SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. 1)
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. Mr. Oakes 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. Oakes are without
merit and will be vigorously defended.
LAWRENCE C. PETRUCCI has agreed to serve as a director of the Company
beginning after the consummation of the Offering. Since June 1997, Mr. Petrucci
has served as an Associate Director of Scotia Capital Markets (U.S.A.), Inc., an
investment banking and financial advisory service. From 1991 to 1997, Mr.
Petrucci 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. On July 31, 1997, the Company's Board of Directors approved a revised
director compensation plan, effective concurrent with the September 11, 1997
Annual Meeting of Shareholders, the material components of which are (i) an
annual retainer of $10,000 earned at $2,500 per calendar quarter; (ii) Board
meeting fees of $2,500 per meeting attended in person ($500 for meetings
attended via teleconference), to a maximum of $10,000 per fiscal year; (iii)
Committee meeting fees of $1,000 per meeting ($1,200 for the Committee Chair),
to a maximum of $4,000 per fiscal year (or $4,800 for the Committee Chair); (iv)
annual stock option awards on April 1 of each year, beginning April 1, 1998, for
5,000 shares of the Company's Common Stock at the then fair market value,
vesting upon termination of service as a director of the Company, with a
five-year term following vesting; and (v) the reimbursement of reasonable travel
expenses incurred in attending meetings of the Board of Directors.
EXECUTIVE OFFICERS
The current executive officers who are not directors 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 $175,000 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 $ 54,000 40,650 --
1996 $ 17,000(5) $ 5,000 -- --
1995 -- -- -- --
Joseph B. Eustace 1997 Vice President of East $124,000 $ 80,000 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.
(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 without regard to the
special bonuses described in the footnotes to the Summary Compensation Table. In
view of the increase in the Company's size as a result of the Pride Acquisition,
Mr. Little's employment agreement was amended on July 31, 1997 to increase his
annual base compensation to $300,000 effective April 1, 1997; the base
compensation for the third contract year has not been determined. His contract
also was amended to remove the bonus limitation of 50% of annual base salary. 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 originally provided 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. In view of the increase in the Company's
size as a result of the Pride Acquisition, Mr. Little's employment agreement was
amended on July 31, 1997 to increase his annual base compensation to $300,000
effective April 1, 1997; the base compensation for the third contract year has
not been determined. His contract also was amended to remove the bonus
limitation of 50% of annual base salary. Under Mr. Little's employment
agreement, in addition to his salary, Mr. Little is 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 have
been reviewed and approved by the Committee and the Board of Directors.
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.
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 (a) 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
See "Compensation of Directors" for a discussion of certain changes
concerning the grants of options to Outside Directors effective concurrent with
the Annual Meeting.
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
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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 to be held 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.
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.
- --------------------------------------------------------------------------------
BACK
[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
DIRECTORS RECOMMEND RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS
INDEPENDENT ACCOUNTANTS AND AUDITORS FOR 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. 1995 INCENTIVE PLAN
DIRECTORS RECOMMEND THE APPROVAL OF 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.
<PAGE>
APPENDIX A
DAWSON PRODUCTION
SERVICES, INC.
AMENDED AND RESTATED
1995 INCENTIVE PLAN
(Amended as of July 31, 1997)
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS........................................................1
SECTION 2. SHARES OF STOCK SUBJECT TO THE PLAN................................7
2.1 Maximum Number of Shares........................................7
2.2 Limitation of Shares............................................8
2.3 Description of Shares...........................................9
2.4 Registration and Listing of Shares..............................9
SECTION 3. ADMINISTRATION OF THE PLAN.........................................9
3.1 Committee.......................................................9
3.2 Duration, Removal, Etc.........................................10
3.3 Meetings and Actions of Committee..............................10
3.4 Committee's Powers.............................................10
SECTION 4. ELIGIBILITY AND PARTICIPATION.....................................11
4.1 Eligible Individuals...........................................11
4.2 Grant of Awards................................................11
4.3 Date of Grant..................................................11
4.4 Award Agreements...............................................12
4.5 Limitation for Incentive Options...............................12
4.6 No Right to Award..............................................12
SECTION 5. TERMS AND CONDITIONS OF OPTIONS...................................12
5.1 Number of Shares...............................................12
5.2 Vesting........................................................12
5.3 Expiration of Options..........................................12
5.4 Exercise Price.................................................13
5.5 Method of Exercise.............................................13
5.6 Incentive Option Exercises.....................................13
5.7 Medium and Time of Payment.....................................13
5.8 Payment with Sale Proceeds.....................................13
5.9 Payment of Taxes...............................................14
5.10 Limitation on Aggregate Value of Shares That May Become
First Exercisable During Any Calendar Year Under an
Incentive Option...............................................14
5.11 No Fractional Shares...........................................15
5.12 Modification, Extension, and Renewal of Options................15
5.13 Other Agreement Provisions.....................................15
SECTION 6. STOCK APPRECIATION RIGHTS.........................................16
6.1 Form of Right..................................................16
6.2 Rights Related to Options......................................16
(a) Exercise and Transfer...................................16
(b) Value of Right..........................................16
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6.3 Right Without Option...........................................16
(a) Number of Shares........................................17
(b) Vesting.................................................17
(c) Expiration of Rights....................................17
(d) Value of Right..........................................17
6.4 Limitations on Rights..........................................17
6.5 Payment of Rights..............................................17
6.6 Payment of Taxes...............................................17
6.7 Other Agreement Provisions.....................................18
SECTION 7. RESTRICTED STOCK AWARDS...........................................18
7.1 Restrictions...................................................18
(a) Transferability.........................................18
(b) Conditions to Removal of Restrictions...................18
(c) Legend..................................................18
(d) Possession..............................................19
(e) Other Conditions........................................19
7.2 Expiration of Restrictions.....................................19
7.3 Rights as Stockholder..........................................19
7.4 Payment of Taxes...............................................19
7.5 Other Agreement Provisions.....................................20
SECTION 8. AWARDS TO NON-EMPLOYEE DIRECTORS..................................20
8.1 Ineligibility for Other Awards.................................20
8.2 Automatic Grant of Awards......................................20
8.3 Available Stock................................................20
8.4 Exercisability.................................................21
SECTION 9. ADJUSTMENT PROVISIONS.............................................21
9.1 Adjustment of Awards and Authorized Stock......................21
9.2 Changes in Control.............................................22
9.3 Restructuring Without Change in Control........................22
9.4 Notice of Restructuring........................................24
SECTION 10. ADDITIONAL PROVISIONS............................................24
10.1 Termination of Employment......................................24
10.2 Other Loss of Eligibility - Non-Employees......................25
10.3 Death..........................................................25
10.4 Disability.....................................................25
10.5 Leave of Absence...............................................26
10.6 Transferability of Awards......................................26
10.7 Forfeiture and Restrictions on Transfer........................26
10.8 Delivery of Certificates of Stock..............................26
10.9 Conditions to Delivery of Stock................................27
10.10 Certain Directors and Officers.................................27
ii
<PAGE>
10.11 Securities Act Legend..........................................28
10.12 Legend for Restrictions on Transfer............................28
10.13 Rights as a Stockholder........................................28
10.14 Furnish Information............................................29
10.15 Obligation to Exercise.........................................29
10.16 Adjustments to Awards..........................................29
10.17 Remedies.......................................................29
10.18 Information Confidential.......................................29
10.19 Consideration..................................................29
SECTION 11. DURATION AND AMENDMENT OF PLAN...................................30
11.1 Duration.......................................................30
11.2 Amendment......................................................30
SECTION 12. GENERAL..........................................................30
12.1 Application of Funds...........................................30
12.2 Right of the Corporation and Subsidiaries to Terminate
Employment.....................................................30
12.3 No Liability for Good Faith Determinations.....................30
12.4 Other Benefits.................................................31
12.5 Exclusion From Pension and Profit-Sharing Compensation.........31
12.6 Execution of Receipts and Releases.............................31
12.7 Unfunded Plan..................................................31
12.8 No Guarantee of Interests......................................32
12.9 Payment of Expenses............................................32
12.10 Corporation Records............................................32
12.11 Information....................................................32
12.12 No Liability of Corporation....................................32
12.13 Corporation Action.............................................32
12.14 Severability...................................................32
12.15 Notices........................................................33
12.16 Successors.....................................................33
12.17 Headings.......................................................33
12.18 Governing Law..................................................33
12.19 Word Usage.....................................................34
iii
<PAGE>
DAWSON PRODUCTION SERVICES, INC.
AMENDED AND RESTATED
1995 INCENTIVE PLAN
(Amended as of July 31, 1997)
SCOPE AND PURPOSE OF PLAN
Dawson Production Services, Inc., a Texas corporation (formerly Dawson
Well Servicing, Inc.) ("Dawson"), has adopted a 1995 Incentive Plan effective as
of October 6, 1995; Dawson now desires to amend and restate such plan as of July
31, 1997 (the "Plan") to provide for the granting of:
(a) Incentive Options (hereafter defined) to certain Key Employees
(hereafter defined);
(b) Nonstatutory Options (hereafter defined) to certain Key
Employees, Non-Employee Directors (hereafter defined) and other
persons;
(c) Restricted Stock Awards (hereafter defined) to certain Key
Employees and other persons; and
(d) Stock Appreciation Rights (hereafter defined) to certain Key
Employees and other persons.
The purpose of the Plan is to provide an incentive for Key Employees and
directors of the Corporation or its Subsidiaries (hereafter defined) to aid the
Corporation in attracting able persons to enter the service of the Corporation
and its Subsidiaries, to extend to them the opportunity to acquire a proprietary
interest in the Corporation so that they will apply their best efforts for the
benefit of the Corporation, and to remain in the service of the Corporation or
its Subsidiaries. This Plan has been originally adopted by the Board of
Directors and stockholders of the Corporation prior to the registration of any
of securities of the Corporation under the Exchange Act (hereafter defined) and
accordingly amounts paid under the Plan are exempt from the provisions of
Section 162(m) of the Code (hereafter defined).
SECTION 1. DEFINITIONS
1.1 "Acquiring Person" means any Person other than the Corporation, any
Subsidiary of the Corporation, any employee benefit plan of the Corporation or
of a Subsidiary of the Corporation or of a corporation owned directly or
indirectly by the stockholders of the Corporation in substantially the same
proportions as their ownership of Stock of the Corporation, or any trustee or
other fiduciary holding securities under an employee benefit plan of the
Corporation or of a Subsidiary of the Corporation or of a corporation owned
directly or indirectly by the stockholders of the Corporation in substantially
the same proportions as their ownership of Stock of the Corporation.
1
<PAGE>
1.2 "Affiliate" means (a) any Person who is directly or indirectly the
beneficial owner of at least 10% of the voting power of the Voting Securities or
(b) any Person controlling, controlled by, or under common control with the
Company or any Person contemplated in clause (a) of this Subsection 1.2.
1.3 "Award" means the grant of any form of Option, Restricted Stock
Award, or Stock Appreciation Right under the Plan, whether granted individually,
in combination, or in tandem, to a Holder pursuant to the terms, conditions, and
limitations that the Committee may establish in order to fulfill the objectives
of the Plan.
1.4 "Award Agreement" means the written agreement between the
Corporation and a Holder evidencing the terms, conditions, and limitations of
the Award granted to that Holder.
1.5 "Board of Directors" means the board of directors of the
Corporation.
1.6 "Business Day" means any day other than a Saturday, a Sunday, or a
day on which banking institutions in the State of Texas are authorized or
obligated by law or executive order to close.
