<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
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:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
SEITEL, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY
JULY 29, 1998
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Seitel, Inc. (the "Company") to be held on Wednesday, July 29, 1998, at 9:00
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 1999 Annual Meeting;
2. To approve proposed amendments to the Company's Non-Employee Directors'
Stock Option Plan;
3. To approve the appointment of Arthur Andersen LLP as independent
certified public accountants for the Company for the year ending
December 31, 1998; and
4. 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 June 1, 1998, will
be entitled to notice of and to vote at the meeting.
Please sign, date and mail the enclosed proxy in the enclosed envelope,
which requires no postage if mailed in the United States, so that your shares
will be represented at the meeting.
By Order of the Board of Directors,
Debra D. Valice
Corporate Secretary
June 26, 1998
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
Wednesday, July 29, 1998, 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 amendments to the Company's Non-Employee Directors'
Stock Option Plan, and (iii) for approval of the appointment of Arthur Andersen
LLP as the Company's independent public accountants for the fiscal year ending
December 31, 1998.
The Board of Directors has fixed the close of business on June 1, 1998, as
the record date for the meeting. On that date, the Company had outstanding
22,625,140 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
amendments to the Non-Employee Directors' 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, 1998, will require the
favorable vote of the holders of a majority of the shares of Common Stock
present, in person or by proxy, at the Annual Meeting and entitled to vote
thereon. Under Delaware law and the Company's Certificate of Incorporation and
Bylaws, abstentions and broker non-votes have no effect on the election of
directors since directors are elected by a plurality vote. With respect to the
other proposals to be decided at the meeting, abstentions are counted as a vote
against a proposal, and broker non-votes (and other limited proxies), although
considered present for quorum purposes, are not considered part of the voting
power present at the meeting with respect to that proposal.
The principal executive offices of the Company are at 50 Briar Hollow Lane,
7th Floor West, Houston, Texas 77027. The proxy statement and form of proxy are
being sent to stockholders on or about June 29, 1998.
<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>
NAME AGE POSITION(S) WITH THE COMPANY DIRECTOR SINCE
---- --- ---------------------------- --------------
<S> <C> <C> <C>
Herbert M. Pearlman............. 65 Chairman of the Board of Directors 1982
Paul A. Frame................... 51 Chief Executive Officer, President 1986
and Director
Horace A. Calvert............... 44 Chief Operating Officer, Executive 1987
Vice President and Director
David S. Lawi................... 62 Chairman of the Executive Committee 1982
and Director
Debra D. Valice................. 41 Chief Financial Officer, Senior 1995
Vice President of Finance,
Treasurer, Corporate Secretary
and Director
Walter M. Craig, Jr............. 44 Director 1987
William Lerner.................. 64 Director 1985
John E. Stieglitz............... 67 Director 1989
Fred S. Zeidman................. 51 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 December 1996,
Mr. Frame has been a Director of Eagle Geophysical, Inc. ("Eagle"), a NASDAQ
listed company engaged in providing seismic data acquisitions services to the
oil and gas industry, and Chairman of the Executive Committee of Eagle's board
of directors since August 1997.
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, Chairman of Helm's
Executive Committee since October 1997, and he was its Executive Vice President
from 1980 through 1992. Since March 1984, Mr. Lawi has been a Director of
Intersystems and, since 1985, he has been Chairman of Intersystems' Executive
Committee. Since June 1990, Mr. Lawi has been a Director of Unapix Entertainment
and, since January 1993, Chairman of its Executive Committee, its Treasurer and
Secretary.
2
<PAGE> 5
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.
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 Core Capital, 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 a member of
the Company's Compensation and Stock Option Committee. Since January 1990, Mr.
Lerner has been engaged in the private practice of law. From May 1990 until
December 1990, he was General Counsel to Hon Development Company, a California
real estate development company. From June 1986 until December 1989, Mr. Lerner
was Vice President and General Counsel of The Geneva Companies, Inc., a
financial services company engaged in counseling privately owned middle-market
companies. Since 1985, he has been a Director of Helm. Mr. Lerner is also a
Director of Rent-Way, Inc., a NASDAQ listed company headquartered in
Pennsylvania that operates a chain of rental-purchase stores, and
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 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 is a member of the Company's Audit Committee and
Compensation and Stock Option Committee. 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 1997, the Company's Board of Directors held two meetings. All of the
directors of the Company attended at least 75% of the total number of meetings
of the Board of Directors and of meetings held by all committees of the Board on
which he served during 1997.
The Board of Directors has a standing Audit Committee, Compensation and
Stock Option Committee, and Executive Committee. The Board of Directors does not
have a Nominating Committee.
During 1997, the Audit Committee was comprised of Messrs. Stieglitz and
Lerner for the entire year, William Lurie until August 1997 when he retired from
the Company's Board, and Mr. Zeidman beginning November 1997. The Audit
Committee held one meeting during 1997. The functions of the Audit Committee are
to select the independent public accountants of the Company, to review with them
the Company's
3
<PAGE> 6
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 1997, 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 1997.
During 1997, the Compensation and Stock Option Committee ("Compensation
Committee") was comprised of Messrs. Stieglitz and Lerner for the entire year,
William Lurie until August 1997 when he retired from the Company's Board, and
Mr. Zeidman beginning November 1997. 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 held 18 meetings during 1997.
BENEFICIAL OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock, as of June 15, 1998, by (i) persons known to the
Company to be beneficial owners of more than 5% of the Common Stock, (ii) each
of the Company's directors (iii) each of the named executive officers, and (iv)
all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) PERCENTAGE OF CLASS
- ------------------- -------------------------- -------------------
<S> <C> <C>
Paul A. Frame, Jr............................. 1,476,919(3) 6.2%
50 Briar Hollow Lane, 7th Floor West
Houston, TX 77027
Horace A. Calvert............................. 1,265,349(4) 5.4%
50 Briar Hollow Lane, 7th Floor West
Houston, TX 77027
Driehaus Capital Management, Inc.............. 1,241,170 5.5%
25 East Erie Street
Chicago, IL 60611
Herbert M. Pearlman........................... 846,105(5) 3.6%
537 Steamboat Road
Greenwich, CT 06830
David S. Lawi................................. 562,485(6) 2.4%
537 Steamboat Road
Greenwich, CT 06830
Debra D. Valice............................... 201,811(7) *
50 Briar Hollow Lane, 7th Floor West
Houston, TX 77027
Walter M. Craig, Jr........................... 62,071(8) *
2 Bridge Avenue
Redbank, NJ 07701
William Lerner................................ 23,170(9) *
423 East Beau Street
Washington, PA 15301
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) PERCENTAGE OF CLASS
- ------------------- -------------------------- -------------------
<S> <C> <C>
John E. Stieglitz............................. 14,000(9) *
Conspectus, Inc.
222 Purchase Street
Rye, NY 10580
Fred S. Zeidman............................... 8,000 *
2104 Chilton
Houston, TX 77019
All directors and executive officers as a
group (9 persons)........................... 4,459,910(10) 17.2%
</TABLE>
- ---------------
* Less than 1%
(1) Except as otherwise noted, each named holder has, to the best of the
Company's knowledge, sole voting and investment power with respect to the
shares indicated.
(2) Includes shares that may be acquired within 60 days by any of the named
persons upon exercise of any right.
(3) Includes 228,384 and 930,438 shares which may be acquired from the Company
within 60 days upon exercise of options and common stock purchase warrants,
respectively. The exercise prices of the options range from $2.78 to $21.50
per share, and the exercise prices of the common stock purchase warrants
range from $12.00 to $20.50 per share.
(4) Includes 393,404 and 465,418 shares which may be acquired from the Company
within 60 days upon exercise of options and common stock purchase warrants,
respectively. The exercise prices of the options range from $2.78 to $20.50
per share, and the exercise prices of the common stock purchase warrants
range from $6.53 to $20.50 per share.
(5) Includes 305,123 and 292,126 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 $12.56 to
$21.50, and the exercise prices of the common stock purchase warrants range
from $12.00 to $20.50 per share.
(6) Includes 271,789 and 187,270 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 $12.56 to
$21.50, and the exercise prices of the common stock purchase warrants range
from $12.00 to $20.50 per share.
