<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
EAGLE GEOPHYSICAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) 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:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
EAGLE GEOPHYSICAL, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY
APRIL 28, 1998
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Eagle Geophysical, Inc. (the "Company") to be held on Tuesday, April 28, 1998,
at 9:00 a.m. at the Holiday Inn Crowne Plaza, 2222 West Loop South, Houston,
Texas 77027, for the following purposes:
1. To elect six directors to serve until the 1999 Annual Meeting;
2. To approve the Eagle Geophysical, Inc. 1997 Stock Option Plan;
3. To approve the performance-based compensation payable to Mr. Jay N.
Silverman, President and CEO of the Company, under the Employment
Agreement between the Company and Mr. Silverman;
4. To approve the performance-based compensation payable to Mr. Paul A.
Frame, a director of the Company, under the Bonus Agreement between the
Company and Mr. Frame;
5. To approve the appointment of Arthur Andersen LLP as independent
certified public accountants for the Company for the year ending
December 31, 1998; and
6. To transact such other business as may properly come before the meeting
or any adjournment of the meeting.
Only stockholders of record at the close of business on March 12, 1998,
will be entitled to notice of and to vote at the meeting.
Please sign, date and mail the enclosed proxy in the enclosed envelope,
which requires no postage if mailed in the United States, so that your shares
will be represented at the meeting.
By Order of the Board of Directors,
RICHARD W. MCNAIRY
Secretary
March 31, 1998
Houston, Texas
<PAGE> 3
EAGLE GEOPHYSICAL, INC.
50 BRIAR HOLLOW LANE, 6TH FLOOR WEST
HOUSTON, TX 77027
---------------------
PROXY STATEMENT
---------------------
The accompanying proxy is solicited on behalf of the Board of Directors of
the Company for use at the Annual Meeting of Stockholders to be held at 9:00
a.m. on Tuesday, April 28, 1998, at the Holiday Inn Crowne Plaza, 2222 West Loop
South, Houston, Texas 77027, and at any adjournment of the meeting. The proxy
may be revoked at any time before it is exercised by notice, in writing, to the
Secretary of the Company, or by a later dated proxy delivered to the Secretary
of the Company at any time before the voting, or by appearing at the meeting and
voting in person. The proxy, when properly executed and returned, will be voted
in accordance with the instructions contained therein. A proxy received by
management which does not withhold authority to vote or on which no
specifications have been indicated will be voted (i) in favor of the nominees
for members of the Board of Directors of the Company named in item 1 of the
proxy, (ii) in favor of the Eagle Geophysical, Inc. 1997 Stock Option Plan,
(iii) in favor of the approval of the performance-based compensation payable to
Mr. Jay N. Silverman, President and CEO of the Company, under the Employment
Agreement between the Company and Mr. Silverman, (iv) in favor of the approval
of the performance-based compensation payable to Mr. Paul A. Frame, a director
of the Company, under the Bonus Agreement between the Company and Mr. Frame, and
(v) for approval of the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending December 31, 1998.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the meeting. On that date, the Company had outstanding
8,489,000 shares of Common Stock. Only stockholders of record at the close of
business on that date will be entitled to vote at the meeting or at any
adjournment of the meeting. Each such stockholder will be entitled to one vote
for each share held and may vote in person or by proxy authorized in writing.
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of Common Stock is necessary to
constitute a quorum. The election of directors will require the favorable vote
of the holders of a plurality of the shares of Common Stock present, in person
or by proxy, at the Annual Meeting and entitled to vote thereon. Approval of (i)
the Eagle Geophysical, Inc. 1997 Stock Option Plan, (ii) the performance-based
compensation payable to Mr. Silverman, (iii) the performance-based compensation
payable to Mr. Frame, and (iv) the appointment of Arthur Andersen LLP as the
Company's independent public accountants for the fiscal year ending December 31,
1998, will require the favorable vote of the holders of a majority of the shares
of Common Stock present, in person or by proxy, at the Annual Meeting and
entitled to vote thereon. Under Delaware law and the Company's Certificate of
Incorporation and Bylaws, abstentions and broker non-votes have no effect on the
election of directors since directors are elected by a plurality vote. With
respect to the other proposals to be decided at the meeting, abstentions are
counted as a vote against a proposal, and broker non-votes (and other limited
proxies), although considered present for quorum purposes, are not considered
part of the voting power present at the meeting with respect to that proposal.
The principal executive offices of the Company are at 50 Briar Hollow Lane,
6th Floor West, Houston, Texas 77027. This proxy statement and the enclosed form
of proxy are being sent to stockholders on or about April 2, 1998.
<PAGE> 4
ELECTION OF DIRECTORS
At the meeting, six directors are to be elected to serve until the next
Annual Meeting of Stockholders or until their successors are elected and
qualified. The persons named in the enclosed form of proxy have advised that,
unless contrary instructions are received, they intend to vote for the six
nominees named by the Board of Directors of the Company and listed below. If, by
reason of death or other unexpected occurrence, one or more of these nominees is
not available for election, the persons named in the form of proxy have advised
that they will vote for such substitute nominees as the Board of Directors of
the Company may propose.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY DIRECTOR SINCE
---- --- ---------------------------- --------------
<S> <C> <C> <C>
William L. Lurie..... 67 Chairman of the Board of Directors 1997
Jay N. Silverman..... 45 Chief Executive Officer, President and Director 1997
Gerald M. Harrison... 44 Executive Vice President and Director 1997
George Purdie........ 42 Senior Vice President -- Offshore Operations and 1997
Director
Paul A. Frame........ 51 Director 1997
Paul G. Somerville... 50 Director 1997
</TABLE>
William L. Lurie is the Chairman of the Board of Directors of the Company
and Chairman of the Compensation Committee and Co-Chairman of the Audit
Committee. Mr. Lurie was a director and a member of the Audit Committee of
Seitel, Inc., the former parent corporation of the Company, from November 1995
to August 1997 and a member of the Compensation Committee of Seitel from July
1996 to August 1997. Mr. Lurie retired from such positions with Seitel at the
time of the Company's initial public offering. He has been Co-Chairman of The
Foundation for the Prevention & Early Resolution of Conflicts since April 1996.
He was President of Prevention and Early Resolution of Conflicts, a consulting
firm, from 1994 until April 1996. Mr. Lurie has been a Director of Minerals
Technologies, Inc., a mining and minerals company listed on the New York Stock
Exchange, since 1993 and is a member of its Compensation Committee. He was
Executive Consultant to the Chairman of The Business Roundtable from 1993 to
1994, and was President of The Business Roundtable from 1984 to 1993. Prior to
that time, Mr. Lurie was Vice President -- General Counsel of International
Paper Company, a global paper and forest products company listed on the New York
Stock Exchange. He has been a Director of Intersystems, Inc., a manufacturing
company listed on the American Stock Exchange, since November 1995.
Jay N. Silverman is the Chief Executive Officer and President and a
Director of the Company. Mr. Silverman served as President of Eagle Geophysical
Onshore, Inc. ("Eagle Onshore"), the Company's onshore crew operations
subsidiary, since its formation in December 1996, and served as President of
Seitel Geophysical Inc. ("SGI"), the Seitel subsidiary that formerly conducted
the business now operated by the Company, from July 1993 until May 1997. From
July 1993 until February 1996, he was Seitel's Vice President of Operations, and
from August 1990 to July 1993, he was Seitel's Manager of Field Operations. From
January 1988 to July 1990, Mr. Silverman was Vice President of Operations of
East Coast Drilling and Boring, Inc., a private drilling company. Between August
1976 and January 1988, Mr. Silverman served as Crew Chief, Operations Supervisor
and Manager for Western Geophysical Company.
Gerald M. Harrison is the Executive Vice President and a Director of the
Company. Mr. Harrison has been Chairman and Managing Director of Energy Research
International, Exploration Holdings Ltd. and Horizon Exploration Ltd. (the
"Horizon Companies") since 1993. The Company acquired the Horizon Companies,
which conduct offshore seismic data acquisition operations, in connection with
the Company's initial public offering in August 1997. From 1991 to 1993, Mr.
Harrison was Managing Director of Simon-Horizon Limited and President and
Chairman of Simon-Horizon Inc., predecessors of the Horizon Companies. From 1988
to 1990, Mr. Harrison was Operations Director of Simon-Horizon Limited,
overseeing both onshore and offshore seismic operations. Between 1980 and 1990,
Mr. Harrison served as Field Crew Manager and Manager of Domestic and
International Operations for predecessor companies of the Horizon Companies.
2
<PAGE> 5
George Purdie is the Senior Vice President -- Offshore Operations and a
Director of the Company. Mr. Purdie has been Operations Director of the Horizon
Companies since 1993, and from 1990 to 1993 was Operations Director of
Simon-Horizon Limited. From 1980 to 1989, he served in various onshore and
offshore field management posts for predecessor companies of the Horizon
Companies.
Paul A. Frame has been a Director of the Company since its formation in
December 1996 and is Chairman of the Executive Committee of the Company's Board
of Directors. In addition to his duties as a director of the Company, Mr. Frame
provides services to the Company relating to marketing the Company's services
and expansion of the Company's business pursuant to a Bonus Agreement with the
Company. Mr. Frame has been Chief Executive Officer of Seitel since July 1992,
President of Seitel since January 1987 and a director of Seitel since May 1986.
Mr. Frame was Executive Vice President of Seitel from January 1985 through
January 1987 and was Vice President of Marketing of Seitel from August 1984
through January 1985.
Paul G. Somerville has been a director of the Company since September 1997
and is the Co-Chairman of the Audit Committee. He has been Chief Executive
Officer and President of Associated Pipeline Contractors, Inc., a private
company located in Houston, Texas, engaged in the pipeline construction
business, since 1985. Mr. Somerville is a Lifetime Vice President and past
Treasurer of the Houston Livestock Show and Rodeo, and serves on the boards of
several other charitable foundations.
All directors are elected to serve until the next annual meeting of
stockholders and until their successors are elected and qualified.
EXECUTIVE OFFICERS
In addition to Messrs. Silverman, Harrison, Purdie and Frame, the Company
has the following executive officers. Officers serve at the discretion of the
Board.
