<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
GRANT GEOPHYSICAL, 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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
GRANT GEOPHYSICAL, INC.
16850 PARK ROW
HOUSTON, TEXAS 77084
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF
GRANT GEOPHYSICAL, INC.
TO BE HELD ON NOVEMBER 1, 1996
To the Stockholders of
Grant Geophysical, Inc.:
The 1996 Annual Meeting of Stockholders of Grant Geophysical, Inc. (the
"Company") will be held on November 1, 1996 at The Holiday Inn, 14703 Park
Row, Houston, Texas 77079 at 10:00 a.m.
The holders of the Company's Common Stock will meet for the following
purposes:
1. To elect three Directors to serve until their successors are elected
and qualified.
2. To approve certain amendments to the Company's Amended 1989 Long-Term
Incentive Plan.
3. To transact such other business as may properly come before the
Meeting or at any adjournment thereof.
The foregoing items of business are discussed in detail in the attached Proxy
Statement.
The Board of Directors has fixed the close of business on September 4,
1996 as the record date for determination of stockholders entitled to notice of
and to vote at the meeting or any adjournments thereof. Stockholders are
encouraged to attend the meeting in person. To ensure that your shares will be
represented and voted in accordance with your wishes, we urge you to vote,
date, sign and mail the enclosed Proxy Card in the envelope which is provided,
whether or not you expect to be present at the meeting. The prompt return of
your Proxy Card will be appreciated. Your Proxy will be returned to you if you
should be present at the meeting and should request return in the manner
provided for revocation of proxies on the initial page of the enclosed Proxy
Statement.
BY ORDER OF THE BOARD OF DIRECTORS
William B. Cleveland, Secretary
Houston, Texas
October 1, 1996
<PAGE> 3
GRANT GEOPHYSICAL, INC.
----------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 1, 1996
----------------------
SOLICITATION AND REVOCATION OF PROXIES
The accompanying Proxy is solicited on behalf of Grant Geophysical, Inc.,
a Delaware corporation (the "Company"), to be voted at the 1996 Annual Meeting
of Stockholders of the Company (the "Meeting") at the time and place and for
the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders and at any adjournment(s) thereof.
The principal executive offices of the Company are located at 16850 Park
Row, Houston, Texas 77084. The Company's mailing address is P. O. Box 219950,
Houston, Texas 77218-9950.
This Proxy Statement and accompanying form of Proxy are being mailed on or
about October 7, 1996. The Company's Annual Report to Stockholders, covering
the Company's fiscal year ended December 31, 1995 and fiscal quarters ended
March 31, 1996 and June 30, 1996 is enclosed herewith, but does not form any
part of the materials for solicitation of proxies.
Any stockholder of the Company giving a Proxy has the unconditional right
to revoke his Proxy at any time prior to the voting thereof either in person at
the Meeting, by delivering a duly executed proxy bearing a later date or by
giving notice of revocation to the Company addressed to Mr. William B.
Cleveland, Secretary, Grant Geophysical, Inc., P. O. Box 219950, Houston,
Texas 77218-9950; no such revocation shall be effective, however, until such
notice of revocation has been received by the Company at or prior to the
Meeting.
The cost of this solicitation of proxies is being borne by the Company.
In addition to the solicitation of proxies by use of the mails, the Company may
use the services of one or more Directors, officers or other regular employees
of the Company (who will receive no additional compensation for their services
in such solicitation) to solicit proxies personally and by telephone.
Arrangements will be made with brokerage firms and other custodians, nominees
and fiduciaries to forward solicitation material to the beneficial owners of
the stock held of record by such persons and the Company will reimburse them
for reasonable expenses actually incurred by them in so doing. In addition, the
Company has retained Corporate Investor Communications, Inc. to aid in the
solicitation of proxies for a fee which is estimated not to exceed $5,000 plus
out-of-pocket expenses.
2
<PAGE> 4
PURPOSES OF THE MEETING
At the Meeting, the holders of the Company's Common Stock will
consider and act upon the following matters:
1. To elect three Directors to serve for the ensuing year or until their
successors are elected and qualified.
2. To approve certain amendments to the Company's Amended 1989 Long-Term
Incentive Plan.
3. To transact such other business as may properly come before the
Meeting or at any adjournment thereof.
VOTING SECURITIES
Stockholders of record at the close of business on September 4, 1996 (the
"Record Date") will be entitled to be present and vote at the Meeting. At the
Record Date there were 15,697,061 shares of the Company's Common Stock, $.002
par value ("Common Stock"), outstanding. Each outstanding share of Common
Stock is entitled to one vote on all matters to come before the Meeting, and
neither the Company's Restated Certificate of Incorporation nor its Bylaws
provides for cumulative voting rights. The presence, in person or by proxy, of
the holders of a majority of the issued and outstanding shares of Common Stock
entitled to vote at the Meeting is necessary to constitute a quorum to transact
business. Assuming the presence of a quorum, the affirmative vote of the
holders of a majority of the issued and outstanding shares of Common Stock
represented at the Meeting is required for the election of the Directors and
approval of certain amendments to the Company's Amended 1989 Long-Term
Incentive Plan. Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction of
business. Abstentions are counted in tabulations of the votes cast on
proposals presented to stockholders, whereas broker non-votes are not counted
for purposes of determining whether a proposal has been approved.
3
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the number
of shares of Common Stock owned beneficially as of the Record Date by: (i)
each person known to the Company to own more than 5% of any class of the
Company's voting securities; (ii) each Director of the Company; and (iii) all
Directors and Officers as a group, including persons deemed to share voting and
investment power.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP(1) OF TOTAL
------------------- ------------ --------
<S> <C> <C>
George W. Tilley(2) . . . . . . . . . . . . . . . 120,000 *
c/o Grant Geophysical, Inc.
16850 Park Row
Houston, Texas 77084
William B. Cleveland(3) . . . . . . . . . . . . . 15,047 *
c/o Grant Geophysical, Inc.
16850 Park Row
Houston, Texas 77084
J. Michael Adcock(4) . . . . . . . . . . . . . . 10,681 *
201 N. Broadway
Shawnee, Oklahoma 74801
Harvey D. Attra . . . . . . . . . . . . . . . . . 16,400 *
17 Lords Highway
Weston, Connecticut 06883
Orville D. Gaither . . . . . . . . . . . . . . . 30,173 *
Gaither Petroleum Corporation
1136 North Kirkwood
Houston, Texas 77043
Douglas K. Stewart . . . . . . . . . . . . . . . 10,107 *
c/o Stewart & Smith, Inc.
1225 23rd St., N.W.
Ground Floor
Washington, D.C. 20037
Elliott Associates, L.P.(5) . . . . . . . . . . . 1,141,271 6.8%
712 Fifth Avenue, 36th Floor
New York, New York 10019
Odyssey Partners, L.P. (6) . . . . . . . . . . . 826,205 5.1%
31 West 52nd Street
New York, New York 10019
Goodland International Investments Ltd.(7) . . . 964,010 6.1%
20 Parliament St.
P. O. Box HM2458
Hamilton HM12 Bermuda
Metropolitan Life Ins. Company(8) . . . . . . . . 821,507 5.2%
One Madison Avenue
New York, New York 10010
U.S. Bancorp (9) . . . . . . . . . . . . . . . . 1,251,200 8.0%
111 S.W. Fifth Avenue
Portland, Oregon 97204
All Directors and Officers as a Group
(6 persons) . . . . . . . . . . . . . . . . . 202,408 1.3%
</TABLE>
- ---------------------
*Less than one percent.
(Notes continued on following page)
4
<PAGE> 6
(1) Unless otherwise indicated, all shares of Common Stock are held directly
with sole voting and investment powers. Amounts indicated do not include
shares subject to options that are not exercisable within 60 days after
the Record Date.
(2) Mr. Tilley has been granted options to acquire a total of 275,000 shares
of Common Stock, of which options to acquire 100,000 shares are
exercisable within 60 days after the Record Date. In addition, Mr. Tilley
has been granted, subject to Stockholder approval of the amendments to the
Company's incentive plan specified herein, options to acquire an
additional 125,000 shares of Common Stock.
(3) Includes (a) granted options to acquire a total of 80,000 shares of Common
Stock, of which options to acquire 12,500 shares are exercisable within 60
days after the Record Date; and (b) 547 shares of Common Stock obtainable
upon conversion of 200 shares of the $2.4375 Convertible Exchangeable
Preferred Stock (the "$2.4375 Preferred Stock"). In addition, Mr.
Cleveland has been granted, subject to Stockholder approval of the
amendments to the Company's incentive plan specified herein, options to
acquire an additional 75,000 shares of Common Stock.
(4) Includes (a) 300 shares of Common Stock owned by his wife and (b) 273
shares of Common Stock obtainable upon conversion of 100 shares of $2.4375
Preferred Stock owned by his wife.
(5) The information shown above was obtained from the Schedule 13D (Amendment
No. 11) dated August 30, 1996, as filed by Elliott Associates, L.P.
("Elliott") with the Securities and Exchange Commission (the
"Commission"). According to the 13D, Elliott has sole voting and
dispositive powers with respect to 1,141,271 shares of Common Stock which
represents the number of shares of Common Stock obtainable upon conversion
of 416,564 shares of $2.4375 Preferred Stock. This does not include
772,740 shares of Common Stock obtainable upon conversion of 282,050
shares of $2.4375 Preferred Stock beneficially owned by certain affiliates
of Elliott.
(6) The information shown above was obtained from Schedule 13D dated August 5,
1996, as filed by Odyssey Partners, L.P. ("Odyssey") with the Commission.
According to the 13D, Odyssey has sole voting and dispositive powers with
respect to 826,205 shares of Common Stock (including 445,205 shares
obtainable upon conversion of 162,500 shares of the $2.4375 Preferred
Stock), except that certain of its general partners share voting and
dispositive power over such stock.
(7) Includes warrants to acquire 81,840 shares of Common Stock which are
currently exercisable.
(8) The information shown above was obtained from the Schedule 13G (Amendment
No. 4) dated February 13, 1996, as filed with the Commission by State
Street Research and Management Company, Inc. ("State Street").
Metropolitan Life Insurance Company ("Metropolitan") is a Parent Holding
Company of State Street. According to the 13G, State Street has the sole
voting power with respect to 726,507 shares of Common Stock (including
91,507 shares obtainable upon conversion of 33,400 shares of $2.4375
Preferred Stock), and sole dispositive power with respect to 821,507
shares of Common Stock. State Street is the beneficial owner of the
shares reported above; provided, however, all such securities are owned by
various clients of State Street and State Street disclaims any beneficial
interest in such securities.
