EXHIBIT 10.3
<PAGE>
SEITEL, INC.
EMPLOYMENT AGREEMENT AMENDMENT NO. 2
THIS EMPLOYMENT AGREEMENT AMENDMENT NO. 2 (this "Agreement") is between
Seitel, Inc. (the "Company"), a Delaware corporation with its principal place of
business in Houston, Texas, and Herbert M. Pearlman (the "Employee," and
collectively with the Company, the "Parties"), and is an amendment to that
certain Employment Agreement between the Company and the Employee dated
effective January 1, 1991 (the "Original Employment Agreement"), as amended by
that certain Employment Agreement Amendment dated effective as of January 1,
1998 (the Original Employment Agreement, as so amended, is referred to herein as
the "Employment Agreement").
Recitals
WHEREAS, the Company and the Employee entered into the Original
Employment Agreement effective as of January 1, 1991 to govern the terms of the
Employee's employment by the Company;
WHEREAS, the Company and the Employee entered into an amendment to the
Original Employment Agreement effective January 1, 1998 to amend certain terms
of the Original Employment Agreement;
WHEREAS, the Employee and the Company are entering into this Agreement
to further amend the Employment Agreement as set forth herein;
NOW, THEREFORE, the Parties do hereby agree as follows:
1. Compensation. Section 2 of the Employment Agreement is hereby
amended by deleting the following sentence:
"If the Employment Period reaches the Termination Date, Employer will
pay Employee for two (2) additional years the compensation then
applicable, which shall include for purposes of this payment the Base
Salary, together with the average of all bonus payments paid to
Employee for the prior three (3) years (the Severance Payment)."
and replacing such sentence with the following sentence:
"If the Employment Period reaches the Termination Date, Employer will
pay Employee for two (2) additional years the compensation then
applicable, which shall include for purposes of this payment the Base
Salary, together with the average of all Pre-Tax Profits Bonus payments
that would have been paid to Employee for the prior three (3) years as
calculated under Section 3 of this Agreement as amended by Amendment
No. 2 to this Agreement (the Severance Payment)."
In addition, Section 2 of the Employment Agreement is further amended by
deleting the following sentence:
"If Employee terminates this Agreement during any renewal period,
Employer will pay Employee 100% of his then current Base Salary
(including bonus and/or commissions) for two additional years, provided
Employee performs the Consulting Services (the Termination Payment)."
and replacing such sentence with the following sentence:
"If Employee terminates this Agreement during any renewal period,
Employer will pay Employee 100% of his then current Base Salary and
Pre-Tax Profits Bonus for two additional years, provided Employee
performs the Consulting Services (the Termination Payment)."
2. Compensation. Section 3 of the Employment Agreement is hereby
amended to reduce the amount of the Pre-Tax Profits Bonus payable thereunder for
the year ending December 31, 2000 and subsequent years during the term of the
Agreement by redesignating existing Section 3(b) of the Agreement as Section
3(b)(I), and by deleting the first paragraph thereof and replacing it with the
following:
"(b)(I) Pre-Tax Profits Bonus. Commencing January 1,
1998, the Employee shall receive bonus payments based on the
annual Pre-Tax Profits (the "PTP") of the Company and its
majority owned subsidiaries ("Subsidiaries"). If the PTP
exceeds the PTP Threshold (hereinafter defined), Employee
shall receive a pre-tax profits bonus equal to the difference
of (I) 3.5% of PTP for PTP up to $50 million and 3.71% of PTP
for PTP in excess of $50 million, minus (II) $300,000,
provided, however, that if the amount determined under clause
(I) is less than $300,000, no bonus shall be payable
hereunder."
Section 3(b) of the Employment Agreement shall be further amended by adding
thereto after Section 3(b)(I) the following Section 3(b)(II):
"(II) Bonus for Reduction of Pre-Tax Profits Bonus.
