SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. _)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate Box:
[ ] Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
DAWSON PRODUCTION SERVICES, INC.
(Name of Registrant as Specified In Its Charter)
DAWSON PRODUCTION SERVICES, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
No fee required [X]
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
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:
<PAGE>
DAWSON PRODUCTION SERVICES, INC.
Notice of Annual Meeting of Shareholders
September 11, 1997
To the Shareholders of Dawson Production Services, Inc.:
Notice is hereby given that the 1997 Annual Meeting of Shareholders (the
"Annual Meeting") of Dawson Production Services, Inc. (the "Company") will be
held on September 11, 1997, at 10:00 a.m. Central Time, at the Adams Mark Hotel,
which is located at 111 Pecan Street East, San Antonio, Texas, for the purpose
of considering and acting upon the following matters:
(1) To elect eight directors to hold office in accordance with the
Company's Bylaws with one director position remaining vacant;
(2) To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent accountants and auditors for the 1998 fiscal year;
(3) To increase the number of shares authorized to be issued pursuant to
the Dawson Production Services, Inc. 1995 Incentive Plan; and
(4) To consider and act upon any matter incident to the foregoing
purposes and transact such other business as may properly come before the
meeting or any adjournments thereof.
The record date for the meeting has been established to be August 1,
1997. Only shareholders of record at the close of business on that date will be
entitled to notice of and to vote at, the Annual Meeting or any adjournments
thereof. You are cordially invited to attend the Annual Meeting. Shareholders
wishing to attend the Annual Meeting should bring proper identification and
evidence of their ownership of shares in the Company's voting securities.
Even if you plan to attend the Annual Meeting, you are still requested
to sign, date and return the accompanying proxy in the enclosed self-addressed,
stamped envelope. If you attend, you may vote in person if you wish, even though
you have sent in your proxy.
By Order of the Board of Directors
/s/ KAREN L. RICHTER
Karen L. Richter, Secretary
San Antonio, Texas
August 7, 1997
<PAGE>
DAWSON PRODUCTION SERVICES, INC.
112 E. Pecan Street, Suite 1000
San Antonio, Texas 78205
---------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
---------------------
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished by the Board of Directors of Dawson
Production Services, Inc., a Texas corporation (the "Company"), in connection
with the solicitation of proxies on behalf of the Company for use at the Annual
Meeting of Shareholders to be held Thursday, September 11, 1997 (the "Meeting")
at the Adams Mark Hotel, 111 Pecan Street East San Antonio, Texas and at any
adjournment thereof. When properly executed proxies in the accompanying form are
received, the shares represented thereby will be voted at the meeting in
accordance with the directions noted thereon. If no direction is indicated, such
shares will be voted for the election of the directors and the appointed
auditors and for the amendment to the 1995 Incentive Plan, as set forth in the
Notice of Annual meeting attached to this Proxy Statement.
Management does not intend to present any business for a vote at the
Meeting other than the matters set forth in the accompanying Notice of Annual
Meeting, and it has no information that others will do so. If other matters
requiring the vote of the shareholders properly come before the Meeting, it is
the intention of the persons named in the attached form of proxy to vote the
proxies held by them in accordance with their judgment on such matters.
Any shareholder giving a proxy has the power to revoke that proxy at any
time before it is voted. A proxy may be revoked by filing with the Secretary of
the Company either a written revocation or a duly executed proxy bearing a date
subsequent to the date of the proxy being revoked. Any shareholder may attend
the Meeting and vote in person, whether or not such shareholder has previously
submitted a proxy.
In addition to soliciting proxies by mail, officers and regular
employees of the Company may solicit the return of proxies personally or by
telephone. Brokerage houses and other custodians, nominees and fiduciaries may
be requested to forward solicitation material to the beneficial owners of stock.
The Company will bear the cost of preparing, printing, assembling and
mailing the Notice of Annual Meeting, this Proxy Statement, the enclosed form of
proxy and any additional material, as well as the cost of forwarding
solicitation material to and soliciting proxies from the beneficial owners of
stock.
This Proxy Statement and the accompanying form of proxy are first being
sent or given to the Company's shareholders on or about August 7, 1997.
<PAGE>
VOTING SECURITIES
The record date for determining shareholders entitled to notice of and
to vote at the Annual Meeting is the close of business on August 1, 1997. On
that date there were 11,126,285 issued and outstanding shares of the Company's
$.01 par value Common Stock ("Common Stock"), held of record by approximately
112 record holders. The Common Stock is the Company's only class of voting
securities outstanding. Each share of the Company's Common Stock is entitled to
one vote for the election of directors and in any other matter that may be acted
upon at the Annual Meeting. The Company's Articles of Incorporation do not
permit cumulative voting.
ADDITIONAL INFORMATION
The Company shall provide without charge to each shareholder of the
Company upon the written request of such shareholder a copy of the Company's
annual report on Form 10-K, including the financial statements and the financial
statement schedules, required to be filed with the Securities and Exchange
Commission pursuant to Rule 13a-1 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), for the Company's most recent fiscal year. The
Company also shall provide without charge by first class or other equally prompt
means within one business day of receipt of a written or oral request from a
person to whom this proxy statement is delivered a copy of any and all
information that has been incorporated herein by reference. Shareholders should
address such requests to Mr. P. Mark Stark, Chief Financial Officer of the
Company, at 112 E. Pecan Street, Suite 1000, San Antonio, Texas 78205.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of June 18, 1997 by (i) each
director of the Company, (ii) each Named Executive Officer, (iii) each person
known or believed by the Company to own beneficially 5% or more of the Common
Stock and (iv) all directors and executive officers as a group. Unless otherwise
indicated, each person has sole voting and dispositive power with respect to
such shares.
<TABLE>
<CAPTION>
NUMBER OF PERCENT BENEFICIALLY
NAME OF BENEFICIAL OWNER SHARES(1) OWNED(1)
------------------------ ------ -----
<S> <C> <C>
Michael E. Little....................................... 254,521(2) 2.26%
Russell Banks........................................... 9,600(3) *
J. Michael Bell......................................... 64,500(4) *
James Byerlotzer........................................ 1,000 *
Joseph B. Eustace....................................... 67,670(5) *
Michael R. Furrow....................................... 1,000 *
Wm Ward Greenwood....................................... 17,723(6) *
Douglas D. Lewis........................................ 23,933(7) *
Paul E. McCollam........................................ 1,267,332(8) 11.37%
Stephen F. Oakes........................................ 1,263,032(9) 11.34%
Lawrence C. Petrucci.................................... 8,600(10) *
P. Mark Stark........................................... 8,130(10) *
RIMCO Partners, L.P.
RIMCO Partners, L.P. II
RIMCO Partners, L.P. III
RIMCO Partners, L.P. IV............................. 1,250,132(11) 11.24%
Resource Investors Management Company Limited
Partnership, their general partner
2
<PAGE>
RIMCO Associates, Inc., its general partner
22 Waterville Road
Avon, Connecticut 06001
All executive officers and directors
as a group (12 persons)............................. 1,736,909(12) 15.24%
</TABLE>
- -----------------------
* Less than 1%
(1) Shares of Common Stock that are not outstanding but that can be acquired
by a person within 60 days upon exercise of an option or similar right
are included in the number of shares beneficially owned and in computing
the percentage for such person but are not included in the number of
shares beneficially owned and in computing the percentage for any other
person.
