INPUT/OUTPUT, INC.
AMENDED AND RESTATED 1990 STOCK OPTION PLAN
(Amended as of January 17, 1997)
1. PURPOSE.
The 1990 Stock Option Plan (the "Plan") is intended to provide a means of
attracting and retaining in the service of Input/Output, Inc. (the "Company")
and its Subsidiaries certain key employees of ability and potential, to
encourage such persons to exert their best efforts on behalf of the Company and
to align their interests more closely with those of the stockholders. It is
intended that these purposes will be effected through the granting of options,
which may be in the form of stock options intended to qualify ("Incentive Stock
Options") under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") or stock options which are not intended to so qualify ("Non-
Qualified Stock Options")
2. ADMINISTRATION.
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"), which
Committee shall consist of at least two members.
The Committee shall have full power and authority to select the key
employees to be granted options hereunder at such time or times, in such
amounts, and upon such terms and conditions as the Committee may prescribe. The
Committee shall have full power and authority to interpret and construe the Plan
and to establish and amend general rules and regulations for the administration
of the Plan. The Committee's interpretation and construction of the Plan shall
be conclusive and binding upon all persons. Administrative costs in connection
with the Plan shall be paid by the Company. The Committee may delegate to
officers of the Company or any affiliate of the Company the authority, subject
to such terms as the Committee shall determine, to perform specified functions
under the Plan; provided however, that any function relating to an optionee then
subject to Section 16 of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), or relating to a "covered employee" as that term is defined under
Section 162(m) of the Code, shall be performed solely by the Committee in order
to ensure compliance with applicable requirements of Rule 16b-3 promulgated
under the 1934 Act and Section 162(m) of the Code.
No current or previous member of the Board or the Committee, nor any
officer or employee of the Company acting on behalf of the Board or the
Committee, shall be personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the Plan, and all
such members of the Board or the Committee and each and any officer or employee
of the Company acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Company in respect of any such action,
determination or interpretation. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such
individuals may be entitled under the Company's Certificate of Incorporation or
Bylaws, as a matter of law, or otherwise.
Each option shall be evidenced by a written stock option agreement. Unless
otherwise provided in the resolution approving such grant, the date on which the
Committee approves the granting of an option shall be considered the date on
which such option is granted. The Committee shall prescribe the terms of each
option agreement, which terms shall not be inconsistent with the terms of this
Plan.
3. ELIGIBILITY.
The individuals who shall be eligible to participate in the Plan shall be
such key employees (including officers and directors who are employees) of the
Company or of any corporation or entity (hereinafter called a "Subsidiary") in
which the Company has a proprietary interest by reason of stock ownership or
otherwise (including any corporation or entity in which the Company acquires a
proprietary interest after the adoption of this Plan), but only if the Company
owns, directly or indirectly, stock or equity interests possessing not less than
50% of the total combined voting power of all classes of stock or equity
interests in such corporation. Such key employees shall be executive,
administrative, professional or technical personnel of the Company or of any
Subsidiary who have principal or shared responsibility for the management,
direction and financial success of the Company. More than one (1) option may be
granted from time to time to any employee. The holders of options shall not be,
or have any of the rights or privileges of, a stockholder of the Company in
respect of any shares purchasable upon the exercise of any part of an option
unless and until certificates representing such shares shall have been issued by
the Company to such holders.
4. STOCKHOLDER APPROVAL AND TERM.
This Plan shall become effective as of the date approved by the
stockholders of the Company. Subject to its termination pursuant to Section 12,
the Plan shall remain in effect until all options granted hereunder shall have
been exercised, earned, or distributed, or shall have expired or have been
canceled; PROVIDED however, that no options hereunder shall be granted after
September 1, 2000.
5. SHARES SUBJECT TO THE PLAN.
Subject to adjustment pursuant to Section 9, the total number of shares of
common stock of the Company, $.01 par value ("Common Stock"), with respect to
which stock options may be granted hereunder shall not exceed 7,000,000. In the
event that shares of Common Stock are delivered to the Company in full or
partial payment of the exercise price for the exercise of a stock option granted
under the Plan in accordance with Section 6 of this Plan, the number of shares
available for future grants of options under the Plan shall be reduced only by
the net number of shares issued upon the exercise of the option.
