FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Amendment No. 2
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| X | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
For Fiscal Year Ended December 31, 1997
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OR
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| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
[No Fee Required] For the transition period to .
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Commission File Number 0-14488
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SEITEL, INC.
(Exact name of registrant as specified in charter)
Delaware 76-0025431
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
50 Briar Hollow Lane
West Building, 7th Floor
Houston, Texas 77027
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(Address of principal (Zip Code)
executive offices)
(713) 881-8900
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
---- ----
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
The aggregate market value of the voting stock held by non-affiliates of the
registrant at March 27, 1998 was approximately $331,183,075. For these purposes,
the term "affiliate" is deemed to mean officers and directors of the registrant.
On such date, the closing price of the Common Stock on the New York Stock
Exchange was $15.50 and there were a total of 22,551,854 shares of Common Stock
outstanding.
<PAGE>
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The executive officers and directors of the Company and their ages (as
of April 1, 1998) and positions with the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position(s) with the Company Director Since
- --------------------- -------- --------------------------------------- -------------------
<S> <C> <C> <C>
Herbert M. Pearlman 65 Chairman of the Board 1982
of Directors
Paul A. Frame 51 Chief Executive Officer, 1986
President and Director
Horace A. Calvert 44 Chief Operating Officer, 1987
Executive Vice President
and Director
David S. Lawi 62 Chairman of the Executive 1982
Committee and Director
Debra D. Valice 41 Chief Financial Officer, 1995
Senior Vice President of Finance,
Treasurer, Corporate Secretary
and Director
Walter M. Craig, Jr. 43 Director 1987
William Lerner 64 Director 1985
John E. Stieglitz 66 Director 1989
Fred S. Zeidman 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, and he was its Executive
Vice President from 1980 through 1992. Since March 1984, Mr. Lawi has been a
Director of Intersystems and, since 1985, he has been Chairman of Intersystems'
Executive Committee. Since June 1990, Mr. Lawi has been a Director of Unapix
Entertainment and, since January 1993, Chairman of its Executive Committee, its
Treasurer and Secretary.
Debra D. Valice, CPA, is the Company's Chief Financial Officer, Senior Vice
President of Finance, Treasurer and Corporate Secretary. Ms. Valice has been the
Company's Chief Financial Officer since February 1987, and was the Company's
Chief Accounting Officer from March 1986 until February 1987. Ms. Valice was
elected as a director of the Company in November 1995.
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.
<PAGE>
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.
Section 16(a) Beneficial Ownership Reporting Compliance
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.
<PAGE>
Item 11. 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.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation
------------------------------------------- -----------------
Awards
Other -----------------
Bonus Annual Stock Options/ All Other
Name and Principal Position Year Salary ($) ($)(1)<F1> Compensation($)(2)<F2> SARs (#) Compensation ($)
----------------------------- -------- ------------ ------------ ---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Paul A. Frame 1997 $144,878 $3,187,599 $1,301,809 932,160 $104,764 (3)<F3>
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 $2,359,409 $1,301,809 378,882 $104,764 (3)<F3>
Chief Operating Officer 1996 $141,898 $1,457,603 $1,205,834 136,498 $87,998
and
Executive Vice President 1995 $139,870 $806,094 $766,456 161,612 $41,358
Herbert M. Pearlman 1997 $128,438 $3,003,710 -- 393,874 $104,764 (3)<F3>
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 $1,501,856 -- 293,874 $104,764 (3)<F3>
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 $773,546 -- 114,762 $70,816 (3)<F3>
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
- -----------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> (1) Includes bonuses based on the Company's pre-tax profits, an additional
bonus for Mr. Frame of $826,690 based on the Company's gain realized
on the spin-off of Eagle Geophysical, Inc. and a discretionary bonus
for Ms. Valice of $627,713. For Messrs. Frame and Calvert and Ms.
Valice, also includes bonuses based on the Company's stock performance
of $79,167, $79,167 and $20,833 in 1997, which represented the final
installment of the bonus.
