SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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/ / 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.
- ---------------------------------------------------------------------------
(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
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(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).
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(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 ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 12, 2003
To Shareholders of
TGC INDUSTRIES, INC.:
The annual meeting of the shareholders of TGC Industries, Inc. (the
"Company") will be held at 1304 Summit Avenue, Suite 2, Plano, Texas on
June 12, 2003, at 10:00 A.M., Central Daylight Savings Time, for the
following purposes:
1. To elect seven (7) directors to serve until the next annual meeting of
shareholders and until their respective successors shall be elected
and qualified;
2. To ratify the selection of Lane Gorman Trubitt, L.L.P. as independent
auditors;
3. To approve an amendment to the Articles of Incorporation to reduce the
par value of the Company's Common Stock from $.30 per share to $.01
per share; 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 April 14, 2003, 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
May 5, 2003
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
ANNUAL MEETING OF SHAREHOLDERS -- June 12, 2003
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
the Annual Meeting of Shareholders to be held at 1304 Summit Avenue, Suite
2, Plano, Texas on June 12, 2003, 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 May 5, 2003.
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 April 14, 2003 (the "Record Date") as the date for determination of
shareholders entitled to notice of and to vote at the meeting. As of the
Record Date, there were 5,515,064 shares of the Company's Common Stock
outstanding, 58,100 shares of the Company's Series C 8% Convertible
Exchangeable Preferred Stock ("Series C Preferred Stock") outstanding and
2,782,708 of the Company's 8.5% Senior Convertible Preferred Stock ("Senior
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, Series C Preferred Stock or Senior Preferred Stock held in his or
her name on the Record Date. The Company's Restated Articles of
Incorporation prohibit cumulative voting.
A copy of the Annual Report to shareholders of the Company for its
fiscal year ended December 31, 2002, is being mailed with this Proxy
Statement to all such shareholders entitled to vote.
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ACTION TO BE TAKEN
AND VOTE REQUIRED
Action will be taken at the meeting to (1) elect seven (7) members to
the Board of Directors, (2) ratify the selection of Lane Gorman Trubitt,
L.L.P. as independent auditors, (3) approve an amendment to the Articles of
Incorporation to reduce the par value of the Company's Common Stock from
$.30 per share to $.01 per share, and (4) transact such other business as
may properly come before the meeting and any adjournment thereof. 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 affirmative vote of the holders of a majority of the outstanding shares
of Common Stock, Series C Preferred Stock and Senior Preferred Stock
present, in person or by proxy, at the annual meeting, is required for the
shareholders to approve the election of the seven (7) members to the Board
of Directors and to ratify the selection of Lane Gorman Trubitt, L.L.P. as
independent auditors. The affirmative vote of the holders of (1) two-thirds
(2/3) of the outstanding shares of Common Stock, Series C Preferred Stock
and Senior Preferred Stock entitled to vote thereon, and (2) two-thirds
(2/3) of the outstanding shares of Common Stock entitled to vote thereon,
voting as a class, is required for the shareholders to approve the
amendment to the Articles of Incorporation to reduce the par value of the
Company's Common Stock.
ELECTION OF DIRECTORS
Seven (7) directors are to be elected at the Annual Meeting of
Shareholders to comprise the entire membership of the Company's Board of
Directors. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the nominees shown below for a term of one
year and until their successors are duly elected and have qualified.
Although it is not contemplated that any nominee will be unable to
serve as a director, in such event the proxies will be voted by the holders
thereof for such other person as may be designated by the current Board of
Directors. The Management of the Company has no reason to believe that any
of the nominees will be unable or unwilling to serve if elected to office,
and to the knowledge of Management, the nominees intend to serve the entire
term for which election is sought. There are no family relationships by
blood, marriage, or adoption between any director or executive officer. Up
to two vacancies may be filled by the Board of Directors under Texas law
during the time between any two successive annual shareholder meetings if
suitable persons are designated. Each executive officer of the Company is
a nominee as set forth below with the exception of Kenneth Uselton (age 59)
who has served as Controller since 1995 and Treasurer since August 1, 1996.
The information set forth below with respect to each of the nominees has
been furnished by each respective nominee.
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Name, Age, and Positions with Company
Business Experience
__________________________________________________________________________
Allen T. McInnes, 65 Chairman of the Board
Chairman of the Board since July 1993; and Secretary
Secretary since November 1997; Chief Executive
Officer of the Company from August 1993 to
March 1996; Executive Vice-President and
Director of Tenneco, Inc. 1960-1992; President
and CEO of Tetra Technologies, Inc. from
April 1996 to August 2001; Director
of Tetra Technologies, 1996 to present;
Dean, Rawls College of Business,
Texas Tech University from August, 2001 to
present; Director of Alamosa PCS, a wireless
communication company which is an affiliate
of Sprint since February, 2003.
Wayne A. Whitener, 51 CEO and President
Chief Executive Officer of the Company since
January 1999; Chief Operating Officer of the
Company from July 1986 to December 1998;
President of the Geophysical Division since
1984; served as Vice President of TGC from 1983
to 1984; Area Manager for Grant Geophysical Co.
from December 1978 until July 1983.
