<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
INPUT/OUTPUT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
INPUT/OUTPUT, INC.
11104 WEST AIRPORT BLVD.
STAFFORD, TEXAS 77477
(713) 933-3339
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 29, 1997
To the Stockholders of Input/Output, Inc.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders of
Input/Output, Inc. (the "Company") will be held at the Stafford Civic Center,
1415 Constitution Avenue, Stafford, Texas 77477, on Monday, September 29,
1997 at 10:00 a.m., Stafford, Texas time, for the following purposes, as
described in the accompanying Proxy Statement:
1. To elect three directors, each for a three-year term expiring
in 2000 or until their successors are duly elected and qualified or
until their earlier death, resignation or removal.
2. To consider and vote upon the adoption of the Input/Output,
Inc. Employee Stock Purchase Plan.
3. To consider and ratify the appointment of KPMG Peat Marwick LLP
as the Company's independent certified public accountants for the
fiscal year ending May 31, 1998.
4. To transact any other business which properly may be brought
before the Annual Meeting or any adjournment thereof.
Only holders of record of the Company's Common Stock at the close of
business on August 12, 1997 are entitled to notice of and to vote at the
Annual Meeting or any adjournment thereof. A complete list of such
stockholders will be open for the examination of any stockholder of record at
the Company's principal executive offices at 11104 West Airport Blvd.,
Stafford, Texas 77477 for a period of ten (10) days prior to the Annual
Meeting. The list shall also be available for the examination of any
stockholder of record present at the Annual Meeting. The Annual Meeting may
be adjourned from time to time without notice other than by announcement at
such meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE PROVIDED.
By Order of the Board of Directors,
/s/ ROBERT P. BRINDLEY
ROBERT P. BRINDLEY
Secretary
Stafford, Texas
August 29, 1997
<PAGE>
INPUT/OUTPUT, INC.
11104 WEST AIRPORT BLVD.
STAFFORD, TEXAS 77477
(713) 933-3339
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 29, 1997
SOLICITATION AND REVOCABILITY OF PROXIES
The Board of Directors of Input/Output, Inc., a Delaware corporation
(the "Company"), is soliciting proxies to be voted at the Annual Meeting of
Stockholders of the Company to be held at the Stafford Civic Center, 1415
Constitution Avenue, Stafford, Texas 77477, on Monday, September 29, 1997 at
10:00 a.m., Stafford, Texas time, and at any adjournment thereof. This Proxy
Statement and the enclosed proxy are first being mailed to stockholders on or
about August 29, 1997 in connection with this solicitation.
This proxy solicitation is intended to afford stockholders the
opportunity to vote on the matters set forth in the accompanying Notice of
Annual Meeting of Stockholders dated August 29, 1997. The proxy permits
stockholders to withhold voting for any or all nominees for election to the
Company's Board of Directors (the "Board") and to abstain from voting for any
proposal if the stockholder so chooses.
All holders of record of shares of the Company's Common Stock
at the close of business on August 12, 1997 (the "Record Date"), are entitled to
notice of and to vote at the Annual Meeting. On the Record Date, the Company
had outstanding 43,462,826 shares of common stock, par value $0.01 per share
(the "Common Stock").
Each share of Common Stock is entitled to one vote. The presence, in
person or by proxy, of holders of a majority of the outstanding shares of
Common Stock entitled to vote as of the Record Date is necessary to
constitute a quorum at the Annual Meeting. A plurality of the votes of the
shares present in person or by proxy at the Annual Meeting, provided a quorum
is constituted, is required for the election of directors. All other actions
proposed herein may be taken upon the affirmative vote of holders of a
majority of the shares of Common Stock represented at the Annual Meeting,
provided a quorum is present in person or by proxy.
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on all other proposals and
will be counted as present for purposes of the item on which the abstention
is noted. Abstentions on the other specific proposals set forth herein will
have the effect of negative votes because these proposals require the
affirmative vote of holders of a majority of shares present in person or by
proxy and entitled to vote. Under the rules of the New York Stock Exchange,
Inc. ("NYSE"), brokers who hold shares in street name for customers have the
authority to vote on certain "discretionary" items when they have not
received instructions from beneficial owners. NYSE rules provide that
brokers who have not received voting instructions from their clients have
discretion to give a proxy and to vote on the election of directors and the
other proposals set forth herein. Under applicable Delaware law, a broker
non-vote will have no effect on the outcome of the election of directors or
the proposal to ratify the appointment of the auditors, nor will it count as
a vote cast in determining the total affirmative votes cast on the proposal
to adopt the Input/Output, Inc. Employee Stock Purchase Plan.
Any stockholder has the unconditional right to revoke his proxy at any
time before it is voted. Any proxy given may be revoked either by a written
notice duly signed and delivered to the Secretary of the
<PAGE>
Company prior to the exercise of the proxy, by execution of a subsequent
proxy and delivery of such subsequent proxy to the Secretary of the Company,
or by voting in person at the Annual Meeting (although attending the Annual
Meeting without executing a ballot or executing a subsequent proxy will not
constitute revocation of a proxy). Where a stockholder's duly executed proxy
specifies a choice with respect to a voting matter, the shares will be voted
accordingly. If no such specification is made, the shares will be voted (i)
FOR the nominees for director identified below, (ii) FOR the adoption of the
Input/Output, Inc. Employee Stock Purchase Plan and (iii) FOR the
ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent certified public accountants for the fiscal year ending May 31,
1998.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation divides the Board into three
classes. The term of office of one class of directors expires at this Annual
Meeting of Stockholders. A second class of directors will serve until the
1998 Annual Meeting of Stockholders, and the third class of directors will
serve until the 1999 Annual Meeting of Stockholders.
Robert P. Brindley, Shelby H. Carter, Jr. and Theodore H. Elliott, Jr.,
each of whom is currently a director of the Company with a term expiring at
the 1997 Annual Meeting, are nominees for director and will stand for
election at this year's Annual Meeting for a three-year term of office
expiring at the 2000 Annual Meeting of Stockholders or until their successors
are duly elected and qualified or until their earlier death, resignation or
removal. For additional information regarding Messrs. Brindley, Carter and
Elliott, see "Management - Directors and Executive Officers of the Company."
The persons named in the proxy will vote FOR such nominees, except where
authority has been withheld as to a particular nominee or as to all nominees.
Nominees for director receiving a plurality of the votes represented by
the shares of Common Stock present in person or represented by proxy at the
Annual Meeting and entitled to vote thereon will be elected as directors.
Each nominee has consented to being named in this Proxy Statement and to
serve his term if elected. If any nominee should for any reason become
unavailable for election, proxies may be voted with discretionary authority
by the persons named therein for any substitute designated by the Board.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THESE NOMINEES
FOR ELECTION TO THE BOARD.
PROPOSAL TO ADOPT THE INPUT/OUTPUT, INC.
EMPLOYEE STOCK PURCHASE PLAN
GENERAL
In March 1997, the Board adopted the Input/Output, Inc. Employee Stock
Purchase Plan (the "Purchase Plan") in order to advance the long-range
interests of the Company by encouraging the acquisition and ownership of
Common Stock by employees of the Company and its subsidiaries. The Purchase
Plan is intended to increase the employees' proprietary interest in the
Company's long-term performance and success and to provide employees with a
means of obtaining an equity ownership interest in the Company. The Purchase
Plan is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). A
copy of the Purchase Plan is attached hereto as Appendix I, and the following
description is qualified in its entirety by reference to Appendix I.
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<PAGE>
DESCRIPTION OF THE PLAN
The Purchase Plan, if approved by the stockholders, will allow all
employees who are employed for more than 20 hours per week and who have been
employed by the Company for at least six months prior to the first day of an
"offering period" (as described below) to authorize payroll deductions at a
rate of 1% to 15% of base compensation (including overtime) to be applied
toward the purchase of Common Stock. There are 1.5 million shares of Common
Stock reserved for issuance under the Purchase Plan, subject to adjustments
for stock dividends and similar events. As of July 31, 1997, there were
approximately 1,018 employees eligible to participate in the Purchase Plan.
The Purchase Plan, which is administered by a Plan Committee appointed by the
Compensation Committee of the Board, will terminate (i) at such time as is
determined in the discretion of the Board or (ii) at such time as all shares
reserved under the Purchase Plan have been purchased.
Under the Purchase Plan, separate six-month offering periods commence on
April 1 and October 1 of each year. An employee must authorize a payroll
deduction before the start of an offering period in order to participate in
that offering. On the last business day of the offering period, the employee
will be deemed to have exercised the option to purchase as many shares as the
employee's payroll deduction will allow, at the option price. The option
price is 85% of the lesser of (i) the fair market value of the stock on the
first day of the offering period, or (ii) the fair market value of the stock
on the last day of the offering period. Fractional shares will not be issued
under the Purchase Plan, and any funds remaining in employee plan accounts
after such purchase shall be retained for the next offering period. Fair
market value shall be determined by reference to the closing share prices as
reported by the composite transaction reporting system for securities listed
on the NYSE. The closing price of the Company's Common Stock as reported on
the NYSE on July 31, 1997 was $21.625.
Shares purchased will be held by the Plan Administrator for the benefit
of Purchase Plan participants, and participants may direct the Plan
Administrator to sell purchased shares from their plan accounts. The initial
Plan Administrator is Harris Trust and Savings Bank. Participants may elect
to receive stock certificates for purchased shares from their plan accounts.
An employee may withdraw from an offering at any time. Upon withdrawal,
the amount in the employee's account will be refunded, without interest.
Employees who withdraw from an offering may not thereafter participate in
that offering, and those employees will also be ineligible to participate in
the next offering period. However, if a withdrawing employee is otherwise
eligible, that employee may participate in any other future offering periods
under the Purchase Plan.
If an employee is terminated for any reason (including death or
disability), that employee's participation in the Purchase Plan will
immediately terminate. All cash remaining in such a former employee's
account will be refunded, without interest.
No employee shall be permitted to purchase any shares under the Purchase
Plan if such employee, immediately after such purchase, owns shares
possessing five percent or more of the total combined voting power or value
of all classes of stock of the Company. The fair market value of all shares
purchased by an employee under the Purchase Plan during any calendar year may
not exceed $25,000.