In consideration of Employee's agreement to the reduction in
Pre-Tax Profits Bonus and the other amendments to this
Employment Agreement set forth in Employment Agreement
Amendment No. 2 to this Employment Agreement, the Company
shall pay Employee a bonus in the aggregate amount of
$2,674,040, which shall be payable as follows:
(i) The Company shall issue Employee 150,000
shares of restricted common stock of the
Company on the date hereof, which shall be
valued at $6.5875 per share, or a total of
$988,125 (which is approximately 15% less
than the current market value of freely
tradable common stock to reflect the
transfer restrictions applicable to such
shares of restricted stock), and shall pay
to Employee on the date hereof the sum of
$532,067, subject to withholding as
specified in paragraph (vii) below, for a
net cash payment of $-0-.
(ii) The Company shall pay Employee on January 2,
2001 the sum of $288,462, subject to
withholding as specified in paragraph (vii)
below, for a net cash payment of $187,500.
(iii) The Company shall pay Employee on January 2,
2002 the sum of $288,462, subject to
withholding as specified in paragraph (vii)
below, for a net cash payment of $187,500.
(iv) The Company shall pay Employee on January 2,
2003 the sum of $288,462, subject to
withholding as specified in paragraph (vii)
below, for a net cash payment of $187,500.
(v) The Company shall pay Employee on January 2,
2004 the sum of $288,462, subject to
withholding as specified in paragraph (vii)
below, for a net cash payment of $187,500.
(vi) The payments in paragraphs (i) through (v)
above shall be contingent on Employee
continuing to be an employee of the Company
on the date such payments are due, and the
right to receive such payments shall not
vest until such dates; provided, however,
that if Employee is not an employee of the
Company on any such date due to termination
of his employment prior to such date as a
result of his death or disability, the
Company shall continue to make such payments
to Employee or his estate on such dates.
(vii) The payments in paragraphs (i) through (v)
above shall be subject to federal tax
withholding at the aggregate rate of 35%.
For the purpose of paragraph (i) above, the
withholding shall be based on the amount of
the cash payment and the $988,125 value
attributed to the stock issued to Employee."
Section 3 of the Employment Agreement shall be further amended by deleting
existing Section 3(d) and replacing it with the following:
"(d) Salary Continuation Benefits. The Company will pay, so
long as the Employee's Employment Agreement, as amended, is in full
force and effect on the date of his death, a monthly salary
continuation amount to the Employee's estate or his designee, for
twelve months beginning on the date of his death. The annual salary
continuation amount will equal the Employee's base salary at his date
of death plus the average of all Pre-Tax Profits Bonus payments that
would have been paid to Employee for the three calendar years preceding
the year of his death as calculated under Section 3 of this Agreement
as amended by Amendment No. 2 to this Agreement."
3. Termination. Paragraph (b) of Section 13 of the Employment
Agreement is hereby amended by deleting the existing paragraph (b) and replacing
it with the following:
"(b) Termination for Employer's Breach: Employee shall have
the right to terminate this Agreement if the Employer materially
breaches any of the provisions hereof and such breach is not cured
within thirty (30) days after the Employer receives written notice from
Employee thereof. In such event, or in the event of a wrongful
termination of Employee, all monies due to Employee through the term of
this Agreement, including the Severance Payment, shall be paid by
Employer in a lump sum amount within thirty (30) days of Employee's
termination. Employee shall have no obligation to mitigate his loss or
any occasioned damages as a result of such termination, or perform any
services to receive such payments.
4. Restriction on Transfer of Stock, Registration Rights. Employee
agrees that he will not sell, assign or otherwise transfer the shares received
pursuant to Section 3(b)(II)(i) of the Employment Agreement as amended hereby
for a period of one year from the date of this Agreement; provided, however,
that Employee may transfer a portion of such shares to members of his immediate
family or trusts for the benefit of members of his immediate family who agree to
be bound by the transfer restrictions set forth herein and who make any required
representations regarding their investment intent as the Company may require.
The Employee shall have the right to demand that the Company use its best
efforts to effect an effective registration under the Securities Act of 1933, as
amended, of Employee's resale of such shares on one occasion not sooner than
nine months after the date hereof or later than December 31, 2003. The Company
may grant similar registration rights to other stockholders, and upon any demand
by any other such stockholder for the registration of his shares, the Company
may also include Employee's shares in such registration and such inclusion shall
constitute the one required registration hereunder. If requested by the Company,
Employee and the Company shall enter into a customary form of registration
agreement relating thereto. The Company may include other shares and selling
shareholders in any such registration in its sole discretion.