William J. Barrett, 63 None
Director of the Company, Secretary of the
Company from 1986 to November 1997; Director and
President of Barrett-Gardner Associates, Inc.,
a merchant and investment banking firm since
November, 2002, and previously Senior Vice President
of Janney Montgomery Scott LLC, investment bankers
since 1978; also a Director of: Supreme Industries,
Inc., a manufacturer of specialized truck bodies
and shuttle buses, since 1979; Chairman of the Board
of Rumson-Fair Haven Bank and Trust, a community
commercial bank and trust company.
Herbert M. Gardner, 63 None
Director of the Company; Director and Executive Vice
President of Barrett-Gardner Associates, Inc., a
merchant and investment banking firm since November,
2002, and previously Senior Vice President of Janney
Montgomery Scott LLC, investment bankers since 1978;
Chairman of the Board and a Director of Supreme
Industries, Inc., a manufacturer of specialized truck
bodies and shuttle buses, since 1979; and President
since 1992. Also a Director of: Nu Horizons Electronics
Corp., an electronic component distributor; iDine
Rewards Network, Inc., formerly Transmedia Network,
Inc., a company that develops and markets transaction-
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Name, Age, and Positions with Company
Business Experience
___________________________________________________________________________
__
based dining and other consumer rewards
programs; Hirsch International Corp., an
importer of computerized embroidery machines
and supplies; and Co-Active Marketing Group,
Inc., a marketing and sales promotion company;
and Rumson-Fair Haven Bank and Trust Company,
a community commercial bank and trust company.
Edward L. Flynn, 68 None
Owner of Flynn Meyer Company, a management company
for the restaurant industry, since 1976; Director
and Treasurer, Citri-Lite Co., a soft drink company;
and Director of Bioject Medical Technologies, Inc.,
a drug delivery system company.
James M. Tidwell, 56 None
Vice President and Chief Financial Officer of
WEDGE Group Incorporated, since January, 2000, a
diversified firm with subsidiaries in engineering
and construction, hotel, oil and gas, and real estate
businesses; President of Daniel Measurement and
Control, a division of Emerson Electric
Company from June, 1999 to January, 2000; from
August, 1996 to June, 1999, Executive Vice President
and Chief Financial Officer of Daniel Industries Inc.,
a leading supplier of specialized equipment and
systems to oil, gas and process operators and plants
to measure and control the flow of fluids; Senior
Vice President and Chief Financial Officer of
Hydril Company, a worldwide leader in engineering,
manufacturing and marketing premium tubular
connections and pressure control devices for oil
and gas drilling and production; and services on
the boards of Pioneer Drilling Company, T3 Energy
Services, and EOTT LLC.
Pasquale V. Scaturro, 49 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 of non-exclusive
seismic surveys from 1986 to 1995.
The Company's Board of Directors recommends that you vote FOR the nominees
named above for election to the Board of Directors.
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RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has appointed Lane Gorman Trubitt, L.L.P. to
serve as auditors of the Company. The Company's Board of Directors
recommends that you vote FOR ratification of the selection of Lane Gorman
Trubitt, L.L.P. as the Company's auditors for the fiscal year ending
December 31, 2003.
AMENDMENT TO THE ARTICLES OF INCORPORATION TO
REDUCE THE PAR VALUE OF THE COMPANY'S COMMON STOCK
General
The Company's Board of Directors has unanimously adopted a resolution
approving, and recommending to the stockholders for approval, a proposal to
amend Article 4.a. of the Company's Articles of Incorporation to reduce the
par value of each share of Common Stock from $.30 to $.01. The form of the
proposed amendment is as follows:
The Articles of Incorporation are hereby amended by amending Article
4.a so that, as amended, it shall read ad follows:
4.a. Common Stock. The aggregate number of shares of Common Stock
which the Corporation may issue is 25,000,000 shares, each having a part
value of $.01. The shares shall be designated as Common Stock and shall
have identical rights and privileges in every request.
Reasons For the Reduction in Par Value
Under Texas corporate law, Common Stock cannot be issued at a price
below par value. As of April 17, 2003, the closing sales price of the
Common Stock was $.08, significantly below the current par value of $.30
per share. As a result, the Company's ability to obtain financing through
the issuance of Common Stock, the issuance of securities convertible into
Common Stock, such as convertible preferred stock or convertible debt, or
the issuance of securities with the right to purchase Common Stock, such as
warrants or options, is significantly limited. In addition, in connection
with a debt financing transaction in 2002, the Company issued warrants
covering 1,500,000 shares of Common Stock which are exercisable at $.20 per
shares. Since such exercise price is below the current par value of $.30,
the warrants are not currently exercisable at $.20, and, therefore, the
warrant agreement governing such warrants provides that in the event the
par value per share is not reduced to $.01 by March 10, 2004, each warrant
entitles the holder to purchase (in lieu of one share of Common Stock) one
unit at the then per share par value, each unit consisting of one share of
Common Stock and one warrant entitling the holder to purchase one share of
Common Stock under the same terms and provisions as provided in the current
warrant agreement. Furthermore, in March 2003, the same investor group
that provided the above described debt financing in 2002 committed to
provide up to $300,000 in debt financing through December 31, 2003, on the
same terms as the 2002 debt financing, provided that warrants covering only
750,000 shares of Common Stock will be issued upon execution of the debt
financing documents and warrants covering the remaining 750,000 shares of
Common Stock will only be issued in proportion to the amount of the
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$300,000 commitment which the Company determines to draw on (e.g. if the
Company borrows a total of $150,000, warrants covering 375,000 shares will
be issued and if the Company borrows the full commitment of $300,000,
warrants covering 750,000 shares will be issued). The Board of Directors
believes that the proposed reduction in the par value is desirable to
provide the Company with the necessary flexibility in future financing
transactions to meet the Company's capital and liquidity needs.
