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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 COMMISSION FILE NUMBER 0-28422
GEOSCIENCE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 76-0497775
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
10500 WESTOFFICE DRIVE, SUITE 210
HOUSTON, TEXAS 77042
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 780-1881
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
- ---------------------------------- ----------------------------------
Common Stock (Par Value $.01 per Nasdaq
share)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 14, 1997, 10,147,600 shares of the registrant's Common Stock
were issued and outstanding. The aggregate market value of the voting stock held
by non-affiliates of the registrant (assuming for purposes of this computation
that Tech-Sym Corporation and directors and officers may be affiliates) was
$26,242,776 (based on the closing sales price published in THE WALL STREET
JOURNAL reports of Nasdaq Composite Transactions on March 14, 1997).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document are incorporated by reference into Part
III of this Annual Report on Form 10-K: the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held April 28, 1997.
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TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business............................. 1
General.............................. 1
Business Strategy.................... 1
Seismic Data Acquisition Systems..... 2
Geoscientific Software............... 4
Product Development.................. 5
Marketing............................ 6
Manufacturing and Raw Materials...... 7
Competition.......................... 7
Backlog.............................. 8
Intellectual Property................ 8
Regulatory Matters................... 8
Employees............................ 8
Geographical Information............. 8
Relationship with Tech-Sym........... 9
Item 2. Properties........................... 9
Item 3. Legal Proceedings.................... 9
Item 4. Submission of Matters to a Vote of
Security Holders................... 9
PART II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder
Matters............................ 10
Item 6. Selected Financial Data.............. 11
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 12
Item 8. Financial Statements and
Supplementary Data................. 14
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure............... 14
PART III
Item 10. Directors and Executive Officers of
the Registrant..................... 14
Item 11. Executive Compensation............... 14
Item 12. Security Ownership of Certain
Beneficial Owners and Management... 14
Item 13. Certain Relationships and Related
Transactions....................... 14
PART IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form
8-K................................ 15
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PART I
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Forward-looking statements in this Form 10-K, future filings by the Company
with the Securities and Exchange Commission, the Company's press releases and
oral statements by authorized officers of the Company are intended to be subject
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Investors are cautioned that all forward-looking statements involve risks
and uncertainty, including without limitation (i) the risk of technological
change relating to the Company's products and the risk of the Company's
inability to develop new competitive products in a timely manner, (ii) the risk
of decreased demand for the Company's products due to fluctuations in energy
industry activity, (iii) the risk of disruption in vendor supplies and the risk
of quality control system problems with the Company's suppliers, (iv) the
Company's reliance on certain significant customers, (v) the credit risk to the
Company from certain sales arrangements, (vi) risks associated with a
significant amount of foreign sales, (vii) the risk of fluctuations in future
operating results, (viii) the risks of excess or inadequate inventory levels,
(ix) the control of the Company by Tech-Sym Corporation, (x) the potential
conflicts of interest between the Company and Tech-Sym Corporation, (xi) the
effect of certain anti-takeover provisions included in the Company's Articles of
Incorporation and Bylaws, (xii) changing governmental regulations, as well as
general market conditions, competition and pricing. The Company believes that
forward-looking statements made by it are based on reasonable expectations.
However, no assurances can be given that actual results will not differ
materially from those contained in such forward-looking statements. The words
"estimate," "project," "anticipate," "expect," "predict," "believe" and similar
expressions are intended to identify forward looking statements.
ITEM 1. BUSINESS
GENERAL
GeoScience Corporation ("GeoScience" or the "Company") was formed in
March 1996 as a wholly-owned subsidiary of Tech-Sym Corporation ("Tech-Sym").
All the outstanding stock of Syntron, Inc. ("Syntron"), CogniSeis Development,
Inc. ("CogniSeis"), and Symtronix Corporation ("Symtronix") was contributed
by Tech-Sym to GeoScience. In May 1996, the Company sold 2,597,600 shares of
Common Stock (24.7% of the outstanding shares on that date) in a public
offering. The Company's Common Stock began trading on the Nasdaq National Market
on May 17, 1996.
GeoScience, through its subsidiaries, designs, develops, manufactures and
markets seismic data acquisition systems, geoscientific software and related
products. The Company's products are used by the oil and gas exploration and
production industry to identify, define and visualize subsurface geologic
structures, primarily to predict the existence and location of oil and gas
reserves.
Oil and gas exploration and development typically begins with the
collection and analysis of various types of data, including seismic and well log
data, which provide information as to the potential existence and location of
oil and gas reserves. Seismic data is acquired over a wide area by directing
sound waves into the earth, typically by use of air guns, dynamite or earth
vibrators, and by measuring the response as these sound waves reflect from
subsurface geologic features. The seismic data is recorded and subsequently
processed to a standard format by mainframe or workstation computers utilizing
specialized computer programs. By using computer programs with complex
calculations to manipulate the processed seismic data, geoscientists can model
and visualize the subsurface through the creation and analysis of spatial
representations. The analysis of seismic and other geological data forms the
basis for decisions to drill exploratory and development wells. Because of the
significant expense associated with drilling oil and gas wells, decisions on
whether or where to drill are critical to the overall process.
BUSINESS STRATEGY
The Company's strategy is focused on: (i) the development of
technologically advanced products; (ii) the integration of seismic data
acquisition, seismic data processing and geological interpretation in order to
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facilitate convenience of use and to decrease the time involved in acquiring,
processing and interpreting data; and (iii) the acquisition of product lines or
businesses to complement internal product development.
SEISMIC DATA ACQUISITION SYSTEMS
The Company's seismic data acquisition systems include systems designed for
use in marine, transition zone and land environments. These systems collect
acoustic energy produced by air guns, dynamite or other sound sources that is
reflected from underground or subsea geological formations. The acoustic energy
is collected by remote sensors in the water, on the ocean floor, or on land and
converted to digital signals that are transmitted to a central recording unit or
a portable recording unit. The recording unit simultaneously records the digital
signals transmitted from multiple remote sensors.
The following is a description of the Company's seismic data acquisition
systems used in (i) marine, (ii) marine and transition zone and (iii) transition
zone and land environments.
MARINE
SYNTRAK 480-24 Multiple Streamer Telemetry System
The Company's principal marine seismic data acquisition system is the
SYNTRAK 480-24 Multiple Streamer Telemetry System. This system consists of a
shipboard central recording unit and cable streamer arrays that are towed behind
a seismic survey vessel. Each cable streamer array includes electronic data
acquisition modules which collect the analog acoustic energy signals produced by
air guns, convert the analog signals to digital signals and transmit the
digitized data to the shipboard central recording unit.
MultiTRAK(Trademark)System.
The Company's MultiTRAK (Trademark)System is used to control the depth and
provide data to calculate the position of streamers, which is important to meet
the energy source and receiver positioning needs of todays 3-D seismic surveys.
The MultiTRAK System consists of a shipboard computer, in-water remote sensing
units and cable leveler modules. The remote sensing units are strategically
located on the streamers, source arrays, ships hull and tail buoys to measure
magnetic heading, cable depth, wing angle and temperature and acoustic ranges
from other remote sensing units. This information is transmitted to the
shipboard computer in order to calculate subsurface sources and sensor
locations. Any adjustments to cable position are made by sending commands from
the shipboard computer to the cable leveler modules attached to the streamers.
The cable leveler modules contain motor-driven wings that may be adjusted to
control the depth of the streamer.
GCS90 Gun Controller System.
The GCS90 is a seismic source controller that provides advantages to the
operator using new technology to digitize source signatures. This provides
real-time monitoring of the seismic source and firing times. The system is
expandable from 8 to 128 guns.
Streamer Cables.
The Company designs and manufactures a variety of streamer cables that
consist of various weights, strengths, diameters and lengths in order to satisfy
customer specifications. The streamer cables are designed to be neutrally
buoyant in order to facilitate the control of the depth at which the streamer
cable is towed behind a seismic survey vessel. The Company has developed a
reduced diameter array ("RDA") streamer cable that reduces towing friction and
increases the length of cable that may be placed on spools on the towing vessel
prior to deployment, and that weighs significantly less than larger diameter
streamers currently on the market. The reduced friction and less weight of the
RDA streamer cables are desired by companies that perform marine seismic surveys
because these factors reduce the fuel consumption of the towing vessels and
permit existing vessels to be reconfigured to tow a greater number of arrays.
Streamer Cable Repair and Maintenance.
The Company provides repair and maintenance support services relating to
streamer cables, whether manufactured by the Company or another vendor, at its
service facilities in the United Kingdom, Singapore
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and the United States. Additionally, the Company's joint venture with China Oil
Offshore Geophysical (COOGC) in Tanggu, China has enabled the Company to provide
services to the Far East.
MARINE AND TRANSITION ZONES
OCEAN BOTTOM CABLE SYSTEM.
The Company's SYNTRAK 480-24 (Trademark) Ocean Bottom Cable System is a
digital telemetry seismic data acquisition system specifically designed for use
in shallow water environments as well as for use in ocean bottom operations in
congested and obstructed areas where conventional towed streamer arrays cannot
be utilized efficiently. The system utilizes air guns mounted on a shooting
vessel to transmit acoustic energy to the ocean floor and the seismic data
reflected from subsea geologic structures is collected by sensors (either
hydrophones, geophones or both, attached to either twisted-pair telemetry cables
or fiber optic cables). The analog acoustic signals received by the sensors are
converted to digital data by data acquisition modules and this data is
transmitted to a shipboard central recording unit.
Seismic contractors are currently developing techniques to deploy ocean
bottom cables in connection with 4-D seismic surveys useful in hydrocarbon
reservoir monitoring. The Company is currently extending the depth of operation
to 1,000 meters to address the future requirements in reservoir monitoring and
4-D seismic operations. The system's architecture has the flexibility to record
multiple component data, which the Company believes will be an important
attribute in connection with 4-D reservoir monitoring. The Company is also
developing a small diameter ocean bottom cable, which will address problems of
storage, weight and handling from which the larger cables suffer.
TRANSITION ZONES AND LAND
POLYSEIS(Trademark)SYSTEM.
The POLYSEIS(Trademark)System was developed by the Company in conjunction
with the Institute Francais du Petrole ("IFP"), a French government research
agency, and was introduced in late 1995. The POLYSEIS(Trademark)System is a
modular 24-bit radio and/or wireline telemetry seismic data acquisition system
that can be configured by the user for either transition zone or land
environments, or a combination of both environments. The
POLYSEIS(Trademark)System is specifically adaptive to the unique requirements
associated with exploration in transition zones or in regions that are
inaccessible or difficult to reach such as lakes, swamps, jungles, or
mountainous areas.
POLYSEIS(Trademark) acquires seismic data using a Remote Telemetry Unit
("RTU"). The POLYSEIS(Trademark)System may be configured to use a combination of
three-channel marine buoy RTUs and six-channel land box RTUs which allow
synchronized signals to be transmitted to a portable recording unit or control
recording system. The ability to utilize a combination of transition zone and
land RTUs permits a large seismic survey to be conducted over diverse terrain.
Each RTU acquires channels of seismic data and remotely transmits the data to a
Data Concentrator Unit ("DCU") via radio or wireline telemetry. Depending upon
the acquisition requirements, data may be recorded at the DCU using a portable
recording unit attached to the DCU or at a remote central recording unit by way
of fiber optic cable.
Land Cables.
The Company manufactures a variety of fiber optic and copper wire cables
for use with land seismic data acquisition systems. The cables are designed to
be compatible with the Company's POLYSEIS(Trademark)System and land seismic data
acquisition systems manufactured by other companies. The Company manufactures
land cables to satisfy its customers' specifications, including specifications
relating to length, covering material and impedance.
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GEOSCIENTIFIC SOFTWARE
Software Products
The Company's software applications products are designed to (i) process
seismic data collected in the field in order to make the seismic data
interpretable and (ii) interpret processed seismic data and other geological
data, such as well logs obtained during the drilling of exploratory or
development wells, in order to identify, define and visualize subsurface
geologic formations. All of the Company's software applications feature
graphical user interfaces for ease of communication with the user and many of
the applications are written in object oriented environments to enable the
software code to be reused in a structured manner and to facilitate maintenance
and enhancement by the Company. Principal products include the following:
FOCUS is a seismic data processing application that utilizes a variety of
algorithmic processes to convert large amounts of raw seismic data collected in
the field into interpretable data sets in a form that is suitable for further
analysis and interpretation. As a result of these processes, data is reduced in
volume and may be displayed both on computer screens and hard copy devices in a
format designed to facilitate interpretation. FOCUS is capable of processing
land and marine data on either a 2-D or 3-D basis and permits either batch or
interactive processing. FOCUS 3D is uniquely capable of performing 3-D pre-stack
depth migration analysis utilizing parallel processing techniques on
workstations that have multiple control processing units, which capability
results in a less expensive method of performing this analysis as compared with
a supercomputer. The use of 3-D pre-stack depth migration analysis enables
geoscientists to accurately process seismic data collected from underneath salt
formations. FOCUS is designed to operate on computer systems manufactured by
multiple vendors, including workstations manufactured by Sun Microsystems and
Silicon Graphics and supercomputers manufactured by Cray Research and Convex.
SEISX is an application that enables the geophysicist to easily interpret
2-D and 3-D seismic information. SEISX is capable of combining 2-D and 3-D
seismic data sets collected from multiple surveys to provide a denser subsurface
coverage that can be interpreted as a single 3-D data set. SEISX also provides a
mapping and display tool with a complete set of horizon and fault interpretation
utilities that is capable of producing final display quality hardcopy output.
SEISX operates on a variety of workstations and has been designed to facilitate
ease of loading seismic data into the user's computer system, a task that has
traditionally been extremely time consuming.
VOXELGEO(Registered Trademark)is an advanced visualization and volume
interpretation system that utilizes voxels with embedded geometrics to maintain
an accurate visualization of the spatial relationships among data points as the
data is being manipulated by the user. While older visualization systems utilize
pixels, or dots, to portray a two-dimensional image on a computer screen,
VOXELGEO(Registered Trademark) utilizes voxels, or three-dimensional cubes, to
portray three-dimensional images on a computer screen. The use of voxels allows
the user to attach opaque or transparent properties to various data sets in
order to display specified data attributes, such as a specified range of
amplitudes, resulting in a visual 3-D display of geological structures in
isolation from surrounding surfaces, faults or other geological features. The
display of the geological structure can be rotated in order to view the
structure from a variety of angles. As a result of the speed and performance of
VOXELGEO(Registered Trademark), it is practical for a user to visualize and
interpret large volumes of seismic data on an interactive basis. The Company
acquired the exclusive right to use and license VOXELGEO(Registered
Trademark)for subsurface (earth and water) applications from a company that
originally developed the software for use in medical imaging applications such
as the visualization of internal organs.
GEOSEC is a 2-D and 3-D model building, restoration and balancing
application designed for exploration/production geologists and geophysicists.
GEOSEC utilizes complex algorithms to enable the user to develop structural
models of the subsurface. GEOSEC also enables the user to validate a developed
model through the use of restoration and balancing, two processes that eliminate
structurally impossible models. Restoration involves the modeling of the
geological changes that have occurred in a subsurface area during the earth's
evolution, and balancing involves an accounting for the conservation of mass and
bed length during the structural reformation. GEOSEC is especially applicable to
contractional, extensional,
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wrench, and salt terrains, where it helps identify complex relationships among
folding, faulting, and sedimentation.
Software Upgrades and Maintenance
A significant percentage of the Company's software customers pay support
fees to the Company that entitles them to receive software upgrades and
maintenance support. The support services include telephone support, on-site
support, systems support, and software and hardware training. The Company
believes that its software upgrades and maintenance support promote continued
customer loyalty.
Computer Hardware
At the request of some of the Company's customers, the Company sometimes
sells supercomputers, workstations or peripherals to its customers in
conjunction with the sale of geoscientific software products. In connection with
this activity, the Company has entered into Value Added Reseller Agreements with
Silicon Graphics, Sun Microsystems, International Business Machines,
Hewlett-Packard, Cray Research and Convex. In connection with such sales, the
Company installs the software onto the supercomputers or work stations and
assists with the set-up of the entire system. Following installation of a
system, the Company provides technical support for the entire system.
PRODUCT DEVELOPMENT
The Company's ability to compete effectively and maintain a leading market
position in the manufacture and sale of seismic data acquisition systems and
geoscientific software depends to a substantial degree upon continued
technological innovation. While the market for these products is characterized
by continual and rapid changes in technology, development cycles from initial
conception through product introduction tend to extend over several years. Over
the past three years, the Company has spent an average of 14% of its revenue
toward the research and development of new products and the enhancement of
current products. In addition, the Company has been involved in efforts with
other companies to jointly develop technology. For example, the
POLYSEIS(Trademark) System was developed by a consortium consisting of the
Company, IFP and two other companies. Pursuant to this arrangement, each of the
members of the consortium incurred a portion of the research and development
expenditures necessary to develop the POLYSEIS(Trademark)System and a
significant portion of the Company's expenditures were reimbursed by the
European Economic Community (the "EEC"). To the extent the research and
development results in a commercially feasible product, the consortium will be
required to pay a negotiated amount based on sales of such products. The Company
actively solicits the views of its customers relating to their future needs with
respect to seismic data acquisition systems and geoscientific software in order
to determine the direction and priority of its research and development
activities.
The Company is currently developing an integrated line of seismic
processing, geological interpretation and visualization applications, called
"TERRACUBE," that would enable geoscientists to develop a consistent 3-D earth
model using all the data, interpretation and derived attributes pertaining to a
project area. TERRACUBE would consist of a number of the Company's individual
applications, including FOCUS 3D, SEISX, VOXELGEO(Registered Trademark), and
GEOSEC, that would be linked by a framework to enable the individual
applications to transparently communicate with each other as if part of one
large application, without sacrificing the ability of each application to stand
on its own. Through the communication links between the applications making up
the framework, all applications would be immediately aware of data modifications
made in other applications, and these changes would be visible in other open
applications. The Company believes that the ability to integrate a number of
seismic processing, geological interpretation and visualization applications
would (i) reduce the amount of time and effort involved with processing and
correlating data derived from these applications, thereby reducing the overall
cycle time and expense involved in processing seismic data and interpreting
geological data and (ii) increase the quality of the interpretation and
visualization of geological data, thereby promoting improved analysis of
geological structures.
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The Company has developed an RDA streamer cable for use with marine seismic
data acquisition systems, and the Company is currently testing an RDA ocean
bottom cable for use in shallow water and in deeper ocean waters. See
"-- Seismic Data Acquisition Systems -- Marine -- Streamer Cables" and
"-- Marine and Transition Zones -- Ocean Bottom Cable." The Company is also
developing products that will enable the Company's existing 3-D seismic data
acquisition systems to be used in connection with 4-D seismic surveys. The 4-D
process, or time-lapse 3-D, measures the same length, depth and width of data
acquired in 3-D surveys, but also features the capability to record time
intervals between two or more surveys. The process is well-suited for reservoir
monitoring applications, and is intended to identify fluid movements and changes
in the producing status of the reservoir. In addition, the Company has begun
development of a seismic data acquisition system, utilizing the existing radio
telemetry technology of the POLYSEIS(Trademark)System, that would be capable of
simultaneously recording a significantly greater number of channels than
existing systems for use in connection with large scale 3-D seismic surveys
conducted on land or transition zones.
MARKETING
The Company's principal customers for its seismic data acquisition systems
are seismic contractors, which operate seismic data acquisition systems to
collect data in accordance with their customers specifications or for their own
seismic data libraries, and major, independent and foreign national oil and gas
companies, which typically specify seismic data acquisition program parameters
to contractors and consequently may stipulate use of the Company's equipment, or
may operate their own seismic crews. During 1996, 1995, and 1994, the three
largest customers in each of those years, Petroleum Geo-Services Exploration
(1996, 1995, 1994), Digicon, Inc. (1996, 1995), Compagnie General de Geophysique
(1996, 1995), China Offshore Geophysical Corporation (1994) and Western
GeoPhysical (1994), accounted for a total of approximately 44%, 39%, and 38%
respectively, of the Company's revenue, and the Company's single largest
customer, Petroleum Geo-Services Exploration, in those years accounted for 16%,
21%, and 26% respectively, of revenue.
The Company's principal customers for its geoscientific software are major,
independent and foreign oil and gas companies that purchase such software for
use by geologists and geophysicists to predict the existence and location of oil
and gas reserves for purpose of exploration and development activities and
reservoir management activities.
The Company focuses a significant portion of its marketing efforts on areas
outside the United States. The Company sells its products through a direct sales
force consisting of Company employees and through several international
third-party sales representatives responsible for key geographic areas. Sales
personnel generally have either oil and gas exploration or production expertise
or experience in selling advanced technology-based systems.
During fiscal 1996, 1995, and 1994, approximately 70%, 70%, and 68%,
respectively, of the Company's revenue was derived from sales to customers
outside the United States. See Note 14 of Notes to Consolidated Financial
Statements for geographic distribution of sales. In addition, systems sold to
domestic customers are frequently deployed internationally. Company sales are
predominantly denominated in U.S. dollars. From time to time, certain foreign
sales require export licenses. See "-- Regulatory Matters" below.
In general, products are sold on standard 30-day credit terms. However,
sales are also made on extended credit arrangements or under lease/purchase
arrangements usually with the credit secured by a security interest in the
product. The Company's extended term credit arrangements typically require a
down payment of 15% to 25% of the purchase price, with the remaining amount
evidenced by a promissory note from the customer that is secured by the
equipment purchased. The promissory notes typically have maturities of 12 to 36
months and bear interest at an annual rate ranging from 1% to 3% above the prime
rate. As of December 31, 1996, the outstanding amounts of such notes totaled
approximately $17.1 million. See Note 4 of Notes to Consolidated Financial
Statements. The Company has an agreement with a commercial bank to sell up to a
total of $25 million of customer notes to the bank at 100% of the principal
amount thereof, subject to the satisfaction of certain conditions, including the
bank's approval of the
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creditworthiness of the customer issuing a note. The Company is obligated to
repurchase these notes from the bank in the event of customer default or other
covenant violations. Although the Company has not experienced any material
financial losses on notes receivables due to nonpayment by its customers, the
significant cost of seismic survey equipment and the difficulty of repossessing
such equipment outside of the United States could adversely affect the financial
condition of the Company if the Company's foreign customers fail to make
payments when due with respect to a significant amount of credit extended
thereto by the Company or by a bank to which the Company has repayment
obligations in the event of a default or a covenant violation.
MANUFACTURING AND RAW MATERIALS
The Company manufactures or assembles its products, produces spare parts
and renovates and repairs seismic survey equipment at its various facilities in
Houston, England, and Singapore. Major components of the POLYSEIS(Trademark)
Systems are manufactured at facilities in France operated by the consortium, of
which a subsidiary of the Company is a member, that developed the system. A
substantial portion of the electronic components and molded shapes used in its
systems and products are purchased from third party vendors. The Company's
manufacturing and product assembly operations consist of machining the necessary
component parts, configuring these parts along with components received from
various vendors, and assembling a final product. The Company maintains
inventory, including work-in-process at different levels of completion, to
enable the Company to satisfy specific configuration requirements of customers
within the shortest amount of time.
The Company has occasionally experienced supply or vendor quality control
problems and the Company may experience supply or vendor quality control
problems from time to time in the future. Such problems, if incurred, could
significantly affect the Company's ability to meet production and sales
commitments. Certain items, such as the 24-bit analog-to-digital converters and
hybrid processors used in its SYNTRAK 480-24(Trademark) towed array system and
ocean bottom cable, are purchased from single vendors. Although the Company
attempts to maintain an adequate inventory of these single source items, the
loss of ready access to any of these items could temporarily disrupt the
Company's ability to manufacture and sell certain products. Since the Company's
components are designed for use with these single source items, replacing the
single source items with functional equivalents could require a redesign of the
Company's components and costly delays could result.
The performance of the Company's seismic acquisition products can be
affected by the performance of the seismic cables. Customers of the Company have
occasionally experienced problems with their seismic data acquisition systems
due to deficiencies in cables purchased from third parties. The Company has
developed or acquired the capability to manufacture seismic cables for use with
all its seismic acquisition products in order to control the quality and lower
the cost of the cables.
COMPETITION
The markets for seismic data acquisition systems and geoscientific software
are highly competitive and are characterized by continual and rapid changes in
technology. The Company's principal competitors for its marine seismic data
acquisition systems are independent manufacturers of seismic equipment and
integrated seismic contractors that produce equipment for their own use and to
sell to others. The Company's existing and potential competitors for
geoscientific software include oil and gas service companies and specialized
software companies. Over 30 companies compete with the Company in one or more
geoscientific software product areas. The Company also experiences competition
from certain of the major oil and gas companies which have internally developed,
and may continue to develop, geoscientific software, thereby limiting the
Company's potential customer base.
The Company believes that technology and reliability are the primary basis
of competition in the industry, as oil and gas exploration companies demand
higher quality seismic data and seismic contractors require improved
productivity from their equipment and crews. The remaining principal competitive
factors include price, financing, customer support, installed base size, and
first-to-market advantage. The Company believes that it competes effectively
with respect to each of these areas, although there can be no assurance
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that sales of the Company's products will not be adversely affected if its
current competitors or new market entrants introduce new products with better
functionality, performance, price or other characteristics than the Company's
products.
BACKLOG
The Company forecasts sales for its products and therefore maintains an
inventory of components that can be used to assemble products on relatively
rapid basis. As a result, the Company normally fills and ships customer orders
within 90 days of receipt and therefore maintains no significant backlog. The
Company's backlog of firm orders at December 31, 1996 was approximately $13.5
million. The Company anticipates that substantially all of such backlog will be
shipped during 1997.
INTELLECTUAL PROPERTY
The Company presently holds U.S. patents that relate to many of the
components of the marine seismic survey and ocean bottom cable product lines.
The Company relies on a combination of patents, trade secrets, copyrights,
contracts, and technical measures to protect its proprietary hardware and
software technologies. While certain key technologies have been patented by the
Company, it does not typically patent its proprietary technology, even where
regarded as patentable. The Company believes that in most cases this technology
is more effectively protected by system enhancements, innovations and
maintaining confidentiality rather than through disclosure and a comprehensive
patent enforcement program. Although the Company's patents are considered
important to its operations, no one patent is considered essential to the
success of the Company. Copyright and trade secret protection may be unavailable
or ineffective in certain foreign countries in which the Company sells its
products. In addition, the Company seeks to protect its trade secrets through
confidentiality agreements with its employees and agents. The Company also owns
a number of trademarks.
The Company pays royalties based on the net sales of certain products in
connection with assignments to the Company of all intellectual property rights
with respect to such products.
REGULATORY MATTERS
The Company's operations are subject to numerous local, state, federal and
foreign government laws and regulations governing the discharge of materials
into the environment as well as relating to the protection of public health and
the environment. Noncompliance with such laws and regulations could result in
the imposition of significant fines, penalties and other liabilities on the
Company. The Company believes that it is currently in substantial compliance
with the requirements of environmental and occupational health and safety laws
and regulations. Compliance with such laws and regulations has not represented a
significant expense for the Company in the past and the Company does not foresee
the need for material expenditures to ensure continued compliance with such laws
and regulations as they currently exist. Regulations in these areas are subject
to change, however, and there can be no assurance that future laws or
regulations will not have a material adverse effect on the Company.
The Company is from time to time required to obtain export licenses from
the United States government. There can be no assurance that the Company will
not experience difficulty in obtaining such licenses as may be required in
connection with export sales. In addition, the Company is required in some
countries to obtain licenses or permits in order to bid on contracts or
otherwise conduct business operations. Some foreign countries require that the
Company enter into a joint venture or similar arrangement with local individuals
or businesses in order to conduct business in such countries.
EMPLOYEES
At December 31, 1996, the Company and its subsidiaries employed
approximately 672 persons worldwide, of whom 443 were employed in the United
States. None of the Company's employees are unionized. The Company considers its
relationship with its employees to be satisfactory.
GEOGRAPHICAL INFORMATION
Certain geographical information with respect to the Company's business is
set forth in Note 14 of Notes to Consolidated Financial Statements.
8
<PAGE>
RELATIONSHIP WITH TECH-SYM
Prior to the organization of GeoScience, Tech-Sym provided management and
administrative assistance and oversight to Syntron, CogniSeis and Symtronix.
Tech-Sym also provided working capital to Syntron, CogniSeis, and Symtronix.
After the organization of GeoScience, Tech-Sym has continued to provide such
assistance and oversight to GeoScience under substantially the same procedures
for allocating costs as before the Company's organization. Tech-Sym and
GeoScience have entered into a Corporate Services Agreement, Tax Allocation
Agreement, Shareholder Agreement, Intercompany Credit Agreement, and Stock
Restriction and Registration Agreement for the purpose of defining the
relationship between them. As a result of its ownership of a majority of the
outstanding common stock of the Company, Tech-Sym is able, acting alone, to
elect the entire Board of Directors of the Company and to approve any action
requiring shareholder approval.
ITEM 2. PROPERTIES
The Company leases 1200 square feet of office space in Houston, Texas for
its executive offices pursuant to a lease with Tech-Sym Management Corporation.
CogniSeis conducts its geoscientific software operations from 73,000 square
feet of leased office space in Houston, Texas. CogniSeis also leases additional
office space for development centers, service centers, and sales offices in
Colorado, Canada, England, The People's Republic of China, Russia and Singapore.
Syntron operates its seismic data acquisition systems business from
company-owned facilities comprising 79,000 square feet located on a 15.2 acre
tract, and leased facilities totaling 15,000 square feet, all of which are
located in Houston, Texas. Syntron's European subsidiary, Syntron Europe
Limited, operates from a 52,000 square foot office and plant facility on a 2.8
acre tract owned by the company in Derbyshire, England. Syntron's Asian
subsidiary, Syntron Asia Pte. Ltd., operates from a 33,300 square foot office
and plant facility on a 1.4 acre tract it leases in Singapore.
Symtronix conducts its operations from 2,100 square feet of office space
leased from Tech-Sym Management Corporation in Houston, Texas.
The Company believes its facilities are adequate and suitable for its
current level of operations. The Company maintains customary compensation,
liability, and property insurance for all of its operations.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is a party to what it believes is routine
litigation and proceedings that may be considered as part of the ordinary course
of its business. The Company is not aware of any current or pending litigation
or proceedings that could have a material adverse effect on the Company's
results of operations, financial condition or cash flow.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1996, no matter was submitted to a vote of the
Company's security holders.
9
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock trades on the Nasdaq National Market under the
symbol "GSCI". At February 28, 1997, the Company had 22 stockholders of
record.
The following table sets forth the high and low sales prices for the
Company's Common Stock for the quarters indicated. The Company's common stock
commenced trading on May 17, 1996.
PRICE RANGE OF COMMON STOCK
HIGH LOW
------- -------
Year Ended December 31, 1996
Second Quarter.................. $21 1/2 $12 1/2
Third Quarter................... 15 1/2 9 7/8
Fourth Quarter.................. 13 3/4 9 3/4
The Company has not paid any dividends on its Common Stock and does not
expect to pay dividends on its Common Stock for the foreseeable future.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected consolidated financial data as of and for the four
years ended December 31, 1996, have been derived from audited consolidated
financial statements. The financial data as of and for the year ended December
31, 1992 is unaudited. The acquisition of CogniSeis in June 1995 was treated as
a pooling of interests and, accordingly, the financial results of CogniSeis are
reflected in the Company's financial data for all periods presented. This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements as of December 31, 1996 and 1995 and for each of the three
years in the period ended December 31, 1996, and the related notes thereto
included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenue:
Equipment sales.................. $ 94,125 $ 67,470 $ 49,076 $ 46,436 $ 33,906
Software sales................... 10,973 9,654 7,254 6,456 7,188
Maintenance and other............ 8,656 7,101 7,056 7,199 7,941
--------- --------- --------- --------- ---------
Total revenue............... 113,754 84,225 63,386 60,091 49,035
--------- --------- --------- --------- ---------
Cost of revenue:
Cost of equipment sales.......... 60,543 39,886 23,719 22,117 18,124
Cost of software sales........... 1,106 1,012 1,159 780 940
Cost of maintenance and other.... 2,720 3,077 3,304 3,943 4,865
--------- --------- --------- --------- ---------
Total cost of revenue....... 64,369 43,975 28,182 26,840 23,929
--------- --------- --------- --------- ---------
Gross profit..................... 49,385 40,250 35,204 33,251 25,106
--------- --------- --------- --------- ---------
Expenses:
Selling, general and
administrative expense......... 29,348 21,038 15,818 14,390 12,186
Research and development
expense........................ 13,405 12,827 10,364 9,761 8,940
Interest expense................. 1,671 2,005 997 869 799
Interest and other income, net... (354) (1,415) (469) (146) (366)
--------- --------- --------- --------- ---------
Total expenses.............. 44,070 34,455 26,710 24,874 21,559
--------- --------- --------- --------- ---------
Income from continuing
operations before
income taxes.............. 5,315 5,795 8,494 8,377 3,547
Provision for income taxes........... 1,648 1,816 2,775 2,595 896
--------- --------- --------- --------- ---------
Income from continuing
operations................ 3,667 3,979 5,719 5,782 2,651
Discontinued operations(1):
Loss from operations(2).......... (435) (926) (931) (692)
Loss on disposal(2).............. (144)
--------- --------- --------- --------- ---------
Net income.................. $ 3,667 $ 3,400 $ 4,793 $ 4,851 $ 1,959
========= ========= ========= ========= =========
PRO FORMA PER SHARE DATA:(3)
Earnings (loss) per common share..... $ 0.39
=========
Weighted average common shares
outstanding........................ 9,453
=========
OTHER DATA:
Capital expenditures................. $ 7,649 $ 9,820 $ 4,626 $ 3,536 $ 5,836
Depreciation and amortization........ 7,149 6,108 4,573 3,835 2,792
AS OF DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
BALANCE SHEET DATA (END OF PERIOD):
Working capital...................... $ 36,863 $ 6,161 $ 10,225 $ 9,736 $ 7,438
Total assets......................... 123,826 98,890 66,669 46,764 38,816
Notes payable........................ 16,197 11,681 4,343 216 4,159
Payable to Tech-Sym.................. 5,126 23,554 14,940 12,348 7,878
Long-term debt....................... 4,620 5,386 2,728 1,482 1,699
Shareholders' investment............. 74,804 33,268 29,866 24,864 20,198
</TABLE>
- ------------
(1) The discontinued operations relate to the Syntron Pressure Controls business
(formerly known as Tri-Tech) acquired in 1992 and sold in 1995.
(2) Net of applicable income tax benefits. See Note 8 of Notes to Combined
Financial Statements.
(3) Earnings per share for 1996 are on a pro forma basis that gives effect to
the issuance of the Common Stock pursuant to the Reorganization.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
1996 COMPARED TO 1995
REVENUE. The Company's revenue for the year ended December 31, 1996,
increased 35% to $113,754,000 from $84,225,000 in 1995. The increase in revenue
was primarily the result of increased equipment sales ($26,655,000 or 40%).
Major contributors to the increased equipment sales were (i) the newly
introduced reduced diameter array (RDA) streamer cable, (ii) increased sales of
the 24-bit digital seismic data acquisition modules designed in 1995, and (iii)
increased sales of computers associated with the sales of geoscientific
software. Further revenue growth from equipment sales was hampered by aggressive
competitive pricing that restricted price increases of the 24-bit digital
seismic data acquisition modules and held new cable business worldwide at less
than optimal price levels and strategic pricing on the new ocean bottom cable
products. 1996 revenue from software sales increased $1,319,000 or 14% over 1995
from new software products sold as a result of the purchase of Photon Systems
Ltd., in 1995, while maintenance and other revenue increased $1,555,000 or 22%
over the prior period due to increases in support services associated with
higher software sales and greater demand for work station services.
COST OF REVENUE. The Company's cost of revenue for 1996 increased
$20,394,000 or 46% over the prior year. The increased costs associated with
equipment sales were primarily due to (i) increased costs associated with
increased sales, (ii) increased manufacturing costs of the 24-bit digital
acquisition modules as compared to the 16-bit modules, and (iii) start up costs
of introducing new products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. The Company's selling,
general and administrative expenses for 1996 increased $8,310,000 or 39% over
the prior year, which corresponds to the 35% increase in sales and was primarily
attributable to (i) additional royalties on increased equipment sales, (ii)
additional personnel associated with general business growth and businesses
acquired in 1995, and (iii) amortization of additional goodwill associated with
those businesses acquired.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense for
1996 increased $578,000 or 5% over the prior year. The increase was primarily
due to the development of new products and the additional research and
development expenses associated with the businesses acquired in 1995.
INTEREST EXPENSE. Interest expense for 1996 decreased $334,000 or 17% from
the prior year, primarily due to the Company utilizing proceeds from its public
stock offering to payoff interest bearing debts to outside parties and Tech-Sym,
and a reduction in the interest rate on its line of credit borrowings.
INTEREST AND OTHER INCOME, NET. Interest and other income, net for 1996,
decreased $1,061,000 or 75% from the prior year primarily due to less interest
income for the year from customer financing.
PROVISION FOR INCOME TAXES. Provision for income taxes for 1996 decreased
as a result of lower income from continuing operations. The Company's effective
tax rate on income from continuing operations remained the same in 1996 as in
1995, 31%. See Note 8 to Notes to Consolidated Financial Statements.
1995 COMPARED TO 1994
REVENUE. The Company's revenue for the year ended December 31, 1995,
increased 33% to $84,225,000 from $63,386,000 in 1994. The increase in revenue
was primarily the result of increased equipment sales ($18,394,000 or 38%) and
increased revenue from the sale of software ($2,400,000 or 33%). The increase in
revenue from the sale of equipment was primarily due to (i) a new customer for
marine streamer systems, (ii) increased sales of computers associated with sales
of geoscientific software, (iii) an existing customer entering the ocean bottom
cable market, (iv) increased sales and repairs of marine seismic cables and
accessories, and (v) increased sales of land seismic cables due to the
acquisition of the assets of Primatek Industries, Inc., effective October 5,
1995. These increases more than offset the lower sales prices realized on
certain sales of seismic data acquisition systems. Revenue from the sale of
software products increased primarily due to the acquisition of Photon Systems
Ltd., effective September 11, 1995.
12
<PAGE>
COST OF REVENUE. The Company's cost of revenue for 1995 increased
$15,793,000 or 56% over the prior year. The costs associated with equipment
sales were primarily due to (i) increased costs associated with increased sales
of existing products and costs associated with products produced by companies
acquired by the Company, (ii) supplier quality problems, (iii) a greater
percentage of computer equipment purchased from third parties for resale, which
historically carry lower margins, (iv) the start up costs of introducing new
products, and (v) increased costs of components associated with certain newly
introduced products. Supplier quality problems in 1995 resulted in the
replacement of a defective seismic cable provided by a third party supplier for
the first production run of the Company's new 24-bit seismic data acquisition
module. The cost of revenue associated with software sales and maintenance and
other was essentially the same as the prior year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. The Company's selling,
general and administrative expenses for 1995 increased $5,220,000 or 33% over
the prior year, which corresponds to the 33% increase in sales and was primarily
attributable to (i) additional personnel associated with businesses acquired in
1995, (ii) the costs of acquiring those businesses, and (iii) amortization of
additional goodwill associated with those acquisitions.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense for
1995 increased $2,463,000 or 24% over the prior year primarily due to the
development of new products and the additional research and development expenses
associated with two businesses acquired in 1995.
INTEREST EXPENSE. Interest expense for 1995 increased $1,008,000 or 101%
over the prior year on a 94% increase in average borrowings for the period. The
increase in borrowings was the result of acquisitions and increased inventory
due to the introduction of new products. The average interest rate for 1995
increased approximately 24% over 1994 for the notes payable to banks and the
interest bearing debt payable to Tech-Sym.
INTEREST AND OTHER INCOME, NET. Interest and other income, net for 1995
increased $946,000 or 202% over the prior year primarily due to additional
interest income for the year from customer financing.
PROVISION FOR INCOME TAXES. Provision for income taxes for 1995 decreased
primarily due to additional benefits derived from foreign sales which reduced
the Company's effective tax rate on income from continuing operations to 31% in
1995 from 33% in 1994. See Note 8 to Notes to Consolidated Financial Statements.
LIQUIDITY & CAPITAL RESOURCES
At December 31, 1996, the Company's working capital was $36,863,000 as
compared to $6,161,000 at December 31, 1995. The Company's cash, cash
equivalents and short-term investments decreased slightly to $1,306,000 during
the period, however, receivables, inventories, and other current assets
increased approximately $15,500,000 and current liabilities decreased
approximately $15,500,000.
The Company's operations used cash in the amount of $13,778,000 in 1996,
and provided cash in the amount of $325,000 and $1,961,000 in 1995, and 1994,
respectively. In 1996, cash was used primarily for additional inventory to
support the Company's overall growth strategy and repayment of intercompany
payables to Tech-Sym. The Company received cash in the amount of $40,428,000
from the issuance of common stock at the initial public offering on May 17,
1996.
At December 31, 1996, the Company had unused lines of credit which
aggregated $7,029,000. These lines of credit are substantially guaranteed by
Tech-Sym as described in Note 7 to Notes to Consolidated Financial Statements.
In addition to the lines of credit, the Company has an agreement with its bank
to sell up to a total of $25.0 million of customer notes receivable to the bank
at 100% of the principal amount thereof, subject to the satisfaction of
conditions, including the bank's approval of the credit worthiness of the
customers issuing notes. The Company is obligated to repurchase these notes from
the bank in the event of customer default or other covenant violations. As of
December 31, 1996, the bank had purchased notes which, in the aggregate, would
obligate the Company to repurchase $2,559,000 in principal amount of notes in
the event of customer defaults. To date, the Company has not experienced any
financial losses due to
13
<PAGE>
nonpayment by its customers or other covenant violations. Tech-Sym currently
guarantees the payment obligations of the Company under this agreement.
Because of the Company's growth in 1996 and anticipated new business, it is
expected that additional investment will be required in capital equipment and
new facilities. Capital expenditures for land, buildings and improvements, and
machinery and equipment were $7,649,000, $9,820,000 and $4,626,000 for 1996,
1995, and 1994, respectively. The Company believes that the funds required for
working capital needs and capital expenditures will come from available funds on
hand, cash flows from operations, unused credit available under credit
facilities, and long term financing.
FLUCTUTATIONS IN OPERATING RESULTS
Due to the relatively high sales price of a seismic data acquisition system
(typically ranging from $1.5 million to more than $5.0 million) and large
Geoscience software sales (typically ranging from $.2 million to more than $1.0
million) and relatively low unit sales volume, the timing in the shipment of
these systems and the mix of products sold can produce significant fluctuations
in quarter-to-quarter and year-to-year financial results. The Company believes
that factors affecting such timing may include, among others, fluctuations in
world oil and gas prices, political changes in developing countries, seasonality
of end-user markets, availability of customer financing, lease/purchase
decisions by customers, manufacturing lead times, shortages and quality control
problems relating to system components manufactured by third parties, and
environmental issues.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth in a separate section of
this Report on Form 10-K. See the accompanying "Index of Financial Statements"
at Page F-1. Such information is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the caption "Election of Directors" and
"Executive Officers of the Registrant" in the Company's Proxy Statement for
its 1996 Annual Meeting of Stockholders (the "Proxy Statement"), which is to
be filed with the Securities and Exchange Commission (the "Commission") within
120 days of December 31, 1996 pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended ("the Act"), is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation" in
the Company's Proxy Statement, which is to be filed with the Commission within
120 days of December 31, 1996, pursuant to Regulation 14A under the Act, is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Company's Proxy Statement, which is to
be filed with the Commission within 120 days of December 31, 1996 pursuant to
Regulation 14A under the Act, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Certain Transactions with
Management" in the Company's Proxy Statement, which is to be filed with the
Commission within 120 days of December 31, 1996 pursuant to Regulation 14A under
the Act, is incorporated herein by reference.
14
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT:
1. FINANCIAL STATEMENTS:
SEE THE ACCOMPANYING "INDEX OF FINANCIAL STATEMENTS" AT PAGE
F-1.
2. FINANCIAL STATEMENT SCHEDULE:
SEE THE ACCOMPANYING "INDEX OF FINANCIAL STATEMENTS" AT PAGE
F-1.
3. EXHIBITS:
SEE THE ACCOMPANYING "INDEX OF EXHIBITS" AT PAGE X-1.
(b) REPORTS ON FORM 8-K.
None.
15
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
GEOSCIENCE CORPORATION
(Registrant)
By: /s/ RICHARD F. MILES
RICHARD F. MILES, PRESIDENT
(PRINCIPAL EXECUTIVE OFFICER
AND DIRECTOR)
March 27, 1997
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
- -------------------- ------------------------- --------------
/s/ RAY F. THOMPSON Vice President, Chief March 27, 1997
(RAY F. THOMPSON) Financial Officer,
Treasurer
(Principal Financial and
Accounting Officer) and
Director
__
/s/ W. L. CREECH* |
(W. L. CREECH |
|
/s/ MICHAEL C. FORREST* |
(MICHAEL C. FORREST) |
|
/s/ WENDELL W. GAMEL* |
(WENDELL W. GAMEL) |
|
/s/ CHRISTOPHER C. KRAFT, JR.* |- Directors of the Registrant March 27, 1997
(CHRISTOPHER C. KRAFT, JR.) |
|
/s/ EDWARD R. PRINCE, JR.* |
(EDWARD R. PRINCE, JR.) |
|
/s J. RANKIN TIPPINS* |
(J. RANKIN TIPPINS) |
|
*By: /s/ RAY F. THOMPSON |
RAY F. THOMPSON |
(ATTORNEY-IN-FACT) |
__|
<PAGE>
GEOSCIENCE COPORATION
INDEX OF FINANCIAL STATEMENTS
PAGE
------
Financial Statements:
Report of Independent
Accountants.................... F-2
Consolidated Statement of Income
for the years ended December
31,
1996, 1995 and 1994........... F-3
Consolidated Balance
Sheet -- December 31, 1996 and
1995........................... F-4
Consolidated Statement of Cash
Flows for the years ended
December 31, 1996, 1995 and
1994........................... F-5
Consolidated Statement of
Changes in Shareholders'
Investment for the
years ended December 31, 1996,
1995 and 1994.................. F-6
Notes to Consolidated Financial
Statements..................... F-7
Financial Statement Schedule:
Schedule II -- Valuation and
Qualifying Accounts............ F-20
All other schedules have been omitted because they are not applicable or
the required information is presented in the financial statements or the notes
to the financial statements.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of GeoScience Corporation
In our opinion, the consolidated financial statements listed in the index
on page F-1 present fairly, in all material respects, the financial position of
GeoScience Corporation and its subsidiaries at December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
February 20, 1997
F-2
<PAGE>
GEOSCIENCE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
----------- --------- ---------
Revenue:
Equipment sales................. $ 94,125 $ 67,470 $ 49,076
Software sales.................. 10,973 9,654 7,254
Maintenance and other........... 8,656 7,101 7,056
----------- --------- ---------
113,754 84,225 63,386
----------- --------- ---------
Cost of revenue:
Cost of equipment sales......... 60,543 39,886 23,719
Cost of software sales.......... 1,106 1,012 1,159
Cost of maintenance and other... 2,720 3,077 3,304
----------- --------- ---------
64,369 43,975 28,182
----------- --------- ---------
Gross profit.............. 49,385 40,250 35,204
----------- --------- ---------
Expenses:
Selling, general and
administrative expense....... 29,348 21,038 15,818
Research and development
expense...................... 13,405 12,827 10,364
Interest expense................ 1,671 2,005 997
Interest and other income,
net.......................... (354) (1,415) (469)
----------- --------- ---------
44,070 34,455 26,710
----------- --------- ---------
Income from continuing
operations
before income taxes..... 5,315 5,795 8,494
Provision for income taxes........... 1,648 1,816 2,775
----------- --------- ---------
Income from continuing
operations.............. 3,667 3,979 5,719
Discontinued operations:
Loss from operations of
discontinued Syntron Pressure
Controls division less
applicable income tax
benefits..................... (435) (926)
Loss on disposal of Syntron
Pressure Controls division
less applicable income tax
benefits..................... (144)
----------- --------- ---------
Net income................ $ 3,667 $ 3,400 $ 4,793
=========== ========= =========
Pro forma earnings per common share
(unaudited -- Note 1)................ $ .39
===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
GEOSCIENCE CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
DECEMBER 31,
----------------------
1996 1995
----------- ---------
ASSETS
Current assets:
Cash and cash equivalents....... $ 1,306 $ 1,668
Receivables..................... 30,793 28,291
Inventories..................... 45,845 32,916
Other........................... 2,632 2,508
----------- ---------
Total current assets...... 80,576 65,383
Property, plant and equipment........ 25,093 22,550
Long-term receivables................ 9,899 2,990
Other assets......................... 8,258 7,967
----------- ---------
Total assets.............. $ 123,826 $ 98,890
=========== =========
LIABILITIES
Current liabilities:
Notes payable and current
maturities of long-term
debt.......................... $ 16,197 $ 11,681
Accounts payable................ 8,336 11,370
Unearned revenue................ 3,232 5,897
Taxes on income................. 2,813 482
Payable to Tech-Sym
Corporation................... 5,126 23,554
Other accrued liabilities....... 8,009 6,238
----------- ---------
Total current
liabilities............. 43,713 59,222
Long-term debt....................... 4,620 5,386
Other liabilities and deferred
credits............................ 689 1,014
----------- ---------
Total liabilities......... 49,022 65,622
----------- ---------
COMMITMENTS AND CONTINGENCIES (Note
13)
SHAREHOLDERS' INVESTMENT
Common stock -- authorized 35,000,000
shares, $0.01 par value; issued
10,497,600 and 7,900,000 shares.... 105 1
Additional capital................... 44,877 4,553
Accumulated earnings................. 32,597 28,930
Cumulative translation adjustments... 271 (216)
Common stock held in treasury, at
cost (240,000 shares).............. (3,046)
----------- ---------
Total shareholders'
investment.............. 74,804 33,268
----------- ---------
Total liabilities and
shareholders'
investment.............. $ 123,826 $ 98,890
=========== =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
GEOSCIENCE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
--------- ---------- ----------
Cash flows from operating activities:
Net income...................... $ 3,667 $ 3,400 $ 4,793
Adjustments to reconcile net
income to net cash provided by
(used for) operating
activities:
Depreciation and
amortization............. 7,149 6,108 4,573
Deferred income taxes...... (624) (485) 38
Change in operating assets and
liabilities:
Receivables................ (2,502) (3,861) (7,042)
Inventories................ (12,929) (15,694) (4,879)
Other current assets....... 200 (701) (467)
Long-term receivables...... (6,909) (219) (2,175)
Other assets............... (2,334) (767) (426)
Accounts payable........... (3,034) 4,058 4,174
Unearned revenue........... (2,665) 4,893 213
Taxes on income............ 2,331 128 455
Other liabilities.......... 2,233 (540) (488)
Payable to Tech-Sym........ 1,639 4,005 3,192
--------- ---------- ----------
Net cash provided by (used for)
operating activities.......... (13,778) 325 1,961
--------- ---------- ----------
Cash flows from investing activities:
Capital expenditures............ (7,649) (9,820) (4,626)
Payments for purchases of
businesses.................... (4,078) (3,000)
--------- ---------- ----------
Net cash used for investing
activities.................... (7,649) (13,898) (7,626)
--------- ---------- ----------
Cash flows from financing activities:
Net borrowings from (payments
to) Tech-Sym Corporation...... (20,067) 4,609 (600)
Net borrowings under lines of
credit agreements............. 5,100 3,641 4,000
Proceeds from long-term debt.... 103 7,284 1,709
Payments on long-term debt...... (1,453) (2,177) (336)
Proceeds from issuance of common
stock......................... 40,428
Purchase of treasury stock...... (3,046)
--------- ---------- ----------
Net cash provided by financing
activities.................... 21,065 13,357 4,773
--------- ---------- ----------
Net decrease in cash and cash
equivalents........................ (362) (216) (892)
Cash and cash equivalents at
beginning of period........... 1,668 1,884 2,776
--------- ---------- ----------
Cash and cash equivalents at end
of period..................... $ 1,306 $ 1,668 $ 1,884
========= ========== ==========
Supplemental Cash Flow Information:
Cash Transactions:
Interest paid to third
parties....................... $ 1,226 $ 535 $ 228
========= ========== ==========
Income taxes paid to third
parties, net.................. $ 738 $ 63 $ 8
========= ========== ==========
Non-Cash Transactions:
Non-cash consideration for
acquisition................... $ $ $ 2,560
========= ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
GEOSCIENCE CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' INVESTMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
COMMON ADDITIONAL ACCUMULATED TRANSLATION TREASURY
STOCK CAPITAL EARNINGS ADJUSTMENTS STOCK TOTAL
------ ---------- ----------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993........... $ $ 4,553 $20,737 $(426) $ $ 24,864
Net income for year.................. 4,793 4,793
Currency translation adjustment...... 208 208
Issuance of Symtronix Corporation
common stock....................... 1 1
------ ---------- ----------- ----------- -------- ---------
Balance, December 31, 1994........... 1 4,553 25,530 (218) 29,866
Net income for year.................. 3,400 3,400
Currency translation adjustment...... 2 2
------ ---------- ----------- ----------- -------- ---------
Balance, December 31, 1995........... 1 4,553 28,930 (216) 33,268
Net income for year.................. 3,667 3,667
Currency translation adjustment...... 487 487
Issuance of GeoScience common
stock.............................. 104 40,324 40,428
Acquisition of treasury shares....... (3,046) (3,046)
------ ---------- ----------- ----------- -------- ---------
Balance, December 31, 1996........... $105 $ 44,877 $32,597 $ 271 $ (3,046) $ 74,804
====== ========== =========== =========== ======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
GeoScience Corporation, a majority owned subsidiary of Tech-Sym Corporation
(Tech-Sym), and its subsidiaries (the Company) designs, develops and
manufactures seismic data exploration systems, geoscientific software, and
related products. The Company operates in one industry segment across
geographically diverse markets.
The Company was formed in March 1996 to effect the combination of certain
wholly-owned subsidiaries of Tech-Sym. The consolidated financial statements
include the accounts of Syntron, Inc. and subsidiaries (Syntron); CogniSeis
Development, Inc. and subsidiaries (CogniSeis); and Symtronix Corporation
(Symtronix), all of which were subsidiaries of Tech-Sym until reorganized into
the Company by Tech-Sym in March 1996. The reorganization was accounted for as
combination of entities under common control and accordingly, the net assets of
the Company were recorded at their historical cost basis at that time.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of GeoScience
Corporation and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in the consolidated financial statements.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of certain assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements and the related reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates. Management
believes that the estimates are reasonable.
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
REVENUE RECOGNITION:
Revenue from the sale of hardware products and software licenses are
recognized at the time of shipment unless significant future obligations remain.
In these instances, revenue is not recognized until obligations have been
satisfied or are no longer significant. Maintenance and other revenue is
principally comprised of post-contract customer support agreements.
Post-contract customer support agreements are recorded as unearned revenue and
recognized as revenue ratably over the contract period.
