<PAGE>
SEITEL, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY
JULY 18, 1995
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Seitel, Inc. ("the Company") to be held on Tuesday, July 18, 1995, at 10:00
a.m. at the Company's Headquarters, 50 Briar Hollow Lane, 7th Floor West,
Houston, Texas 77027, for the following purposes:
1. To elect eight directors to serve until the 1996 Annual Meeting;
2. To approve the Seitel, Inc. 1995 Shareholder Value Incentive Bonus Plan;
3. To approve certain amendments to the Seitel, Inc. 1993 Incentive Stock
Option Plan;
4. To approve the appointment of Arthur Andersen LLP as independent
certified public accountants for the Company for the year ending
December 31, 1995; and
5. 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 May 19, 1995, 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,
Debra D. Valice
Corporate Secretary
June 5, 1995
Houston, Texas
<PAGE>
SEITEL, INC.
50 BRIAR HOLLOW LANE, 7TH 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 on
Tuesday, July 18, 1995, 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 adoption of the Seitel, Inc. 1995 Shareholder Value
Incentive Bonus Plan, (iii) in favor of the adoption of the amendments to the
Seitel, Inc. 1993 Incentive Stock Option Plan, and (iv) for approval of the
appointment of Arthur Andersen LLP as the Company's independent public
accountants for the fiscal year ending December 31, 1995.
The Board of Directors has fixed the close of business on May 19, 1995, as
the record date for the meeting. On that date, the Company had outstanding
9,168,582 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 the
Seitel, Inc. 1995 Shareholder Value Incentive Bonus Plan, of the amendments to
the Seitel, Inc. 1993 Incentive Stock Option Plan and of the appointment of
Arthur Andersen LLP as the Company's independent public accountants for the
fiscal year ending December 31, 1995, 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. Thus, broker non-votes have the effect
of reducing the number of shares voted in favor of such proposal (but not the
percentage) that is required to approve the proposal.
The principal executive offices of the Company are at 50 Briar Hollow Lane,
7th Floor West, Houston, Texas 77027. The proxy statement and form of proxy are
being sent to stockholders on or about June 5, 1995.
<PAGE>
ELECTION OF DIRECTORS
At the meeting, eight 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 eight
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>
DIRECTOR
NAME AGE POSITION(S) WITH THE COMPANY SINCE
---- --- ---------------------------- --------
<S> <C> <C> <C>
Herbert M. Pearlman..... 62 Chairman of the Board of Directors 1982
Paul A. Frame........... 48 Chief Executive Officer, President and Director 1986
Horace A. Calvert....... 41 Chief Operating Officer, Executive Vice President and Director 1987
James C. Rives, Jr. .... 39 Senior Vice President and Director 1984
David S. Lawi........... 59 Chairman of the Executive Committee and Director 1982
Walter M. Craig, Jr. ... 41 Director 1987
William Lerner.......... 61 Director 1985
John E. Stieglitz....... 64 Director 1989
</TABLE>
Herbert M. Pearlman has been Chairman of the Company's Board of Directors
since 1987 and served as Chief Executive Officer from 1987 through July 1992.
He has served as President, Chief Executive Officer and a Director of Helm
Resources, Inc. ("Helm"), an American Stock Exchange listed company with equity
interests in diverse businesses, since 1980, and in June 1984, he became Helm's
Chairman of the Board. Since March 1984, Mr. Pearlman has been Chairman of
Intersystems, Inc. ("Intersystems"), an American Stock Exchange listed company
engaged in providing services to the thermoplastic resins industry, the
majority of the outstanding stock of which is owned by Helm. Since June 1990,
Mr. Pearlman has served as Chairman of Unapix Entertainment, Inc. ("Unapix
Entertainment"), a NASDAQ listed company engaged in multi-media entertainment.
Since August 1994, he has served as Chairman of the Board of American Business
Computer Corp., a NASDAQ listed company engaged in marketing and manufacture of
computerized dispensing equipment.
Paul A. Frame has been Chief Executive Officer of the Company since July 1992
and President since January 1987. He was Executive Vice President of the
Company from January 1985 until his appointment as President. He was hired by
the Company in August 1984 as Vice President of Marketing.
Horace A. Calvert has been Chief Operating Officer of the Company since July
1992 and Executive Vice President since January 1987. In March 1993, Mr.
Calvert was appointed President of DDD Energy, Inc., a wholly-owned subsidiary
of the Company engaged in the exploration and development of oil and gas
reserves. From January 1985 until his appointment as Vice President in May
1986, he was the Company's Chief Geophysicist.
James C. Rives, Jr. has been Senior Vice President of the Company since
January 1987, concentrating his efforts in marketing activities. He became Vice
President of the Company in January 1985. In March 1994, he was appointed
Executive Vice President of Seitel Data Corp., a wholly-owned subsidiary of the
Company which develops and markets seismic data. Mr. Rives has been an employee
of the Company in various marketing-oriented capacities since November 1982.
David S. Lawi has been Chairman of the Company's Executive Committee since
March 1987. He also was Assistant Secretary of the Company from May 1986 until
June 1987 and from June 1989 until July 1993. Mr. Lawi has been Treasurer,
Corporate Secretary and a Director of Helm since 1980, and he was its Executive
Vice President from 1980 through 1992. Since March 1984, Mr. Lawi has been a
Director of Intersystems and, since 1985, he has been Chairman of Intersystems'
Executive Committee. Since June 1990, Mr. Lawi has been a Director of Unapix
Entertainment and, since January 1993, Chairman of its Executive Committee, its
Treasurer and Secretary.
2
<PAGE>
Walter M. Craig, Jr. has provided legal and business advice to the Company,
from time to time, since 1984. Since 1993, he has been President of the
Mezzanine Financial Fund, L.P., a limited partnership engaged in making asset
based loans available to small and mid-market companies. He has served as
Executive Vice President and Chief Operating Officer of Helm since August 1992.
From 1984 to 1992, he was Senior Vice President of Business and Legal Affairs
of Helm. Since April 1993, Mr. Craig has been a Director of Unapix
Entertainment.
William Lerner is Chairman of the Company's Audit Committee and a member of
the Company's Compensation and Stock Option Committee. Since January, 1990, Mr.
Lerner has been engaged in the private practice of law. From May 1990 until
December 1990, he was General Counsel to Hon Development Company, a California
real estate development company. From June 1986 until December 1989, Mr. Lerner
was Vice President and General Counsel of The Geneva Companies, Inc., a
financial services company engaged in counseling privately owned middle-market
companies. Since 1985, he has been a Director of Helm. Mr. Lerner is also a
Director of Rent-Way, Inc., a NASDAQ listed company headquartered in
Pennsylvania that operates a chain of rental-purchase stores, and Of Counsel,
Inc., a NASDAQ listed company headquartered in Texas that provides temporary
lawyers and paralegals to law departments of large companies and law firms.
John E. Stieglitz is Chairman of the Company's Compensation and Stock Option
Committee and a member of the Company's Audit Committee. Since 1976, he has
been President of Conspectus, Inc., a privately held company engaged in
providing services in the area of executive recruitment. Mr. Stieglitz is also
a Director of Helm and Intersystems.
EXECUTIVE OFFICERS
The Company's executive officers who are not also directors are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
---- --- ----------------------------
<S> <C> <C>
Debra D. Valice............... 38 Chief Financial Officer, Vice President of
Finance, Treasurer, and Corporate
Secretary
Jesse R. Marion............... 40 Vice President of Sales
</TABLE>
Debra D. Valice, CPA, is the Company's Chief Financial Officer, Vice
President of Finance, Treasurer and Corporate Secretary. From March 1986 until
February 1987, she was the Company's Chief Accounting Officer.
Jesse R. Marion is the Company's Vice President of Sales and Executive Vice
President of the Company's wholly-owned data brokerage subsidiary, Datatel,
Inc. In March 1994, he was appointed President of Seitel Data Corp. Prior to
joining the Company in April 1992, Mr. Marion was Executive Vice President--
Marketing of First Seismic Corp., a publicly traded seismic data company, from
January 1989 until April 1992.
Officers serve at the discretion of the Board.
BOARD OF DIRECTORS, COMMITTEES AND ATTENDANCE AT MEETINGS
During 1994, the Company's Board of Directors held five 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 1994.
The Board of Directors has a standing Audit Committee, Compensation and Stock
Option Committee, and Executive Committee. The Board of Directors does not have
a Nominating Committee.
During 1994, the Audit Committee was comprised of Messrs. Stieglitz and
Lerner. The Audit Committee held one meeting during 1994. The functions of the
Audit Committee are to select the independent public accountants of the
Company, to review with them the Company's financial statements, to review the
Company's financial systems and controls and to oversee other matters relating
to the integrity of the Company's finances and financial statements as the
Committee may consider appropriate.
3
<PAGE>
During 1994, Messrs. Pearlman, Frame, Calvert and Lawi acted as the Executive
Committee. The function of the Executive Committee is to act on an interim
basis for the full Board. The Executive Committee did not meet officially
separately from the entire Board of Directors during 1994.
During 1994, the Compensation and Stock Option Committee ("Compensation
Committee") was comprised of Messrs. Stieglitz and Lerner. The Compensation
Committee reviews and recommends to the Board of Directors the compensation,
promotion and employment agreements of officers of the Company, the terms of
any proposed employee benefit arrangements, and the granting of awards under
such arrangements. The Compensation Committee did not meet officially
separately from the entire Board of Directors during 1994; however, it did
authorize certain transactions through the execution of four unanimous written
consents during 1994.
