<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
SEITEL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
SEITEL, INC.
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY
NOVEMBER 20, 1997
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Seitel, Inc. (the "Company") to be held on Thursday, November 20, 1997, 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 nine directors to serve until the 1998 Annual Meeting;
2. To approve a proposed amendment to the Company's Certificate of
Incorporation to increase the authorized Common Stock to facilitate
a proposed two-for-one stock split;
3. To approve an amendment to the Seitel, Inc. 1993 Incentive Stock
Option Plan to limit the total number of options that can be
granted to a single participant under the Plan during any calendar
year to 250,000 options;
4. To approve an amendment to the Seitel, Inc. 1993 Incentive Stock
Option Plan to increase the number of shares available for granting
options thereunder by 850,000 shares;
5. To approve the Seitel, Inc. 1998 Executive Compensation Plan;
6. To approve the appointment of Arthur Andersen LLP as independent
certified public accountants for the Company for the year ending
December 31, 1997; and
7. 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 October 7, 1997,
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
October 15, 1997
Houston, Texas
<PAGE> 3
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
Thursday, November 20, 1997, 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 proposal to increase the number of shares of
authorized Common Stock of the Company from 20,000,000 to 50,000,000, (iii) in
favor of the amendment to the Seitel, Inc. 1993 Incentive Stock Option Plan to
limit the total number of options that may be granted to a single participant
under the plan in any calendar year to 250,000 options, (iv) in favor of the
amendment to the Seitel, Inc. 1993 Incentive Stock Option Plan to increase the
number of shares available for granting options thereunder by 850,000, (v) in
favor of the Seitel, Inc. 1998 Executive Compensation Plan, and (vi) for
approval of the appointment of Arthur Andersen LLP as the Company's independent
public accountants for the fiscal year ending December 31, 1997.
The Board of Directors has fixed the close of business on October 7, 1997,
as the record date for the meeting. On that date, the Company had outstanding
11,015,854 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. 1998 Executive Compensation 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, 1997, 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. The proposed amendment to the Company's
Certificate of Incorporation must be approved by the holders of a majority of
the outstanding shares of Common Stock. Under Delaware law and the Company's
Certificate of Incorporation and Bylaws, abstentions and broker non-votes have
no effect on the election of directors since directors are elected by a
plurality vote. With respect to the other proposals to be decided at the
meeting, abstentions are counted as a vote against a proposal, and broker
non-votes (and other limited proxies), although considered present for quorum
purposes, are not considered part of the voting power present at the meeting
with respect to that proposal.
The principal executive offices of the Company are at 50 Briar Hollow Lane,
7th Floor West, Houston, Texas 77027. The proxy statement and form of proxy are
being sent to stockholders on or about October 20, 1997.
2
<PAGE> 4
ELECTION OF DIRECTORS
At the meeting, nine 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 nine
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............ 64 Chairman of the Board of Directors 1982
Paul A. Frame.................. 50 Chief Executive Officer, President and Director 1986
Horace A. Calvert.............. 44 Chief Operating Officer, Executive Vice President and 1987
Director
David S. Lawi.................. 62 Chairman of the Executive Committee and Director 1982
Debra D. Valice................ 40 Chief Financial Officer, Senior Vice President of 1995
Finance, Treasurer, Corporate Secretary and Director
Walter M. Craig, Jr............ 43 Director 1987
William Lerner................. 64 Director 1985
John E. Stieglitz.............. 66 Director 1989
Fred S. Zeidman................ 50 Director 1997
</TABLE>
Herbert M. Pearlman, a co-founder of Seitel, Inc., has been a director of
the Company since 1982, and Chairman of the Company's Board of Directors since
1987. 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. Since June
1990, Mr. Pearlman has served as Chairman of Unapix Entertainment, Inc. ("Unapix
Entertainment"), an American Stock Exchange listed company engaged in
multi-media entertainment.
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. Since August 1997,
Mr. Frame has been a Director of Eagle Geophysical, Inc. ("Eagle"), a NASDAQ
listed company engaged in providing seismic data acquisition services to the oil
and gas industry. The Company has a 17.9% ownership interest in Eagle.
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.
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.
Debra D. Valice, CPA, is the Company's Chief Financial Officer, Senior Vice
President of Finance, Treasurer and Corporate Secretary. Ms. Valice has been the
Company's Chief Financial Officer since February 1987, and was the Company's
Chief Accounting Officer from March 1986 until February 1987. Ms. Valice was
elected as a director of the Company in November 1995.
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<PAGE> 5
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 both the
Mezzanine Financial Fund, L.P., and Professional Financial Services, Inc. Both
enterprises are engaged in making capital available to small and mid-market
companies based on the value of their assets. 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 Co-Chairman
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
Micros-to-Mainframes, Inc., a NASDAQ listed company headquartered in New York
that provides advanced technology communications products and systems
integration and internet services to Fortune 2000 companies.
John E. Stieglitz is Co-Chairman of the Company's Compensation and Stock
Option Committee and a member of the Company's Audit Committee. He is Chairman
Emeritus of Conspectus, Inc., a privately held company, formed in 1976, engaged
in providing services in the area of executive recruitment. He served as
President of Conspectus, Inc. from 1976 to 1996. Mr. Stieglitz is also a
Director of Helm and Intersystems.
Fred S. Zeidman was elected as a director of the Company in September 1997
to fill the vacancy created by the retirement from the Board of William L.
Lurie, who retired from the Company's Board in August 1997. Mr. Zeidman has
served as President, Chief Executive Officer, and a Director of Intersystems
since July 1993. He also served as President of Interpak Terminals, Inc., a
wholly-owned subsidiary of Helm engaged in the packaging and distribution of
thermoplastic resins, from July 1993 until its sale in July 1997. Mr. Zeidman
served as Chairman of Unibar Energy Services Corporation, one of the largest
independent drilling fluids companies in the United States, from 1985 to 1991.
From April 1992 to July 1993, Mr. Zeidman served as President of Service
Enterprises, Inc., which is primarily engaged in plumbing, heating, air
conditioning and electrical installation and repair. From 1983 to 1993, Mr.
Zeidman served as President of Enterprise Capital Corporation, a federally
licensed small business investment company specializing in venture capital
financing. Mr Zeidman also serves as a Director of Heritage Bank.
EXECUTIVE OFFICERS
All of the Company's executive officers are also directors. Officers serve
at the discretion of the Board.
BOARD OF DIRECTORS, COMMITTEES AND ATTENDANCE AT MEETINGS
During 1996, the Company's Board of Directors held three meetings. All of
the directors of the Company attended at least 75% of the total number of
meetings of the Board of Directors and of meetings held by all committees of the
Board on which he served during 1996.
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 1996, the Audit Committee was comprised of Messrs. Stieglitz, Lerner
and Lurie. Mr. Lurie, who retired from the Company's Board of Directors in
August 1997 to become Chairman of the Board of the Company's formerly
wholly-owned subsidiary Eagle Geophysical, Inc., had served as a director of the
Company since November 1995 and as a member of the Audit Committee and
Compensation and Stock Option Committee since July 1996. The Audit Committee is
currently comprised of Messrs. Stieglitz and Lerner as a result of Mr. Lurie's
retirement. The Audit Committee held one meeting during 1996. The functions of
the Audit Committee are to select the independent public accountants of the
Company, to review
4
<PAGE> 6
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.
During 1996, 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 1996.
During 1996, the Compensation and Stock Option Committee ("Compensation
Committee") was comprised of Messrs. Stieglitz, Lurie and Lerner. Due to Mr.
Lurie's retirement from the Board of Directors in August 1997, the Compensation
Committee is now 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 1996; however, it did authorize certain
transactions through the execution of six unanimous written consents during
1996. The Compensation Committee has met on numerous occasions in 1997 in
connection with the executive compensation matters that are discussed in this
Proxy Statement.
BENEFICIAL OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock, as of September 30, 1997, by (i) persons known to
the Company to be beneficial owners of more than 5% of the Common Stock, (ii)
each of the Company's directors (iii) each of the Named Executive Officers, and
(iv) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENTAGE
OF BENEFICIAL OWNER OWNERSHIP(1)(2) OF CLASS
------------------- --------------- ----------
<S> <C> <C>
Driehaus Capital Management, Inc............................ 620,585 5.6%
25 East Erie Street
Chicago, IL 60611
Horace A. Calvert........................................... 568,377(3) 5.0%
50 Briar Hollow Lane, 7th Floor West
Houston, TX 77027
Paul A. Frame, Jr........................................... 559,403(4) 4.9%
50 Briar Hollow Lane, 7th Floor West
Houston, TX 77027
Herbert M. Pearlman......................................... 403,502(5) 3.6%
537 Steamboat Road
Greenwich, CT 06830
David S. Lawi............................................... 271,243(6) 2.4%
537 Steamboat Road
Greenwich, CT 06830
Jay N. Silverman............................................ 110,462(7) 1.0%
50 Briar Hollow Lane, 6th Floor West
Houston, TX 77027
Debra D. Valice............................................. 97,860(8) *
50 Briar Hollow Lane, 7th Floor West
Houston, TX 77027
</TABLE>
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<PAGE> 7
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENTAGE
OF BENEFICIAL OWNER OWNERSHIP(1)(2) OF CLASS
------------------- --------------- ----------
<S> <C> <C>
Walter M. Craig, Jr......................................... 30,981(9) *
2 Bridge Avenue
Redbank, NJ 07701
William Lerner.............................................. 10,585(10) *
423 East Beau Street
Washington, PA 15301
John E. Stieglitz........................................... 6,000(10) *
14 Rye Road
Rye, NY 10580
Fred S. Zeidman............................................. 4,000 *
5120 Woodway, Suite 9029
Houston, Texas 77056
All directors and executive officers as a group (9
persons).................................................. 1,951,501(11) 15.7%
</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 57,219 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 $4.13 to $25.38
per share, and the exercise prices of the common stock purchase warrants
range from $13.05 to $41.00 per share.
