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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
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SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
3-D GEOPHYSICAL, INC.
(NAME OF SUBJECT COMPANY)
3-D GEOPHYSICAL, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
88553V107
(CUSIP NUMBER OF CLASS OF SECURITIES)
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JOEL FRIEDMAN
CHAIRMAN
3-D GEOPHYSICAL, INC.
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
(212) 317-1234
WITH COPY TO:
PETER S. KOLEVZON, ESQ.
KRAMER, LEVIN, NAFTALIS & FRANKEL
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 715-9100
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF
THE PERSON(S) FILING STATEMENT)
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is 3-D Geophysical, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 8226 Park Meadows Drive, Littleton, Colorado 80124. The title
of the class of equity securities to which this Statement relates is the Common
Stock, par value $.01 per share (the "Shares"), of the Company and the
associated Preferred Share Purchase Rights (the "Rights") issued pursuant to the
Rights Agreement, dated as of July 17, 1997, between the Company and American
Securities Transfer & Trust, Inc., as Rights Agent (as the same has heretofore
and may hereafter be amended, the "Rights Agreement").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to a tender offer by WAI Acquisition Corp., a
Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Western
Atlas Inc., a Delaware corporation ("Western"), disclosed in a Tender Offer
Statement on Schedule 14D-1, dated March 13, 1998, to purchase all outstanding
Shares at a purchase price of $9.65 per share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in an
Offer to Purchase dated March 13, 1998 (the "Offer") and pursuant to the
Agreement and Plan of Merger dated as of March 8, 1998 (the "Merger Agreement"),
among Western, Purchaser and the Company.
The bidders in the Offer are Western and Purchaser (the "Bidders"). The
principal executive offices of the Bidders are located at 10205 Westheimer Road,
Houston, Texas 77042.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above.
(b) (i) Certain contracts, agreements, arrangements or understandings
between the Company or its affiliates and certain of its directors and executive
officers are described in the sections entitled "Information Concerning
Directors and Nominees -- Directors Compensation," "Executive
Compensation -- Employment Agreements; Non-competition Agreements" and "Certain
Relationships and Related Transactions" in the Company's Proxy Statement for its
1997 Annual Meeting of Stockholders held on May 16, 1997 (the "1997 Proxy
Statement"). A copy of the relevant sections of the 1997 Proxy Statement has
been filed with the Securities and Exchange Commission (the "SEC" or the
"Commission") as Exhibit (c)(1) to this Statement and is incorporated herein by
reference. In January 1998, the Company entered into amended and restated
employment agreements with Messrs. Wayne P. Widynowski, Executive Vice President
and a director of the Company, and Ronald L. Koons, Chief Financial Officer of
the Company. These agreements are substantially the same as the prior agreements
between the Company and Messrs. Widynowski and Koons except they extend the term
of the agreements to December 31, 2000 and provide for severance equal to two
years of salary (plus bonus) in the case of Mr. Widynowski and one year of
salary (plus bonus) in the case of Mr. Koons if they are terminated without
cause or they leave for "good reason" (as defined) following a change in control
of the Company, are filed with the SEC as Exhibits (c)(2) and (c)(3) to this
Statement, respectively, and are incorporated herein by reference.
(ii) Except as indicated above, and except for the Merger Agreement,
the Support Agreements and the Consulting and Noncompetition Agreements
described below, which information to the extent it relates to this Item 3(b) is
incorporated by reference, there are no material contracts, agreements,
arrangements or understandings or actual or potential conflicts of interest
between the Company or its affiliates and (i) its executive officers, directors
or affiliates, or (ii) to the knowledge of the Company, the Bidders, their
executive officers, directors or affiliates.
MERGER AGREEMENT
THE OFFER. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to prior satisfaction or waiver
of the conditions of the Offer set forth in Annex I to the Merger Agreement (the
"Tender Offer Conditions"), the Purchaser will purchase all Shares validly
tendered
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pursuant to the Offer. The Merger Agreement provides that, without the prior
written consent of the Company, the Purchaser shall not (i) impose conditions to
the Offer other than the Tender Offer Conditions, (ii) modify or amend the
Tender Offer Conditions or any other term of the Offer in a manner adverse to
the holders of Shares pursuant to the Offer, (iii) reduce the number of Shares
subject to the Offer, (iv) reduce the amount offered per Share pursuant to the
Offer, (v) except as provided in the following sentence, extend the Offer if all
of the Tender Offer Conditions are satisfied or waived, or (vi) change the form
of consideration payable in the Offer. Notwithstanding the foregoing, the
Purchaser may, without the consent of the Company, extend the Offer at any time,
and from time to time, (i) if at the then scheduled Expiration Date (as defined
in the Merger Agreement) of the Offer any of the conditions to Purchaser's
obligation to accept for payment and pay for all Shares shall not have been
satisfied or waived; (ii) for any period required by any rule, regulation,
interpretation or position of the SEC or its staff applicable to the Offer; or
(iii) if all Tender Offer Conditions are satisfied or waived but the number of
Shares tendered is at least equal to 70%, but less than 90%, of the then
outstanding number of Shares, for an aggregate period of not more than 10
business days (for all such extensions) beyond the latest Expiration Date that
would be permitted under clause (i) or (ii).
The Offer is conditioned upon, among other things, at least a majority of
the total number of outstanding Shares on a fully diluted basis being validly
tendered prior to the Expiration Date and not properly withdrawn (the "Minimum
Condition"). The Offer is also subject to certain other terms and conditions.
The Offer will expire at 12:00 midnight, New York City time, on Thursday, April
9, 1998, unless extended.
RECOMMENDATION.
The Board of Directors of the Company (the "Company Board" or the "Board"),
at a meeting duly called and held, (i) determined by unanimous vote of its
directors that the Offer and the Merger are fair to and in the best interests of
the Company and its stockholders, and (ii) recommended acceptance of the Offer
and approval of the Merger Agreement by the Company's stockholders (if such
approval is required by applicable law).
The Merger Agreement provides that Western, upon the payment by Purchaser
for Shares pursuant to the Offer, and from time to time thereafter, is entitled
to designate such number of directors, rounded up to the next whole number, on
the Company Board as is equal to the product of the total number of directors on
the Company Board (determined after giving effect to the directors so elected
pursuant to such provision) multiplied by the percentage that the aggregate
number of Shares beneficially owned by Western or its affiliates bears to the
total number of Shares then outstanding. The Company shall, upon request of
Western, promptly take all actions necessary to cause Western's designees to be
so elected, including, if necessary, seeking the resignations of one or more
existing directors; provided, however, that prior to the time the Merger becomes
effective (the "Effective Time"), the Company Board shall always have at least
two members who are neither officers, directors, shareholders or designees of
Purchaser or any of its affiliates ("Purchaser Insiders"). If the number of
directors who are not Purchaser Insiders is reduced below two prior to the
Effective Time, the remaining director who is not a Purchaser Insider will be
entitled to designate a person to fill such vacancy who is not a Purchaser
Insider and who will be a director not deemed to be a Purchaser Insider for all
purposes of the Merger Agreement. Following the election or appointment of
Western's designees and prior to the Effective Time, any amendment or
termination of the Merger Agreement by the Company, any extension by the Company
of the time for performance of any of the obligations or other acts of Western
or the Purchaser or waiver of any of the Company's rights thereunder, will
require the concurrence of a majority of the directors of the Company then in
office who are not Purchaser Insiders (or in the case where there are two or
fewer directors who are not Purchaser Insiders, the concurrence of one director
who is not a Purchaser Insider) if such amendment, termination, extension or
waiver would have an adverse effect on the minority stockholders of the Company.
THE MERGER. The Merger Agreement provides that, at the Effective Time,
Purchaser will be merged with and into the Company. Following the Merger, the
separate corporate existence of the Purchaser will cease and the Company will
continue as the Surviving Corporation.
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The Company has agreed pursuant to the Merger Agreement that, if required
by applicable law in order to consummate the Merger, it will (i) convene a
special meeting of its stockholders as soon as practicable following the
acceptance for payment of and payment for Shares by the Purchaser pursuant to
the Offer for the purpose of considering and taking action upon the Merger
Agreement; (ii) prepare and file with the Commission a preliminary proxy
statement relating to the Merger Agreement, and use its reasonable best efforts
(x) to obtain and furnish the information required to be included by the
Commission in the Proxy Statement (as defined herein) and, after consultation
with Western, to respond as soon as practicable to any comments made by the
Commission with respect to the preliminary proxy statement and to cause a
definitive proxy statement (the "Proxy Statement") to be mailed to its
stockholders and (y) to obtain the necessary approvals of the Merger and
adoption of the Merger Agreement by its stockholders; and (iii) include in the
Proxy Statement the recommendation of the Company Board that stockholders of the
Company vote in favor of the approval and adoption of the Merger and the Merger
Agreement. Western has agreed in the Merger Agreement that it will vote, or
cause to be voted, all of the Shares then owned by it, the Purchaser or any of
its other subsidiaries in favor of the approval of the Merger and the Merger
Agreement.
The Merger Agreement further provides that, notwithstanding the foregoing,
if the Purchaser acquires at least 90% of the outstanding Shares of the Company
pursuant to the Offer, the parties to the Merger Agreement will take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after the acceptance for payment of and payment for the Shares by
the Purchaser pursuant to the Offer without a meeting of the stockholders of the
Company, in accordance with Section 253 of the Delaware General Corporation law
(the "GCL").
CHARTER, BYLAWS, DIRECTORS AND OFFICERS. The Certificate of Incorporation
of Purchaser, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation, until thereafter
amended in accordance with the provisions thereof and of the Merger Agreement
and applicable law. The By-Laws of Purchaser in effect at the time of the
Effective Time shall be the By-Laws of the Surviving Corporation until amended,
subject to the provisions of the Merger Agreement which provide that all rights
to indemnification now existing in favor of directors and officers of the
Company and its subsidiaries as provided in their respective charters or by-laws
shall survive the Merger and continue in effect for not less than six years
thereafter. Subject to applicable law, the directors of Purchaser immediately
prior to the Effective Time will be the initial directors, and the officers of
Purchaser immediately prior to the Effective Time will be the initial officers,
of the Surviving Corporation and will hold office until their respective
successors are duly elected and qualified, or their earlier death, resignation
or removal.
CONVERSION OF SECURITIES. By virtue of the Merger and without any action
on the part of the holders thereof, at the Effective Time, each Share issued and
outstanding immediately prior to the Effective Time (other than (i) any Shares
held by Western, the Purchaser, any wholly-owned subsidiary of Western or the
Purchaser, in the treasury of the Company or by any wholly-owned subsidiary of
the Company, which Shares, by virtue of the Merger and without any action on the
part of the holder thereof, will be canceled and retired and will cease to exist
with no payment being made with respect thereto and (ii) Shares, if any, held by
stockholders who perfect their appraisal rights under Delaware law ("Dissenting
Shares")) will be canceled and retired and will be converted into the right to
receive $9.65 net per Share in cash, payable to the holder thereof, without
interest thereon (the "Merger Price"), upon surrender of the certificate
formerly representing such Share. At the Effective Time, each share of common
stock of Purchaser, par value $.01 per share, issued and outstanding immediately
prior to the Effective Time will, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into and become one validly
issued, fully paid and non-assessable share of common stock, par value $.01 per
share, of the Surviving Corporation.