INVENTORIES:
Inventories are valued at the lower of cost or market. Cost is determined
principally on the first-in, first-out method.
DEPRECIATION AND AMORTIZATION:
Depreciation of plant and equipment is provided using the straight-line
method over the estimated useful lives of the related assets. Major renewals and
betterments are capitalized while minor replacements, maintenance, and repairs
which do not extend useful lives are expensed. The cost and accumulated
depreciation applicable to assets retired or sold are removed from the
respective accounts and the resultant gain or loss is recognized at that time.
Intangible assets include purchased technology and goodwill and are
amortized using the straight-line method over five to seven years. Amortization
expense was $2,490,000, $1,250,000, and $221,000, in 1996,
F-7
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1995, and 1994, respectively. Intangible assets of $6,853,000 and $9,030,000 at
December 31, 1996 and December 31, 1995, respectively, are included in other
assets and are net of accumulated amortization of $7,840,000 and $5,350,000 at
December 31, 1996 and December 31, 1995, respectively.
LONG-LIVED ASSETS:
In 1996, the Company adopted Financial Accounting Standards No. 121 (FAS
121), "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF". In accordance with FAS 121, the Company reviews for
the impairment of long-lived assets and certain identifiable intangibles
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Under FAS 121, an impairment loss would be
recognized when estimated future cash flows expected to result from the use of
the asset and its eventual disposition is less than its carrying amount. No such
impairment losses have been identified by the Company at December 31, 1996.
SOFTWARE DEVELOPMENT COSTS:
Costs of developing software for sale are charged to expense when incurred
as research and development until technological feasibility has been established
for the product. Thereafter, software development costs are capitalized until
the software is ready for general release to customers. Once the software is
ready for general release, amortization of the software development costs
begins. Amortization is calculated as the greater of the amount computed by
applying the ratio of revenues generated during the current year to currently
anticipated gross revenues over the remainder of the product life or by applying
the straight-line method over the currently estimated remaining product life to
the amount capitalized. Capitalized software development costs are generally not
amortized over periods which exceed five years. At each balance sheet date, the
Company evaluates the net realizable value of capitalized software development
costs. The unamortized portion of capitalized software development costs in
excess of net realizable value is charged to expense. For this purpose, net
realizable value is the estimated future gross revenue from each product,
reduced by estimated future costs of completion and disposal, including customer
support and maintenance.
Unamortized software development costs at December 31, 1996 and 1995 were
$746,000 and $773,000, respectively. During the years ended December 31, 1996,
1995 and 1994, $86,000, $69,000 and $29,000, respectively, were charged to
expense for amortization.
INCOME TAXES:
The provision for income taxes is computed based on the pretax income
included in the consolidated statement of income. For the period January 1 thru
May 17, 1996, and for the years ended December 31, 1995 and 1994, the Company
was included in a consolidated U.S. Federal income tax return with Tech-Sym. The
Company's 1996 provision for income taxes is based on a tax sharing arrangement
with Tech-Sym and is not significantly different from that which would result
from a separate consolidated return for the Company. U.S. Federal income taxes
payable reflected in the balance sheet at December 31, 1995 are due to Tech-Sym.
Research and development tax credits are recorded to the extent allowable
as a reduction of the provision for federal income taxes in the year the
qualified research and development expenditures are incurred. The asset and
liability approach is used to recognize deferred tax liabilities and assets for
the expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities.
The Company has not recorded a deferred income tax liability for additional
U.S. Federal income taxes that would result from the distribution of earnings of
its foreign subsidiaries, if they were actually
F-8
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
repatriated. The Company intends to indefinitely reinvest the undistributed
earnings of its foreign subsidiaries. Any federal income taxes on such earnings,
if remitted, would generally be offset by available foreign tax credits.
FOREIGN CURRENCY TRANSLATION:
The Company's foreign subsidiaries use the local currency as their
functional currency. Accordingly, assets and liabilities of the Company's
foreign subsidiaries are translated using the exchange rates in effect at the
balance sheet date, while income and expenses are translated using average
rates. Translation adjustments are reported as a separate component of
shareholders' investment.
PRO FORMA EARNINGS PER COMMON SHARE (UNAUDITED):
Unaudited pro forma earnings per common share presented in the consolidated
statement of income gives effect to the issuance of 10,497,600 shares of
GeoScience common stock -- 7,900,000 shares for the period from January 1, 1996
to the Company's public offering in May 1996 increased by 2,597,600 shares
thereafter in connection with the public offering. The unaudited pro forma
weighted average common shares outstanding for the year ended December 31, 1996
was 9,453,000 assuming pro forma shares outstanding of 7,900,000 as of the
beginning of the period, adjusted by other activity as it occurred during the
period. The effect of common stock equivalents was not significant.
Unaudited supplemental pro forma earnings per common share for 1996 was
$.42 and reflects adjustments for the period prior to the Company's public
offering related to (a) incremental general and administrative costs of
approximately $131,000 resulting from the Company's operating as a separate
entity from Tech-Sym, (b) reduced interest expense of approximately $1,178,000
resulting from payment of indebtedness with proceeds from the public offering
and, (c) the related income tax effects of approximately $366,000. The unaudited
supplemental pro forma common shares outstanding for the year ended December 31,
1996 was 10,426,228 assuming pro forma shares outstanding of 10,497,600 as of
the beginning of the period, adjusted by other activity as it occurred during
the period.
STOCK BASED COMPENSATION:
In 1996, the Company adopted Statement of Financial Accounting Standard No.
123 (FAS 123), "ACCOUNTING FOR STOCK-BASED COMPENSATION". Upon adoption of FAS
123, the Company continued to measure compensation expense for its stock-based
employee compensation plan using the intrinsic value method prescribed by APB
No. 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES", and has provided in Note 10
pro forma disclosures of the effect on net income and earnings per share as if
the fair value-based method prescribed by FAS 123 had been applied in measuring
compensation expense.
RECENT PRONOUNCEMENTS:
In 1996, Financial Accounting Standards No. 125 (FAS 125) "ACCOUNTING FOR
TRANSFER AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES"
was issued. FAS 125 is effective for transfers and servicing of financial assets
and extinguishments of liabilities occurring after December 31, 1996. The
Company will adopt FAS 125 in 1997. Adoption of FAS 125 is not expected to have
a material effect on the Company's consolidated financial position or operating
results.
RECLASSIFICATIONS:
Certain prior year amounts have been reclassified to conform to current
year presentation.
NOTE 2 -- ACQUISITIONS
Syntron acquired certain of the assets of Digicon, Inc. formerly used by
Digicon in its marine engineering, land engineering, and cable and canister
repair facilities in September 1994 for an aggregate
F-9
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purchase price of $5,560,000 in cash and other consideration. The purchase price
exceeded the fair value of the net assets acquired by $2,975,000 and this amount
is being amortized over 5 years.
CogniSeis acquired Photon Systems Ltd., a company that develops, markets,
and licenses seismic and geologic interpretation software in September 1995 for
an aggregate purchase price of $2,252,000. The purchase price exceeded the fair
value of the net assets acquired by $3,986,000 and this amount is being
amortized over five to seven years. In addition, in connection with the
acquisition, $306,000 of the purchase price was allocated to in-process
technology which was expensed at the date of acquisition. During the first
quarter of 1996, the purchase price of Photon was adjusted, which resulted in a
$400,000 increase in goodwill.
The acquisitions noted above were accounted for as purchases. Accordingly,
the operating results of the acquired businesses and the fair values of the
acquired assets and assumed liabilities were included in the Company's combined
financial statements as of their acquisition dates.
With regard to Syntron's 1994 purchase of certain assets from Digicon,
historical and pro forma information related to the purchased assets have not
been presented because the purchased assets are not considered, individually or
together, to constitute a business, primarily due to the change in the use of
such assets by Syntron. The following summary, prepared on a pro forma basis,
combines the operating results as if the 1995 acquisition had occurred as of the
beginning of the periods presented. The summary includes the impact of certain
adjustments such as goodwill amortization and estimated changes in interest
income due to cash outlays associated with the transaction and the related
income tax effects (in thousands):
YEAR ENDED DECEMBER 31,
----------------------
1995 1994
--------- ---------
(UNAUDITED)
Revenue.............................. $ 87,161 $ 68,583
Income from continuing operations.... 2,430 4,815
The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisition had been in effect for the entire periods
presented. In addition, they are not intended to be a projection of future
results and do not reflect any synergies that might be achieved from the
combined operations.
During 1995, the Company made several other acquisitions which were not
significant in the aggregate.
CogniSeis Development, Inc., a company which develops, markets, and
licenses seismic processing and geologic interpretation systems was acquired by
Tech-Sym in June 1995 in a transaction accounted for as a pooling-of-interests.
In connection with the acquisition, Tech-Sym issued 737,781 of its shares in
exchange for all of the outstanding shares of common stock of CogniSeis. The
consolidated financial statements include the operating results of CogniSeis for
all periods presented. Separate operating results of CogniSeis for the periods
prior to the merger are as follows (in thousands):
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, 1994
---------------- -----------------
(UNAUDITED)
Revenue.......................... $9,716 $16,012
Net loss......................... (46) (120)
NOTE 3 -- DISCONTINUED OPERATIONS
On June 15, 1995, the Company sold substantially all of the operating
assets of the Syntron Pressure Controls division (SPC) to an unrelated party.
Total consideration received from the sale was $1,270,000 in cash as well as
contingent consideration in the form of future royalties to be paid to the
Company by the
F-10
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purchaser. These royalties are based on sales of certain Company-developed
products and have not been nor are expected to be significant to the Company in
the future. Syntron Pressure Controls division was engaged in the business of
designing and manufacturing wellhead pressure control equipment such as
electronically controlled blow-out prevention devices and related products sold
to customers engaged in oil and gas production. Management believes SPC
represented a separate line of business from the Company. The pretax loss of
$224,000 on disposition has been accounted for as a loss from discontinued
operations and prior years financial statements have been reclassified to
reflect the disposition. Revenue of this division for 1995 and 1994 were
$1,472,000, and $1,670,000, respectively.
NOTE 4 -- RECEIVABLES AND LONG-TERM NOTES RECEIVABLE
Receivables at December 31, 1996 and 1995 include trade accounts and the
current portion of long-term notes receivable of $7,240,000 and $3,378,000,
respectively, and are net of reserves for doubtful accounts of $1,331,000 and
$660,000, respectively.
The current and long-term portion of notes receivable are net of reserves
for doubtful accounts of $268,000 and $510,000 at December 31, 1996 and 1995,
respectively.
Long-term notes receivable bear interest at rates between 6.72%-13% are due
to the Company in monthly installments through September 1999. Long-term notes
receivable are generally secured by equipment sold.
NOTE 5 -- INVENTORIES
Inventories which consist principally of electronic parts are summarized as
follows (in thousands):
DECEMBER 31,
--------------------
1996 1995
--------- ---------
Raw materials........................ $ 12,669 $ 13,870
Work in process...................... 16,292 12,784
Finished goods....................... 16,884 6,262
--------- ---------
$ 45,845 $ 32,916
========= =========
Included in finished goods inventories reflected above are components on
loan to customers of $2,304,000 and $2,090,000 at December 31, 1996 and 1995,
respectively. Such inventories are recorded at net realizable value.
NOTE 6 -- PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment are summarized as follows
(dollars in thousands):
DECEMBER 31,
ESTIMATED ------------------------
LIVES 1996 1995
---------- ----------- -----------
At cost:
Land, buildings and
improvements................. 10-35 $ 8,381 $ 8,034
Machinery and equipment......... 3-12 29,321 30,540
Lease units..................... 1-3 6,349 3,638
----------- -----------
44,051 42,212
Less accumulated depreciation........ (18,958) (19,662)
----------- -----------
$ 25,093 $ 22,550
=========== ===========
F-11
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Lease units represent systems at customer sites under operating leases.
Such units are amortized over the term of the lease. Accumulated depreciation on
lease units reflected above totaled $2,082,000 and $2,852,000 as of December 31,
1996 and 1995, respectively.
Depreciation expense was $5,106,000, $5,259,000, and $4,219,000 for 1996,
1995, and 1994, respectively.
NOTE 7 -- NOTES PAYABLE AND LONG-TERM DEBT
At December 31, 1996, the Company had unused short-term lines of credit
aggregating approximately $7,029,000. Borrowings under these lines may be made
in such amounts and at such maturities and interest rates as are offered by the
banks and accepted by the Company at the time of each borrowing. The lines of
credit contain certain restrictive covenants including limitations on asset
sales, limitations on indebtedness, limitations on investments and certain
financial covenants and ratios. At December 31, 1996 and 1995, borrowings under
lines of credit totaled $15,263,000 and $10,163,000, respectively. Interest
rates on such borrowings outstanding were 8.25% to 9.75% at December 31, 1996
and 8.5% at December 31, 1995, respectively. The repayment of CogniSeis
indebtedness outstanding under these facilities at December 31, 1996 is fully
guaranteed by Tech-Sym. Amounts outstanding for Syntron are guaranteed by
Tech-Sym at 75.3%. The repayment of indebtedness outstanding under these
facilities at December 31, 1995 was entirely guaranteed by Tech-Sym.
At December 31, 1996, the Company was in violation of a financial covenant
in connection with a $350,000 line of credit agreement, which has been waived by
the lender through June 30, 1997.
The components of long-term debt are summarized as follows (dollars in
thousands):
DECEMBER 31,
--------------------
1996 1995
--------- ---------
Notes to banks:
Term loan, unsecured at 5.30%
maturing in 2000................... $ 2,501 $ 2,825
Other notes:
Real estate mortgage notes, due in
monthly installments with interest
at 8.3% to 9.9% maturing at various
dates through 2009................. 1,727 1,854
Notes secured by equipment, due in
monthly installments with interest
at 4.125% to 11.5% maturing at
various dates through 2002......... 1,176 1,369
Other................................ 150 856
--------- ---------
5,554 6,904
Less current maturities.............. (934) (1,518)
--------- ---------
$ 4,620 $ 5,386
========= =========
The term loan is denominated in Singapore Dollars with an outstanding
balance of 3,500,000 Singapore Dollars at December 31, 1996 and is guaranteed by
Tech-Sym under a letter of credit.
Aggregate maturities of long-term debt due after 1997 are $863,000 in 1998,
$816,000 in 1999, $1,895,000 in 2000, $459,000 in 2001, $110,000 in 2002, and
$477,000 thereafter.
At December 31, 1996, $1,047,000 of machinery and equipment and $4,260,000
of land, buildings and improvements were pledged as collateral to secure various
long-term debt obligations.
F-12
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- INCOME TAXES
The components of income before income taxes were as follows (in
thousands):
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
Continuing operations
Domestic........................ $ 4,215 $ 4,751 $ 6,368
Foreign......................... 1,100 1,044 2,126
--------- --------- ---------
5,315 5,795 8,494
Discontinued operations
Domestic........................ (891) (1,425)
--------- --------- ---------
$ 5,315 $ 4,904 $ 7,069
========= ========= =========
The provision for income taxes consists of the following (in thousands):
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
Current tax expense
U.S. Federal.................... $ 1,513 $ 1,516 $ 1,598
State and local................. 103 186 124
Foreign......................... 656 287 516
--------- --------- ---------
Total current............. 2,272 1,989 2,238
--------- --------- ---------
Deferred tax expense
U.S. Federal.................... (26) (669) (137)
Foreign......................... (598) 184 175
--------- --------- ---------
Total deferred............ (624) (485) 38
--------- --------- ---------
Total provision........... $ 1,648 $ 1,504 $ 2,276
========= ========= =========
The total provision for (benefit from) income taxes has been allocated as
follows (in thousands):
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
Continuing operations................ $ 1,648 $ 1,816 $ 2,775
Discontinued operations
Loss from operations...... (234) (499)
Loss on disposal.......... (78)
--------- --------- ---------
$ 1,648 $ 1,504 $ 2,276
========= ========= =========
F-13
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The income tax expense for 1996, 1995, and 1994 resulted in effective tax
rates of 31.0%, 30.7%, and 32.2%, respectively. The reasons for the differences
between these effective tax rates and the U.S. statutory rate of 35% are as
follows (in thousands):
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
Federal taxes on income at statutory
rates.............................. $ 1,860 $ 1,716 $ 2,474
State income taxes, net.............. 67 121 80
Foreign Sales Corporation benefit.... (651) (305) (249)
Research and development tax
credits............................ (33) 23 (64)
Foreign tax expense, net............. (327) (229) (169)
Non-deductible amortization.......... 352 98 38
Other, net........................... 380 80 166
--------- --------- ---------
$ 1,648 $ 1,504 $ 2,276
========= ========= =========
Deferred tax liabilities (assets) at December 31, 1996 and 1995 are
comprised of the following (in thousands):
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
Deferred tax liabilities
Depreciation.................... $ 461 $ 846
Software development costs...... 323 305
Intangible amortization......... 402
Other........................... 101 87
------------ ------------
Gross deferred tax
liabilities............. 1,287 1,238
------------ ------------
Deferred tax assets
Compensated absences accruals... (110) (110)
Inventory accounting and
valuation allowance.......... (737) (523)
Net operating loss carry
forwards........................ (640) (80)
Receivable valuation
allowances................... (464) (439)
Warranty accrual................ (104) (17)
Accrual for self insurance...... (109) (8)
Intangible amortization......... (451)
Research and development tax
credit....................... (979) (957)
Other........................... (163) (113)
------------ ------------
Gross deferred tax
assets.................. (3,306) (2,698)
------------ ------------
Deferred tax asset valuation
allowance....................... 579 644
------------ ------------
$ (1,440) $ (816)
============ ============
A deferred tax asset valuation allowance is provided to reduce deferred tax
assets to a level which, more likely than not, will be realized. These amounts
relate to research and development tax credits which are expected to expire
unused due to change in ownership limitations.
Net operating loss carry forwards incurred by the Company's foreign
subsidiaries total $1,505,000. Of this amount, $178,000 will expire in the year
2002, and the remaining $1,327,000 will expire in the year 2003.
F-14
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax assets of $1,533,000 and $1,209,000 were included in other
current assets at December 31, 1996 and 1995, respectively. Deferred tax
liabilities of $93,000 and $393,000 were included in other long-term liabilities
at December 31, 1996 and 1995, respectively.
NOTE 9 -- SHAREHOLDER'S INVESTMENT
STOCK REPURCHASES
Effective August 14, 1996 the Company's Board of Directors authorized the
Company to repurchase up to 250,000 shares of its common stock. Effective
October 17, 1996, the Board authorized a 150,000 share increase in the stock
repurchase plan, with a revised maximum amount of 400,000 shares. At December
31, 1996, the Company had repurchased 240,000 shares of its common stock.
NOTE 10 -- EQUITY INCENTIVE PLAN
The Company's 1996 Equity Incentive Plan (the "Plan") covers 1,500,000
shares of common stock and permits the granting of any or all of the following
types of awards: stock appreciation rights, stock options, restricted stock,
dividend equivalents, performance units, automatic Director options, phantom
shares, limited stock appreciation rights ("LSARs"), bonus stock and cash tax
rights.
Options covering a total of 366,300 shares plus 1,000 phantom shares have
been granted to key employees of the Company, Tech-Sym, and affiliates under the
Plan. Each such option has an exercise price of 100% of the fair market value on
the date of grant and has a term of ten years. The options are exercisable 25%
after one year, with an additional 25% exercisable each year thereafter. At
December 31, 1996, no options to employees under the Plan were exercisable. The
phantom shares awarded were payable two years after award in cash and/or stock
at the Company's option and were forfeited in early 1997.
The Plan provides for the automatic grant of stock options to nonemployee
directors of the Company and Tech-Sym (the "Director Options"). Each Director
of the Company who was not an employee of either the Company or Tech-Sym (the
"GeoScience Nonemployee Directors") automatically received an option to
purchase 10,000 shares of common stock, and each nonemployee director of
Tech-Sym who was not a Director of the Company (the "Tech-Sym Nonemployee
Directors") automatically received an option to purchase 5,000 shares of common
stock, in each case at an exercise price per share equal to the arithmetic
average, without regard to number of shares, of the closing price on the NASDAQ
National Market for thirty (30) consecutive trading days after the closing of
the initial public offering ($17.55). Each GeoScience Nonemployee Director shall
automatically receive on the day following each annual meeting of the Company's
stockholders (commencing with the 1997 meeting) an option to purchase 1,000
shares of common stock (the "Annual Grants") at an exercise price per share
equal to the fair market value of the common stock on the date of grant. Each
person who becomes a GeoScience Nonemployee Director after the initial grants
shall receive an initial option award to purchase 10,000 shares of common stock
on the date of such person's election or appointment at an exercise price per
share equal to the fair market value of the common stock on the date of grant.
On December 11, 1996, the Board of Directors adopted, subject to approval
and ratification of Tech-Sym and the Company's stockholders, an amendment to the
Plan granting to each GeoScience Nonemployee Director an option to purchase
10,000 shares of common stock, and each Tech-Sym Nonemployee Director an option
to purchase 5,000 shares of common stock, in each case at an exercise price per
share equal to the fair market value of the common stock on the date of grant
($12.00). On February 19, 1997, the Board of Directors adopted, subject to
approval and ratification of Tech-Sym and the Company's stockholders, an
amendment to the Plan providing, among other things, for an increase in the
Annual Grants from 1,000 shares to 2,000 shares of common stock. Tech-Sym has
approved the amendments to the Plan subject to approval and ratification by the
Company's stockholders.
F-15
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Director Options covering a total of 115,000 shares, including those
subject to approval and ratification by the Company's stockholders, have been
granted under the Plan. These options have exercise prices of $12.00 to $17.55
per share, have a ten year life and are exercisable in full after six months. At
December 31, 1996, Director Options under the Plan covering a total of 45,000
shares were exercisable.
Using the Black-Scholes model, the weighted average fair value at date of
grant for options granted during 1996 was $7.43 per share. The fair value of
options at date of grant was estimated using the following weighted average
assumptions:
1996
----------
Expected Life........................... 6.5 years
Interest Rate........................... 6.58%
Volatility.............................. 51%
Dividend Yield.......................... 0%
Stock based compensation cost would have reduced pretax income $714,000 in
1996 ($464,000 after tax and $.05 per share) if the fair value of the options
granted had been recognized as compensation expense on a straight-line basis
over the vesting period of the grant.
Changes in outstanding options under the Plan during 1996 were as follows:
<TABLE>
<CAPTION>
NUMBER EXERCISE PRICE WEIGHTED AVERAGE
OF SHARES PER SHARE PRICE PER SHARE
--------- -------------- ----------------
<S> <C> <C> <C>
Granted.............................. 481,300 $ 12.00-17.55 $13.15
Expired or cancelled................. (37,700) 12.75-17.55 13.39
--------- -------------- --------
Outstanding, December 31, 1996....... 443,600 12.00-17.55 13.13
========= ============== ========
</TABLE>
There were 1,055,400 shares available for grants under the plans at
December 31, 1996.
The following table summarizes significant ranges of outstanding and
exercisable options and phantom shares at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------- --------------------------------
NUMBER WEIGHTED-AVERAGE NUMBER
RANGE OF OUTSTANDING REMAINING WEIGHTED-AVERAGE EXERCISABLE WEIGHTED-AVERAGE
EXERCISE PRICES AT 12/31/96 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/96 EXERCISE PRICE
---------------- ----------- ---------------- ---------------- ------------ ----------------
<S> <C> <C> <C>
Phantom................................. 1,000 9.47 $ 0.00
$12.00 to $17.55........................ 443,600 9.51 $13.10 45,000 $17.55
----------- ----- -------- ------------ --------
$0.00 to $17.55......................... 444,600 9.53 $13.10 45,000 $17.55
=========== ===== ======== ============ ========
</TABLE>
NOTE 11 -- BENEFIT PLANS
The Company maintains a defined contribution retirement plan covering
substantially all employees in the United States. The annual Company
contributions to the plan were $558,000 for 1996, $360,000 for 1995, and
$309,000 for 1994. The Company's policy is to fund these retirement costs
currently.
NOTE 12 -- RELATED PARTY TRANSACTIONS
Tech-Sym provides management, financial, and legal services to the Company
and charges the Company a fee for such services. These fees represent
reimbursement to Tech-Sym for corporate management and administrative services
as well as charges for external services. Direct costs incurred by Tech-Sym on
behalf of the Company are charged to the Company as incurred, and indirect costs
incurred by Tech-Sym are allocated to the Company based on payroll costs,
operating revenue, tangible capital assets
F-16
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and inventory of the Company relative to Tech-Sym and its subsidiaries in the
aggregate. Management believes the fees charged to the Company by Tech-Sym are
reasonable.
In addition, the Company had outstanding indebtedness to Tech-Sym and was
charged interest on the indebtedness of $1,040,000, $1,338,000, and $709,000 for
1996, 1995, and 1994, respectively, on the outstanding balances. Interest was
charged at a rate of 8% per annum in 1996, 1995, and 1994. Interest accrued on
indebtedness to Tech-Sym is included in payable to Tech-Sym. The borrowings from
Tech-Sym are due on demand.
The following table presents changes in the payable to Tech-Sym for years
1996, 1995, and 1994 (in thousands).
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
Beginning balance.................... $ 23,554 $ 14,940 $ 12,348
Income tax allocations............... (1,213) 1,337 1,469
Management, financial and legal
services............................. 1,812 1,274 1,000
Interest charges..................... 1,040 1,338 709
Net Borrowings (Payments)............ (20,067) 4,609 (600)
Other................................ 56 14
--------- --------- ---------
Ending Balance....................... $ 5,126 $ 23,554 $ 14,940
========= ========= =========
The weighted average non-interest bearing borrowings from Tech-Sym
outstanding during 1996, 1995, and 1994 were $1,517,000, $2,842,000, and
$1,621,000, respectively.
NOTE 13 -- COMMITMENTS AND CONTINGENCIES
CONCENTRATION OF CREDIT RISK:
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash and cash equivalents,
receivables, and long-term receivables. The Company places its cash and cash
equivalents in investment grade, short-term debt instruments and limits the
amount of credit exposure to any one commercial issuer. Credit risk with respect
to receivables and long-term receivables is concentrated in companies engaged in
oil and gas exploration.
A relatively small number of customers has accounted for most of the
Company's revenue. The Company's three largest customers in 1996, 1995, and 1994
accounted for 44%, 39%, and 38% of totals revenue, respectively. Customers
accounting for 10% or more of total revenue during 1996, 1995, and 1994 are as
follows.
1996 1995 1994
---- ---- ----
Customer A........................... 16% 21% 26%
Customer B........................... 15% 12%
Customer C........................... 13%
FINANCIAL INSTRUMENTS:
The Company enters into various types of financial instruments in the
normal course of business. The Company does not hold or issue financial
instruments for trading purposes nor does it hold interest rate, leveraged, or
other types of derivative financial instruments.
Fair values for financial instruments are based on quoted market prices.
The amounts ultimately realized upon settlement of these financial instruments
will depend on actual market conditions during the
F-17
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
remaining life of the instruments. Fair values of cash and cash equivalents,
receivables, long-term receivables, notes payable, accounts payable, other
accrued liabilities, and long-term debt reflected in the December 31, 1996 and
1995 balance sheet approximate carrying value at that date.
LEASE COMMITMENTS:
The Company leases manufacturing and other facilities under certain
long-term agreements which expire at various dates through 2002. Total rentals
charged to operations under such operating leases for 1996, 1995, and 1994 were
$713,000, $1,647,000, and $1,027,000, respectively.
Future minimum rental commitments under all noncancellable operating leases
in effect at December 31, 1996 totaled $1,613,000 and are payable as follows:
1997 -- $626,000; 1998 -- $209,000; 1999 -- $212,000; 2000 -- $221,000;
2001 -- $194,000; and $151,000 thereafter.
LITIGATION:
In the ordinary course of business, the Company is involved in various
pending or threatened legal actions. While management is unable to predict the
ultimate outcome of these actions, it believes that any ultimate liability
arising from these actions will not have a material adverse effect on the
Company's combined financial position, operating results, or cash flows.
OTHER COMMITMENTS AND CONTINGENCIES:
The Company is a member of a consortium that is contingently liable as of
December 31, 1996 for the payment of approximately $2,000,000 based on proceeds
from the sale or license of technology developed by the consortium.
The Company is contingently liable for notes receivable aggregating
$2,559,000 at December 31, 1996 (in the event of customer default or other
covenant violations) which it began selling to a financial institution during
1995. During 1996, the Company did not sell any notes receivable to the
financial institution under this arrangement and has not experienced any
material financial losses to date under this arrangement. During 1995, the
Company sold $14,168,000 of notes receivable to the financial institution under
this arrangement.
In the ordinary course of business, the Company pays royalties on a
percentage of the net sales of certain products in connection with assignments
to the Company of all intellectual property rights with respect to such
products. Generally these royalties are payable until the Company is no longer
using the intellectual property rights. Royalty expense aggregated $2,151,000,
$1,464,000, and $888,000 in 1996, 1995, and 1994, respectively.
The Company has no commitments or contingent liabilities which, in the
judgment of management, would result in losses which would materially affect the
Company's consolidated financial position, operating results, or cash flows.
F-18
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14 -- OTHER FINANCIAL INFORMATION
FOREIGN SALES:
Foreign sales (primarily exports from the U.S.) as a percentage of total
sales are summarized by geographic area as follows:
1996 1995 1994
--------- --------- ---------
Europe............................... 48.0% 33.4% 37.2%
Far East............................. 11.9 26.8 19.5
Middle East.......................... 1.5 1.7 1.7
Other areas.......................... 9.1 8.3 9.6
--------- --------- ---------
70.5% 70.2% 68.0%
========= ========= =========
Retained earnings of the Company's foreign subsidiaries totaled $5,563,000
and $4,308,000 at December 31, 1996 and 1995, respectively.
NOTE 15 -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
QUARTERLY FINANCIAL INFORMATION:
The following is a summary of unaudited quarterly financial data for the
years 1996 and 1995 (in thousands except per share amounts):
<TABLE>
<CAPTION>
EARNINGS
PER
GROSS NET COMMON
SALES PROFIT INCOME SHARE
----------- -------- ------ ---------
<S> <C> <C> <C> <C>
March 31, 1996....................... $ 24,750 $ 11,319 $ 374 $ .05
June 30, 1996........................ 25,400 11,381 228 .03
September 30, 1996................... 32,937 13,164 1,138 .11
December 31, 1996.................... 30,667 13,531 1,927 .19
----------- -------- ------ ---------
$ 113,754 $ 49,395 $3,667 $ .39
=========== ======== ====== =========
March 31, 1995....................... $ 15,506 $ 7,636 $ (519)
June 30, 1995........................ 19,750 9,482 946
September 30, 1995................... 23,202 11,286 1,730
December 31, 1995.................... 25,767 11,846 1,243
----------- -------- ------
$ 84,225 $ 40,250 $3,400
=========== ======== ======
</TABLE>
Earnings per share data is presented on a pro forma basis for all quarters
prior to the quarter ended June 30, 1996 (Note 1).
As more fully discussed in Note 2, on June 30, 1995, the Company acquired
CogniSeis Development, Inc., in a business combination accounted for as a
pooling of interests. Accordingly, the Company's quarterly financial information
for the year ended December 31, 1995 has been restated to present the results of
the combined companies.
F-19
<PAGE>
GEOSCIENCE CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (SCHEDULE II)
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED CHARGED
BALANCE TO COSTS TO COSTS
AT AND BALANCE AND BALANCE
BEGINNING EXPENSES DEDUCTIONS AT END EXPENSES DEDUCTIONS AT END
DESCRIPTION OF 1994 1994 1994 OF 1994 1995 1995 OF 1995
- ------------------------------------- --------- --------- ----------- -------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
GEOSCIENCE CORPORATION AND
CONSOLIDATED SUBSIDIARIES
Reserves deducted from assets:
Current receivables.............. $ 85 $ 813 $ 156 $742 $ 971 $ 1,053 $ 660
Long-term receivables............ 0 246 0 246 160 0 406
--------- --------- ----------- -------- --------- ----------- --------
$ 85 $ 1,059 $ 156 $988 $ 1,131 $ 1,053 $1,066
========= ========= =========== ======== ========= =========== ========
CHARGED
TO COSTS
AND BALANCE
EXPENSES DEDUCTIONS AT END
DESCRIPTION 1996 1996 OF 1996
- ------------------------------------- --------- ----------- --------
GEOSCIENCE CORPORATION AND
CONSOLIDATED SUBSIDIARIES
Reserves deducted from assets:
Current receivables.............. $ 981 $ 310 $1,331
Long-term receivables............ 0 340 66
--------- ----------- --------
$ 981 $ 650 $1,397
========= =========== ========
</TABLE>
F-20
<PAGE>
The exhibits indicated by an asterisk (*) are incorporated by reference to
a prior filing as indicated in parentheses.
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------- -----------------------
3.1* -- Articles of Incorporation of GeoScience Corporation (Exhibit 3.1
to Registrant's Registration Statement (No. 333-2986) on Form
S-1, as amended).
3.2* -- Bylaws of GeoScience Corporation (Exhibit 3.2 to Registrant's
Registration Statement (No. 333-2986) on Form S-1, as amended).
4.1* -- Specimen Common Stock Certificate (Exhibit 4.2 to Registrant's
Registration Statement (No. 333-2986) on Form S-1, as amended).
10.1*+ -- 1996 Equity Incentive Plan. (Exhibit 10.1 to Registrant's
Registration Statement (No. 333-2986) on Form S-1, as amended).
10.2* -- Form of Corporate Services Agreement (Exhibit 10.2 to
Registrant's Registration Statement (No. 333-2986) on Form S-1,
as amended).
10.3* -- Form of Intercompany Credit Agreement (Exhibit 10.3 to
Registrant's Registration Statement (No. 333-2986) on Form S-1,
as amended).
10.4* -- Form of Tax Allocation Agreement (Exhibit 10.4 to Registrant's
Registration Statement (No. 333-2986) on Form S-1, as amended).
10.5* -- Form of Shareholder Agreement (Exhibit 10.5 to Registrant's
Registration Statement (No. 333-2986) on Form S-1, as amended).
10.6* -- Form of Stock Restriction and Registration Agreement (Exhibit
10.6 to Registrant's Registration Statement (No. 333-2986) on
Form S-1, as amended).
10.7 -- Loan Agreement dated December 6, 1996 between Registrant and
Wells Fargo Bank (Texas) N.A.
10.8* -- Loan Agreement dated November 30, 1995 between CogniSeis and
NationsBank (Exhibit 10.7 to Registrant's Registration Statement
(No. 333-2986) on Form S-1, as amended).
10.9 -- Amendment No. 1 to Loan Agreement dated November 30, 1995 between
CogniSeis and NationsBank.
10.10 -- Amendment No. 2 to Loan Agreement dated November 30, 1995 between
CogniSeis and NationsBank.
10.11 -- Amended and Restated Loan Agreement dated December 6, 1996
between Syntron and Wells Fargo Bank (Texas) N.A.
10.12+ -- Form of Nonemployee Director Stock Option Agreement
10.13+ -- Termination Agreement dated August 15, 1996, between Tech-Sym
Corporation and Bruce H. Nelson.
10.14+ -- Termination Agreement dated May 1, 1991 between Tech-Sym
Corporation and J. Rankin Tippins.
10.15+ -- Termination Agreement dated May 1, 1991 between Tech-Sym
Corporation and Ray F. Thompson.
10.16+ -- Termination Agreement dated May 1, 1991 between Tech-Sym
Corporation and Richard F. Miles.
10.17+ -- First Amendment dated June 21, 1994 to Termination Agreement
dated May 1, 1991 between Tech-Sym Corporation and Richard F.
Miles.
X-1
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------- -----------------------
10.18+ -- Executive Retirement Agreement, as amended and restated, dated
April 30, 1992 between Tech-Sym Corporation and Wendell W. Gamel.
10.19+ -- Executive Retirement Agreement, as amended and restated, dated
April 30, 1992 for Ray F. Thompson.
10.20+ -- Executive Retirement Agreement, as amended and restated, dated
April 30, 1992 between Tech-Sym Corporation and J. Rankin
Tippins.
10.21+ -- Executive Retirement Agreement dated April 26, 1994 between
Tech-Sym Corporation and Richard F. Miles.
21 -- Subsidiaries of GeoScience.
23 -- Consent of Independent Accountants.
24 -- Power of Attorney.
27 -- Financial Data Schedule.
- ------------
+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to the requirements of Item 14(c) of Form
10-K.
X-2
EXHIBIT 10.7
LOAN AGREEMENT
AMONG
GEOSCIENCE CORPORATION,
as Borrower
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION,
as Agent and a Bank,
AND
EACH OF THE BANKS FROM TIME TO TIME SIGNATORY HERETO
December 6, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - Definitions ................................................... 1
Section 1.1. Definitions ............................................. 1
Section 1.2. Other Definitional Provisions ........................... 11
ARTICLE II - Advances ..................................................... 11
Section 2.1. Commitment .............................................. 11
Section 2.2. The Notes ............................................... 12
Section 2.3. Repayment of Advances ................................... 12
Section 2.4. Interest ................................................ 12
Section 2.5. Procedure for Advances Under the Revolving
Credit Commitment ..................................... 12
Section 2.6. Use of Proceeds ......................................... 13
Section 2.7. Conversion and Continuation Options ..................... 13
ARTICLE III - Payments .................................................... 14
Section 3.1. Method of Payment ....................................... 14
Section 3.2. Prepayment .............................................. 14
Section 3.3. Pro Rata Treatment ...................................... 14
Section 3.4. Non-Receipt of Funds by the Agent ....................... 14
Section 3.5. Computation of Interest ................................. 15
Section 3.6. Reserve and Capital Adequacy Provisions ................. 15
Section 3.7. Limitation on Eurodollar Borrowings ..................... 16
Section 3.8. Determination of Interest Rates ......................... 17
Section 3.9. No Prepayment During an Interest Period ................. 17
ARTICLE IV - Guaranty ..................................................... 17
Section 4.1. Guaranty ................................................ 17
ARTICLE V - Conditions Precedent .......................................... 17
Section 5.1. Initial Advance ......................................... 17
Section 5.2. All Advances ............................................ 18
ARTICLE VI - Representations and Warranties ............................... 18
Section 6.1. Corporate Existence ..................................... 18
Section 6.2. Financial Statements .................................... 19
<PAGE>
Section 6.3. Corporate Action; No Breach ............................. 19
Section 6.4. Operation of Business ................................... 19
Section 6.5. Litigation and Judgments ................................ 19
Section 6.6. Rights in Properties, Liens ............................. 19
Section 6.7. Enforceability .......................................... 19
Section 6.8. Approvals ............................................... 20
Section 6.9. Taxes ................................................... 20
Section 6.10. Use of Proceeds; Margin Securities ..................... 20
Section 6.11. ERISA .................................................. 20
Section 6.12. Disclosure ............................................. 20
Section 6.13. Subsidiaries ........................................... 20
Section 6.14. Agreements ............................................. 20
Section 6.15. Compliance with Laws ................................... 21
Section 6.16. Investment Company Act ................................. 21
Section 6.17. Public Utility Holding Company Act ..................... 21
Section 6.18. Environmental Matters .................................. 21
ARTICLE VII - Positive Covenants .......................................... 22
Section 7.1. Reporting Requirements .................................. 22
Section 7.2. Maintenance of Existence ................................ 23
Section 7.3. Maintenance of Properties ............................... 23
Section 7.4. Taxes and Claims ........................................ 23
Section 7.5. Insurance ............................................... 23
Section 7.6. Inspection Rights ....................................... 23
Section 7.7. Keeping Books and Records ............................... 23
Section 7.8. Compliance with Laws .................................... 23
Section 7.9. Compliance with Agreements .............................. 24
Section 7.10. Further Assurances ..................................... 24
Section 7.11. ERISA .................................................. 24
Section 7.12. Change in Business ..................................... 24
ARTICLE VIII - Negative Covenants ......................................... 24
Section 8.1. Lease Rentals ........................................... 24
Section 8.2. Debt .................................................... 25
Section 8.3. Liens ................................................... 25
Section 8.4. Merger and Consolidation ................................ 26
Section 8.5. Sale of Assets .......................................... 26
Section 8.6. Dealings with Affiliates ................................ 26
Section 8.7. Loans and Investments ................................... 27
Section 8.8. Compliance with Environmental Laws ...................... 27
<PAGE>
ARTICLE IX - Financial Covenants .......................................... 27
Section 9.1. Tangible Net Worth ...................................... 27
Section 9.2. Working Capital ......................................... 27
Section 9.3. Relationship of Funded Debt to Total Capitalization ..... 27
Section 9.4. Debt Service Ratio ...................................... 27
Section 9.5. Capital Expenditures .................................... 27
ARTICLE X - Default ....................................................... 28
Section 10.1. Events of Default ...................................... 28
Section 10.2. Remedies Upon Default .................................. 29
Section 10.3. Performance by the Agent ............................... 30
ARTICLE XI - The Agent .................................................... 30
Section 11.1. Appointment, Powers and Immunities ..................... 30
Section 11.2. Rights of the Agent as a Bank .......................... 32
Section 11.3. Sharing of Payments, Etc ............................... 32
Section 11.4. Indemnification ........................................ 32
Section 11.5. Independent Credit Decisions ........................... 33
Section 11.6. Several Commitments .................................... 33
Section 11.7. Successor Agent ........................................ 33
ARTICLE XII - Miscellaneous ............................................... 34
Section 12.1. Expenses of the Agent and the Banks .................... 34
Section 12.2. Indemnification ........................................ 34
Section 12.3. Limitation of Liability ................................ 34
Section 12.4. No Waiver; Cumulative Remedies ......................... 35
Section 12.5. Successors and Assigns ................................. 35
Section 12.6. Survival ............................................... 37
Section 12.7. ENTIRE AGREEMENT; AMENDMENT ............................ 38
Section 12.8. Maximum Interest Rate .................................. 38
Section 12.9. Notices ................................................ 39
Section 12.10. APPLICABLE LAW; VENUE; SERVICE OF PROCESS ............. 39
Section 12.11. Counterparts .......................................... 39
Section 12.12. Severability .......................................... 39
Section 12.13. Headings .............................................. 39
Section 12.14. Non-Application of Chapter 15 of Texas Credit Code .... 40
Section 12.15. Special Covenant ...................................... 40
Section 12.16. Arbitration ........................................... 40
<PAGE>
EXHIBITS
A. Form of Note
B. Form of Advance Request Form
C. Form of Limited Guaranty
D. Form of Assignment and Acceptance
E. Real Property Description
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of December 6, 1996 (this "Agreement"), is
between GEOSCIENCE CORPORATION, a Nevada corporation ("Borrower"), each of the
banks or other lending institutions which is or which may from time to time
become a signatory hereto or any successor or assignee thereof (individually, a
"Bank" and, collectively, the "Banks"), and WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION, a national banking association, as agent for itself and the other
Banks (in such capacity, together with its successors in such capacity, the
"Agent").
R E C I T A L S:
The Borrower has requested that the Banks make revolving credit loans to
the Borrower with advances thereunder not to exceed an aggregate principal
amount of $3,000,000 outstanding at any time. The Banks are willing to make such
loans to the Borrower upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
I
DEFINITIONS
I.1. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"AAA" has the meaning assigned to it in Section 12.16(b) hereof.
"ACCEPTABLE ENCUMBRANCE" means a pledge, Lien, security interest, mortgage,
or other encumbrance of the Real Property which secures Acceptable
Permanent Financing.
"ACCEPTABLE PERMANENT FINANCING" means Debt of the Borrower, secured by the
Real Property; provided that such Debt, when incurred, does not cause the
violation of any covenant or agreement contained herein.
"ADJUSTED EURODOLLAR RATE" means that rate of interest per annum which
shall on any day be equal to the sum of (i) the Eurodollar Base Rate plus
(ii) 1.25%. The Adjusted Eurodollar Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurodollar Base Rate.
"ADVANCE" means an advance of funds by a Bank to the Borrower pursuant to
Article II.
<PAGE>
"ADVANCE REQUEST FORM" means a certificate, in substantially the form of
Exhibit "B" hereto, properly completed and signed by the Borrower
requesting an Advance.
"AFFILIATE" means any Person which directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common
control with, the Borrower. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.
"AGGREGATE LONG-TERM LEASE RENTALS" means the aggregate of the minimum
annual rental payments (excluding income taxes, property taxes, insurance
and other charges which the lessee is required to pay to, or on behalf of,
the lessor pursuant to any lease) of the Borrower and its Subsidiaries
under all leases of real and personal property having a remaining unexpired
term as at the date of determination (including the original term and any
renewals or extensions available at the lessee's sole option) in excess of
three years.
"APPLICABLE LENDING OFFICE" means for each Bank and each type of Advance,
the Lending Office of such Bank (or of an Affiliate of such Bank)
designated for such type of Advance below its name on the signature pages
hereof or such other office of such Bank (or of an Affiliate of such Bank)
as such Bank may from time to time specify to the Borrower and the Agent as
the office by which its Advances of such type are to be made and
maintained.
"ASSIGNEE" has the meaning assigned to it in Section 12.5(b) hereof.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into
by a Bank and its assignee and accepted by the Agent pursuant to Section
12.5 in substantially the form of Exhibit "D" hereto.
"BUSINESS DAY" means (a) any day on which commercial banks are not
authorized or required to close in Houston, Texas, and, (b) with respect to
all borrowings, payments, Conversions, Continuations, Interest Periods, and
notices in connection with Eurodollar Advances, any day which is a Business
Day described in clause (a) above and which is also a day on which dealings
in Dollar deposits are carried out in the London interbank market.
"CAPITAL EXPENDITURES" means expenditures which, in accordance with GAAP,
would be required to be capitalized on a consolidated balance sheet of the
Borrower and its Subsidiaries.
"CAPITALIZED LEASE" means any lease of property, real or personal, which in
accordance with GAAP, would be required to be capitalized on a balance
sheet of the lessee.
"CAPITALIZED LEASE OBLIGATIONS" means payments pursuant to Capitalized
Leases which, under GAAP, would be included in determining total
liabilities as shown on the liability side of a balance sheet.
<PAGE>
"CASH FLOW" means, at any particular time, Net Income of the Borrower and
its Subsidiaries plus Interest Expense, depreciation, amortization and
other non-cash expenses deducted from the Borrower's and its Subsidiaries'
revenues to determine Net Income plus those items listed in clauses (i),
(ii) and (iii) of the definition of Net Income, all determined in
accordance with GAAP.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"COMMITMENT" means, as to each Bank, the obligation of such Bank to make
Advances hereunder in the principal amount set forth opposite the name of
such Bank on the signature pages hereto under the heading "Commitment."
"CURRENT ASSETS" means, at any particular time, all amounts which, in
conformity with GAAP, would be included as current assets on a consolidated
balance sheet of the Borrower and its Subsidiaries.
"CURRENT LIABILITIES" means, at any particular time, all amounts which, in
conformity with GAAP, would be included as current liabilities on a
consolidated balance sheet of the Borrower and its Subsidiaries.
"CURRENT MATURITIES OF LONG TERM DEBT" means, at any particular time, all
principal due and payable during the next succeeding twelve month period on
any of the Borrower's or its Subsidiaries' Debt for money borrowed, which
has a maturity of greater than twelve months.
"CURRENT RATIO" means, at any particular time, the ratio of Current Assets
to Current Liabilities.
"DEBT" means (i) all obligations and liabilities, which in accordance with
GAAP would be included in determining total liabilities as shown on a
balance sheet as of the date at which Debt is to be determined, (ii) all
obligations and liabilities for borrowed money secured by any security
interest of any kind existing on property owned subject to such security
interest whether or not such obligations or liabilities shall have been
assumed, (iii) all guaranties (whether by discount or otherwise),
endorsements (other than for collection or deposit in the ordinary course
of business), letters of credit and other contingent obligations and
agreements to acquire or to supply or advance funds in respect of any
obligation, liability or dividend of any other Person and (iv) any
agreement to pay the purchase price of any product or service in which such
agreement to pay is not dependent upon whether or not such product or
service is furnished; provided, however, that Capitalized Lease Obligations
shall not constitute Debt.
"DEBT SERVICE COSTS" means, at any particular time, Current Maturities of
Long Term Debt plus Interest Expense.
"DEBT SERVICE RATIO" means, at the end of each calendar quarter, the ratio
of (i) the sum of Cash Flow for each of the preceding four consecutive
calendar quarters to (ii) Debt Service Costs.
<PAGE>
"DEFAULT" means any event which, with the giving of notice or lapse of
time, could become an Event of Default.
"DEFAULT RATE" means the Maximum Rate or, if no Maximum Rate exists, the
sum of the Prime Rate in effect from day to day plus 5%.
"DISPUTE" has the meaning assigned to it in Section 12.16(a) hereof.
"DOLLARS" and "$" mean lawful money of the United States of America.
"ENVIRONMENTAL LAWS" means any and all federal, state, and local laws,
regulations, and requirements pertaining to health, safety, or the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. ss. 9601 et
seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. ss.
6901 et seq., the Occupational Safety and Health Act, 29 U. S. C. ss. 651
et seq., the Clean Air Act, 42 U. S. C. ss. 7401 et seq. the Clean Water
Act, 33 U.S.C. ss. 1251 et seq., the Toxic Substances Control Act, 15
U.S.C. ss. 2601 et seq., and all similar laws, regulations, and
requirements of any governmental authority or agency having jurisdiction
over the Borrower or any Subsidiary or any of their respective properties
or assets, as such laws, regulations, and requirements may be amended or
supplemented from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published
interpretations thereunder.
"ERISA AFFILIATE" means any corporation or trade or business which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower or is under common control
(within the meaning of Section 414(c) of the Code) with the Borrower.
"EURODOLLAR BASE RATE" means, with respect to each Interest Period during
which the LIBO Rate is applicable, a rate per annum (rounded upward, if
necessary, to the nearest 1/100th of 1%) equal to the quotient of (a) the
LIBO Rate with respect to such Interest Period, divided by (b) the
remainder of 1.00 minus the applicable Statutory Reserve in effect on the
first day of such Interest Period. The Eurodollar Base Rate shall be
adjusted automatically on and as of the effective date of any change in the
applicable Statutory Reserve.
"EURODOLLAR BORROWING" means any Advance with respect to which the Borrower
shall have selected an interest rate based on the Adjusted Eurodollar Rate
in accordance with the provisions of this Agreement.
"EVENT OF DEFAULT" has the meaning specified in Section 10.1.
<PAGE>
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/16 of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business
Day next succeeding such day, provided that (a) if the day for which such
rate is to be determined is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (b)
if such rate is not so published on such next succeeding Business Day, the
Federal Funds Rate for any day shall be the average rate charged to
Reference Bank on such day on such transactions as determined by the Agent.
"FLOATING RATE BORROWING" means any Revolving Credit Loan with respect to
which the Borrower shall have selected an interest rate based upon the
Prime Rate in accordance with the provisions of this Agreement.
"FUNDED DEBT" means the Debt evidenced by the Note and all Debt owed or
guaranteed which by its terms matures more than one year from the date such
Funded Debt is being determined pursuant to applicable provisions of this
Agreement or which may be renewed or extended at the option of the obligor
for more than one year from such date whether or not theretofore renewed or
extended.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants and/or in
statements of the Financial Accounting Standards Board and/or their
respective successors and which are applicable in the circumstances as of
the date in question. Accounting principles are applied on a "consistent
basis" when the accounting principles observed in a current period are
comparable in all material respects to those accounting principles applied
in a preceding period.
"GUARANTOR" means Tech-Sym Corporation, a Nevada corporation, whose address
is 10500 West Office Drive, Houston, Texas 77042.
"GUARANTY" means the guaranty of the Guarantor in favor of the Banks, in
substantially the form of Exhibit "C" hereto, as the same may be amended,
supplemented, or modified from time to time.
"HAZARDOUS SUBSTANCE" means any substance, product, waste, pollutant,
material, chemical, contaminant, constituent, or other material which is or
becomes listed, regulated, or addressed under any Environmental Law,
including, without limitation, asbestos, petroleum, and polychlorinated
biphenyls.
"INTEREST EXPENSE" means any expense of the Borrower or its Subsidiaries
which would be considered interest expense in accordance with GAAP.
<PAGE>
"INTEREST PERIOD" means, (i) as to any portion of the Advance bearing
interest at the Prime Rate, any period selected by the Borrower, and (ii)
as to any portion of the Advance bearing interest at the Adjusted
Eurodollar Rate, a period of one month, two months or three months, as the
Borrower may elect in the manner set forth in Section 2.5 hereof, provided
that:
(i) the initial Interest Period for any portion of the Advance
shall commence on the date of each Advance and each Interest Period
occurring thereafter for such Advance shall commence on the day on
which the next preceding Interest Period for such Advance expires:
(ii) no Interest Period shall extend beyond the Revolving Credit
Termination Date;
(iii) if the Borrower has selected an Interest Period with
respect to any portion of the Advance which extends beyond the
Revolving Credit Termination Date, the Borrower shall be deemed to
have selected an Interest Period which will expire on the Revolving
Credit Termination Date;
(iv) in the absence of an election by the Borrower as provided
above, the Borrower shall be deemed to have elected an Advance bearing
interest at the Prime Rate with a 30 day Interest Period;
(v) if any Interest Period for an Advance would otherwise end on
a day which is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day, unless the result of
such extension would be to extend such Interest Period into another
calendar month, in which event such Interest Period shall end on the
immediately preceding Business Day; and
(vi) any Interest Period with respect to a Eurodollar Borrowing
that begins on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last
Business Day of a calendar month.
"LEVERAGE RATIO" means, at any particular time, the ratio of Liabilities to
Tangible Net Worth.
"LIABILITIES" means, at any particular time, all amounts which, in
conformity with GAAP, would be included as liabilities on a consolidated
balance sheet of the Borrower or its Subsidiaries.
"LIBO RATE" means the rate of interest per annum equal to the arithmetic
average (rounded upward to the nearest whole multiple of one-sixteenth of
one percent) of the respective rates per annum at which deposits in Dollars
are offered to Agent in the interbank eurodollar market at its eurodollar
lending office at approximately 11:00 a.m. Houston, Texas time two Business
Days prior to the first day of an applicable Interest Period, in an amount
approximately equal to the
<PAGE>
principal amount of the Advance of the Banks to which such Interest Period
is to apply, and for a period of time comparable to such Interest Period.
"LIEN" means any mortgage, pledge, security interest, encumbrance,
possessory interest, lien or charge of any kind, including any agreement to
give any of the foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of or agreement
to give any financing statement under the Uniform Commercial Code of any
jurisdiction in connection with any of the foregoing.
"LOAN DOCUMENTS" means this Agreement, the Note, the Guaranty and all other
promissory notes, security agreements, deeds of trust, assignments,
guaranties, and other instruments, documents, and agreements executed and
delivered pursuant to or in connection with this Agreement, as such
instruments, documents, and agreements may be amended, modified, renewed,
extended, or supplemented from time to time.
