EXHIBIT B
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAW. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AND IN
ACCORDANCE WITH (I) THE EXPRESS TERMS HEREOF AND (II) THAT CERTAIN EXCHANGE
AGREEMENT (AS DEFINED BELOW), AND THEN ONLY PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR LAWS.
INPUT/OUTPUT, INC.
COMMON STOCK PURCHASE WARRANT
This Common Stock Purchase Warrant (this "Warrant") is issued as of the
6th day of August, 2002, by Input/Output, Inc., a Delaware corporation (the
"Company"), to SCF-IV, L.P., a Delaware limited partnership (the "Holder").
WHEREAS, the Company and the Holder are parties to that certain
Exchange Agreement dated as of the date hereof (the "Exchange Agreement"); and
WHEREAS, the Company and the Holder have agreed under the Exchange
Agreement that the Company will issue this Warrant under the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Holder agree
as follows.
Part 1. Issuance and Sale of Warrant.
Subject to the terms and conditions hereof, the Company hereby grants
to the Holder the right to purchase from the Company in the manner prescribed
herein an aggregate of 2,673,517 shares of the Company's common stock, par value
$0.01 per share (the "Common Stock"), at an exercise price of $8.00 per share.
The amount and kind of securities purchasable pursuant to the rights granted
hereunder and the exercise price for such securities are subject to adjustment
pursuant to the provisions contained in this Warrant.
Part 2. Exercise of Warrant; Termination.
2A. Exercise Period. The Holder may exercise, in whole or in
part (but not as to a fractional share of Common Stock), the
purchase rights represented by this Warrant at any time and
from time to time during the term commencing on the date
hereof and ending at 5:00 p.m., Houston, Texas time, on August
5, 2005 (the "Exercise Termination Date"), after which time
and date this Warrant shall terminate and no longer be
exercisable.
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2B. Exercise Procedure.
(i) This Warrant will be deemed to have been exercised
immediately prior to the close of business on the
First Business Day on which the Company has received
all of the following items (the "Exercise Time"):
(a) a completed Exercise Agreement, as described
in paragraph 2C below, executed by the
Holder, exercising all or part of the
purchase rights represented by this Warrant
pursuant to paragraph 2A above;
(b) this Warrant; and
(c) any of the following forms of payment that
in the aggregate will be equal to the
Exercise Price (as such term is defined in
Part 3 hereof) multiplied by the number of
shares of Common Stock being purchased upon
such exercise: (1) a cashier's check payable
to the Company in an amount in U.S. dollars,
(2) the delivery by the Holder of
indebtedness or other obligations of the
Company to the Holder to be cancelled by the
Company, valued at the then-outstanding
aggregate amount of outstanding principal
of, premium (if any) of, and accrued and
unpaid interest on, such indebtedness or (3)
a combination of (1) and (2) above. In lieu
of the payment required by this paragraph
2B(i)(c), Holder may exercise the Conversion
Right set forth in paragraph 2E hereof.
(ii) The Company will use its best efforts to deliver to
the Holder certificates for shares of Common Stock
purchased upon exercise of this Warrant within two
(2) business days after the date of the Exercise
Time. Unless this Warrant has expired or all of the
purchase rights represented hereby have been
exercised or converted, the Company will prepare a
new Warrant, substantially identical hereto,
representing the rights, formerly represented by this
Warrant, which have not expired or been exercised or
converted and will, within such two-day period,
deliver such new Warrant to the Holder.
(iii) The Common Stock issuable upon the exercise of this
Warrant will be deemed to have been issued to the
Purchaser at the Exercise Time, and the Purchaser
will be deemed for all purposes to have become the
record holder of such Common Stock at the Exercise
Time.
(iv) The Company will pay all taxes (other than any income
taxes or other similar taxes), if any, attributable
to the initial issuance of the Warrant and the
issuance of the shares of Common Stock upon the
exercise of the Warrant; provided, however, that the
Company shall not be required to pay any tax or taxes
which may be payable in respect of the transfer of
any Warrant, and no such issuance, delivery or
transfer shall be made unless and until the person
requesting such issuance or transfer has paid to the
Company the amount of any such tax, or has
established, to the satisfaction of the Company, that
no such tax is payable or such tax has been paid.
Each share of Common Stock issuable upon exercise of
this Warrant will, upon payment of the Exercise Price
therefor, be fully paid and
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nonassessable and free from all liens and charges
with respect to the issuance thereof.
2C. Exercise Agreement. Upon any exercise of this Warrant, the
Exercise Agreement, substantially in the form set forth in
Exhibit I hereto, will be completed and executed. Such
Exercise Agreement will be dated the actual date of execution
thereof.
