<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:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
INPUT/OUTPUT, INC.
11104 WEST AIRPORT BLVD.
STAFFORD, TEXAS 77477
(281) 933-3339
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 27, 1999
To the Stockholders of Input/Output, Inc.:
NOTICE IS HEREBY GIVEN that the 1999 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
27, 1999 at 10:00 a.m., Central Daylight Time, for the following purposes, as
described in the accompanying Proxy Statement:
1. To elect two directors for a three-year term expiring in 2002
or until their successors are duly elected and qualified.
2. To ratify the appointment of KPMG LLP as the Company's
independent certified public accountants for the fiscal year
ending May 31, 2000.
3. To transact any other business which properly may be brought
before the Annual Meeting or any adjournment thereof.
Only stockholders of record of the Company at the close of business
on August 13, 1999 are entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof. A complete list of these 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 days prior to the Annual Meeting. The list
will 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 the 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,
Stafford, Texas ROBERT P. BRINDLEY
August 27, 1999 Secretary
<PAGE>
INPUT/OUTPUT, INC.
11104 WEST AIRPORT BLVD.
STAFFORD, TEXAS 77477
(281) 933-3339
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 27, 1999
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 27, 1999 at
10:00 a.m., Central Daylight Time, and at any adjournment thereof. This Proxy
Statement and the enclosed proxy are first being mailed to stockholders on or
about August 27, 1999 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 27, 1999. The proxy permits
stockholders to withhold voting for any or all nominees for election to the
Company's Board of Directors and to abstain from voting for any proposal if
the stockholder so chooses.
All holders of record of outstanding shares of the Company's capital
stock at the close of business on August 13, 1999 (the "Record Date"), are
entitled to notice of and to vote at the Annual Meeting. On the Record Date,
the Company had outstanding 50,667,631 shares of common stock, par value
$0.01 per share (the "Common Stock") and 40,000 shares of Series B Preferred
Stock, par value $0.01 per share (the "Preferred Stock").
On each matter to be considered at the Annual Meeting, the Common
Stock and Preferred Stock will vote together as a class. Each share of Common
Stock is entitled to one vote and each share of Preferred Stock is entitled
to 125 votes, on each matter presented at the Annual Meeting. The holders of
the Company's capital stock having a majority of the voting power,
represented in person or by proxy, shall constitute a quorum for purposes of
transacting business at the Annual Meeting. A plurality of the votes of
holders of the shares of Common Stock and Preferred Stock represented in
person or by proxy at the Annual Meeting, provided a quorum is constituted,
is required for the election of directors. All other actions (including the
proposal to ratify the appointment of the Company's independent certified
public accountants) require the approval of a majority of the votes cast,
provided a quorum is present.
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 other proposals and
will be counted as present for purposes of the item on which the abstention
is noted. Abstentions on these proposals will have the effect of negative
votes because these proposals require the approval of a majority of the votes
cast. 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
their beneficial owners. NYSE rules provide that brokers who have not
received voting instructions from their clients have discretion to grant a
proxy and to vote on the election of directors and the proposal to ratify the
appointment of the independent certified public accountants. Under 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.
<PAGE>
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 signed and delivered to the Secretary of the Company prior to the
exercise of the proxy, by execution of a subsequent proxy and delivery of the
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 by itself revoke a proxy).
Where a stockholder's executed proxy specifies a choice with respect to a
voting matter, the shares will be voted accordingly. If no specification is
made, the shares will be voted (i) FOR the nominees for director identified
below, and (ii) FOR the ratification of the appointment of KPMG LLP as the
Company's independent certified public accountants for the fiscal year ending
May 31, 2000.
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 2000 Annual Meeting of Stockholders, and the third class of directors
will serve until the 2001 Annual Meeting of Stockholders.
Axel M. Sigmar, who is currently a director of the Company having a
term expiring at the 1999 Annual Meeting, is a nominee for director and will
stand for election at this year's Annual Meeting for a three-year term of
office expiring at the 2002 Annual Meeting of Stockholders or until his
successor is duly elected and qualified or until his earlier death,
resignation or removal. Sam K. Smith, who is currently a director of the
Company having a term expiring at the 2001 Annual Meeting, is a nominee for
director and will stand for election at this year's Annual Meeting for a
three-year term of office expiring at the 2002 Annual Meeting or until his
successor is duly elected and qualified or until his earlier death,
resignation or removal. If Mr. Smith is elected by the Company's stockholders
at the Annual Meeting, he will, at the time of his election, resign his
position in the class of directors having a term expiring at the 2001 Annual
Meeting. For additional information regarding Mr. Sigmar and Mr. Smith see
"Management - Directors and Executive Officers of the Company." The persons
named in the proxy will vote FOR these nominees, except where authority has
been withheld as to a particular nominee.
The nominees for a director receiving a plurality of the votes
represented by the shares of Common Stock and Preferred Stock present in
person or represented by proxy at the Annual Meeting and entitled to vote
thereon will be elected as directors. The nominees have consented to being
named in this Proxy Statement and to serve their terms if elected. If the
nominees should for any reason become unavailable for election, proxies may
be voted with discretionary authority by the persons appointed as proxies for
any substitute designated by the Board.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THESE NOMINEES FOR
ELECTION TO THE BOARD.
David C. Baldwin joined the Company's Board of Directors in June 1999
as the designee of the holders of the Preferred Stock. Pursuant to the
Certificate of Designation for the Preferred Stock, the holders of the
Preferred Stock, voting as a single class, are entitled to elect one director
to the Company's Board of Directors. Mr. Baldwin is therefore not one of the
nominees for director at the Annual Meeting; however, it is contemplated that
the holders of the Preferred Stock will appoint their director at each Annual
Meeting and that Mr. Baldwin will be designated as the Preferred Stock
director at the Annual Meeting.