"MAXIMUM RATE" means the maximum rate of nonusurious interest permitted
from day to day by applicable law, including as to Article 5069-1.04,
Vernon's Texas Civil Statutes (and as the same may be incorporated by
reference in other Texas statutes), but otherwise without limitation, that
rate based upon the "indicated rate ceiling" and calculated after taking
into account any and .all relevant fees, payments, and other charges in
respect of the Loan Documents which are deemed to be interest under
applicable law.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means a multiemployer plan defined as such in Section
3(37) of ERISA to which contributions have been made by the Borrower or any
ERISA Affiliate and which is covered by Title IV of ERISA.
"NET INCOME" means the net income and net losses of the Borrower and its
Subsidiaries, determined in accordance with GAAP, but excluding therefrom
the sum of:
(i) proceeds of life insurance policies;
(ii) gains arising from (a) the sale or disposition of any assets
of the Borrower or its Subsidiaries which are not current assets, as
determined in accordance with GAAP, (b) any write-up, subsequent to
the date hereof, in the book value of any asset owned by the Borrower
or its Subsidiaries and (c) the acquisition by the Borrower or its
Subsidiaries of debt securities for a cost less than principal and
accrued interest thereon;
(iii) the net income of any Person other than a Subsidiary in
which the Borrower or a Subsidiary has any form of equity interest,
except to the extent such Person's net income has been actually
distributed and received by the Borrower or a
<PAGE>
Subsidiary in the form of cash or other property (the latter valued at
the fair market value thereof at the time of distribution);
(iv) any portion of the net income of any Subsidiary accrued
prior to the date it becomes a Subsidiary;
(v) extraordinary gains and losses (including, without
limitation, capital gains or losses in aggregate amounts exceeding
$100,000 in any one fiscal year) and extraordinary charges or credits;
(vi) any amounts paid or payable in any currency that, at the
time of determination of Net Income, is not fully convertible into
United States dollars;
(vii) net income of any successor to, or transferee corporation
of, the Borrower or its Subsidiaries prior to consummation of the
transaction that results in any related consolidation, merger or
transfer of assets; and
(viii) any deferred credit (or amortization of a deferred credit)
arising from the acquisition in any manner of any other Person.
"NOTES" means the promissory notes executed by the Borrower and payable to
the order of the Banks, in substantially the form of Exhibit "A" hereto,
and all extensions, renewals, and modifications thereof and each document
and instrument given in substitution therefor.
"OBLIGATED PARTY" means the Guarantor or any other Person who is or becomes
party to any agreement that guarantees or secures payment and performance
of the Obligations or any part thereof.
"OBLIGATIONS" means all obligations, indebtedness, and liabilities of the
Borrower to Agent and the Banks, or any or some of them, now existing or
hereafter arising, whether direct, indirect, related, unrelated, fixed,
contingent, liquidated, unliquidated, joint, several, or joint and several,
including, without limitation, the obligations, indebtedness, and
liabilities of the Borrower under this Agreement and the other Loan
Documents, and all interest accruing thereon and all attorneys' fees and
other expenses incurred in the enforcement or collection thereof.
"PAYOR" has the meaning assigned to it in Section 3.4 hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
<PAGE>
"PLAN" means any employee benefit or other plan established or maintained
by the Borrower or any ERISA Affiliate and which is covered by Title IV of
ERISA.
"PRIME RATE" means that variable rate of interest per annum established by
Agent from time to time as its "prime rate." Such rate is set by Agent as a
general reference rate of interest, taking into account such factors as
Agent may deem appropriate, it being understood that many of Agent's
commercial or other loans are priced in relation to such rate, that it is
not necessarily the lowest or best rate charged to any customer and that
Agent may make various commercial or other loans at rates of interest
having no relationship to such rate.
"PROHIBITED TRANSACTION" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Code.
"REAL PROPERTY" means the real property and interests in real property
identified on Exhibit "E" attached hereto and all improvements and fixtures
thereon and all appurtenances thereto.
"REGISTER" has the meaning assigned to it in Section 12.5(d) hereof.
"REPORTABLE EVENT" means any of the events set forth in Section 4043 of
ERISA.
"REQUIRED BANKS" means both Banks if there are only two Banks and the Banks
having at least 66-2/3% of the outstanding principal amount of all Advances
if there are more than two Banks.
"RESTRICTED INVESTMENTS" means all investments (including stock purchases,
capital contributions and advances, loans, guarantees and other extensions
of credit) of the Borrower or its Subsidiaries in any Persons, other than:
(a) Investments existing as of the date hereof, and disclosed to
Agent in writing prior to the date hereof;
(b) Investments in direct or indirect obligations of the United
States of America maturing within three years of acquisition;
(c) Investments in commercial paper maturing within 270 days of
acquisition and rated A-1 by S&P or Prime-1 by Moody's; and
(d) Investments in (i) certificates of deposit maturing within
two years after their date of acquisition and issued by Agent, a Bank
or banks incorporated in the United States of America having capital,
surplus and undivided profits of at least $100,000,000 or (ii) in
Eurodollar certificates of deposit maturing within one year after
their date of acquisition and issued by banks having capital, surplus
and undivided profits of at least $1 billion.
"REVOLVING CREDIT ADVANCE REQUEST" has the meaning assigned to it in
Section 2.5 hereof.
<PAGE>
"REVOLVING CREDIT COMMITMENT" means the obligation of the Banks to make
Advances hereunder in an aggregate principal amount at any one time
outstanding up to but not exceeding $3,000,000 as such amount may be
reduced pursuant to Section 2.7.
"REVOLVING CREDIT TERMINATION DATE" means 11:00 A.M. Houston, Texas time on
December 5, 1997, or such earlier date on which the Revolving Credit
Commitment terminates as provided in this Agreement.
"SELECTED RATE" means the rate of interest (either a Prime Rate or an
Adjusted Eurodollar Rate) which is applicable to the principal balance
under the Notes, or portions thereof, designated in accordance with Section
2.5 hereof, subject to the limitations of Sections 3.5 and 3.6 hereof.
"SHORT-TERM DEBT" means all Debt for borrowed money of the Borrower or its
Subsidiaries maturing on demand or within one year from the date of
determination.
"S&P" means Standard & Poor's Corporation.
"STATUTORY RESERVES" means the aggregate (without duplication) of the
highest maximum reserve percentages (expressed as a decimal fraction) of
Agent (including, without limitation, any basic, marginal, special,
emergency or supplemental reserves) established from time to time by the
Board of Governors of the Federal Reserve System and any other banking
authority to which Agent and the Banks are subject, with respect to any
Eurodollar Borrowing, for Eurocurrency Liabilities (as defined in
Regulation D of said Board). Such reserve percentages shall include,
without limitation, those imposed under Regulation D. Eurodollar Borrowings
shall be deemed to constitute "Eurocurrency Liabilities," as provided for
in Regulation D and to be subject to such reserve requirements without
benefit of or credit for proration, exceptions or offsets which may be
available from time to time to Agent or any Bank under Regulation D.
Statutory Reserves shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.
"SUBSIDIARY" means any Person of which or in which the Borrower and its
other Subsidiaries own or control, directly or indirectly, 50 percent or
more of (a) the combined voting power of all classes having general voting
power under ordinary circumstances to elect a majority of the board of
directors or equivalent body of such Persons, if it is a corporation, (b)
the capital interest or profits interest of such Person, if it is a
partnership, limited liability company, joint venture or similar entity, or
(c) the beneficial interest of such Person, if it is a trust, association
or other unincorporated association or organization.
"TANGIBLE NET WORTH" means the sum of all capital stock, capital in excess
of par value and retained earnings of the Borrower and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP, less (i) the
sum of all goodwill, trade names, trademarks, patents, organization
expense, unamortized debt discount and expense and other similar
intangibles
<PAGE>
properly classified as intangibles in accordance with generally accepted
accounting principles and (ii) write-ups of assets subsequent to the date
hereof.
"TOTAL CAPITALIZATION" means Tangible Net worth plus Funded Debt of the
Borrower and its Subsidiaries determined on a consolidated basis in
accordance with GAAP.
"WORKING CAPITAL" means, at any particular time, the amount by which
Current Assets exceed Current Liabilities.
I.2. OTHER DEFINITIONAL PROVISIONS. All definitions contained in this
Agreement are equally applicable to the singular and plural forms of the terms
defined. The words "hereof", 'herein", and "hereunder" and words of similar
import referring to this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Unless otherwise specified, all
Article and Section references pertain to this Agreement. All accounting terms
not specifically defined herein shall be construed in accordance with GAAP.
Terms used herein that are defined in the Uniform Commercial Code as adopted by
the State of Texas, unless otherwise defined herein, shall have the meanings
specified in the Uniform Commercial Code as adopted by the State of Texas.
II
ADVANCES
II.1. COMMITMENT. Subject to the terms and conditions of this Agreement,
each Bank agrees to make one or more Advances to the Borrower from time to time
from the date hereof to and including the Revolving Credit Termination Date,
provided that the aggregate amount of all Advances at any time outstanding shall
not exceed the Revolving Credit Commitment plus the face amount of outstanding
Credits. Subject to the foregoing limitations, and the other terms and
provisions of this Agreement, the Borrower may borrow, repay, and reborrow
hereunder.
II.2. THE NOTES. The obligation of the Borrower to repay the Advances shall
be evidenced by the Notes.
II.3. REPAYMENT OF ADVANCES. The Borrower shall repay the unpaid principal
amount of all Advances on the Revolving Credit Termination Date.
II.4. INTEREST. Interest shall be subject to the provisions of the Note and
the other provisions of this Article II.
II.5. PROCEDURE FOR ADVANCES UNDER THE REVOLVING CREDIT COMMITMENT. Prior
to the Revolving Credit Termination Date, the Borrower shall give Agent a
written notice executed on behalf of the Borrower by any Authorized Financial
Officer of the Borrower (the "REVOLVING CREDIT ADVANCE REQUEST") of any proposed
Advance under the Revolving Credit Commitment which shall be irrevocable. Each
Revolving Credit Advance Request shall be received by Agent not later than 2:00
p.m. Houston, Texas time, by the Agent, as long as the Agent is the only Bank,
and mutually by the
<PAGE>
Agent, the Borrower and Banks if there is more than one Bank, (i) the same
Business Day of any proposed Floating Rate Borrowing requested by the Borrower,
and (ii) at least two Business Days prior to any proposed Eurodollar Borrowing
requested by the Borrower. Each such Revolving Credit Advance Request shall
specify: (i) the Selected Rate which the Borrower desires; (ii) the principal
amount proposed to be covered by the Selected Rate; (iii) the borrowing date
(which shall be a Business Day); and (iv) a proposed Interest Period. The Agent
shall notify each Bank of the contents of each such notice. Not later than 3:00
p.m., Houston, Texas time (or such other time as may be agreed upon between the
Agent, the Borrower and the Banks if there is more than one Bank) on the date
specified for the Advance hereunder, each Bank will make available to the Agent
at the Principal Office in immediately available funds, for the account of the
Borrower, its pro rata share of the Revolving Credit Advance. After the Agent's
receipt of such funds and subject to the other terms and conditions of this
Agreement, the Agent will make the Revolving Credit Advance available to the
Borrower by depositing the same, in immediately available funds, in an account
of the Borrower (designated by the Borrower) maintained with the Agent at
Agent's principal office. If the required Revolving Credit Advance Request has
not been received by Agent prior to the expiration of any then relevant Interest
Period with respect to any Advance, the Borrower shall be deemed to have elected
to repay such Advance in whole on the last day of the current Interest Period
with respect thereto and to reborrow the principal amount of such Advance on
such date as a Floating Rate Borrowing. Agent is hereby authorized to act in
reliance upon a certificate of incumbency from the Borrower's Secretary or
Assistant Secretary as to the identity of the foregoing officers and their due
appointment and authorization to issue Revolving Credit Advance Requests and
receive proceeds of Advances hereunder on behalf of the Borrower unless and
until Agent is in actual receipt of written notice by the Borrower of revocation
of said appointment and authorization. Prior to 2:00 p.m. Houston, Texas, time
on each borrowing date and subject to the provisions of SECTION 2.1, Agent shall
make available to the Borrower in immediately available funds the requested
Advance by deposit to the Borrower's deposit account maintained with Agent or
such other reasonable disposition of such funds as the Borrower shall request of
Agent in writing. Agent shall, and is hereby authorized by the Borrower to,
endorse on the Schedule attached to the Note or on a continuation of such
Schedule attached to and made a part of such Note an appropriate notation
evidencing the date and amount of each Advance and payment and prepayment by the
Borrower of the principal of and interest on the Advance evidenced by such Note,
the Selected Rate of the Advance made and the Selected Rate of the Advance
repaid, but the failure of Agent to make any such endorsement or any incorrect
endorsement shall not subject Agent or any Bank to any liability hereunder and
shall not limit, enlarge or otherwise affect the Obligations of the Borrower
under the Note.
II.6. USE OF PROCEEDS. The proceeds of Advances shall be used for the
Borrower's general working capital purposes.
II.7. CONVERSION AND CONTINUATION OPTIONS. (a) The Borrower may elect from
time to time to convert Eurodollar Borrowings to Floating Borrowings by giving
Agent at least two Business Days' prior irrevocable notice of such election,
PROVIDED that any such conversion of Eurodollar Borrowings shall only be made on
the last day of an Interest Period with respect thereto. The Borrower may elect
from time to time to convert Floating Rate Borrowings to Eurodollar Borrowings
by giving Agent at least two Business Days' prior irrevocable notice of such
election. All or any part of outstanding Eurodollar Borrowings and Floating Rate
Borrowings may be converted as provided herein,
<PAGE>
PROVIDED that (i) no Advance may be converted into a Eurodollar Borrowing when
any Default or Event of Default has occurred and is continuing, (ii) partial
conversions shall be in an aggregate principal amount of (A) in the case of any
conversion of Floating Rate Borrowings, $10,000 or a whole multiple of $10,000
in excess thereof and (B) in the case of any conversion of Eurodollar
Borrowings, at least $10,000, (iii) any such conversion may only be made if,
after giving effect thereto, SUBSECTION 2.8(c) shall not have been contravened
and (iv) no Advance may be converted to a Eurodollar Borrowing after the date
that is one month prior to the Revolving Credit Termination Date.
(a) Any Eurodollar Borrowing may be continued as such upon the expiration
of an Interest Period with respect thereto by compliance by the Borrower with
the notice provisions contained in SECTION 2.5; PROVIDED that no Eurodollar
Borrowing may be continued as such when any Default or Event of Default has
occurred and is continuing, but shall be automatically converted to a Floating
Rate Borrowing on the last day of the Interest Period, in effect for such
Advance, during which such Default or Event of Default occurs; and PROVIDED,
FURTHER, that if the Borrower shall not have complied with such notice
provisions, the Borrower shall be deemed irrevocably to have requested that such
Eurodollar Borrowing be converted to a Floating Rate Borrowing on the last day
of such Interest Period.
(b) Any borrowings, conversions, payments and prepayments hereunder shall
be in such amounts and be made pursuant to such elections so that, after giving
effect thereto, the unpaid principal amount of Eurodollar Borrowings shall not
be less than $100,000.
III
PAYMENTS
III.1. METHOD OF PAYMENT. All payments of principal, interest, and other
amounts to be made by the Borrower under this Agreement, the Notes, and the
other Loan Documents shall be made to Agent, for the benefit of the Banks, at
its office at 1000 Louisiana, Houston, Texas 77002, without setoff, deduction,
or counterclaim, in Dollars and in immediately available funds. The Borrower
shall, at the time of making each such payment, specify to Agent the sums
payable by the Borrower under this Agreement, the Notes, or other Loan Document
to which such payment is to be applied. In the event the Borrower fails to so
specify, or if an Event of Default has occurred and is continuing, Agent may
apply such payment to the Obligations in such order and manner as it may elect
in its sole discretion. Each payment received by the Agent under this Agreement
or any other Loan Document for the benefit of a Bank shall be paid promptly to
such Bank, in immediately available funds, for the account of such Bank's
Applicable Lending Office (and if not paid promptly shall be accompanied by
interest thereon at a per annum rate equal to the Federal Funds Rate for the
period commencing on the date due until paid). Whenever any payment under this
Agreement, the Notes, or any other Loan Document shall be stated to be due on a
day that is not a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of the payment of interest.
<PAGE>
III.2. PREPAYMENT. The Borrower may prepay the Notes in whole at any time
or from time to time in part without premium or penalty but with accrued
interest to the date of prepayment on the amount so prepaid, provided that each
partial prepayment shall be in the principal amount of $25,000.00 or an integral
multiple thereof.
III.3. PRO RATA TREATMENT. Except to the extent otherwise provided herein:
(a) the making of Advances shall be made pro rata among the Banks according to
the amounts of their respective Commitments; (b) each payment and prepayment of
principal of or interest on Advances by the Borrower shall be made to the Agent
for the benefit of the Banks holding Advances pro rata in accordance with the
respective unpaid principal amounts of such Advances held by such Banks; and (d)
Interest Periods for Advances shall be allocated among the Banks holding
Advances pro rata according to the respective principal amounts held by such
Banks.
III.4. NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Agent shall have been
notified by a Bank or the Borrower (the "Payor") prior to the date on which such
Bank is to make payment to the Agent of the proceeds of a Loan to be made by it
hereunder or the Borrower is to make a payment to the Agent for the account of
one or more of the Banks, as the case may be (such payment being herein called
the "Required Payment"), which notice shall be effective upon receipt, that the
Payor does not intend to make the Required Payment to the Agent, the Agent may
assume that the Required Payment has been made and may, in reliance upon such
assumption (but shall not be required to), make the amount thereof available to
the intended recipient on such date and, if the Payor has not in fact made the
Required Payment to the Agent, the recipient of such payment shall, on demand,
pay to the Agent the amount made available to it together with interest thereon
in respect of the period commencing on the date such amount was so made
available by the Agent until the date the Agent recovers such amount at a rate
per annum equal to the Federal Funds Rate for such period.
III.5. COMPUTATION OF INTEREST. Interest on all Prime Rate Advances and the
Credit Fees hereunder shall be calculated on the basis of a year of 365/366 days
for the actual number of days elapsed. Interest on all Eurodollar Borrowings
shall be calculated on the basis of a year of 360 days, for the actual number of
days elapsed. Agent shall, as promptly as is practicable, notify the Borrower of
each determination of an Adjusted Eurodollar Rate, and of each change in the
Prime Rate, in accordance with the Agent's customary practices. Any changes in
the rate of interest on the Notes resulting from changes in the Prime Rate shall
become effective as of the opening of business on the day on which such change
in the Prime Rate shall occur. If at any time during the term of the Advance the
rate of interest applicable to any Advance would otherwise exceed the Maximum
Rate, the rate of interest on such Advance shall be limited to the Maximum Rate,
but any subsequent reduction in such interest rate will not reduce the rate of
interest below the Maximum Rate until the total amount of interest earned,
measured by a dollar amount, equals the amount of interest which would have been
earned, measured by a dollar amount, if the interest rate had not been held at
the Maximum Rate. After maturity (stated or by acceleration) of the Notes, the
Notes shall, at the option of Agent, bear interest at the Default Rate until the
Notes are paid in full.
III.6. RESERVE AND CAPITAL ADEQUACY PROVISIONS. (a) The Borrower agrees to
indemnify the Banks against, and pay to the Banks within 10 Business Days of
demand therefor, amounts equal to:
<PAGE>
(i) the cost of any increased present and future reserve, capital adequacy
(which are directly related to the cost of funds) or special deposit
requirements or any taxes (other than federal, state, or local income,
franchise, gross profit or other taxes on the overall operations of the Banks),
domestic or foreign, which the Banks are required to keep or pay by reason of
its funding any portion of the Advance bearing interest at an Adjusted
Eurodollar Rate or by reason of or under any outstanding Credits or unfunded
commitments under the Revolving Credit Commitment; (ii) any costs or expenses
incurred by the Banks as a result of the Borrower's failure to borrow a portion
of the Advance to bear interest at an Adjusted Eurodollar Rate once requested
and/or the Borrower's payment or conversion to another Selected Rate hereunder
whether as a result of an acceleration of maturity or otherwise) of all or a
portion of the Advance bearing interest at an Adjusted Eurodollar Rate prior to
the end of the Interest Period and/or the Borrower's failure to make any payment
hereunder when due, including, without limitation, any loss arising from the
reemployment of funds at rates lower than the cost to the Banks of such funds. A
certificate of any Bank, setting forth in reasonable detail the basis for the
determination of such costs and expenses shall be conclusive, absent manifest
error. In determining such amount or amounts, such Bank may use any reasonable
averaging and attribution methods.
(a) In addition to the foregoing provisions, if after the date hereof, any
Bank shall have determined that the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Bank with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on such Bank's capital as a consequence of its
obligations hereunder or the transactions contemplated hereby to a level below
that which such Bank could have achieved but for such adoption, change or
compliance (taking into consideration such Bank's policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, within 10 Business Days after demand by such Bank, the Borrower
shall pay to such Bank such additional amount or amounts as will compensate such
Bank for such reduction. A certificate of any Bank claiming compensation under
this Section 3.4 and setting forth the additional amount or amounts to be paid
to it hereunder shall be conclusive, absent manifest error. In determining such
amount or amounts, such Bank may use any reasonable averaging and attribution
methods.
III.7. LIMITATION ON EURODOLLAR BORROWINGS. If, at any time that an
Adjusted Eurodollar Rate is to be determined or a Eurodollar Borrowing is to be
made or continued by Agent or the Banks, Agent reasonably determines that:
(a) with respect to any Advance to bear interest at the Adjusted
Eurodollar Rate, eurodollar deposits in the appropriate amount and for the
appropriate period are not being offered in the interbank eurodollar
market, Agent shall promptly give notice thereof to the Borrower (and such
determination shall be conclusive on the Borrower), and thereafter no new
Eurodollar Borrowings shall be permitted to be outstanding until such time
as eurodollar deposits for the appropriate amount and for the appropriate
periods are again offered in the interbank eurodollar market; or
<PAGE>
(b) the Adjusted Eurodollar Rate will not adequately and fairly
reflect the cost to the Banks of making, maintaining, or funding a proposed
Advance that the Borrower has requested be made or continued as or
converted into an Advance bearing interest at the Adjusted Eurodollar Rate,
then Agent shall promptly give notice to the Borrower of such
determination, and any such requested Advance shall bear interest at the
Prime Rate; or
(c) as a result of changes after the date of this Agreement in the
laws of any country or state (domestic or foreign), or the adoption or
making after such date of any interpretations, directives, or regulations
(whether or not having the force of law) by any court, governmental
authority, or reserve bank charged with the interpretation or
administration thereof, it shall be or become unlawful or impossible for
any Bank to make, maintain, or fund any Advance bearing an Adjusted
Eurodollar Rate of interest, the Banks' obligation to make the affected
Advance shall be automatically cancelled, and the affected Advance shall be
automatically converted to an Advance bearing interest at the Prime Rate,
and the Borrower shall pay the Banks any amounts necessary to compensate
the Banks for any such conversion which occurs prior to the last day of the
then current Interest Period for such Advance, in accordance with Section
3.4 hereof.
III.8. DETERMINATION OF INTEREST RATES. Agent shall correctly calculate
each interest rate applicable to the Advances hereunder. Agent will, at the
request of the Borrower, furnish such additional information concerning the
calculation of the interest rate on any Eurodollar Borrowings as the Borrower
may reasonably request. Additionally, Agent may fund Advances hereunder bearing
an Adjusted Eurodollar Rate of interest at any office of Agent which Agent, in
its sole discretion, may elect and at which the Borrower maintains an account
capable of receiving such funding.
III.9. NO PREPAYMENT DURING AN INTEREST PERIOD. The Borrower shall not make
any prepayments on any portion of any Eurodollar Borrowing on a day that is not
the last day of the applicable Interest Period with respect to the same.
IV
GUARANTY
IV.1. GUARANTY. By execution and delivery of the Guaranty, the Guarantor
shall unconditionally and irrevocably guarantee payment of the indebtedness
evidenced by the Note and all other indebtedness created by, and amounts payable
by the Borrower under, this Agreement, to the extent stated in such Guaranty.
V
CONDITIONS PRECEDENT
V.1. INITIAL ADVANCE. The obligation of the Banks to make the initial
Advance is subject to the condition precedent that the Agent shall have received
on or before the day of such Advance all of the following, each dated (unless
otherwise indicated) the date hereof, in form and substance satisfactory to the
Agent:
(a) RESOLUTIONS. Resolutions of the Board of Directors of the Borrower
and the Guarantor certified by its respective Secretary or an Assistant
Secretary which authorize the execution, delivery, and performance by the
Borrower and the Guarantor, as applicable, of this Agreement and the other
Loan Documents to which the Borrower or the Guarantor is or is to be a
party;
(b) INCUMBENCY CERTIFICATE. A certificate of incumbency certified by
the respective Secretary or an Assistant Secretary of the Borrower and the
Guarantor certifying the names of the officers of the Borrower and the
Guarantor, as applicable, authorized to sign this Agreement and each of the
other Loan Documents to which the Borrower or the Guarantor, as applicable,
is or is to be a party (including the certificates contemplated herein)
together with specimen signatures of such officers;
(c) GOOD STANDING CERTIFICATES. Evidence from the appropriate
government officials of the state of Nevada as to the existence and good
standing of the Borrower and the Guarantor;
(d) NOTE. The Note executed by the Borrower;
(e) GUARANTY. The Guaranty executed by the Guarantor;
(f) INSURANCE POLICIES. Evidence acceptable to the Agent of the
existence of the insurance coverage required pursuant to Section 7.5; and
(g) UCC SEARCH. The results of a Uniform Commercial Code search
showing all financing statements and other documents or instruments on file
against the Borrower in the office of the Secretary of State of Texas, such
search to be dated a current date.
V.2. ALL ADVANCES. The obligation of the Banks to make any Advance
(including the initial Advance) is subject to the following additional
conditions precedent:
(a) ADVANCE REQUEST FORM. The Agent shall have received, at least one
Business Day prior to the date of such Advance, an Advance Request Form,
dated the date of such Advance, executed by an authorized officer of the
Borrower, all of the statements in which shall be true and correct on and
as of such date; and
(b) ADDITIONAL DOCUMENTATION. The Agent shall have received such
additional approvals, opinions, or documents as the Agent or its legal
counsel may reasonably request.
<PAGE>
VI
REPRESENTATIONS AND WARRANTIES
TO INDUCE THE AGENT AND EACH BANK TO ENTER INTO THIS AGREEMENT, THE
BORROWER REPRESENTS AND WARRANTS TO THE AGENT AND EACH BANK THAT:
VI.1. CORPORATE EXISTENCE. The Borrower (a) is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation; (b) has all requisite corporate power and
authority to own its assets and carry on its business as now being or as
proposed to be conducted; and (c) is qualified to do business in all
jurisdictions in which the nature of its business makes such qualification
necessary and where failure to so qualify would have a material adverse effect
on its business, condition (financial or otherwise), operations, prospects, or
properties. The Borrower has the corporate power and authority to execute,
deliver, and perform its obligations under this Agreement and the other Loan
Documents to which it is or may become a party.
VI.2. FINANCIAL STATEMENTS. The Borrower has delivered to the Agent
unaudited consolidated financial statements of the Borrower as of September 30,
1996. Such financial statements are true and correct, have been prepared in
accordance with GAAP, and fairly and accurately present the financial condition
of the Borrower as of the date indicated therein and the results of operations
for the period indicated therein. The Borrower has no material contingent
liabilities, liabilities for taxes, material forward or long-term commitments,
or unrealized or anticipated losses from any unfavorable commitments not
reflected in such financial statements. There has been no material adverse
change in the business, condition (financial or otherwise), operations,
prospects, or properties of the Borrower since the effective date of the most
recent financial statements referred to in this Section.
VI.3. CORPORATE ACTION; NO BREACH. The execution, delivery, and performance
by the Borrower of this Agreement and the other Loan Documents to which the
Borrower is or may become a party have been duly authorized by all requisite
action on the part of the Borrower and do not and will not violate or conflict
with the articles of incorporation or bylaws of the Borrower or any law, rule,
or regulation or any order, writ, injunction, or decree of any court,
governmental authority, or arbitrator, and do not and will not conflict with,
result in a breach of, or constitute a default under, or result in the creation
or imposition of any Lien upon any of the revenues or assets of the Borrower
pursuant to the provisions of any indenture, mortgage, deed of trust, security
agreement, franchise, permit, license, or other instrument or agreement by which
the Borrower or any of its properties is bound.
VI.4. OPERATION OF BUSINESS. The Borrower possesses all licenses, permits,
franchises, patents, copyrights, trademarks, and trade names, or rights thereto,
to conduct its business substantially as now conducted and as presently proposed
to be conducted, and the Borrower is not in violation of any valid rights of
others with respect to any of the forgoing.
<PAGE>
VI.5. LITIGATION AND JUDGMENTS. There is no action, suit, investigation, or
proceeding before or by any court, governmental authority, or arbitrator
pending, or to the knowledge of the Borrower, threatened against or affecting
the Borrower, that would, if adversely determined, have a material adverse
effect on the business, condition (financial or otherwise), operations,
prospects, or properties of the Borrower or the ability of the Borrower to pay
and perform the Obligations. There are no outstanding judgments against the
Borrower.
VI.6. RIGHTS IN PROPERTIES, LIENS. The Borrower has good and indefeasible
title to or valid leasehold interests in its properties and assets, real and
personal, including the properties, assets, and leasehold interests reflected in
the financial statements described in Section 6.2, and none of the properties,
assets, or leasehold interests of the Borrower is subject to any Lien, except as
permitted by Section 8.3.
VI.7. ENFORCEABILITY. This Agreement constitutes, and the other Loan
Documents to which the Borrower is a party, when delivered, shall constitute the
legal, valid, and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms, except as limited by
bankruptcy, insolvency, or other laws of general application relating to the
enforcement of creditor's rights.
VI.8. APPROVALS. No authorization, approval, or consent of, and no filing
or registration with, any court, governmental authority, or third party is or
will be necessary for the execution, delivery, or performance by the Borrower of
this Agreement and the other Loan Documents to which the Borrower is or may
become a party or the validity or enforceability thereof.
VI.9. TAXES. The Borrower has filed all tax returns (federal, state, and
local) required to be filed, including all income, franchise, employment,
property, and sales taxes, and have paid all of their respective liabilities for
taxes, assessments, and governmental charges and other levies that are due and
payable, and the Borrower knows of no pending investigation of the Borrower by
any taxing authority or of any pending but unassessed tax liability of the
Borrower.
VI.10. USE OF PROCEEDS; MARGIN SECURITIES. The Borrower is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T, U, or X of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any extension of credit under
this Agreement will be used to purchase or carry any such margin stock or to
extend credit to others for the purpose of purchasing or carrying margin stock.
VI.11. ERISA. The Borrower has complied with all applicable minimum funding
requirements and all other applicable and material requirements of ERISA, and
there are no existing conditions that would give rise to liability thereunder.
No Reportable Event has occurred in connection with any Plan that might
constitute grounds for the termination thereof by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer such Plan.
<PAGE>
VI.12. DISCLOSURE. No statement, information, report, representation, or
warranty made by the Borrower in this Agreement or in any other Loan Document or
furnished to the Agent or any Bank in connection with this Agreement or any of
the transactions contemplated hereby contains any untrue statement of a material
fact or omits to state any material fact necessary to make the statements herein
or therein not misleading. There is no fact known to the Borrower which has a
material adverse effect, or which might in the future have a material adverse
effect, on the business, condition (financial or otherwise), operations,
prospects, or properties of the Borrower that has not been disclosed in writing
to the Agent.
VI.13. SUBSIDIARIES. The Borrower has no Subsidiaries other than Cogniseis
Development, Inc., Symtromix Corporation and Syntron, Inc.
VI.14. AGREEMENTS. The Borrower is not a party to any indenture, loan, or
credit agreement, or to any lease or other agreement or instrument, or subject
to any charter or corporate restriction which could have a material adverse
effect on the business, condition (financial or otherwise), operations,
prospects, or properties of the Borrower, or the ability of the Borrower to pay
and perform its obligations under the Loan Documents to which it is a party. the
Borrower is not in default in any material respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which it is
a party.
VI.15. COMPLIANCE WITH LAWS. (i) the Borrower is not: (x) in default with
respect to any order, writ, injunction or decree of any court to which it is a
named party, or (y) in default under any law, rule, regulation, ordinance or
order relating to its or their respective businesses, the sanctions and
penalties resulting from which defaults described in clauses (x) and (y) would,
individually or in the aggregate, have a material adverse effect on the
business, properties, operations, assets or financial condition of the Borrower.
(i) The Borrower is not a "national" of a "designated foreign country", a
Person defined as a "designated foreign country", an entity defined as "Iran" or
an "Iranian Entity," an entity defined as "Nicaragua" or a "Nicaraguan," an
"Entity controlled by the South African Government," or an entity defined as the
"Government of Libya" or a "Libyan Person" within the meaning of definitions in
the Foreign Asset Control, Cuban Assets Control, Iranian Assets Control,
Nicaraguan Control, South African Transaction or Libyan Sanctions Regulations of
the Unites States Treasury Department.
VI.16. INVESTMENT COMPANY ACT. The Borrower is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
VI.17. PUBLIC UTILITY HOLDING COMPANY ACT. The Borrower is not a "holding
company" or a "subsidiary company" of a "holding company" or an "affiliate" of a
"holding company" or a "public utility" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
VI.18. ENVIRONMENTAL MATTERS.
<PAGE>
(a) The Borrower, and all of its properties, assets, and operations
are in compliance with all Environmental Laws. The Borrower is not aware
of, nor has the Borrower received notice of, any past, present, or future
conditions, events, activities, practices, or incidents which may interfere
with or prevent the compliance or continued compliance of the Borrower with
all Environmental Laws.
(b) The Borrower has obtained all permits, licenses, and
authorizations which are required under Environmental Laws.
(c) There is no action, suit, proceeding, investigation, or inquiry
before any court, administrative agency, or other governmental authority
pending or, to the knowledge of the Borrower, threatened against the
Borrower relating in any way to any Environmental Law. The Borrower (i)
does not have any liability for remedial action under any Environmental
Law, (ii) has not received any request for information by any governmental
authority with respect to the condition, use, or operation of any of its
properties or assets, or (iii) has not received any notice from any
governmental authority or other Person with respect to any violation of or
liability under any Environmental Law.
(d) No Lien arising under any Environmental Law has attached to any of
the properties or assets of the Borrower.
VII
POSITIVE COVENANTS
THE BORROWER COVENANTS AND AGREES THAT, AS LONG AS THE OBLIGATIONS OR ANY
PART THEREOF ARE OUTSTANDING OR ANY BANK HAS ANY COMMITMENT HEREUNDER, THE
BORROWER WILL PERFORM AND OBSERVE THE FOLLOWING POSITIVE COVENANTS, UNLESS THE
REQUIRED BANKS SHALL OTHERWISE CONSENT IN WRITING:
VII.1. REPORTING REQUIREMENTS. The Borrower will furnish to the Agent:
(a) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and in any
event within 45 days after the end of each of the first three quarters of
each fiscal year of the Borrower and 90 days after the end of the fourth
quarter of each fiscal year of the Borrower, a copy of an unaudited
consolidated financial report of the Borrower as of the end of such fiscal
quarter and for the portion of the fiscal year then ended, containing
balance sheets, statements of income, statements of retained earnings and
cash flows, in each case setting forth in comparative form the figures for
the corresponding period of the preceding fiscal year, all in reasonable
detail certified by the Treasurer or Assistant Treasurer of the Borrower to
have been prepared in accordance with GAAP and to fairly and accurately
present (subject to year-end audit adjustments) the financial condition and
results of operations of the Borrower at the date and for the periods
indicated therein;
<PAGE>
(b) CERTIFICATE OF NO DEFAULT. Concurrently with the delivery of each
of the financial statements referred to in subsections 7.01(a), a
certificate of the Treasurer or Assistant Treasurer of the Borrower (i)
stating that to the best of such officer's knowledge, (a) no Default or
Event of Default has occurred and is continuing, or if Default or an Event
of Default has occurred and is continuing, a statement as to the nature
thereof and the action which is proposed to be taken with respect thereto
and (b) no material adverse change has occurred in the condition of the
Borrower either financial or otherwise, and (ii) showing in reasonable
detail the calculations demonstrating compliance with Article IX;
(c) NOTICE OF LITIGATION. Promptly after the commencement thereof,
notice of all actions, suits, and proceedings before any court or
governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting the Borrower in which the
damages sought exceed $250,000;
(d) NOTICE OF DEFAULT. As soon as possible and in any event within
five days after the occurrence of each Default or Event of Default, a
written notice setting forth the details of such Default or Event of
Default or the action which the Borrower has taken and proposes to take
with respect thereto; and
(e) GENERAL INFORMATION. Promptly, such other information concerning
the Borrower as the Agent may from time to time reasonably request.
VII.2. MAINTENANCE OF EXISTENCE. The Borrower will preserve and maintain
its corporate existence and all of its leases, privileges, licenses, permits,
franchises, qualifications, and rights that are necessary or desirable in the
ordinary conduct of its business as presently conducted in an orderly and
efficient manner in accordance with good business practices except as permitted
pursuant to Sections 8.5 and 8.6.
VII.3. MAINTENANCE OF PROPERTIES. The Borrower will maintain, keep, and
preserve all of its properties (tangible and intangible) necessary or useful in
the proper conduct of its business in good working order and condition ordinary
wear and tear excepted.
VII.4. TAXES AND CLAIMS. The Borrower will pay or discharge at or before
maturity or before becoming delinquent (i) all taxes, levies, assessments, and
governmental charges imposed on it or its income or profits or any of its
property, and (ii) all lawful claims for labor, material, and supplies, which,
if unpaid, might become a Lien upon any of its property; provided, however, that
the Borrower shall not be required to pay or discharge any tax, levy,
assessment, or governmental charge which is being contested in good faith by
appropriate proceedings diligently pursued, and for which adequate reserves have
been established.
VII.5. INSURANCE. The Borrower will maintain or cause to be maintained,
with financially sound and reputable insurance companies workmen's compensation
insurance, liability insurance, and insurance on its property, assets, and
business at least in such amounts and against such
<PAGE>
risks as are usually insured against by Persons engaged in similar businesses
and in no less than the amounts in existence on the date of this Agreement.
VII.6. INSPECTION RIGHTS. At any reasonable time and from time to time, the
Borrower will permit representatives of the Agent to examine and make copies of
the books and records of, and visit and inspect the properties of the Borrower,
and to discuss the business, operations, and financial condition of the Borrower
with its officers and employees.
VII.7. KEEPING BOOKS AND RECORDS. The Borrower will maintain proper books
of record and account in which full, true, and correct entries in conformity
with GAAP shall be made of all dealings and transactions in relation to its
business and activities.
VII.8. COMPLIANCE WITH LAWS. The Borrower will comply with all laws, rules
and regulations relating to its business, other than the laws, rules and
regulations the failure to comply with which and the sanctions and penalties
resulting therefrom, when taken together with the failure to comply with all
other laws, rules and regulations and the sanctions and penalties resulting
therefrom, would not have an adverse effect on the operations, business,
property, assets or financial condition of the Borrower, or would not result in
the creation of a Lien which, if incurred in the ordinary course of business,
would not be permitted by Section 8.3 on any of the property of the Borrower;
provided, however, that the Borrower shall not be required to comply with laws,
rules and regulations the validity or applicability of which are being contested
in good faith and by appropriate proceedings.
VII.9. COMPLIANCE WITH AGREEMENTS. The Borrower will comply in all material
respects with all agreements, contracts, and instruments binding on it or
affecting its properties or business, if the failure to comply with such
agreements, contracts and instruments could have a material adverse effect on
the business, condition (financial or otherwise), operations, prospects or
properties of the Borrower.
VII.10. FURTHER ASSURANCES. The Borrower will execute and deliver such
further instruments as may be requested by the Agent to carry out the provisions
and purposes of this Agreement and the other Loan Documents.
VII.11. ERISA. The Borrower will comply with all minimum funding
requirements, and all other material requirements, of ERISA, if applicable, so
as not to give rise to any liability thereunder.
VII.12. CHANGE IN BUSINESS. The Borrower shall continue to carry on
substantially in the same types of business carried on by the Borrower as of the
date hereof and activities which are ancillary, incidental or necessary to the
ongoing business of the Borrower.
VIII
NEGATIVE COVENANTS
<PAGE>
THE BORROWER COVENANTS AND AGREES THAT, AS LONG AS THE OBLIGATIONS OR ANY
PART THEREOF ARE OUTSTANDING OR ANY BANK HAS ANY COMMITMENT HEREUNDER, THE
BORROWER WILL PERFORM AND OBSERVE THE FOLLOWING NEGATIVE COVENANTS, UNLESS THE
REQUIRED BANKS SHALL OTHERWISE CONSENT IN WRITING:
VIII.1. LEASE RENTALS. The Borrower will not, at any time, permit Aggregate
Long-Term Lease Rentals to exceed 15% of Tangible Net Worth; provided, however,
that Aggregate Long- Term Lease Rentals may exceed 15% of Tangible Net Worth to
the extent that such Aggregate Long-Term Lease Rentals in excess of 15%
constitute Capitalized Lease Obligations, which, if included as Funded Debt,
could be incurred under Section 8.2.
VIII.2. DEBT. The Borrower will not, and will not permit its Subsidiaries
to, create, assume, incur, guarantee or otherwise become liable, directly or
indirectly, in respect of any Debt other than:
(a) The Note;
(b) Funded Debt of the Borrower and its Subsidiaries existing on the
date hereof and reflected in the financial statements referred to in
Section 6.2;
(c) Other Funded Debt of the Borrower, if after giving effect thereto
and to the application of the proceeds thereof, Funded Debt of the Borrower
and its Subsidiaries determined on a consolidated basis in accordance with
GAAP then to be outstanding would not exceed 55% of Total Capitalization;
(d) Debt to the Guarantor; and
VIII(cc) Acceptable Permanent Financing.
VIII.3. LIENS. The Borrower will not, and will not permit its Subsidiaries
to, create, assume, incur or permit to exist, directly or indirectly, any Lien
on its properties or assets, whether now owned or hereafter acquired, except:
(a) Liens existing on property of the Borrower and its Subsidiaries
and Capitalized Leases of the Borrower and its Subsidiaries as of the date
hereof;
(b) Liens, pledges or deposits in connection with workman's
compensation, social security, taxes, assessments or other similar charges
or deposits required to be made in the ordinary course of business and not
in connection with borrowing money;
<PAGE>
(c) Construction or materialmen's or warehousemen's Liens securing
obligations not overdue, or if overdue, being contested in good faith by
appropriate proceedings;
(d) Pledges or deposits for the purpose of securing a stay or
discharge of the course of any legal proceedings, providing the aggregate
amount of said deposits does not exceed $150,000;
(e) Encumbrances in the nature of zoning restrictions, easements,
rights and restrictions of record on the use of real property, landlord's
and lessor's liens in the ordinary course of business, which do not
materially detract from the value of such property or impair the use
thereof;
(f) Liens incurred in connection with progress payments made by the
United States of America with respect to government contracts entered into
with the United States of America or a contractor performing a government
contract or with respect to inventory purchased in connection with such
government contracts;
(g) Liens on property acquired by the Borrower or its Subsidiaries
after the date hereof, created in respect of such property within 180 days
after the date of acquisition thereof and not extending to other property
of the Borrower or its Subsidiaries and Capitalized Lease Obligations
incurred subsequent to the date hereof; provided that, the Debt secured by
such Lien or Capitalized Lease Obligations does not exceed 100% of the
purchase price of such Property; and
VIII(h) Acceptable Encumbrances.
VIII.4. MERGER AND CONSOLIDATION. The Borrower will not merge or
consolidate with any Person, except that:
(a) The Borrower may consolidate with or merge into any Person or sell
or otherwise transfer substantially all of its assets, or permit any other
Person to merge into it, provided that immediately after giving effect
thereto,
(i) The Borrower or another subsidiary of the Guarantor shall be
the successor corporation, which corporation shall be a corporation
organized under the laws of a state of the United States having
substantially all of its assets in the United States and conducting
substantially all of its business in the United States; and
(ii) The Borrower shall be in compliance with all provisions of
this Agreement, or if the Borrower is not the successor corporation,
the obligations of the Borrower with respect to the Note shall be
assumed in writing by
<PAGE>
such other subsidiary of the Guarantor, and such other subsidiary of
the Guarantor shall be in compliance with all provisions of this
Agreement.
VIII.5. SALE OF ASSETS. The Borrower will not, and will not permit its
Subsidiaries to, sell, lease, transfer or otherwise dispose of any assets, in
one or a series of transactions, other than in the ordinary course of business,
to any Person if in any twelve month period of the Borrower, after giving effect
to such sale, lease, transfer or other disposition, the aggregate of the greater
of book or fair market value of all such assets sold, leased, transferred or
otherwise disposed of in such twelve month period would exceed 20% of Tangible
Net Worth.
VIII.6. DEALINGS WITH AFFILIATES. The Borrower will not enter into any
transaction (including the furnishing of goods or services) with an Affiliate
except in the ordinary course of business as presently conducted (which includes
the payment of management fees and the provision of funds for payment of taxes)
and on terms and conditions no less favorable to the Borrower than would be
obtained in a comparable arm's-length transaction with a Person not an
Affiliate.
VIII.7. LOANS AND INVESTMENTS. The Borrower will not make any advance,
loan, extension of credit, or capital contribution to or investment in, or
purchase any bonds, notes, debentures, or other securities of any Person, except
Restricted Investments and investments permitted under Section 8.4; provided,
however, that notwithstanding any provision of this Section 8.7 to the contrary,
the Borrower may make advances and loans to the Guarantor and to its
Subsidiaries.
VIII.8. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower will not (i)
conduct any activity which is likely to cause a release or threatened release of
any Hazardous Substance, or (i) conduct any activity or use any of their
respective properties or assets in any manner that is likely to violate any
Environmental Law.
IX
FINANCIAL COVENANTS
The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Bank has any commitment hereunder, the
Borrower will observe and perform the following financial covenants, unless the
Required Banks shall otherwise consent in writing:
IX.1. TANGIBLE NET WORTH. The Borrower will at all times maintain Tangible
Net Worth in an amount not less than $60,000,000.
IX.2. WORKING CAPITAL. The Borrower will at all times maintain Working
Capital in an amount not less than $20,000,000.
<PAGE>
IX.3. RELATIONSHIP OF FUNDED DEBT TO TOTAL CAPITALIZATION. The Borrower
will not at any time permit Funded Debt (excluding any intercompany or Affiliate
Debt) of the Borrower and its Subsidiaries to exceed 55% of its consolidated
Total Capitalizations..
IX.4. DEBT SERVICE RATIO. The Borrower will at all times maintain a Debt
Service Ratio of not less than 2.0 to 1.0.
IX.5. CAPITAL EXPENDITURES. The Borrower will not permit the aggregate
Capital Expenditures to exceed $6,000,000.00 during any fiscal year.
X
DEFAULT
X.1. EVENTS OF DEFAULT. Each of the following shall be deemed an "Event of
Default":
(a) The Borrower shall fail to pay when due the Obligations or any
part thereof and such failure shall have continued for three days.
(b) Any representation or warranty made or deemed made by the Borrower
or any Obligated Party (or any of their respective officers) in any Loan
Document or in any certificate, report, notice, or financial statement
furnished at any time in connection with this Agreement shall be false,
misleading, or erroneous in any material respect when made or deemed to
have been made.
(c) The Borrower or any Obligated Party shall fail to perform,
observe, or comply with any covenant, agreement, or term contained in this
Agreement or any other Loan Document and such failure shall have continued
for 30 days after management of the Borrower knows or should have known of
such failure.
(d) The Borrower or any Obligated Party shall commence a voluntary
proceeding seeking liquidation, reorganization, or other relief with
respect to itself or its debts under any bankruptcy, insolvency, or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian, or other similar official of it
or a substantial part of its property or shall consent to any such relief
or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it or shall make a
general assignment for the benefit of creditors or shall generally fail to
pay its debts as they become due or shall take any corporate action to
authorize any of the foregoing.
(e) An involuntary proceeding shall be commenced against the Borrower
or any Obligated Party seeking liquidation, reorganization, or other relief
with respect to it or its debts under any bankruptcy, insolvency, or other
similar law now or
<PAGE>
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official for it or a substantial
part of its property, and such involuntary proceeding shall remain
undismissed and unstayed for a period of 30 days.
(f) The Borrower or any Obligated Party shall fail to discharge within
a period of sixty (60) days after the commencement thereof any attachment,
sequestration, or similar proceeding or proceedings involving an aggregate
amount in excess of $500,000 against any of its assets or properties.
(g) The Borrower or any Obligated Party shall fail to satisfy and
discharge within a period of 60 days any judgment or judgments against it
for the payment of money in an aggregate amount in excess of $500,000.
(h) The Borrower or any Obligated Party shall default (i) in the
payment of the principal of or interest on any other Debt in excess of
$250,000, individually or in the aggregate, as and when the same shall
become due and payable, of the Borrower or any Obligated Party, as
applicable, for borrowed money, (ii) under any mortgage, agreement or other
instrument under or pursuant to which such Debt in excess of $250,000,
individually or in the aggregate, for borrowed money is issued, or (iii)
under any Capitalized Lease of the Borrower or any Obligated Party, as
applicable, or any operating lease, with aggregate payments or rentals in
excess of $250,000, individually or in the aggregate, regardless of whether
such default would be an Event of Default hereunder, and such default under
(i), (ii) or (iii) above shall result in the acceleration of such Debt.
(i) This Agreement or any other Loan Document shall cease to be in
full force and effect or shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by the Borrower,
any Obligated Party or any of their respective shareholders, or the
Borrower or any Obligated Party shall deny that it has any further
liability or obligation under any of the Loan Documents.
(j) Any of the following events shall occur or exist with respect to
the Borrower or any ERISA Affiliate: (i) any Prohibited Transaction
involving any Plan; (ii) any Reportable Event with respect to any Plan;
(iii) the filing under Section 4041 of ERISA of a notice of intent to
terminate any Plan or the termination of any Plan; (iv) any event or
circumstance that might constitute grounds entitling the PBGC to institute
proceedings under Section 4042 of ERISA for the termination of, or for the
appointment of a trustee to administer, any Plan, or the institution by the
PBGC of any such proceedings; (v) complete or partial withdrawal under
Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
reorganization, insolvency, or termination of any Multiemployer Plan; and
in each case above, such event or condition, together with all other events
or conditions, if any, have subjected or could in the reasonable opinion of
the Agent subject the Borrower to any tax, penalty, or other liability to a
Plan, a Multiemployer Plan, the PBGC, or otherwise (or any combination
thereof) which in the aggregate exceed or could reasonably be expected to
exceed $100,000.
<PAGE>
X.2. REMEDIES UPON DEFAULT. If any Event of Default shall occur, any Bank
may without notice terminate its commitment to lend hereunder and declare the
Obligations or any part thereof to be immediately due and payable, and the same
shall thereupon become immediately due and payable, without notice, demand,
presentment, notice of dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, protest, or other formalities of any
kind, all of which are hereby expressly waived by the Borrower; provided,
however, that upon the occurrence of an Event of Default under Section 10.1(d)
or Section 10.1(e), the commitment of the Banks to lend hereunder shall
automatically terminate, and the Obligations shall become immediately due and
payable without notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
protest, or other formalities of any kind, all of which are hereby expressly
waived by the Borrower. If any Event of Default shall occur, each Bank may
exercise all rights and remedies available to it in law or in equity, under the
Loan Documents, or otherwise.
X.3. PERFORMANCE BY THE AGENT. If the Borrower shall fail to perform any
covenant, duty, or agreement contained in any of the Loan Documents, the Agent
may perform or attempt to perform such covenant, duty, or agreement on behalf of
the Borrower. In such event, the Borrower shall, at the request of the Agent,
promptly pay any amount expended by the Agent in such performance or attempted
performance to the Agent, together with interest thereon at the Default Rate
from the date of such expenditure until paid. Notwithstanding the foregoing, it
is expressly agreed that the Agent shall not have any liability or
responsibility for the performance of any obligation of the Borrower under this
Agreement or any other Loan Document.
XI
THE AGENT
XI.1. APPOINTMENT, POWERS AND IMMUNITIES. In order to expedite the various
transactions contemplated by this agreement, the Banks hereby irrevocably
appoint and authorize Wells Fargo Bank (Texas), National Association, to act as
their Agent hereunder and under each of the other Loan Documents. Wells Fargo
Bank (Texas), National Association consents to such appointment and agrees to
perform the duties of the Agent as specified herein. The Banks authorize and
direct the Agent to take such action in their name and on their behalf under the
terms and provisions of the Loan Documents and to exercise such rights and
powers thereunder as are specifically delegated to or required of the Agent for
the Banks, together with such rights and powers as are reasonably incidental
thereto. The Agent is hereby expressly authorized to act as the Agent on behalf
of itself and the other Banks:
(a) To receive on behalf of each of the Banks any payment of
principal, interest, fees or other amounts paid pursuant to this Agreement
and the Notes and to distribute to each Bank its pro rata share of all
payments so received as provided in this Agreement;
(b) To receive all documents and items to be furnished under the Loan
Documents;
<PAGE>
(c) To act as nominee for and on behalf of the Banks in and under the
Loan Documents;
(d) To arrange for the means whereby the funds of the Banks are to be
made available to the Borrower;
(e) To distribute to the Banks information, requests, notices,
payments, prepayments, documents and other items received from the
Borrower, the other Obligated Parties, and other Persons;
(f) To execute and deliver to the Borrower, the other Obligated
Parties, and other Persons, all requests, demands, approvals, notices, and
consents received from the Banks;
(g) To the extent permitted by the Loan Documents, to exercise on
behalf of each Bank all rights and remedies of the Banks upon the
occurrence of any Event of Default; and
(h) To take such other actions as may be requested by Required Banks.
Neither the Agent nor any of its Affiliates, officers, directors,
employees, attorneys, or agents shall be liable for any action taken or omitted
to be taken by any of them hereunder or otherwise in connection with this
Agreement or any of the other Loan Documents except for its or their own gross
negligence or willful misconduct. Without limiting the generality of the
preceding sentence, the Agent (i) may treat the payee of any Note as the holder
thereof until the Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form satisfactory to the Agent; (ii) shall
have no duties or responsibilities except those expressly set forth in this
Agreement and the other Loan Documents, and shall not by reason of this
Agreement or any other Loan Document be a trustee or fiduciary for any Bank;
(iii) shall not be required to initiate any litigation or collection proceedings
hereunder or under any other Loan Document except to the extent requested by the
Required Banks; (iv) shall not be responsible to the Banks for any recitals,
statements, representations or warranties contained in this Agreement or any
other Loan Document, or any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or any other
Loan Document, or for the value, validity, effectiveness, enforceability, or
sufficiency of this Agreement or any other Loan Document or any other document
referred to or provided for herein or therein or for any failure by any Person
to perform any of its obligations hereunder or thereunder; (v) may consult with
legal counsel (including counsel for the Borrower), independent public
accountants, and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants, or experts; and (vi) shall incur no
liability under or in respect of any Loan Document by acting upon any notice,
consent, certificate, or other instrument or writing believed by it to be
genuine and signed or sent by the proper party or parties. As to any matters not
expressly provided
<PAGE>
for by this Agreement, the Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder in accordance with instructions
signed by the Required Banks, and such instructions of the Required Banks and
any action taken or failure to act pursuant thereto shall be binding on all of
the Banks; PROVIDED, however, that the Agent shall not be required to take any
action which exposes the Agent to personal liability or which is contrary to
this Agreement or any other Loan Document or applicable law.