(7) Includes 110,746 and 42,460 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 $12.56 to
$20.50 per share, and the exercise price of the common stock purchase
warrants is $13.56 per share.
(8) Includes 61,304 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 $16.00 to $21.44 per
share.
(9) Includes 14,000 shares which may be acquired from the Company within 60
days upon exercise of options at exercise prices ranging from $14.56 to
$15.25 per share.
(10) Includes an aggregate of 3,316,462 shares which may be acquired from the
Company within 60 days upon exercise of 1,337,446 options and 1,979,016
common stock purchase warrants, respectively, by the group of nine persons
which comprises all executive officers and directors. The exercise prices
of the options range from $2.78 to $21.50 per share, and the exercise
prices of the common stock purchase warrants range from $6.53 to $21.44 per
share.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation awarded to, earned by or paid to the Chief Executive Officer of the
Company and each of the four most highly compensated executive officers of the
Company other than the Chief Executive Officer (collectively, the "Named
Executive Officers") for the years indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------------------- ------------
OTHER STOCK
EAGLE ANNUAL OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) BONUS($)(2) COMPENSATION($)(3) SARS(#) COMPENSATION($)
--------------------------- ---- --------- ----------- ----------- ------------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul A. Frame................ 1997 $144,878 $ 905,099 $2,282,500 $1,301,809 932,160 $104,764(4)
Chief Executive Officer 1996 $141,898 $1,457,603 -- $1,204,334 148,600 $ 87,998
and President 1995 $139,870 $ 806,094 -- $ 766,456 117,984 $ 41,358
Horace A. Calvert............ 1997 $144,878 $ 903,598 $1,455,811 $1,301,809 378,882 $104,764(4)
Chief Operating Officer and 1996 $141,898 $1,457,603 -- $1,205,834 136,498 $ 87,998
Executive Vice President 1995 $139,870 $ 806,094 -- $ 766,456 161,612 $ 41,358
Herbert M. Pearlman.......... 1997 $128,438 $1,183,947 $1,819,763 -- 393,874 $104,764(4)
Chairman of the 1996 $124,818 $1,486,168 -- -- 124,582 $ 88,654
Board of Directors 1995 $121,182 $ 815,712 -- -- 199,898 $ 41,358
David S. Lawi................ 1997 $ 64,892 $ 591,975 $ 909,881 -- 293,874 $104,764(4)
Chairman of the Executive 1996 $ 60,588 $ 749,085 -- -- 124,582 $ 87,998
Committee 1995 $ 58,823 $ 407,856 -- -- 141,852 $ 41,358
Debra D. Valice.............. 1997 $138,583 $ 270,833 $ 502,713 -- 142,762 $ 70,816(4)
Senior Vice President of 1996 $113,519 $ 358,332 -- -- 142,570 $ 58,861
Finance, Treasurer and 1995 $111,896 $ 333,333 -- -- 69,384 $ 28,959
Corporate Secretary
</TABLE>
- ---------------
(1) Includes bonuses based on the Company's pre-tax profits, excluding the gains
related to the spin-off of the Company's former wholly-owned subsidiary,
Eagle Geophysical, Inc. ("Eagle"), and including a discretionary bonus for
Ms. Valice of $125,000. For Messrs. Frame and Calvert and Ms. Valice, also
includes 1997 bonuses based on the Company's 1992 stock performance plan of
$79,167, $79,167 and $20,833, which represented the final installment of the
bonus. No further payments are required to be made under this one-time bonus
plan.
(2) Includes contractual bonuses based on the Company's pre-tax profits related
to the spin-off of Eagle for Messrs. Frame, Calvert, Pearlman, and Lawi, an
additional bonus for Mr. Frame of $826,690 related to the spin-off of Eagle,
and a discretionary bonus for Ms. Valice of $502,713 related to the spin-off
of Eagle.
(3) Includes commissions based on sales.
(4) Includes amounts paid pursuant to a program (the "Incentive Compensation
Program") whereby 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 $100,014 contributed by the Company pursuant to its Incentive
Compensation Program for Messrs. Frame, Calvert, Pearlman and Lawi, and
$66,066 for Ms. Valice. Also includes $4,750 contributed by the Company as
401(k) Plan matching contributions for each of the Named Executive Officers.
6
<PAGE> 9
The following table sets forth certain information with respect to options
to purchase Common Stock granted during the year ended December 31, 1997 to each
of the Named Executive Officers.
OPTION/SAR GRANTS IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
PERCENT POTENTIAL REALIZABLE VALUE
NUMBER OF OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(7)
OPTIONS/SARS EMPLOYEES OR BASE EXPIRATION ----------------------------------------------
NAME GRANTED (#) IN 1997 PRICE ($/SH) DATE 0 PERCENT ($) 5 PERCENT ($) 10 PERCENT ($)
---- ------------ ------------ ------------ ---------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul A. Frame........ 57,400(1) 1.67 $19.00000 06/05/02 -- $ 296,673 $ 673,247
7,800(1) 0.23 $19.06250 06/05/02 $ (488) $ 39,827 $ 90,999
7,400(1) 0.21 $19.12500 06/05/02 $ (925) $ 37,322 $ 85,870
4,600(1) 0.13 $19.00000 06/06/02 -- $ 23,775 $ 53,954
800(1) 0.02 $18.75000 06/09/02 $ 200 $ 4,344 $ 9,584
16,000(1) 0.46 $18.50000 06/09/02 $ 8,000 $ 90,881 $ 195,687
4,000(1) 0.12 $18.43750 06/09/02 $ 2,250 $ 22,970 $ 49,172
38,200(1) 1.11 $18.37500 06/10/02 $ 23,875 $ 222,195 $ 472,031
16,600(1) 0.48 $18.25000 06/10/02 $ 12,450 $ 98,631 $ 207,198
17,600(1) 0.51 $18.37500 06/11/02 $ 11,000 $ 102,372 $ 217,480
20,000(1) 0.58 $18.31250 06/11/02 $ 13,750 $ 117,582 $ 248,387
4,600(1) 0.13 $18.25000 06/11/02 $ 3,450 $ 27,331 $ 57,416
1,000(1) 0.03 $18.25000 06/12/02 $ 750 $ 5,942 $ 12,482
8,400(1) 0.24 $18.12500 06/12/02 $ 7,350 $ 50,960 $ 105,897
10,000(1) 0.29 $18.00000 06/12/02 $ 10,000 $ 61,916 $ 127,318
34,620(1) 1.01 $17.81250 06/13/02 $ 41,111 $ 220,845 $ 447,267
1,800(1) 0.05 $17.87500 06/13/02 $ 2,025 $ 11,370 $ 23,142
49,180(1) 1.43 $17.81250 06/13/02 $ 58,401 $ 313,725 $ 635,372
17,800(1) 0.52 $17.81250 06/16/02 $ 21,138 $ 113,754 $ 229,989
20,000(1) 0.58 $17.75000 06/16/02 $ 25,000 $ 129,063 $ 259,664
19,600(1) 0.57 $17.68750 06/16/02 $ 25,725 $ 127,707 $ 255,696
13,000(1) 0.38 $17.62500 06/16/02 $ 17,875 $ 85,516 $ 170,407
60,000(1) 1.74 $17.50000 06/16/02 $ 90,000 $ 402,190 $ 793,993
200,000(2) 5.81 $20.50000 11/20/02 $ (75,000) $1,037,033 $2,382,303
300,000(3) 8.71 $20.50000 11/20/02 $(112,500) $1,555,550 $3,573,454
1,760(4) 0.05 $19.50000 12/10/02 $ (1,320) $ 7,797 $ 18,827
Horace A. Calvert.... 200,000(2) 5.81 $20.50000 11/20/02 $ (75,000) $1,037,033 $2,382,303
71,082(4) 2.06 $19.56250 12/08/02 -- $ 384,181 $ 848,940
9,600(4) 0.28 $19.40625 12/08/02 $ 1,500 $ 53,386 $ 116,154
8,200(4) 0.24 $19.50000 12/08/02 $ 513 $ 44,832 $ 98,446
2,000(4) 0.06 $19.56250 12/08/02 -- $ 10,810 $ 23,886
1,000(4) 0.03 $19.37500 12/08/02 $ 188 $ 5,592 $ 12,131
24,000(4) 0.70 $17.18750 12/08/02 $ 57,000 $ 186,714 $ 343,634
39,400(4) 1.14 $17.25000 12/08/02 $ 91,113 $ 304,060 $ 561,671
1,000(4) 0.03 $17.53125 12/08/02 $ 2,031 $ 7,436 $ 13,974
1,000(4) 0.03 $17.75000 12/08/02 $ 1,813 $ 7,217 $ 13,756
3,000(4) 0.09 $17.78125 12/08/02 $ 5,344 $ 21,558 $ 41,173
200(4) 0.01 $17.84375 12/08/02 $ 344 $ 1,425 $ 2,732
2,400(4) 0.07 $17.90625 12/08/02 $ 3,975 $ 16,946 $ 32,638
3,000(4) 0.09 $17.96875 12/08/02 $ 4,781 $ 20,996 $ 40,611
700(4) 0.02 $17.68750 12/08/02 $ 1,313 $ 5,096 $ 9,673
10,000(4) 0.29 $17.56250 12/08/02 $ 20,000 $ 74,048 $ 139,431
2,300(4) 0.07 $17.75000 12/08/02 $ 4,169 $ 16,600 $ 31,638
</TABLE>
7
<PAGE> 10
<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(7)
OPTIONS/SARS EMPLOYEES OR BASE EXPIRATION ----------------------------------------------
NAME GRANTED (#) IN 1997 PRICE ($/SH) DATE 0 PERCENT ($) 5 PERCENT ($) 10 PERCENT ($)
---- ------------ ------------ ------------ ---------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Herbert M.
