<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
For Annual and Transition Reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-21841
3DX TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0386601
(State of Incorporation) (IRS Employer Identification Number)
12012 WICKCHESTER, SUITE 250, HOUSTON, TEXAS 77079
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (281) 579-3398
Securities registered pursuant to Section 12(b)of the Exchange Act:
(None)
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $0.01 par value
(TITLE OF CLASS)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers in response
to Item 405 of Regulation S-K is not contained in this form, and no disclosure
will be contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K/A or any amendment to this Form 10-K/A. |X|
As of April 15, 1999, 9,399,353 shares of common stock were
outstanding. The aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the average of the bid
and ask price of such common equity on April 15, 1999 was approximately
$1,595,000.
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TABLE OF CONTENTS
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..................1
ITEM 11. EXECUTIVE COMPENSATION..............................................4
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......9
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................11
SIGNATURES....................................................................12
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
<S> <C> <C> <C>
Jon W. Bayless (1) (3) ........... 59 Co-Chairman of the Board of the Company and
General Partner of Sevin Rosen Funds 1993
C. Eugene Ennis (3)............... 55 Chairman of the Board of the Company and
President and Chief Executive Officer of
Object Reservoir 1992
Ronald P. Nowak .................. 46 President and Chief Executive Officer of the
Company 1998
C.D. Gray (1) (3)................. 64 Petroleum exploration consultant and geologist 1997
Charles E. Edwards (2) (3)........ 73 Petroleum technology consultant and
geophysicist 1995
Douglas C. Williamson (2) (3)..... 48 Managing Director, (Dallas) Venture Capital
Group, BancAmerica Capital Investors 1995
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</TABLE>
(1) MEMBER OF THE HUMAN RESOURCES COMMITTEE.
(2) MEMBER OF THE AUDIT COMMITTEE
(3) MEMBER OF THE CORPORATE GOVERNANCE COMMITTEE.
JON W. BAYLESS. Mr. Bayless has been a director since November 1993
and Vice Chairman of the Board since 1998. Since 1983, Mr. Bayless has been a
general partner of Sevin Rosen Funds, a venture capital investment firm. Mr.
Bayless is also the sole stockholder and director of Jon W. Bayless, Inc., the
general partner of Atlantic Partners L.P., which is the general partner of Citi
Growth Fund L.P., a venture capital investment firm, and serves as a director of
a number of privately held companies. In addition to the Company, Mr. Bayless
currently serves as Chairman of the Board of Directors of both Ciena Corporation
and Shared Resource Exchange, Inc. Shared Resource Exchange, Inc. filed for
reorganization under Chapter 11 of the Federal Bankruptcy Code in August 1996. A
plan of reorganization under Chapter 11 has been approved.
C. EUGENE ENNIS. Mr. Ennis has served as Chairman of the Board since
1998. Mr. Ennis served as the Company's President and Chief Executive Officer
from the Company's inception in December 1992 until June 1998. Since August
1998, Mr. Ennis has been a director of Object Reservoir, a supplier of software
tools for the petroleum industry. Mr. Ennis has been Chief Executive Officer of
Object Reservoir since January 1999. From September 1984 to December 1992, Mr.
Ennis was President, Chief Executive Officer and a director and from October
1990 to December 1992 was also Chairman of the Board of Directors of Landmark
Graphics Corporation ("Landmark"), a provider of interdisciplinary
interpretation tools for the petroleum industry. Mr. Ennis holds a Bachelor of
Science in electrical engineering from the University of Houston and began his
career in 1969 as a design engineer in the Geophysical Products Division of
Texas Instruments where he was employed until 1984.
RONALD P. NOWAK. Mr. Nowak has served as a director since 1998.
Mr. Nowak has served as the Company's Vice President of Exploration from
February through May 1998 and then assumed the role of President and Chief
Executive Officer in June 1998. Prior to joining the Company, Mr. Nowak was
employed by Maxus Energy Corporation in Dallas, Texas from August 1993 to
January 1998, where he served as US manager from 1997. From 1987 to 1993, Mr.
Nowak was employed by Arco Oil & Gas. Prior to 1987, Mr. Nowak worked with Exxon
Company, USA where he acted as an independent geologist working in the onshore
U.S. Gulf Coast region. Mr. Nowak holds a degree in Geology from Central
Michigan University and a Masters of Science degree in Geology from Michigan
State University.