Effective Date and Accounting Matters
The reduction in par value will become effective upon the filing with
the Secretary of State of the Articles of Amendment, which is expected to
take place promptly after the approval of the amendment to the Articles at
the Annual Meeting. As a result of the reduction in par value, on the
effective date thereof, the stated par value capital on the Company's
balance sheet attributable to Common Stock will be reduced to 1/30th of its
present amount, and the additional paid in capital account shall be
credited with the amount by which the stated capital is reduced. The per
share net income or loss and net book value per share of Common Stock will
not be affected.
Recommendation
The Company's Board of Directors recommends that you vote FOR the
amendment to Articles of Incorporation to reduce the par value of the
Company's Common Stock.
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 April 14, 2003, of
more than five percent (5%) of the Company's Common Stock, Series C
Preferred Stock or Senior Preferred Stock. Such tabulation also sets forth
the number of shares of the Company's Common Stock, or Series C Preferred
Stock or Senior Preferred Stock beneficially owned as of April 14, 2003, 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,
Series C Preferred Stock or Senior Preferred Stock possess the sole voting
and dispositive power in regard to such stock. The $5.00 per share Series
C Preferred Stock is freely convertible into shares of Common Stock at the
conversion price per share of Common Stock of $6.00. Ownership of the
Series C Preferred Stock is deemed to be beneficial ownership of Common
Stock at the conversion price per share of $6.00 under Rule 13d-3(d)(1)
promulgated under the Securities Exchange Act of 1934. The Senior
Preferred Stock is freely convertible into shares of Common Stock at the
conversion ratio of one (1) share of Common Stock for each share of Senior
Preferred Stock. Ownership of the Senior Preferred Stock is deemed to be
beneficial ownership of Common Stock at a conversion ratio of one (1) share
of Common Stock for each share of Senior Preferred Stock under Rule 13d-3
(d) (1) promulgated under the Securities Exchange Act of 1934. As of April
14, 2003, there were 5,515,064 shares of Common Stock, 58,100 shares of
Series C Preferred Stock and 2,782,708 shares of Senior Preferred Stock
outstanding.
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The following tabulation also includes Common Stock covered by (i)
options granted under the Company's 1993 and 1999 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 1,053,487 (2) 17.49%
TGC Industries, Inc.
1304 Summit Ave. Ste. 2
Plano, TX 75074
Wayne A. Whitener Common 139,066 (2) 2.47%
TGC Industries, Inc.
1304 Summit Ave., Ste 2
Plano, Texas 75074
Herbert M. Gardner Common 866,233 (2)(3) 14.39%
4 Darley Road
Great Neck, New York 11021
William J. Barrett Common 1,276,607 (2)(4) 21.20%
636 River Road
Fair Haven, New Jersey 07704
Edward L. Flynn Common 1,409,684 (2)(5) 23.41%
75-11 Myrtle Avenue
Glendale, New York 11385
Kenneth W. Uselton Common 14,224 (2) *
TGC Industries, Inc.
1304 Summit, Ste 2
Plano, Texas 75074
Pasquale V. Scaturro Common 6,666 (2) *
1415 Louisiana Ste 3000
Houston, Texas 77002
William C. Hurtt, Jr. Common 658,950 (6) 11.33%
236 Navesink Avenue
Navesink, New Jersey 07752
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WEDGE Energy Common 2,782,708 (7) 33.53%
Services, L.L.C. Senior Pfd. 2,782,708 100.00%
__________________ ______
All directors and officers Common 4,765,967 62.08%
as a group of eight (8) (2)(3)(4)(5)
persons
* 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 Senior Preferred Stock and certain
options and warrants were deemed to be currently outstanding solely with
respect to the holders of such Senior Preferred Stock, options, and
warrants.
(2) 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 6,666 500,000
Edward L. Flynn 6,666 500,000
Herbert M. Gardner 6,666 500,000
Allen T. McInnes 6,666 500,000
Kenneth W. Uselton 9,000 -0-
Pasquale V. Scaturro 6,666 -0-
Wayne A. Whitener 69,433 50,000
William C. Hurtt, Jr. -0- 300,000
______ _______
All directors and officers
as a group 111,763 2,050,000
The number of shares set forth above for each of Messrs. Barrett, Flynn,
Hurtt, Gardner and McInnes includes 300,000 shares issuable upon exercise
of warrants issued in 2002 in connection with debt financing provided to
the Company. Such warrants are exercisable at $.20 per whole share
(provided, however, that the exercise price at the time of a given exercise
shall not be less than the per share par value of the Common Stock).
