SPECIAL MEETING OF STOCKHOLDERS
To be Held on February 1, 2016
December [ ], 2015
Dear ION Stockholders:
You are cordially invited to attend a Special Meeting of
Stockholders (the "Special Meeting") of ION Geophysical Corporation
(the "Company"), which will be held on Monday, February 1, 2016, at
10:30 a.m., Central Time, in the offices of the Company located at
2105 CityWest Boulevard, Suite 400, Houston, Texas 77042-2839.
During the Special Meeting, stockholders will vote on the
following items:
An amendment to our Restated Certificate of Incorporation to
(i) effect a reverse stock split of our common stock at a ratio
selected by our Board of Directors (or any authorized committee of
the Board of Directors) from within a range of between 1-for-5 and
1-for-15, inclusive, and, (ii) if and when the reverse stock split
is effected, proportionately reduce the number of authorized shares
of our common stock by the selected reverse split ratio;
An amendment to our Restated Certificate of Incorporation to
increase the number of authorized shares of our common stock from
200 million to 400 million; and
Subject to stockholder approval and implementation of the
reverse stock split, certain amendments to the Company's 2013
Long-Term Incentive Plan to, if and when the reverse stock split is
effected, increase (i) the total number of shares of our common
stock available for issuance under the 2013 Long-Term Incentive
Plan and (ii) the maximum number of such shares that may be granted
in the form of full-value awards.
While approval of Proposals 1 or 2 will not be conditioned on
the approval of any other proposals, the approval of Proposal 3
will be conditioned on the approval of Proposal 1. The accompanying
Special Meeting Proxy Statement contains complete details on these
proposals.
Your understanding of, and participation in, the Special Meeting
is important, regardless of the number of shares you hold. To
ensure your representation, we encourage you to vote your shares as
soon as practicable.
Thank you for your continued support of ION Geophysical
Corporation. We look forward to seeing you on February 1, 2016.
ION GEOPHYSICAL CORPORATION
2105 CityWest Boulevard, Suite 400
Houston, Texas 77042-2839
(281) 933-3339
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be Held on February 1, 2016
ION Geophysical Corporation (the "Company") will hold a Special
Meeting of Stockholders (the "Special Meeting") in the offices of
the Company located at 2105 CityWest Boulevard, Suite 400, Houston,
Texas 77042-2839, on Monday, February 1, 2016, at 10:30 a.m.,
Central Time, to:
Adopt an amendment to our Restated Certificate of Incorporation
to (i) effect a reverse stock split of our common stock at a ratio
selected by our Board of Directors (or any authorized committee of
the Board of Directors) from within a range of between 1-for-5 and
1-for-15, inclusive, and, (ii) if and when the reverse stock split
is effected, proportionately reduce the number of authorized shares
of our common stock by the selected reverse split ratio;
Adopt an amendment to our Restated Certificate of Incorporation
to increase the number of authorized shares of our common stock
from 200 million to 400 million; and
Approve, subject to stockholder approval and implementation of
the reverse stock split, certain amendments to the Company's 2013
Long-Term Incentive Plan to, if and when the reverse stock split is
effected, increase (i) the total number of shares of our common
stock available for issuance under the 2013 Long-Term Incentive
Plan and (ii) the maximum number of such shares that may be granted
in the form of full-value awards.
While approval of Proposals 1 or 2 will not be conditioned on
the approval of any other proposals, the approval of Proposal 3
will be conditioned on the approval of Proposal 1.
ION's Board of Directors has set December 18, 2015 as the record
date for the Special Meeting. This means that owners of ION common
stock at the close of business on that date are entitled to receive
this notice and vote at the Special Meeting and any adjournments or
postponements of the Special Meeting. Each share of our common
stock is entitled to one vote. As of the record date, there were [
] shares of our common stock outstanding.
If you are the registered owner of shares of our common stock as
of the record date, you may vote those shares by attending the
Special Meeting and voting in person.
Your vote is very important, and your prompt cooperation in
voting your proxy is greatly appreciated. If you are unable to
attend the meeting, we urge you to vote by proxy in any one of the
following three ways:
VIA THE INTERNET, which we encourage if you have Internet
access, at the address shown on your proxy card;
BY TELEPHONE, using the toll-free telephone number shown on the
proxy card; or
BY MAIL, by completing, signing and returning the enclosed
proxy card in the postage-paid envelope.
December [ ], 2015
Houston, Texas
ION GEOPHYSICAL CORPORATION
2105 CityWest Boulevard, Suite 400
Houston, Texas 77042-2839
(281) 933-3339
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
To be Held on February 1, 2016
GENERAL INFORMATION
This Special Meeting Proxy Statement ("Proxy Statement") is
furnished to stockholders of ION Geophysical Corporation, a
Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors (the "Board") for
use at the Company's Special Meeting of Stockholders (the "Special
Meeting") to be held on Monday, February 1, 2016, at 10:30 a.m.,
Central Time, in the offices of the Company located at 2105
CityWest Boulevard, Suite 400, Houston, Texas 77042-2839, and at
any adjournments or postponements thereof.
The proxy materials, including this Proxy Statement and the
proxy card, are first being distributed and made available on or
about December [ ], 2015. The mailing address of our principal
executive offices is 2105 CityWest Boulevard, Suite 400, Houston,
Texas 77042-2839. All properly completed and returned proxies for
the Special Meeting will be voted at the Special Meeting in
accordance with the directions given in the proxy, unless the proxy
is revoked before the Special Meeting. The proxies also may be
voted at any adjournments or postponements of the Special
Meeting.
As stated in the accompanying Notice of Special Meeting of
Stockholders, we will hold the Special Meeting to:
Adopt an amendment to our Restated Certificate of Incorporation
to (i) effect a reverse stock split of our common stock, par value
$0.01 per share ("Common Stock"), at a ratio selected by our Board
(or any authorized committee of the Board) from within a range of
between 1-for-5 and 1-for-15, inclusive, and, (ii) if and when the
reverse stock split is effected, proportionately reduce the number
of authorized shares of our Common Stock by the selected reverse
split ratio;
Adopt an amendment to our Restated Certificate of Incorporation
to increase the number of authorized shares of our Common Stock
from 200 million to 400 million; and
Approve, subject to stockholder approval and implementation of
the reverse stock split, certain amendments to the Company's 2013
Long-Term Incentive Plan (the "2013 LTIP") to, if and when the
reverse stock split is effected, increase (i) the total number of
shares of our Common Stock available for issuance under the 2013
LTIP and (ii) the maximum number of such shares that may be granted
in the form of full-value awards.
