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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
OYO GEOSPACE CORPORATION
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(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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[OYO Geospace Logo]
January 25, 2002
Dear Fellow Stockholder:
I am pleased to invite you to attend OYO Geospace Corporation's 2002 Annual
Stockholders' Meeting. We will hold the meeting at 9:00 a.m. on Wednesday, the
27th of February 2002, in the Searls Room at the Sugar Creek Country Club, 420
Sugar Creek Boulevard, Sugar Land, Texas.
Following this letter you will find the formal Notice of Meeting and a
proxy statement, which describes the action to be taken at the meeting. We
have enclosed a proxy card so that you may grant your proxy to be voted as you
indicate. We have also enclosed a copy of our 2001 Annual Report. We encourage
you to read these materials.
Your vote is important. Please complete and mail your proxy card promptly,
whether or not you plan to attend the annual meeting. If you attend the
meeting you may vote in person even if you have mailed a signed and dated
proxy.
The board of directors recommends that you vote FOR the election of
directors as described in the attached proxy statement.
Thank you for your cooperation. The rest of the board of directors and I
look forward to seeing you at the meeting.
Very truly yours,
/s/ Gary D. Owens
Gary D. Owens
Chairman of the Board, President
and Chief Executive Officer
OYO Geospace Corporation
12750 South Kirkwood, Suite 200
Stafford, Texas 77477
January 25, 2002
Notice of Annual Meeting of Stockholders to Be Held February 27, 2002
The Annual Meeting of the Stockholders of OYO Geospace Corporation will be
held at 9:00 a.m. on Wednesday, the 27th of February 2002, in the Searls Room
at the Sugar Creek Country Club, 420 Sugar Creek Boulevard, Sugar Land, Texas,
to elect two directors, each to hold office until the 2005 Annual Meeting of
Stockholders or until his successor is duly elected and qualified and to
transact such other business as may properly come before the meeting or any
adjournment thereof.
The holders of record of OYO Geospace Corporation common stock at the close
of business on December 27, 2001 will be entitled to vote at the meeting.
By order of the Board of Directors,
/s/ Charles H. Still
Charles H. Still
Secretary
YOUR VOTE IS IMPORTANT
Whether or not you plan to attend the meeting, please sign, date and mail
the enclosed proxy card promptly. If you attend the meeting you may vote in
person even if you have mailed a signed and dated proxy.
OYO Geospace Corporation
Proxy Statement
January 25, 2001
The board of directors of OYO Geospace Corporation is soliciting proxies
from its stockholders for the annual meeting of stockholders to be held at
9:00 a.m. on Wednesday, the 27th of February 2002, in the Searls Room at the
Sugar Creek Country Club, 420 Sugar Creek Boulevard, Sugar Land, Texas, or any
adjournment thereof.
You are entitled to vote at that meeting if you were a holder of record of
OYO Geospace Corporation common stock at the close of business on December 27,
2001. On January 25, 2002, we began mailing to stockholders entitled to vote
at the meeting a proxy card, this proxy statement and our 2001 Annual Report.
On December 27, 2001 there were 5,538,380 shares of OYO Geospace Corporation
common stock outstanding. Each share of common stock entitles the holder to
one vote on each matter considered at the meeting.
Your proxy card will appoint Dr. Thomas L. Davis and Charles H. Still as
proxy holders, or your representatives, to vote your shares as you indicate.
If you sign, date and return your proxy card without specifying voting
instructions, the proxy holders will vote your shares FOR the election of the
director nominees named in this proxy statement.
Signing, dating and returning your proxy card does not preclude you from
attending the meeting and voting in person. If you submit more than one proxy,
the latest-date proxy will automatically revoke your previous proxy. You may
revoke your proxy at any time before it is voted by sending written notice, to
be delivered before the meeting, to: Computershare Investor Services, 12039
West Alameda Parkway, Suite Z-2, Lakewood, Colorado 80228.
The enclosed form of proxy provides a means for you to vote for the
director nominees listed in this proxy statement or to withhold authority to
vote for such nominees.
The board of directors expects the nominees named in this proxy statement
to be available for election. If any nominee is not available, the proxy
holders may vote your shares for a substitute if you have submitted a signed
and dated proxy card that does not withhold authority to vote for nominees. We
are not aware of any matters to be brought before the meeting other than those
described in this proxy statement. If any other matters are properly brought
before the meeting, the proxy holders may vote your shares in their discretion
if you return a signed, dated proxy card.