The Merger Agreement provides that, prior to the consummation of the Offer,
the Company Board (or, if appropriate, any committee thereof) shall adopt
appropriate resolutions and take all other actions necessary to provide for the
cancellation, effective at the Effective Time, of all the outstanding stock
options (the "Options") granted under any stock option or similar plan of the
Company (the "Stock Plans") or under any agreement, without any payment therefor
except as otherwise provided in the Merger Agreement. Immediately prior to the
Effective Time, all Options (whether vested or unvested) will be canceled (and
to the extent exercisable shall no longer be exercisable) and will entitle each
holder thereof, in cancellation and settlement
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therefor, to a payment, if any, in cash by the Company (less any applicable
withholding taxes), as soon as practicable following the Effective Time, equal
to the product of (i) the total number of Shares subject to such Option (whether
vested or unvested) and (ii) the excess, if any, of the Merger Price over the
exercise price per Common Share subject to such Option (the "Cash Payment").
REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Western and the
Purchaser with respect to, among other matters, its organization and
qualification, capitalization, authority, required filings, consents and
approvals, financial statements, public filings, litigation, compliance with
law, employee benefit plans, intellectual property, environmental matters,
material contracts, opinion of financial advisor, information to be included in
the Proxy Statement, tax status, condition of assets, relationships with
customers and employees and the absence of any material adverse effects on the
Company. Western and Purchaser have made customary representations and
warranties to the Company with respect to, among other matters, its
organization, qualifications, authority, required filings, consents and
approvals and availability of funds.
COVENANTS. The Merger Agreement obligates the Company and its
subsidiaries, from the date of the Merger Agreement until the Effective Time, to
conduct their operations only in the ordinary and usual course of business
consistent with past practice and obligates the Company and its subsidiaries to
use their reasonable best efforts to preserve intact their business
organizations, to keep available the services of their present officers and key
employees and to preserve the good will of those having business relationships
with them. The Merger Agreement also contains specific restrictive covenants as
to certain impermissible activities of the Company prior to the Effective Time,
which provide that the Company will not (and will not permit any of its
subsidiaries to) take certain actions without the prior written consent of
Western including, among other things, amendments to its certificate of
incorporation or by-laws, issuances or sales of its securities, changes in
capital structure, dividends and other distributions, repurchases or redemptions
of securities, material acquisitions or dispositions, increases in compensation
or adoption of new benefit plans and certain other material events or
transactions.
ACCESS TO INFORMATION. The Merger Agreement provides that, until the
Effective Time, the Company will give Western and the Purchaser and their
representatives full access, upon reasonable notice and during normal business
hours, to the offices and other facilities and to the books and records of the
Company and its subsidiaries.
EFFORTS. Subject to the terms and conditions provided in the Merger
Agreement, each of the Company, Western and the Purchaser shall cooperate and
use their respective reasonable commercial efforts to take or cause to be made
all filings reasonably necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
the Merger Agreement.
Each of the parties also has agreed to use its reasonable commercial
efforts to obtain as promptly as practicable all Consents (as defined in the
Merger Agreement) of any Governmental Entity (as defined in the Merger
Agreement) or any other person required in connection with, and waivers of any
Violations (as defined in the Merger Agreement) that may be caused by, the
consummation of the transactions contemplated by the Offer and the Merger
Agreement.
PUBLIC ANNOUNCEMENTS. The Merger Agreement provides that the Company, on
the one hand, and Western and the Purchaser, on the other hand, agree to consult
promptly with each other prior to issuing any press release or otherwise making
any public statement with respect to the Offer, the Merger and the other
transactions contemplated by the Merger Agreement, agree to provide to the other
party for review a copy of any such press release or statement, and shall not
issue any such press release or make any such public statement prior to such
consultation and review, unless required by applicable law or any listing
agreement with a securities exchange.
EMPLOYEE BENEFIT ARRANGEMENTS. With respect to employee benefit matters,
the Merger Agreement provides that the Company will, and Western will cause the
Company and, from and after the Effective Time, the Surviving Corporation to,
honor all obligations under specified employment and severance agreements.
Notwithstanding the foregoing, from and after the Effective Time, the Surviving
Corporation will have the
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right to amend, modify, alter or terminate any employee benefit plan, provided
that any such action will not affect any rights for which the agreement of the
other party or a beneficiary is required. The Merger Agreement also provides
that employees of the Surviving Corporation immediately following the Effective
Time who immediately prior to the Effective Time were employees of the Company
or any Company subsidiary will be given credit for purposes of eligibility and
vesting under each employee benefit plan, program, policy or arrangement of
Western or the Surviving Corporation in which such employees participate
subsequent to the Effective Time for all service with the Company and any
Company subsidiary prior to the Effective Time (to the extent such credit was
given by the Company or any Company subsidiary) for purposes of eligibility and
vesting. The Company has agreed that it will not take any action which could
prevent or impede the termination of the Company's 1995 Long-Term Incentive
Compensation Plan, as amended and restated, or 1997 Long-Term Stock Incentive
Plan, and all other Stock Plans (as defined in the Merger Agreement) and any
other plan, program or arrangement providing for the issuance or grant of any
other interest in respect of the capital stock of the Company or any subsidiary
of the Company in each case effective prior to the Effective Time. The Company
has agreed to take all necessary action so that none of Western, the Company or
any of their respective subsidiaries is or will be bound by any Options (as
defined in the Merger Agreement), other options, warrants, rights or agreements
which would entitle any person, other than Western or its affiliates, to own any
capital stock of the Surviving Corporation or any of its subsidiaries or to
receive any payment in respect thereof as of the Effective Time and to obtain
all necessary consents so that after the Effective Time, holders of Options will
have no rights other than the rights of the holders of Options to receive the
Cash Payment, if any, in cancellation and settlement thereof.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. Pursuant to the
Merger Agreement, Western has agreed that from and after the Effective Time all
rights to indemnification existing at the date of the Merger Agreement in favor
of directors or officers of the Company or any of its subsidiaries as set forth
in the Certificate of Incorporation or By-Laws of the Company and its
subsidiaries shall survive the Merger and shall continue in full force and
effect for a period of six years following the Effective Time. The Merger
Agreement further provides that Western shall cause the Company and, from and
after the Effective Time, the Surviving Corporation to maintain in effect for
not less than four years (except as provided below) from the Effective Time the
current policies of the directors' and officers' liability insurance maintained
by the Company; provided that the Surviving Corporation may substitute therefor
other policies not less advantageous (other than to a de minimus extent) to the
beneficiaries for the current policies and provided that such substitution shall
not result in any gaps or lapses in coverage with respect to matters occurring
prior to the Effective Time; and provided, further, that the Surviving
Corporation shall not be required to pay an annual premium in excess of 175% of
the last annual premium paid by the Company prior to the date hereof (which the
Company represented to be $100,000 for the 12-month period ending December 31,
1998) and if the Surviving Corporation is unable to obtain such insurance it
shall obtain as much comparable insurance as possible for an annual premium
equal to such maximum amount. Notwithstanding the foregoing, at any time on or
after the first anniversary of the Effective Time, Western may, at its election,
provide funds to the Surviving Corporation to the extent necessary so that the
Surviving Corporation may self-insure with respect to the level of insurance
coverage required in lieu of causing to remain in effect any directors' and
officers' liability insurance policy.
Any indemnified party under the Merger Agreement (an "Indemnified Party")
wishing to claim such indemnification, upon learning of any claim, action, suit,
proceeding or investigation, must promptly notify Western thereof (but any such
failure or delay will not relieve Western of liability except to the extent
Western is actually prejudiced as a result of such failure or delay). In the
event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) Western or the Surviving
Corporation will have the right, from and after the purchase of Shares pursuant
to the Offer, to assume the defense thereof and Western will not be liable to
such Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, (ii) the Indemnified Parties will cooperate in the defense
of any such matter and (iii) Western will not be liable for any settlement
effected without its prior written consent, provided that Western shall not have
any obligation hereunder to any indemnified party when and if a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final, that such person is not
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entitled to indemnification under applicable law. The Merger Agreement provides
that any Indemnified Party may retain its own separate counsel reasonably
satisfactory to Western if there is a conflict of interest requiring separate
representation under applicable principles of professional responsibility and
may participate in (but not, except with respect to matters relating to such
conflict, control) the defense of such claim, action, suit, proceeding or
investigation and the Indemnifying Party will be responsible for any reasonable
legal expenses or any other reasonable expenses subsequently incurred by such
Indemnified Party in connection with such participation or defense to the extent
such Indemnified Party is entitled to be indemnified therefrom. The Merger
Agreement further provides that Western will not settle any claim, action, suit,
proceeding or investigation unless the Indemnifying Party shall be fully
released and discharged.
NOTIFICATION OF CERTAIN MATTERS. Western and the Company have agreed to
promptly notify each other of (i) the occurrence or non-occurrence of any fact
or event which would be reasonably likely (A) to cause any representation or
warranty contained in the Merger Agreement to be untrue or inaccurate in any
material respect at any time prior to the Effective Time or (B) to cause any
covenant, condition or agreement under the Merger Agreement not to be complied
with or satisfied in any material respect and (ii) any failure of the Company or
Western, as the case may be, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it under the Merger Agreement
in any material respect, provided that no such notification will affect the
representations or warranties of any party or the conditions to the obligations
of any party. Each of the Company, Western and Purchaser is also required to
give prompt notice to the other parties of any notice or other communication
from any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by the Merger
Agreement.
RIGHTS AGREEMENT. The Company covenants and agrees in the Merger Agreement
that it will not (i) redeem the Rights, (ii) amend the Rights Agreement or (iii)
take any action which would allow any Person (as defined in the Rights
Agreement) other than Western or Purchaser to acquire beneficial ownership of
15% or more of the Shares without causing a Distribution Date or a Triggering
Event (as such terms are defined in the Rights Agreement) to occur.
STATE TAKEOVER LAWS. The Merger Agreement provides that the Company will,
upon the request of the Purchaser, take all reasonable steps to assist in any
challenge by the Purchaser to the validity or applicability to the transactions
contemplated by the Merger Agreement, including the Offer and the Merger, of any
state takeover law.
