UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]x Filed by a Party other than the Registrant [_]
Registrant: ¨
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission only (as permitted by Rule 14a-
6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
OYO
| x | Preliminary Proxy Statement | |
| ¨ | Confidential, for Use of the Commission only (as permitted by Rule 14a-6(e)(2)) | |
| ¨ | Definitive Proxy Statement | |
| ¨ | Definitive Additional Materials | |
| ¨ | Soliciting Material Pursuant to § 240.14a-12 | |
Geospace Technologies Corporation
(Name
(Name of Registrant as Specified in its Charter)
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to Exchange Act Rule 0-11:
4.Proposed maximum aggregate value of transaction:
5.Total fee paid:
[_] Fee paid previously with preliminary materials.
[_]
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| 3. | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11: | |||
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| ¨ | 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. | |||
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June 14, 2013
Dear Fellow Stockholder:
You are cordially invited to attend a Special Meeting 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 dateStockholders of its filing.
1.Amount Previously Paid:
2.Form, Schedule or Registration Statement No.:
3.Filing Party:
4.Date Filed:
[OYO Geospace Logo]
January 25, 1999
Dear Fellow Stockholder:
I am pleased to invite you to attend OYO Geospace Corporation's 1999 Annual
Stockholders' Meeting.Technologies Corporation. We will hold the meeting at 10:9:00 a.m. on Monday, the
1st of March 1999,July 9, 2013 at the Stafford Civic Center, 1415 Stafford Parkway,
Stafford, Texas.
company’s corporate headquarters at 7007 Pinemont Drive, Houston, Texas 77040-6601.
Following this letter you will find the formal Notice of Meeting which
lists the matters to be considered at the meeting, and a proxy statement which describes those matters.the action to be taken at the meeting. We have enclosed a proxy card so that you may grant your proxy to be voted as you indicate. We have also enclosed a copy of
our 1998 Annual Report. We encourage you to read these materials.
Your vote is important.Please complete and mail your proxy card promptly, whether or not you plan to attend the annualspecial meeting. If you attend the meeting you may vote in person even if you have mailed a signed and dated proxy. Proxies may also be submitted electronically through Internet voting or telephonically. Instructions for telephonic or electronic voting can be found at [ ].
In addition to solicitation by use of the mails, certain of our officers and employees may solicit the return of proxies personally or by telephone, electronic mail or facsimile. The cost of any solicitation of proxies will be borne by us.
The board of directors recommends that you voteFOR the proposals described
inamendment of the attached proxy statement.
1997 Key Employee Stock Option Plan and ratification of certain stock options issued thereunder.
Thank you for your cooperation. The rest of the board of directors and I look forward to seeing you at the meeting.
Very truly yours,
Gary D. Owens
Chairman of the Board, President
and Chief Executive Officer
OYO
| Very truly yours, |
/s/ Gary D. Owens |
Gary D. Owens Chairman of the Board, President and Chief Executive Officer |
Geospace Technologies Corporation
12750 South Kirkwood, Suite 200
Stafford,
7007 Pinemont Drive
Houston, Texas 77477
January 25, 1999
NOTICE 77040-6601
June 14, 2013
NOTICEOF ANNUAL MEETING SPECIAL MEETINGOF STOCKHOLDERS STOCKHOLDERSTO BE HELD MARCH 1, 1999
The Annual BE HELD JULY 9, 2013
A Special Meeting of the Stockholders of OYO Geospace Technologies Corporation will be held at 10:9:00 a.m. on Monday, the 1st of March 1999,(Houston time) July 9, 2013, at the Stafford Civic
Center, 1415 Stafford Parkway, Stafford,company’s corporate headquarters at 7007 Pinemont Drive, Houston, Texas 77040-6601, for the following purposes:
(1) To elect two directors, each to hold office until the 2002 Annual
Meetingpurpose of Stockholders or until his successor is duly elected and
qualified;
(2) To approveapproving an amendment toof the OYO Geospace CorporationCompany’s 1997 Key Employee Stock Option Plan;Plan and (3) To transact such other businessratification of certain stock options issued thereunder.
The purpose of the amendment to the Company’s 1997 Key Employee Stock Option Plan is primarily to extend the term of the plan, and no additional shares are to be available under the plan as may properly come beforea result of the meeting or any adjournment thereof.
amendment.
The holders of record of OYO Geospace Technologies Corporation common stock at the close of business on January 19, 1999,July 1, 2013 will be entitled to vote at the meeting.
By Order of the Board of Directors,
Charles H. Still
Secretary
| By order of the board of directors, |
/s/ Thomas T. McEntire |
Thomas T. McEntire Secretary |
YOUR VOTE IS IMPORTANT
Whether or not you plan to attend the meeting, please sign, date and mail the enclosed proxy card promptly. If you attend the meeting you may vote in person even if you have mailed a signed and dated proxy.
OYO Proxies may also be submitted electronically through Internet voting or telephonically. Instructions for telephonic or electronic voting can be found at [ ].
Geospace Technologies Corporation
PROXY STATEMENT
January 25, 1999
PROXY STATEMENT
June 14, 2013
The board of directors of OYO Geospace Technologies Corporation (the “Company”) is soliciting proxies from its stockholders for the annualspecial meeting of stockholders to be held at 10:9:00 a.m. on Monday, the 1st of March 1999,July 9, 2013, at the Stafford Civic Center,
1415 Stafford Parkway, Stafford,Company’s corporate headquarters at 7007 Pinemont Drive, Houston, Texas or77040-6601, and for any adjournment thereof.
You are entitled to vote at thatthe meeting if you were a holder of record of OYO Geospace Corporationthe Company’s common stock at the close of business on January 19,
1999.July 1, 2013. On January 25, 1999, we began mailing toJune 14, 2013, stockholders entitled to vote at the meeting will be able to access an electronic version of a proxy card and this proxy statement and our 1998 Annual Report.at [ ]. On January 19, 1999,June 15, 2013, the Company will mail hard copies of these proxy materials to stockholders who have previously elected to receive printed copies.
You may request a printed copy of these proxy materials by sending a written request to Geospace Technologies Corporation, 7007 Pinemont Drive, Houston, Texas 77040-6601, Attention: Secretary. Copies will be mailed to the requesting stockholder free of charge within three business days of the receipt of the request.
On July 1, 2013, there were 5,494,68912,911,316 shares of OYO Geospace Corporationthe Company’s common stock outstanding. Each share of common stock entitles the holder to one vote on each matter considered at the meeting.
Your proxy card will appoint Gary D. Owens and Satoru OhyaThomas T. McEntire as proxy holders, or your representatives, to vote your shares as you indicate. If you sign, date and return your proxy card without specifying voting instructions, the proxy holders will vote your sharesFOR the electionamendment of the director nominees
named in this proxy statement1997 Key Employee Stock Option Plan and FOR the amendment to theratification of certain stock option plan
described in this proxy statement.
options issued thereunder.
Signing, dating and returning your proxy card does not preclude you from attending the meeting and voting in person. If you submit more than one proxy, the latest-date proxy will automatically revoke your previous proxy. You may revoke your proxy at any time before it is voted by sending written notice, to be delivered before the meeting, to: American Securities Transfer & Trust, Inc.
1825 LawrenceComputershare Investor Services, 350 Indiana Street, Suite 444
Denver,800, Golden, Colorado 80202-1817
80401.
The enclosed form of proxy provides a means for you to vote for the director
nomineesproposals listed in this proxy statement or to withhold authority to vote for such nominees and to vote for or against the amendment to the stock option
plan or to withhold authority to vote for that proposal.
The board of directors expects the nominees named in this proxy statement to
be available for election. If any nominee is not available, the proxy holders
may vote your shares for a substitute if you have submitted a signed and dated
proxy card that does not withhold authority to vote for nominees. We are not
aware of anyproposals.
No matters to be brought before the meeting other than those described in this proxy statement. If any other mattersstatement are properly brought
beforeto be considered at the meeting, the proxy holders may vote your shares in their discretion
if you return a signed, dated proxy card.
meeting.
No business can be conducted at the meeting unless a majority of all outstanding shares entitled to vote areis either present at the meeting in person or represented by proxy. The two nominees who receiveproposal to be considered at the most votesmeeting will be elected topassed if the two open directorships even if they receive less thanproposal receives the affirmative vote of a majority of the votes cast. For the amendment to the stock option plan to be
adopted, more shares must be voted for the proposal than against it. Abstentions and broker non-votes are counted as shares present for determining if therea quorum, but will not be counted to determine the total number of votes cast. Broker non-votes occur when nominees, such as brokers and banks holding shares on behalf of the beneficial owners, are sufficientprohibited from exercising discretionary voting authority for beneficial owners who have not provided voting instructions. If you do not give instructions to your bank, brokerage firm or other agent, the bank, brokerage firm or other agent will nevertheless be entitled to vote your shares presentof common stock in its discretion on “routine matters” and may give or authorize the giving of a proxy to holdvote the meeting. Theyshares of common stock in its discretion on such matters. There are not
counted as votes forno rights of appraisal or againstsimilar dissenters’ rights with respect to any item.
matter to be acted upon pursuant to this proxy statement.