No business can be conducted at the meeting unless a majority of all
outstanding shares entitled to vote are either present at the meeting in
person or represented by proxy. The two nominees who receive the most votes
will be elected to the two open directorships even if they receive less than a
majority of the votes cast. Abstentions and broker non-votes are counted as
shares present for determining a quorum, but they are not counted as votes for
or against any director and will not affect the outcome of the election of
directors.
Representatives of Computershare Investors Services, the transfer agent and
registrar for the common stock, will act as the inspectors of election at the
meeting.
PROPOSAL: ELECTION OF DIRECTORS
At the meeting, the stockholders will elect two directors. The board of
directors is divided into three classes, each class being composed as equally
in number as possible. The classes have staggered three-years terms, with the
term of one class expiring at each annual meeting of stockholders.
The directors in Class I, whose terms expire at the meeting, are Thomas L.
Davis, Ph.D. and Ernest M. Hall, Jr. Dr. Davis and Mr. Hall are nominees to
serve in Class I for another term expiring at the 2005 Annual Meeting of
Stockholders. The directors in Class II are serving terms that expire at the
2003 Annual Meeting of Stockholders. The directors in Class III are serving
terms that expire at the 2004 Annual Meeting of Stockholders.
Information regarding the director nominees and directors whose terms will
continue following the meeting follows.
Nominees for Election for Class
I
(Terms Expiring at the 2005 Director
Annual Meeting of Stockholders) Age Position Since
Thomas L. Davis, 54 1997
Ph.D.(a)(b)................. Director
Ernest M. Hall, Jr........... 76 Director 1994
Class II Directors
(Terms Expiring at the 2003
Annual Meeting of Stockholders)
Katsuhiko Kobayashi(a)....... 56 Director 1995
Michael J. Sheen............. 53 Senior Vice President and 1997
Chief Technical Officer, Director
Charles H. Still(a)(b)....... 59 Director 1997
Class III Directors
(Terms Expiring at the 2004
Annual Meeting of Stockholders)
Satoru Ohya.................. 69 Director 1994
Gary D. Owens................ 54 Chairman of the Board, President 1997
and Chief Executive Officer
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(a) Member of the Audit Committee.
(b) Member of the Compensation Committee.
Background of Nominees and Continuing Directors
Thomas L. Davis, Ph.D. became a director in connection with our initial
public offering in November 1997. Dr. Davis is a Professor of Geophysics at
the Colorado School of Mines, where he has worked since 1980. He has also been
a coordinator of the Reservoir Characterization Project, an industry
consortium of the Colorado School of Mines, since it was founded in 1985, with
the objective of characterizing reservoirs through development and application
of 3-D and time lapse 3-D multicomponent seismology. Dr. Davis consults and
lectures worldwide and has written and co-edited numerous papers and other
works in the field of seismic interpretation.
Ernest M. Hall, Jr. has been a director since the company's formation in
September 1994. From then until his retirement in July 1997, Mr. Hall served
as the President and Chief Executive Officer. He served as President of OYO
Corporation U.S.A. ("OYO U.S.A."), the holder of a majority of the company's
common stock, from 1985 until 1995 and was re-elected to that position
effective October 1, 1997. From 1980 to 1985, Mr. Hall served as a consultant
to OYO U.S.A.
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Katsuhiko Kobayashi joined OYO Corporation, the sole shareholder of OYO
U.S.A., in 1995, he was a Managing Director from March 1999 until March 2000,
and has been a Senior Executive Officer since March 2000 and a director since
March 2001. From 1967 to 1995 he was employed by Sanwa Bank primarily in its
international banking area, where he last held the position of general manager
of the International Credit Administration Department from 1993 to 1995. He is
also a director of TrueTime, Inc. (Nasdaq:TRUE), an affiliate of OYO U.S.A.
Michael J. Sheen joined the company as Senior Vice President and Chief
Technical Officer in August 1997 and became a director in connection with our
initial public offering in November 1997. Mr. Sheen had been a Senior Vice
President and Chief Technical Officer of Input/Output, Inc. ("I/O") since 1991
and had held other positions at I/O since 1977.
