EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into by and between INPUT/OUTPUT, INC.
(the "Company"), having a business address at 11104 West Airport Boulevard,
Stafford, Texas 77477-3016, and W. J. Zeringue ("Executive"), having a mailing
address at 7930 State Highway 6, Missouri City, Texas 77459.
WHEREAS, the Company wishes to employ the Executive and to assure itself of
the services of the Executive for the period provided in this Agreement, and the
Executive wishes to be employed by the Company for such period on the terms and
conditions hereinafter provided.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and the Executive hereby agree as follows:
1. EMPLOYMENT. Upon the terms and subject to the conditions contained in
this Agreement, the Executive agrees to provide services as provided herein for
the Company during the term of this Agreement. The Executive agrees to devote
his best efforts to the business of the Company, and shall perform his duties in
a diligent and business-like manner, all for the purpose of advancing the
business of the Company.
2. DUTIES. The duties of the Executive shall be those duties which can
reasonably be expected to be performed by a person with the titles of Chairman
of the Board, President and Chief Executive Officer of Input/Output, Inc. The
Executive shall report directly to the Board of Directors of the Company.
3. EMPLOYMENT TERM. Subject to the terms and conditions hereof, the
Company agrees to employ the Executive for a term commencing as of January 1,
1998 (the "Effective Date") and continuing until December 31, 1998 (the "Primary
Term"), unless renewed in accordance with this SECTION 3. Beginning December
31, 1998, this Agreement shall be automatically renewed for successive one-year
terms, unless either the Company or the Executive provides written notice of
election not to renew, at least 60 days before the applicable renewal date.
4. SALARY AND BENEFITS.
(a) BASE SALARY. The Company shall, during the Primary Term of this
Agreement, pay the Executive an annual base salary of $420,000 beginning on
January 15, 1998. Such salary shall be paid in bi-monthly installments,
minus applicable withholding and authorized salary deductions. The base
salary may be reviewed and adjusted by the Board of Directors upon any
renewal of this Agreement under SECTION 3. The Company may not, however,
reduce the Executive's base salary at any time during the Primary Term.
(b) SIGN-ON BONUS. The Company shall pay the Executive a sign-on
bonus of $200,000, payable on January 2, 1998. Such amount shall be paid
in a lump sum, less applicable withholding and authorized salary
deductions.
(c) BONUS. The Company shall pay the Executive a bonus of $400,000
on December 31, 1998 in lieu of the Executive's right to participate in the
Input/Output, Inc. 1996 Management Incentive Plan (the "Incentive Plan")
for fiscal 1998. This bonus shall be paid to the Executive irrespective of
Company performance during 1998, and is contingent only upon the
Executive's being employed by the Company at December 31, 1998. The
Executive will be eligible to participate in the Incentive Plan for awards
based on the Plan's performance criteria for the Company's fiscal 1999.
(d) SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Company agrees that
the Board will select the Executive to be a participant in the
Input/Output, Inc. Supplemental Executive Retirement Plan or any subsequent
supplement executive retirement plan established by the Company.
(e) STOCK OPTIONS. The Executive shall be granted two stock options
effective December 10, 1997, to purchase shares of common stock of the
Company under the Input/Output, Inc. 1990 Stock Option Plan (the "Option
Plan"). Both option grants will be evidenced by standard stock option
agreements. The first grant will provide for an option to purchase 500,000
shares of stock under the Option Plan, having an exercise price equal to
the fair market value of the stock on the date of grant. This option will
vest in equal annual installments over a four-year period beginning on the
date of grant. This option will have a term of ten years and will
otherwise be subject to the standard terms and conditions of the Option
Plan; provided, however, that the option agreement shall expressly provide
that (i) upon the Company's termination of the Executive's employment for
any reason other than for "Cause" (as defined in SECTION 5(c) of this
Agreement), (A) all unvested installments of shares under such option shall
thereupon automatically accelerate and become fully vested, and (B) the
option shall be exercisable from the date of such termination of employment
through that date which is the first anniversary date of such date of
termination, and (ii) upon the occurrence of a "change of control" (as
defined under the terms of the Option Plan as of the date hereof), all
unvested installments of shares under such option shall thereupon
automatically accelerate and become fully vested.