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Representatives of American Securities Transfer & Trust, Inc.,Computershare Investors Services, the transfer agent and registrar for the common stock, will act as the inspectors of election.
1
PROPOSAL 1: ELECTION OF DIRECTORS
At the meeting, the stockholders will elect two directors. The board of
directors is divided into three classes, each class being composed as equally
in number as possible. The classes have staggered three-years terms, with the
term of one class expiring at each annual meeting of stockholders.
The directors in Class I, whose terms expireelection at the meeting, are Thomas L.
Davis, Ph.D. and Ernest M. Hall, Jr. Both Dr. Davis and Mr. Hall are nominees
to serve in Class Imeeting.
Important Notice Regarding the Availability of Proxy Materials for another term expiring at the 2002 AnnualSpecial Meeting of Stockholders. The directors in Class II are serving terms that expire at the
2000 Annual Meeting of Stockholders. The directors in Class III are serving
terms that expire at the 2001 Annual Meeting of Stockholders.
Information regarding the director nominees and directors whose terms will
continue following the meeting follows.
Nominees for Election for Class
I
(Terms Expiring at the 2002 Director
Annual Meeting of Stockholders) Age Position Since
Thomas L. Davis, Ph.D.(a)(b)... 51 Director 1997
Ernest M. Hall, Jr............. 73 Director 1994
Class II Directors
(Terms Expiring at the 2000
Annual Meeting of Stockholders)
Katsuhiko Kobayashi(a)......... 53 Director 1995
Michael J. Sheen............... 50 Senior Vice President and
Chief Technical Officer, Director 1997
Charles H. Still(a)(b)......... 56 Director 1997
Class III Directors
(Terms Expiring at the 2001
Annual Meeting of Stockholders)
Gary D. Owens.................. 51 Chairman of the Board, President
and Chief Executive Officer 1997
Satoru Ohya.................... 66 Director 1994
- --------
(a) Member of the Audit Committee.
(b) Member of the Compensation Committee.
Background of Nominees and Continuing Directors
Thomas L. Davis, Ph.D. became a director in connection with our initial
public offering in November 1997. Dr. Davis is Professor of Geophysics and
Interim Department Head at the Colorado School of Mines. He also is
coordinator of the Reservoir Characterization Project, whose objective isStockholders To Be Held on July 9, 2013
Pursuant to
characterize reservoirs through development and application of 3-D and time
lapse 3-D multicomponent seismology. Dr. Davis consults and lectures worldwide
and has written and co-edited numerous papers and other works in the field of
seismic interpretation.
Ernest M. Hall, Jr. has been a director since the company's formation in
September 1994. From then until his retirement in July 1997, Mr. Hall served
as the President and Chief Executive Officer. He served as President of OYO
Corporation U.S.A. ("OYO U.S.A."), the holder of a majority of the common
stock, from 1985 until 1995 and was re-elected to that position effective
October 1, 1997. From 1980 to 1985, Mr. Hall served as a consultant to OYO
U.S.A.
Katsuhiko Kobayashi has been Joint General Manager of OYO Corporation, the
sole shareholder of OYO U.S.A., since May 1995. From 1973 to 1995 he was
employed by Sanwa Bank in its international banking area, where he last held
the position of general manager of the International Credit Administration
Department from 1993 to 1995.
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Michael J. Sheen joined the company as Senior Vice President and Chief
Technical Officer in August 1997 and became a director in connection with our
initial public offering in November 1997. Mr. Sheen had been a Senior Vice
President and Chief Technical Officer of Input/Output, Inc. ("I/O") since 1991
and had held other positions at I/O since 1977.
Charles H. Still became a director in connection with our initial public
offering in November 1997. He has been Secretary since the company's formation
in September 1994 and Secretary of various affiliates and predecessors of the
company since 1980. He has been a partner in the law firm of Fulbright &
Jaworski L.L.P. since 1975.
Gary D. Owens joined the company as President and Chief Executive Officer in
August 1997 and became Chairman of the Board in September 1997. From October
1993 until May of 1997, Mr. Owens was the President and Chief Executive
Officer of I/O. Mr. Owens had held other positions at I/O since 1977.
Satoru Ohya, who is a geologist by education at Tokyo University, was
Chairman of the Board from the company's formation in September 1994 until Mr.
Owens' election to that position September 1997, and he has continued as a
director. He has been President of OYO Corporation since 1993. For
approximately 40 years, Mr. Ohya has been an employee or officer of OYO
Corporation and various of its affiliates, including serving as Chief
Executive Officer of the company's predecessors from 1983 to 1994.
Committees of the Board of Directors and Meeting Attendance
The board of directors has an audit committee and compensation committee.
The board of directors has not established a nominating committee.
The audit committee is charged with recommending to the entire board
engagement and discharge of independent auditors of the financial statements
of the company, reviewing the professional service provided by independent
auditors, reviewing the independence of independent auditors, reviewing with
the auditors the plan and results of the auditing engagement, considering the
range of audit and non-audit fees and reviewing the adequacy of the company's
system of internal accounting controls. The audit committee met three times
during the fiscal year ended September 30, 1998.
The compensation committee is charged with recommending to the entire board
the compensation to be paid to officers and key employees of the company and
the compensation of members of the board of directors. The compensation
committee also makes recommendations to the entire board regarding the grant
of stock options and restricted stock awards. The compensation committee met
three times during the fiscal year ended September 30, 1998.
The board of directors met three times during the fiscal year ended
September 30, 1998. Each director attended, in person or by telephone, all
meetings held by the board of directors and by the committees on which the
director served.
Compensation of Directors
Non-employee directors are compensated for their services at a rate of
$25,000 per year, of which one-half is payable in shares of common stock based
on the fair market value thereof at the date of issuance pursuant to the
company's 1997 Non-Employee Director Stock Plan. Also pursuant to that plan,
each non-employee director serving on the board of directors following each
annual meeting of stockholders will receive a grant of options to acquire
3,150 shares of common stock. Messrs. Hall, Kobayashi and Ohya have not
accepted this annual stipend or any stock options to date and have indicated
that they will not accept such compensation in fiscal 1999. All non-employee
directors are reimbursed for ordinary and necessary expenses incurred in
attending board or committee meetings.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The beneficial ownership as of December 1, 1998, of shares of the company's
common stock of each director and executive officer, each person known to the
company to beneficially own more than 5% of outstanding common stock and all
directors and executive officers as a group, along with the percentage of
outstanding common stock that such ownership represents, follows. Each person
named has sole voting and investment power with respect to the shares
indicated except as otherwise stated in the notes to the table.
Beneficial Owner Shares Percentage
---------------- --------- ----------
OYO Corporation (1)................................ 2,850,000 51.9%
OYO Corporation U.S.A. (1)......................... 2,850,000 51.9
Gary D. Owens (2).................................. 215,000 3.9
Michael J. Sheen (2)............................... 25,000 *
Thomas L. Davis (3)................................ 6,755 *
Ernest M. Hall, Jr................................. 40,000 *
Katsuhiko Kobayashi................................ -- *
Satoru Ohya (1).................................... 2,850,000 51.9
Charles H. Still (3)............................... 6,755 *
Thomas T. McEntire (4)............................. 12,500 *
Eagle Asset Management (5)......................... 469,825 8.6
R. Chaney & Partners III L.P. (6).................. 383,000 7.0
Executive officers and directors as a group (8
people)........................................... 3,156,010 57.2%
- --------
* Less than one percent.
(1) The shares indicated as beneficially owned by OYO Corporation are held
directly by its wholly-owned subsidiary, OYO Corporation U.S.A. The
address of OYO Corporation is Ichigaya Building 2-6, Kudan-kita 4-chome,
Chiyoda-ku, Tokyo 102, Japan. The address of OYO Corporation U.S.A. is
7334 N. Gessner Road, Houston, Texas 77040. OYO Corporation and OYO
Corporation U.S.A. share the voting and dispositive power of these shares.
The shares indicated as beneficially owned by Mr. Ohya are the same shares
owned directly by OYO Corporation U.S.A. and are included because of Mr.
