IO ION Geophysical Corporation New

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Section 16(a) Beneficial Ownership Reporting Compliance

        Section 16(a) of the Exchange Act requires directors and certain officers of ION, and persons who own more than 10% of ION's Common Stock, to file with the SEC and the NYSE initial statements of beneficial ownership on Form 3 and changes in such ownership on Forms 4 and 5. Based on our review of the copies of such reports, we believe that during 2019 our directors, executive officers and shareholders holding greater than 10% of our outstanding shares complied with all applicable filing requirements under Section 16(a) of the Exchange Act, and that all of their filings were timely made.

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        For a description of the business background of Mr. Usher, please see "Class I—Term Expiring in 2021" above.

        Mr. Morrison is currently our Executive Vice President and Chief Financial Officer (Interim). Prior to his appointment as Executive Vice President and Chief Financial Officer (Interim), Mr. Morrison exceled in a variety of senior positions in finance and accounting, mostly recently as Vice President of Finance and Treasurer, serving in that role since April 2016. Prior to serving as Vice President of Finance and Treasurer, Mr. Morrison served as Vice President of Finance (May 2013 - April 2016), Vice President and Corporate Controller (January 2007 - May 2013), Controller and Director of Accounting (November 2002 - January 2007) and Assistant Corporate Controller (June 2002 - November 2002). Since November 2016, Mr. Morrison has also served on the Board of Directors of INOVA Geophysical Equipment Limited, a joint venture between the Company and BGP. Prior to joining the Company in 2002, Mr. Morrison was a Director of Accounting providing transaction support for an energy trading company and held a variety of positions at Deloitte & Touche, LLP, a public accounting firm. Mr. Morrison is a Certified Public Accountant. He is a graduate of Texas A&M University with a Bachelor of Business Administration.

        Mr. Williamson is our Executive Vice President and Chief Operating Officer, E&P Technology & Services. Mr. Williamson originally joined ION as Vice President of our GeoVentures business unit in September 2006, became a Senior Vice President in January 2007, and became Executive Vice President and Chief Operating Officer, GeoVentures Division, in November 2012 and Executive Vice President and Chief Operating Officer of E&P Technology & Services in February of 2015. Between 1987 and 2006, Mr. Williamson was employed by Western Geophysical, which in 2000 became part of WesternGeco, a seismic solutions and technology subsidiary of Schlumberger, Ltd., a global oilfield and information services company. While at WesternGeco, Mr. Williamson served as Vice President, Marketing from 2001 to 2003, Vice President, Russia and Caspian Region, from 2003 to 2005 and Vice President, Marketing, Sales & Commercialization of WesternGeco's electromagnetic services and technology division from 2005 to 2006. Mr. Williamson holds a Bachelor of Science degree in geophysics from Cardiff University in Wales.

        Mr. Powers joined ION in 2013 as Senior Legal Counsel and held that position until February 2016 when he was promoted to Deputy General Counsel. In September 2017, he was promoted to General Counsel and Corporate Secretary, and was further promoted to Executive Vice President in October 2017. Prior to joining ION, Mr. Powers held a variety of positions in the Houston offices of Mayer Brown LLP (beginning in 2005 and ending in 2012) and Sidley Austin LLP (beginning in 2012 and ending in 2013). Mr. Powers holds a Juris Doctor from the University of Chicago Law School and a Bachelor's degree in Economics, summa cum laude, from the University of Colorado-Denver. He is licensed to practice in Texas.

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        Mr. Lambert is currently our Executive Vice President, Operations Optimization. Mr. Lambert has over 30 years of multi-disciplinary engineering and management experience leading the development and commercialization of multi-million dollar offshore products and systems. He is a significant contributor to ION's intellectual property portfolio, creating innovative solutions that meet the technical and business challenges of our clients.

        Mr. Lambert began his career at Thompson Equipment Company, where he held various engineering and management roles spanning a decade that culminated in an EVP position responsible for engineering, sales, marketing and manufacturing. There he was involved in many automation projects involving early implementations of artificial intelligence. Next he became Engineering Manager for DigiCOURSE, which ION acquired in 1998. He held engineering positions with increasing levels of responsibility between 1998-2014 in ION's marine equipment group, where he oversaw R&D, product design and systems engineering. From 2015-2019, Mr. Lambert served as Senior Vice President and General Manager of ION's Marine Systems group. In 2020, he was promoted to Executive Vice President of our Operations Optimization group, which includes P&L responsibility for our software and equipment businesses. Mr. Lambert is a graduate of the University of New Orleans with a Master's in Engineering and Bachelor's in Electrical Engineering. He is a registered Professional Engineer in both Electrical and Controls Engineering.

        Mr. Schwausch joined ION in 2006 as Assistant Controller and held that position until June 2010 when he became Director of Financial Reporting. In May 2012, he became Controller, Solutions Business Unit, and in May 2013 became Vice President and Corporate Controller. Mr. Schwausch held a variety of positions at Deloitte & Touche, LLP, a public accounting firm, from 2000 until he joined ION. Mr. Schwausch is a Certified Public Accountant and a Certified Management Accountant. He received a Bachelor of Science degree in accounting from Brigham Young University.

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EXECUTIVE COMPENSATION

        Introductory note: The following discussion of executive compensation contains descriptions of various employee benefit plans and employment-related agreements. These descriptions are qualified in their entirety by reference to the full text or detailed descriptions of the plans and agreements, which are filed or incorporated by reference as exhibits to our annual report on Form 10-K for the year ended December 31, 2019. In this discussion, the terms "ION," "we," "our" and "us" refer to ION Geophysical Corporation and its consolidated subsidiaries, except where the context otherwise requires or as otherwise indicated.

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Executive Summary

        General.    Annual compensation of our NEOs comprises three principal elements: base salary; performance-based annual non-equity incentive plan compensation (that is, annual cash bonuses); and long-term equity-based incentive awards (restricted stock, stock options, and cash-settled stock appreciation rights awards ("SARs")). A significant portion of each NEOs' total annual compensation is performance-based, at risk, and dependent upon our Company's achievement of specific, measurable performance goals. Our performance-based pay closely aligns our NEOs' interests with those of our shareholders and promotes the creation of shareholder value, without encouraging excessive risk-taking. In addition, our equity programs, combined with our executive share ownership requirements, are designed to reward long-term stock performance and encourage investment in the Company.