Richard W. McNairy CPA, is the Vice President -- Chief Financial Officer
and Secretary of the Company. Mr. McNairy served as Vice President and Chief
Financial Officer of Veritas DGC Inc. from February 1994 through March 1997,
prior to which he was corporate controller of Halliburton Energy Services Group
for three years and Vice President-Finance for its geophysical services
subsidiary for the preceding two years. From 1974 to 1989, he was employed in
various financial and operational management capacities with predecessor
companies acquired by Halliburton.
Neil A.M. Campbell is the Vice President -- International Finance of the
Company. Mr. Campbell has been Finance Director, Chief Financial Officer, and
Company Secretary of the Horizon Companies since 1993. Mr. Campbell served as
Finance Director and Company Secretary of Simon-Horizon Limited from 1990 to
1993, and as Chief Accountant and Company Secretary of Simon-Horizon Limited and
its predecessors from 1987 to 1990. Mr. Campbell served in various accounting
positions for predecessors of the Horizon Companies from 1984 to 1987 and in
various accounting positions for British Petroleum from 1972 to 1984.
Sam Sloan was elected Vice President -- Onshore Operations of the Company
in March 1998. Mr. Sloan has been Vice President -- Onshore Operations of Eagle
Onshore since October 1997. Mr. Sloan was Manager of Geophysical Operations for
Eagle Onshore from the time of its formation in December 1996 until October
1997, and served as Manager of Geophysical Operations of SGI from April 1993
until May 1997. Prior to that time, Mr. Sloan was a Data Acquisition Supervisor
for SGI beginning in January 1992. From June 1989 to December 1991, Mr. Sloan
was Vice President of Operations of Coastal Bend Exploration, Inc., a
geophysical crew operations company, and from November 1976 to May 1989, he
served as a Manager for Western Geophysical Company.
David Saindon, CPA, is the Company's Chief Accounting Officer. Mr. Saindon
was Assistant Controller of U.S. Delivery Systems, Inc., a subsidiary of
Corporate Express, Inc., a company listed on The Nasdaq National Stock Market
that distributes office supplies and related products, from July 1996 to July
1997. Mr. Saindon was an auditor with Arthur Andersen LLP from December 1991 to
June 1996.
3
<PAGE> 6
BOARD OF DIRECTORS, COMMITTEES AND ATTENDANCE AT MEETINGS
During 1997, the Company's Board of Directors held three meetings. All of
the directors of the Company attended at least 75% of the total number of
meetings of the Board of Directors and of meetings held by all committees of the
Board on which he served during 1997.
The Board of Directors has a standing Audit Committee, Compensation
Committee, and Executive Committee. The Board of Directors does not have a
Nominating Committee, and nominees for Director are nominated by the full Board
of Directors.
During 1997, the Audit Committee was comprised of Messrs. Lurie and
Somerville, the Company's two independent directors. The Audit Committee held
one meeting during 1997. The functions of the Audit Committee are to engage and
discharge independent auditors of the Company, review with the auditors and
management the Company's policies and procedures with respect to internal
auditing, accounting and financial control, review with the auditors, upon
completion of their audit, their report or opinion on matters related to the
performance of such audit, periodically meet with the Company's financial staff
to discuss internal accounting and auditing procedures and the extent to which
recommendations made by the internal staff or by the auditors have been
implemented, and initiate, direct and supervise any investigations it deems
necessary regarding the accounting and financial policies and controls of the
Company.
During 1997, Messrs. Frame and Lurie acted as the Executive Committee. The
Executive Committee has the authority to exercise all of the powers of the Board
of Directors in the management of the business and affairs of the Company,
subject to certain limitations under the Delaware Business Corporation Law. The
Executive Committee did not meet separately from the entire Board of Directors
during 1997.
During 1997, the Compensation Committee was comprised of Messrs. Lurie and
Somerville. The Compensation Committee held one meeting during 1997. The
functions of the Compensation Committee are to review and make recommendations
to the Board of Directors on all matters of policy relating to the compensation
of and benefits provided to executive management, approve the salaries and
bonuses of executive management, and administer the Company's Stock Option Plan
and other compensation plans approved by the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Messrs. Lurie and
Somerville, who are each independent directors of the Company. Neither of these
individuals had any "interlock" relationship during 1997.
COMPLIANCE WITH SECTION 16(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who beneficially own
more than ten percent of the Company's Common Stock to report their ownership of
and transactions in the Company's Common Stock to the Securities and Exchange
Commission and The Nasdaq National Stock Market. Copies of these reports are
also required to be supplied to the Company. The Company believes, based solely
on a review of the copies of such reports received by the Company, that during
1997 its officers, directors and ten percent or greater stockholders complied
with all applicable Section 16(a) reporting requirements.
4
<PAGE> 7
BENEFICIAL OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock, as of March 12, 1998, by (i) persons known to the
Company to be beneficial owners of more than 5% of the Common Stock, (ii) each
of the Company's directors (iii) each of the Named Executive Officers, and (iv)
all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) PERCENTAGE OF CLASS
------------------- --------------------------- -------------------
<S> <C> <C>
EHI Holdings, Inc.(3)............................. 1,520,000 17.9%
50 Briar Hollow Lane, 7th Floor West
Houston, Texas 77027
William L. Lurie(4)............................... -- --
Jay N. Silverman.................................. 25,000 *
Gerald M. Harrison................................ 131,600 1.6%
George Purdie..................................... 131,600 1.6%
Paul G. Somerville(4)............................. 500 *
Paul A. Frame..................................... --
Richard W. McNairy................................ 2,000 *
Neil A.M. Campbell................................ 131,600 1.6%
All directors and executive officers
as a group (10 persons)......................... 422,300 5.0%
</TABLE>
- ---------------
* Less than 1%
(1) Except as otherwise noted, each named holder has, to the best of the
Company's knowledge, sole voting and investment power with respect to the
shares indicated.
(2) Includes shares that may be acquired within 60 days by any of the named
persons upon exercise of any right.
(3) EHI Holdings, Inc. is a wholly-owned subsidiary of Seitel, Inc. Mr. Frame is
the Chief Executive Officer and President and a Director of Seitel, Inc. As
a result of this relationship, Mr. Frame may be deemed to be the beneficial
owner of the shares owned by EHI Holdings, Inc., although Mr. Frame
disclaims any such beneficial ownership, and no such beneficial ownership is
reflected in this table.
(4) In addition, Messrs. Lurie and Somerville have deferred all or a portion of
their director fees in stock appreciation units under the Company's Deferred
Compensation Plan for Directors. Each such stock appreciation unit
represents one share of Common Stock of the Company. As of March 12, 1998,
Mr. Lurie had 1,576 units and Mr. Somerville had 473 units under the
Deferred Compensation Plan.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation awarded to, earned by or paid to the Chief Executive Officer of the
Company and each of the five most highly compensated executive officers of the
Company other than the Chief Executive Officer (collectively, the "Named
Executive Officers"). The table sets forth such information only for the period
from August 11, 1997 through December 31, 1997 for the Named Executive Officers
other than Mr. McNairy, since these Named Executive Officers were compensated by
other entities prior to completion of the Company's initial public offering on
August 11, 1997. The table sets forth such information for Mr. McNairy from
April 23, 1997, when he became an officer and employee of the Company.
5
<PAGE> 8
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- --------------
AWARDS OTHER
-------------- ANNUAL
BONUS STOCK OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($)(1) SARS(#) ($)(2)
--------------------------- ---- --------- -------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Jay N. Silverman...................... 1997 $100,326 $224,327 150,000 $ 3,285
Chief Executive Officer and
President
Paul A. Frame......................... 1997 -- $160,592 100,000 $12,146
Chairman of the Executive Committee
Richard W. McNairy.................... 1997 $103,125 $ 55,000 50,000 --
Vice President -- Chief Financial
Officer
Gerald M. Harrison.................... 1997 $ 82,629 $ 41,294 75,000 --
Executive Vice President
George Purdie......................... 1997 $ 79,694 $ 39,828 75,000 --
Senior Vice President -- Offshore
Operations
Neil A.M. Campbell.................... 1997 $ 79,694 $ 39,828 75,000 --
Vice President -- International
Finance
</TABLE>
- ---------------
(1) Includes bonuses based on the Company's profit margin for its onshore
business and the Company's pre-tax profits for Mr. Silverman. Includes
bonuses based on increases in the Company's revenues over its prior year's
revenues and on the Company's net after-tax profits for Mr. Frame. Includes
bonuses based on the Company's profit margin for its offshore business for
Messrs. Harrison, Purdie and Campbell. Includes an incentive bonus payable
at the discretion of the Board of Directors for Mr. McNairy.
(2) Includes term life insurance premium of $1,904 and 401(k) contributions of
$1,381 for Mr. Silverman and director fees and meeting fees of $12,146 for
Mr. Frame.
The following table sets forth certain information with respect to options
to purchase Common Stock granted during the year ended December 31, 1997 to each
of the Named Executive Officers.
OPTION/SAR GRANTS IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
PERCENT POTENTIAL REALIZABLE VALUE
NUMBER OF OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(4)
OPTIONS/SARS EMPLOYEES OR BASE EXPIRATION -------------------------------------------
NAME GRANTED(#) IN 1997 PRICE($/SH) DATE 0 PERCENT($) 5 PERCENT($) 10 PERCENT($)
---- ------------ ------------ ----------- ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jay N. Silverman..... 150,000(1) 19.7% $17.00 08/15/07 $0 $1,603,681 $4,064,043
Paul A. Frame........ 100,000(2) 13.1% $17.00 08/15/07 $0 $1,069,121 $2,707,362
Richard W. McNairy... 25,000(1) 3.3% $17.00 08/15/07 $0 $ 267,280 $ 677,341
25,000(3) 3.3% $18.50 09/04/07 $0 $ 290,864 $ 737,106
Gerald M. Harrison... 75,000(1) 9.8% $17.00 08/15/07 $0 $ 801,841 $2,032,022
George Purdie........ 75,000(1) 9.8% $17.00 08/15/07 $0 $ 801,841 $2,032,022
Neil A.M. Campbell... 75,000(1) 9.8% $17.00 08/15/07 $0 $ 801,841 $2,032,022
</TABLE>
- ---------------
(1) These options were granted under the Company's 1997 Stock Option Plan and
are exercisable starting 12 months after the grant date of August 15, 1997,
with 33% of the options granted becoming exercisable on each anniversary of
grant, and full vesting occurring on the third anniversary date. The options
were granted for a term of 10 years, subject to certain events related to
termination of employment.
