<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-12
</TABLE>
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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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<PAGE> 2
SEITEL, INC.
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY
OCTOBER 19, 2000
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Seitel, Inc. (the "Company") to be held on Thursday, October 19, 2000, at 9:00
a.m. at the Waldorf Astoria Hotel, 301 Park Avenue, Herbert Hoover Room, 4th
Floor, New York, New York, 10022, for the following purposes:
1. To elect seven directors to serve until the 2001 Annual Meeting;
and
2. 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 September 12, 2000,
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
September 15, 2000
Houston, Texas
<PAGE> 3
SEITEL, INC.
50 BRIAR HOLLOW LANE, 7TH FLOOR WEST
HOUSTON, TX 77027
---------------------
PROXY STATEMENT
---------------------
The accompanying proxy is solicited on behalf of the Board of Directors of
the Company for use at the Annual Meeting of Stockholders to be held on
Thursday, October 19, 2000, 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 in favor of the nominees for
members of the Board of Directors of the Company named in item 1 of the proxy.
The Board of Directors has fixed the close of business on September 12,
2000, as the record date for the meeting. On that date, the Company had
outstanding 24,035,183 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. 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.
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 September 20, 2000.
<PAGE> 4
ELECTION OF DIRECTORS
At the meeting, seven 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 seven
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................. 67 Chairman of the Board of Directors 1982
Paul A. Frame....................... 53 Chief Executive Officer, President 1986
and Director
Debra D. Valice..................... 43 Chief Financial Officer, Executive 1995
Vice President of Finance,
Treasurer, Corporate Secretary and
Director
Walter M. Craig, Jr. ............... 46 Director and Assistant Secretary 1987
William Lerner...................... 67 Director 1985
John E. Stieglitz................... 69 Director 1989
Fred S. Zeidman..................... 54 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. 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. He
has served as President, Chief Executive Officer and a Director of Helm Capital
Group, Inc. ("Helm"), a publicly-traded company with equity interests in diverse
businesses, since 1980, and in June 1984, he became Helm's Chairman of the
Board.
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. From December 1996 to
March 1999, Mr. Frame was a Director of Eagle Geophysical, Inc. ("Eagle"), a
former subsidiary of the Company engaged in providing seismic data acquisition
services to the oil and gas industry, and from August 1997 to March 1999, he was
Chairman of the Executive Committee of Eagle's board of directors. Eagle filed
bankruptcy under Chapter 11 of the Federal Bankruptcy Code in September 1999.
Debra D. Valice, CPA, is the Company's Chief Financial Officer, Executive
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 been President of Mezzanine Financial Fund, L.P.,
a company which is engaged in providing structured capital to small and
mid-market companies based on the value of their assets, since 1993. He served
as Executive Vice President and Chief Operating Officer of Helm from August 1992
through 1999. Since April 1993, Mr. Craig has been a Director of InterSystems
and since August 2000, he has been President and Chief Executive Officer of
InterSystems. Mr. Craig became Assistant Secretary of the Company in June 2000.
William Lerner is Chairman of the Company's Audit Committee and Co-Chairman
of the Company's Compensation and Stock Option Committee. Since January 1990,
Mr. Lerner has been engaged in the private practice of law. From May 1990 until
December 1990, he was General Counsel to Hon Development Company, a California
real estate development company. From June 1986 until December 1989, Mr. Lerner
2
<PAGE> 5
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 New York Stock Exchange listed company
headquartered in Pennsylvania that operates the second-largest chain of
rental-purchase stores in the United States, and Micros-to-Mainframes, Inc., a
NASDAQ listed company headquartered in New York that provides advanced
technology communications products and systems integration and internet services
to Fortune 2000 companies.
John E. Stieglitz is Co-Chairman of the Company's Compensation and Stock
Option Committee and a member of the Company's Audit Committee. He is Chairman
Emeritus of Conspectus, Inc., a privately held company, formed in 1976, engaged
in providing services in the area of executive recruitment. He served as
President of Conspectus, Inc. from 1976 to 1996. Mr. Stieglitz is also a
Director of Helm and InterSystems.
Fred S. Zeidman is a member of the Company's Audit Committee and
Compensation and Stock Option Committee. Mr. Zeidman has been a Director of
InterSystems since July 1993. He served as President and Chief Executive Officer
of InterSystems from July 1993 until its sale in December 1999. 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 1999, the Company's Board of Directors held five meetings. All of
the directors of the Company attended at least 75% of the total number of
meetings of the Board of Directors and of meetings held by all committees of the
Board on which he served during 1999.
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.
Until July 1999, the Audit Committee was comprised of Messrs. Lerner,
Stieglitz and Zeidman and was comprised of Messrs. Craig, Lerner and Stieglitz
for the remainder of 1999. The Audit Committee held three meetings during 1999.
The functions of the Audit Committee are to select the independent public
accountants of the Company, to review with them the Company's financial
statements, to review the Company's financial systems and controls and to
oversee other matters relating to the integrity of the Company's finances and
financial statements as the Committee may consider appropriate.
During 1999, Messrs. Pearlman and Frame, along with Horace Calvert and
David Lawi, both of whom resigned as directors in 2000, 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 1999.
During 1999, the Compensation and Stock Option Committee ("Compensation
Committee") was comprised of Messrs. Lerner, Stieglitz and Zeidman. 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 two meetings
during 1999.