        Annual Bonus Incentive Plan.    No continuing NEO received a bonus payment under our annual cash bonus incentive plan for 2019. Our former CEO, Mr. Hanson (who retired from the Company effective June 1, 2019), and our former CFO, Mr. Bate (who stepped down from his role as Chief Financial Officer effective February 1, 2020) received 100% of their contractual bonus targets for 2019, but these payments were made in connection with negotiated terminations of their employment contracts with the Company. Mr. Hanson received an amount equal to 100% of his annual base salary, prorated to reflect his June 1 departure, and Mr. Bate received an amount equal to 75% of his annual base salary.

        The other NEOs (Messrs. Usher, Williamson, Powers and Schwausch) did not receive cash bonuses for 2019. At the February board meeting, Mr. Usher expressed his strong belief that the bonus plan pool should not be fully funded because, while the Company performed well on several strategic initiatives, the Company fell short of its cash-generation objectives, which are of paramount importance. He also felt that a "leaders eat last" approach to 2019 bonus compensation would help sustain morale and prevent attrition of valuable employees. He recommended an attenuated bonus pool for the Company's employees, and no bonuses for the NEOs, including himself, for 2019. The Compensation Committee concurred in this judgment.

(1)

Effective February 1, 2020, Mr. Bate stepped down as CFO. Mr. Bate will continue to serve as a strategic advisor through June, 2020, to facilitate a seamless transition. Mr. Michael Morrison, who has held a number of positions with the Company (most recently Treasurer and VP, Finance) currently serves as the interim CFO.

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        Subsequent developments in March 2020- namely, the COVID-19 pandemic and the shock to oil prices—prompted Mr. Usher and the Compensation Committee to revise their decision to fund the pool in even a reduced amount, and instead to not fund the 2019 bonus pool.

        Base Salaries.    Mr. Usher received an increase in base pay in connection with his promotion to President and Chief Executive Officer; his annual salary increased from $378,560 to $525,000. No other NEO received an increase in base pay in 2019.

        Long-Term Stock-Based Incentive Compensation.    Mr. Usher received a grant of equity-based compensation in 2019, in connection with his promotion to President and CEO, which is further set forth below. No other NEO received any grant of equity-based compensation.

Corporate Governance

Compensation Committee

        The Compensation Committee of our Board reviews and approves, or recommends to the Board for approval, all salary and other remuneration for our NEOs, and oversees matters relating to our employee compensation and benefit programs. No member of the Compensation Committee is an employee of ION. The Board has determined that each member of the Compensation Committee satisfies the definition of "independent" as established in the NYSE corporate governance listing standards. In determining the independence of each member of the Compensation Committee, the Board considered all factors specifically relevant to determining whether the director has a relationship to our Company that is material to the director's ability to be independent from management in the execution of his duties as a Compensation Committee member, including, but not limited to:

•

the source of compensation of the director (including any consulting, advisory or other compensatory fee paid by us to the director); and



•

whether the director is affiliated with our Company, a subsidiary or affiliate.

        When considering the director's affiliation with us for purposes of independence, the Board considered whether the affiliate relationship places the director under the direct or indirect control of our Company or its senior management, or creates a direct relationship between the director and members of senior management, in each case, of a nature that would impair the director's ability to make independent judgments about our executive compensation.

        The Compensation Committee operates pursuant to a written charter that sets forth its functions and responsibilities. A copy of the charter can be viewed on our website at http://ir.iongeo.com/phoenix.zhtml?c=101545&p=irol-govhighlights. For a description of the responsibilities of the Compensation Committee, see "Item 1.—Election of Directors—Committees of the Board—Compensation Committee" above.

        During 2019, the Compensation Committee met eight times and took action by unanimous written consent three times.

Compensation Consultants

        The Compensation Committee has the authority and necessary funding to engage and pay compensation consultants, independent legal counsel and other advisors in its discretion. Prior to retaining any such compensation consultant or other advisor, the Compensation Committee evaluates the independence of such advisor and evaluates whether such advisor has a conflict of interest.

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Role of Management in Establishing and Awarding Compensation

        On an annual basis, our Chief Executive Officer, with input from our Human Resources department, recommends to the Compensation Committee any proposed increases in base salary, bonus payments and equity awards for our NEOs (other than himself; no NEO is involved in determining his own salary increase, bonus payment or equity award). When making officer compensation recommendations, our Chief Executive Officer takes into consideration compensation benchmarks, which include data relating to the compensation of employees at comparable companies, the level of inherent importance and risk associated with the position and function, and the executive's job performance over the previous year. See "—Objectives of Our Executive Compensation Programs—Benchmarking" and "—Elements of Compensation—Base Salary" below.

        Our Chief Executive Officer, with assistance and input from senior management, also formulates and proposes to the Compensation Committee an employee bonus incentive plan for the ensuing year. For a description of our process for formulating the employee bonus incentive plan and the factors that we consider, see "—Elements of Compensation—Bonus Incentive Plan" below.

        The Compensation Committee reviews and approves all compensation and awards to NEOs and all bonus incentive plans. With respect to equity compensation awarded to employees other than NEOs, the Compensation Committee reviews and approves all grants of restricted stock and stock options above 5,000 shares, generally based upon the recommendation of the Chief Executive Officer, and has delegated option and restricted stock granting authority to the Chief Executive Officer as permitted under Delaware law for grants to non-NEOs of up to 5,000 shares.

        Of its own initiative, at least once a year, the Compensation Committee reviews the performance and compensation of our Chief Executive Officer and, following discussions with the Chief Executive Officer and other members of the Board, establishes his compensation level. Where it deems appropriate, the Compensation Committee will also consider market compensation information from independent sources. See "—Objectives of Our Executive Compensation Programs—Benchmarking" below.