(4) Includes 56,963 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 $4.13 to $25.38
per share, and the exercise prices of the common stock purchase warrants
range from $13.19 to $43.00 per share.
(5) Includes 33,333 and 245,291 shares which may be acquired from the Company
within 60 days upon exercise of options and common stock purchase warrants,
respectively. The exercise price of the options is $25.13, and the exercise
prices of the common stock purchase warrants range from $24.00 to $43.00
per share.
(6) Includes 16,667 and 202,863 shares which may be acquired from the Company
within 60 days upon exercise of options and common stock purchase warrants,
respectively. The exercise price of the options is $25.13, and the exercise
prices of the common stock purchase warrants range from $24.00 to $43.00
per share.
(7) Includes 50,000 and 23,282 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 $25.13 to
$33.50 per share, and the exercise prices of the common stock purchase
warrants range from $42.56 to $45.06. Also includes 25,000 shares which may
be acquired from the Company within 60 days upon exercise of common stock
purchase warrants at exercise prices to be determined upon exercise of
certain existing stock options.
(8) Includes 8,334 and 57,436 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 $25.13 to
$33.50 per share, and the exercise prices of the common stock purchase
warrants range from $27.13 to $40.00 per share.
(9) Includes 30,652 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 $32.00 to $42.88 per
share.
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<PAGE> 8
(10) Includes 6,000 shares which may be acquired from the Company within 60 days
upon exercise of options at an exercise price ranging from $30.00 to $30.50
per share.
(11) Includes an aggregate of 1,419,889 shares which may be acquired from the
Company within 60 days upon exercise of 192,849 options and 1,227,040
common stock purchase warrants, respectively, by the group of 9 persons
which comprises all executive officers and directors. The exercise prices
of the options range from $4.13 to $33.50 per share, and the exercise
prices of the common stock purchase warrants range from $13.05 to $43.00
per share.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation awarded to, earned by or paid to the Chief Executive Officer of the
Company and each of the four most highly compensated executive officers of the
Company other than the Chief Executive Officer (collectively, the "Named
Executive Officers") for the years indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION OTHER AWARDS
------------------------ ANNUAL STOCK OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION($)(2) SARS(#) COMPENSATION($)
- --------------------------- ---- ---------- ----------- ------------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Paul A. Frame.............. 1996 $141,898 $1,457,603 $1,204,334 74,300 $87,998(3)
Chief Executive Officer 1995 $139,870 $ 806,094 $ 766,456 58,992 $41,358
and President 1994 $136,193 $ 955,213 $ 684,006 292,728 $94,990
Horace A. Calvert.......... 1996 $141,898 $1,457,603 $1,205,834 68,249 $87,998(3)
Chief Operating Officer 1995 $139,870 $ 806,094 $ 766,456 80,806 $41,358
and Executive Vice 1994 $136,193 $ 955,213 $ 684,006 292,728 $94,990
President
Herbert M. Pearlman........ 1996 $124,818 $1,486,168 -- 62,291 $88,654(3)
Chairman of the 1995 $121,182 $ 815,712 -- 99,949 $41,358
Board of Directors 1994 $115,569 $ 897,141 -- 251,740 $94,990
David S. Lawi.............. 1996 $ 60,588 $ 749,085 -- 62,291 $87,998(3)
Chairman of the 1995 $ 58,823 $ 407,856 -- 70,926 $41,358
Executive Committee 1994 $ 56,098 $ 448,570 -- 166,884 $94,990
Jay N. Silverman(4)........ 1996 $ 90,000 $ 306,577 $ 540,556 28,282 $ 3,049(5)
President of Eagle 1995 $ 70,000 $ 123,422 $ 264,483 25,000 $ 4,620
Geophysical Onshore, Inc. 1994 $ 70,000 $ 102,195 $ 211,504 20,000 $ 4,620
</TABLE>
- ---------------
(1) Includes bonuses based on the Company's pre-tax profits for Messrs. Frame,
Calvert, Pearlman and Lawi, and based on a subsidiary's pre-tax profits for
Mr. Silverman. For Messrs. Frame and Calvert, also includes bonuses based on
the Company's stock performance of $316,667 in 1996. The final installment
that may be earned pursuant to the bonuses based on the Company's stock
performance occurred during the first quarter of 1997 and amounted to
$79,167 for each of Messrs. Frame and Calvert.
(2) Includes commissions based on sales.
(3) 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 $84,932 contributed by the Company pursuant to its
Incentive Compensation Program, and $3,066 contributed by the Company as
401(k) Plan matching contributions for Messrs. Frame, Calvert, and Lawi, and
$3,723 for Mr. Pearlman.
7
<PAGE> 9
(4) Mr. Silverman ceased to be an executive officer of the Company on August 11,
1997, when Eagle Geophysical, Inc. completed its initial public offering and
ceased to be a wholly-owned subsidiary of the Company.
(5) Includes $3,049 contributed by the Company as 401(k) Plan matching
contributions.
The following table sets forth certain information with respect to options
to purchase Common Stock granted during the year ended December 31, 1996 to each
of the Named Executive Officers.
OPTION/SAR GRANTS IN 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
PERCENT POTENTIAL REALIZABLE VALUE
NUMBER OF OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(4)
OPTIONS/SARS EMPLOYEES OR BASE EXPIRATION -------------------------------------------
NAME GRANTED(#) IN 1996 PRICE($/SH) DATE 0 PERCENT($) 5 PERCENT($) 10 PERCENT($)
---- ------------ ------------ ------------ ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul A. Frame........ 25,000(1) 2.84 $25.375 04/22/06 $ 0 $ 398,955 $1,011,030
3,053(3) 0.35 $43.000 11/26/01 $ (9,922) $ 23,459 $ 63,812
1,621(3) 0.18 $41.625 11/27/01 $ (3,039) $ 14,684 $ 36,110
11,021(3) 1.25 $41.000 11/29/01 $ (13,776) $ 106,726 $ 252,396
15,221(3) 1.73 $40.500 12/02/01 $ (11,416) $ 155,376 $ 357,078
15,387(3) 1.75 $40.000 12/03/01 $ (3,847) $ 164,765 $ 368,666
2,997(3) 0.34 $40.000 12/04/01 $ (749) $ 32,164 $ 71,981
Horace A. Calvert.... 25,000(1) 2.84 $25.375 04/22/06 $ 0 $ 398,955 $1,011,030
7,206(3) 0.82 $41.000 11/29/01 $ (9,008) $ 69,782 $ 165,027
16,325(3) 1.85 $40.500 12/02/01 $ (12,244) $ 166,646 $ 382,978
16,503(3) 1.87 $40.000 12/03/01 $ (4,126) $ 176,715 $ 395,405
3,215(3) 0.36 $40.000 12/04/01 $ (804) $ 34,504 $ 77,217
Herbert M.
Pearlman........... 1,381(3) 0.16 $43.000 11/26/01 $ (4,488) $ 10,611 $ 28,865
733(3) 0.08 $41.625 11/27/01 $ (1,374) $ 6,640 $ 16,329
4,982(3) 0.57 $41.000 11/29/01 $ (6,228) $ 48,245 $ 114,095
6,883(3) 0.78 $40.500 12/02/01 $ (5,162) $ 70,262 $ 161,472
6,957(3) 0.79 $40.000 12/03/01 $ (1,739) $ 74,496 $ 166,687
1,355(3) 0.15 $40.000 12/04/01 $ (339) $ 14,542 $ 32,544
40,000(2) 4.54 $32.000 04/28/00 $ 150,000 $ 430,860 $ 750,853
David S. Lawi........ 1,381(3) 0.16 $43.000 11/26/01 $ (4,488) $ 10,611 $ 28,865
733(3) 0.08 $41.625 11/27/01 $ (1,374) $ 6,640 $ 16,329
4,982(3) 0.57 $41.000 11/29/01 $ (6,228) $ 48,245 $ 114,095
6,883(3) 0.78 $40.500 12/02/01 $ (5,162) $ 70,262 $ 161,472
6,957(3) 0.79 $40.000 12/03/01 $ (1,739) $ 74,496 $ 166,687
1,355(3) 0.15 $40.000 12/04/01 $ (339) $ 14,542 $ 32,544
40,000(2) 4.54 $32.000 04/28/00 $ 150,000 $ 430,860 $ 750,853
Jay N. Silverman..... 25,000(1) 2.84 $33.500 09/25/06 $ 0 $ 526,699 $1,334,759
3,282(3) 0.37 $41.125 11/21/01 $ (2,462) $ 34,149 $ 78,438
</TABLE>
- ---------------
(1) These options were granted under the Company's 1993 Incentive Stock Option
Plan, as amended, and are exercisable starting 12 months after the grant
date of April 22, 1996 for Messrs. Frame and Calvert and September 25, 1996
for Mr. Silverman, with 33% of the options granted 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.
(2) The expiration dates of the options listed were extended from December 10,
1997 to April 28, 2000.
(3) These common stock purchase warrants were granted under the terms of the
Company's 1995 Warrant Reload Plan upon the exercise of the same number of
previously granted warrants subject to the Warrant
8
<PAGE> 10
Reload Plan. The common stock purchase warrants were fully exercisable on
the date of grant, and will expire on the expiration date indicated, subject
to certain events related to termination of employment.
(4) The values shown are based on the indicated assumed annual rates of
appreciation compounded annually. The actual value an executive may realize
will depend on the extent to which the stock price exceeds the exercise
price of the options or warrants on the date the option or warrant is
exercised. Accordingly, the value, if any, realized by an executive will not
necessarily equal any of the amounts set forth in the table above. These
calculations are not intended to forecast possible future appreciation, if
any, of the price of the Company's Common Stock.