Because the purchase of shares under the Purchase Plan is discretionary
with all eligible employees, it would not be meaningful to include
information as to the amount of shares which would have been distributable
during fiscal 1997 to all employees, or to groups of employees, or to any
particular employee of the Company had the Purchase Plan been in effect
during the fiscal year.
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<PAGE>
The Compensation Committee of the Board of Directors may at any time
amend or terminate the Purchase Plan, provided that no employee's existing
rights under any offering already commenced may be adversely affected
thereby. No amendment may be made to the Purchase Plan without prior approval
of the stockholders of the Company if such amendment would increase the
number of shares reserved thereunder, materially modify the eligibility
requirements, or materially increase the benefits that may accrue to
participants.
If the Company's stockholders have not approved the Purchase Plan prior
to the last day of the first offering period (i.e., September 30, 1997), then
no funds in a participant's plan account may be used to purchase shares until
such stockholder approval has been obtained, and in that event, the purchase
date for the first offering period shall be the fifth business day after the
date of stockholder approval. If the stockholders have not approved the
Purchase Plan by January 17, 1998 (i.e., the date which is 12 months after
the date of adoption of the Purchase Plan by the Board of Directors), the
Purchase Plan shall terminate and all funds held in participants' plan
accounts shall be returned to the participants in cash, plus interest at 5%
per annum.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE PURCHASE PLAN
The federal income tax consequences of an employee's participation under
the Purchase Plan will vary. The following discussion is only a summary of
the general federal income tax guidelines applicable to the Purchase Plan.
Employees should consult their own tax advisors since a taxpayer's particular
situation may be such that some variation of the tax matters described below
will apply.
The Purchase Plan and the right of participants to make purchases
thereunder are intended to qualify under the provisions of Section 421 and
423 of the Code. Under those provisions, no income will be taxable to a
participant at the time of grant of the option or purchase of shares for
federal income tax purposes. However, a participant may become liable for
tax upon dispositions of shares acquired under the Purchase Plan (or if he or
she dies holding such shares), and the tax consequences will depend on how
long a participant has held the shares prior to disposition.
If the shares are disposed of at a point in time which is (a) at least
two years after the date of the beginning of the offering period and (b) at
least one year after the stock is purchased in accordance with the terms of
the Purchase Plan (or if the employee dies while holding the shares), the
following tax consequences will apply: The lesser of (a) the excess of fair
market value of the shares at the time of such disposition over the purchase
price of the shares (the "option price"), or (b) the excess of the fair
market value of the shares at the time the option was granted over the option
price (which option price will be computed as of the offering date) will be
treated as ordinary income to the participant. Any further gain upon
disposition generally will be taxed at long-term capital gain rates. If the
shares are sold and the sales price is less than the option price, there is
no ordinary income and the participant has a long-term capital loss equal to
the difference. If an employee holds the shares for this period, no
deduction in respect of the disposition of such shares will be allowed to the
Company.
If the shares are sold or disposed of (including by way of gift) before
the expiration of either the two year or the one year holding periods
described above, the following tax consequences will apply: The amount by
which the fair market value of the shares on the date the option is exercised
(which is the last business day of the offering period and which is hereafter
referred to as the "termination date") exceeds the option price will be
treated as ordinary income to the participant. This excess will constitute
ordinary income in the year of sale or other disposition even if no gain is
realized on the sale or a gratuitous transfer of the shares is made. The
balance of any gain will be treated as capital gain and will qualify for
long-term capital gain treatment if the shares have been held for more than
one year following the exercise of the option. Even if the shares
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<PAGE>
are sold for less than their fair market value on the termination date, the
same amount of ordinary income is attributed to a participant and a capital
loss is allowed equal to the difference between the sales price and the value
of such shares on such termination date. The Company, in the event of an
early disposition, will be allowed a deduction for federal income tax
purposes equal to the ordinary income realized by the disposing employee.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of
Common Stock represented in person or by proxy at the Annual Meeting and
entitled to vote thereon, provided a quorum is present, is required for the
approval of the Purchase Plan.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE
THE ADOPTION OF THE INPUT/OUTPUT, INC. EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL TO RATIFY APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board has selected KPMG Peat Marwick LLP as independent certified
public accountants to examine the consolidated financial statements of the
Company for the fiscal year ending May 31, 1998. Stockholders are being
asked to ratify this appointment. The Company has been informed that neither
KPMG Peat Marwick LLP nor any of its partners have any direct financial
interest or any material indirect financial interest in the Company nor have
had any connection during the past three years with the Company in the
capacity of promoter, underwriter, voting trustee, director, officer or
employee.
Representatives of KPMG Peat Marwick LLP are expected to be present at
the Annual Meeting with the opportunity to make a statement if they so desire
and to be available to respond to appropriate questions.
The affirmative vote of the holders of a majority of the shares of
Common Stock represented in person or by proxy at the Annual Meeting and
entitled to vote thereon, provided a quorum is present, is required for
approval of this proposal.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING MAY 31, 1998.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names, ages and titles of the
directors and executive officers of the Company.
<TABLE>
Name Age Title
---- --- -----
<S> <C> <C>
Charles E. Selecman . . . . . . . . 68 Chairman of the Board of Directors,
President and Chief Executive Officer
Robert P. Brindley. . . . . . . . . 47 Director, Executive Vice President - Worldwide
Marketing Operations, Chief Financial Officer
and Secretary
G. Thomas Grisham . . . . . . . . . 45 Senior Vice President - Manufacturing
Robert A. Brook . . . . . . . . . . 42 Vice President - Research and Development
Axel M. Sigmar. . . . . . . . . . . 36 Vice President - Advanced System Group
Shelby H. Carter, Jr. . . . . . . . 66 Director
Ernest E. Cook. . . . . . . . . . . 71 Director
Glen H. Denison . . . . . . . . . . 73 Director
Theodore H. Elliott, Jr. . . . . . 61 Director
G. Thomas Graves III. . . . . . . . 48 Director
</TABLE>
Set forth below are descriptions of the backgrounds of the executive
officers and directors of the Company and their principal occupations for the
past five years.
Charles E. Selecman has served as Chairman of the Board of Directors of
the Company since December 1986. On May 16, 1997, Mr. Selecman was elected
President and Chief Executive Officer of the Company. He previously served
as President and Chief Executive Officer of the Company from 1989 until 1993.
Mr. Selecman served from 1984 through 1986 as president of various oil field
equipment and oil and gas exploration and production subsidiaries of Kidde,
Inc., and also served as the group executive for the Kidde, Inc. energy
group, which included the Company. Mr. Selecman's term as a director of the
Company expires at the 1999 Annual Meeting of Stockholders.
Robert P. Brindley, a director of the Company since July 1994, was
appointed Executive Vice President - Worldwide Marketing Operations in June
1997. He has served as Chief Financial Officer and Secretary of the Company
since 1987. He previously served as Senior Vice President from 1991 to June
1997, Vice President - Finance from 1987 to 1991, and Vice President and
Controller from 1982 to 1987. Mr. Brindley, whose present term as a director
of the Company expires at the 1997 Annual Meeting of Stockholders, is a
nominee for re-election at the meeting. See "Election of Directors."
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<PAGE>
G. Thomas Grisham has served as Senior Vice President - Manufacturing of
the Company since June 1997. Prior to his appointment as Senior Vice
President, he had served as Vice President - Manufacturing since 1992. Mr.
Grisham served as Manufacturing Manager for the Company from 1991 to 1992.
Prior to that he held various positions of increasing responsibility in
Marketing and Sales from 1980 until 1991.
Robert A. Brook has served as Vice President - Research and Development
since June 1997. From 1993 until June 1997, Mr. Brook served as Vice
President - Exploration. Mr. Brook joined the Company in 1991.
Axel M. Sigmar was appointed Vice President - Advanced System Group in
June 1997. Prior to that he had served, since 1992, as Vice President -
Corporate Development of the Company. Mr. Sigmar was a product line manager
having worldwide responsibility for land seismic at Schlumberger Geco-Prakla,
a seismic contractor, from 1988 to 1992. Mr. Sigmar served in various
international management and technical positions in Schlumberger Wireline and
Testing operations from 1982 to 1988.
Shelby H. Carter, Jr., a director of the Company since February 1987, is
also a founder/director of Bay Networks, Inc., a software and local area
networking company. Since January 1986, Mr. Carter has also served as a
professor at the University of Texas Graduate School of Business and College
of Business Administration. From December 1986 to September 1989, he served
as an advisory partner at Austin Ventures, L.P., a venture capital firm. In
January 1985, Mr. Carter retired from his positions as General Sales Manager,
Worldwide Operations and Corporate Vice President for Xerox Corporation,
where he had been employed since January 1970; prior to that he was employed
for 15 years by IBM Corporation. He also serves on the Board of Directors of
TechWorks, Inc. and Pervasive Software, Inc. Mr. Carter, whose present term
as a director of the Company expires at the 1997 Annual Meeting of
Stockholders, is a nominee for re-election at the meeting. See "Election of
Directors."
Ernest E. Cook, a director of the Company since February 1987, is an
independent oil and gas consultant. Mr. Cook is also a director of Triton
Energy Corporation. Mr. Cook's term as a director of the Company expires at
the 1998 Annual Meeting of Stockholders.
Glen H. Denison was a director of the Company from 1988 until resigning
in July 1990. Mr. Denison rejoined the Company's Board of Directors in
September 1990 upon retiring as Group Vice President of Hanson Industries,
Inc. and Chief Executive Officer of Axelson, Inc., an oilfield equipment
manufacturer, which were positions he had held since 1984. Mr. Denison
retired as Chairman of Axelson, Inc. in 1993. Mr. Denison's term as a
director of the Company expires at the 1998 Annual Meeting of Stockholders.
Theodore H. Elliott, Jr., a director of the Company since February 1987,
has been Chairman of Prime Capital Management Co. Inc., a Stamford,
Connecticut, venture capital company, during the past five years. Mr.
Elliott's present term as a director of the Company expires at the 1997
Annual Meeting of Stockholders; he is a nominee for re-election at the
meeting. See "Election of Directors."
G. Thomas Graves III, a director of the Company since February 1987,
currently serves as President of Gralee Capital Corporation, an asset
management company. He is also President and Director of Wilco Properties,
Inc., a privately held oil and gas exploration company. Mr. Graves served as
Senior Vice President of Triton Energy Corporation from 1987 to 1993 and also
served as Chairman and Chief Executive of Triton Europe Plc, a London Stock
Exchange listed company engaged in the oil and gas exploration industry, from
October 1991 to September 1993. Mr. Graves' term as a director of the
Company expires at the 1999 Annual Meeting of Stockholders.
