def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
Mitcham Industries, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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previous filing by registration statement number, or the Form or Schedule and the date of its
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MITCHAM
INDUSTRIES, INC.
8141 SH
75 SOUTH
P.O. BOX 1175
HUNTSVILLE, TEXAS
77342-1175
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 12, 2007
To our Shareholders:
We will hold the Annual Meeting of Shareholders of Mitcham
Industries, Inc., a Texas corporation, on Thursday,
July 12, 2007, at the Houston Marriott North, 225 North Sam
Houston Parkway East, Houston, Texas at 10:00 a.m., local
time. At the Annual Meeting, shareholders will be asked to:
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1.
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Elect five individuals to serve on our Board of Directors until
the next annual meeting of shareholders or until their
respective successors are elected and qualified;
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2.
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Ratify the selection by the Audit Committee of our Board of
Directors of Hein & Associates LLP as our independent
registered public accounting firm for the fiscal year ending
January 31, 2008; and
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Transact such other business as may properly come before the
meeting and any adjournment or postponement thereof.
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Our Board of Directors has established the close of business on
May 21, 2007 as the record date for determining the
shareholders entitled to notice of and to vote at the Annual
Meeting of Shareholders to be held July 12, 2007, and any
adjournment or postponement thereof.
Sincerely,
Billy F. Mitcham, Jr.
President and Chief Executive Officer
EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE
COMPLETE, SIGN AND MAIL THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE IN THE ACCOMPANYING ENVELOPE OR USE THE TELEPHONE OR
INTERNET VOTING.
June 1, 2007
TABLE OF CONTENTS
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i
MITCHAM
INDUSTRIES, INC.
8141 SH 75 South
P.O. Box 1175
Huntsville, Texas
77342-1175
PROXY
STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
To be Held July 12, 2007
SOLICITATION
OF PROXIES
Purpose,
Place, Date and Time
This proxy statement is furnished in connection with the
solicitation by the Board of Directors (Board) of
Mitcham Industries, Inc., a Texas corporation, of proxies from
the holders of record of our common stock, par value $.01 per
share, at the close of business on May 21, 2007, for use in
voting at the Annual Meeting of Shareholders (Annual
Meeting) to be held at the Houston Marriott North, 225
North Sam Houston Parkway East, Houston, Texas at
10:00 a.m., local time, on Thursday, July 12, 2007,
and any adjournment or postponement thereof.
The Notice of Annual Meeting, this proxy statement, the attached
proxy card and our Annual Report for the fiscal year ended
January 31, 2007 are being mailed together on or about
June 1, 2007 to each of our shareholders entitled to notice
of and to vote at the Annual Meeting.
Properly executed proxies will be voted as directed. If no
direction is indicated therein, proxies received in response to
this solicitation will be voted FOR: (1) the
election of each of the five individuals nominated for election
as directors; (2) the ratification of the selection of
Hein & Associates LLP as our independent registered
public accounting firm by our Audit Committee for the fiscal
year ending January 31, 2008; and (3) as recommended
by our Board with regard to any other matters, or if no
recommendation is given, at the discretion of the appointed
proxies.
Expenses
of Solicitation
We will bear the entire cost of soliciting proxies, including
the cost of the preparation, assembly, printing and mailing of
this proxy statement, the proxy card and any additional
information furnished to our shareholders in connection with the
Annual Meeting. In addition to this solicitation by mail, our
directors, officers and other employees may solicit proxies by
use of mail, telephone, facsimile, electronic means, in person
or otherwise. These persons will not receive any additional
compensation for assisting in the solicitation, but may be
reimbursed for reasonable
out-of-pocket
expenses in connection with the solicitation. We have retained
Broadridge Investor Communication Services to aid in the
distribution of proxy materials and to provide voting and
tabulation services for the Annual Meeting. For these services,
we will pay Broadridge a fee of $5,000 and reimburse it for
certain expenses. In addition, we will reimburse brokerage
firms, nominees, fiduciaries, custodians and other agents for
their expenses in distributing proxy material to the beneficial
owners of our common stock.
Shareholders
Sharing the Same Last Name and Address
We are sending only one copy of our proxy statement to
shareholders who share the same last name and address, unless
they have notified us that they want to continue receiving
multiple copies. This practice, known as
householding, is designed to reduce duplicate
mailings and save significant printing and postage costs.
If you received a householded mailing this year and you would
like to have additional copies of our proxy statement mailed to
you or you would like to opt out of this practice for future
mailings, please submit your request to our Corporate Secretary
in writing at Mitcham Industries, Inc., P.O. Box 1175,
Huntsville, Texas
77342-1175.
You may also contact us if you received multiple copies of the
annual meeting materials and would prefer to receive a single
copy in the future.
1
VOTING OF
SECURITIES
Record
Date; Shareholders Entitled to Vote
Our Board has fixed the close of business on May 21, 2007
as the record date for determining the holders of shares of
common stock entitled to notice of and to vote at the Annual
Meeting. As of the close of business on May 21, 2007, there
were 9,762,688 issued and outstanding shares of common stock,
each of which is entitled to one vote on each item of business
to be conducted at the Annual Meeting.
For a period of 10 days prior to the Annual Meeting, a list
of the shareholders entitled to vote at the Annual Meeting will
be available for inspection during normal business hours at our
principal place of business, which is located at 8141 SH 75
South, Huntsville, Texas 77340.
Quorum
Our Second Amended and Restated Bylaws provide that the presence
at the Annual Meeting, either in person or by proxy, of the
holders of a majority of the outstanding shares of common stock
will constitute a quorum for the transaction of business.
Consequently, the presence of holders of at least
4,881,344 shares of common stock is required to establish a
quorum for the Annual Meeting.
Abstentions
and Broker Non-Votes
Your shares may be voted if they are held in the name of a
brokerage firm, even if you do not provide the brokerage firm
with voting instructions. Brokerage firms have the authority
under the rules of The NASDAQ Stock Market LLC to cast votes on
certain routine matters if they do not receive
instructions from their customers. The election of directors and
the proposal to ratify the appointment of Hein &
Associates LLP as our independent registered public accounting
firm for the year ending January 31, 2008 are considered
routine matters for which brokerage firms may vote shares for
which they have not received voting instructions. When a
proposal is not a routine matter and the brokerage firm has not
received voting instructions from the beneficial owner of the
shares with respect to that proposal, the brokerage firm cannot
vote the shares on that proposal. This is called a broker
non-vote.
Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the
transaction of business. In the election of directors, which
requires a plurality of votes, broker non-votes will have no
effect. In the ratification of the appointment of our
independent registered public accounting firm, abstentions will
have the same effect as a vote against ratification, and broker
non-votes will not be counted for determining the number of
shares represented at the Annual Meeting for purposes of the
vote on the ratification.
Vote
Required
Assuming a quorum is present, the election of directors will
require a plurality of the votes cast at the Annual Meeting. The
ratification of the selected independent registered public
accounting firm will require the affirmative vote of a majority
of the total votes cast at the Annual Meeting.
All votes will be tabulated by the inspector of elections
appointed for the Annual Meeting, who will separately tabulate
votes for and against, abstentions and broker non-votes. As
discussed above, abstentions from any item of business other
than the election of directors will have the same legal effect
as a vote against the applicable proposal, but a broker non-vote
will not be counted for purposes of determining whether a
majority vote is achieved with respect to the ratification of
the selected independent registered public accounting firm or
any other item of business properly coming before the Annual
Meeting.
Revocation
of Proxies
You may revoke your proxy at any time prior to the vote
tabulation at the Annual Meeting by (1) sending in a proxy
card with a later date, (2) casting a vote by telephone or
over the Internet at a later date, (3) sending a written
notice of revocation by mail to P.O. Box 1175, Huntsville, Texas
77342-1175
marked Proxy Information Enclosed,
2
Attention: Corporate Secretary or (4) by attending
and voting in person at the Annual Meeting. Attendance at the
Annual Meeting will not, in itself, constitute revocation of a
completed and delivered proxy card.
CORPORATE
GOVERNANCE
The following sections summarize information about our corporate
governance policies, our Board and its committees and the
director nomination process.
Our
Governance Practices
General
We are committed to sound corporate governance principles. To
evidence this commitment, our Board has adopted charters for its
committees and a Code of Ethics. These documents provide the
framework for our corporate governance. A complete copy of the
current version of each of these documents is available on our
website at http://www.mitchamindustries.com or in print
to any shareholder who requests it by contacting us by mail at
Mitcham Industries, Inc., P.O. Box 1175, Huntsville, Texas
77342-1175,
Attention: Corporate Secretary, or by telephone
(936) 291-2277.
Our Board regularly reviews corporate governance developments
and modifies our governance documents as appropriate.
Code
of Ethics
Our Board has adopted a Code of Ethics that applies to all of
our employees, including our Chief Executive Officer, Chief
Financial Officer and our Corporate Controller, to ensure that
our business is conducted in a legal and ethical manner.
All of our directors, officers and employees are required to
certify their compliance with the Code of Ethics. The code
requires that any exception to or waiver for an executive
officer or director be made only by our Board and disclosed as
required by law and the listing standards of The NASDAQ Stock
Market LLC (the NASDAQ Listing Standards). To date,
we have neither received any requests for, nor granted, waivers
of the code for any of our executive officers or directors.
Among other things, the code addresses:
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conflicts of interest;
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insider trading;
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record keeping and questionable accounting or auditing matters;
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corporate opportunities;
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confidentiality;
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competition and fair dealing;
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protection and proper use of our company assets; and
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reporting of any illegal or unethical behavior.
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It is our policy that there shall be no acts of retaliation,
intimidation, threat, coercion or discrimination against any
individual for truthfully reporting, furnishing information or
assisting or participating in any manner in an investigation,
compliance review or other activity related to the
administration of the code.
Our
Board
Determination
of Director Independence
Our Board has determined that Messrs. John F. Schwalbe, R.
Dean Lewis and Peter H. Blum are each an independent director,
as that term is defined in the NASDAQ Listing Standards.
Messrs. Schwalbe, Lewis and Blum constitute a majority of
the members of our Board. Mr. Billy F. Mitcham, Jr. is not
independent because he currently
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serves as our President and Chief Executive Officer.
Mr. Robert P. Capps is not independent because he currently
serves as our Executive Vice President of Finance and Chief
Financial Officer.
Attendance
at Board and Committee Meetings
During the fiscal year ended January 31, 2007, our Board
held four meetings. Each individual serving as a director during
such period attended all meetings of our Board and all meetings
of the committees on which such individual served.
Attendance
at Annual Meetings
We have a policy to encourage our directors to attend the annual
meetings of our shareholders. All nominees who are currently
serving as directors attended the annual meeting of our
shareholders in July 2006.
Shareholder
Communications with Our Board
Our Board welcomes communications from our shareholders.