2
<PAGE>
PROPOSAL TO RATIFY APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board has selected KPMG LLP as independent certified public
accountants to examine the consolidated financial statements of the Company
for its fiscal year ending May 31, 2000. Stockholders are being asked to
ratify this appointment. The Company has been informed that neither KPMG 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 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 a majority of the votes cast at the Annual
Meeting, 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 LLP AS THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING MAY 31, 2000.
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>
<CAPTION>
Name Age Title
---- --- -----
<S> <C> <C>
James M. Lapeyre, Jr. 46 Director and Chairman of the Board
Sam K. Smith 67 Director and Chief Executive Officer
Axel M. Sigmar 38 Director, President and Chief Operating Officer
David C. Baldwin 36 Director, Vice President and Chief Financial Officer
Robert P. Brindley 49 Director, Executive Vice President - Business
Development, and Secretary
Thomas C. Connolly 50 Vice President - Manufacturing
Roy Kelm 59 Vice President - Marine Division
Rex K. Reavis 56 Vice President - Land Division
Bruce A. Reichert 42 Vice President - Engineering
Ernest E. Cook 73 Director
Theodore H. Elliott, Jr. 63 Director
G. Thomas Graves III 50 Director
William F. Wallace 60 Director
</TABLE>
3
<PAGE>
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.
EXECUTIVE OFFICERS
James M. Lapeyre, Jr. was appointed to the Board in December 1998,
following the Company's acquisition of DigiCourse, Inc. He was elected
Chairman of the Board in May 1999. The DigiCourse, Inc. acquisition agreement
dated September 30, 1998 had provided that Mr. Lapeyre would be elected as a
director of the Company following the acquisition. Mr. Lapeyre has held
various positions at the Laitram Corporation since 1979, and has served as
its President since 1989. The Laitram Corporation is a privately-owned, New
Orleans-based manufacturer of food processing equipment and modular conveyor
belts, and was the previous owner of DigiCourse, Inc. Mr. Lapeyre's term as a
director of the Company expires at the 2000 Annual Meeting of Stockholders.
Sam K. Smith was elected Chief Executive Officer in May 1999 and was
appointed to the Company's Board of Directors in June 1999. Mr. Smith is a
former chairman of Landmark Graphics Corporation, a Houston-based provider of
workstation technical software for the petroleum industry, serving from 1989
to 1996. Prior to that time, he was a special limited partner at Sevin-Rosen
Management, a Texas-based venture capital firm, from 1983 to 1993, and spent
26 years prior to that time at Texas Instruments, Inc. managing the
development of that company's advanced scientific computer. In addition, he
managed the digital systems group of Texas Instruments, Inc. for six years,
including the division responsible for seismic exploration equipment. Mr.
Smith is also a director of Blue Wave Systems Inc., a NASDAQ company. Mr.
Smith, whose current term as director of the Company expires at the 2001
Annual Meeting of Stockholders, is a nominee for election at the Annual
Meeting. Effective September 1, 1999, Mr. Smith will also assume the title of
President of the Company.
Axel M. Sigmar was elected President and Chief Operating Officer and
was appointed to the Company's Board of Directors in August 1998. Mr. Sigmar
had served as Executive Vice President and Chief Technical Officer of the
Company beginning in December 1997. Prior to that, he had served from June
1997 to December 1997 as Vice President - Advanced System Group of the
Company and from 1992 until June 1997, as Vice President - Corporate
Development. Mr. Sigmar has been responsible for mergers and acquisitions and
the development of advanced technologies, including silicon micro-machining,
integrated circuits, next generation data telemetry and the software platform
being commercialized as the System 2000(TM). Mr. Sigmar, whose present term
as a director of the Company expires at the 1999 Annual Meeting of
Stockholders, is a nominee for re-election at the Annual Meeting. See
"Election of Directors." Effective September 1, 1999, Mr. Sigmar will assume
the title of Executive Vice President and Chief Technical Officer of the
Company and President of I/O Technologies, Inc., a new subsidiary being
formed by the Company.
David C. Baldwin was elected Vice President and Chief Financial
Officer and was appointed to the Company's Board of Directors in June 1999.
Mr. Baldwin is a managing director of SCF Partners, a Houston-based
investment firm. He currently serves on the boards of directors of several
private companies and Bonus Resources, a Toronto Stock Exchange listed
company. Mr. Baldwin serves on the Board as the designee of SCF - IV, L.P.,
the owner of the Company's Series B Preferred Stock, pursuant to the terms of
Certificate of Designation of the Preferred Stock. Mr. Baldwin's term as a
director ends at the Annual Meeting; however, it is contemplated that the
holders of the Preferred Stock will designate Mr. Baldwin to serve until the
2000 Annual Meeting.
Robert P. Brindley has been a director of the Company since July 1994.
Mr. Brindley has served as Executive Vice President since June 1997. He
previously served as Senior Vice President of the Company from 1991 to June
1997, Chief Financial Officer from 1987 to 1998, Vice President - Finance
from 1987 to 1991, and Vice President and Controller from 1982 to 1987 and
Controller from 1975 to 1982. He also served as Secretary of the Company from
1987 to July 1998, and was re-appointed Secretary in May 1999. Effective
September 1, 1999, Mr. Brindley will no longer continue as an officer and
employee of the
4
<PAGE>
Company, but it is anticipated that he will maintain a consulting and
advisory role with the Company. Mr. Brindley's term as a director of the
Company expires at the 2000 Annual Meeting of Stockholders.
Thomas C. Connolly was elected Vice President - Manufacturing in March
1998. Prior to joining the Company, Mr. Connolly served as a plant manager
for Haliburton Energy Services in Dallas from January 1984 to April 1994,
center manager of Haliburton Energy Services from May 1994 to March 1996,
Vice President Manufacturing/Engineering from March 1996 to October 1996 and
as President of CRC Evans, a division of Weatherford Inc., from October 1996
to July 1997.