Ohya's affiliation with OYO Corporation. Mr. Ohya disclaims beneficial
ownership of the shares of common stock owned by OYO Corporation U.S.A.
within the meaning of Rule 13d-3 under the Exchange Act. Mr. Ohya owns
303,300 ordinary shares of OYO Corporation, and his wife and children
collectively own 16,741 ordinary shares of OYO Corporation. Mr. Ohya
disclaims beneficial ownership of the shares of OYO Corporation owned by
his children within the meaning of Rule 13d-3 under the Exchange Act.
(2) Includes unexercised options to purchase 5,000 shares.
(3) Includes unexercised options to purchase 6,300 shares.
(4) Includes unexercised options to purchase 2,500 shares.
(5) Based solely on information provided by The Nasdaq Stock Market, Inc.
(6) Based solely on a Schedule 13D/A filed with the Securities and Exchange Commission rules related to the Internet availability of proxy materials, we have chosen to make this proxy statement, the accompanying notice of annual meeting of stockholders and form of proxy available via the Internet at [ ].
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PROPOSAL I : APPROVALOF AMENDMENTTO 1997 KEY EMPLOYEE STOCK OPTION PLANOFTHE
COMPANYTO EXTENDITS TERMAND RATIFY OPTION GRANTS ISSUED THEREUNDER
Our Board of Directors (the “Board”) is submitting for stockholder approval the amendment (the “Amendment”) of our 1997 Key Employee Stock Option Plan (as amended from time to time, the “Plan”, and as amended by the Amendment, the “Amended 1997 Plan”), a copy of which is attached hereto as Exhibit A. The Amended 1997 Plan is a broad-based incentive plan that provides for the granting of awards to our key employees. The Company has previously discussed its 1997 Non-Employee Director Plan (the “Director Plan”) and its 1999 Broad-Based Option Plan (the “Broad-Based Plan”), neither of which are proposed to be amended. At this time, no additional awards may be granted under the Director Plan or the Broad-Based Plan according to their terms.
The Amendment is intended to retroactively extend the term of the Plan until November 14, 2017 as under the technical provisions of the Plan the term expired on December 12, 1997. AccordingNovember 14, 2007. The Amended 1997 Plan is consistent in substance with the original Plan prior to this Schedule 13D/A, these
shares are beneficially owned by R. Chaney & Partners III L.P., R. Chaney
& Partners, Inc. and Robert H. Chaney, the address of each of whomAmendment. The following is 909
Fannin, Suite 1275, Two Houston Center, Houston, Texas 77010-1006, and
each of whom shares the voting and dispositive power of these shares.
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EXECUTIVE OFFICERS AND COMPENSATION
Information regarding the executive officers follows.
Name Age Position
---- --- ----------------------------------------------------
Chairman of the Board, President and Chief Executive
Gary D. Owens....... 51 Officer
Michael J. Sheen.... 50 Vice President and Chief Technical Officer
Thomas T. McEntire.. 38 Chief Financial Officer
Thomas T. McEntire joined the company as Chief Financial Officer in
September of 1997. Mr. McEntire had been Financial Controller of APS Holding
Corporation ("APS") since February 1995 and held other senior financial
management positions since joining APS in 1990. Prior to joining APS, Mr.
McEntire held various positions with Coopers & Lybrand L.L.P. from 1982 to
1990.
Mr. Owens' and Mr. Sheen's backgrounds are described above under "Background
of Nominees and Continuing Directors".
Summary of Compensation
Aa summary of the compensation earnedAmended 1997 Plan:
Additional restrictions on repricing and extensions of exercisability of stock options are included.
Updates provisions relating to award exercise methods and tax withholding are included.
The date after which no awards may be granted is extended to November 14, 2017.
No additional shares are authorized above the shares previously authorized under the original Plan approved by the executive officers in the fiscal
years ended September 30, 1997 and 1998 follows.
The aggregate number of shares of restrictedCommon Stock that will be available for issuance under the Amended 1997 Plan is approximately 184,350 shares.
Since August 1, 2001, the Company has only issued stock awardedoptions under the Plan. If the Amendment is approved, the Compensation Committee and the Board contemplate that stock options may be issued in the future. Although allowed by the closing price ofAmended 1997 Plan, neither the common stock onCompensation Committee nor the date the awards were granted. All of these awards were
granted in connection with, and were conditioned upon the closing of, our
initial public offering. While the initial public offering price of the
common stock was $14.00 per share, the closing price on November 26, 1997,
the date the offering closed and theseBoard currently anticipates granting restricted stock awards were
granted, was $16.00 per share. to executives or other employees in the foreseeable future.
The executive officers heldAmended 1997 Plan is proposed to enable us to provide a means to continue to attract able employees and to provide a means whereby those individuals upon whom the numberresponsibilities rest for our successful administration and management, and whose present and potential contributions are of shares indicated below as of September 30, 1998, which had the indicated
values as of that date based on the $15.75 closing priceimportance, can acquire and maintain ownership of the Company’s common stock, on that date. These awards vest as to one fourthpar value $.01 per share (the “Common Stock”), thereby strengthening their concern for the Company’s welfare. A further purpose of the shares on
each November 26 from 1998 through 2001.
discretionary grants to our employees (or employees of Messrs. Owensour affiliates, such as our wholly-owned and Sheen has agreedmajority-owned subsidiaries) of stock options that hedo not constitute Incentive Stock Options (“Non-statutory Stock Options”).
The Board adopted the Amended 1997 Plan on May 2, 2013, subject to stockholder approval at the Special Meeting. If the Amended 1997 Plan is not approved by our stockholders at the Special Meeting, then no future awards will not disclose or misappropriate any confidential
informationbe granted under the Plan. The Plan is our only existing compensatory plan under which equity awards relating to shares of Common Stock may be granted to our key employees. As of June 3, 2013, the aggregate number of shares of Common Stock that remain available to be issued under the Plan, and will be available under the Amended 1997 Plan, is approximately 184,350 shares.
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Reasons the Board Recommends Voting For Approval of the company.
Compensation Committee InterlocksPlan Amendment
The Board believes that encouraging our employees to own shares of our Common Stock fosters broad alignment between the interests of employees and Insider Participationthe interests of our stockholders. The compensation committee comprises Dr. Thomas L. Davis, Ph.D.,Board also believes that extending and Mr.
Charles H. Still. Mr. Still is a partner incontinuing the law firm of Fulbright &
Jaworski L.L.P., which provides legal services to the company.
Compensation Committee Report on Executive Compensation
Our executive compensation program is designedPlan will help us to attract, motivate and retain talented, management personnelqualified employees.
The Board also believes that the approval of the Amended 1997 Plan is in the best interest of our stockholders because its adoption avoids the potential negative impacts of failure to approve the Amendment discussed below under the heading “Potential Impacts of Failure of our Stockholders to Approve the Amended 1997 Plan.”
Other Matters Considered by the Board
In determining whether to extend the term of the Plan and to reward managementrecommend the Amended 1997 Plan to our stockholders for approval, the Board also considered a stockholder cost analysis, burn rate analysis and voting power dilution analysis prepared by an independent third party consultant (the “Plan Consultant”). The Plan Consultant’s analysis includes an estimate that the stockholder cost percentage resulting from the extension of the Amended 1997 Plan from and after the date of this proxy statement could be 3.74%, which is below the acceptable dilutive impact threshold noted by the Plan Consultant. The stockholder cost percentage was computed by the Plan Consultant as the estimated cost to stockholders of the Amended 1997 Plan’s extension from and after the date of this proxy statement expressed as a percentage of the Company’s estimated total market value. The Plan Consultant’s analysis indicated that the Company’s average burn rate of stock options over the 2012, 2011 and 2010 fiscal years was 0.35% (calculated utilizing the Plan Consultant’s internal burn rate formula), as compared to an industry burn rate threshold of 4.57%. The Plan Consultant’s analysis indicated that the Company’s average burn rate of stock options over the 2012, 2011, 2010, 2009, and 2008 fiscal years was 0.70%. The average burn rates over such three and five year periods were calculated by the Plan Consultant as the average of the number of shares underlying awards granted in each such fiscal year divided by the weighted average common shares outstanding for that fiscal year. The Plan Consultant’s burn rate formula differs from our internal burn rate formula in that it applies a multiplier to “full value awards” (shares underlying restricted stock awards and other full value awards for which the participant does not pay for the company's successful financial performanceshares), resulting in a higher burn rate. The Plan consultant’s analysis includes an estimate that the voting power dilution (on a fully diluted basis) result from the extension of the Plan from and for increasing stockholder
value. Weafter the date of this proxy statement could be 3.88%, which is below the 10.23% voting power dilution percentage noted by the Plan Consultant.