3
<PAGE> 6
BENEFICIAL OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of the common stock, as of September 1, 2000, 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 PERCENTAGE
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) OF CLASS
------------------- -------------------------- ----------
<S> <C> <C>
Driehaus Capital Management, Inc. ......................... 1,241,170 5.2%
25 East Erie Street
Chicago, IL 60611
Lord, Abbett & Co. ........................................ 1,234,080 5.1%
90 Hudson Street
Jersey City, NJ 07302
Paul A. Frame, Jr. (Director and Named Executive
Officer)................................................. 1,602,730(3) 6.3%
50 Briar Hollow Lane, 7th Floor West
Houston, TX 77027
Horace A. Calvert (Named Executive Officer)................ 1,528,177(4) 6.1%
50 Briar Hollow Lane, 7th Floor West
Houston, TX 77027
Herbert M. Pearlman (Director and Named Executive
Officer)................................................. 1,198,827(5) 4.9%
537 Steamboat Road
Greenwich, CT 06830
David S. Lawi (Named Executive Officer).................... 855,394(6) 3.5%
537 Steamboat Road
Greenwich, CT 06830
Debra D. Valice (Director and Named Executive Officer)..... 394,892(7) 1.6%
50 Briar Hollow Lane, 7th Floor West
Houston, TX 77027
Walter M. Craig, Jr. (Director)............................ 77,562(8) *
1011 HWY 7
Spring Lake, NJ 07762
William Lerner (Director).................................. 47,170(9) *
423 East Beau Street
Washington, PA 15301
John E. Stieglitz (Director)............................... 47,085(9) *
Conspectus, Inc.
222 Purchase Street
Rye, NY 10580
Fred S. Zeidman (Director)................................. 23,200(10) *
2104 Chilton
Houston, TX 77019
All directors and executive officers as a group (7
persons)................................................. 3,391,466(11) 12.9%
</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.
4
<PAGE> 7
(3) Includes 410,398 and 845,400 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 $12.37 to
$16.19 per share, and the exercise prices of the common stock purchase
warrants range from $11.57 to $16.50 per share.
(4) Includes 415,380 and 540,418 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 $12.37 to
$13.73 per share, and the exercise prices of the common stock purchase
warrants range from $6.43 to $13.73 per share.
(5) Includes 338,456 and 322,126 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 $12.37 to
$13.73, and the exercise prices of the common stock purchase warrants range
from $11.57 to $13.73 per share.
(6) Includes 288,456 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 $12.37 to
$13.73, and the exercise prices of the common stock purchase warrants range
from $11.57 to $13.73 per share.
(7) Includes 170,745 and 92,460 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 $12.37 to
$13.73 per share, and the exercise prices of the common stock purchase
warrants range from $11.57 to $13.36 per share.
(8) Includes 2,000 and 67,554 shares which may be acquired from the Company
within 60 days upon exercise of options and common stock purchase warrants.
The exercise price of the options is $14.75 and the exercise prices of the
common stock purchase warrants range from $11.57 to $16.00 per share.
(9) Includes 38,000 shares which may be acquired from the Company within 60
days upon exercise of options. The exercise prices of the options range
from $13.54 to $19.82 per share.
(10) Includes 14,000 shares which may be acquired from the Company within 60
days upon exercise of options. The exercise prices of the options range
from $13.54 to $20.32 per share.
(11) Includes an aggregate of 2,339,139 shares which may be acquired from the
Company within 60 days upon exercise of 1,011,599 options and 1,327,540
common stock purchase warrants, respectively, by the group of seven persons
which comprises all executive officers and directors. The exercise prices
of the options range from $12.37 to $20.32 per share, and the exercise
prices of the common stock purchase warrants range from $11.57 to $16.50
per share.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation awarded to, earned by or paid to the Chief Executive Officer of the
Company and each of the four most highly compensated executive officers of the
Company other than the Chief Executive Officer (collectively, the "Named
Executive Officers") for the years indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM ALL OTHER COMPENSATION
---------------------------------------- COMPENSATION ----------------------------
OTHER ANNUAL AWARDS STOCK OTHER TAX
COMPENSATION OPTIONS/ COMPENSATION REIMBURSEMENT
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) ($)(2) SARS (#) ($) ($)(4)
--------------------------- ---- ---------- ------------ ------------ -------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul A. Frame................... 1999 $444,878 $ 783,452 $1,128,581 197,538 $ 83,213(3) $463,164
Chief Executive Officer 1998 $444,878 $1,809,077 $1,180,450 1,190,798 $104,001 --
and President 1997 $144,878 $3,187,599 $1,301,809 932,160 $104,764 --
Horace A. Calvert............... 1999 $444,878 $ 683,452 $1,074,656 -- $ 83,218(3) $266,276
Chief Operating Officer and 1998 $444,878 $1,809,077 $1,180,450 625,418 $104,001 --
Executive Vice President 1997 $144,878 $2,359,409 $1,301,809 378,882 $104,764 --
Herbert M. Pearlman............. 1999 $428,437 $ 679,315 $ 71,801 -- $ 83,340(3) $300,774
Chairman of the 1998 $428,437 $1,961,347 -- 690,582 $104,123 --
Board of Directors 1997 $128,438 $3,003,710 -- 393,874 $104,764 --
David S. Lawi................... 1999 $214,219 $ 339,658 -- -- $ 83,218(3) $271,426
Chairman of the 1998 $214,219 $ 980,673 -- 505,726 $104,001 --
Executive Committee 1997 $ 64,892 $1,501,856 -- 293,874 $104,764 --
Debra D. Valice................. 1999 $214,583 $ 391,726 $ 467,500 -- $ 56,619(3) $116,497
Executive Vice President 1998 $155,853 $ 437,064 -- 172,412 $ 69,449 --
of Finance, Treasurer and 1997 $138,583 $ 773,546 -- 142,762 $ 70,816 --
Corporate Secretary
</TABLE>
---------------
(1) Includes contractual bonuses based on the Company's pre-tax profits and
includes a discretionary bonus for Ms. Valice of $266,726 in 1999. Amounts
in 1999 also reflect a reduction in contractual bonuses as a result of the
impairment recorded in 1999 due to the dividend distribution of Eagle stock.