However, in the event that the per share value of the Common Stock is not
reduced to one cent ($.01) by March 10, 2004, then each warrant shall be
entitled to purchase (in lieu of one (1) share of Common Stock) one (1)
unit at the then per share par value, such unit consisting of one (1) share
of Common Stock and one (1) warrant entitling the holder to purchase one
(1) share of Common Stock under the same terms and provisions as provided
in the warrant agreement governing such warrants.
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(3) Includes 35,261 shares of Common Stock owned by Herbert M.
Gardner's wife. Mr. Gardner has disclaimed beneficial ownership of these
shares.
(4) Includes 55,231 shares of Common Stock owned by William J.
Barrett's wife. Mr. Barrett has disclaimed beneficial ownership of these
shares.
(5) Includes 20,316 shares of Common Stock owned by Edward L.
Flynn's wife. Mr. Flynn has disclaimed beneficial ownership of these
shares.
(6) Includes 10,800 shares of Common Stock owned by William C.
Hurtt's wife. Mr. Hurtt has disclaimed beneficial ownership of these
shares.
(7) Includes the number of shares of Common Stock which are deemed
to be beneficially owned as a result of ownership of Senior Preferred
Stock. Each share of Senior Preferred Stock is convertible into one share
of Common Stock.
Depositories such as The Depository Trust Company (Cede & Company) as of
April 14, 2003 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.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has an Executive Committee comprised of Messrs.
McInnes, Barrett and Tidwell, an Audit Committee comprised of Messrs.
McInnes, Barrett and Tidwell, and a Stock Option Committee comprised of
Messrs. McInnes, Barrett and Tidwell.
The Executive Committee is charged by the Company's bylaws with the
responsibility of exercising such authority of the Board of Directors as is
specifically delegated to it by the Board, subject to certain limitations
contained in the bylaws.
The Audit Committee which was formed in December, 1997, conducted four
meetings in 2002. The purpose and functions of the Audit Committee are to
recommend the appointment of independent auditors; review the scope of the
audit proposed by the independent auditors; review quarterly and year-end
financial statements prior to issuance; consult with the independent
auditors on matters relating to internal financial controls and procedures;
and make appropriate reports and recommendations to the Board of Directors.
Prior to formation of the Audit Committee, these duties were performed by
the Executive Committee.
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REPORT OF THE AUDIT COMMITTEE
The responsibilities of the Audit Committee, which are set forth in
the Audit Committee Charter adopted by the Board of Directors, include
providing oversight to the Company's financial reporting process, the
systems of financial controls, the performance and independence of the
independent auditors, the annual audit of the Company's financial
statements, and related matters. The Audit Committee is composed of a
majority of independent Directors.
The Audit Committee: (1) reviewed and discussed with management TGC's
audited financial statements for the year ended December 31, 2002; (2)
discussed with the independent auditors the matters required by Statement
on Auditing Standards No. 61, Communication with Audit Committees, as
amended by Statement on Auditing Standards No. 90, Audit Committee
Communications; (3) received the written disclosures and the letter from
the independent auditors required by Independence Standards Board Standard
No. 1, Independence Discussions with Audit Committees; and (4) discussed
with the auditors the auditors' independence.
Based on the review and discussions described above with respect to
the Company's audited financial statements included in the Company's 2002
Annual Report to Shareholders, the Audit Committee recommended to the Board
of Directors that the audited financial statements for the year ended
December 31, 2002, be included in TGC's Annual Report on Form 10-KSB for
filing with the Securities and Exchange Commission.
The Audit Committee:
William J. Barrett, Chairman
Allen T. McInnes
James M. Tidwell
Audit Fees
The aggregate fees billed by the Company's independent accountants for
professional services rendered in connection with (i) the audit of the
Company's annual financial statements set forth in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2002, and (ii) the
review of the Company's quarterly financial statements set forth in the
Company's Quarterly Reports on Form 10-QSB for the quarters ended March 31,
2002, June 30, 2002, and September 30, 2002, were approximately $36,500.
All Other Fees
The aggregate fees for all other services rendered by its independent
accountants for the Company's most recent fiscal year were approximately
$10,100. These fees include work performed by the independent accountants
with respect to preparation of corporate income tax returns and tax
compliance.
The Audit Committee has advised the Company that it has determined
that the non-audit services rendered by the Company's independent
accountants during the Company's most recent fiscal year are compatible
with maintaining the independence of such accountants.
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STOCK OPTION COMMITTEE
The Stock Option Committee had no meetings during the year. The
Committee is responsible for awarding Stock Options to key employees or
individuals who provide substantial advice or other assistance to the
Company so that they will apply their best efforts for the benefit of the
Company.