2D. Fractional Shares. If a fractional share of Common Stock
would, but for the provisions of paragraph 2A, be issuable
upon exercise of the rights represented by this Warrant, the
Company will, within seven (7) days after the Exercise Time,
deliver to the Purchaser a check payable to the Purchaser in
lieu of such fractional share in an amount equal to the
difference between the Market Price (as defined below) of such
fractional share as of the Exercise Time and the Exercise
Price with respect to such fractional share.
For the purposes of this Agreement, "Market Price"
means, with respect to the Common Stock, on any given day, the
last reported sale price or, in case no such reported sale
takes place on such day, the average of the last closing bid
and ask prices, in either case on the New York Stock Exchange
or the principal national securities exchange on which the
Common Stock is listed or admitted to trading, or if not
listed or admitted to trading on any national securities
exchange, (i) the closing sale price for such day reported by
the Nasdaq Stock Market if such security is traded
over-the-counter and quoted in the Nasdaq Stock Market, or
(ii) if such security is so traded, but not so quoted on such
day, the average of the closing reported bid and ask prices of
such security as reported by the Nasdaq Stock Market or any
comparable system, or (iii) if such security is not listed on
the Nasdaq Stock Market or any comparable system but is
actively traded, the average of the closing bid and ask prices
as furnished by two members of the National Association of
Securities Dealers, Inc. selected from time to time by the
Company for that purpose. If such security is not listed and
traded in a manner that the quotations referred to above are
available for the period required hereunder, the Market Price
shall be deemed to be the fair value per share of such
security as determined by a nationally recognized investment
banking firm selected by the Company's Board of Directors and
reasonably acceptable to Holder.
2E. Right to Convert Warrants.
(i) The Holder shall have the right to convert the
purchase rights represented by this Warrant (the
"Conversion Right") at any time and from time to time
prior to the expiration of the Exercise Termination
Date into shares of Common Stock as provided for in
this paragraph 2E. Upon exercise of the Conversion
Right, the Company shall deliver to the Holder
(without payment by the Holder of any Exercise Price)
that number of shares of Common Stock equal to:
(M-E) x S
---------
M
Where:
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M= the Market Price per share of Common Stock
determined as of the immediately preceding business
day on which the Common Stock is traded,
E= Exercise Price in effect immediately prior to the
exercise of the Conversion Right, and
S= the number of shares ("purchase rights") to be
converted under such Conversion Right exercise.
(ii) The Conversion Right may be exercised by the Holder
at any time prior to its expiration on any business
day by delivering a written notice in the form
attached hereto as Exhibit II (the "Conversion
Notice") to the Company, exercising the Conversion
Right and specifying (a) the total estimated number
of shares of Common Stock the Holder proposes to
acquire pursuant to such conversion and (b) a place
and date not less than two nor more than 20 business
days from the date of the Conversion Notice for the
closing of such acquisition. Following receipt of the
Conversion Notice, the Company shall notify Holder of
the Company's calculation of the Market Price and, if
sufficient purchase rights are available to Holder
hereunder to acquire the number of shares of Common
Stock specified in the Conversion Notice, the Company
shall notify Holder that such exercise of the
Conversion Right has been accepted.
(iii) At any exercise of the Conversion Right under
paragraph 2E(ii) hereof, (a) the Holder will
surrender this Warrant and (b) the Company will
deliver to the Holder a certificate or certificates
for the number of shares of Common Stock issuable
upon such conversion, together with cash in lieu of
any fractional share, as provided in paragraph 2D
above. In the event and to the extent that this
Warrant has not been converted in full, then the
Company shall prepare and deliver a new Warrant
evidencing the rights hereunder which have not
previously expired, been exercised or converted, in
accordance with paragraph 2B(ii) hereof or this
paragraph 2E.
2F. Limitation on Exercise. Notwithstanding anything contained
in this Warrant to the contrary, this Warrant shall not be
exercisable (whether in a single exercise or multiple
exercises) by any single Holder for any number of shares of
Common Stock greater than the number of shares of Common Stock
that would cause such Holder to own beneficially (as
calculated in accordance with Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended) 5% of the
aggregate number of outstanding shares of Common Stock, minus
one, unless such Holder shall have provided the Company with
not less than 65 days' prior written notice of its current
intent to exercise this Warrant for such greater number of
shares (which notice of intent shall not be binding). This
notice requirement (i) shall only apply to the exercise of
this Warrant for the number of shares of Common Stock which
are in excess of the number of shares of Common Stock that
would cause such Holder to own beneficially (as calculated in
accordance with Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended) 5% of the aggregate number
of outstanding shares of Common Stock, minus one, and (ii) for
the avoidance of doubt, shall not apply to any exercise of the
Put Option.
