SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-Q
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X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
- -------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
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)
Registrant's telephone number, including area code: (713) 881-8900
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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.
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Yes X No
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As of May 11, 2000 there were 23,640,613 shares of the Company's common stock,
par value $.01 per share outstanding.
<PAGE>
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 2000 (Unaudited) and December 31, 1999................... 3
Consolidated Statements of Operations (Unaudited) for the
Three Months Ended March 31, 2000 and 1999......................... 4
Consolidated Statements of Stockholders' Equity (Unaudited)
for the Three Months Ended March 31, 2000.......................... 5
Consolidated Statements of Cash Flows (Unaudited)
for the Three Months Ended March 31, 2000 and 1999................. 6
Notes to Consolidated Interim Financial Statements................. 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 10
Item 3. Quantitative and Qualitative Disclosures
about Market Risk......................................... 13
PART II. OTHER INFORMATION.................................................. 14
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
Cash and equivalents $ 4,727 $ 5,188
Receivables
Trade (net) 39,076 62,240
Notes and other 284 436
Net data bank 339,373 329,885
Net oil and gas properties 151,378 150,166
Net other property and equipment 2,373 2,421
Investment in marketable securities 993 993
Prepaid expenses, deferred charges and other assets 4,420 4,590
--------- ---------
TOTAL ASSETS $ 542,624 $ 555,919
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 39,057 $ 49,785
Income taxes payable 141 373
Debt
Senior Notes 184,667 184,667
Line of credit 37,000 40,500
Term loans - 33
Obligations under capital leases 33 23
Contingent payables 274 274
Deferred income taxes 33,678 32,778
Deferred revenue 1,678 4,462
--------- ---------
TOTAL LIABILITIES 296,528 312,895
--------- ---------
CONTINGENCIES AND COMMITMENTS
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share; authorized
5,000,000 shares; none issued - -
Common stock, par value $.01 per share; authorized
50,000,000 shares; issued and outstanding
24,321,131 and 24,285,795 at March 31, 2000
and December 31,1999, respectively 243 243
Additional paid-in capital 147,727 147,549
Retained earnings 112,622 110,117
Treasury stock, 680,518 shares at cost at
March 31, 2000 and December 31, 1999 (6,279) (6,279)
Notes receivable from officers and employees (6,661) (6,915)
Accumulated other comprehensive loss (1,556) (1,691)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 246,096 243,024
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 542,624 $ 555,919
========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
-------- --------
<S> <C> <C>
REVENUE $ 28,431 $ 37,881
EXPENSES
Depreciation, depletion and amortization 13,159 17,739
Cost of sales 1,650 1,292
Selling, general and administrative expenses 6,670 7,204
-------- --------
21,479 26,235
-------- --------
INCOME FROM OPERATIONS 6,952 11,646
Interest expense, net (3,098) (2,163)
Equity in loss of affiliate - (91)
Impairment due to dividend distribution
of affiliate stock - (7,794)
-------- --------
Income before provision for income taxes 3,854 1,598
Provision for income taxes 1,349 848
-------- --------
NET INCOME $ 2,505 $ 750
======== ========
Net income per share:
Basic $ .11 $ .03
======== ========
Diluted $ .11 $ .03
======== ========
Weighted average number of common and common equivalent shares:
Basic 23,625 23,635
======== ========
Diluted 23,743 23,945
======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Notes
Receivable Accumulated
Common Stock Additional Treasury Stock from Other
Comprehensive ---------------- Paid-In Retained ----------------- Officers & Comprehensive
Income Shares Amount Capital Earnings Shares Amount Employees Income
--------- ---------- ----- --------- --------- -------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 23,804,508 $ 238 $ 141,826 $ 107,102 (175,818) $(2,977) $ (8,651) $ 49
Net proceeds from issuance
of common stock 481,287 5 5,126 - - - - -
Tax reduction from exer-
cise of stock options - - 597 - - - - -
Treasury stock purchased - - - - (504,700) (3,302) - -
Payments received on
notes receivable from
officers and employees - - - - - - 1,736 -
Distribution of Eagle Geo-
physical, Inc.shares - - - (6,365) - - - -
Net income $ 9,380 - - - 9,380 - - - -
Foreign currency trans-
lation adjustments (695) - - - - - - - (695)
Unrealized loss on
marketable securities
net of income
tax benefit of $526 (1,045) - - - - - - - (1,045)
--------
Comprehensive income $ 7,640
======== ---------- ----- --------- --------- -------- ------- -------- ----------
Balance, December 31, 1999 24,285,795 243 147,549 110,117 (680,518) (6,279) (6,915) (1,691)
Net proceeds from issuance
of common stock 35,336 - 156 - - - - -
Tax reduction from exer-
cise of stock options - - 22 - - - - -
Payments received on
notes receivable from
officers and employees - - - - - - 254 -
Net income $ 2,505 2,505
Foreign currency trans-
lation adjustments 135 - - - - - - - 135
--------
Comprehensive income $ 2,640
======== ---------- ----- --------- --------- -------- ------- -------- ----------
Balance, March 31, 2000
(unaudited) 24,321,131 $ 243 $ 147,727 $ 112,622 (680,518) $(6,279) $ (6,661) $ (1,556)
========== ===== ========= ========= ======== ======= ======== ==========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------
2000 1999
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 48,811 $ 42,579
Cash paid to suppliers and employees (14,515) (12,426)
Interest paid (4,223) (840)
Interest received 258 199
Income taxes paid (659) (466)
--------- ----------
Net cash provided by operating activities 29,672 29,046
--------- ----------
Cash flows from investing activities:
Cash invested in seismic data (20,587) (62,623)
Cash invested in oil and gas properties (5,639) (10,786)
Cash paid to acquire property and equipment (186) (143)
Deferred IPO costs (759) -
--------- ----------
Net cash used in investing activities (27,171) (73,552)
--------- ----------
Cash flows from financing activities:
Borrowings under line of credit agreement 14,900 18,323
Principal payments under line of credit (18,400) (103,823)
Principal payments on term loans (33) (41)
Principal payments under capital lease obligations (12) (18)
Proceeds from issuance of senior notes - 138,000
Proceeds from issuance of common stock 158 45
Costs of debt and equity transactions (2) (2,018)
Payments on notes receivable from officers and employees 254 339
--------- ----------
Net cash provided (used) by financing activities (3,135) 50,807
--------- ----------
Effect of exchange rate changes 173 (30)
--------- ----------
Net increase (decrease) in cash and equivalents (461) 6,271
Cash and cash equivalents at beginning of period 5,188 3,161
--------- ----------
Cash and equivalents at end of period $ 4,727 $ 9,432
========= ==========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited), continued
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------
2000 1999
-------- --------
<S> <C> <C>
Reconciliation of net income to net cash provided by operating activities:
Net income $ 2,505 $ 750
Adjustments to reconcile net income to net cash provided by
operating activities:
Impairment due to dividend distribution of affiliate stock - 7,794
Depreciation, depletion and amortization 13,159 17,739
Deferred income tax provision (benefit) 900 (2,307)
Non-cash sales - (4,035)
Equity in loss of affiliate - 91
Decrease in receivables 23,316 12,684
Decrease in other assets 289 486
Decrease in accounts payable and other liabilities (10,497) (4,156)
-------- --------
Total adjustments 27,167 28,296
-------- --------
Net cash provided by operating activities $ 29,672 $ 29,046
======== ========
Supplemental schedule of non-cash investing and financing activities:
Dividend payable of affiliate stock $ - $ 6,365
======== ========
Capital lease obligations incurred $ 22 $ -
======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)
March 31, 2000
NOTE A-BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions of Regulation S-X. Accordingly, they do
not include all of the information and notes required by accounting principles
generally accepted in the United States for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Certain reclassifications have been made to the amounts in the prior year's
financial statements to conform to the current year's presentation. Operating
results for the three months ended March 31, 2000 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2000. For
further information, refer to the financial statements and notes thereto for the
year ended December 31, 1999 contained in the Company's Annual Report filed on
Form 10-K with the Securities and Exchange Commission.