Amounts in 1997 include contractual bonuses based on the Company's pre-tax
profits related to the spin-off of Eagle in 1997 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.
(2) Includes commissions based on sales for Messrs. Frame and Calvert of
$1,074,656 in 1999. Amount in 1999 for Mr. Frame includes other compensation
of $53,925 of which $22,036 represents compensation due to the below market
interest rate on loans from the Company for the purchase of stock and
$17,330 for disability insurance premiums. Amount in 1999 for Mr. Pearlman
includes other compensation of $71,801 of which $50,577 relates to life
insurance premiums. Includes a bonus based on placement of senior notes for
Ms. Valice in 1999.
(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 $78,340 contributed by the Company pursuant to its Incentive
Compensation Program for Messrs. Frame, Calvert, Pearlman and Lawi, and
$51,619 for Ms. Valice. Also includes 401(k) Plan matching contributions
made by the Company of $4,873 for Mr. Frame, $4,878 for Messrs. Calvert and
Lawi and $5,000 for Mr. Pearlman and Ms. Valice.
(4) Includes amounts paid pursuant to a program ("the Tax Equalization Program")
whereby 10% of the profits (defined as net revenue less costs incurred)
generated by oil and gas projects, whose capital costs were funded by
proceeds from the employee's exercise of Company common stock purchase
warrants, are distributed to employees as compensation for the ordinary
Federal income taxes paid in excess of Federal taxes computed at the capital
gains rate on the warrants exercised.
6
<PAGE> 9
The following table sets forth certain information with respect to options
to purchase Common Stock granted during the year ended December 31, 1999 to each
of the Named Executive Officers.
OPTION/SAR GRANTS IN 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
PERCENT POTENTIAL REALIZABLE VALUE
NUMBER OF OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(3)
OPTIONS/SARS EMPLOYEES OR BASE EXPIRATION ----------------------------------------------
NAME GRANTED (#) IN 1999 PRICE ($/SH) DATE 0 PERCENT ($) 5 PERCENT ($) 10 PERCENT ($)
---- ------------ ------------ ------------ ---------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul A. Frame........ 100(1) 0.01 $16.12500 10/02/03 $ (31) $ 342 $ 781
4,400(1) 0.52 $15.68750 10/02/03 $ (79) $ 16,164 $ 35,203
8,600(1) 1.02 $15.62500 10/02/03 $ 1,182 $ 33,113 $ 70,539
5,650(1) 0.67 $15.75000 10/02/03 $ 51 $ 21,024 $ 45,607
18,750(1) 2.22 $16.50000 10/02/03 $ 7,031 $ 81,281 $168,247
21,000(2) 2.49 $16.00625 05/20/04 $ (131) $ 92,699 $205,000
10,000(2) 1.18 $16.12500 05/20/04 $(1,250) $ 42,955 $ 96,432
45,000(2) 5.33 $16.00000 05/20/04 -- $198,923 $439,567
6,100(2) 0.72 $16.00000 05/21/04 -- $ 26,965 $ 59,586
57,038(2) 6.76 $16.12500 05/21/04 $(7,130) $245,007 $550,027
20,900(2) 2.48 $16.18750 05/21/04 $(3,919) $ 88,470 $200,236
</TABLE>
---------------
(1) These common stock purchase warrants were granted under the terms of the
Company's 1998 Employee Stock Purchase Plan upon the exercise of the same
number of previously issued warrants subject to the reload provision of the
1998 Employee Stock Purchase Plan. The common stock purchase warrants were
fully exercisable on the date of grant and will expire on the expiration
date indicated, subject to certain events related to termination of
employment.
(2) These options were granted under the Company's 1993 Incentive Stock Option
Plan pursuant to the terms of the Company's 1995 Warrant Reload Plan upon
the exercise of the same number of previously granted warrants subject to
the Warrant Reload Plan. These options were fully exercisable on the date of
grant and will expire on the expiration date indicated, subject to certain
events related to termination of employment.
(3) The values shown are based on the indicated assumed annual rates of
appreciation compounded annually. The actual value an executive may realize
will depend on the extent to which the stock price exceeds the exercise
price of the options or warrants on the date the option or warrant is
exercised. Accordingly, the value, if any, realized by an executive will not
necessarily equal any of the amounts set forth in the table above. These
calculations are not intended to forecast possible future appreciation, if
any, of the price of the Company's common stock.
7
<PAGE> 10
The following table sets forth certain information with respect to the
exercise of options during the year ended December 31, 1999, and unexercised
options held at December 31, 1999, and the value thereof, by each of the Named
Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN 1999
AND 12/31/99 OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED 12/31/99 (#) 12/31/99 ($)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul A. Frame.......... 225,562 $1,174,838 1,255,798 160,000 $ 0 $0
Horace A. Calvert...... 28,024 $ 329,515 955,798 160,000 $85,597 $0
Herbert M. Pearlman.... 0 $ 0 705,582 160,000 $ 0 $0
David S. Lawi.......... 0 $ 0 550,726 80,000 $ 0 $0
Debra D. Valice........ 0 $ 0 263,205 35,000 $ 0 $0
</TABLE>
EMPLOYMENT ARRANGEMENTS
Agreements with Messrs. Frame and Pearlman
On November 20, 1997, the stockholders approved the 1998 Executive
Compensation Plan. During the year ended December 31, 1999, the Company had
employment agreements with Herbert M. Pearlman, Chairman of the Board, and Paul
A. Frame, President and Chief Executive Officer, that provided for compensation
in accordance with the 1998 Executive Compensation Plan. These agreements were
modified in June 2000 to reduce the pre-tax profits bonuses payable in 2000 and
subsequent years in exchange for one-time payments and to make other changes as
described below.