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Part 3. Adjustment of Exercise Price and Number of Shares. The initial
exercise price as set forth in Part 1 shall be subject to adjustment from time
to time as provided in this Part 3 (such price, or such price as last adjusted
pursuant to the terms hereof, as the case may be, is herein called the "Exercise
Price"), and the number of shares of Common Stock obtainable upon exercise of
this Warrant shall be subject to adjustment from time to time as provided in
this Part 3.
3A. Common Stock Issued at Less than Market Price or Exercise
Price. If the Company issues or sells any Common Stock other
than Excluded Stock (as defined below) without consideration
or for a consideration per share less than the Market Price
per share of Common Stock on the immediately preceding
business day on which the Common Stock is traded, or less than
the Exercise Price in effect immediately prior to such
issuance or sale, the Exercise Price in effect immediately
prior to each such issuance or sale will immediately be
reduced to the price determined by multiplying the Exercise
Price in effect immediately prior to such issuance or sale, by
a fraction, (1) the numerator of which shall be (i) the number
of shares of Common Stock outstanding prior to such issuance
or sale plus (ii) the number of shares of Common Stock which
the aggregate consideration received by the Company for the
total number of such additional shares of Common Stock so
issued or sold would purchase at the higher of (x) the Market
Price per share of Common Stock on the immediately preceding
business day on which the Common Stock is traded and (y) the
Exercise Price in effect immediately prior to such issuance or
sale and (2) the denominator of which shall be the number of
shares of Common Stock outstanding immediately after such
issue or sale. In such event, the number of shares of Common
Stock issuable upon exercise of this Warrant shall be
increased to the number obtained by dividing (i) the product
of (a) the number of shares of Common Stock issuable upon
exercise of the Warrant before such adjustment to the Exercise
Price and (b) the Exercise Price in effect immediately prior
to such adjustment by (ii) the reduced Exercise Price
determined in accordance with the immediately preceding
sentence.
For the purposes of this paragraph 3A, the term
"Excluded Stock" means (i) shares of Common Stock issued by
the Company as a stock dividend, distribution, or in
connection with a subdivision or reclassification of shares of
Common Stock, in each case which are subject to paragraph 3B,
(ii) shares of Common Stock to be issued to employees,
directors, consultants or advisors of the Company pursuant to,
and in accordance with the terms of, the Company's stock
option, stock incentive, restricted stock, employee stock
purchase or other similar plans or agreements, in each case
that have been approved by the Company's stockholders or (iii)
shares of Common Stock to be issued pursuant to this Warrant
or the exercise thereof.
For the purposes of any adjustment of the Exercise
Price pursuant to this paragraph 3A, the following provisions
shall be applicable:
(i) in the case of the issuance of Common Stock for cash,
the amount of the consideration received by the
Company shall be deemed to be the amount of the cash
proceeds received by the Company for such Common
Stock before deducting therefrom any discounts or
commissions allowed, paid or incurred by the Company
for any underwriting or otherwise in connection with
the issuance and sale thereof;
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(ii) in the case of the issuance of Common Stock
(otherwise than upon the conversion of shares of
capital stock or other securities of the Company) for
a consideration in whole or in part other than cash,
including securities acquired in exchange therefor
(other than securities by their terms so
exchangeable), the consideration other than cash
shall be deemed to be the fair value thereof as
reasonably determined by the Board of Directors of
the Company, irrespective of any accounting
treatment; provided, however, that such fair value as
determined by the Board of Directors of the Company
shall not exceed the aggregate Market Price of the
shares of Common Stock being issued as of the date
the Board of Directors of the Company authorizes the
issuance of such shares;
(iii) in the case of the issuance of (x) options, warrants
or other rights to purchase or acquire Common Stock
(whether or not at the time exercisable), (y)
securities by their terms convertible into or
exchangeable for Common Stock (whether or not at the
time so convertible or exchangeable) or (z) options,
warrants or rights to purchase such convertible or
exchangeable securities (whether or not at the time
exercisable):
(a) the aggregate maximum number of shares of
Common Stock deliverable upon exercise of
such options, warrants or other rights to
purchase or acquire Common Stock (determined
without considering or giving effect to any
anti-dilution provisions of such options,
warrants or rights that are comparable to
the anti-dilution provisions contained
herein) shall be deemed to have been issued
at the time such options, warrants or rights
are issued and for a consideration equal to