NOTE B-EARNINGS PER SHARE
In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings per Share," basic earnings per share is computed based on the
weighted average shares of common stock outstanding during the periods. Diluted
earnings per share is computed based on the weighted average shares of common
stock plus the assumed issuance of common stock for all potentially diluted
securities. Earnings per share computations to reconcile basic and diluted net
income for the three months ended March 31, 2000 and 1999 consist of the
following (in thousands except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------
2000 1999
---------- ----------
<S> <C> <C>
Net income $ 2,505 $ 750
========== ==========
Basic weighted average shares 23,625 23,635
Effect of dilutive securities: (1)<F1>
Options and warrants 118 310
---------- ----------
Diluted weighted average shares 23,743 23,945
========== ==========
Per share income:
Basic $ .11 $ .03
Diluted $ .11 $ .03
- -------------------
<FN>
(1)<F1> A weighted average quarter-to-date number of options and warrants to
purchase 6,159,000 and 4,758,000 shares of common stock were
outstanding during the first quarter of 2000 and 1999, respectively,
but were not included in the computation of diluted per share income
because their exercise prices were greater than the average market
price of the common shares.
</FN>
</TABLE>
NOTE C-DATA BANK
Costs incurred in the creation of proprietary seismic data, including
the direct and incremental costs of Company personnel engaged in project
management and design, are capitalized. Substantially all (greater than 88%) of
the costs incurred to develop the Company's data bank have been for programs
created by the Company. The Company uses the income forecast method to amortize
the costs of seismic data programs it creates. Under the income forecast method,
seismic data costs are amortized in the proportion that revenue for a period
relates to management's estimate of ultimate revenues. Management estimates that
90% of the costs incurred in the creation of seismic data is amortized within
five years of such data becoming available for resale for two-dimensional
seismic data and within seven years of such data becoming available for resale
for three-dimensional seismic data. If anticipated sales fall below
expectations, amortization is accelerated. The Company also purchases existing
seismic data programs from other companies. The costs of purchased seismic data
programs are generally amortized on a straight-line basis over ten years;
however, the costs of a significant purchase (greater than 5% of the net book
value of the data bank), are amortized using the greater of the income forecast
method or ten-year straight-line method. As of March 31, 2000, almost all (96%)
of the net costs of the Company's data bank are expected to be fully amortized
within 10 years from when such data becomes available for resale.
<PAGE>
In certain cases, the Company grants seismic licenses to third parties
for data to be used in their operations (not for resale) in exchange for
exclusive ownership of seismic data from the third party. The Company recognizes
revenue for the licenses granted and records a data library asset for the
seismic data acquired. These transactions are accounted for as non-monetary
exchanges and are valued at the fair market value of such licenses based on
values realized in cash transactions with other parties for similar seismic
data. During the first quarter of 1999, the Company licensed seismic data valued
at $4,035,000 in exchange for the purchase of seismic data for its library.
NOTE D-OIL AND GAS PROPERTIES
The Company accounts for its oil and gas exploration and production
activities using the full-cost method of accounting. Under this method, all
costs associated with acquisition, exploration and development of oil and gas
reserves are capitalized, including salaries, benefits and other internal costs
directly attributable to these activities. Costs associated with production and
general corporate activities are expensed in the period incurred. For the three
months ended March 31, 2000 and 1999, exploration and development related
overhead costs of $478,000 and $479,000, respectively, have been capitalized to
oil and gas properties. Interest costs related to unproved properties and
certain properties under development are also capitalized to oil and gas
properties. For the three months ended March 31, 2000 and 1999, interest costs
of $745,000 and $775,000, respectively, have been capitalized to oil and gas
properties.
NOTE E-INDUSTRY SEGMENTS
SFAS NO. 131, "Disclosures About Segments of an Enterprise and Related
Information," established standards for reporting information about operating
segments in annual financial statements and requires selected information in
interim financial reports. Selected financial information as of and for the
three months ended March 31, 2000 and 1999 is as follows (in thousands):
<TABLE>
<CAPTION>
Exploration
and Total
Seismic Production Segments
--------- --------- ----------
<S> <C> <C> <C>
As of and for the three months ended March 31, 2000
- ---------------------------------------------------
Revenue from external purchasers $ 23,019 $ 5,412 $ 28,431
Depreciation, depletion
and amortization 10,288 2,572 12,860
Cost of sales 77 1,573 1,650
Segment operating income 12,654 1,267 13,921
Capital expenditures (a)<F1> 19,758 3,809 23,567
Assets 380,574 156,913 537,487
As of and for the three months ended March 31, 1999
- ---------------------------------------------------
Revenue from external purchasers $ 33,922 $ 3,959 $ 37,881
Depreciation, depletion
and amortization 15,378 2,081 17,459
Cost of sales 65 1,227 1,292
Segment operating income 18,479 651 19,130
Capital expenditures (a)<F1> 55,789 9,699 65,488
Assets 347,358 161,947 509,305
<FN>
(a)<F1> Includes other ancillary equipment.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three months ended March 31,
--------------------------
2000 999
--------- ---------
<S> <C> <C>
Income before income taxes:
Total reportable segment operating income $ 13,921 $ 19,130
Selling general and administrative expense (6,670) (7,204)
Interest expense, net (3,098) (2,163)
Equity in loss of affiliate - (91)
Impairment due to dividend distribution of affiliate stock - (7,794)
Eliminations and other (299) (280)
--------- ---------
Income before income taxes $ 3,854 $ 1,598
========= =========
</TABLE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company's income from core seismic marketing and exploration and
production operations was $2,505,000 for the first quarter of 2000 as compared
to $5,875,000 for the first quarter of 1999. Additionally, in the first quarter
of 1999, the Company recorded a non-cash, non-operating loss on the dividend
distribution of affiliate stock totaling $5,066,000, net of tax, along with
equity in loss of affiliate of $59,000, net of tax, bringing first quarter 1999
net income to $750,000.