<F2> (2) Includes commissions based on sales.
<F3> (3) 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 $4,750 contributed by the
Company as 401(k) Plan matching contributions for each of the named
executive officers.
</FN>
</TABLE>
<PAGE>
The following table sets forth certain information with respect to options
to purchase Common Stock granted during the year ended December 31, 1997 to each
of the named executive officers.
<TABLE>
OPTION/SAR GRANTS IN 1997
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Individual Grants
----------------------------------------------------------
Percent Potential Realizable Value
Number of of Total at Assumed Annual Rates of
Securities Options/SARs Stock Price Appreciation
Underlying Granted to Exercise for Option Term (7)<F7>
Options/SARs Employees or Base Expiration --------------------------------------------
Name Granted (#) in 1997 Price ($/Sh) Date 0 Percent($) 5 Percent($) 10 Percent($)
--------------------- -------------- ----------- ----------- ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul A. Frame 57,400 (1)<F1> 1.67 $19.00000 06/05/02 - $296,673 $673,247
7,800 (1)<F1> 0.23 $19.06250 06/05/02 ($488) $39,827 $90,999
7,400 (1)<F1> 0.21 $19.12500 06/05/02 ($925) $37,322 $85,870
4,600 (1)<F1> 0.13 $19.00000 06/06/02 - $23,775 $53,954
800 (1)<F1> 0.02 $18.75000 06/09/02 $200 $4,344 $9,584
16,000 (1)<F1> 0.46 $18.50000 06/09/02 $8,000 $90,881 $195,687
4,000 (1)<F1> 0.12 $18.43750 06/09/02 $2,250 $22,970 $49,172
38,200 (1)<F1> 1.11 $18.37500 06/10/02 $23,875 $222,195 $472,031
16,600 (1)<F1> 0.48 $18.25000 06/10/02 $12,450 $98,631 $207,198
17,600 (1)<F1> 0.51 $18.37500 06/11/02 $11,000 $102,372 $217,480
20,000 (1)<F1> 0.58 $18.31250 06/11/02 $13,750 $117,582 $248,387
4,600 (1)<F1> 0.13 $18.25000 06/11/02 $3,450 $27,331 $57,416
1,000 (1)<F1> 0.03 $18.25000 06/12/02 $750 $5,942 $12,482
8,400 (1)<F1> 0.24 $18.12500 06/12/02 $7,350 $50,960 $105,897
10,000 (1)<F1> 0.29 $18.00000 06/12/02 $10,000 $61,916 $127,318
34,620 (1)<F1> 1.01 $17.81250 06/13/02 $41,111 $220,845 $447,267
1,800 (1)<F1> 0.05 $17.87500 06/13/02 $2,025 $11,370 $23,142
49,180 (1)<F1> 1.43 $17.81250 06/13/02 $58,401 $313,725 $635,372
17,800 (1)<F1> 0.52 $17.81250 06/16/02 $21,138 $113,754 $229,989
20,000 (1)<F1> 0.58 $17.75000 06/16/02 $25,000 $129,063 $259,664
19,600 (1)<F1> 0.57 $17.68750 06/16/02 $25,725 $127,707 $255,696
13,000 (1)<F1> 0.38 $17.62500 06/16/02 $17,875 $85,516 $170,407
60,000 (1)<F1> 1.74 $17.50000 06/16/02 $90,000 $402,190 $793,993
200,000 (2)<F2> 5.81 $20.50000 11/20/02 ($75,000) $1,037,033 $2,382,303
300,000 (3)<F3> 8.71 $20.50000 11/20/02 ($112,500) $1,555,550 $3,573,454
1,760 (4)<F4> 0.05 $19.50000 12/10/02 ($1,320) $7,797 $18,827
Horace A. Calvert 200,000 (2)<F2> 5.81 $20.50000 11/20/02 ($75,000) $1,037,033 $2,382,303