While approval of Proposals 1 or 2 will not be conditioned on
the approval of any other proposals, the approval of Proposal 3
will be conditioned on the approval of Proposal 1.
i
On August 11, 2015, we were notified by the New York Stock
Exchange (the "NYSE") that the average closing price of the Common
Stock had fallen below $1.00 per share over a period of 30
consecutive trading days, which is the minimum average share price
required by the NYSE under Section 802.01C of the NYSE Listed
Company Manual. We have six months following receipt of the NYSE's
notice to regain compliance with the NYSE's minimum share price
requirement. We can regain compliance at any time during the
six-month cure period if on the last trading day of any calendar
month during the cure period the Common Stock has a closing share
price of at least $1.00 and an average closing share price of at
least $1.00 over the 30 trading-day period ending on the last
trading day of such month. Notwithstanding the foregoing, if we
determine that we must cure the price condition by taking an action
that will require approval of our stockholders, we may also regain
compliance by: (i) obtaining the requisite stockholder approval by
no later than our next annual meeting, (ii) implementing the action
promptly thereafter and (iii) the price of the Common Stock
promptly exceeding $1.00 per share, and the price remaining above
that level for at least the following 30 trading days.
A delisting of the Common Stock from the NYSE would negatively
impact us because it would: (i) reduce the liquidity and market
price of the Common Stock; (ii) reduce the number of investors
willing to hold or acquire the Common Stock, which could negatively
impact our ability to raise equity financing; (iii) limit our
ability to use a registration statement to offer and sell freely
tradable securities, thereby preventing us from accessing the
public capital markets, and (iv) impair our ability to provide
equity incentives to our employees. The Board has adopted a
proposed amendment to the Restated Certificate of Incorporation,
and recommends that stockholders approve such amendment, for the
purpose of increasing the price of our Common Stock in order to
regain compliance with this listing requirement.
Only owners of record of our outstanding shares of Common Stock
on December 18, 2015 are entitled to vote at the Special Meeting,
or at any adjournment or postponement of the Special Meeting. Each
owner of Common Stock on the record date is entitled to one vote
for each share of Common Stock held. As of the record date, there
were [ ] shares of Common Stock issued and outstanding.
Our Amended and Restated Bylaws (the "Bylaws") provide that
business transacted at any special meeting of stockholders shall be
limited to the purposes stated in a resolution approved by a
majority of the Board or a committee designated for such purpose by
the Board.
Important Notice Regarding the Availability of Proxy Materials
for the Special Meeting to be held on February 1, 2016: This Proxy
Statement is available at:
www.iongeo.com
under "Investor RelationsInvestor MaterialsAnnual Reports,
Quarterly Reports & Proxy Statement."
You may vote your shares prior to the Special Meeting by
following the instructions provided in this Proxy Statement and the
enclosed proxy card.
When used in this Proxy Statement, "ION Geophysical," "ION,"
"Company," "we," "our," "ours" and "us" refer to ION Geophysical
Corporation.
ii
TABLE OF CONTENTS
ABOUT THE SPECIAL MEETING
What is a proxy and proxy statement?
A proxy is your legal designation of another person to vote the
stock you own on your behalf. That other person is referred to as a
"proxy." Our Board has designated R. Brian Hanson and James M.
Lapeyre, Jr. as proxies for the Special Meeting. By completing and
submitting the enclosed proxy card, you are giving Mr. Hanson and
Mr. Lapeyre the authority to vote your shares in the manner you
indicate on your proxy card. A proxy statement is a document that
the regulations of the Securities and Exchange Commission ("SEC")
require us to give you when we ask you to sign a proxy card
designating individuals as proxies to vote on your behalf.
Who is soliciting my proxy?
Our Board is soliciting proxies on its behalf to be voted at the
Special Meeting. All costs of soliciting the proxies will be paid
by ION. Copies of solicitation materials will be furnished to
banks, brokers, nominees and other fiduciaries and custodians to
forward to beneficial owners of the Common Stock held by such
persons. ION will reimburse such persons for their reasonable
out-of-pocket expenses in forwarding solicitation materials. In
addition to solicitations by mail, some of ION's directors,
officers and other employees, without extra compensation, might
supplement this solicitation by telephone, personal interview or
other communication. ION has also retained Georgeson Inc. to assist
with the solicitation of proxies from banks, brokers, nominees and
other holders, for a fee not to exceed $11,000 plus reimbursement
for out-of-pocket expenses. We may also ask our proxy solicitor to
solicit proxies on our behalf by telephone for a fixed fee of $6.00
per phone call and $3.50 per telephone vote, plus reimbursement for
expenses.
What are the voting rights of holders of Common Stock?
Each outstanding share of Common Stock is entitled to one vote
on each matter considered at the Special Meeting.
What is the difference between a "stockholder of record" and a
stockholder who holds stock in "street name"?
If your shares are registered directly in your name, you are a
stockholder of record. If your shares are registered in the name of
your broker, bank or similar organization, then you are the
beneficial owner of shares held in street name.
Where will the Special Meeting be held?
The Special Meeting will be held on the 4
thFloor of 2105 CityWest Boulevard in Houston,
Texas.
Directions:The site for the meeting is located on CityWest
Boulevard off of West Sam Houston Parkway South ("Beltway 8"), near
the intersection of Beltway 8 and Briar Forest Drive. Traveling
south on the Beltway 8 feeder road after Briar Forest Drive, turn
right on Del Monte Drive. Enter Garage Entrance 3 on your immediate
left. Advise the guard that you are attending the ION Special
Meeting. You may be required to show your driver's license or other
photo identification. The guard will then direct you where to park
in the visitors section of the parking garage. The guard can also
direct you to 2105 CityWest Boulevard, which is directly south of
the garage. Once in the building, check in with the security desk
and then take the elevators to the 4
thfloor.
What is the record date and what does it mean?
