SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: (Date of earliest event reported): August 30, 2011
ION Geophysical Corporation
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation)
(Commission file number)
(I.R.S. Employer Identification No.)
2105 CityWest Blvd, Suite 400
Houston, Texas 77042-2839
(Address of principal executive offices, including Zip Code)
(Registrants telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
TABLE OF CONTENTS
Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Amendment to 2004 Long-Term Incentive Plan to Eliminate Accelerated Vesting of Restricted Stock
On August 30, 2011, upon the recommendation and approval of the Compensation Committee and the
Board of Directors, ION Geophysical Corporation (the Company) amended the Companys Amended and
Restated 2004 Long-Term Incentive Plan (the Plan) by deleting Section 7.6(c)(ii) of the Plan,
which provided for the acceleration of vesting of restricted stock and restricted stock units under
the Plan by reason of the Retirement of an employee-participant.
Background. Under the Plan, the Compensation Committee is granted the authority to make
grants of stock options, stock appreciation rights, restricted stock, restricted stock units and
other equity-based awards to the Companys employees, officers, directors and consultants. The
Plan contains provisions regarding the acceleration of vesting of certain awards granted under the
Plan upon the occurrence of certain events such as death, disability or change of control. The
Plan also contains provisions regarding the acceleration of vesting of stock options, stock
appreciation rights and certain other stock-based awards upon the Retirement of any employee who is
the grantee of such awards. Retirement is defined in the Plan as the voluntary termination of
employment from the Company that constitutes retirement for age on any date after the employee
reaches age 65, or such other age as may be designated by the Compensation Committee in the
employees award grant agreement. Section 7.6(c)(ii) of the Plan had provided that upon the
termination of employment due to the Retirement of any employee holding unvested shares of
restricted stock or restricted stock units under the Plan (a participant), the vesting of all
outstanding unvested shares of restricted stock and restricted stock units would accelerate, and
each such award would become fully vested on that date.
Under the Internal Revenue Code of 1986 (the Code) and applicable Treasury regulations,
awards of shares of restricted stock are generally subject to federal ordinary income tax at the
date on which shares are no longer subject to a substantial risk of forfeiture (in most cases,
the date on which the shares become vested under the terms of the award). The Companys grants of
restricted stock awards under the Plan have generally been time-lapse vesting awards. The amount
of ordinary income recognized by a participant for federal income tax purposes is generally equal
to the fair market value of the shares on the vesting date. This ordinary income generally is
subject to withholding of federal income and employment taxes.
Under the terms of the Plan, in order to satisfy the participants withholding tax obligations
payable upon a vesting event, (i) the participant may pay cash, or (ii) the Company may reduce the
number of shares of common stock deliverable under the Plan (i.e., withholding of a portion of
the then-vested shares) by an amount that would have a fair market value equal to the amount of all
federal, state or local taxes to be withheld.
Under applicable Code and Treasury regulations, upon the date when the participant holding
unvested shares of restricted stock reaches age 65, all unvested shares of restricted stock would
no longer be subject to a substantial risk of forfeiture, regardless of whether the participant
has actually retired on that date or whether his shares vest on that date under the
terms of the Plan and the award. In this event, the participant would recognize ordinary
compensation income with respect to those unvested shares on his 65th birthday and
become liable for federal income and withholding taxes at that time. However, because the Plan
provided that a vesting event would not occur until the employee had actually terminated his
employment with the Company after age 65, if the employee elects to continue his employment past
age 65, there would be no vesting event on his 65th birthday and the employee would be
unable to have any otherwise-vested restricted shares available from which to satisfy his or her
withholding tax liabilities.
Plan Amendment. The recognition of ordinary compensation income for federal income tax
purposes regarding unvested restricted stock under the Plan under such circumstances could create a
potential hardship on an employee turning age 65. In addition, such a tax event could motivate a
valuable employee to elect to retire prematurely at age 65 in order to align his tax recognition
and share-vesting dates. Consequently, on August 30, 2011, the Company amended the Plan to delete
Section 7.6(c)(ii) in its entirety. The amendment applies only to awards granted under the Plan
after August 30, 2011 and does not apply to any outstanding award previously granted under the Plan
on or before August 30, 2011. As a result of this amendment, future awards of restricted stock and
restricted stock units under the Plan will no longer be subject to accelerated vesting upon
termination of employment due to Retirement.