Shareholders may send communications to our Board, or any
director in particular, by contacting us by mail at Mitcham
Industries, Inc., P.O. Box 1175,
Huntsville, Texas
77342-1175,
Attention: Corporate Secretary or via e-mail through our website
at http://www.mitchamindustries.com. Each communication
must (1) identify the sender, (2) identify the
applicable director(s) and (3) contain the information
necessary to enable the director(s) to contact the sender. Our
Corporate Secretary will relay such information to the
applicable director(s) and request that the sender be contacted
as soon as possible.
Committees
of Our Board
As of the date of this proxy statement, our Board has standing
Audit, Compensation and Nominating Committees. Our Board, in its
business judgment, has determined that each committee is
comprised entirely of independent directors as currently
required under the Securities and Exchange Commissions
rules and requirements and the NASDAQ Listing Standards. Each
committee is governed by a written charter approved by the full
Board.
Audit
Committee
The Audit Committee has been established to assist our Board in:
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overseeing the quality and integrity of our financial statements
and other financial information we provide to any governmental
body or the public;
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overseeing our compliance with legal and regulatory requirements;
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overseeing the independent registered public accounting
firms qualifications, independence and performance;
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overseeing our systems of internal controls regarding finance,
accounting, legal compliance and ethics that our management and
our Board have established;
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facilitating an open avenue of communication among the
registered independent accountants, financial and senior
management, and our Board, with the registered independent
accountants being accountable to the Audit Committee; and
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performing such other duties as directed by our Board.
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In connection with these purposes, the Audit Committee annually
selects, engages and evaluates the performance and ongoing
qualifications of, and determines the compensation for, our
independent registered public accounting firm, reviews our
annual and quarterly financial statements, and confirms the
independence of our independent registered public accounting
firm. The Audit Committee also meets with our management and
external registered public accounting firm regarding the
adequacy of our financial controls and our compliance with
legal, tax and regulatory matters and significant internal
policies. While the Audit Committee has the
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responsibilities and powers set forth in its charter, it is not
the duty of the Audit Committee to plan or conduct audits, to
determine that our financial statements are complete and
accurate, or to determine that such statements are in accordance
with accounting principles generally accepted in the United
States and other applicable rules and regulations. Our
management is responsible for the preparation of our financial
statements in accordance with accounting principles generally
accepted in the United States and our internal controls. Our
independent registered public accounting firm is responsible for
the audit work on our financial statements. It is also not the
duty of the Audit Committee to conduct investigations or to
assure compliance with laws and regulations and our policies and
procedures. Our management is responsible for compliance with
laws and regulations and compliance with our policies and
procedures.
During the fiscal year ended January 31, 2007, the Audit
Committee, which was comprised during such period of
Messrs. Schwalbe (Chairman), Lewis, Capps (until his
appointment as Executive Vice President of Finance and Chief
Financial Officer in June 2006) and Blum (who replaced
Mr. Capps in June 2006), held six meetings. All members of
the Audit Committee are independent as that term is defined in
the NASDAQ Listing Standards and
Rule 10A-3
promulgated under the Securities Exchange Act of 1934, as
amended (the Exchange Act). Our Board has determined
that each member of the Audit Committee is financially literate
and that Mr. Schwalbe has the necessary accounting and
financial expertise to serve as chairman. Our Board has
determined that Mr. Schwalbe is an audit committee
financial expert following a determination that
Mr. Schwalbe met the criteria for such designation under
the Securities and Exchange Commissions rules and
regulations. For information regarding Mr. Schwalbes
business experience, see Proposal 1
Election of Directors Information About Director
Nominees.
The report of the Audit Committee appears under the heading
Audit Committee Report below.
Compensation
Committee
Pursuant to its charter, the purposes of our Compensation
Committee are to:
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review, evaluate, and approve the agreements, plans, policies
and programs to compensate our officers and directors;
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review and discuss with our management the Compensation
Discussion and Analysis to be included in the proxy statement
for our annual meeting of shareholders and to determine whether
to recommend to our Board that the Compensation Discussion and
Analysis be included in the proxy statement, in accordance with
applicable rules and regulations;
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produce the Compensation Committee Report for inclusion in the
proxy statement, in accordance with applicable rules and
regulations;
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otherwise discharge our Boards responsibilities relating
to compensation of our officers and directors; and
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perform such other functions as our Board may assign to the
committee from time to time.
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In connection with these purposes, our Board has entrusted the
Compensation Committee with the overall responsibility for
establishing, implementing and monitoring the compensation for
our executive officers. When making its executive compensation
decisions, the Compensation Committee considers the
recommendations provided by our compensation consultant. In
addition, the Compensation Committee works with our executive
officers, including our Chief Executive Officer, to implement
and promote our executive compensation strategy. Please see
Compensation Discussion and Analysis for additional
information on the Compensation Committees processes and
procedures for the consideration and determination of executive
compensation and Director Compensation
Non-Employee Director Compensation General for
additional information on its consideration and determination of
director compensation.
The Compensation Committee may form and delegate some or all of
its authority under its charter to subcommittees when it deems
appropriate.
During the fiscal year ended January 31, 2007, the
Compensation Committee held four meetings. The Compensation
Committee currently consists of Messrs. Schwalbe, Lewis and
Blum (Chairman).
5
The report of the Compensation Committee appears under the
heading Compensation Committee Report below.
Nominating
Committee
The purposes of the Nominating Committee, as stated in its
charter, include the following:
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identify individuals qualified to become Board members;
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recommend to our Board the persons to be nominated by our Board
for election as directors at the annual meeting of shareholders;
and
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perform such other functions as our Board may assign to the
committee from time to time.
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During the fiscal year ended January 31, 2007, the
Nominating Committee did not meet. The Nominating Committee
currently consists of Messrs. Schwalbe, Lewis and Blum
(Chairman).
Director
Nomination Process
The Nominating Committee will accept for consideration
shareholders nominations for directors if made in writing
by contacting us by mail at Mitcham Industries, Inc., P.O. Box
1175, Huntsville, Texas
77342-1175,
Attention: Corporate Secretary or via
e-mail
through our website at http://www.mitchamindustries.com.
The candidates written consent to the nomination and
sufficient background information on the candidate must be
included to enable the Nominating Committee to make proper
assessments as to his or her qualifications. The Nominating
Committee may also conduct its own search for potential
candidates, which may include candidates identified directly by
a variety of means as deemed appropriate by the members of the
Nominating Committee. Irrespective of how a candidate may be
brought to the Nominating Committees attention, at the
appropriate time, qualified candidates may be asked to conduct
one or more personal interviews with appropriate members of our
Board. A chosen candidate is extended an invitation to join our
Board and, if the candidate accepts, is formally nominated.
Our Board has empowered the Nominating Committee to develop and
maintain criteria and procedures for the identification and
recruitment of candidates for election to serve as directors,
including consideration of the performance of incumbent
directors in determining whether to nominate them for
reelection. The Nominating Committee is directed to make
appropriate recommendations to our Board with respect to
individuals to be included among managements nominees,
and, as appropriate, to our shareholders with respect to the
election of directors. The Nominating Committee has not
specified criteria for persons to be recommended to our Board as
nominees. The Nominating Committee will consider nominees
proposed by shareholders, but has not specified any guidelines
or policies for such consideration.
The shareholder recommendation procedures described above do not
preclude a shareholder of record from making nominations of
directors or making proposals at any annual shareholder meeting;
provided that they also comply with the requirements described
in the section of this proxy statement entitled
Shareholder Proposals and Director Nominations.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is now, or at any time
has been, employed by or served as an officer of Mitcham
Industries, Inc. or any of its subsidiaries or had any
substantial business dealings with Mitcham Industries, Inc. or
any of its subsidiaries. None of our executive officers are now,
or at any time has been, a member of the compensation committee
or board of directors of another entity, one of whose executive
officers has been a member of the Compensation Committee or our
Board.
6
TRANSACTIONS
WITH RELATED PERSONS
Policies
and Procedures
Historically, our Board has reviewed and approved, as
appropriate, related person transactions as they have been put
before our Board at the recommendation of management. In May
2007, our Board, recognizing that related person transactions
involving our company present a heightened risk of conflicts of
interest and/or improper valuation (or the perception thereof),
adopted a formal process for reviewing, approving and ratifying
transactions with related persons, which is described below.
General
Under the policy, any Related Person Transaction may
be consummated or may continue only if:
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|
|
|
|
the Audit Committee approves or ratifies the transaction in
accordance with the guidelines set forth in the policy and if
the transaction is on terms comparable to those that could be
obtained in arms length dealings with an unrelated third
party;
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|
|
the transaction is approved by the disinterested members of our
Board; or
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|
|
the transaction involves compensation approved by the
Compensation Committee.
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For these purposes, a Related Person is:
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|
a senior officer (which shall include at a minimum each
executive vice president and Section 16 officer) or
director;
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|
a shareholder owning more than 5% of our company (or its
controlled affiliates);
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|
a person who is an immediate family member of a senior officer
or director; or
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|
|
|
an entity which is owned or controlled by someone listed above,
or an entity in which someone listed above has a substantial
ownership interest or control of that entity.
|
For these purposes, a Related Person Transaction is
a transaction between our company and any Related Person
(including any transactions requiring disclosure under
Item 404 of
Regulation S-K
under the Exchange Act), other than:
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|
transactions available to all employees generally; and
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|
|
|
transactions involving less than $5,000 when aggregated with all
similar transactions.
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Audit
Committee Approval
Our Board has determined that the Audit Committee is best suited
to review and approve Related Person Transactions. Accordingly,
at each calendar years first regularly scheduled Audit
Committee meeting, management recommends Related Person
Transactions to be entered into for that calendar year,
including the proposed aggregate value of the transactions (if
applicable). After review, the Audit Committee approves or
disapproves the transactions and at each subsequently scheduled
meeting, management updates the Audit Committee as to any
material change to those proposed transactions.
In the event management recommends any further Related Person
Transactions subsequent to the first calendar year meeting, the
transactions may be presented to the Audit Committee for
approval or preliminarily entered into by management subject to
ratification by the Audit Committee; provided that if
ratification is not forthcoming, management makes all reasonable
efforts to cancel or annul the transaction.
Corporate
Opportunity
Our Board recognizes that situations exist where a significant
opportunity may be presented to management or a member of our
Board that may equally be available to our company, either
directly or via referral. Before the
7
opportunity may be consummated by a Related Person (other than
an otherwise unaffiliated 5% shareholder), the opportunity must
be presented to our Board for consideration.
Disclosure
All Related Person Transactions are to be disclosed in our
applicable filings as required by the Securities and Exchange
Commissions rules and regulations. Furthermore, all
Related Person Transactions are to be disclosed to the Audit
Committee and any material Related Person Transaction are to be
disclosed to the full Board.
Other
Agreements
Management assures that all Related Person Transactions are
approved in accordance with any requirements of our financing
agreements.
Transactions
Since the beginning of the fiscal year ended January 31,
2007, we have not participated in (or proposed to participate
in) any transactions with related persons.