The record date for the Special Meeting is December 18, 2015.
The record date is established by the Board as required by Delaware
law (the state in which we are incorporated). Holders of Common
1
Stock at the close of business on the record date are entitled
to receive notice of the meeting and vote at the meeting and any
adjournments or postponements of the meeting.
How do I vote?
You may vote your shares in four different ways:
Via the Internet.You may vote your shares via the Internet
by following the instructions on your proxy card. If you own your
shares in "street name" or in a nominee account, you may place your
vote through the Internet by following the instructions on the
proxy card provided by your broker, bank or other holder of record.
By Telephone.You may vote your shares by telephone by
calling the toll-free telephone number provided on the proxy card.
If you own your shares in "street name" or in a nominee account,
you may place your vote by telephone by following the instructions
on the proxy card provided by your broker, bank or other holders of
record.
By Mail.Mark your voting instructions on, and sign and date,
the proxy card and return it to Jamey S. Seely, Executive Vice
President, General Counsel and Corporate Secretary, ION Geophysical
Corporation, 2105 CityWest Boulevard, Suite 400, Houston, Texas
77042-2839. If you mail your proxy card, Ms. Seely must receive it
before the polls close at the Special Meeting.
In Person.You may deliver your completed proxy in person at
the Special Meeting. If your shares are held in "street name" or a
nominee account, you will need to obtain a proxy form from the
institution that holds your shares in order to vote at the Special
Meeting. The Board recommends that you vote by one of the three
methods above even if you plan to attend the Special Meeting.
How do I revoke my proxy or change my voting instructions?
You may revoke your proxy or change your voting instructions in
four ways:
Submit voting instructions again by telephone or the
Internet.If you are a "street name" stockholder, you must
follow instructions found on the voting instruction card provided
by your broker or other "street" nominee, or contact your broker or
other "street" nominee in order to revoke your previously given
proxy.
Submit a new proxy card bearing a later date than the one you
wish to revoke.A valid later-dated proxy will automatically
revoke any proxy previously submitted by you. If you own your
shares in "street name," because your broker or other "street"
nominee is actually the record owner, you must obtain a new proxy
card from the broker or other "street" nominee. If you are a holder
of record, then you must obtain a new proxy card from ION's
transfer agent, Computershare Investor Services, at1.888.360.9508.
We must receive your new proxy card before the Special Meeting
begins.
Write to Jamey S. Seely, Executive Vice President, General
Counsel and Corporate Secretary, ION Geophysical Corporation, 2105
CityWest Boulevard, Suite 400, Houston, Texas 77042-2839. Your
letter should contain the name in which your shares are registered,
your control number, the date of the proxy you wish to revoke or
change, your new voting instructions, if applicable, and your
signature. Ms. Seely must receive your letter before the Special
Meeting begins.
Attend the Special Meeting and vote in person as described above
(or by personal representative with an appropriate proxy).
Attendance at the meeting will not by itself revoke a previously
granted proxy; to alter your prior instructions, you must vote your
shares during the Special Meeting.
What constitutes a quorum?
The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of Common Stock constitutes a
quorum. We need a quorum of stockholders to hold a validly convened
Special Meeting. If you have submitted your proxy, your shares will
be counted toward the quorum. If a quorum is not present, the
chairman may adjourn the meeting, without prior notice other than
by announcement at the meeting, until the required quorum is
present. As of the record date, [ ] shares of Common Stock were
outstanding. Thus, the presence of the holders of Common Stock
representing at least [ ] shares will be required to establish a
quorum. Abstentions and broker non-votes will be counted for
purposes of establishing a quorum.
What are my voting choices when voting on Proposal 1 and what
vote is needed to approve Proposal 1?
In voting to approve the proposal to adopt an amendment to the
Restated Certificate of Formation to effect a reverse stock split
and, if and when such reverse stock split is effected,
proportionately reduce the number of authorized shares of our
Common Stock by the selected reverse split ratio, stockholders may
vote in one of the following ways:
The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Special
Meeting is required to adopt such amendment. An abstention has the
same effect as a vote "against" the proposal.
The Board recommends a vote
"FOR"this proposal.
What are my voting choices when voting on Proposal 2 and what
vote is needed to approve Proposal 2?
In voting to approve the proposal to adopt an amendment to the
Restated Certificate of Formation to increase the number of
authorized shares of Common Stock from 200 million to 400 million,
stockholders may vote in one of the following ways:
The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Special
Meeting is required to adopt such amendment. An abstention has the
same effect as a vote "against" the proposal.
The Board recommends a vote
"FOR"this proposal.
What are my voting choices when voting on Proposal 3 and what
vote is needed to approve Proposal 3?
In voting to approve amendments to the 2013 LTIP to, if and when
the reverse stock split is effected, increase (i) the total number
of shares of our Common Stock available for issuance under the
3
2013 LTIP and (ii) the maximum number of such shares that may be
granted in the form of full-value awards, stockholders may vote in
one of the following ways:
The proposal to approve the amendments to the 2013 LTIP requires
a majority of the votes cast on the proposal, provided that the
total votes cast on the proposal represents over 50% of the total
number of outstanding shares of our Common Stock.
While stockholders may cast their votes separately on each of
the proposals contained in this Proxy Statement, the approval of
Proposal 3 will be conditioned on the approval of Proposal 1.
The Board recommends a vote
"FOR"this proposal.
Could other matters be decided at the Special Meeting?
No. Our Bylaws provide that business transacted at any special
meeting of stockholders shall be limited to the purposes stated in
a resolution approved by a majority of the Board or a committee
designated for such purpose by the Board.
What if a stockholder does not specify a choice for a matter
when submitting their proxy?
Stockholders should specify their choice for each matter on
their proxy. If no instructions are given, proxies that are
properly submitted will be voted
"FOR"the proposal to effect the reverse stock split and, if
and when the reverse stock split is effected, proportionately
reduce the number of authorized shares of our Common Stock by the
selected reverse split ratio,
"FOR"the proposal to increase the number of authorized
shares of Common Stock and
"FOR"the proposal to approve the amendments to the 2013
LTIP.
What are broker non-votes?