        Certain members of our senior management attend most meetings of the Compensation Committee, including our Chief Executive Officer and our Executive Vice President, General Counsel & Corporate Secretary. However, no member of management votes on items being considered by the Compensation Committee, and members of management are recused from meetings and portions of meetings where their personal compensation is discussed. The Compensation Committee and Board do solicit the views of our Chief Executive Officer on compensation matters, particularly as they relate to the compensation of the other NEOs and the other members of senior management reporting to the Chief Executive Officer. The Compensation Committee often conducts an executive session during meetings, during which members of management are not present.

Objectives of Our Executive Compensation Programs

General Compensation Philosophy and Policy

        Through our compensation programs, we seek to:

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attract and retain qualified and productive executive officers and key employees by providing total compensation competitive with that of other executives and key employees employed by companies of similar size, complexity and industrial sector;



•

encourage our executives and key employees to drive the Company's financial and operational performance;



•

structure compensation to create meaningful links between corporate performance, individual performance and financial rewards;

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align the interests of our executives with those of our shareholders by providing a significant portion of total pay in the form of equity-based incentives;



•

encourage long-term commitment to our Company; and



•

limit corporate perquisites to seek to avoid perceptions both within and outside of our Company of "soft" compensation.

        Our governing principles in establishing executive compensation have been:

        Long-Term and At-Risk Focus.    Compensation opportunities should be composed of long-term, at-risk pay to focus our management on the long-term interests of our Company.

        Equity Orientation.    Equity-based plans should comprise a major part of the at-risk portion of total compensation to instill ownership thinking and to link compensation to corporate performance and shareholder interests.

        Competitive.    We emphasize total compensation opportunities consistent on average with our peer group of companies. Competitiveness of annual base pay and annual bonuses is more independent of stock performance than equity-based compensation. However, overall competitiveness of total compensation is generally contingent on long-term, equity-based compensation programs. Base salary, annual bonuses and employee benefits should be close to competitive levels when compared to similarly situated companies.

        Focus on Total Compensation.    In making decisions with respect to any element of an NEO's compensation, the Compensation Committee considers the total compensation that may be awarded to the NEO, including salary, annual cash bonus and long-term equity-based incentive compensation. The Compensation Committee analyzes all of these elements of compensation (including the compensation mix) as well as the aggregate total amount of actual and projected compensation. In its most recent review of total compensation, the Compensation Committee determined that annual compensation amounts for our Chief Executive Officer and our other NEOs remained generally consistent with the Compensation Committee's expectations. However, the Compensation Committee reserves the right to make changes that it believes are warranted.

        Internal Pay Equity.    Our core compensation philosophy is to pay our NEOs competitive levels of compensation that best reflect their individual responsibilities and contributions to our Company, while providing incentives to achieve our business and financial objectives. While comparisons to compensation levels at other companies are helpful in assessing the overall competitiveness of our compensation program, we believe that our executive compensation program also must be internally consistent and equitable in order for our Company to achieve our corporate objectives. Over time, there have been variations in the comparative levels of compensation of NEOs and changes in the overall composition of the management team and the overall accountabilities of the individual NEOs; however, we are satisfied that total compensation received by NEOs reflects an appropriate differential for executive compensation.

        These principles apply to compensation policies for all of our NEOs and key employees. We do not follow the principles in a mechanistic fashion; rather, we apply experience and judgment in determining the appropriate mix of compensation for each individual. This judgment also involves periodic review of discernible measures to determine the progress each individual is making toward agreed-upon goals and objectives.

Benchmarking

        When making compensation decisions, we also look at the compensation of our Chief Executive Officer and other NEOs relative to the compensation paid to similarly situated executives at companies

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that we consider to be our industry and market peers—a practice often referred to as "benchmarking." We believe, however, that a benchmark should be just that—a point of reference for measurement—but not the determinative factor for our executives' compensation. The purpose of the comparison is not to supplant the analyses of internal pay equity, shareholder interests and the individual performance of the NEOs that we consider when making compensation decisions. Because the comparative compensation information is just one of the several analytic tools that are used in setting executive compensation, the Compensation Committee has discretion in determining the nature and extent of its use. Further, given the limitations associated with comparative pay information for setting individual executive compensation, including the difficulty of assessing and comparing wealth accumulation through equity gains, the Compensation Committee may elect not to use the comparative compensation information at all in the course of making compensation decisions.

        Most years the Compensation Committee, with assistance from the Human Resources Department, reviews data from market surveys and other sources to assess our competitive position with respect to employee compensation. The Chief Executive Officer normally apprises the Compensation Committee of any proposed increase in any NEO's annual base salary in the autumn board meeting and, at that same meeting, the Compensation Committee considers whether to adjust the Chief Executive Officer's annual base salary. In 2019, the Compensation Committee elected to defer consideration of any base salary adjustments until 2020 (with the exception of Mr. Usher, whose compensation was adjusted in connection with his promotion to President and Chief Executive Officer).

        Consideration of equity grants are normally undertaken at least annually, often in the February meeting. Mr. Usher was the only NEO to receive equity awards in 2019, which were made in connection with his promotion.

        In 2019, the Committee utilized data primarily from Willis Towers Watson The Committee also engaged the services of Aon Hewitt, a leading compensation consultant, to analyze Mr. Usher's compensation in connection with his promotion.

        Reviewing compensation data provides a starting point for our compensation analysis. We believe that the data contain relevant compensation information from companies that are representative of the sectors in which we operate, have relative size as measured by market capitalization and experience relative complexity in the business and the executives' roles and responsibilities. We look extensively at a number of other factors beyond the data, including our estimates of the compensation at our most comparable competitors and other companies that were closest to our Company in size, profitability and complexity. We also consider an individual's current performance, the level of responsibility, risk of attrition, market conditions, and the employee's skills and experience, collectively, in making compensation decisions.

        In the case of our Chief Executive Officer and some of our other NEOs, we also consider our Company's performance during the person's tenure and the anticipated level of compensation that would be required to replace the person with someone of comparable experience and skill.

        In addition to our periodic review of compensation, we also regularly monitor market conditions and will adjust compensation levels from time to time as necessary to remain competitive and retain our most valuable employees.