NO SOLICITATION. The Merger Agreement requires the Company, its affiliates
and their respective officers, directors, employees, representatives and agents
to immediately cease any existing discussions or negotiations with any parties
with respect to any acquisition or exchange of all or any material portion of
the assets of, or any equity interest in, the Company or any of its subsidiaries
or any business combination with the Company or any of its subsidiaries. The
Merger Agreement further provides that, prior to the Effective Time, the Company
will not authorize or permit any of its subsidiaries or any of its subsidiaries'
directors, officers, employees, agents or representatives, directly or
indirectly, to solicit, initiate, encourage or facilitate, or furnish or
disclose non-public information in furtherance of, any inquiries or the making
of any proposal with respect to any merger, liquidation, recapitalization,
consolidation or other business combination involving the Company or its
subsidiaries or acquisition of any capital stock or any material portion of the
assets of the Company or of its subsidiaries, or any combination of the
foregoing (an "Acquisition Transaction") or negotiate, explore or otherwise
engage in discussions with any person (other than Purchaser, Western or their
respective directors, officers, employees, agents and representatives) with
respect to any Acquisition Transaction or enter into any agreement, arrangement
or understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by the Merger Agreement, provided
that the Company may furnish information to, and negotiate or otherwise engage
in discussions with, any party who delivers a bona fide written proposal for an
Acquisition Transaction if the Company Board determines in good faith and on a
reasonable basis by a majority vote, after consultation with its outside legal
counsel and its financial advisor, Salomon Smith Barney, that (i) such
Acquisition Transaction is reasonably likely to be more favorable to the
stockholders of the Company from a financial point of view than the transactions
contemplated by the Merger Agreement and (ii) failing to take such action would
thus constitute a breach of the fiduciary duties of the Company Board. The
Merger Agreement further provides that, from and after the
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execution of the Merger Agreement, the Company will, as soon as practicable,
advise the Purchaser in writing of the receipt, directly or indirectly, of any
discussions, negotiations, proposals or substantive inquiries relating to an
Acquisition Transaction, identify the offeror and furnish to the Purchaser a
copy of any such proposal or inquiry, if it is in writing, or a written summary
of any oral proposal or inquiry relating to an Acquisition Transaction, and that
the Company will promptly advise Western in writing of any substantive
development relating to such proposal, including the results of any substantive
discussions or negotiations with respect thereto.
CONDITIONS TO CONSUMMATION OF THE MERGER. Pursuant to the Merger
Agreement, the respective obligations of Western, the Purchaser and the Company
to consummate the Merger are subject to the satisfaction, at or before the
Effective Time, of each of the following conditions: (i) the stockholders of the
Company shall have duly approved the transactions contemplated by the Merger
Agreement, if required by applicable law; (ii) the Purchaser shall have accepted
for payment and paid for Shares pursuant to the Offer in accordance with the
terms of the Merger Agreement; (iii) the consummation of the Merger is not
restrained, enjoined or prohibited by any order, judgment, decree, injunction or
ruling of a court of competent jurisdiction or any Governmental Entity and there
is not any statute, rule or regulation enacted, promulgated or deemed applicable
to the Merger by any Governmental Entity which prevents the consummation of the
Merger or has the effect of making the purchase of Shares illegal; and (iv) any
waiting period (and any extension thereof) under the HSR Act (as defined)
applicable to the Merger shall have expired or terminated.
TERMINATION. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, notwithstanding approval
thereof by the stockholders of the Company (with any termination by Western also
being an effective termination by Purchaser):
(a) by the mutual written consent of the Company, by action of its Board of
Directors and Western;
(b) by the Company if (i) Purchaser fails to commence the Offer by March
13, 1998, (ii) Purchaser has not accepted for payment and paid for the Shares
pursuant to the Offer in accordance with the terms of the Offer on or before
June 30, 1998, provided that if any applicable waiting period under the HSR Act
shall not have expired or been terminated prior to June 30, 1998, then the
Company may not terminate the Merger Agreement pursuant to this provision until
August 31, 1998 or (iii) Purchaser fails to purchase validly tendered Shares in
violation of the terms of the Merger Agreement;
(c) by Western or the Company if the Offer is terminated or withdrawn
pursuant to its terms without any Shares being purchased thereunder; provided,
however, that neither Western nor the Company may terminate the Merger Agreement
if such party shall have materially breached the Merger Agreement or, in the
case of Western, if it or Purchaser is in material violation of the terms of the
Offer;
(d) by Western or the Company if any court or other Governmental Entity
shall have issued an order, decree, judgment or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the acceptance for
payment of, or payment for, Shares pursuant to the Offer or the Merger and such
order, decree or ruling or other action shall have become final and
nonappealable;
(e) by the Company if, prior to the purchase of Shares pursuant to the
Offer in accordance with the terms of the Merger Agreement, the Company Board
approves an Acquisition Transaction, on terms which a majority of the members of
the Company Board have determined in good faith and on a reasonable basis, after
consultation with its outside counsel and Salomon Smith Barney, that (i) such
Acquisition Transaction is more favorable to the Company and its stockholders
from a financial point of view than the transactions contemplated by the Merger
Agreement and (ii) failure to approve such proposal and terminate the Merger
Agreement would thus constitute a breach of fiduciary duties of the Company
Board under applicable law; provided that the termination described in this
subparagraph (e) shall not be effective unless and until the Company shall have
paid to Western the Termination Fee, as described below under "Fees and
Expenses."
(f) by Western if the Company breaches its covenant in Section 6.08 of the
Merger Agreement (relating to the Rights Agreement);
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(g) by Western prior to the purchase of the Shares pursuant to the Offer if
the Company Board shall have withdrawn or modified (including by amendment of
this Schedule 14D-9) in a manner adverse to the Purchaser its approval or
recommendation of the Offer, the Merger Agreement or the Merger, shall have
approved or recommended another offer or transaction, or shall have resolved to
effect any of the foregoing;
(h) by Western if any Management Stockholder (as defined) who is a party to
a Support Agreement shall have failed to perform or comply with any of his
obligations, covenants or agreements in any material respect under a Support
Agreement;
(i) by Western prior to the purchase of the Shares pursuant to the Offer if
the Minimum Condition shall not have been satisfied by the expiration date of
the Offer and on or prior to such date (A) a third party shall have made a
proposal or public announcement or communication to the Company with respect to
(i) the acquisition of the Company by merger, tender offer or otherwise; (ii)
the acquisition of 50% or more of the assets of the Company and its
subsidiaries, taken as a whole; (iii) the acquisition of 15% or more of the
outstanding Shares; (iv) the adoption by the Company of a plan of liquidation or
the declaration or payment of an extraordinary dividend; or (v) the repurchase
by the Company or any of its subsidiaries of 15% or more of the outstanding
Shares at a price in excess of the Offer Price or (B) any person (including the
Company or any of its affiliates or subsidiaries), other than Western or any of
its affiliates, shall have become the beneficial owner of more than 15% of the
Shares; or
(j) by Western if Purchaser shall not have accepted for payment and paid
for Shares pursuant to the Offer in accordance with the terms thereof on or
before June 30, 1998.
In the event of the termination of the Merger Agreement in accordance with
its terms, the Merger Agreement will become void and have no effect, without any
liability on the part of any party or its directors, officers, employees or
stockholders, other than certain specified provisions, which shall survive any
such termination, provided that no party shall be relieved from liability for
any breach of the Merger Agreement.
FEES AND EXPENSES. Except as provided below, whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Offer, the
Merger Agreement and the transactions contemplated by the Merger Agreement will
be paid by the party incurring such expenses. In the event that the Merger
Agreement is terminated pursuant to subparagraphs (e), (f), (g) or (h) of
"Termination" as described above (or is terminated pursuant to paragraph (c) as
a result of the failure to satisfy the conditions set forth in paragraph (d) of
Section 14 of the Offer) then the Company will within one business day after
such termination (except for a termination under subparagraph (e) in which case
payment is to be made upon or prior to such termination) pay Western a
termination fee of $5,500,000 (the "Termination Fee") in immediately available
funds by wire transfer to an account designated by Western. In the event that
the Merger Agreement is terminated pursuant to subparagraph (i) of "Termination"
and within six months of such termination the Company shall have entered into a
definitive agreement or a written agreement in principle providing for an
Acquisition Transaction, the Company shall pay Western the Termination Fee at or
prior to execution of such agreement or agreement in principle in immediately
available funds by wire transfer to an account designated by Western. In the
event the Merger Agreement is terminated pursuant to subparagraph (c) of
"Termination" as a result of the failure to satisfy the conditions set forth in
subparagraph (f) or (g)(1) of Section 14 of the Offer, then the Company shall
promptly (and in any event within one business day after such termination)
reimburse Western for the fees and expenses of Western and the Purchaser
(including reasonable printing fees, filing fees and reasonable fees and
expenses of its legal and financial advisors) related to the Offer, the Merger
Agreement, the transactions contemplated by the Merger Agreement and any related
financing up to a maximum of $1,500,000 (collectively "Expenses") in immediately
available funds by wire transfer to an account designated by Western. The
prevailing party in any legal action undertaken to enforce the Merger Agreement
or any provision thereof will be entitled to recover from the other party the
costs and expenses (including attorneys and expert witness fees) incurred in
connection with such action.
AMENDMENT; EXTENSION; WAIVER. The Merger Agreement may be amended by the
Company, Western and the Purchaser at any time before or after any approval of
the Merger Agreement by the stockholders of the Company but, after any such
approval, no amendment will be made which decreases the price to be paid
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in the Merger, changes the consideration to be received or which otherwise
adversely affects the rights of the Company's stockholders thereunder without
the approval of such stockholders.
At any time prior to the Effective Time, the parties to the Merger
Agreement may (i) extend the time for the performance of any of the obligations
or other acts of any other party thereto, (ii) waive any inaccuracies in the
representations and warranties contained therein of any other party thereto or
in any document, certificate or writing delivered pursuant to the Merger
Agreement by any other party thereto or (iii) waive compliance with any of the
agreements of any other party or with any conditions to its own obligations.
The Merger Agreement provides that following the election or appointment of
Western's designees to the Company Board and prior to the Effective Time, any
amendment or termination of the Merger Agreement, or any extension by the
Company of the time for the performance of any of the obligations or other acts
of Western or the Purchaser or waiver of any of the Company's rights under the
Merger Agreement, will require the concurrence of a majority of the directors of
the Company then in office who are not Purchaser Insiders (or in the case where
there are two or fewer directors who are not Purchaser Insiders, the concurrence
of one director who is not a Purchaser Insider) if such extension or waiver
would have an adverse effect on the minority stockholders of the Company.
SUPPORT AGREEMENTS
Concurrently with the execution of the Merger Agreement, Western entered
into Support Agreements with each member of the Board of Directors of the
Company and one executive officer who is not a director. In the aggregate, such
stockholders owned 1,748,306 Shares (representing approximately 14.7% of the
Shares outstanding) as of March 8, 1998.
Pursuant to the Support Agreements the stockholder(s) have agreed to tender
(except for one officer-director who owns 3,000 Shares) and not withdraw their
Shares pursuant to the Offer. Each also agreed that, for so long as the Support
Agreement was in effect, at any meeting of the stockholders of the Company,
however called, he would vote his Shares in favor of the Merger, against any
action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement, and against any action or agreement that would
impede, interfere with, delay, postpone or attempt to discourage the Merger or
the Offer.