The Board of Directors does not have nominating or compensation
committees.
MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 2002, the Board of Directors
held eight (8) special meetings in addition to its regular meeting. All of
the Directors listed herein attended 75% or more of the total meetings of
the Board and of the committees on which they serve.
EXECUTIVE COMPENSATION
The table below sets forth on an accrual basis all cash and cash
equivalent remuneration paid by the Company during the year ended December
31, 2002, to the Chief Executive Officer and any other executives whose
salary and bonus exceeded $100,000.
Summary Compensation Table
Name and Principal Annual Compensation Options/ All Other
Position Year Salary Bonus Stock SAR's Compensation
__________________________________________________________________________
Wayne A. Whitener 2002 $125,000 -0- -0- -0- $6,021 (1)
President 2001 $ 94,875 -0- -0- -0- $6,298 (2)
& CEO 2000 $ 94,875 -0- -0- -0- $7,733 (3)
(1) Represents personal use of Company vehicle ($4,883), Company's
payment for personal income tax preparation ($145), Company's
contribution to 401-K program ($717), and life insurance
premiums ($276) in 2002.
(2) Represents personal use of Company vehicle ($5,522), Company's
payment for personal income tax preparation ($135), Company's
contribution to 401-K program ($365), and life insurance
premiums ($276) in 2001.
(3) Represents personal use of Company vehicle ($5,362), Company's
payment for personal income tax preparation ($125), Company's
contribution to 401-K program ($1,970), and life insurance
premiums ($276) in 2000.
12
The Company does not presently, but has in the past, maintained Club
memberships for certain of its executive officers. Although these
memberships were utilized from time-to-time for non-business purposes, the
costs attributable to non-business purposes were not material. The Company
believes that the aggregate amounts of such personal benefits did not
exceed 10% of cash compensation paid to any individual in the table or,
with respect to the group of all executive officers, 10% of the aggregate
cash compensation paid to the members of such group.
401(k) Plan
In 1987, the Company implemented a 401(k) salary deferral plan (the
"Plan") which covers all employees who have reached the age of 20-1/2 years
and have been employed by the Company for at least one year. The covered
employees may elect to have an amount deducted from their wages for
investment in a retirement plan. The Company has the option, at its
discretion, to make contributions to the Plan. Effective January 1, 1990,
the Company determined in its discretion to make a matching contribution to
the Plan equal to 10% of the employees' contributions up to 6% of those
employees' compensation. On July 24, 1991, to be effective August 5, 1991,
the Board of Directors increased the Company's matching contribution to the
Plan to fifty cents ($.50) for every one dollar ($1.00) of compensation a
participant defers under the Plan up to 6% of those employees'
compensation. Beginning January 4, 1993, the Board of Directors
discontinued the matching contribution to the Plan. Concurrently with the
acquisition of the Company's former subsidiary, Chase Packaging
Corporation, the Board of Directors reinstated contributions to the 401(k)
salary deferral plan. The Company made a matching contribution to the Plan
equal to the sum of 75% of each Participant's Salary reduction
contributions to the Plan for such Plan year which were not in excess of 3%
of the Participant's compensation for such Plan year, and 50% of each
Participant's salary reduction contributions to the Plan for such Plan Year
which were in excess of 3% of the Participant's compensation but not in
excess of 8% of the Participant's compensation for such Plan Year. As of
January 1, 1999, the Company determined to make a contribution to the Plan
equal to 100% of each participant's salary reduction contributions to the
Plan up to 2% of the participant's compensation. The total amount of the
Company's contribution during 2002 for the one (1) executive officer of the
Company participating in the 401(k) Plan was as follows: Wayne A. Whitener
- - $717.
Options Granted in Last Fiscal Year
During the year ended December 31, 2002, no stock options or stock
appreciation rights were granted to any of the executive officers of the
Company.
Aggregate Options/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Options/SAR Values
The following table sets forth certain information regarding the year-
end value of Options held by the Company's executive officers during the
fiscal year ended December 31, 2002. There are no stock appreciation
rights outstanding.
13
Aggregated Options Exercised
and FY-End Options Values
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End (2)
Shares
Name and Acquired on Value Exercisable/ Exercisable/
Principal Position Exercise (1) Realized($) Unexercisable
Unexercisable
__________________________________________________________________________
Wayne A. Whitener -0- -0- 69,433/ $ -0-/
President & CEO 16,667 $ -0-
(1) The exercise price and tax withholding obligations related to
exercise may be paid by delivery of already owned shares, subject to
certain conditions.
(2) The value of outstanding options is based on the December
31,2002 closing stock price which was $0.0625.
