|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Owner
|
|
Common
Stock(1)
|
|
Rights to
Acquire(2)
|
|
Restricted
Stock(3)
|
|
Percent of
Common
Stock(4)
|
|
BGP Inc., China National Petroleum Corporation(5)
|
|
|
1,585,969
|
|
|
|
|
|
|
|
|
10.6
|
%
|
James M. Lapeyre, Jr.(6)
|
|
|
1,421,991
|
|
|
|
|
|
2,500
|
|
|
9.5
|
%
|
Renaissance Technologies(7)
|
|
|
1,046,590
|
|
|
|
|
|
|
|
|
7.0
|
%
|
Footprints Asset Management & Research, Inc.(8)
|
|
|
1,030,273
|
|
|
|
|
|
|
|
|
6.9
|
%
|
Laitram, L.L.C.(9)
|
|
|
979,816
|
|
|
|
|
|
|
|
|
6.5
|
%
|
Empery Asset Management, LP(10)
|
|
|
832,314
|
|
|
|
|
|
|
|
|
5.5
|
%
|
Christopher T. Usher
|
|
|
62,893
|
|
|
39,163
|
|
|
219,430
|
|
|
2.1
|
%
|
Kenneth G. Williamson
|
|
|
75,211
|
|
|
64,000
|
|
|
89,430
|
|
|
1.5
|
%
|
David H. Barr
|
|
|
25,433
|
|
|
|
|
|
2,500
|
|
|
*
|
|
Michael Y. McGovern
|
|
|
533
|
|
|
|
|
|
1,760
|
|
|
*
|
|
S. James Nelson, Jr.
|
|
|
16,766
|
|
|
|
|
|
2,500
|
|
|
*
|
|
John N. Seitz
|
|
|
18,759
|
|
|
|
|
|
2,500
|
|
|
*
|
|
Tina L. Wininger
|
|
|
533
|
|
|
|
|
|
1,829
|
|
|
*
|
|
HuaSheng Zheng
|
|
|
1,685
|
|
|
|
|
|
2,500
|
|
|
*
|
|
Matthew R. Powers
|
|
|
11,470
|
|
|
24,166
|
|
|
42,443
|
|
|
*
|
|
Scott P. Schwausch
|
|
|
4,091
|
|
|
8,973
|
|
|
8,973
|
|
|
*
|
|
All directors and executive officers as a group (11 Persons)
|
|
|
1,639,365
|
|
|
136,302
|
|
|
377,003
|
|
|
14.2
|
%
|
-
*
-
Less
than 1%
-
(1)
-
Represents
shares for which the named person (a) has sole voting and investment power or (b) has shared voting and investment power. Excluded are
shares that (i) are unvested restricted stock holdings or (ii) may be acquired through stock option exercises.
-
(2)
-
Represents
shares of Common Stock that may be acquired upon the exercise of stock options held by our officers and directors that are currently exercisable or will
be exercisable on or before April 29, 2020.
-
(3)
-
Represents
unvested shares subject to a vesting schedule, forfeiture risk and other restrictions. Although these shares are subject to risk of forfeiture, the holder
has the right to vote the unvested shares unless and until they are forfeited.
-
(4)
-
Assumes
shares subject to outstanding stock options that such person has rights to acquire upon exercise, presently and on or before April 29, 2020, are
outstanding.
-
(5)
-
The
address for BGP Inc., China National Petroleum Corporation is No. 189 Fanyang Middle Road, ZhuoZhou City, HeBei Province 072750 P.R. China.
-
(6)
-
The
shares of Common Stock held by Mr. Lapeyre include 129,402 shares that Mr. Lapeyre holds as a custodian or trustee for the benefit of his children,
and 979,816 shares owned by
28
Table of Contents
Laitram, L.L.C.
(which are set forth in the table under Laitram, L.L.C.), in all of which Mr. Lapeyre disclaims any beneficial interest. Please read note 9 below.
Mr. Lapeyre has sole voting power over only 315,273 of these shares of Common Stock.
-
(7)
-
The
address for Renaissance Technologies Holdings Corporation is 800 Third Avenue, New York, New York 10022.
-
(8)
-
The
address for Footprints Asset Management & Research, Inc. is 11422 Miracle Hills Drive, Suite 208 Omaha, NE 68154.
-
(9)
-
The
address for Laitram, L.L.C. is 220 Laitram Lane, Harahan, Louisiana 70123. Mr. Lapeyre is the President and Manager of Laitram. Please read
note 6 above. Mr. Lapeyre disclaims beneficial ownership of any shares held by Laitram.
-
(10)
-
The
address for Empery Asset Management, LP is 1 Rockefeller Plaza, Suite 1205, New York, New York 10020.
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.
29
Table of Contents
EXECUTIVE OFFICERS
Our executive officers are as follows:
|
|
|
|
|
|
Name
|
|
Age
|
|
Position with ION
|
Christopher T. Usher
|
|
|
59
|
|
President, Chief Executive Officer and Director
|
Michael L. Morrison
|
|
|
49
|
|
Executive Vice President and Chief Financial Officer (Interim)
|
Dale J. Lambert
|
|
|
61
|
|
Executive Vice President, Operations Optimization
|
Matthew R. Powers
|
|
|
44
|
|
Executive Vice President, General Counsel and Corporate Secretary
|
Scott P. Schwausch
|
|
|
45
|
|
Vice President, Corporate Controller and Chief Accounting Officer
|
Kenneth G. Williamson
|
|
|
55
|
|
Executive Vice President and Chief Operating Officer, E&P Technology & Services
|
For
a description of the business background of Mr. Usher, please see "Class ITerm
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.
30
Table of Contents
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.
31
Table of Contents
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.
32
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (this "CD&A") provides an overview of the Compensation Committee of the Company's Board of Directors,
a discussion of the background and objectives of our compensation programs for our senior executives, and a discussion of all material elements of the compensation of each of the executive officers
identified in the following table, whom we refer to as our named executive officers ("NEOs"):
|
|
|
Christopher T. Usher
|
|
President, Chief Executive Officer and Director (starting June 1, 2019) Executive Vice President and Chief Operating Officer, Operations Optimization (through May 31, 2019)
|
R. Brian Hanson
|
|
President, Chief Executive Officer and Director (through June 1, 2019)
|
Steven A. Bate
|
|
Chief Financial Officer(1)
|
Kenneth G. Williamson
|
|
Executive Vice President and Chief Operating Officer, E&P Technology & Services
|
Matthew Powers
|
|
Executive Vice President, General Counsel and Corporate Secretary
|
Scott P. Schwausch
|
|
Vice President, Corporate Controller, and Chief Accounting Officer
|
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.
33
Table of Contents
Subsequent
developments in March 2020- namely, the COVID-19 pandemic and the shock to oil pricesprompted 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 DirectorsCommittees of the BoardCompensation 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.
34
Table of Contents
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 ProgramsBenchmarking" and "Elements of
CompensationBase 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
CompensationBonus 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 ProgramsBenchmarking" 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:
-
-
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;
35
Table of Contents
-
-
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
36
Table of Contents
that
we consider to be our industry and market peersa practice often referred to as "benchmarking." We believe, however, that a benchmark should be just thata point of
reference for measurementbut not the determinative factor for our executives' compensation. The purpose of the comparison is not to supplant the analyses of internal pay equity,
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.
37
Table of Contents
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.
38
Table of Contents
Special Note on 2020 Actions
In April of 2020, in view of the extreme market downturn due to the COVID-19 pandemic, all NEOs received a 20% reduction in base pay (except for
Mr. Schwausch, who received a 15% reduction in his base pay).
|
|
|
Named Executive Officer
|
|
Salary Information
|
Christopher T. Usher
|
|
Mr. Usher's salary, commencing on his promotion to President and CEO on June 1, 2019, was $525,000. The 2019 MTCS Survey indicated that the mean CEO base salary for surveyed companies in the Services and Drilling sector was $700,000.
Prior to his promotion, Mr. Usher served as COO over the Company's Operations Optimization segment. His salary in 2019 when he served in this capacity was $378,560.