Charles H. Still became a director in connection with our initial public
offering in November 1997. He has been Secretary since the company's formation
in September 1994 and Secretary of various affiliates and predecessors of the
company since 1980. He has been a partner in the law firm of Fulbright &
Jaworski L.L.P. since 1975. He is also a director of TrueTime, Inc.
Satoru Ohya, who is a geologist by education at Tokyo University, was
Chairman of the Board from the company's formation in September 1994 until Mr.
Owens' election to that position September 1997, and he has continued as a
director. He has been President of OYO Corporation since 1993 and Chairman of
OYO Corporation since March 2001. For approximately 40 years, Mr. Ohya has
been an employee or officer of OYO Corporation and of various of its
affiliates, including serving as Chief Executive Officer of the company's
predecessors from 1983 to 1994. He is also a director of TrueTime, Inc.
Gary D. Owens joined the company as President and Chief Executive Officer
in August 1997 and became Chairman of the Board in September 1997. From
October 1993 until May of 1997, Mr. Owens was the President and Chief
Executive Officer of I/O. Mr. Owens had held other positions at I/O since
1977.
Committees of the Board of Directors and Meeting Attendance
The board of directors has an audit committee and compensation committee.
The board of directors has not established a nominating committee.
The audit committee is charged with recommending to the entire board the
engagement and discharge of independent auditors of the financial statements
of the company, reviewing the professional service provided by independent
auditors, reviewing the independence of independent auditors, reviewing with
the auditors the plan and results of the auditing engagement, considering the
range of audit and non-audit fees and reviewing the adequacy of the company's
system of internal accounting controls. The audit committee met four times
during the fiscal year ended September 30, 2001. The audit committee's report
appears below.
The compensation committee is charged with recommending to the entire board
the compensation to be paid to officers and key employees of the company and
the compensation of members of the board of directors. The compensation
committee also makes recommendations to the entire board regarding the grant
of stock options and restricted stock awards. The compensation committee met
four times during the fiscal year ended September 30, 2001. The compensation
committee's report on executive compensation for fiscal 2001 appears on pages
8 and 9 of this proxy statement.
The board of directors met four times during the fiscal year ended
September 30, 2001. Each director attended, in person or by telephone, at
least 75% of the meetings held by the board of directors and by the committees
on which the director served.
Audit Committee Report
We have reviewed and discussed the company's audited financial statements
for the year ended September 30, 2001 with management and have discussed with
PricewaterhouseCoopers LLP, certified public accountants, the independent
auditors and accountants for the company, the matters required to be discussed
by
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SAS 61 (Codification of Statements on Auditing Standards, AU Section 380) with
respect to those statements. We have received the written disclosures and the
letter from PricewaterhouseCoopers LLP required by Independence Standards
Board Standard No. 1 (Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees) and have discussed with
PricewaterhouseCoopers LLP its independence in connection with its audit of
the company's most recent financial statements. Based on this review and these
discussions, we recommended to the board of directors that these audited
financial statements be included in the company's Annual Report on Form 10-K
for the fiscal year ended September 30, 2001.
Thomas L. Davis, Ph.D., Katsuhiko Kobayashi and Charles H. Still are the
members of the audit committee. Dr. Davis and Mr. Still are independent, as
defined in Rule 4200(a)(14) of the National Association of Securities Dealer's
listing standards. Mr. Kobayashi is not independent as defined in that rule
solely because he is an executive officer of OYO U.S.A. The board of directors
has, nonetheless, determined that Mr. Kobayashi's membership on the audit
committee is required by the best interests of the company and its
stockholders. The board determined that Mr. Kobayashi's relationship with the
company's majority stockholder does not in any way impair his independence
from the company's management. To the contrary, Mr. Kobayashi provides
substantial, direct stockholder representation on the audit committee.
Furthermore, Mr. Kobayashi's extensive experience as a senior financial
officer and his level of financial sophistication are invaluable to the audit
committee in performing its function.
The board of directors has adopted a written charter for the audit
committee.
The information in the foregoing three paragraphs shall not be deemed to be
soliciting material, or be filed with the SEC or subject to Regulation 14A or
14C or to liabilities of Section 18 of the Securities Act, nor shall it be
deemed to be incorporated by reference into any filing under the Securities
Act or the Exchange Act, except to the extent that we specifically incorporate
these paragraphs by reference.