(9) The information shown above was obtained from the Schedule 13G dated
February 15, 1996, as filed with the Commission by U.S. Bancorp
("Bancorp") and Qualivest Capital Management, Inc. ("Qualivest"). Bancorp
is a Parent Holding Company of Qualivest. According to the 13G, Bancorp
has the sole voting power with respect to 746,400 shares of Common Stock,
sole dispositive power with respect to 1,163,200 shares of Common Stock
and shared power to dispose of 25,000 shares of Common Stock.
5
<PAGE> 7
ELECTION OF DIRECTORS (ITEM 1)
Three Directors are to be elected at the Meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for the
Company's three nominees named below, all of whom are presently Directors of
the Company. In the event that any nominee of the Company is unable or
declines to serve as a Director at the time of the Meeting, the proxies will be
voted for any nominee who shall be designated by the present Board of Directors
to fill the vacancy. In the event that additional persons are nominated for
election as Directors, the proxy holders intend to vote all proxies received by
them in such a manner as will assure the election of as many of the nominees
listed below as possible, and, in such event, the specific nominees to be voted
for will be determined by the proxy holders. Except as provided above, the
proxy holders will vote the proxies only for the nominees named below. The
Company is not aware of any nominee who will be unable or will decline to serve
as a Director. The term of office of each person elected as a Director will
continue until the next Annual Meeting of Stockholders or until his successor
has been elected and qualified.
NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- ---------
<S> <C> <C> <C>
George W. Tilley . . . . . 59 President and Chief Executive Officer of Grant Geophysical, 1994
Inc. since 1993. Appointed to the Company's Board of
Directors in October 1994. Mr. Tilley served as President
and Chief Executive Officer of Halliburton Geophysical
Services from 1990 until 1992 and Vice President of
Halliburton Geophysical Services from 1988 until 1990.
Mr. Tilley has over 35 years of experience in the
geophysical industry. He serves as a member of the
Board of Directors of ERC Industries, Inc.
Harvey D. Attra . . . . . . 65 Special Advisor to the United States Department of 1993
Energy from 1990 through 1995. Mr. Attra served as
President/General Manager of Esso Egypt and Esso
Suez, Inc. from 1985 until 1989. Mr. Attra serves as
a member of the Board of Directors of Wascana Energy.
Orville D. Gaither . . . . 69 Chairman of the Board, Chief Executive Officer and 1993
President of Gaither Petroleum Corporation since 1991.
Mr. Gaither served as President of the Africa/Middle
East Region of Amoco Production Company from 1979
until 1991. Mr. Gaither serves as a member of the
Board of Directors of Energy Service Company,
International.
</TABLE>
6
<PAGE> 8
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
On November 14, 1995, at the instigation of representatives of Olympic
Capital Management, Inc., whose most recent filing on Schedule 13D indicated
that it owned 24.0% of the Company's Common Stock outstanding at that time, the
Company's Board of Directors was restructured as follows: (1) five directors,
J. Kelly Elliott (Chairman), Theodore M. Hanlon, Robert L. Parker, Jr., Donald
G. Russell and Frank T. Webster, resigned; (2) the size of the Board of
Directors was reduced from ten to seven members; and (3) two new directors,
Gordon W. Ringoen and William C. Macdonald, were appointed to fill the two
vacant seats. On January 9, 1996, Mr. Ringoen was elected as Chairman of the
Board. Effective August 8, 1996, Messrs. Ringoen and Macdonald resigned from
the Company's Board of Directors. The Company's current Board of Directors
consists of five members, George W. Tilley, Harvey D. Attra, Orville D.
Gaither, J. Michael Adcock and Douglas K. Stewart. Messrs. Adcock and Stewart
have been elected to the Board of Directors by the holders of the $2.4375
Preferred Stock.
The Board of Directors of the Company held a total of five meetings during
the fiscal year ended December 31, 1995. No incumbent Director attended fewer
than 75% of the aggregate of all meetings of the Board of Directors, or its
committees on which he served, during the time each Director was a member of
the Board of Directors.
The Executive Committee of the Board of Directors consisted of Messrs.
Elliott, Hanlon, Russell, and Gaither through November 14, 1995. During the
intervals between meetings of the Board of Directors, the Executive Committee
may exercise all powers of the Directors in the management and control of the
business and property of the Company. Five meetings of the Executive Committee
were held during the fiscal year 1995. As of November 14, 1995, the Board of
Directors did not have an Executive Committee.
The Audit Committee consisted of Messrs. Adcock, Attra, Hanlon and Parker,
during 1995. The Audit Committee recommends engagement of the Company's
independent auditors, and is primarily responsible for approving the services
performed by the Company's independent auditors and for reviewing and
evaluating the Company's accounting principles and its system of internal
accounting controls. During the fiscal year 1995, the Audit Committee met four
times. For the period January 9, 1996 to August 8, 1996 the Audit Committee
consisted of Messrs. Attra, Adcock and Macdonald. Effective August 8, 1996,
the Audit Committee consists of Messrs. Attra, Adcock and Gaither.
The Compensation Committee reviews and approves the Company's executive
compensation policy and makes recommendations concerning the Company's employee
benefit policies. The Compensation Committee met once during the fiscal year
1995. The Compensation Committee consisted of Messrs. Gaither, Russell and
Webster for fiscal year 1995. For the period January 9, 1996 to August 8, 1996
the Compensation Committee consisted of Messrs. Attra, Adcock and Macdonald.
Effective August 8, 1996, the Compensation Committee consists of Messrs. Attra,
Adcock and Gaither.
The Board of Directors has no Nominating Committee; however, the Executive
Committee or a specially formed committee if no Executive Committee is
available, when necessary, will perform the functions of a Nominating
Committee. The Nominating Committee assesses the size and composition of the
Board of Directors and recommends prospective Directors, without regard to
race, religion or sex, to assist in creating a balance of knowledge, experience
and capability on the Board.
APPROVAL
The election of each nominee Director of the Company for 1996 requires the
approval by the holders of a majority of the outstanding shares of Common Stock
represented at the Meeting. Proxies will be voted for or against the election
of each nominee Director in accordance with specifications marked thereon, and,
if no specification is made, will be voted in favor of the election of such
nominee Director.
7
<PAGE> 9
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE ELECTION OF EACH OF THE INDIVIDUALS NOMINATED FOR ELECTION AS A DIRECTOR .
DIRECTORS ELECTED BY HOLDERS OF PREFERRED STOCK
Pursuant to the terms of the Company's $2.4375 Convertible Exchangeable
Preferred Stock (the "$2.4375 Preferred Stock"), in the event that the
dividends on the $2.4375 Preferred Stock are in arrears in an amount equal to
at least six quarterly dividends, the holders of the $2.4375 Preferred Stock
are entitled to elect two additional Directors to the Company's Board of
Directors. Effective March 31, 1994, six quarterly dividends on the $2.4375
Preferred Stock were in arrears. As such, holders of a majority of the shares
of the $2.4375 Preferred Stock have elected the following persons to serve as
Directors of the Company until (i) such Directors are replaced by the holders
of the $2.4375 Preferred Stock, or (ii) the Company has declared and paid or
set apart for payment funds for all accrued and unpaid dividends.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- -----
<S> <C> <C> <C>
J. Michael Adcock . . . 47 General Counsel, Ameribank Corporation. Mr. Adcock 1994
served in various management positions with Hadson
Corporation from 1983 to 1993, including Chief
Executive Officer, President and Chief Operating
Officer and General Counsel. He currently serves as
a member of the Board of Directors of American National
Bank and Trust Company of Shawnee, Oklahoma, United
Oklahoma Bankshares, Inc., United Bank, Del City,
Oklahoma and First National Bank of Medicine Lodge,
Kansas. In October 1992, Hadson Corporation filed a
Chapter 11 bankruptcy petition and plan of reorganization
in the Western District Court of Oklahoma. The bankruptcy
court confirmed the plan in November 1992 and the plan
was consummated in December 1992.
Douglas K. Stewart . . 44 President of Stewart & Smith, Inc. for the last seven 1994
years. Prior to founding Stewart & Smith, Mr.
Stewart worked at First Boston Corporation and
the Securities and Exchange Commission.
</TABLE>
As set forth above, Messrs. Adcock and Stewart have been elected by
holders of the $2.4375 Preferred Stock. As such, holders of Common Stock are
not entitled to vote with respect to the election of these Directors.
8
<PAGE> 10
PROPOSAL TO AMEND THE AMENDED 1989 LONG-TERM INCENTIVE PLAN (ITEM 2)
AMENDMENT NO. 1 TO INCREASE THE NUMBER OF SHARES AVAILABLE FOR ISSUANCE
PURSUANT TO THE PLAN
The Board of Directors has approved, and recommends to the Stockholders,
the adoption of a proposed amendment to the Amended 1989 Long-Term Incentive
Plan of Grant Geophysical, Inc. (the "Plan") to increase the aggregate number
of shares of Common Stock which shall be available for awards from 1,303,930
shares to 2,803,930 shares. The Company currently has only 164,133 shares of
Common Stock reserved for issuance under the Plan which are not subject to
outstanding stock options. The Board of Directors believes that it is
desirable to increase the number of shares available for awards under the Plan
in order to ensure that the Company has a sufficient number of shares available
to attract and retain employees who hold positions of responsibility and whose
performance can have a significant effect on the success of the Company. As a
result, the Board of Directors has approved, subject to the approval of these
proposed amendments by the Stockholders, the grant to a number of employees of
new options to acquire an aggregate of 389,500 shares of Common Stock.
AMENDMENT NO. 2 TO EXPAND THE RIGHTS OF THE COMPANY TO GRANT SHARES OF
RESTRICTED STOCK TO FORMER NON-EMPLOYEE DIRECTORS
The Board has approved, and recommends to the Stockholders, the adoption
of a proposed amendment to the Plan to extend the existing right of the Company
to grant awards of Restricted Stock under the Plan to non-employee directors to
include former directors of the Company for a period not to exceed one year
after termination of their service on the Board of Directors. The Company has
made certain arrangements, subject to Stockholder approval, to provide
Restricted Stock under the Plan to certain of the Company's former directors in
accordance with the amendment outlined above. In the event that such Amendment
is not approved by the Stockholders of the Company, such shares will not be
granted pursuant to the Plan, but the Company will make other arrangements
which may include the issuance of shares of Common Stock outside of the Plan or
cash payments. Pursuant to the current Plan, non-employee directors are
entitled to receive Restricted Stock with a fair market value of $1,000 per
month of service as a Director of the Company. In certain instances, the
Company believes that it is important and in the Company's best interest to
further compensate former directors for their service to the Company during
their tenure as directors. This Amendment is intended to allow the Company the
flexibility to provide such compensation in those circumstances where it deems
such awards to be appropriate.