Pearlman........... 20,000(5) 0.58 $20.78125 07/17/02 $ (6,250) $ 105,858 $ 246,554
13,700(5) 0.40 $20.81250 07/17/02 $ (4,709) $ 72,084 $ 168,462
946(5) 0.03 $20.87500 07/17/02 $ (384) $ 4,918 $ 11,573
6,154(5) 0.18 $20.87500 07/17/02 $ (2,500) $ 32,149 $ 75,306
8,700(5) 0.25 $20.25000 07/22/02 $ 1,903 $ 50,886 $ 111,899
1,400(5) 0.04 $20.28125 07/23/02 $ 263 $ 8,145 $ 17,963
10,000(5) 0.29 $20.31250 07/23/02 $ 1,563 $ 57,865 $ 127,995
100(5) 0.00 $20.37500 07/23/02 $ 9 $ 572 $ 1,274
9,800(5) 0.28 $20.40625 07/29/02 $ 613 $ 55,911 $ 124,531
30,000(5) 0.87 $20.53125 07/30/02 $ (1,875) $ 167,779 $ 373,016
7,500(5) 0.22 $20.71875 08/22/02 $ (6,094) $ 34,973 $ 86,125
2,500(5) 0.07 $20.71875 08/25/02 $ (2,031) $ 11,688 $ 28,712
10,074(5) 0.29 $20.75000 08/25/02 $ (8,500) $ 46,782 $ 115,382
1,900(5) 0.06 $20.81250 08/25/02 $ (1,722) $ 8,705 $ 21,643
500(5) 0.01 $20.75000 08/26/02 $ (422) $ 2,322 $ 5,727
12,700(5) 0.37 $20.31250 08/28/02 $ (5,159) $ 64,687 $ 149,183
2,000(5) 0.06 $20.25000 08/29/02 $ (688) $ 10,312 $ 23,618
500(5) 0.01 $20.37500 09/02/02 $ (16) $ 2,795 $ 6,194
9,500(5) 0.28 $20.34375 09/02/02 -- $ 53,396 $ 117,991
10,000(5) 0.29 $20.34375 09/03/02 -- $ 56,206 $ 124,201
35,900(5) 1.04 $20.62500 09/04/02 -- $ 204,569 $ 452,044
200,000(2) 5.81 $20.50000 11/20/02 $ (75,000) $1,037,033 $2,382,303
David S. Lawi........ 20,000(5) 0.58 $20.78125 07/17/02 $ (6,250) $ 105,858 $ 246,554
13,700(5) 0.40 $20.81250 07/17/02 $ (4,709) $ 72,084 $ 168,462
946(5) 0.03 $20.87500 07/17/02 $ (384) $ 4,918 $ 11,573
6,154(5) 0.18 $20.87500 07/17/02 $ (2,500) $ 31,995 $ 75,288
8,700(5) 0.25 $20.25000 07/22/02 $ 1,903 $ 50,886 $ 111,899
1,400(5) 0.04 $20.28125 07/23/02 $ 263 $ 8,145 $ 17,963
10,000(5) 0.29 $20.31250 07/23/02 $ 1,563 $ 57,865 $ 127,995
100(5) 0.00 $20.37500 07/23/02 $ 9 $ 572 $ 1,274
9,800(5) 0.28 $20.40625 07/29/02 $ 613 $ 55,911 $ 124,531
30,000(5) 0.87 $20.53125 07/30/02 $ (1,875) $ 167,779 $ 373,016
7,500(5) 0.22 $20.71875 08/22/02 $ (6,094) $ 34,973 $ 86,125
2,500(5) 0.07 $20.71875 08/25/02 $ (2,031) $ 11,688 $ 28,712
10,074(5) 0.29 $20.75000 08/25/02 $ (8,500) $ 46,782 $ 115,382
1,900(5) 0.06 $20.81250 08/25/02 $ (1,722) $ 8,705 $ 21,643
500(5) 0.01 $20.75000 08/26/02 $ (422) $ 2,322 $ 5,727
12,700(5) 0.37 $20.31250 08/28/02 $ (5,159) $ 64,687 $ 149,183
2,000(5) 0.06 $20.25000 08/29/02 $ (688) $ 10,312 $ 23,618
500(5) 0.01 $20.37500 09/02/02 $ (16) $ 2,795 $ 6,194
9,500(5) 0.28 $20.34375 09/02/02 -- $ 53,396 $ 117,991
10,000(5) 0.29 $20.34375 09/03/02 -- $ 56,206 $ 124,201
35,900(5) 1.04 $20.62500 09/04/02 -- $ 204,569 $ 452,044
100,000(2) 2.90 $20.50000 11/20/02 $ (37,500) $ 518,517 $1,191,151
Debra D. Valice...... 64,762(5) 1.88 $20.00000 07/14/02 $ (30357) $ 392,567 $ 848,866
50,000(6) 1.45 $20.50000 11/20/07 $ (18,750) $ 614,075 $1,584,953
</TABLE>
- ---------------
(1) 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 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.
(2) These common stock purchase warrants (the "Executive Warrants") were granted
pursuant to the 1998 Executive Compensation Plan (the "Compensation Plan")
which was approved by stockholders on
8
<PAGE> 11
November 20, 1997. The Executive Warrants vested 20% upon stockholder
approval with the remaining 80% vesting 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 Executive Warrants will expire on the expiration date indicated,
subject to certain events related to termination of employment.
(3) These common stock purchase warrants were granted pursuant to the
Compensation Plan and vested immediately upon stockholder approval of the
Plan. These warrants will expire on the expiration date indicated, subject
to certain events related to termination of employment.
(4) These options 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 Reload Plan. On November 20, 1997, the
stockholders of the Company approved an amendment to the Company's 1993
Incentive Option Plan which increased the number of shares available for
granting in order to allow for the granting of options to satisfy the
Company's obligations under the Warrant Reload Plan. This will allow the
Company to comply with the requirements of Section 162(m) of the Internal
Revenue Code and therefore maximize tax deductibility. As a result, these
options were granted under the Company's 1993 Incentive Stock Option Plan,
as amended, and were fully exercisable on the date of grant. The options
will expire on the expiration date indicated, subject to certain events
related to termination of employment.
(5) 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 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. During 1997, the Company canceled
these warrants and reissued the same number of options under the same terms
as the original grant.
(6) These options were granted under the Company's 1993 Incentive Stock Option
Plan, as amended, with 10% of the options granted becoming exercisable on
the date of grant of November 20, 1997, and with an additional 10% of the
options becoming exercisable on each successive anniversary date for four
years, with full vesting occurring on the fifth anniversary date. The
options were granted for a term of 10 years, subject to certain events
related to termination of employment.