The aggregate number of shares of Common Stock that may be represented by
grants of stock options made to any optionee during any consecutive four-year
period may not exceed in any event 750,000 shares. Should any option granted
under this Plan expire or terminate unexercised, in whole or in part, the shares
of Common Stock formerly subject to such option shall again be available for
grant under the Plan. Shares granted or issued hereunder may be authorized but
unissued Common Stock or shares reacquired by the Company and held in its
treasury, as may from time to time be determined by the Committee.
6. STOCK OPTIONS.
All stock options granted hereunder shall be evidenced by written stock
option agreements setting forth the following terms and conditions:
(a) NUMBER OF SHARES. The option agreement shall state the total
number of shares to which it pertains.
(b) EXERCISE PRICE. The exercise price shall be not less than the
fair market value, as defined in Section 11(a) hereof, for each share of
Common Stock on the date of grant of the option. If an Incentive Stock
Option is granted to an employee and if the employee owns or is deemed to
own (by reason of the attribution rules applicable under Section 424(d) of
the Code) more than 10% of the combined voting power of all classes of
stock of the Company (or of any parent corporation
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or Subsidiary of the Company), the exercise price for each share (to the
extent required by the Code at the time of grant) shall not be less than
110% of the fair market value of a share of Common Stock on the date such
Incentive Stock Option is granted.
(c) EXERCISE OF STOCK OPTION. The Committee, in its sole discretion,
shall prescribe in each option agreement the time or times at which a stock
option shall be exercisable, in full or in part; PROVIDED that the
Committee, in its sole discretion, may accelerate the time or times at
which stock options shall became exercisable. In no event may an option be
exercised or shares be issued pursuant to an option if any necessary
listing of the shares on a securities exchange or any registration or
qualification required under applicable state or federal securities laws
has not been accomplished. Unless the Committee directs otherwise, an
option granted hereunder may be exercised no sooner than as follows:
EXERCISE DATE NUMBER OF SHARES
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1. One (1) year from the Up to 25% of the total optioned
date of grant shares under the option
2. Two (2) years from the Up to an additional 25% of the
date of grant total optioned shares
3. Three (3) years from the Up to an additional 25% of the
date of grant total optioned shares
4. Four (4) years from the Up to an additional 25% of the
date of grant total optioned shares
(d) EXERCISE PROCEDURES. A stock option shall be exercised by
delivery of written notice of exercise to the Secretary of the Company and
payment of the full exercise price of the shares for which the option is
being exercised. The exercise price may be paid:
(1) in cash or by check payable to the order of the Company, or
(2) through the delivery of Common Stock owned by the optionee,
having an aggregate fair market value on the date of
exercise equal to the exercise price, or
(3) by any combination of (1) and (2) above.
The Committee may impose such limitations and prohibitions on the use of
shares of Common Stock to exercise an option as it deems appropriate.
Additionally, shares covered by a stock option may be purchased upon
exercise, in whole or in part, in accordance with the applicable stock
option agreement, by authorizing a third party to sell the shares (or a
sufficient portion thereof) acquired upon exercise of a stock option, and
assigning the delivery to the Company of a sufficient amount of the sale
proceeds to pay for all the shares acquired through such exercise and any
tax withholding obligations resulting from such exercise.
(e) PERIOD OF OPTIONS. The Committee shall prescribe in each stock
option agreement the period during which a stock option may be exercised;
PROVIDED HOWEVER, that no stock option shall be granted for a period of
longer than ten years. However, if an employee owns or is deemed to own
(by reason of the attribution rules of Section 424(d) of the Code) more
than 10% of the combined voting power of all classes of stock of the
Company (or any parent corporation or Subsidiary of the Company) and an
Incentive Stock Option is granted to such employee, the term of such
Incentive Stock Option (to the extent required by the Code at the time of
grant) shall be no more than five years from the date of grant.
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(f) INCENTIVE STOCK OPTIONS. To the extent required by the Code for
incentive stock options, the exercise of Incentive Stock Options granted
under the Plan shall be subject to the $100,000 calendar year limit as set
forth in Section 422(d) of the Code; to the extent that any grant exceeds
such $100,000 calendar year limit, the portion of such granted Stock Option
shall be deemed a Non-Qualified Stock Option.
(g) GRANTS OF NON-QUALIFIED OPTIONS TO NEW FULL-TIME EMPLOYEES.