XI.2. RIGHTS OF THE AGENT AS A BANK. With respect to its Commitment, the
Advances made by it and the Notes issued to it, Wells Fargo Bank (Texas),
National Association in its capacity as a Bank hereunder shall have the same
rights and powers hereunder as any other Bank and may exercise the same as
though it were not acting as the Agent, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include the Agent in its individual
capacity. The Agent and its Affiliates may (without having to account therefor
to any Bank) accept deposits from, lend money to, act as trustee under
indentures of, provide merchant banking services to, and generally engage in any
kind of business with the Borrower, any of its Subsidiaries, any other Obligated
Party, and any other Person who may do business with or own securities of the
Borrower, any Subsidiary, or any other Obligated Party, all as if it were not
acting as the Agent and without any duty to account therefor to the Banks.
XI.3. SHARING OF PAYMENTS, ETC. If any Bank shall obtain any payment of any
principal of or interest on any Advance made by it under this Agreement or
payment of any other obligation under the Loan Documents then owed by the
Borrower or any other Obligated Party to such Bank, whether voluntary,
involuntary, through the exercise of any right of setoff, banker's lien,
counterclaim or similar right, or otherwise, in excess of its pro rata share,
such Bank shall promptly purchase from the other Banks participations in the
Advances held by them hereunder in such amounts, and make such other adjustments
from time to time as shall be necessary to cause such purchasing Bank to share
the excess payment ratably with each of the other Banks in accordance with its
pro rata portion thereof. To such end, all of the Banks shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if all or any portion of such excess payment is thereafter rescinded or must
otherwise be restored. The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any Bank so purchasing a
participation in the Advances made by the other Banks may exercise all rights of
setoff, banker's lien, counterclaim, or similar rights with respect to such
participation as fully as if such Bank were a direct holder of Advances to the
Borrower in the amount of such participation. Nothing contained herein shall
require any Bank to exercise any such right or shall affect the right of any
Bank to exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or obligation of the Borrower.
XI.4. INDEMNIFICATION. The Banks hereby agree to indemnify the Agent from
and hold the Agent harmless against (to the extent not reimbursed under Sections
12.1 and 12.2, but without limiting the obligations of the Borrower under
Sections 12.1 and 12.2), ratably in accordance with their respective
Commitments, any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, deficiencies, suits, costs, expenses (including attorneys'
fees), and disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Agent in any way relating to or arising
out of any of the Loan Documents or any action taken or omitted to be taken by
the Agent under or in respect of any of the Loan Documents; PROVIDED, further,
that no Bank shall be liable
<PAGE>
for any portion of the foregoing to the extent caused by the Agent's gross
negligence or willful misconduct. Without limitation of the foregoing, it is the
express intention of the Banks that the Agent shall be indemnified hereunder
from and held harmless against all of such liabilities, obligations, losses,
damages, penalties, actions, judgments, deficiencies, suits, costs, expenses
(including attorneys' fees), and disbursements of any kind or nature directly or
indirectly arising out of or resulting from the sole or contributory negligence
of the Agent. Without limiting any other provision of this Section, each Bank
agrees to reimburse the Agent promptly upon demand for its pro rata share
(calculated on the basis of the Commitments) of any and all out-of-pocket
expenses (including attorneys' fees) incurred by the Agent in connection with
the preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings, or otherwise) of,
or legal advice in respect of rights or responsibilities under, the Loan
Documents, to the extent that the Agent is not reimbursed for such expenses by
the Borrower.
XI.5. INDEPENDENT CREDIT DECISIONS. Each Bank agrees that it has
independently and without reliance on the Agent or any other Bank, and based on
such documents and information as it has deemed appropriate, made its own credit
analysis of the Borrower and decision to enter into this Agreement and that it
will, independently and without reliance upon the Agent or any other Bank, and
based upon such documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking or not taking
action under this Agreement or any of the other Loan Documents. The Agent shall
not be required to keep itself informed as to the performance or observance by
the Borrower or any Obligated Party of this Agreement or any other Loan Document
or to inspect the properties or books of the Borrower or any Obligated Party.
Except for notices, reports and other documents and information expressly
required to be furnished to the Banks by the Agent hereunder or under the other
Loan Documents, the Agent shall not have any duty or responsibility to provide
any Bank with any credit or other financial information concerning the affairs,
financial condition or business of the Borrower or any Obligated Party (or any
of their Affiliates) which may come into the possession of the Agent or any of
its Affiliates.
XI.6. SEVERAL COMMITMENTS. The Commitments and other obligations of the
Banks under this Agreement are several. The default by any Bank in making an
Advance in accordance with its Commitment shall not relieve the other Banks of
their obligations under this Agreement. In the event of any default by any Bank
in making any Advance, each nondefaulting Bank shall be obligated to make its
Advance but shall not be obligated to advance the amount which the defaulting
Bank was required to advance hereunder. In no event shall any Bank be required
to advance an amount or amounts which shall in the aggregate exceed such Bank's
Commitment. No Bank shall be responsible for any act or omission of any other
Bank.
XI.7. SUCCESSOR AGENT. Subject to the appointment and acceptance of a
successor Agent as provided below, the Agent may resign at any time by giving
notice thereof to the Banks and the Borrower and the Agent may be removed at any
time with or without cause by the Required Banks. Upon any such resignation or
removal, the Required Banks will have the right to appoint a successor Agent. If
no successor Agent shall have been so appointed by the Required Banks and shall
have accepted such appointment within 30 days after the retiring Agent's giving
of notice of resignation or the Required Banks' removal of the retiring Agent,
then the retiring Agent may, on behalf of the Banks,
<PAGE>
appoint a successor Agent, which shall be a commercial bank organized under the
laws of the United States of America or any State thereof and having combined
capital and surplus of at least $100,000,000. Upon the acceptance of its
appointment as successor Agent, such successor Agent shall thereupon succeed to
and become vested with all rights, powers, privileges, immunities, and duties of
the resigning or removed Agent, and the resigning or removed Agent shall be
discharged from its duties and obligations under this Agreement and the other
Loan Documents. After any Agent's resignation or removal as the Agent, the
provisions of this Article XI shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was the
Agent.
XII
MISCELLANEOUS
XII.1. EXPENSES OF THE AGENT AND THE BANKS. The Borrower hereby agrees to
pay the Agent and each Bank on demand: (i) all reasonable costs and expenses
incurred by the Agent or such Bank in connection with the preparation,
negotiation, and execution of this Agreement and the other Loan Documents and
any and all amendments, modifications, renewals, extensions, and supplements
thereof and thereto, including, without limitation, the fees and expenses of the
Agent or such Bank's legal counsel, (ii) all reasonable costs and expenses
incurred by the Agent or such Bank in connection with the enforcement of this
Agreement or any other Loan Document, including, without limitation, the fees
and expenses of the Agent's or such Bank's legal counsel, and (iii) all other
reasonable costs and expenses incurred by the Agent or such Bank in connection
with this Agreement or any other Loan Document, including, without limitation,
all costs, expenses, taxes, assessments, filing fees, and other charges levied
by any governmental authority or otherwise payable in respect of this Agreement
or any other Loan Document.
XII.2. INDEMNIFICATION. The Borrower hereby indemnifies the Agent, each
Bank and each Affiliate thereof and their respective officers, directors,
employees, attorneys, and agents from, and holds each of them harmless against,
any and all losses, liabilities, claims, damages, penalties, judgments, costs,
and expenses (including attorneys' fees) to which any of them may become subject
which directly or indirectly arise from or relate to (i) the negotiation,
execution, delivery, performance, administration, or enforcement of any of the
Loan Documents, (ii) any of the transactions contemplated by the Loan Documents,
(iii) any breach by the Borrower of any representation, warranty, covenant, or
other agreement contained in any of the Loan Documents, (iv) the presence,
release, threatened release, disposal, removal, or cleanup of any Hazardous
Substance located on, about, within, or affecting any of the properties or
assets of the Borrower or any Subsidiary, or (v) any investigation, litigation,
or other proceeding, including, without limitation, any threatened
investigation, litigation, or other proceeding relating to any of the foregoing.
Without limiting any provision of this Agreement or of any other Loan Document,
it is the express intention of the parties hereto that each Person to be
indemnified under this Section shall be indemnified from and held harmless
against any and all losses, liabilities, claims, damages, penalties, judgments,
costs, and expenses (including attorneys' fees) arising out of or resulting from
the sole or contributory negligence of the Person to be indemnified.
<PAGE>
XII.3. LIMITATION OF LIABILITY. None of the Agent, any Bank or any
Affiliate, officer, director, employee, attorney, or agent thereof shall have
any liability with respect to, and the Borrower hereby waives, releases, and
agrees not to sue any of them upon, any claim for any special, indirect,
incidental, or consequential damages suffered or incurred by the Borrower in
connection with, arising out of, or in any way related to, this Agreement or any
of the other Loan Documents, or any of the transactions contemplated by this
Agreement or any of the other Loan Documents. The Borrower hereby waives,
releases, and agrees not to sue the Agent or any Bank or any of their respective
Affiliates, officers, directors, employees, attorneys, or agents for punitive
damages in respect of any claim in connection with, arising out of, or in any
way related to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or any of the other Loan Documents.
XII.4. NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of the Agent
or any Bank to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power, or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power, or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege. The
rights and remedies provided for in this Agreement and the other Loan Documents
are cumulative and not exclusive of any rights and remedies provided by law. In
addition to any rights of setoff provided by law, the Agent and each Bank shall
have the right to setoff and apply against the Obligations in such manner as the
Agent or such Bank may determine, at any time and without notice to the
Borrower, any and all deposits (general or special, time or demand, provisional
or final) or other sums at any time credited by or owing from the Agent or such
Bank to the Borrower.
XII.5. SUCCESSORS AND ASSIGNS.
<PAGE>
(a) This Agreement is binding upon and shall inure to the benefit of
the Agent, each Bank and the Borrower and their respective successors and
assigns, except that the Borrower may not assign or transfer any of its
rights or obligations under this Agreement except as provided in Section
8.5, without the prior written consent of the Required Banks. Any Bank may
sell participations to one or more banks or other institutions in or to all
or a portion of its rights and obligations under this Agreement and the
other Loan Documents (including, without limitation, all or a portion of
its Commitments and the Advances owing to it); provided, however, that (i)
such Bank's obligations under this Agreement and the other Loan Documents
(including, without limitation, its Commitment) shall remain unchanged,
(ii) such Bank shall remain solely responsible to the Borrower for the
performance of such obligations, (iii) such Bank shall remain the holder of
its Note for all purposes of this Agreement, (iv) the Borrower shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement and the other Loan
Documents, and (v) such Bank shall not sell a participation that conveys to
the participant the right to vote or give or withhold consents under this
Agreement or any other Loan Document, other than the right to vote upon or
consent to (A) any increase of such Bank's Commitment, (B) any reduction of
the principal amount of, or interest to be paid on, the Advances of such
Bank, (C) any reduction of any commitment fee or other amount payable to
such Bank under any Loan
<PAGE>
Document, or (D) any postponement of any date for the payment of any amount
payable in respect of the Advances of such Bank.
(b) The Borrower and each of the Banks agree that any Bank (the
"Assigning Bank") may at any time assign to one or more assignees all, or a
proportionate part of all, of its rights and obligations under this
Agreement and the other Loan Documents (including, without limitation, its
Advance(s)) (each an "Assignee"); provided, however, that (i) each such
assignment shall be of a consistent, and not a varying, percentage of all
of the assigning Bank's rights and obligations under this Agreement and the
other Loan Documents, (ii) except in the case of an assignment of all of a
Bank's rights and obligations under this Agreement and the other Loan
Documents, the amount of the Commitment of the assigning Bank being
assigned pursuant to each assignment (determined as of the date of the
Assignment Acceptance with respect to such assignment) shall in no event be
less than $1,000,000, and (iii) the parties to each such assignment shall
execute and deliver to the Agent for its acceptance and recording in the
Register (as defined below), an Assignment and Acceptance, together with
the Note subject to such assignment, and a processing and recordation fee
of $2,500. Upon such execution, delivery, acceptance, and recording, from
and after the effective date specified in each Assignment and Acceptance,
which effective date shall be at least five Business Days after the
execution thereof, or, if so specified in such Assignment and Acceptance,
the date of acceptance thereof by the Agent, (x) the assignee thereunder
shall be a party hereto as a "Bank" and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment
and Acceptance, have the rights and obligations of a Bank hereunder and
under the Loan Documents and (y) the Bank that is an assignor thereunder
shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under this Agreement and the
other Loan Documents (and, in the case of an Assignment and Acceptance
covering all or the remaining portion of a Bank's rights and obligations
under the Loan Documents, such Bank shall cease to be a party thereto).
(c) By executing and delivering an Assignment and Acceptance, the Bank
that is an assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other
than as provided in such Assignment and Acceptance, such assigning Bank
makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties, or representations made in or in
connection with the Loan Documents or the execution, legality, validity,
and enforceability, genuineness, sufficiency, or value of the Loan
Documents or any other instrument or document furnished pursuant thereto;
(ii) such assigning Bank makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or
any Obligated Party or the performance or observance by the Borrower or any
Obligated Party of its obligations under the Loan Documents; (iii) such
assignee confirms that it has received a copy of the other Loan Documents,
together with copies of the financial statements referred to in Section 7.1
and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and
<PAGE>
without reliance upon the Agent or such assignor and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this Agreement and the other Loan Documents; (v) such assignee
appoints and authorizes the Agent to take such action as agent on its
behalf and exercise such powers under the Loan Documents as are delegated
to the Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the
terms of the Loan Documents are required to be performed by it as a Bank.
(d) The Agent shall maintain at its principal office a copy of each
Assignment and Acceptance delivered to and accepted by it and a register
for the recordation of the names and addresses of the Banks and the
Commitment of, and principal amount of the Advances owing to, each Bank
from time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agent, and the Banks may treat each Person whose name is
recorded in the Register as a Bank hereunder for all purposes under the
Loan Documents. The Register shall be available for inspection by the
Borrower or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and assignee, together with any Note subject to such
assignment, the Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit "D" hereto, (i)
accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register, and (iii) give prompt written notice
thereof to the Borrower. Within five Business Days after its receipt of
such notice, the Borrower, at its expense, shall execute and deliver to the
Agent in exchange for the surrendered Note a new Note to the order of such
assignee in an amount equal to the Commitment assumed by it pursuant to
such Assignment and Acceptance and, if the assigning Bank has retained a
Commitment, a new Note to the order of the assigning Bank in an amount
equal to the Commitment retained by it hereunder (each such promissory note
shall constitute a "Note" for purposes of the Loan Documents). Such new
Notes shall be in an aggregate principal amount of the surrendered Note,
shall be dated the effective date of such Assignment and Acceptance, and
shall otherwise be in substantially the form of Exhibit "D" hereto.
(f) Any Bank may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to the Borrower or its Subsidiaries furnished to such
Bank by or on behalf of the Borrower or its Subsidiaries.
XII.6. SURVIVAL. All representations and warranties made in this Agreement
or any other Loan Document or in any document, statement, or certificate
furnished in connection with this Agreement shall survive the execution and
delivery of this Agreement and the other Loan Documents, and no investigation by
the Agent or any Bank or any closing shall affect the representations and
<PAGE>
warranties or the right of the Agent or any Bank to rely upon them. Without
prejudice to the survival of any other obligation of the Borrower hereunder, the
obligations of the Borrower under Sections 3.5, 12.1, and 12.2 shall survive
repayment of the Note and termination of the Revolving Credit Commitment.
XII.7. ENTIRE AGREEMENT; AMENDMENT. THIS AGREEMENT, THE NOTE, AND THE OTHER
LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE
PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. The
provisions of this Agreement and the other Loan Documents to which the Borrower
is a party may be amended or waived only by an instrument in writing, agreed and
consented to by the Required Banks and the Borrower; PROVIDED, that no
amendment, waiver, or consent shall, unless in writing and signed by all of the
Banks and the Borrower, do any of the following: (a) increase Commitments of the
Banks or subject the Banks to any additional obligations; (b) change the
Maturity Date or reduce the principal of, or interest on, the Notes or any fees
or other amounts payable hereunder; (c) postpone any date fixed for any payment
of principal of, or interest on, the Notes or any fees or other amounts payable
hereunder; (d) waive any of the conditions specified in Article V; (e) change
the percentage of the Commitments or of the aggregate unpaid principal amount of
the Notes or the number of Banks which shall be required for the Banks or any of
them to take any action under this Agreement; (f) change any provision contained
in this Section 12.7; or (g) release any collateral except as permitted in the
Loan Documents. Notwithstanding anything to the contrary contained in this
Section, no amendment, waiver, or consent shall be made with respect to Article
XI hereof without the prior written consent of the Agent.
XII.8. MAXIMUM INTEREST RATE. No provision of this Agreement or of any
other Loan Document shall require the payment or the collection of interest in
excess of the maximum permitted by applicable law. If any excess of interest in
such respect is hereby provided for, or shall be adjudicated to be so provided,
in any Loan Document or otherwise in connection with this loan transaction, the
provisions of this Section shall govern and prevail and neither the Borrower nor
the sureties, guarantors, successors, or assigns of the Borrower shall be
obligated to pay the excess amount of such interest or any other excess sum paid
for the use, forbearance, or detention of sums loaned pursuant hereto. In the
event any Bank ever receives, collects, or applies as interest any such sum,
such amount which would be in excess of the maximum amount permitted by
applicable law shall be applied as a payment and reduction of the principal of
the indebtedness evidenced by its Note; and, if the principal of such Note has
been paid in full, any remaining excess shall forthwith be paid to the Borrower.
In determining whether or not the interest paid or payable exceeds the Maximum
Rate, the Borrower and each Bank shall, to the extent permitted by applicable
law, (i) characterize any nonprincipal payment as an expense, fee, or premium
rather than as interest, (ii) exclude voluntary prepayments and the effects
thereof, and (iii) amortize, prorate, allocate, and spread in equal or unequal
parts the total amount of interest throughout the entire
<PAGE>
contemplated term of the indebtedness evidenced by such Note so that interest
for the entire term does not exceed the Maximum Rate.
XII.9. NOTICES. All notices and other communications provided for in this
Agreement and the other Loan Documents to which the Borrower is a party shall be
given or made by telex, telegraph, telecopy, cable, or in writing and telexed,
telecopied, telegraphed, cabled, mailed by certified mail return receipt
requested, or delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof; or, as to any party at
such other address as shall be designated by such party in a notice to the other
party given in accordance with this Section. Except as otherwise provided in
this Agreement, all such communications shall be deemed to have been duly given
when transmitted by telex or telecopy, subject to telephone confirmation of
receipt, or delivered to the telegraph or cable office, subject to telephone
confirmation of receipt, or when personally delivered or, in the case of a
mailed notice, when duly deposited in the mails, in each case given or addressed
as aforesaid; PROVIDED, however, notices to the Agent pursuant to Article II
shall not be effective until received by the Agent.
XII.10. APPLICABLE LAW; VENUE; SERVICE OF PROCESS. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND
THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THIS AGREEMENT HAS BEEN
ENTERED INTO IN HARRIS COUNTY, TEXAS, AND IT SHALL BE PERFORMABLE FOR ALL
PURPOSES IN HARRIS COUNTY, TEXAS. ANY ACTION OR PROCEEDING AGAINST THE BORROWER
UNDER OR IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT IN HARRIS COUNTY, TEXAS. THE BORROWER HEREBY IRREVOCABLY
(I) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (II) WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN INCONVENIENT
FORUM. THE BORROWER AGREES THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED
OR DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 12.7.
XII.11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
XII.12. SEVERABILITY. Any provision of this Agreement held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
XII.13. HEADINGS. The headings, captions, and arrangements used in this
Agreement are for convenience only and shall not affect the interpretation of
this Agreement.
<PAGE>
XII.14. NON-APPLICATION OF CHAPTER 15 OF TEXAS CREDIT CODE. The provisions
of Chapter 15 of the Texas Credit Code (Vernon's Texas Civil Statutes, Article
5069-15) are specifically declared by the parties hereto not to be applicable to
this Agreement or any of the other Loan Documents or to the transactions
contemplated hereby.
XII.15. SPECIAL COVENANT. In the event that an action or inaction of the
Agent may be directed by the Required Banks and such required percentage is not
obtained due to disagreement by the Banks, the Bank or the Banks objecting to
the action taken or not taken, as the case may be, by the Agent due to the
absence of direction of the Required Banks may, but shall not be required to,
purchase the other Bank's or the Banks' rights and obligations under this
Agreement and the other Loan Documents (including, without limitation, their
Advance(s)) at par value. In such event, the selling Bank or the Banks shall be
obligated to sell its Advance(s) to the other Bank or the Banks and comply with
the provisions of Section 12.5 hereof upon the full payment by the other Bank or
the Banks at par value.
XII.16. ARBITRATION.
(a) ARBITRATION. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this Agreement. A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, any of the Note Purchase
Documents, or any past, present or future extensions of credit and other
activities, transactions or obligations of any kind related directly or
indirectly to any of the Note Purchase Documents, including without limitation,
any of the foregoing arising in connection with the exercise of any self-help,
ancillary or other remedies pursuant to any of the Note Purchase Documents. Any
party may by summary proceedings bring an action in court to compel arbitration
of a Dispute. Any party who fails or refuses to submit to arbitration following
a lawful demand by any other party shall bear all costs and expenses incurred by
such other party in compelling arbitration of any Dispute.
(b) GOVERNING RULES. Arbitration proceedings shall be administered by the
American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Note
Purchase Documents. The arbitration shall be conducted at a location in Texas
selected by the AAA or other administrator. If there is any inconsistency
between the terms hereof and any such rules, the terms and procedures set forth
herein shall control. All statutes of limitation applicable to any Dispute shall
apply to any arbitration proceeding. All discovery activities shall be expressly
limited to matters directly relevant to the Dispute being arbitrated. Judgment
upon any award rendered in an arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. ss.91 or any similar applicable state law.
<PAGE>
(c) NO WAIVER; PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration hereunder.
(d) ARBITRATOR QUALIFICATIONS AND POWERS AWARDS. Arbitrators must be active
members of the Texas State Bar with expertise in the substantive laws applicable
to the subject matter of the Dispute. Arbitrators are empowered to resolve
Disputes by summary rulings in response to motions filed prior to the final
arbitration hearing. Arbitrators (i) shall resolve all Disputes in accordance
with the substantive law of the state of Texas, (ii) may grant any remedy or
relief that a court of the state of Texas could order or grant within the scope
hereof and such ancillary relief as is necessary to make effective any award,
and (iii) shall have the power to award recovery of all costs and fees, to
impose sanctions and to take such other actions as they deem necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
Texas Rules of Civil Procedure or other applicable law. Any Dispute in which the
amount in controversy is $5,000,000 or less shall be decided by a single
arbitrator who shall not render an award of greater than $5,000,000 (including
damages, costs, fees and expenses). By submission to a single arbitrator, each
party expressly waives any right or claim to recover more than $5,000,000. Any
Dispute in which the amount in controversy exceeds $5,000,000 shall be decided
by majority vote of a panel of three arbitrators; provided however, that all
three arbitrators must actively participate in all hearings and deliberations.
(e) JUDICIAL REVIEW. Notwithstanding anything herein to the contrary, in
any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
Texas, and (iii) the parties shall have in addition to the grounds referred to
in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (A) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the state of
Texas. Judgment confirming an award in such a proceeding may be entered only if
a court determines the award is supported by substantial evidence and not based
on legal error under the substantive law of the state of Texas.
<PAGE>
(f) MISCELLANEOUS. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceedings within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulations, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provisions most
directly related to the Note Purchase Documents or the subject matter of the
Dispute shall control. This arbitration provision shall survive termination,
amendment or expiration of any of the Note Purchase Documents or any
relationship between the parties.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
BORROWER:
GEOSCIENCE CORPORATION
By:/s/ Richard F. Miles
Richard F. Miles, President
Address:
10500 Westoffice Drive, Suite 200
Houston, Texas 77042-5326
Attention: General Counsel
Telephone: (713) 785-7790
Telecopier: (713) 780-3524
AGENT:
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
By:/s/ David Anderson
David Anderson, Vice President
Address:
1000 Louisiana, 3rd Floor
Houston, Texas 77002
Fax No.: 713/250-7029
Telephone No.: 713/250-2339
Attention: David Anderson
LENDER:
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
<PAGE>
COMMITMENT: $3,000,000 By:/s/David Anderson
David Anderson, Vice President
Address:
1000 Louisiana
Houston, Texas 77002
Fax No.: 713/250-7029
Telephone No.: 713/250-2339
Attention: David Anderson
<PAGE>
EXHIBIT A
FORM OF NOTES
<PAGE>
EXHIBIT B
FORM OF ADVANCE REQUEST FORM
<PAGE>
EXHIBIT C
FORM OF LIMITED GUARANTY
<PAGE>
EXHIBIT D
FORM OF ASSIGNMENT AND ACCEPTANCE
<PAGE>
EXHIBIT E
REAL PROPERTY DESCRIPTION
EXHIBIT 10.9
AMENDMENT NO. 1
This Amendment No. 1 dated as of June 15, 1996 ("Agreement"), is entered
into by CogniSeis Development, Inc., a Delaware corporation ("Borrower"), and
NationsBank of Texas, N.A. ("Bank"). Reference is made to the Loan Agreement
dated as of November 30, 1995 ("Loan Agreement"), between the Borrower and the
Bank to which this Agreement relates. Capitalized terms used herein but not
defined herein shall have the meanings specified by the Loan Agreement.
INTRODUCTION
The Borrower and the Bank desire to amend the terms of the Loan
Agreement to extend the Final Maturity Date, and to make certain other
amendments to the Loan Documents. In consideration of the foregoing, and for
other good and valuable consideration, the Borrower and the Bank hereby agree as
follows:
Section 1. AMENDMENT OF LOAN AGREEMENT. The Loan Agreement is amended as
follows:
1.1 To extend the Final Maturity Date from June 15, 1996, to September
15, 1996, the definition of "Final Maturity Date" in Section 1.2 of the Loan
Agreement is amended by replacing it in its entirety with the following:
"Final Maturity Date" shall mean September 15, 1996.
Section 2. EFFECT ON LOAN DOCUMENTS.
2.1 Except as amended herein, the Loan Agreement and all other Loan
Documents remain in full force and effect as originally executed. Nothing herein
shall act as a waiver of any of the Bank's rights under the Loan Documents as
amended, including the waiver of any default or event of default, however
<PAGE>
denominated. The Borrower must continue to comply with the terms of the Loan
Documents, as amended.
2.2 This Agreement is a Loan Document for the purposes of the provisions
of the other Loan Documents. Without limiting the foregoing, any breach of
representations, warranties, and covenants under this Agreement may be a default
or event of default under other Loan Documents.
Section 3. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants
to the Bank that:
3.1 The execution, delivery, and performance of this Agreement are
within the corporate power and authority of the Borrower and have been duly
authorized by appropriate proceedings and this Agreement constitutes a legal,
valid, and binding obligation of the Borrower, enforceable in accordance with
its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the rights of creditors
generally and general principles of equity.
3.2 As of the date of this Agreement, all representations and warranties
set forth in the Loan Documents are true and correct in all material respects.
As of the date of this Agreement, the Borrower is in compliance with all
covenants in the Loan Documents. Upon the effectiveness of this Agreement and
the amendment of the Loan Documents as provided for herein, all representations
and warranties set forth in the Loan Documents, as amended, shall be true and
correct in all material respects and the Borrower shall be in compliance with
all covenants in the Loan Documents, as amended.
3.3 As of the date of this Agreement, no Event of Default exists under
the Loan Agreement and there has occurred no event which with notice or lapse of
time would become an Event of Default thereunder. Upon the effectiveness of this
Agreement and the amendment of the Loan Documents as provided for herein, no
Event of Default shall exist under the Loan Documents and there shall have
occurred no event which with notice or lapse of time would become an Event of
Default under the Loan Documents, as amended.
<PAGE>
Section 4. EFFECTIVENESS. This Agreement shall become effective and the Loan
Documents shall be amended as provided for herein when each of the parties
hereto shall have executed and delivered this Agreement.
Section 5. MISCELLANEOUS.
5.1 The Borrower shall reimburse the Bank for all expenses of the Bank,
including charges and disbursements of legal counsel for the Bank, in connection
with the creation, amendment, modification, waiver, or interpretation of this
Agreement, and the preservation or enforcement of any rights of the Bank under
this Agreement.
5.2 This Agreement may be executed in multiple counterparts which
together shall constitute one and the same agreement.
THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the date first above written.
COGNISEIS DEVELOPMENT, INC.
By: /s/ Richard F. Miles
Name: Richard F. Miles
Title: President
<PAGE>
NATIONSBANK OF TEXAS, N.A.
By: /s/ Raul A. Anaya
Name: Raul A. Anaya
Title: Vice President
<PAGE>
The undersigned ("Guarantor"), has executed a Guaranty dated as of November 30,
1995 ("Guaranty"), guaranteeing payment of the Borrower's obligations under the
Loan Agreement and the Loan Documents and certain other amounts in accordance
with the Guarantor's Guaranty. The Guarantor has reviewed this Agreement and
related documents ("Amendment Documents"), and hereby approves them, including
the extension of the Final Maturity Date. The Guarantor represents and warrants
that the Guarantor knows of no defenses to the enforcement of the Guarantor's
Guaranty and that according to its terms the Guarantor's Guaranty will continue
in full force and effect with respect to the Loan Documents, as amended,
following the execution of the Amendment Documents. The signature of this
document does not indicate or establish a requirement that the Guaranty requires
the Guarantor's approval of amendments to the Loan Agreement, but has been
furnished to the Bank as a courtesy at the Bank's request. On the foregoing
terms, this Agreement and the Amendment Documents are hereby approved:
TECH-SYM CORPORATION
By:/s/ Wendell W. Gamel
Name: Wendell W. Gamel
Title: President and Chairman
EXHIBIT 10.10
AMENDMENT NO. 2
This Amendment No. 2 dated as of September 15, 1996 ("Agreement"), is
entered into by CogniSeis Development, Inc., a Delaware corporation
("Borrower"), and NationsBank of Texas, N.A. ("Bank"). Reference is made to the
Loan Agreement dated as of November 30, 1995, as amended by Amendment No. 1
dated as of June 15, 1996 (as the same may be amended, modified or supplemented
from time to time, the "Loan Agreement"), between the Borrower and the Bank to
which this Agreement relates. Capitalized terms used herein but not defined
herein shall have the meanings specified by the Loan Agreement.
INTRODUCTION
The Borrower and the Bank desire on the terms of this Agreement to amend
the terms of the Loan Agreement to extend the Final Maturity Date, modify
certain financial covenants, and to make certain other amendments to the Loan
Documents. In consideration of the foregoing, and for other good and valuable
consideration, the Borrower and the Bank hereby agree as follows:
Section 1. AMENDMENT OF LOAN AGREEMENT. The Loan Agreement is amended as
follows:
1.1 Section 1.1 of the Credit Agreement is amended by replacing or
inserting, as appropriate, the following definition:
"Final Maturity Date" shall mean June 30, 1997.
"GeoScience" shall mean GeoScience Corporation, a Nevada corporation.
<PAGE>
1.2 Section 4.1 of the Loan Agreement is amended by renumbering
paragraph (d) of Section 4.1 as paragraph (e), and inserting the following
paragraphs (d) and (e) following paragraph (c):
(d) GeoScience Annual Reports - promptly after becoming year of
GeoScience, the audited consolidated balance sheet of GeoScience as at
the end of such year, the audited consolidated statement of profit and
loss of GeoScience for such year and the audited consolidated statement
of changes in shareholders investment of GeoScience for such year,
setting forth in each case in comparative form the corresponding figures
for the preceding fiscal year, accompanied by the related report of
independent public accountants of national standing which report shall
be to the effect that such statements have been prepared in accordance
with generally accepted accounting principles consistently followed
throughout the period indicated except for such changes in such
principles with which the independent public accountants shall have
concurred; and
(e) GeoScience Quarterly Reports - promptly after becoming
available and in any event within 120 days after the close of each
fiscal quarter of GeoScience the unaudited consolidated balance sheet of
GeoScience as at the end of such quarter and the unaudited consolidated
statement of profit and loss of GeoScience for such quarter, setting
forth in each case in comparative form the corresponding figures for the
preceding fiscal quarter; and
1.3 Section 5.9 of the Loan Agreement is amended by deleting therefrom
the reference to the amount "$4,000,000" and substituting in lieu thereof a
reference to the amount "$1,500,000."
<PAGE>
1.4 Section 5.11 of the Loan Agreement is amended by deleting therefrom
the reference to the ratio "1.5 to 1.0" and substituting in lieu thereof a
reference to the ratio "1.2 to 1.0."
1.5 EXHIBIT C to the Loan Agreement is deleted therefrom, and EXHIBIT C
attached hereto is substituted in lieu thereof.
Section 2. WAIVER. The Bank hereby waives any Events of Default occurring prior
to the date of this Agreement caused by (a) the Borrower's breach of Section 5.9
of the Loan Agreement resulting from the Borrower permitting its tangible net
worth to be less than $4,000,000, and (b) the Borrower's breach of Section 5.15
of the Loan Agreement resulting from the Borrower incurring a net loss from
operations in excess of $500,000 for two consecutive quarters. This Waiver is
limited solely to the purposes and to the extent provided herein and shall not
be construed to be a waiver, except as specifically provided in this Section 2,
(a) of any term, condition or provision of the Loan Agreement or (b) of any
Event of Default or Default that has or may have occurred or occurs after the
date hereof.
Section 3. EFFECT ON LOAN DOCUMENTS.
3.1 Except as amended and waived herein, the Loan Agreement and all
other Loan Documents remain in full force and effect as originally executed.
Except as specified herein, nothing herein shall act as a waiver of any of the
Bank's rights under the Loan Documents as amended, including the waiver of any
default or event of default, however denominated. The Borrower must continue to
comply with the terms of the Loan Documents, as amended.
3.2 This Agreement and the other agreements, documents, and instruments
executed in connection herewith are Loan Documents for the purposes of this
Agreement and all other Loan Documents, and the definition of "Loan Documents"
in the Loan Agreement is deemed to include this
<PAGE>
Agreement and such agreements, documents, and instruments thereunder. Without
limiting the foregoing, any breach of representations, warranties, and covenants
under this Agreement may be a Default or Event of Default under the Loan
Agreement.
3.3 All definitions in the Loan Agreement and in each other Loan
Document which refer to the Loan Agreement shall be deemed to refer to such
documents as amended hereby, and all parties reaffirming their obligations under
the Loan Documents accept the amendments hereunder and the transactions
contemplated hereby.
Section 4. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants
to the Bank that:
4.1 The execution, delivery, and performance of this Agreement are
within the corporate power and authority of the Borrower and have been duly
authorized by appropriate proceedings and this Agreement constitutes a legal,
valid, and binding obligation of the Borrower, enforceable in accordance with
its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the rights of creditors
generally and general principles of equity.
4.2 Upon the effectiveness of this Agreement and the amendment of the
Loan Documents as provided for herein, all representations and warranties set
forth in the Loan Documents, as amended, shall be true and correct in all
material respects and the Borrower shall be in compliance with all covenants in
the Loan Documents, as amended.
4.3 Upon the effectiveness of this Agreement and the amendment of the
Loan Documents as provided for herein, no Event of Default shall exist under the
Loan Documents and there shall have occurred no event which with
<PAGE>
notice or lapse of time would become an Event of Default under the Loan
Documents, as amended.
Section 5. EFFECTIVENESS. This Agreement and the waivers contained herein shall
become effective and the Loan Documents shall be amended as provided for herein
when the Bank shall have received each of the documents and items listed in the
Closing Documents List dated as of even date herewith relating to this
Agreement, such documents being fully executed where appropriate by the parties
thereto, and the Bank shall have executed and delivered each such document to
which it is a party.
Section 6. MISCELLANEOUS.
6.1 The Borrower shall reimburse the Bank for all expenses of the Bank,
including charges and disbursements of legal counsel for the Bank, in connection
with the creation, amendment, modification, waiver, or interpretation of this
Agreement, and the preservation or enforcement of any rights of the Bank under
this Agreement.
6.2 This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas. This Agreement may be executed
in multiple counterparts which together shall constitute one and the same
agreement.
THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
<PAGE>
EXECUTED as of the date first above written.
COGNISEIS DEVELOPMENT, INC.
By:/s/ RICHARD F. MILES
Name: Richard F. Miles
Title: President
NATIONSBANK OF TEXAS, N.A.
By:/s/RAUL A. ANAYA
Raul A. Anaya
Vice President
The undersigned ("Guarantor"), has executed a Guaranty dated as of November 30,
1995 ("Guaranty"), guaranteeing payment of the Borrower's obligations under the
Loan Agreement and the Loan Documents and certain other amounts in accordance
with the Guarantor's Guaranty. The Guarantor has reviewed this Agreement and
related documents ("Amendment Documents"), and hereby approves them, including
without limitation the extension of the Final Maturity Date and the modification
of the financial covenants amended hereby. The Guarantor represents and warrants
that the Guarantor knows of no defenses to the enforcement of the Guarantor's
Guaranty and that according to its terms the Guarantor's Guaranty will continue
in full force and effect with respect to the Loan Documents, as amended,
following the execution of the Amendment Documents. The signature of this
document does not indicate or establish a
<PAGE>
requirement that the Guaranty requires the Guarantor's approval of amendments to
the Loan Agreement, but has been furnished to the Bank as a courtesy at the
Bank's request. On the foregoing terms, this Agreement and the Amendment
Documents are hereby approved:
TECH-SYM CORPORATION
By:/s/ WENDELL W. GAMEL
Name: Wendell W. Gamel
Title: President and Chairman
EXHIBIT 10.11
AMENDED AND RESTATED LOAN AGREEMENT
AMONG
SYNTRON, INC.,
as Borrower
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION,
as Agent and a Bank,
AND
EACH OF THE BANKS FROM TIME TO TIME SIGNATORY HERETO
December 6, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I - Definitions...................................................... 1
Section 1.1. Definitions........................................... 1
Section 1.2. Other Definitional Provisions......................... 11
ARTICLE II - Advances........................................................ 12
Section 2.1. Commitment............................................ 12
Section 2.2. The Notes............................................. 12
Section 2.3. Repayment of Advances................................. 12
Section 2.4. Interest.............................................. 12
Section 2.5. Procedure for Advances Under the Revolving
Credit Commitment................................... 12
Section 2.6. Use of Proceeds....................................... 13
Section 2.7. Conversion and Continuation Options................... 13
ARTICLE III - Payments....................................................... 14
Section 3.1. Method of Payment..................................... 14
Section 3.2. Prepayment............................................ 14
Section 3.3. Pro Rata Treatment.................................... 14
Section 3.4. Non-Receipt of Funds by the Agent..................... 15
Section 3.5. Computation of Interest............................... 15
Section 3.6. Reserve and Capital Adequacy Provisions............... 15
Section 3.7. Limitation on Eurodollar Borrowings................... 16
Section 3.8. Determination of Interest Rates....................... 17
Section 3.9. Draws under Credits................................... 17
Section 3.10. Credit Fees........................................... 17
Section 3.11. No Prepayment During an Interest Period............... 17
ARTICLE IV - Guaranties...................................................... 17
Section 4.1. Guaranties............................................ 17
ARTICLE V - Conditions Precedent............................................. 18
Section 5.1. Initial Advance....................................... 18
Section 5.2. All Advances.......................................... 18
ARTICLE VI - Representations and Warranties.................................. 19
Section 6.1. Corporate Existence................................... 19
Section 6.2. Financial Statements.................................. 19
Section 6.3. Corporate Action; No Breach........................... 19
Section 6.4. Operation of Business................................. 19
Section 6.5. Litigation and Judgments.............................. 20
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Section 6.6. Rights in Properties, Liens........................... 20
Section 6.7. Enforceability........................................ 20
Section 6.8. Approvals............................................. 20
Section 6.9. Taxes................................................. 20
Section 6.10. Use of Proceeds; Margin Securities.................... 20
Section 6.11. ERISA................................................. 20
Section 6.12. Disclosure............................................ 21
Section 6.13. Subsidiaries.......................................... 21
Section 6.14. Agreements............................................ 21
Section 6.15. Compliance with Laws.................................. 21
Section 6.16. Investment Company Act................................ 21
Section 6.17. Public Utility Holding Company Act.................... 21
Section 6.18. Environmental Matters................................. 22
ARTICLE VII - Positive Covenants............................................. 22
Section 7.1. Reporting Requirements................................ 22
Section 7.2. Maintenance of Existence.............................. 23
Section 7.3. Maintenance of Properties............................. 23
Section 7.4. Taxes and Claims...................................... 23
Section 7.5. Insurance............................................. 24
Section 7.6. Inspection Rights..................................... 24
Section 7.7. Keeping Books and Records............................. 24
Section 7.8. Compliance with Laws.................................. 24
Section 7.9. Compliance with Agreements............................ 24
Section 7.10. Further Assurances.................................... 24
Section 7.11. ERISA................................................. 24
Section 7.12. Change in Business.................................... 24
ARTICLE VIII - Negative Covenants............................................ 25
Section 8.1. Lease Rentals......................................... 25
Section 8.2. Debt.................................................. 25
Section 8.3. Liens................................................. 25
Section 8.4. Merger and Consolidation.............................. 26
Section 8.5. Sale of Assets........................................ 27
Section 8.6. Dealings with Affiliates.............................. 27
Section 8.7. Loans and Investments................................. 27
Section 8.8. Compliance with Environmental Laws.................... 27
ARTICLE IX - Financial Covenants............................................. 27
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Section 9.1. Tangible Net Worth.................................... 27
Section 9.2. Working Capital....................................... 27
Section 9.3. Relationship of Funded Debt to Total Capitalization... 27
Section 9.4. Debt Service Ratio.................................... 28
Section 9.5. Capital Expenditures. ............................... 28
ARTICLE X - Default.......................................................... 28
Section 10.1. Events of Default..................................... 28
Section 10.2. Remedies Upon Default................................. 29
Section 10.3. Performance by the Agent.............................. 30
ARTICLE XI - The Agent....................................................... 30
Section 11.1. Appointment, Powers and Immunities.................... 30
Section 11.2. Rights of the Agent as a Bank......................... 32
Section 11.3. Sharing of Payments, Etc.............................. 32
Section 11.4. Indemnification....................................... 32
Section 11.5. Independent Credit Decisions.......................... 33
Section 11.6. Several Commitments................................... 33
Section 11.7. Successor Agent....................................... 33
ARTICLE XII - Miscellaneous.................................................. 34
Section 12.1. Expenses of the Agent and the Banks................... 34
Section 12.2. Indemnification....................................... 34
Section 12.3. Limitation of Liability............................... 35
Section 12.4. No Waiver; Cumulative Remedies........................ 35
Section 12.5. Successors and Assigns................................ 35
Section 12.6. Survival.............................................. 38
Section 12.7. ENTIRE AGREEMENT; AMENDMENT........................... 38
Section 12.8. Maximum Interest Rate................................. 38
Section 12.9. Notices............................................... 39
Section 12.10. APPLICABLE LAW; VENUE; SERVICE OF PROCESS............. 39
Section 12.11. Counterparts.......................................... 39
Section 12.12. Severability.......................................... 39
Section 12.13. Headings.............................................. 40
Section 12.14. Non-Application of Chapter 15 of Texas Credit Code.... 40
Section 12.15. Special Covenant...................................... 40
Section 12.16. Arbitration........................................... 40
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<PAGE>
EXHIBITS
A. Form of Notes
B. Form of Advance Request Form
C. Form of Limited Guaranty by Tech-Sym Corporation
D. Form of Guaranty by GeoScience Corporation
E. Form of Assignment and Acceptance
F. Real Property Description
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<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT, dated as of December 6, 1996
(this "Agreement"), is among SYNTRON, INC., a Delaware corporation (the
"Borrower"), each of the banks or other lending institutions which is or which
may from time to time become a signatory hereto or any successor or assignee
thereof (individually, a "Bank" and, collectively, the "Banks"), and WELLS FARGO
BANK (TEXAS), NATIONAL ASSOCIATION, a national banking association, as agent for
itself and the other Banks (in such capacity, together with its successors in
such capacity, the "Agent").
R E C I T A L S:
This Agreement amends and restates in its entirety the Loan Agreement
dated as of December 31, 1990, (as the same was, from time to time, amended)
among the parties hereto.
The Borrower has requested that the Banks make revolving credit loans to
the Borrower with advances thereunder not to exceed an aggregate principal
amount of $12,000,000 outstanding at any time. The Banks are willing to make
such loans to the Borrower upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section.1. DEFINITIONS. As used in this Agreement, the following terms
have the following meanings:
"AAA" has the meaning assigned to it in Section 12.16(b) hereof.
"ACCEPTABLE ENCUMBRANCE" means a pledge, Lien, security interest,
mortgage, or other encumbrance of the Real Property which secures
Acceptable Permanent Financing.
"ACCEPTABLE PERMANENT FINANCING" means Debt of the Borrower, secured
by the Real Property; provided that such Debt, when incurred, does not
cause the violation of any covenant or agreement contained herein.
"ADJUSTED EURODOLLAR RATE" means that rate of interest per annum
which shall on any day be equal to the SUM of (i) the Eurodollar Base Rate
PLUS (ii) 1.25%. The Adjusted Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Base Rate.
<PAGE>
"ADVANCE" means an advance of funds by a Bank to the Borrower
pursuant to Article II.
"ADVANCE REQUEST FORM" means a certificate, in substantially the
form of Exhibit "B" hereto, properly completed and signed by the Borrower
requesting an Advance.
"AFFILIATE" means any Person which directly or indirectly through
one or more intermediaries controls, or is controlled by, or is under
common control with, the Borrower. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGGREGATE LONG-TERM LEASE RENTALS" means the aggregate of the
minimum annual rental payments (excluding income taxes, property taxes,
insurance and other charges which the lessee is required to pay to, or on
behalf of, the lessor pursuant to any lease) of the Borrower and its
Subsidiaries under all leases of real and personal property having a
remaining unexpired term as at the date of determination (including the
original term and any renewals or extensions available at the lessee's
sole option) in excess of three years.
"APPLICABLE LENDING OFFICE" means for each Bank and each type of
Advance, the Lending Office of such Bank (or of an Affiliate of such Bank)
designated for such type of Advance below its name on the signature pages
hereof or such other office of such Bank (or of an Affiliate of such Bank)
as such Bank may from time to time specify to the Borrower and the Agent
as the office by which its Advances of such type are to be made and
maintained.
"ASSIGNEE" has the meaning assigned to it in Section 12.5(b) hereof.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance
entered into by a Bank and its assignee and accepted by the Agent pursuant
to Section 12.07 in substantially the form of Exhibit "E" hereto.
"BUSINESS DAY" means (a) any day on which commercial banks are not
authorized or required to close in Houston, Texas, and, (b) with respect
to all borrowings, payments, Conversions, Continuations, Interest Periods,
and notices in connection with Eurodollar Advances, any day which is a
Business Day described in clause (a) above and which is also a day on
which dealings in Dollar deposits are carried out in the London interbank
market.
"CAPITAL EXPENDITURES" means expenditures which, in accordance with
GAAP, would be required to be capitalized on a consolidated balance sheet
of the Borrower and its Subsidiaries; provided, however, that the term
Capital Expenditures does not include "systems" manufactured, fabricated
or assembled by the Borrower for sale or lease or other equipment held by
the Borrower for sale or lease.
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<PAGE>
"CAPITALIZED LEASE" means any lease of property, real or personal,
which in accordance with GAAP, would be required to be capitalized on a
balance sheet of the lessee.
"CAPITALIZED LEASE OBLIGATIONS" means payments pursuant to
Capitalized Leases which, under GAAP, would be included in determining
total liabilities as shown on the liability side of a balance sheet.
"CASH FLOW" means, at any particular time, Net Income of the
Borrower and its Subsidiaries plus Interest Expense, depreciation,
amortization and other non-cash expenses deducted from the Borrower's and
its Subsidiaries' revenues to determine Net Income plus those items listed
in clauses (i), (ii) and (iii) of the definition of Net Income, all
determined in accordance with GAAP.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"COMMITMENT" means, as to each Bank, the obligation of such Bank to
make Advances hereunder in the principal amount set forth opposite the
name of such Bank on the signature pages hereto under the heading
"Commitment."
"CREDIT" or "CREDITS" means an irrevocable standby letter or
letters of credit issued by a Bank for the account of the Borrower (which
term shall include, without limitation, the Existing Credits), and all
extensions and amendments thereof.
"CREDIT FEE" shall have the meaning ascribed to it in Section 3.10
hereof.
"CURRENT ASSETS" means, at any particular time, all amounts which,
in conformity with GAAP, would be included as current assets on a
consolidated balance sheet of the Borrower and its Subsidiaries.
"CURRENT LIABILITIES" means, at any particular time, all amounts
which, in conformity with GAAP, would be included as current liabilities
on a consolidated balance sheet of the Borrower and its Subsidiaries.
"CURRENT MATURITIES OF LONG TERM DEBT" means, at any particular
time, all principal due and payable during the next succeeding twelve
month period on any of the Borrower's or its Subsidiaries' Debt for money
borrowed, which has a maturity of greater than twelve months.
"CURRENT RATIO" means, at any particular time, the ratio of Current
Assets to Current Liabilities.
"DEBT" means (i) all obligations and liabilities, which in
accordance with GAAP would be included in determining total liabilities as
shown on a balance sheet as of the date
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<PAGE>
at which Debt is to be determined, (ii) all obligations and liabilities
for borrowed money secured by any security interest of any kind existing
on property owned subject to such security interest whether or not such
obligations or liabilities shall have been assumed, (iii) all guaranties
(whether by discount or otherwise), endorsements (other than for
collection or deposit in the ordinary course of business), letters of
credit and other contingent obligations and agreements to acquire or to
supply or advance funds in respect of any obligation, liability or
dividend of any other Person and (iv) any agreement to pay the purchase
price of any product or service in which such agreement to pay is not
dependent upon whether or not such product or service is furnished;
provided, however, that Capitalized Lease Obligations shall not constitute
Debt.
"DEBT SERVICE COSTS" means, at any particular time, Current
Maturities of Long Term Debt plus Interest Expense.
"DEBT SERVICE RATIO" means, at the end of each calendar quarter, the
ratio of (i) the sum of Cash Flow for each of the preceding four
consecutive calendar quarters to (ii) Debt Service Costs.
"DEFAULT" means any event which, with the giving of notice or lapse
of time, could become an Event of Default.
"DEFAULT RATE" means the Maximum Rate or, if no Maximum Rate exists,
the sum of the Prime Rate in effect from day to day plus 5%.
"DISPUTE" has the meaning assigned to it in Section 12.16(a) hereof.
"DOLLARS" and "$" mean lawful money of the United States of America.
"ENVIRONMENTAL LAWS" means any and all federal, state, and local
laws, regulations, and requirements pertaining to health, safety, or the
environment, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
ss. 9601 ET SEQ., the Resource Conservation and Recovery Act of 1976, 42
U.S.C. ss. 6901 ET SEQ., the Occupational Safety and Health Act, 29 U. S.
C. ss. 651 ET SEQ., the Clean Air Act, 42 U. S. C. ss. 7401 ET SEQ. the
Clean Water Act, 33 U.S.C. ss. 1251 ET SEQ., the Toxic Substances Control
Act, 15 U.S.C. ss. 2601 ET SEQ., and all similar laws, regulations, and
requirements of any governmental authority or agency having jurisdiction
over the Borrower or any Subsidiary or any of their respective properties
or assets, as such laws, regulations, and requirements may be amended or
supplemented from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations and published
interpretations thereunder.
"ERISA AFFILIATE" means any corporation or trade or business which
is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the
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<PAGE>
Code) as the Borrower or is under common control (within the meaning of
Section 414(c) of the Code) with the Borrower.
"EURODOLLAR BASE RATE" means, with respect to each Interest Period
during which the LIBO Rate is applicable, a rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the QUOTIENT
of (a) the LIBO Rate with respect to such Interest Period, DIVIDED by (b)
the remainder of 1.00 MINUS the applicable Statutory Reserve in effect on
the first day of such Interest Period. The Eurodollar Base Rate shall be
adjusted automatically on and as of the effective date of any change in
the applicable Statutory Reserve.
"EURODOLLAR BORROWING" means any Advance with respect to which the
Borrower shall have selected an interest rate based on the Adjusted
Eurodollar Rate in accordance with the provisions of this Agreement.
"EVENT OF DEFAULT" has the meaning specified in Section 10.1.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/16 of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business
Day next succeeding such day, provided that (a) if the day for which such
rate is to be determined is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (b)
if such rate is not so published on such next succeeding Business Day, the
Federal Funds Rate for any day shall be the average rate charged to
Reference Bank on such day on such transactions as determined by the
Agent.
"FUNDED DEBT" means the Debt evidenced by the Note and all Debt owed
or guaranteed which by its terms matures more than one year from the date
such Funded Debt is being determined pursuant to applicable provisions of
this Agreement or which may be renewed or extended at the option of the
obligor for more than one year from such date whether or not theretofore
renewed or extended.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants and/or in
statements of the Financial Accounting Standards Board and/or their
respective successors and which are applicable in the circumstances as of
the date in question. Accounting principles are applied on a "consistent
basis" when the accounting principles observed in a current period are
comparable in all material respects to those accounting principles applied
in a preceding period.
"GUARANTORS" means Tech-Sym Corporation, a Nevada corporation, whose
address is 10500 Westoffice Drive, Suite 200, Houston, Texas 77042-5391,
and GeoScience
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<PAGE>
Corporation, a Nevada corporation, whose address is 10500 Westoffice
Drive, Suite 210, Houston, Texas 77042-5326.
"GUARANTIES" means the guaranties of Guarantors in favor of the
Banks, in substantially the form of Exhibits "C" and "D" hereto, as the
same may be amended, supplemented, or modified from time to time.
"HAZARDOUS SUBSTANCE" means any substance, product, waste,
pollutant, material, chemical, contaminant, constituent, or other material
which is or becomes listed, regulated, or addressed under any
Environmental Law, including, without limitation, asbestos, petroleum, and
polychlorinated biphenyls.
"INTEREST EXPENSE" means any expense of the Borrower or its
Subsidiaries which would be considered interest expense in accordance with
GAAP.