(7) 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.
9
<PAGE> 12
The following table sets forth certain information with respect to the
exercise of options during the year ended December 31, 1997, and unexercised
options held at December 31, 1997, and the value thereof, by each of the Named
Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN 1997
AND 12/31/97 OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE
SHARES OPTIONS/SARS MONEY OPTIONS/SARS AT
ACQUIRED AT 12/31/97 (#) 12/31/97 ($)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul A. Frame................... 447,574 $5,209,582 1,142,155 226,667 $1,600,231 $300,000
Horace A. Calvert............... 196,862 $2,597,957 842,155 226,667 $4,413,260 $300,000
Herbert M. Pearlman............. 193,874 $2,700,410 597,249 193,333 $1,276,312 $152,083
David S. Lawi................... 193,874 $2,700,410 459,059 96,667 $ 689,342 $ 76,042
Debra D. Valice................. 123,888 $ 915,386 153,206 95,000 $ 233,558 $ 88,542
</TABLE>
EMPLOYMENT ARRANGEMENTS
Agreements with Messrs. Frame, Calvert, Pearlman and Lawi
On November 20, 1997, the stockholders approved the 1998 Executive
Compensation Plan which relates to compensation after January 1, 1998. The
employment arrangements that had been in place since 1991 between the Company
and Herbert M. Pearlman, Paul A. Frame, Horace A. Calvert and David S. Lawi (the
"Executives"), for service in their respective capacities set forth in the
listing of directors and executive officers have been amended in accordance with
the 1998 Executive Compensation Plan. As a result of these amendments, Messrs.
Pearlman, Frame, Calvert and Lawi now receive an annual base salary of $428,435,
$444,878, $444,878, and $214,217, respectively.
The amended agreements also provide that the Executives shall receive bonus
payments based on the annual Pre-Tax Profits (the "PTP") of the Company and its
majority-owned subsidiaries ("Subsidiaries"). The PTP must exceed $10 million
for fiscal 1998 and each of the four years thereafter, $12 million for fiscal
2003 and each of the four years thereafter, and $14 million for fiscal 2008 and
thereafter (the "PTP Threshold"). If the PTP exceeds the PTP Threshold, the
Executives will receive the following bonuses based on the annual PTP of the
Company and its Subsidiaries:
<TABLE>
<CAPTION>
PERCENTAGE UP TO PERCENTAGE ABOVE
$50 MILLION $50 MILLION
PTP 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.
The amended agreements further provide that Messrs. Frame and Calvert shall
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.
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
10
<PAGE> 13
to terminate the agreement immediately and receive from the Company all
compensation required to be paid during the unexpired term thereof as well as
the severance payment described below without any obligation to perform
consulting services as described below. The Company believes that the Change in
Control provisions in these agreements may tend to discourage attempts to
acquire a controlling interest in the Company and may also tend to make the
removal of management more difficult.
Each agreement 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. Each agreement provides that if it is not renewed, the Company will
pay the employee for two additional years' compensation including his then
current base salary plus the average of all 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 also provides for monthly salary continuation payments
for one year upon the employee's death, so long as the agreement is in full
force and effect at the time of the employee's death. The annual salary
continuation amount will equal the employee's base salary at his date of death
plus an average of the bonuses paid for the three previous calendar years.
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.
Agreement with Ms. Valice
Effective as of January 1, 1993, the Company entered into an employment
agreement with Ms. Valice for service in her capacities set forth in the listing
of directors and executive officers. The agreement provides for an annual base
salary of $138,583 and an annual bonus of 2% of the Company's pre-tax profits up
to $125,000, plus an additional amount as determined by the Board of Directors
of the Company.
The agreement includes the same Charge in Control provision as described
above for the Frame and Calvert agreements, and 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. The agreement provides that if it is not renewed,
the Company will pay Ms. Valice for two additional years' compensation including
her then current base salary plus the average of all bonuses paid to her for the
then prior three years. The severance payments are contingent upon Ms. Valice
remaining available to perform consulting services for the benefit of the
Company. The agreement also provides for monthly salary continuation payments
for one year upon Ms. Valice's death, so long as the agreement is in full force
and effect at the time of her death. The annual salary continuation amount will
equal Ms. Valice's base salary at her date of death plus an average of the
bonuses paid for the three previous calendar years.
The agreement provides for certain noncompetition and nondisclosure
covenants of Ms. Valice 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.
Bonus Based On Stock Performance
On July 21, 1992, when the stock price was $2.6875, the Compensation and
Stock Option Committee and the entire Board of Directors approved payment of a
one-time $2,500,000 special stockholder value bonus to be divided among Messrs.
Frame and Calvert, Ms. Valice and two other key employees upon the event of the
market price of the Company's stock maintaining or exceeding $10 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 and was paid
equally over the 12 quarters following the Target Date.
11
<PAGE> 14
Directors Compensation
Outside directors receive an annual fee of $30,000 for serving on the board
and are reimbursed for out of pocket expenses for meeting attendance. No
additional fees are paid for serving on committees, except that committee chairs
receive an additional $5,000 annually or, subject to stockholder approval,
10,000 options to purchase the Company's Common Stock. 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
1, 1997, 60,000 shares have been reserved for issuance under this plan and
directors (including former directors) have accumulated 1,643 deferred shares in
their accounts which began to be distributed in January 1998 in five equal
annual installments. 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 Stockholders 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 2,000 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 10,000 shares of Common Stock at an exercise price equal to
the fair market value of the Common Stock on the date of grant. Options granted
under the Plan become exercisable one year after the date of grant. All options
expire at the earlier of five years after the date of grant, twelve months after
the optionee ceases to serve as a director due to death, disability, or
retirement at or after age 65, or sixty days after the optionee otherwise ceases
to serve as a director of the Company. If a director ceases to serve as such for
any reason other than death, disability, or retirement at or after age 65, the
option may be exercised only if it was exercisable at the date of such cessation
of service. During 1997, William Lerner and John E. Stieglitz were granted
12,000 options each (including 10,000 for chairing a board committee, which
grant is subject to stockholder approval of the proposed amendments to the
Plan), at an exercise price of $20.125. In addition, Fred S. Zeidman, who was
first appointed to the Board of Directors on September 5, 1997, received 10,000
options at an exercise price of $20.625.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation and Stock Option Committee is composed of
William Lerner, John E. Stieglitz and Fred S. Zeidman.
No member of the Compensation Committee of the Board of Directors of the
Company was, during 1997, 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 1997, 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.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers, directors and persons who own
more than 10% of the Company's Common Stock to file reports of ownership and
changes in ownership concerning the Common Stock with the Securities and
Exchange Commission and to furnish the Company with copies of all Section 16(a)
forms they file. Based upon the Company's review of the Section 16(a) filings
that have been received by the Company, the Company believes that all filings
required to be made under Section 16(a) during 1997 were timely made.
12
<PAGE> 15
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
NEW EXECUTIVE COMPENSATION PLAN
The Compensation Committee of the Company (the "Committee"), which
currently consists of three outside directors, met on numerous occasions during
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 the tax deduction
limitations imposed by 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"). Section 162(m) imposes limits on the
Company's ability to deduct compensation expense for income tax purposes for any
compensation paid to each of the Named Executive Officers in excess of
$1,000,000 per year. As a result of this intensive review, the Company proposed
a restructuring of the Company's executive compensation. The resulting executive
compensation plan, which is applicable to Messrs. Frame, Calvert, Pearlman and
Lawi, revised the bonus calculations and imposed profitability conditions on the
payment of bonuses, increased base salaries, and provided for grants of certain
common stock purchase warrants. This new executive compensation plan was
approved by Stockholders at the Company's annual meeting in November 1997. The
new plan became effective January 1, 1998, and Messrs. Frame, Calvert, Pearlman
and Lawi are now being compensated under this new plan.