Roy Kelm was elected Vice President - Marine Division in December
1998. Prior to joining the Company, Mr. Kelm served as President of
DigiCourse, Inc. from 1986 to 1998, and held various management positions at
Geophysical Services, Inc., a wholly owned subsidiary of Texas Instruments,
Inc. from 1958 to 1986. In August 1999, Mr. Kelm announced his intention to
retire effective December 31, 1999, but has agreed to serve as an advisor to
the Company following his resignation.
Rex K. Reavis was elected Vice President - Land Division in December
1998. Prior to that Mr. Reavis served in various management positions at
Schlumberger from 1991 to 1998, Chief Operating Officer of Terra Marine
Engineering from 1985 to 1991, and Chief Executive Officer of M&I Industries
from 1979 to 1985.
Bruce A. Reichert, Ph.D. was elected Vice President-Engineering in
December, 1998. Prior to that Dr. Reichert served as Engineering Program
Manager for Exploration Products with the Company from January 1998 to
December 1998, associate professor with tenure at Kansas State University
from 1994 to 1998, and Research Engineer at NASA's Lewis Research Center from
1989-1994.
DIRECTORS
Ernest E. Cook, a director of the Company since February 1987, is an
independent oil and gas consultant. Mr. Cook's term as a director of the
Company expires at the 2001 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 term as a director of the Company expires at the 2000 Annual
Meeting of Stockholders.
G. Thomas Graves III, a director of the Company since February 1987,
currently serves as President and Director of Toreador Royalty Co., a
Dallas-based oil and gas production 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 will expire at the 1999 Annual Meeting.
William F. Wallace was elected to the Board in August 1998. Since
1996, Mr. Wallace has served as a consultant to The Beacon Group, a New York
- - based venture capital fund. From October 1994 to July 1995, Mr. Wallace
served as a director, President and Chief Operating Officer of Plains
Petroleum Company, a NYSE-listed oil and gas production and exploration
company based in Denver. Following Plains' merger with Barrett Resources, a
NYSE-listed oil and gas production and exploration company, Mr. Wallace
served as a director and Vice Chairman of the Board of Barrett from July 1995
to March 1996. Prior to joining Plains, Mr. Wallace served from 1989 to 1994
as a regional vice president of Texaco Exploration and Production, Inc.
Mr. Wallace currently serves on the boards of directors of KMOC Oil Corp.
and Westport Oil and Gas Company, Inc., both of which are privately owned.
Mr. Wallace's term as a director of the Company expires at the 2001 Annual
Meeting of Stockholders.
5
<PAGE>
No director is related to any other director or executive officer of
the Company or its subsidiaries, and except as described above, 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 16 meetings during fiscal 1999. Each director attended
at least 75% 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), Graves and Wallace, met four times during fiscal 1999. Its
principal functions are to confirm the existence of effective accounting and
internal control systems and to oversee the Company's external and internal
audit functions.
THE COMPENSATION COMMITTEE, which currently consists of Messrs. Graves
(Chairman), Cook and Wallace, held seven meetings during fiscal 1999. 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 and to administrate the Company's executive
compensation plans.
THE NOMINATING COMMITTEE, which currently consists of Messrs. Cook
(Chairman), Baldwin and Lapeyre, met two times during fiscal 1999. 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 in care of the Company at the address set
forth on the first page of this Proxy Statement, on or before April 27, 2000.
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, 1999,
1998 and 1997 paid or accrued by the Company to or on behalf of those persons
who were during the fiscal year ended May 31, 1999, (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 for the fiscal year ended May 31, 1999
are collectively referred to as the "Named Executive Officers").
6
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ALL OTHER
COMPENSATION
ANNUAL COMPENSATION LONG-TERM COMPENSATION (3) (4)
------------------------------------- -------------------------- ----------
SECURITIES RESTRICTED
FISCAL UNDERLYING STOCK AWARDS
YEAR SALARY BONUS OPTIONS ($) (2)
---------- -------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sam K. Smith(1) 1999 $ 0 $ 0 0 $ 0 $ 0
Chief Executive Officer
W. J. ("Zeke") Zeringue(1) 1999 $429,354 $400,000 600,000(5) 0 $1,243,184(8)
Chairman of the Board and Chief
Executive Officer 1998 175,000 0 600,000(5) 1,573,000 0
Axel M. Sigmar 1999 $291,667 $ 0 400,000 0 $ 33,013
President and
Chief Operating Officer 1998 207,000 195,300 280,000 0 49,246
1997 160,000 0 60,000 0 37,976
Robert P. Brindley 1999 $250,000 $ 0 0 0 $ 32,396
Executive Vice President -
Business 1998 250,000 236,250 120,000 0 52,015
Development and Secretary
1997 225,000 0 80,000 0 40,262
Roy Kelm 1999 $108,825(6) $777,918(6) 50,000 0 $ 0
Vice President - Marine Division
Rex K. Reavis 1999 $183,329(7) $ 45,000 80,000 0 $ 0
Vice President - Land Division
</TABLE>
- -----------------
(1) W.J. "Zeke" Zeringue was elected Chairman of the Board and Chief Executive
Officer effective as of January 1, 1998 and resigned as director and from
all other positions with the Company effective as of May 28, 1999. Upon
his resignation, Mr. Zeringue entered into a separation agreement and
consulting agreement with the Company. During fiscal 1999, no compensation
was paid to or accrued on behalf of Sam K. Smith, the Company's Chief
Executive Officer who succeeded Mr. Zeringue on May 28, 1999. See
"Employment Agreements" and "Compensation Committee Report on Executive
Compensation."
(2) The Company is required to use the closing price of its Common Stock on
the date of grant of the restricted stock award for valuation purposes
with respect to this column. The restricted period with respect to each of
the Company's restricted stock awards is two years for 50% of the shares
awarded, three years for an additional 25% of the shares awarded and four
years for the remaining 25% of the shares awarded. Dividend and voting
rights of restricted stock are the same as those for all other shares of
the Company's outstanding Common Stock. Based on the last reported sales
price on December 10, 1997 (the date of grant for Mr. Zeringue) of Common
Stock on the New York Stock Exchange of $29 11/16 per share, Mr.