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Elements of Compensation

        The primary components of our executive compensation program are as follows:

        Below is a summary of each component:

Base Salary

        General.    The general purpose of base salary for our NEOs is to create a base of cash compensation that is consistent on average with the range of base salaries for executives in similar positions and with similar responsibilities at comparable companies. In addition to salary norms for persons in comparable positions at comparable companies, base salary amounts may also reflect the nature and scope of responsibility of the position, the expertise and experience of the individual employee and the competitiveness of the market for the employee's services. Base salaries of executives other than our Chief Executive Officer may also reflect our Chief Executive Officer's evaluation of the individual NEO's job performance. As a result, the base salary level for each individual may be above or below the target market value for the position. The Compensation Committee also recognizes that the Chief Executive Officer's compensation should reflect the greater policy-and decision-making authority that he holds and the higher level of responsibility he has with respect to our strategic direction and our financial and operating results. As of December 31, 2019, our Chief Executive Officer's annual base salary was 36% higher than the annual base salary for the next highest-paid NEO and 70% higher than the average annual base salary for all of our other NEOs. The Compensation Committee does not intend for base salaries to be the vehicle for long-term capital and value accumulation for our executives.

        2019 Actions.    In typical years, base salaries are reviewed at least annually and may also be adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities and changes in responsibilities, performance and contribution to ION, experience, impact on total compensation, relationship of compensation to other ION officers and employees, and changes in external market levels. No NEO received an increase in base salary in 2019, other than Mr. Usher, in connection with his promotion. The chart below depicts the base salaries of our NEOs, together with information on their base salaries vis-à-vis the median salaries of comparable NEOs based on survey data.

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Annual Bonus Incentive Plan(1)

        For several consecutive years, the Compensation Committee has approved an annual employee bonus incentive plan. Our annual bonus incentive plan is intended to promote the achievement, each year, of the Company's performance objectives as set forth in the annual operating plan. These objectives are defined early in the year, along with a target bonus pool, and these are communicated to eligible employees. The Compensation Committee believes that placing a portion of our employees'

(1)

The Compensation Committee has discretion in circumstances it determines are appropriate to authorize discretionary bonus awards apart from awards that would otherwise be payable under the terms of the annual bonus incentive plan. (An example would be signing bonuses for new hires.)

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cash compensation at-risk, and tying it to the Company's achieving important objectives under our operating plan, incentivizes our employees in a way that aligns their interests with the interests of our shareholders.

        Early in the year, management prepares an operating budget for that year and individual operating budgets for each operating unit. The budgets take into consideration our views on market opportunities, customer and sale opportunities, technology enhancements for new products, product manufacturing and delivery schedules and other operating factors known or foreseeable at the time. The Board analyzes the proposed budgets with management extensively and, after analysis and consideration, the Board approves a consolidated operating plan for the year. During this same time, our Chief Executive Officer works with various members of senior management to formulate our bonus incentive plan for the year, consistent with the operating plan approved by the Board. The annual bonus incentive plan is subject to approval by the Compensation Committee. Historically, bonuses attributable to a given year have been paid in February of the next year. Mr. Bate received his contractually mandated target bonus in March of 2020, and Mr. Hanson received his in August of 2019, each in accordance with his respective severance agreement. No other NEO's received bonuses for 2019.

        The Company's bonus program thus includes a three-step process:

1.

At the first quarterly meeting of the Board of Directors in early February, the Compensation Committee approves a target total bonus pool (the "Target Pool") for that calendar year. The Target Pool is based in part on approximate percentages of base salary and our expected headcount. The Target Pool consists of two variable components: the Company's execution of defined long-term strategic initiatives ("Key Initiatives"), and the Company's reaching a defined cash-generation target ("Cash Generation Target"). The Key Initiatives and Cash Generation Target are derived from our annual operating plan, which is approved by the Board at that same quarterly meeting. The Target Pool, Key Initiatives, and Cash Generation Target are forward looking; that is, they are based on the Compensation Committee's goals and expectations for the Company's performance that year.



2.

The determination of the actual amount of the bonus pool (the "Actual Pool") is largely backward looking. At the February meeting of the Board of Directors, in addition to approving the Target Pool for that calendar year, the Compensation Committee determines what the Actual Pool for the prior year should be. The Compensation Committee does this with reference to the Target Pool for the prior year, and the Company's success in achieving the Key Initiatives and the Cash Generation Target for the prior year. However, the Compensation Committee has the authority to fund the Actual Pool in an amount over the Target Pool, an amount under the Target Pool, or not at all. In determining whether to deviate from the Target Pool, the Compensation Committee may consider events that unfolded during the prior year that impacted our performance as a whole that year (such as extraordinary cash generating events (e.g. sales of assets, equity raises), unanticipated governmental actions or economic conditions, indicators of growth or recession in our business segments, and other factors).



3.

Once the Actual Pool is funded, individual bonuses are determined by business unit managers by evaluating each eligible employee's individual and team performance during the prior year (except that no manager participates in determining his or her own bonus). The computation of individual awards for NEOs is approved by the Compensation Committee in accordance with the compensation philosophy and policy described above.

        Our bonus incentive plans are designed for payouts that generally track the financial performance of our Company and, to a lesser extent, achievement of the Company's strategic objectives. The general intent of the plans is to reward key employees based on the Company's and the employee's

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performance, in each case measured against internal targets and plans. In most years when our Company's financial performance is strong, cash bonus payments under the annual incentive plan are generally higher. Likewise, when our financial performance is low as compared to our internal targets and plans, cash bonus payments are generally lower. There are occasionally exceptions to this general trend.

        The Actual Pool for 2019 bonuses would have been $7.4 million if the Compensation Committee elected to fund it based on the Target Pool in the 2019 bonus plan. As further set forth below, this year the Compensation Committee elected not to fund the 2020 bonus pool.

        2019 Bonus Incentive Plan.    The purpose of the 2019 bonus incentive plan was to provide an incentive for our participating employees to achieve their highest level of individual and business unit performance, to align the employees to accomplish and share in the achievement of our Company's 2019 strategic and financial goals, and to prevent attrition of our high-performing employees to competitors. Designated employees, including our NEOs, were eligible to participate in our 2019 bonus incentive plan.

        The Target Pool under the 2019 plan was set at $9.3 million in February 2019. Approximately 35% of this amount ($3.3 million) was tied to the Key Initiatives for 2019, and 65% ($6 million) was tied to the Cash Generation Target for 2019.