INCREASE IN SHARES AVAILABLE FOR GRANTS UNDER 1993 STOCK OPTION 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, the task of seeking to maximize
the deductibility of compensation resulting from future exercises of options and
warrants. As a result of this review, the Company proposed an increase in the
number of shares that could be issued upon exercise of options under the
Company's 1993 Stock Option Plan so that previously granted warrants that did
not meet the deductibility requirements of Section 162(m) could be canceled and
replaced with options granted under the 1993 Stock Option Plan that did meet
these deductibility requirements. A portion of this increase was also reserved
for the granting of options under the 1993 Option Plan in the future to reload,
pursuant to the Company's Warrant Reload Plan, certain warrants currently held
by Messrs. Frame, Calvert, Pearlman and Lawi. This increase in the number of
shares available under the Company's 1993 Stock Option Plan was also approved by
Stockholders at the Company's annual meeting in November 1997.
PERFORMANCE-BASED CASH COMPENSATION
Prior to January 1, 1998, Mr. Frame received a base salary of $144,878,
plus a 1% commission on the first $12,000,000 in revenues for the year and a
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 were resale revenues. In addition, Mr. Frame received a bonus of 4% of
the Company's pre-tax profits. Similarly, the other Named Executive Officers
each received a relatively low base salary plus commissions based on revenues
and/or bonuses based on pre-tax profits. Ms. Valice's contractual pre-tax
profits bonus is limited to $125,000, but she may also receive an additional
bonus at the discretion of the Board of Directors.
In addition to his contractual compensation, the Committee recommended, and
the Board of Directors approved, a special bonus for Mr. Frame to reward him for
his successful efforts in the spin-off of the Company's former wholly-owned
subsidiary, Eagle Geophysical, Inc. The Committee felt that Mr. Frame was
instrumental in this transaction, which raised cash proceeds for the Company of
approximately $29.7 million from the sale of Eagle stock and resulted in a gain
to the Company on disposition of this stock of approximately $23.4 million. In
addition, the Company retains 1,520,000 shares of Eagle stock (17.7% of Eagle's
outstanding shares) with a value as of June 15, 1998 of approximately $18.2
million. The amount of this special bonus is 4% of the gain on disposition of
the Eagle stock less certain charges, which resulted in a
13
<PAGE> 16
bonus of $826,690 in 1997. Under the terms of the special bonus as recommended
by the Committee and approved by the Board of Directors, Mr. Frame will receive
additional amounts calculated on the same basis when the remaining shares of
Eagle are sold by the Company. During 1997, Ms. Valice received a discretionary
bonus of $627,713, of which $502,713 was attributable to pre-tax profits
generated from the spin-off of Eagle.
Under the new compensation plan approved by the Company's Stockholders, Mr.
Frame receives an increased base salary of $444,878. Similarly, Messrs. Calvert,
Pearlman and Lawi received increases in their base salaries. These executives
will also receive a bonus based on the company's pre-tax profits if those
pre-tax profits exceed a threshold amount, as described in detail under the
heading "Employment Arrangements -- Employment Agreements with Messrs. Frame,
Calvert, Pearlman and Lawi" elsewhere in this Proxy Statement. Mr. Frame and
Calvert also receive a bonus based on the Company's annual sales above $30
million if the Company's pre-tax profits exceed a threshold amount, as described
in detail elsewhere in this Proxy Statement. Ms. Valice's compensation was not
changed by the new executive compensation plan.
For the year ended December 31, 1997 (the final year before the
implementation of the new executive compensation plan), Mr. Frame's total cash
compensation increased 83.1% as compared to the total cash compensation he
received for the year ended December 31, 1996, including the special bonus
relating to the Eagle spin-off but 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 1997 resulting from record performance by
both its data licensing and oil and gas exploration operations offset by the
impairment of the Company's oil and gas properties due to lower market prices
and a loss on extinguishment of a volumetric production payment, plus the gain
resulting from the Eagle spin-off. 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. The total cash
compensation to Ms. Valice increased due to the Board of Directors granting the
discretionary bonus to her based on the Company's performance and the spin-off
of Eagle.
BONUSES BASED ON STOCK PERFORMANCE
On January 27, 1995, the Compensation Committee recommended and the Board
of Directors approved a Stockholder Value Incentive Bonus under which a cash
bonus aggregating $4,000,000 would have been paid to all salaried employees if
the market price of the Company's stock reached $30.00 per share on or before
April 30, 1998, and maintained or exceeded that price for at least 90
consecutive days. Since the condition required for the payment of this bonus was
not achieved, no bonuses were paid under the plan and the plan is no longer
operative.
In 1992, when the Company's stock price was $2.688 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, Ms. Valice and two
other key employees if the Company's stock price reached $10 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, 1997, Messrs. Frame and Calvert each received $79,167 and Ms. Valice
received $20,833 under this bonus plan. No further payments are required to be
paid under this one-time bonus plan.
STOCK OPTION AND COMMON STOCK PURCHASE WARRANT PLANS
During 1997, 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 the 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.
14
<PAGE> 17
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. Certain of these warrants are subject to reloading upon
exercise under the Company's Warrant Reload Plan, which provides for the grant
of a like number of new warrants at an exercise price equal to the market price
of the Common Stock on the date of exercise of the reloaded warrant and expiring
on the later of five years from the date of grant or the expiration date of the
reloaded warrants. The new warrants granted to reload the exercised warrants are
not reloadable under the Warrant Reload Plan.
Compensation upon the exercise of warrants and reload warrants does not
meet the deductibility requirements of Section 162(m). Therefore, the Company
proposed, and the Stockholders approved at the annual meeting in November 1997,
an increase in the number of shares available for granting options under the
1993 Stock Option Plan to use for granting reload options rather than warrants
under the Warrant Reload Plan. These reload options are intended to meet the
deductibility requirements of Section 162(m).
Mr. Frame was granted options to purchase 98,600 shares of Common Stock
under the 1993 Option Plan in November 1997 upon cancellation of the same number
of Common Stock purchase warrants that were previously granted to him as reload
grants under the Company's Warrant Reload Plan. This grant was made possible by
the increase in the number of shares available for granting under the 1993 Stock
Option Plan approved by Stockholders at the Company's annual meeting in November
1997. Similarly, options to purchase a total of 635,822 shares of Common Stock
were granted to the other Named Executive Officers in November 1997 upon
cancellation of a like number of previously granted warrants. These grants did
not increase the beneficial ownership of stock of the Company of any of the
Named Executive Officers, but merely replaced warrants that did not meet the
deductibility requirements of Section 162(m) with options that do meet these
deductibility requirements. Therefore, these option grants are not reflected in
the Stock Option Grants Table appearing elsewhere in this Proxy Statement.
Options were also granted to other officers and key employees of the Company
under the 1993 Option Plan at various times throughout the year to reward these
officers and key employees for their efforts.
The new executive compensation plan also provided for the grants of
warrants to purchase 500,000, 200,000, 200,000 and 100,000 Common Stock to
Messrs. Frame, Calvert, Pearlman and Lawi, respectively. These warrant grants
were approved by the Stockholders of the Company at the annual meeting on
November 20, 1997 at an exercise or base price of $20.50 and expire in November
2002. Further information is reflected in the Stock Option Grants Table
appearing elsewhere in this Proxy Statement.
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, Chairman
William Lerner
Fred S. Zeidman
15
<PAGE> 18
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, 1997)
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) SEI Russell 2000 Peer Group**
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 122.22 118.91 110.55
1994 191.11 116.74 101.66
1995 314.44 149.94 145.06
1996 355.56 174.67 212.98
1997 304.44 213.73 322.69
</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, 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).
16
<PAGE> 19
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 $2.6875 per share. The Company recorded compensation
expense due to the below market interest rate on these loans of $43,000 in 1997.
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 1997 were approximately $441,000,
$441,000 and $110,000, respectively. As of June 15, 1998, the aggregate amounts
of principal and interest outstanding on such loans were approximately $416,000,
$416,000 and $104,000, respectively.
On August 11, 1997, the Company's wholly-owned seismic data acquisition
crew subsidiary, Eagle Geophysical, Inc., completed an initial public offering
("Offering") in which the Company sold 1,880,000 of its 3,400,000 shares of
Eagle common stock as a selling stockholder. As of June 15, 1998, the Company
has a 17.7% ownership interest in Eagle. The Company owed Eagle and its
subsidiaries $12,500,000 at December 31, 1997, for seismic data acquisition
services provided to the Company and its subsidiaries subsequent to the Offering
date. The Company incurred charges of $22,200,000 for these services from the
period August 11, 1997 through December 31, 1997. Costs incurred for these
services were based on agreed upon contractual amounts and terms similar to
contracts with third party contractors.