Zeringue's aggregate restricted stock holdings were 53,000 shares, having
a value of $1,573,000 as of that date. The terms of Mr. Zeringue's
separation agreement provided that the restrictions on Mr. Zeringue's
shares of restricted stock would automatically lapse upon the termination
of his employment with the Company.
(3) During fiscal 1999, the Company contributed to its Section 401(k) Plan as
follows: Mr. Zeringue: $3,184; Mr. Sigmar: $2,112; Mr. Brindley: $1,923.
(4) During fiscal 1999, the Company paid whole life insurance premiums as
contributions with respect to the Company's Supplemental Executive
Retirement Plan (SERP) as follows: Mr. Sigmar: $30,901; and Mr. Brindley:
$30,473.
(5) Pursuant to the terms of Mr. Zeringue's separation agreement and the terms
of the Company's Amended and Restated 1990 Stock Option Plan, Mr.
Zeringue's stock options were terminated and canceled upon the termination
of his employment with the Company.
(6) Mr. Kelm joined the Company on October 1, 1999. In connection with the
Company's acquisition of Mr. Kelm's prior employer, DigiCourse, Inc., the
Company agreed to continue DigiCourse's bonus plan only through fiscal
1999 and pay Mr. Kelm's bonus.
(7) Mr. Reavis joined the Company in July 1998.
(8) Includes $1,240,000 paid pursuant to Mr. Zeringue's separation agreement
with the Company.
7
<PAGE>
During fiscal 1999, 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 $50,000 or 10% of such
officer's salary and bonus.
STOCK OPTIONS
The options shown below were awarded during fiscal 1999 under the
Company's Amended and Restated 1990 Stock Option Plan (the "1990 Plan"):
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
- --------------------------------------------------------------------------------------------------------------
Number Percent of
of securities total options
underlying granted to Hypothetical
options employees in Exercise or Expiration Grant Date
Name granted fiscal year base price (1) date Value (2)
- ------------------------- ------- ----------- -------------- -------- ----------
<S> <C> <C> <C> <C> <C>
(#) (%) ($/Sh)
Sam K. Smith 0 0 $ 0 -- $ 0
W. J. "Zeke" Zeringue (3) 100,000 4.25 21.3125 06/01/08 1,033,600
500,000 21.23 10.0000 03/14/09 2,398,750
Axel M. Sigmar 400,000 16.99 10.0000 03/14/09 1,919,000
Robert P. Brindley 0 0 0 -- 0
Roy Kelm 50,000 2.12 6.3750 02/01/09 152,000
Rex K. Reavis 50,000 2.12 6.3750 02/01/09 152,000
30,000 19.3800 07/06/08 296,100
</TABLE>
- -----------------
(1) These options will vest in four equal annual increments beginning on the
first anniversary date of the date of the grant. The 1990 Plan provides
that in the event of a "change of control" of the Company (as defined in
the 1990 Plan), all stock options will become fully vested (unless the
successor to the Company assumes or replaces on substantially equivalent
terms the options outstanding).
(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 51%; (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 and (c) a time of exercise assumption of five years
(although the actual option term generally 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) Pursuant to the terms of Mr. Zeringue's separation agreement and the terms
of the Company's Amended and Restated 1990 Stock Option Plan, Mr.
Zeringue's stock options were terminated and canceled upon the termination
of his employment with the Company.
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, 1999. 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.
8
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Shares Number of Unexercised Value of Unexercised
Acquired on Value Options at Fiscal Year In-the-Money Options at
Name Exercise Realized End (#) Fiscal Year End ($)
------------------------ -------- -------- ------------------------- -------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
------------------------- -------------------------
<S> <C> <C> <C> <C>
Sam K. Smith 0 $ 0 0/0 $0/$0
W. J. "Zeke" Zeringue (1) 0 0 0/0 $0/$0
Axel M. Sigmar 0 0 166,100/642,600 $68,906/$0
Robert P. Brindley 0 0 165,733/136,767 $102,440/$0
Roy Kelm 0 0 0/50,000 $0/$106,250
Rex K. Reavis 0 0 7,500/72,500 $0/$106,250
</TABLE>
- -----------------
(1) Pursuant to the terms of Mr. Zeringue's separation agreement and the terms
of the Company's Amended and Restated 1990 Stock Option Plan, Mr.
Zeringue's stock options were terminated and canceled upon the termination
of his employment with the Company.
On May 31, 1999, the last reported sales price of the Common Stock on
the New York Stock Exchange composite tape was $8.50 per share. No Named
Executive Officers exercised Company stock options during fiscal 1999.
EMPLOYMENT AND CONSULTING AGREEMENTS
Mr. Zeringue's employment agreement terminated upon Mr. Zeringue's
resignation from the Company in May 1999. The Company and Mr. Zeringue have
entered into a separation agreement and consulting agreement under which the
Company agreed to pay Mr. Zeringue an aggregate of $1,240,000, less
applicable withholding and other deductions required by law. In addition, the
Company agreed to provide to Mr. Zeringue and his dependents medical, health
and hospitalization insurance on the same basis as provided to him prior to
his resignation, for a period of up to two years following his date of
resignation.
In June 1999, the Board approved the consulting compensation
arrangements between the Company and Mr. Smith in his capacity as Chief
Executive Officer. Effective June 1, 1999, Mr. Smith will be entitled to
receive compensation valued at $20,000 per month. One-third of this amount
will be paid in cash, and two-thirds will be paid by the Company's issuance
to Mr. Smith of Common Stock of the Company, valued monthly at the last
reported sales price per share on the NYSE composite transactions on the last
trading day of each month. Additionally, the Compensation Committee granted
to Mr. Smith nonqualified stock options to purchase 30,000 shares of Common
Stock under the terms of the Company's Amended and Restated 1990 Stock Option
Plan. The exercise price for this grant is $10.00 per share, the term of the
stock option is for four years and the option will vest in equal annual
one-quarter increments; vesting will accelerate in the event that Mr. Smith
is removed from the Board of Directors. On June 28, 1999, the date of grant,
the closing sales price for the Company's Common Stock as reported on the
NYSE composite transactions was $7.3125 per share.