5. Representations and Warranties of Employee Relating to Stock
Issuance. In connection with the issuance of common stock of the Company to
Employee hereunder, Employee represents and warrants to the Company as follows:
(a) Acquisition for Own Account. Employee is acquiring the
common stock for his own account, for investment and not with a view to
the sale or distribution thereof or with any present intention of
distributing or selling the same, or dividing the common stock with
other persons.
(b) Securities Law Restrictions. Employee will not sell,
assign, transfer, pledge or otherwise dispose of any of the shares of
common stock except in accordance with the provisions of applicable
state and federal securities laws.
(c) Investment Risk. Employee has such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of investment in the shares of common
stock.
(d) Accredited Investor. Employee is an "accredited investor"
as said term is defined in Rule 501 of Regulation D under the
Securities Act, in that he is an individual and either (i) has an
individual net worth, or joint net worth with his spouse, in excess of
$1,000,000, or (ii) had an individual income in excess of $200,000 in
each of the two most recent years or joint income with his spouse of
$300,000 in each of those years and has a reasonable expectation of
reaching the same level in the current year.
(e) Legends, Etc. Employee acknowledges and agrees that (i)
the certificates representing the shares of common stock will contain a
legend substantially in the form of the following, (ii) the shares of
common stock are not registered under the Securities Act or any other
Federal or state law, and (iii) Employee must bear the economic risks
of his investment for an indefinite period of time and is capable of
bearing such risk.
"The securities represented hereby have not been registered
under the Securities Act of 1933 and may not be sold,
assigned, transferred, pledged or otherwise disposed of except
in compliance with the requirements of such Act and until the
Corporation shall have received the written opinion of counsel
to the holder of this certificate, reasonably satisfactory to
the Corporation, to that effect."
(f) Information Provided. Employee has had access to the
Company's most recent publicly filed Annual Report on Form 10-K and
Quarterly Report on Form 10-Q and has had the opportunity to ask
questions of, and receive satisfactory answers from the executive
management of the Company regarding the Company's business and
prospects. He has had the opportunity to obtain the information
necessary to satisfy himself concerning the answers so obtained.
6. Termination of Automatic Renewal of Agreement. The Company hereby
gives notice to Employee, which Employee acknowledges as good and valid notice
under the terms of the Agreement, that the Company will not extend the term of
the Agreement pursuant to Section 2 of the Agreement, so that the Termination
Date will occur on December 31, 2004.
7. Amendment of Employment Agreement. This Agreement is executed as
and shall constitute an amendment to the Employment Agreement, and shall be
construed in connection with and as a part of the Employment Agreement. Except
as specifically amended by this Agreement, all of the terms and provisions of
the Employment Agreement shall remain in full force and effect. In the event of
any conflict between the terms of the Employment Agreement and the terms of this
Agreement, the terms of this Agreement shall apply.
8. Miscellaneous.
(a) Controlling Law. The execution, validity, interpretation
and performance of this Agreement shall be determined and governed by
the laws of the State of Texas, and, in any action by the Company to
enforce this Agreement, venue may be had in Harris County, Texas.
(b) Entire Agreement. The Employment Agreement, as amended by
this Agreement, contains the entire agreement of the Parties. The
Employment Agreement and this Agreement may not be changed orally or by
action or inaction, but only by an agreement in writing signed by the
Party against whom enforcement of any waiver, change, modification,
extension or discharge is sought.
(c) Severability. If any provision of this Agreement is
rendered or declared illegal or unenforceable by reason of any existing
or subsequently enacted legislation or by decree of a court of last
resort, the Parties shall promptly meet and negotiate substitute
provisions for those rendered or declared illegal or unenforceable, but
all remaining provisions of this Agreement shall remain in full force
and effect.
(d) Execution. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of
which shall constitute one instrument.
EXECUTED to be effective as of the 26th day of June, 2000.
SEITEL, INC.
By: /s/ Paul A. Frame
---------------------------
Paul A. Frame
President and CEO
/s/ Herbert M. Pearlman
---------------------------
HERBERT M. PEARLMAN
