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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) June 30, 1998
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MITCHAM INDUSTRIES, INC.
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(Exact name of registrant as specified in its Charter)
Texas 001-13490 76-0210849
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(State or other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification Number)
44000 Highway 75 South, Huntsville, Texas 77342
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (409) 291-2277
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N/A
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(Former address if changed since last report)
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ITEM 5. OTHER EVENTS
a. In June 1998, the Company entered into a Preferred Supplier Agreement (the
"agreement") with Input/Output, Inc. ("I/O"), thus replacing the parties'
Exclusive Lease Referral agreement.
The terms provide that Mitcham Industries will purchase an estimated $90
million to $100 million (after discounts) of I/O products over a five year term
ending May 31, 2003, including Mitcham's May 1998 $15 million purchase of a
substantial portion of I/O's lease fleet. I/O will refer all rental and
lease/purchase inquiries from customers worldwide to Mitcham Industries during
the term of the agreement. Under the terms of the previous Exclusive Lease
Referral Agreement, I/O referred only rental inquiries from its North and South
American customers to Mitcham. Additionally, I/O has agreed in principle not to
rent products covered by the Preferred Supplier Agreement except in limited
circumstances. The agreement is attached hereto as Exhibit 10.1.
b. On July 9, 1998, the Company issued a press release with respect to the
signing of the agreement with I/O. The agreement was effective June 30,
1998. The press release is attached hereto as Exhibit 99.
ITEM 7.
FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements. None
(b) Pro Forma Financial Information. None.
(c) Exhibits.
Exhibit Number Description
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10.1 Preferred Supplier Agreement, dated June 30, 1998,
between the Company and I/O.
99 Press Release dated July 9, 1998
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned hereunto duly authorized.
MITCHAM INDUSTRIES, INC.
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(Registrant)
DATED: July 15, 1998
By: /s/ Roberto Rios
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Roberto Rios
Vice President - Finance
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EXHIBIT INDEX
Exhibit Number Description
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10.1 Preferred Supplier Agreement, dated June 30, 1998, between
the Company and I/O.
99 Press Release dated July 9, 1998
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PREFERRED SUPPLIER AGREEMENT
THIS PREFERRED SUPPLIER AGREEMENT (the "AGREEMENT") is executed as of the
date set forth below by and between INPUT/OUTPUT, INC., a Delaware corporation
("SUPPLIER") and MITCHAM INDUSTRIES, INC., a Texas corporation ("BUYER").
RECITALS:
A. Supplier is primarily engaged in the business of manufacturing and selling
seismic data acquisition equipment and related products. Additionally,
Supplier has been engaged in the business of leasing its equipment to its
customers under lease/purchase agreements as well as providing financing
for customer purchases.
B. Buyer is primarily engaged in the business of renting seismic equipment,
including equipment and products manufactured by Supplier, to its
customers.
C. Pursuant to that certain Equipment Purchase Agreement (the "PURCHASE
AGREEMENT") dated as of May 29, 1998, between Supplier and Buyer, Supplier
sold to Buyer a substantial portion of its inventory held for lease to
customers and Supplier and Buyer agreed to execute and deliver this
Agreement for their mutual benefit and consideration.
NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Supplier and Buyer hereby agree as follows:
1. DEFINED TERMS. As used in this Agreement, the following terms shall
have the meanings set forth below:
"ACTUAL PURCHASE PRICE" means the list price of Products purchased by
Buyer pursuant to this Agreement, less the amount of any applicable
discounts or credits against the list price.
"BUYER DEFAULT" means the occurrence of any of the following:
(i) the failure of Buyer to pay the purchase price of any
Products or to pay any other valid invoice sent by Supplier under the
terms hereof, on or before the date such payment was due, and the
continuation of that failure for fifteen (15) days after written
notice thereof from Supplier to Buyer;
(ii) the breach of any of Buyer's covenants and agreements
hereunder, and the continuation of that failure for fifteen (15) days
after written notice thereof from Supplier to Buyer;
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(iii) the filing of a petition for relief by Buyer under any
bankruptcy or insolvency laws; and
(iv) one of Supplier's competitors becomes a substantial
shareholder of Buyer and/or any of its affiliated companies.