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C.D. GRAY. Mr. Gray has served as a director of the Company since
October 1997. From 1981 until his retirement in 1997, Mr. Gray served as
Executive Vice President for CXY Energy, Inc. in Dallas, Texas. He is currently
an Exploration Consultant to CXY and other clients. Mr. Gray holds a degree in
Geology from the University of Texas at Austin and spent the first 23 years of
his career with Mobil Oil Corporation and its predecessor, Magnolia Petroleum
Company, prior to joining CXY.
CHARLES E. EDWARDS. Mr. Edwards has served as a director of the Company
since August 1995. Since August 1985 to present, Mr. Edwards has acted as a
consultant in petroleum technologies. Prior to August 1985, Mr. Edwards was
employed by Chevron Corp. for a period in excess of 37 years and most recently
served as Chief Geophysicist with responsibility for global exploration
activities. Mr Edwards was a founder in 1987 of ExploiTech, a company
specializing in integrated multi-disciplinary reservoir description studies for
exploration and exploitation that merged with Landmark in 1989. Mr. Edwards has
also served as a director for Digicon Inc. and Landmark.
DOUGLAS C. WILLIAMSON. Mr. Williamson has served as a director to the
Company since July 1995. Mr. Williamson has served for the past nine years as a
Managing Director in the Venture Capital Group in the Dallas, Texas office of
NationsBanc Capital Corporation (now an affiliate of BancAmerica Capital
Investors).
All of the Company's directors are elected at the annual meeting of
stockholders and hold office until their respective successors are elected and
qualified or until their earlier resignation or removal.
BOARD ORGANIZATION AND MEETINGS
During 1998, the Board of Directors held 9 meetings. All directors
attended at least 75% of the total number of meetings of the Board of Directors
and the committees of which he was a member. The Board of Directors currently
has three committees, a Human Resources Committee, an Audit Committee and a
Corporate Governance Committee. The Human Resources Committee consists of Mr.
Bayless and Mr. Gray, each of whom are independent directors. The Human
Resources Committee reviews general policy matters relating to compensation and
benefits of officers and employees of the Company and administers the Stock
Option Plan. The Human Resources Committee held two meetings in 1998. The Audit
Committee, established in October 1996, is responsible for recommending to the
Board of Directors the annual engagement of a firm of independent accountants
and for reviewing with the independent accountants the scope and results of
audits, the internal accounting controls of the Company and audit practices and
professional services rendered to the Company by the independent accountants.
The Audit Committee consists of Mr. Edwards and Mr. Williamson and held one
meeting in 1998. The Corporate Governance Committee was established in June 1997
for the purpose of establishing corporate governance policies for the Company
and identifying and recruiting future board members. The Corporate Governance
Committee consists of all independent directors of the Company. No meetings were
held during 1998.
COMPENSATION OF DIRECTORS
Directors who are not employees are entitled to receive a fee in the
amount of $750 for every meeting of the Board of Directors which such director
attends in person or by telephone and a fee of $500 for each meeting of a
committee of the Board of Directors held separately which such director attends
in person or by telephone. Beginning in 1998, the non-employee directors waived
their right to receive fees for attending meetings. Directors who are employees
of the Company do not receive any additional compensation for their services as
directors. All directors are reimbursed for out-of-pocket expenses incurred in
connection with their service as directors. Under the Stock Option Plan, the
Company may, from time to time, and in the discretion of the Board of Directors,
grant stock options to directors.
In addition, Mr. Edwards and Mr. Gray provide consulting services to
the Company relating to oil and gas exploration. Fees paid to Mr. Edwards and
Mr. Gray during 1998 for these services were $15,400 and $9,500, respectively.
Consulting services are also being provided by Mr. Bayless who is assisting the
Company in obtaining additional financing. No fees were paid to Mr. Bayless for
consulting services rendered to the Company during 1998. In January 1998, as
partial compensation for consulting services, the Company granted to each of Mr.
