UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): AUGUST 6, 2002
INPUT/OUTPUT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-13402 22-2286646
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
12300 PARC CREST DR. 77477
STAFFORD, TX (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (281) 933-3339
ITEM 5. OTHER EVENTS.
On August 6, 2002, Input/Output, Inc., a Delaware corporation (the
"Company"), entered into an Exchange Agreement (the "Exchange Agreement") with
SCF-IV, L.P., a Delaware limited partnership ("SCF"), pursuant to which SCF
exchanged all of the shares of the Company's Series B Convertible Preferred
Stock and the Company's Series C Convertible Preferred Stock owned by it for
(i) $30 million in cash, (ii) an unsecured promissory note (the "Note") in the
original principal amount of $31 million and (iii) a warrant (the "Warrant") to
purchase 2,673,517 shares of the Company's common stock, par value $0.01 per
share ("Common Stock"), at an exercise price of $8.00 per share. The Company and
SCF also entered into a Registration Rights Agreement (the "Registration Rights
Agreement"), providing the holder of the Warrant with certain registration
rights for the shares of Common Stock to be issued upon exercise or conversion
of the Warrant. Immediately prior to the consummation of the transaction, David
C. Baldwin, SCF's representative on the Company's Board of Directors, resigned
as a director of the Company. As part of the Exchange Agreement, SCF and the
Company agreed that the Purchase Agreement dated April 21, 1999 and the
Registration Rights Agreement dated May 7, 1999, each between the Company and
SCF, are terminated and of no further force or effect.
The Note matures on May 7, 2004 and bears interest at an initial rate
of 8% per annum through May 7, 2003, and thereafter at a rate of 13% per annum.
Interest on the Note is payable quarterly by the Company commencing on November
7, 2002, and on each February 7, May 7, August 7 and November 7 thereafter until
paid. The Company is permitted to prepay the outstanding indebtedness under the
Note at any time prior to maturity without premium or penalty. Until payment in
full of the Note, the Company (1) is required to either maintain a debt to total
capitalization ratio that does not exceed 0.35 to 1.00, or maintain unrestricted
cash and cash equivalents in an amount equal to or greater than the outstanding
principal balance of the Note and (2) is not permitted to make any dividend
payment or other distribution in cash or property on account of, or purchase or
redeem, any shares of the Company's capital stock, other than dividends payable
in Common Stock or redemptions or exchanges of the Company's capital stock for
Common Stock. However, the Company shall be permitted (i) to repurchase shares
of Common Stock so long as the aggregate amount expended by the Company in each
twelve-month period starting August 6, 2002 does not exceed $5,000,000, and
(ii) to acquire shares of Common Stock in connection with the exercise of stock
options under the Company's compensation or benefit plans.
In addition to payment defaults, events of default under the Note
include (1) the breach of any covenant under the Note and the failure to cure
such breach within ten business days of being notified of such breach, (2) any
payment default or acceleration of any other debt of the Company having an
aggregate outstanding principal amount of greater than $5,000,000 and (3) the
consummation of any business combination in which the Company becomes a
majority-owned subsidiary of another entity.
The Warrant permits its holder to acquire up to 2,673,517 shares of
Common Stock for an exercise price of $8.00 per share, and expires August 5,
2005. The holder is permitted (1) to pay cash or deliver indebtedness of the
Company held by the holder for cancellation in payment of the exercise price or
(2) surrender the Warrant to the Company on a "cashless" exercise basis and
convert the spread between the then-current market value of the Common Stock and
the exercise price of the Warrant into shares of Common Stock. The Warrant will
not be exercisable by the holder thereof for any number of shares of Common
Stock that would cause such holder to own beneficially more than 5% of the
aggregate number of outstanding shares of Common Stock, minus one share, unless
such holder shall have provided the Company with not less than 65 days' prior
written notice of its current intent to exercise the Warrant for such greater
number of shares. The exercise price and the number of shares of Common Stock
under the Warrant are subject to certain adjustments to prevent dilution,
including adjustments for (1) issuances of Common Stock by the Company at less
than the exercise price of the Warrant or the market value of the Common Stock,
(2) stock splits, subdivisions, reclassifications or combinations, (3) certain
other
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distributions of stock or assets by the Company to the holders of Common Stock,
(4) certain business combinations and (5) certain pro rata repurchases of Common
Stock by the Company. The holder of the Warrant also has an option to sell (or
"put") to the Company the unexercised portion of the Warrant remaining during
the five-business day period immediately following a business combination
involving the Company where the holders of Common Stock receive consideration
where less than 60% of its value consists of publicly traded common equity. The
price to be paid for the shares subject to the put option is based on the number
of shares of Common Stock then obtainable upon exercise of the Warrant
immediately prior to the business combination valued pursuant to the
Black-Scholes Valuation Model, using certain specified assumptions.
