INPUT/OUTPUT, INC. Employment Inducement Stock Option Agreement
Exhibit 4.1
EXECUTION COPY
INPUT/OUTPUT, INC.
Employment Inducement Stock Option Agreement
THIS EMPLOYMENT INDUCEMENT STOCK OPTION AGREEMENT (the “Agreement”) is made effective as of the 14th day of June, 2004 (the “Date of Grant”) by and between Input/Output, Inc., a Delaware corporation (the “Company”), and Optionee (the “Optionee”).
WHEREAS, the Optionee is an employee of GXT;
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. Except as defined elsewhere herein, the words and phrases defined in this Section 1 shall have the meaning set out in these definitions throughout this Agreement, unless the context in which any such word or phrase appears reasonably requires a broader, narrower, or different meaning.
(a) “Affiliate” means any parent corporation and any subsidiary corporation. The term “parent corporation” means any corporation or other entity (other than the Company) in an unbroken chain of corporations or entities ending with the Company if, at the time of the action or transaction, each of the corporations or entities other than the Company owns stock or voting equity possessing 50 percent (50%) or more of the total combined voting power of all classes of stock or voting equity in one of the other corporations or entities in the chain. The term “subsidiary corporation” means any corporation or other entity (other than the Company) in an unbroken chain of corporations or entities beginning with the Company if, at the time of the action or transaction, each of the corporations or entities other than the last corporation or entity in the unbroken chain owns stock or voting equity possessing 50 percent (50%) or more of the total combined voting power of all classes of stock or voting equity in one of the other corporations or entities in the chain.
(b) “Board” means the board of directors of the Company.
“Change in Control” shall mean the occurrence of any of the following, after the Date of Grant:
(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”)) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of forty percent (40%) or more of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Company Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company or any Subsidiary, (ii) any acquisition by the Company or any Subsidiary or by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, or (iii) any acquisition by any corporation pursuant to a reorganization, merger,
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consolidation or similar business combination involving the Company (a “Merger”), if, following such Merger, the conditions described in clauses (i) and (ii) of Section 5.7(c) below are satisfied;
(ii) Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (a solicitation by any person or group of persons for the purpose of opposing a solicitation of proxies or consents by the Board with respect to the election or removal of Directors at any annual or special meeting of stockholders) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;
(iii) Approval by the stockholders of the Company of a Merger, unless immediately following such Merger, (i) substantially all of the holders of the Outstanding Company Voting Securities immediately prior to such Merger beneficially own, directly or indirectly, more than 50% of the common stock of the corporation resulting from such Merger (or its parent corporation) in substantially the same proportions as their ownership of Outstanding Company Voting Securities immediately prior to such Merger and (ii) at least a majority of the members of the board of directors of the corporation resulting from such Merger (or its parent corporation) were members of the Incumbent Board at the time of the execution of the initial agreement providing for such Merger;
(iv) The sale or other disposition of all or substantially all of the assets of the Company.
(c) “Code” means the U.S. Internal Revenue Code of 1986, as amended.
(d) “Committee” means the Compensation Committee of the Board or such other committee designated by the Board.
(e) “Company” has the meaning set forth in the preamble of this Agreement.
(f) “Disability” means a mental or physical disability as determined under the then-established policies of the Company.
(g) “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended from time to time.
(h) “Expiration Date” has the meaning set forth in Section 3 hereof.
(i) “Fair Market Value” of a share of common Stock is the closing sales price per share on the New York Stock Exchange, or such reporting service as the Committee may select, on the date of grant, or in the absence of reported sales on such day, the most recent previous day for which sales were reported.
(j) “Mature Shares” means shares of Stock that Optionee has held for at least six months.
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(k) “Option” has the meaning set forth in Section 3(a) of this Agreement.
(l) “Optionee” has the meaning set forth in the preamble of this Agreement.
(m) “Retire” or “Retirement” means retirement in good standing from the employ of the Company and all of its Affiliates for reason of age under then-established policies of the Company and its Affiliates.
(n) “Stock” means the common stock of the Company, $0.01 par value or, in the event that the outstanding shares of common stock are later changed into or exchanged for a different class of stock or securities of the Company or another corporation, that other stock or security.
(a) Subject to the terms and conditions of this Agreement, on this day, the Date of Grant, the Company hereby grants to the Optionee an option (the “Option”) to purchase Number of Shares Options shares of the Stock of the Company, at an exercise of $7.09 per share, subject to any adjustments provided for in this Agreement. The Option shall vest and be exercisable according to the following schedule, but subject to Sections 3, 4 and 5 below:
(i) On June 14, 2005, the Option shall vest and then be exercisable with respect to 25% of the total number of shares subject to the Option;
(ii) On June 14, 2006, the Option shall vest and then be exercisable with respect to an additional 25% of the total number of shares subject to the Option;
(iii) On June 14, 2007, the Option shall vest and then be exercisable with respect to an additional 25% of the total number of shares subject to the Option;
(iv) On June 14, 2008, the Option shall vest and then be exercisable with respect to the remaining 25% of the total number of shares subject to the Option.
