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:
/ / Preliminary Proxy Statement / / Confidential, for use of
/X/ 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.
- ---------------------------------------------------------------------------
(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 ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 8, 2004
To Shareholders of
TGC INDUSTRIES, INC.:
The annual meeting of the shareholders of TGC Industries, Inc. (the
"Company") will be held at The University Club, One West 54th Street, New
York, New York on June 8, 2004, at 10:00 A.M., Eastern Time, for the
following purposes:
1. To elect six (6) 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; and
3. 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 12, 2004, 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:
Kenneth W. Uselton
Secretary
Plano, Texas
May 3, 2004
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.
1
TGC INDUSTRIES, INC.
1304 Summit Avenue, Suite 2
Plano, Texas 75074
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS -- June 8, 2004
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 The University Club, One
West 54th Street, New York, New York on June 8, 2004, 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 3, 2004.
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 12, 2004 (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 5,729,948 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
3,024,264 shares of the Company's 8 1/2% 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 $.01 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.
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A copy of the Annual Report to shareholders of the Company for its
fiscal year ended December 31, 2003, is being mailed with this Proxy
Statement to all such shareholders entitled to vote, but does not form any
part of the information for solicitation of proxies.
ACTION TO BE TAKEN
AND VOTE REQUIRED
Action will be taken at the meeting to (1) elect six (6) members to the
Board of Directors, (2) ratify the selection of Lane Gorman Trubitt, L.L.P.
as independent auditors, and (3) 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
the Company's Common Stock, Series C Preferred Stock and Senior Preferred
Stock, voting together as a single class, will constitute approval of all
matters expected to come before the meeting.
ELECTION OF DIRECTORS
Six (6) 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. The
Company's Board of Directors is currently comprised of six (6) members. The
nominees for election were recommended to the Board of Directors by a
majority of the independent directors of the Board.
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 W. Uselton (age 60)
who has served as Controller since 1995, Treasurer since August 1, 1996 and
Secretary since March 18, 2004. 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, 66 None
Chairman of the Board from July 1993 to March 2004;
Secretary from November 1997 to March 2004; 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, 52 CEO and President
Director of the Company; 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, 64 None
Director of the Company; Secretary of the
Company from 1986 to November 1997; President of
Barrett-Gardner Associates, Inc., an 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 New Jersey state independent,
commercial bank and trust company.
Herbert M. Gardner, 64 None
Director of the Company; Executive Vice President
of Barrett-Gardner Associates, Inc., an 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
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Director of: Nu Horizons Electronics Corp., an
electronic component distributor; Rewards
Network, Inc., formerly Transmedia Network, Inc., a
company that develops and markets transaction-based
dining and other consumer rewards programs; Hirsch
International Corp., an importer of computerized
embroidery machines and supplies; Co-Active
Marketing Group, Inc., a marketing and sales
promotion company; and Rumson-Fair Haven Bank and
Trust Company, a New Jersey state independent,
commercial bank and trust company.
Edward L. Flynn, 69 None
Director of the Company; 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.
William C. Hurtt, Jr., 59 None
Director of the Company; Retired, Vero Beach, FL;
BA Harvard College 1967; MBA Wharton School of
Business, University of Pennsylvania, 1969;
Manager of Blue Lake Properties, LLC, Tuscaloosa,
AL, from November 1998 to present; Former Director
of River Gas Corporation, October 1998 to
September 2000.
The Company's Board of Directors recommends that you vote FOR the nominees
named above for election to the Board of Directors.
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, 2004.
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 12, 2004, 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
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the number of shares of the Company's Common Stock, or Series C Preferred
Stock or Senior Preferred Stock beneficially owned as of April 12, 2004, 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 12, 2004, there were
5,729,948 shares of Common Stock, 58,100 shares of Series C Preferred Stock
and 3,024,264 shares of Senior Preferred Stock outstanding.
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," (ii) stock purchase
warrants, which warrants are collectively referred to as "Stock Purchase
Warrants" and (iii) Senior Preferred Stock which is convertible on a one-
for-one basis into Common Stock. 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)
___________________ ______________ _______________ ___________
Jason M. Elsas, Jr. Common 360,024 (7) 6.03%
37 Blackpoint Horseshoe
Rumson, NY 07760
Sidney Todres Common 427,735 (7) 7.09%
250 Park Avenue
New York, NY 10177
Allen T. McInnes Common 1,521,964 (2)(7) 22.84%
5529 50th Street
Lubbock, TX 79414
Wayne A. Whitener Common 184,047 (2) 3.14%
TGC Industries, Inc.