"INTEREST PERIOD" means, (i) as to any portion of the Advance
bearing interest at the Prime Rate, any period selected by the Borrower,
and (ii) as to any portion of the Advance bearing interest at the Adjusted
Eurodollar Rate, a period of one month, two months or three months, as the
Borrower may elect in the manner set forth in Section 2.5 hereof, PROVIDED
THAT:
(i) the initial Interest Period for any portion of the Advance shall commence on
the date of each Advance and each Interest Period occurring thereafter for such
Advance shall commence on the day on which the next preceding Interest Period
for such Advance expires:
(ii) no Interest Period shall extend beyond the Revolving Credit Termination
Date;
(iii) if the Borrower has selected an Interest Period with respect to any
portion of the Advance which extends beyond the Revolving Credit Termination
Date, the Borrower shall be deemed to have selected an Interest Period which
will expire on the Revolving Credit Termination Date;
(iv) in the absence of an election by the Borrower as provided above, the
Borrower shall be deemed to have elected an Advance bearing interest at the
Prime Rate with a 30 day Interest Period;
(v) if any Interest Period for an Advance would otherwise end on a day which is
not a Business Day (as to a Floating Rate Borrowing) or a Business Day (as to a
Eurodollar Borrowing), such Interest Period shall be extended to the next
succeeding Business Day or Business Day, as applicable, unless the result of
such extension would be to extend such Interest Period into another calendar
month, in which event such Interest Period shall end on the immediately
preceding Business Day or Business Day, as applicable; and
(vi) any Interest Period with respect to a Eurodollar Borrowing that begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the
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<PAGE>
calendar month at the end of such Interest Period) shall end on the last
Business Day of a calendar month.
"LEVERAGE RATIO" means, at any particular time, the ratio of
Liabilities to Tangible Net Worth.
"LIABILITIES" means, at any particular time, all amounts which, in
conformity with GAAP, would be included as liabilities on a consolidated
balance sheet of the Borrower or its Subsidiaries.
"LIBO RATE" means the rate of interest per annum equal to the
arithmetic average (rounded upward to the nearest whole multiple of
one-sixteenth of one percent) of the respective rates per annum at which
deposits in Dollars are offered to the Agent in the interbank eurodollar
market at its eurodollar lending office at approximately 11:00 a.m.
Houston, Texas time two Business Days prior to the first day of an
applicable Interest Period, in an amount approximately equal to the
principal amount of the Advance of the Banks to which such Interest Period
is to apply, and for a period of time comparable to such Interest Period.
"LIEN" means any mortgage, pledge, security interest, encumbrance,
possessory interest, lien or charge of any kind, including any agreement
to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial
Code of any jurisdiction in connection with any of the foregoing.
"LOAN DOCUMENTS" means this Agreement, the Note, the Guaranty and
all other promissory notes, security agreements, deeds of trust,
assignments, guaranties, and other instruments, documents, and agreements
executed and delivered pursuant to or in connection with this Agreement,
as such instruments, documents, and agreements may be amended, modified,
renewed, extended, or supplemented from time to time.
"MAXIMUM RATE" means the maximum rate of nonusurious interest
permitted from day to day by applicable law, including as to Article
5069-1.04, Vernon's Texas Civil Statutes (and as the same may be
incorporated by reference in other Texas statutes), but otherwise without
limitation, that rate based upon the "indicated rate ceiling" and
calculated after taking into account any and all relevant fees, payments,
and other charges in respect of the Loan Documents which are deemed to be
interest under applicable law.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by the
Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA.
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<PAGE>
"NET INCOME" means the net income and net losses of the Borrower and
its Subsidiaries, determined in accordance with GAAP, but excluding
therefrom the sum of:
(i) proceeds of life insurance policies;
(ii) gains arising from (a) the sale or disposition of any
assets of the Borrower or its Subsidiaries which are not current
assets, as determined in accordance with GAAP, (b) any write-up,
subsequent to the date hereof, in the book value of any asset owned
by the Borrower or its Subsidiaries and (c) the acquisition by the
Borrower or its Subsidiaries of debt securities for a cost less than
principal and accrued interest thereon;
(iii) the net income of any Person other than a Subsidiary in
which the Borrower or a Subsidiary has any form of equity interest,
except to the extent such Person's net income has been actually
distributed and received by the Borrower or a Subsidiary in the form
of cash or other property (the latter valued at the fair market
value thereof at the time of distribution);
(iv) any portion of the net income of any Subsidiary accrued
prior to the date it becomes a Subsidiary;
(v) extraordinary gains and losses (including, without
limitation, capital gains or losses in aggregate amounts exceeding
$100,000 in any one fiscal year) and extraordinary charges or
credits;
(vi) any amounts paid or payable in any currency that, at the
time of determination of Net Income, is not fully convertible into
United States dollars;
(vii) net income of any successor to, or transferee
corporation of, the Borrower or its Subsidiaries prior to
consummation of the transaction that results in any related
consolidation, merger or transfer of assets; and
(viii) any deferred credit (or amortization of a deferred
credit) arising from the acquisition in any manner of any other
Person.
"NOTES" means the promissory notes executed by the Borrower and
payable to the order of a Bank, in substantially the form of Exhibit "A"
hereto, and all extensions, renewals, and modifications thereof and each
document and instrument given in substitution therefor.
"OBLIGATED PARTY" means Guarantors or any other Person who is or
becomes party to any agreement that guarantees or secures payment and
performance of the Obligations or any part thereof.
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"OBLIGATIONS" means all obligations, indebtedness, and liabilities
of the Borrower to the Agent and the Banks, or any or some of them, now
existing or hereafter arising, whether direct, indirect, related,
unrelated, fixed, contingent, liquidated, unliquidated, joint, several, or
joint and several, including, without limitation, the obligations,
indebtedness, and liabilities of the Borrower under this Agreement and the
other Loan Documents, and all interest accruing thereon and all attorneys'
fees and other expenses incurred in the enforcement or collection thereof.
"PAYOR" has the meaning assigned to it in Section 3.4 hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"PLAN" means any employee benefit or other plan established or
maintained by the Borrower or any ERISA Affiliate and which is covered by
Title IV of ERISA.
"PRIME RATE" means that variable rate of interest per annum
established by Payee from time to time as its "prime rate." Such rate is
set by Payee as a general reference rate of interest, taking into account
such factors as Payee may deem appropriate, it being understood that many
of Payee's commercial or other loans are priced in relation to such rate,
that it is not necessarily the lowest or best rate charged to any customer
and that Payee may make various commercial or other loans at rates of
interest having no relationship to such rate.
"PROHIBITED TRANSACTION" means any transaction set forth in Section
406 of ERISA or Section 4975 of the Code.
"REAL PROPERTY" means the real property and interests in real
property identified on Exhibit "F" attached hereto and all improvements
and fixtures thereon and all appurtenances thereto.
"REGISTER" has the meaning assigned to it in Section 12.5(d) hereof.
"REPORTABLE EVENT" means any of the events set forth in Section 4043
of ERISA.
"REQUIRED BANKS" means both Banks if there are only two Banks and
the Banks having at least 66-2/3% of the outstanding principal amount of
all Advances if there are more than two Banks.
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"RESTRICTED INVESTMENTS" means all investments (including stock
purchases, capital contributions and advances, loans, guarantees and other
extensions of credit) of the Borrower or its Subsidiaries in any Persons,
other than:
(a) Investments existing as of the date hereof, and disclosed
to the Agent in writing prior to the date hereof;
(b) Investments in direct or indirect obligations of the
United States of America maturing within three years of acquisition;
(c) Investments in commercial paper maturing within 270 days
of acquisition and rated A-1 by S&P or Prime-1 by Moody's; and
(d) Investments in (i) certificates of deposit maturing within
two years after their date of acquisition and issued by the Agent, a
Bank or banks incorporated in the United States of America having
capital, surplus and undivided profits of at least $100,000,000 or
(ii) in Eurodollar certificates of deposit maturing within one year
after their date of acquisition and issued by banks having capital,
surplus and undivided profits of at least $1 billion.
"REVOLVING CREDIT ADVANCE REQUEST" has the meaning assigned to it in
Section 2.5 hereof.
"REVOLVING CREDIT COMMITMENT" means the obligation of the Banks to
make Advances hereunder in an aggregate principal amount at any one time
outstanding up to but not exceeding $12,000,000 as such amount may be
reduced pursuant to Section 2.7.
"REVOLVING CREDIT TERMINATION DATE" means 11:00 A.M. Houston, Texas
time on April 30, 1997, or such earlier date on which the Revolving Credit
Commitment terminates as provided in this Agreement.
"SELECTED RATE" means the rate of interest (either a Prime Rate or
an Adjusted Eurodollar Rate) which is applicable to the principal balance
under the Notes, or portions thereof, designated in accordance with
Section 2.5 hereof, subject to the limitations of Sections 3.5 and 3.6
hereof.
"SHORT-TERM DEBT" means all Debt for borrowed money of the Borrower
or its Subsidiaries maturing on demand or within one year from the date of
determination.
"S&P" means Standard & Poor's Corporation.
"STATUTORY RESERVES" means the aggregate (without duplication) of
the highest maximum reserve percentages (expressed as a decimal fraction)
of the Agent (including, without limitation, any basic, marginal, special,
emergency or supplemental reserves)
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established from time to time by the Board of Governors of the Federal
Reserve System and any other banking authority to which the Agent and the
Banks are subject, with respect to any Eurodollar Borrowing, for
Eurocurrency Liabilities (as defined in Regulation D of said Board). Such
reserve percentages shall include, without limitation, those imposed under
Regulation D. Eurodollar Borrowings shall be deemed to constitute
"Eurocurrency Liabilities," as provided for in Regulation D and to be
subject to such reserve requirements without benefit of or credit for
proration, exceptions or offsets which may be available from time to time
to the Agent or any Bank under Regulation D. Statutory Reserves shall be
adjusted automatically on and as of the effective date of any change in
any reserve percentage.
"SUBSIDIARY" means any Person of which or in which the Borrower and
its other Subsidiaries own or control, directly or indirectly, 50 percent
or more of (a) the combined voting power of all classes having general
voting power under ordinary circumstances to elect a majority of the board
of directors or equivalent body of such Persons, if it is a corporation,
(b) the capital interest or profits interest of such Person, if it is a
partnership, limited liability company, joint venture or similar entity,
or (c) the beneficial interest of such Person, if it is a trust,
association or other unincorporated association or organization.
"SYNTRON EUROPE" means Syntron Europe, Ltd., a corporation organized
under the laws of Scotland, and its permitted successors and assigns.
"TANGIBLE NET WORTH" means the sum of all capital stock, capital in
excess of par value and retained earnings of the Borrower and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP,
less (i) the sum of all goodwill, trade names, trademarks, patents,
organization expense, unamortized debt discount and expense and other
similar intangibles properly classified as intangibles in accordance with
generally accepted accounting principles and (ii) write-ups of assets
subsequent to the date hereof.
"TOTAL CAPITALIZATION" means Tangible Net worth plus Funded Debt of
the Borrower and its Subsidiaries determined on a consolidated basis in
accordance with GAAP.
"WORKING CAPITAL" means, at any particular time, the amount by which
Current Assets exceed Current Liabilities.
Section 2 OTHER DEFINITIONAL PROVISIONS. All definitions contained in this
Agreement are equally applicable to the singular and plural forms of the terms
defined. The words "hereof", 'herein", and "hereunder" and words of similar
import referring to this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Unless otherwise specified, all
Article and Section references pertain to this Agreement. All accounting terms
not specifically defined herein shall be construed in accordance with GAAP.
Terms used herein that are defined in the Uniform Commercial Code as adopted by
the State of Texas, unless otherwise defined herein, shall have the meanings
specified in the Uniform Commercial Code as adopted by the State of Texas.
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ARTICLE II
ADVANCES
SECTION.1. COMMITMENT. Subject to the terms and conditions of this
Agreement, each Bank agrees to make one or more Advances to the Borrower from
time to time from the date hereof to and including the Revolving Credit
Termination Date, provided that the aggregate amount of all Advances at any time
outstanding shall not exceed the Revolving Credit Commitment plus the face
amount of outstanding Credits. Subject to the foregoing limitations, and the
other terms and provisions of this Agreement, the Borrower may borrow, repay,
and reborrow hereunder.
SECTION.2. THE NOTES. The obligation of the Borrower to repay the Advances
shall be evidenced by the Notes.
SECTION.3. REPAYMENT OF ADVANCES. The Borrower shall repay the unpaid
principal amount of all Advances on the Revolving Credit Termination Date.
SECTION.4. INTEREST. Interest shall be subject to the provisions of the
Note and the other provisions of this Article II.
SECTION.5. PROCEDURE FOR ADVANCES UNDER THE REVOLVING CREDIT COMMITMENT.
Prior to the Revolving Credit Termination Date, the Borrower shall give the
Agent a written notice executed on behalf of the Borrower by any Authorized
Financial Officer of the Borrower (the "REVOLVING CREDIT ADVANCE REQUEST") of
any proposed Advance under the Revolving Credit Commitment which shall be
irrevocable. Each Revolving Credit Advance Request shall be received not later
than 2:00 p.m., Houston, Texas time by the Agent, as long as the Agent is the
only Bank, and mutually by the Agent, the Borrower and the Banks if there is
more than one Bank, (i) the same Business Day of any proposed Floating Rate
Borrowing requested by the Borrower, and (ii) at least two Business Days prior
to any proposed Eurodollar Borrowing requested by the Borrower. Each such
Revolving Credit Advance Request shall specify: (i) the Selected Rate which the
Borrower desires; (ii) the principal amount proposed to be covered by the
Selected Rate; (iii) the borrowing date (which shall be a Business Day); and
(iv) a proposed Interest Period. The Agent shall notify each Bank of the
contents of each such notice. Not later than 3:00 p.m., Houston, Texas time (or
such other time as may be agreed upon between the Agent, the Borrower and the
Banks if there is more than one Bank) on the date specified for the Advance
hereunder, each Bank will make available to the Agent at the Principal Office in
immediately available funds, for the account of the Borrower, its pro rata share
of the Revolving Credit Advance. After the Agent's receipt of such funds and
subject to the other terms and conditions of this Agreement, the Agent will make
the Revolving Credit Advance available to the Borrower by depositing the same,
in immediately available funds, in an account of the Borrower (designated by the
Borrower) maintained with the Agent at the Agent's principal office. If the
required Revolving Credit Advance Request has not been received by the Agent
prior to the expiration of any then relevant Interest Period with respect to any
Advance, the Borrower shall be deemed to have elected to repay such Advance in
whole on the last day of the current Interest Period
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with respect thereto and to reborrow the principal amount of such Advance on
such date as a Floating Rate Borrowing. The Agent is hereby authorized to act in
reliance upon a certificate of incumbency from the Borrower's Secretary or
Assistant Secretary as to the identity of the foregoing officers and their due
appointment and authorization to issue Revolving Credit Advance Requests and
receive proceeds of Advances hereunder on behalf of the Borrower unless and
until the Agent is in actual receipt of written notice by the Borrower of
revocation of said appointment and authorization. Prior to 11:00 a.m. Houston,
Texas, time on each borrowing date and subject to the provisions of Section 2.1,
the Agent shall make available to the Borrower in immediately available funds
the requested Advance by deposit to the Borrower's deposit account maintained
with the Agent or such other reasonable disposition of such funds as the
Borrower shall request of the Agent in writing. The Agent shall, and is hereby
authorized by the Borrower to, endorse on the Schedule attached to the Note or
on a continuation of such Schedule attached to and made a part of such Note an
appropriate notation evidencing the date and amount of each Advance and payment
and prepayment by the Borrower of the principal of and interest on the Advance
evidenced by such Note, the Selected Rate of the Advance made and the Selected
Rate of the Advance repaid, but the failure of the Agent to make any such
endorsement or any incorrect endorsement shall not subject the Agent or any Bank
to any liability hereunder and shall not limit, enlarge or otherwise affect the
Obligations of the Borrower under the Note.
SECTION.6. USE OF PROCEEDS. The proceeds of Advances shall be used for the
Borrower's general working capital purposes.
SECTION.7. CONVERSION AND CONTINUATION OPTIONS. The Borrower may elect
from time to time to convert Eurodollar Borrowings to Floating Borrowings by
giving the Agent at least two Business Days' prior irrevocable notice of such
election, PROVIDED that any such conversion of Eurodollar Borrowings shall only
be made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert Floating Rate Borrowings to Eurodollar
Borrowings by giving the Agent at least two (2) Business Days' prior irrevocable
notice of such election. All or any part of outstanding Eurodollar Borrowings
and Floating Rate Borrowings may be converted as provided herein, PROVIDED that
(i) no Advance may be converted into a Eurodollar Borrowing when any Default or
Event of Default has occurred and is continuing, (ii) partial conversions shall
be in an aggregate principal amount of (A) in the case of any conversion of
Floating Rate Borrowings, $10,000 or a whole multiple of $10,000 in excess
thereof and (B) in the case of any conversion of Eurodollar Borrowings, at least
$10,000, (iii) any such conversion may only be made if, after giving effect
thereto, SUBSECTION 2.8(C) shall not have been contravened and (iv) no Advance
may be converted to a Eurodollar Borrowing after the date that is one (1) month
prior to the Revolving Credit Termination Date.
(a) Any Eurodollar Borrowing may be continued as such upon the expiration
of an Interest Period with respect thereto by compliance by the Borrower with
the notice provisions contained in Section 2.5; PROVIDED that no Eurodollar
Borrowing may be continued as such when any Default or Event of Default has
occurred and is continuing, but shall be automatically converted to a Floating
Rate Borrowing on the last day of the Interest Period, in effect for such
Advance, during which such Default or Event of Default occurs; and PROVIDED,
FURTHER, that if the Borrower shall not
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have complied with such notice provisions, the Borrower shall be deemed
irrevocably to have requested that such Eurodollar Borrowing be converted to a
Floating Rate Borrowing on the last day of such Interest Period.
(b) Any borrowings, conversions, payments and prepayments hereunder shall
be in such amounts and be made pursuant to such elections so that, after giving
effect thereto, the unpaid principal amount of Eurodollar Borrowings shall not
be less than $100,000.
ARTICLE III
PAYMENTS
SECTION.1. METHOD OF PAYMENT. All payments of principal, interest, and
other amounts to be made by the Borrower under this Agreement, the Notes, and
the other Loan Documents shall be made to the Agent, for the benefit of the
Banks, at its office at 1000 Louisiana, Houston, Texas 77002, without setoff,
deduction, or counterclaim, in Dollars and in immediately available funds. The
Borrower shall, at the time of making each such payment, specify to the Agent
the sums payable by the Borrower under this Agreement, the Notes, or other Loan
Document to which such payment is to be applied. In the event the Borrower fails
to so specify, or if an Event of Default has occurred and is continuing, the
Agent may apply such payment to the Obligations in such order and manner as it
may elect in its sole discretion. Each payment received by the Agent under this
Agreement or any other Loan Document for the benefit of a Bank shall be paid
promptly to such Bank, in immediately available funds, for the account of such
Bank's Applicable Lending Office (and if not paid promptly shall be accompanied
by interest thereon at a per annum rate equal to the Federal Funds Rate for the
period commencing on the date due until paid). Whenever any payment under this
Agreement, the Notes, or any other Loan Document shall be stated to be due on a
day that is not a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of the payment of interest.
SECTION.2. PREPAYMENT. The Borrower may prepay the Notes in whole at any
time or from time to time in part without premium or penalty but with accrued
interest to the date of prepayment on the amount so prepaid, provided that each
partial prepayment shall be in the principal amount of $25,000.00 or an integral
multiple thereof.
SECTION.3. PRO RATA TREATMENT. Except to the extent otherwise provided
herein: (a) the Advances shall be by the Banks under Section 2.10, and the
payment of the Credit Fee under Section 3.10 shall be made for the account of
the Banks, pro rata according to the respective Commitments; (b) the making of
Advances shall be made pro rata among the Banks according to the amounts of
their respective Commitments; (c) each payment and prepayment of principal of or
interest on Advances by the Company shall be made to the Agent for the benefit
of the Banks holding Advances pro rata in accordance with the respective unpaid
principal amounts of such Advances held by such Banks; and (d) Interest Periods
for Advances shall be allocated among the Banks holding Advances pro rata
according to the respective principal amounts held by such Banks.
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SECTION.4. NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Agent shall have
been notified by a Bank or the Borrower (the "Payor") prior to the date on which
such Bank is to make payment to the Agent of the proceeds of a Loan to be made
by it hereunder or the Borrower is to make a payment to the Agent for the
account of one or more of the Banks, as the case may be (such payment being
herein called the "Required Payment"), which notice shall be effective upon
receipt, that the Payor does not intend to make the Required Payment to the
Agent, the Agent may assume that the Required Payment has been made and may, in
reliance upon such assumption (but shall not be required to), make the amount
thereof available to the intended recipient on such date and, if the Payor has
not in fact made the Required Payment to the Agent, the recipient of such
payment shall, on demand, pay to the Agent the amount made available to it
together with interest thereon in respect of the period commencing on the date
such amount was so made available by the Agent until the date the Agent recovers
such amount at a rate per annum equal to the Federal Funds Rate for such period.
SECTION.5. COMPUTATION OF INTEREST. Interest on all Prime Rate Advances
and the Credit Fees hereunder shall be calculated on the basis of a year of
365/366 days for the actual number of days elapsed. Interest on all Eurodollar
Borrowings shall be calculated on the basis of a year of 360 days, for the
actual number of days elapsed. The Agent shall, as promptly as is practicable,
notify the Borrower of each determination of an Adjusted Eurodollar Rate, and of
each change in the Prime Rate, in accordance with the Agent's customary
practices. Any changes in the rate of interest on the Notes resulting from
changes in the Prime Rate shall become effective as of the opening of business
on the day on which such change in the Prime Rate shall occur. If at any time
during the term of the Advance the rate of interest applicable to any Advance
would otherwise exceed the Maximum Rate, the rate of interest on such Advance
shall be limited to the Maximum Rate, but any subsequent reduction in such
interest rate will not reduce the rate of interest below the Maximum Rate until
the total amount of interest earned, measured by a dollar amount, equals the
amount of interest which would have been earned, measured by a dollar amount, if
the interest rate had not been held at the Maximum Rate. After maturity (stated
or by acceleration) of the Notes, the Notes shall, at the option of the Agent,
bear interest at the Default Rate until the Notes are paid in full.
SECTION.6. RESERVE AND CAPITAL ADEQUACY PROVISIONS. The Borrower agrees to
indemnify the Banks against, and pay to the Banks within ten Business Days of
demand therefor, amounts equal to: (i) the cost of any increased present and
future reserve, capital adequacy (which are directly related to the cost of
funds) or special deposit requirements or any taxes (other than federal, state,
or local income, franchise, gross profit or other taxes on the overall
operations of the Banks), domestic or foreign, which the Banks are required to
keep or pay by reason of its funding any portion of the Advance bearing interest
at an Adjusted Eurodollar Rate or by reason of or under any outstanding Credits
or unfunded commitments under the Revolving Credit Commitment; (ii) any costs or
expenses incurred by the Banks as a result of the Borrower's failure to borrow a
portion of the Advance to bear interest at an Adjusted Eurodollar Rate once
requested and/or the Borrower's payment or conversion to another Selected Rate
hereunder whether as a result of an acceleration of maturity or otherwise) of
all or a portion of the Advance bearing interest at an Adjusted Eurodollar Rate
prior to the end of the Interest Period and/or the Borrower's failure to make
any payment hereunder when due, including, without limitation, any loss arising
from the reemployment of funds at rates lower than the cost to the Banks of such
funds. A certificate of any Bank, setting forth in
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reasonable detail the basis for the determination of such costs and expenses
shall be conclusive, absent manifest error. In determining such amount or
amounts, such Bank may use any reasonable averaging and attribution methods.
(a) In addition to the foregoing provisions, if after the date hereof, any
Bank shall have determined that the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Bank with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on such Bank's capital as a consequence of its
obligations hereunder or the transactions contemplated hereby to a level below
that which such Bank could have achieved but for such adoption, change or
compliance (taking into consideration such Bank's policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, within ten Business Days after demand by such Bank, the Borrower
shall pay to such Bank such additional amount or amounts as will compensate such
Bank for such reduction. A certificate of any Bank claiming compensation under
this Section 3.4 and setting forth the additional amount or amounts to be paid
to it hereunder shall be conclusive, absent manifest error. In determining such
amount or amounts, such Bank may use any reasonable averaging and attribution
methods.
SECTION.7. LIMITATION ON EURODOLLAR BORROWINGS. If, at any time that an
Adjusted Eurodollar Rate is to be determined or a Eurodollar Borrowing is to be
made or continued by the Agent or the Banks, the Agent reasonably determines
that:
(a) with respect to any Advance to bear interest at the Adjusted
Eurodollar Rate, eurodollar deposits in the appropriate amount and for the
appropriate period are not being offered in the interbank eurodollar
market, the Agent shall promptly give notice thereof to the Borrower (and
such determination shall be conclusive on the Borrower), and thereafter no
new Eurodollar Borrowings shall be permitted to be outstanding until such
time as eurodollar deposits for the appropriate amount and for the
appropriate periods are again offered in the interbank eurodollar market;
or
(b) the Adjusted Eurodollar Rate will not adequately and fairly
reflect the cost to the Banks of making, maintaining, or funding a
proposed Advance that the Borrower has requested be made or continued as
or converted into an Advance bearing interest at the Adjusted Eurodollar
Rate, then the Agent shall promptly give notice to the Borrower of such
determination, and any such requested Advance shall bear interest at the
Prime Rate; or
(c) as a result of changes after the date of this Agreement in the
laws of any country or state (domestic or foreign), or the adoption or
making after such date of any interpretations, directives, or regulations
(whether or not having the force of law) by any court, governmental
authority, or reserve bank charged with the interpretation or
administration thereof, it shall be or become unlawful or impossible for
any Bank to make,
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maintain, or fund any Advance bearing an Adjusted Eurodollar Rate of
interest, the Banks' obligation to make the affected Advance shall be
automatically cancelled, and the affected Advance shall be automatically
converted to an Advance bearing interest at the Prime Rate, and the
Borrower shall pay the Banks any amounts necessary to compensate the Banks
for any such conversion which occurs prior to the last day of the then
current Interest Period for such Advance, in accordance with Section 3.4
hereof.
SECTION.8. DETERMINATION OF INTEREST RATES. The Agent shall correctly
calculate each interest rate applicable to the Advances hereunder. The Agent
will, at the request of the Borrower, furnish such additional information
concerning the calculation of the interest rate on any Eurodollar Borrowings as
the Borrower may reasonably request. Additionally, the Agent may fund Advances
hereunder bearing an Adjusted Eurodollar Rate of interest at any office of the
Agent which the Agent, in its sole discretion, may elect and at which the
Borrower maintains an account capable of receiving such funding.
SECTION.9. DRAWS UNDER CREDITS. The Banks may make Advances under the
Notes to fund draws under any Credits.
SECTION.10. CREDIT FEES. The Borrower shall pay to the Agent, for the
benefit of the Banks, a commission for the issuance of each Credit, computed for
the period of time from issuance to the stated expiry date at the per annum rate
of 0.75% (with a $300 minimum), such fee being non-refundable and payable in
full on the date each Credit is opened (the "Credit Fee").
SECTION.11. NO PREPAYMENT DURING AN INTEREST PERIOD. The Borrower shall
not make any prepayments on any portion of any Eurodollar Borrowing on a day
that is not the last day of the applicable Interest Period with respect to the
same.
ARTICLE IV
GUARANTIES
Section 1 GUARANTIES. By execution and delivery of the Guaranties,
Guarantors shall unconditionally and irrevocably guarantee payment of the
indebtedness evidenced by the Note and all other indebtedness created by, and
amounts payable by the Borrower under, this Agreement, to the extent stated in
such Guaranties.
ARTICLE V
CONDITIONS PRECEDENT
Section.1. INITIAL ADVANCE. The obligation of the Banks to make
the initial Advance is subject to the condition precedent that the Agent shall
have received on or before the day of such Advance all of the following, each
dated (unless otherwise indicated) the date hereof, in form and substance
satisfactory to the Agent:
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(a) RESOLUTIONS. Resolutions of the Board of Directors of the
Borrower and the Guarantors certified by its respective Secretary or an
Assistant Secretary which authorize the execution, delivery, and
performance by the Borrower and the Guarantors, as applicable, of this
Agreement and the other Loan Documents to which the Borrower or the
Guarantors is or is to be a party;
(b) INCUMBENCY CERTIFICATE. A certificate of incumbency certified by
the respective Secretary or an Assistant Secretary of the Borrower and
Guarantors certifying the names of the officers of the Borrower and
Guarantors, as applicable, authorized to sign this Agreement and each of
the other Loan Documents to which the Borrower or Guarantors, as
applicable, is or is to be a party (including the certificates
contemplated herein) together with specimen signatures of such officers;
(c) GOOD STANDING CERTIFICATES. Evidence from the appropriate
government officials of the state of Delaware as to the existence and good
standing of the Borrower and the state of Nevada as to the existence and
good standing of Guarantors;
(d) NOTE. The Note executed by the Borrower;
(e) GUARANTIES. The Guaranties executed by Guarantors;
(f) INSURANCE POLICIES. Evidence acceptable to the Agent of the
existence of the insurance coverage required pursuant to Section 7.5; and
(g) UCC SEARCH. The results of a Uniform Commercial Code search
showing all financing statements and other documents or instruments on
file against the Borrower in the office of the Secretary of State of
Texas, such search to be dated a current date.
Section 2 ALL ADVANCES. The obligation of the Banks to make any Advance
(including the initial Advance) is subject to the following additional
conditions precedent:
(a) ADVANCE REQUEST FORM. The Agent shall have received, at least
one Business Day prior to the date of such Advance, an Advance Request
Form, dated the date of such Advance, executed by an authorized officer of
the Borrower, all of the statements in which shall be true and correct on
and as of such date; and
(b) ADDITIONAL DOCUMENTATION. The Agent shall have received such
additional approvals, opinions, or documents as the Agent or its legal
counsel may reasonably request.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
To induce the Agent and each Bank to enter into this Agreement, the
Borrower represents and warrants to the Agent and each Bank that:
Section.1. CORPORATE EXISTENCE. The Borrower (a) is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation; (b) has all requisite corporate power and
authority to own its assets and carry on its business as now being or as
proposed to be conducted; and (c) is qualified to do business in all
jurisdictions in which the nature of its business makes such qualification
necessary and where failure to so qualify would have a material adverse effect
on its business, condition (financial or otherwise), operations, prospects, or
properties. The Borrower has the corporate power and authority to execute,
deliver, and perform its obligations under this Agreement and the other Loan
Documents to which it is or may become a party.
Section.2. FINANCIAL STATEMENTS. The Borrower has delivered to the Agent
unaudited consolidated financial statements of the Borrower as of September 30,
1996. Such financial statements are true and correct, have been prepared in
accordance with GAAP, and fairly and accurately present the financial condition
of the Borrower as of the date indicated therein and the results of operations
for the period indicated therein. The Borrower has no material contingent
liabilities, liabilities for taxes, material forward or long-term commitments,
or unrealized or anticipated losses from any unfavorable commitments not
reflected in such financial statements. There has been no material adverse
change in the business, condition (financial or otherwise), operations,
prospects, or properties of the Borrower since the effective date of the most
recent financial statements referred to in this Section.
Section.3. CORPORATE ACTION; NO BREACH. The execution, delivery, and
performance by the Borrower of this Agreement and the other Loan Documents to
which the Borrower is or may become a party have been duly authorized by all
requisite action on the part of the Borrower and do not and will not violate or
conflict with the articles of incorporation or bylaws of the Borrower or any
law, rule, or regulation or any order, writ, injunction, or decree of any court,
governmental authority, or arbitrator, and do not and will not conflict with,
result in a breach of, or constitute a default under, or result in the creation
or imposition of any Lien upon any of the revenues or assets of the Borrower
pursuant to the provisions of any indenture, mortgage, deed of trust, security
agreement, franchise, permit, license, or other instrument or agreement by which
the Borrower or any of its properties is bound.
Section.4. OPERATION OF BUSINESS. The Borrower possesses all licenses,
permits, franchises, patents, copyrights, trademarks, and trade names, or rights
thereto, to conduct its business substantially as now conducted and as presently
proposed to be conducted, and the Borrower is not in violation of any valid
rights of others with respect to any of the forgoing.
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Section.5. LITIGATION AND JUDGMENTS. There is no action, suit,
investigation, or proceeding before or by any court, governmental authority, or
arbitrator pending, or to the knowledge of the Borrower, threatened against or
affecting the Borrower, that would, if adversely determined, have a material
adverse effect on the business, condition (financial or otherwise), operations,
prospects, or properties of the Borrower or the ability of the Borrower to pay
and perform the Obligations. There are no outstanding judgments against the
Borrower.
Section.6. RIGHTS IN PROPERTIES, LIENS. The Borrower has good and
indefeasible title to or valid leasehold interests in its properties and assets,
real and personal, including the properties, assets, and leasehold interests
reflected in the financial statements described in Section 6.2, and none of the
properties, assets, or leasehold interests of the Borrower is subject to any
Lien, except as permitted by Section 8.3.
Section.7. ENFORCEABILITY. This Agreement constitutes, and the other Loan
Documents to which the Borrower is a party, when delivered, shall constitute the
legal, valid, and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms, except as limited by
bankruptcy, insolvency, or other laws of general application relating to the
enforcement of creditor's rights.
Section.8. APPROVALS. No authorization, approval, or consent of, and no
filing or registration with, any court, governmental authority, or third party
is or will be necessary for the execution, delivery, or performance by the
Borrower of this Agreement and the other Loan Documents to which the Borrower is
or may become a party or the validity or enforceability thereof.
Section.9. TAXES. The Borrower has filed all tax returns (federal, state,
and local) required to be filed, including all income, franchise, employment,
property, and sales taxes, and have paid all of their respective liabilities for
taxes, assessments, and governmental charges and other levies that are due and
payable, and the Borrower knows of no pending investigation of the Borrower by
any taxing authority or of any pending but unassessed tax liability of the
Borrower.
Section.10. USE OF PROCEEDS; MARGIN SECURITIES. The Borrower is not
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, T, U, or X of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any extension of credit
under this Agreement will be used to purchase or carry any such margin stock or
to extend credit to others for the purpose of purchasing or carrying margin
stock.
Section.11. ERISA. The Borrower has complied with all applicable minimum
funding requirements and all other applicable and material requirements of
ERISA, and there are no existing conditions that would give rise to liability
thereunder. No Reportable Event has occurred in connection with any Plan that
might constitute grounds for the termination thereof by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer such Plan.
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Section.12. DISCLOSURE. No statement, information, report, representation,
or warranty made by the Borrower in this Agreement or in any other Loan Document
or furnished to the Agent or any Bank in connection with this Agreement or any
of the transactions contemplated hereby contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to the
Borrower which has a material adverse effect, or which might in the future have
a material adverse effect, on the business, condition (financial or otherwise),
operations, prospects, or properties of the Borrower that has not been disclosed
in writing to the Agent.
Section.13. SUBSIDIARIES. The Borrower has no Subsidiaries other than
Syntron Europe Limited, PolySeis Limited, Syntron Asia Pte. Ltd., and Tianjin
Geophysical Cable Company.
Section.14. AGREEMENTS. The Borrower is not a party to any indenture,
loan, or credit agreement, or to any lease or other agreement or instrument, or
subject to any charter or corporate restriction which could have a material
adverse effect on the business, condition (financial or otherwise), operations,
prospects, or properties of the Borrower, or the ability of the Borrower to pay
and perform its obligations under the Loan Documents to which it is a party. the
Borrower is not in default in any material respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which it is
a party.
Section.15. COMPLIANCE WITH LAWS. (i) The Borrower is not: (x) in default
with respect to any order, writ, injunction or decree of any court to which it
is a named party, or (y) in default under any law, rule, regulation, ordinance
or order relating to its or their respective businesses, the sanctions and
penalties resulting from which defaults described in clauses (x) and (y) would,
individually or in the aggregate, have a material adverse effect on the
business, properties, operations, assets or financial condition of the Borrower.
(i) The Borrower is not a "national" of a "designated foreign country", a
Person defined as a "designated foreign country", an entity defined as "Iran" or
an "Iranian Entity," an entity defined as "Nicaragua" or a "Nicaraguan," an
"Entity controlled by the South African Government," or an entity defined as the
"Government of Libya" or a "Libyan Person" within the meaning of definitions in
the Foreign Asset Control, Cuban Assets Control, Iranian Assets Control,
Nicaraguan Control, South African Transaction or Libyan Sanctions Regulations of
the Unites States Treasury Department.
Section.16. INVESTMENT COMPANY ACT. The Borrower is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
Section.17. PUBLIC UTILITY HOLDING COMPANY ACT. The Borrower is not a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" or a "public utility" within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
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Section.18. ENVIRONMENTAL MATTERS.
(a) The Borrower, and all of its properties, assets, and operations
are in compliance with all Environmental Laws. The Borrower is not aware
of, nor has the Borrower received notice of, any past, present, or future
conditions, events, activities, practices, or incidents which may
interfere with or prevent the compliance or continued compliance of the
Borrower with all Environmental Laws.
(b) The Borrower has obtained all permits, licenses, and
authorizations which are required under Environmental Laws.
(c) There is no action, suit, proceeding, investigation, or inquiry
before any court, administrative agency, or other governmental authority
pending or, to the knowledge of the Borrower, threatened against the
Borrower relating in any way to any Environmental Law. The Borrower (i)
does not have any liability for remedial action under any Environmental
Law, (ii) has not received any request for information by any governmental
authority with respect to the condition, use, or operation of any of its
properties or assets, or (iii) has not received any notice from any
governmental authority or other Person with respect to any violation of or
liability under any Environmental Law.
(d) No Lien arising under any Environmental Law has attached to any
of the properties or assets of the Borrower.
ARTICLE VII
POSITIVE COVENANTS
The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Bank has any commitment hereunder, the
Borrower will perform and observe the following positive covenants, unless the
Required Banks shall otherwise consent in writing:
Section.1. REPORTING REQUIREMENTS. The Borrower will furnish to the Agent:
(a) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and in any
event within 45 days after the end of each of the first three quarters of
each fiscal year of the Borrower and 90 days after the end of the fourth
quarter of each fiscal year of the Borrower, a copy of an unaudited
consolidated financial report of the Borrower as of the end of such fiscal
quarter and for the portion of the fiscal year then ended, containing
balance sheets, statements of income, statements of retained earnings and
cash flows, in each case setting forth in comparative form the figures for
the corresponding period of the preceding fiscal year, all in reasonable
detail certified by the Treasurer or Assistant Treasurer of the Borrower
to have been prepared in accordance with GAAP and to fairly and accurately
present (subject to year-end audit adjustments) the financial condition
and results of operations of the Borrower at the date and for the periods
indicated therein;
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(b) CERTIFICATE OF NO DEFAULT. Concurrently with the delivery of
each of the financial statements referred to in subsections 7.01(a), a
certificate of the Treasurer or Assistant Treasurer of the Borrower (i)
stating that to the best of such officer's knowledge, (a) no Default or
Event of Default has occurred and is continuing, or if Default or an Event
of Default has occurred and is continuing, a statement as to the nature
thereof and the action which is proposed to be taken with respect thereto
and (b) no material adverse change has occurred in the condition of the
Borrower either financial or otherwise, and (ii) showing in reasonable
detail the calculations demonstrating compliance with Article IX;
(c) NOTICE OF LITIGATION. Promptly after the commencement thereof,
notice of all actions, suits, and proceedings before any court or
governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting the Borrower in which the
damages sought exceed $250,000;
(d) NOTICE OF DEFAULT. As soon as possible and in any event within
five days after the occurrence of each Default or Event of Default, a
written notice setting forth the details of such Default or Event of
Default or the action which the Borrower has taken and proposes to take
with respect thereto; and
(e) GENERAL INFORMATION. Promptly, such other information concerning
the Borrower as the Agent may from time to time reasonably request.
Section.2. MAINTENANCE OF EXISTENCE. The Borrower will preserve and
maintain its corporate existence and all of its leases, privileges, licenses,
permits, franchises, qualifications, and rights that are necessary or desirable
in the ordinary conduct of its business as presently conducted in an orderly and
efficient manner in accordance with good business practices except as permitted
pursuant to Sections 8.5 and 8.6.
Section.3. MAINTENANCE OF PROPERTIES. The Borrower will maintain, keep,
and preserve all of its properties (tangible and intangible) necessary or useful
in the proper conduct of its business in good working order and condition
ordinary wear and tear excepted.
Section.4. TAXES AND CLAIMS. The Borrower will pay or discharge at or
before maturity or before becoming delinquent (i) all taxes, levies,
assessments, and governmental charges imposed on it or its income or profits or
any of its property, and (ii) all lawful claims for labor, material, and
supplies, which, if unpaid, might become a Lien upon any of its property;
provided, however, that the Borrower shall not be required to pay or discharge
any tax, levy, assessment, or governmental charge which is being contested in
good faith by appropriate proceedings diligently pursued, and for which adequate
reserves have been established.
Section.5. INSURANCE. The Borrower will maintain or cause to be
maintained, with financially sound and reputable insurance companies workmen's
compensation insurance, liability insurance, and insurance on its property,
assets, and business at least in such amounts and against
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such risks as are usually insured against by Persons engaged in similar
businesses and in no less than the amounts in existence on the date of this
Agreement.
Section.6. INSPECTION RIGHTS. At any reasonable time and from time to
time, the Borrower will permit representatives of the Agent to examine and make
copies of the books and records of, and visit and inspect the properties of the
Borrower, and to discuss the business, operations, and financial condition of
the Borrower with its officers and employees.
Section.7. KEEPING BOOKS AND RECORDS. The Borrower will maintain proper
books of record and account in which full, true, and correct entries in
conformity with GAAP shall be made of all dealings and transactions in relation
to its business and activities.
Section.8. COMPLIANCE WITH LAWS. The Borrower will comply with all laws,
rules and regulations relating to its business, other than the laws, rules and
regulations the failure to comply with which and the sanctions and penalties
resulting therefrom, when taken together with the failure to comply with all
other laws, rules and regulations and the sanctions and penalties resulting
therefrom, would not have an adverse effect on the operations, business,
property, assets or financial condition of the Borrower, or would not result in
the creation of a Lien which, if incurred in the ordinary course of business,
would not be permitted by Section 8.3 on any of the property of the Borrower;
provided, however, that the Borrower shall not be required to comply with laws,
rules and regulations the validity or applicability of which are being contested
in good faith and by appropriate proceedings.
Section.9. COMPLIANCE WITH AGREEMENTS. The Borrower will comply in all
material respects with all agreements, contracts, and instruments binding on it
or affecting its properties or business, if the failure to comply with such
agreements, contracts and instruments could have a material adverse effect on
the business, condition (financial or otherwise), operations, prospects or
properties of the Borrower.
Section.10. FURTHER ASSURANCES. The Borrower will execute and deliver such
further instruments as may be requested by the Agent to carry out the provisions
and purposes of this Agreement and the other Loan Documents.
Section.11. ERISA. The Borrower will comply with all minimum funding
requirements, and all other material requirements, of ERISA, if applicable, so
as not to give rise to any liability thereunder.
Section.12. CHANGE IN BUSINESS. The Borrower shall continue to carry on
substantially in the same types of business carried on by the Borrower as of the
date hereof and activities which are ancillary, incidental or necessary to the
ongoing business of the Borrower.
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ARTICLE VIII
NEGATIVE COVENANTS
The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Bank has any commitment hereunder, the
Borrower will perform and observe the following negative covenants, unless the
Required Banks shall otherwise consent in writing:
Section.1. LEASE RENTALS. The Borrower will not, at any time, permit
Aggregate Long-Term Lease Rentals to exceed 15% of Tangible Net Worth; provided,
however, that Aggregate Long-Term Lease Rentals may exceed 15% of Tangible Net
Worth to the extent that such Aggregate Long-Term Lease Rentals in excess of 15%
constitute Capitalized Lease Obligations, which, if included as Funded Debt,
could be incurred under Section 8.2.
Section.2. DEBT. The Borrower will not, and will not permit its
Subsidiaries to, create, assume, incur, guarantee or otherwise become liable,
directly or indirectly, in respect of any Debt other than:
(a) The Note;
(b) Funded Debt of the Borrower and its Subsidiaries existing on the
date hereof and reflected in the financial statements referred to in
Section 6.2;
(c) Other Funded Debt of the Borrower, if after giving effect
thereto and to the application of the proceeds thereof, Funded Debt of the
Borrower and its Subsidiaries determined on a consolidated basis in
accordance with GAAP then to be outstanding would not exceed 55% of Total
Capitalization;
(d) Debt to the Guarantors; and
(e) Acceptable Permanent Financing.
Section.3. LIENS. The Borrower will not, and will not permit its
Subsidiaries to, create, assume, incur or permit to exist, directly or
indirectly, any Lien on its properties or assets, whether now owned or hereafter
acquired, except:
(a) Liens existing on property of the Borrower and its Subsidiaries
and Capitalized Leases of the Borrower and its Subsidiaries as of the date
hereof;
(b) Liens, pledges or deposits in connection with workman's
compensation, social security, taxes, assessments or other similar charges
or deposits required to be made in the ordinary course of business and not
in connection with borrowing money;
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(c) Construction or materialmen's or warehousemen's Liens securing
obligations not overdue, or if overdue, being contested in good faith by
appropriate proceedings;
(d) Pledges or deposits for the purpose of securing a stay or
discharge of the course of any legal proceedings, providing the aggregate
amount of said deposits does not exceed $150,000;
(e) Encumbrances in the nature of zoning restrictions, easements,
rights and restrictions of record on the use of real property, landlord's
and lessor's liens in the ordinary course of business, which do not
materially detract from the value of such property or impair the use
thereof;
(f) Liens incurred in connection with progress payments made by the
United States of America with respect to government contracts entered into
with the United States of America or a contractor performing a government
contract or with respect to inventory purchased in connection with such
government contracts;
(g) Liens on property acquired by the Borrower or its Subsidiaries
after the date hereof, created in respect of such property within 180 days
after the date of acquisition thereof and not extending to other property
of the Borrower or its Subsidiaries and Capitalized Lease Obligations
incurred subsequent to the date hereof; provided that, the Debt secured by
such Lien or Capitalized Lease Obligations does not exceed 100% of the
purchase price of such Property; and
(h) Acceptable Encumbrances.
Section.4. MERGER AND CONSOLIDATION. The Borrower will not merge or
consolidate with any Person, except that:
(a) The Borrower may consolidate with or merge into any Person or
sell or otherwise transfer substantially all of its assets, or permit any
other Person to merge into it, provided that immediately after giving
effect thereto,
(i) The Borrower or another subsidiary of the Guarantor shall
be the successor corporation, which corporation shall be a
corporation organized under the laws of a state of the United States
having substantially all of its assets in the United States and
conducting substantially all of its business in the United States;
and
(ii) The Borrower shall be in compliance with all provisions
of this Agreement, or if the Borrower is not the successor
corporation, the obligations of the Borrower with respect to the
Note shall be assumed in writing by such other subsidiary of
Guarantor, and such other subsidiary of Guarantor shall be in
compliance with all provisions of this Agreement.
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Section.5. SALE OF ASSETS. The Borrower will not, and will not permit its
Subsidiaries to, sell, lease, transfer or otherwise dispose of any assets, in
one or a series of transactions, other than in the ordinary course of business,
to any Person if in any twelve month period of the Borrower, after giving effect
to such sale, lease, transfer or other disposition, the aggregate of the greater
of book or fair market value of all such assets sold, leased, transferred or
otherwise disposed of in such twelve month period would exceed 20% of Tangible
Net Worth.
Section.6. DEALINGS WITH AFFILIATES. The Borrower will not enter into any
transaction (including the furnishing of goods or services) with an Affiliate
except in the ordinary course of business as presently conducted (which includes
the payment of management fees and the provision of funds for payment of taxes)
and on terms and conditions no less favorable to the Borrower than would be
obtained in a comparable arm's-length transaction with a Person not an
Affiliate.
Section.7. LOANS AND INVESTMENTS. The Borrower will not make any advance,
loan, extension of credit, or capital contribution to or investment in, or
purchase any bonds, notes, debentures, or other securities of any Person, except
Restricted Investments and investments permitted under Section 8.4; provided,
however, that notwithstanding any provision of this Section 8.7 to the contrary,
the Borrower may make advances and loans to the Guarantor and to its
Subsidiaries.
Section.8. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower will not (i)
conduct any activity which is likely to cause a release or threatened release of
any Hazardous Substance, or (i) conduct any activity or use any of their
respective properties or assets in any manner that is likely to violate any
Environmental Law.
ARTICLE IX
FINANCIAL COVENANTS
The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Bank has any commitment hereunder, the
Borrower will observe and perform the following financial covenants, unless the
Required Banks shall otherwise consent in writing:
Section.1. TANGIBLE NET WORTH. The Borrower will at all times maintain
Tangible Net Worth in an amount not less than $14,000,000.
Section.2. WORKING CAPITAL. The Borrower will at all times maintain
Working Capital in an amount not less than $4,000,000.
Section.3. RELATIONSHIP OF FUNDED DEBT TO TOTAL CAPITALIZATION. The
Borrower will not at any time permit Funded Debt (excluding any intercompany or
Affiliate Debt) of the Borrower and its Subsidiaries to exceed 55% of its
consolidated Total Capitalizations..
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Section.4. DEBT SERVICE RATIO. The Borrower will at all times maintain a
Debt Service Ratio of not less than 2.0 to 1.0.
Section.5. CAPITAL EXPENDITURES. The Borrower will not permit the
aggregate Capital Expenditures to exceed $6,000,000.00 during any fiscal year.
ARTICLE X
DEFAULT
Section.1. EVENTS OF DEFAULT. Each of the following shall be deemed an
"Event of Default":
(a) The Borrower shall fail to pay when due the Obligations or any
part thereof and such failure shall have continued for three days.
(b) Any representation or warranty made or deemed made by the
Borrower or any Obligated Party (or any of their respective officers) in
any Loan Document or in any certificate, report, notice, or financial
statement furnished at any time in connection with this Agreement shall be
false, misleading, or erroneous in any material respect when made or
deemed to have been made.
(c) The Borrower or any Obligated Party shall fail to perform,
observe, or comply with any covenant, agreement, or term contained in this
Agreement or any other Loan Document and such failure shall have continued
for 30 days after management of the Borrower knows or should have known of
such failure.
(d) The Borrower or any Obligated Party shall commence a voluntary
proceeding seeking liquidation, reorganization, or other relief with
respect to itself or its debts under any bankruptcy, insolvency, or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian, or other similar official of it
or a substantial part of its property or shall consent to any such relief
or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it or shall make a
general assignment for the benefit of creditors or shall generally fail to
pay its debts as they become due or shall take any corporate action to
authorize any of the foregoing.
(e) An involuntary proceeding shall be commenced against the
Borrower or any Obligated Party seeking liquidation, reorganization, or
other relief with respect to it or its debts under any bankruptcy,
insolvency, or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official for it or a substantial part of its property, and such
involuntary proceeding shall remain undismissed and unstayed for a period
of 30 days.
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(f) The Borrower or any Obligated Party shall fail to discharge
within a period of 60 days after the commencement thereof any attachment,
sequestration, or similar proceeding or proceedings involving an aggregate
amount in excess of $500,000 against any of its assets or properties.
(g) The Borrower or any Obligated Party shall fail to satisfy and
discharge within a period of 60 days any judgment or judgments against it
for the payment of money in an aggregate amount in excess of $500,000.
(h) The Borrower or any Obligated Party shall default (i) in the
payment of the principal of or interest on any other Debt in excess of
$250,000, individually or in the aggregate, as and when the same shall
become due and payable, of the Borrower or any Obligated Party, as
applicable, for borrowed money, (ii) under any mortgage, agreement or
other instrument under or pursuant to which such Debt in excess of
$250,000, individually or in the aggregate, for borrowed money is issued,
or (iii) under any Capitalized Lease of the Borrower or any Obligated
Party, as applicable, or any operating lease, with aggregate payments or
rentals in excess of $250,000, individually or in the aggregate,
regardless of whether such default would be an Event of Default hereunder,
and such default under (i), (ii) or (iii) above shall result in the
acceleration of such Debt.
(i) This Agreement or any other Loan Document shall cease to be in
full force and effect or shall be declared null and void or the validity
or enforceability thereof shall be contested or challenged by the
Borrower, any Obligated Party or any of their respective shareholders, or
the Borrower or any Obligated Party shall deny that it has any further
liability or obligation under any of the Loan Documents.
(j) Any of the following events shall occur or exist with respect to
the Borrower or any ERISA Affiliate: (i) any Prohibited Transaction
involving any Plan; (ii) any Reportable Event with respect to any Plan;
(iii) the filing under Section 4041 of ERISA of a notice of intent to
terminate any Plan or the termination of any Plan; (iv) any event or
circumstance that might constitute grounds entitling the PBGC to institute
proceedings under Section 4042 of ERISA for the termination of, or for the
appointment of a trustee to administer, any Plan, or the institution by
the PBGC of any such proceedings; (v) complete or partial withdrawal under
Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
reorganization, insolvency, or termination of any Multiemployer Plan; and
in each case above, such event or condition, together with all other
events or conditions, if any, have subjected or could in the reasonable
opinion of the Agent subject the Borrower to any tax, penalty, or other
liability to a Plan, a Multiemployer Plan, the PBGC, or otherwise (or any
combination thereof) which in the aggregate exceed or could reasonably be
expected to exceed $100,000.
Section.2. REMEDIES UPON DEFAULT. If any Event of Default shall occur, any
Bank may without notice terminate its commitment to lend hereunder and declare
the Obligations or any part thereof to be immediately due and payable, and the
same shall thereupon become immediately due
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and payable, without notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
protest, or other formalities of any kind, all of which are hereby expressly
waived by the Borrower; PROVIDED, HOWEVER, that upon the occurrence of an Event
of Default under Section 10.1(d) or Section 10.1(e), the commitment of the Banks
to lend hereunder shall automatically terminate, and the Obligations shall
become immediately due and payable without notice, demand, presentment, notice
of dishonor, notice of acceleration, notice of intent to accelerate, notice of
intent to demand, protest, or other formalities of any kind, all of which are
hereby expressly waived by the Borrower. If any Event of Default shall occur,
each Bank may exercise all rights and remedies available to it in law or in
equity, under the Loan Documents, or otherwise.
Section.3. PERFORMANCE BY THE AGENT. If the Borrower shall fail to perform
any covenant, duty, or agreement contained in any of the Loan Documents, the
Agent may perform or attempt to perform such covenant, duty, or agreement on
behalf of the Borrower. In such event, the Borrower shall, at the request of the
Agent, promptly pay any amount expended by the Agent in such performance or
attempted performance to the Agent, together with interest thereon at the
Default Rate from the date of such expenditure until paid. Notwithstanding the
foregoing, it is expressly agreed that the Agent shall not have any liability or
responsibility for the performance of any obligation of the Borrower under this
Agreement or any other Loan Document.