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<PAGE>
No director is related to any other director or executive officer of the
Company or its subsidiaries, and there are no arrangements or understandings
between a director and any other person pursuant to which such person was
elected as director.
Corporate officers are appointed by the Board and serve at the
discretion of the Board.
MEETINGS OF DIRECTORS AND COMMITTEES
The Board held 12 meetings during fiscal 1997. Each director attended
at least 75% of the aggregate of the total meetings of the Board and any
committee on which such director served.
The Company has the following standing Committees:
THE AUDIT COMMITTEE, which currently consists of Messrs. Elliott
(Chairman), Denison and Graves met four times during fiscal 1997. Its
principal functions are to confirm the existence of effective accounting and
internal control systems and to oversee the entire audit function.
THE COMPENSATION COMMITTEE, which currently consists of Messrs. Carter
(Chairman), Cook and Denison, held six meetings during fiscal 1997. Its
principal functions are to study, advise and consult with the Company's
management regarding the compensation of officers and directors and other key
employees of the Company.
THE NOMINATING COMMITTEE, which currently consists of Messrs. Selecman
(Chairman), Carter and Cook, met once during fiscal 1997. Its principal
functions are to identify suitable candidates to fill vacancies on the Board
which may occur from time to time. The Nominating Committee will consider
nominees recommended by holders of Common Stock. Nominations should be sent
to the Nominating Committee c/o the Company at the address set forth on the
first page of this Proxy Statement, on or before May 4, 1998.
REMUNERATION OF DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION
The following table sets forth information regarding annual and
long-term compensation with respect to the fiscal years ended May 31, 1997,
1996 and 1995 paid or accrued by the Company to or on behalf of those persons
who were during the fiscal year ended May 31, 1997, (i) the Company's Chief
Executive Officers and (ii) the other four most highly compensated executive
officers of the Company (the Company's Chief Executive Officers and the other
four most highly compensated officers are collectively referred to herein as
the "Named Executive Officers.")
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<S> <C> <C> <C> <C> <C>
ALL OTHER
LONG-TERM COMPENSATION
ANNUAL COMPENSATION COMPENSATION (4) (5)
------------------------- ------------ ------------
Securities
Underlying
Year Salary Bonus Options
---- -------- -------- ----------
Charles E. Selecman (1) 1997 $ 0 $ 0 $ 0 $ 0
Chairman of the Board, President
and Chief Executive Officer
Gary D. Owens (1) 1997 $350,000 $ 0 150,000(2) $67,404
President and Chief Executive Officer 1996 300,000 306,526 200,000 67,218
1995 250,000 256,173 0 67,823
Robert P. Brindley 1997 $225,000 $ 0 80,000 $40,262
Executive Vice President, Chief 1996 195,000 179,742 80,000 44,268
Financial Officer and Secretary 1995 175,000 153,071 0 43,550
Michael J. Sheen (3) 1997 $225,000 $ 0 80,000(3) $51,372
Senior Vice President and Chief 1996 195,000 179,742 80,000 55,378
Technical Officer 1995 175,000 153,071 0 53,879
G. Thomas Grisham 1997 $195,000 $ 0 80,000 $ 8,389
Senior Vice President-Manufacturing 1996 160,000 147,480 80,000 13,131
1995 130,000 113,710 0 8,264
Axel M. Sigmar 1997 $160,000 $ 0 60,000 $37,976
Vice President - Advanced System Group 1996 150,000 138,263 50,000 43,899
1995 130,000 113,710 0 41,172
</TABLE>
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(1) Mr. Owens resigned as the Company's President and Chief Executive Officer
and as a member of the Board on May 16, 1997. Mr. Selecman assumed the
positions of President and Chief Executive Officer as of that date.
Mr. Selecman has entered into an employment agreement with the Company.
See "-- Employment Agreements" and "Compensation Committee Report on
Executive Compensation."
(2) On January 17, 1997, stock options to purchase up to 150,000 shares of
Common Stock were granted to Mr. Owens by the Company pursuant to the
Company's Amended and Restated 1990 Stock Option Plan; such stock options
were canceled pursuant to the terms of the such plan contemporaneously with
Mr. Owens' resignation from the Company on May 16, 1997.
(3) Mr. Sheen resigned from his positions as Senior Vice President and Chief
Technical Officer and as a member of the Board on June 3, 1997. The stock
options to purchase up to 80,000 shares of Common Stock granted to Mr.
Sheen during fiscal 1997 were also canceled pursuant to the terms of the
Amended and Restated 1990 Stock Option Plan contemporaneously with his
resignation on such date.
(4) During fiscal 1997, the Company contributed to its Section 401(k) Plan as
follows: Mr. Selecman: $0; Mr. Owens: $15,169; Mr. Sheen: $9,789; Mr.
Brindley: $9,789; Mr. Grisham: $8,389; and Mr. Sigmar: $7,075.
(5) During fiscal 1997, the Company paid whole life insurance premiums as
contributions with respect to the Company's Supplemental Executive
Retirement Plan (SERP) as follows: Mr. Owens: $52,235; Mr. Sheen: $41,583;
Mr. Brindley: $30,473; and Mr. Sigmar: $30,901.
-9-
<PAGE>
During fiscal 1997, the named individuals and certain officers included
in the group received benefits in the form of certain perquisites. However,
none of the individuals identified in the foregoing table received
perquisites which exceeded in value the lesser of $50,000 or 10% of such
officer's salary and bonus.
STOCK OPTIONS
The options shown below were awarded during fiscal 1997 pursuant to the
Company's Amended and Restated 1990 Stock Option Plan (the "1990 Plan"):
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
<TABLE>
- ---------------------------------------------------------------------------------------------------------
Number Percent of total
of securities options granted Hypothetical
underlying to employees in Exercise or Grant Date
Name options granted(1) fiscal year base price(1) Expiration date Value (2)
- ------------------- ------------------ ---------------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
(#) (%) ($/Sh)
Gary D. Owens 150,000(3) 21.43 $21.125 01/17/07 $1,495,500(3)
Robert P. Brindley 80,000 11.43 21.125 01/17/07 797,600
Michael J. Sheen 80,000(3) 11.43 21.125 01/17/07 797,600(3)
G. Thomas Grisham 80,000 11.43 21.125 01/17/07 797,600
Axel M. Sigmar 60,000 8.5 21.125 01/17/07 598,200
Executive Group 450,000 64.29 21.125 01/17/07 4,496,500
Non-Employee Director
Group N/A N/A
Non-Executive Officer-
Employee Group 250,000 35.71 16.875-21.125
</TABLE>
(1) These options will vest in four equal annual increments beginning on the
first anniversary date of the grant. The 1990 Plan provides that in the
event of a "change in control" of the Company (as defined in the 1990
Plan), all stock options will become fully vested. The options granted
during fiscal 1997 to Messrs. Owens and Sheen were canceled
contemporaneously with the resignations of these individuals in May and
June of 1997.
(2) The options are valued pursuant to the Black-Scholes valuation model, based
upon the following assumptions: (a) expected stock price volatility
calculated using monthly changes in stock price since May 1995, resulting
in a stock price volatility of 44%; (b) a risk-free rate of return
calculated using the interest rates of five-year U.S. Treasury notes as of
the date of the grant, resulting in a risk-free rate of return assumption
of 6.27% for options granted on January 17, 1997, and (c) a time of
exercise assumption of five years (although the actual option term is ten
years, that period was reduced for valuation purposes to reflect the
non-transferability, vesting schedule and risk of forfeiture of the
options).
(3) On January 17, 1997, Messrs. Owens and Sheen were granted stock options to
purchase up to 150,000 shares and 80,000 shares of Common Stock,
respectively, pursuant to the 1990 Plan; such stock options were canceled
pursuant to the terms of the such plan contemporaneously with their
resignations from the Company on May 16, 1997 and June 3, 1997,
respectively.
The following table shows the number of shares covered by all
exercisable and non-exercisable stock options held by the Named Executive
Officers as of May 31, 1997. Also reported are the year-end values for their
unexercised "in-the-money" options, which represent the positive spread
between the exercise price of any option and the year-end market price of the
Common Stock.
-10-
<PAGE>
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
Shares
Acquired on Number of Unexercised Value of Unexercised In-the-Money
Name Exercise Value Realized Options at Fiscal year end (#) Options at Fiscal year end ($)
- ------------------- ----------- -------------- ------------------------------ ---------------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
------------------------- -------------------------
<S> <C> <C> <C> <C>
Charles E. Selecman 0 $0 22,500/287,500 $88,573/$88,593
Gary D. Owens(1) 0 0 85,000/0 $1,195,812/$0
Robert P. Brindley 0 0 80,000/40,000 $838,748/$0
Michael J. Sheen 0 0 60,000/0 $553,748/$0
G. Thomas Grisham 15,000 $409,647 35,000/140,000 $207,656/$0
Axel M. Sigmar 60,500 $1,386,831 23,000/105,000 $254,156/$46,500
(1) On January 17, 1997, Messrs. Owens and Sheen were granted stock options to purchase up to 150,000 shares and
80,000 shares of Common Stock, respectively, pursuant to the 1990 Plan; such stock options were canceled
pursuant to the terms of the such plan contemporaneously with their resignations from the Company on May 16,
1997 and June 3, 1997, respectively.
</TABLE>
On May 31, 1997, the last reported sales price of the Common Stock on
the New York Stock Exchange composite tape was $17.75 per share. The Named
Executive Officers exercised Company stock options covering a total of 75,500
shares during fiscal 1997.
EMPLOYMENT AGREEMENTS
In 1991, the Company entered into employment agreements with Messrs.
Owens, Brindley and Sheen, which were subject to automatic yearly extensions.