Each of these stockholders also granted representatives of Western an
irrevocable proxy to vote his Shares in favor of the Merger and other
transactions contemplated by the Merger Agreement, against any Acquisition
Transaction and otherwise as contemplated by the preceding paragraph.
In addition each of the stockholders who is a party to a Support Agreement
agreed not to (i) transfer any or all of his Shares (except for one
officer-director who owns 3,000 Shares and who may transfer his Shares to the
Company), (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of his Shares (except
for such officer-director who owns 3,000 Shares and who may enter into a
contract with the Company with respect to such Shares), (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to his Shares, (iv)
deposit his Shares into a voting trust or enter into a voting agreement or
arrangement with respect to his Shares or (v) take any other action that would
in any way restrict, limit or interfere with the performance of his obligations
under the Support Agreements or by the Merger Agreement or which would make any
representation or warranty of such stockholder under the Support Agreement
untrue or incorrect.
Each further agreed that he would not, and would not permit or authorize
any of his affiliates, representatives or agents to, directly or indirectly,
encourage, solicit, explore, participate in or initiate discussions or
negotiations with, or provide or disclose any information to, any corporation,
partnership, person or other entity or group (other than Western, Purchaser or
any of their affiliates or representatives) concerning any Acquisition
Transaction or enter into any agreement, arrangement or understanding requiring
the Company to abandon, terminate or fail to consummate the Merger or any other
transactions contemplated by the Merger Agreement. Each such stockholder also
agreed immediately to cease any existing activities, discussions or negotiations
with any parties with respect to any Acquisition Transaction and to immediately
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advise Western in writing of the receipt, directly or indirectly, of any
inquiries, discussions, negotiations or proposals relating to an Acquisition
Transaction, identify the offeror and furnish to Western a copy of any such
proposal or inquiry, if it is in writing, or a written summary of any oral
proposal or inquiry relating to an Acquisition Transaction and to promptly
advise Western in writing of any development relating to such proposal,
including the results of any discussions or negotiations with respect thereto.
The Support Agreements provide, however, that any action taken by the Company or
any member of the Board of Directors of the Company (including, if applicable,
such stockholder acting in such capacity) in accordance with the proviso set
forth in the second sentence of "No Solicitation" will be deemed not to violate
the provisions described in this paragraph.
The agreements and proxy contained in each Support Agreement will terminate
on the earlier of payment for the Shares pursuant to the Offer and the
termination of the Merger Agreement in accordance with its terms.
CONSULTING AND NONCOMPETITION AGREEMENTS
Joel Friedman, the Chairman of the Board and Chief Executive Officer of the
Company, and Luis H. Ferran, the Executive Vice President for Latin American
Operations and a director of the Company, have each entered into consulting and
non-compete agreements with Western which will become effective upon
consummation of the Merger. The agreements with Messrs. Friedman and Ferran
provide for annual fees of $250,000 and $125,000, respectively, over a 4-year
term. During their consultancy, and until the later of the end of the 4-year
term or 12 months following the termination of their consultancy, each will be
prohibited from engaging in the Company's primary businesses of seismic data
acquisition and data processing and from soliciting employees and customers of
Western and its affiliates (including the Company).
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) At a special meeting held on March 8, 1998, the Company Board
unanimously determined that each of the Offer and the Merger is fair to, and in
the best interests of, the Company's stockholders and approved the Merger
Agreement and the transactions contemplated thereby. The Board hereby recommends
that the Company's stockholders accept the Offer and tender all of their Shares
pursuant to the Offer. Copies of a letter to stockholders is attached hereto as
Exhibit (a)(1) and is incorporated herein by reference.
(b) The reasons for the position stated in paragraph (a) of this Item 4 are
presented in the information furnished below in this Item 4(b).
BACKGROUND OF THE OFFER
Initial contacts between the Company and Western began in early July 1997
when Richard C. White, President of The Western Geophysical division of Western
Atlas International, Inc., a subsidiary of Western ("WAII"), telephoned Joel
Friedman, Chairman of the Board of the Company, to discuss the possibility of
meeting to explore a business combination. On July 15, 1997 Mr. Friedman met
with Mr. White and Jesse Perez, Senior Vice President of Finance and
Administration of WAII. Although specific terms were not discussed, the parties
entered into a confidentiality agreement relating to the exchange of
confidential information.
After signing the confidentiality agreement, the Company provided Western
with certain confidential information relating to the Company and its
businesses. Following several general discussions concerning possible structures
and potential valuations, both parties agreed that further discussions at such
time would not be pursued. On July 30, 1997, Mr. Perez sent a letter to Mr.
Friedman returning the confidential information which had previously been
provided.
During the fall of 1997, Mr. Friedman and other representatives of the
Company had preliminary discussions with several other companies with respect to
a possible business combination involving the Company. In connection with one
such discussion, the Company and the other party exchanged confidential
information, but determined not to proceed with a transaction.
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In early November 1997, Mr. White contacted Mr. Friedman to reiterate
Western's continued interest in a possible transaction, and later that month
Salomon Smith Barney, which was acting as financial advisor to the Company with
respect to a possible transaction, at the direction of the Company contacted and
had further discussions with Mr. White. In early December 1997, Will
Honeybourne, a Senior Vice President of WAII, met with Mr. Friedman and Mr.
Ferran. The discussions at this meeting related primarily to the Company's and
the industry's outlook and each party's potential interest in pursuing a
business combination. On December 19, 1997 the Company and Western entered into
a new confidentiality agreement. The Company then provided Western with
additional financial and operational data and responded to Western's inquiries
in connection with its preliminary financial review.
On January 13, 1998, representatives of the Company and Western met to
discuss a possible transaction. At this meeting, Western's representatives
indicated that Western was willing to consider proposing an acquisition of the
Company for cash but that Western would need to conduct a detailed due diligence
investigation of the Company before it would be in a position to make or proceed
with any such proposal. Western's representatives said that, for Western to
continue with the necessary due diligence investigation, it would require the
Company to enter into an agreement obligating it to negotiate exclusively with
Western for a limited period of time during which Western would continue with
its due diligence. Western's representatives stated that their initial financial
analysis of the proposed transaction indicated a cash price of $10 per Share. As
a result of these discussions, the Company and Western entered into an
Exclusivity Agreement dated January 20, 1998 which initially provided that the
Company would negotiate exclusively with Western until February 11, 1998 (the
"Exclusivity Period").
Western continued its due diligence investigation through the remainder of
January, and in February representatives of Western and the Company held
numerous telephonic meetings to discuss the information learned through
Western's due diligence investigation. During the course of these discussions,
the Exclusivity Period was extended several times. On February 12, 1998,
representatives of Western met with Messrs. Friedman and Ferran, other senior
executives of the Company, three of its outside directors and a representative
of Salomon Smith Barney to discuss the results of Western's due diligence
investigation to such date.
Following the meeting on February 12, representatives of the Company and
Western held a number of telephonic meetings concerning the results of, and
concerns raised by, Western's due diligence and the impact of such results on
the price per Share Western would be willing to pay. As a result of these
discussions and negotiations, each party's representatives expressed their
willingness to recommend to their respective companies a compromise price of
$9.65 per Share, subject to negotiation and execution of definitive
documentation and board approval thereof. On February 25, 1998, Western
furnished the Company with a draft Merger Agreement. Additional meetings and
telephone discussions between Western, the Company and their respective advisors
occurred between February 25 and March 8 during which the significant terms of
the Merger Agreement, Support Agreements and consulting and non-compete
agreements were negotiated and substantially revised. On March 4, 1998 a form of
the Merger Agreement was presented to, and approved by, the Executive Committee
of the Board of Directors of Western (acting with the authority of the full
Board of Directors) and on March 8, 1998 the Merger Agreement was presented to
and unanimously approved by the Board of Directors of the Company.
Recommendation of the Board of Directors; Fairness of the Offer and the
Merger
In approving the Merger Agreement and recommending acceptance of the Offer
and adoption of the Merger Agreement, the Board considered a number of factors,
including, but not limited to, the following:
(i) The Company's business, financial condition, results of
operations, assets, liabilities, business strategy and prospects, as well
as various uncertainties associated with those prospects.
(ii) The Company's existing competition in the industry in which it
operates and future competition, the relative size of other participants in
the industry in which it operates and the available capital and other
resources of such other participants as compared to the available capital
and other resources of the Company.
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(iii) A review of the possible alternatives to the Offer and the
Merger, including the possibility of continuing to operate the Company as
an independent entity and the timing and feasibility of those alternatives,
and the possible values to the Company's stockholders of such alternatives;
(iv) The historical and current market prices for the Shares.
(v) The opinion of Salomon Smith Barney dated March 8, 1998 (the
"Opinion") to the effect that, as of such date and based upon and subject
to certain matters stated in the Opinion, the $9.65 per Share cash
consideration to be received by holders of Shares (other than Western and
its affiliates) in the Offer and the Merger was fair, from a financial
point of view, to such holders. The full text of Salomon Smith Barney's
Opinion, which sets forth the assumptions made, matters considered and
limitations on the review undertaken by Salomon Smith Barney, is attached
hereto as Exhibit (a)(4) and is incorporated herein by reference. The
Opinion is directed only to the fairness, from a financial point of view,
of the cash consideration to be received in the Offer and the Merger by
holders of Shares (other than Western and its affiliates) and is not
intended to constitute, and does not constitute, a recommendation as to
whether any stockholder should tender Shares pursuant to the Offer. HOLDERS
OF SHARES ARE URGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY.
(vi) The fact that the Offer was not subject to a financing condition.
(vii) The financial and other terms and conditions of the Offer, the
Merger and the Merger Agreement, including, without limitation, the facts
that the terms of the Merger Agreement will not prevent other third parties
from making certain bona fide proposals subsequent to execution of the
Merger Agreement, will not prevent the Company Board from determining, in
the exercise of its fiduciary duties in accordance with the Merger
Agreement, to provide information to and engage in negotiations with such
third parties and will permit the Company, subject to the non-solicitation
provisions and the payment of the termination fee discussed above, to enter
into a transaction with a third party that would be more favorable to the
Company's stockholders from a financial point of view than the Offer and
the Merger.
(viii) The structure of the transaction, which is designed, among
other things, to result in receipt by the holders of Shares at the earliest
practicable time of the consideration to be paid in the Offer and the fact
that the consideration to be paid in the Offer and the Merger is the same.
(ix) The likelihood that the Offer and the Merger would be
consummated.