"PRODUCTS" means the products and equipment manufactured and/or sold
by Supplier, and all related and ancillary equipment, products and property
used and sold in connection therewith, which are the products being offered
for sale to Supplier's customers as of the Effective Date. Products shall
not include any new products introduced and manufactured by Supplier after
the Effective Date; provided, however, that Supplier will negotiate with
Buyer for the inclusion of any such new products within the scope of this
Agreement on a case-by-case basis.
"SUPPLIER DEFAULT" means the occurrence of any of the following:
(i) the breach of any of Supplier's covenants and agreements
hereunder, and the continuation of that failure for fifteen (15) days
after written notice thereof from Supplier to Buyer; and
(ii) the filing of a petition for relief by Supplier under any
bankruptcy or insolvency laws.
"TERM" means the period commencing with the Effective Date and ending
on May 31, 2003.
2. MINIMUM ANNUAL PURCHASES. During each Year of the Term, Buyer agrees
to deliver purchase orders to Supplier for, and to purchase from Supplier,
Products having a minimum aggregate list price as follows:
May 26, 1998 through May 31, 1999 ("YEAR 1") $30 million
June 1, 1999 through May 31, 2000 ("YEAR 2") $25 million
June 1, 2000 through May 31, 2001 ("YEAR 3") $25 million
June 1, 2001 through May 31, 2002 ("YEAR 4") $25 million
June 1, 2002 through May 31, 2003 ("YEAR 5") $25 million
The above amounts shall be based on the Supplier's published list prices for its
Products as of May 31, 1998. Supplier acknowledges and agrees that the Products
purchased by Buyer in connection with the Purchase Agreement are to be credited
to Buyer's minimum annual purchase obligations in Year 1. Buyer may apply the
amount of any purchases in excess of the minimum annual purchase amount in any
Year towards its minimum annual purchase commitment for the following Year. In
the event that at least 75% of the minimum annual purchase requirement is
satisfied by Buyer in Year 2 or 3; the Supplier will not terminate this
agreement due to Buyer
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Default if Buyer purchases the total of shortfall plus the minimum annual
purchase requirement in the subsequent year. For example: Year 2 minimum
annual purchase requirement is $25 million and Buyer actually purchases
$18.75 million in Product at list price during Year 2. Year 3 minimum annual
purchase requirement is $25 million. In order to prevent termination of the
agreement, Buyer must purchase $6.25 million plus $25 million ($31.25 million
total) of Product at list price during Year 3.
3. DISCOUNTS AND CREDITS. Provided no Buyer Default has occurred, Buyer
shall be entitled to the following discounts and credits:
(a) DISCOUNTS. Supplier agrees that Buyer shall be entitled to a
preferred customer discount on its purchases of Products during the Term.
The discount to be deducted from the list price for Products shall be
different for different types of Products and is set forth on SCHEDULE 1
attached hereto.
(b) CREDITS. In addition to the discounts described above, Supplier
agrees that Buyer shall be entitled to a credit against the purchase price
of Products purchased in Year 1 through Year 5 (excluding Products
purchased by Buyer pursuant to the Purchase Agreement), in the amount of
ten percent (10%) of the aggregate Actual Purchase Price of Products
purchased by Buyer during the preceding fiscal Year. The credit must be
used during the Year following the Year in which it was earned or any
unused credit will be waived. Fifty percent (50%) of the Actual Purchase
Price of Products purchased with the credit will apply toward Buyer's
minimum annual purchase requirements for that Year. For example: Buyer
purchases an aggregate $25 million of Products at list price in Year 2.
Buyer will be entitled to a $2.5 million credit towards purchase of
Products at list price in Year 3. 50% of the Actual Purchase Price of
Products purchased with the $2.5 million credit will apply towards the
minimum annual purchase requirement for Year 3.
4. PAYMENT TERMS; SECURITY INTERESTS. Buyer shall pay the purchase price
of all Products purchased from Supplier within thirty (30) days from the date of
the invoice; provided, however, Buyer will be entitled to an additional 2%
discount from the invoice purchase price if payment thereof is received by
Supplier within ten (10) days from date of shipment. Buyer hereby grants to
Supplier a purchase money security interest in any Products sold hereunder until
the purchase price therefor is paid in full. If the aggregate purchase price
for Products purchased at any one time is equal to $5 million or more, Buyer, at
Supplier's option, will, prior to Supplier's shipment of Products to Buyer,
execute and deliver to Supplier a UCC-1 financing statement covering the
Products being purchased and Supplier shall file that financing statement in
order to perfect its purchase money security interest in those Products.
