<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
AMENDMENT NO. 1 TO
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Input/Output, Inc.
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(Name of the Issuer)
Common Stock, par value $.01 per share
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(Title of Class of Securities)
457652105
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(CUSIP Number)
SCF-IV, L.P.
600 Travis, Suite 6600
Houston, Texas 77002
Attention: Anthony F. DeLuca
(713) 227-7888
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
August 17, 1999
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(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Section 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box. [ ]
<PAGE> 2
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1 NAMES OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
SCF-IV, L.P.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
OO
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER 7 SOLE VOTING POWER
OF
SHARES 6,764,705*
BENEFICIALLY --------------------------------------------------------------
OWNED 8 SHARED VOTING POWER
BY None
EACH --------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 6,764,705*
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
None
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,764,705*
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12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [X]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.8%**
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14 TYPE OF REPORTING PERSON
PN
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* The reporting person owns 40,000 shares of Series B Preferred
Stock and 15,000 shares of Series C Preferred Stock of the
Issuer. The Series B Preferred Stock and the Series C Preferred
Stock will not be convertible into Common Stock until the earlier
of May 7, 2002 or certain change of control events. The Series B
Preferred Stock and Series C Preferred Stock will automatically
be converted into Common Stock on May 7, 2004. Based on the
Series B Preferred Stock's $8.00 fixed conversion price, the
Series B Preferred Stock would be convertible into 5,000,000
shares of Common Stock of the Issuer. Based on the Series C
Preferred Stock's $8.50 fixed conversion price, the Series C
Preferred Stock would be convertible into 1,764,705 shares of
Common Stock of the Issuer. The amount indicated for both the
Series B Preferred Stock and the Series C Preferred Stock
excludes an indeterminate number of additional shares of Common
Stock that may be acquired upon conversion of the Series B
Preferred Stock or Series C Preferred Stock based on certain
market price based conversion provisions set forth in the
Certificate of Designation relating to such series, or in respect
of accrued and unpaid dividends.
** Based on information provided by the Issuer as of August 13,
1999.
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<PAGE> 3
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1 NAMES OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
SCF-IV, G.P., Limited Partnership
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
AF
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER 7 SOLE VOTING POWER
OF
SHARES 6,764,705*
BENEFICIALLY --------------------------------------------------------------
OWNED 8 SHARED VOTING POWER
BY None
EACH --------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 6,764,705*
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
None
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,764,705*
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12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [X]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.8%**
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14 TYPE OF REPORTING PERSON
PN
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* The reporting person may be deemed to own beneficially 40,000
shares of Series B Preferred Stock and 15,000 shares of Series C
Preferred Stock of the Issuer. The Series B Preferred Stock and
the Series C Preferred Stock will not be convertible into Common
Stock until the earlier of May 7, 2002 or certain change of
control events. The Series B Preferred Stock and Series C
Preferred Stock will automatically be converted into Common Stock
on May 7, 2004. Based on the Series B Preferred Stock's $8.00
fixed conversion price, the Series B Preferred Stock would be
convertible into 5,000,000 shares of Common Stock of the Issuer.
Based on the Series C Preferred Stock's $8.50 fixed conversion
price, the Series C Preferred Stock would be convertible into
1,764,705 shares of Common Stock of the Issuer. The amount
indicated for both the Series B Preferred Stock and the Series C
Preferred Stock excludes an indeterminate number of additional
shares of Common Stock that may be acquired upon conversion of
the Series B Preferred Stock or Series C Preferred Stock based on
certain market price based conversion provisions set forth in the
Certificate of Designation relating to such series, or in respect
of accrued and unpaid dividends.
** Based on information provided by the Issuer as of August 13,
1999.
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<PAGE> 4
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1 NAMES OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
L.E. Simmons & Associates, Incorporated
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
AF
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER 7 SOLE VOTING POWER
OF
SHARES 6,764,705*
BENEFICIALLY --------------------------------------------------------------
OWNED 8 SHARED VOTING POWER
BY None
EACH --------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 6,764,705*
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
None
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,764,705*
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12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [X]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.8%**
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14 TYPE OF REPORTING PERSON
CO
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* The reporting person may be deemed to own beneficially 40,000
shares of Series B Preferred Stock and 15,000 shares of Series C
Preferred Stock of the Issuer. The Series B Preferred Stock and
the Series C Preferred Stock will not be convertible into Common
Stock until the earlier of May 7, 2002 or certain change of
control events. The Series B Preferred Stock and Series C
Preferred Stock will automatically be converted into Common Stock
on May 7, 2004. Based on the Series B Preferred Stock's $8.00
fixed conversion price, the Series B Preferred Stock would be
convertible into 5,000,000 shares of Common Stock of the Issuer.
Based on the Series C Preferred Stock's $8.50 fixed conversion
price, the Series C Preferred Stock would be convertible into
1,764,705 shares of Common Stock of the Issuer. The amount
indicated for both the Series B Preferred Stock and the Series C
Preferred Stock excludes an indeterminate number of additional
shares of Common Stock that may be acquired upon conversion of
the Series B Preferred Stock or Series C Preferred Stock based on
certain market price based conversion provisions set forth in the
Certificate of Designation relating to such series, or in respect
of accrued and unpaid dividends.
** Based on information provided by the Issuer as of August 13,
1999.
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<PAGE> 5
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1 NAMES OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
L.E. Simmons
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
AF
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER 7 SOLE VOTING POWER
OF
SHARES 6,764,705*
BENEFICIALLY --------------------------------------------------------------
OWNED 8 SHARED VOTING POWER
BY None
EACH --------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 6,764,705*
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
None
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,764,705*
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12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [X]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.8%**
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14 TYPE OF REPORTING PERSON
IN
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* The reporting person may be deemed to own beneficially 40,000
shares of Series B Preferred Stock and 15,000 shares of Series C
Preferred Stock of the Issuer. The Series B Preferred Stock and
the Series C Preferred Stock will not be convertible into Common
Stock until the earlier of May 7, 2002 or certain change of
control events. The Series B Preferred Stock and Series C
Preferred Stock will automatically be converted into Common
Stock on May 7, 2004. Based on the Series B Preferred Stock's
$8.00 fixed conversion price, the Series B Preferred Stock would
be convertible into 5,000,000 shares of Common Stock of the
Issuer. Based on the Series C Preferred Stock's $8.50 fixed
conversion price, the Series C Preferred Stock would be
convertible into 1,764,705 shares of Common Stock of the Issuer.
The amount indicated for both the Series B Preferred Stock and
the Series C Preferred Stock excludes an indeterminate number of
additional shares of Common Stock that may be acquired upon
conversion of the Series B Preferred Stock or Series C Preferred
Stock based on certain market price based conversion provisions
set forth in the Certificate of Designation relating to such
series, or in respect of accrued and unpaid dividends.
** Based on information provided by the Issuer as of August 13,
1999.