The foregoing discussion of the information and factors considered and
given weight by the Board is not intended to be exhaustive. In view of the wide
variety of factors considered in connection with its evaluation of the Offer and
the Merger, the Board found it impracticable to, and did not, quantify or
otherwise attempt to assign relative weights to the specific factors considered
in reaching its determination. The Board discussed in detail the matters
referenced above; however, individual members of the Board may have given
different weights to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained Smith Barney Inc. and Salomon Brothers Inc,
collectively doing business as Salomon Smith Barney, as its financial advisors
in connection with the Offer and the Merger. Pursuant to the terms of Salomon
Smith Barney's engagement, the Company has agreed to pay Salomon Smith Barney
for its services an aggregate financial advisory fee of $900,000, of which
$450,000 was paid in connection with the delivery of the Opinion and will be
credited against the advisory fee which is payable upon consummation of the
Offer. The Company also has agreed to reimburse Salomon Smith Barney for travel
and other out-of-pocket expenses, including legal fees and expenses, and to
indemnify Salomon Smith Barney and certain related parties against certain
liabilities, including liabilities under the federal securities laws, arising
out of Salomon Smith Barney's engagement. Salomon Smith Barney has in the past
provided investment banking services to the Company unrelated to the Offer and
the Merger, for which services Salomon Smith Barney has received compensation.
In December 1996, Smith Barney Inc. acted as the lead managing underwriter for
the Company's public offering of 3,500,000 Shares. In the ordinary course of
business, Salomon Smith Barney and
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its affiliates (including Travelers Group Inc. and its affiliates) may actively
trade or hold the securities of the Company and Western for their own account or
for the account of customers and, accordingly, may at any time hold a long or
short position in such securities.
Neither the Company nor any person acting on its behalf currently intends
to employ, retain or compensate any person to make solicitations or
recommendations to security holders on its behalf concerning the Offer or the
Merger.
ITEM 6. RECENT TRANSACTIONS AND INTEREST WITH RESPECT TO SECURITIES.
(a) No transactions in Shares have been effected during the past 60 days by
the Company or, to the best of the Company's knowledge, by any executive
officer, director, subsidiary or affiliate of the Company.
(b) To the best of the Company's knowledge, each executive officer,
director and affiliate of the Company currently intends to tender to Purchaser
all Shares over which such person has sole dispositive power as of the
Expiration Date of the Offer, and each director and executive officer (except
one officer-director who owns 3,000 Shares) has entered into Support Agreements
pursuant to which they have agreed to do so. See Item 3 hereof.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Other than the Offer and the Merger, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (1) an
extraordinary transaction, such as a merger or reorganization, involving the
Company or any subsidiary of the Company; (2) a purchase, sale or transfer of a
material amount of assets of the Company or any subsidiary of the Company; (3) a
tender offer for or other acquisition of securities by or of the Company; or (4)
any material change in the present capitalization or dividend policy of the
Company.
(b) Except as set forth or as incorporated by reference in this Item 7 or
in Items 3 or 4 hereof, there are no transactions, Board resolutions, agreements
in principle or signed contracts in response to the Offer which relate to or
would result in one or more of the matters referred to in Item 7(a) hereof.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) Section 203 of the Delaware General Corporation Law
As a Delaware corporation, the Company is subject to Section 203 ("Section
203") of the Delaware General Corporation Law. Under Section 203, certain
"business combinations" between a Delaware corporation whose stock is publicly
traded or held on record by more than 2,000 stockholders and an "interested
stockholder" are prohibited for a three-year period following the date that such
a stockholder became an interested stockholder, unless (i) the corporation has
elected in its original certificate of incorporation not to be governed by
Section 203 (the Company did not make such an election), (ii) the transaction in
which the stockholder became an interested stockholder or the business
combination was approved by the board of directors of the corporation before the
other party to the business combination became an interested stockholder, (iii)
upon consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers or held in employee benefit plans in which
the employees do not have a confidential right to tender or vote stock held by
the plan) or (iv) the business combination was approved by the board of
directors of the corporation and ratified by 66 2/3% of the voting stock which
the interested stockholder did not own. The term "business combination" is
defined generally to include mergers or consolidations between a Delaware
corporation and an "interested stockholder," transactions with an "interested
stockholder" involving the assets or stock of the corporation or its
majority-owned subsidiaries and transactions which increase an "interested
stockholder's" percentage ownership of stock. The term "interested stockholder"
is defined generally as a stockholder who, together with affiliates and
associates, owns (or, within three years prior, did own) 15% or more of a
Delaware corporation's voting stock.
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In accordance with the Merger Agreement and Section 203, the Company Board
approved the Offer and the Merger and, therefore, the restrictions of Section
203 are inapplicable to the Offer and the Merger.
(b) Amendment of the Rights Agreement
The Company has represented to Western in the Merger Agreement that the
Company Board, at a meeting duly called and held, has taken all necessary action
to render the Rights inapplicable to the Offer, the Merger and the Support
Agreements and to amend the Rights Agreement so that neither Bidder is an
Acquiring Person as a result of entering into the Merger Agreement or the
Support Agreements or making the Offer.
At its meeting on March 8, 1998, the Company Board approved, and the
Company entered into, the amendment to the Rights Agreement filed with the SEC
as Exhibit (c)(10) to this Statement.
(c) Litigation Relating to the Offer and Merger
On or about March 9, 1998, a putative class action complaint, on behalf of
the Company's stockholders, was filed in the Court of Chancery in the State of
Delaware in and for New Castle County against the Company, the members of the
Company Board, and Western (the "Chancery Court Action"). The complaint in the
Chancery Court Action alleges that the directors of the Company breached their
fiduciary duties by agreeing to the Merger contemplated by the Merger Agreement
without making the requisite effort to obtain the best offer possible. The
complaint seeks declaratory and injunctive relief, as well as unspecified
damages and attorneys' fees. The Company believes that the Chancery Court Action
is without merit and intends to defend such action vigorously.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT NO. DESCRIPTION
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(a)(1) Letter to Stockholders of the Company dated March 13, 1998.
(a)(2) Joint Press Release of the Company and Western dated March
9, 1998.
(a)(3) Form of Summary Advertisement dated March 13, 1998.
(a)(4) Opinion of Salomon Smith Barney dated March 8, 1998.
(c)(1) Relevant Portions of 1997 Proxy Statement.
(c)(2) Form of Amended and Restated Employment Agreement dated
January 13, 1998 between the Company and Wayne P.
Widynowski.
(c)(3) Form of Amended and Restated Employment Agreement dated
January 13, 1998 between the Company and Ronald L. Koons.
(c)(4) Agreement and Plan of Merger dated as of March 8, 1998,
among the Company, Purchaser and Western.
(c)(5) Form of Support Agreement between Western and Robert P.
Andrews, Ralph M. Bahna, Douglas W. Brandrup, Richard Davis,
Arthur Emil, Luis H. Ferran, Joel Friedman, P. Dennis
O'Brien and Emir L. Tavella.
(c)(6) Form of Support Agreement between Western and Ronald L.
Koons.
(c)(7) Form of Support Agreement between Western and Wayne P.
Widynowski.
(c)(8) Consulting Agreement and Noncompetition Agreement, dated as
of March 8, 1998 among Western, Friedman Enterprises Inc.
and Joel Friedman.
(c)(9) Consulting Agreement and Noncompetition Agreement, dated as
of March 8, 1998 among Western, Luis H. Ferran Arroyo.
(c)(10) Rights Agreement, dated as of July 17, 1997, between the
Company and American Securities Transfer & Trust, Inc., as
Rights Agent, as amended.
(c)(11) Amended and Restated 1995 Long-Term Incentive Compensation
Plan of the Company.
(c)(12) 1997 Long-Term Stock Incentive Plan of the Company.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
3-D GEOPHYSICAL, INC.
By: /s/ JOEL FRIEDMAN
------------------------------------
Name: Joel Friedman
Title: Chairman
Dated: March 13, 1998
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Exhibit (a)(4)
[SALOMON SMITH BARNEY LETTERHEAD]
March 8, 1998
The Board of Directors
3-D Geophysical, Inc.
599 Lexington Avenue
New York, New York 10022
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of 3-D Geophysical, Inc. ("3-D
Geophysical") of the consideration to be received by such holders pursuant to
the terms and subject to the conditions set forth in the Agreement and Plan of
Merger, dated as of March 8, 1998 (the "Merger Agreement"), among Western Atlas
Inc. ("Western Atlas"), WAI Acquisition Corporation, a subsidiary of Western
Atlas ("Subsidiary"), and 3-D Geophysical. As more fully described in the Merger
Agreement, (i) Subsidiary will commence a tender offer to purchase all
outstanding shares of the common stock, par value $0.01 per share, of 3-D
Geophysical (the "3-D Common Stock" and, such tender offer, the "Tender Offer")
at a purchase price of $9.65 per share, net to the seller in cash (the "Cash
Consideration") and (ii) subsequent to the Tender Offer, Subsidiary will be
merged with and into 3-D Geophysical (the "Merger" and, together with the Tender
Offer, the "Transaction") and each outstanding share of 3-D Common Stock not
previously tendered will be converted into the right to receive the Cash
Consideration.
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of 3-D Geophysical and certain senior officers and other
representatives of Western Atlas concerning the business, operations and
prospects of 3-D Geophysical. We examined certain publicly available business
and financial information relating to 3-D Geophysical as well as certain
financial forecasts and other information and data for 3-D Geophysical which
were provided to or otherwise discussed with us by the management of 3-D
Geophysical. We reviewed the financial terms of the Merger as set forth in the
Merger Agreement in relation to, among other things: current and historical
market prices and trading volumes of 3-D Common Stock; the historical and
projected earnings and other operating data of 3-D Geophysical; and the
capitalization and financial condition of 3-D Geophysical. We considered, to the
extent publicly available, the financial terms of certain other similar
transactions recently effected which we considered relevant in evaluating the
Merger and analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations we
considered relevant in evaluating those of 3-D Geophysical. In addition to the
foregoing, we conducted such other analyses and examinations and considered such
other information and financial, economic and market criteria as we deemed
appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us, we have been
advised by the management of 3-D Geophysical that such forecasts and other
information and data were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of 3-D Geophysical
as to the future financial performance of 3-D Geophysical. We have not made or
been provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of 3-D Geophysical nor have we made any
physical inspection of the properties or assets of 3-D Geophysical. In
connection with our engagement, we were not requested to, and did not, solicit
third party indications of interest in a possible acquisition of 3-D
Geophysical, nor were we requested to consider, and our opinion does not
address, the relative merits of the Transaction
18
The Board of Directors
3-D Geophysical, Inc.
March 8, 1998
Page 2
as compared to any alternative business strategies that might exist for 3-D
Geophysical or the effect of any other transaction in which 3-D Geophysical
might engage. Our opinion is necessarily based upon information available to
us, and financial, stock market and other conditions and circumstances existing
and disclosed to us, as of the date hereof.
Smith Barney Inc. and Salomon Brothers Inc (collectively doing business as
Salomon Smith Barney) have acted as financial advisors to 3-D Geophysical in
connection with the proposed Transaction and will receive a fee for such
services, a significant portion of which is contingent upon the consummation of
the Transaction. We also will receive a fee upon the delivery of this opinion.