The second stock option grant will provide for an option to purchase
100,000 shares of common stock under the Option Plan. This grant will be
100% vested on December 10, 1998, but will be exercisable commencing upon
that date only if the fair market value per share of the common stock is at
least equal to 120% of the exercise price (i.e., the New York Stock
Exchange
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closing price of the common stock on December 10, 1997). For the
purpose of determining whether the option becomes exercisable beginning on
December 10, 1998, "fair market value" will be based on the average closing
price per share of the common stock on the 30 consecutive trading days
prior to December 10, 1998. If such "fair market value" of the stock on
December 10, 1998 is not equal to at least 120% of the exercise price, then
this option will terminate.
(f) RESTRICTED STOCK. The Executive shall be granted, effective as
of January 1, 1998, 53,000 shares of restricted stock under the terms of
the Input/Output, Inc. 1990 Restricted Stock Plan (the "Restricted Stock
Plan"). The restrictions on the restricted stock will lapse as to one-half
of the restricted stock on January 1, 2000, as to an additional one-fourth
of the restricted stock on January 1, 2001, and as to the remaining
one-fourth of the restricted stock on January 1, 2002; provided, however,
that the award agreement shall expressly provide that (i) any restrictions
on the restricted stock will lapse in full upon the Company's termination
of the Executive's employment for any reason other than for "Cause" (as
defined in SECTION 5(c) of this Agreement) and (ii) any restrictions on the
restricted stock will lapse in full upon the occurrence of a "change of
control" (as defined under the terms of the Restricted Stock Plan as of the
date hereof). The restricted stock will otherwise be subject to the terms
and conditions under the Restricted Stock Plan.
(g) REIMBURSEMENT OF EXPENSES. The Company shall reimburse the
Executive for all out-of-pocket expenses incurred by the Executive in the
course of his duties, in accordance with normal Company policies.
(h) EMPLOYEE BENEFITS. The Executive shall be entitled to
participate in all employee benefit programs generally available to
employees of the Company and to receive all normal perquisites provided to
senior executive officers of the Company.
(i) BENEFITS NOT IN LIEU OF COMPENSATION. No benefit or perquisite
provided to the Executive shall be deemed to be in lieu of base salary,
bonus, or other compensation.
5. TERMINATION OF EMPLOYMENT. The Board of Directors of the Company may
terminate the employment of the Executive at any time as it deems appropriate.
(a) TERMINATION WITHOUT CAUSE. If, during the term of this
Agreement, the Company terminates the Executive's employment for any reason
other than for Cause (as defined in SECTION 5(c) of this Agreement), the
Company shall pay to the Executive an amount (the "Severance Payment")
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equal to (i) two (2), multiplied by (ii) the average of the sum of the
Executive's annual base salary plus annual bonus payments for the three (3)
most recently completed fiscal years of the Company (or, in the event that
the Executive has not been employed by the Company for three (3) fiscal
years of the Company as of the date of his termination of employment with
the Company, (A) two multiplied by (B) the average of the sum of the
Executive's annual base salary plus annual bonus payments during the
Executive's employment with the Company). For these purposes, the bonus
relating to any fiscal year shall be used even if that bonus is actually
paid in a different fiscal year. The amount of any such Severance Payment
shall be paid in a lump sum, less applicable withholding, as soon as
practicable following such termination.
(b) TERMINATION UPON A CHANGE OF CONTROL. If, within one year
following the date of a "Change of Control" of the Company (as defined
below), the Company terminates the Executive's employment for any reason
other than for "Cause" (as defined in SECTION 5(c) of this Agreement) or
the Executive terminates employment with the Company for "Good Reason" (as
defined below), the Company shall pay to the Executive an amount (the
"Change of Control Payment") equal to (A) two (2), multiplied by (B) the
average of the sum of the Executive's annual base salary plus annual bonus
payments for the three (3) most recently completed fiscal years of the
Company (or, in the event that the Executive has not been employed by the
Company for three (3) fiscal years of the Company as of the date of the
Change of Control, (X) two, multiplied by (Y) the average of the sum of the
Executive's annual base salary plus annual bonus payments during the
Executive's employment with the Company). For these purposes, the bonus
relating to any fiscal year shall be used even if that bonus is actually
paid in a different fiscal year. The amount of any such Change of Control
Payment shall be paid in a lump sum, less applicable withholding, as soon
as practicable following such termination, and shall be paid in lieu of any
Severance Payment otherwise payable under SECTION 5(a) above.