(2) These options were granted under the Company's 1997 Stock Option Plan and
are exercisable on August 15, 2002, the fifth anniversary of grant, subject
to earlier vesting of one-third of such options when the Company's gross
revenues reach $150,000,000, $175,000,000 and $200,000,000, respectively,
if the
6
<PAGE> 9
Company's net after-tax profits are at least 4% of gross revenues for the
fiscal year when such target is attained. The options were granted for a
term of 10 years.
(3) These options were granted under the Company's 1997 Stock Option Plan and
are exercisable starting 12 months after the grant date of September 4,
1997, with 33% of the options granted becoming exercisable on each
anniversary of grant, and full vesting occurring on the third anniversary
date. The options were granted for a term of 10 years, subject to certain
events related to termination of employment.
(4) The values shown are based on the indicated assumed annual rates of
appreciation compounded annually. The actual value an executive may realize
will depend on the extent to which the stock price exceeds the exercise
price of the options or warrants on the date the option or warrant is
exercised. Accordingly, the value, if any, realized by an executive will
not necessarily equal any of the amounts set forth in the table above.
These calculations are not intended to forecast possible future
appreciation, if any, of the price of the Company's Common Stock.
The following table sets forth certain information with respect to
unexercised options held at December 31, 1997, by each of the Named Executive
Officers. None of such options were in-the-money at December 31, 1997. None of
the Named Executive Officers exercised any options during the year ended
December 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN 1997
AND 12/31/97 OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS/SARS AT
12/31/97(#)
----------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
<S> <C> <C>
Jay N. Silverman............................................ 0 150,000
Paul A. Frame............................................... 0 100,000
Richard McNairy............................................. 0 50,000
Gerald M. Harrison.......................................... 0 75,000
George Purdie............................................... 0 75,000
Neil A.M. Campbell.......................................... 0 75,000
</TABLE>
The following table sets forth certain information with respect to the
pension plan maintained by the Company's English subsidiary Horizon Exploration
Ltd. for its participating employees in the United Kingdom, including Messrs.
Harrison, Purdie and Campbell.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000................................. $31,250 $ 41,667 $ 52,083 $ 67,500 $ 72,917
$150,000................................. $37,500 $ 50,000 $ 62,500 $ 75,000 $ 87,500
$175,000................................. $43,750 $ 58,333 $ 72,917 $ 87,500 $102,083
$200,000................................. $50,000 $ 66,667 $ 83,333 $100,000 $116,667
$225,000................................. $56,250 $ 75,000 $ 93,750 $112,500 $131,250
$250,000................................. $62,500 $ 83,333 $104,167 $125,000 $145,833
$300,000................................. $75,000 $100,000 $125,000 $150,000 $175,000
</TABLE>
The only Named Executive Officers who participate in this pension plan are
Messrs. Harrison, Purdie and Campbell. The remuneration on which the pension
benefits are based is the employee's final base annual salary, excluding bonuses
and benefits. This annual salary for Messrs. Harrison, Purdie and Campbell is
currently $221,000 (L134,000), $205,000 (L124,000), and $205,000 (L124,000),
respectively. The estimated credited years of service for purposes of the
pension plan for Messrs. Harrison, Purdie and Campbell are 33 years, 30 years,
and 18 years, respectively. The manner in which benefits are computed under the
pension
7
<PAGE> 10
plan is generally one-sixtieth of final salary for each year of service, up to a
maximum of forty-sixtieths of final salary.
EMPLOYMENT ARRANGEMENTS
Messrs. Silverman and McNairy have employment agreements with the Company.
The employment agreement with Mr. Silverman provides for an annual base salary
of $260,000 and for a quarterly bonus equal to 25.0% of his base salary if the
gross margin (revenues less all expenses except for depreciation, amortization,
interest, taxes and overhead) for the onshore operations for such quarter is at
least 17% and an incentive bonus of 4% or 5% of the Company's pre-tax profits
(which percentage varies based on the Company's profit margin). The Company
calculates all bonuses without taking into account the expenses of the bonuses
paid to its officers and directors. The employment agreement with Mr. McNairy
provided for an annual base salary of $150,000, which was raised by the Board of
Directors upon the recommendation of the Compensation Committee to $200,000
effective January 1, 1998, and for an incentive bonus at the discretion of the
Board of Directors equal to one-third of the base annual salary. Mr. Silverman's
employment agreement is for an original term expiring August 10, 2000, and will
automatically renew for successive one-year terms unless either party gives
notice otherwise at least 90 days prior to expiration of the then-current term.
Mr. McNairy's employment agreement will expire April 23, 1999. The employment
agreement with Mr. Silverman contains a covenant not to compete during his
employment with the Company or its subsidiaries, and for one year thereafter if
the Company terminates his employment for cause or he terminates his employment
without cause. In the event the Company terminates Mr. Silverman's employment
without cause, as such term is defined in his employment agreement, the Company
will be required to pay Mr. Silverman severance payments each year for two years
equal to the average of his total cash compensation for the previous three
years, to vest all options previously granted to Mr. Silverman that are not then
vested, and to forgive outstanding indebtedness owed by Mr. Silverman to the
Company relating to his purchase of 25,000 shares of Common Stock to the extent
the value of such shares at the date of such termination is less than the
outstanding indebtedness.
Each of Messrs. Harrison, Purdie and Campbell have employment agreements
with Exploration Holdings Ltd., a wholly-owned subsidiary of the Company. Such
employment agreements, as amended, provide for base annual salaries of $221,000
(L134,000) for Mr. Harrison and $205,000 (L124,000) for Messrs. Purdie and
Campbell. These employment agreements require the Company and the employee to
give twenty-four months' advance notice of termination (other than for
termination with cause). If the Company terminates the employment of Messrs.
Harrison, Purdie or Campbell other than in accordance with the terms of such
agreement (i.e., without giving twenty-four months advance notice, other than
for termination with cause), the options to purchase 75,000 shares of Common
Stock granted to such employee under the Company's Stock Option Plan at the time
of the initial public offering will become fully vested, and the Company may be
liable to such employee for breach of contract. The employment agreements
provide for an annual incentive bonus equal to 50.0% of the annual base salary
if performance criteria established by the Company are met (which criteria for
the year ended December 31, 1997 were that the operating profit margin (revenues
less cost of sales, expressed as a percentage of revenues) from the Company's
offshore operations equal or exceed 24.0%), and provide for an additional
incentive bonus of between 2.0% and 3.0% of the net after-tax profits of the
Company from its offshore operations in excess of 5.0% of gross revenues from
offshore operations. The employment agreements also provide for a bonus of 3% of
the excess, if any, of net after-tax profits of the Company's offshore business
for a fiscal year over the greater of (i) net after-tax profits of the Company's
offshore business for the prior fiscal year or (ii) 5% of the gross revenues of
the Company's offshore business for the prior fiscal year, if the Company's
gross revenues from its offshore business increase by at least 20% as compared
to the prior fiscal year and the net after-tax profits of the Company's offshore
business equal or exceed 5% of gross revenues from its offshore business.
In addition to the employment agreements with the Company's executive
officers described above, Mr. Frame, who serves as a director of the Company and
as Chairman of the Executive Committee of the Board of Directors, has a bonus
agreement with the Company. In addition to his other duties as a director of the
Company, the bonus agreement provides that Mr. Frame has responsibility for
strategic planning,
8
<PAGE> 11
marketing, and domestic and international growth of the Company's business. The
Board of Directors of Seitel, Inc., which owns approximately 17.9% of the
outstanding shares of Common Stock of the Company, has agreed to allow Mr.
Frame, who is the Chief Executive Officer and President of Seitel, to devote 20%
of his time to the Company until December 31, 1999. Pursuant to the bonus
agreement, the Company will pay Mr. Frame bonuses each year during the term of
the bonus agreement equal to 1% of the increase in the Company's gross revenues
for such year over the Company's gross revenues for the prior year (excluding
revenues attributable to mergers and acquisitions in the year of such merger or
acquisition unless it is the final year of the term of the bonus agreement) and
4% of the Company's net after tax profits in excess of its 1996 pro forma
combined net after-tax profits of $0.8 million. The bonus agreement with Mr.
Frame expires December 31, 1999. Mr. Frame also receives annual director fees
and meeting fees as an outside director.
DIRECTORS' COMPENSATION
Each director who is not also an employee of the Company (an "Outside
Director") receives an annual director fee of $25,000 plus meeting fees of
$2,500 for each meeting of the Board of Directors or committee thereof in which
such director participates. If such Outside Director serves as Chairman of the
Board of Directors, such director receives an annual director fee of $50,000
plus meeting fees. Outside Directors are also reimbursed for reasonable
out-of-pocket expenses incurred in connection with attendance of meetings of the
Board of Directors or committees thereof. For purposes of directors'
compensation, Mr. Frame is considered an Outside Director.
The Company has established a Deferred Compensation Plan for Directors
whereby each Outside Director may elect to defer cash compensation for annual
director fees or meeting fees to a date subsequent to such director's death,
retirement, disability or termination of services as a director. Earnings with
respect to such deferred compensation may be calculated, at the election of the
director, as if the amount deferred had been invested in Common Stock or as if
the amount deferred had been invested in an account bearing interest at the
prime rate minus 1.5%.
Independent directors of the Company participate in the Independent
Directors' Stock Option Plan (the "Directors' Option Plan"). An independent
director for purposes of the Directors' Option Plan is a director who receives
no compensation from the Company and its subsidiaries other than annual director
fees, meeting fees, reimbursement of expenses and options under the Directors'
Option Plan and has not, during the three months prior to any grant, been an
employee of the Company or any of its subsidiaries. Messrs. Lurie and Somerville
are the only current directors of the Company eligible to receive grants of
options under the Directors' Option Plan. The Directors' Option Plan generally
provides for an automatic grant of options to purchase 5,000 shares at an
exercise price equal to the fair market value of the Common Stock on the date of
grant to independent directors upon their initial election to serve as a
director of the Company and upon each successive reelection to the Board of
Directors. Options granted under the Directors' Option Plan become exercisable
one year after the date of grant. All options expire at the earlier of five
years after the date of grant, twelve months after the optionee ceases to serve
as a director due to death, disability, or retirement at or after age 65, or 60
days after the optionee otherwise ceases to serve as a director of the Company.