TRANSACTIONS WITH MANAGEMENT
During 2002, the Company issued promissory notes payable in an
aggregate principal amount of $150,000 to an investor group that included
certain directors for debt financing provided to the Company and, in
connection therewith, issued stock purchase warrants to such persons. The
warrants cover 1,500,000 shares of Common Stock, expire on September 10,
2012, and are exercisable at $.20 per whole share (provided, however that
the exercise price at the time of a given exercise of the warrants shall
not be less than the then per share par value of the Common Stock). In the
event that the per share par value of the Common Stock is not reduced to
one cent ($.01) within eighteen (18) months from September 10, 2002, then
each warrant shall be entitled to purchase (in lieu of one (1) share of
Common Stock) one (1) unit at the then per share par value, such unit
consisting of one (1) share of Common Stock and one (1) warrant entitling
the holder to purchase one (1) share of Common Stock under the same terms
and provisions as provided in the warrant agreement governing such
warrants. The promissory notes, which bore interest at 6.75% per annum,
were paid in full during December 2002 and January 2003. The notes and
warrants were issued as follows: Allen T. McInnes - $30,000 note and
warrant for 300,000 shares; An outside investor - $30,000 note and warrant
for 300,000 shares; William J. Barrett - $30,000 note and warrant for
300,000 shares; Herbert M. Gardner - $30,000 note and warrant for 300,000
shares; and Edward L. Flynn - $30,000 note and warrant for 300,000 shares.
In March 2003, the same investor group that provided the above
described debt financing in 2002 committed to provide up to $300,000 in
debt financing through December 31, 2003, on the same terms as the 2002
debt financing, provided that warrants covering only 750,000 shares of
14
Common Stock will be issued upon execution of the debt financing documents
and warrants covering the remaining 750,000 shares of Common Stock will
only be issued in proportion to the amount of the $300,000 commitment which
the Company determines to draw on (e.g. if the Company borrows a total of
$150,000, warrants covering 375,000 shares will be issued and if the
Company borrows the full commitment of $300,000, warrants covering 750,000
shares will be issued).
During the year ended December 31, 2001, the Company had no
transactions with management.
During 1999, the Company issued subordinated promissory notes payable
in an aggregate principal amount of $312,500 to certain officers and
directors for debt financing provided to the Company and, in connection
therewith, issued stock purchase warrants to such persons. The warrants
cover 850,000 shares of Common Stock, are exercisable at $.30 per share,
and expire on July 31, 2009. The subordinated promissory notes, which bore
interest at 8% per annum, were paid in full during December 1999. The
notes and warrants were issued as follows: Allen T. McInnes - $75,000 note
and warrant for 200,000 shares; Wayne A. Whitener - $12,500 note and
warrant for 50,000 shares; William J. Barrett - $75,000 note and warrant
for 200,000 shares; Herbert M. Gardner - $75,000 note and warrant for
200,000 shares; and Edward L. Flynn - $75,000 note and warrant for 200,000
shares.
STOCK OPTION PLANS
1986 Incentive and Nonqualified Stock Option Plan
In 1986 the Company adopted the 1986 Incentive and Nonqualified Stock
Option Plan (the "1986 Plan"). The term of the 1986 Plan was for a period
of ten years with the result that the 1986 Plan terminated on July 24,
1996. Stock options outstanding as of the date of termination of the 1986
Plan remain outstanding until they are exercised, terminated, or expire.
The provisions which were contained in the 1986 Plan were comparable
to the provisions contained in the 1993 Plan (hereafter described) which
succeeded the 1986 Plan.
Options granted under the 1986 Plan covering 6,333 shares (adjusted
for one-for-three reverse stock split) which were outstanding on January 1,
2001, expired unexercised on May 1, 2001.
1993 Stock Option Plan
On June 3, 1993, the Company's Board of Directors approved and adopted
the Company's 1993 Stock Option Plan (the "1993 Plan"). At the 1994 Annual
Meeting, the Company's shareholders approved the 1993 Stock Option Plan.
The following paragraphs summarize certain provisions of the 1993 Stock
Option Plan and are qualified in their entirety by reference thereto.
The 1993 Plan provides for the granting of options (collectively, the
"Options") to purchase shares of the Company's Common Stock to certain key
employees of the Company (and/or any of its affiliates), and certain
individuals who are not employees of the Company but who from time-to-time
15
provide substantial advice or other assistance or services to the Company
(and/or any of its affiliates). The 1993 Stock Option Plan authorizes the
granting of options (both statutory and non-statutory) to acquire up to
283,333 shares of Common Stock (adjusted for the one-for-three reverse
stock split effective November 6, 1998), subject to certain adjustments
described below, to be outstanding at any time. Subject to the foregoing,
there is no limit on the absolute number of awards that may be granted
during the life of the 1993 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 1993 Plan, although fewer employees
may actually receive grants.
Authority to administer the 1993 Plan has been delegated to a
committee (the "Committee") of the Board of Directors. Except as expressly
provided by the 1993 Stock Option Plan, the Committee has the authority, in
its discretion, to award Options and to determine the terms and conditions
(which need not be identical) of such Options, including the person to
whom, and the time or times at which, Options will be awarded, the number
of Options to be awarded to each such person, the exercise price of any
such Options, and the form, terms, and provisions of any agreement pursuant
to which such Options are awarded. The 1993 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 an Option in
connection with the exercise thereof.
Subject to the limitations set forth below, the exercise price of the
shares of stock covered by each 1993 Option will be determined by the
Committee on the date of award.