The Company's employment agreement with Mr. Brindley provides that if
Mr. Brindley's employment is terminated for any reason other than (a) his
death, disability or retirement, (b) for cause or (c) his voluntary
resignation (except for his resignation for "good reason"), he would be
entitled to receive from the Company a lump sum severance payment equal to
the sum of the following amounts: (i) his full base salary through his date
of termination at the rate then in effect, (ii) an amount equal to two times
the average of his annual base salary plus bonus for the preceding three
fiscal years, (iii) certain relocation and indemnity payments, and (iv) in
the event he is subject to the excise tax imposed by Section 4999 of the
9
<PAGE>
Internal Revenue Code of 1986 (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 him as described in the
provisions of Section 280G(b) of the Code. In the event that he is deemed to
receive a "parachute payment" as the result of a change in control, that
payment would be deemed to be an "excess parachute payment" if it equaled or
exceeded 300% of his "base amount," generally the average annual compensation
received by him 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 he is terminated for cause, the
Company must maintain in full force and effect for his continued benefit for
a two-year period after the date of termination all benefit plans and
programs or arrangements in which he was entitled to participate immediately
prior to the date of termination.
Effective August 17, 1999, the Company and Mr. Sigmar entered into an
Employment Agreement. The Employment Agreement provides that Mr. Sigmar will
serve as Executive Vice President and Chief Technical Officer of the Company
and provides for an annual base salary of $300,000 and for Mr. Sigmar to be
eligible to participate in the Company's management incentive plans. The
Company agreed to use its reasonable best efforts to cause Mr. Sigmar to be
elected or reelected to the Board during the six year period following the
effective date of the Agreement. Also, the Agreement provides upon its
effective date for the full vesting for Mr. Sigmar as a participant in the
Company's Supplemental Executive Retirement Plan (SERP), the grant of a
non-qualified stock option for 100,000 shares of Common Stock under the
Company's Amended and Restated 1990 Stock Option Plan and accelerated vesting
and extension of post-employment exercise periods for certain other stock
options. In addition, the Company agreed to repurchase 100,000 shares of
Common Stock owned by Mr. Sigmar at a purchase price of $8.02 per share on
the Agreement's effective date. The Agreement provides for severance payments
to Mr. Sigmar by the Company upon his termination of employment in an amount
of up to two years' annual base salary plus 24 months' aggregate cash
bonuses, a lump sum amount equal to the present value of his SERP vested
deferred benefit accrued through termination, continuation of participation
in Company group health plans, plus vesting and extension of post-employment
exercise periods of certain previous stock option grants. The Agreement also
provides for the Company's obligation to pay certain cash tax "gross-up"
amounts to Mr. Sigmar in the event that he becomes subject to the excise tax
imposed by Section 4999 of the Code as the result of a change of control
under Section 280G of the Code.
CHANGE OF CONTROL AND SEVERANCE AGREEMENTS
During fiscal 1999, the Company entered into severance and change of
control agreements with Messrs. Connolly, Kelm, Reavis and Reichert. Under
the terms of the severance and change of control agreements, in the event of
a termination of employment of a covered executive officer during the
18-month period following a "change of control" of the Company (as defined in
the agreements) other than a voluntary resignation or retirement by the
officer (except as stated below) or a termination of employment for "cause"
(as defined in the agreements) or by reason of death or disability, the
officer will be entitled to receive certain severance payments and other
benefits. A voluntary resignation by the officer following a "change of
duties" (as defined in the agreements) of the officer will also entitle the
officer to the severance benefits and other benefits.
The severance payment amount, payable in one lump sum on or before the
30th day following termination, shall be equal to two times the sum of (a)
the greater of such officer's annual base salary on the effective date of the
change of control or the date of the termination of employment plus (b) the
amount of the applicable "Target Bonus" for the officer as determined under
the management bonus or incentive program then in effect. In addition, the
officer under those circumstances will be entitled to receive continued
medical, dental, vision and group life coverage under the Company's
applicable plans (to the extent permitted by law or by the plan carriers) for
a period of one year or until the officer becomes eligible to obtain
comparable coverage from a subsequent employer. Furthermore, to the extent
the officer's stock options and restricted stock have not fully vested, such
options and restricted stock shall thereupon accelerate and immediately
become fully vested. In the event that any payment under any agreement would
constitute an "excess parachute payment" under Section 280G of the Code (see
" - Employment and
10
<PAGE>
Consulting Agreements" above), the severance amounts and other benefits would
be reduced to an amount so that the present value of all amounts so
receivable would be less than the threshold amount of any excess parachute
payment.
The term of each agreement is for three years, but each agreement will
automatically renew for additional three-year terms absent prior written
notice from the officer or the Company. Each agreement also effectively
amends the terms of any stock option agreement or restricted stock award
between the Company and the officer to provide that in the event of a change
of control of the Company and the full assumption by the successor to the
Company of the Company's options or restricted stock or their replacement
with equivalent options or restricted stock awards, the Company's options and
restricted stock held by that officer will not be accelerated and become 100%
vested upon the change of control event.
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. A Board-appointed committee administers 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. A participant who has not attained
age 65 but has completed ten years of service with the Company shall receive
the actuarial equivalent of his benefit at the date the employee attains age
65 or terminates employment with the Company, whichever is later. If a
participant terminates employment prior to age 65, the Board may, however,
approve of the commencement of such payments upon the participant's
attainment of age 55 or termination of employment, which ever is later (as
defined in the SERP). 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. See "- Employment and Consulting Agreements" above
for a description of the SERP's provisions applicable to Mr. Sigmar.
"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
40% 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 reviews,
evaluates and establishes the salary levels of corporate officers and
administers the Company's stock option, restricted stock and management
incentive plans. The current members of the Committee are G. Thomas Graves
III, Chairman, Ernest E. Cook and William F.Wallace. The following report
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.
