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**Exhibit 10.3**

 

**AS AMENDED (INCLUDING ALL AMENDMENTS AS OF JUNE 30,2008)**

 

 

**SEITEL HOLDINGS, INC.**

**2007 NON-QUALIFIED STOCK OPTION PLANEFFECTIVE FEBRUARY 14, 2007**

 

1.               Purpose of Plan.  This 2007 Non-Qualified Stock Option Plan (the"Plan") of Seitel Holdings, Inc., a Delaware corporation (the "Company"),is designed to provide incentives to such present and future Employees of theCompany or its Subsidiaries, as may be selected in the sole discretion of theCommittee, through the grant of Options by the Company to Participants.  ThisPlan is intended to advance the best interests of the Company by providingthose persons who have a substantial responsibility for its management andgrowth with additional incentives by allowing them to acquire an ownershipinterest in the Company and thereby encouraging them to contribute to thesuccess of the Company and to continue to provide services to or remainemployed by the Company and its Subsidiaries (as the case may be).  Theavailability and offering of Options under the Plan also increases theCompany's ability to attract and retain individuals of exceptional managerialtalent upon whom, in large measure, the sustained progress, growth andprofitability of the Company depends.  All options granted under the Plan areintended to qualify for an exemption (the "Exemption") from theregistration requirements under the Securities Act, pursuant to Rule 701 of theSecurities Act.  In the event that any provision of the Plan would cause anyoption granted under the Plan to not qualify for the Exemption, the Plan shallbe deemed automatically amended to the extent necessary to cause all Optionsgranted under the Plan to qualify for the Exemption.

2.                Definitions.  Certain terms used in this Plan have the meaningsset forth below:

"Agreement"means the agreement between the Company and a Participant pursuant to which anOption is granted and which specifies the terms and conditions of that Option,including the vesting requirements applicable to that Option.  All Optionsgranted under the Plan shall be evidenced by Agreements.

"Approved Sale"shall have the meaning ascribed to such term in the Securities HoldersAgreement.

"Board" meansthe Company's board of directors.

"Cause" shallhave the meaning ascribed to such term in the applicable Employment Agreement,or if none, the Securities Holders Agreement.

"Common Stock"means the Company's Common Stock, par value $0.001 per share.

"Code" meansthe Internal Revenue Code of 1986, as amended, and the regulations promulgatedthereunder, as the same may be amended from time to time and any successorstatute.

"Committee"means the Board or a committee of the Board designated to administer the Plan. Upon the consummation of a Public Offering the Committee shall be composed oftwo or more directors appointed by the Board, each of whom shall be a"non-employee director" as defined in Rule 16b-3 under the Securities ExchangeAct of 1934, as amended (the "1934 Act"), and an "outside director" asdefined in Section 162(m) of the Code. 

"Disability"has the meaning set forth in the applicable Employment Agreement between theParticipant and the Company, or if none, the Securities Holders Agreement.

"Employee" meansa senior executive employee of the Company and/or any of its Subsidiarieslisted on Schedule A hereto.  Notwithstanding the foregoing, the Board may, inits sole discretion, designate such other service providers, including withoutlimitation, other employees, directors and/or consultants, of the Companyand/or its Subsidiaries, as Employees for purposes of participation in thePlan. 

"Employment Agreement" means theemployment agreement by and between a Participant and the Company and/or any ofits Subsidiaries or Affiliates as appropriate, as in effect from time to time.

"EmploymentTermination Date" means the first date on which a Participant is no longeremployed by the Company or its Subsidiaries for any reason.

"Fair MarketValue" of the Option Shares shall mean the fair market value of the OptionShares as determined in good faith by the Committee.

"Investor" meansValueAct Capital Master Fund, L.P., a British Virgin Islands limitedpartnership, or any Successor thereto.

"Non-Qualified StockOption" means an option which is not intended to constitute an "IncentiveStock Option" within the meaning of Section 422 of the Code.

"Option"means a Non-Qualified Stock Option to purchase Common Stock of the Companygranted pursuant to the Plan which has an exercise price no less than the FairMarket Value of the underlying Common Stock on the date of grant and has a termof no more than ten years.

"Participant"means an Employee who is granted an Option hereunder. 

"Person"means an individual, a partnership, a corporation, a limited liability company,an association, a joint share company, a trust, a joint venture, anunincorporated organization and a governmental entity or any department, agencyor political subdivision thereof.

"Public Offering"shall have the meaning ascribed to such term in the Securities HoldersAgreement.