71,082 (4)<F4> 2.06 $19.56250 12/08/02 - $384,181 $848,940
9,600 (4)<F4> 0.28 $19.40625 12/08/02 $1,500 $53,386 $116,154
8,200 (4)<F4> 0.24 $19.50000 12/08/02 $513 $44,832 $98,446
2,000 (4)<F4> 0.06 $19.56250 12/08/02 - $10,810 $23,886
1,000 (4)<F4> 0.03 $19.37500 12/08/02 $188 $5,592 $12,131
24,000 (4)<F4> 0.70 $17.18750 12/08/02 $57,000 $186,714 $343,634
39,400 (4)<F4> 1.14 $17.25000 12/08/02 $91,113 $304,060 $561,671
1,000 (4)<F4> 0.03 $17.53125 12/08/02 $2,031 $7,436 $13,974
1,000 (4)<F4> 0.03 $17.75000 12/08/02 $1,813 $7,217 $13,756
3,000 (4)<F4> 0.09 $17.78125 12/08/02 $5,344 $21,558 $41,173
200 (4)<F4> 0.01 $17.84375 12/08/02 $344 $1,425 $2,732
2,400 (4)<F4> 0.07 $17.90625 12/08/02 $3,975 $16,946 $32,638
3,000 (4)<F4> 0.09 $17.96875 12/08/02 $4,781 $20,996 $40,611
700 (4)<F4> 0.02 $17.68750 12/08/02 $1,313 $5,096 $9,673
10,000 (4)<F4> 0.29 $17.56250 12/08/02 $20,000 $74,048 $139,431
2,300 (4)<F4> 0.07 $17.75000 12/08/02 $4,169 $16,600 $31,638
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
Individual Grants
----------------------------------------------------------
Percent Potential Realizable Value
Number of of Total at Assumed Annual Rates of
Securities Options/SARs Stock Price Appreciation
Underlying Granted to Exercise for Option Term (7)<F7>
Options/SARs Employees or Base Expiration --------------------------------------------
Name Granted (#) in 1997 Price ($/Sh) Date 0 Percent($) 5 Percent($) 10 Percent($)
--------------------- -------------- ----------- ----------- ------------ ------------- ------------ -----------
Herbert M. Pearlman 20,000 (5)<F5> 0.58 $20.78125 07/17/02 ($6,250) $105,858 $246,554
13,700 (5)<F5> 0.40 $20.81250 07/17/02 ($4,709) $72,084 $168,462
946 (5)<F5> 0.03 $20.87500 07/17/02 ($384) $4,918 $11,573
6,154 (5)<F5> 0.18 $20.87500 07/17/02 ($2,500) $32,149 $75,306
8,700 (5)<F5> 0.25 $20.25000 07/22/02 $1,903 $50,886 $111,899
1,400 (5)<F5> 0.04 $20.28125 07/23/02 $263 $8,145 $17,963
10,000 (5)<F5> 0.29 $20.31250 07/23/02 $1,563 $57,865 $127,995
100 (5)<F5> 0.00 $20.37500 07/23/02 $9 $572 $1,274
9,800 (5)<F5> 0.28 $20.40625 07/29/02 $613 $55,911 $124,531
30,000 (5)<F5> 0.87 $20.53125 07/30/02 ($1,875) $167,779 $373,016
7,500 (5)<F5> 0.22 $20.71875 08/22/02 ($6,094) $34,973 $86,125
2,500 (5)<F5> 0.07 $20.71875 08/25/02 ($2,031) $11,688 $28,712
10,074 (5)<F5> 0.29 $20.75000 08/25/02 ($8,500) $46,782 $115,382
1,900 (5)<F5> 0.06 $20.81250 08/25/02 ($1,722) $8,705 $21,643
500 (5)<F5> 0.01 $20.75000 08/26/02 ($422) $2,322 $5,727
12,700 (5)<F5> 0.37 $20.31250 08/28/02 ($5,159) $64,687 $149,183
2,000 (5)<F5> 0.06 $20.25000 08/29/02 ($688) $10,312 $23,618
500 (5)<F5> 0.01 $20.37500 09/02/02 ($16) $2,795 $6,194
9,500 (5)<F5> 0.28 $20.34375 09/02/02 - $53,396 $117,991
10,000 (5)<F5> 0.29 $20.34375 09/03/02 - $56,206 $124,201