1.7 "Change in Control" means the event that is deemed to have occurred
if:
(a) any Acquiring Person is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Corporation representing fifty percent or more of
the combined voting power of the then outstanding Voting Securities of
the Corporation; or
(b) members of the Incumbent Board cease for any reason to
constitute at least a majority of the Board of Directors; or
(c) a public announcement is made of a tender or exchange offer
by any Acquiring Person for fifty percent or more of the outstanding
Voting Securities of the Corporation, and the Board of Directors
approves or fails to oppose that tender or exchange offer in its
statements in Schedule 14D-9 under the Exchange Act; or
(d) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation or
partnership (or, if no such approval is required, the consummation of
such a merger or consolidation of the Corporation), other than a merger
or consolidation that would result in the Voting Securities of the
Corporation outstanding immediately before the consummation thereof
continuing to represent (either by remaining outstanding or by being
converted into Voting Securities of the surviving entity or of a parent
of the surviving entity) a majority of the combined voting power of
2
<PAGE>
the Voting Securities of the surviving entity (or its parent)
outstanding immediately after that merger or consolidation; or
(e) the stockholders of the Corporation approve a plan of
complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all the
Corporation's assets (or, if no such approval is required, the
consummation of such a liquidation, sale, or disposition in one
transaction or series of related transactions) other than a liquidation,
sale, or disposition of all or substantially all the Corporation's
assets in one transaction or a series of related transactions to a
corporation owned directly or indirectly by the stockholders of the
Corporation in substantially the same proportions as their ownership of
Stock of the Corporation.
1.8 "Code" means the Internal Revenue Code of 1986, as amended.
1.9 "Committee" means the Committee, which Committee shall administer
this Plan and is further described under Section 3.
1.10 "Convertible Securities" means evidences of indebtedness, shares of
capital stock, or other securities that are convertible into or exchangeable for
shares of Stock, either immediately or upon the arrival of a specified date or
the happening of a specified event.
1.11 "Corporation" has the meaning given to it in the second paragraph
under "Scope and Purpose of Plan."
1.12 "Date of Grant" has the meaning given it in Subsection 4.3.
1.13 "Disability" has the meaning given it in Subsection 10.4.
1.14 "Disinterested Person" has the meaning given it in Rule
16b-3(c)(2)(i).
1.15 "Effective Date" means October 6, 1995.
1.16 "Eligible Individuals" means (a) Key Employees, (b) Non-Employee
Directors only for purposes of Nonstatutory Options pursuant to Section 8, (c)
any other Person that the Committee designates as eligible for an Award (other
than for Incentive Options) because the Person performs, or has performed,
valuable services for the Corporation or any of its Subsidiaries (other than
services in connection with the offer or sale of securities in a capital-
raising transaction) and the Committee determines that the Person has a direct
and significant effect on the financial development of the Corporation or any of
its Subsidiaries, and (d) any transferee of an Award if the transfer has been
approved in advanced by the written consent of a majority of the Committee
members. Notwithstanding the foregoing provisions of this Subsection 1.16, to
ensure that the requirements of the fourth sentence of Subsection 3.1 are
satisfied, the Board of Directors may from time to time specify individuals who
shall not be eligible for the grant of Awards or equity securities under any
plan of the Corporation or its Affiliates. Nevertheless, the Board of Directors
may at any time determine that an individual who has been
3
<PAGE>
so excluded from eligibility shall become eligible for grants of Awards and
grants of such other equity securities under any plans of the Corporation or its
Affiliates so long as that eligibility will not impair the Plan's satisfaction
of the conditions of Rule 16b-3.
1.17 "Employee" means any employee of the Corporation or of any of its
Subsidiaries, including officers and directors of the Corporation who are also
employees of the Corporation or of any of its Subsidiaries.
1.18 "Exchange Act" means the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder, or any successor law, as it may be
amended from time to time.
1.19 "Exercise Notice" has the meaning given it in Subsection 5.5.
1.20 "Exercise Price" has the meaning given it in Subsection 5.4.
1.21 "Fair Market Value" means, for a particular day:
(a) If shares of Stock of the same class are listed or admitted
to unlisted trading privileges on any national or regional securities
exchange at the date of determining the Fair Market Value, then the last
reported sale price, regular way, on the composite tape of that exchange
on the last Business Day before the date in question or, if no such sale
takes place on that Business Day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to unlisted trading privileges on that securities
exchange; or
(b) If shares of Stock of the same class are not listed or
admitted to unlisted trading privileges as provided in Subsection
1.21(a) and sales prices for shares of Stock of the same class in the
over-the-counter market are reported by the National Association of
Securities Dealers, Inc. Automated Quotations, Inc. ("NASDAQ") National
Market System (or such other system then in use) at the date of
determining the Fair Market Value, then the last reported sales price so
reported on the last Business Day before the date in question or, if no
such sale takes place on that Business Day, the average of the high bid
and low asked prices so reported; or
(c) If shares of Stock of the same class are not listed or
admitted to unlisted trading privileges as provided in Subsection
1.21(a) and sales prices for shares of Stock of the same class are not
reported by the NASDAQ National Market System (or a similar system then
in use) as provided in Subsection 1.21(b), and if bid and asked prices
for shares of Stock of the same class in the over-the-counter market are
reported by NASDAQ (or, if not so reported, by the National Quotation
Bureau Incorporated) at the date of determining the Fair Market Value,
then the average of the high bid and low asked prices on the last
Business Day before the date in question; or
4
<PAGE>
(d) If shares of Stock of the same class are not listed or
admitted to unlisted trading privileges as provided in Subsection
1.21(a) and sales prices or bid and asked prices therefor are not
reported by NASDAQ (or the National Quotation Bureau Incorporated) as
provided in Subsection 1.21(b) or Subsection 1.21(c) at the date of
determining the Fair Market Value, then the value determined in good
faith by the Committee, which determination shall be conclusive for all
purposes; or
(e) If shares of Stock of the same class are listed or admitted
to unlisted trading privileges as provided in Subsection 1.21(a) or
sales prices or bid and asked prices therefor are reported by NASDAQ (or
the National Quotation Bureau Incorporated) as provided in Subsection
1.22(b) or Subsection 1.22(c) at the date of determining the Fair Market
Value, but the volume of trading is so low that the Board of Directors
determines in good faith that such prices are not indicative of the fair
value of the Stock, then the value determined in good faith by the
Committee, which determination shall be conclusive for all purposes
notwithstanding the provisions of Subsections 1.21(a), (b), or (c).
For purposes of valuing Incentive Options, the Fair Market Value of Stock shall
be determined without regard to any restriction other than one that, by its
terms, will never lapse. For purposes of the redemption provided for in
Subsection 9.3(d)(v), Fair Market Value shall have the meaning and shall be
determined as set forth above; provided, however, that the Committee, with
respect to any such redemption, shall have the right to determine that the Fair
Market Value for purposes of the redemption should be an amount measured by the
value of the shares of Stock, other securities, cash, or property otherwise
being received by holders of shares of Stock in connection with the
Restructuring and upon that determination the Committee shall have the power and
authority to determine Fair Market Value for purposes of the redemption based
upon the value of such shares of stock, other securities, cash, or property. Any
such determination by the Committee, as evidenced by a resolution of the
Committee, shall be conclusive for all purposes.
1.22 "Fiscal Year" means the fiscal year of the Corporation ending on
March 31 of each year.
1.23 "Holder" means an Eligible Individual to whom an outstanding Award
has been granted, or the permitted transferee of a Holder.
1.24 "Incumbent Board" means the individuals who, as of the Effective
Date, constitute the Board of Directors and any other individual who becomes a
director of the Corporation after that date and whose election or appointment by
the Board of Directors or nomination for election by the Corporation's
stockholders was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board.
1.25 "Incentive Option" means an incentive stock option as defined under
Section 422 of the Code and regulations thereunder.
1.26 "Key Employee" means any Employee whom the Committee identifies as
having a direct and significant effect on the performance of the Corporation or
any of its Subsidiaries.
5
<PAGE>
1.27 "Non-Employee Director" means a director of the Corporation who
while a director is not an Employee.
1.28 "Nonstatutory Option" means a stock option that does not satisfy
the requirements of Section 422 of the Code or that is designated at the Date of
Grant or in the applicable Award Agreement to be an option other than an
Incentive Option.
1.29 "Non-Surviving Event" means an event of Restructuring as described
in either Subsection 1.37(b) or Subsection 1.37(c).
1.30 "Normal Retirement" means the separation of the Holder from
employment with the Corporation and its Subsidiaries with the right to receive
an immediate benefit under a retirement plan approved by the Corporation. If no
such plan exists, Normal Retirement shall mean separation of the Holder from
employment with the Corporation and its Subsidiaries at age 62 or later.
1.31 "Option" means either an Incentive Option or a Nonstatutory Option,
or both.
1.32 "Person" means any person or entity of any nature whatsoever,
specifically including (but not limited to) an individual, a firm, a company, a
corporation, a partnership, a trust, or other entity. A Person, together with
that Person's affiliates and associates (as "affiliate" and "associate" are
defined in Rule 12b-2 under the Exchange Act for purposes of this definition
only), and any Persons acting as a partnership, limited partnership, joint
venture, association, syndicate, or other group (whether or not formally
organized), or otherwise acting jointly or in concert or in a coordinated or
consciously parallel manner (whether or not pursuant to any express agreement),
for the purpose of acquiring, holding, voting, or disposing of securities of the
Corporation with that Person, shall be deemed a single "Person."
1.33 "Plan" means the Corporation's 1995 Incentive Plan, as it may be
amended from time to time.
1.34 "Restricted Stock" means Stock that is nontransferable or subject
to substantial risk of forfeiture until specific conditions are met.
1.35 "Restricted Stock Award" means the grant or purchase, on the terms
and conditions of Section 7 or that the Committee otherwise determines, of
Restricted Stock.
1.36 "Restructuring" means the occurrence of any one or more of the
following:
(a) The merger or consolidation of the Corporation with any
Person, whether effected as a single transaction or a series of related
transactions, with the Corporation remaining the continuing or surviving
entity of that merger or consolidation and the Stock remaining
outstanding and not changed into or exchanged for stock or other
securities of any other Person or of the Corporation, cash, or other
property;
6
<PAGE>
(b) The merger or consolidation of the Corporation with any
Person, whether effected as a single transaction or a series of related
transactions, with (i) the Corporation not being the continuing or
surviving entity of that merger or consolidation or (ii) the Corporation
remaining the continuing or surviving entity of that merger or
consolidation but all or a part of the outstanding shares of Stock are
changed into or exchanged for stock or other securities of any other
Person or the Corporation, cash, or other property; or
(c) The transfer, directly or indirectly, of all or substantially
all of the assets of the Corporation (whether by sale, merger,
consolidation, liquidation, or otherwise) to any Person, whether
effected as a single transaction or a series of related transactions.
1.37 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange
Act as adopted in Exchange Act Release No. 34-37260 (May 31, 1996), or any
successor rule, as it may be amended from time to time.
1.38 "Securities Act" means the Securities Act of 1933 and the rules and
regulations promulgated thereunder, or any successor law, as it may be amended
from time to time.
1.39 "Stock" means the common stock, $0.01 par value per share, of
Dawson, or any other securities that are substituted for the Stock as provided
in Section 9.
1.40 "Stock Appreciation Right" means the right to receive an amount
equal to the excess of the Fair Market Value of a share of Stock (as determined
on the date of exercise) over, as appropriate, the Exercise Price of a related
Option or the Fair Market Value of the Stock on the Date of Grant of the Stock
Appreciation Right.
1.41 "Subsidiary" means, with respect to any Person, any corporation, or
other entity of which a majority of the Voting Securities is owned, directly or
indirectly, by that Person.
1.42 "Total Shares" has the meaning given it in Subsection 9.2.
1.43 "Voting Securities" means any securities that are entitled to vote
generally in the election of directors, in the admission of general partners or
in the selection of any other similar governing body.
