SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
OYO Geospace Corporation
(Name of Registrant as Specified in its Charter)
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pursuant to Exchange Act Rule 0-11:
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[LOGO]
OYO GEOSPACE
January 27, 2003
Dear Fellow Stockholder:
I am pleased to invite you to attend OYO Geospace Corporation's 2003 Annual
Stockholders' Meeting. We will hold the meeting at 9:00 a.m. on Friday, the
28th of February 2003, 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 2002 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 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 27, 2003
Notice of Annual Meeting of Stockholders to Be Held February 28, 2003
The Annual Meeting of the Stockholders of OYO Geospace Corporation will be
held at 9:00 a.m. on Friday, the 28th of February 2003, in the Searls Room at
the Sugar Creek Country Club, 420 Sugar Creek Boulevard, Sugar Land, Texas, to
elect three directors, each to hold office until the 2006 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 31, 2002 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 27, 2003
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 Friday, the 28th of February 2003, 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 31,
2002. On January 27, 2003, we began mailing to stockholders entitled to vote at
the meeting a proxy card, this proxy statement and our 2002 Annual Report. On
December 31, 2002, there were 5,547,795 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 Ernest M. Hall, Jr. 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, 350
Indiana Street, Suite 800, Golden, Colorado 80401.
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. At this time, no other matters may be
properly brought before the meeting by a stockholder since, under the company's
by-laws, no notice thereof was received by the company by December 29, 2002. If
any other matters not now known are properly brought by the company before the
meeting, and if you return a signed, dated proxy card, the proxy holders may
vote your shares in their discretion as to those other matters.
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 three nominees who receive the most votes will be
elected to the three 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 three 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 II, whose terms expire at the meeting, are Katsuhiko
Kobayashi, Michael J. Sheen and Charles H. Still. Katsuhiko Kobayashi, Michael
J. Sheen and Charles H. Still are nominees to serve in Class II for another
three-year term expiring at the 2006 Annual Meeting of Stockholders. The
directors in Class III are serving terms that expire at the 2004 Annual Meeting
of Stockholders. The directors in Class I are serving terms that expire at the
2005 Annual Meeting of Stockholders.
Information regarding the director nominees and directors whose terms will
continue following the meeting follows.
Class I Directors
(Terms Expiring at the 2005 Annual Meeting of Director
Stockholders) Age Position Since
Thomas L. Davis, Ph.D.(a)(b)......... 55 Director 1997
Ernest M. Hall, Jr................. 77 Director 1994
Nominees for Election for Class II
(Terms Expiring at the 2006 Annual Meeting of
Stockholders)
Katsuhiko Kobayashi(a)............. 57 Director 1995
Michael J. Sheen................... 54 Senior Vice President and 1997
Chief Technical Officer, Director
Charles H. Still(a)(b)............. 60 Director 1997
Class III Directors
(Terms Expiring at the 2004 Annual Meeting of
Stockholders)
Satoru Ohya........................ 70 Director 1994
Gary D. Owens...................... 55 Chairman of the Board, President 1997
and Chief Executive Officer
- --------
(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 again from October 1, 1997 until May 31,
2002. From 1980 to 1985, Mr. Hall served as a consultant to OYO U.S.A. and has
been serving again as a consultant to OYO U.S.A. as well as to the company
since June 1, 2002.
2
Katsuhiko Kobayashi joined OYO Corporation, the sole shareholder of OYO
U.S.A., in 1995 and has been a Managing Director since March 1999 and a senior
executive officer since March 2001. Mr. Kobayashi was elected to serve as the
President of OYO U.S.A. on May 31, 2002 and is currently serving in that
position. From 1967 to 1995, Mr. Kobayashi was employed by Sanwa Bank in its
international banking area, where he last held the position of general manager
of the International Credit Administration Department from 1993 to 1995.
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") beginning
in 1991 and had held other positions at I/O starting in 1977.
Charles H. Still became a director in connection with our initial public
offering in November 1997. He has been Secretary, serving in a non-executive
capacity, 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.
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 was President of OYO Corporation from 1993 until 2001 and has been
serving as the Chairman of OYO Corporation and OYO U.S.A. since March 2001. For
a period of approximately 40 years prior to 2002, Mr. Ohya was 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.
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 beginning in 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 company's system of
internal accounting controls. The audit committee met seven times during the
fiscal year ended September 30, 2002. The audit committee's report appears
below in this proxy statement.
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, 2002. The compensation
committee's report on executive compensation for fiscal 2002 appears below in
this proxy statement.
The board of directors met four times during the fiscal year ended September
30, 2002.
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.