Agreements during 1999
Messrs. Pearlman and Frame received annual base salaries of $428,437 and
$444,878, respectively, under their employment agreements during 1999. The
agreements also provide for Messrs. Pearlman and Frame to receive bonus payments
based on the annual Pre-Tax Profits (the "PTP") of the Company and its majority-
owned subsidiaries ("Subsidiaries"). In order for these bonuses to be payable,
the PTP must exceed a minimum threshold (the "PTP Threshold") for the applicable
year. The PTP Threshold is $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. Messrs. Pearlman and
Frame were entitled to receive the following bonuses in 1999 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*................................ 5.0% 5.30%
Paul A. Frame....................................... 4.0% 4.25%
</TABLE>
---------------
* The annual bonus payment to Mr. Pearlman is reduced by $300,000.
Mr. Frame's agreement further provides for him to receive an annual bonus
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 provided that if a Change of Control occurred, the
employee had 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. Change of Control was
generally defined to mean a change in management of the Company where Messrs.
Pearlman, Frame, Calvert and/or Lawi were no longer officers or directors of the
Company.
Each agreement was for a term of five years, renewable each year for an
additional year unless either party to the agreement gave 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
8
<PAGE> 11
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.
2000 Modifications
In June 2000, the Company entered into employment agreement amendments with
Messrs. Pearlman and Frame. These amendments reduced the percentages for the
pre-tax profits bonuses payable to Messrs. Pearlman and Frame for 2000 and
subsequent years to the following amounts if the PTP exceeds the PTP Threshold.
The PTP Threshold amounts were not modified.
<TABLE>
<CAPTION>
PERCENTAGE UP TO PERCENTAGE ABOVE
$50 MILLION PTP $50 MILLION PTP
---------------- ----------------
<S> <C> <C>
Herbert M. Pearlman*.................................. 3.5% 3.71%
Paul A. Frame......................................... 3.0% 3.1875%
</TABLE>
---------------
* The annual bonus payment to Mr. Pearlman is reduced by $300,000.
In exchange for these bonus reductions and the other modifications made to
their employment agreements, the Company issued 150,000 shares of the Company's
Common Stock to Mr. Pearlman and 100,000 shares to Mr. Frame, and agreed,
subject to continued employment, to pay Mr. Pearlman four net annual payments of
$187,500 and to pay Mr. Frame four net annual payments of $125,000 in January of
2001, 2002, 2003 and 2004. The Company agreed to pay withholding taxes at the
rate of 35% on these stock issuances, based on values of $988,125 and $658,750
for Messrs. Pearlman and Frame, respectively, and on these cash payments.
Messrs. Pearlman and Frame have contractually agreed not to sell any of the
shares of Company stock received under these employment agreement amendments for
one year.
In addition to the bonus reductions, the employment agreements were also
amended so that their primary term will expire on December 31, 2004, subject to
the additional two years of consulting as described above. The employment
agreements were also amended to provide that salary continuation and consulting
payments would be based on the reduced bonus amounts, and to eliminate the
employee's right to terminate his agreement in the event of a Change of Control.
Agreement with Mr. Calvert
The Company had an employment agreement with Horace A. Calvert for his
service as the Executive Vice President and Chief Operating Officer of the
Company during 1999 that provided for compensation in accordance with the 1998
Executive Compensation Plan. Mr. Calvert's employment agreement was modified
effective April 1, 2000 in connection with his resignation as an officer and
director of the Company.
Agreement during 1999
Mr. Calvert received an annual base salary of $444,878 in 1999 under his
employment agreement. Mr. Calvert also received a pre-tax profits bonus of 4.0%
of PTP and a sales bonus of 1% of the annual sales of the Company and its
Subsidiaries in excess of $30 million, less $100,000, under his employment
agreement in 1999.
9
<PAGE> 12
Mr. Calvert's agreement provided that if a Change of Control occurred, Mr.
Calvert had 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. Change of Control was
generally defined to mean a change in management of the Company where Messrs.
Pearlman, Frame, Calvert and/or Lawi were no longer officers or directors of the
Company.
Mr. Calvert's agreement was originally for a term of five years, renewable
each year for an additional year unless either party to the agreement gave
notice to the contrary. The Company had given Mr. Calvert notice in October 1999
that it would not renew the agreement, so the primary term of the agreement was
to have expired on December 31, 2003. The agreement provided that if it was not
renewed, the Company would pay Mr. Calvert for two additional years'
compensation including his then current base salary plus the average of all
bonuses paid to him for the then prior three years. The severance payments would
have been contingent on his remaining available to perform consulting services
for the benefit of the Company. Mr. Calvert's agreement also provided for
monthly salary continuation payments for one year upon his death, so long as the
agreement was in full force and effect at the time of his death. The annual
salary continuation amount was to be equal to his base salary at his date of
death plus an average of the bonuses paid for the three previous calendar years.
Mr. Calvert's agreement also provided for certain noncompetition and
nondisclosure covenants 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.