The 2019 MTCS Survey indicated that the mean Chief Operating OfficerSubsidiary/Group/Division base salary for surveyed companies in the Services and Drilling sector was $376,500.
|
R. Brian Hanson
|
|
Mr. Hanson's salary in 2019 when he served as CEO was $600,000. The 2019 MTCS Survey indicated that the mean CEO base
salary for surveyed companies in the Services and Drilling sector was $700,000.
|
Steven A. Bate
|
|
Mr. Bate's salary throughout 2019 was $375,000. The 2019 MTCS Survey indicated that the mean CFO base salary for
surveyed companies in the Services and Drilling sector was $410,000.
|
Kenneth G. Williamson
|
|
Mr. Williamson's salary throughout 2019 was $387,213. The 2019 MTCS Survey indicated that the mean Chief Operating
OfficerSubsidiary/Group/Division base salary for surveyed companies in the Services and Drilling sectors was $376,500.
|
Matthew R. Powers
|
|
Mr. Powers' salary throughout 2019 was $275,000. The 2019 MTCS Survey indicated that the mean Top Legal Executive base
salary for surveyed companies in the Services and Drilling sector was $350,000.
|
Scott P. Schwausch
|
|
Mr. Schwausch's salary throughout 2019 was $200,450. The 2019 MTCS Survey indicated that the mean base salary for
surveyed companies in the Services and Drilling sector was $250,000.
|
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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Table of Contents
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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Table of Contents
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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Table of Contents
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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Table of Contents
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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Table of Contents
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
44
Table of Contents
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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Table of Contents
-
-
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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Table of Contents
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 Officer4x
Executive
Vice President2x
Senior
Vice President1x
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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SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid to or earned by our named executive officers at December 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($)
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
All
Other
Compensation
($)
|
|
Total
($)
|
|
Christopher T. Usher
|
|
|
2019
|
|
|
457,412
|
|
|
|
|
|
962,000
|
|
|
|
|
|
|
|
|
7,841
|
|
|
1,427,253
|
|
President and CEO
|
|
|
2018
|
|
|
378,560
|
|
|
|
|
|
1,023,188
|
|
|
130,427
|
|
|
220,600
|
|
|
7,482
|
|
|
1,760,257
|
|
starting June 1, 2019
|
|
|
2017
|
|
|
353,808
|
|
|
|
|
|
|
|
|
|
|
|
347,000
|
|
|
5,504
|
|
|
706,312
|
|
Executive Vice President and Chief Operating Officer, Operations Optimization through May 31, 2019
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Brian Hanson
|
|
|
2019
|
|
|
276,923
|
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
656,900
|
|
|
1,183,823
|
|
President and CEO
|
|
|
2018
|
|
|
600,000
|
|
|
|
|
|
1,888,032
|
|
|
262,400
|
|
|
582,000
|
|
|
7,577
|
|
|
3,340,009
|
|
through June 1, 2019
|
|
|
2017
|
|
|
558,689
|
|
|
|
|
|
|
|
|
|
|
|
1,200,000
|
|
|
7,950
|
|
|
1,766,639
|
|
Steven A. Bate
|
|
|
2019
|
|
|
375,000
|
|
|
|
|
|
|
|
|
|
|
|
281,250
|
|
|
11,250
|
|
|
667,500
|
|
Executive Vice President
|
|
|
2018
|
|
|
375,000
|
|
|
|
|
|
1,092,322
|
|
|
130,427
|
|
|
273,100
|
|
|
9,548
|
|
|
1,880,397
|
|
and Chief Financial
|
|
|
2017
|
|
|
350,484
|
|
|
|
|
|
|
|
|
|
|
|
450,000
|
|
|
7,950
|
|
|
808,434
|
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth G. Williamson
|
|
|
2019
|
|
|
387,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,616
|
|
|
398,829
|
|
Executive Vice President
|
|
|
2018
|
|
|
387,213
|
|
|
|
|
|
1,086,632
|
|
|
130,427
|
|
|
211,500
|
|
|
9,590
|
|
|
1,825,362
|
|
and Chief Operating
|
|
|
2017
|
|
|
361,905
|
|
|
|
|
|
|
|
|
|
|
|
508,000
|
|
|
7,950
|
|
|
877,855
|
|
Officer, E&P Technology & Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew R. Powers
|
|
|
2019
|
|
|
275,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,712
|
|
|
280,712
|
|
Executive Vice President,
|
|
|
2018
|
|
|
275,000
|
|
|
|
|
|
365,943
|
|
|
56,027
|
|
|
160,200
|
|
|
5,654
|
|
|
862,824
|
|
General Counsel and
|
|
|
2017
|
|
|
220,664
|
|
|
|
|
|
168,600
|
|
|
291,540
|
|
|
165,000
|
|
|
5,423
|
|
|
851,227
|
|
Corporate Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott P. Schwausch
|
|
|
2019
|
|
|
200,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,770
|
|
|
205,818
|
|
Vice President, Corporate Controller and Chief Accounting Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
49
Table of Contents
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
CompensationValuation 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.
50
Table of Contents
-
-
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
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 ($646,157).
51
Table of Contents
2019 GRANTS OF PLAN-BASED AWARDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant
Date
Fair
Value of
Stock
and
Option
Awards
($)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)(2)
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
|
|
|
|
|
|
|
|
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1)
|
|
Estimated Future Payouts
Under Equity Incentive
Plan Awards
|
|
Exercise
or Base
Price of
Option
Awards
($/Sh)
|
|
Name
|
|
Grant
Date
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Christopher T. Usher
|
|
|
|
|
|
|
|
525,000
|
|
|
1,050,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/1/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130,000
|
|
|
|
|
|
|
|
|
1,003,600
|
|
Steven A. Bate
|
|
|
|
|
93,750
|
|
|
281,250
|
|
|
562,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth G. Williamson
|
|
|
|
|
96,803
|
|
|
290,410
|
|
|
580,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew R. Powers
|
|
|
|
|
68,750
|
|
|
165,000
|
|
|
330,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott P. Schwausch
|
|
|
|
|
50,113
|
|
|
120,270
|
|
|
240,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Brian Hanson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Reflects
the estimated threshold, target and maximum award amounts for payouts under our 2019 incentive plan to our NEOs. Under the plan, every participating NEO had
the opportunity to earn a maximum of 200% of his target depending on performance of the Company against the designated performance goal, and performance of the executive against personal performance
criteria. Mr. Usher's employment agreement does not specify that he will earn a bonus upon achievement of a threshold consolidated performance goal. Because award determinations under the plan
were based in part on outcomes of personal evaluations of employee performance by our Chief Executive Officer and the Compensation Committee, the computation of actual awards generated under the plan
upon achievement of threshold and target company performance criteria differed from the above estimates. See "Compensation Discussion and AnalysisElements of
CompensationBonus Incentive Plan" above. For actual payout amounts to our named executive officers under our 2019 bonus incentive plan, see the "Non-Equity Incentive Plan Compensation"
column in the "Summary Compensation Table" above.
-
(2)
-
These
stock awards were granted to Mr. Usher in September of 2019 under our LTIP. While unvested, a holder of restricted stock is entitled to the same voting
rights as all other holders of Common Stock. The shares vest, if at all, in equal increments upon the first, second and third anniversary of the grant. Each vesting tranche is contingent upon the
grantee remaining employed by the Company through each applicable anniversary. In addition, one half of the shares granted to Mr. Usher require the Company's volume weighted average stock price
to meet or exceed, for twenty consecutive days prior to September 1, 2022, $17.50 for 1/3 of the award to vest; $22.50 for 2/3 of the award to vest; and $27.50 for complete vesting. The
performance-based vesting restriction described in the foregoing sentence is in addition to the time-based vesting restriction. Both the time-based vesting restriction and the performance-based
vesting restriction are subject to certain exceptions that allow earlier vesting (such as in the event of death, disability, or a change in control of the Company's ownership).
-
(3)
-
The
values contained in the table are based on the grant date fair value of the award computed in accordance with ASC Topic 718 for financial statement reporting
purposes, but exclude any impact of assumed forfeiture rates. For a discussion of valuation assumptions, see Note 12, "Shareholders' Equity and Stock-Based
Compensation", in our Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.