Dr. Thomas L. Davis, Ph.D.
Mr. Katsuhiko Kobayashi
Mr. Charles H. Still
Compensation of Directors
Non-employee directors are compensated for their services at a rate of
$25,000 per year, of which one-half is payable in shares of common stock based
on the fair market value thereof at the date of issuance pursuant to the
company's 1997 Non-Employee Director Stock Plan. Also pursuant to that plan,
each non-employee director serving on the board of directors following each
annual meeting of stockholders receives a grant of options to acquire 3,150
shares of common stock at the fair market value on the date of that grant.
Messrs. Hall, Kobayashi and Ohya have not accepted this annual stipend or any
stock options to date. All non-employee directors are reimbursed for ordinary
and necessary expenses incurred in attending board or committee meetings.
4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The beneficial ownership as of December 27, 2001, of shares of the
company's common stock of each director and executive officer, each person
known to the company to beneficially own more than 5% of outstanding common
stock and all directors and executive officers as a group, along with the
percentage of outstanding common stock that such ownership represents,
follows. Each person named has sole voting and investment power with respect
to the shares indicated except as otherwise stated in the notes to the table.
Beneficial Owner Shares Percentage
---------------- --------- ----------
OYO Corporation (1)................................ 2,850,000 51.7%
OYO Corporation U.S.A. (1)......................... 2,850,000 51.7
Gary D. Owens (2).................................. 260,000 4.7
Michael J. Sheen (2)............................... 70,000 1.3
Thomas L. Davis (3)................................ 22,513 *
Ernest M. Hall, Jr................................. 40,000 *
Katsuhiko Kobayashi................................ -- *
Satoru Ohya (1).................................... 2,850,000 51.7
Charles H. Still (3)............................... 22,513 *
Thomas T. McEntire (4)............................. 38,750 *
R. Chaney & Partners III L.P. (5).................. 532,000 9.6
Pebbleton Corporation, N.V. (6).................... 464,900 8.4
Eagle Asset Management (7)......................... 306,475 5.5
Executive officers and directors as a group (8
people)........................................... 3,303,776 60.0%
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* Less than one percent.
(1) The shares indicated as beneficially owned by OYO Corporation are held
directly by its wholly-owned subsidiary, OYO Corporation U.S.A. The
address of OYO Corporation is Ichigaya Building 2-6, Kudan-kita 4-chome,
Chiyoda-ku, Tokyo 102, Japan. The address of OYO Corporation U.S.A. is
7334 N. Gessner Road, Houston, Texas 77040. OYO Corporation and OYO
Corporation U.S.A. share the voting and dispositive power of these shares.
The shares indicated as beneficially owned by Mr. Ohya are the same shares
owned directly by OYO Corporation U.S.A. and are included because of Mr.
Ohya's affiliation with OYO Corporation. Mr. Ohya disclaims beneficial
ownership of the shares of common stock owned by OYO Corporation U.S.A.
within the meaning of Rule 13d-3 under the Exchange Act.
(2) Includes unexercised options to purchase 50,000 shares.
(3) Includes unexercised options to purchase 18,900 shares.
(4) Includes unexercised options to purchase 28,750 shares.
(5) Based solely on a Schedule 13G/A filed with the Securities and Exchange
Commission on February 14, 2000, by R. Chaney & Partners IV L.P. ("Fund
IV"), R. Chaney & Partners III L.P. ("Fund III"), R. Chaney Investments,
Inc. ("Investments"), R. Chaney & Partners, Inc. ("Partners"), and Mr.
Robert H. Chaney. According to this Schedule 13G, Fund IV, Investments and
Mr. Chaney have the sole power to vote or to direct the vote, and the sole
power to dispose or to direct the disposition of, 149,000 shares. Fund
III, Partners and Mr. Chaney have the sole power to vote or direct the
vote, and the sole power to dispose or direct the disposition of, 383,000
shares, and the address of each these entities is 909 Fannin, Suite 1275,
Two Houston Center, Houston, Texas 77010-1006.
(6) Based solely on a Schedule 13D filed with the Securities and Exchange
Commission on December 14, 1998. According to this Schedule 13D, these
shares are beneficially owned by Pebbleton Corporation, N.V. and Mr. Issam
M. Fares, the address of each of whom is Pietermaai 15, Curacao,
Netherlands Antilles, and each of whom shares the voting and dispositive
power of these shares.