Effective December 19, 1996 and thereafter, the Committee shall be
authorized, at any time and from time, to adopt a policy or policies to
grant non-qualified stock options under the Plan to individuals on and
effective as of the date any such individual becomes a full-time employee
of the Company or a Subsidiary, to purchase a number of shares to be from
time to time designated by the Committee, each such stock option to have an
exercise price equal to the fair market value for each share of Common
Stock as of the date of grant in accordance with sub-Section (b) of this
Section 6, to have a term of ten years from the date of grant and to vest
and become exercisable in accordance with the terms of sub-Section (c) of
Section 6. Notwithstanding the foregoing, nothing contained in this sub-
Section (g) shall confer on any person any contractual or similar rights to
any such grant, or be evidence of any agreement, contract or understanding,
express or implied, that any particular person will be employed by the
Company or any Subsidiary or have rights to any non-qualified stock option.
If Common Stock acquired upon exercise of an Incentive Stock Option is
disposed of by an optionee prior to the expiration of either two years from
the date of grant of such option or one year from the transfer of shares to
the optionee pursuant to the exercise of such option or in any other
disqualifying disposition within the meaning of Section 422 of the Code,
then such optionee shall promptly notify the Company in writing of the date
and terms of such disposition. A disqualifying disposition by an optionee
shall not affect the status of any other option granted under the Plan as
an Incentive Stock Option within the meaning of Section 422 of the Code.
Notwithstanding the provisions of Section 7, the option period of an
optionee's Incentive Stock Options shall terminate no later than ninety
(90) days after termination of such optionee's employment with the Company
and its Subsidiaries; PROVIDED that if such employment terminates by reason
of the death or total and permanent disability (as defined in Section 22(e)
of the Code) of the optionee, then the option period of such optionee's
Incentive Stock Options shall terminate no later than one hundred eighty
(180) days after such termination by reason of death or disability.
7. TERM OF EMPLOYMENT.
In the event an optionee shall cease to be employed by the Company, the
unexercised portions of such optionee's options which are eligible to be
exercised in accordance with this Plan as of the date of such termination of
employment may be exercised within one hundred eighty (180) days after such date
of termination; PROVIDED HOWEVER, that the option shall be exercisable as
follows in the event of death, disability or retirement:
(a) DEATH. In the event of death while employed, all unmatured
installments of the stock option outstanding shall thereupon automatically
be accelerated and become fully vested and exercisable in full, and the
stock option may be exercised, for a period of twelve (12) months after the
optionee's death or until expiration of the option term (if sooner), by the
optionee's estate or personal representative, or by the person who acquired
the right to exercise the option by bequest or inheritance or by reason of
the optionee's death; and
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(b) RETIREMENT OR DISABILITY. In the event of termination of
employment as the result of retirement or disability, all unmatured
installments of the stock option outstanding shall thereupon automatically
be accelerated and become fully vested and exercisable in full, and the
stock option may be exercised in full for a period of twelve (12) months
after such termination or until expiration of the option term (if sooner).
For the purposes of this Plan, the "retirement" of an optionee shall be
deemed to be retirement after qualification therefor pursuant to a
retirement plan or a retirement policy of the Company. Also, for the
purposes of this Plan, the "disability" of an optionee shall mean the total
and permanent disability (as that term is described in Section 22(e) of the
Code) of such optionee.
8. CHANGE OF CONTROL.
In the event of a Change of Control affecting the Company, all unmatured
installments of outstanding options shall automatically be accelerated and
become fully vested and exercisable in full, without regard to the provisions of
subsection 6(c) hereof. For the purposes of this Plan, a "Change in Control"
shall mean the occurrence of any of the following events: (i) there shall be
consummated any merger or consolidation pursuant to which shares of the
Company's Common Stock would be converted into cash, securities or other
property, or any sale, lease, exchange or other disposition (excluding
disposition by way of mortgage, pledge or hypothecation), in one transaction or
a series of related transactions, of all or substantially all of the assets of
the Company (a "Business Combination"), in each case unless, following such
Business Combination, the holders of the outstanding Common Stock immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 51% of the outstanding common stock or equivalent equity interests of
the corporation or entity resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the outstanding
Common Stock, (ii) the stockholders of the Company approve any plan or proposal
for the complete liquidation or dissolution of the Company, (iii) any "person"
(as such term is defined in Section 3(a)(9) or Section 13(d)(3) under the
Securities Exchange Act of 1934 (the "1934 Act") or any "group" (as such term is
used in Rule 13d-5 promulgated under the 1934 Act), other than the Company, any
successor of the Company or any Subsidiary or any employee benefit plan of the
Company or any Subsidiary (including such plan's trustee), becomes a beneficial
owner for purposes of Rule 13d-3 promulgated under the 1934 Act, directly or
indirectly, of securities of the Company representing 40% or more of the
Company's then outstanding securities having the right to vote in the election
of directors, or (iv) during any period of two consecutive years, individuals
who, at the beginning of such period constituted the entire Board, cease for any
reason (other than death) to constitute a majority of the directors, unless the
election, or the nomination for election by the Company's stockholders, of each
new director was approved by a vote of at least a majority of the directors then
still in office who were directors at the beginning of the period.