52
Table of Contents
EMPLOYMENT AGREEMENTS
In recent years, we have not entered into employment agreements with employees other than our Chief Executive Officer and Chief Financial
Officer. We have generally entered into employment agreements with employees only when the employee holds an executive officer position and we believe that an employment agreement is desirable for us
to obtain a measure of assurance as to the executive's continued employment in light of prevailing market competition for the particular position held by the executive officer, or where we determine
that an employment agreement is necessary and appropriate to attract an executive in light of market conditions, the prior experience of the executive or practices at ION with respect to other
similarly situated employees.
The
following discussion describes the material terms of our existing executive employment agreements with our executive officers:
Christopher T. Usher
In connection with his appointment as our President and Chief Executive Officer on June 1, 2019, Mr. Usher entered into a new
employment agreement. The agreement provides for Mr. Usher to serve as our President and Chief Executive Officer through August 31, 2021, with two automatic two-year renewals thereafter.
The
agreement provides for Mr. Usher to receive an initial base salary of $525,000 per year and be eligible to receive an annual performance bonus under our incentive compensation
plan, with a target incentive plan bonus amount equal to 100% of his base salary. Under our bonus plans, the terms of which are set annually, employees (including the CEO) typically have the potential
to earn up to 200% of their target incentive bonus amount.
Under
the agreement, and as approved by the Compensation Committee, Mr. Usher will be eligible to receive grants of (i) options to purchase shares of our Common Stock,
(ii) shares of our restricted stock and (iii) stock appreciation rights (SARs). Mr. Usher will also be eligible to participate in other equity compensation plans that are
established for our key executives, as approved by the Compensation Committee. In the agreement, we also agreed to indemnify Mr. Usher to the fullest extent permitted by our Restated
Certificate of Incorporation, as amended, and Bylaws, and to provide him coverage under our directors' and officers' liability insurance policies to the same extent as other company executives.
We
may at any time terminate our employment agreement with Mr. Usher for "Cause", with no severance obligations, if Mr. Usher (i) is convicted of a felony;
(ii) engages in dishonesty, willful misconduct or gross neglect that results in material injury to the Company; (iii) appropriates, or attempts to appropriate, a material business
opportunity of the Company; (iv) steals or embezzles from the Company; or (v) fails, after notice, to follow the reasonable instructions of the Company with respect to his employment.
Any other termination by us would trigger severance obligations, as would Mr. Usher's resignation if we adversely change his title or materially change his responsibilities, authority or status
without prior notice and acceptance; substantially fail to comply with our obligations under his agreement; materially reduce his base salary or bonus opportunity without prior notice and acceptance
(unless in connection with a broad-based reduction for senior executives of the Company); fail to obtain the assumption of his agreement by any successor or assignee of the Company; require him to
relocate more than fifty miles from the Company's current headquarters location; or refuse, without Cause, to renew his agreement for any of the three additional terms commencing on
September 1, 2021, September 1, 2023, or September 1, 2025 (each of the foregoing constituting "good reason" under the agreement for him to resign).
In
his agreement, Mr. Usher agrees not to compete against us, assist any competitor, attempt to solicit any of our suppliers or customers, or solicit any of our employees, in any
case during his
53
Table of Contents
employment
and for a period of two years after his employment ends. The employment agreement also contains provisions relating to protection of our confidential information and intellectual property.
The agreement does not contain any tax gross-up benefits.
For
a discussion of the provisions of Mr. Usher's employment agreement regarding compensation to Mr. Usher in the event of a change of control affecting our Company or his
termination by us without cause or by him for good reason, see "Potential Payments Upon Termination or Change of ControlChristopher T.
Usher" below.
Steven A. Bate
Mr. Bate was our Chief Financial Officer until he stepped down from that role effective February 1, 2020.
In
connection with his appointment as our Executive Vice President and Chief Financial Officer on November 13, 2014, Mr. Bate entered into an employment agreement. The
agreement provides for Mr. Bate to serve as our Executive Vice President and Chief Financial Officer for an initial term of three years, with automatic one-year renewals thereafter. Any change
of control of our Company after November 13, 2015 would have caused the remaining term of Mr. Bate's employment agreement to adjust automatically to a term of two years, which would have
commenced on the effective date of the change of control.
The
agreement provided for Mr. Bate to receive an initial base salary of $375,000 per year, and he was eligible to receive an annual performance bonus under our incentive
compensation plan, with a target incentive plan bonus amount equal to 50% of his base salary beginning in 2015.
Under
the agreement, Mr. Bate was eligible to receive grants of (i) options to purchase shares of our Common Stock and (ii) shares of our restricted stock.
Mr. Bate was also eligible to participate in other equity compensation plans that are established for our key executives, as approved by the Compensation Committee. In the agreement, we also
agreed to indemnify Mr. Bate to the fullest extent permitted by our Restated Certificate of Incorporation, as amended, and Bylaws, and to provide him coverage under our directors' and officers'
liability insurance policies to the same extent as other company executives.
We
could at any time terminate our employment agreement with Mr. Bate for "Cause" if Mr. Bate (i) willfully and continuously failed to substantially perform his
obligations, (ii) willfully engaged in conduct materially and demonstrably injurious to our property or business (including fraud, misappropriation of funds or other property, other willful
misconduct, gross negligence or conviction of a felony or any crime involving moral turpitude) or (iii) committed a material breach of the agreement. Mr. Bate could terminate his
employment agreement for "Good Reason" if we breached any material provision of the agreement, assigned to Mr. Bate any duties materially inconsistent with his position, materially reduce his
duties, functions, responsibilities, budgetary or other authority, or took other
action that resulted in a diminution in his office, position, duties, functions, responsibilities or authority, or we relocated his workplace by more than 50 miles.
In
his agreement, Mr. Bate agreed not to compete against us, assist any competitor, attempt to solicit any of our suppliers or customers, or solicit any of our employees, in any
case during his employment and for a period of twelve months after his employment ends. The employment agreement also contained provisions relating to protection of our confidential information and
intellectual property.
A
discussion of the provisions of Mr. Bate's employment agreement regarding compensation to Mr. Bate in the event of a change of control affecting our Company or his
termination by us without cause or by him for good reason as of December 31, 2019, see "Potential Payments Upon Termination
54
Table of Contents
or Change of ControlSteven A. Bate" below. (Note that Mr. Bate stepped down from his role as Chief Financial Officer in February of 2020).
R. Brian Hanson
Mr. Hanson was our Chief Executive Officer until his retirement from the Company on June 1, 2019.
In
connection with his appointment as our President and Chief Executive Officer on January 1, 2012, Mr. Hanson entered into a new employment agreement. The agreement
provided for Mr. Hanson to serve as our President and Chief Executive Officer for an initial term of three years, with automatic two-year renewals thereafter. Any change of control of our
Company after January 1, 2013 would have caused the remaining term of Mr. Hanson's employment agreement to adjust automatically to a term of three years, which would have commenced on
the effective date of the change of control.
The
agreement provided for Mr. Hanson to receive an initial base salary of $450,000 per year and be eligible to receive an annual performance bonus under our incentive
compensation plan, with a target incentive plan bonus amount equal to 75% of his base salary and with a maximum incentive plan bonus amount equal to 150% of his base salary.
Under
the agreement, and as approved by the Compensation Committee, Mr. Hanson was eligible to receive grants of (i) options to purchase shares of our Common Stock and
(ii) shares of our restricted stock. Mr. Hanson was also eligible to participate in other equity compensation plans that are established for our key executives, as approved by the
Compensation Committee. In the agreement, we also agreed to indemnify Mr. Hanson to the fullest extent permitted by our Restated Certificate of Incorporation, as amended, and Bylaws, and to
provide him coverage under our directors' and officers' liability insurance policies to the same extent as other company executives.