(2) Includes immediately exercisable options to purchase 116,376 shares of
Common Stock.
(3) Includes immediately exercisable options to purchase 8,600 shares of
Common Stock.
(4) Includes 43,000 shares owned by HixVen Partners, of which Mr. Bell, a
director of the Company, is the managing general partner, and with
respect to which shares he exercises sole voting and investment power.
Also includes immediately exercisable options for the purchase of 17,200
shares of Common Stock, and 4,300 shares of Common Stock owned by Mr.
Bell's wife as to which Mr. Bell disclaims any beneficial ownership.
(5) Includes immediately exercisable options to purchase 45,672 shares of
Common Stock.
(6) Includes immediately exercisable options to purchase 17,200 shares of
Common Stock.
(7) Includes immediately exercisable options to purchase 17,200 shares of
Common Stock.
(8) Includes 1,250,132 shares of Common Stock beneficially owned by the
RIMCO Parties and immediately exercisable options to purchase 17,200
shares of Common Stock. Mr. McCollam intends to direct to the RIMCO
Parties the economic benefit of any options he has acquired in his
capacity as a director of the Company. Mr. McCollam's address is c/o
RIMCO Associates, Inc., 600 Travis Street, Suite 6875, Houston, Texas
77002.
(9) Includes 1,250,132 shares of Common Stock beneficially owned by the
RIMCO Parties and immediately exercisable options to purchase 12,900
shares of Common Stock. Mr. Oakes intends to direct to the RIMCO Parties
the economic benefit of any options he has acquired in his capacity as a
director of the Company. Mr. Oakes' address is c/o RIMCO Associates,
Inc., 22 Waterville Road, Avon, Connecticut 06001.
(10) Represents immediately exercisable options to purchase shares of Common
Stock.
(11) The RIMCO Parties are limited partnerships; the general partner of each
is Resource Investors Management Company Limited Partnership, and its
general partner is RIMCO Associates, Inc. Voting and investment power
over the shares held by the RIMCO Parties is exercised by the managing
directors of Resource Investors Management Company Limited Partnership,
and by the officers and directors of RIMCO Associates, Inc. Messrs.
McCollam and Oakes, directors of the Company, are managing directors of
Resource Investors Management Company Limited Partnership.
(12) Includes immediately exercisable options to purchase 269,078 shares of
Common Stock.
ELECTION OF DIRECTORS
A Board of Directors is to be elected, with each director elected to
hold office until the next annual meeting of shareholders or until his successor
shall be elected or appointed. The persons whose names are set forth as proxies
in the enclosed form of proxy will vote all shares over which they have control
"FOR" the election of the Board of
3
<PAGE>
Directors' nominees unless otherwise directed. Although the Board of Directors
of the Company does not contemplate that any of the nominees will be unable to
serve, if such a situation should arise prior to the Annual Meeting, the
appointed proxies will use their discretionary authority pursuant to the proxy
and vote in accordance with their best judgment. The affirmative vote of a
plurality of holders of the outstanding shares of Common Stock represented at a
meeting at which a quorum is present is required to elect each director nominee.
The Company's Bylaws provide that the affairs of the Company shall be
conducted by a Board of Directors composed of nine members and empower the Board
to increase or decrease the number of directors by resolution adopted by a
majority of the Board. The Board in its discretion and in accordance with such
authority has fixed its size at nine members. Eight directors have been
nominated for election at the Annual Meeting, and, if all nominees are elected,
one vacancy will exist on the Board of Directors. No proxy will be voted for a
greater number of persons than the number of nominees named herein. If deemed in
the best interests of the Company, the Board of Directors (pursuant to authority
contained in the Bylaws) may, subsequent to the Annual Meeting, increase its
size; in addition, the Board of Directors may elect one additional qualified
person to fill the existing vacancy, as well as additional vacancies which then
exist pending the next annual meeting of shareholders.
CURRENT DIRECTORS AND NOMINEES
The current directors of the Company and their respective ages and
positions are as follows. All of the current directors, and only the current
directors, have been nominated by management for reelection to the Board of
Directors.
NAME AGE POSITION
---- --- --------
Michael E. Little(1) ............ 42 Chairman of the Board, President and
Chief Executive Officer
Russell Banks(1) ................ 77 Director
J. Michael Bell(2) .............. 58 Director
Wm. Ward Greenwood(1) ........... 44 Director
Douglas D. Lewis(2) ............. 51 Director
Paul E. McCollam(2) ............. 52 Director
Stephen F. Oakes(3) ............. 47 Director
Lawrence C. Petrucci(3) ......... 38 Director
- --------------------------
(1) Member of the Nominations Committee
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
Each of the current members of the Board of Directors has been nominated
to serve as a director for the upcoming year and has consented to be named in
this proxy statement and to serve as a director, if elected. Please refer to the
table in this proxy statement under the caption "Security Ownership of Certain
Beneficial Owners and Management" which sets forth certain additional
information with respect to each of the nominees as of June 18, 1997.
MICHAEL E. LITTLE has been President, Chief Executive Officer and a
director of the Company since 1982 and Chairman of the Board since 1983. From
1980 to 1982, he was Vice President of Cambern Engineering, Inc., a company that
provided drilling and completion consulting services in the Texas Gulf Coast
area. From 1976 to 1980, he was employed by Chevron USA as a drilling foreman in
Midland, Texas and as a drilling engineer in New Orleans, Louisiana. Mr. Little
received his Bachelor of Science degree in Petroleum Engineering in 1978 from
Texas Tech University.
4
<PAGE>
RUSSELL BANKS has been a director of the Company since April 1996. From
1962 to 1995, Mr. Banks was president and chief executive officer of Grow Group,
Inc., which was a New York Stock Exchange company that produced coatings, paints
and household products. Since 1995, Mr. Banks has been a principal of Russell
Banks & Co., Ltd., a financial consulting firm. Mr. Banks is also on the board
of directors of GVC Venture Corporation. Mr. Banks is a past president of the
National Paint and Coatings Association and has served on the executive
committee of the board of directors of the American Management Association and
is currently on its general management council. Mr. Banks has been named as a
defendant in certain litigation relating to his service as a director of another
company. All other directors of such company were also named defendants. Counsel
to such company has taken the position that all the claims against that company
and Mr. Banks are without merit and will be vigorously defended.
J. MICHAEL BELL has been a director of the Company since 1982. For more
than the past five years, he has served as the president of Southwest Venture
Management Company, a firm that provides investment management and advisory
services to three venture capital funds. Mr. Bell also serves as the managing
general partner of each of these funds, one of which is HixVen Partners, a
shareholder of the Company.
WM. WARD GREENWOOD has been a director of the Company since 1983. Mr.