2000 Modifications
Effective May 31, 2000, Mr. Calvert resigned as an officer and director of
the Company and its Subsidiaries. In conjunction with this resignation, Mr.
Calvert and the Company agreed to modify his employment arrangement to provide
for Mr. Calvert to remain an employee of the Company until May 31, 2004. The
Company paid Mr. Calvert approximately $473,000 under the modified employment
arrangement for the second quarter of 2000, and will pay Mr. Calvert a salary of
$850,000 per year from July 1, 2000 through May 31, 2004. Under the modified
employment arrangement, Mr. Calvert is not entitled to any bonuses after March
31, 2000 or any subsequent years, but will continue to participate in the
Company's medical, dental and other welfare benefit plans. Mr. Calvert is not
entitled to any compensation from the Company after May 31, 2004, but the
Company will be obligated to make all payments due under the modified
arrangement to Mr. Calvert or his estate in the event of his disability or death
before May 31, 2004. Mr. Calvert's modified agreement continues to provide for
certain noncompetition and nondisclosure covenants.
Agreement with Mr. Lawi
The Company had an employment agreement with David S. Lawi for service as
Chairman of the Executive Committee during 1999 that provided for compensation
in accordance with the 1998 Executive Compensation Plan. Mr. Lawi's employment
agreement was amended in June 2000 in connection with his resignation as an
officer and director of the Company.
Agreement during 1999
Mr. Lawi received an annual base salary of $214,219 in 1999 under his
employment agreement. Mr. Lawi also received a pre-tax profits bonus of 2.5% of
PTP under his employment agreement in 1999.
Mr. Lawi's agreement provided that if a Change of Control occurred, Mr.
Lawi had 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. Change of Control was generally
defined to mean a change in
10
<PAGE> 13
management of the Company where Messrs. Pearlman, Frame, Calvert and/or Lawi
were no longer officers or directors of the Company.
Mr. Lawi's agreement was originally for a term of five years, renewable
each year for an additional year unless either party to the agreement gave
notice to the contrary. The Company had given Mr. Lawi notice in October 1999
that it would not renew the agreement, so the primary term of the agreement was
to have expired on December 31, 2003. The agreement provided that if it was not
renewed, the Company would pay Mr. Lawi for two additional years' compensation
including his then current base salary plus the average of all bonuses paid to
him for the then prior three years. The severance payments would have been
contingent on his remaining available to perform consulting services for the
benefit of the Company. Mr. Lawi's agreement also provided for monthly salary
continuation payments for one year upon his death, so long as the agreement was
in full force and effect at the time of his death. The annual salary
continuation amount was to be equal to his base salary at his date of death plus
an average of the bonuses paid for the three previous calendar years.
Mr. Lawi's agreement also provided for certain noncompetition and
nondisclosure covenants 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.
2000 Modifications
In June 2000, Mr. Lawi resigned as an officer and director of the Company
and its Subsidiaries. In conjunction with this resignation, Mr. Lawi and the
Company agreed to amend his employment agreement to eliminate the pre-tax
profits bonus effective January 1, 2000. In exchange for the elimination of the
pre-tax profits bonus and the other modifications made to Mr. Lawi's employment
agreement, the Company issued 125,000 shares of the Company's Common Stock to
Mr. Lawi and paid Mr. Lawi a net cash bonus of $200,000 at the time of execution
of the amendment, and agreed, subject to continued employment, to pay Mr. Lawi
three net annual payments of $400,000 in January of 2001, 2002 and 2003 and a
net payment of $200,000 in January 2004. The Company agreed to pay withholding
taxes at the rate of 35% on this stock issuance, based on a value of $823,438,
and on these cash payments. Mr. Lawi has contractually agreed not to sell any of
the shares of Company stock received under this employment agreement amendment
for one year.
In addition to the elimination of the pre-tax profits bonus, Mr. Lawi's
employment agreement was also amended so that its primary term will expire on
January 2, 2004, subject to the additional two years of consulting as described
above. The employment agreement was also amended to provide that salary
continuation and consulting payments would be based on salary only, and to
eliminate Mr. Lawi's right to terminate his agreement in the event of a Change
of Control.
Mr. Lawi's amended employment agreement also provided for the Company to
loan Mr. Lawi $500,000, which bears interest at the prime rate, and to modify
the repayment terms of a loan previously made to Mr. Lawi under the Company's
Employee Stock Purchase Plan. Both of these loans are secured by a contractual
right of offset against amounts owed to Mr. Lawi under his employment agreement.
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. In 1999, Ms. Valice received an annual
salary base of $214,583 under her employment agreement. The agreement also
provides for 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 Change in Control provision as described
above for Mr. Frame's agreement, 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
11
<PAGE> 14
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.
Directors Compensation
Outside directors receive an annual fee of $50,000 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 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. Currently, each non-employee director has elected
to receive $20,000 of his annual fee in the form of deferred shares. As of
December 31, 1999, 60,000 shares have been reserved for issuance under this plan
and directors (including former directors) have accumulated 7,067 deferred
shares in their accounts of which 656 shares have been distributed and 6,411
will be distributed in future years. 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 "Stock Option Plan"), which was approved by Company
Shareholders at the 1994 annual meeting. Under the terms of the Stock Option
Plan, each non-employee director receives on the date of each annual meeting
during the term of the Stock Option 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 Stock Option Plan become
exercisable one year after the date of grant. All options expire at the earlier
of five years after the date of grant, twelve months after the optionee ceases
to serve as a director due to death, disability, or retirement at or after age
65, or 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
1999, 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
$14.75. In addition, Fred S. Zeidman and Walter M. Craig, Jr. each received
2,000 options at an exercise price of $14.75.