35,900 (5)<F5> 1.04 $20.62500 09/04/02 - $204,569 $452,044
200,000 (2)<F2> 5.81 $20.50000 11/20/02 ($75,000) $1,037,033 $2,382,303
David S. Lawi 20,000 (5)<F5> 0.58 $20.78125 07/17/02 ($6,250) $105,858 $246,554
13,700 (5)<F5> 0.40 $20.81250 07/17/02 ($4,709) $72,084 $168,462
946 (5)<F5> 0.03 $20.87500 07/17/02 ($384) $4,918 $11,573
6,154 (5)<F5> 0.18 $20.87500 07/17/02 ($2,500) $31,995 $75,288
8,700 (5)<F5> 0.25 $20.25000 07/22/02 $1,903 $50,886 $111,899
1,400 (5)<F5> 0.04 $20.28125 07/23/02 $263 $8,145 $17,963
10,000 (5)<F5> 0.29 $20.31250 07/23/02 $1,563 $57,865 $127,995
100 (5)<F5> 0.00 $20.37500 07/23/02 $9 $572 $1,274
9,800 (5)<F5> 0.28 $20.40625 07/29/02 $613 $55,911 $124,531
30,000 (5)<F5> 0.87 $20.53125 07/30/02 ($1,875) $167,779 $373,016
7,500 (5)<F5> 0.22 $20.71875 08/22/02 ($6,094) $34,973 $86,125
2,500 (5)<F5> 0.07 $20.71875 08/25/02 ($2,031) $11,688 $28,712
10,074 (5)<F5> 0.29 $20.75000 08/25/02 ($8,500) $46,782 $115,382
1,900 (5)<F5> 0.06 $20.81250 08/25/02 ($1,722) $8,705 $21,643
500 (5)<F5> 0.01 $20.75000 08/26/02 ($422) $2,322 $5,727
12,700 (5)<F5> 0.37 $20.31250 08/28/02 ($5,159) $64,687 $149,183
2,000 (5)<F5> 0.06 $20.25000 08/29/02 ($688) $10,312 $23,618
500 (5)<F5> 0.01 $20.37500 09/02/02 ($16) $2,795 $6,194
9,500 (5)<F5> 0.28 $20.34375 09/02/02 - $53,396 $117,991
10,000 (5)<F5> 0.29 $20.34375 09/03/02 - $56,206 $124,201
35,900 (5)<F5> 1.04 $20.62500 09/04/02 - $204,569 $452,044
100,000 (2)<F2> 2.90 $20.50000 11/20/02 ($37,500) $518,517 $1,191,151
Debra D. Valice 64,762 (5)<F5> 1.88 $20.00000 07/14/02 ($30.357) $392,567 $848,866
50,000 (6)<F6> 1.45 $20.50000 11/20/07 ($18,750) $614,075 $1,584,953
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> (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.
<PAGE>
<F2> (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 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.
<F3> (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.
<F4> (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 shareholders 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.
<F5> (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.
<F6> (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.
<F7> (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.
</FN>
</TABLE>
<PAGE>
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.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN 1997
AND 12/31/97 OPTION/SAR VALUES
<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 PTP $50 Million PTP
-------------------------- --------------------------
<S> <C> <C>
Herbert M. Pearlman*<F1> 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%
<FN>
<F1> * The annual bonus payments to Messrs. Pearlman and Lawi will be reduced
by $300,000 and $150,000, respectively.
</FN>
</TABLE>
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.