(i) For purposes of this SECTION 5(b), "Good Reason" shall mean:
(A) Without his express written consent, the assignment to
Executive of any duties inconsistent with his positions, duties,
responsibilities and status with the Company immediately prior to
a Change of Control, or a change in his reporting
responsibilities, titles or offices as in effect immediately
prior to a Change of Control, or any removal of Executive from or
any failure to re-elect Executive to any of such positions,
except in connection with the termination of his employment for
Cause, death, permanent and total disability (as such term is
defined in
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Section 22(e)(3) of the Internal Revenue Code of 1986,as
amended (the "Code")) or retirement in accordance with normal
Company policies or by Executive other than for Good Reason;
(B) A reduction by the Company in Executive's base salary
as in effect on the date of a Change of Control or as the same
may be increased from time to time thereafter;
(C) The Company's requiring Executive to be based anywhere
other than either the Company's offices at which he was based
immediately prior to a Change of Control or the Company's offices
which are no more than 20 miles from the offices at which the
Executive was based immediately prior to a Change of Control,
except for required travel on the Company's business to an extent
substantially consistent with his business travel obligations
immediately prior to the Change of Control (excluding, however,
any travel obligations prior to the Change of Control that are
associated with or caused by the Change of Control events or
circumstances), or, in the event Executive consents to any
relocation beyond such 20-mile radius, the failure by the Company
to pay (or reimburse Executive) for all reasonable moving
expenses incurred by him relating to a change of his principal
residence in connection with such relocation and to indemnify
Executive against any loss (defined as the difference between the
actual sale price of such residence and the higher of (1) his
aggregate investment in such residence or (2) the fair market
value of such residence as determined by a real estate appraiser
designated by Executive and reasonably satisfactory to the
Company) realized on the sale of Executive's principal residence
in connection with any such change of residence; or
(D) Any failure of the Company to obtain the assumption of,
or the agreement to perform, this Agreement by any successor as
contemplated in SECTION 7(a).
For purposes of this SECTION 5(b)(i), any good faith determination of
"Good Reason" made by the Executive shall be conclusive and binding on
the parties.
(ii) For purposes of this SECTION 5(b), a "Change of Control" of
the Company shall mean the occurrence of any of the following events:
(A) 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
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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 of the Company, (B) the
stockholders of the Company approve any plan or proposal for the
complete liquidation or dissolution of the Company, (C) 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 (D) 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.
(iii) Notwithstanding anything in this Agreement to the
contrary, the total present value of all change of control payments
(i.e., "parachute payments," as defined under Section 280G of the
Code) payable to the Executive or for the Executive's benefit, whether
payable under this Agreement or any other arrangements with the
Company, shall be limited to three times the Executive's base amount
less one dollar and, to the extent necessary, the acceleration of
vesting and exercisability and the payment of benefits to the
Executive shall be reduced so that this limit is not exceeded. The
terms "base amount" and "present value" will have the meanings
assigned to them under Section 280G of the Code. This limit is
intended to avoid excise taxes which
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may be imposed on the Executive under Section 4999 of the Code
and to avoid the disallowance of a deduction to the Company under
Section 280G of the Code.
(c) TERMINATION FOR CAUSE; TERMINATION BY EXECUTIVE. If the Company
shall discharge the Executive for Cause, or if the Executive shall
terminate his employment with the Company due to death, disability, or any
other reason, the Executive shall be entitled to receive only the amount of
base salary accrued by but unpaid to the Executive through the date of such
termination of employment, and the Company shall have no further obligation
to make any payment under this Agreement, except as may otherwise be
provided under the terms of any employee benefit programs in which the
Executive is then participating.