The foregoing description of the amendment to the Plan is qualified in its entirety by
reference to the copy of the amendment filed herewith as Exhibit 99.1.
Acceleration of Vesting of Restricted Stock Award
Robert P. Peebler, Chief Executive Officer of the Company, will be 65 years of age on June 22,
2012. On that date, it is expected that Mr. Peebler will own 333,333 unvested shares of the
Companys restricted stock granted to him under the Plan in 2009 and 2010. Of that total number of
shares, 33,333 shares of restricted stock are scheduled to vest on December 1, 2012, and the
remaining 300,000 shares of restricted stock are scheduled to vest on the date that is the earliest
of (i) June 1, 2013, (ii) Mr. Peeblers retirement from the Company after reaching age 65, and
(iii) the occurrence of certain other events as designated in his employment agreement.
As described above, under the Code and applicable Treasury regulations, Mr. Peebler will
recognize ordinary compensation income and will be subject to ordinary income tax regarding the
333,333 unvested shares of restricted stock he would own when he reaches age 65 on June 22, 2012,
because those shares would no longer be subject to a substantial risk of forfeiture for federal
income tax purposes. However, if Mr. Peebler does not terminate his employment by reason of his
Retirement on that date, then these unvested shares will remain unvested pursuant to the Plan and
will not vest until he terminates his employment, either by reason of his Retirement or otherwise,
or due to any other vesting event under the terms of the Plan and the terms of his grants.
As previously disclosed in the Companys Current Report on Form 8-K filed with the Securities
and Exchange Commission on August 3, 2011, the Company announced, on August 3, 2011, an executive
leadership transition plan that included Mr. Peebler becoming the Executive Chairman of the Board
commencing in January 2012. The Company intends for Mr. Peebler to remain employed and to continue
to serve as Executive Chairman through the end of 2012.
The Compensation Committee reviewed the facts regarding the impact of the recognition
of ordinary income regarding Mr. Peeblers unvested shares of restricted stock and his turning
65, and concluded that it was in the best interests of the Company and its stockholders to take
action to align the date that his unvested shares would no longer be subject to a risk of
forfeiture and the date that vesting events under the Plan would occur, so long as the Committees
action did not result in any adverse financial or accounting impact on the Company.
The Company accounts for stock-based compensation in accordance with the requirements of ASC
Topic 718, which requires all restricted stock awards to be expensed for financial accounting
purposes. Generally, the expensing of restricted stock awards is amortized over the vesting period
of the award. Because the Company had already fully amortized as of December 2010, the entire
stock-based compensation expense related to Mr. Peeblers unvested shares of restricted stock, the
Compensation Committee concluded that the acceleration of vesting of Mr. Peeblers unvested shares
of restricted stock to occur on his 65th birthday on June 22, 2012, would not create any
adverse financial or accounting impact on the Company. Section 1.3(d) of the Plan provides that
the Compensation Committee may, in its discretion, accelerate the vesting of an award made under
the Plan so long as such acceleration is either not adverse to the participant or consented to by
the participant. Accordingly, the Compensation Committee approved the acceleration of vesting of
Mr. Peeblers 333,333 outstanding shares of unvested restricted stock, with such acceleration to be
effective on June 22, 2012. The remaining terms of Mr. Peeblers restricted stock awards,
including the remaining acceleration-of-vesting provisions, have not changed.
Equity Compensation Grant
As previously disclosed in the Companys Current Report on Form 8-K filed with the SEC on
August 2, 2011, the Board of Directors of the Company promoted R. Brian Hanson, Executive Vice
President and Chief Financial Officer, to President, Chief Operating Officer and Chief Financial
Officer, effective on August 2, 2011. The Board also approved an executive leadership transition
plan whereby, effective on January 1, 2012, Mr. Hanson will be appointed the President and Chief
Executive Officer of the Company and will become a member of the Board of Directors of the Company.