"Securities Act"means the Securities Act of 1933, as amended, and any successor statute thereto.

"SecuritiesHolders Agreement" or "Stockholders' Agreement" means the SecuritiesHolders Agreement by and among Seitel Holdings, LLC, Valueact Capital MasterFund, L.P., and the Management Investors identified therein, dated January 8,2007, as amended from time to time.

"Subsidiary"means any corporation (other than the Company), partnership, joint venture orother business entity of which 50% or more of the outstanding voting power isowned, directly or indirectly, by the Company.

"Successor"means: (i) a "Permitted Transferee" as defined in the Securities HoldersAgreement, (ii) the legal representative of the estate of a deceasedParticipant or (iii) the Person or Persons who shall acquire the right toexercise an Option by bequest or inheritance or other transfer or by reason ofthe death of the Participant or (iv) Persons who shall acquire the right toexercise an Option on behalf of the Participant as the result of adetermination by a court or other governmental agency of the incapacity of the Participant.

Capitalized termsused in this Plan and not defined herein shall have the meanings ascribedthereto in the Securities Holders Agreement.

3.                Administration of the Plan.

(i)                The Plan shall be administered by the Committee, which shall have fullpower to interpret and administer the Plan and full authority to act inselecting the Employees to whom Options will be granted, in executingAgreements with Participants under the Plan, in determining whether, and towhat extent, Options may be transferable by the Participant in accordance withthe Securities Holders Agreement, in determining the amount of Options to begranted to each such Employee, and in determining the terms and conditions ofOptions granted under the Plan. 

(ii)               Subject to the other terms of the Plan, the Committee shall, in itsdiscretion as reflected by the terms of the applicable Option Agreement:  (i)determine from time to time those eligible Employees to whom Options are to begranted and the number of shares subject to each such Option; (ii) determinethe time or times when and the manner and condition in which each Option shallvest or become exercisable and the duration of such exercise period, ifapplicable; and (iii) determine or impose other conditions to the receipt ofCommon Stock subject to the Option under the Plan as it may deem appropriate. 

(iii)              The Committee may condition the vesting or exercise of an Option upon:(i) the Employee's continued service over a period of time with the Company orits Subsidiaries, or (ii) any combination of the above conditions, as specifiedin the Agreement.  If the specified conditions are not attained, theParticipant shall forfeit the portion of the Option with respect to which thoseconditions are not attained, and the underlying Common Stock shall be forfeitedto the Company.  

(iv)               The Committee shall have the power to adopt regulations for carrying outthe Plan and to make changes to such regulations as it shall, from time totime, deem advisable.  Any interpretation by the Committee of the terms and provisionsof the Plan and the administration thereof, and all actions taken by theCommittee, shall be final and binding on Participants and Successors, ifapplicable.

4.                Shares of Common Stock Subject to the Plan.  

(i)                Subject to adjustment as provided in Section 6 hereof, 92,898 shares(equal to 8.5% of the Company's Common Stock on a fully diluted basis on thedate this Plan is adopted by the Board) shall be available for Option grantsunder the Plan.

(ii)               Any shares issued by the Company through the assumption or substitutionof outstanding grants from an acquired company shall not reduce the sharesavailable for Options under the Plan.  Any shares issued hereunder may consist,in whole or in part, of authorized and unissued shares or treasury shares.  Ifany shares subject to an Option granted hereunder are forfeited or such Optionotherwise terminates, the shares subject to such Option, to the extent of anysuch forfeiture or termination, shall again be available for Options under thePlan.

5.                Listing, Registration and Compliance with Laws and Regulations. Each Option shall be subject to the requirement that if at any time theCommittee shall determine, in its discretion, that the listing, registration orqualification of the shares subject to the Option upon any securities exchangeor under any federal, state or foreign securities or other law or regulation,or the consent or approval of any governmental regulatory body, is necessary ordesirable as a condition to or in connection with the granting of such Optionor the issue or purchase of shares thereunder, no such Option may be exercisedor paid in shares of Common Stock in whole or in part unless such listing,registration, qualification, consent or approval (a "Required Listing")shall have been effected or obtained, and the Participant of each such Optionwill supply the Company with such certificates, representations and informationas the Company shall request which are reasonably necessary or desirable inorder for the Company to obtain such Required Listing, and shall otherwisecooperate with the Company in obtaining such Required Listing.  The Companyagrees to use commercially reasonable efforts to effect or obtain any RequiredListing.  