Greenwood served as Chief Financial Officer of the Company from December 1994
through December 1995. Mr. Greenwood has been since 1990, and is currently, the
president and sole shareholder of Nueces Ventures, Inc. ("Nueces"), a firm that
provides financial consulting services with respect to acquisitions and capital
formation. Since October 1995, he has also served as a principal of First
Capital Group of Texas II, L.P., a private equity fund. Since 1982, Mr.
Greenwood has provided financial consulting services to the Company, most
recently through Nueces. See "Certain Relationships and Related Transactions."
DOUGLAS D. LEWIS has been a director of the Company since 1982. Since
1972, Mr. Lewis has been in the real estate construction, development and
management business, most recently as principal of Vanguard Development, Inc.,
which he formed in 1987.
PAUL E. MCCOLLAM has been a director of the Company since 1991. Since
1985, he has been a managing director of Resource Investors Management Company
Limited Partnership, a full service investment management company specializing
in the energy industry, and the general partner of the RIMCO Parties. Mr.
McCollam serves as a director of the Company pursuant to the Voting Agreement
described below.
STEPHEN F. OAKES has been a director of the Company since 1994. From
1989 to 1992, he served as managing director of Robert Fleming, Inc., an
investment banking company. He has been associated with Resource Investors
Management Company Limited Partnership, a full service investment management
company specializing in the energy industry, and the general partner of the
RIMCO Parties, since 1992, serving as managing director since 1993. Mr. Oakes
serves as a director of the Company pursuant to the Voting Agreement described
below.
LAWRENCE C. PETRUCCI has agreed to serve as a director of the Company
beginning after the consummation of the Offering. Since 1991, Mr. Petrucci has
served as vice president of First Albany Corporation, a provider of investment
banking, financial advisory and brokerage services. From April 1990 through June
1991, Mr. Petrucci was a portfolio manager with Westinghouse Credit Corporation,
a financial services company.
AGREEMENTS RELATING TO DIRECTORS
An Agreement Regarding Election of Directors dated as of November 21,
1996 (the "Voting Agreement"), provides that the Company will use its best
efforts to cause the election of two persons reasonably acceptable to the
Company designated by the RIMCO Parties to the Company's Board of Directors as
long as the RIMCO Parties own at least 10% of the issued and outstanding shares
of Common Stock, on a fully diluted basis. In addition, as long as the RIMCO
Parties own less than 10% but 5% or more of the issued and outstanding shares of
Common Stock, the Company is required to use its best efforts to elect one
person reasonably acceptable to the Company designated by the RIMCO Parties to
the Company's Board of Directors. Messrs. McCollam and Oakes currently serve as
directors and have been nominated for reelection pursuant to these provisions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF
THE INDIVIDUALS NOMINATED FOR ELECTION AS A DIRECTOR.
5
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors met nine times in the twelve months ended March
31, 1997. During such twelve-month period, each incumbent director of the
Company attended 75 % or more of the aggregate number of (a) meetings of the
Board of Directors held during his tenure and (b) meetings held by committees of
the Board of Directors on which he served except for Mr. Lewis who attended
approximately 69% of such meetings.
The Board of Directors has established standing Audit, Compensation, and
Nomination Committees.
AUDIT COMMITTEE
The Audit Committee annually recommends to the Board of Directors the
appointment of independent certified accountants as auditors for the Company,
discusses and reviews the fees for the prospective annual audit, reviews the
results with the auditors, reviews the Company's compliance with its existing
accounting and financial policies, reviews the adequacy of the financial
organization of the Company and considers comments by auditors regarding
internal controls and accounting procedures and management's response to those
comments. Messrs. Petrucci and Oakes currently serve on the Audit Committee. One
vacancy exists on this Committee. This Committee met once during the fiscal year
ended March 31, 1997.
COMPENSATION COMMITTEE
The Compensation Committee reviews and makes recommendations to the
Board of Directors regarding salaries, compensation and benefits of executive
officers and employees of the Company and administers the Company's 1995
Incentive Plan. The Compensation Committee currently consists of Messrs. Bell,
Lewis and McCollam. This Committee met four times during fiscal year ended March
31, 1997.
NOMINATIONS COMMITTEE
The Nominations Committee is responsible for recommending to the Board
of Directors those persons who will be nominated as the Board of Directors'
nominees for positions on the Board of Directors. The Nominations Committee is
comprised of Messrs. Little, Greenwood and Banks. The Nominations Committee met
once during the fiscal year ended March 31, 1997. The Nominations Committee will
consider nominations made by shareholders. Nominations made by a shareholder
must be made by giving notice of such in writing to the Secretary of the Company
before the later to occur of (i) 60 days prior to the date of the meeting of
shareholders called for the election of directors or (ii) 10 days after the
Board of Directors first publishes the date of such meeting. Such notice shall
include all information concerning each nominee required under applicable rules
adopted pursuant to the Exchange Act. Such notice shall also include a signed
consent of each nominee stating that he or she agrees to serve as a director, if
elected, until the next annual meeting of shareholders or until his successor is
elected or appointed.
COMPENSATION OF DIRECTORS
During the 1997 fiscal year, directors were reimbursed for their
reasonable travel expenses incurred in attending meetings of the Board of
Directors. In addition, on April 1, 1997, each non-employee director received a
grant of an option to purchase 4,300 shares of Common Stock with an exercise
price per share equal to the fair market value of the Common Stock on the date
of grant. The Company anticipates that there will be a number of changes to
director compensation for the 1998 fiscal year including an increase in the
number of options granted to each director.
EXECUTIVE OFFICERS
The current executive officers of the Company and their respective ages
and positions are as follows:
NAME AGE POSITION
---- --- --------
James Byerlotzer 51 Senior Vice President and Chief Operating Officer
P. Mark Stark 42 Chief Financial Officer
6
<PAGE>
Joseph B. Eustace 42 Vice President of East Texas/Gulf Coast Region
Michael R. Furrow 50 Vice President of Permian Basin Region
Jim D. Flynt 52 Vice President of California Region
Officers are elected annually by the Board of Directors and serve until
their successors are chosen or until their resignation or removal.
JAMES BYERLOTZER was appointed Senior Vice President and Chief Operating
Officer of the Company on or about April 3, 1997. Mr. Byerlotzer was employed by
the Company on February 20, 1997 upon the closing of the acquisition by the
Company of a transaction (the "Pride Acquisition") in which it acquired all of
the domestic onshore operations of Pride Petroleum Services, Inc., a Louisiana
corporation ("Pride"). From 1981 until his employment with the Company, Mr.
Bylerlotzer was employed by Pride. Beginning in February 1996, Mr. Byerlotzer
served as the Vice President Domestic Operations of Pride. Prior to that time,
he served as Pride's Vice President - Central Area and in various other
operating positions. Pursuant to the provisions of that certain Purchase
Agreement dated on or about December 23, 1996 between the Company and Pride (the
"Pride Agreement"), the Company has agreed that, if it terminates certain former
employees of Pride, including Mr. Byerlotzer, without cause prior to August
1998, the Company shall pay such employee an amount which is equal to the
product of one month's current salary at the time of termination, times such
employee's number of full years of service for Pride.
P. MARK STARK has served as Chief Financial Officer of the Company since
January 1996. From 1991 through 1995, he was chief financial officer of the Y.O.