Relevant Options
By approving the Amendment the stockholders will be ratifying and approving the grants of the stock options detailed below (the “Relevant Options”). The Relevant Options have been consistently reported in each of the Company’s periodic reports and proxy statements since the dates of grant of the Relevant Options, but were granted after the Plan’s original expiration date. The Relevant Options provide the holder with the right to purchase Common Stock in an amount and at the exercise price set forth in the table below. Each option expires ten years from its date of grant, and vests in four equal annual installments beginning one year following the date of grant. The average market values of the Company’s Common Stock on applicable dates of grant, December 5, 2008, February 25, 2010 and August 5, 2010 were $8.78; $21.95 and $26.48, respectively. The Relevant Options have terms as detailed in the following summary table:
Date of Grant | Exercise Price | Aggregate Number of Shares Granted (1) | Number of Optionees | |||||||||
December 5, 2008 | $ | 8.78 | 292,000 | 37 | ||||||||
February 25, 2010 | $ | 21.95 | 40,000 | 2 | ||||||||
August 5, 2010 | $ | 26.48 | 86,000 | 9 | ||||||||
| (1) | Adjusted for the Company’s 2-for-1 split of its Common Stock effected in the form of a stock dividend (the “Stock Split”). |
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While it is not possible to predict with certainty the amounts of awards that may be granted under the Amended 1997 Plan, the following is a summary of the Relevant Options (which includes all of the options set forth in the table above) granted in the past:
Amended 1997 Plan Benefits | ||||||||
Name and Position | Dollar Value ($) (1) | Number of Shares | ||||||
Gary D. Owens, Chief Executive Officer | $ | 4,092,280 | 70,000 | |||||
Michael J. Sheen, Senior Vice President and Chief Technical Officer | $ | 3,287,005 | 60,000 | |||||
Thomas T. McEntire, Vice President, Chief Financial Officer and Secretary | $ | 3,533,457 | 50,000 | |||||
Walter R. Wheeler, Executive Vice President and Chief Operating Officer | $ | 1,226,840 | 26,000 | |||||
Robbin B. Adams, Executive Vice President and Chief Project Engineer | $ | 977,090 | 26,000 | |||||
Executive Group | $ | 13,116,672 | 232,000 | |||||
Non-Executive Director Group | 0 | |||||||
Non-Executive Officer Employee Group | $ | 9,714,135 | 186,000 | |||||
| (1) | Amounts in this column represent the aggregate value of stock-based compensation granted in the past pursuant to the Plan, based on (i) the actual value realized upon exercise for options which have been exercised or (ii) an estimate of the value of Company’s stock price at $85.00 for options which have not yet been exercised. The actual value that a recipient may realize or has realized depends on the excess of our stock price over the exercise price on the date the options are exercised. |
Potential Impacts of Approval by Stockholders of the Amended 1997 Plan
The Board believes that adopting the Amendment is in the best interest of the stockholders as the Board believes that granting equity-based compensation will incentivize our employees to work to achieve stock price appreciation and incentives through a combinationwill better enable us to attract and retain talented, qualified employees. Additional grants of salaries, annual performance bonuses and long-term incentive stock-based
awards.
Base Annual Salaries
Prioroptions to the company's initial public offering,Company’s key employees under the Amended 1997 Plan would dilute the interests of stockholders as the number of shares outstanding on a fully diluted basis would increase. While it is not possible to predict with precision the dilutive effect that the approval of the Amendment may have on our stockholders, as noted above, the Plan Consultant’s analysis indicates that the stockholder cost percentage resulting from the extension of the Plan from and after the date of this proxy statement is estimated to be 3.74%.
Potential Impacts of Failure of Stockholders to Approve the Amended 1997 Plan
The Board believes that the Company may be exposed to the following risks if the Amended 1997 Plan is not approved by our stockholders:
Because of the NASDAQ determination letter received by the Company and the Company’s plan to regain compliance with NASDAQ listing rules that require stockholder approval of the Amended 1997 Plan, failure to gain approval may cause the Company’s Common Stock to be de-listed from the NASDAQ exchange, which would result in decreased liquidity for the Company’s Common Stock.
Certain employees were granted Relevant Stock Options pursuant to stock option agreements signed by both the Company and the employees that indicated the grants were made under the Plan. The Company believes that if the Amendment is not approved by the stockholders and the stockholders do not ratify the grants of the Relevant Stock Options, the Company will face exposure to claims by
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certain of the impacted employees that they are due cash option cancellation payments. The Company estimates that the magnitude of this potential exposure would be approximately $10 million, however this amount may vary significantly depending on the price of the Company’s Common Stock. |
The Company may have additional liability under the Securities Act of 1933, as amended, resulting from the exercise and subsequent sale of Common Stock acquired under the Relevant Options by Company employees prior to the formationapproval of the compensation committee, the company entered into employment agreements
with Messrs. Owens and SheenAmendment.
Equity Compensation Plan Information
The following equity plan information is accurate as described under "--Employment Agreements"
above. The compensation levels reflected in those employment agreements were
established in July 1997 by negotiations among Messrs. Owens and Sheen, before
they joined the company, and representatives of OYO U.S.A., the company's sole
stockholder at that time. Mr. McEntire's base salary was determined in August
1997 by negotiations among Mr. McEntire, before he joined the company, and Mr.
Owens and representatives of OYO U.S.A.
The base annual salariesSeptember 30, 2012:
Equity Compensation Plan Information
Plan Category | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted-average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) | |||||||||
Equity Compensation Plans Approved by Security Holders | 245,356 | (2) | $ | 13.93 | (2) | 184,350 | (3) | |||||
Equity Compensation Plans Not Approved by Security Holders (1) | 600 | $ | 4.25 | 38,000 | ||||||||
| (1) | The securities are to be issued pursuant to the Company’s 1999 Broad-Based Option Plan. A description of such plan is provided in Note 13 to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K filed with the SEC on December 12, 2012. |
| (2) | Includes the Relevant Options. |
| (3) | The number of securities remaining available under the Plan assumes adoption of this proposal by the stockholders. |
Summary of the company's executive officers for fiscal 1998
were as follows.
Mr. Owens, Chief Executive Officer....... $175,000
Mr. Sheen, Chief Technical Officer....... 150,000
Mr. McEntire, Chief Financial Officer.... 100,000
The compensation committee hasAmended 1997 Plan
Below is a summary of the authorityterms of the Amended 1997 Plan that is qualified in its entirety by reference to adjust these base salaries;
however, the employment agreements described above require that Messrs. Owens'
and Sheen's base salaries not be reduced fromfull text of the base amounts set forth
above. To date, we have not adjusted the base salaries of Messrs. Owens and
Sheen, as we believe them to be within an acceptable range for the officers'
positions and responsibilityPlan and the company's size. For fiscal 1999, we
approved an increase in Mr. McEntire's base annual salaryAmendment which is attached to $125,000 in
recognition of his contributions tothis Proxy Statement as Exhibit A.
Administration
The Amended 1997 Plan is administered by the company.
Annual Performance Bonuses
In January 1998, we recommended to the board of directors, and the board of
directors adopted, a comprehensive, company-wide cash bonus compensation plan
for all employees for the fiscal year 1998, as proposed by Mr. Owens. The cash
bonus plan set forth various targets and criteria for eachCompensation Committee of the company's
operating subsidiaries, based onCompany’s Board or another committee (or a subcommittee thereof), each appointed by the financial resultsBoard of Directors (the “Committee”) that is comprised solely of two or more non-employee directors who also qualify as “outside directors” (within the subsidiary, and
established a cash bonus for each employee of the subsidiaries that met those
targets. The financial targets were designedmeaning assigned to provide incentives for the
employees of each subsidiary to work as a team to improve the financial
results in which the company believed there was room for growth.
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At the executive level, we set a single financial target for fiscal 1998:
the company as a whole needed to achieve net income per share for the fiscal
year of a set amount, which at the time of adoption of the plan was in line
with published analyst's expectations for the fiscal year. We believed this to
be an appropriate short-term goal for a newly-public company. The fiscal 1998
bonus for executive officers was set as an all-or-nothing bonus; there was to
be no graduated payout if the company did not achieve the financial target.
The bonus plan provided a cash bonus to each of the company's executive
officers in an amount equal to 75% of the officer's base salary. As reported
in our 1998 annual report to stockholders, the company achieved net income per
share of $1.32 for the year ended September 30, 1998, and the executive
officers, as well as the other employees of the company, earned the bonuses
set in the bonus plan in January 1998.
Recently, we approved a company-wide bonus plan, including financial targets
and bonus levels, for fiscal 1999. For fiscal 1999, the executive officers'
bonuses will awarded only if the company achieves a predetermined amount of
growth in earnings per share in fiscal 1999.