AMENDMENT NO. 3 TO INCLUDE THE CHAIRMAN OF THE COMPANY'S BOARD OF DIRECTORS
UNDER THE DEFINITION OF EMPLOYEE IN THE PLAN
The Board has approved, and recommends to the stockholders, the adoption of
a proposed amendment to the Plan to amend the definition of "Employee"
thereunder to include the Chairman of the Board of Directors of the Company.
During recent years, the Chairman of the Board of Directors has also been
an employee of the Company and has received a salary in connection with
services that he has rendered to the Company. Effective in 1996, the Company's
former Chairman of the Board of Directors, Mr. Ringoen, was not an employee of
the Company and was not paid a salary by the Company. In order to (i)
compensate such non-employee Chairman for the additional responsibilities
attendant to his obligations as the Chairman, (ii) reduce some of the cash
obligations of the Company and (iii) evidence such Chairman's confidence in the
future of the Company's operations, the Chairman agreed to receive (a) an
option to acquire 150,000 shares of Common Stock and (b) shares of Restricted
Stock in the amount of 2,500 shares earned monthly in lieu of additional
consideration. The Company has made certain arrangements, subject to
Stockholder approval, to provide under the Plan to the Company's former
Chairman (i) options to acquire 150,000 shares of Common Stock, vesting over a
period of four years and (ii) 2,500 shares of Restricted Stock each month
during his service as Chairman in accordance with the Amendment outlined above
(subject to review and adjustment by the Compensation Committee after one
year). Mr. Ringoen resigned effective August 8, 1996, and, as a result of such
resignation, the options were terminated. In the event that such
9
<PAGE> 11
Amendments are not approved by the Stockholders of the Company, such shares
will not be granted pursuant to the Plan, but the Company will make other
arrangements which may include the issuance of shares of Common Stock outside
of the Plan or cash payments. Pursuant to the current Plan, non-employee
directors are entitled to receive Restricted Stock with a fair market value of
$1,000 per month of service as a Director of the Company; however, pursuant to
the proposed amendment, the non-employee Chairman would not be entitled to
receive shares under that arrangement. This proposed amendment is intended to
allow the Company some flexibility with respect to its compensation of
non-employees serving as the Company's Chairman of the Board.
Purpose
The purpose of the Plan is to advance the interest of the Company by
providing additional incentives to attract, motivate and retain qualified and
competent employees and non-employee directors, through the encouragement of
stock ownership in the Company by such employees and non-employee directors.
The Company believes that this purpose will be furthered under the Plan through
the granting of options to purchase shares of Common Stock ("Options"), and
through awards, in lieu of cash compensation, of (i) shares of Common Stock
which are subject to vesting requirements or other restrictions ("Restricted
Stock") and (ii) Stock Appreciation Rights ("SAR") to key, full-time employees
and officers of the Company and its affiliates. In addition, non-employee
directors (current or former) are entitled to receive awards of Restricted
Stock, subject to certain restrictions. Options granted under the Plan may be
Incentive Stock Options or be Nonqualified Options, i.e., options that do not
constitute Incentive Stock Options within the meanings of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). Grants of Options and
awards of Restricted Stock and SARs are collectively referred to herein as
"Awards."
Administration
The Plan is administered by the Compensation Committee of the Board of
Directors (the "Committee"). Subject to the terms and conditions of the Plan,
the Committee has sole authority to select persons who are to be granted Awards
under the Plan, the number of shares to be issued pursuant to such Awards and
the terms of each Award. In making such determinations, the Committee may
consider such factors that the Committee may consider relevant.
Amendment or Termination of the Plan
The Board of Directors in its discretion may amend, suspend or terminate
the Plan, provided, however, that any amendment which would (i) increase the
aggregate numbers of shares of Common Stock to be awarded under the Plan (other
than as prescribed in the Plan for changes in capitalization), (ii) change the
class of persons eligible to receive Awards, or (iii) materially increase the
benefits accruing to participants under the Plan, requires the approval of the
stockholders of the Company.
Subject to express provisions of the Plan, the Committee has the
authority, in its sole and absolute discretion, (a) to prescribe, amend or
rescind rules and regulations relating to the Plan; (b) to interpret the Plan;
(c) to make all determinations necessary or advisable for administering the
Plan; (d) to determine the terms and provisions of, and to construe the
agreements relating to Awards, including provisions defining or otherwise
relating to (i) the term and the period or periods and extend exercisability of
Options, (ii) the restrictions applicable to Restricted Stock awards and (iii)
the effect of termination of employment upon Awards; and (e) subject to the
provisions of the Plan, to accelerate, for any reason, regardless of whether
the applicable agreement so provides, the time exercisability of Options or
SARs that have been previously granted or the time of the lapsing of
restrictions on Restricted Stock.
Description of Awards
Options. The Committee has the authority to grant Options that will be in
such form as the Compensation Committee may from time to time approve,
provided, however, that no Option may be exercised later than ten (10) years
after the date of grant. Subject to the foregoing, Options are exercisable at
such time or times as the Committee in its discretion may determine at or prior
to the time such Option is granted. Current Options awarded vest over a
four-year period. Options become 100 percent vested and are exercisable
immediately in full upon a Change of Control of the Company. A Change of
Control under the Plan means, generally, the acquisition by a person or entity
of 50 percent or
10
<PAGE> 12
more of the Company's outstanding Common Stock, certain reorganizations,
mergers or consolidations of the Company or the occurrence of certain tender or
exchange offers.
To exercise an Option granted under the Plan, the optionee must deliver to
the Company payment in full for the shares being purchased, which payment must
either be in cash or by check, or through delivery to the Company of shares of
Common Stock. Optionees do not have any rights as shareholders of the Company
with respect to shares that are subject to an Option until such time as the
Option has been exercised and the optionee shall have become the holder of
record of such shares.
The exercise price of each Option granted under the Plan must be at least
the market value of the Common Stock on the date of grant, determined in
accordance with the Plan. On September 25, 1996, the closing price for the
Common Stock as quoted on the NASDAQ Stock MarketSM was $1.50 per share.
The Plan provides that if the optionee's employment is terminated for
reasons other than disability or death, the option will terminate at the end of
one month thereafter. If the optionee's employment is terminated by reason of
his disability, then the Option will terminate at the end of three months
thereafter. If the optionee's employment is terminated by reason of his death,
then the Option will terminate at the end of six months thereafter. All of
such time periods are subject to certain extensions at the discretion of the
Board of Directors. However, in no event would an Option be exercisable beyond
the date which is ten (10) years from the date of the grant.
Stock Appreciation Rights. A SAR is a right to receive, without payment,
an amount not in excess of (i) the fair market value on the exercise date of
the number of shares of Common Stock for which the SAR is exercised less (ii)
the exercise price of such SAR, which price shall be equal to the fair market
value of such shares on the date of grant. As of the date of this Proxy
Statement, the Company has not issued any SARs.
Restricted Stock. The Plan provides that Restricted Stock may be awarded
by the Committee, in lieu of cash compensation, to key employees and officers
of the Company and its affiliates and non-employee directors of the Company.
Restricted Stock may not be sold, assigned, transferred, discounted, exchanged,
pledged or otherwise encumbered or disposed of until the terms and conditions
set by the Committee have been satisfied, which terms and conditions may
include, among other things, the providing of services for a specified time or
the achievement of specific goals. The recipient of Restricted Stock would be
the record owner of such shares and would have the right to vote such shares,
but any dividends or other distributions made or paid with respect to such
shares would be accrued but not paid until the restrictions are removed.
Provision is made for all restrictions on shares of Restricted Stock to be
canceled in the event of a Change in Control.
The Plan gives the Committee the authority to cancel all or any portion of
any outstanding restrictions prior to the expiration of such restrictions with
respect to any or all of the shares of Restricted Stock awarded to a person
under the Plan on such terms and conditions as the Committee may deem
appropriate.
If a person to whom Restricted Stock has been awarded ceases to be
employed by at least one of the employers in the group of employers consisting
of the Company and its affiliates, for any reason, prior to the satisfaction of
all terms and conditions of an award, all Restricted Stock remaining subject to
restrictions is thereupon forfeited by the person; provided, however, if the
cessation is due to the person's death, disability, or retirement, the terms
and conditions of the Restricted Stock shall be deemed to have been met for all
or part of such remaining portion.
Shares of Common Stock Subject to the Plan
A total of 1,303,930 shares of Common Stock (subject to adjustment upon
the occurrence of certain events) are reserved for sale in connection with
awards pursuant to the Plan. As of September 25, 1996, there were 640,250
shares of Common Stock subject to outstanding stock options and 164,133 shares
reserved under the Plan which were not subject to outstanding stock options.
As of the same date, the market value of the 804,383 shares of Common Stock
reserved for the issuance under such options was approximately $1,207,000,
based on the closing price per share of the Common Stock of $1.50 on the NASDAQ
Stock MarketSM on September 25, 1996. As of September 25, 1996, (i) no SARs
had been awarded pursuant to the Plan, and (ii) 218,047 shares of Restricted
Stock had been awarded, all to non-employee directors
11
<PAGE> 13
and the Chairman (subject to approval of the amendments). In addition, the
Board of Directors has approved, subject to stockholder approval of these
amendments, the grant to a number of employees of new options to acquire an
aggregate of 389,500 shares of Common Stock.
Automatic Grants to Non-Employee Directors
Pursuant to the Plan, the Company shall issue to each non-employee
director, on the first day of each calendar quarter following a quarter during
which such non-employee director served on the Company's board of directors
(and, at the discretion of the non-interested members of the Board of
Directors, for a period of up to one year following termination of such
service), Restricted Stock with a fair market value of $1,000 for each month of
service by such non- employee director during the preceding quarter (the fair
market value to be determined by the closing price of the Common Stock on the
last trading day of the preceding calendar quarter). The fee of $1,000 per
month is subject to review and adjustment by a committee of directors who are
not non-employee directors. In accordance with Rule 16b-3, a rule promulgated
by the Securities & Exchange Commission, the non-employee directors receiving
Restricted Stock shall be restricted from selling such shares for a period of
six months following the grant. Otherwise, such Restricted Stock issued to the
non-employee directors shall not be subjected to restrictions.
Exercise Price of Options Awarded Pursuant to the Plan
Options awarded pursuant to the Plan may not be granted at a price per
share which is less than the fair market value of a share of the Common Stock
on the date immediately preceding the date of grant.
Non-transferability of Awards
No Award pursuant to the Plan is assignable or transferable, otherwise
than by will or by the laws of descent and distribution.