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<PAGE> 6
Reference is made to the Statement on Schedule 13D (the "Statement")
filed on April 30, 1999 by the Reporting Persons with respect to their
beneficial ownership of common stock, par value $.01 per share (the "Common
Stock"), of Input/Output, Inc., a Delaware corporation (the "Issuer").
Capitalized terms used but not defined herein shall have the respective meanings
assigned to such terms in the Statement.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 3 of the Statement is amended to add the following:
On May 7, 1999, SCF-IV purchased 40,000 shares of Series B Preferred
Stock for $40,000,000 pursuant to the Purchase Agreement. On August 17, 1999,
SCF-IV purchased 15,000 shares of Series C Preferred Stock for $15,000,000
pursuant to the Purchase Agreement. SCF-IV obtained the consideration for these
purchases from its partners in the form of capital contributions.
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 of the Statement is amended to add the following:
The Shares are held for investment purposes. SCF-IV intends to review
its investment in the Issuer on a continuing basis and, depending upon the price
of, and other market conditions relating to, the Common Stock of the Issuer,
subsequent developments affecting the Issuer, the Issuer's business and
prospects, other investment and business opportunities available to SCF-IV,
general stock market and economic conditions, tax considerations and other
factors deemed relevant, SCF-IV may decide to increase or decrease the size of
its investment in the Issuer, subject to the terms of the Purchase Agreement.
In accordance with the terms of the Purchase Agreement and the Shares,
the Issuer has increased its Board of Directors by one and appointed David C.
Baldwin, as SCF-IV's designee, to the Board of Directors. The holders of Series
B Preferred Stock and the Series C Preferred Stock, voting together with
Permitted Parity Securities (which are defined as up to 20,000 shares of
preferred stock, each share of which (i) has a liquidation preference of not
more than $1,000 per share, (ii) has a dividend rate of not more than one
percent per annum, (iii) has no more than one vote per share with respect to
matters on which it votes together with the Series B Preferred Stock and Series
C Preferred Stock and (iv) is pari passu with the Series B Preferred Stock and
Series C Preferred Stock with respect to the payment of dividends and
distributions upon liquidation) as a separate class with one vote per share, are
entitled to elect one member of the Board of Directors of the Issuer.
Additionally, holders of the Series B Preferred Stock and the Series C
Preferred Stock are entitled to vote upon all matters upon which the holders of
Common Stock are entitled to vote. The holders of Series B Preferred Stock, when
voting together with the Common Stock as a single class, are entitled to cast a
number of votes equal to $1,000.00 (plus any accrued and unpaid dividends
through the record date for determining shareholders entitled to vote) divided
by the conversion price of $8.00 (as adjusted from time to time in accordance
with the Series B Preferred Stock's Certificate of Designation). The holders of
Series C Preferred Stock, when voting together with the Common Stock as a single
class, are entitled to cast a number of votes equal to $1,000.00 (plus any
accrued and
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<PAGE> 7
unpaid dividends through the record date for determining shareholders entitled
to vote) divided by the conversion price of $8.50 (as adjusted from time to time
in accordance with the Series C Preferred Stock's Certificate of Designation).
The Purchase Agreement, the Certificates of Designation relating to the
Series B Preferred Stock and the Series C Preferred Stock, and the Registration
Rights Agreement are included as exhibits hereto and incorporated herein by
reference.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
Item 5 of the Statement is amended to add the following:
(a) and (b). Based upon information provided by the Issuer, 50,667,631
shares of Common Stock were issued and outstanding as of August 13, 1999. SCF-IV
may be deemed to beneficially own 6,764,705 shares of Common Stock based on its
ownership of 40,000 shares of Series B Preferred Stock and 15,000 shares of
Series C Preferred Stock. The 6,764,705 shares of Common Stock represent shares
issuable to SCF-IV upon conversion of (i) the Series B Preferred Stock based on
an $8.00 fixed conversion price and (ii) the Series C Preferred Stock based upon
an $8.50 fixed conversion price. Such 6,764,705 shares of Common Stock would
constitute approximately 11.8% of the issued and outstanding Common Stock of the
Issuer. This amount excludes an indeterminate number of additional shares of
Common Stock that may be acquired by SCF-IV upon conversion of the Shares
pursuant to market price based conversions, or in respect of accrued and unpaid
dividends.
SCF-IV G.P. does not directly own any securities of the Issuer, but,
because it is the sole general partner of SCF-IV, it may be deemed to
beneficially own all of the shares of Common Stock of the Issuer SCF-IV is
deemed to beneficially own as described above. Simmons & Associates does not
directly own any securities of the Issuer, but, because it is the sole general
partner of SCF-IV G.P., it may be deemed to beneficially own all of the shares
of Common Stock of the Issuer SCF-IV G.P. is deemed to beneficially own. L. E.
Simmons does not directly own any securities of the Issuer, but, because he is
the sole stockholder of Simmons & Associates, he may be deemed to beneficially
own all of the shares of Common Stock of the Issuer Simmons & Associates is
deemed to beneficially own.
The Shares will not be convertible into Common Stock until the earlier
of May 7, 2002 or certain change of control events. Thus, SCF-IV and the other
Reporting Persons disclaim beneficial ownership of such shares of Common Stock.
(c). Other than the transactions described herein, neither SCF-IV nor
any person identified in Item 2 has effected any transactions in the Common
Stock of the Issuer during the preceding sixty days.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
*A. Purchase Agreement by and between SCF-IV and the Issuer, dated
April 21, 1999.
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<PAGE> 8
B. Certificate of Designation related to Series B Preferred Stock
(incorporated by reference to Exhibit 4.1 to the Issuer's
Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 7, 1999).
**C. Certificate of Designation related to Series C Preferred
Stock.
D. Registration Rights Agreement by and between SCF-IV and the
Issuer, dated May 7, 1999 (incorporated by reference to
Exhibit 10.2 to the Issuer's Current Report on Form 8-K filed
with the Securities and Exchange Commission on May 7, 1999).
*E. Joint Filing Agreement, dated as of April 30, 1999, by and
among SCF-IV, SCF-IV G.P., Simmons & Associates and L. E.
Simmons.
---------------
* Previously filed.
** Filed herewith.
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<PAGE> 9
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: August 18, 1999
SCF-IV, L.P.
By: SCF-IV, G.P., Limited Partnership
By: L. E. Simmons & Associates, Incorporated
By: /s/ L. E. Simmons
------------------------------------
L. E. Simmons, President
SCF-IV, G.P., LIMITED PARTNERSHIP
By: L. E. Simmons & Associates, Incorporated
By: /s/ L. E. Simmons
------------------------------------
L. E. Simmons, President
L. E. SIMMONS & ASSOCIATES, INCORPORATED
By: /s/ L. E. Simmons
------------------------------------
L. E. Simmons, President
L. E. SIMMONS
/s/ L. E. Simmons
----------------------------------------
L. E. Simmons, individually
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<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
*A. Purchase Agreement by and between SCF-IV and the Issuer, dated
April 21, 1999.