To the extent not previously exercised, installments of vested Options shall be cumulative and may be exercised in whole or in part.
Notwithstanding the foregoing, in the event of the termination of the Optionee’s employment with GXT, the Company and any of the other Affiliates for any reason prior to the Expiration Date, the Option shall not continue to vest after such termination of employment and any unvested Options shall be forfeited effective as of such date of termination.
(b) In addition, notwithstanding any provision contained in this Agreement to the contrary, in the event of a Change in Control, this Option shall thereupon be fully vested and shall be immediately exercisable in full.
3. Expiration. The Option evidenced by this Agreement, to the extent such rights with respect thereto shall not previously have been exercised or sooner terminated, shall expire and be rendered null and void at 5:00 p.m., Houston, Texas time, on June 14, 2014 (the “Expiration Date”).
4. Termination.
(a) Death, Disability and Retirement. Upon the death or Disability of the Optionee while in the employ of GXT, the Company or any Affiliate, or upon his Retirement, the Optionee, or, if
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applicable, his executors, administrators or any person or persons to whom his Option may be transferred by will or by the laws of descent and distribution, shall have the right for one year following the date of such death, Disability, or Retirement of the Optionee, but in any event, not later than the Expiration Date, to exercise the Option to the extent it was vested at the date of such death, Disability, or Retirement.
(b) Severance of Employment. Unless expressly provided otherwise in this Agreement, Options shall (a) terminate six months after severance of employment with GXT, the Company and all Affiliates for any reason other than for reasons of death, Retirement, or Disability and (b) be exercisable only to the extent such Options are exercisable at the time of the Optionee’s severance of employment; provided, however, that in no event will the Option be exercisable after the Expiration Date. Whether authorized leave of absence or absence on military or government service shall constitute severance of the employment of the Optionee shall be determined by the Committee at that time.
If the Company shall effect a subdivision or consolidation of shares or other capital readjustment, the payment of a stock dividend, or other increase or reduction of the number of shares of the Stock outstanding, without receiving compensation for it in money, services or property, then the number, class, and per share price of shares of Stock subject to the Option shall be appropriately adjusted in such a manner so as to entitle Optionee to receive upon exercise of the Option, for the same aggregate cash consideration, the equivalent total number and class of shares Optionee would have received had Optionee exercised his Option in full immediately prior to the event requiring the adjustment.
If while the Option remains outstanding and unexercised (i) the Company shall not be the surviving entity in any merger, consolidation or other reorganization (or survives only as a subsidiary of an entity other
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than an entity that was directly or indirectly wholly-owned by the Company immediately prior to such merger, consolidation or other reorganization), (ii) the Company sells, leases or exchanges or agrees to sell, lease or exchange all or substantially all of its assets to any other person or entity (other than an entity that is wholly-owned by the Company), (iii) the Company is to be dissolved, or (iv) the Company is a party to any other corporate transaction (as defined under section 424(a) of the Code and applicable U.S. Treasury Regulations) that is not described in clauses (i), (ii) or (iii) of this sentence (each such event is referred to herein as a “Corporate Change”), then (x) except as otherwise expressly provided in this Agreement or as a result of the effectuation of one or more of the alternatives described below, there shall be no acceleration of the time at which the Option then outstanding may be exercised, and (y) no later than ten (10) days after the approval by the stockholders of the Company of such Corporate Change, the Board or the Committee, acting in their sole and absolute discretion without the consent or approval of Optionee, shall act to effect one or more of the following alternatives:
(i) accelerate the time at which the Option then outstanding may be exercised so that the Option may be exercised in full for a limited period of time on or before a specified date (before or after such Corporate Change) fixed by the Committee or the Board of Directors, after which specified date the Option then remaining unexercised and all rights of Optionee thereunder shall terminate;
(ii) require the mandatory surrender to the Company by Optionee of the Option (regardless of whether the Option is then exercisable under the provisions of this Agreement) as of a date, before or after such Corporate Change, specified by the Committee or the Board of Directors, in which event the Committee or the Board shall thereupon cancel such Option and the Company shall pay to Optionee an amount of cash per share equal to the excess, if any, of the per share price offered to stockholders of the Company in connection with such Corporate Change over the exercise price under this Option for such shares;
(iii) with respect to Optionee, have some or all of this Option (whether vested or unvested) assumed or have a new option substituted for some or all of this Option (whether vested or unvested) by an entity that is a party to the transaction resulting in such Corporate Change and that is then employing him, or a parent or subsidiary of such entity, provided that (A) such assumption or substitution is on a basis in which the excess of the aggregate fair market value of the shares subject to such new option immediately after the assumption or substitution over the aggregate exercise price of such shares hereunder is equal to the excess of the aggregate fair market value of all shares subject to the Option immediately before such assumption or substitution over the aggregate exercise price of such shares, and (B) the assumed rights under the existing Option or the substituted rights under such new option, as the case may be, will have the same terms and conditions as the rights under the existing Option assumed or substituted for, as the case may be;
(iv) provide that the number and class of shares of Stock covered by the Option (whether vested or unvested) theretofore granted shall be adjusted so that the Option when exercised shall thereafter cover the number and class of shares of stock or other securities or property (including, without limitation, cash) to which the Optionee would have been entitled pursuant to the terms of the agreement or plan (or both) relating to such Corporate Change if, immediately prior to such Corporate Change, the Optionee had been the holder of record of the number of shares of Stock then covered by the Option; or
(v) make such adjustments to this Option, if any, as the Committee or the Board deems appropriate to reflect such Corporate Change.