In the ordinary course of our business, we and our affiliates may actively
trade or hold the securities of 3-D Geophysical and Western Atlas for our own
account or for the account of our customers and, accordingly, may at any time
hold a long or short position in such securities. We have in the past provided
investment banking services to 3-D Geophysical unrelated to the proposed
Transaction, for which services we have received compensation. In addition, we
and our affiliates (including Travelers Group Inc. and its affiliates) may
maintain relationships with 3-D Geophysical, Western Atlas and their respective
affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of 3-D Geophysical in its evaluation of
the proposed Transaction, and our opinion is not intended to be and does not
constitute a recommendation to any stockholder as to whether or not such
stockholder should tender shares of 3-D Common Stock in the Tender Offer or how
such stockholder should vote on the proposed Merger. Our opinion may not be
published or otherwise used or referred to, nor shall any public reference to
Salomon Smith Barney be made, without our prior written consent; provided, that
this opinion letter may be included in its entirety in the Solicitation/
Recommendation Statement of 3-D Geophysical relating to the proposed
Transaction.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Cash Consideration to be received in
the Transaction by the holders of 3-D Common Stock (other than Western Atlas
and its affiliates) is fair, from a financial point of view, to such holders.
Very truly yours,
/s/ Salomon Smith Barney
SALOMON SMITH BARNEY
19
ANNEX II
3-D GEOPHYSICAL, INC.
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about March 13, 1998, as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") to holders of the Common Stock of 3-D Geophysical, Inc. (the
"Company"). Capitalized terms used and not otherwise defined herein shall have
the meanings set forth in the Schedule 14D-9. You are receiving this Information
Statement in connection with the possible election of persons (the "Parent
Designees") designated by Western Atlas Inc. (the "Parent") to a majority of the
seats on the Board of Directors of the Company.
Pursuant to the Merger Agreement, on March 13, 1998, Purchaser commenced
the Offer. The Offer is scheduled to expire at 12:00 Midnight on April 9, 1998,
unless otherwise extended.
The information contained in this Information Statement (including
information incorporated by reference) concerning Parent, Purchaser and the
Parent Designees has been furnished to the Company by Parent and Purchaser, a
wholly owned subsidiary of Parent, and the Company assumes no responsibility for
the accuracy or completeness of such information.
GENERAL INFORMATION REGARDING THE COMPANY
GENERAL
The common stock, par value $.01 per share ("Common Stock"), is the only
class of voting securities of the Company outstanding. Each share of Common
Stock has one vote. As of March 2, 1998, there were 11,916,666 shares of Common
Stock outstanding. The Company does not have any treasury shares. The Board of
Directors of the Company currently consists of ten members and there are
currently no vacancies on the Board. The Board has three classes and each
director serves a term of three years until his successor is duly elected and
qualified or until his earlier death, resignation or removal.
PARENT DESIGNEES
The Merger Agreement provides that, subject to compliance with applicable
law, promptly upon the payment by the Purchaser for Shares pursuant to the
Offer, and from time to time thereafter, Parent shall be entitled to designate
such number of directors, rounded up to the next whole number, on the Company
Board as is equal to the product of the total number of directors on the Company
Board (determined after giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Parent or its affiliates bears to the total number of
Shares then outstanding, and the Company shall, upon request of Parent, promptly
take all actions necessary to cause Parent's designees to be so elected,
including, if necessary, seeking the resignations of one or more existing
directors, provided that prior to the Effective Time the Company Board shall
always have at least two members who are neither officers, directors or
designees of the Purchaser or any of its affiliates ("Purchaser Insiders"). If
the number of directors who are not Purchaser Insiders is reduced below two
prior to the Effective Time, the remaining director who is not a Purchaser
Insider shall be entitled to designate a person to fill such vacancy who is not
a Purchaser Insider and who shall be a director not deemed to be a Purchaser
Insider for all purposes of the Merger Agreement.
1
20
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The table below provides information concerning the directors and executive
officers of the Company, and sets forth their respective ages as of March 1,
1998 and the positions they hold with the Company.
NAME AGE POSITION(S)
---- --- -----------
Mr. Joel Friedman (a)(b).................. 58 Chairman of the Board of Directors and
acting Chief Executive Officer
Mr. Wayne P. Widynowski (b)............... 52 Executive Vice President and Chief
Operating Officer and Director;
President of Northern Geophysical, Inc.,
a wholly owned subsidiary of the Company
("Northern")
Mr. Luis H. Ferran (b).................... 49 Executive Vice President -- Latin
American Operations and Director;
President of Geoevaluaciones, S.A. de
C.V. ("Geo"), Procesos Interactivos
Avanzados, S.A. de C.V. ("PIASA") and
3-D Geophysical of Latin America, Inc.
("3-D Latin America"), wholly owned
subsidiaries of the Company.
Mr. Ronald L. Koons....................... 50 Vice President, Chief Financial Officer,
Secretary and Treasurer
Mr. Robert P. Andrews (c)................. 42 Director
Mr. Ralph M. Bahna (c).................... 55 Director
Mr. Douglas W. Brandrup (a)(d)............ 57 Director
Mr. Richard D. Davis...................... 63 Director
Mr. Arthur D. Emil (c).................... 73 Director
Mr. P. Dennis O'Brien (a)(c)(d)........... 56 Director
Mr. Emir L. Tavella....................... 68 Director
- ---------------
(a) Member of the Audit Committee
(b) Member of the Executive Committee
(c) Member of the Compensation Committee
(d) Member of the Stock Option Committee
Mr. Joel Friedman has served as Chairman of the Board of the Company since
February 1996 and as the acting Chief Executive Officer of the Company since
July 1997. He was President and Chief Executive Officer of the Company from
March 1995 until February 1996. From August 1994 to September 1997 Mr. Friedman
was a director of and from August 1994 to October 1996 he was the Chairman of
Consolidated Health Care Associates, Inc., and was the Chief Executive Officer
of that company from August 1994 until March 1996. Since 1969, he has been an
officer, director and shareholder of Founders Property Corporation and its
affiliated companies ("Founders"), a private real estate concern. From 1975 to
1986, Mr. Friedman was President and a director of Kenai Corporation, a
publicly-held company engaged in contract drilling for oil and natural gas,
wellhead equipment manufacturing and remanufacturing and oil and gas exploration
and production.
Mr. Wayne P. Widynowski has served as the Executive Vice President and
Chief Operating Officer of the Company and as President of Northern since
February 1996. From 1981 to February 1996, Mr. Widynowski was employed by
Northern's predecessors, most recently as Executive Vice President. Prior to
1981, Mr. Widynowski was employed as an operations manager by United
Geophysical, Inc., a subsidiary of the Bendix Corporation.
Mr. Luis H. Ferran has served as Executive Vice President -- Latin American
Operations of the Company and as President of Geo and PIASA since February 1996
and as President of 3-D Latin America since its formation by the Company in May
1996. Mr. Ferran was one of the founding shareholders of Geo in 1977 and has
been General Manager of Geo since 1982. Prior to forming Geo, Mr. Ferran was a
supervisor
2
21
with Compania Mexicana de Exploraciones, S.A. de C.V., a Mexican company
associated with PEMEX, Mexico's national oil company.
Mr. Ronald L. Koons has served as Vice President, Chief Financial Officer,
Secretary and Treasurer of the Company since September 30, 1996. Mr. Koons was
the Executive Vice President, Chief Financial Officer and Treasurer of Tuboscope
Vetco International Corp. ("Tuboscope"), an oilfield service company, from
October 1993 to April 1996 and Senior Vice President, Chief Financial Officer
and Treasurer of Tuboscope from November 1991 to October 1993. From August 1988
to November 1991, Mr. Koons was the Vice President, Chief Financial Officer and
Treasurer of Eastman Christensen Company ("Eastman"), an oilfield service
company. He served as Controller of Eastman from June 1987 to August 1988 and
Treasurer of Eastman from September 1986 to June 1987.
Mr. Robert P. Andrews has served as the President of The Andrews Group
International Inc., a Texas corporation which supplies goods and services to the
oil and gas industry in Central and South America, in particular Mexico, since
1987 and as the President of A.G.I. Mexicana, S.A. de C.V., a Mexican company
that sells goods and services relating to computer hardware and software for use
in the oil and gas industry in Mexico, since 1991. Until February 1996, Mr.
Andrews was also the President and Chairman of the Board of PIASA. A.G.I.
Mexicana conducts the business of The Andrews Group International, Inc. in
Mexico and acts as the exclusive representative for several companies in Mexico.
A.G.I. Mexicana also acts as a non-exclusive distributor for various
corporations in Mexico.
Mr. Ralph M. Bahna serves as President of Masterworks Development
Corporation ("Masterworks"), a company that he founded in 1990 to develop a
series of hotels called Club Quarters. Between 1981 and 1988, Mr. Bahna was
chief executive officer of Cunard Line Limited, which owns, among other cruise
liners and hotels, the Queen Elizabeth 2, and was also a divisional managing
director of Trafalgar House PLC, the parent company of Cunard Line Limited. From
1988 until he became President of Masterworks in 1990, he pursued investment and
non-profit endeavors.
Mr. Douglas W. Brandrup is a practicing attorney and senior partner at the
law firm of Griggs, Baldwin & Baldwin in New York City, where he has practiced
since 1974. Mr. Brandrup is Chairman of Equity Oil Company, a publicly-held oil
and gas production and exploration company, and has been a director of that
company since 1975.
Mr. Richard D. Davis served as President and Chief Executive Officer of the
Company from February 1996 until July 1997. From March 1994 to June 1996, Mr.
Davis was Vice President of Operations of Kemp Geophysical Inc., a wholly owned
subsidiary of the Company that was merged with Northern. From 1988 to March
1994, as President and sole owner of D-Cube International Inc., he was an
independent consultant to several major oil companies in the area of seismic
acquisition services. From 1983 to 1988, Mr. Davis was a director of Seismic
Enterprises, Inc. (now Seitel, Inc.) and President and Chief Operating Officer
of Triangle Geophysical Co. From 1979 to 1983, he was Executive Vice President
of Geo Seismic Services, Inc., which at one time operated 38 seismic data
acquisition crews.
Mr. Arthur D. Emil is a practicing attorney and currently of counsel to the
law firm of Kramer, Levin, Naftalis & Frankel in New York City. Between 1986 and
1993, he was a senior partner of and, upon retirement, of counsel to the law
firm of Jones, Day, Reavis & Pogue. He served as an executive officer, director
and chairman of the executive committee of North European Oil Company from 1955
to 1979. In addition, he served as general counsel for various companies,
including the New England Patriots and Bartell Media Corp., a communications
company. He is a trustee of various philanthropic institutions. Kramer, Levin,
Naftalis & Frankel provides legal services to the Company and received fees of
approximately $210,000 for such services in 1997. Mr. Emil was a general partner
of South Norwalk Redevelopment Limited Partnership ("SNRLP"), a Connecticut
limited partnership formed in 1981 to rehabilitate a portion of Norwalk,
Connecticut. On July 25, 1994, a creditor of SNRLP, Scirocco Partners ("SP"),
sought to foreclose on a SNRLP mortgage it held and SNRLP, seeking to avoid the
foreclosure, filed a voluntary petition for reorganization on August 15, 1994 in
the United States Bankruptcy Court, District of Connecticut (Case No. 94-51676).