SECTION 2. SHARES OF STOCK SUBJECT TO THE PLAN
2.1 MAXIMUM NUMBER OF SHARES. Subject to the provisions of Subsection
2.2 and Section 9, the aggregate number of shares of Stock that may be issued or
transferred pursuant to Awards under the Plan shall be 537,500 (after giving
effect to a 4.3-for-1 stock split effective March 1, 1996; provided, however,
the number of shares of Stock shall be increased automatically effective April
1, 1997 (and on each April 1 thereafter for the duration of the Plan), by an
amount equal to an additional 1.5% of the total shares of Stock then issued and
outstanding, added to the number of shares then available under the Plan, up to
a maximum of 200,000 additional shares of Stock per year; provided, further, the
number of shares of Stock available for grant under the
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<PAGE>
Plan shall not exceed 200,000 after allowing for grants anticipated by the
Corporation for the then current fiscal year.
2.2 LIMITATION OF SHARES. For purposes of the limitations specified in
Subsection 2.1, the following principles shall apply:
(a) the following shall count against and decrease the number of
shares of Stock that may be issued for purposes of Subsection 2.1: (i)
shares of Stock subject to outstanding Options, outstanding shares of
Restricted Stock, and shares subject to outstanding Stock Appreciation
Rights granted independent of Options (based on a good faith estimate by
the Corporation or the Committee of the maximum number of shares for
which the Stock Appreciation Right may be settled (assuming payment in
full in shares of Stock)), and (ii) in the case of Options granted in
tandem with Stock Appreciation Rights, the greater of the number of
shares of Stock that would be counted if one or the other alone was
outstanding (determined as described in clause (i) above);
(b) the following shall be added back to the number of shares of
Stock that may be issued for purposes of Subsection 2.1: (i) shares of
Stock with respect to which Options, Stock Appreciation Rights granted
independent of Options, or Restricted Stock Awards expire, are
cancelled, or otherwise terminate without being exercised, converted, or
vested, as applicable, and (ii) in the case of Options granted in tandem
with Stock Appreciation Rights, shares of Stock as to which an Option
has been surrendered in connection with the exercise of a related
("tandem") Stock Appreciation Right, to the extent the number
surrendered exceeds the number issued upon exercise of the Stock
Appreciation Right; provided that, in any case, the holder of such
Awards did not receive any dividends or other benefits of ownership with
respect to the underlying shares being added back, other than voting
rights and the accumulation (but not payment) of dividends of Stock;
(c) shares of Stock subject to Stock Appreciation Rights granted
independent of Options (calculated as provided in clause (a) above) that
are exercised and paid in cash shall be added back to the number of
shares of Stock that may be issued for purposes of Subsection 2.1,
provided that the Holder of such Stock Appreciation Right did not
receive any dividends or other benefits of ownership, other than voting
rights and the accumulation (but not payment) of dividends, of the
shares of Stock subject to the Stock Appreciation Right;
(d) shares of Stock that are transferred by a Holder of an Award
(or withheld by the Corporation) as full or partial payment to the
Corporation of the purchase price of shares of Stock subject to an
Option or the Corporation's or any Subsidiary's tax withholding
obligations shall not be added back to the number of shares of Stock
that may be issued for purposes of Subsection 2.1 and shall not again be
subject to Awards; and
(e) if the number of shares of Stock counted against the number
of shares that may be issued for purposes of Subsection 2.1 is based
upon an estimate made by the
8
<PAGE>
Corporation or the Committee as provided in clause (a) above and the
actual number of shares of Stock issued pursuant to the applicable Award
is greater or less than the estimated number, then, upon such issuance,
the number of shares of Stock that may be issued pursuant to Subsection
2.1 shall be further reduced by the excess issuance or increased by the
shortfall, as applicable.
Notwithstanding the provisions of this Subsection 2.2, no Stock shall be treated
as issuable under the Plan to Eligible Individuals subject to Section 16 of the
Exchange Act if otherwise prohibited from issuance under Rule 16b-3.
2.3 DESCRIPTION OF SHARES. The shares to be delivered under the Plan
shall be made available from (a) authorized but unissued shares of Stock, (b)
Stock held in the treasury of the Corporation, or (c) previously issued shares
of Stock reacquired by the Corporation, including shares purchased on the open
market, in each situation as the Board of Directors or the Committee may
determine from time to time at its sole option.
2.4 REGISTRATION AND LISTING OF SHARES. From time to time, the Board of
Directors and appropriate officers of the Corporation shall and are authorized
to take whatever actions are necessary to file required documents with
governmental authorities, stock exchanges, and other appropriate Persons to make
shares of Stock available for issuance pursuant to the exercise of Awards.
SECTION 3. ADMINISTRATION OF THE PLAN
3.1 COMMITTEE. The Committee shall administer the Plan with respect to
all Eligible Individuals who are subject to Section 16(b) of the Exchange Act,
but shall not have the power to appoint members of the Committee or to
terminate, modify, or amend the Plan. The Board of Directors may administer the
Plan with respect to all other Eligible Individuals, or may delegate all or part
of that duty to the Committee. Except for references in Subsections 3.1, 3.2 and
3.3, and unless the context otherwise requires, references herein to the
Committee shall also refer to the Board of Directors as administrator of the
Plan for Eligible Individuals who are subject to Section 16(b) of the Exchange
Act. The Committee shall be constituted so that, as long as Stock is registered
under Section 12 of the Exchange Act, each member of the Committee shall be a
Disinterested Person and so that the Plan in all other applicable respects will
qualify transactions related to the Plan for the exemptions from Section 16(b)
of the Exchange Act provided by Rule 16b-3, to the extent exemptions thereunder
may be available. No discretion regarding Awards to Eligible Individuals who are
subject to Section 16(b) of the Exchange Act shall be afforded to a person who
is not a Disinterested Person. The number of Persons that shall constitute the
Committee shall be determined from time to time by a majority of all the members
of the Board of Directors and, unless that majority of the Board of Directors
determines otherwise or Rule 16b- 3 is amended to require otherwise, shall be no
less than two Persons. Persons elected to serve on the Committee as
Disinterested Persons shall not be eligible to receive Awards or equity
securities under any plan of the Corporation or its affiliates while they are
serving as members of the Committee; shall not have received Awards or such
equity securities under any plan of the Corporation or its affiliates within one
year before their appointment to the Committee becomes
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effective; and shall not be eligible to receive Awards or such equity securities
under any plan of the Corporation or its affiliates for such period following
service on the Committee as may be required by Rule 16b-3 for that person to
remain a Disinterested Person, in each case except for Awards or equity
securities granted as provided in paragraphs (c)(2)(i)(A), (B), (C), or (D) of
Rule 16b-3. Notwithstanding the foregoing, the Board of Directors may designate
the Compensation Committee (regardless of its composition) of the Board of
Directors to serve as the Committee hereunder, provided that the Stock is not
registered under Section 12 of the Exchange Act.
3.2 DURATION, REMOVAL, ETC. The members of the Committee shall serve at
the discretion of the Board of Directors, which shall have the power, at any
time and from time to time, to remove members from or add members to the
Committee. Removal from the Committee may be with or without cause. Any
individual serving as a member of the Committee shall have the right to resign
from membership in the Committee by at least three days' written notice to the
Board of Directors. The Board of Directors, and not the remaining members of the
Committee, shall have the power and authority to fill all vacancies on the
Committee. The Board of Directors shall promptly fill any vacancy that causes
the number of members of the Committee to be below two or any other number that
Rule 16b-3 may require from time to time.
3.3 MEETINGS AND ACTIONS OF COMMITTEE. The Board of Directors shall
designate which of the Committee members shall be the chairman of the Committee.
If the Board of Directors fails to designate a Committee chairman, the members
of the Committee shall elect one of the Committee members as chairman, who shall
act as chairman until he ceases to be a member of the Committee or until the
Board of Directors elects a new chairman. The Committee shall hold its meetings
at those times and places as the chairman of the Committee may determine. At all
meetings of the Committee, a quorum for the transaction of business shall be
required and a quorum shall be deemed present if at least a majority of the
members of the Committee are present. At any meeting of the Committee, each
member shall have one vote. All decisions and determinations of the Committee
shall be made by the majority vote or majority decision of all of its members
present at a meeting at which a quorum is present; provided, however, that any
decision or determination reduced to writing and signed by all of the members of
the Committee shall be as fully effective as if it had been made at a meeting
that was duly called and held. The Committee may make any rules and regulations
for the conduct of its business that are not inconsistent with the provisions of
the Plan, the Articles or Certificate of Incorporation of the Corporation, the
by-laws of the Corporation, and Rule 16b-3 so long as it is applicable, as the
Committee may deem advisable.
3.4 COMMITTEE'S POWERS. Subject to the express provisions of the Plan
and Rule 16b-3, the Committee shall have the authority, in its sole and absolute
discretion, to (a) adopt, amend, and rescind administrative and interpretive
rules and regulations relating to the Plan; (b) determine the Eligible
Individuals to whom, and the time or times at which, Awards shall be granted;
(c) determine the amount of cash and the number of shares of Stock, Stock
Appreciation Rights, or Restricted Stock Awards, or any combination thereof,
that shall be the subject of each Award; (d) determine the terms and provisions
of each Award Agreement (which need not be identical), including provisions
defining or otherwise relating to (i) the term and the period or periods and
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extent of exercisability of the Options, (ii) the extent to which the
transferability of shares of Stock issued or transferred pursuant to any Award
is restricted, (iii) the effect of termination of employment of the Holder on
the Award, and (iv) the effect of approved leaves of absence (consistent with
any applicable regulations of the Internal Revenue Service); (e) accelerate,
pursuant to Section 9, the time of exercisability of any Option that has been
granted; (f) construe the respective Award Agreements and the Plan; (g) make
determinations of the Fair Market Value of the Stock pursuant to the Plan; (h)
delegate its duties under the Plan to such agents as it may appoint from time to
time, provided that the Committee may not delegate its duties with respect to
making Awards to, or otherwise with respect to Awards granted to, Eligible
Individuals who are subject to Section 16(b) of the Exchange Act; and (i) make
all other determinations, perform all other acts, and exercise all other powers
and authority necessary or advisable for administering the Plan, including the
delegation of those ministerial acts and responsibilities as the Committee deems
appropriate. Subject to Rule 16b-3, the Committee may correct any defect, supply
any omission, or reconcile any inconsistency in the Plan, in any Award, or in
any Award Agreement in the manner and to the extent it deems necessary or
desirable to carry the Plan into effect, and the Committee shall be the sole and
final judge of that necessity or desirability. The determinations of the
Committee on the matters referred to in this Subsection 3.4 shall be final and
conclusive.
SECTION 4. ELIGIBILITY AND PARTICIPATION
4.1 ELIGIBLE INDIVIDUALS. Awards may be granted pursuant to the Plan
only to persons who are Eligible Individuals at the time of the grant thereof.
4.2 GRANT OF AWARDS. Subject to the express provisions of the Plan, the
Committee shall determine which Eligible Individuals shall be granted Awards
from time to time. In making grants, the Committee shall take into consideration
the contribution the potential Holder has made or may make to the success of the
Corporation or its Subsidiaries and such other considerations as the Board of
Directors may from time to time specify. The Committee shall also determine the
number of shares subject to each of the Awards and shall authorize and cause the
Corporation to grant Awards in accordance with those determinations.
4.3 DATE OF GRANT. The date on which the Committee completes all action
resolving to offer an Award to an individual, including the specification of the
number of shares of Stock to be subject to the Award, shall be the date on which
the Award covered by an Award Agreement is granted (the "Date of Grant"), even
though certain terms of the Award Agreement may not be determined at that time
and even though the Award Agreement may not be executed until a later time. In
no event shall a Holder gain any rights in addition to those specified by the
Committee in its grant, regardless of the time that may pass between the grant
of the Award and the actual execution of the Award Agreement by the Corporation
and the Holder. Notwithstanding the above provisions of this Subsection 4.3, the
Date of Grant of an Award granted pursuant to Subsection 8.2(a) shall be the
Effective Date, the Date of Grant of an Award granted pursuant to Subsection
8.2(b) and Subsection 8.2(c) shall be the date on which such Award is granted as
provided in such Subsections.