In January 1997, the agreements were amended. Each of these agreements
provided that if the officer was terminated for a reason other than (a) his
death, disability or retirement, (b) for cause or (c) his voluntary
termination other than for good reason, such officer would be entitled to
receive from the Company a lump sum severance payment equal to the sum of the
following amounts: (i) the officer's full base salary through his date of
termination at the rate then in effect, (ii) an amount equal to two times the
average of the officer's annual base salary plus bonus for the preceding
three fiscal years, (iii) certain relocation and indemnity payments, and (iv)
in the event the officer is subject to the excise tax imposed by Section 4999
of the Code as a result of a change in control, an amount equal to the
product of (a) 25% multiplied by (b) the amount of any "excess parachute
payment" received by the officer as described in the provisions of Section
280G(b) of the Code. In the event that an officer was deemed to receive a
"parachute payment" as the result of a change in control, such payment would
be deemed to be an "excess parachute payment" if it equaled or exceeded 300
percent of the officer's "base amount," generally the average annual
compensation received by the officer over the most recent five tax years.
The "excess parachute payment" is computed as that portion of the "parachute
payment" which exceeds the "base amount." In addition, unless the officer is
terminated for cause, the Company must maintain in full force and effect for
the continued benefit of the officer for a two-year period after the date of
termination all benefit plans and programs or arrangements in which the
officer was entitled to participate immediately prior to the date of
termination. In May and June 1997, Messrs. Owens and Sheen resigned from all
positions with the Company, resulting in payments of $686,000 and $425,000 to
Messrs. Owens and Sheen, respectively. The employment agreement with Mr.
Brindley remains in effect on the terms described above.
In May 1997, the Company entered into an employment agreement with Mr.
Selecman (the "Executive Agreement"), pursuant to which the Company agreed to
employ Mr. Selecman as the Company's President and Chief Executive Officer
through December 15, 1997. The Executive Agreement is automatically
-11-
<PAGE>
renewable for additional six-month terms, unless either party provides prior
written notice of termination. If the Executive Agreement is terminated by
the Company without cause (as defined), voluntarily by Mr. Selecman or due to
the death or disability of Mr. Selecman, the Company will continue to pay
his base salary through the remaining term. In addition, the agreement
provides that Mr. Selecman will be entitled to a severance payment equal to
the product of $360,000 multiplied by a fraction, the numerator being the
number of days Mr. Selecman is not employed by the Company between May 16 and
December 15, 1997 and the denominator being the total number of days between
May 16 and December 15, 1997. The agreement also provides that the Company
will provide lifetime medical benefits to Mr. Selecman at the Company's cost.
Pursuant to the Executive Agreement, Mr. Selecman is also entitled to
certain salary and bonus payments, as well as stock options. See
"Compensation Committee Report on Executive Compensation - Compensation of
the Chief Executive Officer."
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Input/Output, Inc. Supplemental Executive Retirement Plan (the
"SERP") was established in 1992. The SERP is designed to defer taxation of
participants until their receipt of benefits. The Board, in its sole
discretion, is authorized to determine eligibility for participation in the
SERP. The Board has appointed a committee composed of directors and
executive officers of the Company to administer the SERP. The SERP provides
to each participant, upon such participant's retirement from the Company at
age 65, an annual deferred benefit equal to 60% of the participant's average
annual compensation for those three consecutive calendar years during his
employment that results in the highest annual compensation, reduced by
certain social security benefits and certain actuarial equivalents of annual
matching contributions made by the Company and credited to the participant
under the Company's Section 401(k) Plan. If a participant terminates
employment prior to his 65th birthday due to death, total disability or early
retirement that is approved by the Board, the participant will be 50% vested
in his deferred benefit upon attaining age 55 and completing 15 years of
service with the Company. A participant's vested interest increases 5%
thereafter for each additional year of service. A participant is fully
vested in his deferred benefit at age 65, or at age 55 if the participant has
completed 25 years of service with the Company, or upon total disability of
the participant or a change in control of the Company. In addition, the SERP
provides that the Company shall pay a participant an amount equal to any
excise tax pursuant to Section 280G of the Code and any income or other tax
liability arising in connection therewith, in the event that payment of a
deferred benefit results in liability for such tax.
"Change of control" for purposes of the SERP is defined to include the
following: (i) mergers or consolidations in which the Company is not the
surviving corporation (unless the proportionate ownership of the Company's
stockholders in the surviving corporation is unchanged), (ii) any sale or
other disposition of all or substantially all of the Company's assets, (iii)
the approval by the Company's stockholders of any plan of liquidation or
dissolution, (iv) the acquisition by a third party of beneficial ownership of
50.1% of the Company's outstanding voting securities and (v) during any
two-year period, persons who constituted at least a majority of the entire
Board of Directors at the beginning of such period cease for any reason
(other than death) to constitute a majority of the directors, unless the new
director was approved by at least two-thirds of the directors then still in
office who were directors at the beginning of such period.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
includes only directors who are not employees of the Company. The Committee
establishes the salary levels of corporate officers and administers the
Company's stock option and management incentive plans. The present members
of the Committee are Shelby H. Carter, Jr., Chairman, Ernest E. Cook and Glen
H. Denison. The following report
-12-
<PAGE>
presents the Committee's summary of the Company's compensation programs and
policies and describes the bases for compensation of the Company's executive
officers and its chief executive officer:
COMPENSATION POLICY
The goal of the Company's executive compensation policy is to support
the overall objective of enhancing stockholder value, while at the same time
attracting, motivating and retaining highly qualified and productive
employees. It is the policy of the Company that a significant portion of the
compensation paid to the executive officers should be based on the Company's
results of operations and the growth in value of its equity. This policy
aligns the interests of the Company's management and stockholders by placing
increased emphasis on performance-based pay and reduced emphasis on fixed pay
in overall total compensation. To achieve its goals, the Company's executive
compensation policies have been designed to provide competitive levels of
compensation that integrate annual base compensation with bonuses based upon
corporate performance and individual initiatives and performance. Also,
since 1990, the Company has adopted and maintained stock option plans under
which the benefits realized by executives are directly related to stock price
performance.
Consistent with this objective, the Input/Output, Inc. Management
Incentive Plan (the "MIP") provided for annual cash bonuses to the officers
and other key employees of the Company, which were tied to actual profits
performance compared to budgeted and prior year's pretax profits. As a
result of the Committee's review of the Company's total compensation program
for its executives during 1996, the Committee recommended to the Board of
Directors in July 1996 that the Company adopt the Input/Output, Inc. 1996
Management Incentive Program (the "Incentive Plan") to replace the MIP. The
Incentive Plan was adopted by the Board of Directors and was approved by the
stockholders at the 1996 Annual Meeting. The Incentive Plan is similar to
the MIP regarding its calculation of bonuses by reference to objective
performance criteria.
In its assessment of compensation levels, the Committee takes into
consideration performance relative to the individual responsibilities of the
executive officers, as well as the financial performance of the Company
relative to its goals and relative to the financial performance of other
companies. The Committee also considers the competitiveness of both the
entire executive compensation package and each of its individual components.
To assist it in its consideration, the Committee periodically engages the
services of outside compensation consultants to evaluate the Company's
executive compensation structure from time to time. These consultants report
directly to the Committee and advise the Committee regarding the
competitiveness of the Company's executive compensation package as well as
recent trends and developments in executive compensation for U.S. companies.
The Committee has considered the impact of Section 162(m) regarding the
corporate limitations on deducting certain compensation expenses. It is the
Committee's intent to adopt policies to obtain maximum tax deductibility of
executive compensation, consistent with providing motivational and
competitive compensation which is truly performance-based. In furtherance of
this goal, the Incentive Plan and the Company's option plans are intended to
assure that the Company's executive compensation plans meet the requirements
of Section 162(m) to achieve maximum deductibility of executive compensation
expense.
The Committee reviews the performance of the Company and each officer
individually to determine salary and bonus adjustments and to determine stock
option awards. In determining appropriate salary levels, the Committee
generally considers compensation levels for executive positions with similar
duties and responsibilities in the external market, including those at
comparable-sized electronics companies, as well as corporate and individual
performance.
-13-
<PAGE>
Company executive compensation currently consists of two key elements: A
long-term component (stock options) and an annual component (base salary and
bonus). Following is a description of the elements of the Company's current
executive compensation program and how each relates to the objectives and
policies outlined above.
STOCK OPTIONS. The Committee believes that long-term incentives should
be provided to management to increase shareholder value, as measured by stock
price. The Committee believes that stock incentives are appropriate, not
only for senior management, but also for employees of the Company and its
subsidiaries. All options provide for the purchase of shares at an exercise
price equal to fair market value on the date of grant. During fiscal 1997,
Messrs. Owens, Brindley, Sheen, Grisham and Sigmar received stock option
grants under the 1990 Plan. See "Summary Compensation Table" and "Stock
Options" above for information concerning these grants.
INCENTIVE PLAN. The Committee believes that key employees should have a
significant portion of their total compensation based on the Company's
relative financial performance to plan projections and the prior year's
results. The participant's annual cash bonus under the Incentive Plan is
determined based on specified performance achievements by the Company.
Each participant is assigned to a group within the Incentive Plan which
reflects his responsibility level within the Company. The performance
criteria for Incentive Plan groups emphasize the Company's objective for
growth in profits before tax compared to budgeted pretax earnings for the
plan year and the actual pretax results for the prior year.
Because the Company experienced a decline in pre-tax net earnings in
fiscal 1997 compared to fiscal 1996, none of the performance criteria under
the Incentive Plan were met in fiscal 1997. Therefore, none of the Named
Executive Officers received any cash bonuses under the Incentive Plan with
respect to fiscal 1997.
BASE SALARY. The Committee approves the annual salaries for all
officers of the Company. The Committee reviews recommendations made by the
Chief Executive Officer with regard to salary adjustments for officers other
than himself, and then either approves or changes these recommended salary
adjustments. The Committee independently reviews performance of the Chief
Executive Officer and determines an appropriate salary based on the criteria
set forth above. As noted above, base salaries for the Company's executive
officers are also determined by reference to salary surveys from outside
consultants and other sources.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
On May 16, 1997, Mr. Owens resigned as the Company's President and Chief
Executive Officer and as a member of the Board. Following Mr. Owens'
resignation, Charles E. Selecman, the Company's Chairman of the Board,
assumed the additional positions of President and Chief Executive Officer and
entered into the Executive Agreement with the Company.