BENEFICIAL OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock, as of May 25, 1995, 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 who owns shares of the Common Stock, (iii) the Chief
Executive Officer and each of the four other most highly compensated executive
officers (collectively, the "named executive officers"), and (iv) all directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1)(2) OF CLASS
- ------------------------------------ --------------- ----------
<S> <C> <C>
Driehaus Capital Management, Inc..................... 831,900 9.1%
25 East Erie Street
Chicago, IL 60611
Horace A. Calvert.................................... 530,601(3) 5.6%
50 Briar Hollow Lane
7th Floor West
Houston, TX 77027
Paul A. Frame........................................ 513,080(4) 5.4%
50 Briar Hollow Lane
7th Floor West
Houston, TX 77027
Twentieth Century Companies, Inc..................... 460,000(5) 5.0%
4500 Main Street
Kansas City, MO 64141
Herbert M. Pearlman.................................. 369,719(6) 3.9%
93 Mason Street
Greenwich, CT 06830
David S. Lawi........................................ 254,576(7) 2.7%
93 Mason Street
Greenwich, CT 06830
James C. Rives, Jr................................... 150,957(8) 1.6%
50 Briar Hollow Lane
7th Floor West
Houston, TX 77027
Jesse R. Marion...................................... 44,826(9) *
50 Briar Hollow Lane
7th Floor West
Houston, TX 77027
</TABLE>
(Table continued on following page)
4
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1)(2) OF CLASS
- ------------------------------------ --------------- ----------
<S> <C> <C>
Walter M. Craig, Jr................................ 21,230(10) *
145 Mason Street
Greenwich, CT 06830
William Lerner..................................... 9,585(11) *
423 East Beau Street
Washington, PA 15301
John E. Stieglitz.................................. 5,000(11) *
Conspectus, Inc.
222 Purchase Street
Rye, NY 10580
All directors and executive officers as a group (10
persons).......................................... 2,044,137(12) 19.2%
</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) Includes 23,002 and 355,023 shares which may be acquired from the Company
within 60 days upon exercise of options and common stock purchase warrants,
respectively. The exercise prices of the options range from $2.80 to $5.57
per share, and the exercise prices of the common stock purchase warrants
range from $11.25 to $24.00 per share.
(4) Includes 21,719 and 345,399 shares which may be acquired from the Company
within 60 days upon exercise of options and common stock purchase warrants,
respectively. The exercise prices of the options range from $3.11 to $5.57
per share, and the exercise prices of the common stock purchase warrants
range from $13.05 to $24.00 per share.
(5) Pursuant to the Schedule 13G filed with the Securities and Exchange
Commission on or about February 10, 1995, the shares owned of record by
Twentieth Century Companies, Inc. are beneficially owned by Twentieth
Century Companies, Inc., Investors Research Corporation, Twentieth Century
Investors, Inc. and James E. Stowers, Jr.
(6) Includes 245,291 shares which may be acquired from the Company within 60
days upon exercise of common stock purchase warrants. The exercise prices
of the common stock purchase warrants range from $13.05 to $32.00 per
share.
(7) Includes 202,863 shares which may be acquired from the Company within 60
days upon exercise of common stock purchase warrants. The exercise prices
of the common stock purchase warrants range from $13.05 to $32.00 per
share.
(8) Includes 131,000 shares which may be acquired from the Company within 60
days upon exercise of common stock purchase warrants. The exercise prices
of the common stock purchase warrants range from $11.25 to $24.00 per
share.
(9) Includes 6,666 and 10,577 shares which may be acquired from the Company
within 60 days upon exercise of options and common stock purchase warrants,
respectively. The exercise prices of the options range from $15.00 to
$30.00 per share, and the exercise price of the common stock purchase
warrants is $24.00 per share.
(10) Includes 21,230 shares which may be acquired from the Company within 60
days upon exercise of common stock purchase warrants at an exercise price
of $32.00 per share.
(11) Includes 5,000 shares which may be acquired from the Company within 60
days upon exercise of options at an exercise price of $30.50 per share.
(Footnotes continued on following page)
5
<PAGE>
(12) Includes an aggregate of 1,466,125 shares which may be acquired from the
Company within 60 days upon exercise of 71,230 options and 1,394,895
common stock purchase warrants, respectively, by the group of 10 persons
which comprises all executive officers and directors. The exercise prices
of the options range from $2.80 to $30.50 per share, and the exercise
prices of the common stock purchase warrants range from $11.25 to $32.00
per share.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation awarded to, earned by or paid to the named executive officers for
the years indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------
ANNUAL COMPENSATION AWARDS
---------------------------------------- --------------
NAME AND PRINCIPAL OTHER ANNUAL STOCK OPTIONS/ ALL OTHER
POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION($)(2) SARS(#) COMPENSATION($)
------------------ ---- --------- ----------- ------------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Paul A. Frame........... 1994 $136,193 $955,213 $684,006 292,728(3) $94,990(4)
Chief Executive Officer 1993 $132,612 $422,034 $390,262 212,709 $60,945
and President 1992 $128,750 $313,176 $271,117 212,709 $25,447
Horace A. Calvert....... 1994 $136,193 $955,213 $684,006 292,728(3) $94,990(4)
Chief Operating Officer 1993 $132,612 $449,576 $390,262 212,709 $60,945
and Executive 1992 $128,750 $313,176 $271,642 212,709 $25,447
Vice President
Herbert M. Pearlman..... 1994 $115,569 $897,141 -- 251,740(3) $94,990(4)
Chairman of the 1993 $112,861 $544,756 -- 165,677 $60,945
Board of Directors 1992 $109,716 $377,518 -- 165,677 $25,447
David S. Lawi........... 1994 $ 56,098 $448,570 -- 166,884(3) $94,990(4)
Chairman of the Execu- 1993 $ 54,784 $272,378 -- 123,249 $60,945
tive 1992 $ 54,926 $188,759 -- 123,249 $25,447
Committee
Jesse R. Marion......... 1994 $ 75,000 $ 6,620 $932,644 30,577 $ 3,000(5)
Vice President of Sales 1993 $ 40,000 $ 16,397 $630,122 10,000 $ 4,497
1992 $ 30,000 $ 2,085 $149,344 15,000 --
</TABLE>
- --------
(1) Includes bonuses based on the Company's pre-tax profits and, for each of
Messrs. Frame and Calvert, bonuses based on the Company's stock performance
of $237,500 in 1994.
(2) Includes commissions based on sales.
(3) Awards in 1994 include repricings toward the target price established in
July 1992 of certain awards originally granted in 1990. One class of stock
options (common stock purchase warrants) were repriced once during 1994 and
another class of stock options (common stock purchase warrants) were
repriced on three occasions during 1994. See "OPTION/SAR GRANTS IN 1994".
(4) Includes amounts paid pursuant to the program (the "Incentive Compensation
Program") pursuant to which between 2 1/2% and 5% of the revenue generated
annually by seismic creation programs that have fully recouped their direct
costs is distributed to certain officers and key employees, and amounts
contributed by the Company to its 401(k) Savings Plan (the "401(k) Plan")
on behalf of such named executive officers as discretionary and matching
contributions. Includes $90,370 contributed by the Company pursuant to its
Incentive Compensation Program, and $4,620 contributed by the Company as
401(k) Plan matching contributions.
(5) Includes $3,000 contributed by the Company as 401(k) Plan matching
contributions.
6
<PAGE>
The following table sets forth certain information with respect to options to
purchase Common Stock granted during the year ended December 31, 1994 to each
of the named executive officers.
OPTION/SAR GRANTS IN 1994
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
PERCENT RATES OF STOCK PRICE
NUMBER OF OF TOTAL APPRECIATION FOR OPTION
SECRITIES OPTIONS/SARS TERM(4)
UNDERLYING GRANTED TO EXERCISE ------------------------
OPTIONS/SARS EMPLOYEES IN OR BASE EXPIRATION 5
NAME GRANTED(#) 1994 PRICE($/SH) DATE PERCENT($) 10 PERCENT($)
---- ------------ ------------ ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul A. Frame........... 80,019(1) 2.8 $11.25 02/27/95 $ 284,888 $ 350,563
132,690(1) 4.7 $14.72 12/10/00 $ 652,004 $1,643,820
132,690(1) 4.7 $13.72 12/10/00 $1,059,689 $2,150,974
132,690(1) 4.7 $13.05 12/10/00 $1,051,681 $2,101,186
80,019(2) 2.8 $24.00 04/11/99 $ 288,035 $ 866,388
Horace A. Calvert....... 80,019(1) 2.8 $11.25 02/27/95 $ 284,888 $ 350,563
132,690(1) 4.7 $14.72 12/10/00 $ 652,004 $1,643,820
132,690(1) 4.7 $13.72 12/10/00 $1,059,689 $2,150,974
132,690(1) 4.7 $13.05 12/10/00 $1,051,681 $2,101,186
80,019(2) 2.8 $24.00 04/11/99 $ 288,035 $ 866,388
Herbert M. Pearlman..... 86,063(1) 3.0 $11.25 02/27/95 $ 306,406 $ 377,042
79,614(1) 2.8 $14.72 02/10/00 $ 391,203 $ 986,292
79,614(1) 2.8 $13.72 12/10/00 $ 635,813 $1,290,585
79,614(1) 2.8 $13.05 12/10/00 $ 631,008 $1,260,712
86,063(2) 3.0 $24.00 04/11/99 $ 309,791 $ 931,828
David S. Lawi........... 43,635(1) 1.5 $11.25 02/27/95 $ 155,352 $ 191,165
79,614(1) 2.8 $14.72 12/10/00 $ 391,203 $ 986,292
79,614(1) 2.8 $13.72 12/10/00 $ 635,813 $1,290,585
79,614(1) 2.8 $13.05 12/10/00 $ 631,008 $1,260,712
43,635(2) 1.5 $24.00 04/11/99 $ 157,068 $ 472,448
Jesse R. Marion......... 5,000(3) 0.2 $15.00 02/07/04 $ 45,131 $ 116,289
5,000(3) 0.2 $20.00 02/07/04 $ 20,131 $ 91,289
5,000(3) 0.2 $25.00 02/07/04 * $ 66,289
5,000(3) 0.2 $30.00 02/07/04 * $ 41,289
10,577(2) 0.4 $24.00 04/11/99 $ 38,073 $ 114,520
</TABLE>
- --------
(1) The options (common stock purchase warrants) ("warrants") listed were
initially granted in 1990. At its July 21, 1992 meeting, the Company's
Board of Directors accepted its Compensation Committee's recommendation to
reduce the exercise price of each of these two classes of warrants by $1.00
for every $1.00 increase in the market price of the Company's Common Stock
maintained for at least 30 consecutive days, until the exercise price of
the warrants equals the target price of $11.25 per share established by the
Compensation Committee for the warrants expiring on February 27, 1995 and
$13.05 per share for the warrants expiring on December 10, 2000. This
adjustment towards the target price caused the exercise price of the
warrants expiring on February 27, 1995 to decrease by $.88 to the target
price of $11.25 per share during the year ended December 31, 1994. This
adjustment toward the target price also caused the exercise price of the
warrants expiring on December 10, 2000 to have two $1.00 per share
decreases and a $.67 per share decrease to the target price of $13.05 per
share during the year ended December 31, 1994. No further decreases in the
exercise price of these warrants can occur. The expiration dates of the
warrants were not changed from those set with the initial grants in 1990.