(7) Based solely on a Schedule 13G/A filed with the Securities and Exchange
Commission on January 10, 2001. According to this Schedule 13G/A, the
address of Eagle Asset Management, Inc. is 880 Carillon Parkway, St.
Petersburg, Florida 33716.
5
EXECUTIVE OFFICERS AND COMPENSATION
Information regarding the named executive officers follows.
Name Age Position
---- --- -----------------------------------------
Chairman of the Board, President and
Gary D. Owens.................. 54 Chief Executive Officer
Senior Vice President and Chief Technical
Michael J. Sheen............... 53 Officer
Thomas T. McEntire............. 41 Chief Financial Officer
Thomas T. McEntire joined the company as Chief Financial Officer in
September of 1997. Mr. McEntire had been Financial Controller of APS Holding
Corporation ("APS") since February 1995 and held other senior financial
management positions since joining APS in 1990. Prior to joining APS, Mr.
McEntire held various positions with Coopers & Lybrand L.L.P. from 1982 to
1990.
Mr. Owens' and Mr. Sheen's backgrounds are described above under
"Background of Nominees and Continuing Directors".
Summary of Compensation
A summary of the compensation earned by the named executive officers in the
fiscal years ended September 30, 2001, 2000 and 1999 follows.
Annual Long-Term
Compensation Compensation Awards
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Restricted Shares
Name and Principal Fiscal Stock Underlying Other (1)
Position Year Salary Bonus Awards Options Compensation
- ------------------ ------ ------ ----- ---------- ---------- ------------
Gary D. Owens........... 2001 $200,000 -- -- 30,000 $5,215
Chairman of the Board, 2000 175,000 -- -- 30,000 5,002
President and CEO 1999 175,000 -- -- 10,000 5,250
Michael J. Sheen........ 2001 175,000 -- -- 30,000 5,192
Vice President and 2000 150,000 -- -- 30,000 4,673
Chief Technical Officer 1999 150,000 -- -- 10,000 4,500
Thomas T. McEntire...... 2001 150,000 -- -- 20,000 4,442
Chief Financial Officer 2000 125,000 -- -- 20,000 3,894
1999 125,000 -- -- 5,000 3,635
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(1) Other Compensation includes our contributions to defined contribution
401(k) retirement savings plans.
Stock Options
Information regarding stock options granted to the named executive officers
in fiscal 2001 follows.
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Shares of Percent of Price
Common Total Exercise Appreciation for
Stock Options Price Option Term (1)
Underlying Granted per -----------------
Name Options to Employees Share Expiration 5% 10%
- ---- ---------- ------------ -------- ---------- -- --------
Gary D. Owens........... 30,000 32.1% $17.94 11/10/2010 $338,471 $857,752
Michael J. Sheen........ 30,000 32.1 17.94 11/10/2010 338,471 857,752
Thomas T. McEntire...... 20,000 21.4 17.94 11/10/2010 225,647 571,835
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(1) The potential realizable value of the options is based on an assumed
appreciation in the price of the common stock at a compounded annual rate
of 5% or 10% from the date the option was granted until the date the
option expires. The 5% and 10% appreciation rates are set forth in the
Securities and Exchange Commission's regulations. We do not represent that
the common stock will appreciate at these assumed rates or at all.
6
Information regarding unexercised options held by the named executive
officers as of September 30, 2001, follows. None of the named executive
officers exercised any options in fiscal 2001. The value of unexercised
options is based on the $13.50 closing price of the common stock on September
28, 2001.
Number of Shares
Underlying Value of Unexercised
Unexercised In-The-Money Options at
Options at September 30, 2001
September 30, 2001 -------------------------------
Name (# shares) Exercisable(1) Unexercisable(1)
- ---- ------------------ -------------- ----------------
Gary D. Owens................ 90,000 -- --
Michael J. Sheen............. 90,000 -- --
Thomas T. McEntire........... 55,000 -- --
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(1) None of the Options were "In-The-Money" at September 30, 2001.