12
<PAGE> 14
Value of Awards Granted
Although the Company is not able to determine the benefits to be
received by participants under the Plan since awards thereunder are generally
discretionary, subject to the approval of the amendments set forth above by the
Company's Stockholders, the Company's former Chairman, Mr. Ringoen, Mr. Tilley,
Mr. Cleveland and a non-employee director should receive the following under
the Plan during 1996:
PLAN AWARDS
<TABLE>
<CAPTION>
SHARES OF
STOCK OPTIONS(1) RESTRICTED STOCK(2) DOLLAR VALUE
---------------- ------------------- ------------
<S> <C> <C> <C>
Gordon W. Ringoen -- 17,500 $45,938(3)
George W. Tilley, CEO 125,000 -- --
William B. Cleveland, CFO 75,000 -- --
Former Non-Employee Director -- -- $11,000(4)
</TABLE>
- ----------------
1. Stock options awarded pursuant to the Plan which are specifically subject to
Stockholder approval of the amendments to the Plan specified herein.
2. Based on January 9, 1996 Restricted Stock issuance of which 2,500 shares of
Restricted Stock was earned monthly by the Chairman. Restricted Stock grants
terminated upon Chairman's resignation effective August 8, 1996.
3. Based on the January 9, 1996 market price of $2.625.
4. To be awarded in shares of Restricted Stock, the number of which will vary
depending upon the market price of the Common Stock.
Restricted Stock and shares issuable upon the exercise of an Option are
paid, at the specified vesting or exercise date, as the case may be, in shares
of the Company's Common Stock. During 1995, awards were granted to the
Company's executive officers as set forth in the Option/SAR Grants Table under
the heading "Executive Compensation" in this Proxy Statement. During 1995, all
of the Company's current executive officers as a group were granted a total of
110,000 stock options. During 1995, all employees of the Company, excluding
all executive officers, but including all officers who are not executive
officers, were granted a total of 40,000 options. During 1995, non-employee
directors as a group were granted 41,711 shares of Restricted Stock as awards
under the Plan.
Federal Income Tax Consequences
Summarized below are the material federal income tax consequences of the
Plan, based on applicable provisions of the federal income tax laws and
regulations as currently in effect. As a general rule, no income will be
recognized by grantees of Restricted Stock or by optionees upon the grant of
either. Upon the removal of the restrictions with respect to the Restricted
Stock, a grantee will generally recognize ordinary income equal to the fair
market value of the shares of Common Stock when the restrictions lapse.
However, a grantee may elect within thirty (30) days of the grant of the
Restricted Stock to treat the grant, rather than the lapse of the restrictions,
as the taxable event. In this case, the grantee will recognize ordinary income
equal to the fair market value of the shares of the Restricted Stock
(determined without regard to the restrictions) when the Restricted Stock is
granted. Upon the exercise of an Option, the optionee will be treated as
receiving taxable income in an amount equal to the excess of the fair market
value of the shares at the time of exercise over the exercise price for the
shares. The Company generally will be entitled to a tax deduction in the same
amount as, and at the same time as, the optionee or grantee recognizes income,
provided the Company makes the proper federal employment tax withholding. In
addition, in order to be deductible, the compensation must be ordinary and
necessary, must be "reasonable" and must not exceed the deductible compensation
limits under Section 162(m) of the Code. Upon a subsequent disposition of the
shares received under an Award, any difference between the optionee's or
grantee's basis and the amount realized on the disposition would be eligible
for treatment as long-term capital gain or loss if the shares were held for
more than twelve (12) months and were capital assets in the hands of the
optionee or grantee.
13
<PAGE> 15
APPROVAL
The proposal to approve the amendments to the Amended 1989 Long-Term
Incentive Plan requires the approval by the holders of a majority of the shares
of the Common Stock represented at the Meeting. Proxies will be voted for or
against such proposal in accordance with specifications marked thereon, and, if
no specification is made, will be voted in favor of such proposal.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE PROPOSAL TO APPROVE THE AMENDMENTS TO THE AMENDED 1989 LONG-TERM INCENTIVE
PLAN OF THE COMPANY.
EXECUTIVE OFFICERS
The names of the current Executive Officers and certain information with
respect to each are set forth below. All Executive Officers are elected
annually by the Board of Directors to serve at the discretion of the Board of
Directors or until their successors shall have been qualified or until their
resignation or removal. The Executive Officer Compensation section which
contains information as of December 31, 1995 with respect to the Executive
Officers of the Company, also contains information on Former Executive
Officers. The Board of Directors does not presently anticipate any material
changes in the manner in which the Company compensates its Executive Officers.
The current Executive Officers of the Company are:
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION AND BACKGROUND INFORMATION
---- --- -----------------------------------
<S> <C> <C>
George W. Tilley(1) . . . . . 59 Interim Chairman of the Board, President and Chief Executive Officer
William B. Cleveland . . . . . 40 Chief Financial Officer, Vice President of Finance, Secretary and
Treasurer. Mr. Cleveland was elected Chief Financial Officer in
August 1995 and Vice President of Finance, Secretary and Treasurer
in December 1993. Mr. Cleveland has served in various positions
with Halliburton Geophysical Services from 1976 through 1993, the
most recent being Manager of International Manufacturing Accounting
and Special Projects for Halliburton Energy Services.
</TABLE>
- ----------------------------------
(1) For information regarding Mr.Tilley, see "Election of Directors " above.
14
<PAGE> 16
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
-------------------------------------- ------------
Name and Other Annual Awards All Other
Principal Compensation Options/SARs Compensation
Position Year Salary ($) Bonus ($) ($) (#) ($)
(a) (b) (c) (d) (e)(2) (g) (i)(3)
--------- ----- ---------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
J. Kelly Elliott. . . . . . 1995 60,000 45,000 50,000 1,800
Chairman of the Board . . . 1994 60,000 45,000 25,000 1,800
George W. Tilley(1) . . . . 1995 164,588 100,000 50,000 4,743
Chief Executive Officer . . 1994 150,000 60,000 25,000 2,164
1993 76,731 -0- 100,000 -0-
William B. Cleveland . . . 1995 92,650 35,000 10,000 2,772
Chief Financial Officer . .
</TABLE>
- ---------------------------
(1) Mr. Tilley became President and Chief Executive Officer effective June 28,
1993. In conjunction with his appointment, Mr. Tilley was awarded stock
options.
(2) No named Executive Officer received perquisites or other personal
benefits in any of the Company's three most recent years for which the
aggregate amount exceeded the lesser of either $50,000 or 10% of his
total annual salary and bonus for such year.
(3) Amounts reflect matching contributions to the Company's Savings Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-----------------
Potential Realizable Value at
Assumed Annual Rates
% of Total of Stock Price Appreciation
Options/SARs For Option Term
Granted to Exercise or -----------------------------
Options/SARs Employees in Base Price
Name Granted (#) Fiscal Year ($/Sh) Expiration Date 5%$($) 10% ($)
(a) (b) (c) (d) (e) (f) (g)
------- ----------- ----------- ------------- --------------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
J. Kelly Elliott. . . . . 50,000 33.33% 2.31 6/1/2005 $72,716 $184,276
George W. Tilley. . . . . 50,000 33.33% 2.31 6/1/2005 72,716 184,276
William B. Cleveland. . . 10,000 6.67% 2.31 6/1/2005 14,543 36,855
</TABLE>
15
<PAGE> 17
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
EXERCISED DURING YEAR FISCAL YEAR-END (#) FISCAL YEAR-END ($)
--------------------- ------------------------- -------------------------
SHARES
NAME ACQUIRED ON EXERCISE VALUE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
(A) (B) (C) (D) (E)(1)
--------- -------------------- --------------- ------------------------- ------------------------
<S> <C> <C> <C> <C>
J. Kelly Elliott . . . . none none 175,000 $176,675(2) / -0-
175,000 / -0-
George W. Tilley . . . . none none 175,000
56,250 / 118,750 $85,519(3) / $109,856(4)
William B. Cleveland . . none none 30,000
5,000 / 25,000 -0- (5) / $1,900(6)
</TABLE>
- ---------------------
(1) Price per share as of December 31, 1995 for Grant Geophysical, Inc. Common
Stock - $2.50.
(2) Exercise price per share of incentive stock options - $1.125 - 1993,
$1.313 - 1994 and $2.31 - 1995.
(3) Exercise price per share of incentive stock options - $0.938 - 1993 and
1.313 - 1994.
(4) Exercise price per share of incentive stock options - $0.938 - 1993,
$1.313 - 1994 and $2.31 - 1995.
(5) Exercise price per share of incentive stock options - $2.50.
(6) Exercise price per share of incentive stock options - $2.50 - 1994 and
$2.31 - 1995.
BOARD OF DIRECTORS COMPENSATION
Effective January 1, 1994, non-employee Directors of the Company began
participating in the Company's Amended 1989 Long-Term Incentive Plan which
allows the Company to issue restricted stock of the Company in lieu of part or
all of the Directors' fees. The shares of restricted stock will be
automatically issued on the first day of each calendar quarter following a
calendar quarter of service. The fair market value of the restricted stock
will be the closing price of the Common Stock on the last trading day of the
preceding calendar quarter. During 1995, non-employee Directors of the Company
collectively were granted 41,711 shares, with a market value of $103,000, of
restricted stock of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1995, the Compensation Committee consisted of Messrs.
Gaither, Russell and Webster. The Committee serves the role of setting the
Company's Executive Compensation philosophy and establishing compensation
levels for executive officers. For the period January 9, 1996 to August 8,
1996 the Compensation Committee consisted of Messrs. Attra, Adcock and
Macdonald. Effective August 8, 1996, the Compensation Committee consists of
Messrs. Attra, Adcock and Gaither.
The Company had no interlocking relationships during 1995 with respect to
its Compensation Committee, the members of its Board of Directors or its
Executive Officers.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overall Compensation Philosophy and Objectives
The primary objective of our executive compensation program is to help the
Company attract and retain outstanding executive talent, while concurrently
motivating these individuals to maximize stockholder value. We strive to
accomplish this goal by basing our total compensation philosophy on the
following fundamental directives:
16
<PAGE> 18
o Hire, retain, develop, and reward highly talented and performance-
oriented executives;
o Emphasize pay for performance.by placing a significant portion of
executive compensation "at risk"
o Encourage employee stock ownership to further align the long-term
interests of the executives with the long-term interests of the
stockholders; and
o Integrate short- and long-term operating, financial, and strategic
objectives of the Company by establishing compensation plans which
reward executives for maintaining an appropriate balance.
The next section describes the Company's programs by element of
compensation and discusses how each component relates to the Company's overall
compensation philosophy. All plans mentioned pertain to the executive officer
group.
In reviewing this information, reference is often made to the use of
competitive market data as a criteria for establishing targeted compensation
levels. It should be noted that the market data are based on general industry
norms (i.e., market median) for companies our size. The Company did not
consider market data for the peer comparison shown in the performance graph
since the Company recruits talent from a broader market.
Base Salary
The objective of the Company's base salary program is to provide base pay
to executives which approximates competitive market levels. With the
assistance of an independent compensation consulting firm, we periodically
review our executive pay levels to assure consistency with the external market.