(Footnotes continued on following page)
7
<PAGE>
(2) The options (common stock purchase warrants) granted in 1994 are
exercisable 90 days after the grant date of April 11, 1994. The options
were granted for a term of five years, subject to certain events related to
termination of employment.
(3) The options granted to Mr. Marion are exercisable starting 12 months after
the grant date of February 7, 1994, with 33% of the options becoming
exercisable at that time and with an additional 33% of the options becoming
exercisable on each successive anniversary date, with 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 potential realizable value will be nil because the exercise price will
exceed the market price of the Company's Common Stock at the assumed rate of
appreciation.
The following table sets forth certain information with respect to the
exercise of options during the year ended December 31, 1994, and unexercised
options held at December 31, 1994, and the value thereof, by each of the named
executive officers.
AGGREGATED OPTION/SAR EXERCISES IN 1994
AND 12/31/94 OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS/SARS AT THE- MONEY OPTIONS/SARS
SHARES 12/31/94(#) AT 12/31/94($)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul A. Frame........... 81,303 $876,792 367,118 0 $2,587,723 $ 0
Horace A. Calvert....... 71,679 $778,532 378,025 0 $2,710,020 $ 0
Herbert M. Pearlman..... 76,114 $829,448 263,998 0 $1,575,961 $ 0
David S. Lawi........... 37,709 $410,719 213,168 0 $1,464,953 $ 0
Jesse R. Marion......... 10,833 $206,763 14,327 30,417 $ 60,469 $191,307
</TABLE>
EMPLOYMENT ARRANGEMENTS
Agreements with Messrs. Frame, Calvert, Pearlman and Lawi
Effective as of January 1, 1991, the Company entered into employment
agreements with each of Messrs. Frame, Calvert, Pearlman and Lawi for service
in their respective capacities set forth in the listing of directors and
executive officers. During 1992, Mr. Pearlman passed the Chief Executive
Officer title and duties to Mr. Frame, and Mr. Calvert added the additional
title and duties of Chief Operating Officer to those he already held. The
employment agreements were not revised for these changes. Each agreement is for
a term of five years, renewable each year for an additional year unless either
party to the agreement gives notice to the contrary. In accordance with these
agreements, Messrs. Frame, Calvert, Pearlman and Lawi receive an annual base
salary of $136,193, $136,193, $115,569, and $56,098, respectively.
Additionally, each of Messrs. Frame and Calvert receive a 1% commission on the
first $12,000,000 in revenues for the year and 1/2% commission on revenues in
excess thereof, plus an additional 1/2% commission on revenues over $12,000,000
if at least 40% of the Company's revenues are resale revenues, plus a bonus of
4% of the Company's pre-tax profits (as defined therein). Each of Messrs.
Pearlman and Lawi receive an annual bonus of 5% and 2 1/2%, respectively, of
the Company's pre-tax profits (as defined).
8
<PAGE>
Each of the agreements with Messrs. Frame and Calvert provide that if at any
time during the term of such agreement, (i) the employment agreements of
Messrs. Pearlman or Lawi are terminated by the Company prior to the stated term
thereof, or (ii) Messrs. Pearlman and Lawi resign from the Company's Board of
Directors prior to the expiration of the term of their employment agreements,
or (iii) the majority of the members of the Company's Board of Directors is no
longer nominated and supported by a majority of Messrs. Frame, Calvert,
Pearlman and Lawi (each a "Change in Control"), the employee shall have the
right to terminate the agreement immediately and receive from the Company all
compensation required to be paid during the unexpired term thereof as well as
the severance payment described below without any obligation to perform
consulting services as described below. The Company believes that the Change in
Control provisions in these agreements may tend to discourage attempts to
acquire a controlling interest in the Company and may also tend to make the
removal of management more difficult.
Each agreement provides that if it is not renewed, the Company will pay the
employee for two additional years' compensation including his then current base
salary plus the average of all commissions and bonuses paid to the employee for
the then prior three years. The severance payments are contingent upon the
employee remaining available to perform consulting services for the benefit of
the Company.
Each agreement provides for certain noncompetition and nondisclosure
covenants of the employee and for certain Company-paid fringe benefits such as
an automobile allowance, disability insurance and inclusion in pension,
deferred compensation, profit sharing, stock purchase, savings, hospitalization
and other benefit plans in effect from time to time.
Pursuant to the terms of these agreements, on December 10, 1990, the Company
issued warrants to purchase 265,380 shares, 265,380 shares, 159,228 shares, and
159,228 shares of the Common Stock to Messrs. Frame, Calvert, Pearlman and
Lawi, respectively. At December 31, 1994, one-half of such warrants are
exercisable at an exercise price of $13.19 per share and expire on December 10,
1997 and the remaining one-half are exercisable at $13.05 and expire on
December 10, 2000. The warrants expiring December 10, 2000 were repriced during
1994. Refer to the "OPTION/SAR GRANTS IN 1994" table and footnotes thereto for
additional information. On the date of grant, the closing sale price of the
Common Stock as quoted on the American Stock Exchange was $8.80 per share.
Bonus Based On Stock Performance
On July 21, 1992, when the stock price was $5.375, the Compensation Committee
and the entire Board of Directors approved payment of a one-time $2,500,000
special shareholder value bonus to be divided among Messrs. Frame and Calvert
and three other key employees upon the event of the market price of the
Company's stock maintaining or exceeding $20.00 per share for at least 90
consecutive days (the "Target Date") at any time before July 21, 1997. The
Target Date was achieved in June 1994. The bonus vests equally over the 12
quarters following the Target Date, contingent upon continued full-time
employment, except in the event of termination without cause, death or
disability in which case the balance of the bonus will be due and payable
immediately.
DIRECTORS COMPENSATION
Outside directors receive an annual fee of $10,000 for serving on the board
and are reimbursed for out of pocket expenses for meeting attendance. Directors
who are also employees receive no separate compensation for their services as
directors.
Nonemployee directors also participate in the Non-Employee Directors' Stock
Option Plan ("the Plan"), which was approved by Company Shareholders at the
1994 Annual Meeting. Under the terms of the Plan, each non-employee director
receives on the date of each annual meeting during the term of the Plan an
option to purchase 1,000 shares of Common Stock at an exercise price equal to
the fair market value of the Common
9
<PAGE>
Stock on the date of grant. In addition, each non-employee director who is
elected or appointed to the Board of Directors for the first time is granted on
the date of such election or appointment an option to purchase 5,000 shares of
Common Stock at an exercise price equal to the fair market value of the Common
Stock on the date of grant. Options granted under the 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
sixty 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. During 1994,
each non-employee director was granted a total of 5,000 options at an exercise
price of $30.50.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee is composed of William Lerner and John
E. Stieglitz. In 1994, John Stieglitz invested as a general partner in a
partnership for which the Company's subsidiary DDD Energy, Inc. acts as
managing partner. See "Certain Relationships and Related Party Transactions".
REPORT ON REPRICING OF OPTIONS
The Board of Directors of the Company issued during 1990 to certain
executives and directors, including the named executive officers, common stock
purchase warrants to purchase shares of Common Stock at $17.13 per share and
$20.72 per share. On the date of grant, the closing sale price of the Common
Stock as quoted on the American Stock Exchange was $8.80 per share. To reflect
the importance that the Company places on shareholder value, the Board of
Directors accepted the Compensation Committee's recommendation at its July 21,
1992 meeting to reduce the exercise price of these common stock purchase
warrants by $1.00 for every $1.00 increase in the market price of the Company's
Common Stock, maintained for at least 30 days, until the exercise price of the
warrants equals the target price established by the Compensation Committee of
$11.25 per share for the $17.13 warrants and $13.05 per share for the $20.72
warrants. This repricing plan caused the exercise price of the warrants
expiring on February 27, 1995 to decrease by $.88 to the target price of $11.25
per share during the year ended December 31, 1994. This repricing plan also
caused the exercise price of the warrants expiring on December 10, 2000 to have
two $1.00 per share decreases and a $.67 per share decrease to the target price
of $13.05 per share during the year ended December 31, 1994. No further
decreases in the exercise price of these warrants can occur. Details of the
repricings during 1994 for the named executive officers are set forth in the
"TEN YEAR OPTIONS/SAR REPRICINGS" table below.