Employment Agreements
Messrs. Owens and Sheen have entered into employment agreements with the
company. Mr. Owens' base annual salary is $200,000, and Mr. Sheen's base
annual salary is $175,000. These salaries may be adjusted by the board of
directors. Messrs. Owens and Sheen are entitled to participate in our 401(k)
plan and any bonus plan the board of directors adopts and to receive certain
other benefits and vacation. Pursuant to their employment agreements, each of
Messrs. Owens and Sheen is entitled to receive the severance benefits
described below upon termination of his employment unless the termination:
. results from his death, disability or retirement;
. is by the company for Cause; or
. is by the employee other than for Good Reason.
"Cause" is defined to mean the employee's willful and continued failure to
perform his duties after a demand for his performance of those duties or the
employee's willfully engaging in gross misconduct materially and demonstrably
injurious to the company. "Good Reason" is defined to mean a demotion, a
reduction in base salary, a relocation of the employee's base location of
employment, the discontinuation of any employee benefit without comparable
substitution, the failure of any successor of the company to assume the
employment agreement or a purported termination not in compliance with the
employment agreement.
The severance benefits to which either Messr. Owens or Sheen would be
entitled on termination include:
. his salary through the date of termination;
. twice his base salary and pro-rated bonus for the fiscal year of
termination;
. any relocation and indemnity payments to which he is entitled and any
costs and legal fees incurred in connection with any dispute over his
employment agreement; and
. a gross-up for any applicable "excess parachute payment" tax imposed by
the Internal Revenue Code of 1986.
In connection with these employment agreements, each of Messrs. Owens and
Sheen has agreed that he will not disclose or misappropriate any confidential
information of the company.
Compensation Committee Interlocks and Insider Participation
The compensation committee comprises Dr. Thomas L. Davis, Ph.D., and Mr.
Charles H. Still. Mr. Still is a partner in the law firm of Fulbright &
Jaworski L.L.P., which provides legal services to the company. Fulbright &
Jaworski L.L.P. also provides legal services to OYO Corporation and to OYO
U.S.A. and its affiliates. Mr. Still also serves as Secretary of the company.
7
Compensation Committee Report on Executive Compensation
Our executive compensation program is designed to attract, motivate and
retain talented management personnel and to reward management for the
company's successful financial performance and for increasing stockholder
value. We provide compensation and incentives through a combination of
salaries, annual performance bonuses and long-term incentive stock-based
awards.
Base Annual Salaries
Before the company's initial public offering in 1997, and before the
formation of the compensation committee, the company entered into employment
agreements with Messrs. Owens and Sheen as described under "--Employment
Agreements" above. The compensation levels reflected in those employment
agreements were established in July 1997 by negotiations among Messrs. Owens
and Sheen, before they joined the company, and representatives of OYO U.S.A.,
the company's sole stockholder at that time.
The base annual salaries of the company's named executive officers for
fiscal 2001 were as follows.
Mr. Owens, Chief Executive Officer................................. $200,000
Mr. Sheen, Chief Technical Officer................................. 175,000
Mr. McEntire, Chief Financial Officer.............................. 150,000
The compensation committee has the authority to adjust these base salaries;
however, the employment agreements described above require that Messrs. Owens'
and Sheen's base salaries not be reduced from the base amounts set forth
above. For fiscal 2001, we approved an increase in Messrs. Owens', Sheens' and
McEntire's base annual salaries, each in the amount of $25,000, in recognition
of each of their contributions to the company in fiscal 2000.
Annual Performance Bonuses
In November 2000, management recommended to the board of directors, and the
board of directors adopted, a comprehensive, company-wide cash bonus
compensation plan for all employees for the fiscal year 2001. The cash bonus
plan set forth various targets and criteria for each of the company's
operating subsidiaries based on the financial results of the subsidiary and
established a cash bonus for each employee of the subsidiaries that met those
targets. The financial targets were designed to provide incentives for the
employees of each subsidiary to work as a team to improve our financial
results.
As allowed by the fiscal 2001 bonus plan, the executive officers of the
company were eligible to receive a minor bonus award as a result of the
company's profitable results in fiscal 2001. Because the company's fiscal 2001
financial results were below the expectations of the executive officers, each
executive officer declined his allocated annual performance bonus.
Long-Term Stock-Based Compensation
We also believe that long-term incentive compensation is an important
component of the company's compensation program and that the value of this
compensation should be directly related to increases in stockholder value.