B. Certificate of Designation related to Series B Preferred Stock
(incorporated by reference to Exhibit 4.1 to the Issuer's
Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 7, 1999).
**C. Certificate of Designation related to Series C Preferred
Stock.
D. Registration Rights Agreement by and between SCF-IV and the
Issuer, dated May 7, 1999 (incorporated by reference to
Exhibit 10.2 to the Issuer's Current Report on Form 8-K filed
with the Securities and Exchange Commission on May 7, 1999).
*E. Joint Filing Agreement, dated as of April 30, 1999, by and
among SCF-IV, SCF-IV G.P., Simmons & Associates and L. E.
Simmons.
</TABLE>
---------------
* Previously filed.
** Filed herewith.
<PAGE> 1
EXHIBIT C
CERTIFICATE OF DESIGNATION
OF
SERIES C PREFERRED STOCK
OF
INPUT/OUTPUT, INC.
Pursuant to Section 151(g) of the Delaware General Corporation Law,
Input/Output, Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Company"), hereby certifies that the following
resolution was duly adopted by the Board of Directors of the Company on April
21, 1999, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Company (the "Certificate of
Incorporation"), which authorizes the issuance of up to 5,000,000 shares of
preferred stock, $0.01 par value.
RESOLVED, that pursuant to authority expressly granted to and vested in
the Board of Directors of the Company and pursuant to the provisions of the
Certificate of Incorporation, the Board of Directors hereby creates a series of
preferred stock, herein designated and authorized as the Series C Preferred
Stock, $0.01 par value per share, which shall consist of 15,000 of the 5,000,000
shares of preferred stock which the Company now has authority to issue, and the
Board of Directors hereby fixes the powers, designations, preferences and
relative, participating, optional and other special rights of the shares of such
series, and the qualifications, limitations and restrictions thereof as follows:
1. Number and Rank. The number of shares constituting the Series C
Preferred Stock shall be 15,000. The Series C Preferred Stock shall rank senior
to the Company's Series A Preferred Stock with respect to the payment of
dividends and distributions on Liquidation and on parity with the Series B
Preferred Stock with respect to the payment of dividends and distributions on
Liquidation.
2. Definitions. Unless the context otherwise requires, when used herein
the following terms shall have the meaning indicated.
"Adjusted Stated Value" with respect to each share of Series C
Preferred Stock means the Stated Value (a) increased at an annual rate of 8%
thereof, compounded quarterly, less (b) the amount of cash dividends actually
paid with respect to such share, in each case commencing on the Issue Date and
accruing through the applicable Conversion Date, or, in the case of a redemption
being effected pursuant to Sections 6(H) or 6(I), through the date of payment of
the redemption price.
"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, 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.
<PAGE> 2
"Average Market Price" means, for a given security, the average Market
Price for such security for the ten Trading Day period ending on and including
the Trading Day prior to the date of determination; provided, however, that if
during such period the Company takes any action or an action becomes effective
that would require an adjustment to the Conversion Price pursuant to Section 7
hereof, then such Average Market Price shall be appropriately adjusted to
reflect such action in a manner consistent with the adjustments set forth in
Section 7.
"Beneficially Own" or "Beneficial Ownership" has the meaning set forth
in Rules 13d-3 and 13d-5 of the Exchange Act.
"Board" means the Board of Directors of the Company.
"Business Combination" means (i) any consolidation or merger of the
Company with or into any Person or (ii) any Change of Control Stock Issuance, or
(iii) 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.
"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 governmental actions
to close.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated) of capital or capital stock of such Person and (ii) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Certificate" means the Certificate of Incorporation of the Company, as
amended (including any certificate of designation establishing a series of
preferred stock).
"Certificate of Designation" means this Certificate of Designation of
the Series C Preferred Stock.
"Change of Control Stock Issuance" shall mean any issuance, in a single
transaction or series of related transactions, by the Company of shares of
Common Stock or Common Stock Equivalents in connection with the acquisition of
assets (including cash) or securities by the Company or a Subsidiary of the
Company (including by way of a merger of a Subsidiary of the Company with or
into a Person), except where (i) the shareholders of the Company immediately
prior to such issuance own (in substantially the same proportion relative to
each other as such shareholders owned the Common Stock or Voting Stock of the
Company, as the case may be, immediately prior to such consummation) (x) more
than 50% of the Voting Stock of the Company immediately after such issuance, and
(y) more than 50% of the outstanding Common Stock immediately after such
issuance, (ii) the members of the Board immediately prior to entering into the
agreement relating to such issuance (or if no such agreement is entered into,
then immediately prior to the consummation of such issuance) constitute at least
a majority of the Board immediately after such issuance, with no agreements or
arrangements in place immediately after such consummation that would result in
the members of the Board immediately prior to the entering into the agreement
relating to such issuance
<PAGE> 3
ceasing to constitute at least a majority of the Board and (iii) no Person or
Group of Persons immediately after such issuance is the Beneficial Owner of 40%
or more of the total outstanding Voting Stock of the Company or Common Stock. In
calculating the percentage of the Voting Stock of the Company owned by the
shareholders of the Company immediately prior to an 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 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 (i) above.
"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 a Business Combination to which the Company is a party.
"Common Stock Equivalents" means (without duplication with any other
Common Stock or Common Stock Equivalents) 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.
"Company" means Input/Output, Inc. a Delaware corporation.
"Conversion Date" is defined in Section 6(D).
"Conversion Price" means $8.50, as adjusted from time to time in
accordance with Section 7.
"Conversion Ratio" is defined in Section 6(C).
"DGCL" means the General Corporation Law of the State of Delaware, as
amended, or any successor statute or other legislation.
"Dividend Payment Date" is defined in Section 3(A).
"Dividend Period" is defined in Section 3(A).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute, and the rules and regulations promulgated thereunder.
"Excluded Stock" means (i) shares of Common Stock issued by the Company
as a stock dividend payable in shares of Common Stock, or upon any subdivision
or split-up of the outstanding shares of Capital Stock in each case which is
subject to Section 7(B), or upon conversion of shares of Capital Stock (but not
the issuance of such Capital Stock which will be subject to the provisions
<PAGE> 4
of Section 7(A)(iii)), (ii) shares of Common Stock to be issued to employees,
directors, consultants and advisors of the Company pursuant to Stock Plans in
accordance with their respective terms.
"Group" means a group as contemplated by Section 13(d)(3) of the
Exchange Act.
"Holder" means a holder of record of Series C Preferred Stock.