the consideration (determined in the manner
provided in paragraph 3A(i) and (ii)), if
any, received by the Company upon the
issuance of such options, warrants or rights
plus the minimum purchase price provided in
such options, warrants or rights for the
Common Stock covered thereby;
(b) the aggregate maximum number of shares of
Common Stock deliverable upon conversion of
or in exchange for any such convertible or
exchangeable securities, or upon the
exercise of options, warrants or other
rights to purchase or acquire such
convertible or exchangeable securities and
the subsequent conversion or exchange
thereof (determined without considering or
giving effect to any anti-dilution
provisions of such convertible or
exchangeable securities or such options,
warrants or rights that are comparable to
the anti-dilution provisions contained
herein), shall be deemed to have been issued
at the time such securities were issued or
such options, warrants or rights were issued
and for a consideration equal to the
consideration, if any, received by the
Company for any such securities and related
options, warrants or rights (excluding any
cash received on account of accrued interest
or accrued dividends), plus the additional
consideration (determined in the manner
provided in paragraph 3A(i) and (ii)), if
any, to be received by the Company upon the
conversion or exchange of such securities,
or upon the exercise of any related options,
warrants or rights to purchase or acquire
such convertible or exchangeable securities
and the subsequent conversion or exchange
thereof;
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(c) on any change in the number of shares of
Common Stock deliverable upon exercise of
any such options, warrants or rights or
conversion or exchange of such convertible
or exchangeable securities or any change in
the consideration to be received by the
Company upon such exercise, conversion or
exchange, but excluding changes resulting
from the anti-dilution provisions thereof
(to the extent comparable to the
anti-dilution provisions contained herein),
the Exercise Price as then in effect shall
forthwith be readjusted to such Exercise
Price as would have been obtained had an
adjustment been made upon the issuance of
such options, warrants or rights not
exercised prior to such change, or of such
convertible or exchangeable securities not
converted or exchanged prior to such change,
upon the basis of such change;
(d) on the expiration or cancellation of any
such options, warrants or rights (without
exercise), or the termination of the right
to convert or exchange such convertible or
exchangeable securities (without exercise),
if the Exercise Price shall have been
adjusted upon the issuance thereof, the
Exercise Price shall forthwith be readjusted
to such Exercise Price as would have been
obtained had an adjustment been made upon
the issuance of such options, warrants,
rights or such convertible or exchangeable
securities on the basis of the issuance of
only the number of shares of Common Stock
actually issued upon the exercise of such
options, warrants or rights, or upon the
conversion or exchange of such convertible
or exchangeable securities; and
(e) if the Exercise Price shall have been
adjusted upon the issuance of any such
options, warrants, rights or convertible or
exchangeable securities, no further
adjustment of the Exercise Price shall be
made for the actual issuance of Common Stock
upon the exercise, conversion or exchange
thereof;
provided, however, that no increase in the Exercise Price
shall be made pursuant to subclauses (a) and (b) of this
Section 3A(iii).
3B. Stock Splits, Subdivisions, Reclassifications or
Combinations. If the Company shall (1) declare a dividend or
make a distribution on its Common Stock in shares of Common
Stock, (2) subdivide or reclassify the outstanding shares of
Common Stock into a greater number of shares, or (3) combine
or reclassify the outstanding Common Stock into a smaller
number of shares, the number of shares of Common Stock
obtainable upon exercise of this Warrant at the time of the
record date for such dividend or distribution or the effective
date of such subdivision, combination or reclassification
shall be proportionately adjusted so that the Holder shall be
entitled to receive the number of shares of Common Stock which
the Holder would have owned or been entitled to receive after
such date had the Warrant been exercised immediately prior to
such date. In the event of any adjustment to the total number
of shares of Common Stock obtainable upon exercise of the
unexercised portion of this Warrant pursuant to this paragraph
3B, the Exercise Price shall be adjusted to be the amount
determined by multiplying (i) the Exercise Price by (ii) a
fraction, the numerator of which is the number of shares of
Common Stock payable upon exercise of this Warrant immediately
prior to such adjustment and the denominator of which is the
number of shares of Common Stock
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covered by this Warrant immediately after such adjustment.
Successive adjustments to the Exercise Price and to the number
of shares of Common Stock obtainable upon exercise of this
Warrant shall be made whenever any event specified above shall
occur.