We
could at any time terminate our employment agreement with Mr. Hanson for "Cause" if Mr. Hanson (i) willfully and continuously failed to substantially perform his
obligations, (ii) willfully engaged in conduct materially and demonstrably injurious to our property or business (including fraud, misappropriation of funds or other property, other willful
misconduct, gross negligence or conviction of a felony or any crime involving moral turpitude) or (iii) committed a material breach of the agreement. In addition, we could at any time terminate
the agreement if Mr. Hanson suffered permanent and total disability for a period of at least 180 consecutive days, or if Mr. Hanson died. Mr. Hanson could terminate his employment
agreement for "Good Reason" if we breached any material provision of the agreement, we assigned to Mr. Hanson any duties materially inconsistent with his position, we materially reduced his
duties, functions, responsibilities, budgetary or other authority, or took other action that resulted in a diminution in his office, position, duties, functions, responsibilities or authority, we
relocated his workplace by more than 50 miles, or we elected not to extend the term of his agreement.
In
his agreement, Mr. Hanson agreed not to compete against us, assist any competitor, attempt to solicit any of our suppliers or customers, or solicit any of our employees, in any
case during his employment and for a period of two years after his employment ended. The employment agreement also contained provisions relating to protection of our confidential information and
intellectual property. The agreement did not contain any tax gross-up benefits.
55
Table of Contents
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth information concerning unexercised stock options (including outstanding stock appreciation rights, or SARs) and
shares of restricted stock held by our named executive officers at December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards(1)
|
|
Stock Awards(2)
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number of
Shares or
Units of
Stock
That Have
Not Vested
(#)(3)
|
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
other
Rights
That
Have
Not
Vested
(#)(4)
|
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
($)
|
|
Christopher T. Usher
|
|
|
3,333
|
|
|
|
|
|
0
|
|
|
89.40
|
|
|
12/1/2022
|
|
|
65,000
|
|
|
564,200
|
|
|
154,430
|
|
|
1,340,452
|
|
|
|
|
4,000
|
|
|
|
|
|
0
|
|
|
57.90
|
|
|
12/1/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
0
|
|
|
61.05
|
|
|
3/1/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,830
|
|
|
|
|
|
0
|
|
|
34.20
|
|
|
3/1/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,750
|
|
|
6,250
|
|
|
0
|
|
|
3.10
|
|
|
3/1/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
(5)
|
|
3.10
|
|
|
3/1/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,435
|
(6)
|
|
8.85
|
|
|
12/1/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven A. Bate
|
|
|
8,333
|
|
|
|
|
|
|
|
|
95.85
|
|
|
6/1/2023
|
|
|
|
|
|
|
|
|
89,430
|
|
|
776,252
|
|
|
|
|
2,333
|
|
|
|
|
|
0
|
|
|
57.90
|
|
|
12/1/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,333
|
|
|
|
|
|
0
|
|
|
61.05
|
|
|
3/1/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
0
|
|
|
37.05
|
|
|
12/1/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,898
|
|
|
|
|
|
0
|
|
|
34.20
|
|
|
3/1/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,500
|
|
|
12,500
|
|
|
0
|
|
|
3.10
|
|
|
3/1/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
0
|
(5)
|
|
3.10
|
|
|
3/1/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,435
|
(6)
|
|
8.85
|
|
|
12/1/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth G. Williamson
|
|
|
5,000
|
|
|
|
|
|
|
|
|
68.70
|
|
|
3/1/2020
|
|
|
|
|
|
|
|
|
89,430
|
|
|
776,252
|
|
|
|
|
2,333
|
|
|
|
|
|
|
|
|
107.85
|
|
|
12/1/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,333
|
|
|
|
|
|
0
|
|
|
87.15
|
|
|
12/1/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,333
|
|
|
|
|
|
0
|
|
|
89.40
|
|
|
12/1/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
|
57.90
|
|
|
12/1/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
0
|
|
|
61.05
|
|
|
3/1/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,001
|
|
|
|
|
|
|
|
|
34.20
|
|
|
3/1/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,250
|
|
|
8,750
|
|
|
0
|
|
|
3.10
|
|
|
3/1/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
(5)
|
|
3.10
|
|
|
3/1/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,435
|
(6)
|
|
8.85
|
|
|
12/1/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew R. Powers
|
|
|
333
|
|
|
|
|
|
|
|
|
71.85
|
|
|
9/1/2023
|
|
|
4,000
|
|
|
34,720
|
|
|
38,443
|
|
|
333,685
|
|
|
|
|
333
|
|
|
|
|
|
|
|
|
57.90
|
|
|
12/1/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500
|
|
|
|
|
|
|
|
|
61.05
|
|
|
3/1/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
1,250
|
|
|
|
|
|
3.10
|
|
|
3/1/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,334
|
|
|
|
|
|
|
(5)
|
|
3.10
|
|
|
3/1/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000
|
|
|
18,000
|
|
|
|
|
|
13.15
|
|
|
12/1/2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,995
|
(5)
|
|
8.85
|
|
|
12/1/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott P. Schwausch
|
|
|
533
|
|
|
|
|
|
|
|
|
107.85
|
|
|
12/1/2020
|
|
|
|
|
|
|
|
|
9,611
|
|
|
83,423
|
|
|
|
|
640
|
|
|
|
|
|
|
|
|
87.15
|
|
|
12/1/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
800
|
|
|
|
|
|
|
|
|
89.40
|
|
|
12/1/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
57.90
|
|
|
12/1/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
61.05
|
|
|
3/1/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
1,250
|
|
|
|
|
|
3.10
|
|
|
3/1/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,334
|
|
|
|
|
|
|
(5)
|
|
3.10
|
|
|
3/1/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,249
|
(6)
|
|
8.85
|
|
|
12/1/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
All
stock option information in this table relates to nonqualified stock options granted under either our 2004 LTIP or 2013 LTIP. All of the unvested options in this
table vest, if at all, 25% each year over a four-year period, generally contingent on continued employment
56
Table of Contents
of
the grantee (with certain exceptions that allow earlier vesting such as in the event of death, disability, or retirement of the grantee or a change in control of the Company's ownership).
-
(2)
-
Pursuant
to SEC rules, the market value of each executive's shares of unvested restricted stock was calculated by multiplying the number of shares by $8.68 (the
closing price per share of our Common Stock on the NYSE on December 31, 2019).
-
(3)
-
The
amounts shown represent shares of restricted stock granted under our LTIP. While unvested, the holder is entitled to the same voting rights as all other holders
of Common Stock. All of the restricted stock awards are subject to the time-based vesting restrictions.
-
(4)
-
The
amounts shown represent shares of restricted stock granted under our LTIP. While unvested, the holder is entitled to the same voting rights as all other holders
of Common Stock. All of the restricted stock awards are subject to the time-based vesting restrictions. The shares of restricted stock awarded will vest in one-third increments each year over a
three-year period, conditioned upon the recipient's continued employment during that time; however, in addition to this time-based vesting restriction, none of the awards will vest unless certain
performance measures are satisfied, as follows:
If
the 20-day volume weighted average price (the "VWAP") per share of the Company's common stock does not meet or exceed $17.50, none of the shares shall vest; if the VWAP meets or exceeds $17.50 but
does not meet or exceed $22.50, 1/3 of the shares shall vest; if the VWAP meets or exceeds $22.50 but does not meet or exceed $27.50, 2/3 of the shares shall vest; and for full vesting, the VWAP must
meet or exceed $27.50. The performance measures are in addition to the time-based vesting restriction, and vice versa.
-
(5)
-
The
amounts shown reflect awards of cash-settled SARs granted on March 1, 2016 under our 2008 Stock Appreciation Rights Plan ("2008 SAR Plan").
-
(6)
-
The
amounts shown reflect awards of cash-settled SARs granted on December 1, 2018 under our SAR Plan. The shares of restricted stock awarded will vest in
one-third increments each year over a three-year period, conditioned upon the recipient's continued employment during that time; however, in addition to this time-based vesting restriction, none of
the awards will vest unless certain performance measures are satisfied. The SARS have the same time-based and performance based vesting restrictions as the restricted stock, described above. The
maximum value of each SAR is $18.65 per share.
-
(7)
-
Information
about R. Brian Hanson, who ceased being an NEO in June 2019, is not in this table.