In determining appropriate salary levels by individual position, we not
only look at external pay practices, we also consider individual performance,
level of corporate responsibility, and job experience. Accordingly, base salary
levels by individual incumbent may vary from the indicated market levels once
adjusted for these additional factors.
The base salary program serves as an effective tool to attract and retain
top quality senior management. By considering factors such as individual
performance in determining annual increases, the base salary program also
serves to motivate executives toward exemplary performance standards.
Annual Incentives
Annual Incentive (bonus) opportunities are made available to the executive
officer group and reward for noteworthy performance at corporate, business
unit, and individual levels. The Company's 1995 Management Incentive Plan (the
"Management Incentive Plan") was focused on accomplishing the short-term to
intermediate-term financial and operating goals of the Company. The Management
Incentive Plan was also designed to emphasize a philosophy of delivering
compensation for exceptional levels of performance.
In order to gauge performance, the Compensation Committee must establish
and approve the criterion and specific financial targets to be used in the
Management Incentive Plan each year. In 1995, the Management Incentive Plan
incorporated both earnings per share and cash flow relative to budget as the
measures for setting incentive objectives at the corporate level. Net income
applicable to Common Stock is used to gauge performance at the business unit
level. Individual performance was also assessed using discretionary measures
to evaluate each participant's contribution to the overall success of the
Company.
Target award opportunities varied by individual position and were
expressed as a percent of base salary. The amount a particular executive could
earn was directly dependent on the individual's position, responsibility, and
ability to impact the Company's financial success. In order for any individual
to be eligible
17
<PAGE> 19
for award opportunities under the Management Incentive Plan, the Company was
required to achieve a threshold (minimum) cash flow performance level which, if
attained, served as a "trigger" to activate the plan. In 1995, the Company did
not reach this required level of performance and, hence, no bonuses were
awarded under the Management Incentive Plan.
For 1995, however, the Board of Directors determined the Company had
achieved specific discretionary measures. Based on this, the Board of
Directors awarded Mr. Tilley, Mr. Elliott, and Mr. Cleveland discretionary
bonuses of $100,000, $45,000, and $35,000, respectively.
Long-Term Incentives
The Company maintains the Amended 1989 Long-Term Incentive Plan (the
"Incentive Plan") which is designed to focus executive efforts on the long-term
goals of the Company and to maximize total return to our stockholders. The
Company's long-term incentive vehicles include stock options, stock
appreciation rights and restricted stock.
Stock options. Stock options align the interests of employees and
stockholders by providing value to the executive through stock price
appreciation only. To foster a long-term perspective, options granted
under the Incentive Plan are not fully exercisable until four years from
the date of grant, and awards cannot be made at an option price less than
fair market value on the date of grant. All options have a ten year term
before expiration.
Stock option awards are made on a periodic basis at the discretion of
the Compensation Committee. Stock option grant sizes, as well as
appropriate overall levels of shares reserved for such plans, are
established by regularly examining competitive market practices. The exact
number of shares actually granted to a particular participant is also based
on the Company's financial success, its future business plans, and the
individual's position and level of responsibility within the Company.
During 1995, the Compensation Committee granted stock options to the
following executive officers: Messrs. Tilley, Elliott, and Cleveland were
awarded options to acquire 50,000, 50,000 and 10,000 shares of Common
Stock, respectively.
Under the provisions of the Incentive Plan, the Compensation Committee
maintains the ability to grant stock appreciation rights ("SARs"). SARs
are similar to stock options in the sense that they provide value to the
executive equivalent to the amount the stock price appreciates from the
date of grant. Recent changes in federal regulations regarding insider
trading and new rules allowing for broker-financed cashless option
exercises have significantly reduced the usage of SARs. The Company made
no SAR grants in 1995.
Restricted stock. Restricted stock awards support the overall
compensation philosophy of the Company by delivering increased pay for
enhanced performance, aligning management interests with stockholder
interests through ownership of stock, and encouraging retention of quality
executives during the restriction period. Restricted stock represents
common stock of the Company subject to restrictions on transfer of
ownership. Under the Management Incentive Plan, restricted stock may be
granted periodically as determined by the Compensation Committee. No
restricted stock awards were made to the Company's employees in 1995;
however, restricted stock awards were made to the Company's non-employee
Directors in lieu of the Directors' fees.
Benefits and Perquisites
In addition to base salary, annual incentives and long-term incentives, the
Company provides executive benefits and perquisites to key members of senior
management. These include principally monthly automobile allowances and club
memberships. These elements of pay are not intended to be tied to performance,
rather, they serve as part of a competitive total compensation plan.
18
<PAGE> 20
1995 Chief Executive Officer ("CEO") Pay. As previously described, we
consider several factors in developing an executive compensation package.
For the CEO, these factors include competitive pay practices, performance
level, experience, achievement of strategic goals, and financial success of
the Company. Specific actions taken by the Compensation Committee
regarding the CEO's compensation are summarized below.
o Base Salary. Mr. Tilley's base salary for the fiscal year 1995 was
approximately $164,600.
o Annual Incentives. Mr. Tilley received an annual incentive
(discretionary bonus) award of $100,000 for 1995.
o Long-Term Incentives. Mr. Tilley was awarded stock options to
acquire 50,000 shares of Common Stock in June 1995. Awards are made
periodically at the discretion of the Compensation Committee. Size
and frequency of awards is determined by competitive practice, the
Company's financial success, the Company's future business plans and
individual level of responsibility as determined subjectively by the
Compensation Committee.
o $1 Million Pay Deductibility Cap. In 1993, the U.S. Treasury
Department issued regulations that prevent publicly traded companies
from receiving a tax deduction on compensation paid to executive
officers in excess of $1 million. At this time, the Company's
executive officer compensation levels do not exceed the $1 million
pay limit and will most likely not be affected by the regulations in
the near future. Nonetheless, the Company's Compensation Committee
of the Board of Directors plans to review the final regulations and,
if appropriate, take necessary actions in the future to avoid losing
any tax deductions related to compensation.
Conclusion
The preceding report has been compiled and presented over the names of the
Compensation Committee of the Board of Directors of the Company.
Compensation Committee Members
------------------------------
Harvey D. Attra
J. Michael Adcock
Orville D. Gaither
19
<PAGE> 21
PERFORMANCE GRAPH
The performance graph shown below indicates the shareholder return
on $100 invested in the Company's Common Stock from September 1990 (the
month and year of the Company's initial public offering of Common Stock) to
December 1995. The performance of the Company's Common Stock is compared
with shareholder returns based on (i) the Standard & Poor's 500 Stock Index
and (ii) an industry peer group index(1). All shareholder returns are
calculated assuming the reinvestment of dividend payments.
GRANT GEOPHYSICAL, INC.
COMPARISON OF CUMULATIVE TOTAL RETURN
[GRAPH]
<TABLE>
<CAPTION>
---------------------------------------------------------
1990 1991 1992 1993 1994 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Grant Geophysical $100.00 $151.02 $55.10 $22.45 $38.78 $40.82
- -----------------------------------------------------------------------------
S & P 500 $100.00 $130.48 $140.46 $154.62 $156.66 $215.54
- -----------------------------------------------------------------------------
Peer Group $100.00 $105.75 $113.15 $144.02 $224.67 $477.22
- -----------------------------------------------------------------------------
</TABLE>
- ------------------------
(1) The industry peer group, reflected for all years in the performance graph
above, consists of the following companies:
Dawson Geophysical Company
Digicon Inc.*
Input/Output, Inc.
Seitel, Inc.
Universal Seismic Acquisition
* For the above graph, Digicon, Inc. was not included until 1992 due to an
anomalous change in stock price in 1991 resulting from an emergence from
bankruptcy. Including Digicon, Inc. for 1991 skewed and misrepresented the
peer group index.
20
<PAGE> 22
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's Directors and Executive Officers, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission (the "SEC"). Directors,
Executive Officers and greater than 10% beneficial owners are required by SEC
regulation to furnish the Company with copies of all Section 16(a) Forms 3, 4
and 5 they file. Based solely upon a review of such Forms 3, 4 and 5 and any
amendments thereto furnished to the Company, and written representations from
certain reporting persons that no Forms 5 were required, the Company believes
that all such applicable filing requirements were complied with by each of the
Executive Officers, Directors and greater than 10% shareholders, except for one
report relating to one transaction for Mr. L. E. Simmons, a former director of
the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into an exclusive agreement with Macdonald & King,
Incorporated, a financial services firm, for the purpose of assisting the
Company in securing additional sources of financing including equipment
financing and short- and long-term financing. Mr. William C. Macdonald, a
former director of the Company, is the Chairman of the Board and sole
shareholder of Macdonald & King, Incorporated. Pursuant to the terms of the
agreement, the Company is obligated to compensate Macdonald & King,
Incorporated in connection with financing obtained by the Company from certain
entities it had introduced to the Company prior to Mr. Macdonald's resignation
from the Company's Board of Directors effective August 8, 1996. The Company's
obligations under this agreement expire December 1, 1996.
On April 17, 1995, the Company negotiated a $1,000,000 short-term credit
facility with Elliott Associates, L.P. ("Elliott"), a significant holder of
the Company's $2.4375 Preferred Stock. In June 1995, the loan was increased to
$1,750,000 and the expiration date was succeedingly extended to February 20,
1996. The loan was repaid by the Company on the expiration date.
On March 20, 1996, the Company issued 143,000 shares of the Company's
$2.4375 Preferred Stock to Westgate International, L.P., an affiliate of
Elliott ("Westgate"), for an aggregate purchase price of $1,573,000.
Management believes that such transactions described above were on terms
that were at least as favorable to the Company as would have been available
from unaffiliated parties. Future transactions, if any, with affiliates of the
Company will be on terms no less favorable than could be obtained from an
unaffiliated party and will be approved by a disinterested majority of the
Board of Directors of the Company.
AUDITORS
The appointment of the firm of independent certified public accountants
selected to audit the Company's financial statements is subject to approval by
the Board of Directors and is not being submitted to stockholders for
ratification or approval. During the year ended December 31, 1995, KPMG Peat
Marwick was employed principally to perform the annual audit and to render
other services to the Company. A representative of KPMG Peat Marwick is
expected to be present at the Meeting and will have an opportunity to make an
independent statement if he or she desires to do so, although it is not
expected that any statement will be made. The representative is expected to be
available to respond to appropriate questions.
21
<PAGE> 23
DATE FOR RECEIPT OF PROPOSALS
Proposals by Stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders must be received by the Company no later than March 12,
1997, in order to be qualified for inclusion in the Company's Proxy Statement
and form of proxy for such meeting.
OTHER BUSINESS
The Board of Directors is aware of no matters other than those specifically
stated in the Notice of Annual Meeting which are to be presented for action at
the Meeting. However, should any further matters requiring a vote of the
Stockholders arise, it is the intention of the persons named in the Proxy to
vote the shares covered thereby as they may deem advisable.
