under the HSR Act concerning the
transactions contemplated hereby.
(g) CLOSING DELIVERIES. All documents, instruments, certificates
or other items required to be delivered by the Company pursuant to SECTION
7.2(b), in the case of the Initial Closing, or SECTION 7.3(b), in the case of
the Option Closing, shall have been delivered.
(h) CERTIFICATE OF DESIGNATION. The Certificate of Designation
relating to the Series B Preferred Stock, in the case of the Initial Closing,
and the Series C Preferred Stock, in the case of the Option Closing, shall
have been filed with the Delaware Secretary of State.
Section 6.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF COMPANY. The
obligation of the Company to effect the transactions contemplated by this
Agreement at each Closing is subject to the satisfaction of the following
conditions unless waived, in whole or in part, by the Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and as of the
applicable Closing Date as though made on and as of the applicable Closing
Date, and the Company shall have received a certificate to the foregoing
effect signed on behalf of Purchaser by its general partner.
(b) PERFORMANCE OF OBLIGATIONS OF PURCHASER. Purchaser shall have
performed in all material respects the obligations required to be performed
by it under this Agreement prior to the applicable Closing Date, and the
Company shall have received a certificate to such effect signed on behalf of
Purchaser by its general partner.
(c) CLOSING DELIVERIES. All documents, instruments, certificates or
other items required to be delivered by Purchaser pursuant to SECTION 7.2(a), in
the case of the Initial Closing, or SECTION 7.3(a), in the case of the Option
Closing, shall have been delivered.
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(d) HSR FILINGS. The Purchaser shall have filed all reports required
to be filed by the Purchaser under the HSR Act concerning the transactions
contemplated hereby.
ARTICLE VII.
THE CLOSINGS
Section 7.1 THE CLOSINGS.
(a) Subject to the satisfaction or waiver of the conditions set
forth in Article VI, the purchase and sale of the Initial Shares to be
purchased by Purchaser hereunder (the "INITIAL CLOSING") will take place at
the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇, at
10:00 a.m., local time, on the later of the May 7, 1999 or the third Business
Day following the satisfaction or waiver (subject to applicable Law) of each
of the conditions to the obligations of the parties to effect the
transactions to occur at the Initial Closing as set forth in Article VI, or
on such other date as mutually agreed to by the parties hereto. The date on
which the Initial Closing occurs is herein referred to as the "INITIAL
CLOSING DATE." All closing transactions at the Initial Closing shall be
deemed to have occurred simultaneously.
(b) Subject to the satisfaction or waiver of the conditions set
forth in Article VI, the purchase and sale of the Option Shares to be
purchased by Purchaser hereunder (the "OPTION CLOSING") will take place at
the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇, at
10:00 a.m., local time, on the Business Day specified in the Exercise Notice,
or on such other date as mutually agreed to by the parties hereto. The date
on which the Option Closing occurs is herein referred to as the "OPTION
CLOSING DATE". All closing transactions at the Option Closing shall be deemed
to have occurred simultaneously. The Initial Closing and the Option Closing
are sometimes referred to herein as the "CLOSINGS" or individually as a
"CLOSING" and the Initial Closing Date and the Option Closing Date are
sometimes referred to herein as the "CLOSING DATES" or individually as a
"CLOSING DATE".
Section 7.2 ACTIONS TO OCCUR AT THE INITIAL CLOSING.
(a) At the Initial Closing, Purchaser shall deliver to the Company
the following:
(i) PURCHASE PRICE. An amount equal to the Initial Purchase
Price for the Initial Shares in accordance with Article II.
(ii) CERTIFICATES. The certificates described in SECTIONS
6.3(a) and 6.3(b).
(iii) REGISTRATION RIGHTS AGREEMENT. The Registration Rights
Agreement, duly executed by Purchaser.
(b) At the Initial Closing, the Company shall deliver to Purchaser
the following:
(i) SHARE CERTIFICATES. Certificates representing the
Initial Shares.
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(ii) REGISTRATION RIGHTS AGREEMENT. The Registration Rights
Agreement, duly executed.
(iii) CERTIFICATES. The certificates described in SECTIONS
6.2(a) and 6.2(b).
(iv) CONSENTS UNDER AGREEMENTS. The original of each consent
or approval, if any, pursuant to SECTION 6.2(d).
(v) LEGAL OPINIONS. The opinion of counsel referred to in
SECTION 6.2(e).
Section 7.3 ACTIONS TO OCCUR AT THE OPTION CLOSING.
(a) At the Option Closing, Purchaser shall deliver to the Company
the following:
(i) PURCHASE PRICE. An amount equal to the Option Purchase
Price for the Option Shares being purchased in accordance with
Article II.
