SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, for use of
/ / Definitive Proxy Statement the Commission only (as
/ / Definitive Additional Materials permitted by Rule
/ / Soliciting Material Pursuant to 14a-6 (e)(2)
Rule 14a-11 (c) or Rule 14a-12
TGC INDUSTRIES, INC.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
/X/ No fee required.
// Fee computed on table below per Exchange Act Rules 14a-6 (i) (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.
TGC INDUSTRIES, INC.
1304 Summit Avenue, Suite 2
Plano, Texas 75074
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held March 23, 2000
To the Shareholders of
TGC INDUSTRIES, INC.
A special meeting of the shareholders of TGC Industries, Inc. (the
"Company") will be held at 1304 Summit Avenue, Suite 2, Plano, Texas on March
23, 2000, at 10:00 A.M., Central Standard Time, for the following purposes:
1. To elect two (2) new directors to serve until the next annual meeting
of shareholders and until their respective successors shall be
elected and qualified;
2. To consent, by vote of the holders of the Company's outstanding
Preferred Stock, voting as a class, to a new series of Senior
Convertible Preferred Stock;
3. To approve the Company's 1999 Stock Option Plan; and
4. To transact such other business as may properly come before the
meeting and any adjournment thereof.
Information regarding matters to be acted upon at this meeting is
contained in the accompanying Proxy Statement. Only shareholders of record at
the close of business on February 10, 2000, are entitled to notice of and to
vote at the meeting and any adjournment thereof.
All shareholders are cordially invited to attend the meeting. Whether or
not you plan to attend, please complete, sign, and return promptly the
enclosed proxy in the accompanying addressed envelope for which postage is
prepaid. You may revoke the proxy at any time before the commencement of the
meeting.
By Order of the Board of Directors:
Allen T. McInnes
Secretary
Plano, Texas
February 22, 2000
IMPORTANT
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING REGARDLESS
OF THE NUMBER OF SHARES YOU HOLD. PLEASE COMPLETE, SIGN, AND RETURN PROMPTLY
THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE, WHETHER OR NOT YOU INTEND TO
BE PRESENT AT THE MEETING.
TGC INDUSTRIES, INC.
1304 Summit Avenue, Suite 2
Plano, Texas 75074
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS -- March 23, 2000
SOLICITATION OF PROXIES
This Proxy Statement is furnished to shareholders in connection with the
solicitation of proxies by the management of TGC Industries, Inc. (the
"Company" or "TGC") on behalf of the Board of Directors of the Company for a
special meeting of shareholders to be held at 1304 Summit Avenue, Suite 2,
Plano, Texas on March 23, 2000, and at any adjournment thereof, for the
purpose of submitting to a vote of the stockholders the actions and proposals
set forth in this Proxy Statement. The Notice of Meeting, the form of Proxy,
and this Proxy Statement are being mailed to the Company's shareholders on or
about February 22, 2000.
Although solicitation (the total expense of which will be borne by the
Company) is to be made primarily through the mail, the Company's officers
and/or employees and those of its transfer agent may solicit proxies by
telephone, telegram, or personal contact, but in such event no additional
compensation will be paid by the Company for such solicitation. Further,
brokerage firms, fiduciaries, and others may be requested to forward
solicitation material regarding the meeting to beneficial owners of the
Company's Common and Preferred Stock, and in such event the Company will
reimburse them for all accountable costs so incurred.
RECORD DATE AND VOTING SECURITIES
The Board of Directors of the Company has fixed the close of business on
February 10, 2000 (the "Record Date") as the date for determination of
shareholders entitled to notice of and to vote at the Special Meeting. As of
the Record Date, there were 2,264,624 shares of the Company's Common Stock
outstanding and 1,111,250 shares of the Company's Preferred Stock outstanding.
The Company's Restated Articles of Incorporation authorize 25,000,000
shares of Common Stock with a par value of $.30 per share and 4,000,000 shares
of Preferred Stock with a par value of $1.00 per share. In voting on all
matters expected to come before the meeting, a shareholder will be entitled to
one vote, in person or by proxy, for each share of Common Stock and Preferred
Stock held in his or her name on the Record Date. The Company's Restated
Articles of Incorporation prohibit cumulative voting.
ACTION TO BE TAKEN AND VOTE REQUIRED
Action will be taken at the Special Meeting to (1) elect two (2) new
members to the Board of Directors, (2) consent, by vote of the Company's
outstanding Preferred Stock, to a new series of Senior Convertible Preferred
Stock, and (3) approve the Company's 1999 Stock Option Plan (see "1999 Stock
Option Plan"). The proxy will be voted in accordance with the directions
specified thereon, and otherwise in accordance with the judgment of the
persons designated as proxies. Any proxy on which no directions are specified
will be voted for the election of directors named herein, and otherwise in
accordance with the judgment of the persons designated as proxies. Any person
executing the enclosed proxy may nevertheless revoke it at any time prior to
the actual voting thereof by filing with the Secretary of the Company either a
written instrument expressly revoking it or a duly executed proxy bearing a
later date. Furthermore, such person may nevertheless elect to attend the
meeting and vote in person, in which event, the proxy will be suspended. The
election of the two (2) new members to the Board of Directors and the approval
of the 1999 Stock Option Plan requires the affirmative vote of the holders of
a majority of the outstanding shares of the Common Stock and Preferred Stock
present, in person or by proxy, at the Special Meeting. The consent to the
creation of a new series of Senior Convertible Preferred Stock requires the
affirmative vote of the holders of two-thirds (2/3) of the issued and
outstanding shares of Preferred Stock entitled to vote thereon, voting as a
class.
ELECTION OF DIRECTORS
As previously reported, on December 13, 1999, WEDGE Energy Services,
L.L.C., a subsidiary of WEDGE Group, Inc. ("WEDGE"), a diversified Houston
firm with interests in oil and gas services, purchased a $2,500,000 8 1/2%
convertible subordinated debenture (the "Debenture") of the Company. Proceeds
of the financing, together with other available funds, are being utilized for
working capital and an expanded capital expenditure program. The Debenture,
at WEDGE's option, can be converted into either convertible preferred stock or
common stock at a price of $1.15 per share. Certain terms of the WEDGE
financing are set forth below under the heading "Certain Terms of the WEDGE
Financing."
The Debenture Purchase Agreement provides that so long as (a) the
Debenture remains outstanding or (b) WEDGE owns shares of capital stock
representing 10% of the capital stock of TGC on a fully diluted basis, the
Board of Directors of TGC will support and place on the ballot at each
election of directors two (2) nominees to the Board of Directors (the "WEDGE
Board Nominees"). Further, TGC has agreed (i) to expand its Board of
Directors to seven (7) directors by creating two (2) new positions to be
filled by the WEDGE Board Nominees and (ii) that its Board of Directors will
not contain more than seven (7) members. Pursuant to the Bylaws of the
Company, the Board of Directors has created such two new positions on its
Board of Directors, and WEDGE has selected William H. White, President of
WEDGE, and Pasquale V. Scaturro as its nominees to fill such positions.
Messrs. White and Scaturro will serve until the next annual meeting of
shareholders and until their successors are duly elected and have qualified.
The business experience of Messrs. White and Scaturro is set forth below:
Name, Age, and
Business Experience Positions with Company
William H. White, 46 None
President and Chief Executive
Officer of WEDGE Group, Inc.,
a diversified firm with
interests in oil and gas
services, since 1997; Founder
and Chairman of the Board of
Frontera Resources Corporation
and its predecessor, a
privately held international
energy company, since 1995,
also served as President and
Chief Executive Officer of
Frontera from 1995 to 1996;
Deputy Secretary and Chief
Operating Officer of the U.S.
Department of Energy from 1993
to 1995; Director of USEC
Inc., world's leading supplier
of enriched uranium fuel for
commercial nuclear power
plants since July 1998; and
Director of Edge Petroleum
Corporation, an oil and gas
exploration, development, and
production company, since May
1998.
Pasquale V. Scaturro, 46 None
Vice President and Chief
Geophysicist of Destiny
Energy, since 1997; Co-Founder
of Tricon Geophysics, Inc., a
full service geophysical data
processing company in 1995;
President of Seismic
Specialists, Inc. and US
Seismic, companies involved in
the acquisition, management,
and marketing on non-exclusive
seismic surveys from 1986 to
1995.
As a result of WEDGE's right to nominate two (2) directors, certain TGC
shareholders have entered into a Voting Agreement (as defined below), the
purpose of which is to contractually bind those shareholders to vote their
shares at each directors' election in favor of the WEDGE Board Nominees.
WEDGE, TGC and certain shareholders of TGC, including Allen McInnes, Wayne
Whitener, Herbert Gardner, William Barrett and Edward Flynn (collectively,
the "Shareholders"), have entered into a Voting Agreement (the "Voting
Agreement") in connection with the purchase of the Debenture by WEDGE.
Under the terms of the Voting Agreement, the Shareholders have agreed to
vote their shares in favor of the WEDGE Board Nominees. The Voting
Agreement terminates on the first to occur of (i) WEDGE no longer owning at
least 10% of the total issued and outstanding shares of capital stock of TGC
on a fully diluted basis, (ii) redemption of the Debenture by TGC, or (iii)
December 10, 2009. The Shareholders hold in the aggregate shares of capital
stock of TGC representing 38.7% of the shares of capital stock of TGC
currently outstanding and entitled to vote.
The Company's Board of Directors recommends that you vote FOR Messrs.
White and Scaturro for election to the Board of Directors.
CONSENT TO NEW SERIES OF SENIOR CONVERTIBLE PREFERRED STOCK
The Debenture Purchase Agreement grants WEDGE a right of conversion
with respect to the Debenture. As more specifically described in both the
Debenture Purchase Agreement and the Debenture Agreement, the unpaid
principal amount of the Debenture or any portion thereof may, at the
election of WEDGE, be converted into (a) shares of Common Stock at an
initial conversion price per share of Common Stock of $1.15 or (b)(i) a new
preferred stock designated as 8-1/2% Senior Convertible Preferred Stock (the
"Senior Preferred Stock"), at an initial conversion price per share of such
Senior Preferred Stock of $1.15, but only if 66-2/3% of the holders of TGC's
8% Series C Convertible Exchangeable Preferred Stock, par value $1.00 per
share (the "Series C Preferred Stock"), consent to such conversion (the
"Consent") in accordance with the terms of the statement of the
designations, rights and preferences for the Series C Preferred Stock or
(ii) shares of 8% Series D Convertible Preferred Stock (the "Series D
Preferred Stock") with terms which are pari passu with TGC's Series C
Preferred Stock, or any outstanding series of preferred stock of TGC with
rights and terms superior thereto, at an initial conversion price per share
of Series D Preferred Stock of $1.15, if the necessary Consent is not
obtained. The initial conversion price is subject to adjustment from time
to time in accordance with the terms of the Debenture Agreement. Under the
terms of the Debenture Purchase Agreement, TGC has agreed to use its best
efforts to obtain the Consent thereby granting TGC the right to create the
Senior Preferred Stock.
If the Consent is obtained, then TGC will cause to be filed those
designations, rights and preferences in the form substantially similar to
Exhibit A attached hereto(the "Terms of the Senior Preferred Stock") and
WEDGE will automatically convert the Debenture into Senior Preferred Stock,
which action will convert $2,500,000 of debt into equity and materially
improve the capital position of the Company. The Terms of the Senior
Preferred Stock provide that such preferred stock will be senior in rights
to dividends and on liquidation to all classes and series of Stock of TGC,
including the Series C Preferred Stock. Further, holders of the Senior
Preferred Stock will be entitled to receive cumulative cash dividends at a
rate of 8-1/2% per year before any dividend or distribution in cash or other
property (other than dividends payable in stock ranking junior to the Senior
Preferred Stock as to dividends and upon liquidation, dissolution or
winding-up) on any class or series of stock of TGC ranking junior to the
Senior Preferred Stock as to dividends or on liquidation, dissolution or
winding-up is declared or paid or set apart for payment. Dividends on the
Senior Preferred Stock are payable when and as declared by the Board of
Directors of TGC on December 1 and June 1 of each year, beginning June 1,
2000. Notwithstanding the foregoing, dividends in arrears may be declared
and paid at any time. Accrued dividends will not bear interest. Dividends
are payable in cash; provided, however, that for each dividend declared and
payable through December 1, 2000, such dividend payment shall be by payment
in kind by issuance of additional shares of Senior Preferred Stock (the
"Senior Preferred Stock PIK Dividend"). Holders of Senior Preferred Stock
have the option with respect to each dividend payment due and payable after
December 1, 2000 to elect whether such dividend shall be by cash or Senior
Preferred Stock PIK Dividend. Notwithstanding the foregoing, TGC will only
pay the Senior Preferred Stock PIK Dividend if its EBITDA for the six months
ended with the previous quarter is less than 125% of TGC's obligation for
such dividend payment and for all other dividends and interest due and
payable on all other outstanding securities of TGC as of such time. Holders
of Senior Preferred Stock will be entitled to one vote per share of Senior
Preferred Stock held by them. The Senior Preferred Stock will vote with the
Common Stock upon all matters other than those which, by law, the holders of
shares of Senior Preferred Stock have the right to vote as a separate class.
If the Consent is not obtained, then WEDGE has the right to elect to
convert the Debenture into Series D Preferred Stock. If WEDGE makes such an
election, then TGC will, immediately prior to such election by WEDGE, cause
to be filed designations, rights and preferences for the Series D Preferred
Stock as set forth in the Debenture Purchase Agreement (the "Terms of the
Series D Preferred Stock"). The Terms of the Series D Preferred Stock
provide that such preferred stock will have dividend rights and rights on
liquidation which are pari passu with the rights of any outstanding shares
of Series C Preferred Stock. Holders of the Series D Preferred Stock will
be entitled to receive cumulative cash dividends at a rate of 8% per year
before any dividend or distribution in cash or other property (other than
dividends payable in stock ranking junior to the Series D Preferred Stock as
to dividends and upon liquidation, dissolution or winding-up) on any class
or series of stock of TGC ranking junior to the Series D Preferred Stock as
to dividends or on liquidation, dissolution or winding-up is declared or
paid or set apart for payment. Dividends on the Series D Preferred Stock
are payable when and as declared by the Board of Directors of TGC on
December 1 and June 1 of each year, beginning June 1, 2000. Notwithstanding
the foregoing, dividends in arrears may be declared and paid at any time.