For the purposes of this Agreement, the Company shall have "Cause" to
terminate the Executive's employment hereunder upon (i) the willful and
continued failure by the Executive to perform his duties with the Company
(other than any such failure resulting from incapacity due to physical or
mental illness), after a demand for substantial performance is delivered to
the Executive by the Board which specifically identifies the manner in
which the Board believes that he has not substantially performed his
duties, or (ii) the willful engaging by the Executive in gross misconduct
materially and demonstrably injurious to the Company. For purposes of this
paragraph, no act, or failure to act, on the Executive's part shall be
considered "willful" unless done, or omitted to be done, by him not in good
faith and without reasonable belief that his action or omission was not in
the best interest of the Company. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to him a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds (2/3) of the
entire authorized membership of the Board at a meeting of the Board called
and held for the purpose (after reasonable notice and an opportunity for
the Executive, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board he was guilty of
conduct set forth above in clauses (i) or (ii) of the first sentence of
this paragraph and specifying the particulars thereof in detail.
(d) MITIGATION OF AMOUNTS PAYABLE HEREUNDER. The Executive shall
not be required to mitigate the amount of any payment provided for in this
SECTION 5 by seeking other employment or otherwise, nor shall the amount of
any payment provided for in this SECTION 5 be reduced by any compensation
earned by the Executive as the result of employment by another employer
after the date of termination, or otherwise.
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6. CONFIDENTIALITY AGREEMENT. As a condition of his employment with the
Company, the Executive shall be required to execute the Company's standard
Invention and Confidentiality Agreement.
7. MISCELLANEOUS PROVISIONS.
(a) SUCCESSORS OF THE COMPANY. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of
the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the Company
to obtain such agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Executive to
compensation from the Company in the same amount and on the same terms as
the Executive would be entitled hereunder if the Company terminated the
Executive's employment without Cause, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which executes and
delivers the agreement provided for in this SECTION 7(a) or which otherwise
becomes bound by all the terms and provisions of this Agreement by
operation of law.
(b) SPECIAL REPRESENTATIONS OF EXECUTIVE. The Executive may not
assign his rights or delegate his duties or obligations hereunder without
the written consent of the Company. The Executive represents to the
Company that no previous employer has imposed any contractual restriction
which would, if enforced, have a material adverse effect on the Company.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive
should die while any amounts would still be payable to him hereunder as if
he had continued to live, all such amounts, unless other provided herein,
shall be paid in accordance with the terms of this Agreement to his
designee or, if there be no such designee, to his estate.
(c) NOTICE. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered or certified mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the first page
of this Agreement, provided that all notices to the Company shall be
directed to the
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attention of the Executive Vice President of the Company with a copy
to the Secretary of the Company, or to such other person in writing
in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
(d) AMENDMENT; WAIVER. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Executive and such officer
as may be designated by the Board of Directors of the Company. No waiver
by either party hereto at any time of any breach by the other party hereto
of, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. Except as provided in SECTION 6, no agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set
forth expressly in this Agreement.
(e) INVALID PROVISIONS. Should any portion of this Agreement be
adjudged or held to be invalid, unenforceable or void, such holding shall
not have the effect of invalidating or voiding the remainder of this
Agreement and the parties hereby agree that the portion so held invalid,
unenforceable or void shall, if possible, be deemed amended or reduced in
scope, or otherwise be stricken from this Agreement to the extent required
for the purposes of validity and enforcement thereof.
(f) SURVIVAL OF THE PARTIES' OBLIGATIONS. The obligations of the
Company and the Executive under this Agreement shall survive regardless of
whether the Executive's employment by the Company is terminated,
voluntarily or involuntarily, by the Company or the Executive, with or
without Cause or Good Reason.
(g) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
(h) GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Texas.
(i) CAPTIONS. The use of captions and Section headings herein is for
purposes of convenience only and shall not effect the interpretation or
substance of any provisions contained herein.
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IN WITNESS WHEREOF, the parties hereto have signed this Agreement on the
10th day of December, 1997, but except as otherwise set forth in this Agreement,
effective as of January 1, 1998.
INPUT/OUTPUT, INC.
By: /s/ CHARLES E. SELECMAN
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Name: Charles E. Selecman
Title: Chairman of the Board, President
and Chief Executive Officer
/s/ W. J. ZERINGUE
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W. J. Zeringue
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