        In February 2020, the Compensation Committee reviewed the Company's actual performance against each of the plan performance goals established at the beginning of 2019.

        While the Company did not meet its Cash Generation Target, it did achieve cash generation that would have funded a portion of the 65% of the pool determined by that metric. The Compensation Committee found that the Company's achievement of the Key Initiatives was approximately 80%. Based on a strict application of the 2019 bonus incentive plan metrics, the Actual Pool would have been funded at $7.5 million.

        However, at the February board meeting, the Compensation Committee and Mr. Usher believed that the Company's failure to generate free cash flow made it appropriate to attenuate the Actual Pool. Mr. Usher suggested, and the Compensation Committee agreed, that the recent reduction in force and the greater accountability of the NEOs for the Company's overall performance in 2019 made it appropriate to not grant any discretionary annual bonuses to NEOs. This would also allow a smaller, $2 million bonus pool to go further in rewarding non-executives in the Company, which would benefit morale and help prevent attrition, which, in turn, would drive shareholder value in 2020.

        However, in light of the market conditions caused by the COVID-19 pandemic and decline in oil prices in March 2020, the Compensation Committee and Mr. Usher determined that it was not appropriate to award any cash bonuses for 2019.

        The total compensation paid to each NEO is set forth in the graph titled "Summary Compensation Table".

        The Compensation Committee reviews the annual bonus incentive plan each year to ensure that the key elements of the plan continue to meet the objectives described above.

Long-Term Stock-Based Incentive Compensation

        We structure our long-term incentive compensation to appropriately balance between rewarding performance and encouraging employee retention and stock ownership. There is no pre-established policy or target for the allocation between either cash or non-cash, or short-term and long-term, incentive compensation; however, at executive management levels, the Compensation Committee strives for compensation to focus more on longer-term incentives. In conjunction with the Board, executive management is responsible for setting and achieving long-term strategic goals. In support of this

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responsibility, compensation for executive management, and most particularly our Chief Executive Officer, tends to be weighted towards rewarding long-term value creation for shareholders.

        The below table illustrates the mix of total compensation received by Mr. Usher, our CEO, and our other current NEOs during 2019:

        Our long-term incentive plans have provided the principal method for our NEOs to acquire equity or equity-linked interests in our Company.

        Restricted Stock and Restricted Stock Units.    We use restricted stock and restricted stock units to focus executives on our long-term performance and to help align their compensation more directly with shareholder value. Until 2018, vesting of restricted stock and restricted stock units typically occurred ratably over three years, based solely on continued employment of the recipient-employee, and the terms of our LTIP (both prior to and after amendments to it in 2018) require restricted stock and restricted stock units granted under that plan to follow that vesting schedule unless the Compensation Committee approves a different schedule when approving the grant.

        Starting in 2018, the Compensation Committee began to require that most grants of restricted stock contain not only our traditional time-based vesting restrictions, but also contain very aggressive performance-based vesting restrictions: one-third of any such award will vest only if ION's common stock attains, and maintains, a share price of $17.50 on or before the third anniversary of the grant date; two-thirds of any such award will vest only if ION's common stock attains, and maintains, a share price of $22.50 on or before the third anniversary of the grant date; and full vesting as to any such award will occur only if ION's common stock attains, and maintains, a share price of $27.50 on or before the third anniversary of the grant date. This performance-based vesting restriction can be satisfied only if the volume weighted average price per share, at the close of 20 consecutive trading days, meets or exceeds the target price, and are in addition to the time-based vesting restrictions. In addition to facilitating an ownership mentality among our employees, this recent approach to restricted shares allows a more economical use of the shares in our LTIP, as, if the vesting restrictions are

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satisfied, each share of restricted stock is intrinsically more valuable to an employee than each single stock option, because, in the case of a stock option, even if the stock appreciates, such that the option is not worthless, the employee only receives the benefit of the spread between the exercise price of the option and the value of the stock.

        For the 2019 grants to Mr. Usher, made in connection with his promotion to President and Chief Executive Officer, the Compensation Committee had to balance their preference for performance-based vesting restrictions with establishing a total compensation in line with the responsibilities of the chief executive position. Taking into account the recommendations of compensation consulting firm AON Hewitt, the Committee determined that a 50/50 ratio of time-restricted-only to fully-at-risk shares was the most appropriate, given prevailing market compensation, industry competition for executive talent, the Company's stock price and performance hurdles used, and the available pool of equity in the Plan.

        Changes to Restricted Stock Granting Agreement.    In connection with the awards to Mr. Usher, the Compensation Committee also approved new forms for award agreements that grant restricted stock, to ensure, among other things, that any early vesting due to a change in control of the Company shall be subject to the grantee's actual or constructive termination by the Company's successor (that is, the vesting is "double trigger"), and that any early vesting in the event of the grantee's death or disability will only serve to remove the time (service) restriction of the grant, but not the vesting restriction based on the Company's stock price.

        Stock Options.    Under our equity plans, stock options may be granted having exercise prices equal to the closing price of our stock on the date before the date of grant. In any event, all awards of stock options are made at or above the market price at the time of the award. The Compensation Committee will not grant stock options having exercise prices below the market price of our stock on the date of grant, and will not reduce the exercise price of stock options (except in connection with adjustments to reflect recapitalizations, stock or extraordinary dividends, stock splits, mergers, spin-offs and similar events, as required by the relevant plan) without the consent of our shareholders. Our stock options generally vest ratably over four years, based on continued employment, and the terms of our plan require stock options granted under that plan to follow that vesting schedule unless the Compensation Committee approves a different schedule when approving the grant. Prior to the exercise of an option, the holder has no rights as a shareholder with respect to the shares subject to such option, including voting rights and the right to receive dividends or dividend equivalents. New option grants normally have a term of ten years.

        The purpose of stock options is to provide equity compensation with value that has been traditionally treated as entirely at-risk, based on the increase in our stock price and the creation of shareholder value. (However, beginning in 2018, the Compensation Committee has favored placing restricted stock grants entirely at risk by means of performance-based vesting restrictions.) Stock options also allow our NEOs and key employees to have equity ownership and to share in the appreciation of the value of our stock, thereby aligning their compensation directly with increases in shareholder value. Stock options only have value to their holder if the stock price appreciates in value from the date options are granted.