Accrued dividends will not bear interest. Dividends are payable in cash;
provided, however, that for each dividend declared and payable through
December 1, 2000, such dividend payment shall be by payment in kind by
issuance of additional shares of Series D Preferred Stock (the "Series D
Preferred Stock PIK Dividend"). Holders of Series D Preferred Stock have
the option with respect to each interest payment due and payable after
December 1, 2000 to elect whether such dividend shall be by cash or Series D
Preferred Stock PIK Dividend. Notwithstanding the foregoing, TGC will only
pay the Series D Preferred Stock PIK Dividend if its EBITDA for the six
months ended with the previous quarter is less than 125% of TGC's obligation
for such dividend payment and for all other dividends and interest due and
payable on all other outstanding securities of TGC as of such time. Holders
of Series D Preferred Stock will be entitled to one vote per share of Series
D Preferred Stock held by them. The Series D Preferred Stock will vote with
the Common Stock upon all matters other than those which, by law, the
holders of shares of Series D Preferred Stock have the right to vote as a
separate class.
Each share of both the Senior Preferred Stock and the Series D
Preferred Stock issued to WEDGE upon conversion of the Debenture shall be
initially convertible into one share of Common Stock, subject to adjustment
as more fully described in the Debenture Agreement. WEDGE has the right to
convert such preferred stock into Common Stock at any time. Notwithstanding
the foregoing, TGC may, at any time after December 1, 2001, redeem any or
all shares of Senior Preferred Stock or Series D Preferred Stock outstanding
at an initial redemption price of $1.75 per share, subject to adjustment.
Certain additional terms of the WEDGE financing are set forth below under
the heading "Certain Terms of the WEDGE Financing."
The Company's Board of Directors recommends that you vote FOR the
consent to the Senior Convertible Preferred Stock. As stated above, if the
consent is obtained, WEDGE will automatically convert the Debenture into
Senior Preferred Stock, which action will convert $2,500,000 of debt into
equity and materially improve the capital position of the Company.
APPROVAL OF 1999 STOCK OPTION PLAN
On December 14, 1999, the Company's Board of Directors approved and
adopted, subject to shareholder approval, the Company's 1999 Stock Option
Plan, a copy of which is attached hereto as Exhibit B (the "1999 Stock
Option Plan"). Shareholders will be asked to approve the 1999 Stock Option
Plan at the Special Meeting to be held March 23, 2000. The following
paragraphs summarize certain provisions of the 1999 Stock Option Plan and
are qualified in their entirety by reference thereto.
The 1999 Stock Option Plan provides for the granting of options
(collectively, the "1999 Options") to purchase shares of the Company's
Common Stock to certain key employees of the Company and/or its affiliates,
and certain individuals who are not employees of the Company or its
affiliates but who from time to time provide substantial advice or other
assistance or services to the Company and/or its affiliates. The 1999 Stock
Option Plan authorizes the granting of options to acquire up to 300,000
shares of Common Stock, subject to certain adjustments described below, to
be outstanding at any time. Subject to such limitations, there is no limit
on the absolute number of awards that may be granted during the life of the
1999 Stock Option Plan. At the present time, there are approximately 15
employees of the Company, including officers and directors of the Company,
who, in management's opinion, would be considered eligible to receive grants
under the 1999 Stock Option Plan, although fewer employees may actually
receive grants. At January 31, 2000, no options were outstanding under the
Plan.
Authority to administer the 1999 Stock Option Plan has been delegated
to a committee (the "Committee") of the Board of Directors. Except as
expressly provided by the 1999 Stock Option Plan, the Committee has the
authority, in its discretion, to award 1999 Options and to determine the
terms and conditions (which need not be identical) of such 1999 Options,
including the persons to whom, and the time or times at which, 1999 Options
will be awarded, the number of 1999 Options to be awarded to each such
person, the exercise price of any such 1999 Options, and the form, terms and
provisions of any agreement pursuant to which such 1999 Options will be
awarded. The 1999 Stock Option Plan also provides that the Committee may be
authorized by the Board of Directors to make cash awards as specified by the
Board of Directors to the holder of a 1999 Option in connection with the
exercise thereof. Subject to the limitation set forth below, the exercise
price of the shares of stock covered by each 1999 Option will be determined
by the Committee on the date of the award.
Unless a Holder's option agreement provides otherwise, the following
provisions will apply to exercises by the Holder of his or her option: No
options may be exercised during the first twelve months following grant.
During the second year following the date of grant, options covering up to
one-third of the shares covered thereby may be exercised, and during the
third year options covering up to two-thirds of such shares may be
exercised. Thereafter, and until the options expire, the optionee may
exercise options covering all of the shares. Persons over sixty-five on the
date of grant may exercise options covering up to one-half of the shares
during the first year and thereafter may exercise all optioned shares.
Subject to the limitations just described, options may be exercised as to
all or any part of the shares covered thereby on one or more occasions, but,
as a general rule, options cannot be exercised as to less than one hundred
shares at any one time.
The exercise price of the shares of stock covered by each incentive
stock option ("ISO"), within the meaning of Sec. 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), will not be less than the fair market
value of stock on the date of award of such ISO, except that an ISO may not
be awarded to any person who owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Company, unless the exercise price is at least one hundred ten percent
(110%) of the fair market value of the stock at the time the ISO is awarded,
and the ISO is not exercisable after the expiration of five years from the
date it is awarded.
The exercise price of the shares of Common Stock covered by each 1999
Option that is not an ISO ("NSO") will not be less than fifty percent (50%)
of the fair market value of the stock on the date of award.
Payment for Common Stock issued upon the exercise of a 1999 Option may
be made in cash or, with the consent of the Committee, in whole shares of
Common Stock owned by the holder of the 1999 Option for at least six months
prior to the date of exercise or, with the consent of the Committee, partly
in cash and partly in such shares of Common Stock. If payment is made, in
whole or in part, with previously owned shares of Common Stock, the
Committee may issue to such holder a new 1999 Option for a number of shares
equal to the number of shares delivered by such holder to pay the exercise
price of the previous 1999 Option having an exercise price equal to not less
than one hundred percent (100%) of the fair market value of the Common Stock
on the date of such exercise. A 1999 Option so issued will not be
exercisable until the later of the date specified in an individual option
agreement or six months after the date of grant.
In addition, the 1999 Stock Option Plan provides two methods for the
cashless exercise of options. Under the Sale Method, with the consent of
the Committee, payment in full of the exercise price of the option may be
made through the Company's receipt of a copy of instructions to a broker
directing such broker to sell the stock for which the option is being
exercised, to remit to the Company an amount equal to the aggregate exercise
price of such option, with balance being remitted to the holder. Under the
Net Method, with consent of the Committee, payment in full of the exercise
price of the option may be made based on written instructions received from
the holder, by Company's issuance to the holder of that number of shares of
stock having a fair market value equal to only the "profit portion" of his,
her, or its option (i.e. the excess of the then fair market value of the
stock over the holder's exercise price).
The duration of each 1999 Option will be for such period as the
Committee determines at the time of award, but not for more than ten years
from the date of the award in the case of an ISO, and in either case may be
exercised in whole or in part at any time or only after a period of time or
in installments, as determined by the Committee at the time of award, except
that after the date of award, the Committee may accelerate the time or times
at which a 1999 Option may be exercised.
In the event of any change in the number of outstanding shares of
Common Stock effected without receipt of consideration therefor by the
Company, by reason of a stock dividend, or split, combination, exchange of
shares or other recapitalization, merger, or otherwise, in which the Company
is the surviving corporation, the aggregate number and class of reserved
shares, the number and the class of shares subject to each outstanding 1999
Option, and the exercise price of each outstanding 1999 Option shall be
automatically adjusted accurately and equitably to reflect the effect
thereon of such change. Unless a holder's option agreement provides
otherwise, a dissolution or liquidation of the Company, certain mergers or
consolidations in which the Company is not the surviving corporation, or
certain transactions in which another corporation becomes the owner of fifty
percent (50%) or more of the total combined voting power of all classes of
stock of the Company, shall cause such holder's 1999 Options then
outstanding to terminate, but such holder shall have the right, immediately
prior to such transaction, to exercise such 1999 Options without regard to
the determination as to the periods and installments of exercisability made
pursuant to such holder's option agreement if (and only if) such options
have not at that time expired or been terminated.
The 1999 Stock Option Plan will terminate on December 14, 2009, or on
such earlier date as the Board of Directors may determine. Any stock
options outstanding at the termination date will remain outstanding until
they have been exercised, terminated, or have expired.
The 1999 Stock Option Plan may be terminated, modified, or amended by
the Board of Directors at any time without further shareholder approval,
except that shareholder approval is required for any amendment that: (a)
changes the number of shares of Common Stock subject to the 1999 Stock
Option Plan, (b) changes the designation of the class of employees eligible
to receive 1999 Options, (c) decreases the price at which ISOs may be
granted, (d) removes the administration of the 1999 Stock Option Plan from
the Committee, or (e) without the consent of the affected holder, causes the
ISOs granted under the 1999 Stock Option Plan and outstanding at such time
that satisfied the requirements of Sec. 422 of the Code to no longer satisfy
such requirements.
The Company's Board of Directors recommends that you vote FOR approval
of the Company's 1999 Stock Option Plan.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following tabulation sets forth the names of those persons who are
known to Management to be the beneficial owner(s) as of February 10, 2000,
of more than five percent (5%) of the Company's Common Stock or Preferred
Stock. Such tabulation also sets forth the number of shares of the
Company's Common Stock or Preferred Stock beneficially owned as of February
10, 2000, by all of the Company's directors and executive officers (naming
them), and all directors and officers of the Company as a group (without
naming them). Persons having direct beneficial ownership of the Company's
Common Stock or Preferred Stock possess the sole voting and dispositive
power in regard to such stock. The $5.00 per share Preferred Stock is
freely convertible into shares of Common Stock at the conversion price per
share of Common Stock of $2.00 if converted prior to the close of business
on December 31, 2001, at the conversion price per share of Common Stock of
$3.75 if converted after December 31, 2001, but prior to close of business
on December 31, 2002, and at the conversion price per share of Common Stock
at $6.00 thereafter. Ownership of Preferred Stock is deemed to be beneficial
ownership of Common Stock at the conversion price per share of $2.00 under
Rule 13d-3(d)(1) promulgated under the Securities Exchange Act of 1934. As
of February 10, 2000, there were 2,264,624 shares of Common Stock and
1,111,250 shares of Preferred Stock outstanding.
The following tabulation also includes Common Stock covered by (i)
options granted under the Company's 1986 and 1993 Stock Option Plans, which
options are collectively referred to as "Stock Options," and (ii) stock
purchase warrants, which warrants are collectively referred to as "Stock
Purchase Warrants." The Stock Options and Stock Purchase Warrants have no
voting or dividend rights.
Name & Address Title of Class Amount & Nature Approximate
of Beneficial Owner of Beneficial % of
Ownership Class(1)
Allen T. McInnes Common 749,974 (2)(3) 28.00%
Tetra Technologies Preferred 63,162 5.68%
25025 Interstate 45 North
The Woodlands, TX 77380
Wayne A. Whitener Common 106,150 (2) (3) 4.50%
TGC Industries, Inc. Preferred 3,000 *
1304 Summit Ave., Ste 2
Plano, Texas 75074
Herbert M. Gardner Common 545,343 (2)(3)(4) 20.77%
26 Broadway, Suite 829 Preferred 49,500 (4) 4.45%
New York, New York 10004
William J. Barrett Common 730,869 (2)(3)(5) 26.96%
26 Broadway, Suite 829 Preferred 82,500 (5) 7.42%
New York, New York 10004
Edward L. Flynn Common 819,636 (2) 29.09%
75-11 Myrtle Avenue Preferred 141,331 12.72%
Glendale, New York 11385
David P. Williams Common 12,889 (3) *
TGC Industries, Inc.
1304 Summit Ave, Suite 2
Plano, TX 75074
Kenneth W. Uselton Common 12,892 (3) *
TGC Industries, Inc.
1304 Summit, Ste 2
Plano, Texas 75074
Gerlach & Co. Common 200,000 (2) 8.11%
111 Wall Street, 8th Fl. Preferred 80,000 7.20%
New York, NY
Special Situations Cayman Common 125,000 (2) 5.23%
Fund L.P. Preferred 50,000 4.50%
Special Situation Fund Common 375,000 (2) 14.21%
III, L.P. Preferred 150,000 13.50%
WEDGE Energy Services, Common 2,173,913 (6) 48.98%
L.L.C.
All directors and Common 2,977,753 71.67%
officers as a group (2)(3)(4)(5)
of seven (7) persons) Preferred 339,493 30.55%
* Less than 1%
(1) The percentage calculations have been made in accordance with Rule
13d-3(d)(1) promulgated under the Securities Exchange Act of 1934. In
making these calculations, shares of Common Stock beneficially owned by a
person as a result of the ownership of Preferred Stock and certain options
and warrants were deemed to be currently outstanding solely with respect to
the holders of such Preferred Stock, options, and warrants.
(2) Includes the number of shares of Common Stock which are deemed to
be beneficially owned as a result of ownership of shares of Preferred Stock,
which Preferred shares ($5.00 per share) are freely convertible into shares
of Common Stock at the conversion price per share of Common Stock of $2.00
through December 31, 2001.
(3) Includes the number of shares of Common Stock set forth opposite
the person's name in the following table, which shares are beneficially
owned as a result of the ownership of Stock Options and Stock Purchase
Warrants.
Stock Options Warrants
William J. Barrett -0- 239,784*
Edward L. Flynn -0- 200,000
Herbert M. Gardner -0- 237,284
Allen T. McInnes -0- 256,225
Kenneth W. Uselton 7,667 -0-
David P. Williams 12,889 -0-
Wayne A. Whitener 38,333 50,000
________ _______
All directors and 58,889 983,293
officers as a group
(7 persons)
- -----------------------
*Includes 2,500 Warrants owned by Mr. Barrett's wife. Mr. Barrett disclaims
beneficial ownership of such Warrants.
(4) Includes 29,050 shares of Common Stock owned by Herbert M.
Gardner's wife and also includes 5,000 of Common Stock shares purchasable
upon the conversion of 2,000 shares of Preferred Stock owned by Mr.