STOCK
OWNERSHIP MATTERS
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors,
executive officers and persons who beneficially own more than
10% of our outstanding common stock to file initial reports of
ownership and changes in ownership of common stock with the
Securities and Exchange Commission. Reporting persons are
required by the Securities and Exchange Commission to furnish us
with copies of all Section 16(a) forms they file. Based
solely on our review of the copies of reports we received, we
believe that all filings required to be made under
Section 16(a) were timely made.
Principal
Holders of Securities
The following table sets forth the beneficial ownership of the
outstanding shares of common stock as of May 15, 2007, with
respect to each person, other than our directors and officers,
we know to be the beneficial owner of 5% or more of our issued
and outstanding common stock.
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Common Stock Beneficially Owned
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Name and Address of Beneficial Owner
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|
Number of Shares
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|
Percent of Class
|
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|
First Wilshire Securities
Management, Inc.
1224 East Green Street, Suite 200
Pasadena, California
91106-3171
|
|
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592,783(1
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)
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6.1
|
%
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|
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|
(1)
|
|
In a Schedule 13G filed with
the Securities and Exchange Commission in March 2007, First
Wilshire Securities Management, Inc. reported sole voting power
with respect to 41,845 of the shares, sole dispositive power
with respect to 592,783 of the shares and no shares subject to
shared voting power or shared dispositive power.
|
Security
Ownership of Management
The following table sets forth the beneficial ownership of
common stock as of May 15, 2007 by (1) each of the
executive officers named in the Summary Compensation Table
below, (2) each of our directors and director
8
nominees and (3) all current directors and executive
officers as a group. All persons listed have sole disposition
and voting power with respect to the indicated shares except as
otherwise indicated in the footnotes to the table.
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Common Stock Beneficially Owned
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Name of Beneficial Owner
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Number of Shares
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|
Percent of Class
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|
Billy F. Mitcham, Jr.
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|
804,694(1
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)
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8.0
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%
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Peter H. Blum
|
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|
588,026(2
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)
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5.9
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%
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John F. Schwalbe
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|
93,000(3
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)
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1.0
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%
|
R. Dean Lewis
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|
45,000(4
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)
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*
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%
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Paul Guy Rogers
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|
69,667(5
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)
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*
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%
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Robert P. Capps
|
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|
55,000(6
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)
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|
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*
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%
|
Michael A. Pugh
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|
(7
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)
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|
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*
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%
|
Guy Malden
|
|
|
19,667(8
|
)
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*
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%
|
All current directors and executive
officers as a group (7 persons)
|
|
|
1,675,054(9
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)
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|
15.8
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%
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|
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|
*
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|
Less than 1%
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|
(1)
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|
Includes 16,500 shares of
restricted stock that vest over three years and an aggregate of
3,100 shares owned by Mr. Mitchams spouse. Also
includes shares underlying Exercisable Options and options that
will become exercisable within 60 days of May 15, 2007
(collectively, the Exercisable Options) to purchase
an aggregate of 400,500 shares of common stock.
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|
(2)
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|
Includes 4,000 shares of
restricted stock that vest over two years, 250,000 shares
underlying Exercisable Options, 22,624 shares underlying
currently exercisable warrants, 6,000 shares owned by
Mr. Blums spouses IRA and 6,500 shares
owned by Mr. Blums minor son.
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|
(3)
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|
Includes 86,000 shares
underlying Exercisable Options.
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|
(4)
|
|
Includes 41,000 shares
underlying Exercisable Options.
|
|
(5)
|
|
Includes 8,000 shares of
restricted stock that vest over three years and
54,167 shares underlying Exercisable Options.
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|
(6)
|
|
Includes 45,000 shares
underlying Exercisable Options.
|
|
(7)
|
|
Mr. Pugh resigned as Executive
Vice President and Chief Financial Officer effective
June 23, 2006.
|
|
(8)
|
|
Includes 8,000 restricted shares
that vest over three years from grant date and
11,667 shares underlying Exercisable Options.
|
|
(9)
|
|
Includes 888,334 shares
underlying Exercisable Options, 22,624 shares underlying
currently exercisable warrants and 36,500 shares of
restricted stock.
|
PROPOSAL 1:
ELECTION OF DIRECTORS
General
Five individuals will be elected at the Annual Meeting to serve
as directors until the next annual meeting or until their
respective successors are elected and qualified. Shares or
proxies may not be voted for more than five director nominees.
All of the director nominees are currently serving on our Board.
The persons appointed as proxies in the enclosed proxy card will
vote such proxy FOR the persons nominated for
election to our Board, except to the extent authority to vote is
expressly withheld with respect to one or more nominees. If any
nominee is unable to serve as a director for any reason, all
shares represented by proxies pursuant to the enclosed proxy
card, absent contrary instructions, will be voted for any
substitute nominee designated by our Board.
Our Board recommends a vote FOR the election of
each of the director nominees identified below.
9
Information
About Director Nominees
The following table sets forth the names and ages, as of
May 15, 2007, of our current directors, each of whom is a
director nominee. Our directors are elected annually and serve
one-year terms or until their successors are elected.
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Name
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Age
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|
|
Positions Held
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|
Director Since
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|
Billy F. Mitcham, Jr.
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|
|
59
|
|
|
Director, President and Chief
Executive Officer
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|
1987
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|
Peter H. Blum
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|
50
|
|
|
Non-Executive Chairman
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|
2000
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|
Robert P. Capps
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|
|
53
|
|
|
Director, Executive Vice President
of Finance and
Chief Financial Officer
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|
|
2004
|
|
R. Dean Lewis
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|
|
64
|
|
|
Director
|
|
|
1995
|
|
John F. Schwalbe
|
|
|
63
|
|
|
Director
|
|
|
1994
|
|
Billy F. Mitcham, Jr. has served as our President and
Chief Executive Officer since our inception in 1987. From 1987
until July 2004, Mr. Mitcham also served as Chairman of our
Board. Mr. Mitcham has more than 28 years of
experience in the geophysical industry. From 1979 to 1987, he
served in various management capacities with Mitcham Associates,
an unrelated equipment leasing company. From 1975 to 1979,
Mr. Mitcham served in various capacities with Halliburton
Services, primarily in oilfield services.
Peter H. Blum was elected Non-Executive Chairman of our
Board on July 8, 2004. Mr. Blum is Vice Chairman and
Senior Managing Director of Ladenburg Thalmann & Co.,
Inc., an investment banking firm. From June 1998 until March
2003, Mr. Blum served as a Director, and from September
2001 until March 2003, as Executive Vice President, of Mallon
Resources Corporation, an oil and gas exploration and production
company that merged with Black Hills Corporation in March 2003.
Prior to 1998, Mr. Blum was a senior investment banker with
various Wall Street firms. Mr. Blum started his career
with Arthur Young & Co. and is a Certified Public
Accountant.
Robert P. Capps has been a member of our Board since July
2004. In June 2006, Mr. Capps was appointed as our
Executive Vice President and Chief Financial Officer. From July
1999 until May 2006, he was the Executive Vice President and
Chief Financial Officer of TeraForce Technology Corporation
(TeraForce), a publicly-held provider of defense
electronics products. On August 2, 2005, TeraForce filed
for protection under Chapter 11 of the Federal Bankruptcy
Code. On April 6, 2006, TeraForces Chapter 11
Plan of Reorganization was confirmed. From 1996 to 1999,
Mr. Capps was Executive Vice President and Chief Financial
Officer of Dynamex, Inc., a NASDAQ-listed supplier of
same-day
transportation services. Prior to his employment with Dynamex,
Mr. Capps was Executive Vice President and Chief Financial
Officer of Hadson Corporation, a NYSE-listed energy company.
Mr. Capps is a Certified Public Accountant and was formerly
with Arthur Young & Co. Mr. Capps holds a
Bachelor of Accountancy degree from the University of Oklahoma.
R. Dean Lewis is the Dean of the Business School at
Sam Houston State University and has served in this capacity
since October 1995. From 1987 to October 1995, Dr. Lewis
was the Associate Dean and Professor of Marketing at Sam Houston
State University. Prior to 1987, Dr. Lewis held a number of
executive positions in the banking and finance industries.
John F. Schwalbe has had a professional career in
public accounting for more than 30 years.
Mr. Schwalbes experience includes auditing of oil and
gas exploration and production enterprises, school districts and
various banking institutions. For the past 25 years,
Mr. Schwalbe has been in private practice with primary
emphasis in tax planning, consultation and compliance.
Mr. Schwalbe is a Certified Public Accountant and holds a
Bachelor of Business Administration degree from Midwestern
University.
INFORMATION
ABOUT OUR EXECUTIVE OFFICERS
The following table sets forth the names, ages and titles, as of
May 15, 2007, of each of our executive officers. Our
executive officers are elected annually by our Board and serve
one-year terms or until their death, resignation or removal by
our Board. There are no family relationships between any of our
directors and executive officers. In
10
addition, there are no arrangements or understandings between
any of our executive officers and any other person pursuant to
which any person was selected as an executive officer.
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Name
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|
Age
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|
|
Positions Held
|
|
Billy F. Mitcham, Jr.
|
|
|
59
|
|
|
President and Chief Executive
Officer
|
Robert P. Capps
|
|
|
53
|
|
|
Executive Vice President of Finance
and Chief Financial Officer
|
Paul Guy Rogers
|
|
|
57
|
|
|
Vice President of Business
Development
|
Guy Malden
|
|
|
55
|
|
|
Vice President of Marine Systems
|
Billy F. Mitcham, Jr.s biographical information may
be located under Proposal 1: Election of
Directors Information About Director Nominees.
Robert P. Capps biographical information may be
located under Proposal 1: Election of
Directors Information About Director Nominees.
Paul Guy Rogers has served as our Vice President of
Business Development since October 2001. From February 1993 to
September 2001, Mr. Rogers served as Senior Sales
Representative with Geo Space LP, a worldwide manufacturer of
geophysical equipment, with responsibilities for sales in the
United States and Latin America. Mr. Rogers has
14 years of experience in the geophysical industry.
Guy Malden has served as our Vice President of Marine
Systems since January 2004. Mr. Malden has 30 years
experience in the geophysical industry, and has been with
Mitcham Industries since 2002. From 1999 to 2002, he served as
Vice President of Operations for American International
Exploration Group. From 1993 to 1999, he served in various
management capacities with several seismic equipment
manufacturers, most notably Syntron, Inc. From 1975 to 1993,
Mr. Malden served in various field and management
capacities with Geophysical Service Inc./Halliburton Geophysical
Services. Mr. Malden holds a degree in Marine Geology from
Long Island University.
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
of Our Executive Compensation Program
Our business strategy is to meet the needs of the seismic
industry by providing leasing services for a wide range of
equipment and to provide technologically advanced solutions for
marine seismic applications. To achieve this, we leverage one of
our key strengths the expertise of our executive
officers.