Therefore, in addition to base salaries and annual performance bonuses, the
executive officers participate in the company's 1997 Key Employee Stock Option
Plan, which allows the company to grant long-term incentive compensation to
its executive officers in the form of stock options and restricted stock
awards. These options and restricted stock awards typically vest 25% per year
over four years and are therefore intended to compensate executive officers
for long-term appreciation in the market value of the common stock.
In connection with the company's initial public offering in November 1997,
the company granted options to purchase stock and restricted stock to the
executive officers. The amounts of these options and restricted stock were
determined before the initial public offering by negotiations among Mr. Owens
and representatives of
8
OYO U.S.A. Options granted at the time of the initial public offering have an
exercise price of $14 per share, which is equal to the initial public offering
price, and vest over four years.
In November 2000, we recommended to the board of directors, and the board
of directors approved, the grant of an option to purchase 30,000 shares to
each of Messrs. Owens and Sheen and an option to purchase 20,000 shares to Mr.
McEntire. These options have exercise prices of $17.94 and also vest over four
years.
Applicable Tax Code Provision
The compensation committee has reviewed the potential consequences for the
company of Section 162(m) of the Internal Revenue Code, which limits the tax
deduction the company can claim for annual compensation in excess of $1
million to certain executives. This limit did not impact the company in fiscal
2001 and is not expected to impact the company in fiscal 2002.
Dr. Thomas L. Davis, Ph.D.
Mr. Charles H. Still
9
Common Stock Performance Comparisons
The following graphs compare the performance of the common stock with the
performance of the Russell 2001 index and the Standard & Poor's Oil & Gas
(Drilling & Equipment) index from our initial public offering through the end
of fiscal 2001.
[Graph]
11/21/1997 9/30/1998 9/30/1999 9/30/2000 9/30/2001
---------- --------- --------- --------- ---------
OYOG.................... 100 113 78 179 96
Russell 2000............ 100 85 101 124 98
S&P Oil & Gas (Drilling
& Equipment)........... 100 56 75 105 57
These graphs assume $100 invested (a) at our initial public offering price
but as of the date on which the common stock became registered under Section
12 of the Securities Exchange Act, (b) in the stocks comprising the Russell
2000 index on that day and (c) in the stocks comprising the Standard & Poor's
Oil & Gas (Drilling & Equipment) index that day. Reinvestment of all dividends
on stocks comprising the two indices is assumed.
The foregoing graphs are based on historical data and are not necessarily
indicative of future performance. These graphs shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission or subject to the Regulations of 14A or 14C under the Exchange Act
or to the liabilities of Section 18 under that act.
10
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Mr. Ohya, a director of the company, is President of OYO Corporation and
Chairman of the Board of OYO U.S.A. and holds other offices of subsidiaries of
OYO U.S.A. Mr. Kobayashi, also a director of the company, is a Managing
Director of OYO Corporation. Mr. Kobayashi also holds offices with many
subsidiaries of OYO U.S.A. Mr. Hall, also a director of the company, is the
President of OYO U.S.A. Mr. Still, also a director of the company, is the
Secretary of OYO U.S.A. and also serves in that position with respect to most
of the subsidiaries of OYO U.S.A. Mr. Still is a partner in the law firm of
Fulbright & Jaworski L.L.P., which provides legal services to the company.
In fiscal 2001, we purchased printheads for our thermal plotters from OYO
Corporation pursuant to a Printhead Purchase Agreement that we entered into
with OYO Corporation before our initial public offering. OYO Corporation had
in turn purchased the printheads primarily from another Japanese corporation
and, to a lesser extent, from two other Japanese corporations. For its service
and assistance in these transactions, pursuant to the Printhead Purchase
Agreement, OYO Corporation marked up its cost for these printheads by five
percent in reselling them to us. We believe that by purchasing the printheads
through OYO Corporation, we receive a more favorable price for the printheads
than we could obtained if we were to negotiate directly for their purchase. We
intend to continue purchasing printheads from OYO Corporation pursuant to this
arrangement in future periods.
Pursuant to a Master Sales Agreement that we entered into with OYO
Corporation before our initial public offering, we and OYO Corporation
purchase products from one another at scheduled discounts of 5 to 20 percent
off the seller's list prices. In fiscal 2001, we sold approximately $0.2
million in goods to OYO Corporation and its affiliates and purchased
approximately $1.7 million in goods from OYO Corporation (including the
products covered by the Printhead Purchase Agreement).