"Initial Conversion Date" means the first to occur of any of the
following: (i) May 7, 2002, (ii) an agreement providing for a Business
Combination is approved by the Board or a Business Combination is consummated,
(iii) a Tender Offer for Common Stock is approved or recommended by the Board or
(iv) there is a redemption, repurchase or reacquisition by the Company of Rights
issued pursuant to the Rights Agreement or any waiver of the application of the
Rights Agreement to any Beneficial Owner other than Purchaser or its Affiliates
except in the case of this clause (iv) as approved by the Purchaser's
representative to the Board.
"Issue Date" means with respect to any shares of Series C Preferred
Stock the original date of issuance of such shares of Series C Preferred Stock.
"Junior Securities" means Capital Stock that, with respect to dividends
and distributions upon Liquidation, ranks junior to the Series C Preferred
Stock.
"Liquidation" means the voluntary or involuntary liquidation,
dissolution or winding up of the Company; provided, however, that a merger or
consolidation shall not be deemed a Liquidation nor shall the sale of assets not
requiring shareholder approval be deemed to be a Liquidation.
"Liquidation Preference" is defined in Section 5.
"Mandatory Conversion Date" is defined in Section 6(B).
"Market Price" means, with respect to a particular security, on any
given day, the last reported sale price regular way or, in case no such reported
sale takes place on such day, the average of the last closing bid and asked
prices regular way, in either case on the principal national securities exchange
on which the applicable security 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, the average of the
closing reported bid and asked 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 asked 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 Board and reasonably acceptable to the Holders of a
majority of the outstanding shares of Series C Preferred Stock.
<PAGE> 5
"Ordinary Cash Dividends" means any cash dividend or distribution
which, when combined on a per share of Common Stock basis with the per share
amounts of all other cash dividends and distributions paid on the Common Stock
during the 365-day period ending on the date of declaration of such dividend or
distribution (as adjusted to appropriately reflect any of the events referred to
in Section 7 and excluding cash dividends or distributions that resulted in an
adjustment to the Conversion Price), does not exceed 5% of the Market Price of a
share of Common Stock on the Trading Day immediately preceding the date of
declaration of such dividend or distribution.
"Parity Securities" means Capital Stock that, with respect to dividends
or distributions upon Liquidation, is pari passu with the Series C Preferred
Stock.
"Permitted Parity Securities" means up to 20,000 shares of Preferred
Stock of the Company constituting no more than one series of Preferred Stock,
each share of which (i) has a liquidation preference of not more than $1,000 per
share exclusive of accrued and unpaid dividends, (ii) has a dividend rate of not
more than one percent per annum, (iii) has no more than one vote per share with
respect to matters on which it votes together with the Series C Preferred Stock
and Series B Preferred Stock and other Permitted Parity Securities as a single
class and (iv) is pari passu with the Series C Preferred Stock and Series B
Preferred Stock with respect to the payment of dividends and distributions upon
Liquidation.
"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.
"Pro Rata Repurchase" means any purchase of shares of Common Stock by
the Company or any Affiliate thereof pursuant to any tender offer or exchange
offer subject to Section 13(e) of the Exchange Act, 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 Exchange
Act. 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.
"Purchase Agreement" means the Purchase Agreement dated as of April 21,
1999 between the Company and the Purchaser providing for the purchase by the
Purchaser of 40,000 shares of Series B Preferred Stock and up to 15,000 shares
of Series C Preferred Stock from the Company, including all schedules and
exhibits thereto.
"Purchaser" means SCF-IV, L.P., a Delaware limited partnership.
"Record Date" is defined in Section 3(A).
<PAGE> 6
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of May 7, 1999 between the Company and the Purchaser providing for
certain registration rights under the Securities Act with respect to the Common
Stock into which the Series B Preferred Stock and Series C Preferred Stock may
be converted.
"Rights Agreement" has the meaning set forth in Section 6(G).
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.
"Senior Securities" means Capital Stock that, with respect to dividends
or distributions upon Liquidation, ranks senior to the Series C Preferred Stock.
"Series B Preferred Stock" means the Series B Preferred Stock of the
Company issued to Purchaser pursuant to the Purchase Agreement.
"Stated Value" is an amount equal to $1,000.00 per share of Series C
Preferred Stock.
"Stock Plans" means the Company's stock option, stock incentive,
restricted stock, employee stock purchase or other similar plans, in each case
that have been approved by the Company's shareholders.
"Subsidiary" of a Person means (i) a corporation, a majority of whose
stock with voting power, under ordinary circumstances, to elect directors is at
the time of determination, directly or indirectly, owned by such Person or by
one or more Subsidiaries of such Person, or (ii) any other entity (other than a
corporation) in which such Person or one or more Subsidiaries of such Person,
directly or indirectly, at the date of determination thereof has a majority
ownership interest or, with respect to a limited partnership, is a general
partner of such limited partnership.
"Tender Offer" means any transaction to which Regulation 14D of the
Exchange Act applies.
"Trading Day" means a day on which the principal market with respect to
the security in question is regularly scheduled to be open for trading, or if
there is not such principal market, then a day on which the New York Stock
Exchange is regularly scheduled to be open for trading.
"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.
The foregoing definitions will be equally applicable to both the
singular and plural forms of the defined terms.
<PAGE> 7
3. Dividends and Distributions.
(A) The holders of Series C Preferred Stock shall be entitled
to receive out of the assets of the Company legally available for that
purpose, cumulative preferential cash dividends at a rate per annum of
one percent (1%) of the Stated Value (equivalent to $10 per annum or
$2.50 per quarter) for each share of Series C Preferred Stock, and,
except as provided in Section 3(B), no more, to be paid in accordance
with the terms of this Section 3. Such dividends shall be cumulative
from the Issue Date and shall be payable in arrears, when and as
declared by the Board, on March 31, June 30, September 30 and December
31 of each year (each such date being herein referred to as a "Dividend
Payment Date"), commencing on the first such Dividend Payment Date
following the Issue Date; provided that if any Dividend Payment Date
shall not be a Business Day, then the Dividend Payment Date shall be on
the next succeeding day that is a Business Day. The period from the
Issue Date to the next Dividend Payment Date and each quarterly period
between consecutive Dividend Payment Dates shall hereinafter be
referred to as "Dividend Periods." Dividends for the initial Dividend
Period shall be pro rated on a daily basis commencing on and including
the Issue Date on the basis of a 360-day year. Each such dividend shall
be paid to the holders of record of the Series C Preferred Stock as
their names appear on the share register of the Company on the
corresponding Record Date. As used above, the term "Record Date" means,
with respect to the dividend payable on March 31, June 30, September 30
and December 31, respectively, of each year, the preceding March 15,
June 15, September 15 and December 15, or such other record date
designated by the Board with respect to the dividend payable on such
respective Dividend Payment Date not exceeding 30 days preceding such
Dividend Payment Date. Dividends on account of arrears for any past
Dividend Periods may be declared and paid, together with any accrued
but unpaid interest thereon to and including the date of payment, at
any time, without reference to any Dividend Payment Date, to holders of
record on a date designated by the Board, not exceeding 30 days
preceding the payment date thereof, as may be fixed by the Board.