In 1999, the Company's Board of Directors adopted the Non-Employee
Directors' Retirement Plan (the "Retirement Plan"). Under the terms of the
Retirement Plan, each non-employee director with 10 or more years continuous
service is eligible to receive a retirement benefit. The retirement benefit
consists of two credits. The first credit is equal to $5,000 times each
participating non-employee director's years of continuous service as an Outside
Director, as defined in the Retirement Plan. The second credit is equal to the
increase, if any, in the fair market value of 15,000 shares of the Company's
common stock from the initial date of participation in the Retirement Plan to
the last day of the Company's fiscal year ending five years after the
participant's initial participation date. The retirement benefit vests 10% on
each January 1 following the participant's initial participation date. During
1999, Messrs. Craig, Lerner and Stieglitz were credited with a retirement
benefit totaling $5,000, $70,000 and $50,000, respectively.
12
<PAGE> 15
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 1999, 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 1999, 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 1999 were timely made.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company, which consists of three outside
directors, met separately and with the entire Board of Directors in December
1999 to review the Company's compensation policies and practices. The Committee
anticipates conducting similar annual reviews in the future.
COMPENSATION PHILOSOPHY
The compensation of Messrs. Frame, Calvert, Pearlman and Lawi is governed
by the Company's 1998 Executive Compensation Plan, which was approved by
stockholders in November 1997. The plan was submitted to shareholders for
approval in order to give shareholders the opportunity to participate in the
process of setting the executive compensation for Messrs. Frame, Calvert,
Pearlman and Lawi. This plan was intended to link a significant portion of these
executives' compensation to the Company's financial results and to permit the
Company to maximize the deductibility of the compensation paid to these
executives under Section 162(m) of the Internal Revenue Code.
Ms. Valice's compensation is not covered by the 1998 Executive Compensation
Plan, but is governed by her employment contract with the Company.
The Company's compensation philosophy is to pay a modest base salary and to
provide attractive incentives which permit the executive to earn additional
income based on the Company's financial results, plus the granting of stock
options and warrants to reflect the importance that the Company places on
shareholder value. This compensation philosophy also extends to all other
officers and executives of the Company.
RESTRUCTURING OF MANAGEMENT INCENTIVE BONUS COMPENSATION
On June 23, 2000, the Company announced that the employment and
compensation arrangements with Messrs. Frame, Calvert, Pearlman and Lawi had
been significantly revised. Among other things, the management incentive bonuses
on pre-tax profits for 2000 and for succeeding years was reduced by 50% (to 8.5%
from 17.5%), the existing employment agreements of Messrs. Frame and Pearlman
will not be extended
13
<PAGE> 16
beyond the current expiration date of December 31, 2004, and Messrs. Calvert and
Lawi resigned as officers and directors of the Company.
These changes were the result of extensive study by the Compensation
Committee and the Board of Directors. The employment agreement amendments making
these changes are discussed in this Proxy Statement in the "Employment
Arrangements" section and in the Company's quarterly report on Form 10-Q for the
period ended June 30, 2000. The net result of the restructuring was a one-time
non-recurring after-tax restructuring charge in the second quarter of 2000 of
approximately $3.7 million, or $0.16 per share to reflect the cost of the shares
issued and the cash payments made in the second quarter of 2000. Future payments
will also be required under the employment agreement amendments, which will be
expensed as paid.
Some of the compensation paid to these executives in consideration for
these compensation changes will not be deductible by the Company under the
restrictions imposed by Section 162(m) of the Internal Revenue Code. The
Compensation Committee specifically considered the effects of Section 162(m) on
the deductibility of the payments made to Messrs. Frame, Pearlman, Calvert, and
Lawi under the employment agreement amendments discussed above and in the
"Employment Arrangements" section of this Proxy Statement. The Compensation
Committee determined that, in their judgment, it was in the best interests of
the Company and its shareholders to enter into these amendments and make these
adjustments to the management incentive bonus arrangements even though Section
162(m) would limit the tax deductibility of a portion of the payments made in
connection with these amendments.
PERFORMANCE-BASED CASH COMPENSATION
As detailed under the "Employment Arrangements" section, Mr. Frame, the
Company's Chief Executive Officer, received a base salary, a bonus based on
pre-tax profits if pre-tax profits exceed a threshold amount and a bonus based
on the Company's sales in excess of $30 million if pre-tax profits exceed a
threshold amount in 1999. In 1999, Mr. Calvert received a base salary, a bonus
based on pre-tax profits if pre-tax profits exceed a threshold amount and a
bonus based on the Company's sales in excess of $30 million if pre-tax profits
exceed a threshold amount. In 1999, Messrs. Pearlman and Lawi each received a
base salary and a bonus based on pre-tax profits if pre-tax profits exceed a
threshold amount. Ms. Valice received a base salary, a bonus of up to $125,000
based on pre-tax profits and an additional bonus in the Board's discretion in
1999.
The Company's financial performance in 1999 was adversely impacted by
uncertainty in the oil and gas industry regarding oil and gas prices. As a
result, Mr. Frame's total cash compensation decreased 18% for the year ended
December 31, 1999 as compared to the total cash compensation he received for the
year ended December 31, 1998. This decrease in CEO compensation resulted
primarily from a decrease of approximately $1,026,000 in his pre-tax profits
bonus, of which approximately $648,000 was due to decreased pre-tax profits from
core operations of the Company in 1999 as compared to 1998 and approximately
$378,000 was due to the loss incurred by the Company in connection with the
distribution to its stockholders of its remaining shares of its former
subsidiary, Eagle Geophysical, Inc. This decrease in CEO compensation due to the
reduced pre-tax profits bonus was partially offset by payments to Mr. Frame
under the Company's Tax Equalization Program of approximately $463,000 in 1999.