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP served as the company's principal independent
public accountants for the 2001 fiscal year and has been selected to serve for
the 2002 fiscal year. Representatives of PricewaterhouseCoopers LLP are
expected to attend the meeting, will have the opportunity to make a statement
if they so desire and will be available to respond to appropriate questions.
Audit Fees
The aggregate fees billed for professional services rendered for the audit
of the company's annual financial statements for the 2001 fiscal year, and the
reviews of the financial statements included in the company's Forms 10-Q for
the 2001 fiscal year, were $127,000.
Financial Information Systems Design and Implementation Fees
There were no fees billed for professional services described in paragraph
(c)(4)(ii) of Rule 2-01 of Regulation S-X rendered by the company's principal
accountants for the fiscal year 2001.
All Other Fees
The aggregate fees billed for services rendered by the company's principal
accountants, other than for services otherwise covered under the subheadings
"Audit Fees" and "Financial Information Systems Design and Implementation
Fees" above, for fiscal year 2001 were $7,000. We have received services from
our principal accountants, other than for services otherwise covered under the
subheadings "Audit Fees" and "Financial Information Systems Design and
Implementation Fees" above, for fiscal year 2001 for which we have not yet
been billed; we expect that such fees will not exceed $30,000.
11
Compatibility of Certain Fees with Independent Accountants' Independence
The Audit Committee has considered whether the provision of services
covered under the subheadings "Financial Information Systems Design and
Implementation Fees" and "All Other Fees" above is compatible with maintaining
the company's principal accountants' independence.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the company's
officers, directors and persons who own more than 10% of a registered class of
the company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10% stockholders are required by the regulation to furnish the
company with copies of all Section 16(a) reports they file.
Based solely on a review of reports on those filings furnished to the
company and written representations from reporting persons that no additional
reports were required, the company believes that during the fiscal year ended
September 30, 2001, all officers, directors and greater than 10% stockholders
complied with all filing requirements applicable to them.
PROPOSALS FOR NEXT ANNUAL MEETING; OTHER MATTERS
Any proposals of holders of common stock intended to be presented at the
annual meeting of stockholders of the company to be held in 2003 must be
received by the company at its principal executive offices, 12750 S. Kirkwood,
Suite 200, Stafford, Texas 77477, no later than September 27, 2002 to be
included in the proxy statement and form of proxy relating to that meeting.
The cost of solicitation of proxies in the accompanying form will be paid
by the company. In addition to solicitation by use of the mails, the
directors, officers or employees of the company may solicit the return of
proxies by telephone, telecopy or in person.
12
OYO Geospace Corporation
PROXY--ANNUAL MEETING OF STOCKHOLDERS
February 27, 2002
This Proxy is solicited on behalf of the Board of Directors
The undersigned holder of Common Stock of OYO Geospace Corporation ("OYOG")
hereby appoints Thomas L. Davis and Charles H. Still, or either of them,
proxies of the undersigned with full power of substitution, to vote at the
Annual Meeting of Stockholders of OYOG to be held at 9:00 a.m. on Wednesday,
the 27th of February 2002, in the Searls Room at the Sugar Creek Country Club,
420 Sugar Creek Boulevard, Sugar Land, Texas, and at any adjournment or
postponement thereof, the number of votes that the undersigned would be
entitled to cast if personally present.
Please mark, sign, date and return in the enclosed envelope, which requires
no postage if mailed in the United States.
(continued and to be signed on other side)
ELECTION OF DIRECTORS:
FOR all of the nominees WITHHOLD AUTHORITY [_]
listed below [_] to vote for election of directors
(except as indicated to
the contrary below)
NOMINEES: Thomas L. Davis, Ph.D., Ernest M. Hall, Jr.
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
In their discretion, the above-named proxies are authorized to vote upon such
other business as may properly come before the meeting or any adjournment
thereof and upon matters incident to the conduct of the meeting.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR the election of the director nominees named above, or if any one or
more of the nominees becomes unavailable, FOR another nominee or other nominees
to be selected by the Board of Directors.
-----------------------------------
-----------------------------------
Signature of Stockholder(s)
Please sign your name exactly as
it appears hereon. Joint owners
must each sign. When signing as
attorney, executor, administrator,
trustee or guardian, please give
your full title as such.
Date ______________________________