Our executive compensation program is structured principally
around one goal attracting, motivating and retaining
top executive talent with the requisite skills and experience to
execute our business strategy. Because we have no direct public
competitors, we compete with many larger companies for top
executive-level talent. Accordingly, we generally target
compensation at competitive market levels. In addition, we
believe our executive officers should be rewarded for executing
goals that are designed to increase shareholder value. As a
result, the Compensation Committee of our Board (for purposes of
this Analysis, the Committee) considers company
performance measures and evaluates individual performance when
determining selected elements of our executive compensation
program. These elements consist primarily of base salaries,
annual cash incentives and long-term equity-based incentives.
The Committee combines the compensation elements for each
executive officer in a manner that we believe optimizes the
officers contribution to our company.
Throughout this proxy statement, the individuals who served as
our Chief Executive Officer and Chief Financial Officer during
the fiscal year ended January 31, 2007, as well as the
other individuals included in the Summary Compensation Table,
are referred to as Named Executive Officers.
Objectives
of Our Executive Compensation Program
We have developed an executive compensation program that is
designed to (1) recruit, develop and retain key executive
officers responsible for our success and (2) motivate
management to enhance long-term shareholder
11
value. To achieve these goals, the Committees executive
compensation decisions are based on the following principal
objectives:
|
|
|
|
|
providing a competitive compensation package that attracts,
motivates and retains qualified and highly skilled officers that
are key to our long-term success;
|
|
|
|
rewarding individual performance by ensuring a meaningful link
between our operational performance and the total compensation
received by our officers;
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|
|
|
balancing the components of compensation so that short-term
(annual) and long-term performance objectives are recognized; and
|
|
|
|
avoid creating a situation that might cause undo pressure to
meet specific financial goals.
|
Implementing
Our Objectives
Role
of the Committee
On behalf of our Board, the Committee has responsibility for the
review, evaluation and approval of executive compensation,
including the compensation philosophy, policies and plans for
our executive officers. The Committee establishes, reviews and
approves the compensation of our executive officers and makes
appropriate adjustments based on company performance, individual
performance and changes in an officers duties and
responsibilities.
Role
of Our Executive Officers
Our executive officers play an important role in the executive
compensation process. The most significant aspects of their
involvement in this process are:
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|
|
|
|
preparing materials in advance of Committee meetings for review
by the Committee members;
|
|
|
|
evaluating employee performance;
|
|
|
|
establishing our business goals; and
|
|
|
|
recommending the compensation arrangements and components for
our employees.
|
Our Chief Executive Officer is instrumental to this process.
Specifically, our Chief Executive Officer assists the Committee
by:
|
|
|
|
|
providing background information regarding our business goals;
|
|
|
|
annually reviewing performance of each of our executive officers
(other than himself); and
|
|
|
|
recommending compensation arrangements and components for our
executive officers (other than himself).
|
Our other executive officers do not play a role in their own
compensation determination, other than discussing individual
performance objectives with our Chief Executive Officer.
Role
of Our Compensation Consultant
In performing its duties, the Committee obtains input, as it
deems necessary, from an independent compensation consultant,
Villareal & Associates (Compensation
Consultant), engaged directly by the Committee. Pursuant
to its engagement, our Compensation Consultant analyzes the base
salary and annual cash incentive elements of compensation for
our executive officers to ensure that the compensation delivered
reflects company performance, while also considering market
competitiveness. The Compensation Consultant does not analyze
the long-term equity-based component of our executive
compensation program. After conducting its analysis, our
Compensation Consultant prepares a comprehensive base salary
comparison and recommendations for short-term executive
compensation. The Committee solicits and receives input on these
recommendations from our
12
Compensation Consultant independent of management. These
recommendations are considered by the Committee but are not
necessarily determinative of the compensation decisions made by
the Committee.
Determining
Compensation
The Committee, which relies upon the judgment of its members in
making compensation decisions, has established a number of
processes to assist it in ensuring that our executive
compensation program supports our objectives and company
culture. Among those are competitive benchmarking, assessment of
individual and company performance and a total compensation
review, which are described in more detail below.
Competitive Benchmarking. Although we have no public
direct competitors, the Committee compares pay practices for our
executives against other companies to assist it in the review
and comparison of each element of compensation for our executive
officers. This practice recognizes that (1) our
compensation practices must be competitive in the marketplace
and (2) marketplace information is one of the many factors
considered in assessing the reasonableness of our executive
compensation program.
The Committee usually begins its competitive market analysis in
the first quarter of the year in which the compensation
decisions are made. The comparative compensation data used in
the Committees analysis is derived by the Compensation
Consultant from comprehensive surveys performed by third
parties. For the fiscal year ended January 31, 2007,
compensation indices from the ECS Industry Report on Top
Management Compensation, which was prepared by Watson Wyatt Data
Services, and the Salary Assessor, which was prepared by
Economic Research Institute, were used in the Committees
analysis. As part of this analysis, the Committee compared the
compensation of our executive officers with the companies in the
following groups (collectively, Peer Companies):
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|
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|
|
Companies in all industries with comparable total revenue.
|
|
|
|
Companies in the Oil Services / Equipment Sector with
comparable total revenue.
|
Because we have no public direct competitors, the Committee
believes that these industry specific and general industry
comparisons provide the most useful information that is
reasonably assessable. In addition to the foregoing data, our
Compensation Consultant may provide additional market data from
other sources, from time to time, as requested by the Committee.
The market data described above is used collectively by the
Committee to make informed decisions regarding executive
compensation.
Due to our organizational structure and diverse international
operations, comparisons of survey data to the job descriptions
of our executive officers is sometimes difficult. Furthermore,
the complexities of our operations and the skills needed of our
executive officers are, we believe, greater than those of most
companies with comparable total revenues. Therefore, we at times
target base salary and annual cash incentive compensation levels
that are in the top quartile of the survey information for our
Peer Companies. The Committee believes that targeting this level
of compensation helps to meet our overall total rewards strategy
and executive compensation objectives outlined above.
Assessment of Individual and Company
Performance. While we generally do not adhere to rigid
formulas in determining the amount and mix of compensation
elements, the Committee reviews specific company performance
measures when determining the size of incentive payouts for our
executive officers. In addition, a portion of the incentive
payouts are based on evaluations of individual performance.
These performance measures are discussed in more detail below.
Total Compensation Review. Each April, the Committee
reviews each executive officers base salary, annual cash
incentive and long-term equity-based incentives. In addition to
these primary compensation elements, the Committee periodically
reviews perquisites and other compensation as well as payments
that would be required under employment agreements and our
equity-based plans. Following its April 2006 review, the
Committee determined that these elements of compensation were
reasonable in the aggregate in relation to the market data
analyzed by the Committee.
13
Elements
of Our Executive Compensation Program
The Committee evaluates both performance and compensation to
ensure that we maintain our ability to attract and retain
superior employees in key positions and that compensation
provided to our key employees remains competitive relative to
the compensation paid to similarly situated executive officers
of our Peer Companies. In furtherance of these goals, our
executive compensation program consists of three basic
components:
|
|
|
|
|
base salaries;
|
|
|
|
annual cash incentives; and
|
|
|
|
long-term equity-based incentives.
|
The distribution of compensation among the various components of
compensation is driven by our belief that a significant portion
of each Named Executive Officers compensation should be at
risk. The practice of emphasizing variable compensation suits
our philosophy of linking pay to performance, both on an
individual and entity level.
The following table shows the allocation of base salary, annual
cash incentives and long-term equity-based incentives among
fixed, short-term variable and long-term variable compensation
for our Named Executive Officers for the fiscal year ended
January 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term
|
|
|
Long-Term
|
|
|
|
|
|
|
|
|
Variable
|
|
|
Variable
|
|
Named Executive
|
|
|
|
Fixed
|
|
|
(Annual Cash
|
|
|
(Equity-Based
|
|
Officer
|
|
Title
|
|
(Base Salary)
|
|
|
Incentives)
|
|
|
Incentives)
|
|
|
Billy F. Mitcham, Jr.
|
|
President and Chief Executive
Officer
|
|
|
41
|
%
|
|
|
10
|
%
|
|
|
49
|
%
|
Robert P.
Capps1
|
|
Executive Vice President and Chief
Financial Officer
|
|
|
27
|
%
|
|
|
1
|
%
|
|
|
72
|
%
|
Paul Guy Rogers
|
|
Vice President Business Development
|
|
|
54
|
%
|
|
|
10
|
%
|
|
|
36
|
%
|
Guy Malden
|
|
Vice President Marine Systems
|
|
|
55
|
%
|
|
|
10
|
%
|
|
|
35
|
%
|
Michael A.
Pugh2
|
|
Former Executive Vice President and
Chief Financial Officer
|
|
|
81
|
%
|
|
|
|
|
|
|
19
|
%
|
|
|
|
(1)
|
|
On June 26, 2006, our Board
appointed Mr. Capps as Executive Vice President and Chief
Financial Officer.
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(2)
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Mr. Pugh resigned as Executive
Vice President and Chief Financial Officer effective
June 23, 2006.
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The distribution of compensation among (1) the fixed
element of base salary and the variable elements of annual cash
incentives and long-term equity-based incentives and
(2) the total mix of cash and equity compensation is
primarily influenced by the Committees competitive market
analysis and its desire to balance short-term and long-term
goals. The distribution of compensation among short-term and
long-term variable compensation is primarily influenced by the
Committees desire to provide our executive officers a
longer-term stake in our company, act as a long-term retention
tool and align employee and shareholder interests by aligning
compensation with growth in shareholder value.
Base
Salaries
We provide our executive officers and other employees with an
annual base salary to compensate them for services rendered
during the year. Our philosophy has been to establish base
salaries near the top range of such salaries at the Peer
Companies.
In addition to providing a base salary that is competitive with
the market, we target salary compensation to align each
positions salary level so that it accurately reflects the
positions internal weight. To that end, annual salary
adjustments are based on many individual factors, including:
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the responsibilities of the officer;
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period over which the officer has performed these
responsibilities;
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the scope, level of expertise and experience required for the
officers position;
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the strategic impact of the officers position; and
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14
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potential future contribution and demonstrated individual
performance of the officer.
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In addition to individual factors listed above, the Committee
considers our overall business performance, such as our earnings
before interest, taxes, depreciation and amortization (or
EBITDA), leasing growth, sales growth and implementation of
directives. While these measurements are considered in general,
base salaries are not dependant upon attainment of specific
goals or levels.
Base salaries are generally reviewed annually, but are not
automatically increased if the Committee believes that the other
elements of compensation are more appropriate in light of its
stated objectives. After consideration of the factors described
above, the Committee increased the base salaries of
Messrs. Mitcham, Rogers and Malden from $305,000, $165,000
and $162,000 to $335,000, $175,000 and $172,000, respectively,
effective July 1, 2006.
Annual
Cash Incentives
We provide annual cash incentives to provide motivation toward,
and reward our executive officers for, the general success of
our company and individual performance. The criteria considered
by the Committee are subjective in nature and include the
officers impact on our results of operations and our
ability to remain competitive with other companies against whom
we compete for executive-level talent. The Committee, which
retains complete discretion over the amount of the incentive
award for each officer, considers both the financial performance
of our company and personal performance of the executive officer
during the previous fiscal year as factors in its determination.