Edwards, Mr. Gray and Mr. Bayless an option to purchase 20,000 shares of common
stock at an exercise price of $2.875 per share. Fifty percent of the shares
subject to such options will vest on the first anniversary of the date of grant
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and 25 of the shares subject to such options will vest on each of the second and
third anniversaries of the date of grant. These options were cancelled and
reissued on April 20, 1998 at $1.625 per share.
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, Mr. Bayless and Mr. Gray served on the Human Resources
Committee of the Board of Directors of the Company. No member of the Human
Resources Committee has ever served as an officer of the Company.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The following table provides information regarding the executive
officers and significant employees of the Company. The executive officers serve
at the discretion of the Board of Directors.
NAME AGE POSITION
Ronald P. Nowak........... 46 President, Chief Executive Officer
Russell L. Allen ......... 54 Vice President of Finance, Chief
Financial Officer and Secretary
Herbert R. Rohloff III.... 42 Senior Reservoir Engineer
Eric B. Gardner........... 35 Project Leader
Frank C. Sheppard III..... 39 Project Leader
Peter M. Duncan........... 46 Vice President, Chief Geophysicist
and Treasurer
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RONALD P. NOWAK. Mr. Nowak has served as the Company's Vice President
of Exploration from February through May 1998 and then assumed the role of
President and Chief Executive Officer in May 1998. Prior to joining the Company,
Mr. Nowak was employed by Maxus Energy Corporation in Dallas, Texas from August
1993 to January 1998, where he served as US manager from 1997. From 1987 to
1993, Mr. Nowak was employed by Arco Oil & Gas. Prior to 1987, Mr. Nowak worked
with Exxon Company, USA where he acted as an independent geologist working in
the onshore U.S. Gulf Coast region. Mr. Nowak holds a degree in Geology from
Central Michigan University and a Masters of Science degree in Geology from
Michigan State University.
RUSSELL L. ALLEN. Mr. Allen is a full time management advisor to the
Company and in that capacity has served as Vice President of Finance and Chief
Financial Officer since June 1998. Prior to that time, Mr. Allen served various
clients in the capacity of independent management advisor. Mr. Allen holds a
Bachelors and Masters Degree in Accounting from the University of Texas at
Austin and is a Certified Public Accountant.
HERBERT R. ROHLOFF III. Mr. Rohloff has served as the Company's Senior
Reservoir Engineer since joining the Company in January 1995. Prior to joining
the Company, Mr. Rohloff was employed by Amoco Production Company from 1979 to
1993 in various engineering, economic and supervisory positions beginning in
1979 and served most recently as Project Manager-Production New Ventures. Mr.
Rohloff holds a Bachelor of Science in Chemical Engineering from Texas A&M
University. He is a registered professional engineer in the State of Texas.
ERIC B. GARDNER. Mr. Gardner has served as a Senior Explorationist and
Project Leader since joining the Company in September 1994. Mr. Gardner has over
14 years of industry experience and has worked in many geoscience areas,
including production, exploration, seismic technology and research. Mr. Gardner
began his career with Amoco Production Company in 1985 as a technical
geophysicist and served most recently as a staff geophysicist. Mr. Gardner holds
a Bachelor of Science in Engineering Physics from Colorado School of Mines.
FRANK C. SHEPPARD III. Mr. Sheppard joined the Company as a Senior
Explorationist and Project Leader in October 1997. Prior to joining the Company,
Mr. Sheppard was employed by Amoco Production Company where he served since 1985
in a variety of exploration and geophysical roles throughout the Gulf of Mexico
Basin. Most recently, Mr. Sheppard managed numerous 3-D seismic exploration and
production programs for Amoco, and previously served as a 3-D imaging expert in
Amoco's subsalt exploration program. Mr. Sheppard holds a Bachelor of Science in
Earth Sciences from the University of New Orleans.