(B) If, on any Dividend Payment Date, the Company fails to pay
dividends, then until the dividends that were scheduled to be paid on
such date are paid, such dividends shall cumulate and shall accrue
additional dividends with respect to such unpaid dividends to and
including the date of payment thereof at the rate of one percent (1%)
per annum, compounded on a quarterly basis. Dividends for any period
less than a full quarterly Dividend Period or for a period commencing
on a Dividend Payment Date and ending on a Conversion Date shall
cumulate on a day-to-day basis and shall be computed on the basis of a
360-day year.
(C) So long as any shares of the Series C Preferred Stock
shall be outstanding, (i) the Company shall not declare or pay any
dividend whatsoever, whether in cash, property or otherwise, set aside
any cash or property for the payment of dividends, or make any other
distribution on any Junior Securities (except a dividend or
distribution payable solely in shares of Junior Securities), (ii) the
Company shall not declare or pay any dividend whatsoever, whether in
cash, property or otherwise, set aside any cash or property for the
payment of dividends, or make any other distribution on any Parity
Securities ranking on parity with the Series C Preferred Stock with
respect to dividends or distributions (except a
<PAGE> 8
dividend or distribution payable solely in shares of Junior
Securities), unless declared and paid pro rata with the Series C
Preferred Stock in proportion to the full amount to which they would
otherwise be respectively entitled, and (iii) the Company shall not and
shall cause its Subsidiaries not to repurchase, redeem or otherwise
acquire or set aside any cash or property for the repurchase or
redemption of any Junior Securities or Parity Securities, unless in
each such case all dividends to which the holders of the Series C
Preferred Stock shall have been entitled for all previous Dividend
Periods shall have been paid or declared and a sum of money sufficient
for the payment thereof shall have been set aside.
4. Voting Rights. The Holders shall have the following voting rights
with respect to the Series C Preferred Stock:
(A) Subject to applicable law, the shares of Series C
Preferred Stock shall have no voting rights other than as set forth in
this Section 4.
(B) Holders of shares of the Series C Preferred Stock shall be
entitled to vote upon all matters upon which holders of Common Stock
have the right to vote, and Holders shall have that number of votes on
all such matters as is equal to the Conversion Ratio that would apply
if such Holder's shares of Series C Preferred Stock were to be
converted pursuant to Section 6(A) (using the calculation of such
Conversion Ratio specified in Section 6(C)(i) and not Section 6(C)(ii)
for such purpose) as of the record date for the determination of the
shareholders entitled to vote on such matters, or, if no such record
date is established as of the date such vote is taken or any written
consent of shareholders is solicited, such votes to be counted together
with all other shares of capital stock having general voting powers and
not separately as a class. Fractional votes shall not, however, be
permitted and any fractional voting rights resulting from the above
formula (after aggregating all shares into which shares of Series C
Preferred Stock held by each Holder could be converted) shall be
rounded up to the nearest whole number.
(C) The Holders of the Series C Preferred Stock, voting
together with the Series B Preferred Stock and any Permitted Parity
Securities as a separate class with one vote per share of Series C
Preferred Stock, shall be entitled to elect one member of the Board at
each meeting or pursuant to each consent of the Company's shareholders
for the election of directors (unless the term of the director
previously elected by the Holders pursuant to this Section 4(C) would
continue after such election). If the director so elected by the
Holders shall cease to serve as director before his term shall expire,
the Holders may, at a special meeting of such Holders, elect a
successor to hold office for the unexpired term of such director. The
Secretary of the Company may call, and upon written request of the
Holders of ten percent (10%) or more of the outstanding Series C
Preferred Stock addressed to him at the principal office of the Company
shall call, such a special meeting of the Holders for the election of
such director as provided herein. Such meeting shall be held within
fifty (50) days after delivery of such request to such Secretary, at
the place and upon the notice provided by law and in the Bylaws of the
Company for the holding of meetings of its shareholders. Any director
who shall have been elected pursuant to this Section 4(C), may be
removed during the aforesaid term of office, with or without cause,
only by the affirmative
<PAGE> 9
vote of a majority votes entitled to be cast by the Holders of Series C
Preferred Stock, the Series B Preferred Stock and the holders of then
outstanding Permitted Parity Securities.
(D) (i) The consent of the Holders of at least a majority of
the Series C Preferred Stock, voting together with the Series B
Preferred Stock and the Permitted Parity Securities as a single class
with one vote per share, in person or by proxy, either in writing
without a meeting or at an annual or a special meeting of shareholders
called for the purpose, shall be necessary to:
(A) amend, alter or repeal, by way of merger or
otherwise, any of the provisions of the Certificate, so as
to authorize, create or issue any shares of Parity
Securities (other than Permitted Parity Securities) or
Senior Securities (or amend the provisions of any existing
class of Capital Stock to make such class of Capital Stock
a class of Parity Securities or Senior Securities),
(B) issue any Parity Securities (other than Permitted
Parity Securities) or Senior Securities, or
(C) consummate any Business Combination.
(ii) The consent of the Holders of at least a majority of
the Series C Preferred Stock, voting separately as a single
class with one vote per share, in person or by proxy, either
in writing without a meeting or at an annual or a special
meeting of shareholders called for the purpose, shall be
necessary to amend, alter or repeal, by way of merger or
otherwise, any of the provisions of (x) the Certificate of
Designation or any certificate of designation of terms of any
Parity Securities, or (y) the Certificate, so as to affect
adversely any of the rights, preferences or privileges of
Holders.
5. Liquidation Preference. In the event of any Liquidation, after
payment or provision for payment by the Company of the debts and other
liabilities of the Company and the liquidation preference of any Senior
Securities that rank senior to the Series C Preferred Stock with respect to
distributions on Liquidation, each Holder shall be entitled to receive an amount
in cash for each share of the then outstanding Series C Preferred Stock held by
such Holder equal to the Stated Value per share, plus an amount equal to all
accrued but unpaid dividends thereon, whether or not earnings are available in
respect of such dividends or such dividends have been declared, to and including
the date full payment is tendered to the Holders with respect to such
Liquidation, and no more (such amount being referred to herein as the
"Liquidation Preference"), before any distribution shall be made to the holders
of any Junior Securities upon the Liquidation of the Company. In case the assets
of the Company available for payment to the Holders upon a Liquidation are
insufficient to pay the full Liquidation Preference on all outstanding shares of
the Series C Preferred Stock and all outstanding Senior Securities or Parity
Securities, in each case ranking on parity with the Series C Preferred Stock as
to distributions on Liquidation, in the amounts to which the holders of such
shares are entitled, then the entire assets of the Company available for payment
to the Holders of Series C Preferred Stock and holders of such Senior Securities
or Parity Securities will be distributed ratably
<PAGE> 10
among the Holders of the Series C Preferred Stock and the holders of such Senior
Securities or Parity Securities, based upon the aggregate amount due on such
shares upon Liquidation. Written notice of any Liquidation of the Company,
stating a payment date and the place where the distributable amounts shall be
payable, shall be given by mail, postage prepaid, not less than 30 days prior to
the payment date stated therein, to the Holders of record of the Series C
Preferred Stock at their respective addresses as the same shall appear on the
books of the Company.