By the Compensation Committee,
John E. Stieglitz, Chairman
William Lerner
10
<PAGE>
The following table sets forth certain information with respect to repricing
of options to purchase Common Stock and SARs during the ten years ended
December 31, 1994, for any executive officer.
TEN YEAR OPTION/SAR REPRICINGS (1)
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
NUMBER OF OPTION TERM
SECURITIES MARKET PRICE REMAINING
UNDERLYING OF STOCK AT EXERCISE PRICE AT DATE OF
OPTIONS/SAR'S TIME OF AT TIME NEW REPRICING
REPRICED OR REPRICING OR OF REPRICING OR EXERCISE OR
NAME DATE AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE($) AMENDMENT
---- -------- ------------- ------------ --------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul A. Frame........... (2) 9/18/92 80,019 $ 7.75 $17.13 $16.13 2.45 yrs.
Chief Executive 11/28/92 80,019 $ 8.88 $16.13 $15.13 2.25 yrs.
Officer and President 12/5/92 80,019 $ 9.25 $15.13 $14.13 2.25 yrs.
1/9/93 80,019 $11.25 $14.13 $13.13 2.13 yrs.
1/21/93 80,019 $11.63 $13.13 $12.13 2.10 yrs.
1/5/94 80,019 $14.00 $12.13 $11.25 1.15 yrs.
(3) 9/18/92 132,690 $ 7.75 $20.72 $19.72 8.30 yrs.
11/28/92 132,690 $ 8.88 $19.72 $18.72 8.00 yrs.
12/5/92 132,690 $ 9.25 $18.72 $17.72 8.00 yrs.
1/9/93 132,690 $11.25 $17.72 $16.72 7.92 yrs.
1/21/93 132,690 $11.63 $16.72 $15.72 7.88 yrs.
1/5/94 132,690 $14.00 $15.72 $14.72 6.93 yrs.
1/14/94 132,690 $15.50 $14.72 $13.72 6.90 yrs.
1/27/94 132,690 $15.00 $13.72 $13.05 6.87 yrs.
- -----------------------------------------------------------------------------------------------------
Horace A. Calvert....... (2) 9/18/92 80,019 $ 7.75 $17.13 $16.13 2.45 yrs.
Chief Operating 11/28/92 80,019 $ 8.88 $16.13 $15.13 2.25 yrs.
Officer and Executive 12/5/92 80,019 $ 9.25 $15.13 $14.13 2.25 yrs.
Vice President 1/9/93 80,019 $11.25 $14.13 $13.13 2.13 yrs.
1/21/93 80,019 $11.63 $13.13 $12.13 2.10 yrs.
1/5/94 80,019 $14.00 $12.13 $11.25 1.15 yrs.
(3) 9/18/92 132,690 $ 7.75 $20.72 $19.72 8.30 yrs.
11/28/92 132,690 $ 8.88 $19.72 $18.72 8.00 yrs.
12/5/92 132,690 $ 9.25 $18.72 $17.72 8.00 yrs.
1/9/93 132,690 $11.25 $17.72 $16.72 7.92 yrs.
1/21/93 132,690 $11.63 $16.72 $15.72 7.88 yrs.
1/5/94 132,690 $14.00 $15.72 $14.72 6.93 yrs.
1/14/94 132,690 $15.50 $14.72 $13.72 6.90 yrs.
1/27/94 132,690 $15.00 $13.72 $13.05 6.87 yrs.
- -----------------------------------------------------------------------------------------------------
Herbert M. Pearlman..... (2) 9/18/92 86,063 $ 7.75 $17.13 $16.13 2.45 yrs.
Chairman of the 11/28/92 86,063 $ 8.88 $16.13 $15.13 2.25 yrs.
Board of Directors 12/5/92 86,063 $ 9.25 $15.13 $14.13 2.25 yrs.
1/9/93 86,063 $11.25 $14.13 $13.13 2.13 yrs.
1/21/93 86,063 $11.63 $13.13 $12.13 2.10 yrs.
1/5/94 86,063 $14.00 $12.13 $11.25 1.15 yrs.
(3) 9/18/92 79,614 $ 7.75 $20.72 $19.72 8.30 yrs.
11/28/92 79,614 $ 8.88 $19.72 $18.72 8.00 yrs.
12/5/92 79,614 $ 9.25 $18.72 $17.72 8.00 yrs.
1/9/93 79,614 $11.25 $17.72 $16.72 7.92 yrs.
1/21/93 79,614 $11.63 $16.72 $15.72 7.88 yrs.
1/5/94 79,614 $14.00 $15.72 $14.72 6.93 yrs.
1/14/94 79,614 $15.50 $14.72 $13.72 6.90 yrs.
1/27/94 79,614 $15.00 $13.72 $13.05 6.87 yrs.
- -----------------------------------------------------------------------------------------------------
James C. Rives Jr. ..... (2) 9/18/92 49,157 $ 7.75 $17.13 $16.13 2.45 yrs.
Senior Vice President 11/28/92 49,157 $ 8.88 $16.13 $15.13 2.25 yrs.
12/5/92 49,157 $ 9.25 $15.13 $14.13 2.25 yrs.
1/9/93 49,157 $11.25 $14.13 $13.13 2.13 yrs.
1/21/93 49,157 $11.63 $13.13 $12.13 2.10 yrs.
1/5/94 49,157 $14.00 $12.13 $11.25 1.15 yrs.
(3) 9/18/92 37,153 $ 7.75 $20.72 $19.72 8.30 yrs.
11/28/92 37,153 $ 8.88 $19.72 $18.72 8.00 yrs.
12/5/92 37,153 $ 9.25 $18.72 $17.72 8.00 yrs.
1/9/93 37,153 $11.25 $17.72 $16.72 7.92 yrs.
1/21/93 37,153 $11.63 $16.72 $15.72 7.88 yrs.
1/5/94 37,153 $14.00 $15.72 $14.72 6.93 yrs.
1/14/94 37,153 $15.50 $14.72 $13.72 6.90 yrs.
1/27/94 37,153 $15.00 $13.72 $13.05 6.87 yrs.
- -----------------------------------------------------------------------------------------------------
</TABLE>
(Table continued on following page)
11
<PAGE>
TEN YEAR OPTION/SAR REPRICINGS (1), CONTINUED
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
NUMBER OF OPTION TERM
SECURITIES MARKET PRICE REMAINING
UNDERLYING OF STOCK AT EXERCISE PRICE AT DATE OF
OPTIONS/SAR'S TIME OF AT TIME NEW REPRICING
REPRICED OR REPRICING OR OF REPRICING OR EXERCISE OR
NAME DATE AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE($) AMENDMENT
---- -------- ------------- ------------ --------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
David S. Lawi.......... (2) 9/18/92 43,635 $ 7.75 $17.13 $16.13 2.45 yrs.
Chairman of the 11/28/92 43,635 $ 8.88 $16.13 $15.13 2.25 yrs.
Executive Committee 12/5/92 43,635 $ 9.25 $15.13 $14.13 2.25 yrs.
1/9/93 43,635 $11.25 $14.13 $13.13 2.13 yrs.
1/21/93 43,635 $11.63 $13.13 $12.13 2.10 yrs.
1/5/94 43,635 $14.00 $12.13 $11.25 1.15 yrs.
(3) 9/18/92 79,614 $ 7.75 $20.72 $19.72 8.30 yrs.
11/28/92 79,614 $ 8.88 $19.72 $18.72 8.00 yrs.
12/5/92 79,614 $ 9.25 $18.72 $17.72 8.00 yrs.
1/9/93 79,614 $11.25 $17.72 $16.72 7.92 yrs.
1/21/93 79,614 $11.63 $16.72 $15.72 7.88 yrs.
1/5/94 79,614 $14.00 $15.72 $14.72 6.93 yrs.
1/14/94 79,614 $15.50 $14.72 $13.72 6.90 yrs.
1/27/94 79,614 $15.00 $13.72 $13.05 6.87 yrs.
- ----------------------------------------------------------------------------------------------------
Debra D. Valice........ (2) 9/18/92 36,206 $ 7.75 $17.13 $16.13 2.45 yrs.
Chief Financial Officer, 11/28/92 36,206 $ 8.88 $16.13 $15.13 2.25 yrs.
Vice President of 12/5/92 36,206 $ 9.25 $15.13 $14.13 2.25 yrs.
Finance, Treasurer 1/9/93 36,206 $11.25 $14.13 $13.13 2.13 yrs.
and Corporate 1/21/93 36,206 $11.63 $13.13 $12.13 2.10 yrs.
Secretary 1/5/94 36,206 $14.00 $12.13 $11.25 1.15 yrs.
(3) 9/18/92 21,230 $ 7.75 $20.72 $19.72 8.30 yrs.
11/28/92 21,230 $ 8.88 $19.72 $18.72 8.00 yrs.
12/5/92 21,230 $ 9.25 $18.72 $17.72 8.00 yrs.
1/9/93 21,230 $11.25 $17.72 $16.72 7.92 yrs.
1/21/93 21,230 $11.63 $16.72 $15.72 7.88 yrs.
1/5/94 21,230 $14.00 $15.72 $14.72 6.93 yrs.
1/14/94 21,230 $15.50 $14.72 $13.72 6.90 yrs.
1/27/94 21,230 $15.00 $13.72 $13.05 6.87 yrs.