<PAGE>
Each of the agreements with Messrs. Frame and Calvert provide that if at
any time during the term of such agreement, (i) the employment agreements of
Messrs. Pearlman or Lawi are terminated by the Company prior to the stated term
thereof, or (ii) Messrs. Pearlman and Lawi resign from the Company's Board of
Directors prior to the expiration of the term of their employment agreements, or
(iii) the majority of the members of the Company's Board of Directors is no
longer nominated and supported by a majority of Messrs. Frame, Calvert, Pearlman
and Lawi (each a "Change in Control"), the employee shall have the right to
terminate the agreement immediately and receive from the Company all
compensation required to be paid during the unexpired term thereof as well as
the severance payment described below without any obligation to perform
consulting services as described below. The Company believes that the Change in
Control provisions in these agreements may tend to discourage attempts to
acquire a controlling interest in the Company and may also tend to make the
removal of management more difficult.
Each agreement 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.
Bonuses 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 shareholder value bonus to be divided among Messrs.
Frame and Calvert and three other key employees upon the event of the market
price of the Company's stock maintaining or exceeding $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.
<PAGE>
On January 27, 1995, the Company's Board of Directors approved a
shareholder value incentive bonus under which a cash bonus aggregating
$4,000,000 would be paid to all salaried employees if the market price of the
Company's stock reaches $30 per share on or before April 30, 1998, and maintains
that price for at least 90 consecutive days. This bonus would be shared by all
salaried employees on a basis proportionate to their respective compensation
ranking in the Company, and it would vest and be paid out in escalating
quarterly installments over a three-year period, subject to continued employment
with the Company. This shareholder value incentive bonus was approved by Company
Shareholders at the 1995 annual meeting. As of April 27, 1998, the market price
of the Company's common stock was $15.50 per share.
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 shareholder 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 will begin 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.
Nonemployee directors also participate in the Non-Employee Directors' Stock
Option Plan (the "Plan"), which was approved by Company Shareholders at the 1994
annual meeting. Under the terms of the Plan, each non-employee director receives
on the date of each annual meeting during the term of the Plan an option to
purchase 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), 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.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock, as of April 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.
<PAGE>
<TABLE>
<CAPTION>
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership (1)<F2>(2)<F3> Percentage of Class
- ----------------------------------------------- ----------------------------------- -------------------------
<S> <C> <C>
Paul A. Frame, Jr. 1,476,919 (3)<F4> 6.2%
50 Briar Hollow Lane, 7th Floor West
Houston, TX 77027
Horace A. Calvert 1,265,349 (4)<F5> 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)<F6> 3.7%
537 Steamboat Road
Greenwich, CT 06830
David S. Lawi 562,485 (6)<F7> 2.4%
537 Steamboat Road
Greenwich, CT 06830
Debra D. Valice 201,811 (7)<F8> *<F1>
50 Briar Hollow Lane, 7th Floor West
Houston, TX 77027
Walter M. Craig, Jr. 62,071 (8)<F9> *<F1>
2 Bridge Avenue
Redbank, NJ 07701
William Lerner 23,170 (9)<F10> *<F1>
423 East Beau Street
Washington, PA 15301
John E. Stieglitz 14,000 (9)<F10> *<F1>
Conspectus, Inc.
222 Purchase Street
Rye, NY 10580
Fred S. Zeidman 8,000 *<F1>
2104 Chilton
Houston, TX 77019
All directors and executive officers
as a group (9 persons) 4,459,910 (10)<F11> 17.2%
<FN>
<F1> * Less than 1%
<F2> (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.
<F3> (2) Includes shares that may be acquired within 60 days by any of the
named persons upon exercise of any right.
<F4> (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.
<F5> (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.
<PAGE>
<F6> (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.
<F7> (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.
<F8> (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.
<F9> (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.
<F10>(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.
<F11>(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.
</FN>
</TABLE>
Item 13. Certain Relationships and Related 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 April 15, 1998, the aggregate amounts
of principal and interest outstanding on such loans were approximately $414,000,
$414,000 and $103,000, 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 April 15, 1998, the Company
has 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.
<PAGE>
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 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 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.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 10th of June 1998.
SEITEL, INC.
By: /s/ Paul A. Frame
-------------------------------------
Paul A. Frame
President and Chief Executive Officer