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PETER M. DUNCAN. Dr. Duncan served as Vice President of Technology and
Treasurer for the Company since its inception until February 1999, and as Chief
Geophysicist since February 1998. Prior to joining the Company, Dr. Duncan was
employed by Landmark Concurrent Solutions Inc. as Vice President from July 1991
until December 1992. Dr. Duncan terminated his employment with the Company on
March 1, 1999.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Commission and the Nasdaq National
Market. Officers, directors and greater than 10% stockholders are required by
the regulations of the Commission to furnish the Company with copies of all
Section 16(a) reports such persons file. Based solely on a review of copies of
such reports received by it and written representation from certain reporting
persons that no Forms 5 were required for those persons, the Company believes
that during the year ended December 31, 1998 all filing requirements applicable
to its officers, directors and greater than 10% stockholders were complied with.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information concerning
compensation awarded, earned or paid for services rendered in all capacities by
the Company's Chief Executive Officer and each of the Company's three other most
highly compensated executive officers (the "Named Executive Officers") during
the past three fiscal years. The table also identifies the principal capacity in
which each of the Named Executive Officers served the Company during 1998.
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<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
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Restricted Securities All Other
Stock Underlying Compensation
Name and Principal Position Year Salary ($) Bonus ($) Awards ($) Options (#) ($)
- --------------------------- ---- ------- --------- ---------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Ronald P. Nowak 1998 $148,177 - 98,438 150,000 $ -
President and Chief 1997 - - - - -
Executive Officer 1996 - - - - -
C. Eugene Ennis 1998 143,118 - - 100,000 (a) -
President, Chief Executive 1997 171,875 - - -
Officer (b) and Chairman 1996 150,000 - - - -
of the Board
Russell L. Allen 1998 - - - - 229,800 (c)
Vice President, Chief 1997 - - - - -
Financial Officer, Secretary 1996 - - - - -
Peter M. Duncan (d) 1998 130,289 - - 100,000 (a) -
Vice President, Chief 1997 126,670 - - -
Geophysicist, Treasurer 1996 103,920 - - - -
Joseph Schuchardt III (d) 1998 115,087 - - 10,000 (a) -
Vice President of 1997 108,125 27,000 - -
Business Development 1996 95,000 11,875 - - -
</TABLE>
(a) Issued in 1997 and canceled and reissued in 1998.
(b) Mr. Ennis served as President and Chief Executive Officer until May 1998.
(c) Mr. Allen is an independent management advisor that has served as the
Company's Vice President of Finance and Chief Financial Officer since June
1998. Mr. Allen's compensation is based on hours worked and is paid 60% in
common stock of the Company at the price in effect when services are
rendered and 40% in cash. Of the amount reported above, $137,880 is payable
in common stock (225,080 shares) to be issued in 1999.
(d) Mr. Duncan and Mr. Schuchardt terminated their employment with the Company
and resigned their positions as executive officers on March 1, 1999 and
October 16, 1998, respectively.
CASH BONUS PLAN
In 1997, the Company adopted the 1997 Incentive Compensation Plan (the
"Bonus Plan") which provides for the payment of annual cash bonuses, in an
amount up to 40% of the participant's base salary, if certain pre-established
Company-based performance criteria are satisfied. All full-time employees of the
Company are eligible to participate in the Bonus Plan if the Company achieves at
least 80% of its targeted performance criteria, with the exception of the Chief
Executive Officer whose bonus compensation is determined solely at the
discretion of the Board of Directors. The bonuses are prorated based on the
percentage of the targeted performance criteria achieved. The 1997 bonus for Mr.
Schuchardt was paid pursuant to the Bonus Plan upon partial satisfaction of
performance targets. The bonus plan was not renewed in 1998 and no bonus was
paid.
1998 STOCK OPTION GRANTS
The following table sets forth certain information regarding options on
the Company's common stock which were granted to Named Executive Officers in
1998:
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<TABLE>
<CAPTION>
INDIVIDUAL GRANTS DURING 1998(a) POTENTIAL VALUE (b)
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NUMBER OF % OF TOTAL REALIZABLE AT ASSUMED
SECURITIES OPTION ANNUAL RATES OF STOCK
UNDERLYING GRANTS TO EXERCISE/ PRICE APPRECIATION FOR
OPTIONS EMPLOYEES BASE PRICE EXPIRATION OPTION TERM
GRANTED IN 1998 PER SHARE DATE 5% 10%
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<S> <C> <C> <C> <C> <C> <C>
Ronald L. Nowak ....... 150,000 10.1% $1.969 03/05/2008 $185,744 $470,700
</TABLE>
(a) The exercise price of options is the market price of the Company's common
stock on the date of grant. The options vest at the rate of 25% per year
over four years (annually for the first two years and monthly during the
last two years). Stock options are eligible for accelerated vesting upon a
change of control of the Company.