BY ORDER OF THE BOARD OF DIRECTORS
William B. Cleveland, Secretary
October 1, 1996
22
<PAGE> 24
GRANT GEOPHYSICAL, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GRANT GEOPHYSICAL, INC. -- COMMON STOCK PROXY -- for the Annual Meeting of
Stockholders at 10:00 a.m., November 1, 1996, at The Holiday Inn, 14703 Park
Row, Houston, Texas 77079.
The undersigned hereby appoints George W. Tilley and William B. Cleveland, or
either of them, with full power of substitution, as Proxies to vote the Common
Stock of the undersigned at the above stated Annual Meeting, and any
postponements or adjournments thereof, upon the matters set forth in the Notice
of Annual Meeting and Proxy Statement as indicated on the reverse side.
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, IT WILL BE
VOTED FOR IN PROPOSALS 1 AND 2 WITH THE DISCRETION OF THE PROXY OR PROXIES ON
ANY OTHER BUSINESS.
Any Proxy heretofore given by the undersigned with respect to such stock is
being revoked.
Receipt of the Notice of the Annual Meeting and Proxy Statement is hereby
acknowledged.
(Continued and to be dated and signed on the reverse side)
<PAGE> 25
PLEASE MARK BOXES [ ] IN BLUE OR BLACK INK.
1. Election of Directors FOR ALL NOMINEES [ ] AGAINST ALL NOMINEES [ ]
George W. Tilley, Harvey D. Attra, Orville D. Gaither
[ ] FOR ALL NOMINEES, except the following
2. To approve certain amendments to the Company's Amended 1989
Long-Term Incentive Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In their discretion, the proxies are authorized to vote as they deem
appropriate upon any matter that properly may come before the Meeting
or any adjournment thereof.
Do you plan to attend the Meeting?
YES [ ] NO [ ]
Joint owners must EACH sign. Please sign
EXACTLY as your name(s) appear(s) on this card.
When signing as an attorney, trustee, executor,
administrator, guardian or corporate officer,
please give your FULL title.
DATE , 1996
------------------------------------
<PAGE> 26
GRANT GEOPHYSICAL, INC.
AMENDED 1989 LONG-TERM
INCENTIVE PLAN DOCUMENT
(AMENDED EFFECTIVE AS OF NOVEMBER 14, 1995)
---SUBJECT TO STOCKHOLDER APPROVAL---
CONFIDENTIAL
<PAGE> 27
GRANT GEOPHYSICAL, INC.
Amended 1989 Long-Term Incentive Plan
(Amended Effective as of November 14, 1995)
1. Purposes of the Plan. The purposes of this Plan are to attract and
retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and
Non-Employee Directors of the Company and to promote the success of the
Company's business.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Committee, if one has been appointed,
or the Board of Directors of the Company, if no Committee is
appointed.
(b) "Common Stock" shall mean the Common Stock of the Company.
(c) "Company" shall mean Grant Geophysical, Inc., a Delaware
corporation.
(d) "Committee" shall mean the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 5 of the
Plan, if one appointed.
(e) "Continuous Status as an Employee" shall, for the purposes of
this Plan and the Options granted and Restricted Shares issued
hereunder only, mean the absence of any interruption or
termination of service as an Employee. Continuous Status as
an Employee shall not be considered interrupted in the case of
sick leave (including leave on account of disability or
military leave, provided that such sick leave or military
leave is for a period of not more than 90 days, except as may
otherwise be approved by the Board and specified in writing by
the Company), or any other leave of absence approved by the
Board and specified in writing by the Company, subject to any
conditions of such approval. In the event that at the end of
such leave the Employee does not resume his service to the
Company, his employment or relationship with the Company (and
his Continuous Status as an Employee) shall be deemed to have
terminated as of the end of the leave period.
(f) "Employee" mean any person, including officers and directors,
employed by the Company or any Parent, if any, or Subsidiary
of the Company. The payment of a director's fee by the
Company shall not be sufficient to constitute "employment" by
the Company; provided, however, the Chairman of the Board
shall be considered an officer of the Company for this purpose
and shall be deemed to be an Employee.
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<PAGE> 28
(g) "Parent" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 425(e) of the
Internal Revenue Code of 1986, as amended.
(h) "Plan" shall mean this Amended 1989 Long-Term Incentive Plan,
as amended from time to time.
(i) "Share" shall mean a share of the Common Stock (par value
$.002), as adjusted in accordance with Section 12 of the Plan.
(j) "Subsidiary" shall mean a "subsidiary corporation", whether
now or hereafter existing, as defined in Section 425(f) of the
Internal Revenue code of 1986, as amended.
(k) "Award" shall mean an Award described in Section 3 of this
Plan.
(l) "Option" shall mean either an incentive stock option or
non-qualified stock option, as defined in Section 3, herein.
(m) "Non-Qualified Stock Option" shall mean a non-qualified stock
option as defined in Section 3, herein.
(n) "Incentive Stock Option" shall mean an incentive stock option
as defined in Section 3, herein.
(o) "Restricted Stock" shall mean restricted stock as defined in
Section 3, herein.
(p) "Stock Appreciation Right" shall mean a stock appreciation
right as defined in Section 3, herein.
(q) "Award Agreement" shall mean an agreement entered into between
the Company and a Participant, setting forth the terms and
conditions applicable to the Award granted to the Participant,
including stock option and restricted stock agreements.
(r) "Code" shall mean the Internal Revenue Code of 1986 and the
regulations thereunder, as amended from time to time.
(s) "Exchange Act" shall mean the Securities Exchange Act of 1934
and the regulations thereunder, as amended from time to time.
(t) "Participant" shall mean an individual who has been granted an
Award pursuant to this Plan.
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<PAGE> 29
(u) "Plan Year" shall mean the calendar year.
(v) "Non-Employee Director" shall mean a member or former member
of the Board of Directors of the Company who is not also an
Employee.
3. Awards
An Award is the right to receive compensation, payable in cash, Common
Stock or other securities of the Company or an Affiliate, or any
combination thereof. All Awards made pursuant to this Plan are in
consideration of services performed or to be performed for the Company
or its Affiliates. The Committee may establish minimum performance
targets with respect to each Award. Performance targets may be based
on financial criteria, such as the Fair Market Value of Common Stock or
other objective measures of financial performance of the Company, or
may be based on the performance of a division, subsidiary or Affiliate
of the Company, or the performance of an individual Participant.
Notwithstanding anything in this Plan to the contrary any Awards of
stock options or similar rights, or stock appreciation rights shall
contain the restrictions on assignability in Section 12 of this Plan to
the extent required under Rule 16b-3 of the Exchange Act. The
following types of Awards may be granted under this Plan, singly or in
combination or in tandem with other Awards, as the Committee may
determine:
(a) Non-Qualified Stock Options. A non-qualified stock option is
a right to purchase, during such period of time as the
Committee may determine, a specified number of shares of
Common Stock or other security, which does not qualify as an
incentive stock option under Section 422A of the Code, at a
fixed option price equal to no less than 100% of the Fair
Market Value of the Common Stock or other security on the date
the Award is granted.
(b) Incentive Stock Options. An incentive stock option is a right
to purchase, during such period of time as the Committee may
determine, a specified number of shares of Common Stock or
other security, that shall comply with the requirements of
Section 422A of the Code or any successor section, at a fixed
option price equal to no less than 100% of the Fair Market
Value of the Common Stock or other security on the date the
Award is granted.
(c) Stock Appreciation Rights. A stock appreciation right is a
right to receive, without payment, an amount not in excess of
(i) the Fair Market Value on the exercise date of the number
of shares of Common Stock for which the stock appreciation
right is exercised less (ii) the exercise price of such stock
appreciation right, which price shall equal the Fair Market
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<PAGE> 30
Value of such shares on the date the stock appreciation right
was granted (or, in the case of an option with a tandem stock
appreciation right, the option price that the optionee would
otherwise have been required to pay for such shares). The
right to receive such amount shall be conditioned upon the
surrender of the stock appreciation right (or of both the
option and the stock appreciation right in the case of a
tandem stock appreciation right, or a portion of either).
Stock appreciation rights shall be payable in Common Stock,
cash or a combination thereof.
(d) Restricted Stock. Restricted stock is Common Stock or other
security of the Company or any Affiliate that is subject to
restrictions on transfer and such other restrictions on the
incidents of ownership as the Committee may determine.
Restricted Stock Awards may be made without cash payment by,
or other out of pocket consideration from the Participant,
either on the date of grant or the date the restriction(s)
lapse or are removed.
4. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of shares which may be optioned,
granted and/or sold under the Plan is 2,803,930 shares of Common Stock.
The Shares may be authorized, but unissued, or reacquired Common Stock.
If an Option or Restricted Share should expire, lapse or become
unexercisable for any reason without having been exercised in full, the
unpurchased Shares which were subject thereto shall, unless the plan
shall have been terminated, become available for future grant under the
Plan. Any shares sold under the Plan and subsequently repurchased by
the Company shall be available for new issuance pursuant to the Plan;
however, the number of shares reissued in this manner shall be included
in computing the aggregate number of shares sold under the Plan.
5. Administration of the Plan.
(a) Procedure. The Plan shall be administered by the Board of
Directors of the Company.
(i) Subject to subparagraph (ii), the Board of Directors
may appoint a Committee consisting of not less than
two members of the Board of Directors or one or more
officers of the Company to administer the Plan on
behalf of the Board of Directors, subject to such
terms and conditions as the Board of Directors may
prescribe. Once appointed, the Committee shall
continue to serve until otherwise directed by the
Board of Directors. From time to time the Board of
Directors may increase the size of the
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<PAGE> 31
Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new
members in substitution therefore, fill vacancies
however caused, or remove all members of the Committee
and thereafter directly administer the Plan.
Members of the Board who either are eligible for
Options, Restricted Stock, or Stock Appreciation
Rights or have been granted Options, Restricted Stock
or Stock Appreciation Rights may vote on any matters
affecting the Administration of the Plan or the grant
of any Options, Restricted Stock, or Stock
Appreciation Rights pursuant to the Plan, except that
no such member shall act upon the granting of an
Option, Restricted Stock or Stock Appreciation Rights
to himself, but any such member may be counted in
determining the existence of a quorum at any meeting
of the Board during which action is taken with respect
to the granting of Options, Restricted Stock or Stock
Appreciation Rights to him.