If a director ceases to serve as such for any reason other than death,
disability, or retirement at or after age 65, the option may be exercised only
if it was exercisable at the date of such cessation of service. Pursuant to the
Directors' Option Plan, the Company granted Mr. Lurie, the Chairman of the Board
of Directors, options to purchase 25,000 shares of Common Stock at an exercise
price of $17.00/share. This grant, which was made on August 5, 1997, was in lieu
of the grant of options generally provided under the Directors' Option Plan upon
initial election to the Board. These options will vest in cumulative
installments of one-third of the number of shares subject thereto on each of the
first, second, and third anniversaries of the date of grant, and will expire on
the tenth anniversary of the date of grant, subject to earlier expiration 12
months after Mr. Lurie ceases to be a director. Mr. Somerville was granted 5,000
options on September 4, 1997, when he was appointed to the Board, at an exercise
price of $18.50/share.
9
<PAGE> 12
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Under the supervision of the Compensation Committee, the Company seeks to
relate a significant portion of potential total executive compensation to the
Company's financial performance. In general, executive financial rewards may be
segregated into the following significant components: base compensation, bonus
and stock-based benefits.
Base compensation for the Named Executive Officers is intended to afford a
reasonable degree of financial security and flexibility to those individuals who
are regarded by the Company as acceptably discharging the levels and types of
responsibility implicit in the various executive positions. Each Named Executive
Officer has an employment contract or bonus agreement with the Company or one of
its subsidiaries, all of which were entered into in connection with the
Company's initial public offering. Under these agreements, Mr. Silverman, the
Company's Chief Executive Officer and President, receives a base salary of
$260,000, Mr. Harrison receives a base salary of $221,000 (L134,000), and
Messrs. Purdie and Campbell receive base salaries of $205,000 (L124,000) each.
Mr. McNairy received a base annual salary of $150,000 for the year ended
December 31, 1997, which has been increased by the Board of Directors upon the
recommendation of the Committee to $200,000 effective January 1, 1998. Mr.
Silverman's base salary is increased annually in proportion to the increase in
the consumer price index pursuant to his employment agreement, so that his base
salary for 1998 will be $263,640. All other increases in base compensation are
subject to the discretion of the Board of Directors and, to date, base
compensation of the Named Executive Officers remains unchanged except for Mr.
McNairy and Mr. Silverman. Mr. Frame does not receive a base salary, but does
receive director fees.
All of the Named Executive Officers other than Mr. Frame joined the Company
in 1997 in connection with the Company's initial public offering. Mr.
Silverman's contract was negotiated in the context of the existing
parent/subsidiary relationship between Seitel and the Company while Mr.
Silverman was an executive of Seitel. Mr. Frame's bonus agreement was also
negotiated in the context of the existing parent/subsidiary relationship between
Seitel and the Company while Mr. Frame was the Chief Executive Officer and
President of Seitel. In addition, the employment agreements for Messrs.
Harrison, Purdie and Campbell were negotiated in the context of the acquisition
of Energy Research International from companies owned by Messrs. Harrison,
Purdie and Campbell. In negotiating the base pay for the Named Executive
Officers, consideration was given to the compensation plans of executives of
other companies, the salary histories of each executive, and his past
performance, credentials and experience, as well as his perceived future
contribution to the Company.
Annual bonuses are intended to reflect a policy of requiring a minimum
level of Company financial performance before any bonuses are earned by the
Named Executive Officers, with bonuses for achieving higher levels of
performance generally tied to the level achieved. The employment agreements with
Messrs. Silverman, Harrison, Purdie and Campbell and the bonus agreement with
Mr. Frame provide formula bonuses based on specific financial performance goals,
as described above under "Executive Compensation -- Employment Arrangements."
Mr. McNairy's bonus is based on the Compensation Committee's subjective
evaluation of his job performance. On the basis of these criteria, the following
bonuses were paid to the Named Executive Officers for their fiscal 1997
performance: Mr. Silverman -- $224,327; Mr. Frame -- $160,592; Mr.
McNairy -- $55,000; Mr. Harrison -- $41,294; Mr. Purdie -- $39,828; and Mr.
Campbell -- $39,828.
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<PAGE> 13
The Board of Directors is of the view that the periodic grant of stock
options to its employees, including the Named Executive Officers, is calculated
to align the employees' economic interests with those of stockholders and to
provide a direct and continuing focus upon the goal of increasing stockholder
value. The Board of Directors believes that stock options can be used to provide
incentives to persons with experience and ability so that they will remain with
the Company or its subsidiaries, and can be used to attract new employees whose
services are considered valuable to the Company or its subsidiaries, by
encouraging a proprietary interest by such persons in the development and
financial success of the Company. The Company granted options covering an
aggregate of 763,250 shares of the Common Stock to all officers, directors and
employees of the Company during 1997, of which 525,000 were granted to the Named
Executive Officers. The exercise prices for these options range from $17.00 to
$18.50 per share, which represents 100% of market price on the date of grant.
Respectfully submitted,
William L. Lurie, Chairman
Paul G. Somerville
11
<PAGE> 14
PERFORMANCE GRAPH
The following graph sets forth the cumulative total stockholder return for
the Company's Common Stock as compared to the Nasdaq composite index and the
Peer Group index, which was selected by the Company on an industry basis. The
graph assumes an investment of $100 on August 6, 1997, when the Company's stock
was first traded in a public market. Reinvestment of dividends is assumed in all
cases.
COMPARATIVE TOTAL RETURNS*
EAGLE GEOPHYSICAL, INC., NASDAQ COMPOSITE, AND PEER GROUP**
(PERFORMANCE RESULTS THROUGH DECEMBER 31, 1997)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) PEERS EGEO NASDAQ
<S> <C> <C> <C>
6-AUG-97 100 100 100
29-AUG-97 124 108 98
30-SEP-97 150 104 103
31-OCT-97 145 92 98
28-NOV-97 138 85 99
31-DEC-97 134 68 97
</TABLE>
** Peer Group: 3-D Geophysical Inc., Dawson Geophysical Company, Universal
Seismic Associates, Inc., Venture Seismic Ltd, and Veritas DGC Inc.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Prior to the Company's initial public offering in August 1997, the Company
was a wholly-owned subsidiary of Seitel, Inc. As a result of the initial public
offering and related transactions, Seitel now owns approximately 17.9% of the
outstanding stock of the Company. Paul Frame, a Director of the Company and one
of the Named Executive Officers, is also the Chief Executive Officer and
President and a Director of Seitel.
Prior to the Company's initial public offering, Seitel provided the Company
with significant management functions and services, including treasury,
accounting, tax, internal audit, legal, human resources and other support
services. The Company was charged and/or allocated expenses of $818,000 for the
period from January 1, 1997 to August 11, 1997, the date of consummation of the
initial public offering. The costs of these services were directly charged
and/or allocated using methods the Company believes were reasonable.
In addition, Seitel advanced expenses on behalf of the Company prior to the
initial public offering with respect to the Company's work for third-parties,
including amounts attributable to taxes and allocable
12
<PAGE> 15
overhead relating to such third-party work. Pursuant to the Master Separation
Agreement described below, the Company repaid Seitel $3,003,000, the amount of
such advances relating to third-party work at the time of closing of the initial
public offering.
Seitel is a major customer of the Company. Prior to the initial public
offering, revenues for services provided by the Company to Seitel were based on
prices charged to unaffiliated third parties for similar work. The Company's
revenues from work performed for Seitel were $18.5 million for the period from
January 1, 1997 to August 11, 1997. These revenues included a profit. Prior to
the consummation of the initial public offering, the Company declared and paid a
dividend to Seitel of its receivable from Seitel for profits attributable to
work performed for Seitel since formation of the Company's predecessors to the
closing of the initial public offering, less taxes and allocable overhead
attributable to such intercompany work. The amount of such dividend was $6.7
million.
In July 1996, Seitel acquired 50% of the outstanding shares of Energy
Research International, the parent company of the Horizon Companies, from
Oliveira Limited, Dormera Limited, and Balmedie Limited, companies beneficially
owned by Messrs. Harrison, Purdie and Campbell, respectively. Messrs. Harrison,
Purdie and Campbell guaranteed the obligations of these companies for any breach
of the representations, warranties and covenants made by such companies in
connection with such transaction, which obligations will survive until July
1998. In connection with this acquisition, Seitel loaned $2 million to Energy
Research International. In November 1996, Energy Research International
repurchased a portion of these shares from Seitel, as a result of which Seitel's
ownership was reduced to 19% of the outstanding shares of Energy Research
International. Energy Research International issued a note for $2.7 million to
Seitel in consideration of such repurchase of shares. Seitel contributed these
shares of Energy Research International to the Company in May 1997. In
connection with the Company's initial public offering, the Company acquired the
remaining 81% interest in Energy Research International from Oliveira Limited,
Dormera Limited, Balmedie Limited, and another entity in exchange for 600,000
shares of Common Stock of the Company. Messrs. Harrison, Purdie, and Campbell
guaranteed the obligations of these companies for any breach of the
representations, warranties and covenants made by such companies in connection
with such transaction, which obligations will survive until August 1998. Messrs.
Harrison, Purdie, and Campbell and such companies have agreed not to sell or
otherwise dispose of any such shares of Common Stock before August 1998 or more
than 50% of such shares of Common Stock before August 1999, except for the
disposition of an aggregate of 180,000 of such shares pursuant to the exercise
of over-allotment options in connection with the initial public offering or
pledges of such shares pursuant to bona fide lending transactions.
Prior to the Offering, a significant portion of the total seismic data
acquisition services performed by the Horizon Companies were provided to Seitel.
The Horizon Companies charged Seitel for these services at an amount believed by
management of the Horizon Companies to be equal to amounts it would have charged
unrelated third parties for such services. The revenues to the Horizon Companies
from work performed for Seitel were $15.5 million for the period from January 1,
1997 to August 11, 1997.
On July 23, 1997, Jay Silverman purchased 25,000 shares of Common Stock
from the Company at $17.00 per share for a promissory note. Interest will accrue
under such promissory note at a fixed rate of 6.0% per annum. Interest only is
payable thereunder until September 2000, and thereafter Mr. Silverman will repay
such promissory note in 60 equal monthly installments of principal and interest.