57
Table of Contents
2019 OPTION EXERCISES AND STOCK VESTED
The following table sets forth certain information with respect to option and stock exercises by the named executive officers during the year
ended December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number of
Shares
Acquired on
Exercise (#)
|
|
Value
Realized on
Exercise ($)(1)
|
|
Number of
Shares
Acquired on
Vesting (#)
|
|
Value
Realized on
Vesting ($)(2)
|
|
Christopher T. Usher(3)
|
|
|
|
|
|
|
|
|
4,599
|
|
|
60,572
|
|
R. Brian Hanson(4)
|
|
|
150,000
|
|
|
961,500
|
|
|
143,332
|
|
|
1,155,585
|
|
Steven A. Bate(5)
|
|
|
|
|
|
|
|
|
11,666
|
|
|
139,193
|
|
Kenneth G. Williamson(6)
|
|
|
|
|
|
|
|
|
5,833
|
|
|
80,379
|
|
Matthew R. Powers(7)
|
|
|
|
|
|
|
|
|
4,666
|
|
|
41,057
|
|
Scott P. Schwausch(8)
|
|
|
|
|
|
|
|
|
666
|
|
|
9,177
|
|
-
(1)
-
The
value realized upon the exercise of the non-qualified stock options (the "NQSOs") and stock appreciation rights (the "SARs") was calculated by
(a) subtracting $3.10 (the exercise price) from $9.51 (the closing price per share of our Common Stock on September 12, 2019 the date of exercise) to get the realized value per share,
and (b) multiplying the realized value per share by the number of shares underlying shares exercised.
-
(2)
-
The
values realized upon vesting of stock awards contained in the table are based on the market value of our Common Stock on the date of vesting.
-
(3)
-
The
value realized by Mr. Usher on the vesting of his restricted stock awards was calculated by multiplying (a) 4,166 shares by $13.78 (the closing
price per share of our Common Stock on March 1, 2019, the vesting date) and (b) 433 shares by $7.31 (the closing price per share of our Common Stock on June 3, 2019, the first
business day after the vesting date).
-
(4)
-
The
value realized by Mr. Hanson on the vesting of his restricted stock awards was calculated by multiplying (a) 16,666 shares by $13.78 (the closing
price per share of our Common Stock on March 1, 2019, the vesting date) and (b) 126,666 shares by $7.31 (the closing price per share of our Common Stock on June 3, 2019, the first
business day after the vesting date). Mr. Hanson retired from ION on June 1, 2019. Information for Mr. Hanson may be incomplete, as his reporting obligations ceased when he left
the Company in June, 2019.
-
(5)
-
The
value realized by Mr. Bate on the vesting of his restricted stock awards was calculated by multiplying (a) 8,333 shares by $13.78 (the closing
price per share of our Common Stock on March 1, 2019, the vesting date) and (b) 3,333 shares by $7.31 (the closing price per share of our Common Stock on June 3, 2019, the first
business day after the vesting date).
-
(6)
-
The
value realized by Mr. Williamson on the vesting of his restricted stock awards was calculated by multiplying 5,833 shares by $13.78 (the closing price per
share of our Common Stock on March 1, 2019, the vesting date).
-
(7)
-
The
value realized by Mr. Powers on the vesting of his restricted stock awards was calculated by multiplying (a) 666 shares by $13.78 (the closing
price per share of our Common Stock on March 1, 2019, the vesting date) and (b) 4,000 shares by $7.97 (the closing price per share of our Common Stock on December 2, 2019, the
first business day after the vesting date).
-
(8)
-
The
value realized by Mr. Schwausch on the vesting of his restricted stock awards was calculated by multiplying 666 shares by $13.78 (the closing price per
share of our Common Stock on March 1, 2019, the vesting date).
58
Table of Contents
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
Under the terms of our equity-based compensation plans and our employment agreements, our Chief Executive Officer and certain of our other named
executive officers are entitled to payments and benefits upon the occurrence of specified events including termination of employment (with and without cause) and upon a change in control of our
Company. The specific terms of these arrangements, as well as an estimate of the compensation that would have been payable had they been triggered as of December 31, 2019, are described in
detail below. In the case of each employment agreement, the terms of these arrangements were established through the course of arms-length negotiations with each executive officer, both at the time of
hire and at the times of any later amendment. As part of these negotiations, the Compensation Committee analyzed the terms of the same or similar arrangements for comparable executives employed by
companies in our industry group. This approach was used by the committee in setting the amounts payable and the triggering events under the arrangements. The termination of employment provisions of
the employment agreements were entered into in order to address competitive concerns by providing those individuals with a fixed amount of compensation that would offset the potential risk of leaving
their prior employer or foregoing other opportunities in order to join our Company. At the time of entering into these
arrangements, the Compensation Committee considered the aggregate potential obligations of our Company in the context of the desirability of hiring the individual and the expected compensation upon
joining us. However, these contractual severance and post-termination arrangements have not affected the decisions the Compensation Committee has made regarding other compensation elements and the
rationale for compensation decisions made in connection with these arrangements.
The
following summaries set forth estimated potential payments payable to each of our named executive officers upon termination of employment or a change of control of our Company under
their current employment agreements and our stock plans and other compensation programs as if his employment had so terminated for these reasons, or the change of control had so occurred, on
December 31, 2019. The Compensation Committee may, in its discretion, agree to revise, amend or add to the benefits if it deems advisable. For purposes of the following summaries, dollar
amounts are estimates based on annual base salary as of December 31, 2019, benefits paid to the named executive officer in fiscal 2019 and stock and option holdings of the named executive
officer as of December 31, 2019. The summaries assume a price per share of ION Common Stock of $8.68 per share, which was the closing price per share on December 31, 2019, as reported on
the NYSE. The actual amounts to be paid to the named executive officers can only be determined at the time of each executive's separation from the Company.
The
amounts of potential future payments and benefits as set forth in the tables below, and the descriptions of the assumptions upon which such future payments and benefits are based and
derived, may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are estimates of payments and benefits to certain of
our executives upon their termination of employment or a change in control, and actual payments and benefits may vary materially from these estimates. Actual amounts can only be determined at the time
of such executive's actual separation from our Company or the time of such change in control event. Factors that could affect these amounts and assumptions include the timing during the year of any
such event, the price of our Common Stock, unforeseen future changes in our Company's benefits and compensation methodology and the age of the executive.
Christopher T. Usher
Termination and Change of Control. Mr. Usher is entitled to certain benefits under his employment agreement upon the occurrence of
any of the
following events:
-
-
we terminate his employment other than for cause, death or disability;
59
Table of Contents
-
-
Mr. Usher resigns for "good reason" (as described in "Employment AgreementsChristopher
T. Usher", above, which includes the failure, by a successor-in-interest to the Company, to assume the terms of his employment agreement).
Under
Mr. Usher's employment agreement, a "change in control" occurs upon any of the following (which we refer to in this section as an "Employment Agreement Change of Control"):
Upon
the occurrence of any of the above events and conditions, Mr. Usher would be entitled to receive the following (less applicable withholding taxes and subject to compliance
with non-compete, non-solicit and no-hire obligations):
-
-
over a two-year period, a cash amount equal to two times his annual base salary in effect for the year of termination;
-
-
continuation of insurance coverage for Mr. Usher as of the date of his termination for a period of two years at the same cost to him as
prior to the termination.
In
addition, upon the occurrence of any of the above events or conditions, any time-based vesting restriction which would have been removed, had Mr. Usher remained employed for
two years after the last date of his employment, will be lifted (but such awards will remain subject to the applicable performance vesting conditions and shall become fully vested only if, and only to
the extent, the
applicable performance conditions (such as, for example, the Company's stock achieving and maintaining a certain price) are satisfied as provided under the applicable granting agreement).
We
believe the double-trigger change-of-control benefit referenced above maximizes shareholder value because it motivates Mr. Usher to remain in his position following a change of
control to ensure a smoother integration and transition for the new owners. Given his experience with our Company and within the seismic industry as our CFO and CEO, we believe Mr. Usher's
severance structure is in our best interest because it ensures that for a two-year period after leaving our employment, Mr. Usher will not be in a position to compete against us or otherwise
adversely affect our business.