5. RESALE RESTRICTIONS; RIGHT OF FIRST REFUSAL. The parties understand
and agree that Buyer is in the business of renting Products to its customers,
and will not be not acquiring Products for resale to third parties (other than
Products that are purchased from Buyer by
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Buyer's customers pursuant to purchase options granted under rental
agreements). As part of the consideration for the discounts and credits
being granted to Buyer, Buyer agrees that it will not offer for resale to
third parties, without the prior written consent of Supplier, any Products
that it has purchased from Supplier that were manufactured less than 3 years
from the date of the offer ("NEW PRODUCTS"). In connection with the sale of
Products (other than New Products and Products that are purchased from Buyer
by Buyer's customers pursuant to purchase options granted under rental
agreements) where the aggregate sales price is equal to or greater than $1
million ("ROFR PRODUCTS"), Supplier shall have a right of first refusal to
purchase any such ROFR Products that Mitcham desires to sell to a third party
pursuant to a bona fide offer on the same terms and conditions as in that
offer. Buyer shall give Supplier written notice of its proposal to sell ROFR
Products to a third party setting forth the terms of such offer ("NOTICE").
Supplier shall have ten (10) days after receipt of the Notice to provide
written notice to Buyer of its intent to exercise its right of first refusal,
and shall, within ten (10) days thereafter, purchase those Products from
Buyer on the terms set forth in the Notice.
6. RENTAL RESTRICTIONS. Supplier will not offer to rent Products to
third parties during the Term, other than the leasing or rental of Products to
third parties for experimental or developmental purposes, without the express
written consent of Buyer.
7. RENTAL REFERRAL. During the Term, Supplier shall refer all rental
inquiries, including rentals with purchase options for Products received by
Supplier to Buyer. Buyer agrees to use its best efforts to promote Supplier's
Products during the Term. If Buyer cannot agree to rental terms with the
referred customer, then Supplier reserves the right to enter a short term rental
or lease/purchase agreement with the customer.
8. TRAINING; MAINTENANCE AND REPAIRS. Supplier will offer training
courses for Buyer, and its employees and representatives of Buyer's customers
that rent Products, at a 25% discount to Supplier's published rates for those
services in effect from time-to-time. Supplier will not, however, have any
responsibility or pay for travel, lodging, food or incidental expenses of
attendees of training courses. Supplier will provide maintenance and repairs to
all Products, at Supplier's published rates in effect from time-to-time.
9. PREFERRED PRICING. In consideration for Buyer's commitment to make
the minimum annual purchases described in SECTION 2 above, Supplier agrees that,
provided no Buyer Default has occurred and is continuing, it will not, during
the Term, offer pricing for Products to any other customer that is in the same
line of business as Buyer (i.e., seismic equipment rentals) that is more
favorable than that offered to Buyer under the terms of this Agreement.
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10. DEFAULTS; TERMINATION.
(a) SUPPLIER DEFAULT. Upon the occurrence of a Supplier Default,
Buyer shall have the right to (i) terminate this Agreement, and exercise
such remedies and seek such relief against Supplier as Buyer may be
entitled under applicable law.
(b) BUYER DEFAULT. Upon the occurrence of a Buyer Default,
Supplier shall have the right to (i) terminate this Agreement, and (ii) if
the Buyer Default results from the failure to pay the purchase price of any
Products, exercise such remedies and seek such relief against Buyer as
Supplier may be entitled under applicable law.
11. LIMITED WARRANTY. Supplier will warrant all Products in accordance
with the terms of its standard Limited Warranty attached hereto as EXHIBIT A
("LIMITED WARRANTY"); provided, however, that Supplier shall have the right,
during the Term, to modify the Limited Warranty upon prior written notice to
Buyer, but any such modifications shall only be effective for Products purchased
after the date of the modification. Except for the Limited Warranty, Supplier
makes no express or implied warranties with respect to the Products including,
but in no way limited to, any warranty of condition, merchantability,
habitability, or fitness for a particular use, or with respect to the value,
profitability, or marketability of such Products.