(ii) Notwithstanding the foregoing subparagraph (i), if and
in the event the Company registers any class of any
equity security pursuant to Section 12 of the Exchange
Act, from the effective date of such registration
until six months after the termination of such
registration, any grants of Options, Restricted Stock,
or Stock Appreciation Rights to directors shall only
be made by the Board of Directors; provided, however,
that if a majority of the Board of Directors is
eligible to participate in this Plan or any other
stock option or other stock plan of the Company or any
of its affiliates, or has been eligible at any time
within the preceding year, any grants or Options,
Restricted Stock, Stock Appreciation Rights to
directors must be made by, or only in accordance with
the recommendation of, a Committee consisting of three
or more persons, who may but need not be Directors or
employees of the Company, appointed by the Board of
Directors and having full authority to act in the
matter, none of whom is eligible to participate in
this Plan or any other stock option, Restricted Stock,
or other stock plan of the Company or any of its
affiliates, or has been eligible at any time within
the preceding year. Any committee administering the
Plan with respect to grants to officers who are not
also directors shall conform to the requirements of
the preceding sentence. Once appointed, the Committee
shall continue to serve until otherwise directed by
the Board of Directors. Subject to the foregoing,
from time to time the Board of Directors may increase
the size of the Committee and appoint
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<PAGE> 32
additional members thereof, remove members (with or
without cause) and appoint new members in
substitution, fill vacancies however caused, or remove
all members of the Committee and thereafter directly
administer the Plan.
(b) Powers of the Board. Subject to the provisions of the Plan,
the Board shall have the authority, in its discretion: (1) to
grant Incentive Stock Options, Non-Qualified Stock Options,
Stock Appreciation Rights, and/or Restricted Stock as
described in Section 3 of the Plan; (ii) to determine upon
review of relevant information and in accordance with Section
8(b) of the Plan, the fair market value of the Common Stock;
(iii) to determine the exercise price per share of Options or
Restricted Stock to be granted, which exercise price shall be
determined in accordance with Section 8(a) of the Plan; (iv)
to determine the Employees to whom, and the time or times at
which, Options, Restricted Stock or Stock Appreciation Rights
shall be granted and the number of shares to be represented by
each Award; (v) to interpret the Plan; (vi) to prescribe,
amend and rescind rules and regulations relating the Plan;
(vii) to determine the terms and provisions of each Option,
Restricted Stock or Stock Appreciation Right granted (which
need not be identical) and, with the consent of the holder
thereof, modify or amend each Option, Restricted Share, or
Stock Appreciation Right; (viii) to accelerate or defer
(within the consent of the Participant) the exercise date of
any Option, Restricted Stock, or Stock Appreciation Right
consistent with the provisions of Section 6(b) of the Plan;
(ix) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an
Option, Restricted Stock or Stock Appreciation Right
previously granted by the Board; and (x) to make all other
determinations deemed necessary or advisable for the
administration of the Plan.
(c) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all
Participants receiving awards granted under the Plan.
6. Eligibility.
(a) Except for automatic grants of Restricted Stock to
Non-Employee Directors as provided in Section 11 hereof,
Options, Restricted Stock, or Stock Appreciation Rights may be
granted only to Employees. An Employee or Non-Employee
Director who has been granted an Award may, if he is otherwise
eligible, be granted additional Awards.
(b) No Incentive Stock Option may be granted to an Employee which,
when aggregated with all other incentive stock options granted
to such
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<PAGE> 33
Employee by the Company or any Parent or Subsidiary, would
result in Shares having an aggregate fair market value
(determined for each Share) as of the date of grant of the
Option covering such Share in excess of $100,000 becoming
first available for purchase upon exercise of one or more
incentive stock options during any calendar year.
(c) The Plan shall not confer upon any Participant or Purchaser
any right with respect to continuation of employment with the
Company, nor shall it interfere in any way with his right or
the Company's right to terminate his employment at any time.
7. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 19 of the Plan. It
shall continue in effect from June 20, 1989 to June 21, 1999, unless
sooner terminated.
8. Exercise Price and Consideration.
(a) The per Share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is
determined by the Board, but shall be subject to the
following:
(i) In the case of any Option, the per Share exercise
price shall be no less than 100% of the fair market
value per Share on the date of grant.
(ii) In the case of any Incentive Stock Option granted to
any person who, at the time of the grant of such
Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of
the Company or any Parent or Subsidiary, the per Share
exercise price shall be no less than 110% of the fair
market value per Share on the date of grant.
(b) The fair market value shall be determined by the Board in its
discretion; provided, however, that where there is a public
market for the Common Stock, the fair market value per Share
shall be the mean of the last reported bid and asked prices of
the Common Stock on the last trading day immediately preceding
the date of grant (or, if not so reported, as otherwise
reported by the National Association of Securities Dealers
Automated Quotation (NASDAQ) System), or, in event the Common
Stock is listed on a stock exchange or quoted on the NASDAQ
National Market System, the fair market value per Share shall
be the reported closing price on such exchange or in the
NASDAQ National market on the last trading day immediately
prior the date of grant.
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<PAGE> 34
(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be
determined by the Board and may consist entirely of (i) cash, check or
promissory note, (ii) other shares of Common Stock having a fair market
value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised, (iii) or a loan
from a stockbroker extended to the Company on behalf of an optionee for
purposes of exercising an option, so long as the optionee gives proper
written notice to the Company of his exercise of the option, the
optionee instructs the Company to deliver the shares with respect to
which the option is being exercised to the stockbroker, and the Company
promptly follows the optionee's instructions to deliver such shares to
the stockbroker, or (iv) any combination of such methods of payment, or
such other consideration and method of payment for the issuance of
Shares to the extent permitted under the Delaware General Corporation
Law.
9. Options
(a) Term of Options
The term of each Option shall be ten (10) years from the date
of the grant thereof or such shorter term as may be provided
in the Award Agreement. However, in the case of an Incentive
Stock Option granted to a Participant who, at the time the
Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of
the Company or any Parent or Subsidiary, the term of any
Incentive Stock Option shall be five (5) years from the date
of grant thereof or such shorter time as may be provided in
the Stock Option Agreement.
(b) Exercise of Options.
(i) Procedure for Exercise; Rights as a Stockholder. Any
Option granted hereunder shall be exercisable and
shall vest at such times and under such conditions as
determined by the Board, including performance
criteria with respect to the Company and/or the
Participant, and as shall be permissible under the
terms of the Plan.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company
in accordance with the terms of the Option by the
person entitled to exercise the Option and full
payment for the Shares with respect to which the
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<PAGE> 35
Option is exercised has been received by the Company.
Full payment may, as authorized by the Board, consist
of any consideration and method of payment allowable
under Section 8(c) of the Plan. Until the issuance
(as evidenced by the appropriate entry on the books of
the Company or of duly authorized transfer agent of
the Company) of the stock certificate evidencing such
Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect
to the stock, notwithstanding the exercise of the
Option. No adjustment will be made for a dividend or
other Right for which the record date is prior to the
date the stock certificate is issued, except as
provided in Section 13 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares that thereafter shall
be available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to
which the Option is exercised.
(ii) Termination of Status as an Employee. If a
Participant's Continuous Status as an Employee
terminates, the Participant may, but only within one
(1) month (or such other period of time as is
determined by the Board and is specified in writing by
the Company; provided, however, in the case of an
Incentive Stock Option, such period shall not exceed
three (3) months) after the date he ceases to be an
Employee of the Company (but in no event later than
ten years from the date of grant of the Option),
exercise his Option to the extent that (A) the Option
was vested and (B) the Participant was entitled to
exercise it, at the date of such termination. To the
extent that the Option was not vested or he was not
entitled to exercise the Option, at the date of such
termination, or if he does not exercise such Option
within the times specified herein, the Option shall
terminate.
(iii) Disability. Notwithstanding the provisions of Section
9(b) (ii) above, in the event of termination of
Continuous Status as an Employee as a result of a
Participant's disability (as defined in Section 22
(e)(3) of the Internal Revenue Code of 1986), the
Participant may, but only within three (3) months (or
such other period of time not less than three (3)
months nor more than twelve (12) months, as determined
by the Board and specified in writing by the Company)
from the date of termination (but in no event later
than ten years from the date of grant of the Option)
exercise his Option to the extent that (A) the Option
was vested and (B) the Participant was entitled to
exercise it, at the date of such
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<PAGE> 36
termination. To the extent that the Option was not
vested or the Participant was not entitled to exercise
the Option, at the date of such termination, or if the
Participant does not exercise such Option within the
time specified herein, the Option shall terminate.
(iv) Death of Participant. Notwithstanding the provisions
of Section 9(b)(ii) above, in the event of (A) the
death of a Participant during the term of his Option,
where such Participant is at the time of his death an
Employee of the Company and such Participant shall at
the date of death have been in Continuous Status as an
Employee since the date of grant of the Option, or (B)
the death of a Participant within thirty (30) days
after the termination of such Participant's Continuous
Status as an Employee, then the Option may be
exercised at any time within six (6) months (or such
other period of time not less than six months nor more
than twelve (12) months as determined by the Board and
specified in writing by the Company) following the
date of death (but in no event later than ten years
from the date of grant of the Option), by the
Participant's estate or by a person who acquired the
right to exercise the Option by bequest or
inheritance, but only to the extent that (A) the
Option was vested as of the date of termination, and
(B) the Participant was entitled to exercise it at the
date of termination.
10. Restricted Stock
(a) Awards
Except as otherwise specifically provided in Section 11 hereof
or in the grant of an Award of Restricted Stock, such Awards
shall be granted solely for services rendered to the Company
or any Affiliate by the Employee or Non-Employee Director
prior to the date of the grant and shall be subject to the
following terms and conditions:
(i) The shares subject to an Award shall be forfeited to
the Company if the employment of the employee by the
Company, (with or without cause) other than death or
disability (within the meaning of Section 22(e)(3) of
the Internal Revenue Code of 1986, as amended), prior
to a "Change in Control" of the Company as defined in
Section 14 herein, or prior to the lapsing of time
restrictions.
(ii) If at any time the recipient dies or becomes disabled,
or in the event of a "Change in Control" of the
Company, as described in
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Section 14 herein, such recipient shall be entitled to
retain the number of shares subject to the Award.
(iii) Awards may contain such other provisions, not
inconsistent with the provisions of the Plan, as the
Committee shall determine appropriate from time to
time.
(b) Nontransferability of Awards
Shares of Stock subject to Awards shall not be transferable
and shall not be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of at any time prior to the
first to occur of the death or disability of the recipient of
an Award or a Change in Control, or the lapsing of time
restrictions on the Award.
(c) Rights as a Stockholder
An Employee or Non-Employee Director who receives an Award
shall have rights as a stockholder with respect to shares
covered by such Award to receive dividends in cash or other
property or other distributions or rights in respect to such
shares and to vote such shares as the record owner thereof.
11. Restricted Stock Grants to Non-Employee Directors
(a) Automatic Quarterly Grant.