6. Conversion Rights. The Series C Preferred Stock shall be convertible
as follows:
(A) Conversion at Holder's Option. The Holder of any shares of
Series C Preferred Stock shall have the right at such Holder's option,
at any time after the Initial Conversion Date and prior to the
Mandatory Conversion Date and without the payment of any additional
consideration, to convert any or all of such shares of Series C
Preferred Stock into a number of fully paid and nonassessable shares of
Common Stock for each such share of Series C Preferred Stock equal to
the Conversion Ratio, upon the terms hereinafter set forth.
(B) Mandatory Conversion. On May 7, 2004 (the "Mandatory
Conversion Date"), each outstanding share of Series C Preferred Stock
shall, without any action on the part of the Holder of such share, be
converted automatically into a number of fully paid and nonassessable
shares of Common Stock equal to the Conversion Ratio, upon the terms
hereinafter set forth; provided, however, that if the shares of Common
Stock issuable upon conversion of the Series C Preferred Stock are not
immediately freely transferrable under the Securities Act by the
Holders thereof, the Mandatory Conversion Date shall be delayed until
such time as the resale of the Common Stock issuable upon conversion of
such Series C Preferred Stock has been registered under the Securities
Act in accordance with the terms of the Registration Rights Agreement.
(C) Conversion Ratio. In the event of a conversion pursuant to
Section 6(A) or 6(B), the Conversion Ratio shall be a number of shares
of Common Stock calculated using either of the following methods at the
option of the Holder as may be specified by the Holder at the time of
conversion, or, if no such specification is made, using the method that
results in the highest number:
(i) the amount determined by dividing (a) the Stated
Value plus any accrued and unpaid dividends to and including
the applicable Conversion Date by (b) the Conversion Price in
effect on the applicable Conversion Date; or
(ii) the amount determined by dividing (a) the
Adjusted Stated Value as of the applicable Conversion Date by
(b) the Average Market Price determined as of the applicable
Conversion Date (but not less than the lesser of $.01 or the
par value per share of the Common Stock at the time of
conversion).
<PAGE> 11
(D) Mechanics of Conversion. The Holder of any shares of
Series C Preferred Stock may exercise the conversion right specified in
Section 6(A) by surrendering to the Company or any transfer agent of
the Company the certificate or certificates representing the shares of
Series C Preferred Stock to be converted, accompanied by written notice
specifying the number of such shares to be converted. If the
certificates representing shares of Common Stock issuable upon
conversion of shares of Series C Preferred Stock are to be issued in a
name other than the name on the face of the certificates representing
such shares of Series C Preferred Stock, such certificates shall be
accompanied by such evidence of the assignment and such evidence of the
signatory's authority with respect thereto as deemed appropriate by the
Company or its transfer agent. Conversion shall be deemed to have been
effected (i) with respect to conversions pursuant to Section 6(A), on
the date when the notice of an election to convert pursuant to Section
6(A) and certificates representing the shares being converted are
actually received by the Company or any transfer agent of the Company,
or (ii) with respect to mandatory conversion pursuant to Section 6(B),
on the Mandatory Conversion Date. Such dates that the conversion shall
be deemed to be effective shall be referred to herein as the
"Conversion Date." Subject to the provisions of Section 7(G), as
promptly as practicable after the Conversion Date, the Company shall
issue and deliver to or upon the written order of such Holder a
certificate or certificates for the number of shares of Common Stock to
which such Holder is entitled upon such conversion and a check or cash
with respect to any fractional interest in a share of Common Stock, as
provided in Section 6(E). The person in whose name the certificate or
certificates for shares of Common Stock are to be issued shall be
deemed to have become a holder of record of such shares of Common Stock
on the applicable Conversion Date. Upon conversion of only a portion of
the shares covered by a certificate representing shares of Series C
Preferred Stock surrendered for conversion pursuant to Section 6(A),
the Company shall issue and deliver to or upon the written order of the
Holder of the certificate so surrendered for conversion, at the expense
of the Company, a new certificate representing the number of shares of
Series C Preferred Stock representing the unconverted portion of the
certificate so surrendered.
(E) Fractional Shares. No fractional shares of Common Stock or
scrip shall be issued upon conversion of shares of Series C Preferred
Stock. If more than one share of Series C Preferred Stock shall be
surrendered for conversion at any one time by the same Holder, the
number of shares of Common Stock issuable upon conversion thereof shall
be computed on the basis of the aggregate number of shares of Series C
Preferred Stock so surrendered. Instead of any fractional share of
Common Stock which would otherwise be issuable upon conversion of any
shares of Series C Preferred Stock, the Company shall pay a cash
adjustment in respect of such fractional interest in an amount equal to
that fractional interest of the Market Price of the Common Stock on the
Conversion Date.
(F) Authorization and Issuance. The Company covenants and
agrees that:
(i) the shares of Common Stock issuable upon any
conversion of any shares of Series C Preferred Stock will be
deemed to have been issued to the Person exercising such
conversion rights set forth herein on the Conversion Date, and
the Person exercising such conversion rights will be deemed
for all purposes to have become the record holder of such
shares of Common Stock on the Conversion Date;
<PAGE> 12
(ii) all shares of Common Stock which may be issued
upon any conversion of any Series C Preferred Stock will, upon
issuance, be fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issue thereof;
(iii) the Company will take all such action as may be
necessary to assure that all shares of Common Stock issuable
upon conversion of shares of Series C Preferred Stock may be
issued without violation of any applicable law or regulation
or of any requirements of any domestic securities exchange
upon which securities of the same class may be listed and
shall endeavor to list the shares of Common Stock required to
be delivered upon conversion of the shares of Series C
Preferred Stock, prior to such delivery, upon each national
securities exchange, if any, upon which the outstanding Common
Stock is listed at the time of such delivery;
(iv) the Company will not take any action which would
result in any adjustment of the Conversion Price if the total
number of shares of Common Stock issuable after such action
upon conversion of all shares of Series C Preferred Stock,
together with all shares of Common Stock then outstanding and
all shares of Common Stock then issuable upon the exercise of
all outstanding Common Stock Equivalents, would exceed the
total number of shares of Common Stock then authorized by the
Certificate of Incorporation;
(v) the Company will at all times reserve and keep
available, out of its authorized but unissued shares of Common
Stock or out of shares of Common Stock held in its treasury,
the full number of shares of Common Stock into which all
shares of the Series C Preferred Stock having conversion
privileges from time to time outstanding are convertible; and
(vi) the Company will at no time close its transfer
books against the transfer of the Series C Preferred Stock or
of any share of Common Stock issued or issuable upon the
conversion of the Series C Preferred Stock in any manner which
interferes with the timely conversion of the Series C
Preferred Stock.