6.               Adjustment for Change in Common Stock.  In the event of areorganization, recapitalization, stock split, stock dividend, combination ofshares, merger, consolidation or other change in Common Stock (or Common Stockgenerally), the Committee shall make appropriate changes in the number and typeof shares authorized by this Plan, the number and type of shares covered byoutstanding Options and the prices specified therein.

7.                Taxes.  The Company shall be entitled, if necessary or desirable,to withhold (or secure payment from the Participant in lieu of withholding) theamount of any withholding or other tax due from the Company with respect to anyamount payable and/or shares issuable under this Plan, and the Company maydefer such payment or issuance unless indemnified to the Board's satisfaction. In any event, each Participant shall be required to indemnify the Company andhold it harmless for any and all withholding and similar tax obligationsarising as a result of the grant or exercise of Options hereunder or theissuance of any Common Stock upon exercise of the Options.

8.                Termination and Amendment.  The Committee at any time may suspendor terminate this Plan and make such additions or amendments as it deemsadvisable under this Plan (except that it may not extend the term of thisPlan); providedthat, subject to the other provisions hereof, theCommittee may not change any of the terms of a Participant's Agreement in amanner which would have a material adverse effect on the Participant withoutsuch Participant's consent.  Notwithstanding the foregoing, any amendment tothe Securities Holders Agreement that affects a provision contained hereinshall be deemed to be an amendment to the Plan.  To the extent any suchamendment to the Securities Holders Agreement affects the terms of aParticipant's Agreement, the Participant and any Successor shall be deemed tohave consented to that amendment. No Options shall be granted or Common Stockissued hereunder after January 30, 2017. 

9.                Participant Acknowledgments.  In connection with the grant of anyOption and/or the issuance of any Common Stock pursuant to this Plan, eachParticipant acknowledges and agrees, that as a condition to any such grant orissuance:

(i)                The Company will have no duty or obligation to disclose to anyParticipant, and no Participant will have any right to be advised of, anymaterial information regarding the Company or its Subsidiaries at any timeprior to, upon or in connection with the Company's exercise of any repurchaserights in the Securities Holders Agreement, with respect to any Option orCommon Stock acquired upon the exercise of an Option. 

(ii)               Such Participant will have consulted, or will have had an opportunity toconsult with, independent legal counsel regarding his or her rights andobligations under this Plan and any written agreement evidencing any grant ofany Option or the issuance of any Common Stock and he or she fully understandsthe terms and conditions contained herein and therein.

(iii)              Each Participant shall acknowledge the restrictive covenants containedin his or her Employment Agreement and/or the Securities Holders Agreement.

10.              Application of Securities Holders Agreement; Restrictions on Transfer.

(i)                Each Participant and his Permitted Transferees shall be required to jointhe Securities Holders Agreement and agree to be subject to its terms uponreceipt of an Option and/or exercise of an Option granted hereunder.

(ii)               Except as provided below, Options may not be pledged, assigned ortransferred for any reason during the Participant's lifetime, and any attemptto do so shall be void and the relevant Option shall be forfeited.  TheCommittee may grant Options that are transferable by the Participant during hislifetime, but such Options shall be transferable only to the extentspecifically provided in an agreement entered into with the Participant or inthe Securities Holders Agreement.  The transferee of the Participant shall, inall cases, be subject to the Plan, the Securities Holders Agreement and theprovisions of the Agreement between the Company and the Participant.

(iii)              An Employee, or if applicable a Successor, who receives an Option shallbe bound by the Securities Holders Agreement to the same extent as would a"Management Investor", as that term is defined in the Securities HoldersAgreement, and all Common Stock acquired hereunder shall be an "IncentiveSecurity" within the meaning of the Securities Holders Agreement.  Accordingly,except as is otherwise provided in an Agreement, any Option or Common Stockacquired upon the exercise of an Option shall be held, transferred, sold orotherwise disposed of only in accordance with the Securities HoldersAgreement.  Without limiting the generality of the foregoing, each Participantand any Successor shall comply with the provisions set forth in the SecuritiesHolders Agreement with regard to an Approved Sale, as well as be bound by anytransfer restrictions, restrictive covenants and other obligations delineatedin the Securities Holders Agreement.  Any rights of a "Management Investor"under the Securities Holders Agreement will be available to a Participant orSuccessor only in respect of any portion of an Option which is then vested.  Inaddition, and notwithstanding anything to the contrary herein, any Option will,regardless of whether Common Stock subject to such Option is subject torestrictions or conditions or whether such shares or stock are vested under theapplicable terms of the Plan or Agreement, be subject to the Repurchase Optionof the Company upon any termination of the Employee's employment with theCompany or any Subsidiary in accordance with the terms of the SecuritiesHolders Agreement.   