A broker non-vote occurs when the broker is unable to vote on a
proposal because the proposal is not routine and the beneficial
owner has not provided any voting instructions to the broker on
that matter. NYSE rules determine whether proposals are routine or
not routine. If a proposal is routine, a broker holding shares for
an owner in street name may vote for the proposal without voting
instructions. If a proposal is not routine, the broker may vote on
the proposal only if the owner has provided voting instructions. If
a broker does not receive voting instructions for a non-routine
proposal, the broker will return a proxy card without a vote on
that proposal, which is usually referred to as a "broker non-vote."
The proposal to effect the reverse stock split and proportionately
reduce the number of authorized shares of Common Stock by the
selected reverse split ratio and the proposal to amend our 2013
LTIP are not considered to be routine matters under current NYSE
rules, so your broker will not have discretionary authority to vote
your shares held in street name on those matters. The proposal to
increase the number of authorized shares of Common Stock from 200
million to 400 million is considered to be a routine matter on
which brokers will be permitted to vote your shares without
instructions from you.
Will I have electronic access to the proxy materials?
The proxy materials are posted on ION's Internet website at
www.iongeo.com
under "Investor RelationsInvestor MaterialsAnnual Reports,
Quarterly Reports & Proxy Statement."
4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Except as otherwise set forth below, the following table sets
forth information as of December 4, 2015, with respect to the
number of shares of Common Stock owned by (i) each person known by
us to be a beneficial owner of more than 5% of our Common Stock,
(ii) each named executive officer and director of the Company and
(iii) all of our directors and executive officers as a group.
Except where information was otherwise known by us, we have relied
solely upon filings of Schedules 13D and 13G to determine the
number of shares of our Common Stock owned by each person known to
us to be the beneficial owner of more than 5% of our Common Stock
as of such date.
EXECUTIVE COMPENSATION
Introductory note: Under the rules of the SEC, because our
stockholders will be taking action with respect to the 2013 LTIP at
the Special Meeting, we are required to furnish the following
information with respect to our executive compensation. In
accordance with these rules, all information in the following
"Executive Compensation" section of this Proxy Statement has been
taken from our proxy statement for our 2015 Annual Meeting held May
20, 2015. The following discussion of executive compensation
contains descriptions of various employee benefit plans and
employment-related agreements. These descriptions are qualified in
their entirety by reference to the full text or detailed
descriptions of the plans and agreements, which are filed or
incorporated by reference as exhibits to our annual report on Form
10-K for the year ended December 31, 2014.
Compensation Discussion and Analysis
This Compensation Discussion and Analysis provides an overview
of the Compensation Committee of our Board, a discussion of the
background and objectives of our compensation programs for our
senior executives, and a discussion of all material elements of the
compensation of each of the executive officers identified in the
following table, whom we refer to as our named executive
officers:
Executive Summary
General.The objectives and major components of our executive
compensation program did not materially change from 2014 to 2015.
While we regularly review and fine-tune our compensation programs,
we believe consistency in our compensation program and philosophy
is important to effectively motivate and reward top-level
management performance and for the creation of stockholder value.
We continue to provide our named executive officers with total
annual compensation that includes three principal elements: base
salary, performance-based annual incentive cash compensation and
long-term equity-based incentive awards. Elements of our
compensation program continue to be performance-based, and a
significant portion of each executive's total annual compensation
is at risk and dependent upon our Company's achievement of
specific, measurable performance goals. Our performance-based pay
is designed to align our executive officers' interests with those
of our stockholders and to promote the creation of stockholder
value, without encouraging excessive risk-taking. In addition, our
equity programs, combined with our executive share ownership
requirements, are designed to reward long-term stock
performance.
Base salaries for several of our named executive officers were
increased in January 2015, consistent with our usual base salary
review process and practice. Payments under our annual bonus
incentive plan for 2014 reflected our performance and the level of
achievement of our 2014 plan performance goals. In 2014, the
Compensation Committee determined that the bonus available for
awards paid to our named executive officers under the 2014 plan
should be based on our consolidated adjusted operating income and
cash flow generation during the fiscal year. In early 2015, the
Compensation Committee reviewed the Company's adjusted operating
income and cash flow production and approved the bonus for each
named executive based on individual and company performance. In
approving the individual awards to our named executive officers in
February 2015, the Compensation Committee noted that our named
executive officers' efforts had enabled us to drive our financial
performance during a challenging economic period for the seismic
industry while, at the same time, improving our liquidity and
positioning us to take advantage of the next upturn in the energy
cycle. In addition, the Compensation Committee determined that each
named executive officer had individually performed at or above the
expected level and was a significant contributor to our overall
financial performance for the year.
The annual grants made to our named executive officers under our
long-term stock incentive plan on March 1, 2014 were generally
consistent with grants made to named executive officers in previous
years.
Consideration of Say-On-Pay Result.At our 2014 Annual
Meeting of Stockholders held on May 21, 2014, our stockholders
approved all of our director nominees and proposals, including a
non-binding advisory ("say-on-pay") vote to approve the
compensation of our executive officers. In the advisory executive
compensation vote, over 98% of the votes cast on the proposal voted
in favor of our executive compensation. Our general goal since our
2014 Annual Meeting has been to continue to act consistently with
the established practices that were overwhelmingly approved by our
stockholders. We believe that we have accomplished that goal. In
addition, because our stockholders voted in a non-binding advisory
vote held at our 2011 Annual Meeting in favor of our holding an
advisory ("say-on-frequency") vote on executive compensation every
year, we will continue to hold an annual advisory vote to approve
the compensation of our named executive officers. When and if our
Board determines that it is in the best interest of our Company to
hold our say-on-pay vote with a different frequency, we will
propose such a change to our stockholders at the next annual
meeting of stockholders to be held following the 'Board's
determination. Presently, under SEC rules, we are not required to
hold another say-on-frequency vote again until our 2017 Annual
Meeting of Stockholders.
7
Corporate Governance
Compensation Committee
The Compensation Committee of our Board reviews and approves, or
recommends to the Board for approval, all salary and other
remuneration for our executive officers and oversees matters
relating to our employee compensation and benefit programs. No
member of the Compensation Committee is an employee of ION. The
Board has determined that each member of the Compensation Committee
satisfies the definition of "independent" as established in the
NYSE corporate governance listing standards. In determining the
independence of each member of the Compensation Committee, the
Board considered all factors specifically relevant to determining
whether the director has a relationship to our company that is
material to the director's ability to be independent from
management in the execution of his duties as a Compensation
Committee member, including, but not limited to:
the source of compensation of the director, including any
consulting, advisory or other compensatory fee paid by us to the
director; and
whether the director is affiliated with our company, a
subsidiary or affiliate.