The Registration Rights Agreement provides SCF or the holder or holders
of at least 25% of the then outstanding Registrable Securities (which, subject
to certain limitations, means the shares issued or issuable upon exercise or
conversion of the Warrant) may request a registration of the Company of any or
all of SCF's or such holder's Registrable Securities (a "Demand Registration").
However, the number of Registrable Securities to be included in such a Demand
Registration must be at least 500,000 shares (as adjusted for certain changes in
the capitalization of the Company). The holders of Registrable Securities will
be entitled to request only one Demand Registration. The Registration Rights
Agreement also entitles the holders of Registrable Securities the right to have
their securities registered whenever the Company proposes to register any
securities under the Securities Act of 1933, as amended (a "Piggyback
Registration"). As contemplated by the Registration Rights Agreement, the
ability of the holders of Registrable Securities to participate in Piggyback
Registration will depend on the individual circumstances and the nature of the
offering at issue. The registration expenses for Registrable Securities included
in a Demand Registration will be borne by the holders of Registrable Securities;
the registration expenses for Registrable Securities included in a Piggyback
Registration will be borne by the Company. The Company is not permitted to enter
into any new registration rights agreements that adversely affect in any
material respect the rights of the holders of the Registrable Securities,
without the prior written consent of the holders of a majority of the
Registrable Securities.
On August 7, 2002, SCF and certain of its affiliates filed Amendment
No. 2 to its Schedule 13D regarding their beneficial ownership of securities of
the Company (the "Schedule 13D Amendment"). In the Schedule 13D Amendment, SCF
and its affiliates reported that (1) they may be deemed to beneficially own
approximately 4.985% of the issued and outstanding Common Stock of the Company
based on 50,956,889 issued and outstanding shares of Common Stock reported by
the Company as of March 31, 2002 and (2) as a result, SCF and its affiliates
ceased to be the beneficial owner of more than five percent of the Common Stock
on August 6, 2002.
On August 6, 2002, the Company issued a press release, which is filed
as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by
reference, announcing the terms of the Exchange Agreement, the Note, the Warrant
and the Registration Rights Agreement. The foregoing is qualified by reference
to the terms of the Exchange Agreement, the Note, the Warrant and the
Registration Rights Agreement.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
10.21 Exchange Agreement dated August 6, 2002 by
and between Input/Output, Inc. and SCF-IV, L.P.
10.22 Promissory Note dated August 6, 2002 payable by
Input/Output, Inc. to SCF-IV, L.P.
10.23 Warrant dated August 6, 2002 issued by
Input/Output, Inc. to SCF-IV, L.P.
10.24 Registration Rights Agreement dated August 6,
2002 by and between Input/Output, Inc. and
SCF-IV, L.P.
99.1 Press Release issued on August 6, 2002 by
Input/Output, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Date: August 13, 2002
Input/Output, Inc.
(Registrant)
By: /s/ Brad Eastman
-------------------------------------------------
Name: Brad Eastman
Title: Vice President, General Counsel and Secretary
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INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
10.21 Exchange Agreement dated August 6, 2002 by and
between Input/Output, Inc. and SCF-IV, L.P.
10.22 Promissory Note dated August 6, 2002 payable by
Input/Output, Inc. to SCF-IV, L.P.
10.23 Warrant dated August 6, 2002 issued by Input/Output,
Inc. to SCF-IV, L.P.
10.24 Registration Rights Agreement dated August 6, 2002 by
and between Input/Output, Inc. and SCF-IV, L.P.
99.1 Press Release issued on August 6, 2002 by
Input/Output, Inc.