Change of Control Under Equity Compensation Plans. Mr. Usher and our other named executive officers currently hold outstanding
awards under
one or more of the following five equity compensation plans: our 2004 LTIP, our 2013 LTIP, our 2018 LTIP, our 2008 SAR Plan and our 2018 SAR Plan. Under these plans, a "change of control" will be
deemed to have occurred upon any of the following (which we refer to in this section as a "Plan Change of Control"):
-
(1)
-
the
acquisition by a person or group of beneficial ownership of 40% or more of the outstanding shares of Common Stock other than acquisitions directly from ION,
acquisitions by ION or an employee benefit plan maintained by ION, or certain permitted acquisitions in connection with a business combination described in sub-paragraph (3) below;
-
(2)
-
changes
in directors such that the individuals that constitute the entire board of directors cease to constitute at least a majority of directors of the board, other
than new directors whose appointment or nomination for election was approved by a vote of at least a majority of the directors then constituting the entire board of directors (except in the case of
election contests);
-
(3)
-
consummation
of a reorganization, merger, consolidation or similar business combination involving ION, unless (i) owners of our Common Stock immediately
following such transaction together own more than 50% of the total outstanding stock or voting power of the entity resulting from the transaction and (ii) at least a majority of the members of
the board of directors of the entity resulting from the transaction were members of our board of directors at the time the agreement for the transaction is signed; or
-
(4)
-
the
sale of all or substantially all of our assets.
60
Table of Contents
Upon
any such "Plan Change of Control," all of Mr. Usher's stock options granted to him under the LTIP will become fully exercisable, all unvested restricted stock awards granted
to him under the LTIP before September of 2019 will automatically accelerate and become fully vested, and all unvested stock appreciation rights granted to him under the 2018 SAR Plan will become
fully exercisable. However, all unvested restricted stock awards granted to him in September of 2019 are subject to a "double trigger" for early vesting on change in control.
Death, Disability or Retirement. Upon his death or disability, all unvested options, restricted stock and stock appreciation rights
that
Mr. Usher holds would automatically accelerate and become fully vested (except 65,000 of the shares of restricted stock granted to him in September of 2019 will remain subject to the
performance vesting conditions, relating to the Company's stock price, and shall become fully vested only if, and only to the extent, the applicable performance conditions are satisfied as provided
under the applicable granting agreement). Upon his retirement, all unvested options and stock appreciation rights that Mr. Usher holds would automatically accelerate and become fully vested. No
unvested shares of restricted stock held by Mr. Usher would automatically accelerate and become fully vested upon his retirement.
Termination by Us for Cause or by Mr. Usher Other Than for Good Reason. Upon any termination by us for cause or any resignation by
Mr. Usher for any reason other than for "good reason" (as defined in his employment agreement), Mr. Usher is not entitled to any payment or benefit other than the payment of unpaid
salary and possibly accrued and unused vacation pay.
Mr. Usher's
currently-held vested stock options and stock appreciation rights will remain exercisable after his termination of employment, death, disability or retirement for
periods of between three months and one year following such event, depending on the event and the terms of the applicable plan and grant agreement. If Mr. Usher is terminated for cause, all of
his vested and unvested stock options, unvested restricted stock, and vested and unvested stock appreciation rights will be immediately forfeited. We have not agreed to provide Mr. Usher any
additional payments in the event any payment or benefit under his employment agreement is determined to be subject to the excise tax for "excess parachute payments" under U.S. federal income tax
rules, or any other "tax gross-ups" under this employment agreement.
Assuming
Mr. Usher's employment was terminated under each of these circumstances or a change of control occurred on December 31, 2019, his payments and benefits would have
an estimated value as follows (less applicable withholding taxes):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scenario
|
|
Cash
Severance
($)(1)
|
|
Bonus
($)(2)
|
|
Insurance
Continuation
($)(3)
|
|
Tax
Gross-Ups
($)
|
|
Value of
Accelerated
Equity Awards
($)(4)
|
|
Without Cause or For Good Reason
|
|
|
1,050,000
|
|
|
1,050,000
|
|
|
41,309
|
|
|
|
|
|
|
|
Termination after change in control
|
|
|
1,050,000
|
|
|
1,050,000
|
|
|
41,309
|
|
|
|
|
|
1,939,527
|
|
Change of Control (if not terminated), Death or Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,939,527
|
|
Retirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,875
|
|
Voluntary Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Payable
over a two-year period. In addition to the listed amounts, if Mr. Usher resigns or his employment is terminated for any reason, he may be paid for his
unused vacation days. Mr. Usher is currently entitled to accrue up to 25 vacation days per year. The above table assumes that there is no earned but unpaid base salary as of the time of
termination.
-
(2)
-
Represents
two times the estimate of the target bonus payment Mr. Usher would be entitled to receive pursuant to our 2019 bonus incentive plan. The actual
bonus payment he would be entitled
61
Table of Contents
to
receive upon his termination may be different from the estimated amount, depending on the achievement of payment criteria under the bonus plan.
-
(3)
-
The
value of insurance continuation contained in the above table is the total cost of COBRA continuation coverage for Mr. Usher, maintaining his same levels
of medical, dental and other insurance as in effect on December 31, 2019, less the amount of premiums to be paid by Mr. Usher for such coverage.
-
(4)
-
As
of December 31, 2019, Mr. Usher held 219,430 unvested shares of restricted stock, unvested stock options to purchase 6,250 shares of Common Stock
and 95,435 unvested cash-settled stock appreciation rights. The value of accelerated unvested options was calculated by multiplying 6,250 shares underlying Mr. Usher's unvested options by $8.68
(the closing price per share on December 31, 2019) and then deducting the aggregate exercise price for those shares (equal to $3.10 per share for those 6,250 options). The value of the
restricted stock that would accelerate and fully vest in the event of a Change in Control, death or disability was calculated by multiplying 219,430 shares by $8.68. Stock appreciation rights having
an exercise price greater than $8.68 were calculated as having a zero value.
Steven A. Bate
Termination and Change of Control. Mr. Bate would have been entitled to certain benefits under his employment agreement upon the
occurrence of
any of the following events:
-
-
we terminated his employment other than for cause, death or disability;
-
-
Mr. Bate resigned for "good reason"; or
-
-
an "Employment Agreement Change of Control" involving our Company occurred and, within 12 months following the change in control,
(a) we or our successor terminated Mr. Bate's employment or (b) Mr. Bate terminated his employment after we or our successor (i) elected not to extend the term of
his employment agreement, (ii) assigned to Mr. Bate duties inconsistent with his CFO position, duties, functions, responsibilities, authority or reporting relationship to the Board under
his employment agreement, (iii) we became a privately-owned company as a result of a transaction in which Mr. Bate did not participate within the acquiring group, (iv) were
rendered a subsidiary or division or other unit of another company; or (v) took any action that would constitute "good reason" under his employment agreement.
Upon
the occurrence of any of the above events and conditions, Mr. Bate would have been entitled to receive the following (less applicable withholding taxes and subject to
compliance with non-compete, non-solicit and no-hire obligations):
-
-
over a two-year period, a cash amount equal to two times his annual base salary in effect for the year of termination;
-
-
a prorated portion of any unpaid target incentive plan bonus for the year of termination; and
-
-
continuation of insurance coverage for Mr. Bate as of the date of his termination for a period of eighteen months at the same cost to
him as prior to the termination.
Change of Control Under Equity Compensation Plans. Upon a "Plan Change of Control", (see "Christopher T.
UsherChange of Control Under Equity Compensation Plans" above), all of Mr. Bate's stock options granted to him under the 2013 LTIP would have become fully
exercisable, all unvested restricted stock awards granted to him under the 2018 LTIP would have been automatically accelerate and become fully vested, and all unvested stock appreciation rights
granted to him under the 2018 SAR Plan would have become fully exercisable. In addition, any change of control of our Company would
62
Table of Contents
have
caused the remaining term of Mr. Bate's employment agreement to adjust automatically to two years, commencing on the effective date of the change of control.
Upon
his death or disability, all unvested options, restricted stock and stock appreciation rights that Mr. Bate holds would have automatically accelerated and become fully
vested. Upon his retirement, all unvested options and stock appreciation rights that Mr. Bate held would have automatically accelerated and become fully vested. No unvested shares of restricted
stock held by Mr. Bate would automatically accelerate and become fully vested upon his retirement.