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4.4 AWARD AGREEMENTS. Each Award granted under the Plan shall be
evidenced by an Award Agreement that is executed by the Corporation and the
Eligible Individual to whom the Award is granted and incorporating those terms
that the Committee shall deem necessary or desirable. More than one Award may be
granted under the Plan to the same Eligible Individual and be outstanding
concurrently. In the event an Eligible Individual is granted both one or more
Incentive Options and one or more Nonstatutory Options, those grants shall be
evidenced by separate Award Agreements, one for each of the Incentive Option
grants and one for each of the Nonstatutory Option grants.
4.5 LIMITATION FOR INCENTIVE OPTIONS. Notwithstanding any provision
contained herein to the contrary, (a) a person shall not be eligible to receive
an Incentive Option unless he is an Employee of the Corporation or a corporate
Subsidiary (but not a partnership Subsidiary) and (b) a person shall not be
eligible to receive an Incentive Option if, immediately before the time the
Option is granted, that person owns (within the meaning of Sections 422 and
424(d) of the Code) stock possessing more than ten percent of the total combined
voting power or value of all classes of outstanding stock of the Corporation or
a Subsidiary. Nevertheless, Subsection 4.5(b) shall not apply if, at the time
the Incentive Option is granted, the Exercise Price of the Incentive Option is
at least one hundred ten percent of Fair Market Value and the Incentive Option
is not, by its terms, exercisable after the expiration of five years from the
Date of Grant.
4.6 NO RIGHT TO AWARD. The adoption of the Plan shall not be deemed to
give any Person a right to be granted an Award.
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
All Options granted under the Plan shall comply with, and the related
Award Agreements shall be deemed to include and be subject to, the terms and
conditions set forth in this Section 5 (to the extent each term and condition
applies to the form of Option) and also to the terms and conditions set forth in
Sections 9 and 10; provided, however, that the Committee may authorize an Award
Agreement that expressly contains terms and provisions that differ from the
terms and provisions set forth in Subsections 9.2, 9.3, and 9.4 and any of the
terms and provisions of Section 10 (other than Subsections 10.9 and 10.10).
5.1 NUMBER OF SHARES. Each Award Agreement shall state the total number
of shares of Stock to which it relates.
5.2 VESTING. Each Award Agreement shall state the time or periods in
which, or the conditions upon satisfaction of which, the right to exercise the
Option or a portion thereof shall vest and the number of shares of Stock for
which the right to exercise the Option shall vest at each such time, period, or
fulfillment of condition.
5.3 EXPIRATION OF OPTIONS. No Option shall be exercised after the
expiration of a period of ten years commencing on the Date of Grant of the
Option; provided, however, that any portion of a Nonstatutory Option that
pursuant to the terms of the Award Agreement under which such Nonstatutory
Option is granted shall not become exercisable until the date which is the tenth
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anniversary of the Date of Grant of such Nonstatutory Option may be exercisable
for a period of 30 days following the date on which such portion becomes
exercisable.
5.4 EXERCISE PRICE. Each Award Agreement shall state the exercise price
per share of Stock (the "Exercise Price"); PROVIDED, HOWEVER, that the exercise
price per share of Stock subject to an Incentive Option shall not be less than
the greater of (a) the par value per share of the Stock or (b) 100% of the Fair
Market Value per share of the Stock on the Date of Grant of the Option.
5.5 METHOD OF EXERCISE. The Option shall be exercisable only by written
notice of exercise (the "Exercise Notice") delivered to the Corporation during
the term of the Option, which notice shall (a) state the number of shares of
Stock with respect to which the Option is being exercised, (b) be signed by the
Holder of the Option or, if the Holder is dead or becomes affected by a
Disability, by the person authorized to exercise the Option pursuant to
Subsections 10.3 and 10.4, (c) be accompanied by the Exercise Price for all
shares of Stock for which the Option is being exercised, and (d) include such
other information, instruments, and documents as may be required to satisfy any
other condition to exercise contained in the Award Agreement. The Option shall
not be deemed to have been exercised unless all of the requirements of the
preceding provisions of this Subsection 5.5 have been satisfied.
5.6 INCENTIVE OPTION EXERCISES. Except as otherwise provided in
Subsection 10.3, during the Holder's lifetime, only the Holder may exercise an
Incentive Option; provided, however, if an Incentive Option is transferred to a
permitted transferee, as approved by the written consent of a majority of the
Committee members, such Option may be exercised by such transferee as a
Nonstatutory Option if such Option, for any reason, ceases to be an Incentive
Option.
5.7 MEDIUM AND TIME OF PAYMENT. The Exercise Price of an Option shall be
payable in full upon the exercise of the Option (a) in cash or by an equivalent
means acceptable to the Committee, (b) on the Committee's prior consent, with
shares of Stock owned by the Holder (including shares received upon exercise of
the Option or restricted shares already held by the Holder) and having a Fair
Market Value at least equal to the aggregate Exercise Price payable in
connection with such exercise, or (c) by any combination of clauses (a) and (b).
If the Committee elects to accept shares of Stock in payment of all or any
portion of the Exercise Price, then (for purposes of payment of the Exercise
Price) those shares of Stock shall be deemed to have a cash value equal to their
aggregate Fair Market Value determined as of the date the certificate for such
shares is delivered to the Corporation. If the Committee elects to accept shares
of restricted Stock in payment of all or any portion of the Exercise Price, then
an equal number of shares issued pursuant to the exercise shall be restricted on
the same terms and for the restriction period remaining on the shares used for
payment.
5.8 PAYMENT WITH SALE PROCEEDS. In addition, at the request of the
Holder and to the extent permitted by applicable law, the Committee may (but
shall not be required to) approve arrangements with a brokerage firm under which
that brokerage firm, on behalf of the Holder, shall pay to the Corporation the
Exercise Price of the Option being exercised and the Corporation shall promptly
deliver the exercised shares of Stock to the brokerage firm. To accomplish this
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transaction, the Holder must deliver to the Corporation an Exercise Notice
containing irrevocable instructions from the Holder to the Corporation to
deliver the Stock certificates representing the shares of Stock directly to the
broker. Upon receiving a copy of the Exercise Notice acknowledged by the
Corporation, the broker shall sell that number of shares of Stock or loan the
Holder an amount sufficient to pay the Exercise Price and any withholding
obligations due. The broker then shall deliver to the Corporation that portion
of the sale or loan proceeds necessary to cover the Exercise Price and any
withholding obligations due. The Committee shall not approve any transaction of
this nature if the Committee believes that the transaction would give rise to
the Holder's liability for short-swing profits under Section 16(b) of the
Exchange Act.
5.9 PAYMENT OF TAXES. The Committee may, in its discretion, require a
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation), at the time of the exercise
of an Option or thereafter, the amount that the Committee deems necessary to
satisfy the Corporation's or its Subsidiary's current or future obligation to
withhold federal, state, or local income or other taxes that the Holder incurs
by exercising an Option. In connection with the exercise of an Option requiring
tax withholding, a Holder may (a) direct the Corporation to withhold from the
shares of Stock to be issued to the Holder the number of shares necessary to
satisfy the Corporation's obligation to withhold taxes, that determination to be
based on the shares' Fair Market Value as of the date of exercise; (b) deliver
to the Corporation sufficient shares of Stock (based upon the Fair Market Value
as of the date of such delivery) to satisfy the Corporation's tax withholding
obligations, which tax withholding obligation is based on the shares' Fair
Market Value as of the later of the date of exercise or the date as of which the
shares of Stock issued in connection with such exercise become includible in the
income of the Holder; or (c) deliver sufficient cash to the Corporation to
satisfy its tax withholding obligations. Holders who elect to use such a stock
withholding feature must make the election at the time and in the manner that
the Committee prescribes. The Committee may, at its sole option, deny any
Holder's request to satisfy withholding obligations through Stock instead of
cash. In the event the Committee subsequently determines that the aggregate Fair
Market Value (as determined above) of any shares of Stock withheld or delivered
as payment of any tax withholding obligation is insufficient to discharge that
tax withholding obligation, then the Holder shall pay to the Corporation,
immediately upon the Committee's request, the amount of that deficiency in the
form of payment requested by the Committee.
5.10 LIMITATION ON AGGREGATE VALUE OF SHARES THAT MAY BECOME FIRST
EXERCISABLE DURING ANY CALENDAR YEAR UNDER AN INCENTIVE OPTION. Except as is
otherwise provided in Subsection 9.3, with respect to any Incentive Option
granted under this Plan, the aggregate Fair Market Value of shares of Stock
subject to an Incentive Option and the aggregate Fair Market Value of shares of
Stock or stock of any Subsidiary (or a predecessor of the Corporation or a
Subsidiary) subject to any other incentive stock option (within the meaning of
Section 422 of the Code) of the Corporation or its Subsidiaries (or a
predecessor corporation of any such corporation) that first become purchasable
by a Holder in any calendar year may not (with respect to that Holder) exceed
$100,000, or such other amount as may be prescribed under Section 422 of the
Code or applicable regulations or rulings from time to time. As used in the
previous sentence, Fair Market Value shall be determined as of the Date of Grant
of the Incentive Option. For purposes of this Subsection 5.10, "predecessor
corporation" means (a) a corporation that was a
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party to a transaction described in Section 424(a) of the Code (or which would
be so described if a substitution or assumption under that Section had been
effected) with the Corporation, (b) a corporation which, at the time the new
incentive stock option (within the meaning of Section 422 of the Code) is
granted, is a Subsidiary of the Corporation or a predecessor corporation of any
such corporations, or (c) a predecessor corporation of any such corporations.
Failure to comply with this provision shall not impair the enforceability or
exercisability of any Option, but shall cause the excess amount of shares to be
reclassified in accordance with the Code.
5.11 NO FRACTIONAL SHARES. The Corporation shall not in any case be
required to sell, issue, or deliver a fractional share with respect to any
Option. In lieu of the issuance of any fractional share of Stock, the
Corporation shall pay to the Holder an amount in cash equal to the same fraction
(as the fractional Stock) of the Fair Market Value of a share of Stock
determined as of the date of the applicable Exercise Notice.
5.12 MODIFICATION, EXTENSION, AND RENEWAL OF OPTIONS. Subject to the
terms and conditions of and within the limitations of the Plan, Rule 16b-3, and
any consent required by the last sentence of this Subsection 5.12, the Committee
may (a) modify, extend, or renew outstanding Options granted under the Plan, (b)
accept the surrender of Options outstanding hereunder (to the extent not
previously exercised) and authorize the granting of new Options in substitution
for outstanding Options (to the extent not previously exercised), and (c) amend
the terms of an Incentive Option at any time to include provisions that have the
effect of changing the Incentive Option to a Nonstatutory Option. Nevertheless,
without the consent of the Holder, the Committee may not modify any outstanding
Options so as to specify a higher or lower Exercise Price or accept the
surrender of outstanding Incentive Options and authorize the granting of new
Options in substitution therefor specifying a higher or lower Exercise Price. In
addition, no modification of an Option granted hereunder shall, without the
consent of the Holder, alter or impair any rights or obligations under any
Option theretofore granted to such Holder under the Plan except, with respect to
Incentive Options, as may be necessary to satisfy the requirements of Section
422 of the Code or as permitted in clause (c) of this Subsection 5.12.
5.13 OTHER AGREEMENT PROVISIONS. The Award Agreements authorized under
the Plan shall contain such provisions in addition to those required by the Plan
(including without limitation restrictions or the removal of restrictions upon
the exercise of the Option and the retention or transfer of shares thereby
acquired) as the Committee may deem advisable. Each Award Agreement shall
identify the Option evidenced thereby as an Incentive Option or Nonstatutory
Option, as the case may be, and no Award Agreement shall cover both an Incentive
Option and a Nonstatutory Option. Each Award Agreement relating to an Incentive
Option granted hereunder shall contain such limitations and restrictions upon
the exercise of the Incentive Option to which it relates as shall be necessary
for the Incentive Option to which such Award Agreement relates to constitute an
incentive stock option, as defined in Section 422 of the Code.