        Stock option award decisions are generally based on past business and individual performance. In determining the number of options to be awarded, we also consider the grant recipient's qualitative and quantitative performance, the size of stock option and other stock based awards in the past, and expectations of the grant recipient's future performance. No NEOs received option awards in 2019.

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        Stock Appreciation Rights.    SARs grants approved by the Compensation Committee are typically 100% cash-settled. The vesting of the SARs are achieved through both a market condition and a service condition (that is, continued employment plus appreciation in the Company's stock price). As with our stock options, exercise prices for our SARs awards are equal to the closing price of our stock on the date before the date of grant. New SARs grants normally have a term of ten years. No NEOs received SARs grants in 2019.

        Approval and Granting Process.    The Compensation Committee reviews and approves all stock appreciation rights, stock option, restricted stock and restricted stock unit awards made to NEOs, regardless of amount. With respect to equity compensation awarded to employees other than NEOs, the Compensation Committee reviews and approves all grants of stock appreciation rights, restricted stock, stock options and restricted stock units above 5,000 shares, generally based upon the recommendation of our Chief Executive Officer. The Compensation Committee has granted to our Chief Executive Officer the authority to approve grants to any employee other than an NEO of (i) up to 5,000 shares of restricted stock and (ii) stock options for not more than 5,000 shares. Our Chief Executive Officer is also required to provide a report to the Compensation Committee of all awards of options and restricted stock made by him under this authority. We believe that this policy is beneficial because it enables smaller grants to be made more efficiently. This flexibility is particularly important with respect to attracting and hiring new employees, given the increasingly competitive market for talented and experienced technical and other personnel in locales in which our employees work.

        The Board prefers, and the Company strives, for all grants of stock appreciation rights, restricted stock, restricted stock units and stock options to be made on one of four designated quarterly grant dates: March 1, June 1, September 1 or December 1. We favor these dates because they are not close to any dates on which we normally make earnings announcements or other announcements of material events. For an award to a current employee, the grant date for the award is generally the first designated quarterly grant date that occurs after approval of the award. For an award to a newly hired employee who is not yet employed by us at the time the award is approved, the grant date for the award is generally the first designated quarterly grant date that occurs after the new employee commences work. We believe that this process of fixed quarterly grant dates is beneficial because it serves to remove any perception that the grant date for an award could be capable of manipulation or change for the benefit of the recipient. In addition, having all grants occur on a maximum of four days during the year simplifies certain fair value accounting calculations related to the grants, thereby reducing the administrative burden associated with tracking and calculating the fair values, vesting schedules and tax-related events upon vesting of restricted stock and also lessening the opportunity for inadvertent calculation errors.

Clawback Policy

        We have a Compensation Recoupment Policy (commonly referred to as a "clawback" policy), which provides that, in the event of a restatement of our financial results due to material noncompliance with applicable financial reporting requirements, the Board will, if it determines appropriate and subject to applicable laws and the terms and conditions of our applicable stock plans, programs or arrangements, seek reimbursement of the incremental portion of performance-based compensation, including performance-based bonuses and long-term equity-based incentive awards, paid to current or former NEOs within three years of the restatement date, in excess of the compensation that would have been paid had the compensation amount been based on the restated financial results.

Personal Benefits, Perquisites and Employee Benefits

        Our Board and executives have concluded that we will not offer most perquisites traditionally offered to executives of similarly sized companies. As a result, perquisites and any other similar personal benefits offered to our NEOs are substantially the same as those offered to our general

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salaried employee population. These offered benefits include medical and dental insurance, life insurance, disability insurance, a vision plan, charitable gift matching (up to designated limits), a 401(k) plan with a company match of certain levels of contributions, flexible spending accounts for healthcare and dependent care and other customary employee benefits. Business-related relocation benefits may be reimbursed on a case-by-case basis. We intend to continue applying our general policy of not providing specific personal benefits and perquisites to our executives; however, we may, in our discretion, revise or add to any executive's personal benefits and perquisites if we deem it advisable.

Risk Management Considerations

        The Compensation Committee believes that our Company's bonus and equity programs create incentives for employees to create long-term shareholder value. The Compensation Committee has considered the concept of risk as it relates to our compensation programs and has concluded that our compensation programs do not encourage excessive or inappropriate risk-taking. Several elements of the compensation programs are designed to promote the creation of long-term value and thereby discourage behavior that leads to excessive risk:

•

The compensation programs consist of both fixed and variable compensation. The fixed (or salary) portion is designed to provide a steady income regardless of the Company's stock price performance so that executives do not focus exclusively on stock price performance to the detriment of other important business metrics. The variable (cash bonus and equity) portions of compensation are designed to reward both short- and long-term corporate performance. The Compensation Committee believes that the variable elements of compensation are a sufficient percentage of overall compensation to motivate executives to produce positive short- and long-term corporate results, while the fixed element is also sufficiently high such that the executives are not encouraged to take unnecessary or excessive risks in doing so.



•

The financial metrics used to determine the amount of an executive's bonus are measures the Compensation Committee believes contribute to long-term shareholder value and ensure the continued viability of the Company. Moreover, the Compensation Committee attempts to set ranges for these measures that encourage success without encouraging excessive risk taking to achieve short-term results. In addition, the overall maximum bonus for each participating NEO other than our Chief Executive Officer is not expected to exceed 150% of the executive's base salary under the bonus plan, and the overall bonus for our Chief Executive Officer under his employment agreement is not expected to exceed 200% of his base salary under the bonus plan, in each case no matter how much the Company's financial performance exceeds the ranges established at the beginning of the year.



•

We have strict internal controls over the measurement and calculation of the financial metrics that determine the amount of an executive's bonus, designed to keep it from being susceptible to manipulation by an employee, including our executives.



•

Stock options become exercisable over a four-year period, and SARs become exercisable over a three-year period, generally conditioned on continuing employment with the Company, and remain exercisable for up to ten years from the date of grant, encouraging executives to look to long-term appreciation in equity values.