Upon
any termination by us for cause or any resignation by Mr. Bate for any reason other than for "good reason" (as defined in his employment agreement), Mr. Bate would not
have been entitled to any payment or benefit other than the payment of unpaid salary and possibly accrued and unused vacation pay.
Mr. Bate's
currently-held vested stock options and stock appreciation rights would have remained exercisable after his termination of employment, death, disability or retirement
for periods of between three months and one year following such event, depending on the event and the terms of the applicable plan and grant agreement. If Mr. Bate was terminated for cause, all
of his vested and unvested stock options, unvested restricted stock, and vested and unvested stock appreciation rights would have been immediately forfeited.
Assuming
Mr. Bate employment were terminated under each of these circumstances or a change of control occurred on December 31, 2019, his payments and benefits would have an
estimated value as follows (less applicable withholding taxes):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scenario
|
|
Cash
Severance
($)(1)
|
|
Bonus
($)(2)
|
|
Insurance
Continuation
($)(3)
|
|
Value of
Accelerated
Equity Awards
($)(4)
|
|
Without Cause or For Good Reason
|
|
|
750,000
|
|
|
|
|
|
33,274
|
|
|
|
|
Termination after change in control
|
|
|
750,000
|
|
|
|
|
|
33,274
|
|
|
846,002
|
|
Change of Control (if not terminated), Death or Disability
|
|
|
|
|
|
|
|
|
|
|
|
846,002
|
|
Retirement
|
|
|
|
|
|
|
|
|
|
|
|
69,750
|
|
Voluntary Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Payable
over a two-year period. In addition to the listed amounts, if Mr. Bate resigns or his employment is terminated for any reason, he may be paid for his
unused vacation days. Mr. Bate is currently entitled to accrue up to 30 vacation days per year. The above table assumes that there is no earned but unpaid base salary as of the time of
termination.
-
(2)
-
The
actual bonus payment he would be entitled to receive upon his termination may be different from the estimated amount, depending on the achievement of payment
criteria under the bonus plan.
-
(3)
-
The
value of insurance continuation contained in the above table is the total cost of COBRA continuation coverage for Mr. Bate, maintaining his same levels of
medical, dental and other insurance as in effect on December 31, 2019, less the amount of premiums to be paid by Mr. Bate for such coverage.
-
(4)
-
As
of December 31, 2019, Mr. Bate held 89,430 unvested shares of restricted stock, unvested stock options to purchase 12,500 shares of Common Stock and
95,435 unvested cash-settled stock appreciation rights. The value of accelerated unvested options was calculated by multiplying 12,500 shares underlying Mr. Bate's unvested options by $8.68
63
Table of Contents
(the
closing price per share on December 31, 2019) and then deducting the aggregate exercise price for those shares (equal to $3.10 per share for those 12,500 options). The value of the
restricted stock that would accelerate and fully vest in the event of a Change in Control, death or disability was calculated by multiplying 89,430 shares by $8.68. Stock appreciation rights having an
exercise price greater than $8.68 per share were calculated as having a zero value.
Matthew R. Powers
Mr. Powers is not entitled to receive any contractual severance pay if we terminate his employment without cause. Upon a "Plan Change of
Control" (see "Christopher T. UsherChange of Control Under Equity Compensation Plans" above), all of his unvested stock
options granted to him under the 2013 LTIP will become fully exercisable, all unvested restricted stock awards granted to him under the 2018 LTIP will automatically accelerate and become fully vested,
and all unvested stock appreciation rights granted to him under the 2018 SAR Plan will become fully exercisable. Upon his death or disability, all unvested options, restricted stock and stock
appreciation rights that Mr. Powers holds would automatically accelerate and become fully vested. Upon his retirement, all unvested options and stock appreciation rights that Mr. Powers
holds would automatically accelerate and become fully vested. No shares of unvested restricted stock held by Mr. Powers would automatically accelerate and become fully vested upon his
retirement.
The
vested stock options and stock appreciation rights held by Mr. Powers will remain exercisable after his termination of employment, death, disability or retirement for periods
of between three months and one year following such event, depending on the event and the terms of the applicable stock plan and grant agreement. If Mr. Powers is terminated for cause, all of
his vested and unvested stock options, unvested restricted stock, and vested and unvested stock appreciation rights will be immediately forfeited.
Assuming
his employment was terminated under each of these circumstances or a change of control occurred on December 31, 2019, his payments and benefits would have an estimated
value as follows (less applicable withholding taxes):
|
|
|
|
|
|
|
|
Scenario
|
|
Cash
Severance
($)(1)
|
|
Value of
Accelerated
Equity Awards
($)(2)
|
|
Without Cause
|
|
|
|
|
|
|
|
Change of Control (regardless of termination), Death or Disability
|
|
|
|
|
|
375,380
|
|
Retirement
|
|
|
|
|
|
6,975
|
|
Voluntary Termination
|
|
|
|
|
|
|
|
-
(1)
-
If
Mr. Powers resigns or his employment is terminated for any reason, he may be paid for his unused vacation days. Mr. Powers is currently entitled to
accrue up to 25 vacation days per year. The above table assumes that there is no earned but unpaid base salary as of the time of termination.
-
(2)
-
As
of December 31, 2019, Mr. Powers held 42,443 unvested shares of restricted stock, unvested stock options to purchase 19,250 shares of Common Stock
and 40,995 unvested cash-settled stock appreciation rights. The value of accelerated unvested options was calculated by multiplying 1,250 shares underlying Mr. Powers' unvested options by $8.68
(the closing price per share on December 31, 2019) and then deducting the aggregate exercise price for those shares (equal to $3.10 per share for 1,250 options). The options having an exercise
price greater than $8.68 per share were calculated as having a zero
64
Table of Contents
value.
The value of the restricted stock that would accelerate and fully vest in the event of a Change in Control, death or disability was calculated by multiplying 42,443 shares by $8.68. Stock
appreciation rights having an exercise price greater than $8.68 per share were calculated as having a zero value.
Scott P. Schwausch
Mr. Schwausch is not entitled to receive any contractual severance pay if we terminate his employment without cause. Upon a "Plan Change
of Control" (see "Christopher T. UsherChange of Control Under Equity Compensation Plans" above), all of his unvested stock
options granted to him under the 2013 LTIP will become fully exercisable, all restricted stock awards granted to him under the 2018 LTIP will automatically accelerate and become fully vested, and all
unvested stock appreciation rights granted to him under the 2018 SAR Plan will become fully exercisable. Upon his death or disability, all unvested options, restricted stock and stock appreciation
rights that Mr. Schwausch holds would automatically accelerate and become fully vested. Upon his retirement, all unvested options and stock appreciation rights that Mr. Schwausch holds
would automatically accelerate and become fully vested. No unvested shares of restricted stock held by Mr. Schwausch would automatically accelerate and become fully vested upon his retirement.
The
vested stock options and stock appreciation rights held by Mr. Schwausch will remain exercisable after his termination of employment, death, disability or retirement for
periods of between three months and one year following such event, depending on the event and the terms of the applicable stock plan and grant agreement. If Mr. Schwausch is terminated for
cause, all of his vested and unvested stock options, unvested restricted stock, and vested and unvested stock appreciation rights will be immediately forfeited.
Assuming
his employment was terminated under each of these circumstances or a change of control occurred on December 31, 2019, his payments and benefits would have an estimated
value as follows (less applicable withholding taxes):
|
|
|
|
|
|
|
|
Scenario
|
|
Cash
Severance
($)(1)
|
|
Value of
Accelerated
Equity Awards
($)(2)
|
|
Without Cause
|
|
|
|
|
|
|
|
Change of Control (regardless of termination), Death or Disability
|
|
|
|
|
|
90,398
|
|
Retirement
|
|
|
|
|
|
6,975
|
|
Voluntary Termination
|
|
|
|
|
|
|
|
-
(1)
-
If
Mr. Schwausch resigns or his employment is terminated for any reason, he may be paid for his unused vacation days. Mr. Schwausch is currently
entitled to accrue up to 25 vacation days per year. The above table assumes that there is no earned but unpaid base salary as of the time of termination.