The following table sets forth certain information with respect to the
exercise of options during the year ended December 31, 1996, and unexercised
options held at December 31, 1996, and the value thereof, by each of the Named
Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN 1996
AND 12/31/96 OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE
SHARES OPTIONS/SARS MONEY OPTIONS/SARS AT
ACQUIRED AT 12/31/96(#) 12/31/96($)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul A. Frame............ 49,300 $1,342,120 383,785 58,333 $8,075,050 $861,458
Horace A. Calvert........ 52,873 $1,458,047 385,068 58,333 $8,299,730 $861,458
Herbert M. Pearlman...... 22,291 $ 606,839 261,958 33,333 $4,541,218 $495,833
David S. Lawi............ 22,291 $ 606,839 211,196 16,667 $3,738,411 $247,917
Jay N. Silverman......... 23,813 $ 751,514 24,949 48,333 $ 353,599 $527,083
</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. Frame became the Chief Executive Officer, and Mr.
Calvert became the Chief Operating Officer. 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 $141,898, $141,898,
$124,818, and $60,588, 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 therein).
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.
9
<PAGE> 11
Each agreement provides that if it is not renewed, the Company will pay the
employee for the balance of the term of the agreement and 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.
Each of Messrs. Frame, Calvert, Pearlman and Lawi has indicated that he
will agree to amend his employment agreement to reflect the provisions of the
Executive Compensation Plan if the stockholders approve the plan.
Bonuses Based On Stock Performance
On July 21, 1992, when the stock price was $5.375, the Compensation and
Stock Option 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 vested equally over the 12
quarters following the Target Date, and the last installment of the bonus was
paid in April 1997.
On January 27, 1995, the Company's 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 per share on or before April 30, 1998, and maintains
or exceeds 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. This shareholder value incentive bonus was approved
by Company Shareholders at the 1995 annual meeting. As of September 30, 1997,
the market price of the Company's Common Stock was $44.375 per share.
Directors Compensation
Non-employee directors receive an annual fee of $20,000 for serving on the
board and are reimbursed for out of pocket expenses for meeting attendance. On
July 25, 1996, the Company's Board of Directors adopted the Non-Employee
Directors' Deferred Compensation Plan which permits each non-employee director
to elect to receive annual director fees in the form of stock options and to
defer receipt of any directors fees in a deferred cash account or as deferred
shares. As of December 31, 1996, 30,000 shares have been reserved for issuance
under this plan, and directors had accumulated 687 deferred shares in their
accounts. No such shares will be distributed until such time as designated by
the director or as otherwise provided by the plan. Directors who are also
employees receive no separate compensation for their services as directors.
Non-employee 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 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
10
<PAGE> 12
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 1996, William Lerner, John E. Stieglitz and William L. Lurie
(who retired from the Board in August 1997) were granted 1,000 options each, at
an exercise price of $29.125. Mr. Zeidman was granted 5,000 options on September
5, 1997, when he was appointed to the Board, at an exercise price of $41.25.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee of the Board of Directors of the
Company was, during 1996, an officer or employee of the Company or any of its
subsidiaries, or was formerly an officer of the Company or any of its
subsidiaries, or had any relationship requiring disclosure pursuant to
applicable rules and regulations of the Securities and Exchange Commission.
During 1996, no executive officer of the Company served as (i) a member of the
compensation committee (or other board committee performing equivalent
functions) of another entity, one of whose executive officers served on the
Compensation Committee of the Company, (ii) a director of another entity, one of
whose executive officers served on the Compensation Committee of the Company, or
(iii) a member of the compensation committee (or other board committee
performing equivalent functions) of another entity, one of whose executive
officers served as a director of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company (the "Committee"), which
currently consists of two outside directors, met on numerous occasions during
1996 and 1997, both by itself and with the entire Board of Directors, to review
the Company's compensation policies and practices. This intensive review was
conducted as a result of the impending applicability of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), on the compensation paid
by the Company to the Chief Executive Officer and the four other most highly
compensated officers of the Company (the "Named Executive Officers"). In
addition, the Committee consulted extensively with legal counsel and KPMG Peat
Marwick LLP as outside compensation consultants to assist with this review. The
proposed restructuring of the Company's executive compensation described in the
Proxy Statement, which is intended to comply with Section 162(m) of the Code,
was the result of this intensive review. This review was significantly more
in-depth than the annual executive compensation review normally conducted by the
Committee.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Code, which places limits on the tax deductibility of
executive compensation for publicly traded companies, was enacted effective
January 1, 1994. Section 162(m) disallows deductions for compensation in excess
of $1,000,000 per year paid to the Named Executive Officers, unless such
compensation is performance-based, is approved by stockholders, and meets
certain other requirements. Since the Company had existing employment contracts
with its most highly compensated officers at the time Section 162(m) became
effective, the compensation paid to them under the contracts was "grandfathered"
by regulations promulgated under Section 162(m). However, this grandfathered
period will end as of December 31, 1997. In order to maximize deductibility of
future executive compensation under Section 162(m), the Company has proposed a
revised, performance-based compensation plan for certain of its executive
officers (the "Compensation Plan") that is intended to meet the deductibility
requirements of Section 162(m). The Compensation Plan is being submitted for
stockholder approval at the Annual Meeting of Stockholders, as described in the
Proxy Statement under the heading "Proposal to Approve the Seitel, Inc. 1998
Executive Compensation Plan."
As a part of the executive compensation review, the Committee also reviewed
the effects of Section 162(m) on the stock options and warrants that have been
granted to its executives and that may be granted to them in the future. Because
the Company's compensation expense deduction for income realized by a Named
Executive Officer upon the exercise of a stock option or warrant is subject to
the limitations of Section 162(m), the Committee undertook, as part of its
executive compensation review and restructuring,
11
<PAGE> 13
the task of seeking to maximize the deductibility of compensation resulting from
future exercises of options and warrants.
The Company's executives and its other employees may receive grants of
warrants or options under two current Company plans: the Company's Warrant
Reload Plan, pursuant to which warrants that were previously granted to
officers, directors and other employees of the Company are automatically
reloaded upon exercise, and the Company's 1993 Incentive Stock Option Plan (the
"1993 Option Plan"). As of September 30, 1997, warrants to purchase a total of
512,747 shares held by Messrs. Frame, Calvert, Pearlman and Lawi were subject to
reloading under the Warrant Reload Plan. Also as of that date, an additional
331,005 warrants held by these officers had already been reloaded with warrants
having an exercise price of $40.00 per share or more. The compensation resulting
from the exercise of warrants granted under the Warrant Reload Plan does not
meet the deductibility requirements of Section 162(m). However, the compensation
resulting from the exercise of options granted under the 1993 Option Plan will
meet the deductibility requirements of Section 162(m).
The Committee has proposed that the number of shares available for purchase
upon exercise of options granted under its 1993 Option Plan be increased by
850,000 shares. Of these shares, 512,747 shares will be used in the future to
grant options under the 1993 Option Plan to reload, pursuant to the Reload Plan,
the reloadable warrants currently held by Messrs. Frame, Calvert, Pearlman and
Lawi. In addition, the Committee has recommended that the Board of Directors
consider repurchasing warrants that have previously been granted to these
officers under the Warrant Reload Plan but that are only marginally
in-the-money. As of September 30, 1997, warrants to purchase 331,005 shares of
Common Stock had been granted to these officers under the Warrant Reload Plan at
an exercise price of $40.00 or more per share. By purchasing some or all of
these warrants and issuing replacement options under the 1993 Option Plan, any
compensation resulting from future exercises of these replacement options by
these officers will meet the deductibility requirements of Section 162(m). Any
determination to repurchase such warrants will be made by the Board based on the
market price of the Company's Common Stock at the time of the proposed buy-back,
the Company's liquidity and capital resources at such time, the impact of such
buy-back on the Company's results of operations, the willingness of these
officers to have such warrants repurchased, and other factors deemed relevant by
the Board.
COMPENSATION PHILOSOPHY
The Compensation Committee, with the support of the Board of Directors, has
proposed new, performance-based criteria for the compensation of CEO Paul A.
Frame, COO Horace A. Calvert, Chairman Herbert M. Pearlman, and Executive
Committee Chairman David S. Lawi, which will become effective on January 1, 1998
if approved by the stockholders at the Annual Meeting. Each of Messrs. Frame,
Calvert, Pearlman and Lawi has indicated that he will agree to amend his
existing employment agreement to reflect the provisions of the Compensation Plan
upon stockholder approval. If the Compensation Plan is not approved, these
officers will continue to be compensated under their existing employment
agreements.
Historically, the Company's compensation philosophy has been to pay
relatively low base salaries to its senior executives, to provide attractive
incentives to earn additional income based on operating results and to grant
stock options and warrants to reflect the importance that the Company places on
stockholder value. The proposed Compensation Plan places greater emphasis on the
financial performance of the Company by imposing additional profitability
conditions to the payment of incentive bonuses. In order to compensate the
affected executives for the increased risk of nonpayment of bonuses, the
Compensation Plan provides for increases in the executives' base salaries. The
proposed Compensation Plan is described in the Proxy Statement under the heading
"Proposal to Approve the Seitel, Inc. 1998 Executive Compensation Plan."
PERFORMANCE-BASED CASH COMPENSATION
As detailed in the Executive Compensation section of the Proxy Statement
under the heading "Employment Arrangements," Mr. Frame currently receives a base
salary, plus a commission equal to a percentage of Company revenues and a bonus
equal to a percentage of Company pre-tax profits. Similarly, the
12
<PAGE> 14
other Named Executive Officers each currently receive a base salary plus
commissions based on revenues and/or bonuses based on pre-tax profits. Because
of the impending applicability of Section 162(m) to the Company's executive
compensation, the Committee has proposed a new, performance-based Executive
Compensation Plan that is intended to comply with the requirements of Section
162(m). This new Executive Compensation Plan is being submitted for stockholder
approval in order to satisfy the requirements of Section 162(m).