Gardner's wife. Mr. Gardner has disclaimed beneficial ownership of these
shares.
(5) Includes 23,925 shares of Common Stock owned by William J.
Barrett's wife and also includes 25,000 shares of Common Stock purchasable
upon the conversion of 10,000 shares of Preferred Stock owned by Mr.
Barrett's wife. Mr. Barrett has disclaimed beneficial ownership of these
shares.
(6) Includes the number of shares of Common Stock which are deemed to
be beneficially owned as a result of ownership of a $2,500,000 8 1/2%
Convertible Subordinated Debenture, which may be converted into either a
preferred stock or Common Stock at a price of $1.15 per share. If converted
into a preferred stock, each share of such preferred stock is convertible
into one share of Common Stock.
Depositories such as The Depository Trust Company (Cede & Company) as of
February 10, 2000 held, in the aggregate, more than five percent (5%) of the
Company's then outstanding Common Stock voting shares. The Company
understands that such depositories hold such shares for the benefit of
various participating brokers, banks, and other institutions which are
entitled to vote such shares according to the instructions of the beneficial
owners thereof. The Company has no reason to believe that any of such
beneficial owners hold more than five percent (5%) of the Company's
outstanding voting securities.
CERTAIN TERMS OF THE WEDGE FINANCING
Under the terms of the Debenture and the Debenture Agreement, TGC
promises to pay to WEDGE the principal amount of $2,500,000 and interest on
the principal amount at the rate of 8-1/2% per year from December 10, 1999
until December 1, 2009, the date of maturity of the Debenture. Such
principal amount is payable in cash at maturity. Such interest is payable
in cash semi-annually; provided, however, that each interest payment due and
payable through January 1, 2001, shall be paid in kind by the issuance of
additional debentures, like the Debenture, with a principal amount equal to
the amount of the cash interest payment which otherwise would have been paid
("PIK Interest"). WEDGE has the option with respect to each interest
payment due and payable after January 1, 2001, to elect whether such
interest payment shall be by cash or PIK Interest. Notwithstanding the
foregoing, TGC will only pay PIK Interest if its earnings before deduction
of interest, taxes, depreciation and amortization ("EBITDA") for the six
months ended the previous quarter are less than 125% of TGC's obligation for
such interest payment and for all other dividends and interest due and
payable on all other outstanding securities of TGC as of such time.
Interest payments on the Debenture take priority over any preferred stock
dividends payable by TGC. The indebtedness evidenced by the Debenture will
be subordinate in right of payment to all Superior Indebtedness (as defined
in the Debenture Agreement) to the extent and in the manner provided for in
the Debenture Agreement.
In accordance with the terms of the Debenture Purchase Agreement and
the Debenture Agreement, so long as (a) the Debenture remains outstanding or
(b) WEDGE owns shares of preferred stock representing at least 10% of the
shares of capital stock of TGC on a fully diluted basis, TGC will not (i)
pay any cash dividends or any interest accrual on any equity or debt
security, excluding any Superior Indebtedness (as defined in the Debenture
Agreement), until TGC's EBITDA for the six months ended with the quarter for
the last quarterly report are more than 125% of TGC's obligations for all
dividends and interest due and payable on all outstanding securities of TGC
as of such time or (ii) incur, or commit to incur, any capital expenditures
of any kind in excess of $50,000 without the approval of TGC's Board of
Directors, and TGC agrees that until it has expended the $2,500,000 in
proceeds from the issuance of the Debenture, it will not make any capital
expenditures in excess of $50,000 without the consent of WEDGE. So long as
WEDGE or its nominee holds the Debenture, TGC will furnish to such holder
certain financial and business information of TGC including quarterly
statements, annual statements, audit reports, and certain filings with the
Securities Exchange Commission.
Pursuant to the Debenture Purchase Agreement and the Debenture
Agreement, TGC may, at any time after December 1, 2001, prepay the
Debenture, including any debentures issued as PIK Interest, in whole or in
part, by payment of 152.174% of the outstanding principal amount of the
Debenture, or portion thereof to be prepaid, and payment of the accrued
interest thereon to the date of prepayment. In the event of a merger by TGC
or a sale of all or substantially all of its assets, WEDGE may elect to have
TGC prepay all of such Debenture by payment of 100% of the principal amount
of the Debenture and payment of the accrued interest thereon to the date of
prepayment.
In connection with the issuance of the Debenture, WEDGE was granted a
right to participate in any additional equity offerings which TGC may offer,
up to the WEDGE Percentage (as defined in the Debenture Purchase Agreement).
This right of participation expires upon the later to occur of the
following: (a) the maturity of the Debenture, (b) the conversion of the
Debenture into Common Stock, (c) the conversion of the Debenture into Senior
Preferred Stock or Series D Preferred Stock (both as defined above) and the
conversion of such preferred stock into Common Stock, or (d) December 10,
2009.
Under the terms of the Debenture Purchase Agreement and the Debenture
Agreement, upon the request of WEDGE covering at least 51% in the aggregate
principal amount of the Debenture and/or 51% of the shares of Common Stock,
Senior Preferred Stock and/or Series D Preferred Stock (the "Shares") issued
upon conversion of the Debenture, TGC will use its best efforts to effect
the registration under the Securities Act of 1933, as amended (the "1933
Act") of: (a) the Shares which TGC has been requested to register and (b)
all other outstanding Shares, or Shares issuable upon conversion of the
Debenture, the holders of which have made written request to TGC for
registration thereof within 30 days after the receipt of such written notice
from TGC. Such registration shall be in effect for a period of 24 months;
provided, however, that TGC will not be required to register or use its best
efforts to effect any registration of this type of Shares under the 1933 Act
more than once. Notwithstanding the foregoing, if TGC proposes to register
any of its securities under the 1933 Act, TGC will notify WEDGE of such
intention and upon request by WEDGE, TGC will use its best efforts to cause
all such outstanding Shares, or Shares issuable upon conversion of the
Debenture, requested for registration, to be so registered under the 1933
Act, such Shares subject to reduction in the event that the managing
underwriter of a then proposed public offering of TGC's securities
determines that such registration of such Shares would materially and
adversely affect such public offering. All expenses relating to TGC's
compliance with the registration rights of WEDGE, excluding certain expenses
such as underwriting commissions and discounts, the fees of WEDGE's counsel,
and any filing fees associated with the listing of shares of either Senior
Preferred Stock or Series D Preferred Stock (but not Common Stock), will be
paid by TGC. The Debenture Purchase Agreement and the Debenture Agreement
also contain customary indemnification provisions with respect to the
registration rights contained therein.
RECOMMENDATION AND VOTE
It is the opinion of the Board of Directors that the (1) election of
two (2) new members of the Board of Directors, (2) consent, by the holders
of the Company's outstanding shares of Preferred Stock, to a new series of
Senior Convertible Preferred Stock, and (3) approval of the Company's 1999
Stock Option Plan, are advisable and in the best interests of the Company.
As a result, the Board of Directors recommends a vote FOR each of these
items. The affirmative vote of the holders of a majority of the issued and
outstanding shares of Common Stock and Preferred Stock present, in person or
by proxy, at the Special Meeting, is required for the shareholders to
approve the election of the two (2) new members to the Board of Directors
and to approve the 1999 Stock Option Plan. The affirmative vote of the
holders of two-thirds (2/3) of the issued and outstanding shares of
Preferred Stock entitled to vote thereon, voting as a class, is required to
consent to the new series of Senior Convertible Preferred Stock.
OTHER MATTERS
The Company knows of no other matters to be submitted to the special
meeting. If any other matters properly come before the special meeting, it
is the intention of the persons named in the enclosed proxy to vote the
shares represented by such proxy in the manner in which the Board of
Directors may recommend.
By Order of the Board of Directors
/s/ ALLEN T. MCINNES
Allen T. McInnes
Secretary
Plano, Texas
February 22, 2000
154439.1
EXHIBIT A
STATEMENT OF RESOLUTION ESTABLISHING
8-1/2% SENIOR CONVERTIBLE PREFERRED STOCK
OF
TGC INDUSTRIES, INC.
STATEMENT OF RESOLUTION ESTABLISHING
8 1/2% SENIOR CONVERTIBLE PREFERRED STOCK OF
TGC INDUSTRIES, INC.
Pursuant to the provisions of Article 2.13 of the Texas Business
Corporation Act, TGC, Industries, Inc., a Texas corporation (the
"Corporation" or the "Company"), has adopted the following resolution by all
necessary action on the part of the Corporation at a special meeting of the
Board of Directors on November 30, 1999, authorizing the creation and
issuance of a series of preferred stock designated as 8 1/2% Senior Convertible
Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by Article 4.b of the Corporation's Certificate
of Restated Articles of Incorporation, as amended, a series of preferred
stock of the Corporation be, and it is hereby, created out of the authorized
but unissued shares of the capital stock of the Corporation, such series to
be designated 8 1/2% Senior Convertible Preferred Stock (the "Preferred
Stock"), to consist of 2,750,000 shares, of which the preferences and
relative and other rights, and the qualifications, limitations or
restrictions thereof, shall be (in addition to those set forth in the
Corporation's Certificate of Incorporation, as amended) as follows:
1. Certain Definitions. Unless the context otherwise requires, the
terms defined in this paragraph 1 shall have, for all purposes of this
resolution, the meanings herein specified.
Common Stock. The term "Common Stock" shall mean all shares now or
hereafter authorized of any class of Common Stock of the Corporation and any
other stock of the Corporation, howsoever designated, authorized after the
Issue Date, which has the right (subject always to prior rights of any class
or series of preferred stock) to participate in the distribution of the
assets and earnings of the Corporation without limit as to per share amount.
Conversion Date. The term "Conversion Date" shall have the meaning set
forth in subparagraph 3(e) below.
Conversion Ratio. The term "Conversion Ratio" shall mean the ratio
used to determine the number of shares of Common Stock deliverable upon
conversion of the Preferred Stock, subject to adjustment in accordance with
the provisions of paragraph 3 below.
Issue Date. The term "Issue Date" shall mean the date that shares of
Preferred Stock are first issued by the Corporation.
Series C Preferred Stock. The term "Series C Preferred Stock" shall
mean the Corporation's Series C 8% Convertible Exchangeable Preferred Stock.
Subsidiary. The term "Subsidiary" shall mean any corporation of which
shares of stock possessing at least a majority of the general voting power
in electing the board of directors are, at the times as of which any
determination is being made, owned by the Corporation, whether directly or
indirectly through one or more Subsidiaries.
2. Dividends. The Preferred Stock shall be senior in rights to
dividends to all classes and series of stock of the Corporation, including
without limitation the Corporation's Series C Preferred Stock. In addition,
the Preferred Stock shall have the following dividend rights:
(a) Declaration of Dividends. The holders of shares of Preferred
Stock shall be entitled to receive cumulative cash dividends, when and as
declared by the Board of Directors out of funds legally available therefor,
at a rate of eight and one-half percent (8 1/2%) per annum and no more
($0.09775 per share per annum based on the per share liquidation value of
$1.15), before any dividend or distribution in cash or other property (other
than dividends payable in stock ranking junior to the Preferred Stock as to
dividends and upon liquidation, dissolution or winding-up) on any class or
series of stock of the Corporation ranking junior to the Preferred Stock as
to dividends or on liquidation, dissolution or winding-up shall be declared
or paid or set apart for payment.
(b) Payment of Dividends. Dividends on the Preferred Stock shall
be payable, when and as declared by the Board of Directors on December 1 and
June 1 of each year, commencing June 1, 2000 (each such date being
hereinafter individually a "Dividend Payment Date" and collectively the
"Dividend Payment Dates"), except that if such date is a Saturday, Sunday or
legal holiday then such dividend shall be payable on the first immediately
preceding calendar day which is not a Saturday, Sunday or legal holiday, to
holders of record as they appear on the books of the Corporation on such
respective dates, not exceeding sixty days preceding such Dividend Payment
Date, as may be determined by the Board of Directors in advance of the
payment of each particular dividend. Dividends in arrears may be declared
and paid at any time, without reference to any regular Dividend Payment
Date, to holders of record on such date as may be fixed by the Board of
Directors of the Corporation. Dividends declared and paid in arrears shall
be applied first to the earliest dividend period or periods for which any
dividends remain outstanding. The amount of dividends payable per share of
this Series for each dividend period shall be computed by dividing the
annual rate of eight and one-half percent (8 1/2%) by two (2). Dividends
payable on this Series for the initial period and for any period less than a
full semi-annual period shall be computed on the basis of a 360-day year of
twelve 30-day months. Dividends shall be payable in cash, provided that for
each dividend declared and payable through December 1, 2000, the dividend
payment shall be by payment in kind securities by issuance of additional
shares of Preferred Stock with a liquidation value equal to the amount of
the cash dividend payment which would have been paid ("PIK Dividend"). For
each dividend payment due and payable after December 1, 2000, payment shall
be by cash or by PIK Dividend at the election of the holders by written
notice to the Corporation, provided that the Corporation shall only pay a
PIK Dividend and not a cash dividend in the event the Corporation's earnings
before deduction of interest, taxes, depreciation and amortization (EBITDA)
for the six (6) months ended with the previous quarter (for the December 1
payment: the six (6) months ended September 30; and for the June 1 payment:
the six (6) months ended March 31) are less than one hundred twenty-five
percent (125%) of the Corporation's obligation for such dividend payment and
for all other dividends and interest due and payable on all other
outstanding securities of the Corporation as of such time.
(c) Dividends Cumulative. Preferred Stock shall be cumulative and
accrue from and after the date of original issuance thereof, whether or not
declared by the Board of Directors. Accrued dividends shall not bear
interest.
(d) Dividend Restriction. No cash dividend may be declared on any
other class or series of stock ranking on a parity with the Preferred Stock
as to dividends in respect of any dividend period unless there shall also be
or have been declared on the Preferred Stock like dividends for all periods
coinciding with or ending before such semi-annual period, ratably in
proportion to the respective annual dividend rates fixed therefor and the
total dividend obligation with respect thereto.
3. Conversion Rights. The Preferred Stock shall be convertible into
Shares of Common Stock as follows:
(a) Conversion Right. The holder of any shares of Preferred Stock
shall have the right, at such holder's option, at any time to convert any of
such shares of Preferred Stock into fully paid and nonassessable shares of
Common Stock at the Conversion Ratio provided for in subparagraph 3(d) below
by surrendering shares of Preferred Stock for conversion in accordance with
subparagraph 3(e) below.
