<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
3-D GEOPHYSICAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
3-D GEOPHYSICAL, INC.
7076 SOUTH ALTON WAY
BUILDING H
ENGLEWOOD, COLORADO 80112
(303) 290-0214
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 16, 1997
To the Holders of Our Common Stock:
The 1997 Annual Meeting of Stockholders (the "Annual Meeting") of 3-D
GEOPHYSICAL, INC. (the "Company") will be held at the Inverness Hotel and Golf
Club, 200 Inverness Drive West, Englewood, Colorado, on May 16, 1997 at 9:00
a.m., Local Time, for the following purposes:
1. To elect three Class I directors to the Board of Directors.
2. To approve the 3-D Geophysical 1997 Long-Term Incentive Compensation
Plan and the grant of options to the non-employee directors of the
Company to purchase an aggregate of 40,002 shares of the Common Stock of
the Company.
3. To ratify the appointment of Coopers & Lybrand LLP as independent
accountants for the Company for the 1997 fiscal year.
4. To transact other such business as may properly come before the Annual
Meeting.
The Board of Directors has fixed the close of business on April 24, 1997 as
the record date for the determination of stockholders entitled to receive notice
of and to vote at the Annual Meeting or any adjournment thereof. Shares of
Common Stock can be voted at the Annual Meeting only if the holder is present at
the Annual Meeting in person or by valid proxy.
By Order of the Board of Directors,
/s/ RONALD L. KOONS
RONALD L. KOONS
Secretary
Englewood, Colorado
April 25, 1997
- ------------------------------------------------------------------------------
IMPORTANT
Stockholders are requested to DATE, SIGN and MAIL the enclosed proxy. A
postage paid envelope is provided for mailing.
- ------------------------------------------------------------------------------
<PAGE> 3
3-D GEOPHYSICAL, INC.
7076 SOUTH ALTON WAY
BUILDING H
ENGLEWOOD, COLORADO 80112
(303) 290-0214
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 16, 1997
GENERAL
This proxy statement (the "Proxy Statement") is furnished by the board of
directors (the "Board of Directors" or the "Board") of 3-D GEOPHYSICAL, INC., a
Delaware corporation (the "Company"), in connection with the Company's annual
meeting of stockholders (the "Annual Meeting") to be held on May 16, 1997. The
proxy materials are being mailed on or about April 25, 1997 to the Company's
stockholders of record at the close of business on April 24, 1997 (the "Record
Date"). As of the Record Date, there were 11,625,000 shares of the Company's
common stock, $.01 par value per share (the "Common Stock"), issued and
outstanding and entitled to vote at the Annual Meeting. Each holder of shares of
Common Stock issued and outstanding on the Record Date is entitled to one vote
for each such share held on each matter of business to be considered at the
Annual Meeting. The holders of a majority of the voting power of the issued and
outstanding shares of Common Stock entitled to vote at the Annual Meeting,
present in person or represented by proxy, shall constitute a quorum at the
Annual Meeting.
The enclosed proxy is solicited by the Board of Directors of the Company. A
person giving the enclosed proxy has the power to revoke it at any time before
it is exercised by (i) attending the Annual Meeting and voting in person, (ii)
duly executing and delivering a proxy bearing a later date, or (iii) sending a
written notice of revocation to the Company's Secretary. The Company will bear
the cost of the solicitation of proxies, including the charges and expenses of
brokerage firms and others who forward solicitation material to beneficial
owners of Common Stock. In addition to the solicitation of proxies by mail, the
Company may solicit proxies by personal interview, telephone, telegraph or
telefacsimile.
If the enclosed proxy is properly executed and returned to the Company in
time to be voted at the Annual Meeting, it will be voted as specified on the
proxy, unless it is properly revoked prior thereto. Votes cast in person or by
proxy at the Annual Meeting will be tabulated by the inspectors of election
appointed for the meeting. If no specification is made on the proxy as to a
proposal, the shares represented by the proxy will be voted FOR the election of
the nominees for directors named herein, FOR the approval of the 3-D
Geophysical, Inc. 1997 Long-Term Incentive Compensation Plan (the "1997 Plan")
and the grant of options to the non-employee directors of the Company to
purchase an aggregate of 40,002 shares of the Common Stock, FOR the ratification
of the appointment of Coopers & Lybrand L.L.P. ("Coopers & Lybrand") as the
Company's independent accountants for the 1997 fiscal year, and, at the
discretion of the proxy holders, with respect to any other matters that may come
before the Annual Meeting.
Election as a director requires a plurality of the votes of the shares of
Common Stock present in person or represented by proxy at the Annual Meeting.
The affirmative vote of a majority of the voting power of the shares of Common
Stock present in person or represented by proxy at the Annual Meeting will be
required to approve the 1997 Plan and the grant of options to the non-employee
directors of the Company to purchase an aggregate of 40,002 shares of the Common
Stock of the Company and to ratify the appointment of Coopers & Lybrand as
independent accountants of the Company for the 1997 fiscal year.
The inspectors of election will treat abstentions and broker non-votes
(i.e., shares held by brokers or nominees that the broker or nominee does not
have discretionary power to vote on a particular matter and as to
<PAGE> 4
which instructions have not been received from the beneficial owners or persons
entitled to vote) as shares that are present and entitled to vote for purposes
of determining a quorum but as unvoted for purposes of determining the approval
of any matter submitted to stockholders for a vote. Therefore abstentions and
broker non-votes will have the effect of a negative vote. However, with regard
to the election of directors, votes may be cast in favor of or withheld and
directors will be elected by a plurality of the votes cast at the Annual
Meeting. Consequently, votes that are withheld for the election of directors and
broker non-votes will be excluded entirely from the vote and will have no
effect, except to the extent that the failure to vote for a particular nominee
results in another nominee receiving a larger number of votes.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for the Board of
Directors to be divided into three classes. At the Annual Meeting, three
directors will be elected as Class I directors whose terms will expire at the
2000 Annual Meeting of Stockholders. Nominees for election as Class I directors,
Messrs. Robert P. Andrews and Douglas W. Brandrup, existing directors of the
Company, and Wayne P. Widynowski, the Company's Chief Operating Officer, have
been unanimously nominated by the Board of Directors for election at the Annual
Meeting. The Class II directors will serve until the 1998 Annual Meeting of
Stockholders and that class consists of Messrs. Ralph M. Bahna, Richard D.
Davis, Arthur D. Emil and Emir L. Tavella. The Class III directors will serve
until the 1999 Annual Meeting of Stockholders and that class consists of Messrs.
Luis H. Ferran, Joel Friedman and P. Dennis O'Brien.
The shares represented by the enclosed proxy will be voted for the election
as directors of the three nominees named herein, unless a vote is withheld from
any or all of the individual nominees. If any nominee becomes unavailable for
any reason or if a vacancy should occur before the election (which events are
not anticipated), the shares represented by the enclosed proxy may be voted for
such other person as may be determined by the holders of such proxy. The three
nominees receiving the highest number of votes cast at the Annual Meeting will
be elected.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" EACH OF THE
NOMINEES.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
The table below provides information concerning the nominees for election
as directors at the Annual Meeting and the existing directors of the Company,
whose terms continue after the Annual Meeting. Mr. Friedman has served as a
director of the Company since its inception; Messrs. Bahna, Brandrup, Davis,
Emil and Ferran have served as directors since October 1995; Messrs. Andrews and
O'Brien have served as directors since January 1996; and Mr. Tavella has served
as a director since April 1996. Each director has served continuously as a
director of the Company since his first election.
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME POSITION SINCE EXPIRES
---- -------- -------- -------
<S> <C> <C> <C>
CLASS I NOMINEES
Mr. Robert P. Andrews(c).............. Director 1996 2000
Mr. Douglas W. Brandrup(a)(d)......... Director 1995 2000
Mr. Wayne P. Widynowski............... Executive Vice President and Chief -- 2000
Operating Officer; President of
Northern Geophysical, Inc.
("Northern"), a wholly-owned
subsidiary of the Company
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME POSITION SINCE EXPIRES
---- -------- -------- -------
<S> <C> <C> <C>
CLASS II DIRECTORS
Mr. Ralph M. Bahna(c)(d).............. Director 1995 1998
Mr. Richard D. Davis(b)............... President and Chief Executive Officer; 1995 1998
Director
Mr. Arthur D. Emil(c)................. Director 1995 1998
Mr. Emir L. Tavella................... Director 1996 1998
CLASS III DIRECTORS
Mr. Luis H. Ferran(b)................. Executive Vice President -- Latin 1995 1999
American Operations; President of
Geoevaluaciones, S.A. de C.V.
("Geoevaluaciones"), Procesos
Interactivos Avanzados, S.A. de C.V.
("PIASA") and 3-D Geophysical of Latin
America, Inc. ("3-D of Latin
America"), wholly-owned subsidiaries
of the Company; Director
Mr. Joel Friedman(a)(b)............... Chairman of the Board of Directors 1995 1999
Mr. P. Dennis O'Brien(a)(c)(d)........ Director 1996 1999
</TABLE>
- ---------------
(a) Member of the Audit Committee
(b) Member of the Executive Committee
(c) Member of the Compensation Committee
(d) Member of the Stock Option Committee
The name, age and principal occupation, business experience for at least
the past five years and certain other information concerning each nominee and
director is set forth below.
NOMINEES FOR THREE YEAR TERM EXPIRING AT THE 2000 ANNUAL MEETING
<TABLE>
<CAPTION>
NAME (AGE) BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS
---------- -------------------------------------------
<S> <C>
Robert P. Andrews (41)............... Mr. Andrews has served as the president of The Andrews
Group International Inc., a Texas corporation that supplies
goods and services to the oil and gas industry in Central
and South America, in particular Mexico, since 1987 and as
the president of A.G.I. Mexicana, S.A. de C.V., a Mexican
company that sells goods and services relating to computer
hardware and software for use in the oil and gas industry
in Mexico, since 1991. Until February 1996, Mr. Andrews was
also the President and Chairman of the Board of PIASA.
A.G.I. Mexicana conducts the business of The Andrews Group
International, Inc. in Mexico and acts as the exclusive
representative for several companies in Mexico, including
Input/Output, Inc. and Landmark Graphics Corporation.
A.G.I. Mexicana also acts as a non-exclusive distributor
for various corporations in Mexico.
Douglas W. Brandrup (56)............. Mr. Brandrup is a practicing attorney and senior partner at
the law firm of Griggs, Baldwin & Baldwin in New York City,
where he has practiced since 1974. Mr. Brandrup is chairman
of Equity Oil Company, a publicly-held oil and gas
production and exploration company, and has been a director
of that company since 1975.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
NAME (AGE) BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS
---------- -------------------------------------------
<S> <C>
Wayne P. Widynowski (52)............. Mr. Widynowski has served as the Executive Vice President
and Chief Operating Officer and as President of Northern
since February 1996. From 1981 to February 1996, Mr.
Widynowski was employed by Northern's predecessors, most
recently as Executive Vice President. Prior to 1981, Mr.
Widynowski was employed as an operations manager by United
Geophysical, Inc., a subsidiary of the Bendix Corporation.
</TABLE>
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1998 ANNUAL MEETING
<TABLE>
<CAPTION>
NAME (AGE) BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS
---------- -------------------------------------------
<S> <C>
Richard D. Davis (62)................ Mr. Davis has served as President and Chief Executive
Officer since February 1996 and as President of Kemp
Geophysical Inc. ("Kemp"), a wholly-owned subsidiary of the
Company, from June 1996 to December 1996, when Kemp was
merged into Northern. From March 1994 to June 1996, Mr.
Davis was Vice President of Operations of Kemp. From 1988
to March 1994, as president and sole owner of D-Cube
International Inc., he was an independent consultant to
several major oil companies in the area of seismic
acquisition services. From 1983 to 1988, Mr. Davis was a
director of Seismic Enterprises, Inc. (now Seitel, Inc.)
and president and chief operating officer of Triangle
Geophysical Co. From 1979 to 1983, he was executive vice
president of Geo Seismic Services, Inc., which at one time
operated 38 seismic data acquisition crews.
Ralph M. Bahna (54).................. Mr. Bahna currently serves as president of Masterworks
Development Corporation ("Masterworks"), a company that he
founded in 1990 to develop a series of hotels called Club
Quarters. Between 1981 and 1988, Mr. Bahna was chief
executive officer of Cunard Line Limited, which owns, among
other cruise liners and hotels, the Queen Elizabeth 2, and
was also a divisional managing director of Trafalgar House
PLC, the parent company of Cunard Line Limited. From 1988
until he became president of Masterworks in 1990, he
pursued investment and non-profit endeavors.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
NAME (AGE) BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS
---------- -------------------------------------------
<S> <C>
Arthur D. Emil (72).................. Mr. Emil is a practicing attorney and currently of counsel
to the law firm of Kramer, Levin, Naftalis & Frankel in New
York City ("Kramer Levin"). Between 1986 and 1993, he was a
senior partner of and, upon retirement, of counsel to the
law firm of Jones, Day, Reavis & Pogue. Kramer Levin has
provided legal services to the Company since its inception,
including services in connection with the Company's two
public offerings of Common Stock, for which the Company
paid Kramer Levin $1,478,000 in 1996. He served as an
executive officer, director and chairman of the executive
committee of North European Oil Company from 1955 to 1979.