3C. Other Distributions. In case the Company shall fix a
record date for the making of a distribution to all holders of
shares of its Common Stock (1) of the shares of any class
other than its Common Stock or (2) of evidence of indebtedness
of the Company or any of its subsidiaries or (3) of assets
(including cash, but excluding ordinary cash dividends and
dividends or distributions referred to in paragraph 3B), or
(4) rights or warrants, then in each such case the Exercise
Price in effect immediately prior thereto shall be reduced to
the price determined by multiplying the Exercise Price in
effect immediately prior to such record date by a fraction,
(i) the numerator of which shall be an amount equal to the
difference resulting from (A) the number of shares of Common
Stock outstanding on such record date multiplied by the Market
Price per share of Common Stock on such record date, less (B)
the fair market value (as reasonably determined by the Board
of Directors of the Company) of said shares or evidences of
indebtedness or assets or rights or warrants to be so
distributed, and (ii) the denominator of which shall be equal
to the number of shares of Common Stock outstanding on such
record date multiplied by the Market Price per share of Common
Stock on such record date. In such event, the number of shares
of Common Stock issuable upon exercise of this Warrant shall
be increased to the number obtained by dividing (i) the
product of (a) the number of shares of Common Stock issuable
upon exercise of the Warrant before such adjustment to the
Exercise Price and (b) the Exercise Price in effect
immediately prior to such adjustment by (ii) the reduced
Exercise Price determined in accordance with the immediately
preceding sentence. Such adjustment to the Exercise Price
shall be made successively whenever such a record date is
fixed. In the event that such distribution is not so made, the
Exercise Price then in effect shall be readjusted, effective
as of the date when the Company's Board of Directors
determines not to distribute such shares, evidence of
indebtedness, assets, rights or warrants, as the case may be,
to the Exercise Price that would then be in effect if such
record date had not been fixed.
3D. Business Combinations. In case of any Business Combination
(as defined below) in which the holders of shares of Common
Stock are entitled to receive stock, securities or property by
virtue of their ownership of Common Stock or a
reclassification of Common Stock (other than a
reclassification of Common Stock referred to in paragraph 3B),
then, as a part of such Business Combination or
reclassification, lawful provision shall be made so that the
Holder shall thereafter be entitled to receive upon exercise
of this Warrant during the period specified herein and upon
payment of the Exercise Price then in effect, the number of
shares of stock or other securities or property of the
successor entity resulting from such Business Combination that
a holder of the shares of Common Stock deliverable upon
exercise of this Warrant would have been entitled to receive
in such Business Combination, all subject to further
adjustment as provided in this Part 3. If the per-share
consideration payable to the holders for shares in connection
with any such transaction is in a form other than cash or
marketable securities, then the value of such consideration
shall be determined by the Board of Directors of the Company.
In all events, appropriate adjustment (as determined in good
faith by the Board of Directors) shall be made in the
application of the provisions of this Warrant with respect to
the rights and interests of the Holder after the transaction,
to the
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end that the provisions of this Warrant shall be applicable
after that event, as near as reasonably may be, in relation to
any shares or other property deliverable after that event upon
exercise of this Warrant.
In determining the kind and amount of stock,
securities or the property obtainable upon consummation of
such Business Combination, if the holders of Common Stock have
the right to elect the kind or amount of consideration
receivable upon consummation of such Business Combination,
then the Holder shall have the right to make a similar
election as of the Exercise Date with respect to the number of
shares of stock or other securities or property.
For the purposes of this paragraph 3D:
"Business Combination" means:
(i) any consolidation or merger of the Company with or into
any person or entity of any kind,
(ii) the sale, assignment, conveyance, transfer, lease or
other disposition by the Company of all or substantially all
of its assets followed by a liquidation of the Company, or
(iii) any issuance, in a single transaction or series of
related transactions, by the Company of shares of Common Stock
and/or Common Stock Equivalents (defined below) in connection
with the acquisition of assets (including cash) or securities
by the Company or a subsidiary of the Company (including by
way of merger of a subsidiary of the Company with or into a
third party), except where (a) the stockholders of the Company
immediately prior to such issuance own (in substantially the
same proportion relative to each other as such stockholders
owned the Common Stock, or the Voting Stock (defined below),
as the case may be, immediately prior to such issuance) (1)
more than 50% of the Voting Stock immediately after such
issuance, and (2) more than 50% of the outstanding Common
Stock immediately after such issuance, (b) the members of the
Company's Board of Directors immediately prior to entering
into the agreement relating to such issuance (and if no such
agreement is entered into, then immediately prior to such
issuance) constitute at least a majority of the Company's
Board of Directors immediately after such issuance, with no
arrangement or arrangements in place immediately after such
issuance that would result in the members of the Company's
Board of Directors immediately prior to entering into the
agreement relating to such issuance (and if no agreement is
entered into, then immediately prior to such issuance) ceasing
to constitute at least a majority of the Company's Board of
Directors and (c) no Person or group (as contemplated by
Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, or any successor statute, and the rules and
regulations promulgated thereunder) immediately after such
issuance is the beneficial owner of 40% or more of the total
outstanding Voting Stock or Common Stock. In calculating the
percentage of the Voting Stock of the Company owned by the
stockholders of the Company immediately prior to the issuance
of Common Stock or Common Stock Equivalents in which there is
more than one class or series of Voting Stock, the percentage
of the Voting Stock shall be calculated based on the number of
votes eligible to be cast in the election of the directors of
the Company
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generally. In calculating the percentages of Voting Stock and
Common Stock owned for purposes of this definition, such
calculation shall be calculated on a basis assuming the
exercise or conversion in full of all Common Stock Equivalents
and on a basis disregarding all Common Stock Equivalents, and
the percentage which results in the lower percentage owned by
the shareholders of the Company shall apply in the application
of clause (a) above.