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SECTION 6. STOCK APPRECIATION RIGHTS
All Stock Appreciation Rights granted under the Plan shall comply with,
and the related Award Agreements shall be deemed to include and be subject to,
the terms and conditions set forth in this Section 6 (to the extent each term
and condition applies to the form of Stock Appreciation Right) and also the
terms and conditions set forth in Sections 9 and 10; provided, however, that the
Committee may authorize an Award Agreement related to a Stock Appreciation Right
that expressly contains terms and provisions that differ from the terms and
provisions set forth in Subsections 9.2, 9.3, and 9.4 and any of the terms and
provisions of Section 10 (other than Subsection 10.10).
6.1 FORM OF RIGHT. A Stock Appreciation Right may be granted to an
Eligible Individual (a) in connection with an Option, either at the time of
grant or at any time during the term of the Option, or (b) independent of an
Option.
6.2 RIGHTS RELATED TO OPTIONS. A Stock Appreciation Right granted
pursuant to an Option shall entitle the Holder, upon exercise, to surrender that
Option or any portion thereof, to the extent unexercised, and to receive payment
of an amount computed pursuant to Subsection 6.2(b). That Option shall then
cease to be exercisable to the extent surrendered. Stock Appreciation Rights
granted in connection with an Option shall be subject to the terms of the Award
Agreement governing the Option, which shall comply with the following provisions
in addition to those applicable to Options:
(a) EXERCISE AND TRANSFER. Subject to Subsection 10.9, a Stock
Appreciation Right granted in connection with an Option shall be
exercisable only at such time or times and only to the extent that the
related Option is exercisable and shall not be transferable except to
the extent that the related Option is transferable.
(b) VALUE OF RIGHT. Upon the exercise of a Stock Appreciation
Right related to an Option, the Holder shall be entitled to receive
payment from the Corporation of an amount determined by Multiplying:
(i) The difference obtained by subtracting the Exercise
Price of a share of Stock specified in the related Option from
the Fair Market Value of a share of Stock on the date of exercise
of the Stock Appreciation Right, by
(ii) The number of shares as to which that Stock
Appreciation Right has been exercised.
6.3 RIGHT WITHOUT OPTION. A Stock Appreciation Right granted independent
of an Option shall be exercisable as determined by the Committee and set forth
in the Award Agreement governing the Stock Appreciation Right, which Award
Agreement shall comply with the following provisions:
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(a) NUMBER OF SHARES. Each Award Agreement shall state the total
number of shares of Stock to which the Stock Appreciation Right relates.
(b) VESTING. Each Award Agreement shall state the time or periods
in which the right to exercise the Stock Appreciation Right or a portion
thereof shall vest and the number of shares of Stock for which the right
to exercise the Stock Appreciation Right shall vest at each such time or
period.
(c) EXPIRATION OF RIGHTS. Each Award Agreement shall state the
date at which the Stock Appreciation Rights shall expire if not
previously exercised.
(d) VALUE OF RIGHT. Each Stock Appreciation Right shall entitle
the Holder, upon exercise thereof, to receive payment of an amount
determined by multiplying:
(i) The difference obtained by subtracting the Fair
Market Value of a share of Stock on the Date of Grant of the
Stock Appreciation Right from the Fair Market Value of a share of
Stock on the date of exercise of that Stock Appreciation Right,
by
(ii) The number of shares as to which the Stock
Appreciation Right has been exercised.
6.4 LIMITATIONS ON RIGHTS. Notwithstanding Subsections 6.2(b) and
6.3(d), the Committee may limit the amount payable upon exercise of a Stock
Appreciation Right. Any such limitation must be determined as of the Date of
Grant and be noted on the Award Agreement evidencing the Holder's Stock
Appreciation Right.
6.5 PAYMENT OF RIGHTS. Payment of the amount determined under Subsection
6.2(b) or 6.3(d) and Subsection 6.4 may be made, in the sole discretion of the
Committee unless specifically provided otherwise in the Award Agreement, solely
in whole shares of Stock valued at Fair Market Value on the date of exercise of
the Stock Appreciation Right, solely in cash, or in a combination of cash and
whole shares of Stock. If the Committee decides to make full payment in shares
of Stock and the amount payable results in a fractional share, payment for the
fractional share shall be made in cash.
6.6 PAYMENT OF TAXES. The Committee may, in its discretion, require a
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation), at the time of the exercise
of a Stock Appreciation Right or thereafter, the amount that the Committee deems
necessary to satisfy the Corporation's or its Subsidiary's current or future
obligation to withhold federal, state, or local income or other taxes that the
Holder incurs by exercising a Stock Appreciation Right. In connection with the
exercise of a Stock Appreciation Right requiring tax withholding, a Holder may
(a) direct the Corporation to withhold from the shares of Stock to be issued to
the Holder the number of shares necessary to satisfy the Corporation's
obligation to withhold taxes, that determination to be based on the shares' Fair
Market Value as of the date of exercise; (b) deliver to the Corporation
sufficient shares of Stock
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(based upon the Fair Market Value as of the date of such delivery) to satisfy
the Corporation's tax withholding obligations, which tax withholding obligation
is based on the shares' Fair Market Value as of the later of the date of
exercise or the date of which the shares of Stock issued in connection with such
exercise become includible in the income of the Holder; or (c) deliver
sufficient cash to the Corporation to satisfy its tax withholding obligations.
Holders who elect to have Stock withheld pursuant to (a) or (b) above must make
the election at the time and in the manner that the Committee prescribes. The
Committee may, in its sole discretion, deny any Holder's request to satisfy
withholding obligations through Stock instead of cash. In the event the
Committee subsequently determines that the aggregate Fair Market Value (as
determined above) of any shares of Stock withheld or delivered as payment of any
tax withholding obligation is insufficient to discharge that tax withholding
obligation, then the Holder shall pay to the Corporation, immediately upon the
Committee's request, the amount of that deficiency in the form of payment
requested by the Commission.
6.7 OTHER AGREEMENT PROVISIONS. The Award Agreements authorized relating
to Stock Appreciation Rights shall contain such provisions in addition to those
required by the Plan (including without limitation restrictions or the removal
of restrictions upon the exercise of the Stock Appreciation Right and the
retention or transfer of shares thereby acquired) as the Committee may deem
advisable.
SECTION 7. RESTRICTED STOCK AWARDS
All Restricted Stock Awards granted under the Plan shall comply with and
be subject to, and the related Award Agreements shall be deemed to include, the
terms and conditions set forth in this Section 7 and also to the terms and
conditions set forth in Sections 9 and 10; provided, however, that the Committee
may authorize an Award Agreement related to a Restricted Stock Award that
expressly contains terms and provisions that differ from the terms and
provisions set forth in Subsections 9.2, 9.3, and 9.4 and the terms and
provisions set forth in Section 10 (other than Subsections 10.9 and 10.10).
7.1 RESTRICTIONS. All shares of Restricted Stock Awards granted or sold
pursuant to the Plan shall be subject to the following conditions:
(a) TRANSFERABILITY. The shares may not be sold, transferred, or
otherwise alienated or hypothecated until the restrictions are removed
or expire.
(b) CONDITIONS TO REMOVAL OF RESTRICTIONS. Conditions to removal
or expiration of the restrictions may include, but are not required to
be limited to, continuing employment or service as a director, officer,
or Key Employee or achievement of performance objectives described in
the Award Agreement.
(c) LEGEND. Each certificate representing Restricted Stock Awards
granted pursuant to the Plan shall bear a legend making appropriate
reference to the restrictions imposed.
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(d) POSSESSION. The Committee may require the Corporation to
retain physical custody of the certificates representing Restricted
Stock Awards during the restriction period and may require the Holder of
the Award to execute stock powers in blank for those certificates and
deliver those stock powers to the Corporation, or the Committee may
require the Holder to enter into an escrow agreement providing that the
certificates representing Restricted Stock Awards granted or sold
pursuant to the Plan shall remain in the physical custody of an escrow
holder until all restrictions are removed or expire.
(e) OTHER CONDITIONS. The Committee may impose other conditions
on any shares granted or sold as Restricted Stock Awards pursuant to the
Plan as it may deem advisable, including without limitation (i)
restrictions under the Securities Act or Exchange Act, (ii) the
requirements of any securities exchange upon which the shares or shares
of the same class are then listed, and (iii) any state securities law
applicable to the shares.
7.2 EXPIRATION OF RESTRICTIONS. The restrictions imposed in Subsection
7.1 on Restricted Stock Awards shall lapse as determined by the Committee and
set forth in the applicable Award Agreement, and the Corporation shall promptly
deliver to the Holder of the Restricted Stock Award a certificate representing
the number of shares for which restrictions have lapsed, free of any restrictive
legend relating to the lapsed restrictions. Each Restricted Stock Award may have
a different restriction period as determined by the Committee in its sole
discretion. The Committee may, in its discretion, prospectively reduce the
restriction period applicable to a particular Restricted Stock Award.
7.3 RIGHTS AS STOCKHOLDER. Subject to the provisions of Subsections 7.1
and 10.10, the Committee may, in its discretion, determine what rights, if any,
the Holder shall have with respect to the Restricted Stock Awards granted or
sold, including the right to vote the shares and receive all dividends and other
distributions paid or made with respect thereto.
7.4 PAYMENT OF TAXES. The Committee may, in its discretion, require a
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation) the amount that the Committee
deems necessary to satisfy the Corporation's or its Subsidiary's current or
future obligation to withhold federal, state, or local income or other taxes
that the Holder incurs by reason of the Restricted Stock Award. The Holder may
(a) direct the Corporation to withhold from the shares of Stock to be issued to
the Holder the number of shares necessary to satisfy the Corporation's
obligation to withhold taxes, that determination to be based on the shares' Fair
Market Value as of the date on which tax withholding is to be made; (b) deliver
to the Corporation sufficient shares of Stock (based upon the Fair Market Value
as of the date of such delivery) to satisfy the Corporation's tax withholding
obligations, which tax withholding obligation is based on the shares' Fair
Market Value as of the later of the date of issuance or the date as of which the
shares of Stock issued become includible in the income of the Holder; or (c)
deliver sufficient cash to the Corporation to satisfy its tax withholding
obligations. Holders who elect to have Stock withheld pursuant to (a) or (b)
above must make the election at the time and in the manner that the Committee
prescribes. The Committee may, in its sole discretion, deny any Holder's request
to satisfy withholding obligations through Stock instead of cash. In the event
the Committee subsequently determines that the aggregate Fair Market Value
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(as determined above) of any shares of Stock withheld or delivered as payment of
any tax withholding obligation is insufficient to discharge that tax withholding
obligation, then the Holder shall pay to the Corporation, immediately upon the
Committee's request, the amount of that deficiency.
7.5 OTHER AGREEMENT PROVISIONS. The Award Agreements relating to
Restricted Stock Awards shall contain such provisions in addition to those
required by the Plan as the Committee may deem advisable.
SECTION 8. AWARDS TO NON-EMPLOYEE DIRECTORS
Except as otherwise provided in this Section 8 or the applicable Award
Agreement, Awards granted pursuant to this Section 8 shall be subject to the
conditions of Section 5 to the extent permitted under Rule 16b-3.
8.1 INELIGIBILITY FOR OTHER AWARDS. Non-Employee Directors shall not be
eligible to receive any Awards under the Plan other than the Awards specified in
this Section 8.
8.2 AUTOMATIC GRANT OF AWARDS. Unless any Non-Employee Director (or
director nominee) shall have given written notice to the Corporation that he or
she declines to accept any Award pursuant to this Subsection 8.2 on or prior to
the Date of Grant of such Award,
(a) each Non-Employee Director who is a director on the close of
business of the Effective Date of this Plan automatically shall be
granted, as of the Effective Date, Options to purchase 4,300 shares of
Stock (after giving effect to a 4.3-for-1 stock split effective March 1,
1996), which Options shall have a per share Exercise Price equal to
$7.44 (after giving effect to a 4.3-for-1 stock split effective March 1,
1996);
(b) commencing on April 1, 1996, and on each April 1 thereafter
through and including April 1, 1997, each person who is a Non-Employee
Director on such date automatically shall be granted Options to purchase
4,300 shares of Stock, which Options shall have a per share Exercise
Price equal to the Fair Market Value of the Stock on the Date of Grant.