In addition, he served as general counsel for various
companies, including the New England Patriots and Bartell
Media Corp., a communications company. He is a trustee of
various philanthropic institutions. Mr. Emil is a general
partner of South Norwalk Redevelopment Limited Partnership
("SNRLP"), a Connecticut limited partnership formed in 1981
to rehabilitate a portion of Norwalk, Connecticut. On July
25, 1994, a creditor of SNRLP, Scirocco Partners ("SP"),
sought to foreclose on a SNRLP mortgage it held and SNRLP,
seeking to avoid the foreclosure, filed a voluntary
petition for reorganization on August 15, 1994 in the
United States Bankruptcy Court, District of Connecticut
(Case No. 94-51676). In a related case, SP has sued Mr.
Emil in connection with a personal guarantee limited to
interest and certain expenses he gave in connection with
the mortgage. No determination has been made in either the
bankruptcy proceeding or the private suit.
Emir L. Tavella (67)................. Mr. Tavella is a founder, and since May 1995 a partner and
director, of Sagoil S.A., an Argentinian petroleum supply
company associated with Sagoil Inc., a Canadian company.
From February 1987 to April 1995, Mr. Tavella was the
general manager for exploration activities for PLUSPetrol
S.A., an Argentinian petroleum exploration and production
company.
</TABLE>
5
<PAGE> 8
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
<TABLE>
<CAPTION>
NAME (AGE) BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS
---------- -------------------------------------------
<S> <C>
Joel Friedman (57)................... Mr. Friedman has served as Chairman of the Board of
Directors since February 1996 and as Chairman of the Board
of Directors of Paragon Geophysical, Inc., a wholly-owned
subsidiary of the Company ("Paragon") from August 1994 to
December 1996, when Paragon was merged into Northern. He
was President and Chief Executive Officer of the Company
from March 1995 until February 1996. Mr. Friedman has been
since August 1994 a director of and from August 1994 to
October 1996 was the chairman of Consolidated Health Care
Associates, Inc., a Nasdaq National Market listed company,
and was the chief executive officer of that company from
August 1994 until March 1996. Since 1969, he has been an
officer, director and shareholder of Founders Property
Corporation and its affiliated companies, a private real
estate concern. From 1975 to 1986, Mr. Friedman was
president and a director of Kenai Corporation, a
publicly-held company engaged in contract drilling for oil
and natural gas, wellhead equipment manufacturing and
remanufacturing and oil and gas exploration and production.
Luis H. Ferran (48).................. Mr. Ferran has served as Executive Vice President -- Latin
American Operations and as President of Geoevaluaciones and
PIASA since February 1996 and as President of 3-D of Latin
America since its formation by the Company in May 1996. Mr.
Ferran was one of the founding shareholders of
Geoevaluaciones in 1977 and has been General Manager of
Geoevaluaciones since 1982. Prior to forming
Geoevaluaciones, Mr. Ferran was a supervisor with Compania
Mexicana de Exploraciones, S.A. de C.V., a Mexican company
associated with Petroleos Mexicanos, Mexico's national oil
company.
P. Dennis O'Brien (55)............... Mr. O'Brien served as the president and chief operating
officer of Advance Geophysical Corp. ("Advance"), a company
that develops software for the geophysical industry, from
1988 to 1994. In March 1994, Advance merged with a
subsidiary of Landmark Graphics Corporation, a major
software developer in the geophysical industry. From April
1994 to June 1995, Mr. O'Brien served as the chief
operating officer of Advance. Since July 1995, Mr. O'Brien
has provided consulting services to software development
companies serving the petroleum industry.
</TABLE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board has established an Executive Committee consisting of Messrs.
Davis, Ferran and Friedman. It is expected that Mr. Widynowski will be appointed
to the Executive Committee upon his election as a director. The Executive
Committee has the authority to exercise all the powers of the Board in the
management of the business and affairs of the Company, subject to certain
limitations under the General Corporation Law of the State of Delaware. The
Executive Committee acted by unanimous written consent in lieu of meeting three
times in 1996.
The Board has established an Audit Committee consisting of Messrs.
Brandrup, Friedman and O'Brien. The Audit Committee annually will recommend to
the Board the appointment of the independent public accountants to serve as
auditors for the Company. In addition, the Audit Committee will discuss and
review
6
<PAGE> 9
the scope and fees of the prospective annual audit and review the results with
the auditors, review compliance with existing major accounting and financial
policies of the Company, review the adequacy of the financial organization of
the Company and consider comments by the auditors regarding controls and
accounting procedures and management's response to those comments.
The Board has established a Compensation Committee consisting of Messrs.
Andrews, Bahna, Emil and O'Brien. The Compensation Committee meets periodically
to determine the compensation of certain of the Company's executive officers and
other significant employees and the Company's personnel policies and, until
September 1996, administered the Company's 1995 Long-Term Incentive Compensation
Plan (the "1995 Plan"). The Compensation Committee held one meeting and acted by
unanimous written consent in lieu of a meeting two times in 1996.
In September 1996 the Board established a Stock Option Committee consisting
of Messrs. Bahna, Brandrup and O'Brien to administer the 1995 Plan and other
option plans approved by the Board of Directors and to grant options thereunder.
The Stock Option committee will similarly administer the 1997 Plan if it is
approved at the Annual Meeting. The Stock Option Committee acted by unanimous
written consent in lieu of a meeting one time in 1996.
The Company does not have a nominating committee. The functions customarily
performed by a nominating committee are performed by the Board of Directors as a
whole. Any stockholder who wishes to make a nomination at an annual or special
meeting for the election of directors must do so in compliance with the
applicable procedures set forth in the Company's By-laws. The Company will
furnish copies of such By-law provisions upon written request to the Company's
principal executive offices, 7076 South Alton Way, Building H, Englewood,
Colorado 80112, Attn: Secretary.
The Company's Board of Directors held three meetings and acted by unanimous
written consent in lieu of meeting six times in 1996. During 1996, no director
or committee member attended fewer than 75% of the meetings of the Board or the
respective committees on which he served during the periods of his service as a
director or committee member.
DIRECTOR COMPENSATION
Each member of the Board who is not an employee of the Company receives:
(i) an annual retainer of $10,000; (ii) $750 per meeting of the Board of
Directors or any committee thereof at which such director is present in person;
and (iii) reimbursement of all ordinary and necessary expenses incurred in
attending a meeting of the Board of Directors or committee thereof. Directors
who are full-time employees of the Company do not receive any compensation for
serving as directors. Any newly elected or appointed non-employee director
automatically received a nonqualified option under the 1995 Plan to purchase
10,000 shares of Common Stock at an exercise price equal to the fair market
value of the Common Stock on the date of grant. Such option vests in cumulative
installments of one-third on each of the first, second and third anniversaries
of the date of grant and expires on the tenth anniversary of the date of such
grant.
On February 9, 1996, non-employee directors (Messrs. Andrews, Bahna,
Brandrup, Emil and O'Brien) were awarded nonqualified stock options to purchase
10,000 shares of Common Stock pursuant to the 1995 Plan. The exercise price of
these options was equal to the price to the public in the Company's initial
public offering of $7.50 per share. Upon joining the Board in April 1996, Mr.
Tavella was granted an option under the 1995 Plan to purchase 10,000 shares of
Common Stock at an exercise price of $12.3125 per share. On September 30, 1996,
each of such non-employee directors was granted an additional option to purchase
6,667 shares of Common Stock at $8.50 per share, the closing price of the Common
Stock on the date of grant. Such options vested in full on February 6, 1997 and
expire in September 2006. See Proposal 2.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Messrs. Andrews, Bahna,
Emil and O'Brien, who are each independent directors of the Company. None of
these individuals had any "interlock" relationship to report during 1996.
7
<PAGE> 10
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who beneficially own
more than ten percent of the Company's Common Stock to report their ownership of
and transactions in the Company's Common Stock to the Securities and Exchange
Commission and The Nasdaq National Stock Market. Copies of these reports are
also required to be supplied to the Company. The Company believes, based solely
on a review of the copies of such reports received by the Company, that during
1996 all applicable Section 16(a) reporting requirements were complied with.
EXECUTIVE OFFICERS
The executive officers of the Company as of the date of this Proxy
Statement are identified below, together with the information regarding the
business experience of such officers, other than Messrs. Joel Friedman, Richard
D. Davis, Wayne P. Widynowski and Luis H. Ferran, with respect to whom
information is set forth above under the heading "Information Concerning
Directors and Nominees."
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Joel Friedman........................ Chairman of the Board of Directors
Richard D. Davis..................... President and Chief Executive Officer; Director
Wayne P. Widynowski.................. Executive Vice President and Chief Operating Officer;
President of Northern; Nominee for election as a Director
Luis H. Ferran....................... Executive Vice President -- Latin American Operations;
President of Geoevaluaciones, PIASA and 3-D of Latin
America; Director
Ronald L. Koons...................... Vice President, Chief Financial Officer, Secretary and
Treasurer
G.C.L. Kemp.......................... Vice President
</TABLE>
<TABLE>
<CAPTION>
NAME (AGE) BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS
---------- -------------------------------------------
<S> <C>
Ronald L. Koons (49)................. Mr. Koons has served as Vice President, Chief Financial
Officer, Secretary and Treasurer since September 30, 1996.
Mr. Koons was the executive vice president, chief financial
officer and treasurer of Tuboscope Vetco International
Corp. ("Tuboscope"), an oilfield service company, from
October 1993 to April 1996 and senior vice president, chief
financial officer and treasurer of Tuboscope from November
1991 to October 1993. From August 1988 to November 1991,
Mr. Koons was the vice president chief financial officer
and treasurer of Eastman Christensen Company ("Eastman"),
an oilfield service company. He served as controller of
Eastman from June 1987 to August 1988 and as treasurer of
Eastman from September 1986 to June 1987.
G.C.L. Kemp (63)..................... Mr. G.C.L. Kemp has served as a Vice President since
February 1996. Mr. Kemp founded Kemp and was its Chairman
and President from 1978 until June 1996. From 1974 to 1978,
Mr. Kemp was worldwide geophysical operations supervisor
for Phillips Petroleum. From 1964 to 1974, he was manager
for Petty Geophysical Engineering Company. From 1953 to
1964, he was a surveyor and manager of a number of
international seismic operations for Mobil Corp., Shell Oil
Co. and British Petroleum Co., PLC.
</TABLE>
8
<PAGE> 11
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
No salaries were paid during 1995 by the Company. Compensation paid to the
Company's chief executive officer and the four other most highly compensated
executive officers during the fiscal year ended December 31, 1996 (hereinafter,
"1996") is disclosed below. The Board of Directors has not adopted a bonus plan,
but is considering the adoption of a performance-based cash bonus plan in 1997.
Summary Compensation Table. The following table sets forth compensation
earned, whether paid or deferred, by the Company's Chief Executive Officer and
its other four most highly compensated executive officers (collectively, the
"Named Executive Officers") for services rendered in all capacities to the
Company during 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------- ------------
ALL OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
COMPENSATION OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) (#) ($)
--------------------------- ---- ---------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Joel Friedman.................... 1996 125,000 0 82,800(1) 75,000 0
Chairman of the Board
Richard D. Davis................. 1996 155,000 0 0 75,000 0
President and Chief Executive
Officer
Luis Ferran...................... 1996 140,000(2) 0 0 250,000(3) 0
Executive Vice President
Wayne P. Widynowski.............. 1996 140,000 0 0 45,000 0
Executive Vice President
G.C.L. Kemp...................... 1996 75,000 0 50,000(4) 0 0
Vice President
</TABLE>
- ---------------
(1) Consists of an annual office allowance of $75,000 for 1996 and a monthly
automobile allowance totalling $7800.
(2) Includes $77,161 paid to Comercializadora y Arrendadora, a consulting
company owned by Mr. Ferran
(3) Consists of stock options which were granted in January 1996 immediately
prior to the Company's initial public offering at an exercise price of $7.50
per share, equal to the price per share to the public in the initial public
offering.
(4) Consists of 12 monthly payments of $4,167 under Mr. Kemp's non-competition
agreement.
EMPLOYMENT AGREEMENTS; NON-COMPETITION AGREEMENTS
Each of Messrs. Friedman, Davis, Ferran, Widynowski, Koons and Kemp has
entered into an employment agreement with the Company that expires on December
31, 1998, except for the agreement with Mr. Koons, which expires on September
30, 1999, and for the agreement with Mr. Ferran, which expires on December 31,
2000. The employment agreements provide for base annual salaries as follows: Mr.
Friedman: $125,000 plus an annual office allowance of $75,000, a portion of
which is being applied to payments under the Company's New York City lease; Mr.
Davis: $155,000; Mr. Ferran: $140,000; Mr. Widynowski: $140,000; Mr. Koons:
$125,000; Mr. Kemp: $75,000. Certain of the Company's executive officers are
entitled to an automobile allowance, and, in addition, each executive officer is
eligible pursuant to his employment agreement for a bonus to be determined in
the discretion of the Board of Directors or a committee thereof. No bonuses were
paid in respect of 1996.
Each of the employment agreements with Messrs. Friedman, Ferran and Koons
contains a covenant not to compete during the employee's employment with the
Company or its subsidiaries and for one year thereafter unless the Company
terminates the employee's employment without cause. Each of the agreements with
Messrs. Davis and Widynowski contains a similar covenant not to compete but
provides that upon termination of the agreement, other than by the Company for
cause (as defined in the agreement) or by the employee without good reason (as
defined in the agreement), the employee's covenant not to compete will lapse
unless the Company pays the employee 80% of the employee's base salary in the
year following such
9
<PAGE> 12
termination. Mr. Davis' agreement also provides that upon termination under
certain circumstances he will receive a payment for certain relocation expenses
and the continuation of certain benefits for a one-year period. Mr. Kemp
receives a monthly payment of $4,167 for 36 months, ending in January 1999, in
consideration of the covenant not to compete contained in his employment
agreement. In connection with the acquisition by the Company of Geoevaluaciones,
Mr. Ferran and the other former stockholders of Geoevaluaciones entered into
non-competition agreements under which Mr. Ferran and such former stockholders
were entitled to certain additional consideration (see "Certain Relationships
and Related Transactions").