Such promissory note is secured by a pledge of the 25,000 shares of Common Stock
in favor of the Company. The maximum amount outstanding on such note during 1997
was $425,000, which was also the outstanding balance as of March 12, 1998.
The Company and Seitel entered into a number of agreements for the purpose
of defining their continuing relationship after the Company's initial public
offering. These agreements were negotiated in the context of a parent-subsidiary
relationship and therefore were not the result of negotiations between
independent parties. The following is a summary of certain arrangements between
the Company and Seitel.
Master Separation Agreement. The Master Separation Agreement provided for
the Company and Seitel to enter into a Sublease, a Registration Rights
Agreement, a Tax Indemnity Agreement, an Employee Benefits Allocation Agreement
and an Administrative Services Agreement. In addition, the Master Separa-
13
<PAGE> 16
tion Agreement required the Company to repay $7.7 million of indebtedness owed
by the Company and its subsidiaries to Seitel (including the $2 million and $2.7
million notes payable to Seitel from Energy Research International described
above) and to repay $16.7 million of indebtedness owed by the Company and its
subsidiaries to third parties guaranteed by Seitel (or obtain the release of
Seitel's guaranty) contemporaneously with the consummation of the initial public
offering. The Company has repaid these amounts as required by the Master
Separation Agreement. Under the Master Separation Agreement, Seitel and its
subsidiaries and the Company and its subsidiaries have agreed to indemnify each
other with respect to liabilities arising in connection with the operations of
their respective businesses prior to and after the date of the Company's initial
public offering, including any liabilities under the Securities Act with respect
to the initial public offering. The Master Separation Agreement also provides
for continued access by the Company to historical financial and operational
information relating to the Company and its subsidiaries maintained by Seitel.
Sublease. The Sublease between the Company and Seitel provides for the
Company to lease its principal corporate offices, comprising approximately 7,600
square feet, from Seitel until August 15, 2000 at an annual rent of $85,000. The
Sublease also provides for the Company to utilize certain shared office
equipment, such as phone systems and central computer systems, for an additional
charge. The Company paid Seitel an aggregate amount of approximately $25,000
under the Sublease for the period from August 15, 1997 to December 31, 1997.
Registration Rights Agreement. Pursuant to the Registration Rights
Agreement, the Company has agreed to register the offer and sale by EHI
Holdings, Inc. ("EHI"), a wholly-owned subsidiary of Seitel, on a delayed and
continuous basis from time to time of the 1,520,000 shares of Common Stock owned
by EHI at the expense of the Company. The Company has agreed to file a shelf
registration statement on or before August 20, 1998 and to use its best efforts
to secure the effectiveness of such shelf registration statement as soon as
possible thereafter. EHI has agreed in the Registration Rights Agreement not to
sell more than 50% of such shares pursuant to such registration statement prior
to August 15, 1999. In addition, the Company has granted EHI the right to
participate as a selling stockholder in future underwritten public offerings of
the Company's Common Stock, subject to certain restrictions. The Company and EHI
have each agreed to indemnify the other against, or to contribute to any losses
arising out of, certain liabilities in connection with any such registration,
including liabilities under the Securities Act.
Tax Indemnity Agreement. Prior to the Company's initial public offering,
the Company was a member of the Seitel affiliated group and filed its tax
returns on a consolidated basis with such group. As a result of the initial
public offering, the Company is no longer a member of the Seitel affiliated
group. The Company and Seitel have entered into a Tax Indemnity Agreement to
define their respective rights and obligations relating to federal, state and
other taxes for periods before and after the initial public offering. Pursuant
to the Tax Indemnity Agreement, the Company is required to pay Seitel (to the
extent not already paid) its share of federal income taxes prior to the date of
consummation of the initial public offering, and the Company is responsible for
federal income taxes from its operations on and after the date of consummation
of the initial public offering. Any subsequent refunds, additional taxes or
penalties or other adjustments relating to the Company's federal income taxes
for periods prior to the date of consummation of the initial public offering
will be for the benefit of or be borne by Seitel. Similar provisions apply under
the Tax Indemnity Agreement to other taxes, such as state and local income
taxes.
Employee Benefits Allocation Agreement. Seitel and the Company have entered
into an Employee Benefits Allocation Agreement pursuant to which the Company has
established its own 401(k) plan, into which Seitel has transferred those assets
that were held in Seitel's 401(k) plan for the benefit of Company employees.
Also pursuant to the Employee Benefits Allocation Agreement, the Company has
established its own health and disability insurance and related plans to provide
insurance coverage to Company employees. The Company assumed all obligations of
Seitel with respect to vacation and severance for Company employees, and the
parties have agreed to indemnify each other with respect to their obligations
under the Employee Benefits Allocation Agreement.
Administrative Services Agreement. Seitel and the Company entered into an
Administrative Services Agreement pursuant to which Seitel provided the Company
with administrative services, primarily accounting
14
<PAGE> 17
services, for a 90-day transition period to allow the Company adequate time to
build an internal administrative staff. The Company paid Seitel an aggregate of
$5,500 for these services from August 11, 1997 until expiration of this
agreement on November 9, 1997, which was Seitel's actual cost of providing these
services to the Company.
In addition to the above-described transactions relating to periods prior
to the initial public offering and agreements relating to the separation of the
Company from Seitel, Seitel also continues to be a major customer of the
Company's services. From the date of the consummation of the initial public
offering through December 31, 1997, the Company's revenues attributable to work
performed for Seitel was $15.7 million. As of March 12, 1998, Seitel had already
contracted for services from the Company to be performed in 1998 totaling
approximately $45 million. The Company believes that the services provided to
Seitel since the date of the initial public offering are at prices equal to the
prices the Company would have charged unrelated third parties.
PROPOSAL TO APPROVE THE EAGLE GEOPHYSICAL, INC.
1997 STOCK OPTION PLAN
General. The Company believes that stock options are an important tool for
attracting, retaining and motivating key employees and directors by providing
them incentives to enhance the growth and profitability of the Company. The
Company believes that stock options can be used to provide incentives to persons
with experience and ability so that they will remain with the Company or its
subsidiaries, and can be used to attract new employees whose services are
considered valuable to the Company or its subsidiaries, by encouraging a
proprietary interest by such persons in the development and financial success of
the Company.
Background of the Option Plan. Prior to the Company's initial public
offering, the Company adopted the Eagle Geophysical, Inc. 1997 Stock Option Plan
(the "Option Plan"), which became effective upon consummation of the Company's
initial public offering. This plan was adopted subject to approval by the
Company's stockholders, and is therefore being submitted to stockholders for
their approval at the annual meeting. If the Option Plan is not approved by
stockholders, all options previously granted under the plan will be void.
Summary of the Option Plan. The following summary of the Option Plan does
not purport to be complete and is subject to, and is qualified in its entirety
by, the Option Plan, a copy of which is attached hereto as Exhibit A.
The purpose of the Option Plan is to provide directors, officers and other
key employees and consultants of the Company and its subsidiaries with
additional incentives by providing them with the opportunity to increase their
ownership interest in the Company. The maximum number of shares of Common Stock
that may be subject to awards granted under the Option Plan is 1,100,000 shares,
which may be authorized and unissued shares, treasury shares or shares acquired
by the Company for purposes of the Option Plan. Shares of Common Stock that are
attributable to awards that have expired, terminated or been canceled or
forfeited during any calendar year will be available for issuance or use in
connection with future awards.
The Compensation Committee or such other committee of the Board of
Directors as may be appointed by the Board (the "Committee") will be empowered
to administer the Option Plan. The Option Plan is currently administered by the
Compensation Committee.
Options granted under the Option Plan will be either incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") or non-qualified stock options, as designated at the
time of the grant of the options. If options granted under the Option Plan are
not designated as incentive stock options or nonqualified stock options, they
will be deemed to be incentive stock options to the extent they comply with the
requirements of the Code applicable for incentive stock option treatment and as
non-qualified options to the extent they do not satisfy such requirements.
15
<PAGE> 18
Any employee of the Company or a subsidiary, including directors who are
not eligible to receive grants of options under the Directors Option Plan, will
be eligible to receive grants of options under the Option Plan. Actual
participation in the Option Plan will be determined in the sole discretion of
the Committee.
The exercise price for incentive stock options under the Option Plan shall
not be less than 100% of the fair market value per share on the date of grant of
such option. In the event that an incentive stock option is granted under the
Option Plan to any person who, at the time such incentive stock option is
granted, owns more than 10% of the total combined voting power of classes of
shares of the Company or of any subsidiary of the Company (a 10% stockholder),
then the exercise price of the incentive stock options shall not be less than
110% of the fair market value of the shares on the date such option is granted.
Fair market value as used in the Option Plan means the closing sales price of
Common Stock per share as reported in the Wall Street Journal as of the date of
the grant. Pursuant to the terms of the Option Plan, there are no restrictions
applicable to the exercise price of non-qualified stock options. Payment for the
shares acquired upon exercise of an option under the Option Plan shall be made
in cash or other property deemed acceptable by the Committee.
Options granted under the Option Plan will be exercisable at such times,
under such conditions (including, without limitation, performance criteria with
respect to the Company and/or the optionee), in such amounts and during such
period or periods as the Committee determines on the date of the grant of such
options. Such options, however, shall not be exercisable after the expiration of
ten years from the date such option is granted. In the case of an incentive
stock option granted to a more than 10% stockholder, such incentive stock
options shall not be exercisable after the expiration of five years from the
date such incentive stock options are granted.
The aggregate fair market value (determined as of the time an incentive
stock option is granted) of the stock with respect to which incentive stock
options are exercisable for the first time by any participant during any
calendar year, under the Option Plan and all of the Company's other plans, may
not exceed $100,000. Any options granted in excess of this limit will be
non-qualified options. No participant may be granted under the Option Plan in
any calendar year options to purchase more than 250,000 shares of Common Stock.