ARTICLE XI
THE AGENT
Section.1. APPOINTMENT, POWERS AND IMMUNITIES. In order to expedite the
various transactions contemplated by this agreement, the Banks hereby
irrevocably appoint and authorize Wells Fargo Bank (Texas), National
Association, to act as their Agent hereunder and under each of the other Loan
Documents. Wells Fargo Bank (Texas), National Association consents to such
appointment and agrees to perform the duties of the Agent as specified herein.
The Banks authorize and direct the Agent to take such action in their name and
on their behalf under the terms and provisions of the Loan Documents and to
exercise such rights and powers thereunder as are specifically delegated to or
required of the Agent for the Banks, together with such rights and powers as are
reasonably incidental thereto. The Agent is hereby expressly authorized to act
as the Agent on behalf of itself and the other Banks:
(a) To receive on behalf of each of the Banks any payment of
principal, interest, fees or other amounts paid pursuant to this Agreement
and the Notes and to distribute to each Bank its pro rata share of all
payments so received as provided in this Agreement;
(b) To receive all documents and items to be furnished under the
Loan Documents;
(c) To act as nominee for and on behalf of the Banks in and under
the Loan Documents;
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(d) To arrange for the means whereby the funds of the Banks are to
be made available to the Borrower;
(e) To distribute to the Banks information, requests, notices,
payments, prepayments, documents and other items received from the
Borrower, the other Obligated Parties, and other Persons;
(f) To execute and deliver to the Borrower, the other Obligated
Parties, and other Persons, all requests, demands, approvals, notices, and
consents received from the Banks;
(g) To the extent permitted by the Loan Documents, to exercise on
behalf of each Bank all rights and remedies of the Banks upon the
occurrence of any Event of Default; and
(h) To take such other actions as may be requested by Required
Banks.
Neither the Agent nor any of its Affiliates, officers, directors,
employees, attorneys, or agents shall be liable for any action taken or omitted
to be taken by any of them hereunder or otherwise in connection with this
Agreement or any of the other Loan Documents except for its or their own gross
negligence or willful misconduct. Without limiting the generality of the
preceding sentence, the Agent (i) may treat the payee of any Note as the holder
thereof until the Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form satisfactory to the Agent; (ii) shall
have no duties or responsibilities except those expressly set forth in this
Agreement and the other Loan Documents, and shall not by reason of this
Agreement or any other Loan Document be a trustee or fiduciary for any Bank;
(iii) shall not be required to initiate any litigation or collection proceedings
hereunder or under any other Loan Document except to the extent requested by the
Required Banks; (iv) shall not be responsible to the Banks for any recitals,
statements, representations or warranties contained in this Agreement or any
other Loan Document, or any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or any other
Loan Document, or for the value, validity, effectiveness, enforceability, or
sufficiency of this Agreement or any other Loan Document or any other document
referred to or provided for herein or therein or for any failure by any Person
to perform any of its obligations hereunder or thereunder; (v) may consult with
legal counsel (including counsel for the Borrower), independent public
accountants, and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants, or experts; and (vi) shall incur no
liability under or in respect of any Loan Document by acting upon any notice,
consent, certificate, or other instrument or writing believed by it to be
genuine and signed or sent by the proper party or parties. As to any matters not
expressly provided for by this Agreement, the Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder in accordance with
instructions signed by the Required Banks, and such instructions of the Required
Banks and any action taken or failure to act pursuant thereto shall be binding
on all of the Banks; PROVIDED, however, that the Agent shall not be required to
take any action which exposes the Agent to personal liability or which is
contrary to this Agreement or any other Loan Document or applicable law.
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Section.2. RIGHTS OF THE AGENT AS A BANK. With respect to its Commitment,
the Advances made by it and the Notes issued to it, Wells Fargo Bank (Texas),
National Association in its capacity as a Bank hereunder shall have the same
rights and powers hereunder as any other Bank and may exercise the same as
though it were not acting as the Agent, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include the Agent in its individual
capacity. The Agent and its Affiliates may (without having to account therefor
to any Bank) accept deposits from, lend money to, act as trustee under
indentures of, provide merchant banking services to, and generally engage in any
kind of business with the Borrower, any of its Subsidiaries, any other Obligated
Party, and any other Person who may do business with or own securities of the
Borrower, any Subsidiary, or any other Obligated Party, all as if it were not
acting as the Agent and without any duty to account therefor to the Banks.
Section.3. SHARING OF PAYMENTS, ETC. If any Bank shall obtain any payment
of any principal of or interest on any Advance made by it under this Agreement
or payment of any other obligation under the Loan Documents then owed by the
Borrower or any other Obligated Party to such Bank, whether voluntary,
involuntary, through the exercise of any right of setoff, banker's lien,
counterclaim or similar right, or otherwise, in excess of its pro rata share,
such Bank shall promptly purchase from the other Banks participations in the
Advances held by them hereunder in such amounts, and make such other adjustments
from time to time as shall be necessary to cause such purchasing Bank to share
the excess payment ratably with each of the other Banks in accordance with its
pro rata portion thereof. To such end, all of the Banks shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if all or any portion of such excess payment is thereafter rescinded or must
otherwise be restored. The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any Bank so purchasing a
participation in the Advances made by the other Banks may exercise all rights of
setoff, banker's lien, counterclaim, or similar rights with respect to such
participation as fully as if such Bank were a direct holder of Advances to the
Borrower in the amount of such participation. Nothing contained herein shall
require any Bank to exercise any such right or shall affect the right of any
Bank to exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or obligation of the Borrower.
Section.4. INDEMNIFICATION. The Banks hereby agree to indemnify the Agent
from and hold the Agent harmless against (to the extent not reimbursed under
Sections 12.1 and 12.2, but without limiting the obligations of the Borrower
under Sections 12.1 and 12.2), ratably in accordance with their respective
Commitments, any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, deficiencies, suits, costs, expenses (including attorneys'
fees), and disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Agent in any way relating to or arising
out of any of the Loan Documents or any action taken or omitted to be taken by
the Agent under or in respect of any of the Loan Documents; PROVIDED, further,
that no Bank shall be liable for any portion of the foregoing to the extent
caused by the Agent's gross negligence or willful misconduct. Without limitation
of the foregoing, it is the express intention of the Banks that the Agent shall
be indemnified hereunder from and held harmless against all of such liabilities,
obligations, losses, damages, penalties, actions, judgments, deficiencies,
suits, costs, expenses (including attorneys' fees), and disbursements of any
kind or nature directly or
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indirectly arising out of or resulting from the sole or contributory negligence
of the Agent. Without limiting any other provision of this Section, each Bank
agrees to reimburse the Agent promptly upon demand for its pro rata share
(calculated on the basis of the Commitments) of any and all out-of-pocket
expenses (including attorneys' fees) incurred by the Agent in connection with
the preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings, or otherwise) of,
or legal advice in respect of rights or responsibilities under, the Loan
Documents, to the extent that the Agent is not reimbursed for such expenses by
the Borrower.
Section.5. INDEPENDENT CREDIT DECISIONS. Each Bank agrees that it has
independently and without reliance on the Agent or any other Bank, and based on
such documents and information as it has deemed appropriate, made its own credit
analysis of the Borrower and decision to enter into this Agreement and that it
will, independently and without reliance upon the Agent or any other Bank, and
based upon such documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking or not taking
action under this Agreement or any of the other Loan Documents. The Agent shall
not be required to keep itself informed as to the performance or observance by
the Borrower or any Obligated Party of this Agreement or any other Loan Document
or to inspect the properties or books of the Borrower or any Obligated Party.
Except for notices, reports and other documents and information expressly
required to be furnished to the Banks by the Agent hereunder or under the other
Loan Documents, the Agent shall not have any duty or responsibility to provide
any Bank with any credit or other financial information concerning the affairs,
financial condition or business of the Borrower or any Obligated Party (or any
of their Affiliates) which may come into the possession of the Agent or any of
its Affiliates.
Section.6. SEVERAL COMMITMENTS. The Commitments and other obligations of
the Banks under this Agreement are several. The default by any Bank in making an
Advance in accordance with its Commitment shall not relieve the other Banks of
their obligations under this Agreement. In the event of any default by any Bank
in making any Advance, each nondefaulting Bank shall be obligated to make its
Advance but shall not be obligated to advance the amount which the defaulting
Bank was required to advance hereunder. In no event shall any Bank be required
to advance an amount or amounts which shall in the aggregate exceed such Bank's
Commitment. No Bank shall be responsible for any act or omission of any other
Bank.
Section.7. SUCCESSOR AGENT. Subject to the appointment and acceptance of a
successor Agent as provided below, the Agent may resign at any time by giving
notice thereof to the Banks and the Borrower and the Agent may be removed at any
time with or without cause by the Required Banks. Upon any such resignation or
removal, the Required Banks will have the right to appoint a successor Agent. If
no successor Agent shall have been so appointed by the Required Banks and shall
have accepted such appointment within 30 days after the retiring Agent's giving
of notice of resignation or the Required Banks' removal of the retiring Agent,
then the retiring Agent may, on behalf of the Banks, appoint a successor Agent,
which shall be a commercial bank organized under the laws of the United States
of America or any State thereof and having combined capital and surplus of at
least $100,000,000. Upon the acceptance of its appointment as successor Agent,
such successor Agent shall thereupon succeed to and become vested with all
rights, powers, privileges,
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immunities, and duties of the resigning or removed Agent, and the resigning or
removed Agent shall be discharged from its duties and obligations under this
Agreement and the other Loan Documents. After any Agent's resignation or removal
as the Agent, the provisions of this Article XI shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was the Agent.
ARTICLE XII
MISCELLANEOUS
Section.1. EXPENSES OF THE AGENT AND THE BANKS. The Borrower hereby agrees
to pay the Agent and each Bank on demand: (i) all reasonable costs and expenses
incurred by the Agent or such Bank in connection with the preparation,
negotiation, and execution of this Agreement and the other Loan Documents and
any and all amendments, modifications, renewals, extensions, and supplements
thereof and thereto, including, without limitation, the fees and expenses of the
Agent or such Bank's legal counsel, (ii) all reasonable costs and expenses
incurred by the Agent or such Bank in connection with the enforcement of this
Agreement or any other Loan Document, including, without limitation, the fees
and expenses of the Agent's or such Bank's legal counsel, and (iii) all other
reasonable costs and expenses incurred by the Agent or such Bank in connection
with this Agreement or any other Loan Document, including, without limitation,
all costs, expenses, taxes, assessments, filing fees, and other charges levied
by any governmental authority or otherwise payable in respect of this Agreement
or any other Loan Document.
Section.2. INDEMNIFICATION. The Borrower hereby indemnifies the Agent,
each Bank and each Affiliate thereof and their respective officers, directors,
employees, attorneys, and agents from, and holds each of them harmless against,
any and all losses, liabilities, claims, damages, penalties, judgments, costs,
and expenses (including attorneys' fees) to which any of them may become subject
which directly or indirectly arise from or relate to (i) the negotiation,
execution, delivery, performance, administration, or enforcement of any of the
Loan Documents, (ii) any of the transactions contemplated by the Loan Documents,
(iii) any breach by the Borrower of any representation, warranty, covenant, or
other agreement contained in any of the Loan Documents, (iv) the presence,
release, threatened release, disposal, removal, or cleanup of any Hazardous
Substance located on, about, within, or affecting any of the properties or
assets of the Borrower or any Subsidiary, or (v) any investigation, litigation,
or other proceeding, including, without limitation, any threatened
investigation, litigation, or other proceeding relating to any of the foregoing.
Without limiting any provision of this Agreement or of any other Loan Document,
it is the express intention of the parties hereto that each Person to be
indemnified under this Section shall be indemnified from and held harmless
against any and all losses, liabilities, claims, damages, penalties, judgments,
costs, and expenses (including attorneys' fees) arising out of or resulting from
the sole or contributory negligence of the Person to be indemnified.
Section.3. LIMITATION OF LIABILITY. None of the Agent, any Bank or any
Affiliate, officer, director, employee, attorney, or agent thereof shall have
any liability with respect to, and the Borrower hereby waives, releases, and
agrees not to sue any of them upon, any claim for any special,
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indirect, incidental, or consequential damages suffered or incurred by the
Borrower in connection with, arising out of, or in any way related to, this
Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Agreement or any of the other Loan Documents. The Borrower
hereby waives, releases, and agrees not to sue the Agent or any Bank or any of
their respective Affiliates, officers, directors, employees, attorneys, or
agents for punitive damages in respect of any claim in connection with, arising
out of, or in any way related to, this Agreement or any of the other Loan
Documents, or any of the transactions contemplated by this Agreement or any of
the other Loan Documents.
Section.4. NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of the
Agent or any Bank to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power, or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power, or privilege under this Agreement preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege. The rights and remedies provided for in this Agreement and the other
Loan Documents are cumulative and not exclusive of any rights and remedies
provided by law. In addition to any rights of setoff provided by law, the Agent
and each Bank shall have the right to setoff and apply against the Obligations
in such manner as the Agent or such Bank may determine, at any time and without
notice to the Borrower, any and all deposits (general or special, time or
demand, provisional or final) or other sums at any time credited by or owing
from the Agent or such Bank to the Borrower.
Section.5. SUCCESSORS AND ASSIGNS.
(a) This Agreement is binding upon and shall inure to the benefit of
the Agent, each Bank and the Borrower and their respective successors and
assigns, except that the Borrower may not assign or transfer any of its
rights or obligations under this Agreement except as provided in Section
8.5, without the prior written consent of the Required Banks. Any Bank may
sell participations to one or more banks or other institutions in or to
all or a portion of its rights and obligations under this Agreement and
the other Loan Documents (including, without limitation, all or a portion
of its Commitments and the Advances owing to it); PROVIDED, however, that
(i) such Bank's obligations under this Agreement and the other Loan
Documents (including, without limitation, its Commitment) shall remain
unchanged, (ii) such Bank shall remain solely responsible to the Borrower
for the performance of such obligations, (iii) such Bank shall remain the
holder of its Note for all purposes of this Agreement, (iv) the Borrower
shall continue to deal solely and directly with such Bank in connection
with such Bank's rights and obligations under this Agreement and the other
Loan Documents, and (v) such Bank shall not sell a participation that
conveys to the participant the right to vote or give or withhold consents
under this Agreement or any other Loan Document, other than the right to
vote upon or consent to (A) any increase of such Bank's Commitment, (B)
any reduction of the principal amount of, or interest to be paid on, the
Advances of such Bank, (C) any reduction of any commitment fee or other
amount payable to such Bank under any Loan Document, or (D) any
postponement of any date for the payment of any amount payable in respect
of the Advances of such Bank.
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(b) The Borrower and each of the Banks agree that any Bank (the
"Assigning Bank") may at any time assign to one or more assignees all, or
a proportionate part of all, of its rights and obligations under this
Agreement and the other Loan Documents (including, without limitation, its
Advance(s)) (each an "Assignee"); PROVIDED, however, that (i) each such
assignment shall be of a consistent, and not a varying, percentage of all
of the assigning Bank's rights and obligations under this Agreement and
the other Loan Documents, (ii) except in the case of an assignment of all
of a Bank's rights and obligations under this Agreement and the other Loan
Documents, the amount of the Commitment of the assigning Bank being
assigned pursuant to each assignment (determined as of the date of the
Assignment Acceptance with respect to such assignment) shall in no event
be less than $1,000,000, and (iii) the parties to each such assignment
shall execute and deliver to the Agent for its acceptance and recording in
the Register (as defined below), an Assignment and Acceptance, together
with the Note subject to such assignment, and a processing and recordation
fee of $2,500. Upon such execution, delivery, acceptance, and recording,
from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least five Business Days
after the execution thereof, or, if so specified in such Assignment and
Acceptance, the date of acceptance thereof by the Agent, (x) the assignee
thereunder shall be a party hereto as a "Bank" and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Bank
hereunder and under the Loan Documents and (y) the Bank that is an
assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations
under this Agreement and the other Loan Documents (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of a
Bank's rights and obligations under the Loan Documents, such Bank shall
cease to be a party thereto).
(c) By executing and delivering an Assignment and Acceptance, the
Bank that is an assignor thereunder and the assignee thereunder confirm to
and agree with each other and the other parties hereto as follows: (i)
other than as provided in such Assignment and Acceptance, such assigning
Bank makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties, or representations made in or
in connection with the Loan Documents or the execution, legality,
validity, and enforceability, genuineness, sufficiency, or value of the
Loan Documents or any other instrument or document furnished pursuant
thereto; (ii) such assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or any Obligated Party or the performance or observance by the
Borrower or any Obligated Party of its obligations under the Loan
Documents; (iii) such assignee confirms that it has received a copy of the
other Loan Documents, together with copies of the financial statements
referred to in Section 7.1 and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent or such assignor and
based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not
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taking action under this Agreement and the other Loan Documents; (v) such
assignee appoints and authorizes the Agent to take such action as agent on
its behalf and exercise such powers under the Loan Documents as are
delegated to the Agent by the terms thereof, together with such powers as
are reasonably incidental thereto; and (vi) such assignee agrees that it
will perform in accordance with their terms all of the obligations which
by the terms of the Loan Documents are required to be performed by it as a
Bank.
(d) The Agent shall maintain at its principal office a copy of each
Assignment and Acceptance delivered to and accepted by it and a register
for the recordation of the names and addresses of the Banks and the
Commitment of, and principal amount of the Advances owing to, each Bank
from time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agent, and the Banks may treat each Person whose name is
recorded in the Register as a Bank hereunder for all purposes under the
Loan Documents. The Register shall be available for inspection by the
Borrower or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and assignee, together with any Note subject to such
assignment, the Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit "E" hereto, (i)
accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register, and (iii) give prompt written notice
thereof to the Borrower. Within five Business Days after its receipt of
such notice, the Borrower, at its expense, shall execute and deliver to
the Agent in exchange for the surrendered Note a new Note to the order of
such assignee in an amount equal to the Commitment assumed by it pursuant
to such Assignment and Acceptance and, if the assigning Bank has retained
a Commitment, a new Note to the order of the assigning Bank in an amount
equal to the Commitment retained by it hereunder (each such promissory
note shall constitute a "Note" for purposes of the Loan Documents). Such
new Notes shall be in an aggregate principal amount of the surrendered
Note, shall be dated the effective date of such Assignment and Acceptance,
and shall otherwise be in substantially the form of Exhibit "E" hereto.
(f) Any Bank may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to the Borrower or its Subsidiaries furnished to such
Bank by or on behalf of the Borrower or its Subsidiaries.
Section.6. SURVIVAL. All representations and warranties made in this
Agreement or any other Loan Document or in any document, statement, or
certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by the Agent or any Bank or any closing shall affect the
representations and warranties or the right of the Agent or any Bank to rely
upon them. Without prejudice to the survival of any other obligation of the
Borrower hereunder, the obligations of the
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Borrower under Sections 3.5, 12.1, and 12.2 shall survive repayment of the Note
and termination of the Revolving Credit Commitment.
Section.7. ENTIRE AGREEMENT; AMENDMENT. THIS AGREEMENT, THE NOTE, AND THE
OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG
THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. The
provisions of this Agreement and the other Loan Documents to which the Borrower
is a party may be amended or waived only by an instrument in writing, agreed and
consented to by the Required Banks and the Borrower; PROVIDED, that no
amendment, waiver, or consent shall, unless in writing and signed by all of the
Banks and the Borrower, do any of the following: (a) increase Commitments of the
Banks or subject the Banks to any additional obligations; (b) change the
Maturity Date or reduce the principal of, or interest on, the Notes or any fees
or other amounts payable hereunder; (c) postpone any date fixed for any payment
of principal of, or interest on, the Notes or any fees or other amounts payable
hereunder; (d) waive any of the conditions specified in Article V; (e) change
the percentage of the Commitments or of the aggregate unpaid principal amount of
the Notes or the number of Banks which shall be required for the Banks or any of
them to take any action under this Agreement; (f) change any provision contained
in this Section 12.7; or (g) release any collateral except as permitted in the
Loan Documents. Notwithstanding anything to the contrary contained in this
Section, no amendment, waiver, or consent shall be made with respect to Article
XI hereof without the prior written consent of the Agent.
Section.8. MAXIMUM INTEREST RATE. No provision of this Agreement or of any
other Loan Document shall require the payment or the collection of interest in
excess of the maximum permitted by applicable law. If any excess of interest in
such respect is hereby provided for, or shall be adjudicated to be so provided,
in any Loan Document or otherwise in connection with this loan transaction, the
provisions of this Section shall govern and prevail and neither the Borrower nor
the sureties, guarantors, successors, or assigns of the Borrower shall be
obligated to pay the excess amount of such interest or any other excess sum paid
for the use, forbearance, or detention of sums loaned pursuant hereto. In the
event any Bank ever receives, collects, or applies as interest any such sum,
such amount which would be in excess of the maximum amount permitted by
applicable law shall be applied as a payment and reduction of the principal of
the indebtedness evidenced by its Note; and, if the principal of such Note has
been paid in full, any remaining excess shall forthwith be paid to the Borrower.
In determining whether or not the interest paid or payable exceeds the Maximum
Rate, the Borrower and each Bank shall, to the extent permitted by applicable
law, (i) characterize any nonprincipal payment as an expense, fee, or premium
rather than as interest, (ii) exclude voluntary prepayments and the effects
thereof, and (iii) amortize, prorate, allocate, and spread in equal or unequal
parts the total amount of interest throughout the entire contemplated term of
the indebtedness evidenced by such Note so that interest for the entire term
does not exceed the Maximum Rate.
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Section.9. NOTICES. All notices and other communications provided for in
this Agreement and the other Loan Documents to which the Borrower is a party
shall be given or made by telex, telegraph, telecopy, cable, or in writing and
telexed, telecopied, telegraphed, cabled, mailed by certified mail return
receipt requested, or delivered to the intended recipient at the "Address for
Notices" specified below its name on the signature pages hereof; or, as to any
party at such other address as shall be designated by such party in a notice to
the other party given in accordance with this Section . Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telex or telecopy, subject to telephone
confirmation of receipt, or delivered to the telegraph or cable office, subject
to telephone confirmation of receipt, or when personally delivered or, in the
case of a mailed notice, when duly deposited in the mails, in each case given or
addressed as aforesaid; PROVIDED, however, notices to the Agent pursuant to
Article II shall not be effective until received by the Agent.
Section.10. APPLICABLE LAW; VENUE; SERVICE OF PROCESS. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THIS AGREEMENT
HAS BEEN ENTERED INTO IN HARRIS COUNTY, TEXAS, AND IT SHALL BE PERFORMABLE FOR
ALL PURPOSES IN HARRIS COUNTY, TEXAS. ANY ACTION OR PROCEEDING AGAINST THE
BORROWER UNDER OR IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS MAY BE BROUGHT IN
ANY STATE OR FEDERAL COURT IN HARRIS COUNTY, TEXAS. THE BORROWER HEREBY
IRREVOCABLY (I) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND
(II) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY
SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN
INCONVENIENT FORUM. THE BORROWER AGREES THAT SERVICE OF PROCESS UPON IT MAY BE
MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS
SPECIFIED OR DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 12.7.
Section.11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section.12. SEVERABILITY. Any provision of this Agreement held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
Section.13. HEADINGS. The headings, captions, and arrangements used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section.14. NON-APPLICATION OF CHAPTER 15 OF TEXAS CREDIT CODE. The
provisions of Chapter 15 of the Texas Credit Code (Vernon's Texas Civil
Statutes, Article 5069-15) are
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specifically declared by the parties hereto not to be applicable to this
Agreement or any of the other Loan Documents or to the transactions contemplated
hereby.
Section.15. SPECIAL COVENANT. In the event that an action or inaction of
the Agent may be directed by the Required Banks and such required percentage is
not obtained due to disagreement by the Banks, the Bank or the Banks objecting
to the action taken or not taken, as the case may be, by the Agent due to the
absence of direction of the Required Banks may, but shall not be required to,
purchase the other Bank's or the Banks' rights and obligations under this
Agreement and the other Loan Documents (including, without limitation, their
Advance(s)) at par value. In such event, the selling Bank or the Banks shall be
obligated to sell its Advance(s) to the other Bank or the Banks and comply with
the provisions of Section 12.5 hereof upon the full payment by the other Bank or
the Banks at par value.
Section.16. ARBITRATION.
(a) ARBITRATION. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this Agreement. A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, any of the Note Purchase
Documents, or any past, present or future extensions of credit and other
activities, transactions or obligations of any kind related directly or
indirectly to any of the Note Purchase Documents, including without limitation,
any of the foregoing arising in connection with the exercise of any self-help,
ancillary or other remedies pursuant to any of the Note Purchase Documents. Any
party may by summary proceedings bring an action in court to compel arbitration
of a Dispute. Any party who fails or refuses to submit to arbitration following
a lawful demand by any other party shall bear all costs and expenses incurred by
such other party in compelling arbitration of any Dispute.
(b) GOVERNING RULES. Arbitration proceedings shall be administered by the
American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Note
Purchase Documents. The arbitration shall be conducted at a location in Texas
selected by the AAA or other administrator. If there is any inconsistency
between the terms hereof and any such rules, the terms and procedures set forth
herein shall control. All statutes of limitation applicable to any Dispute shall
apply to any arbitration proceeding. All discovery activities shall be expressly
limited to matters directly relevant to the Dispute being arbitrated. Judgment
upon any award rendered in an arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. ss.91 or any similar applicable state law.
(c) NO WAIVER; PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or
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<PAGE>
sale of any real or personal property collateral or security, or to obtain
provisional or ancillary remedies, including without limitation injunctive
relief, sequestration, attachment, garnishment or the appointment of a receiver,
from a court of competent jurisdiction before, after or during the pendency of
any arbitration or other proceeding. The exercise of any such remedy shall not
waive the right of any party to compel arbitration hereunder.
(d) ARBITRATOR QUALIFICATIONS AND POWERS AWARDS. Arbitrators must be
active members of the Texas State Bar with expertise in the substantive laws
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of Texas, (ii) may grant any
remedy or relief that a court of the state of Texas could order or grant within
the scope hereof and such ancillary relief as is necessary to make effective any
award, and (iii) shall have the power to award recovery of all costs and fees,
to impose sanctions and to take such other actions as they deem necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
Texas Rules of Civil Procedure or other applicable law. Any Dispute in which the
amount in controversy is $5,000,000 or less shall be decided by a single
arbitrator who shall not render an award of greater than $5,000,000 (including
damages, costs, fees and expenses). By submission to a single arbitrator, each
party expressly waives any right or claim to recover more than $5,000,000. Any
Dispute in which the amount in controversy exceeds $5,000,000 shall be decided
by majority vote of a panel of three arbitrators; provided however, that all
three arbitrators must actively participate in all hearings and deliberations.
(e) JUDICIAL REVIEW. Notwithstanding anything herein to the contrary, in
any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
Texas, and (iii) the parties shall have in addition to the grounds referred to
in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (A) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the state of
Texas. Judgment confirming an award in such a proceeding may be entered only if
a court determines the award is supported by substantial evidence and not based
on legal error under the substantive law of the state of Texas.
(f) MISCELLANEOUS. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceedings within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulations, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provisions most
directly related to the Note Purchase Documents or the subject matter of the
Dispute shall control.
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<PAGE>
This arbitration provision shall survive termination, amendment or expiration of
any of the Note Purchase Documents or any relationship between the parties.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
BORROWER:
SYNTRON, INC.
By:/s/RICHARD F. MILES
Richard F. Miles
Chairman
Address:
17200 Park Row
Houston, Texas 77084-4925
Fax No.: (281) 579-8656
Telephone No.: (281) 579-7700
Attention: Chairman
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<PAGE>
AGENT:
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
By:/s/DAVID ANDERSON
David Anderson
Vice President
Address:
1000 Louisiana, 3rd Floor
Houston, Texas 77002
Fax No.: 713/250-7029
Telephone No.: 713/250-2339
Attention: David Anderson
LENDER:
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
COMMITMENT: $12,000,000
By:/s/DAVID ANDERSON
David Anderson
Vice President
Address:
1000 Louisiana
Houston, Texas 77002
Attention: David Anderson
-43-
EXHIBIT 10.12
GEOSCIENCE CORPORATION
DIRECTOR STOCK OPTION AGREEMENT
AGREEMENT made effective the ___ day of ____, 199_, (the "Grant Date"),
between GEOSCIENCE CORPORATION, a Nevada corporation (the "Company"), and
________ ("Optionee").
To carry out the purposes of the GeoScience Corporation 1996 Equity
Incentive Plan, to which this Agreement is expressly subject and a copy of which
is attached hereto as Exhibit A, by affording Optionee the opportunity to
purchase shares of Common Stock, par value $.10 per share, of the Company
("Stock"), and in consideration of the mutual agreements and other matters set
forth herein and in the Plan, the Company and Optionee hereby agree as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the right
and option (the "Option") to purchase all or any part of an aggregate of -____-
shares of Stock, on the terms and conditions set forth herein and in the Plan.
2. EXERCISE PRICE. The exercise price of the Option shall be $___ per
share.
3. EXERCISE OF OPTION.
(a) Subject to the further provisions of this Agreement, the
Option granted pursuant to this Agreement shall not become exercisable
until the first day that is more than six months after the date hereof
and thereafter shall be fully exercisable.
(b) Subject to the earlier expiration of the Option as herein
provided and subject to the terms and conditions contained herein, the
Option may be exercised by written notice (which complies in all
respects with the provisions of this Agreement) to the Company at its
principal executive office addressed to the attention of the Secretary
of the Company, identifying the Option and specifying the number of
shares that the Optionee decides to purchase, such exercise to be
effective at the time of receipt of such written notice at the Company's
principal executive office during normal business hours. The notice
shall not be considered to be properly given unless accompanied by full
payment and all documentation deemed appropriate by the Committee to
reflect exercise of the Option and compliance with all applicable laws,
rules and regulations.
(c) The Option shall automatically be exercisable in full upon
the occurrence of a "Change in Control" of the Company (as defined in
the Plan).
<PAGE>
(d) Notwithstanding anything herein to the contrary, including,
without limitation Paragraph 6, in no event shall the Option, or any
part thereof, be exercisable after the tenth anniversary of the Grant
Date.
4. PAYMENT OF OPTION EXERCISE PRICE. Upon exercise of the Option, the
full option exercise price for the shares with respect to which the Option is
being exercised shall be payable to the Company (i) in cash or by check payable
and acceptable to the Company or (ii) subject to the approval of the Committee,
(a) by tendering to the Company shares of Stock owned by the Optionee having an
aggregate Market Value Per Share as of the date of exercise and tender that is
not greater than the full Option exercise price for the shares with respect to
which the Option is being exercised and by paying any remaining amount of the
Option exercise price as provided in (i) above (provided that the Committee may,
upon confirming that the Optionee owns the number of shares being tendered,
authorize the issuance of a new certificate for the number of shares being
acquired pursuant to the exercise of the Option less the number of shares being
tendered upon the exercise and return to the Optionee (or not require surrender
of) the certificate for the shares being tendered upon the exercise) or (b) by
the Optionee delivering to the Company a properly executed exercise notice
together with irrevocable instructions to a broker to promptly deliver to the
Company cash or a check payable and acceptable to the Company to pay the option
exercise price; provided that in the event the Optionee chooses to pay the
Option exercise as provided in (ii)(b) above, the Optionee and the broker shall
comply with such procedures and enter into such agreements of indemnity and
other agreements as the Committee shall prescribe as a condition of such payment
procedure. Payment instructions will be received subject to collection.
5. NON-TRANSFERABILITY. The Option may not be transferred by the
Optionee separately or otherwise than by will or the laws of descent and
distribution.
6. TERMINATION OF DIRECTOR STATUS.
(a) If the Optionee ceases to be director of the Company for
reasons other than (i) retirement, (ii) permanent disability or (iii)
death, the Option shall be exercisable by the Optionee, subject to
paragraph 3(d) above, only within one year after such termination and
only to the extent the Option was exercisable on the date of termination
of director status.
(b) If, however, any termination of director status is due to
retirement or permanent disability, the Option shall be exercisable by
the Optionee at any time, subject to paragraph 3(d) above, after such
termination of director status, only to the extent the Option was
exercisable on the date of termination of director status.
(c) If the Optionee shall die while entitled to exercise the
Option, the Optionee's estate, personal representative or beneficiary,
as the case may be, shall have the right at any time, subject to the
provisions of paragraph 3(d) above, to
<PAGE>
exercise the Option, only to the extent that the Optionee was entitled
to exercise the same on the day of the Optionee's death.
(d) Except as provided above in this paragraph 6, to the extent
the Option is not exercisable on such termination of director status,
the Option shall be terminated and forfeited in full.
7. SECURITIES MATTERS. The Option granted herein shall be subject to the
requirement that, if at any time the Board shall determine, in its discretion,
that the listing, registration or qualification of the shares subject to such
Option upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the issue or purchase of
shares hereunder, such Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not reasonably acceptable to the
Board.
8. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of any successors to the Company and all persons lawfully claiming under
the Optionee. This Agreement and all actions taken shall be governed by and
construed in accordance with the laws of the State of Texas. In the event of
conflict between this Agreement and the Plan, the terms of the Plan shall
control. All undefined capitalized terms used herein shall have the meaning
assigned to them in the Plan. The Committee shall have authority to construe the
terms of this Agreement, and the Committee's determinations shall be final and
binding on the Optionee and the Company.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and the Optionee has executed this Agreement as of the day and year
first above written.
GEOSCIENCE CORPORATION
By:___________________________
President
OPTIONEE
-----------------------------
[Employee]
EXHIBIT 10.13
TERMINATION AGREEMENT
THIS AGREEMENT, made and entered into as of August 15, 1996, is
by and between TECH-SYM CORPORATION, a Nevada corporation (the "Company"), and
BRUCE H. NELSON (the "Employee").
W I T N E S S E T H:
WHEREAS, Employee presently serves the Company or one or more of
its subsidiaries as a senior executive officer; and
WHEREAS, the services of Employee and Employee's business
experience and knowledge are of great value to the Company; and
WHEREAS, the Company considers it prudent to enter into this
Agreement with employee in order to ensure Employee's continued services and
managerial guidance, to receive the benefits of Employee's business knowledge
and experience and to define the nature and terms of Employee's termination
benefits following a "change in control of the Company," as hereinafter defined;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and Employee
hereby agree as follows:
1. TERM. This Agreement shall commence on the date hereof and shall
continue until December 31, 1996; provided, however, that commencing on January
1, 1997 and on each January 1st thereafter, the term of this Agreement shall
automatically be extended for one additional year unless at least 90 days prior
to such January 1st date, the Company shall have given written notice to
Employee of the termination of this Agreement as of the December 31 next
following the January 1st in respect of which such notice is given by the
Company; and provided further, that this Agreement shall automatically terminate
in all events on the earlier of Employee's death or 65th birthday if it has not
been earlier terminated as provided above. Termination of this Agreement after a
change in control of the Company shall not alter or impair the rights of
Employee arising hereunder prior to such termination.
2. CHANGE IN CONTROL. For purposes of this Agreement, a "change in
control of the Company" shall be deemed to have occurred upon, and shall mean.
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (a "Person"), of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 25% or more of either (i) the then outstanding shares
of Common Stock of the Company (the "Outstanding Company Common Stock")
or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding
<PAGE>
Company Voting Securities"); provided, however, that the following
acquisitions shall not constitute a Change of Control: (w) any
acquisition directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege), (x) any acquisition
by the Company, (y) any acquisition by any employee benefit plan(s) (or
related trust(s)) sponsored or maintained by the Company or any
corporation controlled by the Company or (z) any acquisition by any
corporation pursuant to a reorganization, merger or consolidation, if,
immediately following such reorganization, merger or consolidation, the
conditions described in clauses (i), (ii) and (iii) of subsection (c) of
this Section 2 are satisfied;
(b) Individuals who, as of the date hereof, constitute the
Company's Board of Directors (the "Incumbent Board"), cease for any
reason to constitute at least a majority of the Company's Board of
Directors, PROVIDED, HOWEVER, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election
by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either (i) an actual
or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act), or an actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Company's Board of Directors or (ii) a plan or
agreement to replace a majority of the members of the Company's Board of
Directors then comprising the Incumbent Board; or
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case unless,
immediately following such reorganization, merger or consolidation, (i)
more than 60% of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization, merger or
consolidation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior
to such reorganization, merger or consolidation in substantially the
same proportions as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding the Company, any employee benefit plan(s)
(or related trust(s)) of the Company and/or its subsidiaries or such
corporation resulting from such reorganization, merger or consolidation
and any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 25% of
more of the Outstanding Company Common Stock or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the
2
<PAGE>
election of directors and (iii) at least a majority of the members of
the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the Incumbent
Board at the time of the execution of the initial agreement providing
for such reorganization, merger or consolidation; or
(d) Approval by the stockholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company,
other than to a corporation, with respect to which immediately following
such sale or other disposition, (A) more than 60% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other
disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the
case may be, (B) no person (excluding the Company and any employee
benefit plan (or related trust) of the Company or such corporation and
any Person beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 25% or more of the Outstanding
Company Common Stock or Outstanding Company Voting Securities, as the
case may be) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the
election of directors and (C) at least a majority of the members of the
board of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or action of
the Company's Board of Directors providing for such sale or other
disposition of assets of the Company.
3 . TERMINATION FOLLOWING CHANGE IN CONTROL. If a change in control of
the Company occurs while Employee is employed by the Company, Employee shall be
entitled to the benefits provided in Section 4 hereof if during the Termination
Period (as hereinafter defined) Employee becomes disabled or Employee's
employment is terminated, unless such termination is (a) due to Employee's
death, (b) by the Company for Cause or Employee's Disability or (c) by Employee
for other than Good Reason. For purposes of this Agreement, the "Termination
Period" shall mean the period of time beginning with the change in control of
the Company and ending on the earlier to occur of Employee's 65th birthday or
the third anniversary of such change in control of the Company.
(i) DISABILITY. If, as a result of Employee's incapacity due to
physical or mental illness, Employee shall have been absent from
Employee's duties with the Company on a full-time basis for 150
consecutive calendar days, and within 30 days after written Notice of
Termination (as defined hereinafter) Employee shall not have returned to
the full-time performance of Employee's duties, the Company may
terminate Employee's employment
3
<PAGE>
for "Disability"; provided, however, a termination of Employee's
employment for Disability for purposes of this Agreement shall not alter
or impair Employee's rights as a "disabled employee" under any of the
Company's employee benefit plans.
(ii) CAUSE. The Company may terminate Employee's employment for
Cause. For the purposes of this Agreement, the Company shall have
"Cause" to terminate Employee's employment hereunder only upon (A) the
willful and continued failure by Employee to perform substantially
Employee's duties with the Company, other than any such failure
resulting from Employee's incapacity due to physical or mental illness,
which continues unabated after a demand for substantial Performance is
delivered to Employee by the Board of Directors of the Company (the
"Board") that specifically identifies the manner in which the Board
believes that Employee has not substantially performed Employee's duties
or (B) Employee willfully engages in gross misconduct materially and
demonstrably injurious to the Company. For purposes of this paragraph,
an act or failure to act on Employee's part shall be considered
"willful" if done or omitted to be done by Employee otherwise than in
good faith and without reasonable belief that Employee's action or
omission was in the best interest of the Company. Notwithstanding the
foregoing, Employee shall not be deemed to have been terminated for
Cause unless and until there shall have been delivered to Employee a
copy of a resolution duly adopted by the affirmative vote of not less
than three-quarters of the entire membership of the Board, including at
least 50% of the "continuing directors," as hereinafter defined, at a
meeting of the Board called and held for the purpose (after reasonable
notice to Employee and an opportunity for Employee, together with
Employee's counsel, to be heard before the Board), finding that in the
good faith opinion of the Board Employee was guilty of conduct set forth
in clauses (A) or (B) of the first sentence of this subsection (ii) and
specifying the particulars thereof in reasonable detail. The term
"continuing director" shall mean an individual who was a member of the
Board elected by the public stockholders prior to the time of the change
in control of the Company or the individual recommended to succeed a
continuing director by a majority of continuing directors.
(iii) GOOD REASON. Employee may terminate Employee's employment
for Good Reason. For purposes of this Agreement "Good Reason" shall
mean:
(A) without Employee's express written consent, Employee is
assigned any duties inconsistent with Employee's positions,
duties, responsibilities and status with the Company immediately
prior to a change in control of the Company, or a change in
Employee's reporting responsibilities, titles or offices as in
effect immediately prior to a change in control of the Company,
or any removal of Employee from or any failure to re-elect or
appoint Employee to any of such responsibilities, titles, offices
or positions, except in connection with the termination of
Employee's employment for Cause or Disability, or as a result of
Employee's death, or by Employee for other than Good Reason;
(B) a reduction in Employee's annual rate of base salary as in
effect immediately prior to the change in control of the Company
or as the same may be
4
<PAGE>
increased from time to time thereafter (referred to hereinafter
as the "Base Salary");
(C) a failure by the Company to continue the Company's Incentive
Bonus Plan as the same may be modified from time to time, but
substantially in the form in effect immediately prior to the
change in control of the Company (the "Bonus Plan"), or a failure
by the Company to continue Employee as a participant in the Bonus
Plan in at least the same amount (the "Bonus Amount" ) as the
average annual amount paid or payable to Employee with respect to
the two full calendar years immediately preceding a change in
control of the Company or with respect to such shorter period
during which the Employee has been employed by the Company (bonus
amounts related to less than a full year shall be annualized);
(D) the failure by the Company to continue in effect any other
employee benefit or compensation plan program or policy, in which
Employee is participating immediately prior to a change in
control of the Company, unless the Company establishes such new
plans, programs or policies as is necessary to provide Employee
with substantially comparable benefits; the taking of any action
by the Company not required by law that would adversely affect
Employee's participation in or reduce Employee's benefits under
any of such plans, programs or policies or deprive Employee of
any fringe benefit enjoyed by Employee immediately prior to the
change in control of the Company;
(E) the relocation of the Company's principal executive offices
to a location outside the greater Houston area, or the Company's
requiring Employee to relocate anywhere other than the location
of the Company's principal executive offices except for required
travel on the Company's business to an extent substantially
consistent with Employee's business travel obligations
immediately prior to the change in control of the Company;
(F) the amendment, modification or repeal of any provision or the
Certificate of Incorporation, as amended, or the Bylaws of the
Company which was in effect immediately prior to such change in
control of the Company, if such amendment, modification or repeal
would materially adversely effect Employee's right to
indemnification by the Company;
(G) the failure of the Company to obtain the assumption of the
agreement to perform this Agreement by any successor as
contemplated in Section 6 hereof, or
(H) any purported termination of Employee's employment that is
not effected pursuant to a Notice of Termination satisfying the
requirements of subparagraph (iv) below and, if applicable,
subparagraph (ii) above; and for purposes of this Agreement, no
such purported termination shall be effective.
5
<PAGE>
Employee's right to terminate his employment for Good Reason hereunder
shall not be affected by his incapacity due to a physical or mental illness nor
shall Employee's continued employment following any circumstance that
constitutes Good Reason hereunder, regardless of the length of such continued
employment, constitute a consent to or a waiver of Employee's rights hereunder
with respect to such circumstance.
(iv) NOTICE OF TERMINATION. Any termination by the Company
pursuant to subparagraphs (i) or (ii) above or by Employee pursuant to
subparagraph (iii) above, shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice that shall indicate the
specific termination provision in this Agreement relied upon and shall
set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Employee's employment under the
provision so indicated.
(v) DATE OF TERMINATION. "Date of Termination" shall mean (A) if
Employee is terminated for Disability, 30 days after Notice of
Termination is given, provided that Employee shall not have returned to
the performance of Employee's duties on a full-time basis during such
30-day period, (B) if Employee's employment is terminated pursuant to
subparagraph (iii) above, the date specified in the Notice of
Termination and (C) if Employee's employment is terminated for any other
reason, the date on which a Notice of Termination is given; provided,
however, that if within 10 days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other
party in writing that a dispute exists concerning the termination, the
Date of Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties, by a
binding and final arbitration award or by a final judgment, order or
decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected); and
provided further, that for purposes of this Section 3, notwithstanding a
final determination of the Date of Termination occurring beyond the
Termination Period, such termination shall be deemed to have occurred
within the Termination Period as of the initial date of the Notice of
Termination.
4. COMPENSATION DURING DISABILITY OR UPON TERMINATION.
(i) If during the Termination Period Employee fails to perform
Employee's normal duties as a result of incapacity due to physical or
mental illness, Employee shall continue during the period of disability
to receive Employee's full Base Salary and any awards, deferred and
nondeferred, payable during such period of disability under the Bonus
Plan, less any amounts paid to Employee during such period of disability
pursuant to the Company's disability or sick-leave program(s) until
Employee's employment is terminated for Disability pursuant to Section
3(i) hereof. This Section 4(i) shall not reduce or impair Employee's
rights to terminate his employment for Good Reason as otherwise provided
herein.
(ii) If during the Termination Period Employee's employment shall
be terminated for Cause, the Company shall pay Employee's earned but
unpaid Base Salary through the
6
<PAGE>
Date of Termination and the Company shall have no further obligations to
Employee under this Agreement.
(iii) If during the Termination Period the Company shall
terminate Employee other than pursuant to Section 3(i) or 3(ii) hereof,
or if during the Termination Period Employee shall terminate Employee's
employment for Good Reason, then the Company shall pay to Employee, by
wire transfer or certified or bank cashier's check, the amounts (and at
the time or times) specified in subparagraphs A through C below and
shall provide Employee the continued welfare benefits as provided in
subparagraph D below:
(A) beginning with the first of the month coincident with or next
following the Date of Termination and continuing for each month
(or part thereof) during the Termination Period or until
Employee's death, if earlier, (the "Employment Period") an amount
equal to 1/12th of Employee's Base Salary, reduced by the
amount(s), if any, of monthly base salary paid to Employee by
another employer for that month or net earnings from
self-employment received by Employee that month;
(B) within 15 business days of (1) the close of each annual bonus
period under the Bonus Plan (for purposes of this subparagraph
(B), the Bonus Plan, if in existence on the date of the change in
control of the Company, shall be deemed to have been continued
for the entire Employment Period, regardless of whether it is
terminated following such change in control) ending coincident
with or subsequent to the Date of Termination and prior to or
coincident with the end of the Employment Period, an amount equal
to the Bonus Amount and (2) the end or the Employment Period, if
the end of the Employment Period does not coincide with the end
of an annual bonus period, an amount equal to the product of the
Bonus Amount and a fraction the numerator of Which is the number
of days from the end of the immediately preceding annual bonus
period and the denominator of which is 365, reduced by the amount
of bonus paid to Employee for such bonus period(s) by another
employer;
(C) within 15 business day after the Date of Termination, an
amount equal to that portion of Employee's Base Salary earned,
and vacation pay vested for the prior year and accrued for the
current year, to the Date of Termination but not paid, and all
other amounts previously deferred by Employee or earned but not
paid as of such date under all Company bonus or pay plans or
programs; and
(D) the Company shall maintain in full force and effect for the
continued benefit of employee ad his dependents for the
Employment Period all group life, accidental death and
dismemberment, long-term disability and health benefits available
to Employee and his dependents by virtue of being an employee of
the Company as of the Date of Termination, provided that
Employee's continued participation is possible under the general
terms and provisions of such plans and programs, and provided
further that Employee pays the regular active employee
7
<PAGE>
contribution, if any, required by such programs. In the event
that participation by Employee in any such plan or program after
the Date of Termination is barred pursuant to the terms thereof,
the Company shall obtain comparable coverage under individual
insurance policies with Employee paying an amount of the premium
not greater than that which he would have been required to pay
under the Company's group program. At the end of the Employment
Period, which end shall be treated by the Company as the
beginning of Employee's COBRA continuation period for all
purposes, the Company shall arrange to make available to Employee
and his dependents comparable insurance coverage by taking all
action necessary to enable Employee to convert his coverage under
the group plans or programs to an individual insurance policy for
the benefit of Employee and his dependents, or to assume any
individual insurance policies, with Employee paying the full
premiums after the end of the Employment Period (or, with respect
to any group health plan under which Employee has elected COBRA
continuation coverage, after the end of such COBRA continuation
period); provided, however, if Employee retires on the Date of
Termination, Employee's participation shall continue in such
group plans and programs to the extent such group plans and
programs provide benefits for retirees. In the event Employee
becomes covered by another employer's group plan or programs
during the Employment Period, the Company's plans or programs
shall be liable for benefits only to the extent such benefits are
not covered by the subsequent employer's plans or programs.
Notwithstanding anything herein to the contrary, if Employee's
continuedcoverage under any health plan of the Company that is
self-insured results in Employee being taxed on such coverage or
benefits received thereunder, the Company shall make employee
"whole" on an after-tax basis for the consequences of such
coverage or benefits under such plan.
5. MITIGATION OF DAMAGES AND EXPENSES. Employee shall be required to
mitigate the amount of any payments provided for under paragraphs 4(A) and (B)
of this Agreement by making reasonable efforts to seek other employment during
the Employment Period; however, Employee shall not be required to accept any
employment with respect to which Employee's position, authority, duties or
responsibilities shall be in any material respect, as determined by Employee in
his good faith opinion, inconsistent with those contemplated in Section 3 of
this Agreement or which is based at any office or location outside the greater
Houston area.
If any contest or dispute shall arise under this Agreement involving the
termination of Employee's employment with the Company or involving the failure
or refusal of the Company, its successors or assigns to perform in accordance
with the terms hereof, the Company shall reimburse Employee, on a current basis,
for all legal fees and expenses, if any, incurred by Employee in connection with
such contest or dispute, together with interest in an amount equal to the base
rate of Texas Commerce Bank, Houston, Texas, from time to time in effect but in
no event higher than the maximum legal rate permissible under applicable law on
all payments due under the terms of this Agreement and withheld by the Company,
its successors or assigns, such interest to accrue from the date such payment(s)
become due through the date of payment thereof.
8
<PAGE>
6. SUCCESSORS; BINDING AGREEMENT.
(i) The Company will require any successor, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all of the business and/or assets of the Company, by
agreement in form and substance reasonably satisfactory to Employee,
expressly to assume and agree to perform this Agreement in the same
manner and to the same extent as the Company would have been required if
no such succession had taken place. Failure of the Company to obtain
such agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Employee to compensation
from the Company in the same amount and on the same terms as Employee
would be entitled hereunder if Employee terminated Employee's employment
for Good Reason, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed
the Date of Termination. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid that executes and delivers the agreement
provided for in this Section 6 or which otherwise becomes bound by all
the terms and provisions of this Agreement by operation of law.
(ii) This Agreement shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
If Employee should die while any amounts would still be payable to
Employee hereunder if Employee had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to Employee's devisee, legatee, or other
designee or, if there be no such designee, to Employee's estate.
7. NOTICE. For the purpose of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or five days after deposit in the United
States mail, registered and return receipt requested, postage prepaid, addressed
to the respective addresses set forth on the last page of this Agreement, or to
such other address as either party shall have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
8. EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for
purposes of this Agreement (other than in Section 3(iii)) includes employment
with any corporation in which the Company has a direct or indirect ownership
interest of 50% or more of the total combined voting power of all classes of
stock.
9. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by Employee and by the President or other authorized officer
of the Company. No waiver by either party hereto at any time of any breach by
the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a
9
<PAGE>
waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.
10. VALIDITY. The interpretation, construction and performance of this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State ofTexas without regard to the principle of conflicts of laws.
The invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
each of which shall remain in full force and effect.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
12. DESCRIPTIVE HEADINGS. Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of any Provision of
this Agreement.
13. CORPORATE APPROVAL. This Agreement has been approved by the
Company's Board of Directors, and has been duly executed and delivered by
Employee and on behalf of the Company by its duly authorized representative.
14. ARBITRATION. Any dispute or controversy arising out of or in
connection with this Agreement as to the existence, construction, validity,
interpretation or meaning, performance, non-performance, enforcement, operation,
breach, continuance or termination thereof shall be submitted to arbitration
pursuant to the following procedure:
(a) Either party may demand such arbitration in writing after the
controversy arises, which demand shall include the name of the
arbitrator appointed by the party demanding arbitration, together with a
statement of the matter in controversy.
(b) Within 15 days after such demand, the other party shall name
an arbitrator, or in default thereof, such arbitrator shall be named by
the Arbitration Committee of the American Arbitration Association and
the two arbitrators so selected shall name a third arbitrator within 15
days or, in lieu of such agreement on a third arbitrator by the two
arbitrators so appointed a third arbitrator shall be appointed by the
Arbitration Committee of the American Arbitration Association.
(c) The Company shall bear all arbitration costs and expenses
incurred by Employee.
(d) The arbitration hearing shall be held at a site in Houston,
Texas, to be agreed to by a majority of the arbitrators on 10 days'
written notice to the parties.
(e) The arbitration hearing shall be concluded within 10 days
unless otherwise ordered by a majority of the arbitrators, and the award
thereon shall be made within 10 days after the close of the submission
of evidence. An award rendered by a majority of
10
<PAGE>
the arbitrators appointed pursuant to this Agreement shall be final and
binding on all parties to the proceeding during the period of this
Agreement, and judgment on such award may be entered by either party in
the highest court, state or federal, having jurisdiction; provided,
however, that Employee shall be entitled to specific performance of
Employee's right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection
with this Agreement.
The parties stipulate that the provisions hereof shall be a complete
defense to any suit, action, or proceeding instituted in any federal, state, or
local court or before any administrative tribunal with respect to any
controversy or dispute arising during the period of this Agreement and which is
arbitrable as herein set forth. The arbitration provisions hereof shall, with
respect to such controversy or dispute, survive the termination of this
Agreement.
Notwithstanding the pendency of any dispute or controversy pursuant to
this Section 14, the Company will continue to pay Employee Employee's full Base
Salary in effect when the notice giving rise to the dispute was given and
continue Employee as a participant in all compensation, benefit and insurance
plans in which Employee was participating when the notice giving rise to the
dispute was given, until the dispute is finally resolved in accordance with
Section 3(v) hereof. Amounts paid under this Section 14 are in addition to all
other amounts due under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement.
IN WITNESS WHEREOF, the Company and Employee have entered into
this Agreement effective for all purposes as of the day and year first above
written.
TECH-SYM CORPORATION
By: /s/ WENDELL W. GAMEL
President
Dated: August 16, 1996
EMPLOYEE
Dated: 21 August 1996 /s/ BRUCE H. NELSON
Bruce H. Nelson
<PAGE>
Addresses:
If to the Company:
Tech-Sym Corporation
10500 Westoffice, Suite 200
Houston, Texas 77042-5391
Attn: General Counsel
If to Employee:
5570 Aspen
Bellaire, Texas 77401
EXHIBIT 10.14
TERMINATION AGREEMENT
THIS AGREEMENT, made and entered into as of May 1, 1991 is by and
between TECH-SYM CORPORATION, a Nevada corporation (the "Company"), and J.
RANKIN TIPPINS (the "Employee").