Until September 30, 1996, Mr. John D. White, Jr. served as the Company's
Executive Vice President and Chief Financial Officer under an employment
agreement that was to expire on December 31, 1998 and provided for a base salary
of $150,000. Upon his resignation as an officer of the Company, Mr. White and
the Company entered into an agreement terminating this employment agreement (see
"Certain Relationships and Related Transactions").
Option Grants
Shown below is information regarding grants of stock options Plan during
1996 to the Company's executive officers, including the Named Executive
Officers. The following table also shows the hypothetical value of the options
granted at the end of the option terms (ten years) if the price of the Company
Common Stock were to appreciate annually by 5% and 10%, respectively. These
assumed rates of growth are required by the Securities and Exchange Commission
for illustrative purposes only and are not intended to forecast possible future
stock prices.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------
MARKET PRICE POTENTIAL REALIZABLE
% OF TOTAL OF UNDERLYING VALUE OF ASSUMED
NUMBER OF OPTIONS SECURITIES ON ANNUAL RATES OF
SECURITIES GRANTED TO THE DATE OF STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE GRANT IF FOR OPTION TERM(2)
OPTIONS IN FISCAL PRICE HIGHER THAN EXPIRATION -----------------------------
NAME GRANTED YEAR(1) ($/SH) EXERCISE PRICE DATE 5% 10%
---- ---------- ---------- -------- -------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Luis H. Ferran....... 250,000 28.0% $ 7.50 -- 2/09/06 $3,054,375.00 $4,863,750.00
Richard D. Davis..... 50,000(3) 5.6 7.50 -- 2/09/06 610,875.00 972,750.00
75,000(4) 8.4 12.3125 4/26/06 1,504,279.69 2,395,396.88
Joel Friedman........ 75,000(4) 8.4 12.3125 -- 4/26/06 1,504,279.69 2,395,396.88
Wayne P.
Widynowski......... 45,000(3) 5.0 7.50 -- 2/09/06 549,787.50 875,475.00
75,000(4) 8.4 12.3125 4/26/06 1,504,279.69 2,395,396.88
Ronald L. Koons...... 30,000(5) 3.4 8.25 -- 9/30/06 403,177.50 642,015.00
</TABLE>
- ---------------
(1) The Company granted options to purchase an aggregate of 893,352 shares of
Common Stock to its employees in 1996, of which options to purchase an
aggregate of 628,350 shares of Common Stock were granted under the 1995
Plan.
(2) Represents the product of (i) the difference between (A) the per-share fair
market price at the time of the grant compounded annually at the assumed
rate of appreciation over the term of the option, and (B) the per-share
exercise price of the option, and (ii) the number of shares underlying the
grant at the fiscal year-end.
(3) The option became exercisable in three equal cumulative annual installments
commencing on February 9, 1997.
(4) On April 26, 1996 the Compensation Committee granted nonqualified options to
each of Messrs. Friedman, Davis and Widynowski to purchase 75,000 shares of
Common Stock. These options, which were not granted under the 1995 Plan,
have an exercise price of $12.3125 per share, were granted on the same terms
and conditions as are provided for in the 1995 Plan, vest in cumulative
installments of 18,750 shares on each of the first four anniversaries of the
date of grant and expire ten years after the date of grant.
(5) The option becomes exercisable in three equal cumulative annual installments
commencing on September 30, 1997.
10
<PAGE> 13
Aggregate Option Exercises and Year-End Option Values. Shown below is
information relating to the exercise of stock options during 1996 for the
Company's executive officers, including the Named Executive Officers, and the
year-end value of unexercised options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED VALUE OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
NAME ON EXERCISE REALIZED(1) (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
---- ----------- ----------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
Joel Friedman.............. 0 0 0/ 75,000 $0/0
Richard D. Davis........... 0 0 0/125,000 0/ 75,000
Luis H. Ferran............. 0 0 0/250,000 0/375,000
Wayne P. Widynowski........ 0 0 0/120,000 0/ 67,500
Ronald L. Koons............ 0 0 0/ 30,000 0/ 22,500
G.C.L. Kemp................ 0 0 0/0 0/0
</TABLE>
- ---------------
(1) Market value of underlying securities of $9.00 per share based on the
average of the high and low trading price of the Company's Common Stock on
December 31, 1996, minus the aggregate exercise price.
In addition, during 1996 the Compensation Committee and, after September
1996 the Stock Option Committee, granted pursuant to the 1995 Plan options to
purchase an aggregate of 179,350 shares of Common Stock to other key employees
of the Company at prices ranging from $7.375 to $12.3125 per share. Each of
these options vests in cumulative installments of one-fourth of the number of
shares subject thereto on each of the first four anniversaries of the grant date
and expires in 2006.
The Compensation Committee of the Board of Directors made no determination
with respect to the 1996 cash compensation of any of the Company's executive
officers, all of whose cash compensation was paid pursuant to employment
agreements approved by the entire Board of Directors. Options granted to
executive officers prior to the Company's initial public offering were granted
by the entire Board of Directors pursuant to the 1995 Plan. Options granted to
executive officers after the Company's initial public offering were granted by
the Compensation Committee of the Board of Directors under the 1995 Plan or
pursuant to authority granted to the Committee by the entire Board of Directors.
STOCK PERFORMANCE GRAPH
The following graph depicts the cumulative total return on the Company's
Common Stock compared to the cumulative total return for the S&P 500 Index and
the Geophysical Index, which was selected by the Company on an industry and
line-of-business basis. The graph assumes an investment of $100 on February 6,
1996, when the Company's stock was first traded in a public market. Reinvestment
of dividends is assumed in all cases.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) S&P 500 Geophysical TDGO
<S> <C> <C> <C>
Feb 96 100 100 100
Mar 96 101 118 102
Apr 96 102 135 134
May 96 105 145 131
Jun 96 105 127 122
Jul 96 100 124 92
Aug 96 102 138 102
Sep 96 108 126 94
Oct 96 110 132 94
Nov 96 119 123 102
Dec 96 116 110 102
</TABLE>
11
<PAGE> 14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to beneficial
ownership of Common Stock as of March 31, 1997, by: (i) all persons known to the
Company to be the beneficial owner of 5% or more of the outstanding Common
Stock; (ii) each director; (iii) each executive officer of the Company; and (iv)
all officers and directors of the Company as a group.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
--------------------
NUMBER
NAME OF SHARES PERCENT
---- --------- -------
<S> <C> <C>
Joel Friedman(1)............................................ 456,909 3.9%
599 Lexington Avenue
New York, New York 10022
Richard D. Davis(2)......................................... 49,005 *
Luis H. Ferran(3)........................................... 1,234,249 10.6
Ninos Heroes, No. 51
Col. Tepepan
Mexico, D.F.
Wayne P. Widynowski(4)...................................... 33,750 *
Ronald L. Koons(5).......................................... -- --
G.C.L. Kemp(6).............................................. 45,829 *
Robert P. Andrews(7)........................................ 123,859 1.1
Ralph M. Bahna(7)........................................... 15,802 *
Douglas W. Brandrup(7)...................................... 20,000 *
Arthur D. Emil(7)........................................... 15,789 *
P. Dennis O'Brien(7)........................................ 15,000 *
Emir L. Tavella(7).......................................... 10,000 --
John D. White, Jr. ......................................... 152,342 1.3
All officers and directors as a group (13
persons)(1)(2)(3)(4)(5)(6)(7)............................. 2,172,534 18.7
</TABLE>
- ---------------
* Less than 1%.
(1) Includes an aggregate of 109,540 shares of Common Stock, of which (a) 21,908
shares are owned by Friedman Enterprises, (b) 43,816 shares are owned by Mr.
Friedman's wife, in which shares Mr. Friedman disclaims any beneficial
ownership, and (c) 21,908 shares are owned by each of Mr. Friedman's two
adult children, in which shares Mr. Friedman disclaims any beneficial
ownership. Includes 18,750 shares of Common Stock presently issuable, and
excludes 56,250 shares of Common Stock not presently issuable, upon the
exercise of a stock option that was not granted under the 1995 Plan (see
"Executive Compensation -- Option Grants").
(2) Includes 16,667 shares of Common Stock presently issuable, and excludes
33,333 shares of Common Stock not presently issuable, upon the exercise of a
stock option granted under the 1995 Plan. Includes 18,750 shares of Common
Stock presently issuable, and excludes 56,250 shares of Common Stock not
presently issuable, upon the exercise of a stock option that was not granted
under the 1995 Plan (see "Executive Compensation -- Option Grants").
(3) Includes 83,333 shares of Common Stock presently issuable, and excludes
166,667 shares of Common Stock not presently issuable, upon the exercise of
a stock option granted under the 1995 Plan (see "Executive
Compensation -- Option Grants"). Includes 57,394 shares of Common Stock, all
of which shares are held in trust by a Mexican bank for Mr. Ferran's
benefit. Excludes 15,235 shares of Common Stock owned by Mr. Ferran's wife,
all of which shares are held in trust by a Mexican bank for her benefit, and
in which shares Mr. Ferran disclaims any beneficial ownership.
(4) Includes 15,000 shares of Common Stock presently issuable, and excludes
30,000 shares of Common Stock not presently issuable, upon the exercise of a
stock option granted under the 1995 Plan; includes 18,750 shares of Common
Stock presently issuable, and excludes 56,250 shares of Common Stock not
presently issuable, upon the exercise of a stock option that was not granted
under the 1995 Plan (see "Executive Compensation -- Option Grants").
12
<PAGE> 15
(5) Excludes 30,000 shares of Common Stock issuable upon the exercise of a stock
option granted under the 1995 Plan (see "Executive Compensation -- Option
Grants").
(6) Includes 8,705 shares of Common Stock owned by Mr. Kemp's wife.
(7) Includes 10,000 shares of Common Stock presently issuable upon the exercise
of stock options granted under the 1995 Plan. Excludes 6,667 shares of
Common Stock not presently issuable upon the exercise of a stock option that
was not granted under the 1995 Plan (see "Director Compensation").
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was incorporated in March 1995 and conducted no operations
until February 1996, when it consummated its initial public offering (the
"Initial Public Offering") and acquired Northern, Geoevaluaciones, Kemp, Paragon
(the "Operating Subsidiaries") and PIASA. Simultaneously with the consummation
of the Initial Public Offering, the Company acquired in separate transactions,
in exchange for cash, notes and shares of Common Stock, the Operating
Subsidiaries and PIASA, as described below. Of the approximately $28.7 million
of net proceeds to the Company from the Initial Public Offering, (i)
approximately $13.8 million was used to pay the cash portion of the purchase
price to certain former stockholders of the Operating Subsidiaries and PIASA;
and (ii) approximately $5.9 million was used to repay indebtedness of the
Operating Subsidiaries, including approximately $1.9 million of indebtedness
that was guaranteed by or was owed to certain former stockholders of the
Operating Subsidiaries. In addition, the former stockholders of the Operating
Subsidiaries and PIASA received an aggregate of 1,599,319 shares of Common Stock
having a market value, based on the price to the public in the Initial Public
Offering of $7.50 per share, of approximately $12.0 million in the aggregate.
Under a stock purchase agreement (the "Geoevaluaciones Stock Purchase
Agreement"), the Company purchased from Mr. Ferran, his wife, his father-in-law
and his mother-in-law (collectively, the "Former Geoevaluaciones Stockholders")
all of the issued and outstanding shares of capital stock of Geoevaluaciones. In
connection with this acquisition, the Company entered into a separate
non-competition agreement with each of the Former Geoevaluaciones Stockholders
(collectively, the "Geoevaluaciones Non-Competition Agreement"). The
Geoevaluaciones Stock Purchase Agreement and the Geoevaluaciones Non-Competition
Agreement were entered into on the basis of arm's-length negotiations among the
Former Geoevaluaciones Stockholders and, on behalf of the Company, Messrs.
Friedman and White. Neither the Company nor the Former Geoevaluaciones
Stockholders obtained an appraisal of Geoevaluaciones or such non-competition
covenants in connection with this transaction; at September 30, 1995, the net
book value of Geoevaluaciones was approximately $2.1 million. Pursuant to the
Geoevaluaciones Stock Purchase Agreement, the Company paid to the Former
Geoevaluaciones Stockholders: (i) $2.45 million in cash at closing; and (ii)
$1.0 million by delivery at closing of four promissory notes, payable in
installments at six, 12, 18 and 24 months after the closing in the following
aggregate amounts (which amounts include interest at 8% per annum): $290,000,
$280,000, $270,000 and $260,000, respectively. Pursuant to the Geoevaluaciones
Non-Competition Agreement, the Company paid to the Former Geoevaluaciones
Stockholders: (i) 100,000 shares of Common Stock that was issued at closing to
trusts with Mexican banks for the benefit of the Former Geoevaluaciones
Stockholders, and is to be released February 9, 1998; and (ii) $1.9 million,
reduced by the amount of any liabilities Geoevaluaciones had not disclosed to
the Company and by any amount paid by Geoevaluaciones to settle or otherwise in
connection with Geoevaluaciones' dispute with a supplier, such portion of the
consideration consisting of (a) $1.0 million in cash that was deposited at the
closing in a bank account, and which, subject to any such reduction, may be
disbursed only upon the approval of (1) either Mr. Ferran or another Former
Geoevaluaciones Stockholder, and (2) either Mr. Friedman or Mr. White; and (b)
117,647 shares of Common Stock that were delivered at closing to trusts with
Mexican banks for the benefit of the Former Geoevaluaciones Stockholders, and
which may not be released until June 30, 1997 and then only upon the approval of
a designated representative of the Former Geoevaluaciones Stockholders and Mr.