RESULTS OF OPERATIONS
Total revenue was $28,431,000 and $37,881,000 in the first quarters of
2000 and 1999, respectively. Revenue primarily consists of revenue generated
from the marketing of seismic data and oil and gas production.
Revenue from the marketing of seismic data was $23,019,000 in the first
quarter of 2000 compared to $33,922,000 in the first quarter of 1999. In May
1999, the Company made a management decision to focus its marketing team on
licensing of existing data that would generate current cash flow. Management
continued this decision to limit data creation in the first quarter of 2000,
which was the primary reason for lower seismic revenue than in the first quarter
of 1999.
Net volume and price information for the Company's oil and gas
production for the first quarters of 2000 and 1999 is summarized in the
following table:
<TABLE>
<CAPTION>
Quarter Ended
March 31,
----------------------------------
2000 1999
--------- ----------
<S> <C> <C>
Natural gas volumes (mmcf) 1,305 1,630
Average natural gas price ($/mcf) $ 2.75 $ 1.85
Crude oil/condensate volumes (mbbl) 70 84
Average crude oil/condensate price ($/bbl) $ 25.27 $ 10.12
</TABLE>
Oil and gas revenue was $5,412,000 in the first quarter of 2000
compared to $3,959,000 in the first quarter of 1999. The increase in oil and gas
revenue was primarily attributable to higher market prices in the 2000 quarter
offset by lower production volumes as compared to the first quarter of 1999. The
decline in oil and gas production was primarily due to normal production
declines experienced on several of the Company's older wells as well as a
decline related to a group of wells that was sold in July 1999. These declines
were partially offset by production from newer wells.
Depreciation, depletion and amortization consists primarily of data
bank amortization and depletion of oil and gas properties. Data bank
amortization was $10,288,000 in the first quarter of 2000 compared to
$15,378,000 in the first quarter of 1999. The amount of seismic data
amortization fluctuates based on the level of seismic marketing revenue. As a
percentage of revenue from licensing seismic data, data bank amortization was
46% for the first quarters of 2000 and 1999. See Note C for a discussion of the
Company's seismic data amortization policy.
<PAGE>
Depletion of oil and gas properties was $2,572,000 in the first quarter
of 2000 compared to $2,081,000 for the first quarter of 1999, which amounted to
$1.49 and $.98, respectively, per mcfe of gas produced during such periods. The
rate per mcfe varies with the estimate of proved oil and gas reserves of the
Company at each quarter end, as well as evaluated property costs. The increase
in the rate was primarily due to lower proved reserves at March 31, 2000 than at
March 31, 1999.
Cost of sales consists of expenses associated with oil and gas
production and seismic resale support services. Oil and gas production costs
amounted to $1,573,000 or $.91 per mcfe of gas produced in the first quarter of
2000 compared to $1,227,000, or $.57 per mcfe of gas produced in the first
quarter of 1999. The increase in this rate was primarily due to workover costs
related to two wells in the first quarter of 2000 being higher than the workover
costs incurred in the first quarter of 1999.
The Company's selling, general and administrative expenses were
$6,670,000 in the first quarter of 2000 compared to $7,204,000 in the first
quarter of 1999. This decrease primarily resulted from a decrease in variable
expenses related to revenue and pretax profits which was partially offset by an
increase in overhead costs due to the growth of the Company's operations in
Canada between periods and certain nonrecurring costs in 2000.
Net interest expense was $3,098,000 in the first quarter of 2000
compared to $2,163,000 in the first quarter of 1999. The increase was primarily
due to the series of senior notes totaling $138 million being outstanding for
the entire first quarter of 2000 whereas they were only outstanding for one-half
of the first quarter of 1999.
On April 22, 1999, the Board of Directors of Seitel, Inc. declared to
its common stockholders a dividend consisting of the 1,520,000 shares of the
common stock of Eagle Geophysical, Inc. currently owned by the Company. The fair
market value of the common stock of Eagle held by the Company on the date this
dividend was declared was lower than the carrying value of the stock on the
Company's balance sheet; therefore, a non-cash, non-recurring, pre-tax
impairment, net of bonus effect, of $7,794,000 was recorded at March 31, 1999.
The Company's effective income tax rate was 35% for the first quarter
of 2000 compared to 53% for the first quarter of 1999. Income tax expense in the
first quarter of 1999 consisted of two items: (1) income tax expense on income
from core operations at the Company's estimated annual tax rate of 38% offset by
(2) income tax benefit on the non-recurring loss on dividend distribution of
affiliate stock at the tax rate of 35%. The net of these two items resulted in
the higher effective tax rate.
Liquidity and Capital Resources
The Company's cash flow from operations was $ 29,672,000 and
$29,046,000 for the three months ended March 31, 2000 and 1999, respectively.
The small increase from 1999 to 2000 was primarily attributable to an increase
in collections from customers partially offset by an increase in payments to
suppliers and employees and increased interest expense paid.
The Company has a $75 million unsecured revolving line of credit
facility that matures on March 16, 2001. The facility bears interest at a rate
determined by the ratio of the Company's debt to cash flow from operations.
Pursuant to the interest rate pricing structure, funds can currently be borrowed
at LIBOR plus 1 1/2%, the bank's prevailing prime rate, or the sum of the
Federal Funds effective rate for such day plus 1/2%. Certain restrictions exist
that limit the amount of borrowing that the Company can make under this
facility. The balance outstanding on the revolving line of credit at May 11,
2000 was $38 million bearing an average interest rate of 6.96%.
<PAGE>
On November 9, 1999, the Company's wholly-owned subsidiary, Olympic
Seismic Ltd. ("Olympic"), entered into revolving credit facilities which allow
it to borrow up to $5 million (Canadian dollars) by way of prime based loans,
bankers' acceptances, or letters of credit. Prime based loans and bankers'
acceptances bear interest at the rate of the bank's prime rate plus 0.35% per
annum and 0.50% per annum, respectively. Letter of credit fees are based on
scheduled rates in effect at the time of issuance. The facility is secured by
Olympic's assets, but is not guaranteed by Seitel, Inc. or any of its other
subsidiaries. Borrowings under the facility are limited to 75% of trade
receivables less than 90 days old. The facility is subject to repayment upon
demand and is available from time to time at the Bank's sole discretion. Olympic
did not have any amounts outstanding under this line of credit at March 31,
2000, or May 11, 2000. Olympic is not a party to any of the debt held by Seitel,
Inc.
On February 12, 1999, the Company completed a private placement of
three series of unsecured Senior Notes totaling $138 million. The Series D Notes
total $20 million, bear interest at a fixed rate of 7.03% and mature on February
15, 2004, with no principal payments due until maturity. The Series E Notes
total $75 million, bear interest at a fixed rate of 7.28% and mature on February
15, 2009, with annual principal payments of $12.5 million beginning February 15,
2004. The Series F Notes total $43 million, bear interest at a fixed rate of
7.43% and mature on February 15, 2009, with no principal payments due until
maturity. Interest on all series of the notes is payable semi-annually on
February 15 and August 15. As of May 11, 2000, the balance outstanding on the
Series D, E and F Notes was $138 million.