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Prior to 1992, the Company did not reprice any options to purchase Common
Stock.
(2) These common stock purchase warrants were originally granted on February
27, 1990, with an exercise price of $17.13 per share and an expiration date
of February 27, 1995. As described in the Report on Repricing of Options
above, the Company adopted a plan on July 21, 1992, to reduce the exercise
price of these warrants by $1.00 for every $1.00 increase in the market
price of the Company's Common Stock maintained for at least 30 consecutive
days, until the exercise price of the warrants equals the target price of
$11.25 per share established by the Compensation Committee. This adjustment
towards the target price caused three $1.00 per share decreases in the
exercise price of these warrants as of December 31, 1992, two additional
$1.00 per share decreases in the exercise price of these warrants during
the year ended December 31, 1993 and an $.88 decrease in the exercise price
of these warrants to the target price during the year ended December 31,
1994. No further decreases in the exercise price of these warrants can
occur. The original term of these warrants was not changed with the
repricing.
(3) These common stock purchase warrants were originally granted on December
10, 1990 with an exercise price of $20.72 per share and an expiration date
of December 10, 2000. As described in the Report on Repricing of Options
above, the Company adopted a plan on July 21, 1992, to reduce the exercise
price of these warrants by $1.00 for every $1.00 increase in the market
price of the Company's Common Stock maintained for at least 30 consecutive
days, until the exercise price of the warrants equals the target price of
$13.05 per share established by the Compensation Committee. This adjustment
towards the target price caused three $1.00 per share decreases in the
exercise price of these warrants as of December 31, 1992, two additional
$1.00 per share decreases in the exercise price of these warrants during
the year ended December 31, 1993, and two additional $1.00 per share
decreases and a $.67 per share decrease in the exercise price of these
warrants to the target price during the year ended December 31, 1994. No
further decreases in the exercise price of these warrants can occur. The
original term of these warrants was not changed with the repricing.
12
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company, which consists of two outside
directors, met with the entire Board of Directors in November 1994 to review
the Company's compensation policies and practices. Such a review is intended to
be conducted annually.
COMPENSATION PHILOSOPHY
The Compensation Committee, with the support of the entire Board of
Directors, has established performance-based criteria for the compensation of
CEO Paul A. Frame and for the other senior officers of the Company.
The compensation philosophy is to pay a low base salary and to provide
attractive incentives to earn additional income based on operating results,
plus the granting of stock options and warrants to reflect the importance that
the Company places on shareholder value. This compensation philosophy also
extends to all other officers and executives of the Company.
PERFORMANCE-BASED CASH COMPENSATION
As detailed under the Employment Arrangements section, Mr. Frame receives a
base salary, plus a commission based on revenue and a cash bonus based on pre-
tax profits. Similarly, the other senior officers each receive a base salary
plus commissions and/or bonuses based on operating results. Because of the
performance-based cash compensation and other competitive factors, the Board of
Directors resolved to enter in 1991 into a five year employment contract with
CEO Paul A. Frame, as well as with Chairman Herbert M. Pearlman, COO Horace A.
Calvert and Executive Committee Chairman David S. Lawi.
For the year ended December 31, 1994, Mr. Frame's total cash compensation
increased 63% as compared to the total cash compensation he received for the
year ended December 31, 1993, excluding a bonus based on the Company's stock
performance, deferred compensation, Company matching 401(k) income and other
fringe benefits. This increase in CEO compensation reflects the fact that the
Company had record revenues in 1994, which were 70% higher than revenues in
1993, combined with a 65% increase in pre-tax profits in 1994 versus 1993.
Correspondingly, Mr. Frame earned increased commissions related to the higher
revenues in 1994, and he received an increased cash bonus related to the higher
pre-tax profits. Similarly, the total cash compensation for Chairman Pearlman
and Executive Committee Chairman Lawi was increased because of increased cash
bonuses related to greater pre-tax profits, and the total cash compensation for
COO Calvert was increased because of commissions on increased revenues and
increased cash bonuses related to greater pre-tax profits.
BONUSES BASED ON STOCK PERFORMANCE
On January 27, 1995, the Compensation Committee recommended and the Board of
Directors approved a shareholder value incentive bonus under which a cash bonus
aggregating $4,000,000 would be paid to all salaried employees if the market
price of the Company's stock reaches $60.00 per share on or before April 30,
1998, and maintains that price for at least 90 consecutive days. This bonus
would be shared by all salaried employees on a basis proportionate to their
respective compensation ranking in the Company, and it would vest and be paid
out in escalating quarterly installments over a three-year period, subject to
continued employment with the Company. As of May 25, 1995, the market price of
the Company's Common Stock was $29.625 per share.
In 1992, when the Company's stock price was $5.375 per share, the Board of
Directors adopted a similar plan that provided for a one-time bonus of
$2,500,000 to be divided among Messrs. Frame and Calvert and
13
<PAGE>
three other key employees if the Company's stock price reached $20 per share
and maintained that price for at least 90 consecutive days. The conditions of
this bonus were satisfied in June 1994, and the bonus is now being paid in 12
equal quarterly payments contingent on the continued employment of the
recipients. For the year ended December 31, 1994, Messrs. Frame and Calvert
each received $237,500 under this bonus plan.
STOCK OPTION AND COMMON STOCK PURCHASE WARRANTS PLANS
The Company had one stock option plan during 1994 for which options were
available for granting, the incentive stock option plan (the "ISO Plan").
Options granted under the ISO Plan are incentive stock options pursuant to
Section 422 of the Internal Revenue Code and, therefore, the exercise price of
options granted under the ISO Plan may not be less than the fair market value
of the Common Stock on the date of grant (or 110% of the fair market value for
options granted to employees holding 10% or more of the Common Stock of the
Company). Options granted under the ISO Plan have a maximum term of 10 years,
subject to certain events related to termination of employment. Mr. Frame and
the other named executive officers have been granted stock options under a non-
qualified stock option plan and a previous incentive stock option plan. Mr.
Marion is the only executive officer to have been granted options under the ISO
Plan.
The Company also has issued common stock purchase warrants to Mr. Frame, as
well as to the other named executive officers and most other employees. These
warrants are designed to serve as incentives to all employees as to the
importance of their productivity related to the Company's financial performance
and shareholder value.
The Company's stock option plans and common stock purchase warrants are
designed to provide incentives based upon the Company's financial performance
and shareholder returns over time.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1,000,000
paid to the Chief Executive Officer and four other most highly compensated
executive officers of a company, as reported in that company's proxy statement.
Qualifying performance-based compensation is not subject to the deduction limit
if certain requirements are met. The Company believes it has structured its
executive compensation in a manner that complies with this statue.
Respectfully submitted,
John E. Stieglitz, Chairman
William Lerner
14
<PAGE>
PERFORMANCE GRAPH
The following graph sets forth the cumulative total stockholder return for
the Company's Common Stock as compared to the Russell 2000 index, which covers
a broad cross-section of public companies including many which have relatively
small stock market capitalization; and a Peer Group index, which represents 17
publicly traded oil-service companies.
COMPARATIVE TOTAL RETURNS*
Seitel, Inc., Russell 2000, Peer Group**
(Performance results through 12/31/94)
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period RUSSELL
(Fiscal Year Covered) SEI 2000 PEER GROUP
- --------------------- --------------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-1989 $100.00 $100.00 $100.00
FYE 1990 $140.60 $ 80.49 $109.32
FYE 1991 $142.27 $117.56 $ 98.90
FYE 1992 $160.32 $139.21 $ 98.05
FYE 1993 $195.95 $165.52 $108.40
FYE 1994 $306.40 $162.51 $ 99.68
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994
SEI [_] $100.00 $140.60 $142.27 $160.32 $195.95 $306.40
- --------------------------------------------------------------------------------------------
Russell 2000 [ ] $100.00 $ 80.49 $117.56 $139.21 $165.52 $162.51
- --------------------------------------------------------------------------------------------
Peer Group [ ] $100.00 $109.32 $ 98.90 $ 98.05 $108.40 $ 99.68
</TABLE>
Assumes $100 invested at the close of trading on the last trading day
preceding the first day of the fifth preceding fiscal year in SEI common
stock, Russell 2000 Index, and Peer Group.
* Cumulative total return assumes reinvestment of dividends.
** Peer Group: Baker Hughes, Daniel Inds., Dresser Ind., Enterra Corp., Global
Marine, Halliburton Co., Helmerich & Payne, Kaneb Services, McDermott
Int'l., Parker Drilling, Reading & Bates, Rowan Cos., Smith Int'l. Inc.,
Schlumberger Ltd., Tidewater, Inc., Varco Int'l., Western Co. of No.
America.
15
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On July 21, 1992, the Company granted ten-year loans at an interest rate of
4% to most of its employees for purchases of the Company's Common Stock at the
current market price of $5.375 per share. The Company recorded compensation
expense of $64,000 related to these loans in 1994. Payments of 5% of the
original principal balance plus accrued interest are due annually on August 1,
with a balloon payment of the remaining principal and accrued interest due
August 1, 2002. The stock certificates are held by the Company as collateral
until payment is received. Loans in excess of $60,000 were made to Messrs.
Frame, Calvert and Rives and Ms. Valice, amounting to $537,500, $537,500,
$134,375 and $134,375, respectively. The largest aggregate amounts of principal
and interest outstanding on such loans during 1994 were approximately $530,000,
$530,000, $133,000 and $133,000, respectively. As of May 25, 1995, the
aggregate amounts of principal and interest outstanding on such loans were
approximately $499,000, $499,000, $105,000, and $125,000, respectively.