Friedman. Mr. Ferran entered into an employment agreement with the Company and
serves as Executive Vice President -- Latin American Operations, President of
Geoevaluaciones and a director of the Company. In addition, Mr. Ferran may
receive, pursuant to the Geoevaluaciones Non-Competition Agreement, as described
above, up to a maximum of 57,394 of the shares of Common Stock payable to the
Former Geoevaluaciones
13
<PAGE> 16
Stockholders. Of the amounts paid by the Company to the Former Geoevaluaciones
Stockholders, Mr. Ferran received, as described above, $645,167 in cash, a note
in the principal amount of $263,333, with interest of 8% per annum thereon
payable over two years, and will receive up to $263,334 in cash that may not be
released until June 30, 1997 (see "-- Employment Agreements; Non-Competition
Agreements" and "Security Ownership of Certain Beneficial Owners and
Management").
Under a stock purchase agreement, the Company purchased from Messrs.
Andrews, Ferran and five other stockholders of PIASA all of the issued and
outstanding shares of capital stock of PIASA for approximately $300,000,
consisting of $60,000 in cash and approximately 28,235 shares of Common Stock.
The stock purchase agreement with the former stockholders of PIASA was entered
into on the basis of arm's-length negotiations among Mr. Andrews, the President
and Chairman of the Board of PIASA, and Mr. Ferran, a director and Secretary of
PIASA, on behalf of the former stockholders of PIASA, and Messrs. Friedman and
White, on behalf of the Company. Neither the Company nor PIASA obtained an
appraisal of PIASA in connection with this transaction; at September 30, 1995,
the net book value of PIASA was approximately $288,000. Mr. Ferran received
9,176 shares of Common Stock and $19,500 in connection with the sale of PIASA,
and Mr. Andrews received 10,588 shares of Common Stock and $22,500 in connection
with the sale of PIASA.
Under an asset purchase agreement between Northern's predecessor ("Old
Northern") and the Company, the Company purchased substantially all of Old
Northern's assets related to its land-based seismic data acquisition business.
Neither the Company nor Old Northern obtained an appraisal of the assets of Old
Northern to be acquired by the Company in connection with this transaction; at
September 30, 1995, the net book value of such assets was approximately $2.0
million. Such asset purchase agreement was the result of arm's-length
negotiations among representatives of the Company and representatives of Old
Northern. The aggregate consideration paid by the Company was $10.9 million in
cash. Wayne P. Widynowski, the Vice President of Marketing of Old Northern,
entered into an employment agreement with the Company and serves as Executive
Vice President and Chief Operating Officer of the Company and as President of
Northern (see "-- Employment Agreements; Non-Competition Agreements," and
"Security Ownership of Certain Beneficial Owners and Management").
Under a merger agreement among Paragon, the Company and a subsidiary of the
Company, Paragon merged with the subsidiary with Paragon being the surviving
entity (the "Paragon Merger"). Mr. Friedman, two other individuals and members
of their respective immediate families (the "Former Paragon Stockholders" ) each
owned one-third of the issued and outstanding capital stock of Paragon. In
August 1994, Paragon purchased all of the net assets of Paragon Geophysical,
Inc., an Ohio corporation, for $1.1 million in cash and, in addition, assumed
long-term liabilities of $1.9 million. To finance the purchase, Paragon borrowed
$1.1 million from a commercial bank that was guaranteed by the Former Paragon
Stockholders and the Former Paragon Stockholders contributed approximately
$150,000 in cash. The Former Paragon Stockholders received approximately
1,314,261 shares of Common Stock in connection with the Paragon Merger. In
addition, the Company assumed an aggregate of $4.8 million of Paragon's debt, of
which $1.7 million had been personally guaranteed by Mr. Friedman and certain
other Former Paragon Stockholders. All of this debt was repaid upon consummation
of the Initial Public Offering with a portion of the net proceeds therefrom. The
terms of the Paragon Merger were not determined through arm's-length
negotiations and may have been significantly greater than would have resulted
from arm's-length negotiations. The Company did not obtain an appraisal of
Paragon in connection with the Paragon Merger; at September 30, 1995, the net
book value of Paragon was negative by approximately $496,000. Mr. Friedman, who,
prior to the Paragon Merger, was the President and Chief Executive Officer of
the Company and Chairman of the Board and Chief Executive Officer of Paragon,
together with members of his family, owns a total of 438,159 shares of Common
Stock as a result of the Paragon Merger. Mr. White, who, prior to the Paragon
Merger, was acting Chief Financial Officer of Paragon, served as Executive Vice
President, Chief Financial Officer, Secretary, Treasurer and a director of the
Company until September 30, 1996. In connection with the Paragon Merger, Messrs.
Friedman and White entered into employment agreements. Mr. White entered into a
termination agreement with the Company following his resignation in September
1996, as described below.
14
<PAGE> 17
Under a stock purchase agreement among G.C.L. Kemp and his wife (the
"Former Kemp Stockholders") and the Company (the "Kemp Stock Purchase
Agreement"), the Company purchased all of the issued and outstanding shares of
capital stock of Kemp. The Kemp Stock Purchase Agreement was entered into on the
basis of arm's-length negotiations among G.C.L. Kemp, on behalf of the Former
Kemp Stockholders, and Messrs. Friedman and White, on behalf of the Company, and
the consideration payable to the Former Kemp Stockholders thereunder represents
the value the Former Kemp Stockholders deemed appropriate for their business.
Neither the Company nor the Former Kemp Stockholders obtained an appraisal of
Kemp in connection with this transaction; at September 30, 1995 the net book
value of Kemp was $422,000. The aggregate consideration paid by the Company to
the Former Kemp Stockholders, as modified by amendments in June 1996, was
approximately $919,000, consisting of $625,000 in cash and $294,000 paid by
delivery of 39,176 shares of Common Stock. In addition, the Company assumed and
repaid approximately $152,000 in debt owed by Kemp, of which $135,000 was
guaranteed by Mr. Kemp. In addition, the Company assumed $50,000 of debt owed by
Kemp to Mr. Kemp, of which $25,000 was forgiven by Mr. Kemp in June 1996. Mr.
Kemp entered into an employment agreement pursuant to which he serves as a Vice
President of the Company.
Mr. Andrews is the sole stockholder of The Andrews Group International,
Inc. ("Andrews Group") which, through its Mexican affiliate, A.G.I. Mexicana,
S.A. de C.V. ("A.G.I. Mexicana") (collectively, the "Andrews Companies"), acts
as the exclusive representative for several companies in Mexico, including
Input/Output, Inc. and Landmark Graphics Corporation. Geoevaluaciones and PIASA
purchase goods and services from A.G.I. Mexicana and during 1996 such purchases
totalled approximately $635,000. In addition, as of December 31, 1996 PIASA owed
A.G.I. Mexicana $65,000 for goods and services purchased prior to the Initial
Public Offering. The Company also leased approximately 1,000 channels of 3-D
seismic data acquisition equipment and geophones from Andrews Group under two
separate six-month lease agreements with automatic monthly renewals that
provided for deposits of approximately $293,000 and $77,000, respectively, and
for monthly payments of approximately $110,000 and $29,000, respectively. The
leases provided the Company with options to purchase the equipment for
approximately $2,445,000 and $642,000, respectively, subject to offsets of 80%
of the rental payments during the six months ended March 1, 1997 and a 10%
discount if the options were exercised during such period. The Company used a
portion of the proceeds of its December 1996 public offering to exercise such
options and purchase the equipment for $2,942,000. The Company anticipates that
it will continue to purchase goods and services from the Andrews Companies. The
Company believes that the past transactions with the Andrews Companies have
been, and that any future transactions with the Andrews Companies will be, on
terms no less favorable to the Company than could be obtained from an
unaffiliated third party.
The Company agreed to pay to a consulting company owned by Mr. White
$250,000 for financial advisory and other consulting services in connection with
the structuring, negotiation and consummation of the acquisitions of the
Operating Subsidiaries and PIASA, of which $125,000 was paid upon the
consummation the Initial Public Offering and $125,000 was paid on January 3,
1997. In connection with Mr. White's resignation as an executive officer of the
Company and the termination of his employment agreement on October 1, 1996, the
Company agreed to pay Mr. White $200,000 in January 1997 plus $5,000 per month
through December 31, 1998, the expiration date of the employment agreement, to
provide him with office space in the Company's New York City facility through
December 31, 1997, provided he does not serve as an officer of a competitor of
the Company during that period, and to provide him with certain insurance
benefits through December 31, 1998. In exchange therefor, Mr. White rendered
financial and advisory services to the Company in connection with its December
1996 public offering and the acquisition of J.R.S. Exploration Company, Limited.
The Company leases space in New York City at an annual base rental of
$165,000 to provide offices for Messrs. Friedman and White. Mr. Friedman has
agreed to reimburse the Company for any amounts under the lease that are payable
with respect to space that is not utilized by him and Mr. White and which have
not been paid by sub-lessees.
For information concerning legal fees paid to Kramer Levin, to which firm
Mr. Emil is of counsel, see "Information Concerning Directors and Nominees".
15
<PAGE> 18
PROPOSAL NO. 2
3-D GEOPHYSICAL, INC. 1997 LONG-TERM STOCK INCENTIVE PLAN AND GRANT OF STOCK
OPTIONS TO INDEPENDENT DIRECTORS
There will be presented to the 1997 Annual Meeting a proposal to approve
the 1997 Plan and the grant by the Stock Option Committee on September 30, 1996
to each non-employee director of the Company (Messrs. Andrews, Bahna, Brandrup,
Emil, O'Brien and Tavella) of a nonqualified ten-year option to purchase 6,667
shares of Common Stock at an exercise price of $8.50 per share (collectively,
the "Independent Director Options"). The 1997 Plan was adopted by the Board of
Directors on February 3, 1997, subject to stockholder approval at the Annual
Meeting. The 1997 Plan, if adopted, will supersede the 1995 Plan (together with
the 1997 Plan, the "Plans").
The following summary description, insofar as it relates to the 1997 Plan,
is qualified in its entirety by reference to the full text of the 1997 Plan,
which is set forth in Exhibit A attached to this Proxy Statement.
THE 1997 PLAN
The purpose of the 1997 Plan is to provide certain directors, officers and
other key employees and consultants of the Company and its subsidiaries, as the
Board and the Stock Option Committee shall in its discretion select, with
additional incentives by providing them with the opportunity to increase their
ownership interests in the Company. The 1997 Plan, like the 1995 Plan, is
designed to attract and retain qualified persons as directors, officers and key
employees of the Company so as to maintain and enhance the Company's long-term
performance. As of December 31, 1996, options to purchase an aggregate of
628,350 shares of Common Stock had been granted under the 1995 Plan, leaving
91,650 shares of Common Stock reserved for issuance upon the grant of options
under the 1995 Plan. Thus, the Board of Directors unanimously adopted the 1997
Plan as being in the best long-term interest of the Company and its
stockholders. The maximum number of shares of Common Stock subject to awards
granted under the 1997 Plan is 750,000 shares, which may be authorized and
unissued shares, treasury shares or shares acquired by the Company for purposes
of the 1997 Plan. Shares of Common Stock which are attributable to awards which
have expired, terminated or been cancelled or forfeited during any calendar
year, in addition to shares in respect of which a stock appreciation right
("SAR") is settled for cash or shares tendered in payment upon the exercise of
an option or SAR, are available for issuance or use in connection with future
awards. In the event of a stock split, stock dividend, recapitalization or the
like, the Stock Option Committee will equitably adjust the number of shares
available under the 1997 Plan subject to outstanding awards and the exercise
prices of outstanding awards.
Awards under the 1997 Plan are granted by the Board or the Stock Option
Committee and may include: (i) options to purchase shares of Common Stock,
including incentive stock options ("ISOs"), nonqualified stock options or both;
(ii) SARs, whether in conjunction with the grant of stock options or independent
of such grant; (iii) restricted stock; (iv) restricted stock units; (v) dividend
equivalent rights; and (vi) other stock-based awards. To the extent necessary to
comply with Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and Rule 16b-3 promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), awards granted under the 1997 Plan are not
assignable or transferable except by the laws of descent and distribution.
The Stock Option Committee consists of two or more "Non-Employee Directors"
as defined under Rule 16b-3 promulgated under the Exchange Act. The Board and
the Stock Option Committee are authorized, among other things, to: (i) construe,
interpret and implement the provisions of the 1997 Plan; (ii) select the persons
entitled to receive awards under the 1997 Plan; (iii) determine the form of
awards; (iv) determine the number of shares of Common Stock covered by an award;
and (v) determine the terms and conditions of awards, including any restrictions
or limitations on transfer, any vesting schedules or the acceleration thereof
and any forfeiture provisions or waivers thereof. The determinations of the
Board and the Stock Option Committee are made in their sole discretion and are
conclusive.
All options and SARs not yet exercised shall terminate upon termination of
the grantee's employment for cause. Unless the Stock Option Committee otherwise
specifies: (i) if a grantee's employment terminates for
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reasons other than cause, disability or death, the grantee's options or SARs, or
both, generally will remain exercisable for 90 days after termination to the
extent that they were exercisable at termination, but will not be exercisable
after the scheduled expiration date of the award; and (ii) if a grantee's
employment terminates by reason of death or disability, the grantee's options or
SARs, or both, generally will remain exercisable for one year after termination
to the extent that they were exercisable at termination, but will not be
exercisable after the scheduled expiration date of the award. If a grantee's
employment terminates for any reason, the Company generally will have the right
to require forfeiture of restricted shares in exchange for any amount paid by
the grantee for such shares.