On December 28, 1995, the Company completed a private placement of
three series of unsecured Senior Notes totaling $75 million. The Company
contemporaneously issued its Series A Notes and Series B Notes, which total
$52.5 million and bear interest at a fixed rate of 7.17%. On April 9, 1996, the
Company issued its Series C Notes, which total $22.5 million and bear interest
at a fixed rate of 7.48%. The Series A Notes mature on December 30, 2001, and
require annual principal payments of $8.3 million which began on December 30,
1999. The Series B and Series C Notes mature on December 30, 2002, and require
combined annual principal payments of $10 million which began on December 30,
1998. Interest on all series of the notes is payable semi-annually on June 30
and December 30. As of May 11, 2000, the balance outstanding on the Series A, B,
and C Notes was $46,667,000.
The Company may offer from time to time in one or more series (i)
unsecured debt securities, which may be senior or subordinated, (ii) preferred
stock and (iii) common stock, or any combination of the foregoing, up to an
aggregate of $41,041,600 pursuant to an effective "shelf" registration statement
filed with the SEC. In addition, under another effective "shelf" registration
statement filed with the SEC, the Company may offer up to an aggregate of
$200,000,000 of the following securities, in any combination, from time to time
in one or more series: (i) unsecured debt securities, which may be senior or
unsubordinated; (ii) preferred stock; (iii) common stock, and (iv) trust
preferred securities.
From January 1, 2000, through May 11, 2000, the Company received
$142,000 from the exercise of common stock purchase warrants and options. In
connection with these exercises, the Company will also receive approximately
$22,000 in tax savings.
In November 1999, the Company's 19% owned subsidiary, Vision Energy,
filed a registration statement with the SEC to accomplish the spin-off of DDD
Energy through an initial public offering. In the proposed offering, Vision
Energy would acquire all of the stock of DDD Energy from the Company in exchange
for the issuance of shares of Vision Energy stock to the Company, and the
Company would sell most of these Vision Energy shares in the public offering for
cash. Completion of the offering is expected to occur during the last half of
2000; however, its completion is dependent upon market conditions and other
factors. As of March 31, 2000, the Company had incurred costs related to this
offering totaling $956,000 which are included in prepaid expenses in the
Company's balance sheet as of March 31, 2000. The Company continues to explore
opportunities to maximize the value of DDD Energy. The Company intends to use
the cash proceeds from the spin-off of DDD Energy to reduce debt and provide
funds for seismic data bank capital expenditures.
<PAGE>
During November and December 1999, the Company repurchased 504,700
shares of its common stock in the open market at a cost of $3,302,000, pursuant
to a stock repurchase program authorized by the Board of Directors in 1997. The
Board has authorized expenditures of up to $25 million towards the repurchase of
its common stock. As of May 11, 2000, the Company has repurchased a total of
679,700 shares of its common stock at a cost of $6,275,000 since 1997 under this
plan.
During the first three months of 2000, gross seismic data bank
additions and capitalized oil and gas exploration and development costs amounted
to $19,758,000 and $3,783,000 respectively. These capital expenditures, as well
as taxes, interest expenses, cost of sales and general and administrative
expenses, were funded by operations, proceeds from the exercise of common stock
purchase warrants and options and, borrowings under the Company's revolving line
of credit.
Currently, the Company anticipates capital expenditures to total
approximately $50 million for seismic data bank additions for the remainder of
2000 and a range of approximately $7 to $16 million for oil and gas exploration
and development efforts for the remainder of 2000 depending upon the timing of
the proposed offering. The Company believes its current cash balances, revenues
from operating sources and proceeds from the exercise of common stock purchase
warrants and options, combined with its available revolving line of credit,
should be sufficient to fund the currently anticipated 2000 capital
expenditures, along with expenditures for operating and general and
administrative expenses. If these sources are not sufficient to cover the
Company's anticipated expenditures or if the Company were to increase its
planned capital expenditures for 2000, the Company could arrange for additional
debt or equity financing during 2000; however, there can be no assurance that
the Company would be able to accomplish any such debt or equity financing on
satisfactory terms. If such debt or equity financing is not available on
satisfactory terms, the Company could reduce its current capital budget or any
proposed increases to its capital budget, and fund expenditures with cash flow
generated from operating sources. Upon consummation of the proposed spin-off of
DDD Energy, proceeds from such offering would be used to reduce debt and provide
funds for additional seismic data bank capital expenditures.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133, as amended by SFAS No. 137, is required to be adopted on January 1, 2001,
although earlier adoption is permitted. The statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting treatment. The Company has not yet
quantified the impact of adopting SFAS No. 133. However, management does not
believe that the adoption of SFAS No. 133 will have a material impact on the
Company's financial position or results of operations.
Information Regarding Forward Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Although the Company believes that its
expectations are based on reasonable assumptions, it can give no assurance that
its goals will be achieved. Important factors that could cause actual results to
differ materially from those in the forward looking statements herein include,
but are not limited to, changes in the exploration budgets of the Company's
seismic data and related services customers, actual customer demand for the
Company's seismic data and related services, the extent of the Company's success
in acquiring oil and gas properties and in discovering, developing and producing
reserves, the timing and extent of changes in commodity prices for natural gas,
crude oil and condensate and natural gas liquids and conditions in the capital
markets and equity markets during the periods covered by the forward looking
statements. The foregoing and other risk factors are identified in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange Commission for
the year ended December 31, 1999.
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk, including adverse changes in
commodity prices, interest rates and foreign currency exchange rates. Refer to
the Company's Form 10-K for the year ended December 31, 1999 for a detailed
discussion of these risks. The following information discusses changes in the
Company's market risk exposures since December 31, 1999.
Commodity Price Risk
During the first quarter of 2000, the Company recognized net hedging
losses of $62,000. As of March 31, 2000, the Company had open commodity price
hedges totaling 1,375,000 MMBtu at an average price of $2.52 per MMBtu and
15,000 barrels at an average price of $27.30 per barrel.
Interest Rate Risk
The Company may enter into various financial instruments, such as
interest rate swaps, to manage the impact of changes in interest rates.
Currently, the Company has no open interest rate swap or interest rate lock
agreements. Therefore, the Company's exposure to changes in interest rates
primarily results from its short-term and long-term debt with both fixed and
floating interest rates.