Paul Frame, the Chief Executive Officer, President and Director of the
Company, is also a Director of Eagle and Chairman of the Executive Committee of
Eagle's Board of Directors. In addition to his duties as a director of Eagle,
Mr. Frame has responsibility for strategic planning, marketing, and domestic and
international growth of Eagle's business pursuant to a bonus agreement with
Eagle. The Board of Directors of the Company has agreed to allow Mr. Frame to
devote up to 20% of his time to Eagle until December 31, 1999. Pursuant to the
bonus agreement, Eagle will pay Mr. Frame bonuses each year during the term of
the bonus agreement equal to 1% of the increases in Eagle's gross revenues for
such year over Eagle's gross revenues for the prior year (excluding revenues
attributable to mergers and acquisitions in the year of such merger or
acquisition unless it is the final year of the term of the bonus agreement) and
4% of Eagle's net after tax profits in excess of its 1996 pro forma combined net
after-tax profits of $800,000. The bonus agreement with Mr. Frame expires
December 31, 1999. Mr. Frame also receives annual director fees and meeting fees
as an outside director of Eagle.
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 "1997 Partnership"). The 1997
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 1997 Partnership. The 1997 Partnership
is a blind pool which invested partnership funds throughout the year in mineral
interests. Pursuant to the partnership agreement governing the 1997 Partnership,
DDD Energy agreed to use its reasonable efforts to allow the 1997 Partnership to
invest, along with DDD Energy, in all non-operating mineral interests in which
DDD Energy invested during 1997, and the 1997 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 1997 Partnership allocated to
acquisitions were exhausted. Pursuant to the partnership agreement, the amount
of the investment of the 1997 Partnership equals two and one half percent of the
total investment in each such mineral interest made by the 1997 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 1997
Partnership to determine the total level of investment by DDD Energy and the
1997 Partnership. Therefore, DDD Energy does not forego any opportunity to
invest in transactions by allowing the 1997 Partnership to invest with DDD
Energy. All sums required for the 1997 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 1997 Partnership's investments are
provided by DDD Energy or the Company. During 1997, the Contributing General
Partners contributed an aggregate of $575,000 to the 1997 Partnership. Horace A.
Calvert, Herbert
17
<PAGE> 20
M. Pearlman, David S. Lawi, Debra D. Valice, 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%, 4.4%, 4.4%, 1.7%, 1.7%, 1.7%, 1.7%
and 1.7% general partnership interests, respectively, in the 1997 Partnership.
PROPOSAL TO APPROVE AMENDMENTS TO THE NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN
In 1994, the Board of Directors of the Company adopted and the Stockholders
approved the Non-Employee Directors' Stock Option Plan (the "Plan"). The Plan is
intended to promote ownership by non-employee Directors of a greater proprietary
interest in the Company, thereby aligning such Directors' interests more closely
with the interests of stockholders of the Company, and to assist the Company in
attracting and retaining highly qualified persons to serve as non-employee
Directors. The Plan provides for automatic grants of options to non-employee
Directors of the Company upon their election and reelection to the Board of
Directors.
In November 1997, the Board of Directors approved certain amendments to the
Plan, subject to stockholder approval. These amendments primarily increase the
number of shares available for issuance upon the exercise of options granted
under the Plan and provide that a non-employee Director who serves as chairman
of a committee of the Board may receive options to purchase 10,000 shares of
Common Stock of the Company if he or she elects to forgo the additional
directors fees attributable to serving as chairman of such committee. The plan
and the proposed amendments are summarized below. This summary is qualified in
its entirety by reference to the full text of the amended Plan, attached hereto
as Exhibit A.
The Plan currently provides for the automatic grant to a non-employee
Director, at the time he or she is first elected or appointed as a Director of
the Company, of an option to purchase 10,000 shares of Common Stock. The Plan
also provides for an annual grant to each non-employee Director of an option to
purchase 2,000 shares of Common Stock upon any subsequent reelection. Such
grants are made automatically on the date Directors are elected or reelected at
the Company's annual meeting. Only one option may be granted to a non-employee
Director in any calendar year, so that a Director who is initially elected or
appointed during a calendar year and receives a 10,000-share option grant at
that time does not receive an additional option grant at the annual meeting that
year if the annual meeting follows his or her initial election or appointment.
Pursuant to the proposed amendments to the Plan, a non-employee Director
will also be granted an option to purchase an additional 10,000 shares of Common
Stock upon his or her election as chairman of a committee of the Board of
Directors, but only if the Director elects to forgo any additional directors
fees attributable to acting as chairman of such committee.
A non-employee Director under the Plan is a Director who, on an option
grant date, is not and has not been during the preceding three month period an
employee of the Company or any parent or subsidiary of the Company. Currently,
three Directors, Messrs. Lerner, Stieglitz and Zeidman, qualify as non-employee
Directors under the Plan. Mr. Lerner is currently chairman of the Company's
Audit Committee, and Mr. Stieglitz is currently chairman of the Company's
Compensation and Stock Option Committee.
Stock options granted under the Plan are non-qualified stock options having
an exercise price equal to 100% of the fair market value of the Common Stock at
the date of grant. Directors are not required to pay any cash consideration at
the time of grant of options. A Director may pay the exercise price of an option
in cash or by surrendering previously acquired shares of Common Stock.
All options become exercisable one year after the date of grant. Options
granted under the Plan 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 ceases to serve as a Director of the Company for any other reason. If a
Director ceases to serve as such for any reason other than death, disability, or
retirement at or after age 65, the option may be exercised only if it was
exercisable at the date of such cessation of service. A Director will not be
treated as having ceased to serve as such if he or she continues as an employee
of the Company or any subsidiary. Options are not transferable by the optionee
18
<PAGE> 21
otherwise than by will or by the laws of descent and distribution or to a
designated beneficiary in the event of death, and are exercisable during the
Director's lifetime only by the Director.
Currently, a total of 150,000 shares of Common Stock are reserved and
available for issuance and delivery under the Plan. The proposed amendments to
the Plan will increase this to 250,000 shares. Such shares may be authorized and
unissued shares or treasury shares. If any option expires or terminates without
having been exercised in full, the shares remaining subject to such option will
again be available for option grants under the Plan. The number and kind of
shares issuable under the Plan will be appropriately adjusted by the Board in
the event of a recapitalization, reorganization, merger, consolidation,
spin-off, combination, repurchase, exchange of shares or other securities of the
Company, stock split or reverse split, liquidation, dissolution, certain
extraordinary dividends, or other similar corporate transaction or event in
order to prevent dilution or enlargement of Directors' rights under the Plan.
The number of shares reserved under the plan and the number of options granted
have been adjusted to the amounts described in this summary for the two-for-one
stock split accomplished by the Company in December 1997.
The Plan is administered by the Board of Directors, provided that any
action by the Board shall be taken only if approved by vote of a majority of the
Directors who are not then eligible to participate in the Plan. The Plan may be
amended, altered, suspended, discontinued, or terminated by the Board without
further stockholder approval, unless such approval is required by law or
regulation or under the rules of any automated quotation system (such as the
NASDAQ National Market System) or stock exchange on which the Common Stock is
then quoted or listed. Thus, stockholder approval will not necessarily be
required for amendments which might increase the cost of the Plan or broaden
eligibility. Stockholder approval will not be deemed to be required under laws
or regulations that condition favorable treatment of optionees on such approval,
although the Board may, in its discretion, seek stockholder approval in any
circumstance in which it deems such approval advisable.
The amendments to the Plan will become effective upon their approval by
stockholders, provided that options granted under the proposed amendments in
November 1997 to Messrs. Lerner and Stieglitz upon their election as chairman of
committees of the Board, which options were granted subject to stockholder
approval, will be effective as of the date of grant of November 20, 1997. Both
Mr. Lerner and Mr. Stieglitz elected to forgo additional directors fees
attributable to acting as chairman of committees of the Board and so were
granted these options. If the proposed amendments are not approved by
stockholders, the Company will pay Messrs. Lerner and Stieglitz these additional
directors fees, and the options will be void.