Unless sooner terminated by the Board of Directors, the provisions of the
1997 Plan with respect to the grant of incentive stock options shall terminate
on February 26, 2007. All awards made under the 1997 Plan prior to its
termination shall remain in effect until they are satisfied or terminated. The
Board of Directors may, without stockholder approval, suspend, discontinue,
revise or amend the 1997 Plan at any time or from time to time; provided,
however, that stockholder approval shall be obtained for any amendment for which
such approval is required by Section 422 of the Code or under other applicable
law. The Stock Option Committee may amend any outstanding award, including,
without limitation, by amendment which would accelerate the time or times at
which the award becomes unrestricted or may be exercised, or waive or amend any
goals, restrictions or conditions on the award.
In the event of a merger or consolidation of the Company with or into any
other corporation or entity, outstanding awards shall be assumed or an
equivalent option or right shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation, unless the Stock Option
Committee determines, in the exercise of its sole discretion, to accelerate the
date on which an award becomes exercisable or fully vested. In the absence of an
assumption or substitution of awards, awards shall, to the extent not exercised,
terminate as of the date of the closing of the merger.
GRANTS UNDER THE 1997 PLAN
Stock Options. Each stock option granted under the 1997 Plan will be
exercisable during the period fixed by the Stock Option Committee; however, no
incentive stock option shall be exercisable more than ten years after the date
of grant. Unless the Stock Option Committee expressly provides otherwise, an
option will become exercisable as to 25% of the shares subject thereto on each
of the first through fourth anniversaries of the grant. The purchase price per
share payable upon the exercise of an option (the "option purchase price") will
be established by the Stock Option Committee, provided that the option exercise
price of an ISO shall not be less than 100% of the fair market value of a share
of the Common Stock on the date of grant. The option exercise price is payable
in cash, or by surrender of shares of Common Stock acquired at least six months
prior to the option exercise date and having a fair market value on the date of
the exercise equal to part or all of the option exercise price, or by such other
payment method as the Stock Option Committee may prescribe.
Stock Appreciation Rights. Stock appreciation rights may be granted in
connection with all or any part of, or independently of, any option granted
under the 1997 Plan. Generally, no SAR will be exercisable at a time when any
option to which it relates is not exercisable. The grantee of an SAR has the
right to surrender the SAR and to receive from the Company an amount equal to
the aggregate appreciation (over the exercise price of such right, or over the
option exercise price if the SAR is granted in connection with an option) in the
shares of Common Stock in respect of which such SAR is being exercised. Payment
due upon exercise of an SAR may be in cash, in Common Stock, or partly in each,
as determined by the Stock Option Committee in its discretion.
Dividend Equivalent Rights. The Stock Option Committee may include in any
award a dividend equivalent right entitling the grantee to receive amounts equal
to the ordinary dividends that would be paid, during the time such award is
outstanding, unexercised or not vested, on the shares of Common Stock covered by
such award if the such shares were then outstanding. The Stock Option Committee
shall determine whether such payments may be made in cash, in shares of Common
Stock or in another form, whether they shall be conditioned upon the exercise of
the award to which they relate and such other terms and conditions as the Stock
Option Committee shall deem appropriate.
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Restricted Stock. The Stock Option Committee may grant restricted shares
of Common Stock to such key persons, in such amounts and subject to such terms
and conditions (which may depend upon or be related to performance goals and
other conditions) as the Stock Option Committee shall determine in its
discretion. Certificates for the shares of Common Stock covered by a restricted
stock award will remain in the possession of the Company until such shares are
free of restrictions. Subject to the applicable restrictions, the grantee has
the rights of a stockholder with respect to the restricted stock.
Restricted Stock Units. The Stock Option Committee may grant restricted
stock units to such key persons, in such amounts and subject to such terms and
conditions as the Stock Option Committee shall determine in its discretion. At
the time of grant, the Stock Option Committee shall specify the date or dates on
which the restricted stock units shall become fully vested and nonforfeitable.
On the maturity date, the grantee shall be entitled to one unrestricted, fully
transferable share of Common Stock for each restricted stock unit scheduled to
be paid out on such date. The purchase price, if any, to be paid by the grantee
for such shares of Common Stock will be determined by the Stock Option
Committee.
Other Stock-Based Awards. The Board of Directors may authorize other types
of stock-based awards, which the Stock Option Committee may grant to such key
persons, in such amounts and subject to such terms and conditions as the Stock
Option Committee shall determine in its sole discretion.
No award or right granted to any person under the 1997 Plan shall be
assignable or transferable other than by will or by the laws of descent and
distribution.
FEDERAL INCOME TAX CONSEQUENCES OF THE PLANS
The description of Federal tax consequences set forth below is necessarily
general in nature and does not purport to be complete.
There are generally no Federal tax consequences either to the grantee or
the Company upon the grant of a stock option. On exercise of an ISO the grantee
will not recognize any income, and the Company will not be entitled to a
deduction for tax purposes, although such exercise may give rise to liability
for the grantee under the alternative minimum tax provisions of the Code.
However, if the grantee disposes of shares acquired upon exercise of an ISO
within two years of the date of grant or one year of the date of exercise, the
grantee will recognize compensation income, and the Company will be entitled to
a deduction for tax purposes in the same amount, equal to the excess of the fair
market value of the shares of Common Stock on the date of exercise over the
option exercise price (or the gain on sale, if less); the remainder of the gain
to the grantee will be treated as capital gain. Otherwise, the Company will not
be entitled to any deduction for tax purposes upon disposition of such shares,
and the entire gain for the grantee will be treated as a capital gain. On the
exercise of a nonqualified stock option, the amount by which the fair market
value of the Common Stock on the date of exercise exceeds the option exercise
price will generally be taxable to the grantee as compensation income, and will
generally be deductible for tax purposes by the Company. The disposition of
shares of Common Stock acquired upon exercise of a non-qualified stock option
will generally result in a capital gain or loss for the grantee, but will have
no tax consequences for the Company.
The grant of an SAR, a dividend equivalent right, restricted stock or a
restricted stock unit generally will not result in income for the grantee or in
a tax deduction for the Company. Upon the settlement of such a right or unit and
upon the vesting of restricted stock, the grantee will recognize ordinary income
equal to the fair market value of any shares of Common Stock and/or any cash
received, and the Company will be entitled to a tax deduction in the same
amount. With respect to an award of restricted stock, the grantee may elect to
recognize ordinary income equal to the fair market value of the shares less any
amount paid for them at the time of grant, and the Company will be entitled to a
tax deduction in the same amount. Dividends paid on forfeitable restricted
shares are treated as compensation for Federal tax purposes. A grant of
unrestricted shares of Common Stock will result in income for the grantee, and a
tax deduction for the Company, generally equal to the fair market value of such
shares less any amount paid for them.
Limitations on the Company's Compensation Deduction. Section 162(m) of the
Code limits the deduction which the Company may take for otherwise deductible
compensation payable to certain executive
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<PAGE> 21
officers to the extent that compensation paid to such officers for a year
exceeds $1 million, unless such compensation meets certain criteria. Although
the Company believes that compensation realized from stock options and stock
appreciation rights granted under the 1997 Plan generally will satisfy the
requirements of Section 162(m) of the Code, there is no assurance such awards
will satisfy such requirements. In addition, because other awards under the 1997
Plan will generally not meet the requirements of Section 162(m) of the Code, the
deduction attributable to any compensation realized under any such awards to the
affected executive officers may be limited under Section 162(m) of the Code.
THE INDEPENDENT DIRECTOR OPTIONS
The Independent Director Options, which were not granted pursuant to the
1995 Plan, vested in full on February 6, 1997, subject to the approval of the
Company's stockholders at the Annual Meeting. The purpose of the Independent
Director Options is to retain qualified persons as non-employee directors of the
Company so as to maintain and enhance the Company's long-term performance. The
Independent Director Options were also granted in response to the expectation of
certain directors that they would be entitled to exercise options to purchase an
aggregate of 10,000 shares of Common Stock after having served on the Board of
Directors for one year. Each of the Independent Director Options provides for an
exercise price of $8.50 per share of Common Stock. On April 9, 1997, the closing
price of the Common Stock on the Nasdaq National Market was $5.625 per share.
VOTING ON PROPOSAL
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or by proxy at the Annual Meeting and entitled to vote
thereon is required for approval of the 1997 Plan and the grant of the
Independent Director Options.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE 1997 PLAN AND THE GRANT OF THE INDEPENDENT DIRECTOR OPTIONS.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Coopers & Lybrand as independent
accountants to audit the financial statements of the Company for the fiscal year
ending December 31, 1997, subject to ratification by the stockholders at the
Annual Meeting. If the stockholders reject the appointment, the Board of
Directors will reconsider its selection. If the stockholders ratify the
appointment, the Board of Directors, in its sole discretion, may still direct
the appointment of new independent accountants at any time during the year if
the Board of Directors believe that such a change would be in the best interests
of the Company.
Coopers & Lybrand has audited the Company's consolidated financial
statements since the Company's inception in 1995. The Company has been advised
that a representative of Coopers & Lybrand will be present at the Annual
Meeting, will have the opportunity to make a statement, and is expected to be
available to respond to appropriate questions.
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or by proxy at the Annual Meeting and entitled to vote
thereon is required for ratification of the appointment of Coopers & Lybrand as
the Company's independent accountants for the fiscal year ending December 31,
1997.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS.
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PROPOSALS BY STOCKHOLDERS
Any proposal which a stockholder proposes to present at the Company's 1998
Annual Meeting of Stockholders must be received in writing at the Company's
principal executive offices, 7076 South Alton Way, Building H, Englewood,
Colorado 80112, Attention: Secretary, by no later than January 15, 1998, if such
proposal is to be considered for inclusion in the Company's proxy statement and
form of proxy relating to such meeting, which meeting the Company expects will
be held in May, 1998. Any such proposals must comply in all respects with the
rules and regulations of the Securities and Exchange Commission. Stockholders of
the Company who intend to bring business before the meeting must also comply
with the applicable procedures set forth in the Company's By-laws. The Company
will furnish copies of such By-law provisions upon written request to the
Secretary at the aforementioned address.
1996 ANNUAL REPORT AND FORM 10-K
A copy of the 1996 Annual Report to Stockholders accompanies this Proxy
Statement. The Annual Report incorporates the Company's Annual Report on Form
10-K for the year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and contains information concerning the Company and its
operations.
OTHER BUSINESS
The Annual Meeting is being held for the purposes set forth in the Notice
which accompanies this Proxy Statement. The Board is not presently aware of any
business to be transacted at the Annual Meeting other than as set forth in the
Notice but, if any such matter comes before the Annual Meeting, the proxies
named in the accompanying proxy card will vote in their discretion on such
matter.
By Order of the Board of Directors,
/s/ JOEL FRIEDMAN
JOEL FRIEDMAN
Chairman of the Board
Englewood, Colorado
April 25, 1997
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3-D GEOPHYSICAL
1997 LONG-TERM STOCK INCENTIVE PLAN
<PAGE> 24
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
GENERAL
1.1 Purpose..................................................... 1
1.2 Administration.............................................. 1
1.3 Persons Eligible for Awards................................. 1
1.4 Types of Awards Under Plan.................................. 2
1.5 Shares Available for Awards................................. 2
1.6 Definitions of Certain Terms................................ 2
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards................................ 3
2.2 No Rights as a Shareholder.................................. 3
2.3 Grant of Stock Options, Stock Appreciation Rights and
Dividend Equivalent Rights................................ 3
2.4 Exercise of Options and Stock Appreciation Rights........... 5
2.5 Termination of Employment; Death............................ 5
2.6 Grant of Restricted Stock................................... 6
2.7 Grant of Restricted Stock Units............................. 6
2.8 Other Stock-Based Awards.................................... 7
2.9 Grant of Dividend Equivalent Rights......................... 7
2.10 Right of Recapture.......................................... 7
ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan; Modification of Awards............... 8
3.2 Tax Withholding............................................. 8
3.3 Restrictions................................................ 8
3.4 Nonassignability............................................ 9
3.5 Requirement of Notification of Election Under Section 83(b)
of the Code............................................... 9
3.6 Requirement of Notification Upon Disqualifying Disposition
Under Section 421(b) of the Code.......................... 9
3.7 Change in Control........................................... 9
3.8 Right of Discharge Reserved................................. 10
3.9 Nature of Payments.......................................... 10
3.10 Non-Uniform Determinations.................................. 10
3.11 Other Payments or Awards.................................... 10
3.12 Section Headings............................................ 10
3.13 Effective Date and Term of Plan............................. 10
3.14 Governing Law............................................... 11
</TABLE>
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ARTICLE I
GENERAL
1.1 PURPOSE
The purpose of the 3-D Geophysical 1997 Long-Term Stock Incentive Plan (the
"Plan") is to provide for officers, other employees and directors of, and
consultants to, 3-D Geophysical, Inc. (the "Company") and its subsidiaries an
incentive (a) to enter into and remain in the service of the Company or its
subsidiaries, (b) to enhance the long-term performance of the Company and its
subsidiaries, and (c) to acquire a proprietary interest in the success of the
Company and its subsidiaries.