Foreign Currency Exchange Rate Risk
The Company conducts business in the Canadian dollar and pounds
sterling and is therefore subject to foreign currency exchange rate risk on cash
flows related to sales, expenses, financing and investing transactions. On March
31, 2000, the Company entered into forward exchange contracts to hedge a portion
of its foreign currency exchange risk related to its Canadian activities. As of
March 31, 2000, the Company had open forward exchange contracts totaling $13
million (Canadian dollars) at an exchange rate into U.S. dollars of .6925
maturing in equal amounts of $1 million (Canadian dollars) each month from April
2000 to April 2001. Exposure from market rate fluctuations related to activities
in the Cayman Islands, where the Company's functional currency is pounds
sterling, is not material at this time.
PART II - OTHER INFORMATION
Items 1., 2., 3., 4., and 5. Not applicable.
- ----------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Common Stock Purchase Warrant Certificate for the
purchase of 90,000 shares of Seitel, Inc. Common Stock
issued to Kevin S. Fiur
(b) Not applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEITEL, INC.
Dated: May 12, 2000 /s/ Paul A. Frame
-------------------------------------
Paul A. Frame
President
Dated: May 12, 2000 /s/ Debra D. Valice
-------------------------------------
Debra D. Valice
Chief Financial Officer
Dated: May 12, 2000 /s/ Marcia H. Kendrick
-------------------------------------
Marcia H. Kendrick
Chief Accounting Officer
<PAGE>
EXHIBIT
INDEX
- ------- ------------------------------------------------------------ -------
Exhibit Title Page
Number
- ------- ------------------------------------------------------------ -------
10.1 Common Stock Purchase Warrant Certificate for the purchase 17
of 90,000 shares of 17 Seitel, Inc. Common Stock issued to
Kevin S. Fiur
EXHIBIT 10.1
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT MAY BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
IN WHOLE OR IN PART IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT OR AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY
TO COUNSEL OF SEITEL, INC., THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT
OR THE RULES AND REGULATIONS THEREUNDER IS AVAILABLE WITH RESPECT TO THE
PROPOSED SALE, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION.
Seitel, Inc.
Common Stock Purchase
Warrant Certificate
TO PURCHASE 90,000
SHARES OF COMMON STOCK
VOID AFTER 5:00 P.M., HOUSTON, TEXAS
LOCAL TIME ON November 15, 2009
Date of Grant: November 15, 1999
Certificate No. KFEW 9915
This Warrant Certificate certifies that Kevin S. Fiur is the registered
holder ("Holder") of 90,000 Common Stock Purchase Warrants (the "Warrants") to
purchase shares of the $.01 par value common stock, ("Common Stock") of SEITEL,
INC., a Delaware corporation (the "Company").
Each Warrant enables the Holder to purchase from the Company with
respect to (a) one-third of the shares at any time on and after the first
anniversary of the grant date set forth above, (b) an additional one-third of
the shares on and after the second anniversary of the grant date set forth
above, and (c) an additional one-third of the shares on and after the third
anniversary of the grant date set forth above, and until 5:00 p.m., Houston,
Texas, local time on November 15, 2009, one fully paid and non-assessable share
of Common Stock ("Share") upon presentation and surrender of this Warrant
Certificate and upon payment of the purchase price of $8.000 per Share. Payment
shall be made in lawful money of the United States of America by certified check
payable to the Company at its principal office at 50 Briar Hollow Lane, West,
7th Floor, Houston, Texas, 77027. As hereinafter provided, the purchase price
and number of Shares purchasable upon the exercise of the Warrants are subject
to modification or adjustment upon the happening of certain events.
FOR ALL OTHER PURPOSES STATED HEREIN, THE COMPANY MAY DEEM AND TREAT
THE PERSON IN WHOSE NAME THIS WARRANT CERTIFICATE IS REGISTERED AS THE ABSOLUTE
TRUE AND LAWFUL OWNER HEREOF FOR ALL PURPOSES WHATSOEVER.
1. Upon surrender to the Company, this Warrant Certificate may be
exchanged for another Warrant Certificate or Warrant Certificates
evidencing a like aggregate number of Warrants. If this Warrant
Certificate shall be exercised in part, the Holder shall be
entitled to receive upon surrender hereof another Warrant
Certificate or Warrant Certificates evidencing the number of
Warrants not exercised.
<PAGE>
2. No Holder shall be deemed to be the holder of Common Stock or any
other securities of the Company that may at any time be issuable
on the exercise hereof for any purpose nor shall anything
contained herein be construed to confer upon the Holder any of
the rights of a shareholder of the Company or any right to vote
for the election of directors or upon any matter submitted to
shareholders at any meeting thereof or to give or withhold
consent to any corporate action (whether upon any reorganization,
issuance of stock, reclassification or conversion of stock,
change of par value, consolidation, merger, conveyance, or
otherwise) or to receive notice of meetings or to receive
dividends or subscription rights or otherwise until a Warrant
shall have been exercised and the Common Stock purchasable upon
the exercise thereof shall have become issuable.
3. Each Holder consents and agree with the Company and any other
Holder that:
A. this Warrant Certificate is exercisable in whole or in part
by the Holder in person or by attorney duly authorized in
writing at the principal office of the Company.
B. anything herein to the contrary notwithstanding, in no event
shall the Company be obligated to issue Warrant Certificates
evidencing other than a whole number of Warrants or issue
certificates evidencing other than a whole number of Shares
upon the exercise of this Warrant Certificate; provided,
however, that the Company shall pay with respect to any such
fraction of a Share an amount of cash based upon the current
public market value (or book value, if there shall be no
public market value) for Shares purchasable upon exercise
hereof, as determined in accordance with subparagraph I of
Section 10 hereof; and
C. the Company may deem and treat the person in whose name this
Warrant Certificate is registered as the absolute true and
lawful owner hereof for all purposes whatsoever.
4. The Company shall maintain books for the transfer and
registration of Warrants. Upon the transfer of any Warrants,
the Company shall issue and register the Warrants in the
names of the new Holders. The Warrants shall be signed
manually by the Chairman, Chief Executive Officer, President
or any Vice President and the Secretary (or Assistant
Secretary) of the Company. The Company shall transfer, from
time to time, any outstanding Warrants upon the books to be
maintained by the Company for such purpose upon surrender
thereof for transfer properly endorsed or accompanied by
appropriate instructions for transfer. Upon any transfer, a
new Warrant Certificate shall be issued to the transferee
and the surrendered Warrants shall be canceled by the
Company. Warrants may be exchanged at the option of the
Holder, when surrendered at the office of the Company, for
another Warrant, or other Warrants of different
denominations, of like tenor and representing in the
aggregate the right to purchase a like number of Shares.
Subject to the terms of this Warrant Certificate, upon such
surrender and payment of the purchase price, the Company
shall issue and deliver with all reasonable dispatch to or
upon the written order of the Holder of such Warrants and in
such name or names as such Holder may designate, a
certificate or certificates for the number of full Shares so
purchased upon the exercise of such Warrants. Such
certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein
shall be deemed to have become the holder of record of such
Shares as of the date of the surrender of such Warrants and
payment of the purchase price; provided, however, that if,
at the date of surrender and payment, the transfer books of
the Shares shall be closed, the certificates for the Shares
shall be issuable as of the date on which such books shall
be opened and until such date the Company shall be under no
duty to deliver any certificate for such Shares; provided,
further, however, that such transfer books, unless otherwise
required by law or by applicable rule of any national
securities exchange, shall not be closed at any one time for
a period longer than 20 days. The rights of purchase
represented by the Warrants shall be exercisable, at the
election of the Holders, either as an entirety or from time
to time for part only of the Shares.