(b) These columns show the gains option holders could realize if the Company's
common stock appreciates at annual rates of 5% and 10%, respectively. These
growth rates are arbitrary assumptions specified by the Commission and do
not represent the Company's predictions of future stock price performance.
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth information regarding the number of
option shares exercised during 1998 and the number and year-end value of
unexercised options held at December 31, 1998, by each of the Named Executive
Officers.
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES IN FISCAL 1998
AND FISCAL 1998 YEAR-END OPTION VALUES
- -------------------------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES VALUE UNEXERCISED OPTIONS AT "IN-THE-MONEY" OPTIONS AT
NAME ACQUIRED ON REALIZED ON DECEMBER 31, 1998 DECEMBER 31, 1998
EXERCISED (#) EXERCISE ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (1)
<S> <C> <C> <C> <C>
Ronald L. Nowak ........ - $ - - 150,000 $ - $ -
C. Eugene Ennis......... - - 20,144 100,000 3,042 -
Peter M. Duncan......... - - 20,144 100,000 3,042 -
Joseph Schuchardt III .. 166,381 87,483 - - - -
</TABLE>
(1) Options are "in-the-money" if the fair market value of the underlying
securities exceeds the exercise price of the options. The amounts set forth
represent the difference between the exercise price of the options and
$0.34, the closing price for the Common Stock on December 31, 1998 on the
Nasdaq National Market, multiplied by the applicable number of options.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS.
In March 1998, the Company entered into a two-year employment agreement
(the "Employment Agreement") with Mr. Nowak, pursuant to which Mr. Nowak was
employed as the Company's Vice President of Exploration. Mr. Nowak became
President and Chief Executive OFficer in May 1998. Pursuant to the Employment
Agreement, Mr. Nowak is entitled to annual compensation in the amount of
$150,000, and was granted an option to purchase 150,000 shares of the Company's
common stock. Additionally, in the event Mr. Nowak is terminated by the Company,
without cause, before the expiration of the term of the Employment Agreement, he
is entitled to receive from the Company his annual salary compensation for the
remainder of the two year term.
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Also in March 1998, the Company entered into a Restricted Stock Award
Agreement with Mr. Nowak (the "Restricted Stock Award Agreement"), pursuant to
which Mr. Nowak was granted 50,000 shares of the Company's common stock (the
"Restricted Stock"), subject to certain restrictions (the "Restricted Stock
Award"). Mr. Nowak's right to the Restricted Stock vests on March 6, 2000, so
long as he is employed by the Company on a full-time basis on that date.
Furthermore, Mr. Nowak becomes automatically vested in the Restricted Stock upon
a transfer of control of the Company, so long as Mr. Nowak is actively employed
by the Company as of the date such transfer of control occurs.
REPORT ON REPRICING OF OPTIONS
It was determined by the Human Resource Committee during 1998 that the
options held by directors, executive officers and employees no longer
represented an incentive, as the market price of the stock had dropped below the
exercise price of the options. Therefore, it was determined that the options
should be repriced in line with the current market value.
Members of the Human Resources Committee: Jon W. Bayless
C.D. Gray
<TABLE>
<CAPTION>
TEN-YEAR OPTION REPRICINGS
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LENGTH OF
ORIGINAL
NUMBER OF MARKET OPTION
SECURITIES PRICE OF EXERCISE TERM
UNDERLYING STOCK AT PRICE AT NEW REMAINING
OPTIONS TIME OF TIME OF EXERCISE AT DATE OF
DATE OF REPRICED REPRICING REPRICING PRICE REPRICING
NAME REPRICING (#) ($) ($) ($) (MONTHS)
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<S> <C> <C> <C> <C> <C> <C>
Ronald L. Nowak
President and Chief
Executive Officer 04/20/98 150,000 $1.625 $1.969 $1.625 119
C. Eugene Ennis
Chairman of the Board 04/20/98 100,000 $1.625 $11.000 $1.625 111
Peter M. Duncan
Vice-President, Chief
Geophysicist, Treasurer 04/20/98 100,000 $1.625 $11.000 $1.625 111
Joseph Schuchardt III
Vice-President of
Business Development 04/20/98 10,000 $1.625 $11.875 $1.625 106
</TABLE>
In January 1999, the Human Resource Committee decided to reprice, at $0.3125,
the currently outstanding options dated April 20, 1998.