(b) Continuance of Conversion Right. The Conversion Right set
forth above will continue so long as such Preferred Stock is outstanding
with respect to any stock not redeemed in accordance with the terms of
paragraph 7.
(c) Surrender of Shares on Exercise of Conversion Right. In the
event that any holder of shares of Preferred Stock surrenders such shares
for conversion, such holder will be issued the number of shares of Common
Stock to which such holder is entitled pursuant to the provisions of
subparagraph 3(d) in the manner provided for in subparagraph 3(e). The
shares of Preferred Stock deemed to have been surrendered will have the
status described in paragraph 11 below.
(d) Conversion Ratio. Each share of Preferred Stock may, at the
discretion of the holder thereof, be converted into shares of Common Stock
of the Corporation at the conversion ratio of one (1) share of Common Stock
for each share of Preferred Stock, as such conversion ratio may be adjusted
and readjusted from time to time in accordance with subparagraph 3(g) hereof
(such conversion ratio, as adjusted and readjusted and in effect at any
time, being herein called the "Conversion Ratio"). The Conversion Ratio
referred to above will be subject to adjustment as set forth in subparagraph
3(g).
(e) Mechanics of Conversion. The holder of any shares of Preferred
Stock may exercise the conversion right specified in subparagraph 3(a) by
surrendering to the Corporation or any transfer agent of the Corporation the
certificate or certificates for the shares to be converted, accompanied by
written notice specifying the number of shares to be converted. Conversion
shall be deemed to have been effected upon receipt of the certificate or
certificates for the shares to be converted accompanied by written notice of
election to convert specifying the number of shares to be converted. The
date of such receipt is referred to herein as the "Conversion Date." As
promptly as practicable thereafter (and after surrender of the certificate
or certificates representing shares of Preferred Stock to the Corporation or
any transfer agent of the Corporation) the Corporation shall issue and
deliver to or upon the written order of such holder a certificate or
certificates for the number of full shares of Common Stock to which such
holder is entitled and a check or cash with respect to any fractional
interest in a share of Common Stock as provided in subparagraph 3(f). The
person in whose name the certificate or certificates for Common Stock are to
be issued shall be deemed to have become a holder of record of such Common
Stock on the applicable Conversion Date. Upon conversion of only a portion
of the number of shares covered by a certificate representing shares of
Preferred Stock surrendered for conversion, the Corporation shall issue and
deliver to or upon the written order of the holder of the certificate so
surrendered for conversion, at the expense of the Corporation, a new
certificate covering the number of shares of Preferred Stock representing
the unconverted portion of the certificate so surrendered.
(f) Fractional Shares. No fractional Shares or scrip shall be
issued upon conversion of shares of Preferred Stock. If more than one share
of Preferred Stock shall be surrendered for conversion at any one time by
the same holder, the number of shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
shares of Preferred Stock so surrendered. Instead of any fractional shares
which would otherwise be issuable upon conversion of any shares of Preferred
Stock, the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to that fractional interest of the
then current market price.
(g) Conversion Ratio Adjustments. The Conversion Ratio shall be
subject to adjustment from time to time as follows:
(i) Stock Dividends, Subdivisions, Reclassifications or
Combinations. If the Corporation shall (x) declare a dividend or make a
distribution on its Common Stock in shares of its Common Stock, (y)
subdivide or reclassify the outstanding shares of Common Stock into a
greater number of shares, or (z) combine or reclassify the outstanding
Common Stock into a smaller number of shares, the Conversion Ratio in effect
at the time of the record date for such dividend or distribution or the
effective date of such subdivision, combination or reclassification shall be
proportionately adjusted so that the holder of any shares of Preferred Stock
surrendered for conversion after such date shall be entitled to receive the
number of shares of Common Stock which he would have owned or been entitled
to receive had such Preferred Stock been converted immediately prior to such
date. Successive adjustments in the Conversion Ratio shall be made whenever
any event specified above shall occur.
(ii) Other Distributions. In case the Corporation shall fix a
record date for the making of a distribution to all holders of shares of its
Common Stock (w) of shares of any class other than its Common Stock or (x)
of evidence of indebtedness of the Corporation or any Subsidiary or (y) of
assets (excluding cash dividends or distributions, and dividends or
distributions referred to in subparagraph 3(g)(i) above), or (z) of rights
or warrants, in each such case the Conversion Ratio in effect immediately
prior thereto shall be immediately thereafter proportionately adjusted for
such distribution so that the holder of Preferred Stock would be entitled to
receive the fair market value (as determined by the Board of Directors,
whose determination in good faith shall be conclusive) of what he would have
been entitled to receive had such Preferred Stock been converted prior to
such distribution. Such adjustment shall be made successively whenever such
a record date is fixed. In the event that such distribution is not so made,
the Conversion Ratio then in effect shall be readjusted, effective as of the
date when the Board of Directors determines not to distribute such shares,
evidences of indebtedness, assets, rights or warrants, as the case may be,
to the Conversion Ratio which would then be in effect if such record date
had not been fixed.
(iii) Consolidation, Merger, Sale, Lease or Conveyance. In case
of any consolidation with or merger of the Corporation with or into another
corporation or entity, or in case of any sale, lease or conveyance to
another corporation or entity of the assets of the Corporation as an
entirety or substantially as an entirety, each share of Preferred Stock
shall after the date of such consolidation, merger, sale, lease or
conveyance be convertible into the number of shares of stock or other
securities or property (including cash) to which the shares of Common Stock
issuable (at the time of such consolidation, merger, sale, lease or
conveyance) upon conversion of such share of Preferred Stock would have been
entitled upon such consolidation, merger, sale, lease or conveyance; and in
any such case, if necessary, the provisions set forth herein with respect to
the rights and interests thereafter of the holders of the shares of
Preferred Stock shall be appropriately adjusted so as to be applicable, as
nearly as may reasonably be, to any shares of stock or other securities or
property thereafter deliverable on the conversion of the shares of Preferred
Stock.
(h) Statement Regarding Adjustments. Whenever the Conversion Ratio
shall be adjusted as provided in subparagraph 3(g), the Corporation shall
forthwith file, at the office of any transfer agent for the Preferred Stock
and at the principal office of the Corporation, a statement showing in
detail the facts requiring such adjustment and the Conversion Ratio that
shall be in effect after such adjustment, and the Corporation shall also
cause a copy of such statement to be sent by mail, first class postage
prepaid, to each holder of shares of Preferred Stock at its address
appearing on the Corporation's records. Where appropriate, such copy may be
given in advance and may be included as part of a notice required to be
mailed under the provisions of subparagraph 3(i).
(i) Notice to Holders. In the event the Corporation shall propose
to take any action of the type described in clause (i), (ii) or (iii) of
subparagraph 3(g), the Corporation shall give notice to each holder of
shares of Preferred Stock, in the manner set forth in subparagraph 3(h),
which notice shall specify the record date, if any, with respect to any such
action and the approximate date on which such action is to take place. Such
notice shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the extent
such effect may be known at the date of such notice) on the Conversion Ratio
and the number, kind or class of shares which shall be deliverable upon
conversion of shares of Preferred Stock. In the case of any action which
would require the fixing of a record date, such notice shall be given at
least 10 days prior to the date so fixed, and in case of all other action,
such notice shall be given at least 15 days prior to the taking of such
proposed action. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of any such action.
(j) Treasury Stock. For the purposes of this paragraph 3, the sale
or other disposition of any Common Stock theretofore held in the
Corporation's treasury shall be deemed to be an issuance thereof.
(k) Costs. The Corporation shall pay all documentary, stamp,
transfer or other transactional taxes attributable to the issuance or
delivery of shares of Common Stock upon conversion of any shares of
Preferred Stock; provided that the Corporation shall not be required to pay
any taxes which may be payable in respect of any transfer involved in the
issuance or delivery of any certificate for such shares in a name other than
that of the holder of the shares of Preferred Stock in respect of which such
shares are being issued.
(l) Reservation of Shares. The Corporation shall reserve at all
times so long as any shares of Preferred Stock remain outstanding, free from
preemptive rights, out of its treasury stock (if applicable) or its
authorized but unissued shares of Common Stock, or both, solely for the
purpose of effecting the conversion of the shares of Preferred Stock,
sufficient shares of Common Stock to provide for the conversion of all
outstanding shares of Preferred Stock.
(m) Approvals. If any shares of Common Stock to be reserved for
the purpose of conversion of shares of Preferred Stock require registration
with or approval of any governmental authority under any Federal or state
law before such shares may be validly issued or delivered, then the
Corporation will in good faith and as expeditiously as possible endeavor to
secure such registration or approval, as the case may be. If, and so long
as, any shares of Common Stock into which the shares of Preferred Stock are
then convertible are listed on any national securities exchange, the
Corporation will, if permitted by the rules of such exchange, list and keep
listed on such exchange, upon official notice of issuance, all such shares
issuable upon conversion.
(n) Valid Issuance. All shares of Common Stock which may be issued
upon conversion of the shares of Preferred Stock will upon issuance by the
Corporation be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issuance thereof,
and the Corporation shall take no action which will cause a contrary result.
4. Voting Rights. The holders of the shares of the Preferred Stock
will be entitled to one vote per share of Preferred Stock held by them to
vote upon all matters which the holders of shares of the Company's Common
Stock shall have the right to vote. In all cases, as a matter of law, where
the holders of shares of Preferred Stock shall have the right to vote
separately as a class, such holders will also be entitled to one vote per
share of Preferred Stock held by them.
The affirmative vote or consent of the holders of at least two-thirds
of the outstanding shares of the Preferred Stock, voting as a class, will be
required to (i) authorize, create or issue, or increase the authorized or
issued amount of, shares of any class or series of stock ranking senior to
the Preferred Stock, either as to dividends or upon liquidation, or (ii)
amend, alter or repeal (whether by merger, consolidation or otherwise) any
provisions of the Company's Articles of Incorporation or of the Statement of
Resolution establishing this series of Preferred Stock so as to materially
and adversely affect the preferences, special rights or powers of the
Preferred Stock; provided, however, that any increase in the authorized
preferred stock or the creation and issuance of any other series of
preferred stock ranking on a parity with or junior to the Preferred Stock
shall not be deemed to materially and adversely affect such preferences,
special rights or powers.
5. Liquidation Rights. Upon the dissolution, liquidation or winding
up of the Corporation, whether voluntary or involuntary, the holders of the
shares of this series of Preferred Stock shall be entitled to receive,
before any payment or distribution of the assets of the Corporation or
proceeds thereof (whether capital or surplus) shall be made to or set apart
for the holders of the Common Stock or any other class or series of stock
ranking junior to the shares of this series of Preferred Stock upon
liquidation, including without limitation the Series C Preferred Stock, the
amount of One Dollar and Fifteen Cents ($1.15) per share, plus a sum equal
to all dividends on such shares (whether or not earned or declared) accrued
and unpaid thereon to the date of final distribution, but such holders shall
not be entitled to any further payment. If, upon any liquidation,
dissolution or winding-up of the Corporation, the assets of the Corporation,
or proceeds thereof, distributable among the holders of shares of the
Preferred Stock and any other class or series of preferred stock ranking on
a parity with the Preferred Stock as to payments upon liquidation,
dissolution or winding-up shall be insufficient to pay in full the
preferential amount foresaid, then such assets or the proceeds thereof shall
be distributed among such holders ratably in accordance with the respective
amounts which would be payable on such shares if all amounts payable thereon
were paid in full. For the purposes of this paragraph 5, the voluntary
sale, conveyance, lease, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all the property
or assets of the Corporation to, or a consolidation or merger of the
Corporation with, one or more corporations (whether or not the Corporation
is the corporation surviving such consolidation or merger) shall not be
deemed to be a liquidation, dissolution or winding-up, voluntary or
involuntary.
6. Registration Rights.
(a) Registration on Request. Upon the written request of any
holder or holders of at least fifty-one percent (51%) in the aggregate
number of shares of the Preferred Stock and/or shares of Common Stock
("Shares") issued upon conversion of such Preferred Stock (provided that in
computing such 51% amount the number of shares of Preferred Stock and Common
Stock shall be weighted proportionately taking into account the Conversion
Ratio with respect to which such shares of Common Stock were issued upon
conversion), which request shall state the intended method of disposition by
such holder or holders and shall request that the Company effect the
registration of all or part of such Shares, or the Shares issuable upon the
conversion of such Preferred Stock, or both, under the Securities Act of
1933, as amended (the "Act"), the Company will promptly give written notice
of such requested registration to all holders of outstanding Preferred Stock
and Shares, and thereupon will use its best efforts to effect the
registration under the Act of:
(i) the Shares which the Company has been so requested to register, for
disposition in accordance with the intended method of disposition
stated
in such request, and
(ii) all other outstanding Shares, or Shares issuable upon the
conversion
of Preferred Stock, the holders of which shall have made written
request
(stating the intended method of disposition of such securities by such
holders) to the Company for registration thereof within thirty (30)
days
after the receipt of such written notice from the Company,
all to the extent requisite to permit the disposition (in accordance with
the intended methods thereof as aforesaid) by the holders of the Shares so
registered and to maintain such registration in effect for a period of
twenty-four (24) months from the effective date of such registration
statement; provided, that the Company shall not be required to register or
use its best efforts to effect any registration of Shares under the Act
pursuant to this paragraph 6(a) more than once. In the event that, as a
result of such registration, another person with incidental registration
rights granted by the company requests that the Company include securities
of such person in such registration, such request will not result in a
reduction in the number of securities of the holder or holders of the
Preferred Stock and/or Shares to be included in such registration.
The Company shall have no obligation to register or use its best
efforts to effect any registration of Shares under the Act pursuant to this
paragraph 6 which would be in conflict with the obligations of any holder or
holders of Preferred Stock and/or Shares under any confidentiality agreement
between such holder or holders and the Company entered into in connection
with the offering of the Preferred Stock to such holder or holders.