<PAGE>
5. The Company will pay any documentary stamp taxes attributable to
the initial issuance of the Shares issuable upon the exercise of
the Warrants; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect
of any transfer involved in the issuance or delivery of any
certificates for Shares in a name other than that of the Holder in
respect of which such Shares are issued, and in such case the
Company shall not be required to issue or deliver any certificate
for Shares or any Warrant until the person requesting the same has
paid to the Company the amount of such tax or has established to
the Company's satisfaction that such tax has been paid.
6. In case the Warrant Certificate shall be mutilated, lost, stolen
or destroyed, the Company may, in its discretion, issue and
deliver in exchange and substitution for and upon cancellation of
the mutilated Warrant Certificate, or in lieu of and substitution
for the Warrant Certificate, lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent
right or interest, but only upon receipt of evidence satisfactory
to the Company of such loss, theft or destruction and an
indemnity, if requested, also satisfactory to it.
7. The Company warrants that there have been reserved, and covenants
that at all times in the future it shall keep reserved, out of the
authorized and unissued Common Stock, a number of Shares
sufficient to provide for the exercise of the rights or purchase
represented by this Warrant Certificate. The Company agrees that
all Shares issuable upon exercise of the Warrants shall be, at the
time of delivery of the certificates for such Shares, validly
issued and outstanding, fully paid and non-assessable and that the
issuance of such Shares will not give rise to preemptive rights in
favor of existing shareholders.
8. As used herein, the term "Exercise Rate" shall mean the number and
kind of shares of capital stock of the Company which the Holder of
this Warrant shall be entitled from time to time to receive for
each $1,000.00 of warrant exercise payment. Unless and until an
adjustment thereof shall be required as hereinafter provided, the
Exercise Rate shall be 125.000 shares of Common Stock.
9. The term "Exercise Price" shall mean the price obtained by
dividing $1,000.00 by the number of shares constituting the
Exercise Rate in effect at the time for such amount.
10. The Exercise Rate in effect any time shall be subject to
adjustment as follows:
A. Whenever the Company shall (i) pay a dividend on Common Stock
in shares of its Common Stock, (ii) subdivide its outstanding
shares of Common Stock, (iii) combine its outstanding shares
of Common Stock into a smaller number of shares, or (iv) issue
by reclassification of its shares of Common Stock (including
any reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation) any
shares, the Exercise Rate in effect at the time of the record
date for such dividend or of the effective date of such
subdivision, combination or reclassification shall be
proportionately adjusted so that the Holder of this Warrant
exercising it after such time shall be entitled to receive the
total number and kind of shares which bear the same proportion
to the total issued and outstanding Common Stock of the
Company immediately after such time as the proportion he would
have owned and have been entitled to receive immediately prior
to such time.
B. Whenever the Company shall issue any shares of Common Stock
other than:
(i) shares issued in a transaction described in subparagraph H
of this Paragraph 10; and
<PAGE>
(ii)shares issued upon exercise or conversion of securities of
the type referred to in subparagraphs E and F of this
Paragraph 10 or shares issued, subdivided or combined in
transactions described in subparagraph (A) of this
Paragraph 10 if and to the extent that the Exercise Rate
shall have been previously adjusted pursuant to the terms
of this subparagraph (B) or subparagraph (A) of this
Paragraph 10 as a result of the issuance, subdivision or
combination of such securities;
at a price per share which is less than the current public
market value of a share of Common Stock, the Exercise Rate in
effect immediately prior to such issuance shall be adjusted by
multiplying such Exercise Rate by a fraction, the numerator of
which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance plus the number
of additional shares of Common Stock so issued, and the
denominator of which shall be the number of Shares of Common
Stock outstanding immediately prior to such issuance plus the
number of shares of Common Stock which the fair value of the
consideration received by the Company for the total number of
additional shares so issued would purchase at a price equal to
the current public market value.
C. Whenever the Company shall pay a dividend or make a
distribution (other than in a transaction which results in an
equivalent adjustment pursuant to other subparagraphs of this
Paragraph 10) generally to holders of its Common Stock or
evidences of its indebtedness or assets (excluding dividends
paid in, or distributions of cash to the extent of current
income or earned surplus of the Company), or securities of the
Company, or rights to subscribe for or purchase securities of
the Company, the Exercise Rate in effect immediately prior to
such distribution shall be adjusted by multiplying such
Exercise Rate by a fraction, the numerator of which shall be
the then current public market value, if any, per share of the
Common Stock receiving such dividend or distribution or, if
there shall be no such current public market value, then the
book value per share as of the close of the month preceding
such distribution, and the denominator of which shall be the
numerator less the fair market value of the portion of the
assets, or the evidences of indebtedness or rights, so
distributed which is applicable to each such share; provided,
however, if as a result of such adjustment the Exercise Price
would be a negative figure, such adjustment shall be modified
so that the Exercise Price after such adjustment is $.01 per
share.
D. Whenever the Company shall issue by reclassification of its
shares of Common Stock any shares of stock, the Exercise Rate
in effect immediately prior to such issuance shall be
proportionately adjusted so that the Holder of this Warrant
exercising it after such time shall be entitled to receive,
the number and kind of shares which, when added to the number
of shares of such kind exercisable hereunder prior to such
issue, would entitle the Holder hereof, upon the exercise
hereof in full, to purchase an amount of shares of such kind
which bears the same proportion to the total issued and
outstanding capital stock of the Company as the proportion he
would have owned and have been entitled to receive immediately
prior to such issue. In the event that at any time, as a
result of an adjustment made pursuant to this paragraph 10,
the Holder of this Warrant shall become entitled upon exercise
thereof to receive any shares of the Company other than shares
of its Common Stock, then thereafter the number of such other
shares so receivable upon exercise of this Warrant shall be
subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions
contained in this Paragraph 10 in the respect of the Common
Stock.
<PAGE>
E. For purposes of the adjustments provided for in the foregoing
subparagraphs of this Paragraph 10, if at any time, the
Company shall issue any rights or options for the purchase of,
or stock or other securities convertible into Common Stock,
(such convertible stock or securities being herein referred to
as "Convertible Securities") the Company shall be deemed to
have issued at the time of the issuance of such rights or
options or Convertible Securities the maximum number of shares
of Common Stock issuable upon exercise or conversion thereof
and to have received as consideration for the issuance of such
shares an amount equal to the amount of cash and fair value of
other consideration, if any, received by the Company for the
issuance of such rights or options or Convertible Securities,
plus, in the case of such options or rights, the minimum
amounts of cash and fair value of other consideration, if any,
payable to the Company upon the exercise of such options or
rights and, in the case of Convertible Securities, the minimum
amounts of cash and fair value of other consideration, if any,
payable, to the Company.