For the year ended December 31, 1996, Mr. Frame's total cash compensation
increased 78% as compared to the total cash compensation he received for the
year ended December 31, 1995, 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 Company's higher
pre-tax profits and revenues in 1996 resulting from record results in both its
data licensing and oil and gas exploration operations. Similarly, the total cash
compensation for Chairman Pearlman and Executive Committee Chairman Lawi
increased because of increased cash bonuses related to higher pre-tax profits,
and the total cash compensation for COO Calvert increased because of increased
cash bonuses and commissions related to higher pre-tax profits and revenues.
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 will 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 or exceeds 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 September 30, 1997, the market
price of the Company's Common Stock was $44.375 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 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 was paid in 12 equal quarterly payments,
the last of which was paid in April 1997. For the year ended December 31, 1996,
Messrs. Frame and Calvert each received $316,667 under this bonus plan.
STOCK OPTION AND COMMON STOCK PURCHASE WARRANT PLANS
During 1996, the Company had only one stock option plan, the 1993 Option
Plan, under which options were available for granting to officers and employees
of the Company. Options granted under the 1993 Option Plan can be either
incentive stock options pursuant to Section 422 of Code or non-qualified stock
options. Options granted under the 1993 Option Plan have a maximum term of 10
years, subject to certain events related to termination of employment. Mr.
Frame, as well as other executive officers, have been granted stock options
under previous non-qualified and incentive stock option plans. Mr. Frame and
other executive officers of the Company were granted options under the 1993
Option Plan on April 22, 1996. Options were also granted to other officers and
key employees of the Company under the 1993 Option Plan at various times
throughout the year.
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 stockholder value.
The Committee has proposed an increase in the number of shares of Common
Stock available for issuance upon exercise of options granted under the 1993
Option Plan, as described in the Proxy Statement under the heading "Proposal to
Amend the 1993 Incentive Stock Option Plan to Increase the Number of Shares
Available for Granting Options." As a result of the proposed increase, the
Company will be able to maximize the deductibility under Section 162(m) of the
compensation received by its Named Executive
13
<PAGE> 15
Officers upon their exercise of options, and the Company will also have an
adequate number of options for future incentive grants under the 1993 Option
Plan.
The Company's stock option plans and common stock purchase warrants are
designed to provide incentives based upon the Company's financial performance
and stockholder returns over time.
Respectfully submitted,
John E. Stieglitz, Co-Chairman
William Lerner, Co-Chairman
14
<PAGE> 16
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 the Peer Group index, which represents
publicly traded oil-service companies.
COMPARATIVE TOTAL RETURNS*
SEITEL, INC., RUSSELL 2000, AND PEER GROUP
(Performance results through December 31, 1996)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) SEI RUSSELL 2000 PEER GROUP**
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 112.69 118.41 99.14
1993 137.74 140.80 109.60
1994 215.37 138.24 100.78
1995 354.36 177.55 143.82
1996 400.69 206.83 211.15
</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 Inc.; Daniel Industries, Inc.; Dresser Industries,
Inc.; Enterra Corp. (until October 1995, when it ceased to be publicly
traded); Global Marine Inc.; Halliburton Co., Helmerich & Payne, Inc.; Kaneb
Services, Inc.; McDermott International, Inc.; Parker Drilling Co.; Reading &
Bates Corp.; Rowan Companies, Inc.; Smith International, Inc.; Schlumberger
Ltd.; Tidewater Inc.; Varco International, Inc.; Western Atlas Inc. (which
began to be publicly traded in March 1994,); and Western Co. of North America
(until April 1995, when it ceased to be publicly traded).
15
<PAGE> 17
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
then market price of $5.375 per share. The Company recorded compensation expense
of $48,000 related to these loans in 1996. 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 and Calvert
and Ms. Valice, amounting to $537,500, $537,500 and $134,375, respectively. The
largest aggregate amounts of principal and interest outstanding on such loans
during 1996 were approximately $474,000, $474,000 and $119,000, respectively. As
of September 30, 1997, the aggregate amounts of principal and interest
outstanding on such loans were approximately $405,000, $405,000 and $101,000,
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 "1996 Partnership"). The 1996
Partnership was formed to permit officers, directors and employees of the
Company and its subsidiaries, and members of their immediate families, who are
accredited investors to invest in mineral interests as general partners
("Contributing General Partners") in the 1996 Partnership. The 1996 Partnership
is a blind pool which invested partnership funds throughout the year in mineral
interests. Pursuant to the partnership agreement governing the 1996 Partnership,
DDD Energy agreed to use its reasonable efforts to allow the 1996 Partnership to
invest, along with DDD Energy, in all nonoperating mineral interests in which
DDD Energy invested during 1996, and the 1996 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 1996 Partnership allocated to
acquisitions were exhausted. Pursuant to the partnership agreement, the amount
of the investment of the 1996 Partnership equals three percent of the total
investment in each such mineral interest made by the 1996 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 1996
Partnership to determine the total level of investment by DDD Energy and the
1996 Partnership. Therefore, DDD Energy does not forego any opportunity to
invest in transactions by allowing the 1996 Partnership to invest with DDD
Energy. All sums required for the 1996 Partnership to acquire such interests and
pay costs related to such interests thereafter are provided by the Contributing
General Partners, and no funds for the 1996 Partnership's investments are
provided by DDD Energy or the Company. During 1996, the Contributing General
Partners contributed an aggregate of $702,000 to the 1996 Partnership. Paul A.
Frame, Horace A. Calvert, Herbert M. Pearlman, David S. Lawi, Jay N. Silverman,
Debra D. Valice, William L. Lurie, Sheryl Pearlman (wife of Herbert Pearlman),
Julia L. Pearlman, Lee R. Pearlman, Lawrence Marolda, Nicole E. Lawi and Neil A.
Lawi have 14.3%, 14.3%, 13.5%, 11.4%, 7.1%, 10.7%, 7.1%, 3.6%, 1.4%, 1.4%, 1.4%,
1.4% and 1.4% general partnership interests, respectively, in the 1996
Partnership.
DDD Energy acts as managing partner of a similar partnership relating to
the non-operating mineral interest in which it will invest in 1997 (the "1997
Partnership"). The amount of the investment of the 1997 Partnership will equal
two and one half percent of the total investment in each such mineral interest
made by the 1997 Partnership and DDD Energy. Officers, directors and employees
of the Company and its subsidiaries, and members of their immediate families,
have contributed $575,000 to the 1997 Partnership. Horace A. Calvert, Herbert M.
Pearlman, David S. Lawi, Jay N. Silverman, Debra D. Valice, William L. Lurie,
Sheryl Pearlman (wife of Herbert Pearlman), Julia L. Pearlman, Lee R. Pearlman,
Lawrence Marolda, Nicole E. Lawi and Neil A. Lawi have 17.4%, 16.5%, 13.9%,
8.7%, 4.4%, 4.4%, 4.4%, 1.7%, 1.7%, 1.7%, 1.7% and 1.7% general partnership
interests, respectively, in the 1997 Partnership.
16
<PAGE> 18
PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION TO
INCREASE AUTHORIZED COMMON STOCK
The Board of Directors has unanimously voted to recommend that the
shareholders authorize an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
20,000,000 shares to 50,000,000 shares to facilitate a proposed two-for-one
stock split. The proposed amendment is set forth in Exhibit A to this Proxy
Statement. If the amendment is approved, the increased number of shares may be
issued from time to time by the Board of Directors. It is not expected that
further authorization from the shareholders will be solicited for the issuance
of any such shares of Common Stock, except to the extent such authorization is
required by law or by the rules of the New York Stock Exchange. Shareholders do
not have preemptive rights, and the proposed amendments would not create any
preemptive rights.
INCREASE OF AUTHORIZED COMMON STOCK. The Board of Directors recommends that
the number of authorized shares of Common Stock be increased to 50,000,000
shares. The Company currently has 20,000,000 shares of Common Stock authorized
and, as of October 7, 1997, had 11,015,854 shares outstanding and an additional
3,359,366 shares reserved under the Company's stock option, warrant and other
employee benefit plans. Accordingly, as of October 7, 1997, only 5,624,780
shares of Common Stock were authorized and not outstanding or reserved for
issuance.
PROPOSED STOCK SPLIT. The Board of Directors has unanimously approved a
two-for-one stock split to be effected through a stock dividend. Because the
Company does not currently have an adequate number of shares of authorized but
unissued shares of Common Stock to effect the stock split, the stock split is
subject to stockholder approval of the proposed increase in the number of
authorized shares of Common Stock. If stockholder approval is obtained,
stockholders of record on December 3, 1997, will receive one additional share of
Common Stock as a dividend on each issued and outstanding share of Common Stock.
The stock split is intended to place the market price of the Common Stock in a
range more attractive to a wider range of investors, particularly individuals,
and may result in a broader market and more widespread ownership of the
Company's Common Stock.
In connection with the stock split in the form of a stock dividend, the
Company will transfer $0.01 for each additional share of Common Stock issued, or
approximately $110,000, from the Company's additional paid-in capital account to
its Common Stock account as of December 3, 1997, so that the additional shares
to be issued will be fully paid.
If stockholders approve the proposed increase in authorized shares,
certificates representing the additional shares issuable pursuant to the stock
split will be distributed by the Company on or about December 12, 1997, to
stockholders of record as of December 3, 1997, without any further action by the
stockholders. Existing certificates will continue to represent the number of
shares they currently represent and should be retained by stockholders. The
Company will list on the New York Stock Exchange the additional shares of Common
Stock to be issued. As a result of the proposed stock split, brokerage
commissions and transfer taxes on any subsequent trades of Common Stock may
increase.