Long-Term Stock-Based Compensation
We also believe that long-term incentive compensation is an important
component of the company's compensation program and that the value of this
compensation should be directly related to increases in stockholder value.
Therefore, in addition to base salaries and annual performance bonuses, the
executive officers participate in the company's 1997 Key Employee Stock Option
Plan, which allows the company to grant long-term incentive compensation to
its executive officers in the form of stock options and restricted stock
awards. These options and restricted stock typically vest 25% per year over
four years and are therefore intended to compensate executive officers for
long-term appreciation in the market value of the common stock, and only for
such appreciation.
In connection with the company's initial public offering, the company
granted options to purchase stock and restricted stock to the executive
officers as set forth aboveterm under "Summary of Compensation" and "Stock
Options". The amounts of these options and restricted stock were determined
before the initial public offering by negotiations among Mr. Owens and
representatives of OYO U.S.A. These options have an exercise price of $14 per
share, which is equal to the initial public offering price, and vest over four
years.
In November 1998, we recommended to the board of directors, and the board of
directors approved, the grant of options to purchase 10,000 shares to each of
Messrs. Owens and Sheen and options to purchase 5,000 shares to Mr. McEntire.
These options have exercise prices of $14.56 and also vest over four years.
Applicable Tax Code Provision
The compensation committee has reviewed the potential consequences for the
company of Section 162(m) of the Internal Revenue Code which limits the tax
deduction the company can claim for annual compensation(“Section 162(m)”)) and as “Non-Employee Directors” as defined in excess of $1
million to certain executives. This limit did not impact the company in fiscal
1998 and is not expected to impact the company in fiscal 1999.
Compensation Committee:
Dr. Thomas L. Davis, Ph.D.
Mr. Charles H. Still
8
Common Stock Performance Comparisons
The following graphs compare the performanceRule 16b-3 of the common stock with the
performance of the Russell 2000 index and the Standard & Poor's Oil & Gas
(Drilling & Equipment) index from our initial public offering through the end
of fiscal 1998.
[GRAPH APPEARS HERE]
11/20/97 9/30/98
-------- -------
OYOG..................................................... 100.00 112.50
Russell 2000............................................. 100.00 83.45
S&P Oil & Gas............................................ 100.00 56.01
(Drilling & Equipment)
These graphs assume $100 dollars invested (a) at our initial public offering
price on the date on which the common stock became registered under Section 12
of the Securities Exchange Act, (b) in the stocks comprising the Russell 2000
index on that day and (c) in the stocks comprising the Standard & Poor's Oil &
Gas (Drilling & Equipment) index that day. In each case, reinvestment of all
dividends is assumed.
Act.
The foregoing graphs are based on historical data and are not necessarily
indicative of future performance. These graphs shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission orCommittee will have full authority, subject to the Regulationsterms of 14Athe Amended 1997 Plan, to establish rules and regulations for the proper administration of the Amended 1997 Plan, to select the employees to whom awards are granted, and to set the dates of grants, the types of awards that shall be made (whether Non-statutory Stock Options or 14CIncentive Stock Options) and the other terms of the awards. When granting awards, the Committee will consider such factors as an individual’s duties and present and potential contributions to our success and such other factors as the Committee in its discretion shall deem relevant. The Committee may also correct any defect or supply any omission or reconcile any inconsistency in the Amended 1997 Plan or in any agreement relating to an award in the manner and to the extent it shall deem expedient to carry it into effect.
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Number of Shares Subject to the Amended 1997 Plan and Award Limits
The aggregate maximum number of shares of Common Stock that may be issued under the Exchange Act
orAmended 1997 Plan is 2,250,000 shares (adjusted to reflect the liabilitiesStock Split) (the “Plan Share Limit”). As of Section 18 under that act.
PROPOSAL 2: AMENDMENT OF STOCK OPTION PLAN
General
At the meeting, the stockholders will vote on a proposal (the "Amendment")
to amend the company's 1997 Key Employee Stock Option Plan (the "Plan") to
increasedate of this proxy statement the number of shares of Common Stock remaining available for issuance under the Amended 1997 Plan (subject to stockholder approval of the Amended 1997 Plan) was 184,350 shares. The number of shares of Common Stock that are the subject of awards under the Amended 1997 Plan which are forfeited or terminated, expire unexercised, are settled in cash in lieu of shares of Common Stock or in a manner such that all or some of the shares covered by an award are not issued to a participant or are exchanged for awards that do not involve shares will again immediately become available to be issued pursuant to awards granted under the Amended 1997 Plan. If shares of Common Stock are withheld from payment of an award to satisfy tax obligations with respect to the award, those shares will be treated as shares that have been issued under the Amended 1997 Plan and will not again be available for issuance under the Amended 1997 Plan. If shares of Common Stock are tendered in payment of an option price of an option, those shares will not be available for issuance under the Amended 1997 Plan.
The aggregate number of shares of Common Stock with respect to which Incentive Stock Options may be granted under the Amended 1997 Plan is also 2,250,000 shares (adjusted to reflect the Stock Split). The maximum aggregate number of shares of Common Stock that may be subject to options granted in any one calendar year to any one employee is 800,000 shares (as adjusted following the Stock Split), determined as of the dates of grant.
The limitations described above may be adjusted upon a subdivision or consolidation of shares of Common Stock or other capital readjustment, the payment of a stock dividend on Common Stock, or other increase or reduction in the number of shares of Common Stock outstanding without receipt of consideration by the Company.
Eligibility
All of our (and our affiliates’) key employees are eligible to participate in the Amended 1997 Plan. The selection of those employees from among those eligible, who will receive Incentive Stock Options and Non-statutory Stock Options or any combination thereof is within the discretion of the Committee. However, Incentive Stock Options may be granted only to our key employees and key employees of our subsidiary corporations. We currently have six executive officers and approximately 75 other employees who would be eligible to participate in the Amended 1997 Plan.
Term of the Amended 1997 Plan
The Amendment will be effective as of May 2, 2013, the date of its adoption by the Board, and will retroactively extend the term of the Plan from 425,000its original expiration of November 14, 2007 to 625,000. Approval ofNovember 14, 2017, provided the Amendment requires the vote of the holders of a
majority of the shares being votedis approved by our stockholders at the meeting.
Description of the Plan
The Plan is designed to provide key employees, including officers and
employee-directors of the company, with additional incentives to promote the
success of our business and to enhance our ability to attract and retain the
services of qualified persons. The Plan is currently administered by the Board
of Directors.
9
Under the Plan, the Board of DirectorsSpecial Meeting. No further awards may grant options to purchase the
company's common stock and awards of the company's restricted stock up to an
aggregate of 425,000 shares of common stock. The exercise price of optionsbe granted under the Amended 1997 Plan after November 14, 2017, and the Amended 1997 Plan will terminate thereafter once all awards have been satisfied, exercised or expire. The Board in its discretion may terminate the Amended 1997 Plan at any time with respect to any shares of Common Stock for which awards have not theretofore been granted.
Stock Options
a. Term of Option. The term of each option will be as specified by the Committee at the date of grant but shall not be exercisable more than ten years after the date of grant. The effect of the termination of an optionee’s employment, consulting relationship, or membership on the Board will be specified in the option agreement that evidences each option grant.
7
b.Option Price. The option price will be determined by the Committee and may not be less than the fair market value of the
common stocka share of Common Stock on the date that the option is granted.
c.Repricing Restrictions. Except for adjustments for certain changes in the Common Stock, the Committee may not, without the approval of grant. In the case of a grant ofour stockholders, amend any outstanding option agreement that evidences an option designated asgrant to lower the option price (or cancel and replace any outstanding option agreement with an "Incentive Option" (as defined inoption agreement having a lower option price). In addition, the Plan)Committee may not lower the option price (or cancel and replace any outstanding option agreement with an option agreement having a lower option price) to the extent that doing so would subject the holder to additional taxes under Section 409A of the Code (“Section 409A”).
d.Special Rules for Certain Stockholders. If an Incentive Stock Option is granted to an employee who then owns, ten percentdirectly or by attribution under the Code, stock possessing more than 10% of the outstanding sharestotal combined voting power of commonall classes our stock (a "10%
Stockholder"),or the exercise pricestock of a subsidiary of ours, then the term of the option may not exceed five years, and the option price will be less thanat least 110% of the fair market value of the commonshares on the date that the option is granted.
e.Size of Grant. Subject to the limitations described above under the section “Number of Shares Subject to the Amended 1997 Plan and Award Limits,” the number of shares for which an option is granted to an employee will be determined by the Committee.
f.Status of Options. The status of each option granted to an employee as either an Incentive Stock Option or a Non-statutory Stock Option will be designated by the Committee at the time of grant. Unless an option is specifically characterized by the Committee as an Incentive Stock Option it will be a Non-statutory Stock Option. If, however, the aggregate fair market value (determined as of the date of grant) of shares with respect to which Incentive Stock Options become exercisable for the first time by an employee exceeds $100,000 in any calendar year, the options with respect to the excess shares will be Non-statutory Stock Options.
g.Payment. The option price upon exercise may be paid by an optionee in any combination of the following: (a) cash, certified check, bank draft or postal or express money order for an amount equal to the option price under the option, (b) an election to make a cashless exercise through a registered broker-dealer (if approved in advance by the Committee or one of our executive officers) or (c) any other form of payment which is acceptable to the Committee.
h.Option Agreement. All options will be evidenced by a written agreement containing provisions consistent with the Amended 1997 Plan and such other provisions as the Committee deems appropriate. The terms and conditions of the respective option agreements need not be identical. The Committee may, with the consent of the participant, amend any outstanding option agreement in any manner not inconsistent with the provisions of the Amended 1997 Plan, including amendments that accelerate the exercisability of the option.