Unless earlier terminated by the Board, the Plan will terminate when no
shares remain available for further option grants and no previously granted
options remain outstanding.
The following table sets forth the number of options that were
automatically granted in 1997 to non-employee Directors as a group under the
Plan as it is proposed to be amended, including the options granted to Messrs.
Lerner and Stieglitz that were granted subject to stockholder approval of the
amendments to the Plan:
NEW PLAN BENEFITS
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF OPTIONS
----------------- -----------------
<S> <C>
Non-employee Directors (3 in number) 34,000
</TABLE>
The closing price of the Company's Common Stock on June 15, 1998 was
$14.6875 per share. On November 20, 1997, the date on which options were
granted, subject to stockholder approval, to Messrs. Lerner and Stieglitz to
purchase 10,000 shares of Common Stock each, the reported closing price of the
Company's Common Stock by the New York Stock Exchange was $20.125 per share,
which is the exercise price of these options.
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 Plan. This discussion is intended for the
information of stockholders considering how to vote at the Annual Meeting and
not as tax
19
<PAGE> 22
guidance to optionees. The grant of an option will create no tax consequences
for the optionee or the Company, provided that in the case of an option granted
to a non-employee director who is elected to serve as chairman of a committee,
the optionee irrevocably elects to receive the option prior to rendering the
corresponding services as chairman. Upon exercise of an option, the optionee
must generally recognize ordinary income equal to the fair market value of the
Common Stock acquired on the date of exercise minus the exercise price, and the
Company will be entitled to a deduction equal to the amount recognized as
ordinary income by the optionee. A disposition of shares acquired upon the
exercise of an option generally will result in short-term, mid-term or long-term
capital gain or loss measured by the difference between the sale price and the
participant's tax basis (i.e., the exercise price plus the amount recognized as
ordinary income) in such shares. Generally, there will be no tax consequences to
the Company in connection with a disposition of option shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP as independent
auditors for the Company for the year ending December 31, 1998, 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 1999 must be received by the Company at 50 Briar
Hollow Lane, 7th Floor West, Houston, Texas 77027, Attention Debra D. Valice, no
later than February 26, 1999.
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 materials to beneficial owners.
June 26, 1998
Houston, Texas
20
<PAGE> 23
EXHIBIT A
SEITEL, INC.
AMENDED NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
[DELETIONS ARE SHOWN IN STRIKE-THROUGH TEXT AND ADDITIONS ARE SHOWN IN
UNDERLINED
TEXT AS COMPARED TO THE TEXT OF THE PLAN AS APPROVED BY STOCKHOLDERS IN JUNE
1994]
[NOTE: SHARE AND OPTION NUMBERS AS AMENDED REFLECT THE TWO-FOR-ONE STOCK SPLIT
OF THE COMPANY'S COMMON STOCK IN DECEMBER 1997.]
1. Purpose. The purpose of this Non-Employee Directors' Stock Option Plan
(the "Plan") of Seitel, Inc. (the "Company") is to promote ownership by
non-employee Directors of a greater proprietary interest in the Company, thereby
aligning such Directors' interests more closely with the interests of
stockholders of the Company, and to assist the Company in attracting and
retaining qualified persons to serve as non-employee Directors.
2. Definitions. In addition to terms defined elsewhere in the Plan, the
following are defined terms under the Plan:
(a) "Code" means the Internal Revenue Code of 1986, as amended.
References to any provision of the Code include regulations thereunder and
successor provisions and regulations.
(b) "Exchange Act" means the Securities Exchange Act of 1934, as
amended. References to any provision of the Exchange Act include rules
thereunder and successor provisions and rules.
(c) "Fair Market Value" of Stock means the closing price of the Stock
on the date on which such value is to be determined, as reported for such
day by the New York Stock Exchange.
(d) "Option" means the right, granted to a Participant under Section
6, to purchase Stock at the specified exercise price for a specified period
of time under the Plan.
(e) "Participant" means a Director who is eligible to receive and is
granted Options under the Plan.
(f) "Stock" means the Common Stock, $.01 par value, of the Company and
such other securities as may be substituted for Stock or such other
securities pursuant to Section 7.
3. Shares Available Under the Plan. The total number of shares of Stock
reserved and available for delivery under the Plan is 75,000 250,000, subject to
adjustment as provided in Section 7 below. Such shares may be authorized but
unissued shares or treasury shares. If any Option expires or terminates for any
reason without having been exercised in full, the shares remaining subject to
such Option will again be available for delivery under the Plan.
4. Administration of the Plan. The Plan will be administered by the Board
of Directors of the Company, provided that any action by the Board of Directors
relating to the Plan will be taken only if, in addition to any other required
vote, approved by the affirmative vote of the majority of the Directors who are
not then eligible to participate under the Plan.
5. Eligibility. Each Director of the Company who, on any date on which an
Option is to be granted hereunder, is not, and has not been during the preceding
three months, an employee of the Company or any parent or subsidiary of the
Company will be eligible to receive a grant of an Option at such date. No person
other than those specified in this Section 5 will participate in the Plan.
6. Stock Options. An option to purchase 5,000 10,000 shares of Stock will
be granted under the Plan to each person who is an existing non-employee
Director of the Company on the effective date of the Plan. Additionally, an
option to purchase 5,000 10,000 shares of Stock will be granted under the Plan
to each person who, after the effective date of the Plan, is first elected or
appointed to serve as a Director of the Company, such grant to be effective at
the date of such first election or appointment, if such Director is then
eligible to receive an Option grant. Also, an Option to purchase 1,000 2,000
shares of Stock will be granted each year to
A-1
<PAGE> 24
each Director of the Company who is then eligible to receive an Option grant at
the close of business on the day of the Company's annual meeting of stockholders
at which Directors (or a class of Directors if the Company then has a classified
Board of Directors) are elected or reelected by the Company's stockholders. The
foregoing notwithstanding, no Director may be granted an Option more than once
during any one calendar year under the Plan foregoing sentences. In addition,
any non-employee director who is elected as a chairman of a committee of the
Board of Directors shall be granted an option to purchase 10,000 shares of Stock
if such Director elects to forego any additional directors fees that are
attributable to serving as chairman of such committee. Options granted under the
Plan will be non-qualified stock options which will be subject to the following
terms and conditions:
(a) Exercise Price. The exercise price per share of Stock purchasable
under an Option will be equal to 100% of the Fair Market Value of Stock on
the date of grant of the Option.
(b) Option Term. Each Option will expire at the earlier of (i) five
years after the date of grant, (ii) twelve months after the Participant
ceases to serve as a Director of the Company due to death, disability, or
retirement at or after age 65, or (iii) sixty days after the Participant
ceases to serve as a Director of the Company for any reason other than
death, disability, or retirement at or after age 65.
(c) Exercisability. Each Option will become fully exercisable
beginning one year after the date of grant, and will thereafter remain
exercisable until the Option expires; provided, however, that an Option
previously granted to a Participant will be exercisable after the
Participant ceases to serve as a Director of the Company for any reason
other than death, disability, or retirement at or after age 65 only if the
Option was exercisable at the date of such cessation of service.
(d) Method of Exercise. Each Option may be exercised, in whole or in
part, at such time as it is exercisable and prior to its expiration by
giving written notice of exercise to the Company specifying the Option to
be exercised and the number of shares to be purchased, and accompanied by
payment in full of the exercise price in cash (including by check) or by
surrender of shares of Stock of the Company acquired by the Participant at
least six months prior to the exercise date and having a Fair Market Value
at the time of exercise equal to the exercise price, or a combination of a
cash payment and surrender of such Stock.