1304 Summit Ave., Ste 2
Plano, Texas 75074
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Herbert M. Gardner Common 1,390,362 (2)(3)(7) 20.72%
636 River Road
Fair Haven, NJ 07704
William J. Barrett Common 2,349,936 (2)(4) (7) 32.37%
636 River Road
Fair Haven, NJ 07704
Edward L. Flynn Common 1,870,661 (2)(5) 28.08%
75-11 Myrtle Avenue
Glendale, New York 11385
Kenneth W. Uselton Common 9,224 (2) *
TGC Industries, Inc.
1304 Summit, Ste 2
Plano, TX 75074
William C. Hurtt, Jr. Common 1,319,527 (6) 19.87%
917 Lady Bug Lane
Vero Beach, FL 32963
__________________ ______
All directors and officers Common 8,645,721 77.68%
as a group of seven (7) (2)(3)(4)(5)
persons (7)
* 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.
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Stock Options Warrants
_____________ ________
William J. Barrett 10,000 733,329
Edward L. Flynn 10,000 733,329
Herbert M. Gardner 10,000 733,329
Allen T. McInnes 10,000 733,329
Kenneth W. Uselton 4,000 -0-
Wayne A. Whitener 71,100 50,000
William C. Hurtt, Jr. -0- 533,329
_______ _________
All directors and officers
as a group 115,100 3,516,645
The number of shares set forth above for each of Messrs. Barrett, Flynn,
Gardner and McInnes includes 200,000 shares each issuable upon exercise (at
$.30 per whole share) of warrants issued in 1999. In addition, the number
of shares set forth above for each of Messrs. Barrett, Flynn, Hurtt, Gardner
and McInnes includes 300,000 shares each issuable upon exercise (at $.20 per
whole share) of warrants issued in 2002 and 150,000 shares each issuable
upon the exercise (at $.20 per whole share) of warrants issued in 2003, in
connection with debt financing provided to the Company. The above also
includes the additional warrants resulting from application of the anti-
dilution provisions under the 2002 and 2003 warrants as a result of the PIK
dividends paid on the Senior Preferred Stock.
(3) Includes 35,261 shares of Common Stock and 47,000 shares of
Senior Preferred 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 and 75,500 shares of
Senior Preferred 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 and 188,500 shares of
Senior Preferred 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 set
forth opposite the person's name in the following table. Each share of
Senior Preferred Stock is convertible into one share of Common Stock.
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Senior Preferred Stock
______________________
William J. Barrett 709,200
Edward L. Flynn -0-
Herbert M. Gardner 188,500
William C. Hurtt, Jr. 375,000
Allen T. McInnes 188,500
Jason M. Elsas, Jr. 235,800
Sidney Todres 300,000
Depositories such as The Depository Trust Company (Cede & Company) as of
April 12, 2004 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;
INDEPENDENT DIRECTORS
The Board of Directors has an Executive Committee comprised of Messrs.
McInnes, Barrett and Gardner, an Audit Committee comprised of Messrs.
Barrett, Flynn and Hurtt, and a Stock Option Committee comprised of Messrs.
McInnes, Barrett and Gardner.
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 five
meetings in 2003. The purpose and functions of the Audit Committee are to
appoint or terminate the independent auditors; evaluate and determine
compensation of the independent auditors; review the scope of the audit
proposed by the independent auditors; review 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.
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.
9
During the fiscal year ended December 31, 2003, the Board of Directors
held one (1) 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.
The Board of Directors has determined that the following five
directors, constituting a majority of the Board of Directors, have no
material relationship with the Company that would interfere with the
exercise of independent judgment and are therefore independent directors of
the Company: Allen T. McInnes, William J. Barrett, Herbert M. Gardner,
Edward L. Flynn and William C. Hurtt, Jr.