11.              Approved Sale, Public Offering or Other Corporate Transaction

(i)                Notwithstanding any provision in this Plan to the contrary and unlessotherwise provided in the applicable Participant's Agreement, in the event (a)of an Approved Sale, (b) of a Public Offering, (c) a "change in control" asdefined in the applicable Participant's Agreement  or determined by theCommittee in its sole discretion(each, a "Transaction"), the Committeemay, in its sole discretion:

        (a)               accelerate the exercisability of all or a portion of Options to theextent the Committee deems appropriate,

        (b)              cancel all outstanding vested Options in exchange for a cash payment inan amount equal to the excess, if any, of the Fair Market Value of the CommonStock underlying the unexercised portion of the Option as of the date of theTransaction over the exercise price of such portion,

        (c)               terminate all Options immediately prior to the Transaction, providedthat the Company provide the Participant an opportunity to exercise the Optionwithin a specified period following the Participant's receipt of a writtennotice of such Transaction and of the Company's intention to terminate theOption prior to such Transaction, or

        (d)              require the successor corporation, following a Transaction if theCompany does not survive such Transaction, to assume all outstanding Options orto substitute such Options with Options involving the common stock of suchsuccessor corporation on terms and conditions necessary to preserve the rightsof Participants.

12.              Severability.  Whenever possible, each provision of this Planwill be interpreted in such manner as to be effective and valid underapplicable law, but if any provision of this Plan is held to be invalid,illegal or unenforceable in any respect under any applicable law or rule in anyjurisdiction, such invalidity, illegality or unenforceability will not affectany other provision or any other jurisdiction, but this Plan will be reformed,construed and enforced in such jurisdiction as if such invalid, illegal orunenforceable provision had never been contained herein.

13.              Remedies.  Each of the Company and any Participant will beentitled to enforce its rights under this Plan specifically, to recover damagesand costs (including reasonable attorneys' fees) caused by any breach of anyprovision of this Plan and to exercise all other rights existing in its favor. Each Participant and the Company acknowledges and agrees that money damages maynot be an adequate remedy for any breach of the provisions of this Plan andthat any party may in its sole discretion apply to any court of law or equityof competent jurisdiction (without posting any bond or deposit) for specificperformance and/or other injunctive relief in order to enforce or prevent anyviolations of the provisions of this Plan.

14.              Business Days.  If any time period for giving notice or takingaction hereunder expires on a day which is a Saturday, Sunday or holiday in thestate in which the Company's chief executive office is located, the time periodshall be automatically extended to the business day immediately following suchSaturday, Sunday or holiday.

15.              Governing Law.  All issues concerning this Plan will be governedby and construed in accordance with the laws of the State of Delaware, withoutgiving effect to any choice of law or conflict of law provision of rule(whether of the State of Delaware or any other jurisdiction) that would causethe application of the law of any jurisdiction other than the State ofDelaware. ** **Each of the Company and each Participant waives the necessityfor personal service of any and all process upon it and consents that all suchservice of process may be made by registered or certified mail (return receiptrequested) or an overnight courier with delivery confirmation, in each casedirected to such party in accordance with the notice requirements set forth inthis Plan, and service so made will be deemed to be completed on the date ofactual receipt.  Each of the Company and each Participant consents to serviceof process as aforesaid.  Nothing in this Plan will prohibit personal servicein lieu of the service by certified or registered mail or an overnight courierwith delivery confirmation contemplated herein.

16.              Notices.  Any notice required or permitted under this Plan or anyagreement executed and delivered in connection with this Plan shall be inwriting and shall be either delivered by reputable overnight courier withdelivery confirmation, personally delivered, or certified or registered mail,return receipt requested, to any Participant at the address indicated in theCompany's records for such Person, and to the Company at the address belowindicated:

Notices to the Company:

 

Seitel Holdings, Inc.

c/o ValueAct Capital Master Fund, L.P.

435 Pacific Avenue, 4th Floor

San Francisco, CA  94133

Attention:          Allison Bennington, General Counsel

or such other address or to theattention of such other person as the recipient party shall have specified byprior written notice to the sending party.  Any notice under this Plan shall bedeemed to have been given when so delivered or mailed.

 

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