Similarly, the total cash compensation for Messrs. Calvert, Pearlman and Lawi
decreased in 1999 as compared to 1998, primarily due to the same reasons. While
there was a similar decrease in Ms. Valice's pre-tax profits bonus, her overall
cash compensation increased in 1999 as compared to 1998 due to an increase in
her base salary, a one-time bonus recognizing her efforts relating to the
Company's $138 million senior notes issuance, and payments to Ms. Valice under
the Company's Tax Equalization Program.
STOCK OPTIONS AND COMMON STOCK PURCHASE WARRANTS
The Company has previously granted various options and warrants to purchase
Company common stock to its executives. However, the only options and warrants
granted during 1999 to any of the Named Executive Officers were granted under
preexisting warrant reload obligations. These option and warrant grants, all of
which were made to Mr. Frame, were granted upon his exercise of previously
granted warrants. These grants
14
<PAGE> 17
were made under the Company's Warrant Reload Plan and under the reload
provisions of the Company's 1998 Employee Stock Purchase Plan.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code, enacted in 1993, imposes
certain limitations on the deductibility by the Company for federal income tax
purposes of compensation amounts exceeding $1,000,000 paid to the chief
executive officer and four other highest paid executive officers of a company.
Qualifying performance based compensation is not subject to the deduction limit
if certain requirements are met. The Compensation Committee attempts to
structure incentive awards to be deductible under Section 162(m) and intends,
whenever reasonably possible, to have compensation paid by the Company to the
chief executive officer and the four other highest paid executive officers
satisfy Section 162(m). Notwithstanding the efforts of the Compensation
Committee in this regard, no assurance can be given that the compensation
intended to satisfy the requirements under Section 162(m) does, in fact, do so.
By the Compensation Committee,
William Lerner, Co-Chairman
John E. Stieglitz, Co-Chairman
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, the Old Peer Group index, which represents
publicly traded oil-service companies, and the New Peer Group index, which
includes all companies included in the Oil Service Index (OSX). The Company has
elected to change its Peer Group due to the recognition of the OSX index as a
reliable index for the oil service sector.
COMPARATIVE TOTAL RETURNS*
SEITEL, INC., RUSSELL 2000, OLD PEER GROUP AND NEW PEER GROUP
(PERFORMANCE RESULTS THROUGH DECEMBER 31, 1999)
[PERFORMANCE GRAPH]
<TABLE>
<S> <C> <C> <C> <C>
SEI Russell 2000 Old Peer Group New Peer Group
1994 100.00 100.00 100.00 100.00
1995 164.54 128.44 145.69 153.27
1996 186.05 149.63 213.90 239.40
1997 159.30 183.08 324.08 372.19
1998 115.70 178.42 182.33 182.48
1999 63.70 216.35 251.41 272.25
</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, Old Peer Group and New Peer Group.
* Cumulative total return assumes reinvestment of dividends.
** Old Peer Group consists of the following companies: Baker-Hughes, Inc.;
Daniel Industries, Inc. (until June 1999 when it ceased to be publicly
traded); Dresser Industries, Inc. (until September 1998 when it ceased to be
publicly traded); Global Marine Inc.; Halliburton Company, Helmerich &
Payne, Inc.; Kaneb Services, Inc.; McDermott International, Inc.; Parker
Drilling Company; R&B Falcon Corp. (formerly known as Reading & Bates
Corporation); Rowan Companies, Inc.; Smith International, Inc.; Schlumberger
Ltd.; Tidewater, Inc.; Varco International, Inc.; and Western Atlas Inc.
(until August 1998 when it ceased to be publicly traded).
*** New Peer Group consists of the following companies: Baker-Hughes, Inc.;
Cooper Cameron Corp. (which began to be publicly traded in June 1995);
Global Industries, Ltd.; Global Marine Inc.; Halliburton Company; Nabors
Industries, Inc.; Noble Drilling Corp.; R&B Falcon Corp. (formerly known as
Reading & Bates Corporation); Rowan Companies, Inc.; Schlumberger Ltd.;
Smith International, Inc.; Tidewater, Inc.; Transocean Sedco Forex, Inc.;
Varco International, Inc.; and Weatherford International, Inc.
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 the purchase of 800,000 shares of the Company's
common stock at the then market price of $2.6875 per share. 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 Company recorded compensation expense due to the below
market interest rate on these loans of $38,000 in 1999. 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 since January 1, 1999 were
approximately $391,000, $391,000 and $98,000, respectively. As of September 1,
2000, the aggregate amounts of principal and interest outstanding on such loans
were approximately $323,000, $323,000 and $81,000, respectively.
On October 2, 1998, the Company granted five-year loans at an interest rate
of 4% to most of its employees for the purchase of 794,300 shares of the
Company's common stock at the then market price of $10.3125 per share and
options to purchase a like number of shares of the Company's common stock at an
exercise price of $11.75 per share. Payment of 60% of the loan amount plus
accrued interest is being made in equal monthly, quarterly or annual payments,
as applicable, and a balloon payment of the remaining 40% is due on October 2,
2003. The Company recorded compensation expense due to the below market interest
rate on these loans of $76,000 in 1999. Loans in excess of $60,000 were made to
Messrs. Frame, Calvert, Pearlman and Lawi amounting to $773,438 each, to Ms.