•

Restricted stock and SARs vest over a three-year period, generally conditioned on continuing employment with the Company, which, again, encourages executives to look to long-term appreciation in equity values. Additionally, as noted above, beginning in 2018, the majority of stock grants and SARs grants also require significant appreciation in our stock price for vesting to occur.

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•

Senior executives, including our NEOs, are required to acquire over time and hold shares of our Company's stock having a value of between one and four times the executive's annual base salary, depending on the level of the executive. The Compensation Committee believes that the stock ownership guidelines provide a considerable incentive for management to consider the Company's long-term interests, since a portion of their personal investment portfolio consists of our Common Stock.



•

In addition, we do not permit any of our NEOs or directors to enter into any derivative or hedging transactions involving our stock, including short sales, market options, equity swaps and similar instruments, thereby preventing executives from insulating themselves from the effects of poor company stock price performance. Please refer to "—Stock Ownership Requirements; Hedging Policy" below.



•

We have a compensation recoupment (clawback) policy that provides, in the event of a restatement of our financial results due to material noncompliance with financial reporting requirements, for reimbursement of the incremental portion of performance-based compensation, including performance-based cash bonuses and long-term equity-based incentive awards, paid to current or former NEOs within three years of the restatement date, in excess of the compensation that would have been paid had such compensation amount been based on the restated financial results. Please refer to "—Clawback Policy" above.

        Consideration of Say-On-Pay Result.    At our 2019 Annual Meeting of Shareholders held on May 15, 2019, our shareholders approved all of our director nominees and proposals, including a non-binding advisory vote to approve the compensation of our NEOs ("say-on-pay"). In the advisory executive compensation vote, over 96% of the votes cast on the proposal voted in favor of our executive compensation. Our general goal is to continue to act consistently with the established practices that were approved by our shareholders. We believe that we have accomplished that goal. At our 2017 Annual Meeting, our shareholders also voted on a non-binding advisory vote on the frequency of advisory votes on executive compensation ("say-on-frequency") and approved "every year". The Board intends to hold advisory votes on executive compensation within the time frame approved by the shareholders. When and if our Board determines that it is in the best interest of our Company to hold our say-on-pay vote with a different frequency, we will propose such a change to our shareholders at the next annual meeting of shareholders to be held following the Board's determination. Presently, under SEC rules, we are not required to hold another say-on-frequency vote again until our 2023 Annual Meeting of Shareholders.

Indemnification of Directors and Executive Officers

        Our Bylaws provide certain rights of indemnification to our directors and employees (including our NEOs) in connection with any legal action brought against them by reason of the fact that they are or were a director, officer, employee or agent of our Company, to the full extent permitted by law. Our Bylaws also provide, however, that no such obligation to indemnify exists as to proceedings initiated by an employee or director against us or our directors unless (a) it is a proceeding (or part thereof) initiated to enforce a right to indemnification or (b) was authorized or consented to by our Board.

        As discussed below, we have also entered into employment agreements with certain of our NEOs that provide for us to indemnify the executive to the fullest extent permitted by our Restated Certificate of Incorporation, as amended, and our Bylaws. The agreements also provide that we will provide the executive with coverage under our directors' and officers' liability insurance policies to the same extent as provided to our other executives.

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Stock Ownership Requirements; Hedging Policy

        We believe that broad-based stock ownership by our employees (including our NEOs) enhances our ability to deliver superior shareholder returns by increasing the alignment between the interests of our employees and our shareholders. Accordingly, the Board has adopted stock ownership guidelines applicable to each of our senior executives, including our NEOs. The policy requires each executive to retain direct ownership of at least 50% of all shares of our Company's stock received upon exercise of stock options and vesting of awards of restricted stock or restricted stock units until the executive owns shares having an aggregate value (setting aside risk of forfeiture) equal to the following multiples of the executive's annual base salary:

President and Chief Executive Officer—4x

Executive Vice President—2x

Senior Vice President—1x

        The Compensation Committee and our Chief Executive Officer may, in their discretion, grant temporary exemptions from the guidelines to prevent severe hardships to senior executives. As of the date of this Proxy Statement, all of our NEOs were in compliance with the stock ownership requirements. In addition, we do not permit any of our NEOs or directors to enter into any derivative or hedging transactions with respect to our stock, including short sales, market options, equity swaps and similar instruments.

Impact of Regulatory Requirements and Accounting Principles on Compensation

        Code Section 162(m) limits the Company's ability to deduct compensation paid in any given year to our "covered employees" (as defined by Section 162(m), generally, our current and former named executive officers) in excess of $1.0 million. Prior to the enactment of legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA"), Section 162(m) provided an exception from this deduction limit for certain forms of "performance-based compensation," which included the gain recognized by covered employees upon the exercise of compensatory stock options and on the vesting of performance share awards. The TCJA repealed the performance-based compensation exemption under Section 162(m), effective for taxable years beginning after December 31, 2017, subject to certain transition relief. This repeal means that compensation paid to our covered employees in excess of the $1.0 million compensation limitation under Code Section 162(m) will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017, commonly referred to as grandfathered amounts.

        In the past, our Compensation Committee generally sought to structure performance-based compensation for our covered employees in a manner that complies with Section 162(m) in order to provide for the deductibility of such compensation to the extent possible. Our Compensation Committee generally will continue to emphasize performance-based compensation, even though it may no longer be deductible. The Compensation Committee has authorized and expects in the future to authorize compensation in excess of $1.0 million to covered employees, which will not be deductible under Section 162(m), when it believes doing so is in the best interests of the Company and our stockholders.

        Our Compensation Committee will endeavor to maintain the deductibility of grandfathered amounts going forward, except where it determines in its business judgment that it is in our best interest to provide for compensation that may not be fully deductible. Because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the guidance issued thereunder, including the uncertain scope of the transition relief for grandfathered amounts, no assurance can be given that compensation intended to satisfy the requirements for exception from the Section 162(m) deduction limit in fact will satisfy the exception.

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        Likewise, the impact of Section 409A of the Internal Revenue Code is taken into account, and our executive compensation plans and programs are, in general, designed to comply with the requirements of that section so as to avoid possible adverse tax consequences that may result from non-compliance.