In effecting one or more of alternatives (3), (4) or (5) above, and except as otherwise may be provided
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in this Agreement, the Committee or the Board of Directors, in their sole and absolute discretion and without the consent or approval of the Optionee, may accelerate the time at which some or all Options then outstanding may be exercised.
If changes occur in the outstanding Stock by reason of recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges or other changes in capitalization occurring after the Date of Grant and not otherwise provided for by this Section 6, then the Option and this Agreement shall be subject to adjustment by the Committee or the Board in their sole and absolute discretion as to the number and price of shares of stock or other consideration subject to this Option.
7. Forms of Consideration Authorized.
(a) The exercise of the Option shall be made only by a written notice delivered in person, by telecopy or by mail to the Secretary of the Company at the Company’s principal executive office, specifying the number of shares of Stock to be purchased and accompanied by payment therefor. The exercise price for any shares of Stock to be purchased pursuant to the exercise of the Option shall be paid in full upon such exercise by any one or a combination of the following: (i) by payment in cash (in U.S. Dollars), certified check, bank draft or postal or express money order payable to the order of the Company for an amount equal to the exercise price under the Option, (ii) by tender to the Company of Mature Shares having a Fair Market Value on the date of exercise equal to the exercise price under the Option, (iii) by delivery of a properly executed notice of exercise together with irrevocable instructions to a broker or dealer providing for the assignment to the Company of the proceeds of a sale or loan arranged by the Optionee with respect to some or all of the shares being acquired upon the exercise of the Option (a “Cashless Exercise”), or (iv) by such other terms and conditions as may be approved by the Committee to the extent permitted by applicable law.
(b) Limitations on Forms of Consideration.
Whenever this Option is exercised by exchanging Mature Shares owned by the Optionee, the Optionee shall deliver to the Company certificates registered in the name of the Optionee representing a number of shares of Stock legally and beneficially owned by the Optionee, free of all liens, claims and encumbrances of every kind, accompanied by stock powers duly endorsed in blank by the record holder of the shares represented by the certificates (with signature guaranteed by a commercial bank or trust company or by a brokerage firm having a membership on a registered national stock
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exchange). The delivery of certificates upon the exercise of Options is subject to the condition that the person exercising the Option provide the Company with the information the Company might reasonably request pertaining to exercise, sale or other disposition. If requested by the Secretary of the Company, the Optionee shall deliver this Agreement to the Secretary of the Company who shall endorse thereon a notation of such exercise and return such Agreement to the Optionee.
(a) GXT, the Company or any Affiliate shall be entitled to deduct from other compensation payable to Optionee any sums required by any applicable law to be withheld with respect to the grant or exercise of the Option. In the alternative, GXT or the Company may require the Optionee (or other person exercising the Option) to pay the sum directly to the employer. If the Optionee is required to pay the sum directly, payment in cash or by check of such sums for taxes shall be delivered within ten days after the date of grant or exercise, as the case may be. In satisfaction of the payment of such sum to the Company or Affiliate, the Optionee may make a written election, which may be accepted or rejected in the discretion of the Chief Financial Officer of the Company, to have withheld a portion of the shares of Stock issuable to him or her upon exercise of the Option having an aggregate Fair Market Value, on the date of exercise, equal to or less than the amount required to be withheld, provided that the Fair Market Value of the shares held back shall not exceed the Company’s or Affiliate’s minimum statutory withholding tax obligations.
(b) The Company and its Affiliates shall have no obligation upon exercise of the Option to issue any shares of Stock until the Company has received payment sufficient to cover all sums due with respect to that exercise. The Company and its Affiliates shall not be obligated to advise Optionee of the existence of the tax or the amount which the employer will be required to withhold.
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The shares of stock represented by this certificate have not been registered under the Securities Act of 1933 or under the securities laws of any State and may not be sold or transferred except upon such registration or upon receipt by the Corporation of an opinion of counsel satisfactory to the Corporation, in form and substance satisfactory to the Corporation, that registration is not required for such sale or transfer.
16. Governing Law. The validity, construction and performance of this agreement shall be governed by the laws of the State of Texas. Any invalidity of any provision of this Agreement shall not affect the validity of any other provision.
Signatures on Following Page
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered to be effective as of the Date of Grant.
INPUT/OUTPUT, INC. | ||
Xxxxx Xxxxxx Vice President — General Counsel |
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OPTIONEE | ||
Optionee |
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