In general, if an optionee ceases to be an employee or director of the
Company or its subsidiaries for reasons other than disability or death, he or
she will have, with respect to incentive stock options, until the earlier of
three months from the date of such termination or the date the option expires to
exercise the option, to the extent the optionee was entitled to exercise the
option on the date of termination. If an optionee is unable to continue to
perform services for the Company or any of its subsidiaries as a result of
disability, he or she will have until the earlier of 12 months from the date of
such disability or the date the option expires to exercise the option, in whole
or in part, to the extent the optionee was entitled to exercise the option on
such date. In addition, the optionee must have been an employee since the date
of grant and must be an employee on the date of disability to take advantage of
this provision. These same rules apply to the exercise of options in the event
of the death of an optionee. An option granted under the Option Plan may not be
sold, pledged, assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent and distribution, and will not be
assignable by operation of law or subject to execution, attachment or similar
process.
The Option Plan will expire ten years after the date of consummation of the
Offering. The Board may terminate the Option Plan at any time in its sole
discretion. No options may be granted under the Option Plan after it is
terminated. The termination of the Option Plan, or any amendment thereto, shall
not affect any shares previously issued to a participant or any option
previously granted under the Option Plan.
The Option Plan will not be qualified under the provisions of Section
401(a) of the Code, and it is not intended to be subject to any of the
provisions of the Employee Retirement Income Security Act of 1974, as amended.
Participation in the Option Plan The following table sets forth certain
information with respect to stock options granted pursuant to the Option Plan
during 1997 to (i) the Named Executive Officers, (ii) all current executive
officers as a group, and (iii) all employees, including all current officers who
are not executive officers, as a group. The options shown below are not
necessarily indicative of the number of options that may
16
<PAGE> 19
be granted in the future. As of March 12, 1998, a total of 774,500 options had
been granted under the Option Plan, leaving 325,500 options available for future
grants under the Option Plan.
NEW PLAN BENEFITS
EAGLE GEOPHYSICAL, INC. 1997 STOCK OPTION PLAN
<TABLE>
<CAPTION>
OPTIONS
GRANTED
NAME IN 1997
---- -------
<S> <C>
Jay N. Silverman............................................ 150,000
Chief Executive Officer and President
Paul A. Frame............................................... 100,000
Chairman of the Executive Committee
Richard W. McNairy.......................................... 50,000
Vice President -- Chief Financial Officer
Gerald M. Harrison.......................................... 75,000
Executive Vice President
George Purdie............................................... 75,000
Senior Vice President -- Offshore Operations
Neil A.M. Campbell.......................................... 75,000
Vice President -- International Finance
All Executive Officers as a Group........................... 582,500
All Non-Executive Officer Employees as a Group.............. 180,750
</TABLE>
Federal Income Tax Consequences. The following is a brief description of
the federal income tax consequences generally arising with respect to options
that may be granted under the Option Plan.
Incentive Stock Options. Certain options granted under the Option Plan are
intended to be incentive stock options within the meaning of Section 422 of the
Code. An option holder will not recognize taxable income upon the grant of
incentive stock options under the Option Plan. In addition, an option holder
will not recognize taxable income with respect to the excess of the fair market
value of stock received on exercise of an incentive stock option over the
exercise price under the Option Plan. The income tax treatment of any gain or
loss recognized upon an option holder's disposition of shares received upon
exercise of incentive stock options granted under the Option Plan depends on the
timing of the disposition. If the option holder holds the shares received upon
exercise of such incentive stock options for the longer of two years from the
date such incentive stock option was granted or one year from the date of
exercise, the difference (if any) between the amount realized from the sale of
such shares and the holder's tax basis (i.e., generally the exercise price) will
be taxed as long-term capital gain or loss.
If an option holder disposes of the shares acquired upon exercise of an
incentive stock option before the end of the applicable holding periods
described above (i.e., he or she makes a "disqualifying disposition"), such
holder may be deemed to be in receipt of taxable income in the year of the
disqualifying disposition, depending on the selling price. If the selling price
exceeds the fair market value of the stock on the date of exercise, the excess
of the fair market value on the date of exercise over the exercise price will be
taxable to the holder as ordinary income, and the excess of the selling price
over the fair market value on the date of exercise will be taxable to the holder
as capital gain. If the selling price exceeds the exercise price but not the
fair market value of the stock on the date of exercise, the excess of the
selling price over the exercise price will be taxable to the holder as ordinary
income. If the selling price is less than the exercise price, the difference
will be treated as capital loss.
The Company is not entitled to a deduction for federal income tax purposes
with respect to the grant or exercise of incentive stock options under the
Option Plan or the disposition of shares acquired upon exercise of incentive
stock options if the applicable holding periods have been met. In the event of a
disqualifying disposition, however, the Company will be entitled to a federal
income tax deduction in an amount equal to the ordinary income recognized by the
holder, to the extent it is reasonable compensation.
17
<PAGE> 20
Non-Qualified Stock Options. Options granted under the Option Plan that are
not incentive stock options within the meaning of Section 422 of the Code will
be non-qualified stock options. An option holder will not realize taxable income
upon the grant of non-qualified stock options. An option holder will recognize
taxable ordinary income upon the exercise of non-qualified stock options equal
to the amount that the fair market value of the underlying stock on the date of
exercise exceeds the aggregate exercise price. The income tax treatment of any
gain or loss realized upon an option holder's disposition of shares received
upon exercise of non-qualified stock options depends on the timing of the
disposition. If the option holder holds the shares received upon exercise of
such non-qualified stock options for at least one year from the date of
exercise, the difference (if any) between the amount realized from the sale of
such shares and the holder's tax basis (i.e., generally the exercise price plus
the amount of ordinary income recognized by the holder on exercise of the
option) will be taxed as long-term capital gain or loss. If an option holder
disposes of the shares acquired upon exercise of a non-qualified stock option
within one year from the date of exercise of the option, such holder will
generally recognize short term capital gain or loss.
The Company is entitled to a deduction for federal income tax purposes with
respect to the exercise of nonqualified stock options, but not the disposition
of shares acquired upon exercise of such non-qualified stock options, in an
amount equal to the ordinary income recognized by the option holder, to the
extent it is reasonable compensation.
THE SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR THE
INFORMATION OF STOCKHOLDERS CONSIDERING HOW TO VOTE AT THE ANNUAL MEETING ONLY
AND NOT AS A GUIDE TO PARTICIPANTS. PARTICIPANTS SHOULD CONSULT THEIR OWN TAX
ADVISORS FOR DETERMINATION AS TO THE SPECIFIC TAX CONSEQUENCES APPLICABLE TO
THEM.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSALS TO APPROVE THE PERFORMANCE-BASED COMPENSATION
PAYABLE TO MESSRS. SILVERMAN AND FRAME
As described above under "Executive Compensation -- Employment
Arrangements," Mr. Jay N. Silverman, the President and Chief Executive Officer
of the Company, is compensated by the Company pursuant to an employment
agreement that was entered into in connection with the Company's initial public
offering. As also described above, Mr. Paul A. Frame, a director of the Company
and the President and Chief Executive Officer of Seitel, Inc., which owns 17.9%
of the outstanding stock of the Company, is compensated by the Company pursuant
to a bonus agreement that was entered into in connection with the Company's
initial public offering. These agreements provide for bonuses to be paid to
Messrs. Silverman and Frame based on the attainment of certain performance goals
by the Company. Both Messrs. Silverman and Frame are Named Executive Officers of
the Company. The Company is seeking stockholder approval of the
performance-based compensation payable to Mr. Silverman under his employment
agreement and to Mr. Frame under his bonus agreement to comply with the
deductibility restrictions imposed by Section 162(m) of the Internal Revenue
Code, as amended.
Section 162(m) of the Code limits a company's ability to deduct for federal
income tax purposes certain payments made to its Chief Executive Officer and the
four other most highly compensated officers of the company under certain
circumstances. Section 162(m) disallows deductions for amounts in excess of
$1,000,000 per year paid to any of these officers unless such compensation is
paid in accordance with performance goals established by the outside directors
of the company, is approved by the stockholders of the company in advance of any
such payments and the attainment of those performance goals is certified by the
outside directors of the company prior to payment of any of those amounts. The
performance-based compensation payable to Mr. Silverman under his employment
agreement and to Mr. Frame under his bonus agreement is intended to qualify for
deductibility under Section 162(m), subject to stockholder approval.
There are special transition rules which apply to compensation paid to
employees of subsidiaries of public companies which become separate publicly
held corporations. These transition rules provide that compensa-
18
<PAGE> 21
tion payments pursuant to performance of goals set by the outside directors of a
company before it becomes a separate publicly held company will not be subject
to the Section 162(m) limitations and will not require stockholder approval
during the transition period so long as the outside directors of the newly
public company certify compliance with the performance goals prior to actual
payment of the compensation. These transition rules postpone stockholder
approval for compensation paid and stock options granted prior to the first
regularly scheduled meeting of the stockholders of a new publicly held company
that occurs more than 12 months after the date the corporation becomes a
separate public company.
Until August 11, 1997, the Company was a wholly-owned subsidiary of Seitel,
Inc., a publicly held corporation. Prior to that date, the Compensation
Committee of Seitel, Inc., which consisted exclusively of outside directors of
Seitel, Inc., established the performance-based compensation goals contained in
Mr. Silverman's employment agreement and Mr. Frame's bonus agreement as more
particularly described below. In addition, the attainment of those performance
goals has been certified to date by the Company Compensation Committee, which
consists exclusively of outside directors. Since the Company became a separate
public Company on August 11, 1997, the stockholder approval requirement of
Section 162(m) is not applicable to payments made prior to the first regularly
scheduled stockholders meeting that occurs more than 12 months after the date
the Company became a separate public Company. The annual meeting of the
stockholders scheduled for April 28, 1998 will occur prior to the expiration of
that 12-month period, consequently the transition rules would normally postpone
the submission of these performance-based compensation arrangements for
stockholder approval until the 1999 annual meeting of stockholders. However, the
Company has decided to submit these performance-based compensation amounts for
stockholder approval at the April 28, 1998 meeting.