(b) Incidental Registration. If the Company at any time proposes
to register any of its securities under the Act (otherwise than pursuant to
paragraph 6(a) and other than a registration on Form S-8, or the form, if
any, which supplants such Form), it will at such time give written notice to
all holders of outstanding Preferred Stock and Shares of its intention to do
so and, upon the written request of any such holder made within thirty (30)
days after the receipt of any such notice (which request shall specify the
Shares intended to be disposed of by such holder and state the intended
method of disposition thereof), the Company will use its best efforts to
cause all such outstanding Shares, or Shares issuable upon the conversion of
Preferred Stock, the holders of which shall have so requested the
registration thereof, to be registered under the Act to the extent requisite
to permit the disposition (in accordance with the intended methods thereof
as aforesaid) of the Shares so registered; provided that, if in the good
faith judgment of the managing underwriter or underwriters of a then
proposed public offering of the Company's securities, such registration of
such Shares would materially and adversely affect such public offering, then
in such event the number of Shares and other securities to be registered by
the Company shall each be proportionally reduced to such number as shall be
acceptable to the managing underwriter, subject to Section 6(a) above.
(c) Registration Procedures. If and whenever the Company is
required to use its best efforts to effect or cause the registration of any
Shares under the Act as provided in this paragraph 6, the Company will, as
expeditiously as possible:
(i) prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement with respect to such Shares and
use its best efforts to cause such registration statement to become
effective;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such
registration statement
effective for such period not exceeding twenty-four (24) months from
the effective date of such registration statement as may be necessary
to comply with the provisions of the Act with respect to the
disposition of
all Shares covered by such registration statement during such period in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement;
(iii) furnish to each seller of such Shares such number of copies of
such
registration statement and of each such amendment and supplement
thereto
(in each case including all exhibits), such number of copies of the
prospectus included in such registration statement (including each
preliminary prospectus and, if any seller shall so request, a summary
prospectus), in conformity with the requirements of the Act, and such
other documents, as such seller may reasonably request in order to
facilitate the disposition of the Shares owned by such seller;
(iv) use its best efforts to register or qualify such Shares covered by
such registration statement under such other securities or blue sky
laws
of such jurisdictions as each seller shall reasonably request and as
agreed to by the Corporation, and do any and all other acts and things
which may be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the Shares owned by
such seller; and
(v) notify each seller of any such Shares covered by such registration
statement, at any time when a prospectus relating thereto is required
to
be delivered under the Act within the period mentioned in subdivision
(b)
of this paragraph 6(c), of the happening of any event as a result of
which the prospectus included in such registration statement, as then
in
effect, includes an untrue statement of a material fact or omits to
state
any material fact required to be stated therein or necessary to make
the
statements therein not misleading in the light of the circumstances
then
existing, and at the request of any such seller prepare and furnish to
such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Shares, such prospectus shall not
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then
existing.
(d) Registration Expenses. All expenses incident to the Company's
performance of or compliance with this paragraph 6, including, without
limitation, all registration and filing fees, fees and expenses of complying
with securities or blue sky laws, printing expenses and fees and
disbursements of counsel for the Company and of independent pubic
accountants, but excluding underwriting commissions and discounts, the fees
of any counsel engaged by the holder or holders, and any filing fees
associated with shares of Preferred Stock, but not Common Stock, being
listed with a national securities exchange or quoted on the NASDAQ National
Market System or Small Cap Market, shall be borne by the Company.
(e) Indemnification.
(i) In the event of any registration of any Shares under the Act
pursuant
to this paragraph 6, the Company will, to the extent permitted by law,
indemnify and hold harmless the seller of such Shares and each
underwriter of such securities and each other person, if any, who
controls such seller or underwriter within the meaning of the Act,
against any losses, claims, damages, or liabilities, joint or several,
to
which such seller or underwriter or controlling person may become
subject, under the Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or
are based upon (x) any untrue statement or alleged untrue statement of
any material fact contained, on the effective date thereof, in any
registration statement under which such securities were registered
under
the Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or (y) any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; and
the Company will reimburse such seller and each such underwriter and
each
such controlling person for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability, or action, provided that the Company
shall not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus,
final prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such seller or underwriter specifically for
use in the preparation thereof.
(ii) The Company may require, as a condition to including any Shares in
any registration statement filed pursuant to paragraph 6(c), that the
Company shall have received an undertaking satisfactory to it from the
prospective seller of such Shares and from each underwriter of such
Shares, to indemnify and hold harmless (in the same manner and to the
same extent as set forth in paragraph 6(e)(i)) the Company, each
director
of the Company, each officer of the Company who shall sign such
registration statement and any person who controls the Company within
the
meaning of the Act, with respect to any statement or omission from such
registration statement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, if such
statement or omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly
executed by such seller or underwriter specifically for use in the
preparation of such registration statement, preliminary prospectus,
final
prospectus, amendment, or supplement.
(iii)Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the
preceding
subparagraphs of this paragraph 6(e), such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party,
give written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as
provided therein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this paragraph 6(e). In
case any such action is brought against an indemnified party, the
indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to
assume
the defense thereof the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred
by the latter in connection with the defense thereof. No indemnifying
party, in the defense of any such claim or litigation, shall, except
with
the consent of each indemnified party, consent to entry of any judgment
or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such
indemnified
party of a release from all liability in respect to such claim or
litigation.
7. Redemption Rights.
(a) Company's Redemption Option. Except for any redemption which
the Company would be prohibited from effecting under applicable law, and
provided the shares of Preferred Stock of a holder have not earlier been
converted in accordance with the provisions hereof, the shares of Preferred
Stock may be redeemed by the Company, in whole or in part, at the option of
the Company upon written notice by the Company to the holders of Preferred
Stock at any time after December 1, 2001, in the event that the Preferred
Stock of one or more holders has not been converted pursuant to the terms
hereof on or before such date. The Company shall redeem each share of
Preferred Stock of such holders within thirty (30) days of the Company's
delivery of the above notice to such holders and such holders shall
surrender the certificate(s) representing such shares of Preferred Stock.
For any partial redemptions the Company shall redeem shares in proportion to
the number of shares held by each holder. The redemption amount shall be
One Dollar and Seventy-five Cents ($1.75) per share, plus in each case
accrued and unpaid dividends thereon to the date of payment of such amount
(the total sum so payable on any such redemption being herein referred to as
the "redemption price").
(b) Redemption Notice. Notice of any redemption pursuant to this
paragraph 7 shall be mailed to the party or parties required to receive such
notice at the principal office or residence address for such party or
parties. Each such notice shall state: (1) the election of the redemption
option and the facts which give rise to such option; and (2) the number of
shares of Preferred Stock which are being elected to be redeemed. From and
after the date of the Company's payment of the redemption price to such
holder or holders in accordance with such redemption notice (the "redemption
date"), notwithstanding that any certificates for such shares shall not have
been surrendered for cancellation, the shares represented thereby shall no
longer be deemed outstanding, the rights to receive dividends and
distributions shall cease to accrue from and after the redemption date, and
all rights of such holder or holders of the shares of Preferred Stock as a
stockholder of the Corporation with respect to such shares, shall cease and
terminate.
8. Special rights. So long as, but only so long as, the shares of
Preferred Stock are held by WEDGE Energy Services, L.L.C., a Delaware
limited liability company ("WEDGE"), or by an affiliate of WEDGE
(collectively "Holder"), the shares of Preferred Stock shall have the
following special rights:
(a) Right of Participation.
(i) Grant of Right of Participation. The Company hereby
grants the Holder a right of participation to participate in any additional
equity offerings which the Company may offer, up to the Holder Percentage
(as defined below), on the following terms and conditions. In the event
that the Company has received a bona fide offer (which the Company desires
to accept) with respect to the issuance of any equity securities (including,
without limitation, any common or preferred stock, any options (excluding
the Company's 1993 Stock Option Plan or any future employee stock option
plan approved by the Company's shareholders), warrants, rights, unsecured
convertible notes, convertible debentures, or other convertible securities),
the Company shall immediately give written notice thereof (the "Notice") to
the Holder of the Preferred Stock. The Notice shall state the name of the
party proposing to provide the offering and all the pertinent terms and
conditions of such offering. This right shall expire upon the later to
occur of the following: (a) the conversion by the Holder of the Preferred
Stock into Common Stock, or (b) the tenth anniversary of the date of the
filing of this Statement.
(ii) Procedure. The Holder shall have fourteen (14) days from
the date the Notice was given to indicate to the Company, in writing, that
the Holder undertakes to participate in the offering under the terms and
conditions set forth in the Notice. If the Holder undertakes to participate
in such offering, then the Company shall be obligated to accept such
participation up to the Holder Percentage upon the terms and conditions set
forth in the Notice and the parties shall use their best efforts to enter
into a definitive agreement relating to such offering. In the event that
the Holder declines to participate in such offering, the Company shall have
the right to accept such offering from the third party without participation
by the Holder provided that it does so upon the terms and conditions set
forth in the Notice. In the event that such offering is not consummated
within sixty (60) days after the date the Notice was given, the Company
shall not consummate such offering without again complying with this
subparagraph 8(a)(ii).
(iii) Holder Percentage. For purposes hereof, the term
"Holder Percentage" shall mean that percentage calculated, on a fully
diluted basis, as if the Holder had (a) converted the Preferred Stock into
Common Stock, which number shall constitute the numerator, and (b) divided
by the denominator, which shall be equal to the total number of shares of
Common Stock issued and outstanding as of such date, plus (i) that number of
shares of Common Stock issuable upon the conversion of all convertible
securities of the Company, including, without limitation, the Preferred
Stock, and (ii) that number of shares of Common Stock issuable upon the
exercise of all options and warrants utilizing the "treasury method" as of
such date. Under the treasury method, only shares issuable upon the
exercise of "in the money" options and warrants are considered in the
calculation and the net dilution is that number of shares issuable upon such
exercise net of that number of shares which could have been purchased with
the proceeds from the exercise of the options and warrants at the then
market price. For example, assuming 100,000 options are outstanding at a
strike price of $1.00 per share and that the market price of the Common
Stock is $2.50 per share, under the treasury method, the proceeds from the
exercise of the options would equal $100,000 and such proceeds would
purchase 40,000 shares of Common Stock at the market price of $2.50 per
share. The net dilution is 60,000 shares, which number of shares is
utilized in the calculation of the Holder Percentage under the above
formula.
(b) Restriction on Payment of Cash Dividends and Interest.
The Company agrees that so long as the Holder owns shares of Preferred Stock
representing at least ten percent (10%) of the shares of capital stock of
the Company on a fully diluted basis utilizing the "treasury method" as
described in subparagraph 8(a)(iii) above, it shall not pay any cash
dividends or any interest accruals on any equity security or any debt
security (excluding any Superior Indebtedness as defined in that certain
Debenture Agreement dated December 10, 1999, between the Company and WEDGE
(the "Debenture Agreement") on file at the Company's principal office), in
existence as of the date hereof or created hereafter unless and until the
Company's earnings before deduction of interest, taxes, depreciation and
amortization ("EBITDA") for the six (6) months ended with the quarter for
the last quarterly report which the Company is required to furnish to WEDGE
under Section 4.01 of the Debenture Agreement are more than 125% of the
Company's obligations for all dividends and interest due and payable on all
outstanding securities of the Company as of such time.
(c) Prohibition Against Capital Expenditures. The Company
agrees that so long as Holder owns shares of Preferred Stock representing at
least ten percent (10%) of the shares of capital stock of the Company on a
fully diluted basis utilizing the "treasury method" as described in
subparagraph 8(a)(iii) above, the Company will not incur, or commit to
incur, any capital expenditures of any kind or nature in excess of $50,000
without the approval by the Board of Directors of the Company, and, in
addition, the Company agrees that, until the Company has expended the
$2,500,000 in proceeds from the issuance of the Debenture, from the date
hereof there shall be no capital expenditure in excess of $50,000 without
the affirmative written consent of WEDGE or its affiliate.
9. Exclusion of Other Rights. Except as may otherwise be required by
law, the shares of Preferred Stock shall not have any preferences or
relative, participating, optional or other special rights, other than those
specifically set forth in this resolution (as such resolution may be amended
from time to time) and in the Corporation's Certificate of Incorporation.
The shares of Preferred Stock shall have no preemptive or subscription
rights.
10. Severability of Provisions. If any right, preference or
limitation of the Preferred Stock set forth in this resolution (as such
resolution may be amended from time to time) is invalid, unlawful or
incapable of being enforced by reason of any rule or law or public policy,
all other rights, preferences and limitations set forth in this resolution
(as so amended) which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation herein set forth shall be
deemed enforceable and not dependent upon any other such right, preference
or limitation unless so expressed herein.
11. Status of Reacquired Shares. Shares of Preferred Stock which have
been issued and reacquired in any manner shall (upon compliance with any
applicable provisions of the laws of the State of Texas) have the status of
authorized and unissued shares of Preferred Stock issuable in series
undesignated as to series and may be redesignated and reissued.
[END]
EXHIBIT B
1999 Stock Option Plan
of
TGC Industries, Inc.
Table of Contents
Page
Article I:
Definitions......................................................1
Sec. 1:1.
Act.........................................................1
Sec. 1:2.
Affiliates..................................................1
Sec. 1:3.
Agreement...................................................2
Sec. 1:4. Board of
Directors..........................................2
Sec. 1:5.
Code........................................................2
Sec. 1:6.
Committee...................................................2
Sec. 1:7. Eligible
Individuals........................................2
Sec. 1:8. Fair Market
Value...........................................2
Sec. 1:9.
Holder......................................................2
Sec. 1:10. Incentive Stock
Options.....................................2
Sec. 1:11. Nonstatutory Stock
Options..................................2
Sec. 1:12.
Options.....................................................2
Sec. 1:13.