Ranch and family holdings of the Schreiner family which has interests in
agribusiness, tourism, lodging and retail and real estate development. From 1979
through 1991, Mr. Stark was employed by Shelton Ranch Corporation and its
successor, Texas Hill Country Orchards, LLP, serving as chief financial officer
from 1984 through 1991. His duties with Shelton Ranch Corporation included
serving as treasurer of Shelton Energy Resources, Ltd., an oil and gas
exploration and production partnership among Shelton Ranch Corporation,
Prudential Insurance Company of America and Shell Oil Company. Mr. Stark
received his Bachelor of Business Administration degree in Finance from the
University of Texas in 1977, and his Master of Business Administration degree in
1978 from Southern Methodist University.
JOSEPH B. EUSTACE was appointed Vice President of East Texas/Gulf Coast
Region on or about April 3, 1997. From March 1983 until the Pride Acquisition,
he served as Vice President of Operations and Chief Operating Officer of the
Company. From June 1981 to March 1982, he served as assistant manager of
ServRigs, Inc., the Company's largest competitor at the time. Mr. Eustace
received his Bachelor of Arts degree in Agribusiness in 1978 from Texas Tech
University.
MICHAEL R. FURROW was appointed Vice President of Permian Basin Region
on or about April 3, 1997. He was employed by the Company in February 1997 upon
the closing of the Pride Acquisition. Mr. Furrow joined Pride Petroleum
Services, Inc. in February, 1990 where he held the positions of Vice President
and area manager in locations such as Alice, Texas and Bakersfield, California.
He has served in his capacity as a regional manager over the Permian Basin
region since January 1996. Prior to his employment with Pride, Mr. Furrow worked
for Harkins & Company for six years and with Shell Oil Company for 15 years.
Pursuant to the provisions of the Pride Agreement, the Company has agreed that,
if it terminates certain former employees of Pride, including Mr. Furrow,
without cause prior to August 1998, the Company shall pay such employee an
amount which is equal to the product of one month's current salary at the time
of termination, times such employee's number of full years of service for Pride.
JIM D. FLYNT was appointed Vice President of California Region on or
about April 3, 1997. He was employed by the Company in February 1997 upon the
closing of the Pride Acquisition. Mr. Flynt joined Pride Petroleum Services,
Inc. in January, 1996 as the Vice President and area manager for the Western
Area which is the California Region for Dawson. Prior to his employment with
Pride, Mr. Flynt worked for California Production Service for over 19 years, 12
of which were in the capacity of Vice President of Operations. Pursuant to the
provisions of the Pride Agreement, the Company has agreed that, if it terminates
certain former employees of Pride, including Mr. Flynt, without cause prior to
August 1998, the Company shall pay such employee an amount which is equal to the
product of one month's current salary at the time of termination, times such
employee's number of full years of service for Pride.
7
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information for the fiscal years
ended March 31, 1997, 1996 and 1995, with respect to the Chief Executive Officer
(Mr. Little), the Chief Financial Officer (Mr. Stark) and the Vice President of
East Texas/Gulf Coast Region (Mr. Eustace) (collectively, the "Named Executive
Officers"). There were no other executive officers of the Company who received
annual compensation (including salary and bonuses earned) which exceeded
$100,000 during fiscal year 1997.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION
---------------------- ------------
FISCAL SECURITIES ALL OTHER
NAME YEAR PRINCIPAL POSITION SALARY BONUS(2) UNDERLYING OPTIONS COMPENSATION(3)
---- ---- ------------------ ------ -------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
Michael E. Little 1997 Chairman of the Board, $174,038 -- 87,380 --
President and Chief
Executive Officer
1996 $150,000 $ 50,000 51,600 --
$241,000(4)
1995 $138,125 $ 75,000 64,500 $500
P. Mark Stark 1997 Chief Financial Officer $ 80,000 -- 40,650 --
1996 $ 17,000(5) $ 5,000 -- --
1995 -- -- -- --
Joseph B. Eustace 1997 Vice President of East $124,000 -- 63,520 --
Texas/ Gulf Coast Region
1996 $ 96,200 $ 20,000 17,200 --
$ 24,000(4)
1995 $ 80,000 $ 15,000 21,500 $500
</TABLE>
- -------------
(1) The value of perquisites and personal benefits are excluded because the
aggregate amount thereof did not exceed the lesser of $50,000 or 10% of
the total annual salary and bonus reported for each Named Executive
Officer.
(2) Bonuses are awarded annually in the discretion of the Compensation
Committee with respect to performance in the fiscal year indicated; the
amount of the bonuses is determined and the bonuses are paid in the
following fiscal year. The Company anticipates that bonuses will be paid
with respect to performance in fiscal year 1997, however, those amounts
have not yet been determined.
(3) All other compensation consists entirely of employer contributions to
the Company's 401(k) Plan made by the Company in 1995 as a result of
1994 earnings.
(4) In the fiscal year ended March 31, 1996, in addition to standard
bonuses, the Board of Directors declared special bonuses in the amount
of $241,000 for Mr. Little and $24,000 for Mr. Eustace, each of whom
exercised non-statutory stock options and incurred federal income tax
liability in connection with such exercises.
(5) Employment commenced January 1, 1996.
Following the Pride Acquisition, the Company appointed James Byerlotzer
as Chief Operating Officer, Jim D. Flynt as Vice President of California Region,
and Michael R. Furrow as Vice President of Permian Basin Region. Total
compensation paid to these officers in the fiscal year ended March 31, 1997 was
less than $100,000.
8
<PAGE>
STOCK OPTION GRANTS IN 1997
The following table shows information concerning individual grants of
stock options during fiscal year 1997 to the Named Executive Officers.
<TABLE>
<CAPTION>
NO. OF POTENTIAL REALIZABLE VALUE AT
SECURITIES % OF TOTAL ASSUMED ANNUAL RATES OF STOCK
UNDERLYING OPTIONS PRICE APPRECIATION FOR OPTION
OPTIONS GRANTED TO EXERCISE EXPIRATION TERM
NAME GRANTED EMPLOYEES PRICE DATE 5% 10%
---- ------- --------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C>
Michael E. Little 87,380 30% $11.375 7/3/06 $567,266 $1,408,321
P. Mark Stark 40,650 14% $11.375 7/3/06 $263,897 $ 655,164
Joseph B. Eustace 63,520 22% $11.375 7/3/06 $412,368 $1,023,764
</TABLE>
- ----------------
STOCK OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning the exercise of
stock options during the fiscal year ended March 31, 1997, and the number and
value of unexercised stock options held as of the end of the fiscal year ended
March 31, 1997 by the Named Executive Officers.