(c) commencing on April 1, 1998 and on each April 1 thereafter
through and including April 1, 2005, each person who is a Non-Employee
Director on such date automatically shall be granted Options to purchase
5,000 shares of Stock, which Options shall have a per share Exercise
Price equal to the Fair Market Value of the Stock on the Date of Grant.
8.3 AVAILABLE STOCK. The automatic Awards specified in Subsection 8.2
shall be made in the amounts specified in Subsection 8.2 only if the number of
shares of Stock available to be issued, transferred or exercised pursuant to
Awards under this Plan (as calculated in Section 2) is sufficient to make all
automatic grants required to be made by Subsection 8.2 on the Date of Grant of
those automatic Awards. In the event that the number of shares of Stock that are
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available to be issued, transferred, or exercised pursuant to Awards under the
Plan on the Date of Grant of the automatic Awards described in Subsection 8.2 is
insufficient to permit the grant of the entire number of shares specified in
Subsection 8.2, then the number of available shares shall be apportioned equally
among the automatic Awards made on that date, and the number of shares
apportioned to each automatic Award shall be the amount of shares automatically
subject to that automatic Award.
8.4 EXERCISABILITY. Options granted pursuant to Section 8.2 shall vest
immediately upon their grant, and shall be exercisable for a period of ten years
from the date of their grant.
SECTION 9. ADJUSTMENT PROVISIONS
9.1 ADJUSTMENT OF AWARDS AND AUTHORIZED STOCK. The terms of an Award and
the number of shares of Stock authorized pursuant to Subsection 2.1 and Section
8 for issuance under the Plan shall be subject to adjustment from time to time,
in accordance with the following provisions:
(a) If at any time, or from time to time, the Corporation shall
subdivide as a whole (by reclassification, by a Stock split, by the
issuance of a distribution on Stock payable in Stock, or otherwise) the
number of shares of Stock then outstanding into a greater number of
shares of Stock, then (i) the maximum number of shares of Stock
available for the Plan as provided in Subsection 2.1 shall be increased
proportionately, and the kind of shares or other securities available
for the Plan shall be appropriately adjusted, (ii) the number of shares
of Stock (or other kind of shares or securities) that may be acquired
under any Award shall be increased proportionately, and (iii) the price
(including Exercise Price) for each share of Stock (or other kind of
shares or securities) subject to then outstanding Awards shall be
reduced proportionately, without changing the aggregate purchase price
or value as to which outstanding Awards remain exercisable or subject to
restrictions.
(b) If at any time, or from time to time, the Corporation shall
consolidate as a whole (by reclassification, reverse Stock split, or
otherwise) the number of shares of Stock then outstanding into a lesser
number of shares of Stock, then (i) the maximum number of shares of
Stock available for the Plan as provided in Subsection 2.1 shall be
decreased proportionately, and the kind of shares or other securities
available for the Plan shall be appropriately adjusted, (ii) the number
of shares of Stock (or other kind of shares or securities) that may be
acquired under any Award shall be decreased proportionately, and (iii)
the price (including Exercise Price) for each share of Stock (or other
kind of shares or securities) subject to then outstanding Awards shall
be increased proportionately, without changing the aggregate purchase
price or value as to which outstanding Awards remain exercisable or
subject to restrictions.
(c) Whenever the number of shares of Stock subject to outstanding
Awards and the price for each share of Stock subject to outstanding
Awards are required to be adjusted as provided in this Subsection 9.1,
the Committee shall promptly prepare a notice setting
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forth, in reasonable detail, the event requiring adjustment, the amount
of the adjustment, the method by which such adjustment was calculated,
and the change in price and the number of shares of Stock, other
securities, cash, or property purchasable subject to each Award after
giving effect to the adjustments. The Committee shall promptly give each
Holder such a notice.
(d) Adjustments under Subsections 9(a) and (b) shall be made by
the Committee, and its determination as to what adjustments shall be
made and the extent thereof shall be final, binding, and conclusive. No
fractional interest shall be issued under the Plan on account of any
such adjustments.
9.2 CHANGES IN CONTROL. Any Award Agreement may provide that, upon the
occurrence of a Change in Control, one or more of the following apply: (a) each
Holder of an Option shall immediately be granted corresponding Stock
Appreciation Rights; (b) all outstanding Stock Appreciation Rights and Options
shall immediately become fully vested and exercisable in full, including that
portion of any Stock Appreciation Right or Option that pursuant to the terms and
provisions of the applicable Award Agreement had not yet become exercisable (the
total number of shares of Stock as to which a Stock Appreciation Right or Option
is exercisable upon the occurrence of a change in Control is referred to herein
as the "Total Shares"); and (c) the restriction period of any Restricted Stock
Award shall immediately be accelerated and the restrictions shall expire. An
Award Agreement does not have to provide for any of the foregoing. If a Change
in Control involves a Restructuring or occurs in connection with a series of
related transactions involving a Restructuring and if such Restructuring is in
the form of a Non-Surviving Event and as a part of such Restructuring shares of
Stock, other securities, cash, or property shall be issuable or deliverable in
exchange for Stock, then the Holder of an Award shall be entitled to purchase or
receive (in lieu of the Total Shares that the Holder would otherwise be entitled
to purchase or receive), as appropriate for the form of Award, the number of
shares of Stock, other securities, cash, or property to which that number of
Total Shares would have been entitled in connection with such Restructuring
(and, for Options, at an aggregate exercise price equal to the Exercise Price
that would have been payable if that number of Total Shares had been purchased
on the exercise of the Option immediately before the consummation of the
Restructuring). Nothing in this Subsection 9.2 shall impose on a Holder the
obligation to exercise any Award immediately before or upon the Change of
Control, or cause Holder to forfeit the right to exercise the Award during the
remainder of the original term of the Award because of a Change in Control.
9.3 RESTRUCTURING WITHOUT CHANGE IN CONTROL. In the event a
Restructuring shall occur at any time while there is any outstanding Award
hereunder and that Restructuring does not occur in connection with a Change in
Control or a series of related transactions involving a Change in Control, then:
(a) no outstanding Option or Stock Appreciation Right shall
immediately become fully vested and exercisable in full merely because
of the occurrence of the Restructuring;
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(b) no Holder of an Option shall automatically be granted
corresponding Stock Appreciation Rights;
(c) the restriction period of any Restricted Stock Award shall
not immediately be accelerated and the restrictions expire merely
because of the occurrence of the Restructuring; and
(d) at the option of the Committee, the Committee may (but shall
not be required to) cause the Corporation to take any one or more of the
following actions:
(i) accelerate in whole or in part the time of the
vesting and exercisability of any one or more of the outstanding
Stock Appreciation Rights and Options so as to provide that those
Stock Appreciation Rights and Options shall be exercisable
before, upon, or after the consummation of the Restructuring;
(ii) grant each Holder of an Option corresponding Stock
Appreciation Rights;
(iii) accelerate in whole or in part the expiration of
some or all of the restrictions on any Restricted Stock Award;
(iv) if the Restructuring is in the form of a
Non-Surviving Event, 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 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, as such payment may be reduced
for tax withholding obligations as contemplated in Subsections
5.9, 6.6, or 7.4, as applicable, in an amount equal to:
(A) for Options and Stock Appreciation Rights
granted in connection with Options, the excess of (1) the
Fair Market Value, determined as of the date immediately
preceding the consummation of the Restructuring, of the
aggregate number of shares of Stock subject to the Award
and as to which the Award is being redeemed over (2) the
Exercise Price for that number of shares of Stock;
(B) for Stock Appreciation Rights not granted in
connection with an Option, the excess of (1) the Fair
Market Value, determined as of the date immediately
preceding the consummation of the Restructuring, of the
aggregate number of shares of Stock subject to the Award
and as to which the Award is being redeemed over (2) the
Fair Market Value of that number of shares of Stock on the
Date of Grant; and
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(C) for Restricted Stock Awards, the Fair Market
Value, determined as of the date immediately preceding the
consummation of the Restructuring, of the aggregate number
of shares of Stock subject to the Award and as to which
the Award is being redeemed.
The Corporation shall promptly notify each Holder of any election or action
taken by the Corporation under this Subsection 9.3. In the event of any election
or action taken by the Corporation pursuant to this Subsection 9.3 that requires
the amendment or cancellation of any Award Agreement as may be specified in any
notice to the Holder thereof, that Holder shall promptly deliver that Award
Agreement to the Corporation in order for that amendment or cancellation to be
implemented by the Corporation and the Committee. The failure of the Holder to
deliver any such Award Agreement to the Corporation as provided in the preceding
sentence shall not in any manner affect the validity or enforceability of any
action taken by the Corporation and the Committee under this Subsection 9.3,
including without limitation any redemption of an Award as of the consummation
of a Restructuring. Any cash payment to be made by the Corporation pursuant to
this Subsection 9.3 in connection with the redemption of any outstanding Awards
shall be paid to the Holder thereof currently with the delivery to the
Corporation of the Award Agreement evidencing that Award; provided, however,
that any such redemption shall be effective upon the consummation of the
Restructuring notwithstanding that the payment of the redemption price may occur
subsequent to the consummation. If all or any portion of an outstanding Award is
to be exercised or accelerated upon or after the consummation of a Restructuring
that does not occur in connection with a Change in Control and is in the form of
a Non-Surviving Event, and as a part of that Restructuring shares of stock,
other securities, cash, or property shall be issuable or deliverable in exchange
for Stock, then the Holder of the Award shall thereafter be entitled to purchase
or receive (in lieu of the number of shares of Stock that the Holder would
otherwise be entitled to purchase or receive) the number of shares of Stock,
other securities, cash, or property to which such number of shares of Stock
would have been entitled in connection with the Restructuring (and, for Options,
upon payment of the aggregate exercise price equal to the Exercise Price that
would have been payable if that number of Total Shares had been purchased on the
exercise of the Option immediately before the consummation of the Restructuring)
and such Award shall be subject to adjustments that shall be as nearly
equivalent as may be practical to the adjustments provided for in this Section
9.
9.4 NOTICE OF RESTRUCTURING. The Corporation shall attempt to keep all
Holders informed with respect to any Restructuring or of any potential
Restructuring to the same extent that the Corporation's stockholders are
informed by the Corporation of any such event or potential event.
SECTION 10. ADDITIONAL PROVISIONS
10.1 TERMINATION OF EMPLOYMENT. If a Holder is an Eligible Individual
because the Holder is an Employee and if that employment relationship is
terminated for any reason other than (a) that Holder's death or (b) that
Holder's Disability (hereafter defined), then any and all Awards held by such
Holder in such Holder's capacity as an Employee as of the date of the
termination that are not yet exercisable (or for which restrictions have not
lapsed) shall become null and void
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as of the date of such termination; provided, however, that the portion, if any,
of such Awards that are exercisable as of the date of termination shall be
exercisable for a period of the lesser of (a) the remainder of the term of the
Award or (b) the date which is 30 days after the date of termination. Any
portion of an Award not exercised upon the expiration of the lesser of the
period specified above shall be null and void unless the Holder dies during such
period, in which case the provisions of Subsection 10.3 shall govern.