STOCK OPTION PLAN
In January 1994, the Company adopted the Stock Option Plan under which
"non-qualified" stock options ("NQSOs") to acquire shares of Common Stock may be
granted to directors of and consultants to the Company and incentive stock
options ("ISOs") to acquire shares of Common Stock may be granted to employees
and directors who are also employees of the Company.
Currently, the Stock Option Plan provides for the issuance of up to a
maximum of 2,004,937 shares of Common Stock and is administered by the Human
Resources Committee. Under the Stock Option Plan, the option price of any ISO
may not be less than the fair market value of a share of Common Stock on the
date on which the option is granted. The option price of an NQSO may be less
than the fair market value on the date the NQSO is granted if the Human
Resources Committee so determines, but may not in any event be less than 85% of
such fair market value. An ISO may not be granted to a "ten percent stockholder"
(as such term is defined in Section 422A of the Internal Revenue Code of 1986,
as amended) unless the exercise price is at least 110% of the fair market value
of
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the Common Stock at the time of grant and the option must be exercised within
five years. Options granted pursuant to the Stock Option Plan are evidenced by a
written agreement executed by the Company and the grantee, containing the terms,
provisions and conditions of the grant. Stock options may not be assigned or
transferred during the lifetime of the holder except as may be required by law.
The maximum term of each stock option is ten years from the date of grant.
For options to qualify as ISOs, the aggregate fair market value,
determined on the date of grant, of the shares with respect to which the ISOs
are exercisable for the first time by the grantee during any calendar year may
not exceed $100,000. Payment by option holders upon exercise of an option may be
made (i) in cash, (ii) by tender to the Company of shares of the Company's stock
owned by the optionee having a fair market value, as determined by the Human
Resources Committee (but without regard to any restrictions on transferability
applicable to such stock by reason of federal or state securities laws or
agreements with an underwriter for the Company), not less than the exercise
price, (iii) by delivery of a promissory note made by the optionee in a form
approved by the Company, (iv) by the assignment of the proceeds of a sale of
some or all of the shares being acquired upon the exercise of the option, (v) by
the withholding of shares being acquired upon exercise of the option bearing a
fair market value, as determined by the Human Resources Committee (but without
regard to any restrictions on transferability applicable to such stock by reason
of federal or state securities laws or agreements with an underwriter for the
Company), not less than the exercise price, or (vi) by any combination thereof.
The Human Resources Committee may at any time or from time to time grant options
which do not permit all of the foregoing forms of consideration to be used in
payment of the exercise price and/or which otherwise restrict the use of one or
more forms of consideration. In addition, the Human Resources Committee, in its
sole discretion, may authorize the surrender by an optionee of all or part of an
unexercised stock option and authorize a payment in consideration thereof of an
amount equal to the difference between the aggregate fair market value of the
Common Stock subject to such stock option and the aggregate option price of such
Common Stock. In the Human Resources Committee's discretion, such payment may be
made in cash, shares of Common Stock with a fair market value on the date of
surrender equal to the payment amount or some combination thereof.
The Stock Option Plan provides that outstanding options vest in their
entirety and become exercisable in the event of certain mergers, consolidations
or sales of all or substantially all of the assets of the Company, unless the
successor corporation assumes such options. As of December 31, 1998, options to
purchase 826,404 shares of Common Stock were outstanding under the Stock Option
Plan at exercise prices ranging from $0.19 to $1.625 per share, with 764,421
option shares available for grant.
REPORT OF THE HUMAN RESOURCES COMMITTEE OF THE BOARD OF DIRECTORS
The Human Resources Committee of the Board of Directors oversees the
compensation policies applicable to all employees of the Company, including its
executive officers. The Human Resources Committee also has primary
responsibility for administering stock-based compensation plans of the Company.