12. PURCHASE ORDER ACCEPTANCE AND PAYMENT. All sales of Products are
subject to Supplier's standard conditions of sales, however, Supplier reserves
the right to, at any time, change, alter or amend these conditions by giving
prior written notice. Buyer shall confirm with Supplier all relevant delivery
information prior to the submission of a purchase order for Products.
13. TAXES. All sales, value added, use, excise and other taxes (other
than income or similar taxes) arising from the transactions contemplated by this
Agreement are to be paid by Buyer. Buyer agrees to indemnify and hold Supplier
harmless from and against any liability for such sales, use, excise, or other
taxes (other than income or similar taxes) arising from the transactions
contemplated by this Agreement.
14. EXPORT RESTRICTIONS. Buyer agrees that it shall comply with any and
all laws, regulations, orders, or other restrictions of the United States of
America relating to the export and re-export of commodities and technical data
which may be imposed from time to time. Buyer will not export or re-export,
directly or indirectly any products or information with respect to the Products
to any destination prohibited by such laws, regulations, orders or other
restrictions without the prior authorization of the appropriate U.S. Government
authorities. Buyer agrees that its obligations under this section shall survive
the expiration of the Term or the termination of this Agreement.
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15. RESTRICTIONS ON USE. Buyer acknowledges that the Products contain
certain hardware and software proprietary to Supplier. Buyer may install, use
and execute only one (1) copy of Supplier's software for use on only one (1)
computer at a time. Supplier's software may not be copied, distributed,
republished, uploaded, posted, decompiled, disassembled, modified or transmitted
in any way without Supplier's prior written consent. Supplier's software is
licensed on a non-exclusive basis solely for Buyer's use. Embedded software
organic to and contained in the Products is to be used by Buyer solely within
the Product in which such software resides when shipped. ANY VIOLATION OF THIS
PROVISION VOIDS ALL WARRANTIES AS TO SUCH PRODUCTS.
Supplier's Products may not be copied or reverse-engineered in any way
without Supplier's prior written consent. In addition, the Products may be only
repaired or modified by Supplier or by an authorized representative of Supplier,
except as otherwise directed in writing by Supplier. ANY VIOLATION OF THIS
PROVISION VOIDS ALL WARRANTIES AS TO SUCH PRODUCTS.
16. NOTICES. Any notice or delivery to be given hereunder by either party
to the other may be effected by personal delivery in writing, certified mail,
postage prepaid, mailgram or telegram, or by facsimile at the number listed
below (provided that a hard copy of any such facsimile notice or delivery is
delivered to the recipient within two (2) business days by mail or personal
delivery) and shall be deemed communicated as of delivery, unless otherwise
provided in this Agreement in accordance with this paragraph at the address set
forth below:
Supplier: Input/Output, Inc.
11104 West Airport, Suite 200
Stafford, Texas 77477
Attention: Chief Financial Officer
Fax No. (281) 879-3600
Buyer: Mitcham Industries, Inc.
P.O. Box 1175
Huntsville, Texas 77342
Attention: Billy F. Mitcham, Jr.
Fax No.(409) 295-1922
17. CONFIDENTIALITY; DISCLOSURE. Supplier and Buyer acknowledge and agree
that the terms of this Agreement are confidential. Buyer further acknowledges
that it shall not, without the prior written consent of Supplier, divulge any
information relating to the terms of this Agreement to any third party, except
as to the extent required by law, and shall take all reasonable action to
prevent its employees and all others, if any, involved in this Agreement from
divulging such information to third parties. In the event that Buyer determines
that any disclosure of this Agreement or any of its terms is required by law,
Buyer shall notify Supplier in writing at least ten (10) days prior to the date
such disclosure is made. In addition, neither party
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will issue any public announcement or press release regarding this Agreement
or any purchase of any Products hereunder without the written approval of the
other party.
18. MISCELLANEOUS PROVISIONS.
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between Supplier and Buyer with respect to the purchase and sale
of the Products and no representation or statement not contained herein
shall be binding upon Supplier or Buyer as a warranty or otherwise, unless
in writing and executed by the party to be bound thereby. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns.
(b) GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Texas.
(c) RISK OF LOSS. The sale of all Products hereunder will be F.O.B.