9. ADJUSTMENTS.
(a) If at any time while the Plan is in effect or unexercised options
are outstanding, there shall be any increase or decrease in the number of
issued and outstanding shares of Common Stock through the declaration of a
stock dividend or through any recapitalization resulting in a stock split-
up, combination, or exchange of shares of Common Stock, then and in such
event:
(1) An appropriate adjustment shall be made in the maximum
number of shares of Common Stock then subject to being
awarded under the Plan to the end
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that the same proportion of the Company's issued and
outstanding shares of Common Stock shall continue to be
subject to being so awarded; and
(2) Appropriate adjustments shall be made in the number of
shares of Common Stock and the exercise price per share
thereof then subject to purchase pursuant to each option
previously granted, to the end that the same proportion of
the Company's issued and outstanding shares of Common Stock
in each such instance shall remain subject to purchase at
the same aggregate exercise price.
(b) Except as otherwise expressly provided herein, the issuance by
the Company of shares of its capital stock of any class, or securities
convertible into shares of capital stock of any class, either in connection
with direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of obligations of the Company convertible
into such shares or other securities, shall not affect, and no adjustment
by reason thereof shall be made with respect to, the number of or exercise
price of shares of Common Stock then subject to outstanding options granted
under the Plan.
Without limiting the generality of the foregoing, the presence of
outstanding options granted under the Plan shall not affect in any manner
the right or power of the Company to make, authorize or consummate (1) any
or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (2) any merger or
consolidation of the Company; (3) any issuance by the Company of debt
securities or preferred or preference stock which would rank senior to the
shares of Common Stock subject to outstanding options; (4) the dissolution
or liquidation of the Company; (5) any sale, transfer or assignment of all
or any part of the assets or business of the Company; or (6) any other
corporate act or proceeding, whether of a similar character or otherwise.
(c) Subject to any required action by the stockholders, if the
Company shall be the surviving or resulting corporation in any
reorganization, merger or consolidation, any outstanding stock option
granted hereunder shall pertain to and apply to the securities or rights
(including cash, property or assets) to which a holder of the number of
shares of Common Stock subject to the stock option would have been
entitled. Notwithstanding any other provision of the Plan, and without
affecting the number of shares reserved or available hereunder, the
Committee shall authorize the issuance, continuation or assumption of
outstanding stock options or provide for other equitable adjustments after
changes in the shares of Common Stock resulting from any merger,
consolidation, sale of assets, acquisition of property or stock,
recapitalization, reorganization, or similar occurrence in which the
Company is the continuing or surviving corporation, upon such terms and
conditions as it may deem necessary in order to preserve optionees' rights
under the Plan.
(d) In the event of any reorganization, merger or consolidation
pursuant to which the Company is not the surviving or resulting
corporation, or of any proposed sale of all or substantially all of the
assets of the Company, there shall be substituted for each share of Common
Stock subject to the unexercised portions of such outstanding stock option
that number of shares of each class of stock or other securities or that
amount of cash, property or assets of the surviving or consolidated company
which were distributed or distributable to the stockholders of the Company
in respect of each share of Common Stock held by them, such outstanding
stock options to be thereafter exercisable for such stock, securities, cash
or property in accordance with their terms.
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(e) Upon the occurrence of each event requiring an adjustment of the
exercise price and/or the number of shares purchasable pursuant to stock
options granted pursuant to the terms of this Plan, the Company shall mail
forthwith to each optionee a copy of its computation of such adjustment
which shall be conclusive and shall be binding upon each such optionee,
except as to any optionee who contests such computation by written notice
to the Company within thirty (30) days after receipt thereof by such
optionee.