Stock.......................................................2
Article II: Stock and Maximum Number of Shares Subject to the
Plan..........3
Sec. 2:1. Description of Stock and Maximum Shares
Allocated...........3
Sec. 2:2. Restoration of
Shares.......................................3
Article III: Administration of the
Plan.....................................3
Sec. 3:1. Stock Option
Committee......................................3
Sec. 3:2. Duration, Removal,
Etc......................................3
Sec. 3:3. Meetings and Actions of
Committee...........................3
Sec. 3:4. Committee's
Powers..........................................3
Article IV: Eligibility and
Participation...................................4
Sec. 4:1. Eligible
Individuals........................................4
Sec. 4:2. No Right to
Option..........................................4
Article V: Grant of Options and Certain Terms of the
Agreements.............5
Sec. 5:1. Determination of Eligible
Individuals.......................5
Sec. 5:2. Date of
Grant...............................................5
Sec. 5:3. Stock Option
Agreement......................................5
Sec. 5:4. Forfeiture of
Stock.........................................5
Sec. 5:5. Cash
Awards.................................................5
Article VI: Terms and Conditions of
Options.................................6
Sec. 6:1. Number of
Shares............................................6
Sec. 6:2. Exercise
Price..............................................7
Sec. 6:3. Medium and Time of Payment, Method of Exercise, and
Withholding
Taxes...........................................7
Sec. 6:4. Terms, Time of Exercise, and Transferability of
Options.....................................................9
Sec. 6:5. Limitation on Aggregate Value of Shares That May
Become First Exercisable During Any Calendar Year
Under an Incentive Stock
Option............................12
Sec. 6:6. Adjustments Upon Changes in Capitalization, Merger,
Etc....12
Sec. 6:7. Rights as a
Shareholder....................................13
Sec. 6:8. Modification, Extension, and Renewal of
Options............13
Sec. 6:9. Furnish
Information........................................14
Sec. 6:10. Obligation to Exercise; Termination of
Employment..........14
Sec. 6:11. Agreement
Provisions.......................................14
Article VII: Duration of
Plan..............................................14
Article VIII: Amendment of
Plan.............................................15
Article IX:
General.......................................................15
Sec. 9:1. Application of
Funds.......................................15
Sec. 9:2. Right of Company and Affiliates to Terminate
Employment....15
Sec. 9:3. No Liability for Good Faith
Determinations.................15
Sec. 9:4. Information
Confidential...................................15
Sec. 9:5. Other
Benefits.............................................16
Sec. 9:6. Execution of Receipts and
Releases.........................16
Sec. 9:7. No Guarantee of
Interests..................................16
Sec. 9:8. Payment of
Expenses........................................16
Sec. 9:9. Company
Records............................................16
Sec. 9:10.
Information................................................16
Sec. 9:11. No Liability of
Company....................................16
Sec. 9:12. Company
Action.............................................16
Sec. 9:13.
Severability...............................................17
Sec. 9:14.
Notices....................................................17
Sec. 9:15. Waiver of
Notice...........................................17
Sec. 9:16.
Successors.................................................17
Sec. 9:17.
Headings...................................................17
Sec. 9:18. Governing
Law..............................................17
Sec. 9:19. Word
Usage.................................................17
Sec. 9:20.
Remedies...................................................18
Article X: Approval of
Shareholders........................................18
1999 Stock Option Plan
of
TGC Industries, Inc.
This TGC Industries, Inc. 1999 Stock Option Plan (the "Plan") provides
for the granting of:
(a) Incentive Stock Options (hereinafter defined) to certain key
employees of TGC Industries, Inc., a Texas corporation ("Company"),
and/or its Affiliates (hereinafter defined), and
(b) Nonstatutory Stock Options (hereinafter defined) to certain
key
employees of Company, and/or its Affiliates, and to certain individuals
who are not employees of Company or its Affiliates.
The purpose of the Plan is to provide an incentive for key employees of
Company and/or its Affiliates, and for individuals who are not employees of
Company and/or its Affiliates but who from time to time provide substantial
advice or other assistance or services to Company and/or its Affiliates, to
remain in the service of Company and/or its Affiliates or continue to
provide such assistance, to extend to them the opportunity to acquire a
proprietary interest in Company so that they will apply their best efforts
for the benefit of Company, and to aid Company in attracting able persons to
enter the service of Company and/or its Affiliates or provide such
assistance.
Article I
Definitions
Sec. 1:1. Act. "Act" shall mean the Securities Exchange Act of 1934,
as amended.
Sec. 1:2. Affiliates. "Affiliates" shall mean: (a) any corporation,
other than Company, in an unbroken chain of corporations ending with Company
if each of the corporations, other than Company, owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain; and (b) any
corporation, other than Company, in an unbroken chain of corporations
beginning with Company if each of the corporations, other than the last
corporation in the unbroken chain, owns stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
Sec. 1:3. Agreement. "Agreement" shall mean the written agreement
between Company and a Holder evidencing the Option granted by Company and
the understanding of the parties with respect thereto.
Sec. 1:4. Board of Directors. "Board of Directors" shall mean the
board of directors of Company.
Sec. 1:5. Code. "Code" shall mean the Internal Revenue Code of 1986,
as amended.
Sec. 1:6. Committee. "Committee" shall mean the committee designated
in Article III hereof by the Board of Directors to administer this Plan.
Sec. 1:7. Eligible Individuals. "Eligible Individuals" shall mean:
(a) key employees, including officers and/or directors who are also
employees of Company and/or of any of its Affiliates; and (b) individuals
who are not employees of Company and/or of its Affiliates but who from time
to time provide substantial advice or other assistance or services to
Company and/or its Affiliates.
Sec. 1:8. Fair Market Value. "Fair Market Value" shall mean, if the
Stock is traded on one or more established markets or exchanges, the mean of
the opening and closing prices of the Stock on the primary market or
exchange on which the Stock is traded, and if the Stock is not so traded or
the Stock does not trade on the relevant date, the value determined in good
faith by the Board of Directors. For purposes of valuing Incentive Stock
Options, the Fair Market Value of stock shall be determined without regard
to any restriction other than one which, by its terms, will never lapse.
Sec. 1:9. Holder. "Holder" shall mean an Eligible Individual to whom
an Option has been granted.
Sec. 1:10. Incentive Stock Options. "Incentive Stock Options" shall
mean stock options that are intended to satisfy the requirements of Sec. 422
of the Code.
Sec. 1:11. Nonstatutory Stock Options. "Nonstatutory Stock Options"
shall mean stock options that are not intended to be, or are not denominated
as, Incentive Stock Options.
Sec. 1:12. Options. "Options" shall mean either Incentive Stock
Options or Nonstatutory Stock Options, or both.
Sec. 1:13. Stock. "Stock" shall mean Company's authorized $.10 par
value Common Stock.
Article II
Stock and Maximum Number of Shares Subject to the Plan
Sec. 2:1. Description of Stock and Maximum Shares Allocated. The
Stock which Options granted hereunder give a Holder the right to purchase
may be unissued or reacquired shares of Stock, as the Board of Directors
may, in its sole and absolute discretion, from time to time determine.
Subject to the adjustments in Sec. 6.6 hereof, the aggregate number of
shares of Stock to be issued pursuant to the exercise of all Options granted
hereunder may equal, but may not exceed, 300,000 shares of Company's Stock.
Sec. 2:2. Restoration of Shares. If an Option hereunder expires,
terminates, or is not exercised for any reason during the term of this Plan,
the shares of Stock which were subject to such Option shall be "restored" to
the Plan by again being available for Options granted after the shares'
restoration, effective as of the first day of the year following such
expiration, termination, or non-exercise.
Article III
Administration of the Plan
Sec. 3:1. Stock Option Committee. This Plan will be administered by a
Committee consisting of six members to be appointed by Company's Board of
Directors. The members of the Stock Option Committee must be members of the
Company's Board of Directors.
Sec. 3:2. Duration, Removal, Etc. The members of the Committee shall
serve at the pleasure of the Board of Directors, which shall have the power,
at any time and from time to time, to remove members from the Committee or
to add members thereto. Vacancies on the Committee, however caused, shall
be filled by the Board of Directors.
Sec. 3:3. Meetings and Actions of Committee. The Committee shall
elect one of its members as its Chairman and shall hold its meetings at such
times and places as it may determine. All decisions and determinations of
the Committee shall be made by the majority vote of all of its members
present at a meeting; provided, however, that any decision or determination
reduced to writing and signed by all of the members of the Committee shall
be as fully effective as if it had been made at a meeting duly called and
held. The Committee may make any rules and regulations for the conduct of
its business that are not inconsistent with the provisions hereof and with
the Bylaws of Company.
Sec. 3:4. Committee's Powers. Subject to the express provisions
hereof, the Committee shall have the authority, in its sole and absolute
discretion to: (a) adopt, amend, and rescind administrative and interpretive
rules and regulations relating to the Plan; (b) determine the terms and
provisions of the respective Agreements (which need not be identical),
including provisions defining or otherwise relating to: (i) subject to
Article VI of the Plan, the term and the period or periods and extent of
exercisability of the Options, (ii) the extent to which the transferability
of shares of Stock issued upon exercise of Options is restricted, (iii) the
effect of termination of employment upon the exercisability of the Options,
and (iv) the effect of approved leaves of absence (consistent with any
applicable regulations of the Internal Revenue Service); (c) accelerate the
time of exercisability of any Option that has been granted; (d) construe the
respective Option Agreements and the Plan; and (e) make all other
determinations and perform all other acts necessary or advisable for
administering the Plan, including the delegation of such ministerial acts
and responsibilities as the Committee deems appropriate. The Committee may
correct any defect or supply any omission or reconcile any inconsistency in
the Plan or in any Agreement in the manner and to the extent it shall deem
expedient to carry it into effect, and it shall be the sole and final judge
of such expediency. The determination of the Committee on the matters
referred to in this Sec. 3.4 shall be final and conclusive.
Article IV
Eligibility and Participation
Sec. 4:1. Eligible Individuals. Options may be granted hereunder only
to persons who are Eligible Individuals at the time of the grant thereof.
Notwithstanding any provision contained herein to the contrary, a person may
not receive an Incentive Stock Option hereunder unless he or she is an
employee of Company and/or an Affiliate, nor shall a person be eligible to
receive an Incentive Stock Option hereunder if he or she, at the time such
Option is granted, would own (within the meaning of Secs. 422 and 424 of the
Code) stock possessing more than ten percent (10%) of the total combined
voting power or value of all classes of stock of Company or an Affiliate,
unless at the time such Incentive Stock Option is granted the exercise price
per share is at least one hundred ten percent (110%) of the Fair Market
Value of each share of stock to which the Incentive Stock Option relates and
the Incentive Stock Option is not exercisable after the expiration of five
(5) years from the date it is granted.
Sec. 4:2. No Right to Option. The adoption of the Plan shall not be
deemed to give any person a right to be granted an Option.
Article V
Grant of Options and Certain Terms of the Agreements
Sec. 5:1. Determination of Eligible Individuals. Subject to the
express provisions hereof, the Committee shall determine which Eligible
Individuals shall be granted Options hereunder from time to time. In making
grants, the Committee shall take into consideration the contribution the
potential Holder has made or may make to the success of Company and/or its
Affiliates along with such other considerations as the Board of Directors
may from time to time specify. The Committee shall also determine the
number of shares subject to each of such Options and shall authorize and
cause Company to grant Options in accordance with such determinations.
Sec. 5:2. Date of Grant. The date on which the Committee completes
all action constituting an offer of an Option to an individual, including
the specification of the number of shares of Stock to be subject to the
Option, shall be the date on which the Option covered by an Agreement is
granted, even though certain terms of the Agreement may not be determined at
such time and even though the Agreement may not be executed until a later
time. For purposes of the preceding sentence, an offer shall be deemed made
if the Committee has completed all such action and has communicated the
grant thereof to the potential Holder. In no event, however, may an
Optionee gain any rights in addition to those specified by the Committee in
its grant, regardless of the time that may pass between the grant of the
Option and the actual execution of the Agreement by Company and the
Optionee.
Sec. 5:3. Stock Option Agreement. Each Option granted hereunder shall
be evidenced by an Agreement, executed by Company and the Eligible
Individual to whom the Option is granted, incorporating such terms as the
Committee deems necessary or desirable. More than one Option may be granted
hereunder to the same Eligible Individual and be outstanding concurrently
hereunder. In the event an Eligible Individual is granted both one or more
Incentive Stock Options and one or more Nonstatutory Stock Options, such
grants shall be evidenced by separate Agreements, one for each of the
Incentive Stock Option grants and one for each of the Nonstatutory Stock
Option grants.
Sec. 5:4. Forfeiture of Stock. Each Agreement may provide for
conditions giving rise to the forfeiture of the Stock acquired pursuant to
an Option granted hereunder and/or such restrictions on the transferability
of shares of Stock acquired pursuant to an Option granted hereunder as the
Committee in its sole and absolute discretion deems proper or advisable.
Such conditions giving rise to forfeiture may include, but need not be
limited to, the requirement that the Holder render substantial services to
Company and/or its Affiliates for a specified period of time. Such
restrictions on transferability may include, but need not be limited to,
options and rights of first refusal in favor of Company.
Sec. 5:5. Cash Awards. In addition, the Board of Directors may
authorize the Committee to grant cash awards payable in connection with the
exercise of an Option upon such terms and conditions as are specified by the
Board of Directors; provided that no such cash award shall be effective
unless it complies with any applicable requirements for exemption from
liability pursuant to Rule 16b-3 promulgated under the Act.
Article VI
Terms and Conditions of Options
All Options granted hereunder shall comply with, be deemed to include,
and shall be subject to, the following terms and conditions:
Sec. 6:1. Number of Shares. Each Agreement shall state the number of
shares of Stock to which it relates. Except to the extent an Agreement
otherwise provides, the following limitations shall apply to the exercise of
each Option:
A. First Year. A Holder may not exercise his or her Option
during
the first twelve (12) month period following the date of grant of such
Option.
B. After First Year. A Holder may exercise up to (but not more
than) one-third of the total shares of Stock subject to his or her
Option
at any time after the first twelve (12) month period following the day
of
grant of such Option.
C. After Second Year. A Holder may exercise up to (but not more
than) two-thirds of the total shares of Stock subject to his or her
Option at any time after the first twenty-four (24) month period
following the date of grant of such Option.
D. After Third Year. A Holder may exercise all of the shares of
Stock subject to his or her Option at any time after the first
thirty-six
(36) month period following the date of grant of such Option.
E. Senior Status. Notwithstanding the limitations stated above,
if a Holder is sixty-five (65) years of age or older at the time his or
her Option is granted, such Holder may exercise up to (but not more
than)
one-half of the total shares of Stock subject to such Option at any
time
during the first twelve (12) month period following the date of grant
of
such Option and thereafter may exercise all of the shares of Stock
subject to such Option.
F. De Minimus Limitation. Subject to the limitations stated
above, each Option may be exercised at one time or on several
successive
occasions; however, each Option may not be exercised in an amount less
than one hundred (100) shares at any one time (unless such exercise is
being made as to the entire portion of Stock which may be purchased
pursuant to this Plan).