Unless a holder's option agreement provides otherwise, the following
provisions will apply to exercise by the holder of his or her option: No
option 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 following the date of grant, 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
16
from the date it is awarded. The exercise price of the shares of Common
Stock covered by each Option that is not an ISO 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 an 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 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 Option for a number of shares
equal to the number of shares delivered by such holder to pay the exercise
price of the previous Option having an exercise price equal to at least
one-hundred percent (100%) of the fair market value per share of the Common
Stock on the date of the exercise of the previous Option.
The duration of each 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 award in the case of an ISO.
In the event of any change in the number of 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 class of shares subject to each outstanding Option, and the
exercise price of each outstanding Option will be automatically adjusted to
reflect the effect thereon of such change. Unless a holder's option
agreement provides otherwise, a dissolution or liquidation of the Company,
certain sales of all or substantially all of the assets 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, will cause such holder's Options
then outstanding to terminate, but such holder may, immediately prior to
such transaction, exercise such options without regard to the period and
installments of exercisability applicable pursuant to such holder's option
agreement.
The 1993 Plan will terminate on June 3, 2003, or such earlier date as
the Board of Directors may determine. Any stock option outstanding at the
termination date will remain outstanding until it has been exercised,
terminated, or has expired.
The 1993 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 which: (a) changes the
number of shares of Common Stock subject to the 1993 Stock Option Plan
other than by adjustment provisions provided therein, (b) changes the
designation of the class of employees eligible to receive Options, (c)
decreases the price at which ISO's may be granted, (d) removes the
administration of the 1993 Stock Option Plan from the Committee, or (e)
without the consent of the affected holder, causes the ISO's granted under
the 1993 Stock Option Plan and outstanding at such time that satisfied the
requirements of Sec. 422 of the Code no longer to satisfy such
requirements.
17
Granted stock options under the 1993 Stock Option Plan covering 63,100
shares (adjusted for one-for-three reverse split) were outstanding at
December 31, 2002. All 63,100 incentive stock options are outstanding to
officers and employees of the Company. 53,055 non-statutory stock options,
that were outstanding to officers and employees of the Company's former
subsidiary, Chase Packaging Corporation, expired unexercised during 2001.
During 2001 and 2002, no stock options were granted under the Company's
1993 Stock Option Plan.
Effective July 31, 1996, the Company's wholly owned subsidiary, Chase
Packaging Corporation ("Chase"), was spun-off to the Company's
shareholders. In view of this situation, and in order to provide the
employees of both Chase and the Company with the maximum period available
under the tax laws for exercising their options after a termination of
employment, the 1993 Plan was amended to extend from thirty days to three
months, the period of time following termination of employment, during
which the terminating employee could exercise his or her incentive stock
option. The 53,055 options not so exercised were converted to non-
statutory options and expired unexercised during 2001.
The purpose of the 1993 Plan is to provide an incentive for key
employees of the Company to remain in the service of the Company and to
apply their best efforts for the benefit of the Company so as to improve
the Company's financial performance.
1999 Stock Option Plan
On December 14, 1999, the Company's Board of Directors approved and
adopted the Company's 1999 Stock Option Plan (the "1999 Plan"). At the
2000 Annual Meeting, the Company's shareholders approved the 1999 Plan.
The following paragraphs summarize certain provisions of the 1999 Plan and
are qualified in their entirety by reference thereto.
The 1999 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 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 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 Plan, although fewer employees
may actually receive grants. During 2000, 169,000 options were granted
under the Company's 1999 Plan to directors, officers and employees of the
Company. During 2001 and 2002, no stock options were granted under the
Company's 1999 Stock Option Plan. Granted stock options under the 1999
Stock Option Plan covering 169,000 shares were outstanding at December 31,
2002.
18
Authority to administer the 1999 Plan has been delegated to a
committee (the "Committee") of the Board of Directors. Except as expressly
provided by the 1999 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
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, Nonstatutory Stock Option ("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
19
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 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 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.
20
The 1999 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 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 Plan from the Committee, or (e) without the
consent of the affected holder, causes the ISOs granted under the 1999 Plan
and outstanding at such time that satisfied the requirements of Sec. 422 of
the Code to no longer satisfy such requirements.
RECOMMENDATION AND VOTE
It is the opinion of the Board of Directors that the (1) election of
the seven (7) members of the Board of Directors, (2) ratification of the
selection of Lane Gorman Trubitt, L.L.P. as independent auditors, and (3)
the reduction in the par value of the Company's Common Stock 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 outstanding shares of Common Stock,
Series C Preferred Stock and Senior Preferred Stock present, in person or
by proxy, at the annual meeting, is required for the shareholders to
approve the election of the seven (7) members to the Board of Directors and
to ratify the selection of Lane Gorman Trubitt, L.L.P. as independent
auditors. The affirmative vote of the holders of (1) two-thirds (2/3) of
the outstanding shares of Common Stock, Series C Preferred Stock and Senior
Preferred Stock entitled to vote therefor, and (2) two-thirds (2/3) of the
outstanding shares of Common Stock entitled to vote thereon, voting as a
class, is required for the shareholders to approve the amendment to the
Articles of Incorporation to reduce the par value of the Company's Common
Stock.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Lane Gorman Trubitt, L.L.P. to
serve as auditors of the Company. It is expected that a representative of
Lane Gorman Trubitt, L.L.P. will be present at the shareholders' meeting
with the opportunity to make a statement if he/she desires to do so and
also will be available to respond to appropriate questions at the meeting.