When considering the director's affiliation with us for purposes
of independence, the Board considered whether the affiliate
relationship places the director under the direct or indirect
control of our company or its senior management, or creates a
direct relationship between the director and members of senior
management, in each case, of a nature that would impair the
director's ability to make independent judgments about our
executive compensation.
The Compensation Committee operates pursuant to a written
charter that sets forth its functions and responsibilities. A copy
of the charter can be viewed on our website at
http://ir.iongeo.com/phoenix.zhtml?c=101545&p=irol-govhi....
For a description of the responsibilities of the Compensation
Committee, see "Item 1.Election of DirectorsCommittees of the
BoardCompensation Committee" above.
During 2014, the Compensation Committee met in person or by
conference call four times. In addition, the Compensation Committee
took action by unanimous written consent, as permitted under
Delaware law and our Bylaws, two times during 2014, primarily to
approve individual non-executive employee grants of restricted
stock and stock options. We believe that each of these individual
grants made by unanimous written consent of the Compensation
Committee complied with the applicable grant date requirements
under Financial Accounting Standards Board (FASB) Accounting
Standards Codification Topic (ASC) 718, "CompensationStock
Compensation" ("ASC Topic 718").
Compensation Consultants
The Compensation Committee has the authority and necessary
funding to engage, terminate and pay compensation consultants,
independent legal counsel and other advisors in its discretion.
Prior to retaining any such compensation consultant or other
advisor, the Compensation Committee evaluates the independence of
such advisor and also evaluates whether such advisor has a conflict
of interest. During 2011, the Compensation Committee engaged
Performensation Consulting, an equity compensation consulting firm,
to provide advisory services with regard to the preparation of our
2011 proxy statement and to provide the Compensation Committee with
analysis on the number of shares to propose to stockholders to add
to our stock plan at our 2011 Annual Meeting for future grants to
employees and directors. During 2011, the Compensation Committee
also engaged Aon Hewitt as its consultant in connection with the
promotion of Mr. Hanson to Chief Executive Officer. From 2012-2014,
at the recommendation of our management, the Compensation Committee
has approved and engaged Performensation Consulting to provide
advisory services with regard to the preparation of our proxy
statements.
8
From 2011 to date, neither of Performensation Consulting nor Aon
Hewitt has received compensation, or advised our Company or our
executive officers, on matters outside the scope of their
respective engagements by the Compensation Committee.
The Compensation Committee has considered the independence of
Performensation Consulting in light of SEC rules and NYSE listing
standards. Among the factors considered by the Compensation
Committee were the following:
other services provided to our Company by Performensation
Consulting;
the amount of fees paid by us as a percentage of
Performensation Consulting's total revenues;
policies or procedures maintained by Performensation Consulting
that are designed to prevent a conflict of interest;
any business or personal relationships between the individual
consultants involved in the engagement and any member of the
Compensation Committee;
any of our Common Stock owned by the individual consultants
involved in the engagement; and
any business or personal relationships between our executive
officers and Performensation Consulting or the individual
consultants involved in the engagement.
The Compensation Committee discussed these considerations and
concluded that the work of Performensation Consulting did not raise
any conflict of interest.
Role of Management in Establishing and Awarding Compensation
On an annual basis, our Chief Executive Officer, with the
assistance of our Human Resources department, recommends to the
Compensation Committee any proposed increases in base salary, bonus
payments and equity awards for our executive officers other than
himself. No executive officer is involved in determining his own
salary increase, bonus payment or equity award. When making officer
compensation recommendations, our Chief Executive Officer takes
into consideration compensation benchmarks, which include industry
standards for similar sized organizations serving similar markets,
as well as comparable positions, the level of inherent importance
and risk associated with the position and function, and the
executive's job performance over the previous year. See "
Objectives of Our Executive Compensation
ProgramsBenchmarking" and "
Elements of CompensationBase Salary"below.
Our Chief Executive Officer, with the assistance of our Human
Resources department and input from our executive officers and
other members of senior management, also formulates and proposes to
the Compensation Committee an employee bonus incentive plan for the
ensuing year. For a description of our process for formulating the
employee bonus incentive plan and the factors that we consider, see
"
Elements of CompensationBonus Incentive Plan" below.
The Compensation Committee reviews and approves all compensation
and awards to executive officers and all bonus incentive plans.
With respect to equity compensation awarded to employees other than
executive officers, the Compensation Committee reviews and approves
all grants of restricted stock and stock options above 5,000
shares, generally based upon the recommendation of the Chief
Executive Officer, and has delegated option and restricted stock
granting authority to the Chief Executive Officer as permitted
under Delaware law for grants to non-executive officers of up to
5,000 shares.
On its own initiative, at least once a year, the Compensation
Committee reviews the performance and compensation of our Chief
Executive Officer and, following discussions with the Chief
Executive Officer and other members of the Board, establishes his
compensation level. Where it deems appropriate, the Compensation
Committee will also consider market compensation information
from
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independent sources. See "
Objectives of Our Executive Compensation
ProgramsBenchmarking" below.
Certain members of our senior management generally attend most
meetings of the Compensation Committee, including our Chief
Executive Officer, our Senior Vice PresidentGlobal Human Resources,
and our Executive Vice President/General Counsel/Corporate
Secretary. However, no member of management votes on items being
considered by the Compensation Committee. The Compensation
Committee and Board do solicit the views of our Chief Executive
Officer on compensation matters, particularly as they relate to the
compensation of the other named executive officers and the other
members of senior management reporting to the Chief Executive
Officer. The Compensation Committee often conducts an executive
session during each meeting, during which members of management are
not present.