<TABLE>
<CAPTION>
AT MARCH 31, 1997
------------------------------------------------------------
NUMBER OF UNEXERCISED OPTIONS VALUE OF IN-THE-MONEY OPTIONS
----------------------------- -----------------------------
NAME OPTIONS EXERCISED EXERCISABLE UNEXERCISABLE EXERCISABLE* UNEXERCISABLE*
---- ----------------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Michael E. Little 0 60,200 143,280 $409,532 $405,322
P. Mark Stark 0 0 40,650 -- $ 35,569
Joseph B. Eustace 0 20,141 82,079 $137,068 $164,644
</TABLE>
- -----------------
* Based on closing price of $12.25 on March 31, 1997.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Little,
Eustace and Stark. Mr. Little's agreement is for a three-year term commencing
April 1, 1996 and provides for an annual base salary of $175,000 in the first
year, increasing to $200,000 in the second year and to $225,000 in the third
year. The agreement does not provide for a mandatory bonus, but the Board of
Directors may, in its discretion, award an annual bonus of up to 50% of Mr.
Little's compensation without regard to the special bonuses described in the
footnotes to the Summary Compensation Table. If Mr. Little's employment is
terminated without cause in the first, second or third year of the agreement, he
will be entitled to severance compensation in an amount equal to his then
current annual base salary rate for 14, 15, or 16 months, respectively. If Mr.
Little's employment is terminated in connection with a change of control of the
Company, he will be entitled to
9
<PAGE>
severance compensation in an amount equal to three times his then current annual
base salary. If Mr. Little's employment is constructively terminated in
connection with a change of control of the Company, he will be entitled to
severance compensation in an amount equal to two times his then current base
salary. The Compensation Committee currently is considering recommending to the
Board of Directors a modification to Mr. Little's employment agreement based
upon the recent growth of the Company resulting from the Pride Acquisition.
Mr. Stark's employment agreement is for a two-year term commencing April
1, 1996 and provides for an annual base salary of $80,000 in the first year and
$90,000 in the second year. The Board of Directors may, in its discretion, award
Mr. Stark an annual cash bonus. If Mr. Stark's employment is terminated without
cause in the first or second year of the agreement, he will be entitled to
severance compensation in an amount equal to one or two months' salary,
respectively, at his then current annual base salary rate. If Mr. Stark's
employment is terminated in connection with a change of control of the Company,
he will be entitled to severance compensation in an amount equal to his then
current annual base salary. If Mr. Stark's employment is constructively
terminated in connection with a change of control of the Company, he will be
entitled to severance compensation in an amount equal to six months' salary at
his then current annual base salary rate.
Mr. Eustace's employment agreement is for a three-year term commencing
April 1, 1996 and provides for an annual base salary of $125,000 in the first
year, increasing to $132,500 in the second year and to $140,000 in the third
year. The Board of Directors may, in its discretion, award Mr. Eustace an annual
cash bonus. If Mr. Eustace's employment is terminated without cause, he will be
entitled to severance compensation in an amount equal to his then current annual
base salary rate. If Mr. Eustace's employment is terminated in connection with a
change of control of the Company, he will be entitled to severance compensation
in an amount equal to 1.5 times his then current annual base salary. If Mr.
Eustace's employment is constructively terminated in connection with a change of
control of the Company, he will be entitled to severance compensation in an
amount equal to his then current annual base salary.
The Company does not have an employment agreement with Mr. Byerlotzer.
PERFORMANCE GRAPH
Set forth below is a graph comparing the percentage change in the
Company's cumulative total shareholder return on its Common Stock with the
cumulative total return on the published Standard & Poor's 500 Stock Index, and
the cumulative average total return provided by an investment in two of the
Company's principal competitors, Pool Energy Services Co. and Key Energy Group,
Inc. The graph covers the period between the effective date of the Company's
initial public offering, March 20, 1996, and the last trading date in the fiscal
year ended March 31, 1997, which was March 27, 1997.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
DPSI PESC KEG S&P 500 NASDAQ COMP.
------ ------- ------- -------- ------------
01-Apr-96 100.0 100.0 100.0 100.0 100.0
05-Apr-96 102.3 101.1 99.2 100.3 101.1
12-Apr-96 108.1 103.3 97.5 97.4 99.5
19-Apr-96 132.6 112.2 99.2 98.7 103.0
26-Apr-96 130.2 118.9 109.2 100.0 107.4
03-May-96 123.3 101.1 116.0 98.1 107.1
10-May-96 116.3 110.6 109.2 99.7 108.8
17-May-96 111.6 104.4 110.9 102.3 112.3
24-May-96 115.1 124.4 106.7 103.8 112.8
31-May-96 109.3 123.3 107.6 102.4 112.4
07-Jun-96 107.0 112.2 112.6 103.0 111.1
14-Jun-96 107.0 111.1 109.2 101.9 109.6
21-Jun-96 102.3 115.6 110.9 102.0 106.2
28-Jun-96 107.0 105.6 110.9 102.9 107.2
05-Jul-96 102.3 97.8 110.1 100.6 104.7
12-Jul-96 109.3 110.6 109.2 98.8 99.8
19-Jul-96 104.7 110.0 113.4 97.7 99.3
26-Jul-96 100.0 105.6 112.6 97.3 97.7
02-Aug-96 90.7 101.1 112.6 101.3 101.9
09-Aug-96 93.0 96.7 106.7 101.3 103.1
16-Aug-96 100.0 94.4 102.5 101.8 102.7
23-Aug-96 100.0 92.2 104.2 102.0 103.6
30-Aug-96 114.0 103.3 102.5 99.7 103.4
06-Sep-96 114.0 103.9 102.5 100.3 103.2
13-Sep-96 119.8 112.2 104.2 104.1 107.8
20-Sep-96 114.0 111.1 112.6 105.1 110.7
27-Sep-96 111.6 111.1 111.8 105.0 111.7
04-Oct-96 109.3 116.7 132.8 107.3 113.3
11-Oct-96 116.3 124.4 126.9 107.2 113.4
18-Oct-96 111.6 133.3 139.5 108.7 113.0
25-Oct-96 111.6 131.1 147.9 107.2 110.6
01-Nov-96 114.0 132.8 156.3 107.7 110.5
08-Nov-96 114.0 130.0 152.9 111.8 113.9
15-Nov-96 111.6 128.9 149.6 112.8 114.3
22-Nov-96 114.0 133.3 151.3 114.5 115.5
29-Nov-96 111.6 131.1 163.0 115.8 117.2
06-Dec-96 123.3 124.4 161.3 113.1 116.8
13-Dec-96 120.9 126.7 149.6 111.5 116.6
20-Dec-96 123.3 136.7 147.9 114.6 117.0
27-Dec-96 139.5 141.1 149.6 115.8 117.3
03-Jan-97 145.3 148.9 154.6 114.4 119.0
10-Jan-97 130.2 153.9 173.1 116.2 120.9
17-Jan-97 148.8 158.9 193.3 118.7 122.5
24-Jan-97 142.4 155.0 200.0 117.9 123.8
31-Jan-97 134.9 153.3 193.3 120.3 125.3
07-Feb-97 132.6 144.4 194.9 120.8 123.3
14-Feb-97 122.1 151.1 184.9 123.7 124.2
21-Feb-97 125.6 145.6 171.4 122.6 121.1
28-Feb-97 108.1 123.3 158.0 121.0 118.8
07-Mar-97 112.8 127.2 158.0 123.1 119.0
14-Mar-97 111.6 127.8 181.5 121.3 117.3
21-Mar-97 111.6 115.6 188.2 119.9 113.8
28-Mar-97 111.6 127.8 193.3 118.4 113.4
31-Mar-97 114.0 131.1 191.6 115.8 110.8
10
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The objectives of the Company's compensation policies are (i) to attract
and retain the best possible executive talent, (ii) to motivate its executives
to achieve the Company's goals, (iii) to link executive and shareholder
interests through equity based compensation and (iv) to provide a compensation
package that appropriately recognizes both individual and corporate
contributions. With these objectives in mind, a significant portion of executive
compensation is linked to the Company's financial success.