"Common Stock Equivalents" means rights, warrants, options,
convertible securities or exchangeable securities, exercisable
for or convertible or exchangeable into, directly or
indirectly, Common Stock, whether at the time of issuance or
upon the passage of time or the occurrence of some future
event.
"Voting Stock" means any and all shares, interests,
participations or other equivalents, however designated, of
the class or classes of capital or capital stock of the
Company, pursuant to which the holders thereof have the
general voting power to vote in the election of the Board of
Directors of the Company.
The foregoing provisions of this paragraph 3D are
subject in all respects to Part 4 of this Warrant.
3E. Certain Repurchases of Common Stock. In case the Company
effects a Pro Rata Repurchase (as defined below) of Common
Stock, then the Exercise Price shall be reduced to the price
determined by multiplying the Exercise Price in effect
immediately prior to the effective date of such Pro Rata
Repurchase by a fraction of which (1) the numerator shall be
(i) the product of (a) the number of shares of Common Stock
outstanding immediately before such Pro Rata Repurchase and
(b) the Market Price per share of Common Stock on the trading
day immediately preceding the first public announcement of the
intent to effect such Pro Rata Repurchase, minus (ii) the
aggregate purchase price of the Pro Rata Repurchase, and of
which (2) the denominator shall be the product of (i) the
number of shares of Common Stock so repurchased and (ii) the
Market Price per share of Common Stock on the trading day
immediately preceding the first public announcement of such
Pro Rata Repurchase. In such event, the number of shares of
Common Stock issuable upon exercise of this Warrant shall be
increased to the number obtained by dividing (i) the product
of (a) the number of shares of Common Stock issuable upon
exercise of the Warrant before such adjustment to the Exercise
Price and (b) the Exercise Price in effect immediately prior
to such adjustment by (ii) the reduced Exercise Price
determined in accordance with the immediately preceding
sentence. For purposes of this Agreement, (i) the term "Pro
Rata Repurchase" means any purchase of shares of Common Stock
by the Company or any Affiliate (as defined below) thereof
pursuant to any tender offer or exchange offer subject to
Section 13(e) of the Securities Exchange Act of 1934, as
amended, or pursuant to any other offer available to
substantially all holders of Common Stock, whether for cash,
shares of capital stock of the Company, other securities of
the Company, evidences of indebtedness of the Company or any
other person or any other property (including, without
limitation, shares of capital stock, other securities or
evidences of indebtedness of a subsidiary of the Company), or
any combination thereof; provided, however, that "Pro Rata
Repurchase" shall not include any purchase of shares by the
Company or any Affiliate thereof made in accordance with the
requirements of Rule 10b-18 as in effect under the Securities
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Exchange Act of 1934, as amended; (ii) the "effective date" of
a Pro Rata Repurchase shall mean the date of acceptance of
shares for purchase or exchange under any tender or exchange
offer which is a Pro Rata Repurchase or the date of purchase
with respect to any Pro Rata Repurchase that is not a tender
or exchange offer and (iii) the term "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.
3F. Rounding of Calculations; Minimum Adjustments. All
calculations under this Part 3 shall be made to the nearest
one tenth (1/10th) of a cent or to the nearest one hundredth
(1/100th) of a share, as the case may be. Any provision of
this Part 3 to the contrary notwithstanding, no adjustment in
the Exercise Price shall be made if the amount of such
adjustment would be less than $0.01, but any such amount shall
be carried forward and an adjustment with respect thereto
shall be made at the time of and together with any subsequent
adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate $0.01 or
more. In addition, in no event shall the Exercise Price be
adjusted to less than the lesser of $0.01 per share or the par
value of the Common Stock.
3G. Timing of Issuance of Additional Common Stock upon Certain
Adjustments. In any case in which the provisions of this Part
3 shall require that an adjustment shall become effective
immediately after a record date for an event, the Company may
defer until the occurrence of such event (1) issuing to the
Holder exercising after such record date and before the
occurrence of such event the additional shares of Common Stock
issuable upon such exercise by reason of the adjustment
required by such event over and above the shares of Common
Stock issuable upon such exercise before giving effect to such
adjustment and (2) paying to such Holder any amount of cash in
lieu of a fractional share of such Common Stock; provided,
however, that the Company upon request shall deliver to the
Holder a due bill or other appropriate instrument evidencing
the Holder's right to receive such additional shares, and such
cash, upon the occurrence of the event requiring such
adjustment.