3
Audit Committee Report
We have reviewed and discussed the company's audited financial statements
for the year ended September 30, 2002 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 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 annual financial statements. Based on this review and
these discussions, we recommended to the board of directors that the audited
financial statements be included in the company's Annual Report on Form 10-K
for the fiscal year ended September 30, 2002.
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 this Audit Committee Report 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 Exchange 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.
Thomas L. Davis, Ph.D.
Katsuhiko Kobayashi
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 and committee meetings.
4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The beneficial ownership as of December 31, 2002, of shares of the company's
common stock of each director and named executive officer, each person known to
the company to beneficially own more than 5% of the outstanding common stock
and all directors and named 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 51.4%
OYO Corporation U.S.A.(1)............................. 2,850,000 51.4
Gary D. Owens(2)...................................... 277,500 5.0
Michael J. Sheen(2)................................... 87,500 1.6
Thomas L. Davis(3).................................... 26,608 *
Ernest M. Hall, Jr.................................... 40,000 *
Katsuhiko Kobayashi................................... -- *
Satoru Ohya(1)........................................ 2,850,000 51.4
Charles H. Still(3)................................... 26,608 *
Thomas T. McEntire(4)................................. 50,000 *
R. Chaney & Partners III L.P.(5)...................... 532,000 9.6
Pebbleton Corporation, N.V.(6)........................ 464,900 8.4
Eagle Asset Management(7)............................. 276,800 5.0
Executive officers and directors as a group (8 people) 3,358,216 60.5%
- --------
* 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 4-2-6 Kudan-kita, Chiyoda-ku, Tokyo 102, Japan. The
address of OYO Corporation U.S.A. is 245 Carmelo Avenue, Suite 101,
Pasadena, California 91107. 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 67,500 shares.
(3) Includes unexercised options to purchase 22,050 shares.
(4) Includes unexercised options to purchase 40,000 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 February 4, 2002. 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
- ---- --- --------
Gary D. Owens..... 55 Chairman of the Board, President and Chief Executive Officer
Michael J. Sheen.. 54 Senior Vice President and Chief Technical Officer
Thomas T. McEntire 42 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") beginning in 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, 2002, 2001 and 2000 follows.
Annual Long-term
Compensation Compensation Awards
-------------- ---------------------
Restricted Shares Other(1)
Fiscal Stock Underlying Annual
Name and Principal Position Year Salary Bonus Awards Options Compensation
- --------------------------- ------ -------- ----- ---------- ---------- ------------
Gary D. Owens.............. 2002 $200,000 -- -- -- $5,561
Chairman of the Board, 2001 200,000 -- -- 30,000 5,215
President and CEO 2000 175,000 -- -- 30,000 5,002
Michael J. Sheen........... 2002 175,000 -- -- -- 5,250
Vice President and Chief 2001 175,000 -- -- 30,000 5,192
Technical Officer 2000 150,000 -- -- 30,000 4,673
Thomas T. McEntire......... 2002 150,000 -- -- -- 4,500
Chief Financial Officer 2001 150,000 -- -- 20,000 4,442
2000 125,000 -- -- 20,000 3,894
- --------
(1) Other Annual Compensation includes our contributions to defined
contribution 401(k) retirement savings plans.
Stock Options
Information regarding unexercised options held by the named executive
officers as of September 30, 2002, follows. None of the named executive
officers exercised any options in fiscal 2002. The value of unexercised options
is based on the $12.49 closing price of our common stock on September 30, 2002.
Number of Shares
Underlying Value of Unexercised
Unexercised In-The-Money Options at
Options at September 30, 2002
September 30, 2002 -------------------------------
Name (# shares) Exercisable(1) Unexercisable(1)
---- ------------------ -------------- ----------------
Gary D. Owens..... 90,000 -- --
Michael J. Sheen.. 90,000 -- --
Thomas T. McEntire 55,000 -- --
- --------
(1) None of the Options were "In-The-Money" at September 30, 2002.
6
Employment Agreements
Messrs. Owens and Sheen have entered into employment agreements with the
company. Mr. Owens' annual base salary is $200,000, and Mr. Sheen's annual base
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 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 in a
non-executive capacity.
Board 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.
7
The base annual salaries of the company's named executive officers for
fiscal 2002 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.
Annual Performance Bonuses
In November 2001, 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 fiscal year 2002. 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 2002 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 2002. Because the company's fiscal 2002
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 named
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 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 vested 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 year
2002 and is not expected to impact the company in fiscal year 2003.
The information in this Compensation Committee Report on Executive
Compensation 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 Exchange 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 this report by reference.
Thomas L. Davis, Ph.D.