The Company's wholly-owned subsidiary DDD Energy, Inc. ("DDD Energy"), which
acquires and develops non-operating interests in mineral properties, acts as
managing partner of a general partnership (the "1994 Partnership"). The 1994
Partnership was formed to permit officers, directors and employees of the
Company and its subsidiaries who are accredited investors to invest in mineral
interests as general partners in the 1994 Partnership. The 1994 Partnership is
a blind pool which invested partnership funds throughout the year in mineral
interests. Pursuant to the partnership agreement governing the 1994
Partnership, DDD Energy agreed to use its reasonable efforts to allow the 1994
Partnership to invest, along with DDD Energy, in all non-operating mineral
interests in which DDD Energy invested during 1994, and the 1994 Partnership
was obligated to invest in all interests in which DDD Energy invested (to the
extent allowed by the sellers of such interests) until funds of the 1994
Partnership allocated to acquisitions were exhausted. Pursuant to the
partnership agreement, the amount of the investment of the 1994 Partnership
equals five percent of the total investment in each such mineral interest made
by the 1994 Partnership and DDD Energy. DDD Energy determines the amount that
it desires to invest in a particular mineral interest, and then adds the amount
to be invested by the 1994 Partnership to determine the total level of
investment by DDD Energy and the 1994 Partnership. Therefore, DDD Energy does
not forego any opportunity to invest in transactions by allowing the 1994
Partnership to invest with DDD Energy. All sums required for the 1994
Partnership to acquire such interests and pay costs related to such interests
thereafter are provided by the officer, director and employee general partners,
and no funds for the 1994 Partnership's investments are provided by DDD Energy
or the Company. During 1994, the officer, director and employee general
partners contributed an aggregate of $962,000 to the 1994 Partnership. Paul A.
Frame, Horace A. Calvert, Herbert M. Pearlman, David S. Lawi, Debra D. Valice,
James C. Rives, Jr., Jesse R. Marion and John E. Stieglitz have 10.4%, 10.4%,
10.4%, 10.4%, 7.8%, 7.5%, 5.2% and 3.1% general partnership interests,
respectively, in the 1994 Partnership.
DDD Energy acts as managing partner of a similar partnership relating to the
non-operating mineral interests in which it will invest in 1995 (the "1995
Partnership"). Officers, directors and employees of the Company and its
subsidiaries have contributed $836,500 to the 1995 Partnership. Paul A. Frame,
Horace A. Calvert, Herbert M. Pearlman, David S. Lawi, Debra D. Valice, James
C. Rives, Jr. and Jesse R. Marion have 12%, 12%, 17.9%, 12%, 9%, 7.2% and 6%
general partnership interests, respectively, in the 1995 Partnership.
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PROPOSAL TO APPROVE THE SEITEL, INC. 1995 SHAREHOLDER VALUE INCENTIVE BONUS
PLAN
On January 27, 1995, the Board of Directors of the Company adopted, subject
to stockholder approval, the 1995 Shareholder Value Incentive Bonus Plan (the
"Bonus Plan"). The Bonus Plan is intended to provide an incentive to all
salaried employees of the Company and its subsidiaries to work to increase the
value of the Company as reflected by the Company's stock price. Under the Bonus
Plan, a bonus of $4,000,000 would be paid to the salaried employees of the
Company and its subsidiaries when the price of the Company's Common Stock
reaches $60.00 per share on or before April 30, 1998, and maintains that price
for at least 90 consecutive days. The Board of Directors began considering this
Bonus Plan in early January 1995, when the Company's Common Stock was trading
at approximately $20 per share. The $4,000,000 bonus under the Bonus Plan would
represent 1% of the approximately $400,000,000 increase in shareholder value
resulting from the increase in price of the Company's Common Stock from $20 to
$60 per share, assuming 10,000,000 shares are outstanding. The bonus would be
paid in quarterly installments over a three-year period, and would be shared
among all of the salaried employees of the Company and its subsidiaries
proportionately to their compensation. As of May 25, 1995, the Company and its
subsidiaries had 87 salaried employees, of whom eight are directors or
executive officers of the Company, and the closing price of the Company's
Common Stock on the New York Stock Exchange was $29.625 per share.
PLAN SUMMARY. The following summary of the material features of the Bonus
Plan is qualified in its entirety by reference to the full text of the Bonus
Plan, which is attached hereto as Exhibit A.
The Company shall pay an aggregate bonus of $4,000,000 to participants under
the Bonus Plan ("Participants") if the closing price of the Company's Common
Stock as reported on the New York Stock Exchange equals or exceeds $60.00 per
share (the "Target Price") on or before April 30, 1998, and thereafter equals
or exceeds the Target Price for a period of 90 consecutive days (the "Target
Date"). Only those persons who are salaried employees of the Company or one of
the Company's subsidiaries on the Target Date will be qualified as Participants
under the Bonus Plan. Each Participant will be entitled to receive, subject to
vesting as hereinafter described, a bonus equal to $4,000,000 multiplied by a
fraction, the numerator of which shall equal the compensation paid to the
Participant during the period beginning on February 1, 1995, and ending on the
Target Date (the "Calculation Period"), and the denominator of which shall
equal the total compensation paid to all Participants during the Calculation
Period (a "Participant's Bonus").
Each Participant shall vest in his or her Participant's Bonus in 12 portions.
The first portion will vest on the Target Date, and each subsequent portion
shall vest on the first day of each third month thereafter (each a "Vesting
Date"). Participants shall vest as to 6.25% of their Participant's Bonus on
each of the first four Vesting Dates, as to 8.75% of their Participant's Bonus
on the next four Vesting Dates, and as to 10% of their Participant's Bonus on
each of the last four Vesting Dates. Should any Participant cease to be a
salaried employee of the Company or subsidiary, the unvested portion of the
Participant's Bonus shall be forfeited, and the Participant shall no longer be
entitled to receive any unvested portions of the Participant's Bonus. However,
any Participant terminated without cause after the Target Date shall upon such
termination without cause become immediately vested in one-half of any then
unvested portion of the Participant's Bonus (and shall forfeit the other one-
half of the then unvested portion), and the Company shall pay the portion of
such Bonus then vesting to such Participant in full within 30 days of such
termination without cause. In the event of termination with cause of a
Participant or of death or permanent disability of any Participant occurring
while such Participant is a salaried employee of the Company or one of its
subsidiaries, all of the unvested portion of the Participant's Bonus shall be
forfeited. Any amount of any Participant's Bonus that is forfeited shall be
redistributed to the other Participants proportionally based on the
Participants' Bonuses of such remaining Participants. As used in the Bonus
Plan, "termination without cause" means a termination not justified by poor job
performance, employee misconduct or misbehavior, or any other justifiable
reason.
Under the Bonus Plan, payments of each Participant's Bonus shall be made in
12 quarterly payments, the amount of which shall be equal to the portion of the
Participant's Bonus having vested on the immediately
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<PAGE>
preceding Vesting Date. The first such payment shall be made on the first day
of the month following the month in which the Target Date occurs, and
subsequent payments shall be made on the first day of each third month
thereafter (each a "Bonus Payment Date") until the Participants' Bonuses have
been paid in full.
In the event the Company is a party to any merger, consolidation or corporate
reorganization, as the result of which the Company is the surviving
corporation, the rights and duties of the Participants and the Company under
the Bonus Plan will not be affected in any manner. In the event the Company
sells all or substantially all of its assets or is a party to a merger,
consolidation or corporate reorganization, as a result of which the Company is
not the surviving organization, or in the event any other corporation makes a
successful tender or exchange offer for more than 50% of the stock of the
Company (the surviving corporation, purchaser, or tendering corporation being
hereinafter referred to as the "purchaser," and the transaction being
hereinafter referred to as the "purchase"), and the Board of Directors obtains
the agreement of the purchaser to assume the obligations of the Company to pay
the remaining payments of Participants' Bonuses pursuant to the terms of the
Bonus Plan, then the rights and duties of the Participants and the Company (as
assumed by the purchaser) shall not be affected in any manner. If the Company
is purchased and the Board of Directors does not obtain such agreement of the
purchaser to assume such obligations on or before the date of such purchase,
all unvested portions of all Participants' Bonuses that have not been forfeited
as of the date of such purchase shall be accelerated and shall be immediately
paid to all such Participants by the Company.
STOCKHOLDER APPROVAL. In adopting the Bonus Plan, the Board of Directors has
provided that the Bonus Plan be submitted to stockholder approval at the 1995
Annual Meeting. However, the Bonus Plan is not required by law or New York
Stock Exchange rules to be submitted to a vote of the stockholders. The Bonus
Plan provides that if it is not approved by the affirmative vote of the
majority of shares of the Company's Common Stock present and entitled to vote
thereon at the Annual Meeting, the Board of Directors may, but shall not be
obligated to, amend or revoke the Bonus Plan in its sole discretion. In the
event the Bonus Plan is not approved by the stockholders and is not revoked by
the Board of Directors, cash payments under the Bonus Plan to any named
executive officer may not be deductible by the Company as compensation expense.
The Board of Directors has not determined what action it will take with respect
to the Bonus Plan in the event it is not approved by the stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL TO APPROVE CERTAIN AMENDMENTS TO THE SEITEL, INC. 1993 INCENTIVE STOCK
OPTION PLAN
The Company in the past has used stock options 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 in the employ of 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.
On May 10, 1993, the Board of Directors adopted the Seitel, Inc. 1993
Incentive Stock Option Plan (the "ISO Plan"), and on July 28, 1993, the
stockholders of the Company approved the ISO Plan. The ISO Plan currently
provides for the issuance of options to purchase up to 295,000 shares of Common
Stock, which options may not be granted after May 10, 2003. As of May 25, 1995,
a total of 252,333 shares of Common Stock were issuable or have been issued
pursuant to options granted under the ISO Plan, and therefore only 42,667
shares remain available for options to be granted under the ISO Plan.