(G) Rights. Whenever the Company issues shares of Common Stock
upon conversion of Series C Preferred Stock, the Company will issue,
together with each such share of Common Stock, one right to purchase
Series A Preferred Stock of the Company (or other securities in lieu
thereof) pursuant to the Rights Agreement dated as of January 17, 1997
by and between the Company and Harris Trust and Savings Bank, as
amended (the "Rights Agreement"), or any similar rights, if any, issued
to holders of Common Stock in addition thereto or in the replacement
therefor (such rights, together with any additional or replacement
rights, being collectively referred to as the "Rights"), whether or not
such rights shall be exercisable at such time, but only if such Rights
are issued and outstanding and held by other holders of Common Stock
(or are evidenced by outstanding share certificates representing Common
Stock) at such time and have not expired or been redeemed.
<PAGE> 13
(H) Cash Redemption Option. Notwithstanding the provisions of
Sections 6(A) or 6(B), in the event of a conversion of Series C
Preferred Stock pursuant to which the Conversion Ratio is determined
using Section 6(C)(ii) (rather than Section 6(C)(i)), then, provided
that full cumulative dividends shall have been paid or declared and set
apart for payment upon all outstanding shares of Series C Preferred
Stock for all past dividend periods, the Company may offer to redeem
for cash any or all of such shares of Series C Preferred Stock at a
redemption price per share equal to the Adjusted Stated Value (a
"Redemption Offer"), in lieu of effecting such conversion. To effect a
Redemption Offer, the Company must give notice of such election,
specifying the redemption price, (a "Redemption Offer Notice") to the
Holder of such shares of Series C Preferred Stock (i) with respect to
conversions pursuant to Section 6(A), within three Business Days after
the notice of an election to convert pursuant to Section 6(A) is
received by the Company or any transfer agent of the Company, or (ii)
with respect to mandatory conversion pursuant to Section 6(B), on the
Mandatory Conversion Date. If the Company fails to give a Redemption
Offer Notice within the foregoing time periods, it may not make a
Redemption Offer. If the Company has given a Redemption Offer Notice
with respect to more than 50% of the shares of Series C Preferred Stock
to be converted, then within three Business Days following receipt of a
Redemption Offer Notice, the Holder may give notice to the Company
declining the Company's offer to redeem up to 50% of the shares of
Series C Preferred Stock to be converted, in which event the Company
will not be entitled to redeem such shares as specified and must
convert such shares into Common Stock in accordance with the terms
hereof effective as of the Conversion Date. The Company shall be
entitled to redeem all of the shares subject to the Redemption Offer
Notice at the redemption price set forth above to the extent the Holder
does not properly decline such redemption in accordance with the prior
sentence. The Company shall make any such redemption payment by wire
transfer to an account specified by the Holder on the first Business
Day following the expiration of the three Business Day period after the
Holder's receipt of the Redemption Offer Notice, failing which payment
the Company shall not be entitled to redeem such shares but shall be
obligated to convert all of such Shares into Common Stock in accordance
with the terms hereof.
(I) Limitation on Number of Conversion Shares. Notwithstanding
the provisions of Sections 6(A) or 6(B), if the Company ever issues
Common Stock upon conversion of Series C Preferred Stock pursuant to
which the Conversion Ratio is calculated pursuant to Section 6(C)(ii)
rather than Section 6(C)(i), the Company shall not be obligated to
issue, in the aggregate, a number of shares of Common Stock in excess
of the NYSE Limitation upon conversion of the Series C Preferred Stock.
The "NYSE Limitation" shall mean the maximum number of shares of Common
Stock that could be issued by the Company pursuant to the conversion of
the Series B Preferred Stock, the Series C Preferred Stock and any
substantially similar series of Permitted Parity Securities issued to
the Holder pursuant to the terms of the Purchase Agreement without
triggering a requirement to obtain the approval of the Company's
shareholders of such issuance pursuant to Section 312.03(c) of the New
York Stock Exchange Listed Company Manual as in effect on the Issue
Date. To the extent that any shares of Series C Preferred Stock are
submitted for conversion such that the NYSE Limitation would be
exceeded, such excess shares shall, in lieu of being converted into
Common Stock, be redeemed in exchange for a cash payment equal to the
Adjusted
<PAGE> 14
Stated Value per share. The Company shall make any such redemption
payment by wire transfer to an account specified by the Holder on the
second Business Day following the Conversion Date on which the shares
of Series C Preferred Stock would otherwise be converted into Common
Stock.
7. Conversion Price Adjustments. The Conversion Price shall be subject
to adjustment from time to time as follows:
(A) Common Stock Issued at Less than Market Price or
Conversion Price. If the Company issues or sells any Common Stock other
than Excluded Stock without consideration or for a consideration per
share less than the Market Price per share of Common Stock, on the
Trading Day immediately preceding such issuance or sale or less than
the Conversion Price in effect immediately prior to such issuance or
sale, the Conversion Price in effect immediately prior to each such
issuance or sale will immediately (except as provided below) be reduced
to the price determined by multiplying the Conversion 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 immediately 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 Trading Day
immediately preceding such issuance or sale and (y) the Conversion
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. For the purposes of
any adjustment of the Conversion Price pursuant to this Section 7(A),
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;
(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, irrespective of any accounting
treatment; provided, however, that such fair value as
determined by the Board shall not exceed the aggregate Market
Price of the shares of Common Stock being issued as of the
date the Board authorizes the issuance of such shares;
<PAGE> 15
(iii) in the case of the issuance of (a) options,
warrants or other rights to purchase or acquire Common Stock
(whether or not at the time exercisable), (b) securities by
their terms convertible into or exchangeable for Common Stock
(whether or not at the time so convertible or exchangeable) or
options, warrants or rights to purchase such convertible or
exchangeable securities (whether or not at the time
exercisable):
(1) aggregate maximum number of shares of
Common Stock deliverable upon exercise of
such options, warrants or other rights to
purchase or acquire Common Stock 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 Section 7(A)(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;
(2) 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, 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
Section 7(A)(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;
(3) 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 Conversion Price as then in effect
shall forthwith be readjusted to such
<PAGE> 16
Conversion 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;
(4) 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 Conversion Price shall have been
adjusted upon the issuance thereof, the
Conversion Price shall forthwith be
readjusted to such Conversion 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
(5) if the Conversion Price shall have been
adjusted upon the issuance of any such
options, warrants, rights or convertible or
exchangeable securities, no further
adjustment of the Conversion 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 Conversion Price
shall be made pursuant to subclauses (1) or (2) of this
Section 7(A)(iii).