3H. Certain Events. If any event occurs of the type
contemplated by the provisions of this Part 3 but not
expressly provided for by such provisions, then the Company
will make an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock obtainable upon exercise
of this Warrant, as applicable, so as to protect the rights of
the Holder.
3I. No Duplication of Adjustments. If any action would require
adjustment of the Exercise Price pursuant to more than one of
the provisions of this Part 3, only one adjustment shall be
made and such adjustment shall be the adjustment that results
in the lowest Exercise Price after giving effect to such
adjustment.
3J. Notices.
(i) Immediately upon any event causing adjustment of the
Exercise Price, the Company will give written notice
thereof to the Holder describing such event and the
recalculation of the Exercise Price in reasonable
detail.
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(ii) The Company will give written notice to the Holder at
least twenty (20) days prior to the date on which the
Company closes its books or takes a record (A) with
respect to any dividend or distribution on the Common
Stock, (B) with respect to any pro rata subscription
offer to holders of Common Stock or (C) for
determining rights to vote with respect to any
Business Combination, dissolution or liquidation.
(iii) The Company will also give written notice to the
Holder at least twenty (20) days prior to the date on
which any Business Combination, dissolution or
liquidation will take place.
Part 4. Put Option. Subject to the terms of this Part 4, the Company
hereby grants to the Holder an option to sell to the Company, and the Company
shall be obligated to purchase from the Holder under such option (the "Put
Option"), all (but not any portion) of this Warrant that remains unexercised and
unconverted at a price based upon the number of shares of Common Stock then
obtainable upon exercise of this Warrant (the "Put Shares"). The Put Option will
be effective and exercisable only upon, and for a period of five (5) Business
Days immediately following, the date of consummation of any Business Combination
(the "Put Option Period") with respect to which the holders of Common Stock are
entitled to receive aggregate consideration of which less than sixty percent
(60%) of the aggregate value thereof is in the form of publicly traded common
equity.
4A. Put Price. In the event that the Holder exercises the Put
Option, the price (the "Put Price") to be paid to the Holder
pursuant to this Warrant will be cash in an amount determined
by reference to the number of Put Shares exercisable
immediately prior to consummation of such Business Combination
and valued pursuant to the Black-Scholes Valuation Model,
based upon the following assumptions: (i) an unadjusted price
of the Common Stock equal to the average closing price of the
Common Stock for the ten (10) consecutive trading day-period
preceding and exclusive of the date of the public announcement
of such Business Combination; (ii) an exercise price equal to
the Exercise Price in effect immediately prior to the date of
the public announcement of such Business Combination; (iii) a
stock price volatility of 60% on an annual basis; (iv) a
risk-free rate of return equal to the effective yield of U.S.
Treasury notes having a duration approximately equal to that
of the remaining term of the Warrant as of the date of the
public announcement of such Business Combination; (v) a
dividend yield equal to the cash dividend yield of the Common
Stock immediately prior to the date of the public announcement
of such Business Combination; and (vi) a time to exercise
assumption based upon the remaining term of the Warrant as of
the date of the public announcement of such Business
Combination. If the Holder and the Company are in good faith
dispute with respect to the determination of the Put Price,
each such party shall select a nationally recognized
investment banking firm, and the two firms so selected shall
select a third nationally recognized investment banking firm,
which third firm shall determine the Put Price in accordance
with the provisions of the first sentence of this Section 4A
and provide each party with a written notice of such
determination. Both the Holder and the Company shall be bound
by such determination, each such party shall be responsible
for all of the fees and expenses charged by the investment
banking firm such party selects, and each such party will be
responsible for one-half of the fees and expenses charged by
the third investment banking firm in connection with its
determination of the Put Price.
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4B. Exercise of Put Option. The Put Option may be exercised
during the Put Option Period by the Holder giving written
notice to the Company either prior to or during the Put Option
Period of the Holder's election to exercise the Put Option,
and the date of the Put Option Closing will be not less than
sixty (60) days after the date of the consummation of the
Business Combination.
4C. Put Option Closing. The closing for the purchase and sale
of this Warrant under the Put Option, will take place at the
principal executive offices of the Company on the date
specified in such notice of exercise (the "Put Option
Closing"). At the Put Option Closing, the Holder will deliver
this Warrant duly endorsed in blank. In consideration
therefor, the Company will deliver to the Holder the Put
Price, which will be payable in immediately available funds,
and the Company shall cancel on its books this Warrant
certificate, and thereupon the rights of the Holder hereunder
(other than the right to receive the Put Price) shall
terminate.