10. OPTIONS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED BY OTHER CORPORATIONS.
Stock options may be granted under the Plan from time to time in
substitution for such options held by employees of a corporation or other entity
who become or are about to become key employees of the Company or a Subsidiary
as the result of a merger or consolidation of the employing corporation or
entity with the Company or a Subsidiary or the acquisition by the Company or a
Subsidiary of equity securities of the employing corporation or entity as the
result of which it becomes a Subsidiary. The terms and conditions of the
substitute options so granted may vary from the terms and conditions set forth
in Section 6 of this Plan to such extent as the Board or the Committee, as the
case may be, at the time of grant deem appropriate to conform, in whole or in
part, to the provisions of the options in substitution for which they are
granted.
11. MISCELLANEOUS PROVISIONS.
The following provisions shall apply hereunder:
(a) FAIR MARKET VALUE. For the purposes of this Plan, "fair market
value" of the Company's shares of Common Stock means (i) the closing sales
price per share on the principal securities exchange on which the Common
Stock is traded (or if there is no sale on the relevant date, then on the
last previous day on which a sale was reported), or (ii) the mean between
the closing or average (as the case may be) bid and asked prices per share
of Common Stock on the over-the-counter market, whichever is applicable.
(b) NO RIGHT TO CONTINUE EMPLOYMENT. Nothing in the Plan or in any
stock option agreement confers upon any employee the right to continue in
the employ of the Company or interferes with or restricts in any way the
right of the Company to discharge any employee at any time.
(c) STOCKHOLDERS' RIGHTS. The holder of a stock option shall have
none of the rights or privileges of a stockholder except with respect to
shares which have been issued.
(d) TAX REQUIREMENTS. The employee receiving shares issued upon
exercise of any stock option shall be required to pay the Company the
amount of any taxes which the Company is required to withhold with respect
to such shares of Common Stock. Such payment shall be required to be made
prior to or concurrent with the delivery of any certificate representing
such shares of Common Stock. Such payment may be made in cash, by check,
or through the delivery of shares of Common Stock which the employee owns
or is entitled to receive after payment of the exercise price, which shares
have an aggregate fair market value equal to the required withholding
payment, or any combination thereof. With respect to an Incentive Stock
Option, in the event of a subsequent disqualifying disposition of Common
Stock within the meaning of Section 422 of the Code, such payment of taxes
may be made in cash, by check or through the delivery of shares of Common
Stock which the employee then owns, which shares have an aggregate fair
market value equal to the required withholding payment, or any combination
thereof.
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(e) GOVERNMENT REGULATIONS. Notwithstanding any of the provisions
hereof, or of any written agreements evidencing options granted hereunder,
the obligation of the Company to sell and deliver shares shall be subject
to all applicable laws, rules and regulations and to such approvals by any
government agencies or national securities exchanges as may be required.
The employee shall agree not to exercise any stock option, and the Company
shall not be obligated to issue any shares, if the exercise thereof or if
the issuance of shares shall constitute a violation by the employee or the
Company of any provision of any law or regulation of any governmental
authority.
(f) BENEFIT PLAN COMPUTATIONS. Any benefits received or amounts paid
to an employee with respect to any option under the Plan shall not affect
the level of benefits provided to or received by any employee, or the
employee's estate or beneficiary, pursuant to any employee benefit plan of
the Company.
(g) LIMITED ASSIGNABILITY OF OPTION. A stock option granted to an
optionee may not be transferred or assigned other than (i) by will or the
laws of descent and distribution or (ii) pursuant to a qualified domestic
relations order (as defined in Section 401(a)(13) of the Internal Revenue
Code of 1986, as amended (the "Code") or Section 206(d)(3) of the Employee
Retirement Income Security Act of 1974, as amended). In addition, the
Committee may, in its discretion, authorize all or a portion of the stock
options granted to an optionee to be on terms which permit transfer by such
optionee to (A) the spouse, ex-spouse, children, step children or
grandchildren of the optionee ("Immediate Family Members"), (B) a trust or
trusts for the exclusive benefit of one or more Immediate Family Members,
(C) a partnership or limited liability company in which one or more
Immediate Family Members are the only partners or members, (D) an entity
exempt from federal income tax pursuant to Section 501(c)(3) of the Code or
any successor provision and/or (E) a split interest trust or pooled income
fund described in Section 2522(c)(2) of the Code or any successor
provision, so long as (x) the stock option agreement evidencing any option
granted pursuant to this Plan is approved by the Committee and expressly
provides for transferability in a manner consistent with this Section
11(g), and (y) subsequent transfers of such option shall be prohibited
except for transfers by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order (as described above).