F. For purposes of the adjustment provided for in subparagraph B
above, if at any time the Company shall issue any rights or
options for the purchase of Convertible Securities, the
Company shall be deemed to have issued at the time of the
issuance of such rights or options the maximum number of
shares of Common Stock issuable upon conversion of the total
amount of Convertible Securities covered by such rights or
options and to have received as consideration for the issuance
of such shares an amount equal to the amount of cash and the
amount of fair value of other consideration, if any, received
by the Company for the issuance of such rights or options,
plus the minimum amounts of cash and fair value of other
consideration, if any, payable to the Company upon the
exercise of such rights or options and payable to the Company
on conversion of such Convertible Securities.
G. Anything in subparagraph E or F above to the contrary
notwithstanding, whenever the Company shall issue any shares
(other than on exercise of this Warrant) upon exercise of any
rights or options or upon conversion of any Convertible
Securities and if the Exercise Rate shall not previously have
been adjusted upon the issuance of such rights, options or
Convertible Securities, the computation described in
subparagraph B above shall be made and the Exercise Rate
adjusted in accordance with the provisions thereof (the shares
so issued being deemed for purposes of such computation to
have been issued at a price per share equal to the amount of
cash and fair value of other consideration, if any, properly
attributable to one such share received by the Company upon
issuance and exercise of such rights or options or sale and
conversion of such Convertible Securities (and upon issuance
of any rights or options pursuant to which such Convertible
Securities may have been sold).
H. Anything in this Paragraph 10 to the contrary notwithstanding,
no adjustment in the Exercise Rate or Exercise Price shall be
made in connection with:
(i) Convertible Securities issued pursuant to the Company's
qualified or non-qualified Employee Stock Option Plans or
any other bona fide employee benefit plan or incentive
arrangement, adopted or approved by the Company's Board of
Directors or shares of Common Stock issued pursuant to the
exercise of any rights or options granted pursuant to said
plans or arrangements (but only to the extent that the
aggregate number of shares excluded by the Clause (i) and
issued after the date hereof shall not exceed 15% of the
Company's Common Stock outstanding at the time of any such
issuance); and
<PAGE>
(ii)The issuance of any shares of Common Stock pursuant to the
exercise of Convertible Securities outstanding as of the
date hereof including without limitation, the conversion
of any Warrant issued in the same placement of securities
pursuant to which this Warrant was issued by the Company.
I. For purposes of this Paragraph 10, the current public market
value of a share of Common Stock on any date shall be deemed
to be the arithmetical average of the following prices for
such of the thirty (30) business days immediately preceding
such day as shall be available: (i) for any of the such days
on which the Common Stock shall be listed on a national
securities exchange, the last sale price on such day or, if
there shall have been no sale on such day, the average of the
closing bid and asked prices on such exchange on such day, or
(ii) for any of such days on which the Common Stock shall not
be listed on a national securities exchange but shall be
included in the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), the average of the
closing bid and asked prices on such day quoted by brokers and
dealers making a market in NASDAQ, furnished by any member of
the New York Stock Exchange selected by the Company for that
purpose, or (iii) for any of such days on which the Common
Stock shall not be so listed on a national securities exchange
or included in NASDAQ but shall be quoted by three brokers
regularly making a market in such shares in the
over-the-counter market, the average of the closing bid and
asked prices on such day, furnished by any member of the New
York Stock Exchange selected by the Company for that purpose,
or (iv) for any days on which the information described in
items (i), (ii) or (iii) above is unavailable, the book value
per share of the Common Stock as determined in accordance with
generally accepted accounting principles; provided, however,
in its discretion the Board may make an appropriate reduction
in the "current public market value" based upon any applicable
trading restrictions to particular shares of Common Stock.
J. Anything in this Paragraph 10 to the contrary notwithstanding,
no adjustment in the Exercise Rate shall be required unless
such adjustment would require an increase or decrease of at
least 1% in such rate; provided, however, that any adjustments
which by reason of this subparagraph J are not required to be
made shall be carried forward and taken into account in making
subsequent adjustments. All calculations under the Paragraph
10 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
K. No adjustment in the Exercise Rate shall be made for purposes
of subparagraphs B and C of this Paragraph 10 if such
adjustment would result in an increase in such Exercise Price
or decrease in the Exercise Rate except that, in the case of
any Convertible Securities in respect of which an adjustment
has previously been made under subparagraph B above and which
has expired or otherwise been canceled without exercise of the
rights or options evidenced thereby, such previous adjustment
shall be reversed.
L. Before taking any action which could cause an adjustment
pursuant to this Paragraph 10 reducing the Exercise Price per
share below the then par value (if any) of the shares covered
hereby, the Company will take any corporate action which may
be necessary in order that the Company may validly and legally
issue at the Exercise Price as so adjusted shares that are
fully paid and non-assessable.
M. The number of shares of capital stock of the Company
outstanding at any given time shall not include shares owned
or held by or for the account of the Company, and the
disposition of any such shares shall be considered an issue or
sale of such shares for the purposes of this Paragraph 10.
<PAGE>
N. If any event occurs as to which the other provisions of this
Paragraph 10 are not strictly applicable but the lack of any
adjustment would not fairly protect the purchase rights of the
Holder of this Warrant in accordance with the basic intent and
principles of such provisions, or if strictly applicable would
not fairly protect the purchase rights of the Holder of this
Warrant in accordance with the basic intent and principles of
such provisions, then the Company shall appoint a firm of
independent certified public accountants (which shall not be
the regular auditors of the Company) of recognized national
standing, which shall give their opinion upon the adjustment,
if any, on a basis consistent with the basic intent and
principles established in the other provisions of this
Paragraph 10, necessary to preserve, without dilution, the
exercise rights of the registered Holder of this Warrant. Upon
receipt of such opinion, the Company shall forthwith make the
adjustments described therein. In taking any action or making
any determination pursuant to the provisions of this Section
10, the Company and its Board of Directors shall, at all
times, exercise reasonable judgment and act in good faith.
O. Upon any adjustment of any Exercise Rate, then and in each
such case, the Company shall promptly deliver a notice to the
registered Holder of this Warrant, which notice shall state
the Exercise Price and Exercise Rate resulting from such
adjustment and the increase or decrease, if any, in the number
of shares purchasable at such price upon the exercise hereof,
setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based.