11
<PAGE>
COMPENSATION POLICY
The principal goals of the Company's executive compensation policy are
to provide competitive compensation opportunities to attract and retain
highly qualified and productive executive employees; to motivate executives
to meet and exceed corporate financial goals; and to create meaningful links
between corporate performance, individual performance and rewards. It is the
Company's policy 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 and restricted stock
plans under which the benefits realized by executives are directly related to
stock price performance.
In its assessment of compensation levels, the Committee takes into
consideration performance relative to the individual responsibilities of the
executive officers, and considerations of internal equity, 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 the entire executive compensation package and each of
its individual components. The Committee reviews the performance of the
Company and each officer individually to determine salary and bonus
adjustments and to determine stock option awards.
Company executive compensation has principally consisted of three key
elements: A long-term incentive component (stock options - and in less
frequent instances, restricted stock awards); a short-term incentive
component (cash bonus for attainment of financial and performance goals
established by the Board); and base salary.
STOCK OPTIONS AND RESTRICTED STOCK. The Committee believes that
long-term incentives should be provided to management to increase stockholder
value, as measured by stock price. The Committee believes that stock
incentives are appropriate, not only for senior management, but also for
other employees of the Company and its subsidiaries. All options provide for
the purchase of shares at an exercise price equal to not less than the fair
market value on the date of grant. Restricted stock awards have also been
made, but on much more limited occasions, principally to attract and retain
qualified senior executive candidates. See "Summary Compensation Table" and
"Stock Options" above for information concerning these grants and awards.
SHORT-TERM 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 compared to the Company's financial
objectives. The 1999 Management Incentive Program granted the Committee wide
discretion and flexibility to determine the particular financial determinants
for corporate performance goals, but also permitted the Committee to weigh
individual performance attributes in determining a participant's annual cash
bonus. For 1999, the key determinants established by the Committee for
corporate performance goals were free cash flow and return on operating
assets. No bonuses were paid to any of the Named Executive Officers under the
1999 Management Incentive Program with respect to fiscal 1999. The Company
did pay Mr. Zeringue a bonus of $400,000 in December 1998 under the terms of
his employment agreement with the Company, and the Company paid Mr. Kelm's
bonus of $777,918 under the terms of the DigiCourse bonus program, assumed by
the Company in connection with the DigiCourse acquisition. The DigiCourse
plan has been discontinued and its participants will be eligible to
participate in the 1999 Management Incentive Program. Mr. Reavis earned a
bonus of $45,000 as a result of the terms of his offer of employment based
on the discretion of management.
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
12
<PAGE>
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 well as input
from outside consultants and other sources.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Zeringue's compensation for fiscal 1999 was largely determined by
the terms of his January 1998 employment agreement with the Company. Under
his employment agreement, Mr. Zeringue was to receive an annual base salary
of $420,000, and was entitled to a $400,000 guaranteed bonus that was paid in
December 1998. In addition, during fiscal 1999, the Company granted to Mr.
Zeringue two non-qualified stock options: an option for 100,000 shares
granted on June 1, 1998 vesting in four equal annual installments and an
option for 500,000 shares granted on March 14, 1999 vesting in four equal
annual installments. Pursuant to the terms of Mr. Zeringue's separation
agreement and the terms of the Company's Amended and Restated 1990 Stock
Option Plan, Mr. Zeringue's stock options were terminated and canceled upon
the termination of his employment with the Company. Under his separation
arrangements, the restrictions on his January 1998 restricted stock grant of
53,000 shares lapsed upon his resignation.
The terms of Mr. Smith's compensation as Chief Executive Officer were
determined through arms'-length negotiations between Mr. Smith and the
Committee and Mr. Lapeyre as Chairman of the Board, giving effect to Mr.
Smith's prior employment experience and his expected contributions to the
Company. See " - Employment and Consulting Agreements."
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 are rewarded commensurately. When
performance goals are not met, the executives' overall cash compensation is
negatively impacted. 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.
G. Thomas Graves III, Chairman
Ernest E. Cook
William F. Wallace
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 specifically incorporates this information by reference, and shall
not otherwise be deemed filed under such Acts.
13
<PAGE>
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:
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
Dollars(1)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
INPUT/OUTPUT 100 132 313.6 137.9 170.9 66.02
S&P 500 100 120.2 154.4 199.8 261.1 316
S&P ELECTRONICS 100 167.6 212.8 289.3 302.9 389.5
</TABLE>
(1) The graph assumes that $100.00 was invested on June 1, 1994 in the
Company's common stock, the Standard & Poor's 500 Index, and the
Standard & Poor's Electronics Index assumes that all dividends were
re-invested.
14
<PAGE>
COMPENSATION OF DIRECTORS
Effective June 1, 1999, the Company's Board of Directors amended its
compensation arrangements. Each director who is not an employee of the
Company will receive $1,500 for each meeting attended ($500 for telephonic
meetings) and $1,000 for each committee meeting attended (compared to $1,500
per meeting in fiscal 1999). In addition, each non-employee director will
receive an annual stipend of $15,000 (compared to $25,000 in fiscal 1999),
and each Committee Chairman will receive an annual stipend of $3,000
(compared to $10,000 in fiscal 1999). Messrs. Lapeyre and Baldwin have
declined any directors fees for fiscal 2000.
DIRECTORS RETIREMENT PLAN. In 1992, the Company adopted its 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 commences at the
beginning of the Company's fiscal quarter next following the later of the
dates on which a director (i) attains age sixty-five and (ii) retires from
the Board.
In 1996, the Board 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 then an outside director was
prohibited. During 1998, the Board determined to further amend the Plan to
provide, in lieu of payments of benefits in quarterly installments, a lump
sum payment equivalent to the present value of the product of the "Applicable
Stipend" times the "Applicable Period." The "Applicable Period" is a period
of years equal to the lesser of (a) the actual number of years and portions
thereof, rounded upwards to the nearest six months, during which such
director served as an outside director, and (b) ten years. The "Annual
Stipend" definition was recently amended to be $25,000. The present value
will be computed on the basis of the actuarial equivalent of the stream of
payments represented by the Applicable Stipend paid in quarterly installments
over a period of time equal to the Applicable Period.