In a related case, SP has sued Mr. Emil in connection with a personal guarantee
limited to interest and certain expenses he gave in connection with the
mortgage. The bankrutcy has been terminated
3
22
and Mr. Emil has received a general release. In February 1998 Prudential
Associates, a limited partnership, of which Mr. Emil is one of three general
partners, owning a building in Buffalo, New York, filed a voluntary Chapter XI
petition in the Western District of New York to avoid a foreclosure. In a
related case, one of the mortgages sued the three general partners on a
guaranty. These cases are pending.
Mr. P. Dennis O'Brien served as the President and Chief Operating Officer
of Advance Geophysical Corp. ("Advance"), a company that develops software for
the geophysical industry, from 1988 to 1994. In March 1994, Advance merged with
a subsidiary of Landmark Graphics Corporation, a major software developer in the
geophysical industry. From April 1994 to June 1995, Mr. O'Brien served as the
Chief Operating Officer of Advance. Since July 1995, Mr. O'Brien has provided
consulting services to software development companies serving the petroleum
industry.
Mr. Emir L. Tavella is founder, and since May 1995 a partner and director,
of Sagoil S.A., an Argentinian petroleum supply company associated with Sagoil
Inc., a Canadian company. From February 1987 to April 1995, Mr. Tavella was the
general manager for exploration activities for PLUSPetrol S.A., an Argentinian
petroleum exploration and production company.
------------------------
Mr. Friedman has served as a Director of the Company since its inception;
Messrs. Bahna, Brandrup, Davis, Emil and Ferran have served as Directors since
October 1995; Messrs. Andrews and O'Brien have served as Directors since January
1996; and Mr. Tavella has served as a Director since April 1996.
There are no family relationships among any of the directors or executive
officers of the Company.
There has been no change in control of the Company since January 1, 1997.
The Offer will result in a change in control of the Company upon its
consummation (see Item 2 of the Schedule 14D-9).
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board has established an Executive Committee consisting of Messrs.
Ferran, Friedman and Widynowski. The Executive Committee has the authority to
exercise all the powers of the Board in the management of the business and
affairs of the Company, subject to certain limitations under the General
Corporation Law of the State of Delaware. The Executive Committee held six
meetings and acted by unanimous written consent in lieu of a meeting three times
in 1997.
The Board has established an Audit Committee consisting of Messrs.
Brandrup, Friedman and O'Brien. The Audit Committee annually recommends to the
Board the appointment of the independent public accountants to serve as auditors
for the Company. In addition, the Audit Committee discusses and reviews the
scope and fees of the annual audit and reviews the results with the auditors,
reviews compliance with existing major accounting and financial policies of the
Company, reviews the adequacy of the financial organization of the Company and
considers comments by the auditors regarding controls and accounting procedures
and management's response to those comments. The Audit Committee held one
meeting in 1997.
The Board has established a Compensation Committee consisting of Messrs.
Andrews, Bahna, Emil and O'Brien. The Compensation committee meets periodically
to determine the compensation of certain of the Company's executive officers and
other significant employees and the Company's personnel policies. The
Compensation Committee held three meetings in 1997.
The Board has established a Stock Option Committee consisting of Messrs.
Brandrup and O'Brien to administer the Company's Stock Option Plan and other
option plans approved by the Board of Directors and to grant options thereunder.
The Stock Option Committee acted by unanimous written consent in lieu of a
meeting five times in 1997.
The Company does not have a nominating committee. The functions customarily
performed by a nominating committee are performed by the Board of Directors as a
whole.
The Company's Board of Directors held three meetings and acted by unanimous
written consent in lieu of a meeting four times in 1997. During 1997, no
director or committee member attended fewer than 75% of the
4
23
meetings of the Board or the respective committees on which he served during the
periods of his service as a director or committee member.
DIRECTOR COMPENSATION
Each member of the Board who is not an employee of the Company receives:
(i) an annual retainer of $10,000; (ii) $750 per meeting of the Board of
Directors or any committee thereof at which such director is present in person;
and (iii) reimbursement of all ordinary and necessary expenses incurred in
attending a meeting of the Board of Directors or committee thereof. Directors
who are full-time employees of the Company do not receive any compensation for
serving as directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Messrs. Andrews, Bahna,
Emil and O'Brien, who are each independent directors of the Company. None of
these individuals had any "interlock" relationship to report during 1997.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Section
16(a)"), requires the Company's directors and executive officers and persons who
beneficially own more than ten percent of the Company's Common Stock to report
their ownership of and transactions in the Company's Common Stock to the
Securities and Exchange Commission and The Nasdaq National Stock Market. Copies
of these reports are also required to be supplied to the Company. The Company
believes, based solely on a review of the copies of such reports received by the
Company, that during 1997 all applicable Section 16(a) reporting requirements
were complied with, except that Messrs. Bahna, Ferran, Friedman, Koons and
Widynowski inadvertently did not report the grant of options in November 1997,
and Mr. Widynowski inadvertently did not report the purchase of 3,000 shares of
Common Stock in December 1997, on a timely basis.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
No salaries were paid during 1995 by the Company. Compensation paid to the
Company's chief executive officer and the other most highly compensated
executive officers who made more than $100,000 during the fiscal year ended
December 31, 1997 (hereinafter, "1997") is disclosed below.
5
24
Summary Compensation Table. The following table sets forth compensation
earned, whether paid or deferred, by the Company's Chief Executive Officer and
its other most highly compensated executive officers who made more than $100,000
(collectively, the "Named Executive Officers") for services rendered in all
capacities to the Company during 1997.
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
---------------------------------------- ------------
ALL OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
SALARY BONUSES COMPENSATION OPTIONS/SARS COMPENSATION
YEAR ($) ($) ($) (#) ($)
---- ------- ------- ------------ ------------ ------------
Joel Friedman................... 1997 125,000 0 82,800(1) 50,000 0
Chairman of the Board 1996 125,000 0 82,800(1) 75,000 0
Luis Ferran..................... 1997 140,000(2) 0 0 0 0
Executive Vice President 1996 140,000(2) 0 0 250,000(3) 0
Wayne P. Widynowski............. 1997 140,000 0 6,900 20,000 0
Executive Vice President 1996 140,000 0 0 120,000 0
Ronald L. Koons(4).............. 1997 125,000 0 7,800 20,000 0
Vice President and Chief 1996 31,250 0 1,950 30,000 0
Financial Officer
- ---------------
(1) Consists of an annual office allowance of $75,000 and a monthly automobile
allowance totalling $7800.
(2) Includes $77,161 and $89,910 paid to Comercializadora y Arrendadora, a
consulting company owned by Mr. Ferran, in 1996 and 1997, respectively.
(3) Consists of stock options which were granted in January 1996 immediately
prior to the Company's initial public offering at an exercise price of $7.50
per share, equal to the price per share to the public in the initial public
offering.
(4) Mr. Koons commenced his employment with the Company on September 30, 1996.
EMPLOYMENT AGREEMENTS; NON-COMPETITION AGREEMENTS
Each of Messrs. Friedman, Ferran, Widynowski and Koons has entered into an
employment agreement with the Company; the agreement with Mr. Friedman expires
on December 31, 1998, and the agreements with Messrs. Ferran, Widynowski and
Koons, expire on December 31, 2000. The employment agreements provide for base
annual salaries as follows: Mr. Friedman: $125,000 plus an annual office
allowance of $75,000, a portion of which is being applied to payments under the
Company's New York City lease: Mr. Ferran: $140,000; Mr. Widynowski: $140,000;
Mr. Koons: $125,000. Certain of the Company's executive officers are entitled to
an automobile allowance, and, in addition, each executive officer is eligible
pursuant to his employment agreement for a bonus to be determined in the
discretion of the Board of Directors or a committee thereof. No bonuses were
paid in 1996 or 1997.
Each of the employment agreements with Messrs. Friedman, Ferran and Koons
contains a covenant not to compete during the employee's employment with the
Company or its subsidiaries and for one year thereafter unless the Company
terminates the employee's employment without cause. The agreement with Mr.
Widynowski contains a similar covenant not to complete but provides that upon
termination of the agreement, other than by the Company for cause (as defined in
the agreement) or by the employee without good reason (as defined in the
agreement), the employee's covenant not to compete will lapse unless the Company
pays the employee 80% of the employee's base salary in the year following such
termination. In connection with the acquisition by the Company of Geo, Mr.
Ferran and the other former stockholders of Geo entered into non-competition
agreements under which Mr. Ferran and such former stockholders were entitled to
certain additional consideration. In January 1998, the employment agreements of
Messrs. Widynowski and Koons were amended and restated as described in Item 3(b)
of the Schedule 14D-9.
6
25
OPTION GRANTS
Shown below is information regarding grants of stock options during 1997 to
the Company's executive officers, including the Named Executive Officers. The
following table also shows the hypothetical value of the options granted at the
end of the option terms (ten years) if the price of the Company Common Stock
were to appreciate annually by 5% and 10%, respectively. These assumed rates of
growth are required by the Securities and Exchange Commission for illustrative
purposes only and are not intended to forecast possible future stock prices.
INDIVIDUAL GRANTS
----------------------------------------------------------
MARKET POTENTIAL REALIZABLE
PRICE OF VALUE OF ASSUMED
% OF TOTAL UNDERLYING ANNUAL RATES
OPTIONS SECURITIES OF STOCK PRICES
GRANTED ON THE DATE APPRECIATION FOR
NUMBER TO OF GRANT IF OPTION TERM(2)
OF EMPLOYEES EXERCISE HIGHER THAN ----------------------
OPTIONS IN FISCAL PRICE EXERCISE EXPIRATION 5% 10%
NAME GRANTED YEAR(1) ($) PRICE DATE ($) ($)
- ---- ------- ---------- -------- ----------- ---------- ---------- ----------
Joel Friedman................. 50,000(3) 14.8% 7.25 -- 11/10/2007 590,474.30 940,231.64
Wayne P. Widynowski(4)........ 20,000(3) 5.9% 7.25 -- 11/10/2007 236,189.72 376,092.66
Ronald L. Koons............... 20,000(3) 5.9% 7.25 -- 11/10/2007 236,189.72 376,092.66
- ---------------
(1) The Company granted options to purchase an aggregate of 337,800 shares of
Common Stock to its employees in 1997, of which 287,800 were granted under
the 1997 Plan and 50,000 options were granted under the 1995 Plan.
(2) Represents the product of (i) the difference between (A) the per-share fair
market price at the time of the grant compounded annually at the assumed
rate of appreciation over the term of the option, and (B) the per-share
exercise price of the option, and (ii) the number of shares underlying the
grant at March 8, 1998.