(B) 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 Conversion Price in
effect 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
of any shares of Series C Preferred Stock surrendered for conversion or
exchange after such date shall be entitled to receive the number of
shares of Common Stock which such holder would have owned or been
entitled to receive after such date had such Series C Preferred Stock
been converted or exchanged immediately prior to such date. Successive
adjustments in the Conversion Price shall be made whenever any event
specified above shall occur.
<PAGE> 17
(C) 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 shares of any class other than its Common
Stock or (2) of evidence of indebtedness of the Company or any
Subsidiary or (3) of assets (including cash but excluding Ordinary Cash
Dividends, and dividends or distributions referred to in Section 7(B)),
or (4) of rights or warrants, then in each such case the Conversion
Price in effect immediately prior thereto shall be reduced to the price
determined by multiplying the Conversion 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 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. Such adjustment shall be made successively
whenever such a record date is fixed. In the event that such
distribution is not so made, the Conversion Price then in effect shall
be readjusted, effective as of the date when the Board determines not
to distribute such shares, evidences of indebtedness, assets, rights or
warrants, as the case may be, to the Conversion Price that would then
be in effect if such record date had not been fixed.
(D) Certain Repurchases of Common Stock. In case the Company
effects a Pro Rata Repurchase of Common Stock, then the Conversion
Price shall be reduced to the price determined by multiplying the
Conversion 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 (x) the number of shares of Common Stock
outstanding immediately before such Pro Rata Repurchase and (y) 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 (a) the number of shares of Common Stock outstanding immediately
prior to such Pro Rata Repurchase minus the number of shares of Common
Stock so repurchased and (b) the Market Price per share of Common Stock
on the Trading Day immediately preceding the first public announcement
of such Pro Rata Repurchase.
(E) Business Combinations. In case of any Business Combination
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 Section 7(B)), each
share of Series C Preferred Stock shall after the date of such Business
Combination or reclassification be convertible into the number of
shares of stock or other securities or property (including cash) to
which the Common Stock issuable upon conversion of such share of Series
C Preferred Stock immediately prior to such Business Combination or
reclassification would have been entitled upon such Business
Combination or reclassification; and in any such case, if necessary,
the provisions set forth herein with respect to the rights and
interests thereafter of the Holders of the shares of Series C Preferred
Stock shall be appropriately adjusted so as to be applicable, as nearly
as may reasonably be, to any shares of stock or other securities or
<PAGE> 18
property thereafter deliverable on the conversion of the shares of
Series C Preferred Stock. In determining the kind and amount of stock,
securities or the property receivable 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 of the Series C Preferred
Stock shall have the right to make a similar election as of the
Conversion Date with respect to the number of shares of stock or other
securities or property into which the Series C Preferred Stock shall be
convertible.
(F) Rounding of Calculations; Minimum Adjustments. All
calculations under this Section 7 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 Section 7 to the
contrary notwithstanding, no adjustment in the Conversion 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 be Conversion Price be adjusted to less than the
lesser of $.01 per share or the par value of the Common Stock.
(G) Timing of Issuance of Additional Common Stock Upon Certain
Adjustments. In any case in which the provisions of this Section 7
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 of any share of
Series C Preferred Stock converted after such record date and before
the occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment required by
such event over and above the shares of Common Stock issuable upon such
conversion before giving effect to such adjustment and (B) 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 such Holder a due bill or other appropriate instrument
evidencing such Holder's right to receive such additional shares, and
such cash, upon the occurrence of the event requiring such adjustment.
(H) Statement Regarding Adjustments. Whenever the Conversion
Price shall be adjusted as provided in Section 7 the Company shall
forthwith file, at the office of any transfer agent for the Series C
Preferred Stock and at the principal office of the Company a statement
showing in reasonable detail the facts requiring such adjustment and
the Conversion Price that shall be in effect after such adjustment and
the Company shall also cause a copy of such statement to be sent by
mail, first class postage prepaid, to each Holder at its address
appearing in the Company's records.
(I) Notices. In the event that the Company shall propose to
take any action of the type described in Section 7 (but only if the
action of the type described in Section 7 would result in an adjustment
in the Conversion Price or a change in the type of securities or
property to be delivered upon a conversion or exchange of Series C
Preferred Stock), the Company shall give notice to each Holder, in the
manner set forth in Section 7(H), which
<PAGE> 19
notice shall specify the record date, if any, with respect to any such
action and the approximate date on which such action is to take place.
Such notice shall also set forth the facts with respect thereto as
shall be reasonably necessary to indicate the effect on the Conversion
Price and the number, kind or class of shares or other securities or
property which shall be deliverable upon conversion of shares of the
Series C Preferred Stock. In the case of any action which would require
the fixing or a record date, such notice shall be given at least 10
days prior to the date so fixed, and in case of all other action, such
notice shall be given at least 15 days prior to the taking of such
proposed action. Failure to give such notice, or any defect therein,
shall not affect the legality or validity of any such action.
(J) 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 6 and 7 and in taking of
all such action as may be necessary or appropriate in order to protect
the conversion rights of the Holders of the Series C Preferred Stock
against impairment.
(K) No Duplication of Adjustments. If any action would require
adjustment of the Conversion Price pursuant to more than one of the
provisions of this Section 7, only one adjustment shall be made and
such adjustment shall be the adjustment that results in the lowest
Conversion Price after giving effect to such adjustment.
8. Limitations on Series C Preferred Stock. No share or shares of
Series C Preferred Stock the Company acquires through redemption, option,
exchange or otherwise will be reissued as Series C Preferred Stock, and all such
shares will be canceled, retired and eliminated from the shares of Series C
Preferred Stock which the Company will be authorized to issue, and will be
restored to the status of authorized but undesignated preferred stock of the
Company eligible for designation and reissuance subject to the terms hereof and
the Certificate. The Company will not issue any further shares of Series C
Preferred Stock.
9. Waivers. With the written consent of Holders of a Majority of the
Series C Preferred Stock, the obligations of the Company and the rights of the
Holders under this Certificate of Designation may be waived (either generally or
in a particular instance, either retroactively or prospectively and either for a
specified period of time or indefinitely). Upon the effectuation of each such
waiver, the Company will promptly give written notice thereof to the Holders who
have not previously consented thereto in writing.
10. Redemption. Except as expressly set forth herein, the Company shall
have no right or obligation to redeem the Series C Preferred Stock.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 20
IN WITNESS WHEREOF, this Certificate has been signed on behalf of the
Company by its President and attested to by its Secretary, all as of the 16th
day of August, 1999.
INPUT/OUTPUT, INC.
By: /s/ Robert P. Brindley
----------------------------------
Robert P. Brindley
Executive Vice President
and Secretary
ATTEST:
By: /s/ Roy Kelm
------------------------------------------
Roy Kelm
Vice President, Marine Division