In the opinion of counsel for the Company, the adoption of the proposed
amendment and the issuance of the additional shares in connection with the stock
split will not result in any gain or loss or any other taxable income to
stockholders for United States federal income tax purposes. The laws of
jurisdictions other than the United States may impose income taxes on the
issuance of the additional shares in connection with the stock split, and
stockholders subject to those laws are urged to consult their tax advisors.
The proposed increase in the number of authorized shares of Common Stock is
required in order to effect, and is a condition to the effectiveness of, the
stock split authorized by the Board of Directors.
Other than the proposed two-for-one stock split, the Company has no plans,
understandings or negotiations underway at this time for the issuance of any
unissued and unreserved shares. After giving effect to the proposed stock split,
the Company will have approximately 22 million shares of Common Stock
outstanding and approximately 6.7 million shares of Common Stock reserved for
issuance, based on the number of outstanding and reserved shares as of October
7, 1997 and excluding any shares to be reserved for
17
<PAGE> 19
issuance under other proposals set forth in this Proxy Statement. In addition,
the Board believes that it is desirable to have a sufficient number of shares of
Common Stock available, as the occasion may arise, for possible future
financings and acquisition transactions, stock dividends or splits, stock
issuances pursuant to employee benefit plans and other proper corporate purposes
and accordingly recommends the proposed increase. Having such additional shares
available for issuance in the future would give the Company greater flexibility
by allowing shares to be issued without incurring the delay and expense of a
special stockholders' meeting.
CERTAIN POSSIBLE EFFECTS OF THE AMENDMENT. Although the Board has no
present intention of doing so, shares of authorized and unissued Common Stock
could be issued in one or more transactions that could have the effect of making
a takeover of the Company more difficult and deterring an offer for the Company
at a substantial premium over the current market price of the Company's Common
Stock. The amendment has not been proposed as an anti-takeover provision, and
the Company is not aware of any attempt by a third party to acquire control of
the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSALS TO APPROVE CERTAIN AMENDMENTS TO THE SEITEL, INC.
1993 INCENTIVE STOCK OPTION PLAN
GENERAL. 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.
BACKGROUND OF THE OPTION PLAN. In 1993, the Board of Directors adopted and
the stockholders of the Company approved the Seitel, Inc. 1993 Incentive Stock
Option Plan (the "Option Plan"). As initially adopted, the Option Plan provided
for the issuance of incentive stock options to purchase up to 295,000 shares of
Common Stock. In 1995, the Board of Directors and the stockholders of the
Company approved amendments to the Option Plan increasing the number of shares
available for options to be granted under the Option Plan to a total of 700,000
shares and extending the term of the Option Plan to May 2005. In November 1995
and April 1996, the Board of Directors adopted additional amendments to the
Option Plan to provide for the grant of non-qualified stock options under the
Option Plan and to increase the number of shares of Common Stock available for
issuance pursuant to options granted under the Option Plan to a total of
1,150,000 shares. These amendments were approved by the stockholders in 1996.
SECTION 162(M) OF THE INTERNAL REVENUE CODE. Section 162(m) of the Code
disallows a corporate tax deduction for compensation in excess of $1,000,000 per
year paid to the Company's Chief Executive Officer and the four other most
highly compensated officers (the "Named Executive Officers") unless such
compensation meets certain requirements. The compensation resulting from an
officer's exercise of a non-qualified stock option or warrant is subject to
these deductibility limitations. However, the compensation resulting from an
officer's exercise of non-qualified options granted under the Option Plan will
meet the deductibility requirements of Section 162(m) after the approval by the
stockholders of a minor technical amendment to the Option Plan limiting the
total number of options that can be granted to any participant to 250,000
options per year. In order to maximize the deductibility of the compensation
resulting from future exercises of options and warrants by the Named Executive
Officers, the Compensation Committee has recommended that this technical
amendment be adopted and that the number of shares available for granting
options under the Option Plan be increased.
In 1995, the Company adopted its Warrant Reload Plan, pursuant to which
warrants that were previously granted to officers, directors and other employees
of the Company are automatically reloaded upon exercise. As of September 30,
1997, warrants to purchase a total of 512,747 shares held by Messrs. Frame,
Calvert, Pearlman and Lawi were subject to reloading under the Warrant Reload
Plan. Also as of that date, warrants to
18
<PAGE> 20
purchase an additional 331,005 shares had been granted to these officers with an
exercise price of $40.00 or more per share. Although the compensation resulting
from the exercise of warrants granted under the Warrant Reload Plan does not
meet the deductibility requirements of Section 162(m), the compensation
resulting from the exercise of options granted under the Option Plan will meet
the deductibility requirements of Section 162(m) if the proposed technical
amendment limiting the total number of options that can be granted to a single
participant in any calendar year is approved by the stockholders. The Committee
has proposed an increase in the number of shares available for granting options
under the Option Plan so that future reload grants pursuant to the Warrant
Reload Plan can be granted under the Option Plan. In addition, the proposed
increase will enable the Company to repurchase previously reloaded warrants that
are only marginally in-the-money and replace these repurchased warrants with
options under the Option Plan. Any determination to repurchase such warrants
will be made by the Board based on the market price of the Company's Common
Stock at the time of the proposed buy-back, the Company's liquidity and capital
resources at such time, the impact of such buy-back on the Company's results of
operations, and other factors deemed relevant by the Board.
PROPOSALS TO AMEND OPTION PLAN. Specifically, the Committee has proposed
two amendments to the Option Plan. First, the Committee has proposed that the
Option Plan be amended to limit the maximum number of shares for which options
may be granted under the Option Plan to any single participant during any
calendar year to 250,000 shares on a pre-stock split basis. Second, the
Committee has proposed that the Option Plan be amended to increase the number of
shares available for purchase upon exercise of options granted under the Option
Plan by 850,000 shares on a pre-stock split basis. These proposals are listed
separately as items 3 and 4 on the enclosed proxy. The text of the specific
amendments is set forth in Exhibits B and C to this Proxy Statement.
Of the proposed additional 850,000 shares under the Option Plan, 512,747
shares will be used to grant options to satisfy the Company's obligations under
the Warrant Reload Plan to reload warrants currently held by Messrs. Frame,
Calvert, Pearlman and Lawi. If the proposed increase in the number of shares
available for granting options under the Option Plan is approved, the Company
will be able to maximize tax deductibility by granting options under the Option
Plan, the compensation from which will comply with the requirements of Section
162(m), to satisfy its obligations under the Warrant Reload Plan.
In addition, the Committee has recommended that the Board of Directors
consider repurchasing warrants that have previously been granted to Messrs.
Frame, Calvert, Pearlman and Lawi under the Warrant Reload Plan that are only
marginally in-the-money and granting replacement options under the Option Plan
for such repurchased warrants. As of September 30, 1997, warrants to purchase
331,005 shares of Common Stock had been granted to these officers under the
Warrant Reload Plan with exercise prices of $40.00 or more per share. By
purchasing some or all of these warrants and issuing replacement options under
the Option Plan, any compensation resulting from future exercises of these
replacement options by these officers will meet the deductibility requirements
of Section 162(m). Any determination to repurchase such warrants will be made by
the Board based on the market price of the Company's Common Stock at the time of
the proposed buy-back, the Company's liquidity and capital resources at such
time, the impact of such buy-back on the Company's results of operations, the
willingness of these officers to have such warrants repurchased, and other
factors deemed relevant by the Board.
At September 30, 1997, a total of 876,997 shares of Common Stock were
issuable or have been issued pursuant to options granted under the Option Plan,
and 273,003 shares were available for additional options to be granted under the
Option Plan. Of the proposed additional 850,000 shares under the Option Plan,
the Company intends to grant options in the future for 512,747 shares to satisfy
its obligations under the Warrant Reload Plan. In addition, the Company may
grant options to purchase up to an additional 331,005 shares to replace
marginally in-the-money warrants if the Board elects to repurchase such
warrants. If the Board does not elect to repurchase some or all of these
warrants, these options will be available for other option grants under the
Option Plan. An additional 279,251 shares will also be available for granting
options under the Option Plan if this proposal is approved by the stockholders.
The current market value of the additional 850,000 shares of Common Stock, based
on the closing price of the Common Stock as reported by the New York Stock
Exchange on September 30, 1997, is $37,718,750.
19
<PAGE> 21
If the proposed amendments to the Option Plan are not approved by
stockholders, the Company will not grant the currently proposed options for
512,747 shares under the Option Plan to satisfy reload obligations under the
Warrant Reload Plan and does not intend to repurchase any marginally
in-the-money warrants and grant options to replace such repurchased warrants.
However, the Company may grant other options under the Option Plan or provide
other compensation to its executives.
SUMMARY OF THE OPTION PLAN. Under the prior terms of the Option Plan, the
Company could grant options to purchase up to an aggregate of 1,150,000 shares
of Common Stock. Pursuant to the proposed amendments to the Option Plan, this
number will be increased by 850,000 shares of Common Stock, to a total of
2,000,000 shares. Options granted under the Option Plan can be either incentive
stock options or non-qualified stock options, as designated at the time of grant
of the options. If options granted under the Option Plan are not designated as
incentive stock options or non-qualified stock options, they will be deemed to
be incentive stock options to the extent they comply with the requirements of
the Code applicable for incentive stock option treatment and as non-qualified
options to the extent that they do not satisfy such requirements.
The Compensation Committee or such other committee as may be appointed by
the Board (the "Committee") is empowered to administer the Option Plan. The
Option Plan is currently administered by the Compensation Committee. Under the
terms of the Option 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.
Any employee of the Company or a subsidiary is eligible to receive grants
of options under the Option Plan. The Company currently has six persons serving
as directors who are also employees of the Company, and as of September 30,
1997, had a total of 67 employees. Any employee-director is eligible to receive
plan awards, unless such person serves on the Committee. Actual participation in
the Option Plan is determined in the sole discretion of the Committee.