10.2 OTHER LOSS OF ELIGIBILITY - NON-EMPLOYEES. If a Holder is an
Eligible Individual because the Holder is serving in a capacity other than as an
Employee and if that capacity is terminated for any reason other than the
Holder's death or Disability, then that portion, if any, of any and all Awards
held by the Holder that were granted because of that capacity which are not yet
exercisable (or for which restrictions have not lapsed) as of the date of the
termination shall become null and void as of the date of the termination;
provided, however, that the portion, if any, of any and all Awards held by the
Holder that are then exercisable as of the date of the termination shall be
exercisable for a period of the lesser of (a) the remainder of the term of the
Award or (b) 30 days following the date such capacity is terminated. If a Holder
is an Eligible Individual because the Holder is serving in a capacity other than
as an Employee and if that capacity is terminated by reason of the Holder's
death or Disability, then the portion, if any, of any and all Awards held by the
Holder that are not yet exercisable (or for which restrictions have not lapsed)
as of the date of that termination for death or Disability shall become
exercisable (and the restrictions thereon, if any, shall lapse) and all such
Awards held by that Holder as of the date of termination that are exercisable
(either as a result of this sentence or otherwise) shall be exercisable for a
period of the lesser of (a) the remainder of the term of the Award or (b) the
date which is 30 days after the date of termination. Any portion of an Award not
exercised upon the expiration of the periods specified in (a) or (b) of the
preceding two sentences shall be null and void upon the expiration of such
period, as applicable.
10.3 DEATH. Upon the death of a Holder, any and all Awards held by the
Holder that are not yet exercisable (or for which restrictions have not lapsed)
as of the date of the Holder's death shall become exercisable as provided below
and any restrictions shall immediately lapse as of the date of death; provided,
however, that the Awards held by the Holder as of the date of death shall be
exercisable by that Holder's legal representatives, heirs, legatees, or
distributees for a period of 90 days following the date of the Holder's death.
Any portion of an Award not exercised upon the expiration of such period shall
be null and void. Except as expressly provided in this Subsection 10.3, no Award
held by a Holder shall be exercisable after the death of that Holder.
10.4 DISABILITY. If a Holder is an Eligible Individual because the
Holder is an Employee and if that employment relationship is terminated by
reason of the Holder's Disability, then the portion, if any, of any and all
Awards held by the Holder that are not yet exercisable (or for which
restrictions have not lapsed) as of the date of that termination for Disability
shall become exercisable as provided below and any restrictions shall
immediately lapse as of the date of termination; provided, however, that the
Awards held by the Holder as of the date of that termination shall be
exercisable by the Holder, his guardian or his legal representative for a period
of 30 days following the date of such termination. Any portion of an Award not
exercised upon
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the expiration of such period shall be null and void unless the Holder dies
during such period, in which event the provisions of Subsection 10.3 shall
govern. "Disability" shall have the meaning given it in the employment agreement
of the Holder; provided, however, that if that Holder has no employment
agreement, "Disability" shall mean, as determined by the Board of Directors in
the sole discretion exercised in good faith of the Board of Directors, a
physical or mental impairment of sufficient severity that either the Holder is
unable to continue performing the duties he performed before such impairment or
the Holder's condition entitles him to disability benefits under any insurance
or employee benefit plan of the Corporation or its Subsidiaries and that
impairment or condition is cited by the Corporation as the reason for
termination of the Holder's employment.
10.5 LEAVE OF ABSENCE. With respect to an Award, the Committee may, in
its sole discretion, determine that any Holder who is on leave of absence for
any reason will be considered to still be in the employ of the Corporation for
any or all purposes of the Plan and the Award Agreement of such Holder.
10.6 TRANSFERABILITY OF AWARDS. In addition to such other terms and
conditions as may be included in a particular Award Agreement, an Award
requiring exercise shall be exercisable during a Holder's lifetime only by that
Holder or by that Holder's guardian or legal representative. An Award requiring
exercise shall not be transferrable other than (i) by will or the laws of
descent and distribution, or (ii) upon the written consent of a majority of the
Committee members.
10.7 FORFEITURE AND RESTRICTIONS ON TRANSFER. Each Award Agreement may
contain or otherwise provide for conditions giving rise to the forfeiture of the
Stock acquired pursuant to an Award or otherwise and may also provide for those
restrictions on the transferability of shares of the Stock acquired pursuant to
an Award or otherwise that the Committee in its sole and absolute discretion may
deem proper or advisable. The conditions giving rise to forfeiture may include,
but need not be limited to, the requirement that the Holder render substantial
services to the Corporation or its Subsidiaries for a specified period of time.
The restrictions on transferability may include, but need not be limited to,
options and rights of first refusal in favor of the Corporation and stockholders
of the Corporation other than the Holder of such shares of Stock who is a party
to the particular Award Agreement or a subsequent holder of the shares of Stock
who is bound by that Award Agreement.
10.8 DELIVERY OF CERTIFICATES OF STOCK. Subject to Subsection 10.9, the
Corporation shall promptly issue and deliver a certificate representing the
number of shares of Stock as to which (a) an Option has been exercised after the
Corporation receives an Exercise Notice and upon receipt by the Corporation of
the Exercise Price and any tax withholding as may be requested, (b) a Stock
Appreciation Right has been exercised (to the extent the Committee determines to
pay such Stock Appreciation Right in shares of Stock pursuant to Subsection 6.5)
and upon receipt by the Corporation of any tax withholding as may be requested,
and (c) restrictions have lapsed with respect to a Restricted Stock Award and
upon receipt by the Corporation of any tax withholding as may be requested. The
value of the shares of Stock or cash transferable because of an Award under the
Plan shall not bear any interest owing to the passage of time, except as may be
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otherwise provided in an Award Agreement. If a Holder is entitled to receive
certificates representing Stock received for more than one form of Award under
the Plan, separate Stock certificates shall be issued with respect to Incentive
Options and Nonstatutory Options.
10.9 CONDITIONS TO DELIVERY OF STOCK. Nothing herein or in any Award
granted hereunder or any Award Agreement shall require the Corporation to issue
any shares with respect to any Award if that issuance would, in the opinion of
counsel for the Corporation, constitute a violation of the Securities Act or any
similar or superseding statute or statutes, any other applicable statute or
regulation, or the rules of any applicable securities exchange or securities
association, as then in effect. At the time of any exercise of an Option or
Stock Appreciation Right, or at the time of any grant of a Restricted Stock
Award, the Corporation may, as a condition precedent to the exercise of such
Option or Stock Appreciation Right or vesting of any Restricted Stock Award,
require from the Holder of the Award (or in the event of his death, his legal
representatives, heirs, legatees, or distributees) such written representations,
if any, concerning the Holder's intentions with regard to the retention or
disposition of the shares of Stock being acquired pursuant to the Award and such
written covenants and agreements, if any, as to the manner of disposal of such
shares as, in the opinion of counsel to the Corporation, may be necessary to
ensure that any disposition by that Holder (or in the event of the Holder's
death, his legal representatives, heirs, legatees, or distributees) will not
involve a violation of the Securities Act or any similar or superseding statute
or statutes, any other applicable state or federal statute or regulation, or any
rule of any applicable securities exchange or securities association, as then in
effect.
10.10 CERTAIN DIRECTORS AND OFFICERS. With respect to Holders who are
directors or officers of the Corporation or any of its Subsidiaries and who are
subject to Section 16(b) of the Exchange Act, Awards and all rights under the
Plan shall be exercisable during the Holder's lifetime only by the Holder or the
Holder's guardian or legal representative, but not for at least six months after
grant, unless (a) the Board of Directors expressly authorizes that an Award
shall be exercisable before the expiration of the six-month period or (b) the
death or disability of the Holder occurs before the expiration of the six-month
period. In addition, no such officer or director shall exercise any Stock
Appreciation Right or have shares of Stock withheld to pay tax withholding
obligations within the first six months of the term of an Award. Any election by
any such officer or director to have tax withholding obligations satisfied by
the withholding of shares of Stock shall be irrevocable and shall be
communicated to the Committee during the period beginning on the third day
following the date of release of quarterly or annual summary statements of sales
and earnings and ending on the twelfth business day following such date (the
"Window Period") or by an irrevocable election communicated to the Committee at
least six months before the date of exercise of the Award for which such
withholding is desired. Any election by such an officer or director to receive
cash in full or partial settlement of a Stock Appreciation Right, as well as any
exercise by such individual of a Stock Appreciation Right for such cash, in
either case to the extent permitted under the applicable Award Agreement or
otherwise permitted by the Committee, shall be made during the Window Period or
within any other periods that the Committee shall specify from time to time.
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10.11 SECURITIES ACT LEGEND. Certificates for shares of Stock, when
issued, may have the following legend, or statements of other applicable
restrictions (including, without limitation, restrictions required under any
Federal, state or foreign law), endorsed thereon and may not be immediately
transferable:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED,
TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES
EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION OF THE
ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER)
THAT SUCH OFFER, SALE, PLEDGE, TRANSFER, OR OTHER DISPOSITION WILL NOT
VIOLATE APPLICABLE FEDERAL OR STATE LAWS.
This legend shall not be required for shares of Stock issued pursuant to an
effective registration statement under the Securities Act.
10.12 LEGEND FOR RESTRICTIONS ON TRANSFER. Each certificate representing
shares issued to a Holder pursuant to an Award granted under the Plan shall, if
such shares are subject to any transfer restriction, including a right of first
refusal, provided for under this Plan or an Award Agreement, bear a legend that
complies with applicable law with respect to the restrictions on transferability
contained in this Subsection 10.12, such as:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THAT CERTAIN INSTRUMENT
ENTITLED "DAWSON WELL SERVICING, INC. 1995 INCENTIVE PLAN" AS ADOPTED BY
DAWSON WELL SERVICING, INC. (THE "CORPORATION"), AND AN AGREEMENT
THEREUNDER BETWEEN THE CORPORATION AND THE INITIAL HOLDER THEREOF DATED
________________, 199_, AND MAY NOT BE TRANSFERRED, SOLD, OR OTHERWISE
DISPOSED OF EXCEPT AS THEREIN PROVIDED. THE CORPORATION WILL FURNISH A
COPY OF SUCH INSTRUMENT AND AGREEMENT TO THE RECORD HOLDER OF THIS
CERTIFICATE WITHOUT CHARGE ON REQUEST TO THE CORPORATION AT ITS
PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.
10.13 RIGHTS AS A STOCKHOLDER. A Holder shall have no right as a
stockholder with respect to any shares covered by his Award until a certificate
representing those shares is issued in his name. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash or other property) or
distributions or other rights for which the record date is before the date that
certificate is issued, except as contemplated by Section 9 hereof. Nevertheless,
dividends, dividend equivalent rights and voting rights may be extended to and
made part of any Award denominated in Stock or units of Stock, subject to such
terms, conditions and restrictions as the
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Committee may establish. The Committee may also establish rules and procedures
for the crediting of interest on deferred cash payments and dividend equivalents
for deferred payment denominated in Stock or units of Stock.
10.14 FURNISH INFORMATION. Each Holder shall furnish to the Corporation
all information requested by the Corporation to enable it to comply with any
reporting or other requirement imposed upon the Corporation by or under any
applicable statute or regulation.
10.15 OBLIGATION TO EXERCISE. The granting of an Award hereunder shall
impose no obligation upon the Holder to exercise the same or any part thereof.
10.16 ADJUSTMENTS TO AWARDS. Subject to the general limitations set
forth in Sections 5, 6, and 9, the Committee may make any adjustment in the
Exercise Price of, the number of shares subject to, or the terms of a
Nonstatutory Option or Stock Appreciation Right by canceling an outstanding
Nonstatutory Option or Stock Appreciation Right and regranting a Nonstatutory
Option or Stock Appreciation Right. Such adjustment shall be made by amending,
substituting, or regranting an outstanding Nonstatutory Option or Stock
Appreciation Right. Such amendment, substitution, or regrant may result in terms
and conditions that differ from the terms and conditions of the original
Nonstatutory Option or Stock Appreciation Right. The Committee may not, however,
impair the rights of any Holder of previously granted Nonstatutory Options or
Stock Appreciation Rights without that Holder's consent. If such action is
effected by amendment, such amendment shall be deemed effective as of the Date
of Grant of the amended Award.
10.17 REMEDIES. The Corporation shall be entitled to recover from a
Holder reasonable attorneys' fees incurred in connection with the enforcement of
the terms and provisions of the Plan and any Award Agreement whether by an
action to enforce specific performance or for damages for its breach or
otherwise.