On April 2, 2003, Grant Thornton LLP ("Grant Thornton") notified the Audit
Committee (the "Audit Committee") of the Board of Directors of TGC
Industries, Inc. (the "Company") and the Board of Directors of the Company
that Grant Thornton declined to stand for re-election as the Company's
principal accountants. In addition, on April 2, 2003, the Audit Committee
and the Board of Directors approved the engagement of Lane Gorman Trubitt,
LLP as the Company's principal accountants.
The reports of Grant Thornton on the Company's consolidated financial
statements for the years ended December 31, 2001 and 2002 contained no
adverse opinion or disclaimer of opinion and were not qualified or modified
as to uncertainty, audit scope or accounting principle.
21
In connection with its audits for the two most recent fiscal years and
through April 2, 2003, there have been no disagreements with Grant Thornton
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of Grant Thornton, would have caused them to
make reference thereto in their reports on the Company's consolidated
financial statements for such years.
OTHER MATTERS
The Company's management knows of no other matters that may properly
be, or which are likely to be, brought before the meeting. However, if any
other matters are properly brought before the meeting, the persons named in
the enclosed proxy, or their substitutes, will vote in accordance with
their best judgment on such matters.
SHAREHOLDER PROPOSALS
A shareholder proposal intended to be presented at the Company's
annual meeting of Shareholders in 2004 must be received by the Company at
its
principal executive offices in Plano, Texas on or before December 1, 2003
in order to be included in the Company's proxy statement and form of proxy
relating to that meeting.
FINANCIAL STATEMENTS
Financial statements of the Company are contained in the Annual Report
to Shareholders for the fiscal year ended December 31, 2002 enclosed
herewith. Such financial statements are incorporated herein by reference.
By Order of the Board of Directors
/s/ Allen T. McInnes
Plano, Texas
May 5, 2003
4891.00001/334298.1
22
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Front of Card
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COMMON STOCK PROXY
TGC INDUSTRIES, INC. (the "Company")
Proxy Solicited on Behalf of the Board of Directors for the
Annual Meeting of Shareholders, June 12, 2003
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 in TGC Industries, Inc. which the undersigned would be
entitled to vote on all matters that may come before the annual meeting of
the Shareholders of the Company, to be held on June 12, 2003, 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)
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Back of Card
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COMMON STOCK PROXY
/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 DIRECTORS OF THE COMPANY.
____ FOR all nominees ____ Withhold authority Nominees:
listed at right to vote for all Allen T. McInnes
(except as marked nominees listed Wayne A. Whitener
to the contrary at right William J. Barrett
as indicated below) Herbert M. Gardner
Edward L. Flynn
Pasquale V. Scaturro
James M. Tidwell
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. APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION TO REDUCE THE PAR
VALUE OF THE COMPANY'S COMMON STOCK FROM $.30 PER SHARE TO $.01 PER SHARE.
_____ FOR _____ AGAINST _____ ABSTAIN
23
3. RATIFICATION OF SELECTION OF LANE GORMAN TRUBITT, L.L.P. AS
INDEPENDENT AUDITORS.
_____ 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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Front of Card
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SERIES C PREFERRED STOCK PROXY
TGC INDUSTRIES, INC. (the "Company")
Proxy Solicited on Behalf of the Board of Directors for the
Annual Meeting of Shareholders, June 12, 2003
The undersigned hereby appoint(s) Allen T. McInnes or Wayne A.
Whitener, each with full power of substitution, as proxies, to vote all
Preferred Stock in TGC Industries, Inc. which the undersigned would be
entitled to vote on all matters that may come before the annual meeting
of the Shareholders of the Company, to be held on June 12, 2003,
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)
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Back of Card
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SERIES C PREFERRED STOCK PROXY
/X/ Please mark your
votes as in this
example.
The Board of Directors recommends a vote FOR each
of the following items:
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1. ELECTION OF DIRECTORS OF THE COMPANY.
____ FOR all nominees ____ Withhold authority Nominees:
listed at right to vote for all Allen T. McInnes
(except as marked nominees listed Wayne A. Whitener
to the contrary at right William J. Barrett
as indicated below) Herbert M. Gardner
Edward L. Flynn
Pasquale V. Scaturro
James M. Tidwell
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. APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION TO REDUCE THE PAR
VALUE OF THE COMPANY'S COMMON STOCK FROM $.30 PER SHARE TO $.01 PER SHARE.
_____ FOR _____ AGAINST _____ ABSTAIN
3. RATIFICATION OF SELECTION OF LANE GORMAN TRUBITT, L.L.P. AS
INDEPENDENT AUDITORS.
_____ 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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