        For accounting purposes, we apply the guidance in ASC Topic 718 to record compensation expense for our equity-based compensation grants. ASC Topic 718 is used to develop the assumptions necessary and the model appropriate to value the awards as well as the timing of the expense recognition over the requisite service period, generally the vesting period, of the award.

        Executive officers will generally recognize ordinary taxable income from stock option awards when a vested option is exercised. We generally receive a corresponding tax deduction for compensation expense in the year of exercise. The amount included in an NEO's wages and the amount we may deduct is equal to the Common Stock price when the stock options are exercised less the exercise price, multiplied by the number of shares under the stock options exercised. We do not pay or reimburse any NEO for any taxes due upon exercise of a stock option. We have not historically issued any tax-qualified incentive stock options under Section 422 of the Internal Revenue Code.

        Executives will generally recognize taxable ordinary income with respect to their shares of restricted stock at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant). Restricted stock unit awards are generally subject to ordinary income tax at the time of payment or issuance of unrestricted shares of stock. We are generally entitled to a corresponding federal income tax deduction at the same time the executive recognizes ordinary income.

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Discussion of Summary Compensation Table

        Stock Awards Column.    All of the amounts in the "Stock Awards" column reflect the grant-date fair value of awards of restricted stock made during the applicable fiscal year (excluding any impact of assumed forfeiture rates) under our LTIP. While unvested, a holder of restricted stock is entitled to the same voting rights as all other holders of Common Stock. In each case, unless stated otherwise below, the awards of shares of restricted stock vest in one-third increments each year, over a three-year period. The values contained in the Summary Compensation Table under the Stock Awards column are based on the grant date fair value of all stock awards (excluding any impact of assumed forfeiture

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rates). The grants and awards listed immediately after this paragraph are grants that were made in 2017 and 2018.

•

On March 1, 2018, Mr. Usher received an award of 6,605 shares of restricted stock.



•

On December 1, 2018, Mr. Usher received an award of 89,430 shares of restricted stock.



•

On March 1, 2018, Mr. Hanson received an award of 7,270 shares of restricted stock.



•

On December 1, 2018, Mr. Hanson received an award of 180,000 shares of restricted stock.



•

On March 1, 2018, Mr. Bate received an award of 9,035 shares of restricted stock.



•

On December 1, 2018, Mr. Bate received an award of 89,430 shares of restricted stock.



•

On March 1, 2018, Mr. Williamson received an award of 8,835 shares of restricted stock.



•

On December 1, 2018, Mr. Williamson received an award of 89,430 shares of restricted stock.



•

On March 1, 2017, Mr. Powers received an award of 12,000 shares of restricted stock.



•

On March 1, 2018, Mr. Powers received an award of 242 shares of restricted stock.



•

On December 1, 2018, Mr. Powers received an award of 38,443 shares of restricted stock.



•

On March 1, 2018, Mr. Schwausch received an award of 242 shares of restricted stock.



•

On December 1, 2018, Mr. Schwausch received an award of 9,611 shares of restricted stock

        Grants and awards made in 2019 are described in the "—2019 Grants of Plan-Based Awards" table below.

        Option Awards Column.    All of the amounts shown in the "Option Awards" column reflect stock options granted under our 2013 LTIP and stock appreciation rights granted under our 2018 SAR Plan. In each case, unless stated otherwise below, the options vest 1/4 each year over a four-year period and the SARs vest 1/3 per year over a three-year period and also contain a performance-based restriction further described in the footnotes to the next following table. The time-based vesting restrictions are generally contingent on the grantee's continued employment (with certain exceptions that allow earlier vesting, such as in the event of a change of control in the Company's ownership or the death, disability or retirement of the grantee). The values contained in the Summary Compensation Table under the Stock Options column are based on the grant date fair value of all option awards (excluding any impact of assumed forfeiture rates). For a discussion of the valuation assumptions for the awards, see Note 10, Shareholders' Equity and Stock-Based Compensation—Valuation Assumptions, in our Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. All of the exercise prices for the options equal or exceed the fair market value per share of ION Common Stock on the date of grant. In addition to the grants and awards in 2019 described in the "2019 Grants of Plan-Based Awards" table below:

•

On December 1, 2018, Mr. Usher was granted 95,435 cash-settled SARs having an exercise price of $8.85 per share.



•

On December 1, 2018, Mr. Hanson was granted 192,000 cash-settled SARs having an exercise price of $8.85 per share.



•

On December 1, 2018, Mr. Bate was granted 95,435 cash-settled SARs having an exercise price of $8.85 per share.



•

On December 1, 2018, Mr. Williamson was granted 95,435 cash-settled SARs having an exercise price of $8.85 per share.

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•

On March 1, 2017, Mr. Powers received an award of options to purchase 36,000 shares of our Common Stock for an exercise price of $13.15 per share.



•

On December 1, 2018, Mr. Powers was granted 40,995 cash-settled SARs having an exercise price of $8.85 per share.



•

On December 1, 2018, Mr. Schwausch was granted 10,249 cash-settled SARs having an exercise price of $8.85 per share

Other Columns.

        Payments of non-equity incentive plan compensation reported for 2019 were made to Mr. Bate in March 2020, and to Mr. Hanson in August 2019, with regard to the 2019 fiscal year and were paid pursuant to their severance agreements.

        We do not sponsor for our employees (i) any defined benefit or actuarial pension plans (including supplemental plans), (ii) any non-tax-qualified deferred compensation plans or arrangements or (iii) any nonqualified defined contribution plans.

        Our general policy is that our executive officers do not receive any executive "perquisites," or any other similar personal benefits that are different from what our salaried employees are entitled to receive. We provide the named executive officers with certain group life, health, medical and other non-cash benefits generally available to all salaried employees, which are not included in the "All Other Compensation" column in the Summary Compensation Table pursuant to SEC rules.

        The amounts shown in the "All Other Compensation" column for all employees, other than Mr. Hanson, solely consist of employer matching contributions to ION's 401(k) plan. Mr. Hanson includes employer matching contributions to ION's 401(k) plan ($5,538), unused vacation pay ($5,205), and severance payments ($646,157).

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