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 through periodic
meetings with the Company's independent auditors and management to review
accounting, auditing, internal controls and financial reporting matters. A
copy of the Audit Committee Charter is attached as Appendix A. The members
of the Audit Committee are independent as defined in Section 121(A) of the
American Stock Exchange listing standards (which is the national securities
exchange definition of "independent" the Audit Committee has chosen to use
as required under Item 7(d)(3)(iv) of Schedule 14A under the Securities
Exchange Act of 1934). All members of the Audit Committee are financially
literate and are able to read and understand fundamental financial
statements, including a balance sheet, income statement and cash flow
statement. The Board of Directors has determined that Mr. Barrett qualifies
as an "Audit Committee Financial Expert" as defined in Section 229.401(h) of
the 1934 Act, and his experience and background are described above under
the heading "Election of Directors." The management of the Company is
responsible for the preparation and integrity of the financial reporting
information and related systems of internal controls. The Audit Committee,
in carrying out its role, relies on the Company's senior management,
including senior financial management, and its independent auditors. The
Audit Committee has the authority and available funding to engage any
independent legal counsel and any accounting or other expert advisors as
necessary to carry out its duties.
We have reviewed and discussed with senior management the Company's
audited financial statements included in the 2003 Annual Report to
Shareholders. Management has confirmed to us that such financial statements
(i) have been prepared with integrity and objectivity and are the
responsibility of management and, (ii) have been prepared in conformity with
accounting principles generally accepted in the United States of America.
We have discussed with Lane Gorman Trubitt, L.L.P., the Company's
independent accountants, the matters required to be discussed by Statement
of Auditing Standards ("SAS") No. 61, "Communications with Audit
Committees." SAS No. 61 requires the Company's independent accountants to
provide us with additional information regarding the scope and results of
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their audit of the Company's financial statements, including with respect to
(i) their responsibility under auditing standards generally accepted in the
United States of America, (ii) significant accounting policies, (iii)
management judgments and estimates, (iv) any significant audit adjustments,
(v) any disagreements with management, and (vi) any difficulties encountered
in performing the audit.
We have received from Lane Gorman Trubitt, L.L.P. a letter providing
the disclosures required by Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees", with respect to any
relationships between Lane Gorman Trubitt, L.L.P. and the Company that in
their professional judgment may reasonably be thought to bear on their
independence. Lane Gorman Trubitt, L.L.P. has discussed its independence
with us and has confirmed in such letter that, in its professional judgment,
it is independent of the Company within the meaning of the federal
securities laws.
Based on the review and discussions described above with respect to the
Company's audited financial statements included in the Company's 2003 Annual
Report to Shareholders, we have recommended to the Board of Directors that
such financial statements be included in the Company's Annual Report on Form
10-KSB for filing with the Securities and Exchange Commission.
As specified in the Audit Committee Charter, it is not the duty of the
Audit Committee to plan or conduct audits or to determine that the Company's
financial statements are complete and accurate and in accordance with
accounting principles generally accepted in the United States of America.
That is the responsibility of management and the Company's independent
accountants. In giving our recommendation to the Board of Directors, we have
relied on (i) management's representation that such financial statements
have been prepared with integrity and objectivity and in conformity with
generally accepted accounting principles, and (ii) the report of the
Company's independent accountants with respect to such financial statements.
The Audit Committee:
William J. Barrett, Chairman
Edward L. Flynn
William C. Hurtt, Jr.
Accounting Fees
The aggregate fees billed by the Company's independent accountants
(Lane Gorman Trubitt, L.L.P. for 2003 and Grant Thornton LLP for 2002) 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, 2003, 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,
2003, June 30, 2003, and September 30, 2003, were $35,600.
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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The following table sets forth the aggregated fees billed to the
Company for fiscal years 2003 and 2002 by the Company's independent public
accountants:
2003 2002
__________ __________
Audit fees $35,600 $39,565
Audit-related fees - -
Tax fees - 12,132
All other fees - -
__________ __________
Total fees $35,600 $51,697
========== ==========
Code of Ethics
The Company has adopted a Code of Ethics that applies to the Company's
Officers and Directors, including the Company's principal executive officer
and principal financial and accounting officer. A copy of the Code may be
obtained without charge by written request to the Company as follows: TGC
Industries, Inc., 1304 Summit Avenue, Suite 2, Plano, Texas 75074, Attn:
Kenneth W. Uselton, Secretary.
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, 2003, 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 $15,000 -0- -0- $7,039 (1)
President 2001 $125,000 -0- -0- -0- $6,021 (2)
& CEO 2000 $ 94,875 -0- -0- -0- $6,298 (3)
(1) Represents personal use of Company vehicle ($3,960), Company's
payment for personal income tax preparation ($145), Company's
contribution to 401-K program ($2,658), and life insurance
premiums ($276) in 2003.