1.2 ADMINISTRATION
1.2.1 Subject to Section 1.2.6, the Plan shall be administered by the
Compensation Committee (the "Committee") of the board of directors of the
Company (the "Board"), which shall consist of not less than two directors. The
members of the Committee shall be appointed by, and serve at the pleasure of,
the Board. To the extent required for transactions under the Plan to qualify for
the exemptions available under Rule 16b-3 ("Rule 16b-3") promulgated under the
Securities Exchange Act of 1934 (the "1934 Act"), all actions relating to awards
to persons subject to Section 16 of the 1934 Act shall be taken by the Board
unless each person who serves on the Committee is a "non-employee director"
within the meaning of Rule 16b-3 or such actions are taken by a sub-committee of
the Committee (or the Board) comprised solely of "non-employee directors". To
the extent required for compensation realized from awards under the Plan to be
deductible by the Company pursuant to section 162(m) of the Internal Revenue
Code of 1986 (the "Code"), the members of the Committee shall be "outside
directors" within the meaning of section 162(m).
1.2.2 The Committee shall have the authority (a) to exercise all of the
powers granted to it under the Plan, (b) to construe, interpret and implement
the Plan and any Plan Agreements executed pursuant to Section 2.1, (c) to
prescribe, amend and rescind rules and regulations relating to the Plan,
including rules governing its own operations, (d) to make all determinations
necessary or advisable in administering the Plan, (e) to correct any defect,
supply any omission and reconcile any inconsistency in the Plan, and (f) to
amend the Plan to reflect changes in applicable law.
1.2.3 Actions of the Committee shall be taken by the vote of a majority of
its members. Any action may be taken by a written instrument signed by a
majority of the Committee members, and action so taken shall be fully as
effective as if it had been taken by a vote at a meeting.
1.2.4 The determination of the Committee on all matters relating to the
Plan or any Plan Agreement shall be final, binding and conclusive.
1.2.5 No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any award
thereunder.
1.2.6 Notwithstanding anything to the contrary contained herein: (a) until
the Board shall appoint the members of the Committee, the Plan shall be
administered by the Board; and (b) the Board may, in its sole discretion, at any
time and from time to time, grant awards or resolve to administer the Plan. In
either of the foregoing events, the Board shall have all of the authority and
responsibility granted to the Committee herein.
1.3 PERSONS ELIGIBLE FOR AWARDS
Awards under the Plan may be made to such directors, officers and other
employees of the Company and its subsidiaries (including prospective employees
conditioned on their becoming employees), and to such consultants to the Company
and its subsidiaries (collectively, "key persons") as the Committee shall in its
discretion select.
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1.4 TYPES OF AWARDS UNDER PLAN
Awards may be made under the Plan in the form of (a) incentive stock
options (within the meaning of section 422 of the Code), (b) nonqualified stock
options, (c) stock appreciation rights, (d) dividend equivalent rights, (e)
restricted stock, (f) restricted stock units and (g) other stock-based awards,
all as more fully set forth in Article II. The term "award" means any of the
foregoing. No incentive stock option may be granted to a person who is not an
employee of the Company on the date of grant.
1.5 SHARES AVAILABLE FOR AWARDS
1.5.1 The total number of shares of common stock of the Company, par value
$0.01 per share ("Common Stock"), which may be transferred pursuant to awards
granted under the Plan shall not exceed 750,000 shares. Such shares may be
authorized but unissued Common Stock or authorized and issued Common Stock held
in the Company's treasury or acquired by the Company for the purposes of the
Plan. The Committee may direct that any stock certificate evidencing shares
issued pursuant to the Plan shall bear a legend setting forth such restrictions
on transferability as may apply to such shares pursuant to the Plan.
1.5.2 Subject to any required action by the shareholders of the Company,
the number of shares of Common Stock covered by each outstanding award, the
number of shares available for awards, the number of shares that may be subject
to awards to any one employee, and the price per share of Common Stock covered
by each such outstanding award shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an award.
After any adjustment made pursuant to this Section 1.5.2, the number of shares
subject to each outstanding award shall be rounded to the nearest whole number.
1.5.3 Except as provided in this Section 1.5 and in Section 2.2.8, there
shall be no limit on the number or the value of the shares of Common Stock that
may be subject to awards to any individual under the Plan.
1.6 DEFINITIONS OF CERTAIN TERMS
1.6.1 The "Fair Market Value" of a share of Common Stock on any day shall
be determined as follows.
(a) If the principal market for the Common Stock (the "Market") is a
national securities exchange or the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") National Market, the last
sale price or, if no reported sales take place on the applicable date, the
average of the high bid and low asked price of Common Stock as reported for
such Market on such date or, if no such quotation is made on such date, on
the next preceding day on which there were quotations, provided that such
quotations shall have been made within the ten (10) business days preceding
the applicable date;
(b) If the Market is the NASDAQ National List, the NASDAQ Supplemental
List or another market, the average of the high bid and low asked price for
Common Stock on the applicable date, or, if no such quotations shall have
been made on such date, on the next preceding day on which there were
quotations, provided that such quotations shall have been made within the
ten (10) business days preceding the applicable date; or,
(c) In the event that neither paragraph (a) nor (b) shall apply, the
Fair Market Value of a share of Common Stock on any day shall be determined
in good faith by the Committee.
1.6.2 The term "incentive stock option" means an option that is intended to
qualify for special federal income tax treatment pursuant to sections 421 and
422 of the Code, as now constituted or subsequently
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<PAGE> 27
amended, or pursuant to a successor provision of the Code, and which is so
designated in the applicable Plan Agreement. Any option that is not specifically
designated as an incentive stock option shall under no circumstances be
considered an incentive stock option. Any option that is not an incentive stock
option is referred to herein as a "nonqualified stock option."
1.6.3 The term "employment" means, in the case of a grantee of an award
under the Plan who is not an employee of the Company, the grantee's association
with the Company or a subsidiary as a director, consultant or otherwise.
1.6.4 A grantee shall be deemed to have a "termination of employment" upon
ceasing to be employed by the Company and all of its subsidiaries or by a
corporation assuming awards in a transaction to which section 425(a) of the Code
applies. The Committee may in its discretion determine (a) whether any leave of
absence constitutes a termination of employment for purposes of the Plan, (b)
the impact, if any, of any such leave of absence on awards theretofore made
under the Plan, and (c) when a change in a non-employee's association with the
Company constitutes a termination of employment for purposes of the Plan. The
Committee shall have the right to determine whether the termination of a
grantee's employment is a dismissal for cause and the date of termination in
such case, which date the Committee may retroactively deem to be the date of the
action that is cause for dismissal. Such determinations of the Committee shall
be final, binding and conclusive.
1.6.5 The term "cause," when used in connection with termination of a
grantee's employment, shall have the meaning set forth in any then-effective
employment agreement between the grantee and the Company or a subsidiary
thereof. In the absence of such an employment agreement, "cause" means: (a)
conviction of any crime (whether or not involving the Company) constituting a
felony in the jurisdiction involved; (b) engaging in any substantiated act
involving moral turpitude; (c) engaging in any act which, in each case,
subjects, or if generally known would subject, the Company to public ridicule or
embarrassment; (d) material violation of the Company's policies, including,
without limitation, those relating to sexual harassment or the disclosure or
misuse of confidential information; (e) serious neglect or misconduct in the
performance of the grantee's duties for the Company or a subsidiary or willful
or repeated failure or refusal to perform such duties; in each case as
determined by the Committee, which determination shall be final, binding and
conclusive.
ARTICLE II
AWARDS UNDER THE PLAN
2.1 AGREEMENTS EVIDENCING AWARDS
Each award granted under the Plan (except an award of unrestricted stock)
shall be evidenced by a written agreement ("Plan Agreement") which shall contain
such provisions as the Committee in its discretion deems necessary or desirable.
By accepting an award pursuant to the Plan, a grantee thereby agrees that the
award shall be subject to all of the terms and provisions of the Plan and the
applicable Plan Agreement.
2.2 NO RIGHTS AS A SHAREHOLDER
No grantee of an option or stock appreciation right (or other person having
the right to exercise such award) shall have any of the rights of a shareholder
of the Company with respect to shares subject to such award until the issuance
of a stock certificate to such person for such shares. Except as otherwise
provided in Section 1.5.3, no adjustment shall be made for dividends,
distributions or other rights (whether ordinary or extraordinary, and whether in
cash, securities or other property) for which the record date is prior to the
date such stock certificate is issued.
2.3 GRANT OF STOCK OPTIONS, STOCK APPRECIATION RIGHTS AND DIVIDEND EQUIVALENT
RIGHTS
2.3.1 The Committee may grant incentive stock options and nonqualified
stock options (collectively, "options") to purchase shares of Common Stock from
the Company, to such key persons, in such amounts and subject to such terms and
conditions, as the Committee shall determine in its discretion, subject to the
provisions of the Plan.
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2.3.2 The Committee may grant stock appreciation rights to such key
persons, in such amounts and subject to such terms and conditions, as the
Committee shall determine in its discretion, subject to the provisions of the
Plan. Stock appreciation rights may be granted in connection with all or any
part of, or independently of, any option granted under the Plan. A stock
appreciation right granted in connection with a nonqualified stock option may be
granted at or after the time of grant of such option. A stock appreciation right
granted in connection with an incentive stock option may be granted only at the
time of grant of such option.
2.3.3 The grantee of a stock appreciation right shall have the right,
subject to the terms of the Plan and the applicable Plan Agreement, to receive
from the Company an amount equal to (a) the excess of the Fair Market Value of a
share of Common Stock on the date of exercise of the stock appreciation right
over (b) the exercise price of such right as set forth in the Plan Agreement (or
over the option exercise price if the stock appreciation right is granted in
connection with an option), multiplied by (c) the number of shares with respect
to which the stock appreciation right is exercised. Payment upon exercise of a
stock appreciation right shall be in cash or in shares of Common Stock (valued
at their Fair Market Value on the date of exercise of the stock appreciation
right) or both, all as the Committee shall determine in its discretion. Upon the
exercise of a stock appreciation right granted in connection with an option, the
number of shares subject to the option shall be correspondingly reduced by the
number of shares with respect to which the stock appreciation right is
exercised. Upon the exercise of an option in connection with which a stock
appreciation right has been granted, the number of shares subject to the stock
appreciation right shall be correspondingly reduced by the number of shares with
respect to which the option is exercised.
2.3.4 Each Plan Agreement with respect to an option shall set forth the
amount (the "option exercise price") payable by the grantee to the Company upon
exercise of the option evidenced thereby. The option exercise price per share
shall be determined by the Committee in its discretion; provided, however, that
the option exercise price of an incentive stock option shall be at least 100% of
the Fair Market Value of a share of Common Stock on the date the option is
granted, and provided further that in no event shall the option exercise price
be less than the par value of a share of Common Stock.
2.3.5 Each Plan Agreement with respect to an option or stock appreciation
right shall set forth the periods during which the award evidenced thereby shall
be exercisable, whether in whole or in part. Such periods shall be determined by
the Committee in its discretion; provided, however, that no incentive stock
option (or a stock appreciation right granted in connection with an incentive
stock option) shall be exercisable more than 10 years after the date of grant.
2.3.6 The Committee may in its discretion include in any Plan Agreement
with respect to an option (the "original option") a provision that an additional
option (the "additional option") shall be granted to any grantee who, pursuant
to Section 2.4.3(b), delivers shares of Common Stock in partial or full payment
of the exercise price of the original option. The additional option shall be for
a number of shares of Common Stock equal to the number thus delivered, shall
have an exercise price equal to the Fair Market Value of a share of Common Stock
on the date of exercise of the original option, and shall have an expiration
date no later than the expiration date of the original option. In the event that
a Plan Agreement provides for the grant of an additional option, such Agreement
shall also provide that the exercise price of the original option be no less
than the Fair Market Value of a share of Common Stock on its date of grant, and
that any shares that are delivered pursuant to Section 2.4.3(b) in payment of
such exercise price shall have been held for at least six months.
2.3.7 To the extent that the aggregate Fair Market Value (determined as of
the time the option is granted) of the stock with respect to which incentive
stock options granted under this Plan and all other plans of the Company and any
subsidiary are first exercisable by any employee during any calendar year shall
exceed the maximum limit (currently, $100,000), if any, imposed from time to
time under section 422 of the Code, such options shall be treated as
nonqualified stock options.
2.3.8 Notwithstanding the provisions of Sections 2.3.4 and 2.3.5, to the
extent required under section 422 of the Code, an incentive stock option may not
be granted under the Plan to an individual who, at the time the option is
granted, owns stock possessing more than 10% of the total combined voting power
of all classes of
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stock of his employer corporation or of its parent or subsidiary corporations
(as such ownership may be determined for purposes of section 422(b)(6) of the
Code) unless (a) at the time such incentive stock option is granted the option
exercise price is at least 110% of the Fair Market Value of the shares subject
thereto and (b) the incentive stock option by its terms is not exercisable after
the expiration of 5 years from the date it is granted.
2.4 EXERCISE OF OPTIONS AND STOCK APPRECIATION RIGHTS
Subject to the provisions of this Article II, each option or stock
appreciation right granted under the Plan shall be exercisable as follows:
2.4.1 Unless the applicable Plan Agreement otherwise provides, an option or
stock appreciation right shall become exercisable in four substantially equal
installments, on each of the first, second, third and fourth anniversaries of
the date of grant, and each installment, once it becomes exercisable, shall
remain exercisable until expiration, cancellation or termination of the award.
2.4.2 Unless the applicable Plan Agreement otherwise provides, an option or
stock appreciation right may be exercised from time to time as to all or part of
the shares as to which such award is then exercisable (but, in any event, only
for whole shares). A stock appreciation right granted in connection with an
option may be exercised at any time when, and to the same extent that, the
related option may be exercised. An option or stock appreciation right shall be
exercised by the filing of a written notice with the Company, on such form and
in such manner as the Committee shall prescribe.