The Company seeks to provide a compensation program which will allow it
to attract and retain highly qualified and motivated employees. Its compensation
program is also designed to enhance stockholder value by providing significant
incentives for employees to achieve the Company's goals. The Company is striving
to promote an entrepreneurial environment which encourages all employees to
focus on the continuing long-term growth of the Company. Specifically, the
compensation plan includes the following components:
BASE SALARY. It is the goal of the Human Resources Committee that the
primary element of compensation result from the achievement of performance-based
objectives which contribute in a meaningful way to long-term stockholder value.
However, the Company must also provide a base salary and employee benefits which
are competitive with compensation offered by other oil and gas exploration
companies similar to the Company. The Human Resources Committee expects that
base salary will not exceed the average paid by the Company's peers.
STOCK OPTION PLAN. The Stock Option Plan is a broad-based stock option
plan covering all employees which is designed to motivate and retain employees
and allow all employees to benefit from performance which enhances long-term
stockholder value. All stock options granted to employees have exercise prices
which equal the fair market value of the Common Stock on the date of grant and
vest ratably over a period of four years. Accordingly, the options provide a
significant incentive for superior long-term performance and continued retention
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of employees by the Company. For stock options awarded to executive officers
during 1998, refer to the section "Stock Option Grants".
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
As discussed above, the Company's compensation philosophy for all
employees, including the Chief Executive Officer, is to provide a competitive
base salary and incentive compensation based on the Company's performance. Mr.
Nowak did not receive a bonus for 1998. The bonus for the Chief Executive
Officer is discretionary under the Bonus Plan and reflects factors in addition
to the objective performance measures in the Bonus Plan.
Members of the Human Resources Committee: Jon W. Bayless
C.D. Gray
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Common Stock with the cumulative total return of (i) the Media General Industry
Group Index No. 123, "Oil and Gas Drilling/Exploration" ("MG Group Index") and
(ii) the NASDAQ Market Value Index from the first day of trading of the Common
Stock, December 20, 1996 through December 31, 1998. The graph assumes that the
value of an investment in the Common Stock and each index was $100 at December
20, 1996 and that any dividends were reinvested. Numerical values used for the
six month period end plot points in the graph are set forth in the table under
the graph.
Comparison of Cumulative Total Return for 3DX Technologies Inc.,
NASDAQ Market Index and MG Group Index
[GRAPH]
<TABLE>
<CAPTION>
12/20/96 12/31/96 06/30/97 12/31/97 06/30/98 12/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
3DX Technologies Inc. 100.00 100.00 90.91 36.36 14.77 3.13
NASDAQ Market Index 100.00 100.00 112.29 122.67 147.48 172.79
MG Group Index 100.00 100.00 119.74 147.23 110.82 59.83
</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of April 15, 1999, there were 9,399,353 shares of Common Stock
outstanding and entitled to vote. The following table sets forth certain
information regarding the beneficial ownership of Common Stock, as of April 15,
1999, by (i) each person known to the Company to own beneficially 5% or more of
the Company's outstanding shares of Common Stock, (ii) each director of the
Company, (iii) each of the Named Executive Officers, as defined in "Executive
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<PAGE>
Compensation," and (iv) all executive officers and directors of the Company as a
group. The information with respect to beneficial ownership is based on the most
recent filings with the Securities and Exchange Commission which have been
furnished to the Company by the respective stockholders of the Company.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-------------------
NAME AND ADDRESS (1) NUMBER OF SHARES(2) PERCENT
- -------------------- ---------------- -------
<S> <C> <C>
Ronald P. Nowak .............................................. 50,000 (3) *
Jon W. Bayless................................................ 754,195 (4) 8.0%
Charles E. Edwards............................................ 25,267 (5) *
C. Eugene Ennis............................................... 289,411 3.1%
C.D. Gray..................................................... - *
Douglas C. Williamson......................................... 727,073 (6) 7.7%
Russell L. Allen ............................................. - *
Peter M. Duncan .............................................. 375,592 4.0%
Joseph Schuchardt III ........................................ 207,278 2.2%
All directors and executive officers as a group (9 persons)... 2,428,816 25.8%
CWS Limited-Liability Company ................................ 1,172,270 12.5%
One Rockefeller Plaza, 31st Floor
New York, NY 11002
Citi Growth Fund L.P.......................................... 727,477 7.7%
c/o CitiGrowth Funds, Sycamore Partners
989 Lenox Drive
Lawrenceville, New Jersey 08648
NationsBanc Capital Corporation............................... 721,903 7.7%
(Affiliate of BancAmerica Capital Investors)
901 Main Street
Dallas, Texas 75202
</TABLE>
- --------
* Represents beneficial ownership of less than 1% of the outstanding
shares of Common Stock.