The exercise price for incentive stock options under the Option 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 incentive stock option is granted under the
Option Plan to any person who, at the time such incentive stock option is
granted, owns more than 10% of the total combined voting power of classes of
shares of the Company or of any subsidiary of the Company (a "10% Stockholder"),
then the exercise price of the incentive stock options shall 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 Option Plan means the closing sales price of
Common Stock per share as reported in the Wall Street Journal as of the date of
the grant. There are no restrictions under the Option Plan applicable to the
exercise price of non-qualified stock options. Payment for the shares acquired
upon exercise of an option under the Option Plan shall be made in cash or other
property deemed acceptable by the Committee.
Any option granted under the Option 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 options, however, shall not be exercisable after the expiration of
ten years from the date such option is granted. In the case of an incentive
stock option granted to a 10% Stockholder, such incentive stock options shall
not be exercisable after the expiration of five years from the date such
incentive stock options are granted.
The aggregate fair market value (determined as of the time an incentive
stock option is granted) of the stock with respect to which incentive stock
options are exercisable for the first time by any Participant during any
calendar year, under the Option Plan and all of the Company's other plans, may
not exceed $100,000. Any options granted in excess of this limit will be
non-qualified options. In addition, the Company currently may not grant under
the Option Plan in any calendar year incentive stock options to purchase in
excess of 100,000 shares of Common Stock to any single Participant. Pursuant to
the proposal to amend the Option Plan, the Company may not grant under the
Option Plan in any calendar year stock options, including both incentive and
non-qualified options, to purchase in excess of 250,000 shares of Common Stock
to any single Participant.
20
<PAGE> 22
The Committee may establish procedures under the Option 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 Option Plan generally 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. The Committee may, in its discretion, allow certain transfers
of options granted under the Option Plan to or for the benefit of members of an
option holder's immediate family.
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 Option Plan; (ii) reach an agreement with the purchaser that
the purchaser will convert each outstanding option under the Option 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 Option Plan are accelerated and afford
to each 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 Option Plan
or his or her option agreement.
The Option Plan will currently expire on May 12, 2005. The Board may
terminate the Option Plan at any time in its sole discretion. No options may be
granted under the Option Plan after it is terminated. The termination of the
Option Plan, or any amendment thereto, shall not affect any shares previously
issued to a Participant or any option previously granted under the Option Plan.
The Option Plan 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.
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<PAGE> 23
PARTICIPATION IN THE OPTION PLAN. The following table sets forth certain
information with respect to stock options granted pursuant to the Option Plan
during fiscal year 1996 and options to be granted pursuant to the Option Plan
under the Warrant Reload Plan and to reload warrants that may be repurchased by
the Company to (i) the Named Executive Officers, (ii) all current executive
officers as a group, and (iii) all employees, including all current officers who
are not executive officers, as a group. The options shown below, which are on a
pre-stock split basis, are not necessarily indicative of the number of options
that may be granted in the future.
AMENDED PLAN BENEFITS
1993 SEITEL, INC. INCENTIVE STOCK OPTION PLAN
<TABLE>
<CAPTION>
OPTIONS TO BE
OPTIONS TO BE GRANTED GRANTED TO RELOAD
OPTIONS GRANTED IN UNDER WARRANT RELOAD WARRANTS TO BE
NAME 1996 PLAN REPURCHASED*
---- ------------------ --------------------- -----------------
<S> <C> <C> <C>
Paul A. Frame........................... 25,000 80,899 49,300
President and Chief Executive Officer
Horace A. Calvert....................... 25,000 302,150 43,249
Executive Vice President and Chief
Operating Officer
Herbert M. Pearlman..................... -0- 86,063 119,228
Chairman of the Board
David Lawi.............................. -0- 43,635 119,228
Chairman of the Executive Committee
Jay N. Silverman........................ 25,000 -0- -0-
President of Eagle Geophysical, Inc.
All Executive Officers as a Group**..... 75,000 512,747 331,005
All Non-Executive Officer Employees as a
Group................................. 228,500 -0- -0-
</TABLE>
- ---------------
* Calculated assuming a repurchase of all reloaded warrants with a current
exercise price equal to or greater than $40.00 per share: the actual number
of options granted will be equal to the number of warrants repurchased by the
Company, if any, which number will be determined by the Board of Directors.
** Does not include Jay N. Silverman, who ceased to be an executive officer
effective August 11, 1997.
FEDERAL INCOME TAX CONSEQUENCES. The following is a brief description of
the federal income tax consequences generally arising with respect to options
that may be granted under the Option Plan. This discussion is intended for the
information of stockholders considering how to vote at the Annual Meeting and
not as tax guidance to Participants.
INCENTIVE STOCK OPTIONS. Certain options to be granted under the Option
Plan are intended to be incentive stock options within the meaning of Section
422 of the Code. A Participant does not recognize taxable income upon the grant
of incentive stock options under the Option Plan. In addition, a Participant
will not recognize taxable income with respect to the excess of the fair market
value of stock received on exercise of an incentive stock option over the
exercise price. The income tax treatment of any gain or loss recognized upon a
Participant's disposition of shares received upon exercise of incentive stock
options granted under the Option Plan depends on the timing of the disposition.
If the Participant holds the shares received upon exercise of such incentive
stock options for the longer of two years from the date such incentive stock
option was granted or one year from the date of exercise, the difference (if
any) between the amount realized from the sale of such shares and the
Participant's tax basis (i.e., generally the exercise price) will be taxed as
mid-term or long-term capital gain or loss.
If a Participant disposes of the shares acquired upon exercise of an
incentive stock option before the end of the applicable holding periods
described above (i.e., he or she makes a "disqualifying disposition"), such
Participant may be deemed to be in receipt of taxable income in the year of the
disqualifying disposition,
22
<PAGE> 24
depending on the selling price. If the selling price exceeds the fair market
value of the stock on the date of exercise, the excess of the fair market value
on the date of exercise over the exercise price is taxable to the Participant as
ordinary income, and the excess of the selling price over the fair market value
on the date of exercise 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.
The Company is not entitled to a deduction for federal income tax purposes
with respect to the grant or exercise of incentive stock options under the
Option Plan or the disposition of shares acquired upon exercise of incentive
stock options if the applicable holding periods have been met. In the event of a
disqualifying disposition, however, the Company is entitled to a federal income
tax deduction in an amount equal to the ordinary income recognized by the
Participant, subject to certain limitations.
NON-QUALIFIED STOCK OPTIONS. Options to be granted under the Option Plan
that are not incentive stock options within the meaning of Section 422 of the
Code are non-qualified stock options. A Participant does not realize taxable
income upon the grant of non-qualified stock options under the Option Plan. A
Participant will recognize taxable ordinary income upon the exercise of
non-qualified stock options under the Option Plan equal to the amount that the
fair market value of the underlying stock on the date of exercise exceeds the
aggregate exercise price. The income tax treatment of any gain or loss realized
upon a Participant's disposition of shares received upon exercise of
non-qualified stock options granted under the Option Plan depends on the timing
of the disposition. If the Participant holds the shares received upon exercise
of such non-qualified stock options for at least one year from the date of
exercise, the difference (if any) between the amount realized from the sale of
such shares and the Participant's tax basis (i.e., generally the exercise price
plus the amount of ordinary income recognized by the Participant on exercise of
the option) will be taxed as mid-term or long-term capital gain or loss. If a
Participant disposes of the shares acquired upon exercise of a non-qualified
stock option within one year from the date of exercise of the option, such
Participant will generally recognize short-term capital gain or loss.
Subject to certain limitations, the Company is entitled to a deduction for
federal income tax purposes with respect to the exercise of non-qualified stock
options under the Option Plan, but not the disposition of shares acquired upon
exercise of such non-qualified stock options, in an amount equal to the ordinary
income recognized by the Participant.
Certain Participants may be subject to alternative minimum tax which in
individual cases could reduce or eliminate any tax benefits to them under the
Option 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 THESE PROPOSALS.
23
<PAGE> 25
PROPOSAL TO APPROVE THE SEITEL, INC.
1998 EXECUTIVE COMPENSATION PLAN
On September 5, 1997, the Compensation Committee of the Board of Directors
of the Company adopted, subject to stockholder approval, the Seitel, Inc. 1998
Executive Compensation Plan (the "Compensation Plan"), which will modify the
compensation arrangements the Company currently has with Herbert M. Pearlman,
Paul A. Frame, Horace A. Calvert and David S. Lawi (the "Executives").
The Executives are subject to long-standing employment agreements with the
Company (the "Employment Agreements"), which include provisions for the payment
of certain commissions and bonuses. Section 162(m) of the Internal Revenue Code
of 1986 (the "Code") contains limitations on the deductibility by the employer
of the compensation expense paid to its Named Executive Officers. The
compensation payments made to the Executives pursuant to the Employment
Agreements have been exempt from Section 162(m) under grandfather provisions
that will cease to apply on December 31, 1997. The Compensation Plan is intended
to provide for performance-based compensation to the Executives that will be
tax-deductible by the Company. Each of the Executives has indicated that he will
agree to participate in the Compensation Plan and accept the compensation
described below in lieu of the current salary, commission and bonus provisions
of his Employment Agreement if the Compensation Plan is approved by the
Company's stockholders. Thus, upon stockholder approval, the Company and each
Executive intend to enter into an appropriate amendment to the Executive's
Employment Agreement.
PLAN SUMMARY. The following summary of the material features of the
Compensation Plan is qualified in its entirety by reference to the full text of
the Compensation Plan, which is attached hereto as Exhibit D.