-
(2)
-
As
of December 31, 2019, Mr. Schwausch held 9,611 unvested shares of restricted stock, unvested stock options to purchase 1,250 shares of Common Stock
and 20,498 unvested cash-settled stock appreciation rights. The value of accelerated unvested options was calculated by multiplying 1,250 shares underlying Mr. Schwausch's unvested options by
$8.68 (the closing price per share on December 31, 2019) and then deducting the aggregate exercise price for those shares (equal to $3.10 per share for those 1,250 options). The value of the
restricted stock that would accelerate and fully vest in the event of a Change in Control, death or disability was calculated by multiplying 9,611
65
Table of Contents
shares
by $8.68. Stock appreciation rights having an exercise price greater than $8.68 per share were calculated as having a zero value.
Kenneth G. Williamson
Mr. Williamson is not entitled to receive any contractual severance pay if we terminate his employment without cause. Upon a "Plan Change
of Control" (see "Christopher T. UsherChange of Control Under Equity Compensation Plans" above), all of his unvested stock
options granted to him under the 2013 LTIP will become fully exercisable, all unvested restricted stock awards granted to him under the 2018 LTIP will automatically accelerate and become fully vested,
and all unvested stock appreciation rights granted to him under the 2018 SAR Plan will become fully exercisable. Upon his death or disability, all unvested options, restricted stock and stock
appreciation rights that Mr. Williamson holds would automatically accelerate and become fully vested. Upon his retirement, all unvested options and stock appreciation rights that
Mr. Williamson holds would automatically accelerate and become fully vested. No unvested shares of restricted stock held by Mr. Williamson would automatically accelerate and become fully
vested upon his retirement.
The
vested stock options and stock appreciation rights held by Mr. Williamson will remain exercisable after his termination of employment, death, disability or retirement for
periods of between three months and one year following such event, depending on the event and the terms of the applicable stock plan and grant agreement. If Mr. Williamson is terminated for
cause, all of his vested and unvested stock options, unvested restricted stock, and vested and unvested stock appreciation rights will be immediately forfeited.
Assuming
his employment was terminated under each of these circumstances or a change of control occurred on December 31, 2019, his payments and benefits would have an estimated
value as follows (less applicable withholding taxes):
|
|
|
|
|
|
|
|
Scenario
|
|
Cash
Severance
($)(1)
|
|
Value of
Accelerated
Equity Awards
($)(2)
|
|
Without Cause
|
|
|
|
|
|
|
|
Change of Control (regardless of termination), Death or Disability
|
|
|
|
|
|
825,077
|
|
Retirement
|
|
|
|
|
|
48,825
|
|
Voluntary Termination
|
|
|
|
|
|
|
|
-
(1)
-
If
Mr. Williamson resigns or his employment is terminated for any reason, he may be paid for his unused vacation days. Mr. Williamson is currently
entitled to accrue up to 25 vacation days per year. The above table assumes that there is no earned but unpaid base salary as of the time of termination.
-
(2)
-
As
of December 31, 2019, Mr. Williamson held 89,430 unvested shares of restricted stock, unvested stock options to purchase 8,750 shares of Common
Stock and 95,435 unvested cash-settled stock appreciation rights. The value of accelerated unvested options was calculated by multiplying 8,750 shares underlying Mr. Williamson's unvested
options by $8.68 (the closing price per share on December 31, 2019) and then deducting the aggregate exercise price for those shares (equal to $3.10 per share for those 8,750 options). The
value of the restricted stock that would accelerate and fully vest in the event of a Change in Control, death or disability was calculated by multiplying 89,430 shares by $8.68. Stock appreciation
rights having an exercise price greater than $8.68 per share were calculated as having a zero value.
66
Table of Contents
R. Brian Hanson
R. Brian Hanson informed the Company of his retirement and resignation from the Board of Directors of the Company and his position as President
and Chief Executive Officer, each effective June 1, 2019.
In
connection with Mr. Hanson's retirement, the Company and Mr. Hanson negotiated and entered into a Separation Agreement dated as of June 3, 2019 (the "Separation
Agreement"). The Separation Agreement, which contains a general release of claims in favor of the Company and provides that Mr. Hanson will receive, among other things, in each case subject to
applicable withholdings (i) a severance payment equal to $2,400,000, payable in substantially equal installments in accordance with the Company's normal payroll practices over the two year
period beginning June 1, 2019, provided that the first six months of payments shall be paid in a lump sum on the six-month anniversary of the Separation Agreement, (ii) a one-time
payment of $250,000 representing the pro-rata share of Mr. Hanson's 2019 target annual bonus payment, and (iii) continuing coverage for a 48-month period under the Company's group
medical, dental, health, and hospital plan for Mr. Hanson and his spouse and dependents.
In
addition, the Company caused 120,000 shares of restricted Common Stock to become fully vested pursuant to the Restricted Stock Agreement dated December 1, 2018 between the
Company and Mr. Hanson. The Company also caused the options for 25,000 shares of Common Stock to become fully vested under the terms of that certain Grant Agreement for Non-Statutory Option
dated March 1, 2016. The exercise period for all outstanding vested stock options and appreciation rights was extended until the earlier of June 1, 2021 or the expiration of the full
original term specified in each applicable stock option or stock appreciation rights agreement.
The
full text of Mr. Hanson's Separation Agreement was filed on a Current Report on Form 8-K on June 4, 2019.
67
Table of Contents
2019 PENSION BENEFITS AND NONQUALIFIED DEFERRED COMPENSATION
None of our named executive officers participates or has account balances in (i) any qualified or non-qualified defined benefit plans or
(ii) any non-qualified defined contribution plans or other deferred compensation plans maintained by us.
68
Table of Contents
EQUITY COMPENSATION PLAN INFORMATION
(as of December 31, 2019)
The following table provides certain information regarding our equity compensation plans under which equity securities are authorized for
issuance, categorized by (i) the equity compensation plans previously approved by our shareholders and (ii) the equity compensation plans not previously approved by our shareholders:
|
|
|
|
|
|
|
|
|
|
|
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 Shareholders
|
|
|
|
|
|
|
|
|
|
|
2004 Long-Term Incentive Plan ("2004 LTIP")
|
|
|
244,692
|
|
$
|
79.90
|
|
|
|
|
Third Amended and Restated 2013 Long-Term Incentive Plan ("2018 LTIP")
|
|
|
444,517
|
|
$
|
14.59
|
|
|
736,618
|
|
2010 Employee Stock Purchase Plan ("2010 ESPP")
|
|
|
|
|
|
|
|
|
47,241
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
689,209
|
|
|
|
|
|
783,859
|
|
Equity Compensation Plans Not Approved by Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
689,209
|
|
|
|
|
|
783,859
|
|
|
|
|
|
|
|
|
|
|
|
|
A
description of our Stock Appreciation Rights Plans has not been provided in this sub-section because awards of SARs made under those plans may be settled only in cash.
69
Table of Contents
CEO PAY RATIO DISCLOSURE
As required by Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the median of
the annual total compensation of our employees and the annual total compensation of Mr. Christopher T. Usher, our Chief Executive Officer (our "CEO"):
For
2019, our last completed fiscal year:
-
-
the median of the annual total compensation of all employees of our company (other than our CEO), was $95,487; and
-
-
the annual total compensation of our CEO was $1,494,851.
Based
on this information, for 2019, the ratio of the annual total compensation of Mr. Christopher T. Usher, our Chief Executive Officer, to the median of the annual total
compensation of all employees was 16 to 1. Our CEO base pay and bonus has been annualized to reflect Mr. Usher's appointment as CEO on June 1, 2019. We expect that our pay ratio will
increase for next year as Mr. Usher's full compensation and other benefits will be reflected in total.
The
"median employee" that was used for purposes of calculating the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees is
the same employee that was identified for purposes of our 2018 disclosure. There has been no change in our employee population or employee compensation arrangements since that median employee was
identified that we believe would significantly impact our pay ratio disclosure.
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Table of Contents