(3) The option will become exercisable in four equal cumulative annual
installments commencing on November 10, 1998.
(4) On March 17, 1997 the Stock Option Committee amended the stock option to
purchase 75,000 shares of Common Stock at a purchase price of $12.3125 per
share granted to Mr. Widynowski on April 26, 1996 by changing the purchase
price thereof to $6.25 per share. Such option was "repriced" in order to
provide Mr. Widynowski with a significant additional incentive to further
align his interests with all of the Company's stockholders. No option held
by any other executive officer of the Company has ever been "repriced."
Aggregate Option Exercises and Year-End Option Values. Shown below is
information relating to the exercise of stock options during 1997 for the
Company's executive officers, including the Named Executive Officers, and the
value of unexercised options at March 8, 1998, assuming consummation of the
Merger.
SHARES
ACQUIRED NUMBER OF SECURITIES VALUE OF UNEXERCISED
ON UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NAME EXERCISE VALUE REALIZED OPTIONS AT MARCH 8, 1997 AT MARCH 8, 1998(1)
---- ----------- -------------- ------------------------ --------------------
Joel Friedman................... 0 0 125,000 $120,000
Luis H. Ferran.................. 0 0 250,000 $537,500
Wayne P. Widynowski............. 0 0 140,000 $471,750
Ronald L. Koons................. 0 0 50,000 $ 90,000
- ---------------
(1) Market value of underlying securities of $9.65 per share based on the price
payable in the Offer.
7
26
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to beneficial
ownership of Common Stock as of March 1, 1998, by: (i) all persons known to the
Company to be the beneficial owner of 5% or more of the outstanding Common
Stock, (ii) each director, (iii) each executive officer of the Company, and (iv)
all executive officers and directors of the Company as a group:
COMMON STOCK
BENEFICIALLY OWNED
--------------------
NUMBER OF
SHARES PERCENT
--------- -------
Joel Friedman(1)............................................ 569,409 4.7%
599 Lexington Avenue
New York, New York 10022
Richard D. Davis(2)......................................... 138,588 1.2
Luis H. Ferran(3)........................................... 1,433,651 11.8
Ninos Heroes, No. 51
Col. Tepepan
Mexico, D.F.
Wayne P. Widynowski(4)...................................... 148,000 1.2
Ronald L. Koons(5).......................................... 62,500 *
Robert P. Andrews(6)........................................ 130,526 1.1
Ralph M. Bahna(6)(7)........................................ 28,719 *
Douglas W. Brandrup(6)...................................... 26,667 *
Arthur D. Emil(6)........................................... 24,456 *
Dennis O'Brien(6)........................................... 21,667 *
Emir L. Tavella(6).......................................... 16,667 *
All officers and directors as a group (11
persons)(1)(2)(3)(4)(5)(6)(7)............................. 2,600,850 20.4
Wellington Management(8).................................... 891,000 7.0
Company, LLP
75 State Street
Boston, Mass 02109
Heartland Advisor, Inc.(9).................................. 1,183,000 9.3
790 North Milwaukee Street
Milwaukee, WI 53202
- ---------------
* Less than 1%
(1) Includes an aggregate of 109,540 shares of Common Stock, of which (a) 21,908
shares are owned by Friedman Enterprises, Inc., (b) 43,816 shares are owned
by Mr. Friedman's wife, in which shares Mr. Friedman disclaims any
beneficial ownership, and (c) 21,908 shares are owned by each of Mr.
Friedman's two adult children, in which shares Mr. Friedman disclaims any
beneficial ownership. Also includes 131,250 shares of Common Stock issuable
upon the exercise of stock options.
(2) Includes 125,000 shares of Common Stock issuable upon the exercise of stock
options.
(3) Includes 267,500 shares of Common Stock issuable upon the exercise of stock
options. Excludes 15,235 shares of Common Stock owned by Mr. Ferran's wife,
all of which shares are held in trust by a Mexican bank for her benefit, and
in which shares Mr. Ferran disclaims any beneficial ownership.
(4) Includes 145,000 shares of Common Stock issuable upon the exercise of stock
options.
(5) Includes 62,500 shares of Common Stock issuable upon the exercise of stock
options.
(6) Includes 16,667 shares of Common Stock issuable upon the exercise of stock
options.
(7) Includes 6,250 shares of Common Stock issuable upon the exercise of stock
options granted in connection with a loan transaction (see "Certain
Relationships and Related Transactions").
(8) Based on Schedule 13G dated January 17, 1998.
(9) Based on Schedule 13G dated February 2, 1998.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Andrews is the sole stockholder of The Andrews Group International,
Inc. ("Andrews Group") which, through its Mexican affiliate, A.G.I. Mexicana,
S.A. de C.V. ("A.G.I. Mexicana"), acts as the exclusive representative for
several companies in Mexico. Geo purchased goods and services from A.G.I.
Mexicana during 1997. Such purchases totalled approximately $619,000.
In October 1997, Messrs. Bahna, Friedman, Koons and Widynowski loaned an
aggregate of $600,000 to the Company at an annual interest rate of 12%. At the
same time, Mr. Ferran guaranteed borrowings by Geo in the principal amount of
$350,000. In connection with these loan transactions, the Company issued
five-year options to purchase an aggregate of 47,500 shares of Common Stock at
$6.50 per share. All of such loans were repaid in December 1997 in connection
with the refinancing of the Company's line of credit with a commercial bank.
In July 1997, the Company and Mr. Richard D. Davis entered into an
agreement to terminate Mr. Davis' employment agreement with the Company. In
connection with such termination, the Company paid Mr. Davis $80,000 plus
accrued vacation pay of $8,950 in a lump sum and agreed to pay Mr. Davis a
consulting fee of $155,000 for consulting services to be provided to the Company
for the 12 months ending June 30, 1998. In addition, the Company agreed to pay
Mr. Davis' moving expenses of $15,000, certain other relocation expenses and to
continue certain insurance benefits for Mr. Davis and his family through
December 31, 1998.
The Company leases space in New York City at an annual base rental of
$165,000. Mr. Friedman utilizes a portion of said space as his office and the
balance of the space is utilized by sub-tenants. Mr. Friedman has agreed to
reimburse the Company for any amounts under the lease that are payable with
respect to space that is not utilized by the Company and which have not been
paid by sub-tenants.
In connection with the recent award of a contract to the Company, the
Company has agreed to purchase certain seismic data owned by a company in which
Mr. Widynowski is an officer and has an equity interest of less than ten
percent. The purchase price for the data will be determined on the basis of an
appraisal, but could approximate $500,000.
For information concerning legal fees paid to Kramer, Levin, Naftalis &
Frankel, to which firm Mr. Emil is of counsel, see "Directors and Executive
Officers -- Directors and Executive Officers of the Company."
CERTAIN LITIGATION
For a description of certain litigation pending in connection with the
Offer and the Merger Agreement see Item 8(c) of the Schedule 14D-9.
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STOCK PERFORMANCE GRAPH
The following table depicts the cumulative total return on the Company's
Common Stock compared to the cumulative total return for the S&P 500 Index and
the Geophysical Index, which was selected by the Company on an industry and
line-of-business basis. The table assumes an investment of $100 on February 6,
1996, when the Company's stock was first traded in a public market. Reinvestment
of dividends is assumed in all cases.
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PARENT DESIGNEES
The table below provides information concerning the Parent Designees
furnished to the Company by Parent and Purchaser:
POSITION WITH PARENT;
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AGE 5-YEAR EMPLOYMENT HISTORY
---- --- -----------------------------------
James E. Brasher....... 49 Senior Vice President and General Counsel of Parent since
October 1997. Prior thereto, Vice President of Parent from
1996 to 1997 and Vice President and Group Counsel of
Western Atlas International, Inc., ("WAII") from 1994 to
1997. Secretary and General Counsel of WAII from 1987 to
1994.
William H. Flores...... 44 Senior Vice President and Chief Financial Officer of Parent
since October 1997. Chief Financial Officer for WAII since
August 1997. Prior thereto, served as an officer of Marine
Drilling Companies, Inc. or its predecessors since 1980,
most recently as Executive Vice President and Chief
Financial Officer.
Lourdes T. Hernandez... 42 Director since 1998. Corporate Secretary of Parent since
September 1997. For more than five years prior thereto,
assistant general counsel of NL Industries, Inc., a
publicly traded international producer of titanium dioxide
pigments.
Will Honeybourne....... 46 Senior Vice President Marketing & Business Development of
WAII and Vice President of Parent since September 1996.
Prior thereto, President and Chief Executive Officer of
Computalog Ltd., Calgary from September 1993 through
November 1995, Vice President and General Manager of Baker
Hughes INTEQ from March 1993 through August 1993 and
President of EXLOG INC., a division of Baker Hughes Inc.,
from March 1984 through March 1993. Mr. Honeybourne is a
citizen of the United Kingdom and a permanent resident of
the United States.
Richard C. White....... 42 Senior Vice President of Parent since May 7, 1996 and
President of Western Geophysical division of WAII since
1995. Prior thereto, Vice President of Parent from 1995 to
1996. Senior Vice President of WAII since 1995. Chief
Operating Officer from 1994 to 1995 and Senior Vice
President of Western Geophysical since 1993.
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
(a)(1) Letter to Stockholders of the Company dated March 13, 1998.
(a)(2) Joint Press Release of the Company and Western dated March
9, 1998.
(a)(3) Form of Summary Advertisement dated March 13, 1998
(a)(4) Opinion of Salomon Smith Barney dated March 8, 1998.
(c)(1) Relevant Portions of 1997 Proxy Statement.
(c)(2) Form of Amended and Restated Employment Agreement dated
January 13, 1998 between the Company and Wayne P.
Widynowski.
(c)(3) Form of Amended and Restated Employment Agreement dated
January 13, 1998 between the Company and Ronald L. Koons.
(c)(4) Agreement and Plan of Merger dated as of March 8, 1998,
among the Company, Purchaser and Western.
(c)(5) Form of Support Agreement between Western and Robert P.
Andrews, Ralph M. Bahna, Douglas W. Brandrup, Richard Davis,
Arthur Emil, Joel Friedman, Luis H. Ferran, P. Dennis
O'Brien and Emir L. Tavella.
(c)(6) Form of Support Agreement between Western and Ronald L.
Koons.
(c)(7) Form of Support Agreement between Western and Wayne P.
Widynowski.
(c)(8) Consulting Agreement and Noncompetition Agreement, dated as
of March 8, 1998 among Western, Friedman Enterprises Inc.
and Joel Friedman.
(c)(9) Consulting Agreement and Noncompetition Agreement, dated as
of March 8, 1998 between Western and Luis H. Ferran Arroyo.
(c)(10) Rights Agreement, dated as of July 17, 1997, between the
Company and American Securities Transfer & Trust, Inc., as
Rights Agent, as amended.
(c)(11) Amended and Restated 1995 Long-Term Incentive Compensation
Plan of the Company.
(c)(12) 1997 Long-Term Stock Incentive Plan of the Company.