In fiscal 1997, Mr. Owens' annual base salary was $350,000. The factors
which the Committee considered in determining Mr. Owens' compensation for
fiscal 1997 were basically the same as those discussed above for the
Company's executive officers. As stated above, neither Mr. Owens nor any of
the other Named Executive Officers received any cash bonuses with respect to
fiscal 1997 pursuant to the Incentive Plan. Mr. Owens' participation in
option grants made by the Company during fiscal 1997 under the 1990 Plan was
based upon overall compensation packages and option plans provided to senior
executives in similar companies as well as Mr. Owens' level and scope of
responsibilities to the Company during fiscal
-14-
<PAGE>
1997. In January 1997, the Committee awarded options to purchase 150,000
shares of Common Stock under the 1990 Plan to Mr. Owens. As a result of Mr.
Owens' resignation as President and Chief Executive Officer of the Company in
May 1997, these options terminated upon his resignation.
Pursuant to the terms of the Executive Agreement, Mr. Selecman is to
receive a salary of $40,000 for each month of service as the Company's
President and Chief Executive Officer. In addition, Mr. Selecman received an
initial fee of $150,000 (in part to defray his relocation costs) pursuant to
the Executive Agreement. Mr. Selecman's bonus under the Executive Agreement
will be determined by reference to the average of the closing prices (the
"Average Price") for the Common Stock on the NYSE for the ten consecutive
trading days preceding December 15, 1997 (the day on which the initial term
of the Executive Agreement expires). If the Average Price is less than $20,
Mr. Selecman's bonus will be $300,000; if the Average Price is at least $20
but less than $25, Mr. Selecman's bonus will be $600,000; if the Average
Price is at least $25 but less than $30, Mr. Selecman's bonus will be
$1,200,000; if the Average Price is at least $30 but less than $35, Mr.
Selecman's bonus will be $2,400,000; and if the Average Price is $35 or
greater, Mr. Selecman's bonus will be $3,600,000. In connection with the
Executive Agreement, the Company granted Mr. Selecman on June 4, 1997 an
option under the 1990 Plan to purchase 200,000 shares of Common Stock at an
exercise price of $17.50 per share. On June 4, 1997, the closing price per
share of Company Common Stock as reported on NYSE composite transactions was
$17.50. The option becomes fully exercisable at the earlier to occur of (i)
Mr. Selecman's termination of employment with the Company or (ii) June 4,
1998.
In determining Mr. Selecman's compensation as the Company's President
and Chief Executive Officer, the Committee considered the extraordinary
nature of Mr. Selecman's services, his efforts in reorganizing Company
management and his willingness to come out of retirement on an expedited
basis to serve the Company as its Chief Executive Officer. The Committee
also considered Mr. Selecman's prior experience as President and Chief
Executive Officer of the Company from 1989 to 1993. The Committee has
authorized an executive search for a new President and Chief Executive
Officer.
SUMMARY
The Committee believes that the Company's executive compensation
policies and programs serve the interests of the stockholders and the Company
effectively. The various compensation programs are believed appropriately
balanced to provide motivation for executives to contribute to the Company's
overall success and enhance the value of the Company for the stockholders'
benefit. When performance goals are met or exceeded, resulting in increased
value to stockholders, executives will be rewarded commensurately. When
performance goals are not met, the executives' overall cash compensation is
negatively impacted. During fiscal 1997, none of the Named Executive
Officers received any cash compensation derived from incentives directly
linked to corporate performance. The Committee will continue to monitor the
effectiveness of the Company's total compensation program and continue to
make proposals where applicable, to meet the current and future needs of the
Company.
This report has been provided by the Compensation Committee.
Shelby H. Carter, Jr., Chairman
Ernest E. Cook
Glen H. Denison
The Compensation Committee Report on executive compensation shall not be
deemed incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of
1933 or the Securities Exchange Act of 1934, except to the extent that the
Company
-15-
<PAGE>
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
STOCK PERFORMANCE GRAPH
The following performance graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
The following performance graph compares the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock (as
measured by dividing: (i) the difference between the Common Stock share price
at the end and the beginning of the measurement period by (ii) the Common
Stock share price at the beginning of the measurement period) with the
cumulative total return assuming reinvestment of dividends of (1) the
Standard and Poor's 500 Index and (2) the Standard and Poor's Electronics
Index:
1993 1994 1995 1996 1997
----------------------------------------------
INPUT/OUTPUT 102.86 294.29 388.57 922.86 405.71
S&P 500 111.61 116.36 139.86 179.63 232.25
S&P Electronics 110.46 106.15 177.91 225.86 307.1
Instrumentation
-16-
<PAGE>
COMPENSATION OF DIRECTORS
As compensation for serving on the Company's Board of Directors, each
director who is not an employee of the Company receives $1,500 for each
meeting attended and $1,500 for each committee meeting attended. In
addition, each non-employee director receives an annual stipend of $20,000.
DIRECTORS RETIREMENT PLAN. In 1992, the Company adopted the Directors
Retirement Plan. Under the Directors Retirement Plan, participation was
limited to directors who served as outside directors for an aggregate of not
less than five years or whose service on the Board as an outside director
terminated due to death or disability or a change in control of the Company.
Payment of benefits under the Directors Retirement Plan is payable in
quarterly installments and commences at the beginning of the Company's fiscal
quarter next following the later date at which a director (i) attains age
sixty-five or (ii) retires from the Board. Payments of benefits shall
continue for a period equal to the lesser of (a) the number of years and
portions thereof, rounded upwards to the nearest six months, during which
such director served as an outside director or (b) ten years. (During fiscal
1996, the Board determined to accelerate the vesting in full of Mr.
Selecman's years of service as an outside director.) In the event of a
"change of control" (as defined in the Plan), the director may elect to
receive a lump sum payment representing the present value of the quarterly
payments otherwise payable. Total benefits payable to an outside director
under the Directors Retirement Plan are equal to the greater of (i) 100% of
the outside director's annual stipend effective for the fiscal year in which
he retires or (ii) 100% of the outside director's annual stipend payable in
the fiscal year prior to retirement.
In July 1996, the Board of Directors of the Company determined to
discontinue the Directors Retirement Plan. Under the terms adopted by the
Board, all benefit accruals relating to years of service through the date of
discontinuation were frozen; in addition, participation by any individual not
currently an outside director was prohibited.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN. Pursuant to the
Input/Output, Inc. Non-Employee Director Stock Option Plan (the "Directors'
Plan"), the Company is authorized to make automatic and discretionary grants
of options to purchase shares of Common Stock to outside directors. The
Directors' Plan provides that each individual serving as an outside director
on the first business day of November 1996 will automatically receive a
nonqualified stock option to purchase 20,000 shares of Common Stock and that
each outside director who joins the Company's Board in the future will
automatically receive a nonqualified stock option to purchase 20,000 shares
of Common Stock on the date on which such person is first elected or begins
to serve as an outside director. This first grant of a stock option for
20,000 shares is referred to as the "First Grant." Additionally, outside
directors will receive a stock option to purchase 10,000 shares of Common
Stock (the "Second Grant") on the first business day of the November
immediately succeeding the First Grant and a stock option to purchase 10,000
shares of Common Stock (the "Third Grant") on the first business day of the
November immediately succeeding the Second Grant. The First Grant stock
options shall vest in 33.33% installments on the first, second, and third
anniversary dates of the First Grant. The Second Grant stock options shall
vest in 50% installments on the first and second anniversary dates of the
Second Grant. The Third Grant stock options shall be fully exercisable on
and following the first anniversary date of the Third Grant. In addition,
the Directors' Plan provides for discretionary grants of stock options to
outside directors as determined from time to time by the Board. On June 30,
1997, the five outside Board members (Messrs. Carter, Cook, Denison, Elliott
and Graves) were each granted options to purchase 12,000 shares of Common
Stock, vesting in one-third increments over a three-year period following the
date of grant. The exercisability of options under the Directors' Plan
accelerates upon a change of control (as described in the plan) and upon the
option holder's death while serving as a director or upon termination as a
director as the result of retirement or disability. As of July 31, 1997, the
Company had granted options covering a total of 830,000 shares of Common
Stock under the Directors' Plan.
-17-
<PAGE>
VOTING AND STOCK OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
At the Record Date, there were outstanding 43,462,826 shares of Common
Stock which were held of record by 306 stockholders, and the Company believes
that there were approximately 11,050 beneficial owners of the Common Stock on
such date. Each share of Common Stock is entitled to one vote on each matter
to come before the Annual Meeting. The holders of the Common Stock have no
appraisal or similar rights with respect to any of the matters to be voted on
at the Annual Meeting.
The following table sets forth certain information with regard to the
beneficial ownership as of July 31, 1997 of Common Stock by (i) all persons
known by the Company to be the beneficial owners of more than five percent of
the outstanding Common Stock, (ii) each director of the Company, (iii) each
Named Executive Officer of the Company and (iv) all executive officers and
directors as a group (ten persons).
<TABLE>
COMMON STOCK
--------------------------------------
Name of Beneficial Owner(1) Number of Shares(1) Percent of Class
--------------------------- ------------------- ----------------
<S> <C> <C>
J. P. Morgan & Co., Inc.
60 Wall Street
New York, NY 10260 4,416,700 10.2%
Wellington Management
One Post Office Square
Boston, MA 02709-2137 3,515,680 8.0%
Charles E. Selecman (2) 52,500 *
Robert P. Brindley (3) 146,000 *
G. Thomas Grisham (4) 55,000 *
Robert A. Brook (5) 51,200 *
Axel M. Sigmar (6) 23,000 *
Shelby H. Carter, Jr. (7) 25,000 *
Ernest E. Cook (8) 25,000 *
Glen H. Denison (7) 25,000 *
Theodore H. Elliott, Jr. (8) 33,500 *
G. Thomas Graves III 23,800 *
All officers and directors as a group (10 persons) (9) 470,000 1.1%
- ---------------
*Less than 1%.
(1) Except as otherwise indicated, the persons named in the table possess sole voting and
investment power with respect to all shares of Common Stock shown as beneficially owned
by them. The table also includes shares of Common Stock held by wives and minor children
of such persons and corporations and partnerships in which such persons hold a controlling
interest, but excludes any controlling interest which may be deemed solely to exist by
virtue of such person being a director of a corporation.
(2) Includes 22,500 shares which are subject to a currently exercisable option granted under
the Company's 1991 Directors Stock Option Plan.
(3) Includes 80,000 shares which are subject to a currently exercisable option granted under
the Amended and Restated 1990 Stock Option Plan and 18,000 shares of restricted stock.