(ii) CERTIFICATES. The certificates described in SECTIONS
6.3(a) and 6.3(b).
(b) At the Option Closing, the Company shall deliver to Purchaser
the following:
(i) SHARE CERTIFICATES. Certificates representing the Option
Shares being purchased.
(ii) CERTIFICATES. The certificates described in SECTIONS
6.2(a) and 6.2(b).
(iii) LEGAL OPINIONS. The opinion of counsel referred to in
SECTION 6.2(e).
ARTICLE VIII.
TERMINATION
Section 8.1 TERMINATION. This Agreement may be terminated prior to
the Initial Closing:
(a) by mutual consent of Purchaser and the Company;
(b) by either Purchaser or the Company:
(i) in the event of a breach by the other party of any
representation, warranty, covenant or agreement contained in this
Agreement which (A) would give rise to the failure of a condition set
forth in SECTION 6.2 or 6.3, and (B) cannot be cured or, if curable, has
not been cured within 20 days following receipt by the breaching party
of written notice of such breach;
(ii) if a court of competent jurisdiction or other
Governmental Entity shall have issued an order, decree, or ruling
or taken any other action (which order, decree, or ruling
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Purchaser and the Company shall use all commercially reasonable efforts
to lift), in each case permanently restraining, enjoining, or otherwise
prohibiting the transactions contemplated by this Agreement, and such
order, decree, ruling, or other action shall have become final and
nonappealable; rovided, however, that the right to terminate this
Agreement under this clause (ii) shall not be available to any party
whose breach of this Agreement has been the cause of, or resulted in,
such order, decree, ruling or other action; or
(iii) if the Initial Closing shall not have occurred by May 14,
1999, provided, however, that the right to terminate this Agreement
under this clause (iii) shall not be available to any party whose breach
of this Agreement has been the cause of, or resulted in, the failure of
the Initial Closing to occur on or before such date.
The right of any party hereto to terminate this Agreement pursuant to
this SECTION 8.1 shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto, any
person controlling any such party or any of their respective officers,
directors, employees, accountants, consultants, legal counsel, agents, or
other representatives whether prior to or after the execution of this
Agreement.
Section 8.2 EFFECT OF TERMINATION. In the event of the termination
of this Agreement, written notice thereof shall forthwith be given to the
other party specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall forthwith become null and void,
except for liability of a party arising out of a willful breach of, or
misrepresentation under, this Agreement prior to such termination (but in no
event shall any party hereto be entitled to recover punitive, consequential,
special or exemplary damages).
ARTICLE IX.
RECOVERY OF FEES
Any party who shall obtain a final judgment in a court of competent
jurisdiction for the payment of damages by another party for a breach of this
Agreement or any other Transaction Document shall be entitled to recover
reasonable attorneys' fees and court costs incurred in connection with the
obtaining of such judgment.
ARTICLE X.
MISCELLANEOUS
Section 10.1 SURVIVAL OF PROVISIONS.
(a) The representations and warranties of the Company and
Purchaser made herein or in any other Transaction Document and the covenants
of the Company and Purchaser to be complied with on or prior to the Closings
shall remain operative and in full force and effect pursuant to their terms,
regardless of (x) any investigation made by or on behalf of Purchaser or the
Company, as the case may be, or (y) acceptance of any of the Shares and
payment by Purchaser therefor, until the date which is 18 months following
the Initial Closing; provided that the representations and warranties
contained in SECTIONS 3.1, 3.3, 3.4, 3.12 AND 3.18 shall survive until the
sixth anniversary of the Initial Closing; and provided, further, that such
representations and warranties shall survive as to any claim
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or demand made prior to their termination date until such claim or demand is
fully paid or otherwise resolved by the parties hereto in writing or
otherwise.
(b) The covenants and agreements of the Company and Purchaser
contained in this Agreement that, by their terms, are to be performed or
complied with after either Closing Date will survive until the period
specified herein with respect to such covenant or agreement; and PROVIDED,
FURTHER, that such covenants and agreements shall survive as to any claim or
demand made prior to their termination date until such claim or demand is
fully paid or otherwise resolved by the parties hereto in writing or
otherwise.
Section 10.2 NO WAIVER; MODIFICATION IN WRITING. No failure or
delay on the part of the Company or Purchaser in exercising any right, power
or remedy hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The provisions of this Agreement, including the provisions of this sentence,
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given without the written
consent of the Company and Purchaser. Any amendment, supplement or
modification of or to any provision of this Agreement, or any waiver of any
provision of this Agreement, shall be effective only in the specific instance
and for the specific purpose for which made or given. Except where notice is
specifically required by this Agreement, no notice to or demand on any party
hereto in any case shall entitle the other party to any other or further
notice or demand in similar or other circumstances.