Cash Bonus Based on Company Pre-Tax Profits. Commencing January 1, 1998,
the Executives will receive the following bonuses based on the annual "Pre-Tax
Profits" of the Company and its subsidiaries (the "PTP"), as defined in the
Compensation Plan, if the PTP exceeds the PTP Threshold (hereinafter defined):
<TABLE>
<CAPTION>
PERCENTAGE UP TO PERCENTAGE ABOVE
$50 MILLION PTP $50 MILLION PTP
---------------- ----------------
<S> <C> <C>
Herbert M. Pearlman*.................................. 5.0% 5.3%
Paul A. Frame......................................... 4.0% 4.25%
Horace A. Calvert..................................... 4.0% 4.25%
David S. Lawi*........................................ 2.5% 2.65%
</TABLE>
- ---------------
* The annual bonus payments to Messrs. Pearlman and Lawi will be reduced by
$300,000 and $150,000, respectively, which are the amounts of their proposed
base salary increases.
The PTP Threshold will be $10 million per year for the first five years,
$12 million per year for the second five years and $14 million per year
thereafter. The PTP will be computed without including the above bonuses but
after the payment of the sales-based bonuses described below.
Cash Bonuses Based on Percentage of Company Sales and Pre-Tax
Profits. Commencing January 1, 1998, Messrs. Frame and Calvert will each receive
annual bonuses equal to 1% of the annual sales of the Company and its
subsidiaries in excess of $30 million, provided that the PTP exceeds the PTP
Threshold.
Additional Compensation. The Executives will also receive salary increases,
salary continuation benefits and common stock purchase warrants under the
Compensation Plan.
Increases in Base Salary Levels. The base salary increases, commencing
January 1, 1998, will be $300,000 per year each to Messrs. Pearlman, Frame and
Calvert and $150,000 per year to Mr. Lawi as follows:
<TABLE>
<CAPTION>
CURRENT NEW BASE SALARY
EMPLOYEE BASE SALARY (JANUARY 1, 1998)
-------- ----------- -----------------
<S> <C> <C>
Herbert M. Pearlman...................................... $128,435 $428,435
Paul A. Frame............................................ $144,878 $444,878
Horace A. Calvert........................................ $144,878 $444,878
David S. Lawi............................................ $ 64,217 $214,217
</TABLE>
24
<PAGE> 26
Salary Continuation Benefits. So long as the Executive's Employment
Agreement is in full force and effect on the date of his death, the Company will
pay a monthly salary continuation amount to the Executive's estate or his
designee for one year beginning on the date of his death. The annual salary
continuation amount will equal the Executive's base salary at his date of death
plus an average of the bonuses paid to such Executive by the Company for the
three calendar years preceding the year of his death.
Grant of Warrants to Purchase Company Common Stock. The Company will grant
warrants (the "Executive Warrants") on a pre-stock split basis to purchase
100,000 shares of Common Stock of the Company to each of Messrs. Frame, Pearlman
and Calvert, and 50,000 shares of Common Stock of the Company to Mr. Lawi. Also
as part of the Compensation Plan, the Company will grant warrants (the "Bonus
Warrants") to purchase an additional 150,000 shares of Common Stock of the
Company to Mr. Frame as a bonus to reward him for his contributions to the
success of the recently completed public offering by the Company's former
subsidiary, Eagle Geophysical, Inc. The Executive Warrants and the Bonus
Warrants will be granted effective upon shareholder approval of the Compensation
Plan. The exercise price of the Executive Warrants and the Bonus Warrants will
equal the closing price of the Company's Common Stock on the date of stockholder
approval, rounded up to the next whole dollar amount. The Executive Warrants
will expire on the earlier of five years after stockholder approval of the
Compensation Plan or 90 days after termination of employment, and will be 20%
vested upon stockholder approval of the Compensation Plan. The remaining 80% of
the Executive Warrants will vest on the date three years after stockholder
approval of the Compensation Plan, or, if earlier, in incremental installments
of 20% of the total number of option shares for each two-point increase in the
market price of the Company's stock above the exercise price which is maintained
or exceeded for 10 consecutive trading days. The Bonus Warrants will expire on
the earlier of five years after stockholder approval of the Compensation Plan or
90 days after termination of employment and will vest immediately upon
stockholder approval of the Compensation Plan.
25
<PAGE> 27
Participation in the Compensation Plan. The following table sets forth
certain information with respect to benefits that would have been received by
the Executives under the Compensation Plan during fiscal year 1996 if the
Compensation Plan had been in effect during 1996. No benefits will be payable
under the Compensation Plan to any employee of the Company other than the
Executives. The benefits shown below are not necessarily indicative of the cash
compensation that may be paid to the Executives in the future under the
Compensation Plan.
NEW PLAN BENEFITS
EXECUTIVE COMPENSATION PLAN
<TABLE>
<CAPTION>
NUMBER OF
DOLLAR VALUE WARRANTS
NAME AND POSITION (1996 PRO FORMA)(1) (1996 PRO FORMA)(2)
----------------- ------------------- -------------------
<S> <C> <C>
Paul A. Frame,
President and CEO............................ $2,314,481(3) 250,000
Horace A. Calvert,
Executive Vice President and COO............. $2,314,481(4) 100,000
Herbert M. Pearlman,
Chairman of the Board of Directors........... $1,532,854(5) 100,000
David S. Lawi,
Chairman of the Executive Committee.......... $ 764,606(6) 50,000
Executive Group................................ $6,926,422(7) 500,000
</TABLE>
- ---------------
(1) Does not include any amounts attributable to salary continuation benefits.
(2) On a pre-stock split basis.
(3) Includes increased base salary of $441,898 and Pre-Tax Profits and Sales
Bonuses of $1,872,583.
(4) Includes increased base salary of $441,898 and Pre-Tax Profits and Sales
Bonuses of $1,872,583.
(5) Includes increased base salary of $424,818 and a Pre-Tax Profits Bonus of
$1,108,036.
(6) Includes increased base salary of $210,588 and a Pre-Tax Profits Bonus of
$554,018.
(7) Includes increased base salaries of $1,519,202 in the aggregate and Pre-Tax
Profits and Sales Bonuses of $5,407,220 in the aggregate.
FEDERAL INCOME TAX CONSEQUENCES. The following is a brief description of
the federal income tax consequences generally arising with respect to the
warrants that will be granted pursuant to the Compensation Plan.
The warrants to be granted pursuant to the Compensation Plan are not
intended to qualify as incentive stock options under the Code. An Executive will
not realize taxable income upon the grant of the warrants under the Compensation
Plan. An Executive will recognize taxable ordinary income upon the exercise of
the warrants under the Compensation Plan equal to the amount that the fair
market value of the underlying stock on the date of exercise exceeds the
aggregate exercise price. The income tax treatment of any gain or loss realized
upon the Executive's disposition of shares received upon exercise depends on the
timing of the disposition. If the Executive holds the shares received upon
exercise of such warrants for at least one year from the date of exercise, the
difference (if any) between the amount realized from the sale of such shares and
the Executive's tax basis (i.e., generally the exercise price plus the amount of
ordinary income recognized by the Executive on exercise of the warrant) will be
taxed as mid-term or long-term capital gain or loss. If an Executive disposes of
the shares acquired upon exercise within one year from the date of exercise of
the warrants, such Executive will generally recognize short-term capital gain or
loss.
The Company is entitled to a deduction for federal income tax purposes with
respect to the exercise of warrants granted pursuant to the Compensation Plan,
but not the disposition of shares acquired upon exercise of such warrants, in an
amount equal to the ordinary income recognized by the Executive, to the extent
it is reasonable compensation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
26
<PAGE> 28
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP as independent
auditors for the Company for the year ending December 31, 1997, 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 Meeting of Stockholders. They will have an opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
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 1998 must be received by the Company at 50 Briar
Hollow Lane, 7th Floor West, Houston, Texas 77027, Attention Debra D. Valice, no
later than June 14, 1998.
MISCELLANEOUS
The Board of Directors knows of no other matters that are to be brought
before the meeting. However, if any other matters do come before the meeting,
the persons named on the enclosed form of proxy or their substitutes will vote
in accordance with their judgment in those matters.
The cost of solicitation of proxies, including expenses in connection with
preparing, assembling and mailing this proxy statement, will be borne by the
Company. The solicitation will be made by mail and may also be made by officers
or regular employees of the Company personally or by telephone or telegram. The
Company may reimburse brokers, custodians and nominees for their expenses in
sending proxies and proxy material to beneficial owners.
October 15, 1997
Houston, Texas
27
<PAGE> 29
EXHIBIT A
If the proposal to increase the authorized shares of Common Stock is
approved, sub-paragraph (a) of paragraph Fourth of the Certificate of
Incorporation will be amended in its entirety to read as follows:
(a) The aggregate number of shares of all classes of stock which the
corporation shall have the authority to issue is fifty-five million
(55,000,000), consisting of and divided into:
(i) one class of fifty million (50,000,000) shares of common stock,
par value $0.01 per share; and
(ii) one class of five million (5,000,000) shares of preferred
stock, par value $0.01 per share, which may be divided into and issued
in series, as hereinafter provided.
A-1
<PAGE> 30
EXHIBIT B
SEITEL, INC. 1993 INCENTIVE STOCK OPTION PLAN
AMENDMENT TO LIMIT OPTIONS GRANTED TO A SINGLE PARTICIPANT
The subsection of Section VII headed "Maximum Annual Amount Per Employee"
is hereby amended to read in its entirety as follows:
The aggregate fair market value (determined as of the time the
Incentive Stock Option is granted) of stock with respect to which Incentive
Stock Options are exercisable for the first time by any Participant during
any calendar year (under this and any other plans of the Company or any
Subsidiary) shall not exceed $100,000. In no event will any Participant be
granted under the Plan in any calendar year Options to purchase more than
250,000 Shares, subject to adjustment as provided in Section VIII hereof.