WITNESSETH:
WHEREAS, Employee presently serves the Company or one or more of its
subsidiaries as a senior executive officer; and
WHEREAS, the services of Employee and Employee's business experience
and knowledge are of great value to the Company; and
WHEREAS, the Company considers it prudent to enter into this
Agreement with Employee in order to ensure Employee's continued services and
managerial guidance, to receive the benefits of Employee's business knowledge
and experience and to define the nature and terms of Employee's termination
benefits following a "change in control of the Company," as hereinafter defined;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and Employee
hereby agree as follows:
1. TERM. This Agreement shall commence on the date hereof and shall
continue until December 31, 1993; provided, however, that commencing on January
1, 1993 and on each January 1st thereafter, the term of this Agreement shall
automatically be extended for one additional year unless at least 90 days prior
to such January 1st date, the Company shall have given written notice to
Employee of the termination of this Agreement as of the December 31 next
following the January 1st in respect of which such notice is given by the
Company; and provided further, that this Agreement shall automatically terminate
in all events on the earlier of Employee's death or 65th birthday if it has not
been earlier terminated as provided above. Termination of this Agreement after a
change in control of the Company shall not alter or impair the rights of
Employee arising hereunder prior to such termination.
2. CHANGE IN CONTROL. For purposes of this Agreement, a "change in
control of the Company" shall be deemed to have occurred upon, and shall mean:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a Person"), of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 25% or more of either (i) the then outstanding shares
of Common Stock of the Company (the "Outstanding Company Common Stock")
or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting
<PAGE>
Securities"); provided, however, that the following acquisitions shall
not constitute a Change of Control: (w) any acquisition directly from
the Company (excluding an acquisition by virtue of the exercise of a
conversion privilege), (x) any acquisition by the Company, (y) any
acquisition by any employee benefit plan(s) (or related trust(s))
sponsored or maintained by the Company or any corporation controlled
by these Company or (z) any acquisition by any corporation pursuant to
a reorganization, merger or consolidation, if, immediately following
such reorganization, merger or consolidation, the conditions described
in clauses (i), (ii) and (iii) of subsection (c) of this Section 2 are
satisfied;
(b) Individuals who, as of the date hereof, constitute the
Company's Board of Directors (the "Incumbent Board"), cease for any
reason to constitute at least a majority of the Company's Board of
Directors; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election
by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either (i) an actual
or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act), or an actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Company's Board of Directors or (ii) a plan or
agreement to replace a majority of the members of the Company's Board of
Directors then comprising the Incumbent Board; or
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case unless,
immediately following such reorganization, merger or consolidation, (i)
more than 60% of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization, merger or
consolidation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior
to such reorganization, merger or consolidation in substantially the
same proportions as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding the Company, any employee benefit plan(s)
(or related trust(s)) of the Company and/or its subsidiaries or such
corporation resulting from such reorganization, merger or consolidation
and any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 25% of
more of the Outstanding Company Common Stock or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (iii) at least a majority of
the members of the board of directors of the corporation resulting from
such reorganization, merger or consolidation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation; or
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<PAGE>
(d) Approval by the stockholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the sale or
other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which immediately
following such sale or other disposition, (A) more than 60% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior
to such sale or other disposition in substantially the same proportion
as their ownership, immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no person (excluding the Company and
any employee benefit plan (or related trust) of the Company or such
corporation and any Person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, 25% or more of
the Outstanding Company Common Stock or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (C) at least a majority of
the members of the board of directors of such corporation were members
of the Incumbent Board at the time of the execution of the initial
agreement or action of the Company's Board of Directors providing for
such sale or other disposition of assets of the Company.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. If a change in control
of the Company occurs while Employee is employed by the Company, Employee shall
be entitled to the benefits provided in Section 4 hereof if during the
Termination Period (as hereinafter defined) Employee becomes disabled or
Employee's employment is terminated, unless such termination is (a) due to
Employee's death, (b) by the Company for Cause or Employee's Disability or (c)
by Employee for other than Good Reason. For purposes of this Agreement, the
"Termination Period" shall mean the period of time beginning with the change in
control of the Company and ending on the earlier to occur of Employee's 65th
birthday or the third anniversary o-l' such change in control of the Company.
(i) DISABILITY. If, as a result of Employee's incapacity due to physical
or mental illness, Employee shall have been absent from Employee's duties
with the Company on a full-time basis for 150 consecutive calendar days,
and within 30 days after written Notice of Termination (as defined
hereinafter) Employee shall not have returned to the full-time performance
of Employee's duties, the Company may terminate Employee's employment for
"Disability"; provided, however, a termination of Employee's employment
for Disability for purposes of this Agreement shall not alter or impair
Employee's rights as a "disabled employee" under any of the Company's
employee benefit plans.
(ii) CAUSE. The Company may terminate Employee's employment for Cause.
For the purposes of this Agreement, the Company shall have "Cause" to
terminate Employee's employment hereunder only upon (A) the willful and
continued failure by Employee to perform substantially Employee's duties
with
-3-
<PAGE>
the Company, other than any such failure resulting from Employee's
incapacity due to physical or mental illness, which continues unabated
after a demand for substantial performance is delivered to Employee by
the Board of Directors of the Company (the "Board") that specifically
identifies the manner in which the Board believes that Employee has not
substantially performed Employee's duties or (B) Employee willfully
engages in gross misconduct materially and demonstrably injurious to the
Company. For purposes of this paragraph, an act or failure to act on
Employee's part shall be considered "willful" if done or omitted to be
done by Employee otherwise than in good faith and without reasonable
belief that Employee's action or omission was in the best interest of
the Company. Notwithstanding the foregoing, Employee shall not be deemed
to have been terminated for Cause unless and until there shall have been
delivered to Employee a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board, including at least 50% of the "continuing
directors," as hereinafter defined, at a meeting of the Board called and
held for the purpose (after reasonable notice to Employee and an
opportunity for Employee. together with Employee's counsel, to be heard
before the Board), finding that in the good faith opinion of the Board
Employee was guilty of conduct set forth in clauses (A) or (B) of the
first sentence of this subsection (ii) and specifying the particulars
thereof in reasonable detail. The term "continuing director" shall mean
an individual who was a member of the Board elected by the public
stockholders prior to the time of the change in control of the Company
or the individual recommended to succeed a continuing director by a
majority of continuing directors.
(iii) GOOD REASON. Employee may terminate Employee's employment for Good
Reason. For purposes of this Agreement "Good Reason" shall mean:
(A) without Employee's express written consent, Employee is
assigned any duties inconsistent with Employee's positions,
duties, responsibilities and status with the Company immediately
prior to a change in control of the Company, or a change in
Employee's reporting responsibilities, titles or offices as in
effect immediately prior to a change in control of the Company,
or any removal of Employee from or any failure to re-elect or
appoint Employee to any of such responsibilities, titles, offices
or positions, except in connection with the termination of
Employee's employment for Cause or Disability, or as a result of
Employee's death, or by Employee for other than Good Reason;
(B) a reduction in Employee's annual rate of base salary as in
effect immediately prior to the change in control of the Company
or as the same may be increased from time to time thereafter
(referred to hereinafter as the "Base Salary");
(C) a failure by the Company to continue the Company's Incentive
Bonus Plan as the same may be modified from time to time, but
substantially in the form in effect immediately prior to the
change in control of the Company (the "Bonus Plan"), or a failure
by the Company to continue Employee as a participant in the Bonus
Plan in at least the same amount (the "Bonus Amount") as the
average annual amount paid or payable to Employee with respect to
the two full calendar years immediately preceding a change in
control of the Company or with respect to such shorter period
during which the Employee has been employed by the
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<PAGE>
Company (bonus amounts related to less than a full year shall be
annualized);
(D) the failure by the Company to continue in effect any other
employee benefit or compensation plan program or policy, in which
Employee is participating immediately prior to a change in
control of the Company, unless the Company establishes such new
plans, programs or policies as is necessary to provide Employee
with substantially comparable benefits; the taking of any action
by the Company not required by law that would adversely affect
Employee's participation in or reduce Employee's benefits under
any of such plans, programs or policies or deprive Employee of
any fringe benefit enjoyed by Employee immediately prior to the
change in control of the Company;
(E) the relocation of the Company's principal executive offices
to a location outside the greater Houston area, or the Company's
requiring Employee to relocate anywhere other than the location
of the Company's principal executive offices except for required
travel on the Company's business to an extent substantially
consistent with Employee's business travel obligations
immediately prior to the change in control of the Company;
(F) the amendment, modification or repeal of any provision of the
Certificate of Incorporation, as amended, or the Bylaws of the
Company which was in effect immediately prior to such change in
control of the Company, if such amendment, modification or repeal
would materially adversely effect Employee's right to
indemnification by the Company;
(G) the failure of the Company to obtain the assumption of the
agreement to perform this Agreement by any successor as
contemplated in Section 6 hereof, or
(H) any purported termination of Employee's employment that is
not effected pursuant to a Notice of Termination satisfying the
requirements of subparagraph (iv) below and, if applicable,
subparagraph (ii) above; and for purposes of this Agreement, no
such purported termination shall be effective.
Employee's right to terminate his employment for Good Reason
hereunder shall not be affected by his incapacity due to a physical or mental
illness nor shall Employee's continued employment following any circumstance
that constitutes Good Reason hereunder, regardless of the length of such
continued employment, constitute a consent to or a waiver of Employee's rights
hereunder with respect to such circumstance.
(iv) NOTICE OF TERMINATION. Any termination by the Company pursuant to
subparagraphs (i) or (ii) above or by Employee pursuant to subparagraph
(iii) above, shall be communicated by written Notice of Termination to the
other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice that shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of Employee's employment under the provision so indicated.
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<PAGE>
(v) DATE OF TERMINATION. "Date of Termination" shall mean (A) if Employee
is terminated for Disability, 30 days after Notice of Termination is
given, provided that Employee shall not have returned to the performance
of Employee's duties on a full-time basis during such 30-day period, (B)
if Employee's employment is terminated pursuant to subparagraph (iii)
above, the date specified in the Notice of Termination and (C) if
Employee's employment is terminated for any other reason, the date on
which a Notice of Termination is given; provided, however, that if within
10 days after any Notice of Termination is given, the party receiving such
Notice of Termination notifies the other party in writing that a dispute
exists concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding and final arbitration award or by a
final judgment, order or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal having been
perfected); and provided further, that for purposes of this Section 3,
notwithstanding a final determination of the Date of Termination occurring
beyond the Termination Period, such termination shall be deemed to have
occurred within the Termination Period as of the initial date of the
Notice of Termination.
4. COMPENSATION DURING DISABILITY OR UPON TERMINATION.
(i) If during the Termination Period Employee fails to perform Employee's
normal duties as a result of incapacity due to physical or mental illness,
Employee shall continue during the period of disability to receive
Employee's full Base Salary and any awards, deferred and nondeferred,
payable during such period of disability under the Bonus Plan, less any
amounts paid to Employee during such period of disability pursuant to the
Company's disability or sick-leave program(s) until Employee's employment
is terminated for Disability pursuant to Section 3(i) hereof. This Section
4(i) shall not reduce or impair Employee's rights to terminate his
employment for Good Reason as otherwise provided herein.
(ii) If during the Termination Period Employee's employment shall be
terminated for Cause, the Company shall pay Employee's earned but unpaid
Base Salary through the Date of Termination and the Company shall have no
further obligations to Employee under this Agreement.
(iii) If during the Termination Period the Company shall terminate
Employee other than pursuant to Section 3(i) or 3(ii) hereof, or if during
the Termination Period Employee shall terminate Employee's employment for
Good Reason, then the Company shall pay to Employee, by certified or bank
cashier's check, the amounts (and at the time or times) specified in
subparagraphs A through C below and shall provide Employee the continued
welfare benefits as provided in subparagraph D below:
(A) beginning with the first of the month coincident with or next
following the Date of Termination and continuing for each month
(or part thereof) during the Termination Period or until
Employee's death, if earlier, (the "Employment Period") an amount
equal to 1/12th of Employee's Base Salary, reduced by the
amount(s), if any, of monthly base salary paid to Employee by
another employer for that month or net earnings from
self-employment received by Employee that month;
-6-
<PAGE>
(B) within 15 business days of (1) the close of each annual bonus
period under the Bonus Plan (for purposes of this subparagraph
(B), the Bonus Plan, if in existence on the date of the change in
control of the Company, shall be deemed to have been continued
for the entire Employment Period, regardless of whether it is
terminated following such change in control) ending coincident
with or subsequent to the Date of Termination and prior to or
coincident with the end of the Employment Period, an amount equal
to the Bonus Amount and (2) the end of the Employment Period, if
the end of the Employment Period does not coincide with the end
of an annual bonus period, an amount equal to the product of the
Bonus Amount and a fraction the numerator of which is the number
of days from the end of the immediately preceding annual bonus
period and the denominator of which is 365, reduced by the amount
of bonus paid to Employee for such bonus period(s) by another
employer;
(C) within 15 business day after the Date of Termination, an
amount equal to that portion of Employee's Base Salary earned,
and vacation pay vested for the prior year and accrued for the
current year, to the Date of Termination but not paid, and all
other amounts previously deferred by Employee or earned but not
paid as of such date under all Company bonus or pay plans or
programs; and
(D) the Company shall maintain in full force and effect for the
continued benefit of Employee and his dependents for the
Employment Period all group life, accidental death and
dismemberment, long-term disability and health benefits available
to Employee and his dependents by virtue of being an employee of
the Company as of the Date of Termination, provided that
Employee's continued participation is possible under the general
terms and provisions of such plans and programs, and provided
further that Employee pays the regular active employee
contribution, if any, required by such programs. In the event
that participation by Employee in any such plan or program after
the Date of Termination is barred pursuant to the terms thereof,
the Company shall obtain comparable coverage under individual
insurance policies with Employee paying an amount of the premium
not greater than that which he would have been required to pay
under the Company's group program. At the end of the Employment
Period, the Company shall arrange to make available to Employee
and his dependents comparable insurance coverage by taking all
action necessary to enable Employee to convert his coverage under
the group plans or programs to an individual insurance policy for
the benefit of Employee and his dependents, or to assume any
individual insurance policies, with Employee paying the full
premiums after the end of the Employment Period (or, with respect
to any group health plan under which Employee has elected COBRA
continuation coverage, if later, after the end of such COBRA
continuation period); provided, however, if Employee retires on
the Date of Termination, Employee's participation shall continue
in such group plans and programs to the extent such group plans
and programs provide benefits for retirees. In the event Employee
becomes covered by another employer's group plan or programs
during the Employment Period, the Company's plans or programs
shall be liable for benefits only to the extent such benefits are
not covered by the subsequent employer's plans or programs.
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<PAGE>
5. MITIGATION OF DAMAGES AND EXPENSES. Employee shall be required to
mitigate the amount of any payments provided for under paragraphs 4(A) and (B)
of this Agreement by making reasonable efforts to seek other employment during
the Employment Period; however, Employee shall not be required to accept any
employment with respect to which Employee's position, authority, duties or
responsibilities shall be in any material respect, as determined by Employee in
his good faith opinion, inconsistent with those contemplated in Section 3 of
this Agreement or which is based at any office or location outside the greater
Houston area.
If any contest or dispute shall arise under this Agreement involving
the termination of Employee's employment with the Company or involving the
failure or refusal of the Company, its successors or assigns to perform in
accordance with the terms hereof, the Company shall reimburse Employee, on a
current basis, for all legal fees and expenses, if any, incurred by Employee in
connection with such contest or dispute, together with interest in an amount
equal to the base rate of [Bank], from time to time in effect but in no event
higher than the maximum legal rate permissible under applicable law on all
payments due under the terms of this Agreement and withheld by the Company, its
successors or assigns, such interest to accrue from the date such payment(s)
become due through the date of payment thereof.
6. SUCCESSORS; BINDING AGREEMENT.
(i) The Company will require any successor, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all of the business and/or assets of the Company, by
agreement in form and substance reasonably satisfactory to Employee,
expressly to assume and agree to perform this Agreement in the same
manner and to the same extent as the Company would have been required if
no such succession had taken place. Failure of the Company to obtain
such agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Employee to compensation
from the Company in the same amount and on the same terms as Employee
would be entitled hereunder if Employee terminated Employee's employment
for Good Reason, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed
the Date of Termination. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid that executes and delivers the agreement
provided for in this Section 6 or which otherwise becomes bound by all
the terms and provisions of this Agreement by operation of law.
(ii) This Agreement shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
If Employee should die while any amounts would still be payable to
Employee hereunder if Employee had continued to live, all such a-mounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to Employee's devisee, legatee, or other
designee or, if there be no such designee, to Employee's estate.
7. NOTICE. For the purpose of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or five days after deposit in the United
States mail, registered and return receipt requested, postage prepaid, addressed
to the respective addresses set forth on the last page of this Agreement, or to
such other address as
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<PAGE>
either party shall have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only upon
receipt.
8. EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes
of this Agreement (other than in Section 3(iii)) includes employment with any
corporation in which the Company has a direct or indirect ownership interest of
50% or more of the total combined voting power of all classes of stock.
9. MISCELLANEOUS. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by Employee and by the President or other authorized officer of
the Company. No waiver by either party hereto at any time of any breach by the
other party hereto Of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
10. VALIDITY. The interpretation, construction and performance of this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Texas without regard to the principle of conflicts of laws.
The invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
each of which shall remain in full force and effect.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
12. DESCRIPTIVE HEADINGS. Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of any provision of
this Agreement.
13. CORPORATE APPROVAL. This Agreement has been approved by the Company's
Board of Directors, and has been duly executed and delivered by Employee and on
behalf of the Company by its duly authorized representative.
14. ARBITRATION. Any dispute or controversy arising out of or in
connection with this Agreement as to the existence, construction, validity,
interpretation or meaning, performance, non-performance, enforcement, operation,
breach, continuance or termination thereof shall be submitted to arbitration
pursuant to the following procedure:
(a) Either party may demand such arbitration in writing after the
controversy arises, which demand shall include the name of the arbitrator
appointed by the party demanding arbitration, together with a statement of
the matter in controversy.
(b) Within 15 days after such demand, the other party shall name an
arbitrator, or in default thereof, such arbitrator shall be named by the
Arbitration Committee of the American Arbitration Association, and the two
arbitrators so selected shall name a third arbitrator within 15 days or,
in lieu of such agreement on a third arbitrator by the two arbitrators so
appointed a third arbitrator shall be appointed by the Arbitration
Committee of the American Arbitration Association.
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<PAGE>
(c) The Company shall bear all arbitration costs and expenses
incurred by Employee.
(d) The arbitration hearing shall be held at a site in Houston,
Texas, to be agreed to by a majority of the arbitrators on 10 days'
written notice to the parties.
(e) The arbitration hearing shall be concluded within 10 days unless
otherwise ordered by a majority of the arbitrators, and the award thereon
shall be made within 10 days after the close of the submission of
evidence. An award rendered by a majority of the arbitrators appointed
pursuant to this Agreement shall be final and binding on all parties to
the proceeding during the period of this Agreement, and judgment on such
award may be entered by either party in the highest court, state or
federal, having jurisdiction; provided, however, that Employee shall be
entitled to specific performance of Employee's right to be paid until the
Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this agreement.
The parties stipulate that the provisions hereof shall be a complete
defense to any suit, action, or proceeding instituted in any federal, state, or
local court or before any administrative tribunal with respect to any
controversy or dispute arising during the period of this Agreement and which is
arbitrable as herein set forth. The arbitration provisions hereof shall, with
respect to such controversy or dispute, survive the termination of this
Agreement.
Notwithstanding the pendency of any dispute or controversy pursuant
to this Section 14, the Company will continue to pay Employee Employee's full
Base Salary in effect when the notice giving rise to the dispute was given and
continue Employee as a participant in all compensation, benefit and insurance
plans in which Employee was participating when the notice giving rise to the
dispute was given, until the dispute is finally resolved in accordance with
Section 3(v) hereof. Amounts paid under this Section 14 are in addition to all
other amounts due under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement.
IN WITNESS WHEREOF, the Company and Employee have entered into this
Agreement effective for all purposes as of the day and year first above written.
TECH-SYM CORPORATION
Dated: May 6, 1991 By:/s/ WENDELL W. GAMEL
President
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<PAGE>
EMPLOYEE
Dated: 5/13/91 /s/ J. RANKIN TIPPINS
J. Rankin Tippins
Addresses:
If to the Company:
Tech-Sym Corporation
10500 Westoffice
Houston, Texas 77042
Attn: President
If to Employee:
11514 Lakeside Place Dr.
Houston TX 77077
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EXHIBIT 10.15
TERMINATION AGREEMENT
THIS AGREEMENT, made and entered into as of May 1, 1991 is by and
between TECH-SYM CORPORATION, a Nevada corporation (the "Company"), and RAY F.
THOMPSON (the "Employee").
W I T N E S S E T H:
WHEREAS, Employee presently serves the Company or one or more of its
subsidiaries as a senior executive officer; and
WHEREAS, the services of Employee and Employee's business experience
and knowledge are of great value to the Company; and
WHEREAS, the Company considers it prudent to enter into this
Agreement with Employee in order to ensure Employee's continued services and
managerial guidance, to receive the benefits of Employee's business knowledge
and experience and to define the nature and terms of Employee's termination
benefits following a "change in control of the Company," as hereinafter defined;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and Employee
hereby agree as follows:
1. TERM. This Agreement shall commence on the date hereof and shall
continue until December 31, 1993; provided, however, that commencing on January
1, 1993 and on each January lst thereafter, the term of this Agreement shall
automatically be extended for one additional year unless at least 90 days prior
to such January lst date, the Company shall have given written notice to
Employee of the termination of this Agreement as of the December 31 next
following the January 1st in respect of which such notice is given by the
Company; and provided further, that this Agreement shall automatically terminate
in all events on the earlier of Employee's death or 65th birthday if it has not
been earlier terminated as provided above. Termination of this Agreement after a
change in control of the Company shall not alter or impair the rights of
Employee arising hereunder prior to such termination.
2. CHANGE IN CONTROL. For purposes of this Agreement, a "change in
control of the Company" shall be deemed to have occurred upon, and shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person"), of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 25% or more of either (i) the then outstanding shares of Common
Stock of the Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting securities"); PROVIDED, HOWEVER, that the
following acquisitions shall not
<PAGE>
constitute a Change of Control: (w) any acquisition directly from the
Company (excluding an acquisition by virtue of the exercise of a
conversion privilege), (x) any acquisition by the Company, (y) any
acquisition by any employee benefit plan(s) (or related trust(s))
sponsored or maintained by the Company or any corporation controlled by
the Company or (z) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, immediately following such
reorganization, merger or consolidation, the conditions described in
clauses (i), (ii) and (iii) of subsection (e) of this Section 2 are
satisfied;
(b) Individuals who, as of the date hereof, constitute the Company's
Board of Directors (the "Incumbent Board"), cease for any reason to
constitute at least a majority of the Company's Board of Directors;
PROVIDED, HOWEVER, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption
of office occurs as a result of either (i) an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act), or an actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Company's Board of Directors or (ii) a plan or agreement to replace a
majority of the members of the Company's Board of Directors then
comprising the Incumbent Board; or
(c) Approval by the stockholders of the Company of a reorganization,
merger or consolidation, in each case unless, immediately following such
reorganization, merger or consolidation, (i) more than 60% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
and the combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of directors
is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such reorganization,
merger or consolidation, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no Person
(excluding the Company, any employee benefit plan(s) (or related trust(s))
of the Company and/or its subsidiaries or such corporation resulting from
such reorganization, merger or consolidation and any Person beneficially
owning, immediately prior to such reorganization, merger or consolidation,
directly or indirectly, 25% of more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 25% or more of, respectively,
the then outstanding shares of common stock of the corporation resulting
from such reorganization, merger or consolidation or the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and (iii) at least
a majority of the members of the board of directors of the corporation
resulting from such reorganization, merger or consolidation were members
of the Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger or consolidation; or
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<PAGE>
(d) Approval by the stockholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company,
other than to a corporation, with respect to which immediately following
such sale or other disposition, (A) more than 60% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other
disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the
case may be, (B) no person (excluding the Company and any employee
benefit plan (or related trust) of the Company or such corporation and
any Person beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 25% or more of the Outstanding
Company Common Stock or Outstanding Company Voting Securities, as the
case may be) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the
election of directors and (C) at least a majority of the members of the
board of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or action of
the Company's Board of Directors providing for such sale or other
disposition of assets of the Company.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. If a change in control of
the Company occurs while Employee is employed by the Company, Employee shall be
entitled to the benefits provided in Section 4 hereof if during the Termination
Period (as hereinafter defined) Employee becomes disabled or Employee's
employment is terminated, unless such termination is (a) due to Employee's
death, (b) by the Company for Cause or Employee's Disability or (c) by Employee
for other than Good Reason. For purposes of this Agreement, the "Termination
Period" shall mean the period of time beginning with the change in control of
the Company and ending on the earlier to occur of Employee's 65th birthday or
the third anniversary of such change in control of the Company.
(i) DISABILITY. If, as a result of Employee's incapacity due to physical
or mental illness, Employee shall have been absent from Employee's duties
with the Company on a full-time basis for 150 consecutive calendar days,
and within 30 days after written Notice of Termination (as defined
hereinafter) Employee shall not have returned to the full-time performance
of Employee's duties, the Company may terminate Employee's employment for
"Disability"; provided, however, a termination of Employee's employment
for Disability for purposes of this Agreement shall not alter or impair
Employee's rights as a "disabled employee" under any of the Company's
employee benefit plans.
(ii) CAUSE. The Company may terminate Employee's employment for Cause. For
the purposes of this Agreement, the Company shall have "Cause" to
terminate Employee's employment hereunder only upon (A) the willful and
continued failure by Employee to perform substantially Employee's duties
with the Company, other than any such failure resulting from Employee's
incapacity
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<PAGE>
due to physical or mental illness, which continues unabated after a demand
for substantial performance is delivered to Employee by the Board of
Directors of the Company (the "Board") that specifically identifies the
manner in which the Board believes that Employee has not substantially
performed Employee's duties or (B) Employee willfully engages in gross
misconduct materially and demonstrably injurious to the Company. For
purposes of this paragraph, an act or failure to act on Employee's part
shall be considered "willful" if done or omitted to be done by Employee
otherwise than in good faith and without reasonable belief that Employee's
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, Employee shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to
Employee a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters of the entire membership of the Board,
including at least 50% of the "continuing directors," as hereinafter
defined, at a meeting of the Board called and held for the purpose (after
reasonable notice to Employee and an opportunity for Employee, together
with Employee's counsel, to be heard before the Board), finding that in
the good faith opinion of the Board Employee was guilty of conduct set
forth in clauses (A) or (B) of the first sentence of this subsection (ii)
and specifying the particulars thereof in reasonable detail. The term
"continuing director" shall mean an individual who was a member of the
Board elected by the public stockholders prior to the time of the change
in control of the Company or the individual recommended to succeed a
continuing director by a majority of continuing directors.
(iii) GOOD REASON. Employee may terminate Employee's employment for Good
Reason. For purposes of this Agreement "Good Reason" shall mean:
(A) without Employee's express written consent, Employee is
assigned any duties inconsistent with Employee's positions,
duties, responsibilities and status with the Company immediately
prior to a change in control of the Company, or a change in
Employee's reporting responsibilities, titles or offices as in
effect immediately prior to a change in control of the Company,
or any removal of Employee from or any failure to re-elect or
appoint Employee to any of such responsibilities, titles, offices
or positions, except in connection with the termination of
Employee's employment for Cause or Disability, or as a result of
Employee's death, or by Employee for other than Good Reason;
(B) a reduction in Employee's annual rate of base salary as in
effect immediately prior to the change in control of the Company
or as the same may be increased from time to time thereafter
(referred to hereinafter as the "Base Salary");
(C) a failure by the Company to continue the Company's Incentive
Bonus Plan as the same may be modified from time to time, but
substantially in the form in effect immediately prior to the
change in control of the Company (the "Bonus Plan"), or a failure
by the Company to continue Employee as a participant in the Bonus
Plan in at least the same amount (the "Bonus Amount") as the
average annual amount paid or payable to Employee with respect to
the two full calendar years immediately preceding a change in
control of the Company or with respect to such shorter period
during which the Employee has been employed by the Company (bonus
amounts related to less than a full year shall be annualized);
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<PAGE>
(D) the failure by the Company to continue in effect any other
employee benefit or compensation plan program or policy, in which
Employee is participating immediately prior to a change in
control of the Company, unless the Company establishes such new
plans, programs or policies as is necessary to provide Employee
with substantially comparable benefits; the taking of any action
by the Company not required by law that would adversely affect
Employee's participation in or reduce Employee's benefits under
any of such plans, programs or policies or deprive Employee of
any fringe benefit enjoyed by Employee immediately prior to the
change in control of the Company;
(E) the relocation of the Company's principal executive offices
to a location outside the greater Houston area, or the Company's
requiring Employee to relocate anywhere other than the location
of the Company's principal executive offices except for required
travel on the Company's Business to an extent substantially
consistent with Employee's business travel obligations
immediately prior to the change in control of the Company;
(F) the amendment, modification or repeal of any provision of the
Certificate of Incorporation, as amended, or the Bylaws of the
Company which was in effect immediately prior to such change in
control of the Company, if such amendment, modification or repeal
would materially adversely effect Employee's right to
indemnification by the Company;
(G) the failure of the Company to obtain the assumption of the
agreement to perform this Agreement by any successor as
contemplated in Section 6 hereof; or
(H) any purported termination of Employee's employment that is
not effected pursuant to a Notice of Termination satisfying the
requirements of subparagraph (iv) below and, if applicable,
subparagraph (ii) above; and for purposes of this Agreement, no
such purported termination shall be effective.
Employee's right to terminate his employment for Good Reason
hereunder shall not be affected by his incapacity due to a physical or mental
illness nor shall Employee's continued employment following any circumstance
that constitutes Good Reason hereunder, regardless of the length of such
continued employment, constitute a consent to or a waiver of Employee's rights
hereunder with respect to such circumstance.
(iv) NOTICE OF TERMINATION. Any termination by the Company pursuant to
subparagraphs (i) or (ii) above or by Employee pursuant to subparagraph
(iii) above, shall be communicated by written Notice of Termination to the
other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice that shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of Employee's employment under the provision so indicated.
(v) DATE OF TERMINATION. "Date of Termination" shall mean (A) if Employee
is terminated for Disability, 30 days after Notice of Termination is
given,
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<PAGE>
provided that Employee shall not have returned to the performance of
Employee's duties on a full-time basis during such 30-day period, (B) if
Employee's employment is terminated pursuant to subparagraph (iii) above,
the date specified in the Notice of Termination and (C) if Employee's
employment is terminated for any other reason, the date on which a Notice
of Termination is given; provided, however, that if within 10 days after
any Notice of Termination is given, the party receiving such Notice of
Termination notifies the other party in writing that a dispute exists
concerning the termination, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding and final arbitration award or by a
final judgment, order or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal having been
perfected); and provided further, that for purposes of this Section 3,
notwithstanding a final determination of the Date of Termination occurring
beyond the Termination Period, such termination shall be deemed to have
occurred within the Termination Period as of the initial date of the
Notice of Termination.
4. COMPENSATION DURING DISABILITY OR UPON TERMINATION.
(i) If during the Termination Period Employee fails to perform Employee's normal
duties as a result of incapacity due to physical or mental illness, Employee
shall continue during the period of disability to receive Employee's full Base
Salary and any awards, deferred and nondeferred, payable during such period of
disability under the Bonus Plan, less any amounts paid to Employee during such
period of disability pursuant to the Company's disability or sick-leave
program(s) until Employee's employment is terminated for Disability pursuant to
Section 3(i) hereof. This Section 4(i) shall not reduce or impair Employee's
rights to terminate his employment for Good Reason as otherwise provided herein.
(ii) If during the Termination Period Employee's employment shall be terminated
for Cause, the Company shall pay Employee's earned but unpaid Base Salary
through the Date of Termination and the Company shall have no further
obligations to Employee under this Agreement.
(iii) If during the Termination Period the Company shall terminate Employee
other than pursuant to Section 3(i) or 3(ii) here-of, or if during the
Termination Period Employee shall terminate Employee's employment for Good
Reason, then the Company shall pay to Employee, by certifies or bank cashier's
check, the amounts (and at the time or times) specified in subparagraphs A
through C below and shall provide Employee the continued welfare benefits as
provided in subparagraph D below:
(A) beginning with the first of the month coincident with or next
following the Date of Termination and continuing for each month (or part
thereof) during the Termination Period or until Employee's death, if
earlier, (the "Employment Period") an amount equal to 1/12th of
Employee's Base Salary, reduced by the amount(s), if any, of (a) monthly
base salary paid to Employee by another employer for that month or net
earnings from self-employment received by Employee that month and (b)
monthly retirement benefit, if any, paid to Employee by the Company for
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<PAGE>
that month pursuant to the Executive Retirement Agreement entered into
by and between the Company and Employee and dated as of May 1, 1991;
(B) within 15 business days of (1) the close of each annual bonus period
under the Bonus Plan (for 'purposes of this subparagraph (B), the Bonus
Plan, if in existence on the date of the change in control of the
Company, shall be deemed to have been continued for the entire
Employment Period, regardless of whether it is terminated following such
change in control) ending coincident with or subsequent to the Date of
Termination and prior to or coincident with the end of the Employment
Period, an amount equal to the Bonus Amount and (2) the end of the
Employment Period, if the end of the Employment Period does not coincide
with the end of an annual bonus period, an amount equal to the product
of the Bonus Amount and a fraction the numerator of which is the number
of days from the end of the immediately preceding annual bonus period
and the denominator of which is 365, reduced by the amount of bonus paid
to Employee for such bonus period(s) by another employer;
(C) within 15 business day after the Date of Termination, an amount
equal to that portion of Employee's Base Salary earned, and vacation pay
vested for the prior year and accrued for the current year, to the Date
of Termination but not paid, and all other amounts previously deferred
by Employee or earned but not paid as of such date under all Company
bonus or pay plans or programs; and
(D) the Company shall maintain in full force and effect for the
continued benefit of Employee and his dependents for the Employment
Period all group life, accidental death and dismemberment, long-term
disability and health benefits available to Employee and his dependents
by virtue of being an employee of the Company as of the Date of
Termination, provided that Employee's continued participation is
possible under the general terms and provisions of such plans and
programs, and provided further that Employee pays the regular active
employee contribution, if any, required by such programs. In the event
that participation by Employee in any such plan or program after the
Date of Termination is barred pursuant to the terms thereof, the Company
shall obtain comparable coverage under individual insurance policies
with Employee paying an amount of the premium not greater than that
which he would have been required to pay under the Company's group
program. At the end of the Employment Period, the Company shall arrange
to make available to Employee and his dependents comparable insurance
coverage by taking all action necessary to enable Employee to convert
his coverage under the group plans or programs to an individual
insurance policy for the benefit of Employee and his dependents, or to
assume any individual insurance policies, with Employee paying the full
premiums after the end of the Employment Period (or, with respect to any
group health plan under which Employee has elected COBRA continuation
coverage, if later, after the end of such COBRA continuation period);
provided, however, if Employee retires on the Date of Termination,
Employee's participation shall continue in such group plans and programs
to the extent such group plans and programs provide benefits for
retirees. In the event Employee becomes covered by another employer's
group plan or programs during the Employment Period, the Company's plans
or programs shall be liable for
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<PAGE>
benefits only to the extent such benefits are not covered by the
subsequent employer's plans or programs. Further, the above provisions
concerning continued group health plan coverage or benefits (other than
mandated COBRA rights) shall not be applicable if Employee is entitled
to continued health benefits pursuant to the Executive Retirement
Agreement.
5. MITIGATION OF DAMAGES AND EXPENSES. Employee shall be required to
mitigate the amount of any payments provided for under paragraphs 4(A) and (B)
of this Agreement by making reasonable efforts to seek other employment during
the Employment Period; however, Employee shall not be required to accept any
employment with respect to which Employee's position, authority, duties or
responsibilities shall be in any material respect, as determined by Employee in
his good faith opinion, inconsistent with those contemplated in Section 3 of
this Agreement or which is based at any office or location outside the greater
Houston area.
If any contest or dispute shall arise under this Agreement involving
the termination of Employee's employment with the Company or involving the
failure or refusal of the Company, its successors or assigns to perform in
accordance with the terms hereof, the Company shall reimburse Employee, on a
current basis, for all legal fees and expenses, if any, incurred by Employee in
connection with such contest or dispute, together with interest in an amount
equal to the base rate of [Bank], from time to time in effect but in no event
higher than the maximum legal rate permissible under applicable law on all
payments due under the terms of this Agreement and withheld by the Company, its
successors or assigns, such interest to accrue from the date such payment(s)
become due through the date of payment thereof.
6. SUCCESSORS; BINDING AGREEMENT.
(i) The Company will require any successor, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all of the business and/or assets of the Company, by
agreement in form and substance reasonably satisfactory to Employee,
expressly to assume and agree to perform this Agreement in the same
manner and to the same extent as the Company would have been required if
no such succession had taken place. Failure of the Company to obtain
such agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Employee to compensation
from the Company in the same amount and on the same terms as Employee
would be entitled hereunder if Employee terminated Employee's employment
for Good Reason, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed
the Date of Termination. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid that executes and delivers the agreement
provided for in this Section 6 or which otherwise becomes bound by all
the terms and provisions of this Agreement by operation of law.
(ii) This Agreement shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
If Employee should die while any amounts would still be payable to
Employee hereunder if Employee had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to Employee's devisee, legatee, or other
designee or, if there be no such designee, to Employee's estate.
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<PAGE>
7. NOTICE. For the purpose of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or five days after deposit in the United
States mail, registered and return receipt requested, postage prepaid, addressed
to the respective addresses set forth on the last page of this Agreement, or to
such other address as either party shall have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
8. EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes
of this Agreement (other than in Section 3(iii)) includes employment with any
corporation in which the Company has a direct or indirect ownership interest of
50% or more of the total combined voting power of all classes of stock.
9. MISCELLANEOUS. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by Employee and by the President or other authorized officer of
the Company. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
10. VALIDITY. The interpretation, construction and performance of this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Texas without regard to the principle of conflicts of laws.
The invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
each of which shall remain in full force and effect.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
12. DESCRIPTIVE HEADINGS. Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of any provision of
this Agreement.
13. CORPORATE APPROVAL. This Agreement has been approved by the Company's
Board of Directors, and has been duly executed and delivered by Employee and on
behalf of the Company by its duly authorized representative.
14. ARBITRATION. Any dispute or controversy arising out of or in
connection with this Agreement as to the existence, construction, validity,
interpretation or meaning, performance, non-performance, enforcement, operation,
breach, continuance or termination thereof shall be submitted to arbitration
pursuant to the following procedure:
(a) Either party may demand such arbitration in writing after the
controversy arises, which demand shall include the name of the
arbitrator appointed by the party demanding arbitration, together with a
statement of the matter in controversy.
(b) Within 15 days after such demand, the other party shall name an
arbitrator, or in default thereof, such arbitrator shall be named by the
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<PAGE>
Arbitration Committee of the American Arbitration Association, and the
two arbitrators so selected shall name a third arbitrator within 15 days
or, in lieu of such agreement on a third arbitrator by the two
arbitrators so appointed a third arbitrator shall be appointed by the
Arbitration Committee of the American Arbitration Association.
(c) The Company shall bear all arbitration costs and expenses
incurred by Employee.
(d) The arbitration hearing shall be held at a site in Houston,
Texas, to be agreed to by a majority of the arbitrators on 10 days'
written notice to the parties.
(e) The arbitration hearing shall be concluded within 10 days
unless otherwise ordered by a majority of the arbitrators, and the award
thereon shall be made within 10 days after the close of the submission
of evidence. An award rendered by a majority of the arbitrators
appointed pursuant to this Agreement shall be final and binding on all
parties to the proceeding during the period of this Agreement, and
judgment on such award may be entered by either party in the highest
court, state or federal, having jurisdiction; provided, however, that
Employee shall be entitled to specific performance of Employee's right
to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this
Agreement.
The parties stipulate that the provisions hereof shall be a complete
defense to any suit, action, or proceeding instituted in any federal, state, or
local court or before any administrative tribunal with respect to any
controversy or dispute arising during the period of this Agreement and which is
arbitrable as herein set forth. The arbitration provisions hereof shall, with
respect to such controversy or dispute, survive the termination of this
Agreement.
Notwithstanding the pendency of any dispute or controversy pursuant
to this Section 14, the Company will continue to pay Employee Employee's full
Base Salary in effect when the notice giving rise to the dispute was given and
continue Employee as a participant in all compensation, benefit and insurance
plans in which Employee was participating when the notice giving rise to the
dispute was given, until the dispute is finally resolved in accordance with
Section 3(v) hereof. Amounts paid under this Section 14 are in addition to all
other amounts due under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement.
IN WITNESS WHEREOF, the Company and Employee have entered into this
Agreement effective for all purposes as of the day and year first above written.
TECH-SYM CORPORATION
Dated: May 6, 1991 By:/s/ Wendell W. Gamel
President
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<PAGE>
EMPLOYEE
Dated: May 13, 1991 /s/ RAY F. THOMPSON
Ray F. Thompson
Addresses:
If to the Company:
Tech-Sym Corporation
10500 Westoffice
Houston, Texas 77042
Attn: General Counsel
If to Employee:
Ray F. Thompson
1603 Briar Park
Houston TX 77042
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EXHIBIT 10.16
TERMINATION AGREEMENT
THIS AGREEMENT, made and entered into as of May 1, 1991 is by and
between TECH-SYM CORPORATION, a Nevada corporation (the "Company"), and RICHARD
F. MILES (the "Employee").
WITNESSETH:
WHEREAS, Employee presently serves the Company or one or more of its
subsidiaries as a senior executive officer; and
WHEREAS, the services of Employee and Employee's business experience
and knowledge are of great value to the Company; and
WHEREAS, the Company considers it prudent to enter into this
Agreement with Employee in order to ensure Employee's continued services and
managerial guidance, to receive the benefits of Employee's business knowledge
and experience and to define the nature and terms of Employee's termination
benefits following a "change in control of the Company," as hereinafter defined;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and Employee
hereby agree as follows:
1. TERM. This Agreement shall commence on the date hereof and shall
continue until December 31, 1993; provided, however, that commencing on January
1, 1993 and on each January lst thereafter, the term of this Agreement shall
automatically be extended for one additional year unless at least 90 days prior
to such January lst date, the Company shall have given written notice to
Employee of the termination of this Agreement as of the December 31 next
following the January lst in respect of which such notice is given by the
Company; and provided further, that this Agreement shall automatically terminate
in all events on the earlier of Employee's death or 65th birthday if it has not
been earlier terminated as provided above. Termination of this Agreement after a
change in control of the Company shall not alter or impair the rights of
Employee arising hereunder prior to such termination.
2. CHANGE IN CONTROL. For purposes of this Agreement, a "change in control
of the Company" shall be deemed to have occurred upon, and shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the 'Exchange Act")) (a 'Person"), of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 25% or more of either (i) the then outstanding shares of Common
Stock of the Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting
<PAGE>
Securities"); PROVIDED, HOWEVER, that the following acquisitions shall not
constitute a Change of Control: (w) any acquisition directly from the
Company (excluding an acquisition by virtue of the exercise of a
conversion privilege), (x) any acquisition by the Company, (y) any
acquisition by any employee benefit plan(s) (or related trust(s))
sponsored or maintained by the Company or any corporation controlled by
the Company or (z) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, immediately following such
reorganization, merger or consolidation, the conditions described in
clauses (i), (ii) and (iii) of subsection (c) of this Section 2 are
satisfied;
(b) Individuals who, as of the date hereof, constitute the Company's
Board of Directors (the "Incumbent Board"), cease for any reason to
constitute at least a majority of the Company's Board of Directors;
PROVIDED, HOWEVER, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption
of office occurs as a result of either (i) an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act), or an actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Company's Board of Directors or (ii) a plan or agreement to replace a
majority of the members of the Company's Board of Directors then
comprising the Incumbent Board; or
(c) Approval by the stockholders of the Company of a reorganization,
merger or consolidation, in each case unless, immediately following such
reorganization, merger or consolidation, (i) more than 60% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
and the combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of directors
is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such reorganization,
merger or consolidation, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no Person
(excluding the Company, any employee benefit plan(s) (or related trust(s))
of the Company and/or its subsidiaries or such corporation resulting from
such reorganization, merger or consolidation and any Person beneficially
owning, immediately prior to such reorganization, merger or consolidation,
directly or indirectly, 25% of more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 25% or more of, respectively,
the then outstanding shares of common stock of the corporation resulting
from such reorganization, merger or consolidation or the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and (iii) at least
a majority of the members of the board of directors of the corporation
resulting from such reorganization, merger or consolidation were members
of the Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger or consolidation; or
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<PAGE>
(d) Approval by the stockholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company,
other than to a corporation, with respect to which immediately following
such sale or other disposition, (A) more than 60% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other
disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the
case may be, (B) no person (excluding the Company and any employee benefit
plan (or related trust) of the Company or such corporation and any Person
beneficially owning, immediately prior to such sale or other disposition,
directly or indirectly, 25% or more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 25% or more of, respectively,
the then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors and
(C) at least a majority of the members of the board of directors of such
corporation were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Company's Board of
Directors providing for such sale or other disposition of assets of the
Company.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. If a change in control of the
Company occurs while Employee is employed by the Company, Employee shall be
entitled to the benefits provided in Section 4 hereof if during the Termination
Period (as hereinafter defined) Employee becomes disabled or Employee's
employment is terminated, unless such termination is (a) due to Employee's
death, (b) by the Company for Cause or Employee's Disability or (c) by Employee
for other than Good Reason. For purposes of this Agreement, the "Termination
Period" shall mean the period of time beginning with the change in control of
the Company and ending on the earlier to occur of Employee's 65th birthday or
the third anniversary of such change in control of the Company.
(i) DISABILITY. If, as a result of Employee's incapacity due to physical
or mental illness, Employee shall have been absent from Employee's
duties with the Company on a full-time basis for 150 consecutive
calendar days, and within 30 days after written Notice of Termination
(as defined hereinafter) Employee shall not have returned to the
full-time performance of Employee's duties, the Company may terminate
Employee's employment for "Disability"; provided, however, a termination
of Employee's employment for Disability for purposes of this Agreement
shall not alter or impair Employee's rights as a "disabled employee"
under any of the Company's employee benefit plans.
(ii) CAUSE. The Company may terminate Employee's employment for Cause.
For the purposes of this Agreement, the Company shall have "Cause" to
terminate Employee's employment hereunder only upon (A) the willful and
continued failure by Employee to perform substantially Employee's duties
with
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<PAGE>
the Company, other than any such failure resulting from Employee's
incapacity due to physical or mental illness, which continues unabated
after a demand for substantial performance is delivered to Employee by
the Board of Directors of the Company (the "Board") that specifically
identifies the manner in which the Board believes that Employee has not
substantially performed Employee's duties or (B) Employee willfully
engages in gross misconduct materially and demonstrably injurious to the
Company. For purposes of this paragraph, an act or failure to act on
Employee's part shall be considered "willful" if done or omitted to be
done by Employee otherwise than in good faith and without reasonable
belief that Employee's action or omission was in the best interest of
the Company. Notwithstanding the foregoing, Employee shall not be deemed
to have been terminated for Cause unless and until there shall have been
delivered to Employee a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board, including at least 50% of the "continuing
directors," as hereinafter defined, at a meeting of the Board called and
held for the purpose (after reasonable notice to Employee and an
opportunity for Employee, together with Employee's counsel, to be heard
before the Board), finding that in the good faith opinion of the Board
Employee was guilty of conduct set forth in clauses (A) or (B) of the
first sentence of this subsection (ii) and specifying the particulars
thereof in reasonable detail. The term "continuing director" shall mean
an individual who was a member of the Board elected by the public
stockholders prior to the time of the change in control of the Company
or the individual recommended to succeed a continuing director by a
majority of continuing directors.
(iii) GOOD REASON. Employee may terminate Employee's employment for Good
Reason. For purposes of this Agreement "Good Reason" shall mean:
(A) without Employee's express written consent, Employee is
assigned any duties inconsistent with Employee's positions,
duties, responsibilities and status with the Company immediately
prior to a change in control of the Company, or a change in
Employee's reporting responsibilities, titles or offices as in
effect immediately prior to a change in control of the Company,
or any removal of Employee from or any failure to re-elect or
appoint Employee to any of such responsibilities, titles, offices
or positions, except in connection with the termination of
Employee's employment for Cause or Disability, or as a result of
Employee's death, or by Employee for other than Good Reason;
(B) a reduction in Employee's annual rate of base salary as in
effect immediately prior to the change in control of the Company
or as the same may be increased from time to time thereafter
(referred to hereinafter as the "Base Salary");
(C) a failure by the Company to continue the Company's Incentive
Bonus Plan as the same may be modified from time to time, but
substantially in the form in effect immediately prior to the
change in control of the Company (the "Bonus Plan"), or a failure
by the Company to continue Employee as a participant in the Bonus
Plan in at least the same amount (the "Bonus Amount") as the
average annual amount paid or payable to Employee with respect to
the two full calendar years immediately preceding a change in
control of the Company or with respect to such shorter period
during which the Employee has been employed by
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<PAGE>
the Company (bonus amounts related to less than a full year
shall be annualized);
(D) the failure by the Company to continue in effect any other
employee benefit or compensation plan program or policy, in which
Employee is participating immediately prior to a change in
control of the Company, unless the Company establishes such new
plans, programs or policies as is necessary to provide Employee
with substantially comparable benefits; the taking of any action
by the Company not required by law that would adversely affect
Employee's participation in or reduce Employee's benefits under
any of such plans, programs or policies or deprive Employee of
any fringe benefit enjoyed by Employee immediately prior to the
change in control of the Company;
(E) the relocation of the Company's principal executive offices
to a location outside the greater Houston area, or the Company's
requiring Employee to relocate anywhere other than the location
of the Company's principal executive offices except for required
travel on the Company's business to an extent substantially
consistent with Employee's business travel obligations
immediately prior to the change in control of the Company;
(F) the amendment, modification or repeal of any provision of the
Certificate of Incorporation, as amended, or the Bylaws of the
Company which was in effect immediately prior to such change in
control of the Company, if such amendment, modification or repeal
would materially adversely effect Employee's right to
indemnification by the Company;
(G) the failure of the Company to obtain the assumption of the
agreement to perform this Agreement by any successor as
contemplated in Section 6 hereof; or
(H) any purported termination of Employee's employment that is
not effected pursuant to a Notice of Termination satisfying the
requirements of subparagraph (iv) below and, if applicable,
subparagraph (ii) above; and for purposes of this Agreement, no
such purported termination shall be effective.
Employee's right to terminate his employment for Good Reason
hereunder shall not be affected by his incapacity due to a physical or mental
illness nor shall Employee's continued employment following any circumstance
that constitutes Good Reason hereunder, regardless of the length of such
continued employment, constitute a consent to or a waiver of Employee's rights
hereunder with respect to such circumstance.
(iv) NOTICE OF TERMINATION. Any termination by the Company pursuant to
subparagraphs (i) or (ii) above or by Employee pursuant to subparagraph
(iii) above, shall be communicated by written Notice of Termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice that shall indicate the specific
termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Employee's employment under the provision so
indicated.
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<PAGE>
(v) DATE OF TERMINATION. "Date of Termination" shall mean (A) if
Employee is terminated for Disability, 30 days after Notice of
Termination is given, provided that Employee shall not have returned to
the performance of Employee's duties on a full-time basis during such
30-day period, (B) if Employee's employment is terminated pursuant to
subparagraph (iii) above, the date specified in the Notice of
Termination and (C) if Employee's employment is terminated for any other
reason, the date on which a Notice of Termination is given; provided,
however, that if within 10 days after any Notice of Termination is
given. the party receiving such Notice of Termination notifies the other
party in writing that a dispute exists concerning the termination, the
Date of Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties, by a
binding and final arbitration award or by a final judgment, order or
decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected); and
provided further, that for purposes of this Section 3, notwithstanding a
final determination of the Date of Termination occurring beyond the
Termination Period, such termination shall be deemed to have occurred
within the Termination Period as of the initial date of the Notice of
Termination.
4. COMPENSATION DURING DISABILITY OR UPON TERMINATION.
(i) If during the Termination Period Employee fails to perform Employee's
normal duties as a result of incapacity due to physical or mental illness,
Employee shall continue during the period of disability to receive
Employee's full Base Salary and any awards, deferred and nondeferred,
payable during such period of disability under the Bonus Plan, less any
amounts paid to Employee during such period of disability pursuant to the
Company's disability or sick-leave program(s) until Employee's employment
is terminated for Disability pursuant to Section 3(i) hereof. This Section
4(i) shall not reduce or impair Employee's rights to terminate his
employment for Good Reason as otherwise provided herein.
(ii) If during the Termination Period Employee's employment shall be
terminated for Cause, the Company shall pay Employee's earned but unpaid
Base Salary through the Date of Termination and the Company shall have no
further obligations to Employee under this Agreement.
(iii) If during the Termination Period the Company shall terminate
Employee other than pursuant to Section 3(i) or 3(ii) hereof, or if during
the Termination Period Employee shall terminate Employee's employment for
Good Reason, then the Company shall pay to Employee, by certified or bank
cashier's check, the amounts (and at the time or times) specified in
subparagraphs A through C below and shall provide Employee the continued
welfare benefits as provided in subparagraph D below:
(A) beginning with the first of the month coincident with or next
following the Date of Termination and continuing for each month (or
part thereof) during the Termination Period or until Employee's
death, if earlier, (the "Employment Period") an amount equal to
1/12th of Employee's Base Salary, reduced by the amount(s), if any,
of monthly base salary paid to Employee by another employer for that
month or net earnings from self-employment received by Employee that
month;
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<PAGE>
(B) within 15 business days of (1) the close of each annual bonus
period under the Bonus Plan (for purposes of this subparagraph (B),
the Bonus Plan, if in existence on the date of the change in control
of the Company, shall be deemed to have been continued for the
entire Employment Period, regardless of whether it is terminated
following such change in control) ending coincident with or
subsequent to the Date of Termination and prior to or coincident
with the end of the Employment Period, an amount equal to the Bonus
Amount and (2) the end of the Employment Period, if the end of the
Employment Period does not coincide with the end of an annual bonus
period, an amount equal to the product of the Bonus Amount and a
fraction the numerator of which is the number of days from the end
of the immediately preceding annual bonus period and the denominator
of which is 365, reduced by the amount of bonus paid to Employee for
such bonus period(s) by another employer;
(C) within 15 business day after the Date of Termination, an amount
equal to that portion of Employee's Base Salary earned, and vacation
pay vested for the prior year and accrued for the current year, to
the Date of Termination but not paid, and all other amounts
previously deferred by Employee or earned but not paid as of such
date under all Company bonus or pay plans or programs; and
(D) the Company shall maintain in full force and effect for the
continued benefit of Employee and his dependents for the Employment
Period all group life, accidental death and dismemberment, long-term
disability and health benefits available to Employee and his
dependents by virtue of being an employee of the Company as of the
Date of Termination, provided that Employee's continued
participation is possible under the general terms and provisions of
such plans and programs, and provided further that Employee pays the
regular active employee contribution, if any, required by such
programs. In the event that participation by Employee in any such
plan or program after the Date of Termination is barred pursuant to
the terms thereof, the Company shall obtain comparable coverage
under individual insurance policies with Employee paying an amount
of the premium not greater than that which he would have been
required to pay under the Company's group program. At the end of the
Employment Period, the Company shall arrange to make available to
Employee and his dependents comparable insurance coverage by taking
all action necessary to enable Employee to convert his coverage
under the group plans or programs to an individual insurance policy
for the benefit of Employee and his dependents, or to assume any
individual insurance policies, with Employee paying the full
premiums after the end of the Employment Period (or, with respect to
any group health plan under which Employee has elected COBRA
continuation coverage, if later, after the end of such COBRA
continuation period); provided, however, if Employee retires on the
Date of Termination, Employee's participation shall continue in such
group plans and programs to the extent such group plans and programs
provide benefits for retirees. In the event Employee becomes covered
by another employer's group plan or programs during the Employment
Period, the Company's plans or programs shall be liable for benefits
only to the extent such benefits are not covered by the subsequent
employer's plans or programs.