Supplier's plant in Stafford, Texas, with Buyer being responsible for the
cost of shipping and transporting the Products.
(d) BINDING EFFECT. This Agreement is binding upon and inures to the
benefit of Supplier and Buyer and their respective successors and assigns.
(e) FURTHER ACTS. In addition to the acts and deeds recited in this
Agreement and contemplated to be performed, executed and/or delivered by
Supplier or Buyer, Supplier and Buyer agree to perform, execute and/or
deliver or cause to be performed, executed and/or delivered at the Closing
or after the Closing any and all further acts, deeds and assurances as are
reasonably necessary to consummate the transactions contemplated hereby.
(f) TIME OF THE ESSENCE. It is expressly agreed by Buyer and
Supplier that time is of the essence with respect to this Agreement.
(g) ATTORNEY'S FEES. If either party hereto employs an attorney to
enforce or defend its rights hereunder, the prevailing party shall be
entitled to recover its reasonable attorney's fees.
(h) MULTIPLE COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one
and the same agreement, and any of the parties to this Agreement may
execute this Agreement by signing any of the counterparts.
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EXECUTED as of June 30, 1998.
INPUT/OUTPUT, INC., a Delaware corporation
By:
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Dennis N. Jordhoy, Vice President-Sales
MITCHAM INDUSTRIES, INC., a Texas
corporation
By:
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Billy F. Mitcham, President and Chief
Executive Officer
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EXHIBIT 99
CONTACT: -OR- INVESTOR RELATIONS COUNSEL:
Mitcham Industries, Inc. The Equity Group Inc.
Roberto Rios Marie Driscoll (212) 836-9605
Chief Financial Officer (409) 291-2277 Linda Latman (212) 836-9609
FOR IMMEDIATE RELEASE
MITCHAM INDUSTRIES SIGNS PREFERRED SUPPLIER AGREEMENT
WITH INPUT/OUTPUT
HUNTSVILLE, TX, JULY 9, 1998 -Mitcham Industries, Inc. (NASDAQ:MIND) announced
that on June 30, 1998, it signed the previously announced Preferred Supplier
Agreement with Input/Output, Inc. ("I/O"), thus replacing the parties'
Exclusive Lease Referral Agreement.
The terms provide that Mitcham Industries will purchase an estimated $90 million
to $100 million (after discounts) of I/O products over a five year term ending
May 31, 2003, including Mitcham's May 1998 $15 million purchase of a substantial
portion of I/O's lease fleet. I/O will refer all rental and lease/purchase
inquiries from customers worldwide to Mitcham Industries during the term of the
agreement. Under the terms of the previous Exclusive Lease Referral Agreement,
I/O referred only rental inquiries from its North and South American customers
to Mitcham. Additionally, I/O has agreed in principle not to rent products
covered by the Preferred Supplier Agreement except in limited circumstances.
Billy F. Mitcham, Jr., Chairman, President & CEO of Mitcham Industries, said,
"This new Preferred Supplier Agreement builds on our original alliance with
Input/Output begun in 1994. Under the new agreement, we will diversify our
lease pool to include I/O reservoir imaging and 4-D reservoir monitoring seismic
equipment. Together with worldwide referrals from I/O, this should allow
Mitcham to expand our customer base as well as progress in our goal to be the
'one-stop shop for seismic.' We look forward to continuing our mutually
advantageous relationship with I/O under the more favorable terms of this new
agreement."
Mitcham Industries, Inc. is the leading independent company specializing in the
leasing of 3-D seismic equipment to the oil and gas exploration industry.
Mitcham also sells new and "experienced" seismic equipment. Input/Output, Inc.
is a world leader in seismic acquisition technology for land and marine
exploration.
This press release includes forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934. All statements other than
statements of historical facts included herein, including statements regarding
potential future products and markets, the Company's future financial position
and results of operations, business strategy and other plans and objectives for
future operations, are forward-looking statements. Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct, and actual results may differ materially from such forward-looking
statements. Additional important factors that could cause or contribute to such
differences are disclosed in the Company's Securities and Exchange Commission
filings, available from the Company without charge. Further, all written and
verbal forward-looking statements attributable to the Company or persons acting
on its behalf are expressly qualified in their entirety by such factors.
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