Each Non-Employee Director, effective on the date of the
Non-Employee Director's election or re-election to the Board
of Directors of the Company (commencing January 1, 1994 for
those Non-Employee Directors serving on the Board of
Directors as of such date) shall be automatically granted
Restricted Stock in accordance with the following:
(i) on the first day of each calendar quarter following a
quarter during which such Non-Employee Director
served on the Company's Board of Directors, such
Non-Employee Director shall receive Restricted Stock
with a fair market value (determined in accordance
with Section 8(b) hereof) of One Thousand and No/100
Dollars (subject to adjustment by a committee of the
Board of Directors made up of directors who are not
Non-Employee Directors on a basis no more frequently
than bi-annually) for each calendar month (full or
partial) of service during the preceding calendar
quarter. At the discretion of a committee of the
Board of Directors made up of disinterested Directors,
the
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<PAGE> 38
automatic grants of Restricted Stock may continue for
a period of up to one year following the termination
of a Director's service on the Company's Board of
Directors, for whatever reason.
(ii) A Non-Employee Director shall be eligible to receive a
grant of Restricted Stock as provided in this Section
11(a) only if, as of the date of such grant, the
Non-Employee Director (A) is not otherwise an
Employee, and (B) has not been an Employee for any
portion of the three-month period preceding the date
of grant.
(iii) The first grant of Restricted Stock to Non-Employee
Directors pursuant to this Section 11 shall be as of
April 1, 1994, for the Non-Employee Directors serving
during the first calendar quarter of 1994.
(iv) In the event that calculation of an Award of
Restricted Stock pursuant to this Section 11 results
in fractional shares of Restricted Stock, such number
shall be rounded up to the next whole number so that
no fractional shares will be issued.
(b) Restrictions.
The Restricted Stock awarded to a Non-Employee Director
pursuant to this Section 11 shall not be subject to any of the
restrictions set forth in Section 10 hereof; provided,
however, such shares of Restricted Stock may not be
transferred, sold or assigned by a Non-Employee Director
during the six-month period immediately following the date of
grant.
(c) Automatic Grants.
Except for the automatic grants of Restricted Stock under
Section 11(a), no Awards shall otherwise be granted to
Non-Employee Directors hereunder, and the Board shall not have
any discretion with respect to the grant of Restricted Stock
to Non-Employee Directors within the meaning of Rule 16b-3
promulgated under the Exchange Act, or any successor rule.
12. Assignability. Awards may not be assigned or transferred in any manner
other than by will or by the laws of descent or distribution and may be
exercised only by a participant or his guardian or legal
representative.
13. Adjustments Upon Change in Capitalization, Merger or Reorganization.
Subject to any required actions by the stockholders of the Company, the
number of shares of Common Stock covered by each outstanding Option and
Restricted
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Share and the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options or
Restricted Shares have yet been granted or which have been returned to
the Plan upon cancellation or expiration of an Option or Restricted
Share as well as the price per share of Common Stock covered by each
such outstanding Option or Restricted Share shall be proportionately
adjusted for any increase or decrease in the number of issued shares of
Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common
Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common
Stock subject to an Option or number or price of Restricted Shares.
In the event of the proposed dissolution or liquidation of the Company,
any outstanding Options shall terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Board. The Board may, in the exercise of its sole discretion in such
instances, declare that any Option shall terminate as of a date fixed
by the Board, and may give each Participant the right to exercise his
Option as to all or any part of the Stock, including Shares as to which
the Option would not otherwise be exercisable. In the event of a
proposed sale of all or substantially all of the assets of the Company
, or the merger of the Company with or into another corporation,
Options shall be assumed or an equivalent option or right shall be
substituted by such successor corporation or a parent or subsidiary of
such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or
substitution, that the Participant shall have the right to exercise the
Option as to all of the Optioned Stock, including Shares as to which
the Option would not otherwise be exercisable. If the Board makes an
Option fully exercisable "in lieu of assumption or substitution in the
event of a merger or sale of assets, the Board shall notify the
Participant that the Option shall be fully exercisable for a period of
thirty (30) days from the date of such notice, and the Option will
terminate upon the expiration of such period.
In the event that the Company forms a new corporation and the
shareholder owning Company Common Stock exchange these shares for
common stock of the new corporation, the Board may authorize the
substitution of options granted prior to 1991 for common stock of the
new corporation for the options
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granted herein for Company Common Stock. The transaction shall be
structured to ensure that (1) the substitution is fair and equitable to
the Employees and (2) any options granted as incentive stock options
granted b substitution remain qualified as incentive stock options.
The board shall not be required to submit a substitution structured in
this manner to the shareholders for approval.
14. Change in Control
The vesting periods for all Awards granted under the plan shall
automatically and fully accelerate in the event of a "Change in
Control".
For purposes of this Section, a "Change in Control" means the
occurrence of one or more of the following events: (i) any corporation,
person or other entity other than the Company makes a tender or
exchange offer for shares of common stock of the Company and shares of
the Company are purchased pursuant thereto; (ii) more than fifty
percent (50%) of the Company's common stock is acquired by any person
or group; or (iii) the stockholders of the company approve a definitive
agreement to merge the Company into another corporation, to consolidate
the Company with another corporation, or to sell or otherwise dispose
of substantially all of the Company's assets.
Notwithstanding the foregoing, in no event shall the distribution by
the Company to its stockholders of stock in a subsidiary be deemed a
Change in Control.
15. Time of Granting Options, Restricted Stock, or Stock Appreciation
Rights
The date of grant of an Award Option shall, for all purposes, be the
date on which the Board makes the determination granting such an award.
Notice of the determination shall be given to each Employee to whom an
Award is so granted within a reasonable time after the date of such
grant.
16. Amendment and Termination of the Plan.
(a) Amendment and Termination. The board may amend or terminate
the Plan from time to time in such respects as the Board may
deem advisable; provided that, the following revisions or
amendments shall require approval of the holders of a majority
of the outstanding shares of the Company entitled to vote:
(i) any increase in the number of Shares subject to the
Plan, other than in connection with an adjustment
under Section 13 of the Plan;
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(ii) any material change in the designation of the class of
employees eligible to be granted Options or Stock
Appreciation Rights; or
(iii) if the Company has a class of equity security
registered under Section 12 of the Exchange Act at the
time of such revision or amendment, any material
increase in the benefits accruing to participants
under the Plan.
(b) Stockholder Approval. If any amendment requiring stockholder
approval under Section 16(a) of the Plan is made subsequent to
the first registration of any class of equity security by the
Company under Section 12 of the Exchange Act, such stockholder
approval shall be solicited as described in Section 19(a) of
the Plan.
(c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Awards already
granted and such Awards shall remain in full force and effect
as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Board and the
Participant or Purchaser which agreement must be in writing
and signed by the Company and the Participant or Purchaser.
17. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall
be sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel
to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of the
failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
18. Award Agreements. Awards shall be evidenced by written award
agreements in such form as the Board shall approve.
19. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve months before
or after the date the Plan is adopted. If such stockholder approval is
obtained at a duly held stockholders' meeting, it may be obtained by
the affirmative vote of the holders of a majority of the outstanding
shares of the Company present or represented and entitled to vote
thereon. If and in the event that the Company registers any class of
any equity security pursuant to Section 12 of the Exchange Act, the
approval of such stockholders of the Company shall be:
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(a) (1) solicited substantially in accordance with Section 14(a)
of the Exchange Act and the rules and regulations promulgated
thereunder, or (2) solicited after the Company has furnished
in writing to the holders entitled to vote substantially the
same information concerning the Plan as that which would be
required by the rules and regulations in effect under Section
14(a) of the Exchange Act at the time such information is
furnished; and
(b) obtained at or prior to the first annual meeting of
stockholders held subsequent to the first registration of any
class of equity securities of the Company under Section 12 of
the Exchange Act.
If such stockholder approval is obtained by written consent,
it must be obtained by the unanimous written consent of all
stockholders of the Company.
20. Stock Appreciation Rights. The Board may, in its discretion, grant
Stock Appreciation Rights to Participants at the same time as such
Participants are awarded Options under the Plan. Such Stock
Appreciation Rights shall be evidenced by agreements in such form as
the Board shall from time to time approve. Such agreements shall
comply with, and be subject to, the following terms and conditions:
(a) The Board may, in its discretion, include in any Stock
Appreciation Rights granted under the Plan a condition that
the Participant shall agree to remain in the employ of, and to
render services to, the Company or any of its Subsidiaries for
a period of time (specified in the agreement) from the date
the Stock Appreciation Rights are granted. No such agreement
shall impose upon the Company or any Parent or Subsidiary,
however, any obligation to employ the Participant for any
period of time.
(b) Each Stock Appreciation Right shall be related to a specific
Option under the Plan, and shall be awarded to a Participant
concurrently with the grant of such option. The number of
Stock Appreciation Rights held by a Participant shall be
reduced by the number of Stock Appreciation Rights exercised
for Shares or cash under the Stock Appreciation Rights
agreement.
(c) A Participant shall exercise Stock Appreciation Rights by
giving written notice of such exercise to the Company. The
date upon which such written notice is received by the Company
shall be the exercise date for the Stock Appreciation Rights.
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(d) Each Stock Appreciation Right shall entitle a Participant to
the following amount of appreciation -- the excess of the fair
market value of a Share on the exercise date over the option
price of the related Option. The total appreciation available
to a Participant from any exercise of Stock Appreciation
Rights shall be equal to the number of Stock Appreciation
Rights being exercised, multiplied by the amount of
appreciation per Right determined under the preceding
sentence.
(e) In the discretion of the Board, the total appreciation
available to a Participant from an exercise of Stock
Appreciation Rights may be paid to the Participant either in
Shares or in cash. If paid in cash, the amount thereof shall
be the amount of appreciation determined under Section 20(d)
above. If paid in Shares, the number of Shares that shall be
issued pursuant to the exercise of Stock Appreciation Rights
shall be determined by dividing the amount of appreciation
determined under Section 20(d) above by the fair market value
of a Share on the exercise date of the Stock Appreciation
Rights; provided, however, that no fractional shares shall be
issued upon the exercise of Stock Appreciation Rights.
(f) A Participant may exercise a Stock Appreciation Right for cash
only in conjunction with the exercise of the Option to which
the Stock Appreciation Right relates. Stock Appreciation
Rights may be exercised only at such times and by such persons
as may exercise Options under the plan. Adjustment to the
number of shares in the Plan and the price per share pursuant
to Section 13 above shall also be made to any Stock
Appreciation Rights held by each Participant. Any
termination, amendment, or revision of the Plan pursuant to
Section 16 above shall be deemed a termination, amendment, or
revision of Stock Appreciation Rights to the same extent.
21. Information To Participants. The Company shall provide to each
Participant such information as may be required by statute or
regulation. The Company may provide further information to
Participants at the sole discretion of the Board of Directors.
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