Furthermore, the Committee may, in its discretion, authorize all or a
portion of the stock options granted to an optionee to be on terms which
permit transfer by such optionee to other entities or persons to whom the
Committee may in its discretion permit transfers of the option.
Notwithstanding any provision contained herein to the contrary, in the case
of an Incentive Stock Option, such transfer or assignment may occur only to
the extent it will not result in disqualifying such option as an incentive
stock option under Section 422 of the Code, or any successor provision.
Following any such transfer permitted by the terms hereof, such option
shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer, provided that for purposes of
Sections 1, 2, 5, 6, 8, 9, 11 and 12 of this Plan any reference to
"optionee" shall be deemed to include the transferee. The provisions of
Section 7 of this Plan concerning events of termination of service shall
continue to be applied with respect to the original optionee, following
which event(s) any such affected stock options shall be exercisable by the
transferee only to the extent and for the periods specified therein or in
the stock option agreement. The Committee and the Company shall have no
obligation to inform any transferee of a stock option of any expiration,
termination, lapse or acceleration of such stock option. Subject to the
foregoing, during an optionee's lifetime, stock options granted to an
optionee may be exercised only by the optionee or, provided the particular
stock option agreement so provides, by the optionee's guardian or legal
representative. The designation by an optionee of a beneficiary will not
constitute a transfer of the stock option.
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(h) EMPLOYMENT. Employment by the Company shall be deemed to include
employment by a Subsidiary. The Committee shall have the authority to
determine whether or not an optionee has terminated his employment with the
Company.
(i) INVESTMENT INTENT. The Company may require that there be
presented to and filed with it by any optionee(s) under the Plan, such
evidence as it may deem necessary to establish that the options or the
shares of Common Stock to be purchased or transferred are being acquired
for investment and not with a view to their distribution.
(j) INTERPRETATION. Where the context requires, words in the
masculine gender shall include the feminine and neuter genders, the plural
form of a word shall include the singular form, and the singular form of a
word shall include the plural form. All references in this Plan to
sections of the Code or sections of ERISA shall be deemed to include any
successor provisions to such sections as contained in any laws or
regulations adopted subsequent to August 1, 1996.
12. SUSPENSION, TERMINATION OR AMENDMENT OF THE PLAN.
Subject to the limitations set forth in this Section 12, the Board may at
any time and from time to time, without the consent of the optionees, alter,
amend, revise, suspend, or discontinue the Plan in whole or in part, except that
the Board shall not amend this Plan in any manner which would have the effect of
preventing Incentive Stock Options granted under this Plan from being "incentive
stock options" as defined in Section 422 of the Code, although it is recognized
that stock options are not prevented from being "incentive stock options" at
grant solely because the requirements of Section 422 of the Code are not met
upon exercise of the stock option or sale of the Common Stock acquired upon
exercise, or as a result of any cancellation of the stock option.
In addition, the Board shall have the power to amend the Plan in any manner
advisable in order for stock options granted under the Plan to qualify for the
exemption provided by Rule 16b-3 (or any successor rule relating to exemption
from Section 16(b) of the 1934 Act) or to qualify as "performance-based"
compensation under Section 162(m) of the Code (including amendments as a result
of changes to Rule 16b-3 or Section 162(m) or the regulations promulgated
thereunder to permit greater flexibility with respect to stock options granted
under the Plan), and any such amendment shall, to the extent deemed necessary or
advisable by the Committee, be applicable to any outstanding stock options
theretofore granted under the Plan, notwithstanding any contrary provisions
contained in any stock option agreement. In the event of any such amendment to
the Plan, the holder of any stock option outstanding under the Plan shall, upon
request of the Committee and as a condition to the exercisability thereof,
execute a conforming amendment in the form prescribed by the Committee to any
stock option agreement relating thereto within such reasonable time as the
Committee shall specify in such request. Notwithstanding anything contained in
this Plan to the contrary, unless required by law, no action contemplated or
permitted by this Section 12 shall adversely affect any rights of optionees or
obligations of the Company to optionees with respect to any stock options
theretofore granted under the Plan without the consent of the affected optionee.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed
pursuant to prior action taken by the Board.
INPUT/OUTPUT, INC.
By: /s/ GARY D. OWENS
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Name: GARY D. OWENS
Title: President
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