(4) Includes 35,000 shares which are subject to a currently exercisable option granted under
the Amended and Restated 1990 Stock Option Plan and 10,000 shares of restricted stock.
(5) Represents 51,200 shares which are subject to a currently exercisable option granted under
the Amended and Restated 1990 Stock Option Plan.
-18-
<PAGE>
(6) Represents 23,000 shares which are subject to a currently exercisable option granted under
the Amended and Restated 1990 Stock Option Plan.
(7) Represents 25,000 shares which are subject to a currently exercisable option granted
under the 1991 Directors Stock Option Plan.
(8) Includes 22,500 shares which are subject to a currently exercisable option granted under
the 1991 Directors Stock Option Plan.
(9) Includes an aggregate of 189,200 shares which are subject to currently exercisable
options granted under the Amended and Restated 1990 Stock Option Plan and 102,500 shares
which are subject to currently exercisable options granted under the 1991 Directors Stock
Option Plan.
</TABLE>
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a)
of the Securities Exchange Act of 1934 requires the Company's directors,
executive officers and persons who own more than 10% of the Company's Common
Stock, to file with the Securities and Exchange Commission ("SEC") initial
reports of ownership and reports of changes of ownership of Common Stock and
other equity securities of the Company. Such persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) reports
they file. Based solely upon its review of Forms 3, 4 and 5 and amendments
thereto provided to the Company, during the fiscal year ended May 31, 1997,
the Company's directors and executive officers and the persons who own more
than 10% of the Company's Common Stock had complied with all Section 16(a)
filing requirements, except that Mr. Graves inadvertently reported one
transaction one month late.
STOCKHOLDER PROPOSALS AT 1998 ANNUAL MEETING
In order for stockholder proposals to receive consideration for
inclusion in the Company's Proxy Statement for its 1998 Annual Meeting of
Stockholders, such proposals must be received at the Company's offices at
11104 West Airport Blvd., Stafford, Texas 77477, Attention: Secretary, on or
before May 4, 1998. All stockholder proposals must comply with Rule 14a-8
promulgated by the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended.
OTHER MATTERS
The Company will bear all costs of this proxy solicitation. In addition
to soliciting proxies by mail, directors, executive officers and employees of
the Company, without receiving additional compensation, may solicit proxies
by telephone, by telegram or in person. Arrangements will also be made with
brokerage firms and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of shares of the Common
Stock, and the Company will reimburse such brokerage firms and other
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in connection with forwarding such materials. In addition,
the Company has retained Kissel-Blake Inc., a proxy solicitation firm, for
assistance in connection with the Annual Meeting at a cost of approximately
$4,000 plus reimbursement of reasonable out-of-pocket expenses.
The Board does not know of any business to be presented for
consideration at the Annual Meeting other than that stated in the
accompanying Notice. It is intended, however, that the persons authorized
under the proxies may, in the absence of instructions to the contrary, vote
or act in accordance with their judgment with respect to any other proposal
properly presented for action at such meeting.
The Annual Report of Stockholders for the fiscal year ended May 31,
1997, which includes financial statements, is enclosed herewith. The Annual
Report does not form a part of this Proxy Statement or the materials for the
solicitation of proxies to be voted at the Annual Meeting.
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<PAGE>
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL
STATEMENTS BUT NOT INCLUDING EXHIBITS, WILL BE FURNISHED AT NO CHARGE TO EACH
PERSON TO WHOM A PROXY STATEMENT IS DELIVERED UPON RECEIPT OF A WRITTEN
REQUEST OF SUCH PERSON ADDRESSED TO INPUT/OUTPUT, INC., ATTN: INVESTOR
RELATIONS, 11104 WEST AIRPORT BLVD., STAFFORD, TEXAS 77477, TELEPHONE (713)
933-3339. THE COMPANY WILL ALSO FURNISH SUCH ANNUAL REPORT ON FORM 10-K TO
ANY "BENEFICIAL OWNER" OF SUCH SECURITIES AT NO CHARGE UPON RECEIPT OF A
WRITTEN REQUEST, CONTAINING A GOOD FAITH REPRESENTATION THAT, AT THE RECORD
DATE, SUCH PERSON WAS A BENEFICIAL OWNER OF SECURITIES OF THE COMPANY
ENTITLED TO VOTE AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
SEPTEMBER 29, 1997. COPIES OF ANY EXHIBIT TO THE FORM 10-K WILL BE FURNISHED
UPON THE PAYMENT OF A REASONABLE FEE.
Information contained in the Proxy Statement relating to the security
holdings of and related information concerning directors and officers of the
Company is based upon information received from the individual directors and
officers.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF
MAILED IN THE UNITED STATES. A PROMPT RETURN OF YOUR PROXY CARD WILL BE
APPRECIATED AS IT WILL SAVE THE EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors,
/s/ Robert P. Brindley
Robert P. Brindley
Secretary
Stafford, Texas
August 29, 1997
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<PAGE>
APPENDIX I
INPUT/OUTPUT, INC.
EMPLOYEE STOCK PURCHASE PLAN
This Plan is intended to advance the long-range interests of
Input/Output, Inc., a Delaware corporation (the "Company"), by encouraging
the acquisition and ownership of capital stock of the Company ("Common
Stock"), upon the terms herein set forth, by employees of the Company and
certain of its subsidiaries, in order that their proprietary interest in the
Company's long-term performance and success, and their continuance as
employees of the Company, may be enhanced. The Plan is also intended to
provide employees with an opportunity to acquire a proprietary interest in
the Company through the purchase of shares of the Common Stock of the
Company. This Plan shall be known as the "Input/Output, Inc. Employee Stock
Purchase Plan." The Plan is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"). The provisions of the Plan shall be construed in a
manner consistent with requirements of Section 423 of the Code.
1. SHARES OFFERED. The total number of shares of Common Stock ($.01
par value) available for purchase by Participants under all Offerings
(defined in Section 3 below) is 1,500,000 SHARES, which are either authorized
but unissued Common Stock or Common Stock held by the Company in its
treasury. If any Offering shall expire without all shares available under
such Offering having been purchased, such unpurchased shares shall be added
to the shares otherwise available for future Offerings.
2. ADMINISTRATION. The Plan shall be administered by a committee (the
"Plan Committee") appointed by the compensation committee of the Board of
Directors (the "Compensation Committee"), which Plan Committee shall consist
of not less than three members. Subject to the express provisions of the
Plan, the Plan Committee shall have authority, in its discretion, to
interpret and construe any and all provisions of the Plan, to adopt rules and
regulations for administering the Plan, and to make all other determinations
necessary or advisable for administering the Plan. The Plan Committee's
determination on the foregoing matters shall be conclusive. The Plan
Committee shall have the power to appoint and remove an independent third
party (which may, but need not, be a bank or trust company) to act as
administrator of the Plan and custodian of all stock certificates issued
under the Plan, and to provide such other services as the Plan Committee may
determine (the "Administrator"), and the Plan Committee is authorized to
enter into an agreement with the Administrator concerning its duties under
the Plan.
The Compensation Committee may from time to time appoint members of the
Plan Committee in substitution for or in addition to members previously
appointed, and may fill vacancies, however caused, in the Plan Committee.
The Plan Committee may select one of its members as its Chairman and shall
hold its meetings at such times and places as it shall deem advisable, and
may hold telephonic meetings. A majority of its members shall constitute a
quorum. All determinations of the Plan Committee shall be made by a
majority of its members. The Plan Committee may correct any defect or
omission, or reconcile any inconsistency in the Plan, in the manner and to
the extent it shall deem desirable. Any decision or determination reduced to
writing and signed by a majority of the members of the Plan Committee shall
be as fully effective as if it had been made by a majority vote at a meeting
duly called and held. The Plan Committee may appoint a secretary and shall
make such rules and regulations for the conduct of its business as it shall
deem advisable.
3. OFFERINGS. The Plan Committee shall make an offering to Eligible
Employees (defined in Section 4 below) to purchase Common Stock under the
Plan (each an "Offering") during the six-month periods from April 1 through
September 30 and from October 1 through March 31, until this Plan terminates;
each such six-month offering period during which any such Offering is open is
referred to herein as an "Offering Period." The April 1 or October 1 which
is the first day of an Offering Period is the "Offering Date" for such
Offering Period. For each Offering Period, payroll deductions of
Participants for all payroll periods which end during the Offering Period
(including a payroll period which ends on the last day of an Offering Period)
shall be
<PAGE>
considered Payroll Deductions during such Offering Period and shall be used
to purchase Common Stock at the end of the Offering Period in accordance with
Section 7 below. Unless otherwise specified by the Plan Committee, the number
of shares of Common Stock that may be purchased under an Offering shall be
the balance of the 1,500,000 shares authorized in Section 1 above which have
not been previously purchased under the terms of this Plan.
4. ELIGIBILITY. The Compensation Committee shall designate the
subsidiaries of the Company whose employees are eligible to participate in
the Plan ("Participating Subsidiaries").
An "Eligible Employee" is a person who (i) is actively employed by
the Company or one of the Participating Subsidiaries, (ii) is actively employed
on the first day of the calendar month prior to an Offering Period, and (iii) is
not excluded pursuant to the following sentence. The following persons shall not
be Eligible Employees: (1) employees whose customary employment with the
Company and all Participating Subsidiaries is twenty (20) hours or less per
week, (2) employees who have not been employed by the Company or a Participating
Subsidiary for at least six (6) consecutive months, and (3) an employee who owns
capital stock of the Company (including all capital stock which may be purchased
under outstanding Offerings under the Plan or outstanding options under any
stock plan of the Company) possessing 5% or more of the total combined voting
power or value of all classes of capital stock of the Company or of its
subsidiary corporations (for the foregoing purposes, the rules of Section 425(d)
of the Code shall apply in determining stock ownership), as provided in Code
Section 423(b)(3). All Eligible Employees may participate in the Plan. A
person shall be considered actively employed when the person is presently
performing his/her regular duties with the Company or a Participating
Subsidiary. A person's period of employment with a company acquired by the
Company or by one of its subsidiaries shall be included in determining an
employee's length of employment for the purpose of this paragraph, provided that
such acquired company is a Participating Subsidiary on the Offering Date. A
person who is a director but not an employee shall not be eligible under the
Plan.