Corporate Change and Other Adjustments
The Amended 1997 Plan provides that, upon a Corporate Change (as hereinafter defined), the Committee generally may accelerate the vesting of options, cancel options and cause us to make payments in respect thereof in cash, or adjust the outstanding options as appropriate to reflect such Corporate Change (including, subject to certain conditions, having some or all of the then outstanding options (whether vested or unvested) assumed or having a new award of a similar nature substituted for some or all of their then outstanding options under the Amended 1997 Plan (whether vested or unvested) by an entity which is a party to the transaction resulting in such Corporate Change). The Amended 1997 Plan provides that a Corporate Change occurs if (i) we are not the surviving entity in any merger or consolidation or other reorganization (or we survive only as a subsidiary of an entity other than an entity that was directly or indirectly wholly-owned by us immediately prior to such merger, consolidation or other reorganization), (ii) we sell, lease or exchange all or substantially all of our assets to any other person (other than an entity that is directly or indirectly wholly owned by us), or (iii) we are to be dissolved. With respect to awards under the Amended 1997 Plan other than options, upon changes in our capitalization the Committee generally may make appropriate adjustments to the awards.
8
The maximum number of shares that may be issued under the Amended 1997 Plan and the maximum number of shares that may be issued to any one individual and the other individual award limitations, as well as the number and price of shares of Common Stock or other consideration subject to an award under the Amended 1997 Plan, will be appropriately adjusted by the Committee in the event of changes in the outstanding Common Stock by reason of recapitalizations, reorganizations, mergers, consolidations, combinations, split-ups, split-offs, spin-offs, exchanges or other relevant changes in capitalization or distributions to the holders of Common Stock occurring after an award is granted.
Transferability
An Incentive Stock Option is not transferable other than by will or the laws of descent and distribution, and may be exercised during the employee’s lifetime only by the employee or such employee’s guardian or legal representative. All other awards under the Amended 1997 Plan are not transferable other than by will or the laws of descent and distribution.
Amendments
The Board may from time to time amend the Amended 1997 Plan; however, any change that would impair the rights of a participant with respect to an award theretofore granted will require the participant’s consent. Further, without the prior approval of our stockholders, the Board may not amend the Amended 1997 Plan to change the class of eligible individuals, increase the number of shares of Common Stock that may be issued under the Amended 1997 Plan, or amend or delete the provisions of the Amended 1997 Plan that prevent the Committee from amending any outstanding option agreement to lower the option price (or cancel and replace any outstanding option agreement with an option agreement having a lower option price).
Federal Income Tax Aspects of the Amended 1997 Plan
The following discussion summarizes certain material U.S. Federal income tax consequences to us and U.S. holders with respect to the acquisition, ownership, exercise or disposition of awards which may be granted under the Amended 1997 Plan. The discussion is based upon the provisions of the Code and the regulations and rulings promulgated thereunder, all of which are subject to change (possibly with retroactive effect) or different interpretations. This summary reflects generally contemplated consequences and does not purport to deal with all aspects of U.S. Federal income taxation that may be relevant to an individual award holder’s situation, nor any tax consequences arising under the laws of any state, local or foreign jurisdiction.
Incentive Stock Options. Incentive Stock Options are subject to special federal income tax treatment. No federal income tax is imposed on the optionee upon the grant or the exercise of an Incentive Stock Option if the optionee does not dispose of the shares acquired pursuant to the exercise within the two-year period beginning on the date the option was granted or within the one-year period beginning on the date the option was exercised (collectively, the “holding period”). In such event, the Company would not be entitled to any deduction for federal income tax purposes in connection with the grant or exercise of the option or the disposition of the shares so acquired. With respect to an Incentive Stock Option, the difference between the fair market value of the stock on the date of exercise and the exercise price must generally be included in the optionee’s alternative minimum taxable income for the year in which such exercise occurs. However, if the optionee exercises an Incentive Stock Option and disposes of the shares received in the same year and the amount realized is less than the fair market value of the shares on the date of exercise, then the amount included in alternative minimum taxable income will not exceed the amount realized over the adjusted basis of the shares.
Upon disposition of the shares received upon exercise of an Incentive Stock Option after the holding period, any appreciation of the shares above the exercise price should constitute long-term capital gain. If an optionee disposes of shares acquired pursuant to his or her exercise of an Incentive Stock Option prior to the end of the holding period, the optionee will be treated as having received, at the time of disposition, compensation taxable
9
as ordinary income. In such event, and subject to the application of Section 162(m) as discussed below, we may claim a deduction for compensation paid at the same time and in the same amount as compensation is treated as received by the optionee. The amount treated as compensation is the excess of the fair market value of the shares at the time of exercise (or in the case of a sale in which a loss would be recognized, the amount realized on the sale if less) over the exercise price; any amount realized in excess of the fair market value of the shares at the time of exercise would be treated as short-term or long-term capital gain, depending on the holding period of the shares.
Non-statutory Stock Options. As a general rule, no federal income tax is imposed on the optionee upon the grant of a Non-statutory Stock Option, and we are not entitled to a tax deduction by reason of such grant. Generally, upon the exercise of a Non-statutory Stock Option, the optionee will be treated as receiving compensation taxable as ordinary income in the year of exercise in an amount equal to the excess of the fair market value of the shares of stock at the time of exercise over the option price paid for such shares. Upon the exercise of a Non-statutory Stock Option, and subject to the application of Section 162(m) as discussed below, we may claim a deduction for compensation paid at the same time and in the same amount as compensation income is recognized by the optionee assuming any federal income tax reporting requirements are satisfied.
Upon a subsequent disposition of the shares received upon exercise of a Non-statutory Stock Option, any difference between the fair market value of the shares at the time of exercise and the amount realized on the disposition would be treated as capital gain or loss. If the shares received upon the exercise of an option are transferred to the optionee subject to certain restrictions, then the taxable income realized by the optionee, unless the optionee elects otherwise, and our tax deduction (assuming any federal income tax reporting requirements are satisfied) should be deferred and should be measured at the fair market value of the shares at the time the restrictions lapse. The restrictions imposed on officers, directors and 10% stockholders by Section 16(b) of the Exchange Act is such a restriction during the period prescribed thereby if other shares have been purchased by such an individual within six months of the exercise of a Non-statutory Stock Option.
Section 162(m).Generally, Section 162(m) precludes a public corporation from taking a deduction for annual compensation in excess of $1,000,000 paid to its covered employees (as defined in Section 162(m)). Our Section 162(m) covered employees are the principal executive officer and our three next highest-paid officers other than the principal financial officer. The Section 162(m) deduction limitation does not apply to certain performance-based compensation that satisfies certain requirements of Section 162(m). The Amended 1997 Plan is intended to permit the Committee to grant certain Non-statutory stock options to covered executive officers that is intended to constitute qualified performance-based compensation for purposes of Section 162(m). However, we can provide no assurances that the Internal Revenue Service would agree that certain of the Relevant Options are exempt from the Section 162(m) deduction limitation, whether or not the stockholders approve of the Amendment to the Plan.
The Amended 1997 Plan is not qualified under Section 401(a) of the Code. Based upon current law and published interpretations, we do not believe that the Amended 1997 Plan is subject to any of the provisions of the Employee Retirement Income Security Act of 1974, as amended.
The comments set forth in the above paragraphs are only a summary of certain of the Federal income tax consequences relating to the Amended 1997 Plan. No consideration has been given to the effects of state, local, or other tax laws on the Amended 1997 Plan or award recipients.