The Compensation Committee is composed entirely of disinterested members
of the Board of Directors. No member of the Compensation Committee is a current
or former employee or officer of the Company. In determining executive
compensation, the Compensation Committee considers (i) the performance of the
executive, (ii) the performance of the Company, and (iii) the competitiveness of
executive compensation at the Company relative to other similar employment
opportunities which may be available to the executive.
The key elements of an executive's compensation consist of base salary,
bonus and stock options. The Compensation Committee in the fiscal year ended
March 31, 1996, entered into employment agreements with Messrs. Little, Eustace
and Stark, in each case commencing April 1, 1996. See "Employment Agreements."
Mr. Little's employment agreement provides for an increase in his base salary
from $150,000 in the fiscal year ended March 31, 1996 to $175,000 in the fiscal
year ending March 31, 1997, $200,000 in the fiscal year ending March 31, 1998,
and $225,000 in the fiscal year ending March 31, 1999. This salary was based on
the Compensation Committee's subjective evaluation of Mr. Little's service and
his contributions to the Company's financial results, as well as an evaluation
of the competitiveness of this salary range relative to other corporations'
compensation packages. The Compensation Committee currently is considering
recommending to the Board of Directors a modification to Mr. Little's employment
agreement based upon the recent growth of the Company resulting from the Pride
Acquisition. The Compensation Committee anticipates that it will approve payment
to Mr. Little of a bonus based upon his performance in the fiscal year ended
March 31, 1997; however, the amount of such bonus has yet to be determined.
Under Mr. Little's employment agreement, in addition to his salary set forth
above, Mr. Little will be entitled to a bonus, at the discretion of the
Compensation Committee. This bonus is structured to allow the Compensation
Committee flexibility in rewarding Mr. Little based on the performance of the
Company in each year of his employment agreement. Mr. Little also received
incentive stock options in fiscal year ended March 31, 1997 to acquire 87,380
shares of Common Stock at $11.375 per share, which the Compensation Committee
believes to be the fair market value of the stock options on the date of grant.
These stock options expire upon the earlier of (i) five years from the date of
vesting and (ii) July 3, 2006 and become exercisable ratably over a five-year
period. This approach is designed to provide an incentive to create shareholder
value over the long term.
The Compensation Committee has employed a consulting firm to consider
changes to the compensation plan to take into account the growth of the Company
resulting from the Pride Acquisition. Recommendations from the consultant are
currently being reviewed by the Committee which intends to make recommendations
to the Board of Directors for certain changes. The Company anticipates that
changes to the compensation plan may be adopted by the Board of Directors and
implemented by the Company in the near future.
Paul E. McCollam
J. Michael Bell
Douglas D. Lewis
11
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 1, 1994, the Company loaned Mr. Little, Chairman of the
Board, President and Chief Executive Officer of the Company, $55,456, which
amount bears interest at 7.5% per annum, provides for annual payments of
interest and for one principal payment at the end of the six-year term of the
note. The loan was made to enable Mr. Little to acquire 33,699 shares of Common
Stock and is secured by those shares. In February 1996, the Company loaned Mr.
Little $75,000, which amount bears interest at 7.5% per annum, provides for
annual payments of interest and provides for one principal payment at the end of
the six-year term of the note. This loan was made to enable Mr. Little to
exercise options to acquire 32,250 shares of Common Stock and is secured by
those shares. The maximum indebtedness from Mr. Little to the Company during the
fiscal year ended March 31, 1997 was $130,486 and the balance due on that
indebtedness as of July 15, 1997 was $145,451.
An Agreement Regarding Election of Directors dated as of November 21,
1996 (the "Voting Agreement"), provides that the Company will use its best
efforts to cause the election of two persons reasonably acceptable to the
Company designated by the RIMCO Parties to the Company's Board of Directors as
long as the RIMCO Parties own at least 10% of the issued and outstanding shares
of Common Stock, on a fully diluted basis. In addition, as long as the RIMCO
Parties own less than 10% but 5% or more of the issued and outstanding shares of
Common Stock, the Company is required to use its best efforts to elect one
person reasonably acceptable to the Company designated by the RIMCO Parties to
the Company's Board of Directors. Messrs. McCollam and Oakes currently serve as
directors and have been nominated for reelection pursuant to these provisions.
In March 1996, the Company entered into a letter agreement that provided
Kevin P. Collins, a director of the Company at that time, with the right, upon
his departure from the Board of Directors prior to the Company's next annual
meeting of shareholders, to designate a successor Board member, subject to the
approval of such successor by the Board of Directors. Mr. Collins resigned from
the Board of Directors effective April 12, 1996 and designated Russell Banks to
serve as his successor. The Company approved Mr. Banks' appointment on April 30,
1996.
Gene Little, the father of Michael E. Little, serves as an operations
consultant to the Company and received fees and expense reimbursements of
approximately $51,000 in the fiscal year ended March 31, 1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During the fiscal year ended March 31, 1997, based on a review of Forms
3 and 4 furnished to the Company during its most recent fiscal year and Forms 5
furnished to the Company with respect to its most recent fiscal year, Joseph B.
Eustace, Michael E. Little and P. Mark Stark each failed to make a timely filing
of one Form 5 which was required to report one transaction involving the grant
of options by the Company to them effective July 1996.
FINANCIAL AND OTHER INFORMATION
The information called for by item 13 of Schedule 14A is incorporated
herein by reference to such information included in the Company's annual report
on Form 10-K under the captions "Financial Statements and Supplementary Data,"
"Selected Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Changes In and Disagreements with
Accountants on Accounting and Financial Disclosure."
12
<PAGE>
INCREASE IN SHARES RESERVED FOR ISSUANCE UNDER THE 1995 INCENTIVE PLAN
Shareholders will be asked at the Annual Meeting to approve an amendment
to the Company's 1995 Incentive Plan (the "Plan") to increase the number of
shares of Common Stock reserved for issuance thereunder. The Plan provides for
the grant to employees, including officers of the Company, of "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), nonstatutory stock options, stock appreciation rights
and restricted shares of Common Stock (collectively, "Awards"). In addition,
non-employee directors ("Outside Directors") and consultants are eligible to
receive nonstatutory stock options. The Plan originally provided for the
issuance of up to 537,500 shares of Common Stock. Of this amount, only
approximately 51,050 shares currently remain available. The Board of Directors
believes that in order to continue the Plan's purpose, as described below, it is
necessary to amend the Plan to provide for an annual automatic adjustment to the
number of shares reserved under the Plan so that each year an additional 1.5% of
the total shares outstanding of the Company is added to the number of shares
available under the Plan up to a maximum of 200,000 additional shares of Common
Stock per year; provided, however, that the number of shares available for grant
under the Plan shall not exceed 200,000 after allowing for grants anticipated by
the Company for the then current fiscal year. (The number of shares reserved for
issuance under the Plan is subject to adjustment in certain events, such as
stock splits or recapitalizations.)