Part 5. No Voting Rights; Limitations of Liability. This Warrant will
not entitle the Holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision hereof, in the absence of affirmative
action by the Holder to purchase Common Stock, and no enumeration herein of the
rights or privileges of the Holder shall give rise to any liability of the
Holder for the Exercise Price of Common Stock acquirable by exercise hereof or
as a stockholder of the Company.
Part 6. Warrant Exchangeable for Different Denominations. This Warrant
is exchangeable, upon the surrender hereof by the Holder at the principal
executive offices of the Company, for new warrants of like tenor representing in
the aggregate the purchase rights hereunder, and each of such new warrants will
represent such portion of such rights as is designated by the Holder at the time
of such surrender. The date the Company initially issues this Warrant will be
deemed to be the date of issuance thereof regardless of the number of times new
warrants or certificates representing the unexpired and unexercised rights
formerly represented by this Warrant shall be issued. All such Warrants
representing portions of the rights hereunder are referred to herein as the
"Warrants."
Part 7. Replacement. Upon receipt of evidence reasonably satisfactory
to the Company (an affidavit of the Holder being deemed satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing this Warrant, and in the case of any such loss, theft or destruction,
upon receipt of indemnity reasonably satisfactory to the Company, or, in the
case of any such mutilation upon surrender of such certificate, the Company will
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the same rights represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate.
Part 8. Reservation of Shares. The Company covenants and agrees that at
all times it shall reserve and keep available for the exercise of the Warrant up
to 200,000 shares held in the treasury of the Company and such additional number
of authorized shares of Common Stock as are sufficient to permit the exercise in
full of the Warrant, and that it will take such action as may be required from
time to time to assure that the par value per shares of the Underlying Shares is
at all times equal to or less than the per share Exercise Price.
Part 9. Listing of Shares. The Company shall use all commercially
reasonable efforts to list on each national securities exchange on which any
Common Stock may at any time be listed, subject to notice of issuance upon the
exercise or conversion of this Warrant, and shall use its commercially
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reasonable efforts to maintain such listing, so long as any other shares of its
Common Stock shall be so listed, all shares of Common Stock from time to time
issuable upon exercise or conversion of this Warrant.
Part 10. No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of Sections
2, 3 and 4 hereof and in taking of all such action as may be necessary or
appropriate in order to protect the exercise and conversion rights of the
holders of this Warrant against impairment.
Part 11. Notices. Except as otherwise expressly provided herein, all
notices referred to in this Warrant will be in writing and will be delivered
personally or by registered or certified mail, return receipt requested, postage
prepaid and will be deemed to have been given when so delivered or mailed (i) to
the Company, at its principal executive offices, and (ii) to the Holder of this
Warrant, at such Holder's address as it appears in the records of the Company
(unless otherwise indicated by the Holder).
Part 12. Successors and Assigns. The terms, provisions and rights
evidenced by this Warrant shall inure to the benefit of, and be binding upon,
the Company and the Holder and their respective successors and assigns.
Part 13. Amendments and Waivers. Any term of this Warrant may be
amended and the observance of any term of this Warrant may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the Holder. Any
waiver or amendment effected in accordance with this Part 13 shall be binding
upon each holder of any shares of Common Stock purchased under this Warrant at
the time outstanding (including any securities into which such shares have been
converted or exchanged), each future holder of all such shares of Common Stock,
and the Company.
Part 14. Descriptive Headings; Governing Law. The descriptive headings
of the several parts and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. The construction, validity
and interpretation of this Warrant will be governed by the laws of the State of
Texas (excluding that body of laws relating to conflicts of laws).
* * *
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by its duly authorized officers under its corporate seal and to be
dated as of the date first set forth above.
INPUT/OUTPUT, INC.
By: /s/ X. XXXXXX XXXXX
-------------------------------------
Name: X. Xxxxxx Xxxxx
Title: Vice President
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EXHIBIT I
EXERCISE AGREEMENT
To: Input/Output, Inc.
The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby agrees to subscribe for and purchase _______ shares of the
Common Stock covered by such Warrant and makes payment herewith in full therefor
at the Exercise Price per share provided by such Warrant.
Dated:
-------------
HOLDER:
----------------------------------
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
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EXHIBIT II
CONVERSION NOTICE
(To be executed upon conversion of Warrant.)
The undersigned hereby irrevocably elects to exercise the Conversion
Right, represented by this Warrant, to purchase ________ shares of Common Stock
and herewith tenders in payment for such shares this Warrant, all in accordance
with the terms hereof.
Dated:
-------------
HOLDER:
----------------------------------
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
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