P. In the case of the issuance of shares of Common Stock or
Convertible Securities for a consideration in whole or in
part, other than cash, the consideration other than cash shall
be deemed to be the fair market value thereof as reasonably
determined in good faith by the Board of Directors of the
Company (regardless of accounting treatment thereof);
provided, however, that if such consideration consists of the
cancellation of debt issued by the Company the consideration
shall be deemed to be the amount the Company received upon
issuance of such debt (gross proceeds) plus accrued interest
and, in the case of original issue discount or zero coupon
indebtedness, accreted value to the date of such cancellation,
but not including any premium or discount at which the debt
may then be trading or which might otherwise be appropriate
for such class of debt;
Q. The Company shall not issue any shares of its capital stock
(other than Common Stock) at or for consideration which is
less than fair value determined by the Board of Directors of
the Company in light of all circumstances surrounding such
issuance.
11. In the case:
A. The Company shall declare any dividend or distribution on
its Common Stock (or on any other shares which the Holder of
this Warrant may become entitled to receive upon exercise
hereof); or
B. The Company shall authorize the issuance to holders of its
Common Stock (or on any other shares which the Holder of
this Warrant may become entitled to receive upon exercise
hereof) any subscription rights or warrants; or
C. Of any subdivision, combination or reclassification of shares
of Common Stock of the Company (or any shares of the Company
which are subject to this Warrant), or of any proposed
consolidation or merger to which the Company is to be a party
and for which the approval of any shareholders of the Company
is required, or of the proposed sale or transfer of all or
substantially all of the assets of the Company; or
<PAGE>
D. Of the proposed voluntary or involuntary dissolution,
liquidation, or winding up of the Company; or
E. The Company proposes to effect any transaction not specified
above which would require an adjustment of the Exercise Rate
pursuant to Paragraph 10 hereof;
then the Company shall cause to be mailed to Holders of this
Warrant, at least ten (10) days prior to the applicable record or
other date hereinafter specified, a notice describing such
transaction in reasonable detail, specifying the character, amount
and terms of all securities and the amounts of cash and other
property, if any, involved in such transaction and stating (i) the
date as of which the holders of Common Stock (or any such other
shares) of record to be entitled to receive any such dividend,
distribution, rights, or warrants is to be determined, or (ii) the
date of which any such subdivision, combination, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation,
winding up, or other transaction is expected to become effective,
and the date as of which it is expected that holders of Common
Stock (or any such other shares) of record shall be entitled to
exchange the same for securities or other property, if any,
deliverable upon such transaction.
12.The Company covenants and agrees that it will not merge or
consolidate with or into or sell or otherwise transfer all or
substantially all of its assets to any other corporation or entity
unless at the time of or prior to such transaction such other
corporation or other entity shall expressly assume all of the
liabilities and obligations of the Company under this Warrant and
(without limiting the generality of the foregoing) shall expressly
agree that the Holder of this Warrant shall thereafter have the
right (subject to subsequent adjustment as nearly equivalent as
practicable to the adjustments provided for in Paragraph 10 of
this Warrant) to receive upon the exercise of this Warrant the
number and kind of shares of stock and other securities and
property receivable upon such transaction by a Holder of the
number and kind of shares which would have been receivable upon
the exercise of this Warrant immediately prior to such
transactions.
13. The Holder of this Warrant Certificate, each transferee hereof and
any holder and transferee of any Shares, by his acceptance
thereof, agrees that (i) no public distribution of Warrants or
shares will be made in violation of the Act, and (ii) during such
period as the delivery of a prospectus with respect to Warrants or
Shares may be required by the Act, no public distribution of
Warrants or Shares will be made in a manner or on terms different
from those set forth in, or without delivery of, a prospectus then
meeting the requirements of Section 10 of the Act and in
compliance with all applicable state securities laws. The Holder
of this Warrant Certificate and each transferee hereof further
agrees that if any distribution of any of the Warrants or Shares
is proposed to be made by them otherwise than by delivery of a
prospectus meeting the requirements of Section 10 of the Act, such
action shall be taken only after submission to the Company of an
opinion of counsel, reasonably satisfactory in form and substance
to the Company's counsel, to the effect that the proposed
distribution will not be in violation of the Act or of applicable
state law. Furthermore, it shall be a condition to the transfer of
the Warrants that any transferee thereof deliver to the Company
his written agreement to accept and be bound by all of the terms
and conditions contained in this Warrant Certificate.
14. This Warrant Certificate shall be exercisable only during the
continuance of the Holder's employment at the Company or its
subsidiaries, except that:
a. If the Holder ceases to be an employee at the Company (or a
subsidiary of the Company) for any reason other than by death
or disability, this Warrant Certificate may be exercised by
Holder, to the extent that it was exercisable at the date of
<PAGE>
termination, at any time within three months after the date
Holder ceases to be an employee, but not later than 11/15/09
except that, in case of his death or disability within that
three-month period, this Warrant Certificate may be exercised
as provided in subparagraph (b) below.
b. If the Holder dies or becomes disabled during employment or
within the three-month period referred to in subparagraph (a)
above, this Warrant Certificate may be exercised, to the
extent that it was exercisable by the Holder at the date of:
(i) death, by the person or persons to whom Holder's rights
under this Warrant Certificate pass by will or by the laws
of descent and distribution or
(ii) disability, by the Holder's legal representative,
at any time within one year after the date of Holder's death
or disability, but not later than 11/15/09.
The determination by the Company's Board of Directors of the
reason for termination of the Holder's employment shall be binding
and conclusive on the Holder.
WITNESS the following signatures as of November 15, 1999.
SEITEL, INC.
By: /s/ Paul A. Frame
---------------------------------
Paul A. Frame
Chief Executive Officer
Accepted:
--------------------------------
Kevin S. Fiur
<PAGE>
PURCHASE FORM
TO: SEITEL, INC. DATE:
--------------------
The undersigned hereby irrevocably elects to exercise the attached
Warrant Certificate No. KFEW 9915, to the extent of shares of Common
----------
Stock, $.01 par value per share of SEITEL, INC., and hereby makes payment of
in payment of the aggregate exercise price thereof.
- ------------
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name: Kevin S. Fiur
Address:
-------------------------------
-------------------------------
-------------------------------
----------------------------
By:
----------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,727
<SECURITIES> 0
<RECEIVABLES> 40,618
<ALLOWANCES> 1,258
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 216,192<F2>
<DEPRECIATION> 62,441
<TOTAL-ASSETS> 542,624
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 221,700
0
0
<COMMON> 243
<OTHER-SE> 245,853
<TOTAL-LIABILITY-AND-EQUITY> 542,624
<SALES> 28,431
<TOTAL-REVENUES> 28,431
<CGS> 1,650
<TOTAL-COSTS> 1,650
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,098
<INCOME-PRETAX> 3,854
<INCOME-TAX> 1,349
<INCOME-CONTINUING> 2,505
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,505
<EPS-BASIC> .11
<EPS-DILUTED> .11
<FN>
<F1> The Company does not present a classified balance sheet; therefore, current
assets and current liabilities are not reflected in the Company's financial
statements.
<F2> PP&E does not include seismic data bank assets with a cost of $649,138,000
and related accumulated amortization of $309,765,000.
</FN>
</TABLE>