Objectives of Our Executive Compensation Programs
General Compensation Philosophy and Policy
Through our compensation programs, we seek to achieve the
following general goals:
attract and retain qualified and productive executive officers
and key employees by providing total compensation competitive with
that of other executives and key employees employed by companies of
similar size, complexity and industry of business;
encourage our executives and key employees to achieve strong
financial and operational performance;
structure compensation to create meaningful links between
corporate performance, individual performance and financial
rewards;
align the interests of our executives with those of our
stockholders by providing a significant portion of total pay in the
form of stock-based incentives;
limit corporate perquisites to seek to avoid perceptions both
within and outside of our Company of "soft" compensation.
Our governing principles in establishing executive compensation
have been:
Long-Term and At-Risk Focus.Compensation opportunities
should be composed of long-term, at-risk pay to focus our
management on the long-term interests of our Company. Base salary,
annual incentives and employee benefits should be close to
competitive levels when compared to similarly-situated
companies.
Equity Orientation.Equity-based plans should comprise a
major part of the at-risk portion of total compensation to instill
ownership thinking and to link compensation to corporate
performance and stockholder interests.
Competitive.We emphasize total compensation opportunities
consistent on average with our peer group of companies.
Competitiveness of annual base pay and annual incentives is
independent of stock performance. However, overall competitiveness
of total compensation is generally contingent on long-term,
stock-based compensation programs.
Focus on Total Compensation.In making decisions with respect
to any element of an executive officer's compensation, the
Compensation Committee considers the total compensation that may be
awarded to the executive officer, including salary, annual bonus
and long-term incentive compensation. These total compensation
reports are prepared by our Human Resources department and present
the
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dollar amount of each component of the named executive officers'
compensation, including current cash compensation (base salary,
past bonus and eligibility for future bonus), equity awards and
other compensation. The overall purpose of these total compensation
reports is to bring together, in one place, all of the elements of
actual and potential compensation of our named executive officers
so that the Compensation Committee may analyze both the individual
elements of compensation (including the compensation mix) as well
as the aggregate total amount of actual and projected compensation.
In its most recent review of total compensation reports, the
Compensation Committee determined that annual compensation amounts
for our Chief Executive Officer and our other named executive
officers remained generally consistent with the Compensation
Committee's expectations. However, the Compensation Committee
reserves the right to make changes that it believes are
warranted.
Internal Pay Equity.Our core compensation philosophy is to
pay our executive officers competitive levels of compensation that
best reflect their individual responsibilities and contributions to
our Company, while providing incentives to achieve our business and
financial objectives. While comparisons to compensation levels at
other companies (discussed below) are helpful in assessing the
overall competitiveness of our compensation program, we believe
that our executive compensation program also must be internally
consistent and equitable in order for our Company to achieve our
corporate objectives. Each year our Human Resources department
reports to the Compensation Committee the total compensation paid
to our Chief Executive Officer and all other senior executives,
which includes a comparison for internal pay equity purposes. Over
time, there have been variations in the comparative levels of
compensation of executive officers and changes in the overall
composition of the management team and the overall accountabilities
of the individual executive officers; however, we and the
Compensation Committee are satisfied that total compensation
received by executive officers reflects an appropriate differential
for executive compensation.
These principles apply to compensation policies for all of our
executive officers and key employees. We do not follow the
principles in a mechanistic fashion; rather, we apply experience
and judgment in determining the appropriate mix of compensation for
each individual. This judgment also involves periodic review of
discernible measures to determine the progress each individual is
making toward agreed-upon goals and objectives.
Benchmarking
When making compensation decisions, we also look at the
compensation of our Chief Executive Officer and other executive
officers relative to the compensation paid to similarly-situated
executives at companies that we consider to be our industry and
market peersa practice often referred to as "benchmarking." We
believe, however, that a benchmark should be just thata point of
reference for measurementbut not the determinative factor for our
executives' compensation. The purpose of the comparison is not to
supplant the analyses of internal pay equity, total wealth
accumulation and the individual performance of the executive
officers that we consider when making compensation decisions.
Because the comparative compensation information is just one of the
several analytic tools that are used in setting executive
compensation, the Compensation Committee has discretion in
determining the nature and extent of its use. Further, given the
limitations associated with comparative pay information for setting
individual executive compensation, including the difficulty of
assessing and comparing wealth accumulation through equity gains,
the Compensation Committee may elect to not use the comparative
compensation information at all in the course of making
compensation decisions.
In most years, at least once each year, our Human Resources
department, under the oversight of the Compensation Committee,
reviews data from market surveys, independent consultants and other
sources to assess our competitive position with respect to base
salary, annual incentives and long-term incentive compensation.
When reviewing compensation data in November 2014, we utilized data
primarily from Radford salary surveys, the Mercer U.S. Compensation
Planning Survey, TowersWatson executive salary survey and Frost's
2014 Oilfield Manufacturing and Services Industry Executive
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Compensation Survey ("OFMS Survey"). The survey information from
most of these resources covered a broad range of industries and
companies. However, the 2014 OFMS Survey compiled proxy
compensation data from 53 oilfield services companies and survey
results from the following 19 oilfield services companies:
Each year, the administrators of the OFMS Survey in their
discretion make adjustments to the list of companies included in
the survey. As a result, the above list of companies included in
the 2014 OFMS Survey is slightly different from the list of
companies included in the OFMS Survey for 2013 and previous years
and will likely be different from the list of companies to be
included in future OFMS Surveys.
The overall results of the compensation surveys provide the
starting point for our compensation analysis. We believe that the
surveys contain relevant compensation information from companies
that are representative of the sector in which we operate, have
relative size as measured by market capitalization and experience
relative complexity in the business and the executives' roles and
responsibilities. Beyond the survey numbers, we look extensively at
a number of other factors, including our estimates of the
compensation at our most comparable competitors and other companies
that were closest to our Company in size, profitability and
complexity. We also consider an individual's current performance,
the level of corporate responsibility, and the employee's skills
and experience, collectively, in making compensation decisions.
In the case of our Chief Executive Officer and some of our other
executive officers, we also consider our Company's performance
during the person's tenure and the anticipated level of
compensation that would be required to replace the person with
someone of comparable experience and skill.
In addition to our periodic review of compensation, we also
regularly monitor market conditions and will adjust compensation
levels from time to time as necessary to remain competitive and
retain our most valuable employees. When we experience a
significant level of competition for retaining current employees or
hiring new employees, we will typically reevaluate our compensation
levels within that employee group in order to ensure our
competitiveness.