5. OFFERING RIGHTS. With respect to each Offering, each Eligible
Employee may elect to participate by having a portion of his Compensation
(defined in Section 6 below) withheld and applied to the purchase of shares of
Common Stock at the end of the Offering Period. The amount withheld from each
paycheck issued to the Eligible Employee during the Offering Period is the
Participant's "Payroll Deduction" (in accordance with Section 6 below), and the
Plan Committee shall apply such Payroll Deductions during an Offering Period to
the purchase of the Company's Common Stock at the end of the Offering Period in
accordance with Section 7 below. In no event may the number of shares of Common
Stock which may be purchased by all Participants for an Offering exceed the
number of shares available during the Offering Period (as determined in
accordance with Section 3 above).
6. PARTICIPATION; PAYROLL DEDUCTIONS. An Eligible Employee who
completes and delivers an authorization for Payroll Deduction on the form
provided by the Plan Committee ("Payroll Deduction Authorization Form") shall
become a participant in the Plan ("Participant"). A Participant may deliver
a Payroll Deduction Authorization Form to the Chief Financial Officer of the
Company prior to the Offering Date of an Offering Period, and in accordance
with the rules developed by the Plan Committee. On his Payroll Deduction
Authorization Form, the Participant shall elect to have deductions made on
each payday which may be any whole percentage from 1% up to and including 15%
of the Participant's Compensation in effect at the beginning of the Offering
Period. "Compensation" shall mean W-2 compensation, including overtime but
excluding commissions, bonuses and other special payments. A Participant who
elects to participate for an Offering Period through Payroll Deduction shall
be deemed to have elected to participate in the Plan on the same basis for
each successive Offering Period until such Participant changes his Payroll
Deduction in accordance with Section 8 below or withdraws (or is deemed to
withdraw) from an Offering pursuant to Section 12 below. A Participant shall
not be required to file additional Payroll Deduction Authorization Forms for
successive Offering Periods in order to continue participation in the Plan.
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<PAGE>
7. PARTICIPANTS' PLAN ACCOUNTS. The Plan Committee will
maintain, or cause to have maintained, a Plan Account in the name of each
Participant. On each payday, a Participant's Payroll Deduction shall be
withheld and credited to such Participant's Plan Account. As of the last day of
the Offering Period or such other date as designated by the Plan Committee if
required for proper administration of the Plan ("Purchase Date"), the amount
then in such Participant's Plan Account shall be applied to the purchase of
shares in accordance with Section 10 below; provided, however, that the first
Purchase Date after the adoption of the Plan may be delayed pursuant to Section
27 below. The purchase of shares shall be made solely from amounts credited to
the Participants' Plan Accounts.
8. PAYROLL DEDUCTION CHANGES. Except in the case of a withdrawal
under Section 12 below, a Participant may not change his Payroll Deduction
during an Offering Period. A Participant may, however, decrease or increase his
Payroll Deduction for a subsequent Offering Period prior to the commencement of
the next Offering Period, by filing a new Payroll Deduction Authorization Form
with the Chief Financial Officer of the Company during the time specified by the
Plan Committee.
9. NO INTEREST. The Plan Committee shall NOT credit a Participant's
Plan Account with interest on any Payroll Deduction, except as provided in
Section 27 below.
10. PURCHASE PRICE AND PURCHASE OF SHARES. Subject to Section 28 below,
the purchase price for a share of Common Stock under any Offering will be the
lesser of:
(a) 85% of the closing sale price for shares of Common Stock as
reported by the composite transaction reporting system for securities
listed on the New York Stock Exchange on the Offering Date for such
Offering or on the most recently preceding date on which there was such
a sale (the "Initial Offering Price"); or
(b) 85% of the closing sale price for shares of Common Stock
as reported by the composite transaction reporting system for
securities listed on the New York Stock Exchange on the last day of the
Offering Period or on the most recently preceding date on which there
was such a sale (the "Alternate Offering Price").
As of the Purchase Date, the Alternate Offering Price shall be
ascertained. The Plan Committee will then apply all funds credited to the
Participants' Plan Accounts to purchase shares of Common Stock available
under the Offering. Unless a Participant has withdrawn prior to the Purchase
Date pursuant to Section 12, and subject to the provisions of Sections 25 and
28, a Participant shall be deemed to have elected to purchase the maximum
number of whole shares of Common Stock which may be purchased with the amount
credited to his Plan Account as of the Purchase Date at the lower of the
Initial Offering Price or the Alternate Offering Price. Fractional shares
will not be issued under the Plan and any funds in a Participant's Plan
Account which would have been used to purchase fractional shares shall be
retained in such Plan Account for the next Offering Period.
11. TERMINATION OF EMPLOYMENT; TERMINATION OF ELIGIBILITY. In the
event of a Participant's termination of employment for any reason (including
death or disability), the Participant's participation in the Plan shall
immediately terminate without notice to the Participant, and all Payroll
Deductions credited to such Participant's Plan Account shall be returned to
such Participant in cash, without interest.
An Eligible Employee of a company included in the Plan which ceases to
be a Participating Subsidiary shall be deemed to have terminated employment
for purposes of this Section as of the date such company ceases to be a
Participating Subsidiary unless, as of such date, the Participant shall
become an Eligible Employee of the Company or of any Participating Subsidiary
then included in the Plan.
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<PAGE>
12. WITHDRAWAL FROM OFFERING. Each Participant shall have the right,
at any time prior to the Purchase Date, to withdraw from an Offering by
providing fifteen (15) days' prior written notice to the Chief Financial
Officer of the Company revoking his Payroll Deduction. A Participant who
elects to cease participation in the Plan by revoking his Payroll Deduction
may not resume participation in the Plan until after the expiration of one
full Offering Period following the Offering Period in which he withdraws and
ceases participation. As promptly as practicable after the receipt of a
revocation notice, all Payroll Deductions credited to such Participant's Plan
Account shall be returned to such Participant in cash, without interest.
13. STOCK CERTIFICATES. As promptly as practicable after the
Purchase Date of each Offering, the Plan Committee will deliver to the
Administrator all shares of Common Stock purchased with the funds credited to
the Plan Accounts. The Administrator will hold the shares of Common Stock of
all Participants in its name or in the name of its nominee evidenced by as
many or as few certificates as the Administrator determines. No certificate
representing shares of Common Stock purchased for a Participant's Plan
Account will be issued to the Participant unless he or she makes a request in
writing or until his or her Plan Account is terminated, or such Participant
withdraws from an Offering. So long as the stock credited to a Participant's
Plan Account is held by the Administrator, all rights accruing to an owner of
record of such stock, including, without limitation, voting rights and rights
of disposal, shall belong to the Participant for whose account such stock is
held.
A Participant may elect, at any time and from time to time, to receive a
stock certificate for shares credited to his Plan Account after the purchase
price for such shares has been paid in full. In such event, certificates for
shares of Common Stock shall be issued only in the name of the Participant
unless the Participant or the Participant's designee (in the event the
Participant has died) elects otherwise by written notice to the Plan
Committee and the Plan Committee gives prior written consent to such
election.
If a Participant withdraws from an Offering, terminates employment for
any reason, or elects to terminate participation in the Plan, the
Administrator will transfer to the Participant a stock certificate for whole
shares credited to his Plan Account (and for which the purchase price has
been paid in full), unless the Participant elects to sell all or part of the
Participant's shares in accordance with Section 14 below.
14. SALE OF SHARES OF COMMON STOCK. A Participant may request that
the Administrator sell all or any part of the shares of Common Stock credited
to such Participant's Plan Account. Upon receipt of a written request from a
Participant, the Administrator, as the Participant's agent, will sell the
number of shares of Common Stock specified in the Participant's request
within five business days of receipt by the Administrator of instructions to
sell the shares of Common Stock, and will deliver to the Participant the
proceeds of the sale, less a handling charge, brokerage commissions, and
other costs of sale. Whole and fractional shares may be aggregated and sold
with those of other Participants, in which case the proceeds for each
Participant will be based on the average sales price of all shares aggregated
and sold. Any sale may, but need not, be made by purchase for other Plan
Accounts, subject to and in accordance with the terms of the Plan, in which
case the price will be the closing sale price of Common Stock as reported by
the principal securities exchange or the inter-dealer quotation system on
which the stock is traded or quoted on the date of receipt by the
Administrator of the notice of the Participant's desire to sell shares of
Common Stock or, if the stock is not traded on the date of receipt, the mean
on the next prior date that it was so traded. No sales of any fractional
shares shall be permitted.
15. VOTING OF SHARES OF COMMON STOCK. The Administrator will vote a
Participant's shares of Common Stock as instructed by the Participant on a
form to be furnished by and returned to the Administrator at least ten days
(or such shorter period as the law may require) before the meeting at which
such shares of Common Stock are to be voted. The Administrator will not vote
shares of Common Stock for which no instructions are received.
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<PAGE>
16. TENDER OR EXCHANGE OFFER. If a tender offer or exchange offer is
commenced for shares of Common Stock, the Administrator, upon receipt of
information with respect thereto as the holder of record of the shares of
Common Stock, will either (i) forward, or arrange for the forwarding of,
information provided by the offeror to holders of record of Common Stock to
each Participant or (ii) provide to the offeror the name and mailing address
of each Participant as reflected on the records of the Administrator with
instructions to mail such material to each Participant. The Administrator
will tender all or part of a Participant's shares of Common Stock in response
to written instructions from the Participant in such form as the
Administrator may reasonably require and only if such instructions are
received by the Administrator at least five days (or such shorter period as
may be required by law) prior to the termination of the offer. Unless the
Administrator has received instructions in accordance with the previous
sentence, it will not tender a Participant's shares of Common Stock. Except
to the extent disclosure is required to tender shares of Common Stock
pursuant to proper written instructions, the Administrator will maintain the
confidentiality of a Participant's election to tender or not tender shares of
Common Stock.
17. CASH DIVIDENDS, STOCK DIVIDENDS AND SPLITS. Any cash dividends
paid on shares credited to a Participant's Plan Account will, when received
by the Administrator, be credited to the Participant's Plan Account and used
to purchase additional shares on the next Purchase Date. Any stock dividends
and any shares received as a result of a stock split on any shares of Common
Stock credited to a Participant's Plan Account will, when received by the
Administrator, be credited to the Participant's Plan Account.
18. STATEMENTS. As soon as practicable after the cash credited to
the Participant's Plan Account has been applied to the purchase of shares of
Common Stock (but in no event later than 20 calendar days after the purchase)
the Administrator will mail a statement to the Participant summarizing the
transactions in the Participant's Plan Account since the last statement.