Sec. 6:2. Exercise Price. Each Agreement shall state the exercise
price per share of Stock. The exercise price per share of stock subject to
an Incentive Stock Option shall not be less than the greater of: (a) the
par value per share of the Stock; or (b) one hundred percent (100%) of the
Fair Market Value per share of Company's Stock on the date of the grant of
the Option. The exercise price per share of stock subject to a Nonstatutory
Stock Option shall not be less than fifty percent (50%) of the Fair Market
Value per share of the Stock on the date of the grant of the Option.
Sec. 6:3. Medium and Time of Payment, Method of Exercise, and
Withholding Taxes.
A. Exercise of Option. Except as otherwise permitted below, the
exercise price of stock covered by an Option shall be payable upon the
exercise of the Option in cash, by certified or cashier's check.
Exercise of an Option shall not be effective until Company has
received
written notice of exercise. Such notice must specify the number of
whole shares to be purchased and be accompanied by payment in full of
the aggregate exercise price of the number of shares purchased.
Company
shall not in any case be required to sell, issue, or deliver a
fractional share with respect to any Option.
1. Stock-for-Stock Exercise. With the consent of the
Committee,
the Holder may pay the exercise price with shares of Stock of
Company which have been held by the Holder for at least six (6)
months prior to the date of exercise, or with the consent of the
Committee, by a combination of cash and such shares. Such Stock
shall be duly endorsed for transfer to Company. Such Stock shall
be deemed to have a fair market value on the date of delivery
equal
to the aggregate purchase price of the shares with respect to
which
such Option or portion thereof is being exercised.
2. Cashless Exercise/Sale Method. With the consent of the
Committee, payment in full of the exercise price of the Option
may
be made through the Company's receipt of a copy of instructions
to
a broker directing such broker to sell the Stock for which the
Option is being exercised, to remit to the Company an amount
equal
to the aggregate exercise price of such Option, with the balance
being remitted to Holder.
3. Cashless Exercise/Net Method. With the consent of the
Committee, payment in full of the exercise price of the Option
may
be made, based on written instructions received from the Holder,
by
Company's issuance to the Holder of that number of shares of
Stock
having a fair market value equal to only the "profit portion" of
his, her, or its Option (i.e., the excess of the then fair market
value of the Stock over the Holder's exercise price).
B. New Options. In the event that a Holder pays the exercise
price of his Option, in whole or in part, with previously owned shares
of Stock, pursuant to the rules specified above, then, if and to the
extent approved by the Committee, in addition to the shares of Stock
purchased pursuant to the Option exercise, such Holder shall also
receive a new Option, subject to the terms and conditions set forth
below and in the Holder's individual Stock Option Agreement. Upon
exercise of the Option with payment in the form of either shares of
Stock or a combination of cash and shares of Stock, the Committee may,
in its sole and absolute discretion, grant the Holder a new Option for
shares of Stock equal to the number of shares that were delivered by
the
Holder to Company to pay, in whole or in part, the exercise price of
the
previous Option. The exercise price of the new Option shall be equal
to
at least 100% of the Fair Market Value per share of the Stock on the
date of the exercise of the previous Option. Provided, however, the
new
Option cannot be exercised by the Holder until the later of: (1) the
exercisability dates specified in the individual Option Agreement; or
(2) six (6) months after the date of grant. As a further condition on
the exercisability of the new Option, the shares of Stock received by
the Holder upon exercise of his or her previous Option must be held by
the Holder for at least six (6) months prior to any sale of such
shares
by the Holder. Any sale of such shares by a Holder prior to the
expiration of the six (6) month holding period shall render the new
Option non-exercisable. Nothing in this paragraph shall prevent the
Committee from granting a Holder another new Option in the future when
the previous new Option is exercised by the Holder with the payment of
previously owned shares of Stock.
C. Withholding.
1. General. The Committee may, in its discretion, require a
Holder to pay to Company at the time of exercise of an Option (or
portion thereof) the amount that Company deems necessary to
satisfy
its obligation to withhold Federal, state, or local income or
other
taxes incurred by reason of the exercise. Upon the exercise of
an
Option requiring tax withholding, a Holder may make a written
request to have shares of stock withheld by Company from the
shares
otherwise to be received. The number of shares so withheld shall
have an aggregate Fair Market Value on the date of exercise
sufficient to satisfy the applicable withholding taxes. The
acceptance of any such request by a Holder shall be at the sole
discretion of the Committee, including, if deemed necessary by
the
Committee, approval by the Securities and Exchange Commission and
the satisfaction of any additional requirements necessary to
obtain
such approval.
2. Additional Sec. 16b Requirements. Currently, with
respect
to Option holders subject to liability under Section 16b of the
Act, such additional requirements include the following: (1) any
previously owned shares of Stock used to satisfy the withholding
obligation must have been held by the taxpayer for at least six
(6)
months, and any Option shares otherwise issuable hereunder to be
withheld to satisfy such obligations may be so withheld only if
both the exercise of the Option and the election to have shares
withheld are made at least six (6) months after the date of
grant;
(2) the Option holder's election must be made: (a) at least six
(6)
months less one day prior to the date on which the option
exercise
becomes taxable, or (b) within a 10-day "window period" beginning
on the third business day following the release of Company's
annual
or quarterly financial reports and ending on the twelfth day
thereafter (but in no event later than the date the option
exercise
becomes taxable); (3) Company has been subject to the Act's
reporting requirements for more than a year and has filed all
reports and statements required to be filed pursuant to Section
13
of the Act; (4) Company regularly issues quarterly or annual
summary statements of sales and earnings; (5) all members of the
Committee administering the Plan with respect to Option holders
subject to liability under Section 16b of the Act are
"disinterested" in accordance with Rule 16b-3 promulgated under
the
Act; (6) the Committee will be empowered to consent to or
disapprove an Option holder's withholding election; and (7) any
withholding election will be required to be irrevocable.
Sec. 6:4. Terms, Time of Exercise, and Transferability of Options.
2.0 Decrease in Term of Option. In addition to such other terms
and conditions as may be included in a particular Agreement granting an
Option, an Option shall be exercisable during a Holder's lifetime only by
him or her or by his or her guardian or legal representative. An Option
shall not be transferrable other than by will or the laws of descent and
distribution. Each Option shall also be subject to the following terms and
conditions (except to the extent a Holder's Agreement otherwise provides):
(a) Termination of Employment or Directorship.
I. Voluntary Termination. If a Holder ceases to be
employed
by at least one of the employers in the group of employers
consisting of Company and its Affiliates because the Holder
voluntarily terminates his or her employment with such group
of employers and the Holder does not remain or thereupon
become a director of Company or one or more of its
Affiliates,
or if a Holder ceases to be a director of at least one of
the
corporations in the group of corporations consisting of
Company and its Affiliates and the Holder does not remain or
thereupon become an employee of Company or one or more of
its
Affiliates, the portion (if any) of an Option that remains
unexercised, including that portion (if any) that pursuant
to
the Agreement is not yet exercisable, as of the date of the
Holder's termination of employment or ceasing to be a
director, whichever occurs later, shall terminate and cease
to
be exercisable as of such date (or ninety [90] days prior
thereto if the Holder elected to exercise his or her Option
in
anticipation of such termination [to be determined in the
sole
discretion of the Committee]).
II. Termination for Cause. If a Holder ceases to be
employed
by at least one of the employers in the group of employers
consisting of Company and its Affiliate because any of such
entities terminates the Holder's employment for cause, the
portion (if any) of an Option that remains unexercised,
including that portion (if any) that pursuant to the
Agreement
is not yet exercisable, at the time of the Holder's
termination of employment, shall terminate and cease to be
exercisable immediately upon such termination (or ninety
[90]
days prior thereto if the Holder elected to exercise his or
her Option in anticipation of such termination [to be
determined in the sole discretion of the Committee]). A
Holder's employment shall be deemed terminated "for cause"
if
terminated by the Board of Directors of Company (or the
board
of directors of an Affiliate) because of incompetence,
insubordination, dishonesty, other acts detrimental to the
interest of Company and/or its Affiliates, or any material
breach by the Holder of any employment, nondisclosure,
noncompetition, or other contract with Company and/or one of
its Affiliates. Whether "cause" exists shall be determined
by
such Board of Directors in its sole discretion and in good
faith. The exercise of an option in anticipation of a
termination for cause shall be null and void.
III. Termination Without Cause. If a Holder ceases to be
employed by at least one of the employers in the group of
employers consisting of Company and its Affiliates because
one
or more of such entities terminates the employment of the
Holder for otherwise than for "cause," and the Holder does
not
remain or thereupon become a director of Company and/or one
or
more of its Affiliates, the Holder shall have the right for
thirty (30) days following such termination to exercise the
Option with respect to that portion thereof that has become
exercisable pursuant to Holder's Agreement as of the date of
such termination, and thereafter the Option shall terminate
and cease to be exercisable.
(b) Disability. If a Holder ceases to be employed by at least one of
the employers in the group of employers consisting of Company and its
Affiliates by reason of disability (as defined in Sec. 22(e)(3) of the
Code) and does not remain or thereupon become a director of Company or
one or more of its Affiliates, or if the Holder ceases by reason of
such
disability to be a director of at least one of the corporations in the
group of corporations consisting of Company and its Affiliates, the
Holder shall have the right for ninety (90) days after the date of
termination of employment with, or cessation of directorship of, such
group of employers by reason of disability, whichever occurs later, to
exercise an Option to the extent such Option is exercisable on the
date
of his or her termination of employment, and thereafter the Option
shall
terminate and cease to be exercisable.
(c) Death. If a Holder dies while in the employ of Company or an
Affiliate, or dies while a director of Company or an Affiliate, his or
her Option shall be exercisable by his or her legal representatives,
legatees, or distributees for six (6) months following the date of the
Holder's death to the extent such Option is exercisable on the
Holder's
date of death, and thereafter the Option shall terminate and cease to
be
exercisable.
2.1 Term of Option. Notwithstanding any other provision of this Plan,
including the provisions of Subsection A above, no Incentive Stock Option
may be exercised after the expiration of ten (10) years from the date it was
granted (or the period specified in Sec. 4.1, if applicable). The Committee
may prescribe in any Agreement that the Option evidenced thereby may be
exercised in full or in part as to any number of shares subject thereto at
any time or from time to time during the term of the Option, or in such
installments at such times during said term as the Committee may prescribe.
Except as provided above and unless otherwise provided in any Agreement, an
Option may be exercised at any time or from time to time during the term of
the Option. Such exercise may be as to any or all whole (but no fractional)
shares which have become purchasable under the Option.
2.2 Issuance of Stock Certificates. Within a reasonable time, or such
time as may be permitted by law, after Company receives written notice that
the Holder has elected to exercise all or a portion of an Option, such
notice to be accompanied by payment in full of the aggregate exercise price
of the number of shares purchased, Company shall issue and deliver a
certificate representing the shares acquired as a result of the exercise and
any other amounts payable in consequence of such exercise. In the event
that a Holder exercises both an Incentive Stock Option, or portion thereof,
and a Nonstatutory Stock Option, or a portion thereof, separate Stock
certificates shall be issued, one for the Stock subject to the Incentive
Stock Option and one for the Stock subject to the Nonstatutory Stock Option.
The number of shares of Stock transferrable due to an exercise of an Option
under this Plan shall not be increased due to the passage of time, except as
may be provided in an Agreement.
2.3 Issuance in Compliance With Securities Laws. Nothing herein or in
any Option granted hereunder shall require Company to issue any shares upon
exercise of any Option if such issuance would, in the opinion of counsel for
Company, constitute a violation of the Securities Act of 1933, as amended,
or any similar or superseding statute or statutes, or any other applicable
statute or regulation, as then in effect.
2.4 Investment Legend. At the time of exercise of an Option, Company
may, as a condition precedent to the exercise of such Option, require from
the Holder of the Option (or in the event of his or her death, his or her
legal representatives, legatees, or distributees) such written
representations, if any, concerning his or her intentions with regard to the
retention or disposition of the shares being acquired by exercise of such
Option and such written covenants and agreements, if any, as to the manner
of disposal of such shares as, in the opinion of counsel to Company, may be
necessary to ensure that any disposition by such Holder (or in the event of
his or her death, his or her legal representatives, legatees, or
distributees), will not involve a violation of the Securities Act of 1933,
as amended, or any similar or superseding statute or statutes, or any other
applicable state or federal statute or regulation, as then in effect.
Certificates for shares of Stock, when issued, may have the following
legend, or statements of other applicable restrictions, endorsed thereon,
and may not be immediately transferable:
The shares of Stock evidenced by this certificate have been
issued to the registered owner in reliance upon written
representations that these shares have been purchased for
investment. These shares may not be sold, transferred, or
assigned unless, in the opinion of Company and its legal
counsel, such sale, transfer, or assignment will not be in
violation of the Securities Act of 1933, as amended,
applicable rules and regulations of the Securities and
Exchange Commission, and any applicable state securities laws.
Sec. 6:5. Limitation on Aggregate Value of Shares That May Become
First Exercisable During Any Calendar Year Under an Incentive Stock Option.
With respect to any Incentive Stock Option granted under this Plan, to the
extent that the aggregate Fair Market Value of shares of Stock exceed
$100,000, then such excess over $100,000 shall not be considered as subject
to an Incentive Stock Option, but rather shall be considered as subject to a
Nonstatutory Stock Option. This rule shall be applied by taking shares of
Stock subject to Incentive Stock Options that are purchasable for the first
time in the calendar year into account in the order in which such Incentive
Stock Options were granted.
Sec. 6:6. Adjustments Upon Changes in Capitalization, Merger, Etc.
A. Method of Adjustment. In the event of any change in the
number
of outstanding shares of Stock effected without receipt of
consideration
therefor by Company (other than as a result of the conversion of
Company's Class B Common Stock into Class A Common Stock) by reason of
a
stock dividend, or split, combination, exchange of shares or other
recapitalization, merger, or otherwise, in which Company is the
surviving
corporation, the aggregate number and class of the reserved shares, the
number and class of shares subject to each outstanding Option, and the
exercise price of each outstanding Option shall be automatically
adjusted
to accurately and equitably reflect the effect thereon of such change
(provided that any fractional share resulting from such adjustment may
be
eliminated). In the event of a dispute concerning such adjustment, the
decision of the Committee shall be conclusive. The number of reserved
shares or the number of shares subject to any outstanding Option shall
be
automatically reduced by any fraction included therein which results
from
any adjustment made pursuant hereto.