In connection with Mr. Hansons August 2, 2011 promotion, on September 1, 2011 the Company
granted to Mr. Hanson under the Plan (i) nonqualified stock options to purchase 250,000 shares of
the Companys common stock and (ii) 42,000 shares of the Companys restricted stock. The options
granted will vest 25% each year over a four-year period on each anniversary date of the date of
grant, and are exercisable at a price equal to $7.07 per share, which is the closing sales price
per share of the Companys common stock on the New York Stock Exchange on the last trading day
immediately prior to the date of grant, in accordance with the terms of the Plan. The shares of
restricted stock awarded to Mr. Hanson will vest in one-third increments each year, over a
three-year period. Under the terms of the Plan, during the time that the restricted stock has not
yet vested, holders of shares of restricted stock are nonetheless entitled to the same voting
rights as all other holders of common stock.
As described in the definitive proxy statement filed with the SEC with respect to the
Companys Annual Meeting of Stockholders held on May 27, 2011, the Company has adopted a policy
that all awards of restricted stock and stock options to its employees and directors will be
granted on one of four designated dates during the year: March 1, June 1, September 1 or December
1. Mr. Hansons equity awards were made on September 1, 2011 because September
1, 2011 was the first quarterly grant date occurring after his August 2, 2011 promotion.
Item 7.01. Regulation FD Disclosure
Mr. Peebler and Mr. Hanson will be presenting at the Barclays Capital 2011 CEO Energy-Power
Conference to be held in New York City, on September 8, 2011, commencing at approximately 8:25 a.m.
Eastern Time. A copy of the presentation slides will be available in the Investor Relations
section of the Companys website at www.iongeo.com on the day of the presentation and will be
archived there for approximately 90 days.
The information contained in Item 7.01 of this report (i) is not to be considered filed
under the Securities Exchange Act of 1934, as amended (the Exchange Act) and (ii) shall not be
incorporated by reference into any previous or future filings made by or to be made by the Company
with the SEC under the Securities Act of 1933, as amended, or the Exchange Act.
The presentations referenced in this report and any oral or written statements made in
connection with the presentation may contain certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. These
forward-looking statements may include statements concerning estimated revenues, expected timing of
future revenues and growth rates, estimated gross margins and operating expenses for fiscal 2011
and other years, future sales and market growth, timing of product introduction and
commercialization, and other statements that are not statements of historical fact. Actual results
may vary materially from those described in the forward-looking statements. All forward-looking
statements will reflect numerous assumptions and involve a number of risks and uncertainties.
These risks and uncertainties include risks associated with the timing and development of the
Companys products and services and market acceptance of the Companys new and revised product
offerings; risks associated with economic downturns and volatile credit environments; risks
associated with the performance of the Companys INOVA
Geophysical Equipment Limited
joint venture; risks associated with the Companys level of indebtedness and compliance with debt
covenants, including compliance by its guarantors; risks of audit adjustments and other
modifications to the Companys financial statements not currently foreseen; risks associated with
competitors product offerings and pricing pressures resulting therefrom; risks that sources of
capital may not prove adequate; risks related to collection of receivables; risks associated with
pending and future litigation; and risks related to technological and marketplace changes affecting
the Companys product line. Additional risk factors, which could affect actual results, are
disclosed by the Company from time to time in its filings with the Securities and Exchange
Commission, including its Annual Reports on Form 10-K and its Quarterly Reports on Form 10-Q.
Item 9.01. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
(b) Pro forma financial information.
(c) Shell company transactions.
||Amendment to Amended and Restated 2004 Long-Term Incentive Plan dated August 30,
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|Date: September 2, 2011
||ION GEOPHYSICAL CORPORATION
||/s/ DAVID L. ROLAND
||David L. Roland
||Senior Vice President, General Counsel and
||Amendment to Amended and Restated 2004 Long-Term Incentive Plan dated August 30, 2011.