Financial Performance. In considering our overall
financial performance, the Committee reviews the financial
results for the most recent fiscal year, including revenue
growth, overall profitability, as measured by net income, and
cash flow, as measured by EBITDA. The Committee may also
consider other performance measures as it considers appropriate.
Personal Performance. The Committee also considers
the personal performance specific to each executive officer. The
items considered may include:
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level of responsibility or duties of the officer;
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overall contribution to our financial performance;
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successful completion of particular projects; and
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acquisition and implementation of new technical knowledge.
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The financial and personal performance measures, which are used
only as guides in determining annual cash incentives, are
reviewed and annually updated and amended as the Committee deems
necessary.
For the fiscal year ended January 31, 2007, each Named
Executive Officer received a cash incentive payment as reflected
in the Summary Compensation Table.
Long-Term
Equity-Based Incentives
Our long-term equity-based incentive program is designed to give
our key employees a longer-term stake in our company, act as a
long-term retention tool and align employee and shareholder
interests by aligning compensation with growth in shareholder
value. To achieve these objectives, we generally rely on a
combination of grants of stock options and restricted stock,
which are made pursuant to our Mitcham Industries, Inc. Stock
Awards Plan.
In determining the level of equity-based compensation, the
Committee makes a subjective determination based on the same
factors that are used to determine the annual cash incentives
described above. In addition, when deciding whether to award
restricted stock versus stock options, the Committee considers
the total amount of awards and attempts to maintain a balance
between the restricted stock and stock options held by each
executive officer. Existing ownership levels are not a factor in
the total award determination, as we do not want to discourage
executives from holding significant amounts of our common stock.
15
Messrs. Mitcham, Rogers, Malden and Pugh each received
grants of stock options and restricted stock in March 2006.
One-third of the stock options vest and the restrictions on
one-third of the restricted stock lapse on the first, second and
third anniversary of the March 2006 grants. Mr. Capps was
granted stock options upon his appointment as our Chief
Financial Officer in June 2006. Mr. Capps options
vest one-fourth annually commencing one year from his date of
employment. We believe that these vesting schedules aid us in
retaining our executive officers and motivating longer-term
performance.
The long-term equity-based incentive grants awarded to our Named
Executive Officers the fiscal year ended January 31, 2007
are set forth in the Summary Compensation Table and the Grants
of Plan-Based Awards Table.
Other
Benefits
In addition to base salaries, annual cash incentives and
long-term equity-based incentives, we provide the following
forms of compensation:
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Health and Welfare Benefits. Our executive officers
are eligible to participate in medical, dental, vision,
disability insurance and life insurance to meet their health and
welfare needs. These benefits are provided so as to assure that
we are able to maintain a competitive position in terms of
attracting and retaining officers and other employees. This is a
fixed component of compensation and the benefits are provided on
a non-discriminatory basis to all of our employees in the United
States.
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Perquisites and Other Personal Benefits. We believe
that the total mix of compensation and benefits provided to our
executive officers is competitive and perquisites should
generally not play a large role in our executive officers
total compensation. As a result, the perquisites and other
personal benefits we provide to our executive officers are
limited. Pursuant to our employment agreement with
Mr. Mitcham, we maintain a term life insurance policy in an
amount equal to at least three times his annual salary. In
addition, we pay for club membership privileges that are used
for business and personal purposes by Mr. Mitcham and
provide Mr. Mitcham with the use of a company-owned
automobile. We provide Mr. Rogers and Mr. Malden with
the use of a company-owned automobile and pay for club
membership privileges that are used for business and personal
purposes by Mr. Rogers.
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Employment
Agreements, Severance Benefits and Change in Control
Provisions
Employment
Agreement with Billy F. Mitcham, Jr.
We maintain an employment agreement with our President and Chief
Executive Officer, Mr. Mitcham, to ensure that he will
perform his role for an extended period of time. This agreement
is described in more detail elsewhere in this proxy statement.
Please read Executive Compensation Narrative
Disclosure to Summary Compensation Table and Grants of
Plan-Based Awards Table Employment Agreement with
Billy F. Mitcham, Jr. This agreement provides for
severance compensation to be paid if the employment of
Mr. Mitcham is terminated under certain conditions, such as
constructive termination and termination without cause, each as
defined in the agreement.
The employment agreement between Mr. Mitcham and us and the
related severance provisions are designed to meet the following
objectives:
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Constructive Termination. In certain scenarios, the
potential for merger or being acquired may be in the best
interests of our shareholders. As a result, we have agreed to
provide severance compensation to Mr. Mitcham if he
terminates his employment within 60 days following a
constructive termination (as defined in the
employment agreement) to promote his ability to act in the best
interests of our shareholders even though his duties and
responsibilities could be changed as a result of the transaction.
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Termination without Cause. If we terminate
Mr. Mitchams employment without cause, we are
obligated to pay him certain compensation and other benefits as
described in greater detail in Potential Payments upon
Termination or Change in Control below. We believe these
payments are appropriate because Mr. Mitcham is bound by
confidentiality, non-solicitation and non-compete provisions for
a period of two years after termination and because
Mr. Mitcham and we have mutually agreed to severance
package that is
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16
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in place prior to any termination event. This provides us with
more flexibility to make a change in senior management if such a
change is in our and our shareholders best interests.
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We believe that the triggering events under
Mr. Mitchams employment agreement represent the
general market triggering events found in employment agreements
of companies against whom we compete for executive-level talent
at the time they were negotiated.
Equity-Based
Plans
Under the terms of our equity incentive plans, any unvested
grants will become vested and, in the case of stock options,
exercisable, upon the executive officers death or
disability or upon a change in control of our company (as
defined in the applicable award agreement). We believe these
triggering events represent the general market triggering events
found in comparable agreements of companies against whom we
compete for executive-level talent.
Severance
Arrangement with Michael A. Pugh
Effective June 23, 2006, Michael A. Pugh, Executive Vice
President and Chief Financial Officer, resigned from those
positions with us. At the time of his resignation, Mr. Pugh
entered into a Separation Agreement and Release with us. This
agreement is described in more detail elsewhere in this proxy
statement. Please read Executive Compensation
Narrative Disclosure to Summary Compensation Table and Grants of
Plan-Based Awards Table Severance Arrangement with
Michael A. Pugh. We believe that the severance
arrangements entered into with Mr. Pugh were necessary and
proper in order to ensure an orderly transition and the
availability of Mr. Pugh to answer any questions that might
arise during the transition.
Other
Matters
Stock
Ownership Guidelines and Hedging Prohibition
Stock ownership guidelines have not been implemented by the
Committee for our executive officers. Our Insider Stock Trading
Policy discourages, but does not prohibit, executive officers
from entering into derivative transactions related to our common
stock. We will continue to periodically review best practices
and re-evaluate our position with respect to stock ownership
guidelines and hedging prohibitions.
Tax
Treatment of Executive Compensation Decisions
Our Board has not yet adopted a policy with respect to the
limitation under Section 162(m) of the Internal Revenue
Code, which generally limits our ability to deduct compensation
in excess of $1,000,000 to a particular executive officer in any
year. On October 22, 2004, the American Jobs Creation Act
of 2004 was signed into law, changing the tax rules applicable
to nonqualified deferred compensation arrangements. While the
final regulations have not become effective yet, the Committee
will evaluate any potential impact of the proposed rules as
necessary.
17
COMPENSATION
COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the
disclosure set forth above under the heading Compensation
Discussion and Analysis with management and, based on the
review and discussions, it has recommended to the Board of
Directors that the Compensation Discussion and
Analysis be included in this proxy statement and
incorporated by reference into Mitcham Industries, Inc.s
Annual Report on
Form 10-K
for the fiscal year ended January 31, 2007.
Respectfully submitted by the Compensation Committee,
Peter H. Blum (Chairman)
R. Dean Lewis
John F. Schwalbe
18
EXECUTIVE
COMPENSATION
Summary
Compensation
The following table summarizes, with respect to our Named
Executive Officers, information relating to the compensation
earned for services rendered in all capacities. Our Named
Executive Officers consist of our four current executive
officers, including our Chief Executive Officer and Chief
Financial Officer. In addition, our former Executive Vice
President and Chief Financial Officer is included.
Summary
Compensation Table for the Year Ended January 31,
2007
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Fiscal Year
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Name and
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Ended
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Stock
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Option
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All Other
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Principal Position
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January 31,
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Salary
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Bonus
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Awards1
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Awards2
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Compensation
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Total
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($)
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($)
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($)
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($)
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($)
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($)
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Billy F. Mitcham, Jr.
President and Chief Executive Officer
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2007
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322,500
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79,794
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52,447
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330,601
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75,139
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3
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860,481
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Robert P. Capps
Executive Vice President and Chief Financial
Officer4
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2007
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105,449
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4,503
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277,469
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5
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12,500
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6
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399,921
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Paul Guy Rogers
Vice President Business Development
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2007
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170,833
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29,889
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19,716
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93,229
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313,667
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Guy Malden
Vice President Marine Systems
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2007
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167,833
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29,368
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17,545
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92,451
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307,197
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Michael A. Pugh
Former Executive Vice President and Chief Financial
Officer7
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2007
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66,667
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640
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14,937
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40,000
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8
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122,244
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(1)
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This column includes the dollar
amount of compensation expense we recognized for the fiscal year
ended January 31, 2007 in accordance with FAS 123R.
Pursuant to the Securities and Exchange Commissions rules
and regulations, the amounts shown exclude the impact of
estimated forfeitures related to service-based vesting
conditions. These amounts reflect our accounting expense for
these awards, and do not correspond to the actual value that
will be recognized by our Named Executive Officers. Assumptions
used in the calculation of these amounts are included in Note 14
to our audited financial statements for the fiscal year ended
January 31, 2007 included in our Annual Report on
Form 10-K.
The awards for which compensation expense was recognized consist
of awards granted on (a) March 31, 2006 to
Messrs. Mitcham, Pugh, Rogers and Malden;
(b) July 17, 2003 to Messrs. Mitcham and Rogers;
(c) January 31, 2005 to Messrs. Mitcham, Rogers
and Malden; and (d) September 11, 2006 and
July 17, 2003 to Messrs. Mitcham, Rogers and Malden.
See Narrative Disclosure to Summary Compensation Table and
Grants of Plan-Based Awards Table below for a description
of the material features of these awards.
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(2)
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This column includes the dollar
amount of compensation expense we recognized for the fiscal year
ended January 31, 2007 in accordance with FAS 123R.
Pursuant to the Securities and Exchange Commissions rules
and regulations, the amounts shown exclude the impact of
estimated forfeitures related to service-based vesting
conditions. These amounts reflect our accounting expense for
these awards, and do not correspond to the actual value that
will be recognized by our Named Executive Officers. Assumptions
used in the calculation of these amounts are included in Note 14
to our audited financial statements for the fiscal year ended
January 31, 2007 included in our Annual Report on
Form 10-K.