Mr. Silverman's employment agreement with the Company provides for an
annual base salary of $260,000 (which is not considered performance-based
compensation), adjusted annually for inflation, and for a quarterly bonus equal
to 25.0% of his base salary if the gross margin (revenues less all expenses
except for depreciation, amortization, interest, taxes and overhead) for the
onshore operations for such quarter is at least 17%. The employment agreement
also provides for the Company to pay Mr. Silverman an incentive bonus of 4% of
the Company's pre-tax profits if the Company's profit margin is less than 10%
and 5% of the Company's pre-tax profits if the Company's profit margin is 10% or
greater. The Company calculates all bonuses without taking into account the
expenses of the bonuses paid to its officers and directors. The amounts payable
to Mr. Silverman for such bonuses in 1998 will be dependent upon the Company's
financial performance during the year and therefore are currently
indeterminable. However, Mr. Silverman received bonuses aggregating $224,327
under his employment agreement for the period from August 11, 1997 (the date of
the Company's initial public offering and the date upon which Mr. Silverman's
employment agreement became effective) through December 31, 1997.
Mr. Frame, who serves as a director of the Company and as Chairman of the
Executive Committee of the Board of Directors, is compensated by the Company
pursuant to a bonus agreement with the Company. In addition to his other duties
as a director of the Company, the bonus agreement provides that Mr. Frame has
responsibility for strategic planning, marketing, and domestic and international
growth of the Company's business. Pursuant to the bonus agreement, the Company
will pay Mr. Frame bonuses each year during the term of the bonus agreement
equal to 1% of the increase in the Company's gross revenues for such year over
the Company's gross revenues for the prior year (excluding revenues attributable
to mergers and acquisitions in the year of such merger or acquisition unless it
is the final year of the term of the bonus agreement) and 4% of the Company's
net after tax profits in excess of its 1996 pro forma combined net after-tax
profits of $0.8 million. The bonus agreement with Mr. Frame expires December 31,
1999. The amounts payable to Mr. Frame for such bonuses in 1998 will be
dependent upon the Company's financial performance during the year and therefore
are currently indeterminable. However, Mr. Frame received bonuses aggregating
$160,592 under his bonus agreement for the period from August 11, 1997 through
December 31, 1997.
Both Mr. Silverman's employment agreement and Mr. Frame's bonus agreement
contain a provision that requires that any compensation payable under such
agreement that would not be deductible by the Company pursuant to Section 162(m)
will be deferred until such time as its payment would be deductible pursuant to
Section 162(m). Thus, if stockholders do not approve the above-described
performance-based compensation
19
<PAGE> 22
payments, and if the total compensation payable to either Mr. Silverman or Mr.
Frame that is subject to the deductibility cap provided in Section 162(m)
exceeds $1,000,000, then such compensation that otherwise would have been
payable in excess of such $1,000,000 limit will not be paid currently, but will
be deferred, without interest, until such time as it can be paid without
exceeding such $1,000,000 cap.
Both Mr. Silverman's employment agreement and Mr. Frame's bonus agreement
can be amended with the approval of a majority of the Board of Directors of the
Company and of Mr. Silverman or Mr. Frame, as applicable. However, if the
stockholders approve the above-described performance based compensation, any
amendment to the bonus provisions of the applicable agreement would require
stockholder approval in order to insure that future payments under the amended
performance-based compensation arrangement would continue to be deductible under
Section 162(m) to the extent such bonuses exceed the $1,000,000 limitation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THESE PROPOSALS.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP as independent
auditors for the Company for the year ending December 31, 1998, which
appointment will be submitted for ratification at the meeting. Arthur Andersen
LLP served as independent auditors to the Company in connection with the
Company's initial public offering, and has served as independent auditors to the
Company's former parent corporation, Seitel, Inc., since 1985. The Company has
been advised that representatives of Arthur Andersen LLP will attend the Annual
Meeting of Stockholders. They will have an opportunity to make a statement if
they desire to do so and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSALS BY STOCKHOLDERS
Proposals that stockholders wish to include in the Company's proxy
statement and form of proxy for presentation at the next Annual Meeting of
Stockholders to be held in 1999 must be received by the Company at 50 Briar
Hollow Lane, 6th Floor West, Houston, Texas 77027, Attention Richard W. McNairy,
no later than November 27, 1998.
MISCELLANEOUS
The Board of Directors knows of no other matters that are to be brought
before the meeting. However, if any other matters do come before the meeting,
the persons named on the enclosed form of proxy or their substitutes will vote
in accordance with their judgment in those matters.
The cost of solicitation of proxies, including expenses in connection with
preparing, assembling and mailing this proxy statement, will be borne by the
Company. The solicitation will be made by mail and may also be made by officers
or regular employees of the Company personally or by telephone or telegram. The
Company may reimburse brokers, custodians and nominees for their expenses in
sending proxies and proxy material to beneficial owners.
March 31, 1998
Houston, Texas
20
<PAGE> 23
EXHIBIT A
1997 STOCK OPTION PLAN
EAGLE GEOPHYSICAL, INC.
Eagle Geophysical, Inc., a Delaware corporation (the "Company"), hereby
establishes and adopts the following 1997 Stock Option Plan (the "Plan"):
I. PURPOSE
The Plan is intended as an employment incentive, to retain in the
employment of the Company and its subsidiaries persons of experience and
ability, to attract new employees whose services are considered unusually
valuable, to encourage the sense of proprietorship of such persons, and to
stimulate the active interest of such persons in the development and financial
success of the Company.
II. DEFINITIONS
As used in this Plan, the following words and phrases shall have the
following meanings:
(1) Board of Directors or "Board" shall mean the Board of Directors of
the Company.
(2) Code shall mean the Internal Revenue Code of 1986, as amended.
(3) Committee shall mean the Compensation Committee of the Board or
such other committee of the Board designated by the Board to administer the
Plan as provided herein.
(4) Company means Eagle Geophysical, Inc. and any successor thereto by
merger, consolidation, liquidation or other reorganization which has made
provision for adoption of the Plan and the assumption of the Company's
obligations hereunder.
(5) Eligible Employee shall mean any person who is employed by the
Company or a Subsidiary, including, but not limited to, any employee who is
also an officer and director of the Company or a Subsidiary, but not
including any director who serves on the Committee.
(6) Fair Market Value of a share of Common Stock of the Company shall
mean the closing sales price per share of such stock as reported in the
Wall Street Journal (or any other nationally recognized newspaper or other
source should such price not be published in the Wall Street Journal) as of
the applicable date.
(7) Options shall mean the Incentive Stock Options and the
Non-Qualified Stock Options granted from time to time under the Plan. If
Options are not designated as Incentive Stock Options or Non-Qualified
Stock Options at the time of grant, the number of Options granted which
qualify for treatment as Incentive Stock Options under the Code will be
Incentive Stock Options, and the remainder of such Options, if any, will be
Non-Qualified Stock Options.
(8) Participant shall mean an Eligible Employee who has been
designated by the Committee to participate in the Plan.
(9) Subsidiary shall mean any corporation to which the Company is a
"parent corporation" as defined in Section 424(e) of the Code.
(10) Incentive Stock Option shall mean a stock option granted under
the Plan that is intended to be an incentive stock option within the
meaning of Section 422 of the Code.
(11) Non-Qualified Stock Option shall mean a stock option granted
under the Plan that is not an incentive stock option within the meaning of
Section 422 of the Code.
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<PAGE> 24
III. DURATION
The Plan will be effective upon consummation of the initial public offering
of the Company's Common Stock (the "Effective Date"), subject to approval of the
Plan by the Company's shareholders within twelve months after the Effective
Date. No Option shall be granted pursuant to the Plan more than ten years after
the Effective Date.
IV. ADMINISTRATION
The Plan will be administered as follows:
COMMITTEE
The Plan shall be administered by the Committee as it may be constituted by
the Board from time to time. The Committee shall consist solely of two or more
members of the Board who are outside directors within the meaning of Section
162(m) of the Code.
COMMITTEE POWERS
The Committee shall be deemed to have and to be exercising all of the
powers of the Board in the performance of any of the powers and duties delegated
to it under the Plan, including, without limitation, the selection of
Participants, the determination of the number of shares for which each
Participant shall be granted an Option, and all other terms and conditions of
each Option to the extent not inconsistent with the Plan. The Committee may from
time to time establish eligibility requirements for participation in the Plan
and rules for the administration of the Plan that are not inconsistent with the
provisions and purposes of the Plan. The Committee shall have the authority,
exercisable in its sole discretion, to grant various forms of Options containing
such terms and conditions, consistent with the provisions of this Plan, as the
Committee shall determine.
COMMITTEE ACTION
A majority of the members of the Committee shall constitute a quorum. All
action taken by the Committee at a meeting shall be by the vote of a majority of
those present at such meeting, but any action may be taken by the Committee
without a meeting upon written consent signed by all of the members of the
Committee. Members of the Committee may participate in a meeting by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other. The Committee shall
appoint a secretary and shall keep minutes of its meetings, including those
conducted by telephone conference.
COMMITTEE DETERMINATION CONCLUSIVE
The determination of the Committee as to any disputed question arising
under the Plan, including questions of construction and interpretation, shall be
final, binding, and conclusive upon all persons. Without limiting the generality
of the foregoing, the determination of the Committee as to whether a Participant
has terminated his employment and the date thereof, or the cause to which
termination of employment is attributable, shall be final, binding, and
conclusive upon all persons.
COMMITTEE LIABILITY
No member of the Committee or of the Board as a whole shall be liable to
any person for any action taken or omitted in connection with the interpretation
or administration of the Plan unless attributable to such member's own willful
misconduct or lack of good faith.
A-2
<PAGE> 25
EXPENSES OF ADMINISTRATION
All expenses of administration of the Plan shall be borne by the Company,
and no part thereof shall be directly charged against the Participants.
V. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section VIII hereof, a total of One
Million One Hundred Thousand (1,100,000) shares of Common Stock of the Company
(the "Shares") shall be subject to the Plan. The Shares shall consist of
unissued shares or previously issued shares reacquired and held by the Company,
and such number of shares shall be and is hereby reserved for sale for such
purpose. Any of the Shares which remain unsold and which are not subject to
outstanding Options at the termination of the Plan shall cease to be reserved
for the purpose of the Plan, but until termination of the Plan, the Company
shall at all times reserve a sufficient number of Shares to meet the
requirements of the Plan. Should any Option expire or be canceled prior to its
exercise, the Shares theretofore subject to such Option may again by subjected
to an Option under the Plan.