Parachute Payment Sanctions. Certain provisions of the Amended 1997 Plan or provisions included in an award agreement may afford a recipient special protections or payments which are contingent on a change in the ownership or effective control of us or in the ownership of a substantial portion of our assets. To the extent triggered by the occurrence of any such event, these special protections or payments may constitute “parachute payments” that, when aggregated with other parachute payments received by the recipient, if any, could result in the recipient receiving “excess parachute payments” (a portion of which would be allocated to those protections
10
or payments derived from the award). We would not be allowed a deduction for any such excess parachute payments, and the recipient of the payments would be subject to a nondeductible 20% excise tax upon such payments in addition to income tax otherwise owed.
Required Vote
This proposal requires approval by the affirmative vote of a simple majority of the stockholders who, being entitled to do so, vote in person or by proxy on this proposal at the Meeting.
The board of directors recommends voting “FOR” this proposal.
11
Communications with the Board of Directors
Any stockholder or other interested party wishing to send written communications to any one or more members of the Company’s board of directors may do so by sending them to the Company Secretary, c/o Geospace Technologies Corporation, 7007 Pinemont Drive, Houston, Texas 77040-6601. All such communications will be forwarded to the intended recipient(s).
Proposals for Next Annual Meeting; Other Matters
Any appropriate proposals of holders of Common Stock intended to be presented at the annual meeting of stockholders of the Company to be held in 2014 must be received by the Company at its principal executive offices, 7007 Pinemont Drive, Houston, Texas 77040-6601, no later than September 5, 2013 to be included in the proxy statement and form of proxy relating to that meeting. A matter as to which the Company receives notice that is proposed to be brought before the annual meeting of stockholders of the Company in 2014 outside the process of the Securities and Exchange Commission’s rule on stockholder proposals (described in the preceding sentence) will be considered not properly brought before that meeting, and will be out of order, unless the notice as to that matter meets the requirements of the advance notice provisions of the Company’s by-laws. That provision requires notice of any matter, including nomination of a director, to be submitted by a stockholder at the annual meeting of stockholders of the Company in 2014 to be received by the Company no later than November 21, 2013, and to be received by the Company no earlier than October 24, 2013, subject to certain other requirements and deadlines outlined in the Company’s by-laws.
The cost of solicitation of proxies in the accompanying form will be paid by the Company. In addition to solicitation by use of the mails, the directors, officers or employees of the Company may solicit the return of proxies by telephone, electronically or in person.
12
EXHIBIT A
AMENDMENT NO. 6 TO
OYO GEOSPACE TECHNOLOGIES CORPORATION
1997 KEY EMPLOYEE STOCK OPTION PLAN
THIS AMENDMENT by Geospace Technologies Corporation (the “Company”).
W I T N E S S E T H:
WHEREAS, effective as of November 15, 1997, the Board of Directors of OYO Geospace Corporation adopted the OYO Geospace Corporation 1997 Key Employee Stock Option Plan (the “Plan”);
WHEREAS, the name of OYO Geospace Corporation has been changed to Geospace Technologies Corporation;
WHEREAS, the Board of Directors of the Company has determined to amend and readopt the Plan to extend the term of the Plan, to reflect the change in name of the Company, and to make certain other technical revisions to the Plan;
WHEREAS, the stockholders of the Company previously approved the reservation of 1,250,000 shares of the Common Stock of the Company for issuance under the Plan;
WHEREAS, on October 18, 2012, the Company declared a two-for-one stock split in the form of a stock dividend of shares of the Common Stock of the Company payable to the holders of Common Stock of the Company of record on October 15, 2012; and
WHEREAS, the Board of Directors of the Company has adopted this Amendment contingent upon the approval of the stockholders of the Company.
NOW, THEREFORE,BE IT RESOLVED THATthe Plan is amended, readopted and extended as follows:
(1) Section 1.2 of the Plan is hereby amended in its entirety to provide as follows:
1.2 EFFECTIVE DATE OF PLAN. The Plan is effective November 15, 1997, if within one year of that date it shall have been approved by at least a majority vote of stockholders voting in person or by proxy at a duly held stockholder’s meeting, or if the provisions of the corporate charter, by-laws or applicable state law prescribes a greater degree of stockholder approval for this action, the approval by the holders of that percentage, at a duly held meeting of stockholders. No Award shall be granted pursuant to the Plan after November 14, 2017.
(2) Article II of the Plan is hereby amended by adding thereto the following new Section 2.2:
2.2“AWARD” means any Nonqualified Option, Incentive Option or Restricted Stock award granted under the Plan.
(3) Section 2.6 of the Plan is hereby amended in its entirety to provide as follows:
2.6 “COMPANY” means Geospace Technologies Corporation, a Delaware corporation.
(4) Section 2.14 of the Plan is hereby amended in its entirety to provide as follows:
2.6 “PLAN” means the Geospace Technologies Corporation 1997 Key Employee Stock Option Plan as it may be amended from time to time.
A-1
(5) Article II of the Plan is hereby amended by adding thereto the following new Section 2.18:
2.18 “SECTION 409A” means section 409A of the Code and other guidance promulgated by the Internal Revenue Service under Section 409A of the Code.
(6) Article II of the Plan is hereby amended by adding thereto the following new Section 2.19:
2.19 “SHARE” means a share of Common Stock of the Company.
(7) Article II of the Plan is hereby amended by changing the Section numbers of the Sections to reflect the addition of the new Sections pursuant to this amendment.
(8) Section 4.2 of the Plan is hereby amended in its entirety to provide as follows:
4.2 DEDICATED SHARES. Subject to adjustment as provided in Section 4.5, the aggregate number of Shares that may be issued under the Plan shall be 1,125,000 Shares (2,250,000 Shares following the stock split in the form of a stock dividend on October 18, 2012). The Shares that are available for issuance under the Plan may be issued in any form of any Award authorized under the Plan. Any Shares that are the subject of Awards under the Plan that are forfeited or terminated, expire unexercised, are settled in cash in lieu of Shares or in a manner such that all or some of the Shares covered by an Award are not issued to a Participant or are exchanged for Awards that do not involve Shares shall again immediately become available to be issued pursuant to Awards granted under the Plan. If Shares are withheld from payment of an Award to satisfy tax obligations with respect to the Award, such Shares shall be treated as Shares that have been issued under the Plan, and the number of such Shares shall not again be available for issuance under the Plan. If Shares are tendered in payment of an option price of an Option, such Shares shall not be available for issuance under the Plan.
The following rules shall apply to grants of Awards under the Plan:
(i)Incentive Stock Options. The aggregate number of Shares with respect to which Incentive Stock Options may be granted under the Plan for a period of more than ten years. Inis 1,125,000 Shares (2,250,000 Shares following the casestock split in the form of a 10%
Stockholder, no option designated as an Incentive Optionstock dividend on October 18, 2012).
(ii)Options. The maximum aggregate number of Shares that may be subject to Options granted for a
period of more than five years. Options designated as Incentive Options under
the Plan may notin any one calendar year to any one employee shall be granted to an individual to the extent the aggregate fair
market value of400,000 Shares (800,000 Shares following the stock valuedsplit in the form of a stock dividend on October 18, 2012) determined as of the date of the grant, with respect to
which options first are exercisable by that person in any calendar year, under
the Plan or any other incentive stock option plangrant.
(iii)Adjustments. Each of the Company, exceeds
$100,000.
Under the Plan, the Board of Directors may issue shares of restricted stock
to employees for no payment by the employee or for a payment below the fair
market value on the date of grant. The restricted stock is subject to certain
restrictions described in the Plan, with no restrictions continuing for more
than ten years from the date of the award. Generally, restricted stock may not
be transferred and is subject to forfeiture on termination of employment until
the awards vest. Generally, awards vest annually in four equal increments.
Currently, there are no shares left under the Plan for the grant of options
or restricted stock.
In the 1993 Omnibus Budget Reconciliation Act ("OBRA"), Congress generally
limited to $1.0 million per year the tax deduction available to public
companies for certain compensation paid to designated executives. These
executives include the chief executive officer and the next four highest
compensated officers of the company. An exception is provided from this
deduction limitation, for "performance-based" compensation, if specified
statutory requirements are satisfied. The Plan is generally designed to
satisfy these statutory requirements for stock options. We anticipate being
entitled to deduct an amount equal to the ordinary income reportable by an
optionee on exercise of nonqualified options and the early disposition of
shares of stock acquired by exercise of incentive stock options. Restricted
stock awards vest based on service to the company, and generally will not be
exempt from the $1.0 million deduction cap. Because of special transition
rules applicable to companies which first become public in an initial public
offering, we do not anticipate that application of this deduction cap will
have a material impact on awards issued under this Plan.