The awards for which compensation expense was recognized consist
of awards granted on (a) March 31, 2006 to
Messrs. Mitcham, Pugh, Rogers and Malden;
(b) June 26, 2006 and July 21, 2005 to
Mr. Capps; (c) January 31, 2005 to
Messrs. Mitcham, Rogers and Malden; and
(d) July 17, 2003 to Messrs. Mitcham and Rogers.
See Narrative Disclosure to Summary Compensation Table and
Grants of Plan-Based Awards Table below for a description
of the material features of these awards.
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(3)
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Includes life insurance premiums of
$69,000, automobile costs and country club dues. Automobile
costs are determined by multiplying the Alternative Leave Value,
as published by the Internal Revenue Service, by the percentage
of personal use mileage versus total mileage for the year.
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(4)
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Mr. Capps has served as a
member of our Board since July 2004. On June 26, 2006, he
assumed the added position of Executive Vice President and Chief
Financial Officer.
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(5)
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Includes $73,355 related to awards
made in connection with Mr. Capps role as a director
before he became an executive officer.
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(6)
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Represents Fees Earned or
Paid in Cash to Mr. Capps as a member of our Board
for the period prior to his becoming an executive officer.
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(7)
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Mr. Pugh resigned as Executive
Vice President and Chief Financial Officer effective
June 23, 2006.
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(8)
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Represents amounts paid pursuant to
a Separation Agreement and Release entered into between us and
Mr. Pugh in connection with his resignation.
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19
Grants of
Plan-Based Awards
The following table provides information concerning each grant
of an award made to our Named Executive Officers under any plan,
including awards, if any, that have been transferred.
Grants
of Plan-Based Awards for the Year Ended January 31,
2007
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All Other Stock
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All Other Option
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Awards:
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Awards: Number
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Number of
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of Securities
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Exercise or Base
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Grant Date Fair
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Shares of
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Underlying
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Price of
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Value of Stock and
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Name
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Grant Date
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Stock or Units
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Options
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Option Awards
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Option Awards
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(#)
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(#)
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($/Sh)
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($)
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Billy F. Mitcham, Jr.
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3-31-06
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50,000
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16.64
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532,816
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3-31-06
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7,500
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16.64
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124,800
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9-11-06
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9,000
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10.59
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95,310
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Robert P.
Capps1
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6-26-06
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80,000
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12.57
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669,052
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Paul Guy Rogers
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3-31-06
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15,000
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16.64
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159,481
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3-31-06
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2,000
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16.64
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33,280
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9-11-06
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6,000
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10.59
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63,540
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Guy Malden
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3-31-06
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15,000
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16.64
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159,481
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3-31-06
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2,000
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16.64
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33,280
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9-11-06
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6,000
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10.59
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63,540
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Michael A.
Pugh2
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3-31-06
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500
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16.64
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8,320
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3-31-06
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5,000
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16.64
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50,707
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(1)
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Mr. Capps has served as a
member of our Board since July 2004. On June 26, 2006, he
assumed the added position of Executive Vice President and Chief
Financial Officer.
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(2)
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Mr. Pugh resigned as Executive
Vice President and Chief Financial Officer effective
June 23, 2006. Pursuant to a Separation Agreement and
Release entered into in connection with Mr. Pughs
resignation, all restrictions related to 500 shares of
restricted stock lapsed as of the date of resignation and
vesting for options for the purchase of 5,000 shares of
stock were accelerated to the date of resignation.
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Narrative
Disclosure to Summary Compensation Table and Grants of
Plan-Based Awards Table
The following is a discussion of material factors necessary to
an understanding of the information disclosed in the Summary
Compensation Table and the Grants of Plan-Based Awards Table.
Long-Term
Equity-Based Incentive Compensation
In March 2006, the Compensation Committee granted
Messrs. Mitcham, Rogers, Malden and Pugh a combination of
stock options and restricted stock pursuant to our Stock Awards
Plan. In June 2006, the Compensation Committee granted
Mr. Capps stock options upon his appointment as our Chief
Financial Officer. For a description of the grants, including
the vesting schedule for the stock options and the dates that
the restrictions lapse on the restricted stock, please see
Compensation Discussion and Analysis Elements
of Our Executive Compensation Program Long-Term
Equity-Based Incentives.
20
Salary
and Cash Incentive Awards in Proportion to Total
Compensation
The following table sets forth the percentage of each Named
Executive Officers total compensation that we paid in the
form of base salary and annual cash incentive awards.
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Percentage of Total
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Name
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Compensation
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Billy F. Mitcham, Jr.
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46
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%
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Robert P.
Capps1
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28
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%
|
Paul Guy Rogers
|
|
|
63
|
%
|
Guy Malden
|
|
|
64
|
%
|
Michael A.
Pugh2
|
|
|
86
|
%
|
|
|
|
(1)
|
|
Mr. Capps has served as a
member of our Board since July 2004. On June 26, 2006, he
assumed the added position of Executive Vice President and Chief
Financial Officer.
|
|
(2)
|
|
Mr. Pugh resigned as Executive
Vice President and Chief Financial Officer effective
June 23, 2006. Pursuant to a Separation Agreement and
Release entered into in connection with Mr. Pushs
resignation, a significant portion of his compensation for the
fiscal year ended January 31, 2007 was paid in cash.
|
Employment
Agreement with Billy F. Mitcham, Jr.
Effective January 15, 1997, we entered into an employment
agreement with Mr. Mitcham for a term of five years,
beginning January 15, 1997, which term is automatically
extended for successive one-year periods unless either party
gives written notice of termination at least 30 days prior
to the end of the current term. The agreement provides for an
annual salary of $150,000 subject to increase by our Board. It
may be terminated prior to the end of the initial term or any
extension thereof if (1) Mr. Mitcham dies; (2) it
is determined that Mr. Mitcham has become disabled; or
(3) our Board determines that Mr. Mitcham has breached
the employment agreement in any material respect, has
appropriated a material business opportunity of ours or has
engaged in fraud or dishonesty with respect to our business that
is punishable by imprisonment. If Mr. Mitchams
employment is terminated by us prior to the end of the initial
five-year term other than for a reason enumerated above,
Mr. Mitcham will be entitled to payments equal to three
times his annual salary payable ratably over the 24 months
following his termination. As of January 31, 2007, the
payments would amount to $1,050,000. For a period of two years
after the termination of the agreement, Mr. Mitcham is
prohibited from engaging in any business activities that are
competitive with our business and from diverting any of our
customers to a competitor.
Appointment
of Robert P. Capps
On June 26, 2006, our Board appointed Robert P. Capps as
Executive Vice President and Chief Financial Officer.
Mr. Capps received a base salary of $175,000 per year (pro
rated). Mr. Capps was granted options to purchase
80,000 shares of our common stock upon his employment. The
options vest over a four year period beginning with the first
anniversary of the grant date.
Severance
Arrangement with Michael A. Pugh
Effective June 23, 2006, Michael A. Pugh, Executive Vice
President and Chief Financial Officer, resigned from those
positions with us. At the time of his resignation, Mr. Pugh
entered into a Separation Agreement and Release with us,
pursuant to which he received monthly payments in the amount of
$13,333.32 and continued medical coverage (valued at
approximately $1,265 per month) for each of July, August and
September 2006, subject to applicable withholding. In addition,
the agreement provided for the accelerated vesting of 5,000
unvested stock options, having a fair market value as of
June 23, 2006, of $0 (the options were underwater as of
such date) and amended the award agreement with respect to those
options to provide that they were exercisable until
December 31, 2006.
In addition, Mr. Pugh released us from all claims related
to his employment and the termination of his employment.
21
Outstanding
Equity Awards Value at Fiscal Year-End Table
The following table provides information concerning unexercised
options, stock that has not vested, and equity incentive plan
awards for our Named Executive Officers.
Outstanding
Equity Awards as of January 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Market Value of
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
Shares or Units
|
|
|
Shares or Units
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Expiration
|
|
|
of Stock That
|
|
|
of Stock That
|
|
Name
|
|
(#) Exercisable
|
|
|
(#) Unexercisable
|
|
|
Price
|
|
|
Date
|
|
|
Have Not Vested
|
|
|
Have Not Vested
|
|
|
|
|
|
|
|
|
|
($)
|
|
|
|
|
|
(#)
|
|
|
($)
|
|
|
Billy F. Mitcham, Jr.
|
|
|
15,000
|
|
|
|
|
|
|
|
22.00
|
|
|
|
10-03-07
|
|
|
|
|
|
|
|
|
|
|
|
|
70,500
|
|
|
|
|
|
|
|
3.56
|
|
|
|
2-23-09
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
|
|
|
|
|
5.13
|
|
|
|
7-27-10
|
|
|
|
|
|
|
|
|
|
|
|
|
80,000
|
|
|
|
|
|
|
|
5.00
|
|
|
|
7-18-11
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
1.90
|
|
|
|
7-17-13
|
|
|
|
|
|
|
|
|
|
|
|
|
85,000
|
|
|
|
|
|
|
|
1.99
|
|
|
|
8-15-12
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
4.16
|
|
|
|
7-13-14
|
|
|
|
|
|
|
|
|
|
|
|
|
33,333
|
|
|
|
16,667
|
1
|
|
|
6.18
|
|
|
|
1-31-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
2
|
|
|
16.64
|
|
|
|
3-31-16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,500
|
3
|
|
|
222,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert P.
Capps4
|
|
|
25,000
|
|
|
|
|
|
|
|
8.98
|
|
|
|
7-21-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,000
|
5
|
|
|
12.57
|
|
|
|
6-26-16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Guy Rogers
|
|
|
10,000
|
|
|
|
|
|
|
|
4.60
|
|
|
|
10-23-11
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
1.99
|
|
|
|
8-15-12
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
|
|
|
|
|
|
|
1.90
|
|
|
|
7-7-13
|
|
|
|
|
|
|
|
|
|
|
|
|
6,667
|
|
|
|
3,333
|
1
|
|
|
6.18
|
|
|
|
1-31-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
2
|
|
|
16.64
|
|
|
|
3-31-16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
6
|
|
|
107,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guy Malden
|
|
|
6,667
|
|
|
|
3,333
|
1
|
|
|
6.18
|
|
|
|
1-31-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
2
|
|
|
16.64
|
|
|
|
3-31-16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
6
|
|
|
107,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael A.