PURPOSE
The purpose of the Plan is to provide an incentive for certain employees
and directors of the Company or its subsidiaries to aid the Company in
attracting able persons to enter the service of the Company and its
subsidiaries, to extend to them the opportunity to acquire a proprietary
interest in the Company so that they will apply their best efforts for the
benefit of the Company, and to remain in the service of the Company or its
subsidiaries.
The Plan provides that Awards may be granted to employees (including
officers), consultants and directors of the Company and its majority owned
subsidiaries. To the extent that the aggregate fair market value of the shares
with respect to which options designated as "incentive stock options" are
exercisable for the first time by any optionee during any calendar year (under
all plans of the Company) exceeds $100,000, such options will be reclassified in
accordance with the Code. The Plan is not a qualified deferred compensation plan
under Section 401(a) of the Code and is not subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended.
ADMINISTRATION
The Plan provides that it shall be administered by the Board of
Directors or by a committee of the Board. The Plan is currently administered by
the Compensation Committee of the Board. Subject to special provisions relating
to Outside Directors, the Board or its designated committee selects the
employees to which Awards may be granted and the type of Award to be granted and
determines, as applicable, the number of shares to be subject to each Award, the
exercise price and the vesting. In making such determination, the Board or its
designated committee takes into account the employee's present and potential
contributions to the success of the Company and other relevant factors.
AMENDMENTS
No Award may be granted under the Plan after the date that is ten years
from the earlier of the date the Plan was initially adopted by the Board of
Directors and (b) the date approved by the shareholders.
The Board of Directors may, with respect to any shares which at the
time, are not subject to Awards, suspend or discontinue the Plan or revise or
amend it in any respect whatsoever and may amend any provision
13
<PAGE>
of the Plan or any Award Agreement to make the Plan or the Award Agreement
comply with Section 16(b) of the Exchange Act. The Board of Directors may also
amend, modify, suspend, or terminate the Plan for the purpose of meeting or
addressing any changes in other legal requirements applicable to the Company or
the Plan or for any other purpose permitted by law. The Plan may not be amended
without the consent of the holders of a majority of the shares of stock then
outstanding to (a) increase materially the aggregate number of shares of stock
that may be issued under the Plan, (b) increase materially the benefits accruing
to Eligible Individuals under the Plan, or (c) modify materially the
requirements regarding eligibility for participation in the Plan; provided,
however, that such amendments may be made without the consent of shareholders of
the Company if changes occur in law or other legal requirements that would
permit such changes. In connection with any amendment to the Plan, the Board of
Directors shall be authorized to incorporate such provisions as shall be
necessary for amounts paid under the Plan to be exempt from Section 162(m) of
the Code.
STOCK OPTIONS
The exercise price of all incentive stock options granted under the Plan
must be at least equal to the fair market value of the shares of Common Stock on
the date of grant. With respect to any participant who owns stock representing
more than 10% of the voting rights of the Company's outstanding capital stock,
the exercise price of any incentive stock option granted under the Plan must
equal at least 110% of the fair market value of the shares of Common Stock
subject to such option on the date of grant, and the term of the option must not
exceed five years.
Options granted under the Plan vest pursuant to terms determined by the
Board of Directors or its designated committee.
The terms of all incentive stock options and nonstatutory stock options
granted under the Plan may not exceed ten years and ten years and thirty days,
respectively. However, the terms of all incentive stock options granted to an
optionee who, at the time of grant, owns stock representing more than 10% of the
voting rights of the Company's outstanding capital stock may not exceed five
years.
OUTSIDE DIRECTORS' OPTIONS
Options may be granted to Outside Directors under the Plan only pursuant
to an automatic, nondiscretionary grant mechanism which provides that on April 1
of each year, from and including 1996 to 2003, each Outside Director will
receive an option to purchase 4,300 shares of Common Stock at the fair market
value of the Common Stock on the date of grant. The terms of options granted to
Outside Directors are as follows: (i) the term of the option shall be ten years;
(ii) the option shall be exercisable only while the Outside Director remains a
director or the lesser of (a) the remainder of the term of the option and (b)
one month after termination of his status as an Outside Director; (iii) the
exercise price per share of Common Stock shall be 100% of the fair market value
on the date of grant of the option; and (iv) the option shall be fully vested
immediately. See "Compensation of Directors" for a discussion of certain
proposed changes concerning the grant of options to Outside Directors.
RESTRICTED STOCK AWARDS
Restricted shares of Common Stock ("Restricted Stock") may be granted to
employees pursuant to terms determined by the Board of Directors or its
designated committee. Restricted Stock may not be transferred until the
restrictions are removed or have expired. Conditions to the removal of
restrictions may include, but are not required to be limited to, continuing
employment or service to the Company or the achievement of certain performance
objectives.
14
<PAGE>
STOCK APPRECIATION RIGHTS
Stock appreciation rights ("SARs") may be granted to employees, either
independent of, or in connection with, options. SARs granted in connection with
an option are subject to the terms of the Award agreement granting the option.
Upon exercise of SARs granted in connection with an option, the holder shall
receive payment (in cash, Common Stock or a combination of both at the
discretion of the Board or its designated committee) in an amount equal to the
product of (i) the fair market value of a share of Common Stock on the date of
exercise minus the exercise price per share of the option, multiplied by (ii)
the number of shares of Common Stock as to which the SAR is being exercised.
SARs granted independent of an option are exercisable in the manner, and
pursuant to the terms, determined by the Board or its designated committee.
Terms to be determined by the Board or its designated committee include the
number of shares to which the SAR applies, the vesting schedule for the exercise
of such right and the expiration date of the right. Upon exercise of an SAR, the
holder shall receive payment (in cash, stock or a combination of both at the
discretion of the Board or its designated committee) in an amount equal to the
product of (i) the fair market value of a share of Common Stock as of the date
of exercise, minus the fair market value of a share of Common Stock as of the
date the SAR was granted, multiplied by (ii) the number of shares as to which
the SAR is being exercised. The exercise of SARs granted in connection with
options requires the holder to surrender the related option (or any portion
thereof, to the extent unexercised). No SAR granted under the Plan is
transferable by the employee other than by will or by the laws of descent and
distribution, and each SAR is exercisable during the lifetime of the employee
only by such employee.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
If any change is made in the Company's capitalization, such as a stock
split or stock dividend, which results in a greater or lesser number of shares
of outstanding Common Stock, appropriate adjustment shall be made in the
exercise price and the number of shares subject to options, Restricted Stock
Awards and SARs.