(2) 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.
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(3) 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 ($276) in 2001.
401(k) Plan
In 1987, the Company implemented a 401(k) salary deferral plan (the
"Plan") which covers all employees who have reached the age of 20-1/2 years
and have been employed by the Company for at least one year. The covered
employees may elect to have an amount deducted from their wages for
investment in a retirement plan. The Company has the option, at its
discretion, to make contributions to the Plan. Effective January 1, 1990,
the Company determined in its discretion to make a matching contribution to
the Plan equal to 10% of the employees' contributions up to 6% of those
employees' compensation. On July 24, 1991, to be effective August 5, 1991,
the Board of Directors increased the Company's matching contribution to the
Plan to fifty cents ($.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 2003 for the one (1) executive officer of the Company participating
in the 401(k) Plan was as follows: Wayne A. Whitener - $2,658.
Options Granted in Last Fiscal Year
During the year ended December 31, 2003, no stock options or stock
appreciation rights were granted to any of the executive officers of the
Company.
Aggregate Options/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Options/SAR Values
The following table sets forth certain information regarding the year-
end value of Options held by the Company's executive officers during the
fiscal year ended December 31, 2003. There are no stock appreciation rights
outstanding.
13
Aggregated Options Exercised
and FY-End Options Values
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End (2)
Shares
Name and Acquired on Value Exercisable/ Exercisable/
Principal Position Exercise (1) Realized($) Unexercisable
Unexercisable
__________________________________________________________________________
Wayne A. Whitener -0- -0- 54,433/ $ -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 31,2003
closing stock price which was $0.70.
TRANSACTIONS WITH MANAGEMENT
In March 2003, certain directors provided up to $300,000 in debt
financing through December 31, 2003, on the same terms as the 2002 debt
financing, described below, provided that warrants covering only 750,000
shares of Common Stock were issued upon execution of the debt financing
documents and warrants covering the remaining 750,000 shares of Common Stock
were to be issued in proportion to the amount of the $300,000 commitment
which the Company drew on (e.g. if the Company borrowed a total of $150,000,
warrants covering 375,000 shares were to be issued and if the Company
borrowed the full commitment of $300,000, warrants covering 750,000 shares
were to be issued). The Company had no borrowings under this commitment
during 2003. The warrants were issued as follows: Allen T. McInnes -
warrant for 150,000 shares; William C. Hurtt Jr. - warrant for 150,000
shares; William J. Barrett - warrant for 150,000 shares; Herbert M. Gardner
- - warrant for 150,000 shares; and Edward L. Flynn - warrant for 150,000
shares.
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. The promissory notes,
14
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; William C. Hurtt,
Jr. - $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.
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.
15
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
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
16
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 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.
17
The 1993 Plan terminated on June 3, 2003. Stock options outstanding as
of the date of termination remain outstanding until they are exercised,
terminated, or expire.
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.
Granted stock options under the 1993 Stock Option Plan covering 29,100
shares (adjusted for one-for-three reverse split) were outstanding at
December 31, 2003. All 29,100 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, 2002 and 2003, 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 was 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
18
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, 2002 and 2003, no stock options were granted under the
Company's 1999 Stock Option Plan. Granted stock options under the 1999
Stock Option Plan covering 153,000 shares were outstanding at December 31,
2003.
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
19
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
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.
20
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.
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 six (6) members of the Board of Directors, and (2) ratification of the
selection of Lane Gorman Trubitt, L.L.P. as independent auditors, 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 six (6) members to the Board of Directors and to ratify
the selection of Lane Gorman Trubitt, L.L.P. as independent auditors.
21
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Lane Gorman Trubitt, L.L.P. to
serve as auditors of the Company. It is not expected that a representative
of Lane Gorman Trubitt, L.L.P. will be present at the shareholders' meeting.
Lane Gorman Trubitt, L.L.P. became the Company's principal accountants
in April of 2003. As previously reported, on April 2, 2003, Grant Thornton
LLP ("Grant Thornton") notified the Audit Committee of the Board of
Directors of 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, L.L.P. 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.
In connection with its audits for the years ended December 31, 2001 and
2002, and through April 2, 2003, there were 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 2005 must be received by the Company at its
principal executive offices in Plano, Texas on or before December 1, 2004 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, 2003 enclosed
herewith.