Text of the Amendment
The Amendment amends the Plan as follows:
1. Section 4.2 of the Plan is amended to read in its entirety as follows:
" 1.1 Dedicated Shares. The total number of shares of Stock with
respect to which Options and Stock Awards may be granted under the Plan
shall be 625,000. The shares may be treasury shares or authorized but
unissued shares. The maximum number of shares subject to Options that
may be issued to any Employee under the Plan in any calender year is
400,000. The number of sharesforegoing numerical limits stated in this Section 4.2 shall be subject to adjustment in accordance with the provisions of Section 4.5.
In
(9) Article V of the event thatPlan is hereby amended by adding thereto the following new Section 5.9:
5.9 RESTRICTIONS ON REPRICING AND EXTENSIONS OF EXERCISABILITY OF OPTIONS. Except as provided in Section 4.5, the Committee may not, without approval of the stockholders of the Company, amend any outstanding Option or Stock Award shall expire
or terminate forAgreement to lower the option price (or cancel and replace any reason oroutstanding Option Agreement with Option Agreements having a lower option price). Further, the Committee may not lower an option price of an Option (or cancel and replace any outstanding Option or Stock Award is
surrendered, the shares of Stock allocableAgreement with Option Agreements having a lower option price) to the unexercised portionextent that doing so would subject the Employee to additional taxes under Section 409A. The exercisability of that Option or Stock Award may again be subject to an Option or
Stock Awardshall not be extended to the extent that such extension would subject the Employee to additional taxes under the Plan."
Reasons for the Amendment
We believe itSection 409A.
A-2
Proxy - Geospace Technologies Corporation
This Proxy is in the best interestssolicited on behalf of the company to attract and retain
the servicesboard of experienced and knowledgeable employees and to provide an
incentive for those employees to increase their proprietary interest in our
long-term success and progress. The Plan is designed to provide certain full-
time key employees, including officers and directorsdirectors.
Proxy-Special Meeting of the company and its
subsidiaries (approximately 425 people as of November 30, 1998), with
additional incentives to promote the success of the company's business.
10
The Plan currently provides that the Board of Directors may grant options to
purchase the company's common stock and awards of the company's restricted
stock up to an aggregate of 425,000 shares of common stock. The Amendment
would increase the aggregate number of shares of common stock that could be
subject to those awards to 625,000. The Board of Directors has adopted the
Amendment and directed that it be presented to the shareholders for their
approval.
Certain Considerations
You should note that certain disadvantages may result from the adoption of
the Amendment, including a dilution of your proportional interest in the
company with respect to future earnings per share, voting, liquidation value
and book and market value per share if options are granted under the Plan and
subsequently exercised or if restricted stock is granted under the Plan and
subsequently vests.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Mr. Ohya, a director of the company, is President of OYO Corporation and
Chairman of the Board of OYO U.S.A. and holds other offices of subsidiaries of
OYO U.S.A. Mr. Kobayashi, also a director of the company, is the Joint General
Manager of OYO Corporation. Mr. Kobayashi also holds offices with many
subsidiaries of OYO U.S.A. Mr. Hall, also a director of the company, is the
President of OYO U.S.A. Mr. Still, also a director of the company, is the
Secretary of OYO U.S.A. and also serves in that position with respect to most
of the subsidiaries of OYO U.S.A. Mr. Still is a partner in the law firm of
Fulbright & Jaworski L.L.P., which provides legal services to the company.
In fiscal 1998, we purchased printheads for our thermal plotters from OYO
Corporation pursuant to a Printhead Purchase Agreement (the "Printhead
Purchase Agreement"), between us and OYO Corporation. OYO Corporation had in
turn purchased the printheads primarily from another Japanese corporation and,
to a lesser extent, from two other Japanese corporations. For its service and
assistance in these transactions, pursuant to the Printhead Purchase
Agreement, OYO Corporation marked up its cost for these printheads by 10% in
reselling them to us. We believe that, by purchasing the heads through OYO
Corporation, we receive a more favorable price for the heads than we could
obtained if we were to negotiate directly for their purchase.
Pursuant to a Master Sales Agreement (the "Master Sales Agreement"), we and
OYO Corporation purchase products from one another at scheduled discounts of 5
to 20 percent off the seller's list prices. In fiscal 1998, we sold
approximately $0.4 million in goods to OYO Corporation and its affiliates and
purchased approximately $2.6 million in goods from OYO Corporation (including
the products covered by the Printhead Purchase Agreement).
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
PriceWaterhouseCoopers LLP served as the company's principal independent
public accountants for the 1998 fiscal year. Representatives of
PriceWaterhouseCoopers LLP are expected to attend the meeting, will have the
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the company's
officers, directors and persons who own more than 10% of a registered class of
the company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10% stockholders are required by the regulation to furnish the
company with copies of all Section 16(a) reports they file.
Based solely on a review of reports on those filings furnished to the
company and written representations from reporting persons that no additional
reports were required, the company believes that during and with respect to
the fiscal year ended September 30, 1998, all officers, directors and greater
than 10% stockholders complied with all filing requirements applicable to
them, except that a Form 5 reporting a gift of 200 shares by Mr. Owens' wife
to her parents was filed late.
11
PROPOSALS FOR NEXT ANNUAL MEETING; OTHER MATTERS
Any proposals of holders of common stock intended to be presented at the
annual meeting of stockholders of the company to be held in 2000 must be
received by the company at its principal executive offices, 12750 S. Kirkwood,
Suite 200, Stafford, Texas 77477, no later than September 20, 1999 to be
included in the proxy statement and form of proxy relating to that meeting.
The cost of solicitation of proxies in the accompanying form will be paid by
the company. In addition to solicitation by use of the mails, the directors,
officers or employees of the company may solicit the return of proxies by
telephone, telecopy or in person.
12
OYO Geospace Corporation
PROXY--ANNUAL MEETING OF STOCKHOLDERS
March 1, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Stockholders – July 9, 2013
The undersigned holder of Common Stockcommon stock of OYO Geospace Technologies Corporation ("OYOG"(“GEOS”) hereby appoints Gary D. Owens and Satoru Ohya,Thomas T. McEntire, or either of them, proxies of the undersigned with full power of substitution, to vote at the AnnualSpecial Meeting of Stockholders of OYOGGEOS to be held at 10:9:00 a.m. on Monday, the 1st of March
1999,July 9, 2013, at the Stafford Civic Center, 1415 Stafford Parkway, Stafford,GEOS corporate headquarters at 7007 Pinemont Drive, Houston, Texas 77040-6601, and at any adjournment or postponement thereof, the number of votes that the undersigned would be entitled to cast if personally present.
This proxy when properly executed 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 the director nominees named in Item 1, or if any one
or more of the nominees becomes unavailable, FOR another nominee or other
nominees to be selected by the Board of Directors, and FOR the proposal set
forth in Item 2.
Please mark, sign, date and return in the enclosed envelope, which requires no
postage if mailed in the United States.
(continued and to be signed on other side)
(1)ELECTION OF DIRECTORS:
In their discretion, the above-namedabove named proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment thereof and upon matters incident to the conduct of the meeting.
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Signature
This proxy when properly executed will be voted in the manner directed herein by the undersigned stockholder.If no direction is made, this proxy will be voted FOR the amendment of Stockholder(s)the 1997 Key Employee Stock Option Plan and ratification of certain stock options issued thereunder.
Please mark, sign, date and return in the enclosed envelope, which requires no postage if mailed in the United States. In order for your vote to be submitted by proxy, you must (i) properly complete the Internet voting instructions or telephone voting instructions no later than 11:59 p.m. Houston time on July 8, 2013, or (ii) properly complete and return this proxy card at or prior to the Special Meeting of Stockholders on July 9, 2013.
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY INTERNET OR TELEPHONE.
(continued and to be signed on other side)
Geospace Technologies Corporation
| [Name] | ||||||
| [Address] | Holder Account Number | |||||
| ¨ | Mark this box with an X if you have made changes to your name or address details above. | |||||
Special Meeting Proxy Card
[A] Other Matters
2. The board of directors recommends a voteFORthe amendment of the 1997 Key Employee Stock Option Plan and ratification of certain stock options issued thereunder.
| To Amend the 1997 Key Employee Stock Option Plan to Extend its Term and to Ratify Certain Stock Options Issued Thereunder | For | Withhold | ||
| ¨ | ¨ |
[B] Authorized Signatures – Sign Here – This section must be completed for your instructions to be executed.
NOTE: Please sign your name exactlyname(s) EXACTLY as it
appears hereon. Joint ownersyour name(s) appear(s) on this proxy. All joint holders must
each sign. When signing as attorney, trustee, executor, administrator, trusteeguardian or guardian,corporate officer, please giveprovide your full
title as such.
Date , 1999.