Pugh7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Vests on January 31, 2008.
|
|
(2)
|
|
Vests one-third on March 31,
2007, one-third on March 31, 2008 and one-third on
March 31, 2009.
|
|
(3)
|
|
Vests as follows: 2,500 shares
on March 31, 2007; 3,000 shares on September 11,
2007; 2,500 shares on March 31, 2008;
3,000 shares on September 11, 2008; 2,500 shares
on March 31, 2009; and 3,000 shares on
September 11, 2009.
|
|
(4)
|
|
Mr. Capps has served as a
member of our Board since July 2004. On June 26, 2006, he
assumed the added position of Executive Vice President and Chief
Financial Officer.
|
|
(5)
|
|
Vests 25% annually commencing
June 26, 2007.
|
|
(6)
|
|
Vests as follows: 666 shares
on March 31, 2007; 2,000 shares on September 11,
2007; 667 shares on March 31, 2008; 2,000 shares
on September 11, 2008; 667 shares on March 31,
2009; and 2,000 shares on September 11, 2009.
|
|
(7)
|
|
Mr. Pugh resigned as Executive
Vice President and Chief Financial Officer effective
June 23, 2006. Pursuant to a Separation Agreement and
Release, all restrictions related to 500 shares of
restricted stock lapsed as of the date of resignation and
vesting for options for the purchase of 5,000 shares of
stock were accelerated to the date of resignation.
|
22
Option
Exercises and Stock Vested
The following table provides information concerning each
exercise of stock option and each vesting of stock, including
restricted stock, restricted stock units and similar
instruments, during the fiscal year ended January 31, 2007
on an aggregated basis with respect to each of our Named
Executive Officers.
Option
Exercises and Stock Vested for the Year Ended January 31,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
Name
|
|
Acquired on Exercise
|
|
|
Exercise
|
|
|
Acquired on Vesting
|
|
|
on Vesting
|
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
Billy F. Mitcham, Jr.
|
|
|
9,000
|
|
|
|
54,630
|
|
|
|
6,000
|
|
|
|
70,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert P.
Capps1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Guy Rogers
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
|
|
29,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guy Malden
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael A.
Pugh2
|
|
|
20,000
|
|
|
|
152,400
|
|
|
|
500
|
|
|
|
6,575
|
|
|
|
|
(1)
|
|
Mr. Capps has served as a
member of our Board since July 2004. On June 26, 2006, he
assumed the added position of Executive Vice President and Chief
Financial Officer.
|
|
(2)
|
|
Mr. Pugh resigned as Executive
Vice President and Chief Financial Officer effective
June 23, 2006. The options exercised subsequent to his
resignation represent those options vested as of the date of his
resignation. Pursuant to a Separation Agreement and Release, all
restrictions related to 500 shares of restricted stock
previously issued to Mr. Pugh lapsed as of the date of his
resignation.
|
Potential
Payments upon Termination or Change in Control
We have entered into arrangements with certain of our Named
Executive Officers that provide additional payments and/or
benefits upon a change in control of our company and/or in
connection with the termination of the Named Executive
Officers employment. The following is a discussion of
those arrangements. Unless otherwise provided, the dollar
amounts disclosed assume that the triggering event for the
payment(s) and/or benefit(s) was December 31, 2006. As a
result, the dollar amounts disclosed are merely estimates of the
amounts or benefits that would be payable to the Named Executive
Officers upon their termination or a change in control of our
company. The actual dollar amounts can only be determined at the
time of the Named Executive Officers termination or the
change in control.
Equity-Based
Plans
Stock options and shares of restricted stock awarded to the
Named Executive Officers under our 1998 Amended and Restated
Stock Awards Plan and our Stock Awards Plan will become vested
and, in the case of stock options, exercisable, upon the Named
Executive Officers death or disability or upon a change in
control of our company (as defined in the form nonqualified
stock option agreement filed with respect to our Stock Awards
Plan). As a result, assuming either of those events occurred on
January 31, 2007: (1) Mr. Mitchams 66,667
unvested stock options (fair market value as of that date of
$121,836) and 16,500 shares of restricted stock (fair
market value as of that date of $222,585),
(2) Mr. Capps 80,000 unvested stock options
(fair market value as of such date of $73,600);
(3) Mr. Rogers 18,333 unvested stock options
(fair market value as of that date of $148,280) and 8,000
unvested shares of restricted stock (fair market value as of
that date of $107,920); and (4) Mr. Maldens
18,333 unvested stock options (fair market value as of that date
of $23,231) and 8,000 unvested shares of restricted stock (fair
market value as of that date of $107,920), would have become
fully vested.
Employment
Agreement with Billy F. Mitcham, Jr.
Pursuant to our employment agreement with Mr. Mitcham, in
the event his employment is terminated by us without
cause (as defined in the employment agreement) or he
terminates his employment with us within 60 days
23
following a constructive termination (as defined in
the employment agreement), he will be entitled to a severance
payment in an amount equal to three times his annual salary, or
$1,050,000, payable in equal monthly payments over a period of
24 months following the date of termination. In addition,
if Mr. Mitchams employment is terminated by us
without cause, his options will remain exercisable and will vest
and expire in accordance with the terms of the applicable option
agreements. As of January 31, 2007, Mr. Mitcham had
66,667 unvested options and 16,500 shares of unvested
restricted stock outstanding.
If Mr. Mitchams employment with us is terminated as a
result of his death, all of his outstanding options will become
fully vested and exercisable as of the date of his death. All
options will expire on the one-year anniversary of his death.
Assuming, therefore, that Mr. Mitchams employment
terminated on January 31, 2007 as a result of his death,
66,667 options and 16,500 shares of unvested restricted
stock, having a total fair market value as of that date of
$344,421, would have become fully exercisable.
If Mr. Mitchams employment with us is terminated as a
result of his disability (as defined in the employment
agreement), we will continue to pay to him his base salary
(determined as of the date of his disability) for the lesser of
(1) six consecutive months, or (2) the period until
disability insurance benefits commence under any disability
insurance coverage furnished by us to Mr. Mitcham. Under
our long-term disability insurance program, coverage commences
on the 61st day after the covered employee is unable to perform
his or her job functions.
Mr. Mitchams employment agreement contains standard
non-solicitation and non-compete provisions that are effective
during the term of the employment agreement and for two years
following his date of termination.
Severance
Arrangement with Michael A. Pugh
We entered into a Separation Agreement and Release with
Mr. Pugh, effective as of August 22, 2006. The
agreement provides for Mr. Pughs resignation
effective as of June 23, 2006. The agreement entitled
Mr. Pugh to monthly payments in the amount of $13,333.32
and continued medical coverage (valued at approximately
$1,265 per month) for each of July, August and September
2006, subject to applicable withholding. In addition, the
agreement provided for the accelerated vesting of 5,000 unvested
stock options, having a fair market value as of June 23,
2006, of $0 (the options were underwater as of such date) and
amended the award agreement with respect to those options to
provide that they were exercisable until December 31, 2006.
Mr. Pughs separation agreement contains a standard
non-solicitation clause that is effective for one year following
his date of termination (i.e., until June 23, 2007).
24
DIRECTOR
COMPENSATION
Non-Employee
Director Compensation
General
Each year, the Compensation Committee reviews the total
compensation paid to our non-employee directors and
Non-Executive Chairman of our Board. The purpose of the review
is to ensure that the level of compensation is appropriate to
attract and retain a diverse group of directors with the breadth
of experience necessary to perform our Boards duties, and
to fairly compensate directors for their service. The review
includes the consideration of qualitative and comparative
factors. To ensure directors are compensated relative to the
scope of their responsibilities, the Compensation Committee
considers: (1) the time and effort involved in preparing
for Board, committee and management meetings and the additional
duties assumed by committee chairs; (2) the level of
continuing education required to remain informed of broad
corporate governance trends, and material developments and
strategic initiatives within our company; and (3) the risks
associated with fulfilling fiduciary duties.
The following table sets forth a summary of the compensation we
paid to our non-employee directors during the fiscal year ended
January 31, 2007. Directors who are our full-time employees
receive no compensation for serving as directors.
Director
Compensation for the Year Ended January 31,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Paid in Cash
|
|
|
Stock
Awards1
|
|
|
Option
Awards2
|
|
|
Total
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Peter H. Blum
|
|
|
79,000
|
|
|
|
18,610
|
|
|
|
292,980
|
|
|
|
390,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John F. Schwalbe
|
|
|
35,000
|
|
|
|
|
|
|
|
146,490
|
|
|
|
181,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Dean Lewis
|
|
|
32,000
|
|
|
|
|
|
|
|
146,490
|
|
|
|
178,490
|
|
|
|
|
(1)
|
|
This column includes the dollar
amount of compensation expense we recognized for the fiscal year
ended January 31, 2007 in accordance with FAS 123R.
Pursuant to the Securities and Exchange Commissions rules
and regulations, the amounts shown exclude the impact of
estimated forfeitures related to service-based vesting
conditions. These amounts reflect our accounting expense for
these awards, and do not correspond to the actual value that
will be recognized by our non-employee directors. Assumptions
used in the calculation of these amounts are included in
Note 14 to our audited financial statements for the fiscal
year ended January 31, 2007 included in our Annual Report
on
Form 10-K.
The awards for which compensation expense was recognized consist
of an award granted on March 31, 2006 for Mr. Blum.
|
|
(2)
|
|
This column includes the dollar
amount of compensation expense we recognized for the fiscal year
ended January 31, 2007 in accordance with FAS 123R.
Pursuant to the Securities and Exchange Commissions rules
and regulations, the amounts shown exclude the impact of
estimated forfeitures related to service-based vesting
conditions. These amounts reflect our accounting expense for
these awards, and do not correspond to the actual value that
will be recognized by our non-employee directors. Assumptions
used in the calculation of these amounts are included in
Note 14 to our audited financial statements for the fiscal
year ended January 31, 2007 included in our Annual Report
on
Form 10-K.
The awards for which compensation expense was recognized consist
of awards granted on January 31, 2005, July 21, 2005,
March 31, 2006 and July 27, 2006 to Messrs. Blum,
Schwalbe and Lewis. See Equity-Based Compensation
below for a brief description of this one-time award.
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Retainer/Fees
Each non-employee director receives the following compensation:
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an annual cash retainer fee of $25,000 per year, plus an
additional $50,000 for the Non-Executive Chairman of our Board;
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additional cash retainer of $5,000 per year for each member of
the Audit Committee, plus an additional $3,000 per year for the
chairperson of the Audit Committee; and
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additional cash retainer of $2,000 per year for each member of
the Compensation Committee, plus an additional $2,000 per year
for the chairperson of the Compensation Committee.
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25
Equity-Based
Compensation
In addition to cash compensation, our non-employee directors are
eligible, at the discretion of our full Board, to receive
discretionary grants of stock options or restricted stock or any
combination thereof under our equity compensation plans. On
July 27, 2006, the Compensation Committee awarded options
to purchase 30,000 shares of common stock to each
non-employee director (except for the Non-Executive Chairman)
and options to purchase 60,000 shares to our Non-Executive
Chairman pursuant our Stock Awards Plan. The grant was made
after a review of the prior compensation of our non-employee
directors. The option awards vest over a three year period
beginning on the first anniversary of the grant date. Our
Non-Executive Chairman was awarded 4,000 shares of
restricted stock on March 31, 2006 pursuant to our 1998
Amended and Restated Stock Awards Plan. The restrictions on
these shares lapse over three years beginning on the first
anniversary of the grant date.