10.18 INFORMATION CONFIDENTIAL. As partial consideration for the
granting of each Award hereunder, the Holder shall agree with the Corporation
that he will keep confidential all information and knowledge that he has
relating to the manner and amount of his participation in the Plan; provided,
however, that such information may be disclosed as required by law and may be
given in confidence to the Holder's spouse, tax or financial advisors, or to a
financial institution to the extent that such information is necessary to secure
a loan. In the event any breach of this promise comes to the attention of the
Committee, it shall take into consideration that breach in determining whether
to recommend the grant of any future Award to that Holder, as a factor
mitigating against the advisability of granting any such future Award to that
Person.
10.19 CONSIDERATION. No Option or Stock Appreciation Right shall be
exercisable and no restriction on any Restricted Stock Award shall lapse with
respect to a Holder unless and until the Holder thereof shall have paid cash or
property to, or performed services for, the Corporation or any of its
Subsidiaries that the Committee believes is equal to or greater in value than
the par value of the Stock subject to such Award.
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SECTION 11. DURATION AND AMENDMENT OF PLAN
11.1 DURATION. No Awards may be granted hereunder after the date that is
ten years from the earlier of (a) the date the Plan was initially adopted by the
Board of Directors and (b) the date the Plan is approved by the stockholders of
the Corporation.
11.2 AMENDMENT. The Board of Directors may, insofar as permitted by law,
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 of the Plan or any Award Agreement to make the Plan
or the Award Agreement, or both, comply with Section 16(b) of the Exchange Act
and the exemptions from that Section in the regulations thereunder. 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 Corporation 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 (except for adjustments
pursuant to Section 9 hereof), (b) increase materially the benefits accruing to
Eligible Individuals under the Plan, or (c) modify materially the requirements
about eligibility for participation in the Plan; provided, however, that such
amendments may be made without the consent of stockholders of the Corporation if
changes occur in law or other legal requirements (including Rule 16b-3) that
would permit such changes. In connection with any amendment of 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.
SECTION 12. GENERAL
12.1 APPLICATION OF FUNDS. The proceeds received by the Corporation from
the sale of shares pursuant to Awards may be used for any general corporate
purpose.
12.2 RIGHT OF THE CORPORATION AND SUBSIDIARIES TO TERMINATE EMPLOYMENT.
Nothing contained in the Plan, or in any Award Agreement, shall confer upon any
Holder the right to continue in the employ of the Corporation or any Subsidiary
or interfere in any way with the rights of the Corporation or any Subsidiary to
terminate the Holder's employment at any time.
12.3 NO LIABILITY FOR GOOD FAITH DETERMINATIONS. Neither the members of
the Board of Directors nor any member of the Committee shall be liable for any
act, omission or determination taken or made in good faith with respect to the
Plan or any Award granted under it; and members of the Board of Directors and
the Committee shall be entitled to indemnification and reimbursement by the
Corporation in respect of any claim, loss, damage, or expense (including
attorneys' fees, the costs of settling any suit, provided such settlement is
approved by independent legal counsel selected by the Corporation, and amounts
paid in satisfaction of a judgment, except a judgment based on a finding of bad
faith) arising therefrom to the full extent permitted by law and under any
directors' and officers' liability or similar insurance coverage that may from
time to time be in effect. This right to indemnification shall be in addition
to, and not a limitation on,
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any other indemnification rights any member of the Board of Directors or the
Committee may have.
12.4 OTHER BENEFITS. Participation in the Plan shall not preclude the
Holder from eligibility in any other stock or stock option plan of the
Corporation or any Subsidiary or any old age benefit, insurance, pension, profit
sharing retirement, bonus, or other extra compensation plans that the
Corporation or any Subsidiary has adopted, or may, at any time, adopt for the
benefit of its Employees. Neither the adoption of the Plan by the Board of
Directors nor the submission of the Plan to the stockholders of the Corporation
for approval shall be construed as creating any limitations on the power of the
Board of Directors to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options and the
awarding of stock and cash otherwise than under the Plan and such arrangements
may be either generally applicable or applicable only in specific cases.
12.5 EXCLUSION FROM PENSION AND PROFIT-SHARING COMPENSATION. By
acceptance of an Award (regardless of form), as applicable, each Holder shall be
deemed to have agreed that the Award is special incentive compensation that will
not be taken into account in any manner as salary, compensation, or bonus in
determining the amount of any payment under any pension, retirement, or other
employee benefit plan of the Corporation or any Subsidiary, unless any pension,
retirement, or other employee benefit plan of the Corporation or Subsidiary
expressly provides that such Award shall be so considered for purposes of
determining the amount of any payment under any such plan. In addition, each
beneficiary of a deceased Holder shall be deemed to have agreed that the Award
will not affect the amount of any life insurance coverage, if any, provided by
the Corporation or a Subsidiary on the life of the Holder that is payable to the
beneficiary under any life insurance plan covering employees of the Corporation
or any Subsidiary.
12.6 EXECUTION OF RECEIPTS AND RELEASES. Any payment of cash or any
issuance or transfer of shares of Stock to the Holder, or to his legal
representative, heir, legatee, or distributee, in accordance with the provisions
hereof, shall, to the extent thereof, be in full satisfaction of all claims of
such persons hereunder. The Committee may require any Holder, legal
representative, heir, legatee, or distributee, as a condition precedent to such
payment, to execute a release and receipt therefor in such form as it shall
determine.
12.7 UNFUNDED PLAN. Insofar as it provides for Awards of cash and Stock,
the Plan shall be unfunded. Although bookkeeping accounts may be established
with respect to Holders who are entitled to cash, Stock, or rights thereto under
the Plan, any such accounts shall be used merely as a bookkeeping convenience.
The Corporation shall not be required to segregate any assets that may at any
time be represented by cash, Stock, or rights thereto, nor shall the Plan be
construed as providing for such segregation, nor shall the Corporation nor the
Board of Directors nor the Committee be deemed to be a trustee of any cash,
Stock, or rights thereto to be granted under the Plan. Any liability of the
Corporation to any Holder with respect to a grant of cash, Stock, or rights
thereto under the Plan shall be based solely upon any contractual obligations
that may be created by the Plan and any Award Agreement; no such obligation of
the Corporation shall be deemed to be secured by any pledge or other encumbrance
on any property of the Corporation.
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Neither the Corporation nor the Board of Directors nor the Committee shall be
required to give any security or bond for the performance of any obligation that
may be created by the Plan.
12.8 NO GUARANTEE OF INTERESTS. Neither the Committee nor the
Corporation guarantees the Stock of the Corporation from loss or depreciation.
12.9 PAYMENT OF EXPENSES. All expenses incident to the administration,
termination, or protection of the Plan, including, but not limited to, legal and
accounting fees, shall be paid by the Corporation or its Subsidiaries; provided,
however, the Corporation or a Subsidiary may recover any and all damages, fees,
expenses, and costs arising out of any actions taken by the Corporation to
enforce its right to purchase Stock under this Plan.
12.10 CORPORATION RECORDS. Records of the Corporation or its
Subsidiaries regarding the Holder's period of employment, termination of
employment and the reason therefor, leaves of absence, re-employment, and other
matters shall be conclusive for all purposes hereunder, unless determined by the
Committee to be incorrect.
12.11 INFORMATION. The Corporation and its Subsidiaries shall, upon
request or as may be specifically required hereunder, furnish or cause to be
furnished all of the information or documentation which is necessary or required
by the Committee to perform its duties and functions under the Plan.
12.12 NO LIABILITY OF CORPORATION. The Corporation assumes no obligation
or responsibility to the Holder or his legal representatives, heirs, legatees,
or distributees for any act of, or failure to act on the part of, the Committee.
12.13 CORPORATION ACTION. Any action required of the Corporation shall
be by resolution of its Board of Directors or by a person authorized to act by
resolution of the Board of Directors.
12.14 SEVERABILITY. In the event that any provision of this Plan, or the
application hereof to any Person or circumstance, is held by a court of
competent jurisdiction to be invalid, illegal, or unenforceable in any respect
under present or future laws effective during the effective term of any such
provision, such invalid, illegal, or unenforceable provision shall be fully
severable; and this Plan shall then be construed and enforced as if such
invalid, illegal, or unenforceable provision had not been contained in this
Plan; and the remaining provisions of this Plan shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance from this Plan. Furthermore, in lieu of each such
illegal, invalid, or unenforceable provision, there shall be added automatically
as part of this Plan a provision as similar in terms to such illegal, invalid,
or unenforceable provision as may be possible and be legal, valid, and
enforceable. If any of the terms or provisions of this Plan conflict with the
requirements of Rule 16b-3 (as those terms or provisions are applied to Eligible
Individuals who are subject to Section 16(b) of the Exchange Act), then those
conflicting terms or provisions shall be deemed inoperative to the extent they
so conflict with the requirements of Rule 16b-3 and, in lieu of such conflicting
provision, there shall be added automatically as part of this Plan a provision
as similar in terms to such conflicting provision as may be possible and not
conflict with
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the requirements of Rule 16b-3. If any of the terms or provisions of this Plan
conflict with the requirements of Section 422 of the Code (with respect to
Incentive Options), then those conflicting terms or provisions shall be deemed
inoperative to the extent they so conflict with the requirements of Section 422
of the Code and, in lieu of such conflicting provision, there shall be added
automatically as part of this Plan a provision as similar in terms to such
conflicting provision as may be possible and not conflict with the requirements
of Section 422 of the Code. With respect to Incentive Options, if this Plan does
not contain any provision required to be included herein under Section 422 of
the Code, that provision shall be deemed to be incorporated herein with the same
force and effect as if that provision had been set out at length herein;
provided, however, that, to the extent any Option that is intended to qualify as
an Incentive Option cannot so qualify, that Option (to that extent) shall be
deemed a Nonstatutory Option for all purposes of the Plan.
12.15 NOTICES. Whenever any notice is required or permitted hereunder,
such notice must be in writing and personally delivered or sent by mail. Any
notice required or permitted to be delivered hereunder shall be deemed to be
delivered on the date on which it is actually received by the Corporation
addressed to the attention of the Corporate Secretary at the Corporation's
office as specified in the applicable Award Agreement. The Corporation or a
Holder may change, at any time and from time to time, by written notice to the
other, the address which it or he had previously specified for receiving
notices. Until changed in accordance herewith, the Corporation and each Holder
shall specify as its and his address for receiving notices the address set forth
in the Award Agreement pertaining to the shares to which such notice relates.
Any person entitled to notice hereunder may waive such notice.
12.16 SUCCESSORS. The Plan shall be binding upon the Holder, his legal
representatives, heirs, legatees, and distributees, upon the Corporation, its
successors and assigns and upon the Committee and its successors.
12.17 HEADINGS. The titles and headings of Sections and Subsections are
included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
12.18 GOVERNING LAW. All questions arising with respect to the
provisions of the Plan shall be determined by application of the laws of the
State of Texas, without giving effect to any conflict of law provisions thereof,
except to the extent Texas law is preempted by federal law. Questions arising
with respect to the provisions of an Award Agreement that are matters of
contract law shall be governed by the laws of the state specified in the Award
Agreement, except to the extent that Texas corporate law subconflicts with the
contract law of such state, in which event Texas corporate law shall govern
irrespective of any conflict of law laws. The obligation of the Corporation to
sell and deliver Stock hereunder is subject to applicable federal, state and
foreign laws and to the approval of any governmental authority required in
connection with the authorization, issuance, sale, or delivery of such Stock.
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12.19 WORD USAGE. Words used in the masculine shall apply to the
feminine where applicable, and wherever the context of this Plan dictates, the
plural shall be read as the singular and the singular as the plural.
IN WITNESS WHEREOF, Dawson, acting by and through its officers hereunto
duly authorized, has executed this Amended and Restated 1995 Incentive Plan, to
be effective as of July 31, 1997.
DAWSON PRODUCTION SERVICES, INC.,
a Texas corporation
By: _____________________________
Michael E. Little, President
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