Currently, only Messrs. Cook and Elliott are entitled to receive any
benefits under the Directors Retirement Plan. In February 1999, the Company
agreed to pay Mr. Graves $64,319 in liquidation of his interests with respect
to any future benefits under the Directors Retirement Plan; this amount
represented a discounted present value of the actuarial equivalent of Mr.
Graves' potential benefits under the plan as computed by the Company.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN. As a means to attract and
recruit qualified new directors and to retain capable directors in a manner
that promotes ownership of a proprietary interest in the Company, the
Input/Output, Inc. Amended and Restated 1996 Non-Employee Director Stock
Option Plan (the "Directors Plan") was adopted in 1996. In 1998, the
Company's stockholders approved certain amendments to the plan, increasing
the total shares of Common Stock authorized for issuance under the Directors
Plan to 700,000 shares.
Under the terms of the Directors Plan, each non-employee director of
the Company is to be granted an option to purchase 20,000 shares of Common
Stock on the date that person commences serving as a non-employee director.
Afterwards, the non-employee director will be entitled to receive options to
purchase 10,000 shares on the first business days of each November following
such initial 20,000 share grant. The initial 20,000 share grant vests in
33.33% installments on the first, second and third anniversary dates of the
initial grant; the first 10,000 share grant after the initial grant vests in
50% installments on the first and second anniversary dates of such grant; and
the second 10,000 share grant after the initial grant will be fully
exercisable on and after the first anniversary date of such grant. Any
subsequent annual grants are each fully exercisable on their dates of grant.
Messrs. Wallace, Lapeyre, Smith and Baldwin were each granted 20,000-share
options effective upon their appointment to the Board during fiscal 1999 and
in June 1999, respectively. See "Management".
15
<PAGE>
The Directors Plan also provides for discretionary grants of stock
options to Non-Employee Directors as determined from time to time by the
Board. See "- Employment and Compensation Agreements" above.
As of August 1, 1999, the Company had options covering 504,500 shares of
Common Stock available for future grant under the Directors Plan.
16
<PAGE>
VOTING AND STOCK OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
At the Record Date, there were outstanding 50,667,631 shares of Common
Stock which were held of record by 507 stockholders, and the Company believes
that there were approximately 17,973 beneficial owners of 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 following table sets forth certain information with regard to the
beneficial ownership as of July 31, 1999 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 or Preferred Stock, (ii) each director and
nominee for director of the Company, (iii) each Named Executive Officer of
the Company and (iv) all executive officers and directors as a group (14
persons).
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
---------------------------------------- -------------------------------------
NAME OF BENEFICIAL OWNER(1) NUMBER OF SHARES(1) PERCENT OF CLASS NUMBER OF SHARES PERCENT OF CLASS
--------------------------- ------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
PRIMECAP Management Company 4,149,000 8.2% -- --
225 S. Lake Avenue
Pasadena, CA 91101-3005
J. P. Morgan & Co., Inc. 3,600,000 7.1% -- --
60 Wall Street
New York, NY 10260
Merrill Lynch & Co., Inc. 2,915,000 5.8% -- --
800 Scudders Mill Road
Plainsboro, NJ 08536
The Laitram Corporation 5,794,000 11.4% -- --
220 Laitram Lane
Harahan, LA 70123
SCF-IV, L.P. --(10) -- (10) 40,000(10) 100%
600 Travis, Suite 6600
Houston, TX 77002
James M. Lapeyre, Jr. 98,500 0.2% -- --
Sam K. Smith (2) 3,556 * -- --
David C. Baldwin (10) -- -- -- --
Axel M. Sigmar (3) 272,475 0.5% -- --
Robert P. Brindley (4) 189,165 0.4% -- --
Roy Kelm -- -- -- --
Rex K. Reavis (5) 8,500 * -- --
Ernest E. Cook (6) 69,533 0.1% -- --
Theodore H. Elliott, Jr. (7) 89,833 0.2% -- --
G. Thomas Graves III (8) 88,333 0.2% -- --
William F. Wallace -- -- -- --
W. J. "Zeke" Zeringue (9) 63,488 0.1% -- --
All officers and directors as a group 901,442 1.8% -- --
(14 persons) (11)
</TABLE>
------------
*Less than 0.1%.
17
<PAGE>
(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) Represents shares issued as compensation to Mr. Smith pursuant to his
Consulting Agreement with the Company. See "Remuneration of Directors and
Officers - Employment and Consulting Agreements.
(3) Includes 166,000 shares which are subject to a currently exercisable option
granted under the Amended and Restated 1990 Stock Option Plan. Includes
165,733 shares which are subject to currently exercisable options granted
under the Amended and Restated 1990 Stock Option Plan.
(4) Includes 165,733 shares which are subject to currently exercisable options
granted under the Amended and Restated 1990 Stock Option Plan.
(5) Includes 7,500 shares which are subject to currently exercisable options
granted under the Amended and Restated 1990 Stock Option Plan.
(6) Includes 18,166 shares which are subject to currently exercisable options
granted under the 1991 Directors Stock Option Plan and the Amended and
Restated 1996 Non-Employee Directors Stock Option Plan.
(7) Includes 40,666 shares which are subject to currently exercisable options
granted under the 1991 Directors Stock Option Plan and the Amended and
Restated 1996 Non-Employee Directors Stock Option Plan.
(8) Includes 38,160 shares which are subject to currently exercisable options
granted under the 1991 Directors Stock Option Plan and the Amended and
Restated 1996 Non-Employee Directors Stock Option Plan.
(9) Includes 53,000 shares of restricted stock.