B. Termination of Option. The following provisions shall apply
unless a Holder's Agreement provides otherwise. A dissolution or
liquidation of Company; a sale of all or substantially all of the
assets
of Company where it is contemplated that within a reasonable period of
time thereafter Company will either be liquidated or converted into a
nonoperating company or an extraordinary dividend will be declared
resulting in a partial liquidation of Company (but in all cases only
with
respect to those employees whom it is anticipated will lose their
employment with Company and its Affiliates as a result of such sale of
assets); a merger or consolidation (other than a merger effecting a
reincorporation of Company in another state or any other merger or a
consolidation in which the shareholders of the surviving corporation
and
their proportionate interests therein immediately after the merger or
consolidation are substantially identical to the shareholders of
Company
and their proportionate interests therein immediately prior to the
merger
or consolidation) in which Company is not the surviving corporation (or
survives only as a subsidiary of another corporation in a transaction
in
which the shareholders of the parent of Company and their proportionate
interests therein immediately after the transaction are not
substantially
identical to the shareholders of Company and their proportionate
interests therein immediately prior to the transaction) shall cause
every
Option then outstanding to terminate, but the Holders of each such then
outstanding Option shall, in any event, have the right, immediately
prior
to such dissolution, liquidation, sale of assets, merger,
consolidation,
or transaction, to exercise each such Option, to the extent not
theretofore exercised, without regard to the determination as to the
periods and installments of exercisability made pursuant to a Holder's
Agreement if (and only if) such Options have not at that time expired
or
been terminated.
Sec. 6:7. Rights as a Shareholder. A Holder shall have no right as a
shareholder with respect to any shares covered by his or her Option until a
certificate representing such shares is issued to him or her. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash or
other property) or distributions or other rights for which the record date
is prior to the date such certificate is issued (except as provided in Sec.
6.6. hereof).
Sec. 6:8. Modification, Extension, and Renewal of Options. Subject to
the terms and conditions of and within the limitations of the Plan, the
Committee may modify, extend, or renew outstanding Options granted under the
Plan, or accept the surrender of Options outstanding hereunder (to the
extent not theretofore exercised) and authorize the granting of new Options
hereunder in substitution therefor (to the extent not theretofore
exercised). The Committee may not, however, without the consent of the
Holder, modify any outstanding Incentive Stock Options so as to specify a
lower exercise price or accept the surrender of outstanding Incentive Stock
Options and authorize the granting of new Options in substitution therefor
specifying a lower option price. In addition, no modification of an Option
granted hereunder may, without the consent of the Holder, alter or impair
any rights or obligations under any Option theretofore granted hereunder to
such Holder under the Plan, except as may be necessary with respect to
Incentive Stock Options to satisfy the requirements of Sec. 422 of the Code.
Sec. 6:9. Furnish Information. Each Holder shall furnish to Company
all information requested by Company to enable it to comply with any
reporting or other requirements imposed upon Company by or under any
applicable statute or regulation.
Sec. 6:10. Obligation to Exercise; Termination of Employment. The
granting of an Option hereunder shall impose no obligation upon the Holder
to exercise the same or any part thereof. In the event of a Holder's
termination of employment with Company or an Affiliate, the unexercised
portion of an Option granted hereunder shall terminate in accordance with
Sec. 6.4 hereof.
Sec. 6:11. Agreement Provisions. The Agreements authorized under the
Plan shall contain such provisions in addition to those required by the Plan
(including, without limitation, restrictions or the removal of restrictions
upon the exercise of the Option and the retention or transfer of shares
thereby acquired) as the Committee deems advisable. Each Agreement shall
identify the Option evidenced thereby as an Incentive Stock Option or
Nonstatutory Stock Option, as the case may be, and no Agreement shall cover
both an Incentive Stock Option and Nonstatutory Stock Option. Except as
provided by Subsection B of Sec. 6.6, each Agreement relating to an
Incentive Stock Option granted hereunder shall contain such limitations and
restrictions upon the exercise of the Incentive Stock Option to which it
relates as is necessary for the Incentive Stock Option to which such
Agreement relates to constitute an incentive stock option, as defined in
Sec. 422 of the Code.
Article VII
Duration of Plan
No Incentive Stock Options may be granted hereunder after the date that
is ten (10) years from the earlier of: (i) the date this Plan is adopted by
the Board of Directors; or (ii) the date this Plan is approved by Company's
shareholders. In addition, with respect to shares of Stock not currently
covered by an outstanding Option, this Plan may be terminated at any time by
the Board of Directors.
Article VIII
Amendment of Plan
The Board of Directors may, insofar as permitted by law, with respect
to any shares at the time are not subject to Options, suspend or discontinue
the Plan or revise or amend it in any respect whatsoever; provided, however,
that, without the approval of the holders of a majority of the outstanding
shares of voting stock of all classes of Company, no such revision or
amendment shall: (a) change the number of shares of the Stock subject to
the Plan, (b) change the designation of the class of employees eligible to
receive Options, (c) decrease the price at which Incentive Stock Options may
be granted, (d) remove the administration of the Plan from the Committee, or
(e) without the consent of the affected Holder, cause the Incentive Stock
Options granted hereunder and outstanding at such time that satisfied the
requirements of Sec. 422 of the Code to no longer satisfy such requirements.
Article IX
General
Sec. 9:1. Application of Funds. The proceeds received by Company from
the sale of shares pursuant to Options shall be used for general corporate
purposes.
Sec. 9:2. Right of Company and Affiliates to Terminate Employment.
Nothing contained in the Plan, or in any Agreement, shall confer upon any
Holder the right to continue in the employ of Company or any Affiliate, or
interfere in any way with the rights of Company or any Affiliate to
terminate his or her employment at any time.
Sec. 9:3. No Liability for Good Faith Determinations. Neither the
members of the Board of Directors nor any member of the Committee shall be
liable for any act, omission, or determination taken or made in good faith
with respect to the Plan or any Option granted under it, and members of the
Board of Directors and the Committee shall be entitled to indemnification
and reimbursement by Company in respect of any claim, loss, damage, or
expense (including attorneys' fees, the costs of settling any suit, provided
such settlement is approved by independent legal counsel selected by
Company, and amounts paid in satisfaction of a judgment, except a judgment
based on a finding of bad faith) arising therefrom to the full extent
permitted by law and under any directors and officers liability or similar
insurance coverage that may from time to time be in effect.
Sec. 9:4. Information Confidential. As partial consideration for the
granting of each Option hereunder, the Holder shall agree with Company that
he or she will keep confidential all information and knowledge that he or
she has relating to the manner and amount of his participation in the Plan;
provided, however, that such information may be disclosed as required by law
and may be given in confidence to the Holder's spouse, tax, and financial
advisors, or to a financial institution to the extent that such information
is necessary to secure a loan. In the event any breach of this promise
comes to the attention of the Committee, it shall take into consideration
such breach, in determining whether to recommend the grant of any future
Option to such Holder, as a factor militating against the advisability of
granting any such future Option to such individual.
Sec. 9:5. Other Benefits. Participation in the Plan shall not
preclude the Holder from eligibility in any other stock option plan of
Company or any Affiliate or any old age benefit, insurance, pension, profit
sharing retirement, bonus, or other extra compensation plans which Company
or any Affiliate has adopted, or may, at any time, adopt for the benefit of
its employees.
Sec. 9:6. Execution of Receipts and Releases. Any payment of cash or
any issuance or transfer of shares of Stock to the Holder, or to his or her
legal representative, heir, legatee, or distributee, in accordance with the
provisions hereof, shall, to the extent thereof, be in full satisfaction of
all claims of such persons hereunder. The Committee may require any Holder,
legal representative, heir, legatee, or distributee, as a condition
precedent to such payment, issuance, or transfer, to execute a release and
receipt therefor in such form as it shall determine.
Sec. 9:7. No Guarantee of Interests. Neither the Committee nor
Company guarantees the Stock of Company from loss or depreciation.
Sec. 9:8. Payment of Expenses. All expenses incident to the
administration, termination, or protection of the Plan, including, but not
limited to, legal and accounting fees, shall be paid by Company or its
Affiliates.
Sec. 9:9. Company Records. Records of Company or its Affiliates
regarding the Holder's period of employment, termination of employment and
the reason therefor, leaves of absence, re-employment, and other matters
shall be conclusive for all purposes hereunder, unless determined by the
Committee to be incorrect.
Sec. 9:10. Information. Company and its Affiliates shall, upon
request or as may be specifically required hereunder, furnish or cause to be
furnished, all of the information or documentation which is necessary or
required by the Committee to perform its duties and functions under the
Plan.
Sec. 9:11. No Liability of Company. Company assumes no obligation or
responsibility to the Holder or his or her personal representatives, heirs,
legatees, or distributees for any act of, or failure to act on the part of,
the Committee.
Sec. 9:12. Company Action. Any action required of Company shall be by
resolution of its Board of Directors or by a person authorized to act by
resolution of the Board of Directors.
Sec. 9:13. Severability. If any provision of this Plan is held to be
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining provisions hereof, but such provision shall be fully
severable, and the Plan shall be construed and enforced as if the illegal or
invalid provision had never been included herein.
Sec. 9:14. Notices. Whenever any notice is required or permitted
hereunder, such notice must be in writing and personally delivered or sent
by mail. Any notice required or permitted to be delivered hereunder shall
be deemed to be delivered on the date on which it is personally delivered,
or, whether actually received or not, on the third business day after it is
deposited in the United States mail, certified or registered, postage
prepaid, addressed to the person who is to receive it at the address which
such person has theretofore specified by written notice delivered in
accordance herewith. Company or a Holder may change, at any time and from
time to time, by written notice to the other, the address which it or he had
theretofore specified for receiving notices. Until changed in accordance
herewith, Company and each Holder shall specify as its and his or her
address for receiving notices the address set forth in the Agreement
pertaining to the shares to which such notice relates.
Sec. 9:15. Waiver of Notice. Any person entitled to notice hereunder
may waive such notice.
Sec. 9:16. Successors. The Plan shall be binding upon the Holder, his
or her heirs, legatees, and legal representatives, upon Company, its
successors, and assigns, and upon the Committee, and its successors.
Sec. 9:17. Headings. The titles and headings of Sections and
Subsections are included for convenience of reference only and are not to be
considered in construction of the provisions hereof.
Sec. 9:18. Governing Law. All questions arising with respect to the
provisions of the Plan shall be determined by application of the laws of the
State of Texas except to the extent Texas law is preempted by federal law.
Questions arising with respect to the provisions of an Agreement that are
matters of contract law shall be governed by the laws of the state specified
in the Agreement, except to the extent Texas corporate law conflicts with
the contract law of such state, in which event Texas corporate law shall
govern. The obligation of Company to sell and deliver Stock hereunder is
subject to applicable laws and to the approval of any governmental authority
required in connection with the authorization, issuance, sale, or delivery
of such Stock.
Sec. 9:19. Word Usage. Words used in the masculine shall apply to the
feminine where applicable, and wherever the context of this Plan dictates,
the plural shall be read as the singular and the singular as the plural.
Sec. 9:20. Remedies. Company may recover from a Holder reasonable
attorneys' fees incurred in connection with the enforcement of the terms and
provisions of the Plan and any Agreement whether by an action to enforce
specific performance or for damages for its breach or otherwise.
Article X
Approval of Shareholders
The Plan shall take effect on the date it is adopted by the Board of
Directors. However, if this Plan is not approved by the holders of a
majority of the outstanding shares of Company's Common Stock at a Meeting
of Shareholders scheduled to be held in 2000, any Options granted hereunder
shall be null, void, and of no force and effect as of their grant date.
IN WITNESS WHEREOF, TGC Industries, Inc., acting by and through its
officers hereunto duly authorized has executed this instrument to be
effective the 14th day of December, 1999.
TGC INDUSTRIES, INC.
By: /s/ Allen T. McInnes
Allen T. McInnes,
Chairman of the Board
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Front of Card
- ----------------------------------------------------------------------------
TGC INDUSTRIES, INC. (the "Company")
Proxy Solicited on Behalf of the Board of Directors for the
Special Meeting of Shareholders, March 23, 2000
The undersigned hereby appoint(s) Allen T. McInnes or Wayne A.
Whitener, each with full power of substitution, as proxies, to vote all
Common Stock and Preferred Stock in TGC Industries, Inc. which the
undersigned would be entitled to vote on all matters which may come before
the Special Meeting of the Shareholders of the Company, to be held on
March 23, 2000, and any adjournments thereof.
THE PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE
THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 and 3.
(Continued on other side)
- ----------------------------------------------------------------------------
Back of Card
- ----------------------------------------------------------------------------
/X/ Please mark your
votes as in this
example.
The Board of Directors recommends a vote FOR each
of the following items:
1. ELECTION OF TWO (2) NEW DIRECTORS OF THE COMPANY.
______ FOR all nominees ______ Withhold authority Nominees:
listed at right to vote for all William H. White
(except as marked nominees listed Pasquale V. Scaturro
to the contrary at right
as indicated below)
INSTRUCTIONS: To withhold authority to vote for any
individual nominee, vote for all
nominees and strike a line through
the individual nominee's name listed
at right.
2. CONSENT TO A NEW SERIES OF 8-1/2% SENIOR CONVERTIBLE PREFERRED STOCK
(By vote of the holders of the Company's outstanding Preferred Stock,
voting as a class).
_____ FOR _____ AGAINST _____ ABSTAIN
ONLY HOLDERS OF PREFERRED STOCK ARE ENTITLED TO VOTE ON ITEM 2. ABOVE.
3. APPROVAL OF THE COMPANY'S 1999 STOCK OPTION PLAN.
_____ FOR _____ AGAINST _____ ABSTAIN
Returned proxy forms when properly executed will be voted: (1) as
specified on the matters listed above; (2) in accordance with the
Directors' recommendations where a choice is not specified; and (3) in
accordance with the judgment of the proxies on any other matters that may
properly come before the meeting.
PLEASE COMPLETE, SIGN, DATE AND RETURN THE CARD PROMPTLY.
Signature(s) _____________________________________ Date:______________
Note: Executors, trustees and others signing in a representative capacity
should include their names and capacity in which they sign. PLEASE DATE
AND SIGN AS SHOWN HERE AND MAIL PROMPTLY IN THE ENCLOSED ENVELOPE.
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