2.4.3 Any written notice of exercise of an option shall be accompanied by
payment for the shares being purchased. Such payment shall be made: (a) by
certified or official bank check (or the equivalent thereof acceptable to the
Company) for the full option exercise price; or (b) unless the applicable Plan
Agreement provides otherwise, by delivery of shares of Common Stock acquired at
least six months prior to the option exercise date and having a Fair Market
Value (determined as of the exercise date) equal to all or part of the option
exercise price and a certified or official bank check (or the equivalent thereof
acceptable to the Company) for any remaining portion of the full option exercise
price; or (c) at the discretion of the Committee and to the extent permitted by
law, by such other provision as the Committee may from time to time prescribe.
2.4.4 Promptly after receiving payment of the full option exercise price,
or after receiving notice of the exercise of a stock appreciation right for
which payment will be made partly or entirely in shares, the Company shall,
subject to the provisions of Section 3.3 (relating to certain restrictions),
deliver to the grantee or to such other person as may then have the right to
exercise the award, a certificate or certificates for the shares of Common Stock
for which the award has been exercised. If the method of payment employed upon
option exercise so requires, and if applicable law permits, an optionee may
direct the Company to deliver the certificate(s) to the optionee's stockbroker.
2.5 TERMINATION OF EMPLOYMENT; DEATH
2.5.1 Except to the extent otherwise provided in Section 2.5.2 or 2.5.3 or
in the applicable Plan Agreement, all options and stock appreciation rights not
theretofore exercised shall terminate upon termination of the grantee's
employment for any reason (including death).
2.5.2 If a grantee's employment terminates for any reason other than death
or dismissal for cause, the grantee may exercise any outstanding option or stock
appreciation right on the following terms and conditions: (a) exercise may be
made only to the extent that the grantee was entitled to exercise the award on
the date of employment termination; and (b) exercise must occur within three
months after employment terminates, except that the three-month period shall be
increased to one year if the termination is by reason of disability, but in no
event after the expiration date of the award as set forth in the Plan Agreement.
In the case of an incentive stock option, the term "disability" for purposes of
the preceding sentence shall have the meaning given to it by section 422(c)(7)
of the Code.
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2.5.3 If a grantee dies while employed by the Company or any subsidiary, or
after employment termination but during the period in which the grantee's awards
are exercisable pursuant to Section 2.5.2, any outstanding option or stock
appreciation right shall be exercisable on the following terms and conditions:
(a) exercise may be made only to the extent that the grantee was entitled to
exercise the award on the date of death; and (b) exercise must occur by the
earlier of the first anniversary of the grantee's death or the expiration date
of the award. Any such exercise of an award following a grantee's death shall be
made only by the grantee's executor or administrator, unless the grantee's will
specifically disposes of such award, in which case such exercise shall be made
only by the recipient of such specific disposition. If a grantee's personal
representative or the recipient of a specific disposition under the grantee's
will shall be entitled to exercise any award pursuant to the preceding sentence,
such representative or recipient shall be bound by all the terms and conditions
of the Plan and the applicable Plan Agreement which would have applied to the
grantee including, without limitation, the provisions of Sections 3.3 and 3.7
hereof.
2.6 GRANT OF RESTRICTED STOCK
2.6.1 The Committee may grant restricted shares of Common Stock to such key
persons, in such amounts, and subject to such terms and conditions as the
Committee shall determine in its discretion, subject to the provisions of the
Plan. Restricted stock awards may be made independently of or in connection with
any other award under the Plan. A grantee of a restricted stock award shall have
no rights with respect to such award unless such grantee accepts the award
within such period as the Committee shall specify by executing a Plan Agreement
in such form as the Committee shall determine and, if the Committee shall so
require, makes payment to the Company by certified or official bank check (or
the equivalent thereof acceptable to the Company) in such amount as the
Committee may determine.
2.6.2 Promptly after a grantee accepts a restricted stock award, the
Company shall issue in the grantee's name a certificate or certificates for the
shares of Common Stock covered by the award. Upon the issuance of such
certificate(s), the grantee shall have the rights of a shareholder with respect
to the restricted stock, subject to the nontransferability restrictions and
Company repurchase rights described in Sections 2.6.4 and 2.6.5 and to such
other restrictions and conditions as the Committee in its discretion may include
in the applicable Plan Agreement.
2.6.3 Unless the Committee shall otherwise determine, any certificate
issued evidencing shares of restricted stock shall remain in the possession of
the Company until such shares are free of any restrictions specified in the
applicable Plan Agreement.
2.6.4 Shares of restricted stock may not be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of except as specifically provided
in this Plan or the applicable Plan Agreement. The Committee at the time of
grant shall specify the date or dates (which may depend upon or be related to
the attainment of performance goals and other conditions) on which the
nontransferability of the restricted stock shall lapse. Unless the applicable
Plan Agreement provides otherwise, additional shares of Common Stock or other
property distributed to the grantee in respect of shares of restricted stock, as
dividends or otherwise, shall be subject to the same restrictions applicable to
such restricted stock.
2.6.5 During the 120 days following termination of the grantee's employment
for any reason, the Company shall have the right to require the return of any
shares to which restrictions on transferability apply, in exchange for which the
Company shall repay to the grantee (or the grantee's estate) any amount paid by
the grantee for such shares.
2.7 GRANT OF RESTRICTED STOCK UNITS
2.7.1 The Committee may grant awards of restricted stock units to such key
persons, in such amounts, and subject to such terms and conditions as the
Committee shall determine in its discretion, subject to the provisions of the
Plan. Restricted stock units may be awarded independently of or in connection
with any other award under the Plan.
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2.7.2 At the time of grant, the Committee shall specify the date or dates
on which the restricted stock units shall become fully vested and
nonforfeitable, and may specify such conditions to vesting as it deems
appropriate. In the event of the termination of the grantee's employment by the
Company and its subsidiaries for any reason, restricted stock units that have
not become nonforfeitable shall be forfeited and cancelled. The Committee at any
time may accelerate vesting dates and otherwise waive or amend any conditions of
an award of restricted stock units.
2.7.3 At the time of grant, the Committee shall specify the maturity date
applicable to each grant of restricted stock units, which may be determined at
the election of the grantee. Such date may be later than the vesting date or
dates of the award. On the maturity date, the Company shall transfer to the
grantee one unrestricted, fully transferable share of Common Stock for each
restricted stock unit scheduled to be paid out on such date and not previously
forfeited. The Committee shall specify the purchase price, if any, to be paid by
the grantee to the Company for such shares of Common Stock.
2.8 OTHER STOCK-BASED AWARDS
The Board may authorize other types of stock-based awards (including the
grant of unrestricted shares), which the Committee may grant to such key
persons, and in such amounts and subject to such terms and conditions, as the
Committee shall in its discretion determine, subject to the provisions of the
Plan. Such awards may entail the transfer of actual shares of Common Stock to
Plan participants, or payment in cash or otherwise of amounts based on the value
of shares of Common Stock.
2.9 GRANT OF DIVIDEND EQUIVALENT RIGHTS
The Committee may in its discretion include in the Plan Agreement with
respect to any award a dividend equivalent right entitling the grantee to
receive amounts equal to the ordinary dividends that would be paid, during the
time such award is outstanding and unexercised, on the shares of Common Stock
covered by such award if such shares were then outstanding. In the event such a
provision is included in a Plan Agreement, the Committee shall determine whether
such payments shall be made in cash, in shares of Common Stock or in another
form, whether they shall be conditioned upon the exercise of the award to which
they relate, the time or times at which they shall be made, and such other terms
and conditions as the Committee shall deem appropriate.
2.10 RIGHT OF RECAPTURE
If at any time within one year after the date on which a participant
exercises an option or stock appreciation right, or on which restricted stock
vests, or which is the maturity date of restricted stock units, or on which
income is realized by a participant in connection with any other stock-based
award (each of which events is a "Realization Event"), the participant (a) is
terminated for cause or (b) engages in any activity determined in the discretion
of the Committee to be in competition with any activity of the Company, or
otherwise inimical, contrary or harmful to the interests of the Company
(including, but not limited to, accepting employment with or serving as a
consultant, adviser or in any other capacity to an entity that is in competition
with or acting against the interests of the Company), then any gain ("Gain")
realized by the participant from the Realization Event shall be paid by the
participant to the Company upon notice from the Company. Such Gain shall be
determined as of the date of the Realization Event, without regard to any
subsequent change in the Fair Market Value of a share of Common Stock. The
Company shall have the right to offset such Gain against any amounts otherwise
owed to the participant by the Company (whether as wages, vacation pay, or
pursuant to any benefit plan or other compensatory arrangement).
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<PAGE> 32
ARTICLE III
MISCELLANEOUS
3.1 AMENDMENT OF THE PLAN; MODIFICATION OF AWARDS
3.1.1 The Board may from time to time suspend, discontinue, revise or amend
the Plan in any respect whatsoever, except that no such amendment shall
materially impair any rights or materially increase any obligations under any
award theretofore made under the Plan without the consent of the grantee (or,
after the grantee's death, the person having the right to exercise the award).
For purposes of this Section 3.1, any action of the Board or the Committee that
alters or affects the tax treatment of any award shall not be considered to
materially impair any rights of any grantee.
3.1.2 Shareholder approval of any amendment shall be obtained to the extent
necessary to comply with section 422 of the Code (relating to incentive stock
options) or other applicable law or regulation.
3.1.3 The Committee may amend any outstanding Plan Agreement, including,
without limitation, by amendment which would accelerate the time or times at
which the award becomes unrestricted or may be exercised, or waive or amend any
goals, restrictions or conditions set forth in the Agreement. However, any such
amendment (other than an amendment pursuant to Section 3.7.2, relating to change
in control) that materially impairs the rights or materially increases the
obligations of a grantee under an outstanding award shall be made only with the
consent of the grantee (or, upon the grantee's death, the person having the
right to exercise the award).
3.2 TAX WITHHOLDING
3.2.1 As a condition to the receipt of any shares of Common Stock pursuant
to any award or the lifting of restrictions on any award, or in connection with
any other event that gives rise to a federal or other governmental tax
withholding obligation on the part of the Company relating to an award
(including, without limitation, FICA tax), the Company shall be entitled to
require that the grantee remit to the Company an amount sufficient in the
opinion of the Company to satisfy such withholding obligation.
3.2.2 If the event giving rise to the withholding obligation is a transfer
of shares of Common Stock, then, unless otherwise specified in the applicable
Plan Agreement, the grantee may satisfy the withholding obligation imposed under
Section 3.2.1 by electing to have the Company withhold shares of Common Stock
having a Fair Market Value equal to the amount of tax to be withheld. For this
purpose, Fair Market Value shall be determined as of the date on which the
amount of tax to be withheld is determined (and any fractional share amount
shall be settled in cash).
3.3 RESTRICTIONS
3.3.1 If the Committee shall at any time determine that any consent (as
hereinafter defined) is necessary or desirable as a condition of, or in
connection with, the granting of any award under the Plan, the issuance or
purchase of shares or other rights thereunder, or the taking of any other action
thereunder (each such action being hereinafter referred to as a "plan action"),
then such plan action shall not be taken, in whole or in part, unless and until
such consent shall have been effected or obtained to the full satisfaction of
the Committee.
3.3.2 The term "consent" as used herein with respect to any plan action
means (a) any and all listings, registrations or qualifications in respect
thereof upon any securities exchange or under any federal, state or local law,
rule or regulation, (b) any and all written agreements and representations by
the grantee with respect to the disposition of shares, or with respect to any
other matter, which the Committee shall deem necessary or desirable to comply
with the terms of any such listing, registration or qualification or to obtain
an exemption from the requirement that any such listing, qualification or
registration be made and (c) any and all consents, clearances and approvals in
respect of a plan action by any governmental or other regulatory bodies.
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3.4 NONASSIGNABILITY
Except to the extent otherwise provided in the applicable Plan Agreement,
no award or right granted to any person under the Plan shall be assignable or
transferable other than by will or by the laws of descent and distribution, and
all such awards and rights shall be exercisable during the life of the grantee
only by the grantee or the grantee's legal representative.
3.5 REQUIREMENT OF NOTIFICATION OF ELECTION UNDER SECTION 83(B) OF THE CODE
If any grantee shall, in connection with the acquisition of shares of
Common Stock under the Plan, make the election permitted under section 83(b) of
the Code (that is, an election to include in gross income in the year of
transfer the amounts specified in section 83(b)), such grantee shall notify the
Company of such election within 10 days of filing notice of the election with
the Internal Revenue Service, in addition to any filing and notification
required pursuant to regulations issued under the authority of Code section
83(b).
3.6 REQUIREMENT OF NOTIFICATION UPON DISQUALIFYING DISPOSITION UNDER SECTION
421(B) OF THE CODE
If any grantee shall make any disposition of shares of Common Stock issued
pursuant to the exercise of an incentive stock option under the circumstances
described in section 421(b) of the Code (relating to certain disqualifying
dispositions), such grantee shall notify the Company of such disposition within
10 days thereof.
3.7 CHANGE IN CONTROL
3.7.1 For purposes of this Section 3.7, a "change in control" shall have
occurred if:
(a) any "person", as such term is used in Sections 13(d) and 14(d) of
the 1934 Act (other than (i) the Company or any 80% owned subsidiary of the
Company, (ii) any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or (iii) any company owned, directly
or indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly
or indirectly, of securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding securities; or
(b) during any period of twenty-four (24) consecutive months,
individuals who at the effective date of this Plan constitute the Board of
Directors of the Company and any new director (other than a director
designated by a person who has entered into an agreement with the Company
to effect a transaction described in clause (a), (c) or (d) of this Section
3.7.1) whose election by the Board of Directors or nomination for election
by the Company shareholders was approved by a vote of at least two-thirds
( 2/3) of the directors then still in office who either were directors at
the effective date of this Plan or whose election or nomination for
election was previously so approved, cease for any reason to constitute at
least a majority thereof;
(c) the shareholders of the Company approve a merger or consolidation
of the Company with any other company (other than a wholly-owned subsidiary
of the Company), other than (i) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity) 50% or
more of the combined voting power of voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
"person" (as defined in Section 3.7.1(a) above with the exceptions noted in
section 3.7.1(a)) acquires 50% or more of the combined voting power of the
Company's then outstanding securities); or
(d) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets (or any
transaction having a similar effect).