VI. PARTICIPATION
Participation in the Plan will be subject to the following:
ELIGIBILITY
Employees of the Company or a Subsidiary who are in a position to
materially contribute to the Company's or such Subsidiary's success shall be
eligible for participation under the Plan. Eligible Employees shall include, but
shall not necessarily be limited to, officers and directors of the Company or a
Subsidiary. Members of the Board of Directors or the board of directors of a
Subsidiary shall not be Eligible Employees solely by virtue of their being
directors of the Company or such Subsidiary, but directors otherwise qualified
shall be eligible to participate.
PARTICIPANTS
The Committee shall determine and designate from time to time those
management, professional and key employees of the Company and its Subsidiaries,
including officers and directors active in capacities other than as directors
only, to whom Options are to be granted and who thereby become Participants in
the Plan. A designation of an Eligible Employee to participate shall not
automatically entitle such Participant to participate with respect to future
Options.
VII. PLAN OPERATION
The Plan shall operate according to the following general guidelines:
TIME OF GRANTING OPTIONS
Neither anything contained in the Plan or in any resolution adopted or to
be adopted by the Board of Directors or the stockholders of the Company nor any
action taken by the Committee shall constitute the granting of any Option. The
granting of an Option shall take place only when a written option agreement
shall have been duly executed and delivered by or on behalf of the Company and
the Participant to whom such Option has been granted. No Option shall be granted
following the expiration of ten (10) years from the earlier of (i) the Effective
Date of this Plan as stated in Article III, or (ii) approval of this Plan by the
shareholders of the Company.
A-3
<PAGE> 26
OPTION PRICE
The purchase price of each Share placed under an Incentive Stock Option
shall be determined by the Committee, but shall in no event be less than one
hundred percent (100%) of the Fair Market Value of such Share on the date the
Incentive Stock Option is granted. However, the purchase price of each Share
placed under an Incentive Stock Option to a Participant who owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any Subsidiary at the time of the grant shall
be a least one hundred and ten percent (110%) of the Fair Market Value of such
Share on the date the Option is granted. The purchase price of each Share placed
under a Non-Qualified Stock Option shall be determined by the Committee, and may
be less than, equal to, or greater than the Fair Market Value of such Share on
the date the Non-Qualified Stock Option is granted.
OPTION PERIOD AND TERMS
No Option shall be exercisable after the expiration of ten (10) years from
the date such Option is granted. However, if the Participant to whom an
Incentive Stock Option is granted owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any Subsidiary at the time such Incentive Stock Option is granted, such
Incentive Stock Option shall not be exercisable after the expiration of five (5)
years from the date such Incentive Stock Option is granted. Subject to the
provisions of the Plan, the Committee shall determine the terms and conditions
of each Option granted under the Plan, including the number of Shares covered by
the Option, and the time or times of exercise of the Option (which may be for a
term of up to ten (10) years from the date the Option is granted, or, in the
discretion of the Committee, may be for a shorter term designated by the
Committee). The Committee may provide that an Option shall not be exercisable
for a designated period of time after grant. The Committee may provide that
failure to exercise an Option as to the exercisable portion of the Option during
a specific time shall constitute a forfeiture of the right to exercise such
Option after termination of that time period. So long as consistent with the
provisions of the Plan, the terms and conditions of any Option need not be the
same as the terms and conditions of any other Option.
MAXIMUM ANNUAL AMOUNT PER EMPLOYEE
The aggregate fair market value (determined as of the time the Incentive
Stock Option is granted) of the stock with respect to which Incentive Stock
Options are exercisable for the first time by any Participant during any
calendar year (under this and any other plans of the Company or any Subsidiary)
shall not exceed $100,000. In no event shall any Participant be granted under
the Plan in any calendar year Options to purchase more than 250,000 Shares,
subject to adjustment as provided in Section VIII hereof.
EXERCISE OF OPTIONS
No Incentive Stock Option may be exercised unless the Participant shall
have been an employee of the Company or a Subsidiary at all times during the
period beginning on the date of grant of the Option and ending on the day three
(3) months before the date of such exercise. However, if a Participant becomes
disabled (within the meaning of Section 22(e)(3) of the Code) or dies, no
Incentive Stock Option may be exercised by such Participant after such
disability, or by the estate of such Participant or a person who acquired the
right to exercise such Option by bequest or inheritance or by reason of the
death of such Participant, unless the Participant shall have been an employee of
the Company or a Subsidiary at all times during the period beginning on the date
of grant of the Incentive Stock Option and ending on the date one (l) year
before the date of such exercise. Options may be exercised solely by the
Participant during his lifetime, or after his disability by his legal
representative on his behalf, or after his death by the personal representative
of the Participant's estate or the person or persons entitled thereto under his
will or under the laws of descent and distribution.
The purchase price of the Shares as to which an Option is exercised shall
be paid in full in cash and/or other property, including stock of the Company,
as deemed acceptable by the Committee, at the time of the exercise. Without
limiting the generality of the foregoing, the Committee shall have the power to
establish
A-4
<PAGE> 27
procedures from time to time for Participants: (1) to pay the exercise price of
an Option by withholding from the total number of Shares to be acquired upon
exercise of an Option that number of Shares having a Fair Market Value equal to
the aggregate exercise price; (2) to have withheld from the total number of
Shares to be acquired, in the same manner as (1) above, the withholding
obligation for federal and state income and other taxes; and (3) to exercise a
portion of the Option by delivering already-owned shares of Common Stock of the
Company in payment of the exercise price. A Participant shall not be or have any
of the rights or privileges of a shareholder of the Company in respect of any
Shares purchasable upon the exercise of any part of an Option unless and until
certificates representing such Shares shall have been issued by the Company to
such Participant.
USE OF PROCEEDS
The proceeds received by the Company from the sale of stock pursuant to
this Plan will be used for general corporate purposes.
VIII. CAPITAL CHANGES OF THE COMPANY
In the event there is any change in the Common Stock of the Company through
the declaration of stock dividends, or through recapitalization resulting in
stock splits, or combinations or exchanges of shares, or any similar
transactions, the number of Shares subject to Options previously granted and the
number of Shares remaining available for Options and the price per Share of such
Shares shall be appropriately adjusted by the Committee.
In the event the Company shall be a party to any merger, consolidation or
corporate reorganization, as the result of which the Company shall be the
surviving corporation, the rights and duties of the Participants and the Company
shall not be affected in any manner. In the event the Company shall sell all or
substantially all of its assets or shall be a party to any merger, consolidation
or corporate reorganization, as the result of which the Company shall not be the
surviving organization, or in the event any other corporation may make a tender
or exchange offer for stock of the Company (the surviving corporation,
purchaser, or tendering corporation being hereinafter collectively referred to
as the "purchaser," and the transaction being hereinafter referred to as the
"purchase"), then the Board of Directors may, at its election, (i) reach an
agreement with the purchaser that the purchaser will assume the obligations of
the Company as to all outstanding Options; (ii) reach an agreement with the
purchaser that the purchaser will convert each outstanding Option into an option
of at least equal value as to stock of the purchaser; or (iii) not later than
thirty (30) days prior to the effective date of the purchase, notify all
Participants that their Options are accelerated and afford to each Participant a
right for ten (10) days after the date of such notice to exercise any then
unexercised portion of all Options held by him whether or not such Options shall
then be exercisable under the terms of the Plan or his option agreement; and
within such ten day period, each such Participant may exercise any portion of
any Option as he may desire.
IX. LIMITATION OF RIGHTS
Participation in this Plan is subject to certain limitations:
LIMITATIONS
Nothing in this Plan shall be construed to:
(1) give any employee of the Company or a Subsidiary any right to be
designated a Participant herein, other than in the sole discretion of the
Committee;
(2) give a Participant any rights whatsoever with respect to Shares
until Options are exercised and Shares are issued to the Participant;
(3) give a Participant or any person any interest in any fund or in
any specific asset or assets of the Company;
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<PAGE> 28
[SIDE A OF PROXY CARD]
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
EAGLE GEOPHYSICAL, INC.
APRIL 28, 1998
Please Detach and Mail in the Envelope Provided
[X] Please mark your votes as in this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING MATTERS:
1. To elect six directors to serve FOR WITHHOLD
until the 1999 Annual Meeting. [ ] [ ]
To withhold authority to vote for any nominee(s), print name(s) below.
- --------------------------------------------------------------------------------
Nominees: William L. Lurie
Jay N. Silverman
Gerald M. Harrison
George Purdie
Paul A. Frame
Paul G. Somerville
2. Proposal to approve the Eagle Geophysical, Inc. 1997 Stock Option
Plan;
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Proposal to approve the performance-based compensation payable to Mr.
Jay N. Silverman, President and CEO of the Company, under the
Employment Agreement between the Company and Mr. Silverman;
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Proposal to approve the performance-based compensation payable to Mr.
Paul A. Frame, a director of the Company, under the Bonus Agreement
between the Company and Mr. Frame;
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. Proposal to approve the appointment of Arthur Andersen LLP as
independent certified public accountants for the Company for the year
ending December 31, 1998; and
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
6. To transact such other business as may properly come before the
meeting or any adjournment of the meeting.
Check this box if duplicate Annual Reports to Stockholders are sent to your
address and you do not need a personal copy sent to you. [ ]
SIGNATURE(S) DATE
, 1998
- -------------------------------------------- --------------------
Note: (Please sign your name exactly as
it appears on the proxy. When signing
as attorney, agent, executor, administrator,
trustee, guardian or corporate officer,
please give full title as such. Each joint
owner should sign the proxy.)
<PAGE> 29
[SIDE B OF PROXY CARD]
EAGLE GEOPHYSICAL, INC.
ANNUAL MEETING OF STOCKHOLDERS
APRIL 28, 1998
The undersigned hereby appoints WILLIAM L. LURIE and JAY N. SILVERMAN, and each
of them, with full power of substitution, proxies to vote all stock of Eagle
Geophysical, Inc. owned by the undersigned at the Annual Meeting of
Stockholders April 28, 1998 and any adjournment of the meeting, on the items of
business set forth on the reverse side and on such other business as may
properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IF THE UNDERSIGNED
FAILS TO SPECIFY HOW THE PROXY IS TO BE VOTED, IT WILL BE VOTED FOR THE
ELECTION OF THESE DIRECTORS AND FOR PROPOSALS 2, 3, 4 AND 5.
(TO BE SIGNED ON REVERSE SIDE)
- ----------- SEE REVERSE SIDE -----------