19. NO RIGHTS AS A STOCKHOLDER. None of the rights or privileges of
a stockholder of the Company shall exist with respect to shares of Common
Stock purchased under this Plan until a certificate representing such shares
is issued.
20. RIGHTS NOT TRANSFERABLE. Except as hereinafter set forth and
unless otherwise provided by law, no Participant shall have the right to
sell, assign, transfer, pledge, or otherwise dispose of or encumber either
the right to participate in the Plan or any interest in the Participant's
Plan Account, and such right and interest shall not be liable for or subject
to the debts, contracts, or liabilities of such Participant. If any such
action is taken by the Participant, or any claim asserted by another party in
respect of such right and interest, such action or claim will be treated as
notice of cancellation, and except as may otherwise be required by law, such
event shall be deemed to be a withdrawal from the Plan and the Participant's
Plan Account shall be repaid to him as provided in Section 12.
Provided, however, that a Participant may designate in writing (on a
form provided by the Plan Committee) the person who shall have the right to
receive the Participant's Plan Account in the event of the Participant's
death. In the event of death, if a Participant has not designated a person to
receive the Participant's Plan Account, such Participant's Plan Account shall
be distributed to the Participant's estate.
21. APPLICATION OF FUNDS. All funds received or withheld by the Plan
Committee under this Plan as Payroll Deductions shall be held by the Company
without segregation and may be used for any general corporate purpose without
restriction.
22. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Notwithstanding any
other provision of the Plan, in the event of any change in the outstanding
Common Stock by reason of a stock dividend, recapitalization, merger,
consolidation, split-up, combination or exchange of shares, or the like, the
aggregate number and class of shares available under the Plan, the number and
class of shares subject to outstanding
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<PAGE>
Offerings, the maximum number of shares which an individual Eligible Employee
may purchase, and the Initial Offering Price shall be proportionately
adjusted, and such other adjustments shall be made as may be deemed
equitable, by the Plan Committee, whose determinations shall be conclusive.
23. AMENDMENTS OF THE PLAN. Except as provided below, the
Compensation Committee may at any time, and from time to time, make such
changes in and additions to the Plan as the Compensation Committee deems
advisable. However, the following amendments may only be made by the Board of
Directors with approval by vote of the holders of a majority of shares of
Common Stock voted at a properly convened meeting at which a quorum is
present: (a) increase the maximum number of shares which may be purchased
under the Plan, (b) reduce the purchase price per share, or (c) amend the
requirements for an Eligible Employee. No amendment of the Plan may, without
the consent of the Participant with respect to any outstanding Offering,
materially and adversely affect the Eligible Employee's rights with respect
to such Offering.
24. TERMINATION OF THE PLAN. This Plan shall terminate (a) on the
date that all of the shares authorized for sale under the Plan have been
purchased, except as otherwise extended by authorizing additional shares, or
(b) at any time, at the discretion of the Board of Directors of the Company;
provided, however, that no termination shall affect outstanding Offerings.
Upon termination of the Plan and the exercise or lapse of all Offering
rights hereunder, all remaining amounts credited to Plan Accounts of
Participants shall be returned to such Participants in cash, without interest.
25. ALLOCATION OF SHARES IF EXCEED MAXIMUM OFFERED. If the total
number of shares which would otherwise be purchased by Participants through
Payroll Deductions under any Offering exceeds the shares available for
purchase under the Offering, the Plan Committee may allocate the available
shares among the Participants on any basis consistent with the terms of the
Plan, and any remaining funds credited to a Participant's Plan Account on the
Purchase Date shall be returned to the Participant in cash, without
interest.
26. GOVERNMENTAL AND OTHER REGULATIONS. The obligation of the
Company to issue or transfer and deliver shares under this Plan shall be
subject to (a) compliance with all applicable laws, governmental rules and
regulations and administrative action, (b) the effectiveness of a
Registration Statement under the Securities Act of 1933, as amended, with
respect to such issue or transfer, if deemed necessary or appropriate by
counsel for the Company, and (c) the condition that the shares of Common
Stock reserved for issuance upon the purchase of shares subject to Offering
under the Plan shall have been listed (or authorized for listing upon
official notice of issuance) upon each securities exchange on which
outstanding shares of the same class may then be listed.
27. APPROVAL OF STOCKHOLDERS. The Plan has been adopted by the Board
of Directors of the Company, subject to the approval of the stockholders of
the Company. If the stockholders do not approve the Plan by a vote of the
holders of a majority of shares of Common Stock voted at a properly convened
meeting at which a quorum is present, the Plan shall be immediately
terminated and all funds held in Participants' Plan Accounts shall be
returned to such Participants in cash, with interest at 5% per annum from the
date of transfer to such accounts to the date of refund. If the stockholders
have not approved the Plan by a vote of the holders of a majority of shares
of Common Stock voted at a properly convened meeting at which a quorum is
present within twelve (12) months after the date of adoption of the Plan by
the Board of Directors, the Plan shall terminate on the date which is twelve
(12) months after the date of adoption of the Plan by the Board, and all
funds held in Participants' Plan Accounts shall be returned to such
Participants in cash, with interest at 5% per annum from the date of transfer
to such accounts to the date of refund. If the stockholders have not
approved the Plan by a vote of the holders of a majority of shares of Common
Stock voted at a properly convened meeting at which a quorum is present prior
to the last day of the first Offering Period, no funds in a Participant's
Plan Account may be used to purchase shares under Section 7 above until such
stockholder approval has been
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<PAGE>
obtained; in that event, the first Purchase Date shall be the fifth business
day after the date of stockholder approval.
28. $25,000 LIMITATION. No Eligible Employee shall be included in an
Offering which permits him to purchase Common Stock under all employee stock
purchase plans of the Company and its subsidiaries to accrue (within the
meaning of Section 423(b)(8) of the Code) at a rate which exceeds $25,000 of
fair market value of such capital stock (determined at the Offering Date) for
each calendar year in which such Offering is outstanding at any time.
29. INDEMNIFICATION. No current or previous member of the Board of
Directors, the Compensation Committee, or the Plan Committee, nor any officer
or employee of the Company acting on behalf of the Board of Directors, the
Compensation Committee, or the Plan Committee, shall be personally liable for
any action, determination, or interpretation taken or made in good faith with
respect to the Plan, and all such members of the Board of Directors, the
Compensation Committee, or the Plan Committee and each and any officer or
employee of the Company acting on their behalf shall, to the extent permitted
by law, be fully indemnified and protected by the Company in respect of any
such action, determination or interpretation. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification
to which such individuals may be entitled under the Company's Certificate of
Incorporation or Bylaws, as a matter of law, or otherwise.
30. INVESTMENT INTENT. The Company may require that there be
presented to and filed with it by any Participant(s) under the Plan, such
evidence as it may deem necessary to establish that the rights to purchase
Common Stock granted or the shares of Common Stock to be purchased or
transferred hereunder are being acquired for investment and not with a view
to their distribution.
31. NO RIGHT TO CONTINUE EMPLOYMENT. This Plan does not constitute a
contract of employment. Nothing in the Plan or in any related documentation
confers upon any employee the right to continue in the employ of the Company
or any of its subsidiaries or interferes with or restricts in any way the
right of the Company or any of its subsidiaries to discharge any employee at
any time (subject to any contract rights of such employee).
32. GOVERNING LAW. The law of the State of Delaware will govern all
matters relating to this Plan except to the extent it is superseded by the
federal laws of the United States of America.
33. CONSTRUCTION OF PLAN. The captions used in this Plan are for
convenience only and shall not be construed in interpreting the Plan.
Whenever the context so requires, the masculine shall include the feminine
and neuter, and the singular shall also include the plural, and conversely.
-7-
<PAGE>
PROXY
FOR
ANNUAL
MEETING
OF
STOCKHOLDERS
SEPTEMBER 29, 1997
INPUT/OUTPUT, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
SEPTEMBER 29, 1997
The undersigned stockholder acknowledges receipt of the Notice of Annual
Meeting of Stockholders and the Proxy Statement, each dated August 29, 1997,
and hereby appoints Charles E. Selecman and Robert P. Brindley, or either of
them, proxies for the undersigned, each with full power of substitution, to
vote all of the undersigned's shares of common stock of Input/Output, Inc.
(the "Company") at the Annual Meeting of Stockholders of the Company to be
held at the Stafford Civic Center, 1415 Constitution Avenue, Stafford, Texas
77477, on Monday, September 29, 1997 at 10:00 a.m., Stafford, Texas time, and
at any adjournments or postponements thereof.
(PLEASE SIGN ON REVERSE SIDE)
<PAGE>
INPUT/OUTPUT, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
1. Election of Directors, Nominees: Robert P. Brindley, For Withheld For All
Shelby H. Carter, Jr. and Theodore H. Elliott, Jr. All All Except
/ / / / / /
For all, except nominee's written in below:
--------------------------------------------------
2. The adoption of the Input/Output, Inc. Employee For Against Abstain
Stock Purchase Plan. / / / / / /
3. The ratification of the appointment of KPMG Peat For Against Abstain
Marwick LLP as the Company's independent / / / / / /
certified public accountants for the fiscal year
ending May 31, 1998.
4. In their discretion, upon such other matters as For Against Abstain
may properly come before the meeting. / / / / / /
The board of directors recommends a vote FOR the nominees and proposals above
and if no specification is made, the shares will be voted for such nominees
and proposals.
Dated , 1997
----------------------------------
- ----------------------------------------------
Stockholder's Signature
- ----------------------------------------------
Stockholder's Signature
Signature should agree with name printed hereon. If Stock is held in the name
of more than one person, EACH joint owner should sign. Executors,
administrators, trustees, guardians, and attorneys should indicate the
capacity in which they sign. Attorneys should submit powers of attorney.
PLEASE SIGN, DATE AND RETURN THE PROXY IN THE ENVELOPE ENCLOSED. THIS PROXY
WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL
NOMINEES IN ITEM 1, FOR THE PROPOSALS SET FORTH IN ITEMS 2 AND 3 AND WILL
GRANT DISCRETIONARY AUTHORITY PURSUANT TO ITEM 4. THIS PROXY WILL REVOKE ALL
PRIOR PROXIES SIGNED BY YOU.