Recognizing the limited number of shares remaining available for the granting
of new options under the ISO Plan and the anticipated continued growth of the
Company, the Board of Directors, on May 12, 1995,
18
<PAGE>
approved an amendment to the ISO Plan to increase the number of shares of
Common Stock available for issuance pursuant to options granted under the ISO
Plan by 405,000 shares. This amendment, if approved by the stockholders, will
increase the total number of shares that could be purchased under the ISO Plan
to 700,000, of which 447,667 would currently be available for the granting of
new options under the ISO Plan. The Board also determined to amend the ISO Plan
to permit options to be granted to any employee of the Company or a subsidiary,
instead of limiting eligible employees to full-time, salaried employees as the
ISO Plan currently provides. In addition, in order to ensure the tax deduction
of the Company arising upon certain dispositions of shares received upon the
exercise of options by certain participants, the Board of Directors also
determined to amend the ISO Plan to limit the maximum number of options that
may be granted in any calendar year to any single participant to options to
purchase no more than 100,000 shares of Common Stock. The proposed amendments
to the ISO Plan are set forth in Exhibit B hereto.
At May 25, 1995, a total of 252,333 shares of Common Stock were issuable or
have been issued pursuant to options granted under the ISO Plan, and 42,667
shares were available for options to be granted under the ISO Plan. The
proposed amendments to the ISO Plan will authorize the issuance of an
additional 405,000 shares of Common Stock pursuant to options to be granted and
exercised under the ISO Plan. The current market value of the additional
405,000 shares of Common Stock, based on the closing price of the Common Stock
as reported by the New York Stock Exchange on May 25, 1995, is $11,998,125.
SUMMARY OF THE ISO PLAN. Under the current terms of the ISO Plan, the Company
may grant options to purchase up to an aggregate of 295,000 shares of Common
Stock. Pursuant to the proposed amendments to the ISO Plan, this number will be
increased by 405,000 shares of Common Stock, to a total of 700,000 shares.
Options under the ISO Plan are intended to be incentive stock options within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").
The Compensation Committee or such other committee as may be appointed by the
Board (the "Committee") is empowered to administer the ISO Plan. The ISO Plan
is currently administered by the Compensation Committee. Under the terms of the
ISO Plan, the Committee shall consist of at least two persons, and all members
shall be "disinterested persons" within the meaning of Rule 16b-3 (or any
successor rule or regulation) promulgated under the Securities Exchange Act of
1934.
Currently, ISO Plan awards may be granted to selected full-time, salaried
employees of the Company or its subsidiaries (the "Participants") in
consideration for services provided to the Company or its subsidiaries.
Pursuant to the proposed amendments, any employee of the Company or a
subsidiary would be eligible to receive grants of options under the ISO Plan.
The Company currently has six persons serving as directors who are also
employees of the Company, and as of May 25, 1995, had a total of 147 employees.
Any employee-director is eligible to receive plan awards, unless such person
serves on the Committee. Actual participation in the ISO Plan will be
determined in the sole discretion of the Committee.
The exercise price for options under the ISO Plan shall be not less than 100%
of the fair market value per share on the date of grant of such option. In the
event that an option is granted under the ISO Plan to any person who, at the
time such 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 options shall be not 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 ISO 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. Payment for the shares acquired upon exercise of an
option under the ISO Plan shall be made in cash or other property deemed
acceptable by the Committee.
Any option granted under the ISO Plan is 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
option. Such
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<PAGE>
options, however, shall not be exercisable after the expiration of ten years
from the date such option is granted. In the case of an option granted to a 10%
stockholder, such options shall not be exercisable after the expiration of five
years from the date such options are granted.
The aggregate fair market value (determined as of the time an option is
granted) of the stock with respect to which options are exercisable for the
first time by any Participant during any calendar year, under the ISO Plan and
all of the Company's other plans, may not exceed $100,000. In addition,
pursuant to the proposed amendments, the Company may not grant under the ISO
Plan in any calendar year options to purchase in excess of 100,000 shares of
Common Stock to any single Participant.
The Committee may establish procedures under the ISO Plan for an optionee:
(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 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 shares of common
stock already owned by such optionee in payment of the exercise price.
In general, if an optionee ceases to be an employee of the Company or its
subsidiaries for reasons other than disability (as defined in Section 22(e)(3)
of the Code) or death, he or she will have 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 twelve 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 ISO 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 or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder, and is not
assignable by operation of law or subject to execution, attachment or similar
process.
Subject to any required action by the stockholders of the Company, the number
of shares covered by each outstanding option (as well as the exercise price
covered by any outstanding option) shall be proportionately adjusted for any
increase or decrease in the number of issued shares resulting from a stock
split, payment of a stock dividend with respect to the Common Stock or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company.
In the event the Company is a party to any merger, consolidation or corporate
reorganization, as the result of which the Company is the surviving
corporation, the rights and duties of the Participants and the Company will not
be affected in any manner. In the event the Company sells all or substantially
all of its assets or is a party to a merger, consolidation or corporate
reorganization, as a result of which the Company is not the surviving
organization, or in the event any other corporation makes a tender or exchange
offer for stock of the Company (the surviving corporation, purchaser, or
tendering corporation being hereinafter referred to as the "purchaser," and the
transaction being hereinafter referred to as the "purchase"), then the Board
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 under the ISO Plan; (ii) reach an agreement with the purchaser that the
purchaser will convert each outstanding option under the ISO Plan into an
option of at least equal value as to stock of the purchaser; or (iii) not later
than thirty days prior to the effective date of the purchase, notify all
Participants that their options under the ISO Plan are accelerated and afford
to each
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<PAGE>
Participant a right for ten days after the date of such notice to exercise any
then unexercised portion of all options held by him or her, whether or not such
options shall then be exercisable under the terms of the ISO Plan or his or her
option agreement.
The ISO Plan will expire on May 10, 2003, unless sooner terminated. The Board
may terminate the ISO Plan at any time in its sole discretion. No options may
be granted under the ISO Plan after it is terminated. The termination of the
ISO Plan, or any amendment thereto, shall not affect any shares previously
issued to a Participant or any option previously granted under the ISO Plan.
The ISO Plan is not qualified under the provisions of Section 401(a) of the
Code and is not subject to any of the provisions of the Employee Retirement
Income Security Act of 1974, as amended.
PARTICIPATION IN THE ISO PLAN. The following table sets forth certain
information with respect to stock options granted pursuant to the ISO Plan
during fiscal year 1994 to (i) the executive officer named below, (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 be
granted in the future. No options were granted in 1994 under the ISO Plan to
any named executive officer other than Mr. Marion or to any of the Company's
Directors.
AMENDED PLAN BENEFITS
1993 SEITEL, INC. INCENTIVE STOCK OPTION PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
UNDERLYING
NAME OPTION GRANTED
---- ----------------
<S> <C>
Jesse R. Marion, Vice President of Sales................ 20,000
All Executive Officers as a Group....................... 20,000
All Non-Executive Officer Employees as a Group.......... 82,000
</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 ISO Plan. This discussion is intended for the
information of stockholders considering how to vote at the Annual Meeting and
not as tax guidance to Participants.
The options to be granted under the ISO Plan are intended to be incentive
stock options within the meaning of Section 422 of the Code. A Participant
therefore does not realize taxable income upon the grant of stock options under
the ISO Plan. In addition, a Participant will not realize taxable income with
respect to the excess of the fair market value of stock received on exercise of
the option over the exercise price under the ISO Plan. The income tax treatment
of any gain or loss realized upon a Participant's disposition of shares
received upon exercise of options granted under the ISO Plan depends on the
timing of the disposition. If the Participant holds the shares received upon
exercise of such options for the longer of two years from the date such 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 Participant's
tax basis (i.e., generally the exercise price) will be taxed as long-term
capital gain or loss.
If a Participant disposes of the shares before the end of the applicable
holding periods described above (i.e., he or she makes a "disqualifying
disposition"), such Participant 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 over the exercise price
is taxable to the Participant as ordinary income, and the excess of the selling
price over the fair market value is taxable to the Participant 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 is taxable to the Participant as ordinary income. If the selling
price is less than the exercise price, the difference is treated as capital
loss.
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<PAGE>
The Company is not entitled to a deduction for federal income tax purposes
with respect to the grant or exercise of stock options under the ISO Plan or
the disposition of shares acquired upon exercise (if the applicable holding
periods have been met). In the event of a disqualifying disposition, however,
the Company is entitled to a federal income tax deduction in an amount equal to
the ordinary income recognized by the Participant, to the extent it is
reasonable compensation.
Certain Participants may be subject to alternative minimum tax which in
individual cases could reduce or eliminate any tax benefits to them under the
ISO Plan.
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.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP as independent
auditors for the Company for the year ending December 31, 1995, which
appointment will be submitted for ratification at the meeting. Arthur Andersen
LLP has served as independent auditors to the Company since 1985. The Company
has been advised that representatives of Arthur Andersen LLP will attend the
Annual Stockholder Meeting. They will have an opportunity to make a statement
if they desire to do so and will be available to respond to appropriate
questions.
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 1996 must be received by the Company at 50 Briar Hollow Lane, 7th
Floor West, Houston, Texas 77027, Attention Debra D. Valice, no later than
February 8, 1996.
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.
June 5, 1995
Houston, Texas
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EXHIBIT A
1995 SHAREHOLDER VALUE INCENTIVE BONUS PLAN
Seitel, Inc., a Delaware corporation (the "Company"), hereby adopts the
following 1995 Shareholder Value Incentive Bonus Plan (the "Plan") effective as
of February 1, 1995 (the "Effective Date"), subject to shareholder approval as
set forth herein.