7. Adjustment Provisions. In the event any recapitalization,
reorganization, merger, consolidation, spin-off, combination, repurchase,
exchange of shares or other securities of the Company, stock split or reverse
split, extraordinary dividend having a value in excess of 150% of the quarterly
dividends paid during the preceding twelve-month period, liquidation,
dissolution, or other similar corporation transaction or event affects Stock
such than an adjustment is determined by the Board of Directors to be
appropriate in order to prevent dilution or enlargement of Participants' rights
under the Plan, then the Board of Directors will, in a manner that is
proportionate to the change to the Stock and is otherwise equitable, adjust (i)
any or all of the number of kind of shares of Stock reserved for issuance and
delivery under the Plan, (ii) the number or kind of shares of Stock to be
subject to each automatic grant of Options under Section 6, and (iii) the number
and kind of shares of Stock issuable or deliverable upon exercise of outstanding
Options, and/or the exercise price per share thereof (provided that no
fractional shares will be issued upon exercise of any Option). The foregoing
notwithstanding, no adjustment may be made hereunder except as shall be
necessary to preserve, without exceeding, the value of outstanding Options and
potential grants of Options. If at any date an insufficient number of shares are
available for the automatic grant of Options, and/or the exercise price per
share thereof (provided that no fractional shares will be issued upon exercise
of any Option). The foregoing notwithstanding, no adjustment may be made
hereunder except as shall be necessary to preserve, without exceeding, the value
of outstanding Options and potential grants of Options. If at any date an
insufficient number of shares are available for the automatic grant of Options
at the date, Options will be automatically granted under Section 6
proportionately to Participants to the extent shares are available.
8. Changes to the Plan. The Board of Directors may amend, alter, suspend,
discontinue, or terminate the Plan or authority to grant Options under the Plan
without the consent of stockholders or Participants, except that any such action
will be subject to the approval of the Company's stockholders at the next annual
meeting
A-2
<PAGE> 25
of stockholders having a record date after the date such action was taken if
such stockholder approval is required by any federal or state law or regulation
or the rules of any automated quotation system or stock exchange on which the
Stock may then be quoted or listed, or if the Board of Directors determines in
its discretion to seek such stockholder approval; provided, however, that,
without the consent of an affected Participant, no such action may materially
impair the rights of such Participant with respect to any previously granted
Option; and provided further, that any Plan provision that specifies the
Directors who may receive grants of Options, the amount and price of securities
to be granted to such Directors, and the timing of grants to such Directors, or
is otherwise a "plan provision" referred to in Rule 16-b-3(c)(2)(ii)(B) under
the Exchange Act, shall not be amended more than once every six months, other
than to comport with changes in the Code or the rules thereunder.
9. General Provisions.
(a) Consideration for Grants; Agreements. Options will be granted
under the Plan in consideration of the services of the Participants and,
except for the payment of the Option exercise price upon exercise of the
options, no other consideration shall be required therefor. Grants of
Options will be evidenced by agreements executed by the Company and the
Participant containing the terms and conditions set forth in the Plan
together with such other terms and conditions not inconsistent with the
Plan as the Board of Directors may from time to time approve.
(b) Compliance with Laws and Obligations. The Company will not be
obligated to issue or deliver Stock in connection with any Option in a
transaction subject to the registration requirements of the Securities Act
of 1933, as amended, or any state securities law, any requirement under any
listing agreement between the Company and any automated quotation system or
national securities exchange, or any other law, regulation or contractual
obligation, until the Company is satisfied that such laws, regulations, and
other obligations of the Company have been complied with in full.
Certificates representing shares of Stock delivered under the Plan will be
subject to such stop-transfer orders and other restrictions as may be
applicable under such laws, regulations, and other obligations of the
Company, including any requirement that a legend or legends be placed
thereon.
(c) Non-transferability. Options and any other right under the Plan
that may constitute a "derivative security" as generally defined in Rule
16-a-1(c) under the Exchange Act will not be transferable by a Participant
except by will or the laws of descent and distribution (or to a designated
beneficiary in the event of a Participant's death), and will be exercisable
during the lifetime of a Participant only by such Participant or his or her
guardian or legal representative.
(d) Compliance with Rule 16b-3. It is the intent of the Company that
this Plan comply in all respects with applicable provisions of Rule 16b-3
under the Exchange Act in connection with any grant of Options to a
Participant. Accordingly, if any provision of this Plan or any agreement
hereunder does not comply with the requirements of Rule 16-b-3 as then
applicable to any such grant to a Participant, or would cause any
Participant no longer to be deemed a "disinterested person" within the
meaning of Rule 16b-3, such provision will be construed or deemed amended
to the extent necessary to conform to such requirements with respect to
such Participant. In addition, the Board of Directors shall have no
authority to make any amendment, alteration, suspension, discontinuation,
or termination of the Plan or any agreement hereunder, to make any
adjustment under Section 7, or take other action if and to the extent such
authority would cause a Participant's transactions under the Plan not to be
exempt, or would cause Participants no longer to be deemed "disinterested
persons," under Rule 16b-3 under the Exchange Act the Board of Directors
hereby approves all grants of options under this Plan for purposes of Rule
16b-3.
(e) Continued Service as an Employee. If a Participant ceases serving
as a Director and, immediately thereafter, he or she is employed by the
Company or any subsidiary, then solely for purposes of Sections 6(b) and
(c) of the Plan, such Participant will not be deemed to have ceased service
as a Director at that time, and his or her continued employment by the
Company or any subsidiary will be deemed to be continued service as a
Director; provided, however, that such former Director will not be eligible
for additional grants of Options under the Plan.
A-3
<PAGE> 26
(f) No Right to Continue as a Director. Nothing contained in the Plan
or any agreement hereunder will confer upon any Participant any rights to
continue to serve as a Director of the Company.
(g) No Stockholder Rights Conferred. Nothing contained in the Plan or
any agreement hereunder will confer upon any Participant any rights of a
stockholder of the Company unless and until an Option is duly exercised
hereunder.
(h) Governing Law. The Place of administration of the Plan shall be
conclusively deemed to be within the State of Texas; and the validity,
construction, interpretation and effect of the Plan and all rights of any
of the persons having or claiming to have any interest in the Plan shall be
governed by the laws of the State of Texas.
10. Effective Date and Duration of Plan. The Plan will be effective at the
time stockholders of the Company have approved it by the affirmative votes of
the holders of a majority of the shares of Stock present in person, or
represented by proxy, and entitled to vote at a meeting of the Company's
stockholders duly held in accordance with the Delaware General Corporation Law
or any adjournment thereof, and the amendments set forth herein shall be
effective upon approval of such vote of the stockholders, provided that options
granted on November 20, 1997 pursuant to the amendments to this Plan shall be
effective as of the date of grant. Unless earlier terminated by action of the
Board of Directors, the Plan will remain in effect until such time as no Stock
remains available for issuance or delivery under the Plan and the Company has no
further rights or obligations with respect to outstanding Options under the
Plan.
Adopted by the Board of Directors April 14, 1994, and amended as of
November 20, 1997.
A-4
<PAGE> 27
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SEITEL, INC.
-----------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY
JULY 29, 1998
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. (the "Company") owned by the undersigned at the Annual Meeting of
Stockholders to be held on Wednesday, July 29, 1998 at 9:00 a.m. at the
Company's Headquarters, 50 Briar Hollow Lane, 7th Floor West, Houston, Texas
77027, 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 AND 4.
-------------
SEE REVERSE
SIDE
(TO BE SIGNED ON REVERSE SIDE) -------------
- --------------------------------------------------------------------------------
<PAGE> 28
<TABLE>
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
A [X] Please mark your |
votes as in this |
example. |_____
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING MATTERS:
FOR WITHHOLD FOR AGAINST ABSTAIN
1. To elect nine [ ] [ ] Nominees: Herbert M. Pearlman 2. To approve proposed amendments [ ] [ ] [ ]
directors to Paul A. Frame to the Company's Non-Employee
serve until the Horace A. Calvert Directors' Stock Option Plan.
1999 Annual Meeting. David S. Lawi
Debra D. Valice 3. To approve the appointment of [ ] [ ] [ ]
To withhold authority to vote for any Walter M. Craig, Jr. Arthur Andersen LLP as the
nominee(s), print name(s) below: William Lerner independent certified public
John E. Stieglitz accountants for the Company for
------------------------------------- Fred S. Zeidman the year ending December 31,
1998; and
4. 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
June 1, 1998, will be entitled to notice of and to vote
at the meeting.
Please sign, date and mail the enclosed proxy in the
enclosed envelope, which requires no postage if mailed in
the United States, so that your shares will be represented
at the meeting.
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.)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