Valice amounting to $515,625 and to Mr. Craig amounting to $64,453. The largest
aggregate amounts of principal and interest outstanding on such loans since
January 1, 1999 were approximately $786,000 for each of Messrs. Frame, Calvert,
Pearlman and Lawi, $524,000 for Ms. Valice and $64,000 for Mr. Craig. As of
September 1, 2000, the aggregate amounts of principal and interest outstanding
on such loans were approximately $671,000 for each of Messrs. Frame, Calvert,
Pearlman and Lawi, $447,000 for Ms. Valice and $51,000 for Mr. Craig.
The Company guarantees borrowings up to $750,000 made by Paul Frame under a
line of credit. The Company is only obligated to make payment in the event of
default by Mr. Frame. The Company has a contractual right of offset against any
salary, bonus, commission or other amounts due from the Company to Mr. Frame for
any amounts paid by the Company pursuant to this guaranty. The maximum amount
outstanding on this line of credit during 1999 was $700,000. The Company did not
make any payments under this guaranty during 1999. As of September 1, 2000,
$700,000 was outstanding on this line of credit.
In 1998, the Company loaned Walter Craig $33,000 bearing interest at the
rate of 10%. The Company also made a loan to Mr. Craig in 2000 totaling $25,000
bearing interest at the prime rate. The largest aggregate amount of principal
and interest outstanding on these loans since January 1, 1999 was approximately
$47,000, which also represented the aggregate amount of principal and interest
outstanding on these loans as of September 1, 2000.
In connection with David Lawi's employment agreement modification in 2000,
the Company loaned Mr. Lawi $500,000 bearing interest at the prime rate. The
largest aggregate amount of principal and interest outstanding on this loan
since January 1, 1999 was approximately $507,000, which also represented the
aggregate amount of principal and interest outstanding on this loan as of
September 1, 2000.
On August 11, 1997, the Company's wholly-owned seismic data acquisition
crew subsidiary, Eagle Geophysical, Inc., completed an initial public offering
in which the Company sold 1,880,000 of its 3,400,000 shares of Eagle common
stock as a selling stockholder. On April 22, 1999, the Board of Directors of
Seitel, Inc. declared to its common stockholders a dividend consisting of the
remaining 1,520,000 shares of the common stock of Eagle owned by the Company.
The dividend was declared at the rate of approximately 0.064 shares of Eagle
common stock for each share of Seitel, Inc. common stock owned as of the close
of business on the record date of May 18, 1999. The Company incurred charges of
$58,594,000 for the seismic data acquisition services of Eagle for the year
ended December 31, 1999, $27,735,000 of which were incurred during the four
months ended April 30, 1999, the period that Eagle was considered a related
party. Costs
17
<PAGE> 20
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, was a Director of Eagle and Chairman of the Executive Committee of
Eagle's Board of Directors until March 1999. In addition to his duties as a
director of Eagle, Mr. Frame was responsible for strategic planning, marketing,
and domestic and international growth of Eagle's business pursuant to a bonus
agreement with Eagle, which was terminated in March 1999 when he resigned as a
director of Eagle. The Board of Directors of the Company had agreed to allow Mr.
Frame to devote 20% of his time to Eagle until December 31, 1999.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP acted as independent auditors for the Company for the
year ended December 31, 1999. The Company has been advised that representatives
of Arthur Andersen LLP will attend the Annual Meeting of Stockholders. They will
have an opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions. The Board of Directors has put
the audit for the year ending December 31, 2000 out to bid, and has not yet
selected independent auditors for the Company for this year. Therefore, the
Company is not seeking stockholder ratification of a selection of auditors for
the year ending December 31, 2000 at the Annual Meeting.
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 2001 must be received by the Company at 50 Briar
Hollow Lane, 7th Floor West, Houston, Texas 77027, Attention Debra D. Valice, no
later than December 31, 2000, based on an expected mailing date of April 30,
2001 for the proxy material related to the 2001 Annual Meeting.
MISCELLANEOUS
The Board of Directors knows of no other matters that are to be brought
before the meeting. However, if any other matters do come before the meeting,
the persons named on the enclosed form of proxy or their substitutes will vote
in accordance with their judgment in those matters.
The cost of solicitation of proxies, including expenses in connection with
preparing, assembling and mailing this proxy statement, will be borne by the
Company. The solicitation will be made by mail and may also be made by officers
or regular employees of the Company personally or by telephone or telegram. The
Company may reimburse brokers, custodians and nominees for their expenses in
sending proxies and proxy material to beneficial owners.
September 15, 2000
Houston, Texas
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<PAGE> 21
SEITEL, INC.
-------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY
OCTOBER 19, 2000
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 Thursday, October 19, 2000 at 9:00 a.m. at the
Waldorf Astoria Hotel, 301 Park Avenue, Herbert Hoover Room, 4th Floor,
New York, New York, 10022, 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.
-----------
SEE REVERSE
SIDE
-----------
(TO BE SIGNED ON REVERSE SIDE)
<PAGE> 22
* PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED *
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A [X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING MATTER:
FOR WITHHOLD
1. To elect seven [ ] [ ] NOMINEES: Herbert M. Pearlman 2. To transact such other business as may properly
directors to Paul A. Frame come before the meeting or any adjournment of the
serve until the Debra D. Valice meeting.
2001 Annual Meeting. Walter M. Craig, Jr.
William Lerner ONLY STOCKHOLDERS OF RECORD AT THE CLOSE OF
To withhold authority to vote for any nominee(s), John E. Stieglitz BUSINESS ON SEPTEMBER 12, 2000, WILL BE ENTITLED TO
print name(s) below. Fred S. Zeidman 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.)
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