Charles H. Still
8
Common Stock Performance Comparisons
The following graphs compare the performance of the common stock with the
performance of the Russell 2000 index and the Standard & Poor's Oil & Gas
Equipment and Services index from our initial public offering through the end
of fiscal year 2002.
[CHART]
11/21/1997 9/30/1998 9/30/1999 9/30/2000 9/30/2001 9/30/2002
---------- --------- --------- --------- --------- ---------
OYOG................................ 100 113 78 179 96 89
Russell 2000........................ 100 85 101 124 98 89
S&P Oil & Gas Equipment and Services 100 57 76 105 60 50
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 Equipment and Services index on that day. Reinvestment of all dividends on
stocks comprising the two indices is assumed.
The S&P Oil & Gas Equipment and Services index is a new name for the peer
group index previously called the S&P Oil & Gas (Drilling & Equipment) index,
with some attendant changes in issuers included in the index.
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 of the Exchange Act.
9
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Ohya, a director of the company, is the Chairman of the Board of OYO
Corporation and OYO U.S.A. Mr. Ohya had been the President of OYO Corporation
until 2001, and held other offices of subsidiaries of OYO U.S.A. until that
time. Mr. Kobayashi, also a director of the company, is a Managing Director and
senior executive officer of OYO Corporation and the President of OYO U.S.A. Mr.
Kobayashi also holds offices with many subsidiaries of OYO U.S.A. Mr. Hall,
also a director of the company, was the President of OYO U.S.A. until May 31,
2002. Mr. Hall has been serving as a consultant to the company and to OYO
U.S.A. since June 1, 2002. Mr. Hall and the company have negotiated a monthly
fee of $8,333 for Mr. Hall's consulting services provided to the company. 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 year 2002, 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 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
have 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 2002, we sold approximately $0.1 million in
goods to OYO Corporation and its affiliates and purchased approximately $0.6
million in goods from OYO Corporation (including the products covered by the
Printhead Purchase Agreement).
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP served as the company's principal independent
public accountants for the 2002 fiscal year and has been selected to serve for
the 2003 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 2002 fiscal year, and the
reviews of the financial statements included in the company's Forms 10-Q for
the 2002 fiscal year, were $155,200.
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 2002.
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 2002 were $19,245. We have received services from our
principal
10
accountants, other than for services otherwise covered under the subheadings
"Audit Fees" and "Financial Information Systems Design and Implementation Fees"
above, for fiscal year 2002 for which we have not yet been billed; we expect
that such fees will not exceed $35,000.
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, 2002, all officers, directors and greater than 10% stockholders
complied with all filing requirements applicable to them.
PROPOSALS FOR NEXT ANNUAL MEETING; OTHER MATTERS
Any appropriate proposals of holders of common stock intended to be
presented at the annual meeting of stockholders of the company to be held in
2004 must be received by the company at its principal executive offices, 12750
S. Kirkwood, Suite 200, Stafford, Texas 77477, no later than September 29, 2003
to be included in the proxy statement and form of proxy relating to that
meeting. A matter as to which the company receives notice that is proposed to
be brought before the annual meeting of stockholders of the company in 2004
(outside the process of the Securities and Exchange Commission's rule on
shareholder proposals (described in the preceding sentence) will be considered
not properly brought before that meeting, and will be out of order, unless the
notice as to that matter meets the requirements of the advance notice
provisions of the company's by-laws. That provision requires notice of any
matter, including nomination of a director, to be submitted by a stockholder at
the annual meeting of stockholders of the company in 2004 to be received by the
company no later than December 30, 2003, and to be received by the company no
earlier than September 1, 2003.
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.
11
OYO Geospace Corporation
Holder Account Number
[_] Mark this box with an X if you have
made changes to your name or
address details above.
Annual Meeting Proxy Card
[A] Election of Directors
1. The Board of Directors recommends a vote FOR the listed nominees.
For Withhold
01 - Katsuhiko Kobayashi [ ] [ ]
02 - Michael J. Sheen [ ] [ ]
03 - Charles H. Still [ ] [ ]
[B] Authorized Signatures - Sign Here - This section must be completed for your
instructions to be executed.
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.
Signature 1 - Please keep signature within the box
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Signature 2 - Please keep signature within the box
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Date (mm/dd/yyyy)
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1 U P X H H H P P P P 001548
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Proxy - OYO Geospace Corporation
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Annual Meeting of Stockholders to be Held on
February 28, 2003
This Proxy is solicited on behalf of the Board of Directors
The undersigned holder of Common Stock of OYO Geospace Corporation ("OYOG")
hereby appoints Dr. Thomas L. Davis and Ernest M. Hall, Jr., 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 Friday, the
28th of February 2003, 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.
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 on the reverse, 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.
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)