I. PURPOSE
The Plan is intended as an employment incentive, to retain in the employment
of the Company and its majority owned subsidiaries ("Subsidiaries") persons of
training, experience, and ability, to attract new employees whose services are
considered valuable to the Company, and to stimulate the active interest of
such persons in the development and financial success of the Company, as
evidenced by the market price of the Company's common stock.
II. BONUS AMOUNT AND CONDITIONS
The Company shall pay an aggregate bonus in the sum of $4,000,000 (the
"Bonus") to participants under the Plan ("Participants") if the closing price
of the Company's common stock, par value $0.01 per share, as traded on the New
York Stock Exchange (or, should the Company's common stock cease to be listed
thereon, on any other nationally recognized stock exchange) equals or exceeds
$60.00 per share (the "Target Price") on or before April 30, 1998, and
thereafter equals or exceeds the Target Price for a period of ninety (90)
consecutive days (the "Target Date"). If the closing price of the Company's
common stock does not reach the Target Price on or before April 30, 1998, or
does not remain above the Target Price for such 90 consecutive day period, no
Bonus shall be payable hereunder. The Board of Directors of the Company shall
make appropriate adjustments to the Target Price in the event of 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.
III. PARTICIPATION
Only those persons who are salaried employees of the Company or its
Subsidiaries on the Target Date will be qualified as Participants under the
Plan and entitled to receive any bonus hereunder. Each Participant shall be
entitled to receive a bonus, subject to vesting as specified herein, equal to
the aggregate Bonus ($4,000,000) multiplied by a fraction, the numerator of
which shall be the total compensation paid to the Participant by the Company
(or applicable Subsidiary) during the period beginning on the Effective Date
and ending on the Target Date (the "Calculation Period"), and the denominator
of which shall be the sum of all compensation paid to all Participants by the
Company and its Subsidiaries during the Calculation Period (a "Participant's
Bonus"). Notwithstanding anything herein to the contrary, compensation received
by a Participant from a Subsidiary that is not wholly-owned by the Company
shall be multiplied by the percentage of the outstanding voting stock of the
Subsidiary owned by the Company at the time of receipt of such compensation for
the purposes of calculating Participants' Bonuses hereunder. Compensation, as
used to determine a Participant's Bonus hereunder, shall include salary,
commissions, bonuses based on revenues, profits, earnings, sales, or similar
financial performance levels, and car allowances, but shall not include other
fringe benefits, employer contributions to the 1988 Incentive Compensation
Program, retirement or 401(k) plans, bonuses based on stock performance,
compensation deemed to be received upon exercise of stock options,
reimbursements, or living allowances.
A-1
<PAGE>
IV. VESTING
Each Participant shall vest in his or her Participant's Bonus in twelve (12)
portions, the first portion of which will vest on the Target Date, the second
portion of which will vest on the first day of the third month following the
month in which the Target Date occurs, and the remaining portions of which
shall vest on the first day of each third month thereafter (each a "Vesting
Date"). Participants shall vest as to 6.25% of their Participant's Bonus on
each of the first four Vesting Dates, as to 8.75% of their Participant's Bonus
on the next four Vesting Dates, and as to 10% of their Participant's Bonus on
each of the last four Vesting Dates. No Participant shall vest in and be
entitled to payment of any quarterly payment of the Participant's Bonus (as
provided in Section V hereof) unless on such Vesting Date such Participant is
and has been at all times since the Target Date a salaried employee of the
Company or a Subsidiary. Should any Participant cease to be a salaried employee
of the Company or a Subsidiary, the unvested portion of the Participant's Bonus
shall be forfeited, and the Participant shall no longer be entitled to receive
any unvested portions of the Participant's Bonus. Notwithstanding the
foregoing, any Participant terminated without cause after the Target Date shall
upon such termination without cause become immediately vested in one-half of
any then unvested portion of the Participant's Bonus (and shall forfeit the
other one-half of the then unvested portion), and the Company shall pay the
portion of such Bonus vesting upon such termination without cause to such
Participant in full within 30 days of such termination. In the event of
termination with cause of a Participant or a death or permanent disability of
any Participant occurring while such Participant is a salaried employee of the
Company or a Subsidiary, all of the unvested portion of the Participant's Bonus
shall be forfeited. Any amount of any Participant's Bonus that is forfeited
shall be redistributed to the other Participants proportionally based on the
Participants' Bonuses of such remaining Participants.
As used herein, "termination without cause" shall mean a termination not
justified by poor job performance, employee misconduct or misbehavior, or any
other justifiable reason. Nothing herein shall be construed as placing any
restrictions on the ability of the Company or any Subsidiary to terminate any
employee at any time.
V. BONUS PAYMENTS
The Company shall pay each Participant his or her respective Participant's
Bonus in twelve (12) quarterly payments, the amount of which shall be equal to
the portion of the Participant's Bonus having vested on the immediately
preceding Vesting Date. The first such payment shall be made on the first day
of the month following the month in which the Target Date occurs, and
subsequent payments shall be made on the first day of each third month
thereafter (each a "Bonus Payment Date") until the Participants' Bonuses have
been paid in full.
VI. CERTAIN EVENTS
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
makes a successful tender or exchange offer for more than 50% of the 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"), and the Board of
Directors obtains the agreement of the purchaser to assume the obligations of
the Company to pay the remaining payments of Participants' Bonuses pursuant to
the terms hereof, then the rights and duties of the Participants and the
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Company (as assumed by the purchaser) shall not be affected in any manner. If
the Company is purchased and the Board of Directors does not obtain such
agreement of the purchaser to assume such obligations on or before the date of
such purchase, all unvested portions of all Participants' Bonuses that have not
been forfeited as of the date of such purchase shall be accelerated and shall
be immediately paid to all such Participants by the Company.
VII. SHAREHOLDER APPROVAL
In adopting this Plan, the Board of Directors of the Company has directed
that the Plan be submitted for approval by the shareholders at their next
annual meeting. If the Plan is not approved by the affirmative vote of the
majority of shares of the Company's common stock present and voting at such
meeting at which a quorum is present, the Board of Directors reserves the right
to amend or revoke the Plan in its sole discretion.
VIII. COMPENSATION COMMITTEE
The performance goals under this Plan (including the Target Price and the
time period in which it must be attained) were determined by the Compensation
Committee of the Board of Directors of the Company. Before the Company shall be
obligated to make any payments of Bonus under this Plan, the Compensation
Committee shall certify to the Board that the material terms and performance
goals hereunder have been met, which determination shall be made by the
Compensation Committee in its sole discretion.
IX. GOVERNING LAW
The Plan shall be governed by and construed in accordance with the laws of
the State of Texas.
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EXHIBIT B
SEITEL, INC. 1993 INCENTIVE STOCK OPTION PLAN
STATEMENT OF AMENDMENTS EFFECTIVE MAY 12, 1995
1. Section II(5) is hereby amended to read as follows:
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.
2. The first sentence of Section V is hereby amended to read as follows:
Subject to adjustment as provided in Section VIII hereof, a total of Seven
Hundred Thousand (700,000) shares of Common Stock of the Company (the
"Shares") shall be subject to the Plan.
3. The first sentence of the section headed "Eligibility" under Section VI is
hereby amended to read as follows:
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.
4. The section headed "Maximum Annual Amount Per Employee" under Section VII is
hereby amended by adding the following sentence at the end of such section:
In no event will any Participant be granted under the Plan in any calendar
year Options to purchase more than 100,000 Shares, subject to adjustment as
provided in Section VIII hereof.
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SEITEL, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
JULY 18, 1995
The undersigned hereby appoints HERBERT M. PEARLMAN and PAUL A. FRAME,
and each of them, with full power of substitution, proxies to vote all stock of
Seitel, Inc. owned by the undersigned at the Annual Meeting of Stockholders
July 18, 1995 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.
(TO BE SIGNED ON REVERSE SIDE)
SEE REVERSE
SIDE
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<PAGE>
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__ |
/X/ PLEASE MARK YOUR | |
VOTES AS IN THIS |____
EXAMPLE.
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING MATTERS:
FOR WITHHOLD NOMINEES: PAUL A. FRAME
1. ELECTION OF / / / / HORACE A. CALVERT
DIRECTORS HERBERT M. PEARLMAN
DAVID S. LAWI
JAMES C. RIVES, JR.
WILLIAM LERNER
WALTER M. CRAIG, JR.
JOHN E. STIEGLITZ
TO WITHHOLD AUTHORITY TO VOTE FOR ANY
NOMINEE(S), PRINT NAME(S), BELOW.
--------------------------------------
FOR AGAINST ABSTAIN
2. PROPOSAL FOR THE APPROVAL OF THE SEITEL, INC. / / / / / /
1995 SHAREHOLDER VALUE INCENTIVE BONUS PLAN.
3. PROPOSAL FOR THE APPROVAL OF CERTAIN / / / / / /
AMENDMENTS TO THE SEITEL, INC. 1993 INCENTIVE
STOCK OPTION PLAN.
4. PROPOSAL FOR THE SELECTION OF ARTHUR / / / / / /
ANDERSEN LLP AS THE INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS FOR THE YEAR ENDING
DECEMBER 31, 1995.
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.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IF THE
UNDERSIGNED FAILS TO SPECIFY HOW THIS PROXY IS TO BE VOTED, IT WILL BE VOTED
FOR THE ELECTION OF THESE DIRECTORS AND FOR PROPOSALS 2, 3 AND 4.
SIGNATURE(S) DATE
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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).
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