(10) The Preferred Stock may be converted into an aggregate of 5,000,000 shares
of Common Stock (based upon the current conversion price of $8.00 per
share) upon the earlier to occur of the third anniversary of the issuance
of the Preferred Stock or a change of control (as defined) of the Company,
and is mandatorily convertible on May 7, 2004. David C. Baldwin, the
designee of the holder of the Preferred Stock to the Company's Board of
Directors, is a managing director of SCF Partners, an affiliate of SCF-IV,
L.P. Mr. Baldwin disclaims any beneficial ownership of the Preferred Stock
or the Common Stock into which it may be converted. Each share of Preferred
Stock is currently entitled to 125 votes on each matter presented at the
Annual Meeting.
(11) Includes an aggregate of 356,833 shares which are subject to currently
exercisable options granted under the Amended and Restated 1990 Stock
Option Plan and 203,999 shares which are subject to currently exercisable
options granted under the 1991 Directors Stock Option Plan and the Amended
and Restated 1996 Non-Employee Directors Stock Option Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a)
of the Securities Exchange Act of 1934 (the 1934 Act) 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 provided to the
Company, during the fiscal year ended May 31, 1999, the Company believes
that, due to inadvertent administrative oversights, certain of the Company's
officers and directors failed to file Forms 5 with respect to options granted
during fiscal 1999. Each late filing represented one transaction. To correct
the error in August 1999, Messrs. Sigmar, Connolly, Kelm, Reavis and Reichart
filed Forms 4 with regard to their options to purchase 400,000, 20,000,
50,000, 50,000 and 50,000 shares of Common Stock, respectively, granted in
February and
18
<PAGE>
March 1999. Similarly, in August 1999, each of Messrs. Cook, Elliott, Graves
and Wallace filed Forms 4 with regard to options to purchase 10,000 shares of
common stock under the Company's Amended and Restated 1996 Non-Employee
Directors Stock Option Plan in November 1998, and Mr. Lapeyre filed a Form 4
with regard to options to purchase 20,000 shares of Common Stock granted
under the same plan in December 1998.
CERTAIN TRANSACTIONS
In connection with the Company's acquisition of DigiCourse, Inc. in
November 1998, the Company entered into a Continued Services Agreement with
The Laitram Corporation ("Laitram"), under which Laitram agreed to provide
accounting, software, manufacturing and maintenance services to the Company.
Mr. Lapeyre, the Company's Chairman of the Board, is the chairman and
principal stockholder of Laitram. Under the terms of the Service Agreement,
Laitram bills the Company for facility lease and machine shop services
rendered on a monthly basis. In the fiscal year ended May 31, 1999, the
Company paid Laitram an aggregate of $2,677,730 under the Continued Services
Agreement. The facility lease portion of the Service Agreement has a term of
three years expiring September 30, 2001 and the machine shop agreement has a
term of one year ending on November 17, 1999.
STOCKHOLDER PROPOSALS AT 2000 ANNUAL MEETING
The Board presently intends to hold the Company's next Annual Meeting
of Stockholders on or about September 25, 2000. A proxy statement and notice
of this meeting will be mailed to all stockholders approximately one month
prior to that date. In order to be eligible for inclusion in the Company's
proxy statement for the 2000 Annual Meeting of Stockholders, a proposal of a
stockholder must be received by the Company at its principal executive
offices in Stafford, Texas, by May 1, 2000. All stockholder proposals of this
nature must comply with SEC Rule 14a-8 under the 1934 Act.
In addition, in order for a stockholder proposal to be raised from the
floor during the next year's annual meeting, written notice about that
proposal must be received by the Company by no later than May 1, 2000 and
must contain the necessary information as required by the Company's bylaws.
In order for a stockholder to make a director nomination at an annual
meeting, it is necessary to notify the Company not fewer than 120 days in
advance of the day specified in the Proxy Statement for this year's Annual
Meeting.
Since August 27, 1999 is specified as the mailing date in this year's
Proxy Statement, in order for any nomination notice or stockholder proposal
to be timely for next year's annual meeting, it must be received by the
Company not later than May 1, 2000 (that is, 120 days prior to August 27).
Also, the notice must meet the other requirements contained in the Company's
bylaws. A copy of the relevant bylaw provisions containing the requirements
for making stockholder proposals may be obtained by contacting the Company's
corporate Secretary at the executive headquarters of the Company. Also,
please refer to "Management-Meetings of Directors and Committees" for
information about suggestions for nominations to the Board of Directors.
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 these 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.
19
<PAGE>
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,
1999, 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.
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,
Robert P. Brindley
SECRETARY
Stafford, Texas
August 27, 1999
20
<PAGE>
PROXY INPUT/OUTPUT, INC. PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS--SEPTEMBER 27, 1999
The undersigned stockholder acknowledges receipt of the Notice of Annual
Meeting of Stockholders and the Proxy Statement, each dated August 24, 1999,
and hereby appoints Axel M. Sigmar 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 27, 1999 at 10:00 a.m. Central Daylight Time, and at any
adjournments or postponements thereof.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
TRIANGLE FOLD AND DETACH HERE TRIANGLE
<PAGE>
INPUT/OUTPUT, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
[ ]
<TABLE>
<CAPTION>
For Withheld For All
All All Except
<S> <C> <C> <C> <C>
1. Election of Directors.
NOMINEES: Axel M. Sigmar and Sam K. Smith // // // --------------------------
Nominee's Excepted
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 PROPOSAL
SET FORTH IN ITEM 2 AND WILL GRANT DISCRETIONARY
AUTHORITY PURSUANT TO ITEM 3. THIS PROXY WILL REVOKE
ALL PRIOR PROXIES SIGNED BY YOU.
For Against Abstain
2. 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, 2000.
For Against Abstain
3. In their discretion, upon such other matters as // // //
may properly come before the meeting.
</TABLE>
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 , 1999
------------------------------------------------
- -----------------------------------------------------------
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.
TRIANGLE FOLD AND DETACH HERE TRIANGLE
YOUR VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