By Order of the Board of Directors
/s/ Kenneth W. Uselton
Plano, Texas
May 3, 2004
22
INDEX TO APPENDICES
Appendix Description
________ ___________
A TGC Industries, Inc. Audit Committee Charter
23
APPENDIX A
__________
AUDIT COMMITTEE CHARTER
OF
TGC INDUSTRIES, INC.
I. PURPOSE
The Audit Committee shall provide assistance to the Corporation's
directors in fulfilling their responsibility to the shareholders, potential
shareholders, and the investment community relating to corporate accounting,
reporting practices of the Corporation, and the quality and integrity of the
financial reports of the Corporation. The Audit Committee's primary duties
and responsibilities are to:
Oversee that management has maintained the reliability
and integrity of the accounting policies and financial
reporting and disclosure practices of the Corporation.
Oversee that management has established and maintained
processes to assure that an adequate system of internal
control is functioning within the Corporation.
Oversee that management has established and maintained
processes to assure compliance by the Corporation with
all applicable laws, regulations, and corporate policy.
Oversee the independent accountant's qualifications,
independence and performance.
Prepare the report required by the Securities and
Exchange Commission's ("SEC") proxy rules to be
included in the Corporation's annual proxy statement.
The Audit Committee will fulfill these responsibilities primarily by
carrying out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be an "independent director" as
defined in Section 121(A) of the American Stock Exchange listing standards
(which is the national securities exchange definition of "independent" the
Audit Committee has chosen to use as required under Item 7(d)(3)(iv) of
Schedule 14A under the Securities Exchange Act of 1934), and shall be free
24
from any relationship that, in the opinion of the Board, would interfere
with the exercise of his or her independent judgment as a member of the
Audit Committee. All members of the Audit Committee shall have a working
familiarity with basic finance and accounting practices including being able
to read and understand fundamental financial statements, including a balance
sheet, income statement, and cash flow statement. In addition, at least one
member of the Audit Committee shall have accounting or related financial
management expertise so as to qualify as an "Audit Committee Financial
Expert" as defined in Sections 229.401(h) of the 1934 Act.
The members of the Audit Committee shall be elected by the Board at the
annual meeting of the Board to serve for the ensuing year or until their
successors have been duly elected and qualified. Unless a Chairperson is
elected by the full Board, the members of the Audit Committee may designate
a Chairperson by majority vote of the full Audit Committee membership.
III. MEETINGS
The Audit Committee shall meet at least four times annually, or more
frequently as circumstances dictate. As part of its job to foster open
communication, the Audit Committee plans to meet at least annually with
management and the independent accountants to discuss any matters that the
Audit Committee or each of these groups believes should be discussed
privately. In addition, the Audit Committee, or its Chairperson, plans to
meet with management and the independent accountants quarterly to review the
Corporation's financials consistent with Section IV.D below.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports Review
A. Review and reassess, at least annually, the adequacy
of this Charter; and make recommendations to the Board,
as conditions dictate, to update this Charter.
B. Review with management, and the independent accountants,
the Corporation's annual financial statements, including
a discussion with the independent accountants of the
matters required to be discussed by Statement of
Auditing Standards No. 61 ("SAS No. 61"), as amended.
C. Review with management and the independent accountants
the Corporation's quarterly financial statements on
Form 10-QSB prior to their filing or prior to the release
of earnings, including a discussion with the independent
accountants of the matters to be discussed by SAS No. 61.
Independent Accountants
D. The Audit Committee shall directly appoint, retain,
compensate, evaluate and terminate the Corporation's
independent accountants and shall be directly
responsible for the oversight of the independent
25
accountants, including the resolution of disagreements
between management and the independent accountants.
The Audit Committee has the sole authority to approve
all engagements and fees with the independent accountants.
This does not preclude the Audit Committee from obtaining
the input of Company management. The independent
accountants are accountable to the Audit Committee and
ultimately to the entire Board for such accountants'
audit of the financial statements of the Corporation.
On an annual basis, the Audit Committee shall review
and discuss with the independent accountants all
significant relationships the accountants have with
the Corporation to determine the accountants'
independence.
E. Oversee independence of the accountants by:
receiving from the accountants, at least annually, a
formal written statement delineating all relationships
between the accountants and the Corporation consistent
with the Independence Standards Board Standard 1 ("ISB
No. 1");
reviewing, and actively discussing with the Board, if
necessary, and the accountants, at least annually,
any disclosed relationships or services between the
accountants and the Corporation or any other disclosed
relationships or services that may impact the objectivity
and independence of the accountants; and
recommending, if necessary, that the Board take certain
action to satisfy itself of the auditor's independence.