(1) Unless otherwise indicated, the address of each stockholder identified
in the table is at the principal executive offices of the Company at
12012 Wickchester, Houston, Texas 77079.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission"). In computing the
number of shares of Common Stock beneficially owned by a person and the
percentage ownership of that person, shares of Common Stock subject to
options and warrants held by that person that are currently exercisable
or exercisable within 60 days of April 15, 1998 are deemed outstanding.
Such shares, however, are not deemed outstanding for the purposes of
computing the percentage ownership of any other person. Shares of
Common Stock issuable upon exercise of stock options granted pursuant
to the Company's 1994 Stock Option Plan (the "Stock Option Plan"),
which are currently exercisable or exercisable within 60 days of April
15, 1999, include 20,144 shares for Mr. Ennis, 5,170 shares for Mr.
Bayless, 5,170 shares for Mr. Edwards, 5,170 shares for Mr. Williamson,
and 35,654 shares for all directors and executive officers as a group.
Except as indicated in the footnotes hereto, each stockholder named in
the table has sole voting and investment power with respect to the
shares set forth beside such stockholder's name.
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<PAGE>
(3) Subject to the Restricted Stock Award discussed in Item 11, "Employment
Contracts, Termination of Employment and Change of Control
Arrangements."
(4) Includes 727,477 shares beneficially owned by Citi Growth Fund L.P. Mr.
Bayless is the sole stockholder and director of Jon W. Bayless Inc.,
the general partner of Atlantic Partners L.P., the general partner of
Citi Growth Fund L.P.
(5) Includes 1,200 shares of Common Stock owned by Mr. Edwards' spouse.
(6) Includes 721,903 shares of Common Stock held by NationsBanc Capital
Corporation (an affiliate of Bank of America Capital Investors). Mr.
Williamson is a Managing Director in the Venture Capital Group of
NationsBanc Capital Corporation (an affiliate of Bank of America
Capital Investors).
TEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
3DX TECHNOLOGIES INC.
By: /s/ Russell L. Allen
----------------------------------------
Vice President, Finance, Chief Financial
Officer and Secretary
Know All Men By These Presents, that each individual whose signature
appears below hereby constitutes and appoints Ronald P. Nowak and Russell L.
Allen and each of them individually, his true and lawful agent, proxy and
attorney-in-fact, with full power of substitution and resubstitution, for him in
his name, place and stead, in any and all capacities, to (i) act on, sign and
file with the Securities and Exchange Commission any and all amendments to this
report together with all schedules and exhibits thereto, (ii) act on, sign and
file with the Securities and Exchange Commission any exhibits to this report,
(iii) act on, sign and file such certificates, instruments, agreements and other
documents as may be necessary or appropriate in connection therewith and (iv)
take any and all actions which may be necessary or appropriate in connection
therewith, granting unto such agents, proxies and attorneys-in-fact and each of
them individually, full power and authority to do and perform each and every act
and thing necessary or appropriate to be done, as fully for all intents and
purposes as he might or could do in person, hereby approving, ratifying and
confirming all that such agents, proxies and attorneys-in-fact, any of them or
any of his or their substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
DATE SIGNATURE TITLE(S)
April 30, 1999 /s/ Ronald P. Nowak Pesident and Chief Executive Officer
--------------------- (Principal Executive Officer)
Ronald P. Nowak
April 30, 1999 /s/ Russell L. Allen Vice President, Finance and Chief
----------------------- Financial Officer
Russell L. Allen (Principal Financial and Accounting
Officer)
Director
-----------------------
Jon W. Bayless
Director
------------------------
Charles E. Edwards
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<PAGE>
April 30, 1999 /s/ C. Eugene Ennis Chairman of the Board
------------------------
C. Eugene Ennis
April 30, 1999 /s/ C.D. Gray Director
------------------------
C.D. Gray
April 27, 1999 /s/ Douglas C. Williamson Director
-------------------------
Douglas C. Williamson
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