B-1
<PAGE> 31
EXHIBIT C
SEITEL, INC. 1993 INCENTIVE STOCK OPTION PLAN
AMENDMENT TO INCREASE NUMBER OF SHARES AVAILABLE FOR GRANTING OPTIONS
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
Two Million (2,000,000) shares of Common Stock of the Company (the
"Shares") shall be subject to the Plan.
C-1
<PAGE> 32
EXHIBIT D
SEITEL, INC. 1998 EXECUTIVE COMPENSATION PLAN
Seitel, Inc., a Delaware corporation (the "Company"), hereby adopts the
following Executive Compensation Plan (the "Compensation Plan") effective as of
January 1, 1998 (the "Effective Date"), subject to shareholder approval as set
forth herein (provided that the warrant grants provided for herein shall be made
effective upon shareholder approval).
I. PURPOSE
By providing for performance based compensation to the participating
executives, the Compensation Plan is intended to motivate the executives by
providing them incentives to enhance the growth and profitability of the
Company.
II. PARTICIPANTS
The executives eligible to participate under the Compensation Plan include
the following: Herbert M. Pearlman, Paul A. Frame, Horace A. Calvert, and David
S. Lawi (collectively the "Executives"). The Executives are subject to
long-standing employment agreements with the Company (the "Employment
Agreements") which include provisions for the payment of certain commissions and
bonuses. Section 162(m) of the Internal Revenue Code of 1986 contains
limitations on the deductibility by the employer of compensation expense paid to
its named executive officers. The Employment Agreements have been exempt from
Section 162(m) under grandfather provisions that cease to apply on December 31,
1997. The Compensation Plan provides for performance-based compensation to the
Executives which is tax-deductible by the Company. Executives may elect either
to participate in the Compensation Plan (as described hereinafter) or to retain
the current commission and bonus structures as set forth in their respective
Employment Agreements. Each of the Executives must make an election as to
whether or not he will participate in the Compensation Plan on or before January
1, 1998.
III. PRE-TAX PROFITS BONUSES
Commencing January 1, 1998, the Executives who elect to participate in the
Compensation Plan (the "Participants") are eligible to receive bonus payments
based on the annual Pre-Tax Profits (the "PTP") of the Company and its majority
owned subsidiaries ("Subsidiaries"). If the PTP exceeds the PTP Threshold
(hereinafter defined), the Participants shall receive a pre-tax profits bonus
calculated as follows:
<TABLE>
<CAPTION>
PERCENTAGE UP PERCENTAGE
PARTICIPANT TO $50M PTP OVER $50M PTP
- --------------------------------------------------------- ------------- -------------
<S> <C> <C>
Herbert M. Pearlman*..................................... 5.00% 5.30%
Paul A. Frame............................................ 4.00% 4.25%
Horace A. Calvert........................................ 4.00% 4.25%
David S. Lawi*........................................... 2.50% 2.65%
</TABLE>
- ---------------
* The annual bonus payments to Messrs. Pearlman and Lawi will be reduced by
$300,000 and $150,000, respectively, which are the amounts of their proposed
salary increases.
Annual profits of the Company must equal or exceed ten million dollars
($10,000,000) pre-tax profits for fiscal year 1998 and each of the four years
thereafter, twelve million dollars ($12,000,000) pre-tax profits for fiscal year
2003 and each of the four years thereafter, and fourteen million dollars
($14,000,000) pre-tax profits for fiscal year 2008 and thereafter (the "PTP
Threshold"). The PTP shall be computed as follows:
(i) Any bonuses paid to Company employees (other than the bonuses paid
to the Executives under this Section III and bonuses paid to other
employees of the Company aggregating up to 2% of PTP) shall be deducted
before any bonuses payable to the Executives are calculated;
D-1
<PAGE> 33
(ii) Any bonuses payable under Section IV hereof shall be deducted
before any bonuses payable under this Section III are calculated;
(iii) Any bonuses payable to any Executive under this Section III or
bonuses paid to other employees of the Company aggregating up to 2% of PTP
shall not be deducted from pre-tax profits in order to calculate the bonus
payable to any other Executive under this Section III;
(iv) The annual pre-tax profits bonus calculation shall be tested by
the Company's outside auditors and approved by the Compensation Committee
before any bonuses are paid to the Executives; and
(v) Any payments to any Executive by any company that is not a
wholly-owned Subsidiary of the Company but whose profits are included in
the Company's pre-tax profits calculation shall reduce the Company's
pre-tax profits for purposes of calculating any percent of Company pre-tax
profits payable to such Executive.
IV. SALES BONUSES
Commencing January 1, 1998, Messrs. Frame and Calvert will each receive
bonuses equal to 1% of the annual sales of the Company and its Subsidiaries in
excess of $30 million, provided that the PTP exceeds the PTP Threshold.
V. BASE SALARY INCREASES AND WARRANTS
The Compensation Plan Participants will also receive salary increases and
stock purchase warrants. Commencing January 1, 1998, Messrs. Pearlman, Frame and
Calvert will receive base salary increases of $300,000, and Mr. Lawi will
receive a salary increase of $150,000.
Messrs. Pearlman, Frame and Calvert will each be issued warrants to
purchase up to 100,000 shares of the Company's Common Stock upon shareholder
approval of the Compensation Plan. Mr. Lawi will be issued a warrant to purchase
up to 50,000 shares of the Company's Common Stock upon shareholder approval of
the Compensation Plan. These warrants will expire on the earlier of November 19,
2002 or 90 days after termination of employment of the Executive, and the
exercise price will be equal to the closing price of the Company's stock on
November 20, 1997, rounded to the next highest whole dollar. The warrants will
be 20% vested when issued, with the remaining 80% vesting on November 19, 2000,
but will vest earlier as follows: 20% for each two-point increase in the market
price of the Company's stock above the exercise price which is maintained for 10
consecutive trading days. No reload options will be granted upon the exercise of
these warrants.
Mr. Frame will be issued an additional warrant to purchase up to 150,000
shares of the Company's Common Stock upon shareholder approval of the
Compensation Plan. The warrant will have the same expiration provisions and
exercise price as the other warrants but will be fully and immediately vested.
No reload options will be granted upon the exercise of this warrant.
VI. BONUS PAYMENTS
The Company shall pay each Participant his respective bonus no later than
March 15th of the year following the year in which it is earned. The Company
may, in its sole discretion, advance monthly any amounts which would otherwise
be due under Section IV hereof assuming that the PTP Threshold for the year is
achieved.
VII. SALARY CONTINUATION BENEFITS
The Company will pay to each Participant, so long as his Employment
Agreement is in full force and effect on the date of his death, a monthly salary
continuation amount to the Participant's estate or his designee, for one year
beginning on the date of his death. The annual salary continuation amount will
equal his
D-2
<PAGE> 34
base salary at his date of death plus an average of the bonuses paid to such
Participant by the Company for the three calendar years preceding the year of
his death.
VIII. 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 not 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 a 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 hereafter
collectively referred to as the "purchaser" and the transaction being
hereinafter referred to 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 the Participants' bonuses pursuant to the terms hereof,
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 and warrants that have not been forfeited
as of the date of such purchase shall be accelerated and shall be immediately
paid to the Participants by the Company.
IX. 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 Plan will terminate.
X. COMPENSATION COMMITTEE
The performance goals under this Plan were determined by the Compensation
Committee of the Board of Directors of the Company. Before the Company shall be
obligated to make any payments 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.
XI. GOVERNING LAW
The Plan shall be governed by and construed in accordance with the laws of
the State of Texas.
D-3
<PAGE> 35
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
SEITEL, INC.
NOVEMBER 20, 1997
Please Detach and Mail in the Envelope Provided
- -------------------------------------------------------------------------------
A [X] Please mark your
votes as in this
example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING MATTERS:
1. To elect nine FOR WITHHOLD
directors to [ ] [ ]
serve until the
1998 Annual Meeting.
To withhold authority to vote for any nominee(s), print name(s) below.
- -------------------------------------------------------------------------------
Nominees: Herbert M. Pearlman
Paul A. Frame
Horace A. Calvert
David S. Lawi
Debra D. Valice
Walter M. Craig, Jr.
William Lerner
John E. Stieglitz
Fred S. Zeidman
2. Proposal to approve a proposed amendment to the Company's Certificate of
Incorporation to increase the authorized Common Stock to facilitate a
proposed two-for-one stock split;
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Proposal to approve an amendment to the Seitel, Inc. 1993 Incentive Stock
Option plan to limit the total number of options that can be granted to a
single participant under the Plan during any calendar year to 250,000
options;
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Proposal to approve an amendment to the Seitel, Inc. 1993 Incentive Stock
Option Plan to increase the number of shares available for granting
options thereunder by 850,000 shares;
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. Proposal to approve the Seitel, Inc. 1998 Executive Compensation Plan;
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
6. Proposal to approve the appointment of Arthur Andersen LLP as the
independent certified public accountants for the year ending December 31,
1997; and
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
7. To transact such other business as may properly come before the meeting or
any adjournment of the meeting.
Check this box if duplicate Annual Reports to Stockholders are sent to your
address and you do not need a personal copy sent to you. [ ]
SIGNATURE(S) DATE
--------------------------------------- --------------------
Note: (Please sign your name exactly as it appears on the proxy. When signing
as attorney, agent, executor, administrator, trustee, guardian or
corporate officer, please give full title as such. Each joint owner
should sign the proxy.)
<PAGE> 36
SEITEL, INC.
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 20, 1997
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 November
20, 1997 and any adjournment of the meeting, on the items of business set forth
on the reverse side and on such other business as may properly come before the
meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IF THE UNDERSIGNED
FAILS TO SPECIFY HOW THE PROXY IS TO BE VOTED, IT WILL BE VOTED FOR THE
ELECTION OF THESE DIRECTORS AND FOR PROPOSALS 2, 3, 4, 5 AND 6.
(TO BE SIGNED ON REVERSE SIDE)
-----------
SEE REVERSE
SIDE
-----------