Section 10.3 SPECIFIC PERFORMANCE. The parties recognize that in
the event the Company or Purchaser should refuse to perform under the
provisions of this Agreement or any other Transaction Document, monetary
damages alone will not be adequate. Purchaser or the Company, as the case
may be, shall therefore be entitled, in addition to any other remedies which
may be available, including money damages, to obtain specific performance of
the terms of this Agreement. In the event of any action to enforce this
Agreement or any other Transaction Document specifically, the Company and
Purchaser hereby waive the defense that there is an adequate remedy at law.
Section 10.4 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal, or incapable of being enforced by any rule of
applicable law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated herein are not
affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal, or
incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties
as closely as possible in a mutually acceptable manner in order that the
transactions contemplated herein are consummated as originally contemplated
to the fullest extent possible.
Section 10.5 FEES AND EXPENSES. Within 30 days after the Initial
Closing, the Company shall pay to Purchaser an amount equal to Purchaser's
Expenses through the Initial Closing Date (the amount of such costs and
expenses shall have been furnished to the Company at least within 25 days
after the Initial Closing Date), and within 30 days after the Option Closing,
the Company shall pay to Purchaser an amount equal to Purchaser's Expenses
through the Option Closing Date that have
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not been reimbursed pursuant to the preceding sentence (the amount of such
costs and expenses shall have been furnished to the Company at least within
25 days after the Option Closing Date); PROVIDED, HOWEVER, that all such
Purchaser's Expenses to be paid by the Company pursuant to the foregoing
(other than fees payable in connection with filings under the HSR Act
pursuant to SECTION 5.4) shall not in the aggregate exceed $150,000.
Section 10.6 PARTIES IN INTEREST. This Agreement shall be binding
upon and, except as provided below, inure solely to the benefit of each party
hereto and their successors and assigns, and nothing in this Agreement,
express or implied, is intended to confer upon any other Person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 10.7 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally or by facsimile or mailed by registered or certified mail (return
receipt requested) or Federal Express or another recognized overnight courier
to the parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(a) If to Purchaser, to:
SCF-IV, L.P.
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Company, to:
Input/Output, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chairman
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any of the above addresses may be changed at any time by notice given
as provided above; provided, however, that any such notice of change of
address shall be effective only upon receipt. All notices, requests or
instructions given in accordance herewith shall be deemed received on the
date of delivery, if hand delivered, on the date of receipt, if telecopied,
three Business Days after the date of mailing, if mailed by registered or
certified mail, return receipt requested, and one Business Day after the date
of sending, if sent by Federal Express or other recognized overnight courier.
Section 10.8 COUNTERPARTS. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
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Section 10.9 ENTIRE AGREEMENT; TERMINATION OF CONFIDENTIALITY
AGREEMENT. This Agreement (which term shall be deemed to include the
Exhibits and Schedules hereto and the other certificates, documents and
instruments delivered hereunder) and the other Transaction Documents
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof and supersede all prior agreements, letters
of intent and understandings, both written and oral, among the parties with
respect to the subject matter hereof and thereof. There are no
representations or warranties, agreements, or covenants of the parties with
respect to the subject matter hereof and thereof other than those expressly
set forth in this Agreement and the other Transaction Documents. The parties
hereby agree that the terms of this Agreement supersede and terminate the
provisions of the Confidentiality and Standstill Agreement dated as of
February 24, 1999 between the Company and SCF Partners, provided that if this
Agreement is terminated prior to the Initial Closing, such agreement shall be
reinstated pursuant to its terms.
Section 10.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING
EFFECT TO ANY CONFLICTS OF LAW PROVISIONS.
Section 10.11 PUBLIC ANNOUNCEMENTS. The Company and Purchaser shall
consult with each other before issuing any press release or otherwise making
any public statements with respect to this Agreement or the transactions
contemplated hereby, except for statements required by Law or by any listing
agreements with or rules of any national securities exchange or made in
disclosures reasonably determined as required to be filed pursuant to the
Securities Act or the Exchange Act.
Section 10.12 ASSIGNMENT. Neither this Agreement nor any of the
rights, interests, or obligations hereunder shall be assigned by any of the
parties hereto, whether by operation of Law or otherwise.
Section 10.13 HEADINGS. The headings of this Agreement are for
convenience of reference only and are not part of the substance of this
Agreement.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer as of the date first
written above.
INPUT/OUTPUT, INC.
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇. ▇. ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
SCF-IV, L.P.
By: SCF-IV, G.P., Limited Partnership,
its General Partner
By: ▇. ▇. ▇▇▇▇▇▇▇ & Associates, Incorporated,
its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Director
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