F. Based on the review and discussions referred to in
paragraph IV.B. and IV.E. above, the Audit Committee
shall determine whether to recommend to the Board
that the Corporation's audited financial statements
be included in the Corporation's Annual Report on
Form 10-KSB for the last fiscal year for filing with
the Securities and Exchange Commission.
Financial Reporting Process
G. In conjunction with the independent accountants, review
the integrity of the Corporation's financial reporting
processes, both internal and external.
H. Consider and approve, if appropriate, major changes to
the Corporation's auditing and accounting principles
and practices proposed by management. Discuss with the
independent accountants any significant changes in
auditing standards or their audit scope.
26
I. Establish regular systems of reporting to the Audit
Committee by each of management and the independent
accountants regarding any significant judgments made
in management's preparation of the financial
statements and any significant difficulties encountered
during the course of the review or audit, including
any restriction on the scope of the work or access
to required information.
J. Review any significant disagreement among management
and the independent accountants in connection with
the preparation of the financial statements.
Legal Compliance/General
K. Review, with the Corporation's counsel, any legal
matter that could have a significant impact on the
Corporation's financial statements.
L. Engage such independent legal counsel and such
accounting or other expert advisors as the Audit
Committee deems necessary to carry out its duties.
M. Ensure that a Code of Ethics is formalized in
writing and that all employees have knowledge of it.
N. Report through its Chairperson to the Board following
meetings of the Audit Committee.
O. Maintain minutes or other records of meetings and
activities of the Audit Committee.
P. Establish written procedures for the receipt,
retention and treatment of complaints on accounting,
internal accounting controls or auditing matters, as
well as for the confidential, anonymous submissions by
Corporation's employees of concerns regarding questionable
accounting or auditing matters.
Funding of the Audit Committee
Q. The Audit Committee shall receive appropriate funding,
as determined by the Audit Committee, from the
Corporation for payment of (a) compensation to the
Corporation's independent accountants and auditors,
(b) compensation to the outside legal, accounting or
other expert advisors employed by the Audit Committee
in the fulfillment of its duties, and ( c) ordinary
administrative expenses of the Audit Committee that
are necessary or appropriate to carry out its duties.
The Audit Committee has sole authority to approve
the fees and other retention terms of such legal,
accounting and other expert advisors.
27
Scope of Responsibilities and Duties
R. While the Audit Committee has the responsibilities
and duties set forth in this Charter, it is not
the duty of the Audit Committee to plan or conduct
audits or to determine that the Corporation's
financial statements are complete and accurate and
are in accordance with generally accepted accounting
principles. This is the responsibility of management
and the independent auditor.
28
- --------------------------------------------------------------------------
Front of Card
- --------------------------------------------------------------------------
COMMON STOCK PROXY
TGC INDUSTRIES, INC. (the "Company")
Proxy Solicited on Behalf of the Board of Directors for the
Annual Meeting of Shareholders, June 8, 2004
The undersigned hereby appoint(s) Kenneth W. Uselton 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 8, 2004, 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 AND 2.
(Continued on other side)
29
- --------------------------------------------------------------------------
Back of Card
- --------------------------------------------------------------------------
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
William C. Hurtt, Jr.
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. 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.
30
- ---------------------------------------------------------------------------
Front of Card
- ---------------------------------------------------------------------------
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 8, 2004
The undersigned hereby appoint(s) Kenneth W. Uselton 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 8, 2004,
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 and 2.
(Continued on other side)
31
- ---------------------------------------------------------------------------
Back of Card
- ---------------------------------------------------------------------------
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:
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
William C. Hurtt, Jr.
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. 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.
32
8 1/2% SENIOR CONVERTIBLE PREFERRED STOCK PROXY
TGC INDUSTRIES, INC. (the "Company")
Proxy Solicited on Behalf of the Board of Directors for the
Annual Meeting of Shareholders, June 8, 2004
The undersigned hereby appoint(s) Kenneth W. Uselton or Wayne A.
Whitener, each with full power of substitution, as proxies, to vote all
Senior 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 8, 2004, 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 AND 2.
/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
William C. Hurtt, Jr.
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. 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.
4891.00001/413288.2
33