26
PROPOSAL 2:
RATIFICATION OF THE SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected Hein & Associates LLP
as our independent registered public accounting firm to conduct
our audit for the fiscal year ending January 31, 2008.
The engagement of Hein & Associates LLP has been
recommended by the Audit Committee and approved by our Board
annually. The Audit Committee has reviewed and discussed the
audited consolidated financial statements included in our Annual
Report on
Form 10-K
for the fiscal year ended January 31, 2007, and has
recommended, and our Board has approved their inclusion therein.
See Audit Committee Report included elsewhere in
this proxy statement.
Although shareholder ratification of the selection of
Hein & Associates LLP is not required, the Audit
Committee and our Board consider it desirable for our
shareholders to vote upon this selection. The affirmative vote
of the holders of a majority of the shares entitled to vote at
the Annual Meeting is required to approve and ratify the
selection of Hein & Associates LLP. Even if the
selection is ratified, the Audit Committee may, in its
discretion, direct the appointment of a different independent
registered public accounting firm at any time during the year if
it believes that such a change would be in the best interests of
our shareholders and us.
One or more representatives of Hein & Associates LLP
are expected to be present at the Annual Meeting and will have
the opportunity to make a statement if they desire to do so. The
representatives of Hein & Associates LLP are expected
to be available to respond to appropriate questions.
Our Board recommends a vote FOR the ratification
of the selection of Hein & Associates LLP as our
independent registered public accounting firm for the fiscal
year ending January 31, 2008.
FEES AND
EXPENSES OF HEIN & ASSOCIATES LLP
The following table sets forth the amount of audit fees,
audit-related fees and tax fees billed or expected to be billed
by Hein & Associates LLP, our independent registered
public accounting firm, for the fiscal years ended
January 31, 2006 and January 31, 2007:
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2006
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2007
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Audit
fees1
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$
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227,100
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$
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381,300
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Audit-related
fees2
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Tax
fees3
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78,361
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115,948
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All other
fees4
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16,127
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Total Fees
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$
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321,588
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$
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497,248
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(1)
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Includes the annual consolidated
financial statement audit, review of quarterly reports on
Form 10-Q
and other services associated with the audit.
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(2)
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During the indicated periods, our
independent registered public accounting firm did not provide us
with any services of this nature.
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(3)
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Includes fees and expenses for
services primarily related to tax compliance, tax advice and tax
planning for certain acquisitions.
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(4)
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Includes fees related to
acquisitions and Securities and Exchange Commission matters.
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The Audit Committee has pre-approved all audit services and
permitted non-audit services provided by the independent
registered public accounting firm, and the compensation, fees
and terms for such services, for the fiscal year ending
January 31, 2007. The Audit Committee also has approved a
policy that requires committee pre-approval of the compensation
and terms of service for audit services and any permitted
non-audit services based on ranges of fees, and any changes in
terms, conditions and fees resulting from changes in audit scope
or other matters. Any proposed audit or non-audit services
exceeding the pre-approved fee ranges require additional
pre-approval by the Audit Committee or its chairman.
27
AUDIT
COMMITTEE REPORT
The Audit Committee was established to implement and to support
oversight function of the Board of Directors with respect to the
financial reporting process, accounting policies, internal
controls and independent registered public accounting firm of
Mitcham Industries, Inc.
The Board of Directors, in its business judgment, has determined
that each of Messrs. Schwalbe, Lewis and Blum is an
independent director, as that term is defined in Rule 4350
of the NASDAQ Marketplace Rules, and meets the Securities and
Exchange Commissions additional independence requirements
for members of audit committees. In addition, the Board of
Directors has determined that each member of the Audit Committee
is financially literate and that Mr. Schwalbe has the
necessary accounting and financial expertise to serve as
chairman. Our Board has determined that Mr. Schwalbe is an
audit committee financial expert following a
determination that Mr. Schwalbe met the criteria for such
designation under the Securities and Exchange Commissions
rules and regulations.
In fulfilling its responsibilities, the Audit Committee:
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reviewed and discussed the audited financial statements
contained in Mitcham Industries, Inc.s Annual Report on
Form 10-K
for the fiscal year ended January 31, 2007 with management
and the independent registered public accounting firm;
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discussed with the independent registered public accounting firm
the matters required to be discussed by the statement on
Auditing Standards No. 61, Communications with
Audit Committees;
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received from the independent registered public accounting firm
the written disclosures and the letter required by Independence
Standards Board Statement No. 1, Independence
Discussions with Audit Committees and discussed the
independent registered public accounting firms
independence with the firm; and
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considered the compatibility of non-audit services with the
independent registered public accounting firms
independence.
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Based on these reviews and discussions, the Audit Committee
recommended to the Board of Directors that the audited financial
statements be included in Mitcham Industries, Inc.s Annual
Report on
Form 10-K
for the fiscal year ended January 31, 2007.
The information contained in this Audit Committee Report shall
not be deemed to be soliciting material to be
filed with the Securities and Exchange Commission,
nor shall such information be incorporated by reference into any
future filings with the Securities and Exchange Commission, or
subject to the liabilities of Section 18 of the Securities
Exchange Act of 1934, as amended, except to the extent that we
specifically incorporate it by reference into a document filed
under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended.
Respectfully submitted by the Audit Committee,
John F. Schwalbe (Chairman)
R. Dean Lewis
Peter H. Blum
28
ANNUAL
REPORT
Our Annual Report covering the fiscal year ended
January 31, 2007 accompanies this proxy statement. Except
for the financial statements included in the Annual Report that
are specifically incorporated by reference herein, the Annual
Report is not incorporated in this proxy statement and is not to
be deemed part of this proxy soliciting material. Additional
copies of the Annual Report are available upon request.
OTHER
MATTERS
As of the date hereof, our Board knows of no other business to
be presented at the Annual Meeting. If any other matter properly
comes before the meeting, however, it is intended that the
persons named in the accompanying proxy will vote the proxy in
accordance with the discretion and instructions of our Board.
SHAREHOLDER
PROPOSALS AND DIRECTOR NOMINATIONS
Pursuant to the Securities and Exchange Commissions rules
and regulations, shareholders interested in submitting proposals
for inclusion in our proxy materials and for presentation at our
2008 Annual Meeting of Shareholders may do so by following the
procedures set forth in
Rule 14a-8
under the Exchange Act. In general, shareholder proposals must
be received by our Corporate Secretary at Mitcham Industries,
Inc., P.O. Box 1175, Huntsville, Texas
77342-1175
no later than February 2, 2008 to be eligible for inclusion
in our proxy materials.
In addition, shareholders may present business at a shareholder
meeting without having submitted the proposal pursuant to
Rule 14a-8
as discussed above. For business to be properly brought or
nominations of persons for election to our Board to be properly
made at the time of our 2008 Annual Meeting of Shareholders,
notice must be received by our Corporate Secretary at the
address in the preceding paragraph by April 17, 2008.
Detailed information for submitting shareholder proposals is
available upon written request to our Corporate Secretary at
Mitcham Industries, Inc., P.O. Box 1175, Huntsville, Texas
77342-1175.
29
MITCHAM INDUSTRIES, INC.
8141 SH 75 SOUTH
HUNTSVILLE, TX 77340
VOTE BY INTERNET www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you access the
web site and follow the instructions to obtain your records and to create an
electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred by Mitcham Industries, Inc. in
mailing proxy materials, you can consent to receiving all future proxy
statements, proxy cards and annual reports electronically via e-mail or the
Internet. To sign up for electronic delivery, please follow the instructions
above to vote using the Internet and, when prompted, indicate that you agree to
receive or access shareholder communications electronically in future years.
VOTE BY PHONE 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your
proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we have provided.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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MITCH1
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
MITCHAM INDUSTRIES, INC.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR PROPOSALS (1) AND (2)
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ELECTION OF DIRECTORS |
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Billy F. Mitcham, Jr. |
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2. |
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Peter H. Blum |
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3. |
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Robert P. Capps |
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4. |
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R. Dean Lewis |
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5. |
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John F. Schwalbe |
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For
All
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Withhold
All
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For All
Except |
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¡ |
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¡ |
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To withhold authority to vote for any individual nominee(s), mark For All Except and write
the number(s) of the nominee(s) on the line below.
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(2) |
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RATIFICATION OF THE SELECTION OF HEIN & ASSOCIATES, LLP AS MITCHAM INDUSTRIES, INC.S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING JANUARY 31, 2008. |
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For
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Against
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Abstain |
¡
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¡
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¡ |
IMPORTANT: please sign exactly as your name or names appear(s) on this proxy,
and when signing as an attorney, executor, administrator, trustee or guardian,
give your full title as such. If the signatory is a corporation, sign the full
corporate name by duly authorized officer, or if a partnership, sign in
partnership name by authorized person.
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN,
DATE AND MAIL PROMPTLY THE ACCOMPANYING PROXY CARD IN THE ENCLOSED RETURN
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THIS WILL
ENSURE THE PRESENCE OF A QUORUM AT THE MEETING. IF YOU ATTEND THE MEETING, YOU
MAY VOTE IN PERSON EVEN IF YOU HAVE PREVIOUSLY SENT IN YOUR PROXY CARD.
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Yes
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No
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Please indicate if you plan to attend the Annual Meeting.
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¡
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¡ |
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Signature [PLEASE SIGN WITHIN BOX]
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Signature (Joint Owners)
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MITCHAM INDUSTRIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD ON THURSDAY, JULY 12, 2007
The undersigned hereby constitutes and appoints Billy F. Mitcham, Jr.
and Peter H. Blum, and each of them, the attorneys and proxies of the
undersigned with full power of substitution to appear and to vote all of the
shares of the common stock of Mitcham Industries, Inc. held of record by the
undersigned on May 21, 2007 as if personally present at the Annual Meeting of
Shareholders to be held on Thursday July, 12 2007 and any adjournment or
postponement thereof, as designated on the reverse.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MITCHAM
INDUSTRIES, INC. THE PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EACH OF THE
PROPOSALS LISTED ON THE REVERSE AND ACCORDING TO THE DISCRETION OF THE PROXY
HOLDERS ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING. THIS
PROXY REVOKES ALL PREVIOUSLY SIGNED PROXIES.
YOU ARE URGED TO DATE, SIGN AND RETURN PROMPTLY THIS PROXY IN THE
ENVELOPE PROVIDED. IT IS IMPORTANT FOR YOU TO BE REPRESENTED AT THE ANNUAL
MEETING. THIS PROXY MUST BE RECEIVED BY MAIL IN THE POSTAGE-PAID ENVELOPE
PROVIDED OR ELECTRONICALLY VIA THE INTERNET AT www.proxyvote.com OR BY
PHONE AT +1 800 690 6903 PRIOR TO 11.59 PM EASTERN DAYLIGHT SAVING TIME THE DAY
BEFORE THE MEETING DATE.