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3.7.2 Upon the happening of a change in control:
(a) notwithstanding any other provision of this Plan, any option or
stock appreciation right then outstanding shall become fully vested and
immediately exercisable upon the subsequent termination of employment of
the grantee by the Company or it successors without cause unless the
applicable Plan Agreement expressly provides otherwise;
(b) to the fullest extent permitted by law, the Committee may, in its
sole discretion, amend any Plan Agreement in such manner as it deems
appropriate, including, without limitation, by amendments that advance the
dates upon which any or all outstanding awards of any type shall terminate.
3.7.3 Whenever deemed appropriate by the Committee, any action referred to
in Section 3.7.2(b) may be made conditional upon the consummation of the
applicable Change in Control transaction.
3.8 RIGHT OF DISCHARGE RESERVED
Nothing in the Plan or in any Plan Agreement shall confer upon any grantee
the right to continue in the employ of the Company or affect any right which the
Company may have to terminate such employment.
3.9 NATURE OF PAYMENTS
3.9.1 Any and all grants of awards and issuances of shares of Common Stock
under the Plan shall be in consideration of services performed for the Company
by the grantee.
3.9.2 All such grants and issuances shall constitute a special incentive
payment to the grantee and shall not be taken into account in computing the
amount of salary or compensation of the grantee for the purpose of determining
any benefits under any pension, retirement, profit-sharing, bonus, life
insurance or other benefit plan of the Company or under any agreement between
the Company and the grantee, unless such plan or agreement specifically provides
otherwise.
3.10 NON-UNIFORM DETERMINATIONS
The Committee's determinations under the Plan need not be uniform and may
be made by it selectively among persons who receive, or are eligible to receive,
awards under the Plan (whether or not such persons are similarly situated).
Without limiting the generality of the foregoing, the Committee shall be
entitled, among other things, to make non-uniform and selective determinations,
and to enter into non-uniform and selective Plan agreements, as to (a) the
persons to receive awards under the Plan, (b) the terms and provisions of awards
under the Plan, and (c) the treatment of leaves of absence pursuant to Section
1.6.4.
3.11 OTHER PAYMENTS OR AWARDS
Nothing contained in the Plan shall be deemed in any way to limit or
restrict the Company from making any award or payment to any person under any
other plan, arrangement or understanding, whether now existing or hereafter in
effect.
3.12 SECTION HEADINGS
The section headings contained herein are for the purpose of convenience
only and are not intended to define or limit the contents of the sections.
3.13 EFFECTIVE DATE AND TERM OF PLAN
3.13.1 The Plan was adopted by the Board on February 3, 1997. To the extent
provided in the applicable Plan Agreement, an award may be subject to approval
of the Plan by the Company's shareholders, in which case, if such approval is
not obtained within one year of such date of adoption by the Board, the award
shall terminate on that date.
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3.13.2 Unless sooner terminated by the Board, the provisions of the Plan
respecting the grant of incentive stock options shall terminate on the day
before the tenth anniversary of the adoption of the Plan by the Board, and no
incentive stock option awards shall thereafter be made under the Plan. All
awards made under the Plan prior to its termination shall remain in effect until
such awards have been satisfied or terminated in accordance with the terms and
provisions of the Plan and the applicable Plan Agreements.
3.14 GOVERNING LAW
All rights and obligations under the Plan shall be construed and
interpreted in accordance with the laws of the State of Delaware, without giving
effect to principles of conflict of laws.
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3-D GEOPHYSICAL, INC.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "Agreement"), dated September 30, 1996, between
3-D GEOPHYSICAL, INC., a Delaware corporation (the "Company"), and [Independent
Director Name] (the "Optionee"), a member of the Board of Directors of the
Company.
The Board of Directors of the Company has determined that it is in the
Company's best interests to grant a stock option to the optionee. In
consideration of the foregoing and of the mutual undertakings set forth in this
Agreement, the Company and the optionee agree as follows:
SECTION 1. Grant of Option.
1.1 The Company hereby grants to the Optionee a stock option (the
"Option") to purchase 6,667 shares of Common Stock at a purchase price of $8.50
per share.
1.2 If there is any change in the outstanding shares of Common Stock by
reason of a stock dividend or distribution, stock split-up, recapitalization,
combination or exchange of shares, or by reason of any merger, consolidation,
spinoff or other corporate reorganization in which the Company is the surviving
corporation, the number of shares subject to the Option and the purchase price
per share shall be equitably adjusted by the Company. After any such adjustment,
the number of shares subject to the Option shall be rounded to the nearest whole
number.
SECTION 2. Exercisability.
2.1 Subject to the further terms of this Agreement, the Option shall
become exercisable in full on February 6, 1997. Unless earlier terminated
pursuant to the provisions of this Agreement, the unexercised portion of the
Option shall expire and cease to be exercisable at 12:01 a.m. on February 6,
2006.
2.2 The Option may be exercised from time to time as to all or part of the
shares as to which it is then exercisable. Once an installment becomes
exercisable, it shall remain exercisable until expiration, cancellation or
termination of the Option.
SECTION 3. Method of Exercise.
3.1 The Option or any part thereof may be exercised only by the giving of
written notice to the Company on such form and in such manner as the Company
shall prescribe. Such written notice must be accompanied by payment of the full
purchase price for the number of shares being purchased. Such payment may be
made by one or a combination of the following methods: (a) by a check acceptable
to the Company; (b) with the consent of the Company, by delivery of shares of
Common Stock acquired prior to the option exercise date and having a Fair Market
Value on the exercise date equal to part or all of the purchase price; or (c) by
such other method as the company may authorize. The date of exercise of the
Option shall be the date on which written notice of exercise is hand delivered
to the Company, during normal business hours, at its address as provided in
Section 8 of this Agreement, or, if mailed, the date on which it is postmarked,
provided such notice is actually received.
3.2 For purposes of this Agreement, "Fair Market Value" shall have the
meaning ascribed thereto in Section 1.6.1 of the Company's 1995 Long-Term
incentive Compensation Plan (the "Plan").
SECTION 4. Termination of Employment; Death.
4.1 Upon termination of the Optionee's membership on the Board for any
reason, the Option shall terminate and expire except as provided in Section 4.2
or 4.3 of this Agreement.
4.2 If the Optionee's membership on the Board terminates for any reason
other than death, disability or removal for cause, the Option shall be
exercisable but only to the extent it was exercisable at the time of such
termination and only until the earlier of the expiration date of the Option,
determined pursuant to Section 2 of this Agreement, or the expiration of three
months following such termination.
<PAGE> 37
4.3 If the Optionee's membership on the Board terminates by reason of
disability or death, or if the Optionee dies during the period in which the
Option is exercisable pursuant to Section 4.2 of this Agreement, the Option
shall be exercisable but only to the extent it was exercisable at the time of
termination (or death) and only until the earlier of the expiration date of the
Option, determined pursuant to Section 2 of this Agreement, or the first
anniversary of the date of the Optionee's termination (or death). Any such
exercise following the Optionee's death shall be made only by the Optionee's
executor or administrator, unless the Optionee's will specifically disposes of
the option, in which case exercise shall be made only by the recipient of such
specific disposition. If the Optionee's personal representative or the recipient
of a specific disposition under the Optionee's will shall be entitled to
exercise the option pursuant to the preceding sentence, such representative Or
recipient shall be bound by all the terms and conditions of this Agreement.
SECTION 5. Restrictions.
5.1 If the Company shall at any time determine that any Consent (as
hereinafter defined) is necessary or desirable as a condition of, or in
connection with, the transfer of shares of Common Stock, or the taking of any
other action, pursuant to this Agreement (each such action being hereinafter
referred to as an "Action"), then such Action shall not be taken, in whole or in
part, unless and until such Consent shall have been effected or obtained to the
full satisfaction of the Company.
5.2 The term "Consent" as used herein with respect to any Action means (a)
any and all listings, registrations or qualifications in respect thereof upon
any securities exchange or under any federal, state or local law, rule or
regulation, (b) any and all written agreements and representations by the
Optionee with respect to the disposition of shares, or with respect to any other
matter, which the Company shall deem necessary or desirable to comply with the
terms of any such listing, registration or qualification or to obtain an
exemption from the requirement that any such listing, qualification or
registration be made and (c) any and all consents, clearances and approvals in
respect of an Action by any governmental or other regulatory bodies.
SECTION 6. No Rights as Stockholder.
Neither the optionee nor any other person having the right to exercise the
Option shall have any of the rights of a stockholder of the company with respect
to shares subject to the Option until the issuance of a stock certificate to
such person for such shares. Except as otherwise provided in Section 1.2, no
adjustment shall be made for dividends, distributions or other rights (whether
ordinary or extraordinary, and whether in cash, securities or other property)
for which the record date is prior to the date such stock certificate is issued.
The optionee acknowledges that the option agreement dated April 26, 1996 had,
not been properly authorized by the Company and is and was of no force or
effect.
SECTION 7. Right of Discharge Reserved.
Nothing in this Agreement shall confer upon the Optionee the right to
continue in the employ of the Company or any subsidiary thereof or affect any
right which the Company may have to terminate such employment.
SECTION 8. Notices.
Any notice to be given to the Company hereunder shall be in writing and
shall be addressed to 3-D Geophysical, Inc., 7076 South Alton Way, Building H,
Englewood, Colorado 80112, or at such other address as the Company may hereafter
designate to the Optionee by notice as provided in this Section S. Any notice to
be given to the Optionee hereunder shall be addressed to the Optionee at the
address set forth beneath his signature hereto, or at such other address as the
Optionee may hereafter designate to the Company by notice as provided herein. A
notice shall be deemed to have been duly given when personally delivered or
mailed by registered or certified mail to the party entitled to receive it.
SECTION 9. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and the successors and assigns of the Company and, to the extent
consistent with Section 4 of this Agreement and with the Plan, the heirs and
personal representatives of the optionee.
2
<PAGE> 38
SECTION 10. Governing Law.
This Agreement shall be interpreted, construed and administered in
accordance with the laws of the State of New York as they apply to contracts
made, delivered and performed in the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement am of
the date and year first written above.
3-D GEOPHYSICAL, INC.
ATTEST: By
- ------------------------------------------ ------------------------------------
Title:
OPTIONEE
[Independent Director Name]
------------------------------------
Address:
------------------------------------
------------------------------------
------------------------------------
Social Security Number
3
<PAGE> 39
3-D GEOPHYSICAL, INC.
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned
hereby appoints Joel Friedman, Richard Davis and Luis Ferran, or if only one is
present, then that individual, with full power of substitution, to vote all of
the shares of Common Stock of 3-D GEOPHYSICAL, INC. (the "Company"), which the
undersigned is entitled to vote at the Company's Annual Meeting of Stockholders
(the "Annual Meeting") to be held at Inverness Hotel and Golf Club, 200
Inverness Drive West, Englewood, Colorado, on the 16th day of May, 1997, at 9:00
a.m. Local Time, and at any adjournments or postponements thereof, hereby
ratifying all that said proxies or their substitutes may do by virtue hereof,
and the undersigned authorizes and instructs said proxies to vote as follows:
1. ELECTION OF CLASS I DIRECTORS: To elect Messrs. Robert P. Andrews and Douglas
W. Brandrup, existing directors of the Company, and Wayne P. Widynowski, the
Company's Chief Operating Officer, as Class I directors of the Company for
terms to expire at the 2000 Annual Meeting of Stockholders;
[ ] FOR ALL THE NOMINEES LISTED ABOVE (EXCEPT AS MARKED TO THE CONTRARY
BELOW)
[ ] WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED ABOVE
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name on the list
below.)
Robert Andrews, Douglas Brandrup and Wayne Widynowski
2. APPROVAL OF 1997 PLAN AND INDEPENDENT DIRECTOR OPTIONS: To approve the 3-D
Geophysical, Inc. 1997 Long-Term Incentive Compensation Plan and the grant of
options to the non-employee directors of the Company to purchase an aggregate
of 40,002 shares of Common Stock;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS: To ratify the Board
of Directors' appointment of Coopers & Lybrand as independent accountants to
audit the financial statements of the Company for the fiscal year ending
December 31, 1997;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
and in their sole discretion, to vote upon any other matters that may properly
come before the Annual Meeting or any adjournments or postponements thereof.
(Continued and to be dated and signed on the other side.)
<PAGE> 40
(continued from other side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" PROPOSALS 1, 2 AND 3.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Receipt of the Notice of Annual Meeting and of the Proxy Statement and
Annual Report of the Company accompanying the same is hereby acknowledged.
Dated: , 1997
------------------------
------------------------------------
Signature of Stockholder
------------------------------------
Name of Stockholder (Please Print)
------------------------------------
Signature if held jointly
------------------------------------
Name of Stockholder (Please Print)
Your signature should appear the
same as your name appears on your
stock certificate(s). If signing as
attorney, executor, administrator,
trustee or guardian, please indicate
the capacity in which signing. When
signing as joint tenants, all
parties to the joint tenancy must
sign. When the proxy is given by a
corporation, it should be signed by
an authorized officer.