12
Elements of Compensation
The primary components of our executive compensation program are
as follows:
Below is a summary of each component:
Base Salary
General.The general purpose of base salary for our executive
officers is to create a base of cash compensation for the officer
that is consistent on average with the range of base salaries for
executives in similar positions and with similar responsibilities
at comparable companies. In addition to salary norms for persons in
comparable positions at comparable companies, base salary amounts
may also reflect the nature and scope of responsibility of the
position, the expertise of the individual employee and the
competitiveness of the market for the employee's services. Base
salaries of executives other than our Chief Executive Officer may
also reflect our Chief Executive Officer's evaluation of the
individual executive officer's job performance. As a result, the
base salary level for each individual may be above or below the
target market value for the position. The Compensation Committee
also recognizes that the Chief Executive Officer's compensation
should reflect the greater policy- and decision-making authority
that he holds and the higher level of responsibility he has with
respect to our strategic direction and our financial and operating
results. At December 31, 2014, our Chief Executive Officer's annual
base salary was 48% higher than the annual base salary for the next
highest-paid named executive officer and 60% higher than the
average annual base salary for all of our other named executive
officers. The Compensation Committee does not intend for base
salaries to be the vehicle for long-term capital and value
accumulation for our executives.
2014 Actions.In typical years, base salaries are reviewed at
least annually and may also be adjusted from time to time to
realign salaries with market levels after taking into account
individual responsibilities and changes in responsibilities,
performance and contribution to ION, experience, impact on total
compensation, relationship of compensation to other ION officers
and employees, and changes in external market levels. Salary
increases for executive officers do not follow a preset schedule or
formula but do take into account changes in the market and
individual circumstances.
13
All of our named executive officers received an increase in base
salary in January 2015, as described below:
Bonus Incentive Plan
Our employee annual bonus incentive plan is intended to promote
the achievement each year of the Company's performance objectives,
the employee's particular business unit's performance objectives
and to recognize those employees who contributed to the Company's
achievements. The plan provides cash compensation that is at-risk
on an annual basis by establishing bonus pools for each business
unit contingent on achievement of annual business and operating
objectives. The plan also provides for individual awards designed
to reward Company and individual performance. This provides all
participating employees the opportunity to share in the Company's
performance through the achievement of established financial and
individual objectives. The financial and individual objectives
within the plan are intended to measure an increase in the value of
our Company.
In recent years, we have adopted a bonus incentive plan with
regard to each year. Performance under the annual bonus incentive
plan is measured with respect to the designated plan fiscal
year.
Payments under the plan are paid in cash in an amount reviewed
and approved by the Compensation Committee and are ordinarily made
in the first quarter following the completion of a fiscal year,
after the financial results for that year have been determined.
14
Our annual bonus incentive plan is usually consistent with our
operating plan for the same year. In late 2013, we prepared a
consolidated company operating budget for 2014 and individual
operating budgets for each operating unit. The budgets took into
consideration our views on market opportunities, customer and sale
opportunities, technology enhancements for new products, product
manufacturing and delivery schedules and other operating factors
known or foreseeable at the time. The Board analyzed the proposed
budgets with management extensively and, after analysis and
consideration, the Board approved the consolidated 2014 operating
plan. During late 2013, our Chief Executive Officer worked with our
Human Resources department and members of senior management to
formulate our 2014 bonus incentive plan, consistent with the 2014
operating plans approved by the Board.
At the beginning of 2014, the Compensation Committee approved
our 2014 bonus incentive plan for executives and certain designated
non-executive employees. The computation of awards generated under
the plan is required to be approved by the Compensation Committee.
In February 2015, the Compensation Committee reviewed the Company's
actual performance against each of the plan performance goals
established at the beginning of 2014 and evaluated the individual
performance during the year of each participating named executive
officer. The results of operations of the Company for 2014 and
individual performance evaluations determined the appropriate
payouts under the annual bonus incentive plan.
The Compensation Committee has discretion in circumstances it
determines are appropriate to authorize discretionary bonus awards
that might exceed amounts that would otherwise be payable under the
terms of the bonus incentive plan. These discretionary awards can
be payable in cash, stock options, restricted stock, restricted
stock units or a combination thereof. Any stock options, restricted
stock or restricted stock units awarded would be granted under one
of our existing long-term equity compensation plans. The
Compensation Committee also has the discretion, in appropriate
circumstances, to grant a lesser bonus award, or no bonus award at
all, under the bonus incentive plan.
As described above, our bonus incentive plans are designed for
payouts that generally track the financial performance of our
Company. The general intent of the plans is to reward key employees
when the Company and the employee perform well and not reward them
when the Company and the employee do not perform well. In most
years when company financial performance is strong, cash bonus
payments are generally higher. Likewise, when our financial
performance is low as compared to our internal targets and plans,
cash bonus payments are generally lower. There are occasionally
exceptions to this general trend. For example, in 2008 and 2011, we
achieved improved financial performance over the previous year, but
average cash bonus awards under our annual bonus incentive plans
were relatively lower because we did not achieve our internal
financial and growth objectives for the relevant years. In 2012, we
achieved improved financial performance over the previous year, but
our average bonus award paid to our named executive officers
remained at approximately the same level as 2011 because our
internal financial objectives for 2012 were higher than in 2011.
This history demonstrates a clear and consistent link between our
executive officer bonus incentive compensation and our
performance.
Below are general descriptions of our 2014 bonus incentive plan
and our company performance criteria applicable to the plan.
2014 Bonus Incentive Plan.The purpose of the 2014 bonus
incentive plan was to provide an incentive for our participating
employees to achieve their highest level of individual and business
unit performance and to align the employees to accomplish and share
in the achievement of our Company's 2014 strategic and financial
goals.
15
The bonus program includes a three step process:
1. The total bonus pool is established in our annual operating
plan based on approximate percentages of base salary and our
expected headcount. As discussed below, the total bonus pool
consists of a fixed portion available for awards to eligible
employees regardless of the Company's financial performance, and a
variable portion available for distribution to eligible employees
only to the extent the Company satisfies the designated financial
performance criteria (
i.e., consolidated adjusted operating income and cash
flow).