ADJUSTMENTS UPON CHANGE IN CONTROL
Award agreements under the Plan may, as determined by the Board or its
designated committee, provide that, in the event of a "change in control" of the
Company, (i) the holder of a stock option will be granted a corresponding SAR,
(ii) all outstanding SARs and stock options will become immediately and fully
vested and exercisable in full and (iii) the restriction period on any
Restricted Stock will be accelerated and the restrictions will expire. In
general, a "change in control" of the Company occurs in any of five situations:
(i) a person other than (a) the Company, (b) certain affiliated companies or
benefit plans, or (c) a company a majority of which is owned directly or
indirectly by the shareholders of the Company, becomes the beneficial owner of
50% or more of the voting power of the Company's outstanding voting securities;
(ii) a majority of the Board is not comprised of the members of the Board at the
effective date of the Plan and persons whose elections as directors were
approved by those original directors or their approved successors; (iii) a
person described in clause (i) announces a tender offer for 50% or more of the
Company's outstanding voting securities and the Board approves or does not
oppose the tender offer; (iv) the Company merges or consolidates with another
corporation or partnership, or the Company's shareholders approve such a merger
or consolidation, other than mergers or consolidations in which the Company's
voting securities are converted into securities having the majority of voting
power in the surviving company; or (v) the Company liquidates or sells all or
substantially all of its assets, or the Company's shareholders approve such a
liquidation or sale, except sales to corporations having substantially the same
ownership as the Company.
If a "restructuring" of the Company occurs that does not constitute a
change in control of the Company, the Board or the committee administering the
Plan may (but need not) cause the Company to take any one or more of the
following actions: (i) accelerate in whole or in part the time of vesting and
15
<PAGE>
exercisability of any outstanding stock options and SARs to permit those stock
options and SARs to be exercisable before, upon, or after the completion of the
restructure; (ii) grant each option holder corresponding SARs; (iii) accelerate
in whole or in part the expiration of some or all of the restrictions on any
Restricted Stock; (iv) if the restructuring involves a transaction in which the
Company is not the surviving entity, cause the surviving entity to assume in
whole or in part any one or more of the outstanding Awards upon such terms and
provisions as the Board or its designated committee deems desirable; or (v)
redeem in whole or in part any one or more of the outstanding Awards (whether or
not then exercisable) in consideration of a cash payment, adjusted for
withholding obligations. A restructuring generally is any merger of the Company
or the direct or indirect transfer of all or substantially all of the Company's
assets (whether by sale, merger, consolidation, liquidation, or otherwise) in
one transaction or a series of transactions.
OUTSTANDING AWARDS.
As of March 31, 1997, options to purchase a total of 462,650 shares of
Common Stock had been granted to employees and directors and were outstanding
pursuant to the Plan of which options to purchase 5,300 shares have been
canceled or have expired. No shares of Restricted Stock have been issued. Awards
to be made in the future will be at the discretion of the Compensation Committee
and, therefore, are not currently determinable. The table entitled "Option
Exercises and Year-End Value Table" sets forth the holdings under the Plan of
the executive officers named in the Summary Compensation Table.
Approval of the proposed amendment to the Plan requires the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
INCREASE IN SHARES AVAILABLE AND RESERVED FOR ISSUANCE UNDER THE 1995
INCENTIVE PLAN.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
KPMG Peat Marwick LLP has been engaged as independent accountants for
the purpose of issuing a report on the financial statements of the Company for
the year ended March 31, 1998. Ratification of the appointment of KPMG Peat
Marwick LLP requires the affirmative vote of the holders of a majority of the
shares present or represented by proxy and entitled to vote at the Annual
Meeting.
Representatives of KPMG Peat Marwick LLP are expected to be present at
the Annual Meeting and will have an opportunity to make a statement if they
desire to do so and to respond to appropriate questions from those attending the
Annual Meeting.
In the event the shareholders fail to ratify the appointment of KPMG
Peat Marwick LLP as the Company's independent auditors, it is not anticipated
that KPMG Peat Marwick LLP would be replaced in 1998. Such lack of approval,
however, would be considered by the Audit Committee in selecting the Company's
independent auditors for 1999.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS.
16
<PAGE>
SHAREHOLDER PROPOSALS
Shareholder proposals to be presented at the next annual meeting of
shareholders must be in writing and received at the Company's executive offices
by the Secretary no later than April 8, 1998 in order to be included in the next
year's proxy statement.
OTHER BUSINESS
The Board of Directors of the Company knows of no matters to be
presented at the Annual Meeting other than those described above; however, if
other matters are properly presented to the meeting for action, it is intended
that the persons named in the accompanying form of proxy, and acting thereunder,
will vote in accordance with their best judgment on such matters.
By Order of the Board of Directors
/s/ MICHAEL E. LITTLE
Michael E. Little
President
Dated August 7, 1997
San Antonio, Texas
17
<PAGE>
FRONT
DAWSON PRODUCTION SERVICES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT
The shareholder of Dawson Production Services, Inc. whose name appears
on the reverse side hereof (the "Undersigned") acknowledges receipt of the
Notice of Annual Meeting of the Company on September 11, 1997 at 10:00 a.m. CDT,
and attached proxy statement, and appoints Michael E. Little and P. Mark Stark
and each of them the attorneys of the Undersigned, with power of substitution,
for and in the name of the Undersigned, to vote as proxies for the Undersigned
according to the number of shares of Common Stock the Undersigned would be
entitled to vote if then personally present at the Annual Meeting of
Shareholders of the Company to be held at the Adams Mark Hotel at 111 Pecan
Street East, San Antonio, Texas on Thursday, September 11, 1997, or at any
adjournment or adjournments thereof, and to vote all shares of Common Stock of
the Company held by the Undersigned and entitled to be voted upon the matters,
and in accordance with the instructions, on the reverse side hereof.
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BACK
DAWSON PRODUCTION SERVICES, INC. ANNUAL MEETING TO BE HELD ON SEPTEMBER 11, 1997
AT 10:00 A.M. CDT FOR HOLDERS AS OF AUGUST 1, 1997.
[X] PLEASE MARK YOUR VOTES AS SHARES IN YOUR NAME:
IN THIS EXAMPLE
1. DIRECTORS
DIRECTORS RECOMMEND: A VOTE FOR ELECTION OF THE FOLLOWING DIRECTORS: 01-MICHAEL
E. LITTLE; 02-RUSSELL BANKS; 03-J. MICHAEL BELL; 04-WM. WARD GREENWOOD;
05-DOUGLAS D. LEWIS; 06-PAUL E. MCCOLLAM; 07-STEPHEN F. OAKES; 08-LAWRENCE C.
PETRUCCI.
[ ] FOR [ ] ABSTAIN
[ ] FOR EXCEPT FOR THE FOLLOWING (LIST NAMES OR NUMBERS):_______________________
2. AUDITORS
RATIFY APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT ACCOUNTANTS AND
AUDITORS FOR 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. 1995 INCENTIVE PLAN
APPROVE AMENDMENTS TO THE 1995 INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES
UNDER THE PLAN AS DESCRIBED IN THE PROXY STATEMENT.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
NOTE -- PROXY HOLDERS MAY VOTE IN THEIR DISCRETION ON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
SIGNATURE(S): DATE:
SIGNATURE(S): DATE:
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
title as such.