2. The total bonus pool is allocated among our business units
based on satisfaction of the designated financial performance
criteria.
3. Once the bonus pool for each business unit is funded,
individual bonuses are determined by business unit managers by
evaluating each eligible employee's individual and team
performance, and the computation of individual awards is approved
by the Compensation Committee.
Although achievement of our cash flow and consolidated adjusted
operating income targets establish a guideline funding level of the
bonus pool available to our named executive officers, actual
amounts paid to our named executive officers are at the discretion
of the Compensation Committee based on its overall assessment of
other qualitative and quantitative corporate and individual
criteria, generally in accordance with the compensation philosophy
and policy described above.
Designated employees, including our named executive officers,
were eligible to participate in our 2014 bonus incentive plan.
Under the 2014 plan, approximately 25% of the funds allocated for
distribution were available for awards to eligible employees
regardless of the Company's 2014 financial performance, and
approximately 75% of the funds allocated for distribution were
available for distribution to eligible employees only to the extent
the Company satisfied the designated 2014 financial performance
criteria. In addition, the 2014 plan was structured so that the
total amount of funds available for distribution increased as the
Company's financial performance and cash flow increased, up to a
maximum funding level of 200%. As a result, the amount of total
dollars available for distribution under the bonus incentive plan
was largely dependent on the Company's achievement of financial
objectives.
Our 2014 bonus incentive plan established a dual emphasis on
2014 target consolidated adjusted operating income and cash flow
generation as the performance goals.
Consolidated adjusted operating income is equal to revenues
minus expense related to manufacturing or costs of performing
services, sales, marketing, research and development and general
and administrative costs.
Cash flow generation is the cash ION records in its bank
accounts globally, based on the collection of customer payments,
offset by the payment of vendors, employee payroll, taxes,
utilities, and similar matters, excluding cash from external
funding arrangements and interest payments.
Cash flow generation and consolidated adjusted operating income
were selected as the most appropriate performance goals for our
2014 plan because the Compensation Committee believed that cash
flow generation and consolidated adjusted operating income were the
best indicators of our Company's overall business trends and
performance at that time and evidenced a direct correlation with
the interests of our stockholders and our Company's performance.
When determining whether financial targets have been achieved under
the 2014 plan, the Compensation Committee has the discretion to
modify or revise the targets as necessary to reflect any
significant beneficial or adverse change that results in a
substantial positive or negative effect on our performance as a
whole, such as sales of assets, mergers, acquisitions,
divestitures, spin-offs or unanticipated matters such as economic
conditions, indicators of growth or recession in our business
segments, nature of our operations or changes in or effect of
applicable laws, regulations or accounting practices.
16
Under the plan, every participating named executive officer
other than our Chief Executive Officer had the opportunity to earn
up to 200% of his target depending on performance of our Company
against the designated performance goals and performance of the
executive against personal criteria determined at the beginning of
2014 by our Chief Executive Officer. The Compensation Committee has
the discretion to determine the amounts of individual bonus awards.
Under separate terms approved by the Compensation Committee and
contained in his employment agreement, Mr. Hanson, who served as
our Chief Executive Officer during 2014, participated in the plan
with potential to earn a target incentive payment of 75% of his
base salary, depending on achievement of the Company's target
consolidated performance goals and pre-designated personal critical
success factors, and a maximum of 150% of his base salary upon
achievement of the maximum consolidated performance goal and his
personal goals. Our Chief Executive Officer typically carries a
higher target and maximum bonus incentive plan percentage as
compared to our other named executive officers as a result of his
leadership role in setting company policy and strategic
planning.
Performance Criteria.In 2014, the Compensation Committee
approved a plan that placed equal importance on operating income
and cash flow generation as the criteria for consideration of bonus
awards to the named executive officers and other covered employees
under our 2014 bonus incentive plan:
Where an employee is primarily involved in a particular business
unit, the financial performance criteria under the bonus incentive
plan are weighted toward the operational performance of the
employee's business unit rather than consolidated company
performance. The "
Non-Equity Incentive Plan Compensation" column of the 2014
Summary Compensation Table below reflects the payments that our
named executive officers earned and received under our 2014 bonus
incentive plan, and the "
Bonus" column of the same table reflects any discretionary
cash bonus payments received by our named executive officers during
2014. Our 2014 cash flow generation exceeded the target performance
criteria under our 2014 bonus incentive plan but our operating
income did not meet the target criteria under the plan.
In addition to overall company performance, when considering the
2014 bonus incentive plan awards paid to our named executive
officers, the Compensation Committee also considered the individual
performances and accomplishments of each officer. For example, when
considering the bonus award paid to Mr. Hanson, among the factors
the Compensation Committee took into consideration was Mr. Hanson's
effective leadership in our achievement of several important
strategic objectives during the year, such as our further
re-focusing the strategies and organization of the Company to
prepare for the challenges associated with low oil prices, our
development of our seabed strategy and management of the OceanGeo
ocean-bottom joint venture. When considering the bonus award paid
to Mr. Williamson, among the factors the Compensation Committee
took into consideration were the 2014 financial performance of his
GeoVentures Division and his efforts to reduce the amount of risk
associated with the business portfolio. When considering the bonus
award paid to Mr. Hulme, among the factors the Compensation
Committee took into consideration were his management of the
business and the positive financial results achieved in light of
the new and start-up nature of OceanGeo. When considering the bonus
award paid to Mr. Bate, among the factors the Compensation
Committee took into consideration were the positive 2014 financial
results of his efforts for the Company prior to becoming Chief
Financial Officer and his promotion to Chief Financial Officer.
When considering the
17
bonus award paid to Mr. Usher, among the factors the
Compensation Committee took into consideration were the 2014
financial results of his GeoScience Division and his role in
reorganizing the Division into a broader group within the Company.
When considering the bonus award paid to Mr. Heinlein, among the
factors the Compensation Committee took into consideration was his
progress towards goals prior to his departure. The total
compensation paid to each named executive officer is set forth in
the graph titled "
Summary Compensation Table".
The Compensation Committee reviews the annual bonus incentive
plan each year to ensure that the key elements of the plan continue
to meet the objectives described above.
Long-Term Stock-Based Incentive Compensation
We have structured our lo