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<PAGE>
5. MITIGATION OF DAMAGES AND EXPENSES. Employee shall be required to
mitigate the amount of any payments provided for under paragraphs 4(A) and (B)
of this Agreement by making reasonable efforts to seek other employment during
the Employment Period; however, Employee shall not be required to accept any
employment with respect to which Employee's position, authority, duties or
responsibilities shall be in any material respect, as determined by Employee in
his good faith opinion, inconsistent with those contemplated in Section 3 of
this Agreement or which is based at any office or location outside the greater
Houston area.
If any contest or dispute shall arise under this Agreement involving
the termination of Employee's employment with the Company or involving the
failure or refusal of the Company, its successors or assigns to perform in
accordance with the terms hereof, the Company shall reimburse Employee, on a
current basis, for all legal fees and expenses, if any, incurred by Employee in
connection with such contest or dispute, together with interest in an amount
equal to the base rate of [Bank], from time to time in effect but in no event
higher than the maximum legal rate permissible under applicable law on all
payments due under the terms of this Agreement and withheld by the Company, its
successors or assigns, such interest to accrue from the date such payment(s)
become due through the date of payment thereof
6. SUCCESSORS; BINDING AGREEMENT.
(i) The Company will require any successor, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all of the business and/or assets of the Company, by
agreement in form and substance reasonably satisfactory to Employee,
expressly to assume and agree to perform this Agreement in the same
manner and to the same extent as the Company would have been required if
no such succession had taken place. Failure of the Company to obtain
such agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Employee to compensation
from the Company in the same amount and on the same terms as Employee
would be entitled hereunder if Employee terminated Employee's employment
for Good Reason, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed
the Date of Termination. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid that executes and delivers the agreement
provided for in this Section 6 or which otherwise becomes bound by all
the terms and provisions of this Agreement by operation of law.
(ii) This Agreement shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
If Employee should die while any amounts would still be payable to
Employee hereunder if Employee had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to Employee's devisee, legatee, or other
designee or, if there be no such designee, to Employee's estate.
7. NOTICE. For the purpose of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or five days after deposit in the United
States mail, registered and return receipt requested, postage prepaid, addressed
to the respective addresses set forth on the last page of this Agreement, or to
such other address as
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<PAGE>
either party shall have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only upon
receipt.
8. EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes
of this Agreement (other than in Section 3(iii)) includes employment with any
corporation in which the Company has a direct or indirect ownership interest of
50% or more of the total combined voting power of all classes of stock.
9. MISCELLANEOUS. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by Employee and by the President or other authorized officer of
the Company. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
10. VALIDITY. The interpretation, construction and performance of this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Texas without regard to the principle of conflicts of laws.
The invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
each of which shall remain in full force and effect.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
12. DESCRIPTIVE HEADINGS. Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of any provision of
this Agreement.
13. CORPORATE APPROVAL. This Agreement has been approved by the Company's
Board of Directors, and has been duly executed and delivered by Employee and on
behalf of the Company by its duly authorized representative.
14. ARBITRATION. Any dispute or controversy arising out of or in
connection with this Agreement as to the existence, construction, validity,
interpretation or meaning, performance, non-performance, enforcement, operation,
breach, continuance or termination thereof shall be submitted to arbitration
pursuant to the following procedure:
(a) Either party may demand such arbitration in writing after the
controversy arises, which demand shall include the name of the arbitrator
appointed by the party demanding arbitration, together with a statement of
the matter in controversy.
(b) Within 15 days after such demand, the other party shall name an
arbitrator, or in default thereof, such arbitrator shall be named by the
Arbitration Committee of the American Arbitration Association, and the two
arbitrators so selected shall name a third arbitrator within 15 days or,
in lieu of such agreement on a third arbitrator by the two arbitrators so
appointed a third arbitrator shall be appointed by the Arbitration
Committee of the American Arbitration Association.
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<PAGE>
(c) The Company shall bear all arbitration costs and expenses
incurred by Employee.
(d) The arbitration hearing shall be held at a site in Houston,
Texas, to be agreed to by a majority of the arbitrators on 10 days'
written notice to the parties.
(e) The arbitration hearing shall be concluded within 10 days unless
otherwise ordered by a majority of the arbitrators, and the award thereon
shall be made within 10 days after the close of the submission of
evidence. An award rendered by a majority of the arbitrators appointed
pursuant to this Agreement shall be final and binding on all parties to
the proceeding during the period of this Agreement, and judgment on such
award may be entered by either party in the highest court, state or
federal, having jurisdiction; provided, however, that Employee shall be
entitled to specific performance of Employee's right to be paid until the
Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
The parties stipulate that the provisions hereof shall be a complete
defense to any suit, action, or proceeding instituted in any federal, state, or
local court or before any administrative tribunal with respect to any
controversy or dispute arising during the period of this Agreement and which is
arbitrable as herein set forth. The arbitration provisions hereof shall, with
respect to such controversy or dispute, survive the termination of this
Agreement.
Notwithstanding the pendency of any dispute or controversy pursuant
to this Section 14, the Company will continue to pay Employee Employee's full
Base Salary in effect when the notice giving rise to the dispute was given and
continue Employee as a participant in all compensation, benefit and insurance
plans in which Employee was participating when the notice giving rise to the
dispute was given, until the dispute is finally resolved in accordance with
Section 3(v) hereof. Amounts paid under this Section 14 are in addition to all
other amounts due under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement.
IN WITNESS WHEREOF, the Company and Employee have entered into this
Agreement effective for all purposes as of the day and year first above written.
TECH-SYM CORPORATION
Dated: 5/6/91 By:/s/ WENDELL W. GAMEL
President
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<PAGE>
EMPLOYEE
Dated: 5/13/91 /s/ RICHARD F. MILES
Richard F/Miles
Addresses:
If to the Company:
Tech-Sym Corporation
10500 Westoffice
Houston, Texas 77042
Attn: General Counsel
If to Employee:
14955 Bramblewood Drive
Houston
Texas 77079
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EXHIBIT 10.17
FIRST AMENDMENT
TO
TERMINATION AGREEMENT
WHEREAS, TECH-SYM CORPORATION, a Nevada corporation (the "Company"), and
RICHARD F. MILES (the "Employee") previously entered into a Termination
Agreement dated as of May 1, 1991; and
WHEREAS, the Company and Employee have entered into an Executive
Retirement Agreement as of the date hereof and as a consequence desire to amend
the Termination Agreement;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and Employee hereby agree
that effective as of April 26, 1994, Section 4(iii)(A) of the Termination
Agreement is hereby amended and restated in Its entirety to read as follows:
"(A) beginning with the first of the month coincident with or next
following the Date of Termination and continuing for each month (or
part thereof) during the Termination Period or until Employee's death,
if earlier, (the "Employment Period") an amount equal to 1/12th of
Employee's Base Salary, reduced by the amount(s), if any, of (a)
monthly base salary paid to Employee by another employer for that
month or net earnings from self-employment received by Employee that
month and (b) monthly retirement benefit, if any, paid to Employee by
the Company for that month pursuant to the Executive Retirement
Agreement entered into by and between the Company and Employee and
dated as of April 26, 1994.
All terms used herein that are defined in the Termination Agreement
shall have the same meanings given to such terms In the Termination Agreement,
except as otherwise expressly provided herein. As amended hereby, the
Termination Agreement shall continue In full force and effect without
interruption.
This amendment may be executed in several counterparts, each of which
shall be deemed an original, but all of such counterparts and the Termination
Agreement shall constitute but one and the same Instrument.
<PAGE>
IN WITNESS WHEREOF the Company has caused this Amendment to be executed
by its duly authorized officer, and the Executive has executed this Amendment
effective for all purposes as of the date first written above.
TECH-SYM CORPORATION
Dated: 6/21/94 By:/s/ WENDELL W. GAMEL
Title: President
EXECUTIVE
Dated: 6/21/94 /s/ RICHARD F. MILES
Richard F. Miles
-2-
EXHIBIT 10.18
EXECUTIVE RETIREMENT AGREEMENT
(AS AMENDED AND RESTATED)
THIS AGREEMENT made and entered into as of April 30, 1992, between
TECH-SYM CORPORATION (the "Company") and WENDELL W. GAMEL (the "Executive").
WITNESSETH:
WHEREAS, the Executive has rendered outstanding service to the
Company over a period of years and the Executive's experience and knowledge of
the affairs Of the Company and his reputation and contacts are extremely
valuable to the Company; and
WHEREAS, in recognition of the Executive's service to the Company
and to encourage the Executive's continued service, the Company is desirous of
offering him, in addition to his regular compensation and termination benefits,
certain retirement benefits;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and the Executive
hereby agree as follows:
1. BENEFITS
1.1 QUALIFICATIONS FOR RETIREMENT BENEFITS. The Executive (or his
surviving spouse, as the case may be) shall be entitled to receive the
retirement (or death) benefits provided by this Agreement following his
termination of employment with the Company unless his employment with the
Company is terminated (i) voluntarily by the Executive prior to his attaining a
62, other than due to a Total Disability (as defined below), or (ii) by the
Company for Cause (as defined below). A termination of employment that would
entitle the Executive (or his spouse) to receive retirement (or death) benefits
as provided hereunder is hereafter referred to as a "Qualified Termination."
For the purposes of this Agreement, the Company shall have "Cause"
to terminate the Executive's employment hereunder only upon (i) the willful and
continued failure by the Executive to perform substantially the Executive's
duties with the Company, other than any such failure resulting ' g from the
Executive's incapacity due to physical or mental illness, after a demand for
substantial performance is delivered to the Executive by the Board that
specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties or (ii) the
willful engaging by the Executive in gross misconduct materially and
demonstrably injurious to the Company. For purposes of this paragraph, an act or
failure to act on the Executive's part shall be considered "willful" if done or
omitted to be done by the Executive otherwise than in good faith and without
reasonable belief that the Executive's action or omission was in the best
interest of the Company.
<PAGE>
For purposes of this Agreement, the term "Total Disability" means
that, in the opinion of the Executive's physician, the Executive has suffered a
mental or physical disability that is expected to be permanent or of long
continued duration and which prevents the Executive from continuing full-time
his duties with the Company or Subsidiary.
1.2 AMOUNT OF RETIREMENT BENEFITS. Following a Qualified Termination the
Executive shall receive, beginning with the later of the date of such Qualified
Termination or the Executive's 65th birthday (the "Commencement Date"), an
annual retirement benefit equal to 65% of the highest rate of annual base salary
in effect for the Executive with the Company at any time prior to the
Executive's 61st birthday (the "Base Salary") with such benefit payable on each
January 1 on or after the Commencement Date on which he is living; provided,
however, that if the Executive's Commencement Date is other than on January 1,
the Executive shall receive a partial annual retirement benefit for the
remainder of the year in which such Commencement Date occurs in an amount equal
to the full annual benefit that will commence on the next January 1 but reduced
by a fraction, the numerator of which is the number of calendar months during
such year that have elapsed prior to the Commencement Date (with any partial
month rounded up to a complete month), and the denominator of which is 12 and
such partial benefit shall be paid to the Executive on the first day of the
month coinciding with or next following the Commencement Date; provided further,
however, that:
(a) if the Executive's employment terminates due to a Qualified
Termination prior to his reaching age 65, the Executive may elect to
commence receiving his retirement benefits hereunder as of the date of
such Qualified Termination or any date thereafter, provided the
Executive is at least age 62 as of such Early Commencement Date, by
giving written notice of such election to the Company prior to such
Early Commencement Date and the amount of the annual retirement benefit
(and partial benefit, if any) payable hereunder shall be reduced by
1.39% for each full calendar month by which his Early Commencement Date
precedes his 65th birthday unless the Board, in its sole discretion,
elects to waive all or part of this reduction; and
(b) if on the Early Commencement Date the Executive is also
entitled to receive benefits under a separate Termination Agreement with
the Company dated effective as of May 1, 1991 (as the same may be
amended from time-to-time thereafter), then for purposes of subparagraph
(a) above the Executive's age as of the Early Commencement Date shall be
increased by (but not beyond age 65) the length of the Termination
Period (as defined in the Termination Agreement) remaining as of the
Early Commencement Date.
1.3 DEATH BENEFITS. If the Executive is married on his date of death and
such death occurs while he is an employee of the Company or on or after a
Qualified Termination, including one due to Total Disability, his surviving
spouse ("Spouse") shall receive an annual survivor's benefit hereunder in an
amount equal to 37 1/2% of the Executive's Base Salary. The Spouse's benefit
shall commence on the first day of the month coinciding with or next following
the Executive's date of death. Subsequent payment(s) of the Spouse's benefit
shall be made on each anniversary of the date such survivor payments first
began, provided that the Spouse is alive on such anniversary date, and shall
cease when either a total of 10 annual survivor benefit payments have been paid
to the Spouse hereunder or the Spouse dies, whichever occurs first.
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<PAGE>
1.4 LUMP SUMS. Notwithstanding Section 1.2 or Section 1.3 hereof to the
contrary, the Board, in its sole discretion, may at any time direct that the
actuarial present value of any retirement (or death) benefits accrued under this
Agreement, as determined in accordance with the actuarial factors and rates then
in effect for a lump sum payment (for an immediate or deferred annuity, as the
case may be) upon a qualified plan's termination under Pension Benefit Guaranty
Corporation regulations, be immediately paid to the Executive (or his spouse, as
the case may be) in a lump sum in cash (by check).
1.5 CONTINUED HEALTH BENEFITS. On and after a Qualified Termination, the
Executive shall be entitled to continue, for as long as he lives, his
participation and that of his qualified dependents, if any, in the Company's
group health plan for active employees in which the Executive participated
immediately prior to such Qualified Termination provided that the Executive
continues to pay the regular active employee premium, if any, required by such
plan; however, in the event that continued participation by the Executive in
such plan after the date of his Qualified Termination is not permitted by the
plan or such plan is terminated or benefits under such plan would be taxable to
the Executive, the Company shall either obtain comparable coverage under another
group health plan of the Company (and under which benefits to the Executive
would not be taxable) or, if there is none, an individual insurance policy
providing comparable benefits with the Executive paying an amount of the premium
therefor that is not greater than that which he would have been required to pay
from time to time under the Company's group health plan for active employees had
his participation continued in such plan and the Company paying the balance of
such cost and any taxes on any income the Executive would have as a result of
such Company-provided coverage.
2. TERMINATION AND AMENDMENT
2.1 TERMINATION OR AMENDMENT. The Company, by action of the Board,
reserves the right to amend or terminate this Agreement for whatever reasons it
may deem appropriate as of the first day of the month following the delivery to
the Executive of written notice of such amendment or termination; however, no
such amendment shall impair, reduce or void the Executive's (or his Spouse's)
rights with respect to the continued health benefits provided by Section 1.5 or
the retirement (or death) benefits (whether or not in pay status) accrued under
this Agreement as of the date of such amendment and further, any termination of
this Agreement by the Company shall, notwithstanding anything herein to the
contrary, entitle the Executive (or his Spouse, as the case may be) to
immediately receive from the Company the lump sum present value of the accrued
retirement (or death) benefits as calculated in accordance with Section 1.4.
3. ADMINISTRATION
3.1 BOARD DECISION. The Board's decision whether or not to waive the
reduction in the amount of benefits payable in the event of the Executive's
Qualified Termination prior to reaching age 65, as provided in Section 1.2(a),
shall be totally discretionary with the Board and need not be based upon any
standard nor be consistent with any past practices and shall be conclusive on
all parties.
3.2 BENEFITS UNFUNDED. This Agreement is completely separate from and is
not a part of any other plan, qualified or nonqualified, of the Company and its
subsidiaries. The benefits payable hereunder, if any, are in addition to those
that
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<PAGE>
may be provided to the Executive under any other plan, arrangement or agreement.
Further, the benefits payable hereunder are completely unfunded and shall be
payable by the Company solely out of its general assets and the Executive and
his spouse shall be unsecured, general creditors of the Company with respect to
such benefits; provided, however, the Company, in its discretion, may establish
a grantor or "rabbi" trust to pay all or part of the benefits it may be required
to pay under this Agreement, in which event this Agreement shall be deemed to be
a part of such trust agreement and the Executive hereby waives, with respect to
the assets of such rabbi trust, any preference he may have under state law with
respect to such assets and acknowledges that he shall be a general, unsecured
creditor of the Company with respect to the same.
4. MISCELLANEOUS
4.1 NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement shall be
construed as a contract of employment between the Company and the Executive, or
as a right of the Executive to be continued in the employment of the Company or
as a limitation of the right of the Company to discharge the Executive at any
time, with or without Cause.
4.2 ASSIGNMENT. The benefits payable under this Agreement may not be
assigned, alienated, pledged, transferred, sold, encumbered or hypothecated in
any manner by the Executive or his spouse. Any attempted sale, conveyance,
transfer, assignment, pledge or encumbrance of this Agreement or of such rights,
interest and benefits or the levy of any attachment or similar process thereupon
shall be null and void and without affect.
4.3 BINDING EFFECT. The Company will require any successor, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to the Executive, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent as
the Company would have been required if no such succession had taken place.
Notwithstanding anything herein to the contrary, failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall
constitute a termination of this Agreement pursuant to Section 2.1 and entitle
the Executive (or Spouse) as the case may be, to immediate payment thereunder.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid that
executes and delivers the agreement provided for in this Section 4.3 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
4.4 MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and by the President or other authorized
officer of the Company. No waiver by either party hereto at any time of any
breach b the other party hereto of, or compliance with, any condition or
provision be performed by such other party shall be deemed a waiver of provision
or conditions at the same or at any prior or subsequent time.
4.5 PAYMENTS. The Company may make any payments required by this
Agreement, when in the judgment of the Company the recipient is incapacitated by
reasons of physical or mental illness or infirmity, to the recipient directly,
or to the legal guardian of the recipient.
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<PAGE>
4.6 TAXES. The Company shall have the right to deduct from all payments
made under this Agreement, any federal, state or local income taxes required by
law to be withheld with respect to such payments.
4.7 VALIDITY. The interpretation, construction and performance of this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Texas without regard to the principle of conflicts of laws.
The invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of a other provision of this Agreement,
each of which shall remain in full force and effect.
4.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
4.9 EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes
of this Agreement includes employment with any corporation in which the Company
has a direct or indirect ownership interest of 50% or more of the total combined
voting power of all classes of stock.
4.10 ARBITRATION. Any dispute or controversy arising out of or in
connection with this Agreement as to whether the Executive (or his spouse) is
entitled to a retirement (or survivor's) benefit, the amount thereof or other
matter shall be submitted to arbitration pursuant to the following procedure:
(a) Either party may demand such arbitration in writing after
the controversy arises, which demand shall include the name of the
arbitrator appointed by the party demanding arbitration, together with a
statement of the matter in controversy.
(b) Within 15 days after such demand, the other party shall name
an arbitrator, or in default thereof, such arbitrator shall be named by
the Arbitration Committee of the American Arbitration Association, and
the two arbitrators so selected shall name a third arbitrator within 15
days or, in lieu of such agreement on a third arbitrator by the two
arbitrators so appointed a third arbitrator shall be appointed by the
Arbitration Committee of the American Arbitration Association.
(e) The Company shall bear all arbitration costs and expenses,
including without limitation any legal fees and expenses incurred by the
Executive (or his spouse) in connection with such arbitration procedure.
(d) The arbitration hearing shall be held at a site in Houston,
Texas, to be agreed to by a majority of the arbitrators on ten days'
written notice to the parties.
(e) The arbitration hearing shall be concluded within ten days
unless otherwise ordered by a majority of the arbitrators, and the award
thereon shall be made within ten days after the close of the submission
of evidence. An award rendered by a majority of the arbitrators
appointed pursuant to this Agreement shall be final and binding on all
parties to the proceeding, and judgment on such award may be entered by
either party in the highest court, state or federal, having
jurisdiction.
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<PAGE>
The parties stipulate that the provisions hereof shall be a complete
defense to any suit, action, or proceeding instituted in any federal, state, or
local court or before any administrative tribunal with respect to any
controversy or dispute arising under this Agreement, and which is arbitrable as
herein set forth. The arbitration provisions hereof shall, with respect to such
controversy or dispute, survive the termination of this Agreement.
4.11 AMENDMENT AND RESTATEMENT OF PRIOR EXECUTIVE RETIREMENT AGREEMENT.
The Company and the Executive hereby agree that concurrently with the execution
and delivery of this Agreement, this Agreement shall operate and be construed as
an amendment and restatement of that certain Executive Retirement Agreement,
dated May 1, 1991 between the Company and the Executive (the Retirement
Agreement"), and effective with such delivery the terms and provisions of the
Prior Agreement shall be superseded by the terms and provisions of this
Agreement.
IN WITNESS WHEREOF the Company has caused this Agreement to be
executed by its duly authorized officer, and the Executive has executed this
Agreement effective for all purposes as of the date first written above.
TECH-SYM CORPORATION
Dated: 4/29/92 By:/s/ Coy J. Scribner
Title: Vice President
EXECUTIVE
Dated: 4/29/92 /s/ WENDELL W. GAMEL
Wendell W. Gamel
-6-
EXHIBIT 10.19
EXECUTIVE RETIREMENT AGREEMENT
(AS AMENDED AND RESTATED)
THIS AGREEMENT made and entered into as of April 30, 1992, between
TECH-SYM CORPORATION (the "Company") and RAY F. THOMPSON (the "Executive").
WITNESSETH:
WHEREAS, the Executive has rendered outstanding service to the
Company over a period of years and the Executive's experience and knowledge of
the affairs of the Company and his reputation and contacts are extremely
valuable to the Company; and
WHEREAS, in recognition of the Executive's service to the Company
and to encourage the Executive's continued service, the Company is desirous or
offering him, in addition to his regular compensation and termination benefits,
certain retirement benefits;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and the Executive
hereby agree as follows:
1. BENEFITS
1.1 QUALIFICATIONS FOR RETIREMENT BENEFITS. The Executive (or his
surviving spouse, as the case may be) shall be entitled to receive the
retirement (or death) benefits provided by this Agreement following his
termination of employment with the Company unless his employment with the
Company is terminated (i) voluntarily by the Executive prior to his attaining
age 62, other than due to a Total Disability (as defined below), or (ii) by the
Company for Cause (as defined below). A termination of employment that would
entitle the Executive (or his spouse) to receive retirement (or death) benefits
as provided hereunder is hereafter referred to as a "Qualified Termination."
For the purposes of this Agreement, the Company shall have "Cause"
to terminate the Executive's employment hereunder only upon (i) the willful and
continued failure by the Executive to perform substantially the Executive's
duties with the Company, other than any such failure resulting from the
Executive's incapacity due to physical or mental illness, after a demand for
substantial performance is delivered to the Executive by the Board that
specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties or (ii) the
willful engaging by the Executive in gross misconduct materially and
demonstrably injurious to the Company. For purposes of this paragraph, an act or
failure to act on the Executive's part shall be considered "willful" if done or
omitted to be done by the Executive otherwise than in good faith and without
reasonable belief that the Executive's action or omission was in the best
interest of the Company.
<PAGE>
For purposes of this Agreement, the term "Total Disability" means
that, in the opinion of the Executive's physician, the Executive has suffered a
mental or physical disability that is expected to be permanent or of long
continued duration and which prevents the Executive from continuing full-time
his duties with the Company or Subsidiary.
1.2 AMOUNT OF RETIREMENT BENEFITS. Following a Qualified Termination the
Executive shall receive, beginning with the later of the date of such Qualified
Termination or the Executive's 65th birthday (the "Commencement Date"), an
annual retirement benefit equal to 65% of the highest rate of annual base salary
in effect for the Executive with the Company at any time prior to the
Executive's 61st birthday (the "Base Salary") with such benefit payable on each
January 1 on or after the Commencement Date on which he is living; provided,
however, that if the Executive's Commencement Date is other than on January 1,
the Executive shall receive a partial annual retirement benefit for the
remainder of the year in which such Commencement Date occurs in an amount equal
to the full annual benefit that will commence on the next January 1 but reduced
by a fraction, the numerator of which is the number of calendar months during
such year that have elapsed prior to the Commencement Date (with an 'y partial
month rounded up to a complete month), and the denominator of which is 12 and
such partial benefit shall be paid to the Executive on the first day of the
month coinciding with or next following the Commencement Date; provided further,
however, that if on the Commencement Date:
(a) if the Executive's employment terminates due to a Qualified
Termination prior to his reaching age 65, the Executive may elect to
commence receiving his retirement benefits hereunder as of the date of
such Qualified Termination or any date thereafter, provided the
Executive is at least age 62 as of such Early Commencement Date, by
giving written notice of such election to the Company prior to such
Early Commencement Date and the amount of the annual retirement benefit
(and partial benefit, if any) payable hereunder shall be reduced by
1.39% for each full calendar month by which his Early Commencement Date
precedes his 65th birthday unless the Board, in its sole discretion,
elects to waive all or part of this reduction; and
(b) if on the Early Commencement Date the Executive is also
entitled to receive benefits under a separate Termination Agreement with
the Company dated effective as of May 1, 1991 (as the same may be
amended from time-to-time thereafter), then for purposes of subparagraph
(a) above the Executive's age as of the Early Commencement Date shall be
increased by (but not beyond age 65) the length of the Termination
Period (as defined in the Termination Agreement) remaining as of the
Early Commencement Date.
1.3 DEATH BENEFITS. If the Executive is married on his date of death and
such death occurs while he is an employee of the Company or on or after a
Qualified Termination, including one due to Total Disability, his surviving
spouse ("Spouse") shall receive an annual survivor's benefit hereunder in an
amount equal to 37 1/2% of the Executive's Base Salary. The Spouse's benefit
shall commence on the first day of the month coinciding with or next following
the Executive's date of death. Subsequent payment(s) of the Spouse's benefit
shall be made on each anniversary of the date such survivor payments first
began, provided that the Spouse is alive on such anniversary date, and shall
cease when either a total of 10 annual survivor
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<PAGE>
benefit payments have been paid to the Spouse hereunder or the Spouse dies,
whichever occurs first.
1.4 LUMP SUMS. Notwithstanding Section 1.2 or Section 1.3 hereof to the
contrary, the Board, in its sole discretion, may at any time direct that the
actuarial present value of any retirement (or death) benefits accrued under this
Agreement, as determined in accordance with the actuarial factors and rates then
in effect for a lump sum payment (for an immediate or deferred annuity , as the
case may be) upon a qualified plan's termination under Pension Benefit Guaranty
Corporation regulations, be immediately paid to the Executive (or his spouse, as
the case may be) in a lump sum in cash (by check).
1.5 CONTINUED HEALTH BENEFITS. On and after a Qualified Termination, the
Executive shall be entitled to continue, for as long as he lives, his
participation and that of his qualified dependents, if any, in the Company's
group health plan for active employees in which the Executive participated
immediately prior to such Qualified Termination provided that the Executive
continues to pay the regular active employee premium, if any, required by such
plan; however, in the event that continued participation by the Executive in
such plan after the date of his Qualified Termination is not permitted by the
plan or such plan is terminated or benefits under such plan would be taxable to
the Executive, the Company shall either obtain comparable coverage under another
group health plan of the Company (and under which benefits to the Executive
would not be taxable) or, if there is none, an individual insurance policy
providing comparable benefits with the Executive paying an amount of the premium
therefor that is not greater than that which he would have been required to pay
from time to time under the Company's group health plan for active employees had
his participation continued in such plan and the Company paying the balance of
such cost and any taxes on any income the Executive would have as a result of
such Company-provided coverage.
2. TERMINATION AND AMENDMENT
2.1 TERMINATION OR AMENDMENT. The Company, by action of the Board,
reserves the right to amend or terminate this Agreement for whatever reasons it
may deem appropriate as of the first day of the month following the delivery to
the Executive of written notice of such amendment or termination; however, no
such amendment shall impair, reduce or void the Executive's (or his Spouse's)
rights with respect to the continued health benefits provided by Section 1.5 or
the retirement (or death) benefits (whether or not in pay status) accrued under
this Agreement as of the date of such amendment and further, any termination of
this Agreement by the Company shall, notwithstanding anything herein to the
contrary, entitle the Executive (or his Spouse, as the case may be) to
immediately receive from the Company the lump sum present value of the accrued
retirement (or death) benefits as calculated in accordance with Section 1.4.
3. ADMINISTRATION
3.1 BOARD DECISION. The Board's decision whether or not to waive the
reduction in the amount of benefits payable in the event of the Executive's
Qualified Termination prior to reaching age 65, as provided in Section 1.2(a),
shall be totally discretionary with the Board and need not be based upon any
standard nor be consistent with any past practices and shall be conclusive on
all parties.
-3-
<PAGE>
3.2 BENEFITS UNFUNDED. This Agreement is completely separate from and is
not a part of any other plan, qualified or nonqualified, of the Company and its
subsidiaries. The benefits payable hereunder, if any, are in addition to those
that may be provided to the Executive under any other plan, arrangement or
agreement. Further, the benefits payable hereunder are completely unfunded and
shall be payable by the Company solely out of its general assets and the
Executive and his spouse shall be unsecured, general creditors of the Company
with respect to such benefits; provided, however, the Company, in its
discretion, may establish a grantor or "rabbi" trust to pay all or part of the
benefits it may be required to pay under this Agreement, in which event this
Agreement shall be deemed to be a part of such trust agreement and the Executive
hereby waives, with respect to the assets of such rabbi trust, any preference he
may have under state law with respect to such assets and acknowledges that he
shall be a general, unsecured creditor of the Company with respect to the same.
4. MISCELLANEOUS
4.1 NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement shall be
construed as a contract of employment between the Company and the Executive, or
as a right of the Executive to be continued in the employment of the Company or
as a limitation of the right of the Company to discharge the Executive at any
time, with or without Cause.
4.2 ASSIGNMENT. The benefits payable under this Agreement may not
be assigned, alienated, pledged, transferred, sold, encumbered or hypothecated
in any manner by the Executive or his spouse. Any attempted sale, conveyance,
transfer, assignment, pledge or encumbrance of this Agreement or of such rights,
interest and benefits or the levy of any attachment or similar process thereupon
shall be null and void and without effect.
4.3 BINDING EFFECT. The Company will require any successor, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to the Executive, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent as
the Company would have been required if no such succession had taken place.
Notwithstanding anything herein to the contrary, failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall
constitute a termination of this Agreement pursuant to Section 2.1 and entitle
the Executive (or Spouse) as the case may be, to immediate payment thereunder.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid that
executes and delivers the agreement provided for in this Section 4.3 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
4.4 MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and by the President or other authorized
officer of the Company. No waiver by either party hereto at any time of any
breach b the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provision or conditions at the same or at any
prior or subsequent time.
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<PAGE>
4.5 PAYMENTS. The Company may make any payments required by this
Agreement, when in the judgment of the Company the recipient is incapacitated by
reasons of physical or mental illness or infirmity, to the recipient directly,
or to the legal guardian of the recipient.
4.6 TAXES. The Company shall have the right to deduct from all
payments made under this Agreement, any federal, state or local income taxes
required by law to be withheld with respect to such payments.
4.7 VALIDITY. The interpretation, construction and performance of
this Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of Texas without regard to the principle of conflicts
of laws. The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, each of which shall remain in full force and effect.
4.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
4.9 EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for
purposes of this Agreement includes employment with any corporation in which the
Company has a direct or indirect ownership interest of 50% or more of the total
combined voting power of all classes of stock.
4.10 ARBITRATION. Any dispute or controversy arising out of or in
connection with this Agreement as to whether the Executive (or his spouse) is
entitled to a retirement (or survivor's) benefit, the amount thereof or other
matter shall be submitted to arbitration pursuant to the following procedure:
(a) Either party may demand such arbitration in writing after
the controversy arises, which demand shall include the name of the
arbitrator appointed by the party demanding arbitration, together with a
statement of the matter in controversy.
(b) Within 15 days after such demand, the other party shall name
an arbitrator, or in default thereof, such arbitrator shall be named by
the Arbitration Committee of the American Arbitration Association, and
the two arbitrators so selected shall name a third arbitrator within 15
days or, in lieu of such agreement on a third arbitrator by the two
arbitrators so appointed a third arbitrator shall be appointed by the
Arbitration Committee of the American Arbitration Association.
(c) The Company shall bear all arbitration costs and expenses,
including without limitation any legal fees and expenses incurred by the
Executive (or his spouse) in connection with such arbitration procedure.
(d) The arbitration hearing shall be held at a site in Houston,
Texas, to be agreed to by a majority of the arbitrators on ten days'
written notice to the parties.
(e) The arbitration hearing shall be concluded within ten days
unless otherwise ordered by a majority of the arbitrators, and the award
thereon shall be made within ten days after the close of the submission
of evidence. An award
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<PAGE>
rendered by a majority of the arbitrators appointed pursuant to this
Agreement shall be final and binding on all parties to the proceeding,
and judgment on such award may be entered by either party in the highest
court, state or federal, having jurisdiction.
The parties stipulate that the provisions hereof shall be a complete
defense to any suit, action, or proceeding instituted in any federal, state, or
local court or before any administrative tribunal with respect to any
controversy or dispute arising under this Agreement, and which is arbitrable as
herein set forth. The arbitration provisions hereof shall, with respect to such
controversy or dispute, survive the termination of this Agreement.
4.11 AMENDMENT AND RESTATEMENT OF PRIOR EXECUTIVE RETIREMENT AGREEMENT.
The Company and the Executive hereby agree that concurrently with the execution
and delivery of this Agreement, this Agreement shall operate and be construed as
an amendment and restatement of that certain Executive Retirement Agreement,
dated May 1 , 1991 between the Company and the Executive (the "Prior
Agreement"), and effective with such delivery the terms and provisions of the
Prior Agreement shall be superseded by the terms and provisions of this
Agreement.
IN WITNESS WHEREOF the Company has caused this Agreement to be
executed by its duly authorized officer , and the Executive has executed this
Agreement effective for all purposes as of the date first written above.
TECH-SYM CORPORATION
Dated: 4/29/92 By:/s/ WENDELL W. GAMEL
Title: President
EXECUTIVE
Dated: 4/29/92 /s/ RAY F. THOMPSON
Ray F. Thompson
-6-
EXHIBIT 10.20
EXECUTIVE RETIREMENT AGREEMENT
(AS AMENDED AND RESTATED)
THIS AGREEMENT made and entered into as of April 30, 1992, between
TECH-SYM CORPORATION (the "Company") and J. RANKIN TIPPINS (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive has rendered outstanding service to the
Company over a period of years and the Executive's experience and knowledge of
the affairs of the Company and his reputation and contacts are extremely
valuable to the Company; and
WHEREAS, in recognition of the Executive's service to the Company
and to encourage the Executive's continued service, the Company is desirous of
offering him, in addition to his regular compensation and termination benefits,
certain retirement benefits;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and the Executive
hereby agree as follows:
1. BENEFITS
1.1 QUALIFICATIONS FOR RETIREMENT BENEFITS. The Executive (or his
surviving spouse, as the case may be) shall be entitled to receive the
retirement (or death) benefits provided by this Agreement following his
termination of employment with the Company unless his employment with the
Company is terminated (i) voluntarily by the Executive prior to his attaining
age 62, other than due to a Total Disability (as defined below), or (ii) by the
Company for Cause (as defined below). A termination of employment that would
entitle the Executive (or his spouse) to receive retirement (or death) benefits
as provided hereunder is hereafter referred to as a "Qualified Termination."
For the purposes of this Agreement, the Company shall have "Cause"
to terminate the Executive's employment hereunder only upon (i) the willful and
continued failure by the Executive to perform substantially the Executive's
duties with the Company, other than any such failure resulting from the
Executive's incapacity due to physical or mental illness, after a demand for
substantial performance is delivered to the Executive by the Board that
specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties or (ii) the
willful engaging by the Executive in gross misconduct materially and
demonstrably injurious to the Company. For purposes of this paragraph, an act or
failure to act on the Executive's part shall be considered to willful" if done
or omitted to be done by the Executive otherwise than in good faith and without
reasonable belief that the Executive's action or omission was in the best
interest of the Company.
<PAGE>
For purposes of this Agreement, the term "Total Disability" means
that, in the opinion of the Executive's physician, the Executive has suffered a
mental or physical disability that is expected to be permanent or of long
continued duration and which prevents the Executive from continuing full-time
his duties with the Company or Subsidiary.
1.2 AMOUNT OF RETIREMENT BENEFITS. Following a Qualified Termination the
Executive shall receive, beginning with the later of the date of such Qualified
Termination or the Executive's 65th birthday (the "Commencement Date"), an
annual retirement benefit equal to 65% of the highest rate of annual base salary
in effect for the Executive with the Company at any time prior to the
Executive's 61st birthday (the "Base Salary") with such benefit payable on each
January I on or after the Commencement Date on which he is living; provided,
however, that if the Executive's Commencement Date is other than on January 1,
the Executive shall receive a partial annual retirement benefit for the
remainder of the year in which such Commencement Date occurs in an amount equal
to the full annual benefit that will commence on the next January 1 but reduced
by a fraction, the numerator of which is the number of calendar months during
such year that have elapsed prior to the Commencement Date (with any partial
month rounded up to a complete month), and the denominator of which is 12 and
such partial benefit shall b-e paid to the Executive on the first day of the
month coinciding with or next following the Commencement Date; provided further,
however, that:
(a) if the Executive's employment terminates due to a Qualified
Termination prior to his reaching age 65, the Executive may elect to
commence receiving his retirement benefits hereunder as of the date of
such Qualified Termination or any date thereafter, provided the
Executive is at least age 62 as of such Early Commencement Date, by
giving written notice of such election to the Company prior to such
Early Commencement Date and the amount of the annual retirement benefit
(and partial benefit, if any) payable hereunder shall be reduced by
1.39% for each full calendar month by which his Early Commencement Date
precedes his 65th birthday unless the Board, in its sole discretion,
elects to waive all or part of this reduction; and
(b) if on the Early Commencement Date the Executive is also
entitled to receive benefits under a separate Termination Agreement with
the Company dated effective as of May 1, 1991 (as the same may be
amended from time-to-time thereafter), then for purposes of subparagraph
(a) above the Executive's age as of the Early Commencement Date shall be
increased by (but not beyond age 65) the length of the Termination
Period (as defined in the Termination Agreement) remaining as of the
Early Commencement Date.
1.3 DEATH BENEFITS. If the Executive is married on his date of death and
such death occurs while he is an employee of the Company or on or after a
Qualified Termination, including one due to Total Disability, his surviving
spouse ("Spouse") shall receive an annual survivor's benefit hereunder in an
amount equal to 37 1/2% of the Executive's Base Salary. The Spouse's benefit
shall commence on the first day of the month coinciding with or next following
the Executive's date of death. Subsequent payment(s) of the Spouse's benefit
shall be made on each anniversary of the date such survivor payments first
began, provided that the Spouse is alive on such anniversary date, and shall
cease when either a total of 10 annual survivor benefit payments have been paid
to the Spouse hereunder or the Spouse dies, whichever occurs first.
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<PAGE>
1.4 LUMP SUMS. Notwithstanding Section 1.2 or Section 1.3 hereof to the
contrary, the Board, in its sole discretion, may at any time direct that the
actuarial present value of any retirement (or death) benefits accrued under this
Agreement, as determined in accordance with the actuarial factors and rates then
in effect for a lump sum payment (for an immediate or deferred annuity, as the
case may be) upon a qualified plan's termination under Pension Benefit Guaranty
Corporation regulations, be immediately paid to the Executive (or his spouse, as
the case may be) in a lump sum in cash (by check).
1.5 CONTINUED HEALTH BENEFITS. On and after a Qualified Termination, the
Executive shall be entitled to continue, for as long as he lives, his
participation and that of his qualified dependents, if any, in the Company's
group health plan for active employees in which the Executive participated
immediately prior to such Qualified Termination provided that the Executive
continues to pay the regular active employee premium, if any, required by such
plan; however, in the event that continued participation by the Executive in
such plan after the date of his Qualified Termination is not permitted by the
plan or such plan is terminated or benefits under such plan would be taxable to
the Executive, the Company shall either obtain comparable coverage under another
group health plan of the Company (and under which benefits to the Executive
would not be taxable) or, if there is none, an individual insurance policy
providing comparable benefits with the Executive paying an amount of the premium
therefor that is not greater than that which he would have been required to pay
from time to time under the Company's group health plan for active employees had
his participation continued in such plan and the Company paying the balance of
such cost and any taxes on any income the Executive would have as a result of
such Company-provided coverage.
2. TERMINATION AND AMENDMENT
2.1 TERMINATION OR AMENDMENT. The Company, by action of the Board,
reserves the right to amend or terminate this Agreement for whatever reasons it
may deem appropriate as of the first day of the month following the delivery to
the Executive of written notice of such amendment or termination; however, no
such amendment shall impair, reduce or void the Executive's (or his Spouse's)
rights with respect to the continued health benefits provided by Section 1.5 or
the retirement (or death) benefits (whether or not in pay status) accrued under
this Agreement as of the date of such amendment and further, any termination of
this Agreement by the Company shall, notwithstanding anything herein to the
contrary, entitle the Executive (or his Spouse, as the case may be) to
immediately receive from the Company the lump sum present value of the accrued
retirement (or death) benefits as calculated in accordance with Section 1.4.
3. ADMINISTRATION
3.1 BOARD DECISION. The Board's decision whether or not to waive the
reduction in the amount of benefits payable in the event of the Executive's
Qualified Termination prior to reaching age 65, as provided in Section 1.2(a),
shall be totally discretionary with the Board and need not be based upon any
standard nor be consistent with any past practices and shall be conclusive on
all parties.
3.2 BENEFITS UNFUNDED. This Agreement is completely separate from and is
not a part of any other plan, qualified or nonqualified, of the Company and its
subsidiaries. The benefits payable hereunder, if any, are in addition to those
that
-3-
<PAGE>
may be provided to the Executive under any other plan, arrangement or agreement.
Further, the benefits payable hereunder are completely unfunded and shall be
payable by the Company solely out of its general assets and the Executive and
his spouse shall be unsecured, general creditors of the Company with respect to
such benefits; provided, however, the Company, in its discretion, may establish
a grantor or "rabbi" trust to pay all or part of the benefits it may be required
to pay under this Agreement, in which event this Agreement shall be deemed to be
a part of such trust agreement and the Executive hereby waives, with respect to
the assets of such rabbi trust, any preference he may have under state law with
respect to such assets and acknowledges that he shall be a general, unsecured
creditor of the Company with respect to the same.
4. MISCELLANEOUS
4.1 NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement shall be
construed as a contract of employment between the Company and the Executive, or
as a right of the Executive to be continued in the employment of the Company or
as a limitation of the right of the Company to discharge the Executive at any
time, with or without Cause.
4.2 ASSIGNMENT. The benefits payable under this Agreement may not be
assigned, alienated, pledged, transferred, sold, encumbered or hypothecated in
any manner by the Executive or his spouse. Any attempted sale, conveyance,
transfer, assignment, pledge or encumbrance of this Agreement or of such rights,
interest and benefits or the levy of any attachment or similar process thereupon
shall be null and void and without effect.
4.3 BINDING EFFECT. The Company will require any successor, whether direct
or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to the Executive, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent as
the Company would have been required if no such succession had taken place.
Notwithstanding anything herein to the contrary, failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall
constitute a termination of this Agreement pursuant to Section 2.1 and entitle
the Executive (or Spouse) as the case may be, to immediate payment thereunder.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid that
executes and delivers the agreement provided for in this Section 4.3 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
4.4 MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and by the President or other authorized
officer of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provision or conditions at the same or at any
prior or subsequent time.
4.5 PAYMENTS. The Company may make any payments required by this
Agreement, when in the judgment of the Company the recipient is incapacitated by
reasons of physical or mental illness or infirmity, to the recipient directly,
or to the legal guardian of the recipient.
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<PAGE>
4.6 TAXES. The Company shall have the right to deduct from all payments
made under this Agreement, any federal, state or local income taxes required by
law to be withheld with respect to such payments.
4.7 VALIDITY. The interpretation, construction and performance of this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Texas without regard to the principle of conflicts of laws.
The invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of a other provision of this Agreement,
each of which shall remain in full force and effect.
4.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
4.9 EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes
of this Agreement includes employment with any corporation in which the Company
has a direct or indirect ownership interest of 50% or more of the total combined
voting power of all classes of stock.
4.10 ARBITRATION. Any dispute or controversy arising out of or in
connection with this Agreement as to whether the Executive (or his spouse) is
entitled to a retirement (or survivor's) benefit, the amount thereof or other
matter shall be submitted to arbitration pursuant to the following procedure:
(a) Either party may demand such arbitration in writing after
the controversy arises, which demand shall include the name of the
arbitrator appointed by the party demanding arbitration, together with a
statement of the matter in controversy.
(b) Within 15 days after such demand, the other party shall name
an arbitrator, or in default thereof, such arbitrator shall be named by
the Arbitration Committee of the American Arbitration Association, and
the two arbitrators so selected shall name a third arbitrator within 15
days or, in lieu of such agreement on a third arbitrator by the two
arbitrators so appointed a third arbitrator shall be appointed by the
Arbitration Committee of the American Arbitration Association.
(c) The Company shall bear all arbitration costs and expenses,
including without limitation any legal fees and expenses incurred by the
Executive(or his spouse) in connection with such arbitration procedure.
(d) The arbitration hearing shall be held at a site in Houston,
Texas, to be agreed to by a majority of the arbitrators on ten days'
written notice to the parties.
(e) The arbitration hearing shall be concluded within ten days
unless otherwise ordered by a majority of the arbitrators, and the award
thereon shall be made within ten days after the close of the submission
of evidence. An award rendered by a majority of the arbitrators
appointed pursuant to this Agreement shall be final and binding on all
parties to the proceeding, and judgment on such award may be entered by
either party in the highest court, state or federal, having
jurisdiction.
-5-
<PAGE>
The parties stipulate that the provisions hereof shall be a complete
defense to any suit, action, or proceeding instituted in any federal, state, or
local court or before any administrative tribunal with respect to any
controversy or dispute arising under this Agreement, and which is arbitrable as
herein set forth. The arbitration provisions hereof shall, with respect to such
controversy or dispute, survive the termination of this Agreement.
4.11 AMENDMENT AND RESTATEMENT OF PRIOR EXECUTIVE RETIREMENT AGREEMENT.
The Company and the Executive hereby agree that concurrently with the execution
and delivery of this Agreement, this Agreement shall operate and be construed as
an amendment and restatement of that certain Executive Retirement Agreement,
dated July 1, 1991 between the Company and the Executive (the "Prior
Agreement"), and effective with such delivery the terms and provisions of the
Prior Agreement shall be superseded by the terms and provisions of this
Agreement.
IN WITNESS WHEREOF the Company has caused this Agreement to be
executed by its duly authorized officer, and the Executive has executed this
Agreement effective for all purposes as of the date first written above.
TECH-SYM CORPORATION
Dated: 4/29/92 By:/s/ Wendell W. Gamel
Title: President
EXECUTIVE
Dated:4/29/92 /s/ J. Rankin Tippins
J. RANKIN TIPPINS
-6-
EXHIBIT 10.21
EXECUTIVE RETIREMENT AGREEMENT
THIS AGREEMENT made and entered into as of April 26, 1994, between
TECH-SYM CORPORATION (the "Company") and RICHARD F. MILES (the "Executive").
WITNESSETH:
WHEREAS, the Executive has rendered outstanding service to the
Company over a period of years and the Executive's experience and knowledge of
the affairs of the Company and his reputation and contacts are extremely
valuable to the Company; and
WHEREAS, in recognition of the Executive's service to the Company
and to encourage the Executive's continued service, the Company is desirous of
offering him, in addition to his regular compensation and termination benefits,
certain retirement benefits;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and the Executive
hereby agree as follows:
1. BENEFITS
1.1 QUALIFICATIONS FOR RETIREMENT BENEFITS. The Executive (or his
surviving spouse, as the case may be) shall be entitled to receive the
retirement (or death) benefits provided by this Agreement following his
termination of employment with the Company unless his employment with the
Company is terminated (i) voluntarily by the Executive prior to his attaining
age 62, other than due to a Total Disability (as defined below), (ii) by the
Company for Cause (as defined below) or (iii) by the Company for any other
reason (other than due to a Total Disability) prior to both a Change in Control
(as defined in the Termination Agreement described in Section 1.2(b) below) and
the 10th anniversary of the Executive's employment commencement date with the
Company ("Employment Date"); provided, however, if the Executive's employment is
terminated by the Company (other than for Cause or Total Disability) prior to a
Change in Control and on or after the 10th anniversary, but before the 15th
anniversary, of his Employment Date, the Executive (or his surviving spouse, as
the case may be) shall be entitled to receive only a percentage ("Vested
Percentage") of the retirement (or death) benefits otherwise provided under this
Agreement, based on the following schedule:
<PAGE>
EXECUTIVE'S WHOLE YEARS OF
CONTINUOUS EMPLOYMENT AT VESTED
TERMINATION DATE PERCENTAGE
- --------------------------- ----------
10, but less than 11 ......................................... 50%
11, but less than 12 ......................................... 60%
12, but less than 13 ......................................... 70%
13, but less than 14 ......................................... 80%
14, but less than 15 ......................................... 90%
15 or more ................................................... 100%
A termination of employment that would entitle the Executive (or his spouse) to
receive retirement (or death) benefits as provided hereunder is hereafter
referred to as a "Qualified Termination."
For the purposes of this Agreement, the Company shall have "Cause"
to terminate the Executive's employment hereunder only upon (i) the willful and
continued failure by the Executive to perform substantially the Executive's
duties with the Company, other than any such failure resulting from the
Executive's incapacity due to physical or mental illness, after a demand for
substantial performance is delivered to the Executive by the Board of Directors
of the Company (the "Board") that specifically identifies the manner in which
the Board believes that the Executive has not substantially performed the
Executive's duties or (ii) the willful engaging by the Executive in gross
misconduct materially and demonstrably injurious to the Company. For purposes of
this paragraph, an act or failure to act on the Executive's part shall be
considered "willful" if done or omitted to be done by the Executive otherwise
than in good faith and without reasonable belief that the Executive's action or
omission was in the best interest of the Company.
1.2 AMOUNT OF RETIREMENT BENEFITS. Following a Qualified Termination the
Executive shall receive, beginning with the later of the date of such Qualified
Termination or the Executive's 62nd birthday (the "Commencement Date"), an it
equal to 65% of the highest rate of annual base salary in annual retirement
benefit effect for the Executive with the Company at any time prior to the
Executive's 61st birthday (the "Base Salary") with such benefit payable on each
January 1 on or after the Commencement Date on which he is living; provided,
however, that if the Executive's Commencement Date is other than on January 1,
the Executive shall receive a partial annual retirement benefit for the
remainder of the year in which such Commencement Date occurs in an amount equal
to the full annual benefit that will commence on the next January 1 but reduced
by a fraction, the numerator of which is the number of calendar months during
such year that have elapsed prior to the Commencement Date (with any partial
month rounded up to a complete month), and the denominator of which is 12 and
such partial benefit shall be paid to the Executive on the first day of the
month coinciding with or next following the Commencement Date; provided further,
however, that if on the Commencement Date:
(a) the Executive has not attained the age of 65, the amount of the
annual retirement benefit (and partial benefit, if any) shall be reduced
by 1.39% for each full calendar month by which his Commencement Date
precedes his 65th birthday unless the Board, in its sole discretion,
elects to waive all of part of this reduction; and
-2-
<PAGE>
(b) the Executive is also entitled to receive benefits under a
separate Termination Agreement with the Company dated effective as of
May 1, 1991 (as the same may be amended from time to time), then for
purposes of subparagraph (a) above the Executive's age as of the
Commencement Date shall be increased by (but not beyond age 65) the
length of the Termination Period (as defined in the Termination
Agreement) remaining as of the date of the Qualified Termination; and
(c) the Executive is under a Total Disability and entitled (or
thereafter becomes entitled) to receive benefits under a group long-term
disability plan of the Company, the amount of any such annual disability
payments payable under such group plan for such year shall reduce the
amount of the annual retirement benefit otherwise payable hereunder for
such year and notwithstanding anything in this Section 1.2 to the
contrary, if the Executive's employment terminates due to a Total
Disability prior to his reaching age 62, (i) his retirement benefits
shall not commence hereunder until the Executive reaches age 62 and (ii)
the reduction under paragraph (a) above for the early commencement of
benefits shall be based on the Executive's age as of the date benefits
commence hereunder and not on his age as of the date the Executive
becomes totally disabled; and
(d) the Executive's Qualified Termination is due to Section
1.1(iii), Executive (or his surviving spouse, as the case may be) shall
be entitled to receive only the Vested Percentage of the retirement (or
death) benefits otherwise provided above.
For purposes of this Agreement, the term "Total Disability" means
that, in the opinion of the Executive's physician, the Executive has suffered a
mental or physical disability that is expected to be permanent or of long
continued duration and which prevents the Executive from continuing full-term
his duties with the Company or Subsidiary.
1.3 DEATH BENEFITS. If the Executive is married on his date of death and
such death occurs while he is an employee of the Company or on or after a
Qualified Termination, including one due to Total Disability, his surviving
spouse ("Spouse") shall receive an annual survivor's benefit hereunder in an
amount equal to 37 1/2% of the Executive's Base Salary. The Spouse's benefit
shall commence on the first day of the month coinciding with or next following
the Executive's date of death. Subsequent payment(s) of the Spouse's benefit
shall be made on each anniversary of the date such survivor payments first
began, provided that the Spouse is alive on such anniversary date, and shall
cease when either a total of 10 annual survivor benefit payments have been paid
to the Spouse hereunder or the Spouse dies, whichever occurs first.
1.4 LUMP SUMS. Notwithstanding Section 1.2 or Section 1.3 hereof to the
contrary, the Board, in its sole discretion, may at any time direct that the
actuarial present value of any retirement (or death) benefits accrued under this
Agreement, as determined in accordance with the actuarial factors and rates then
in effect for a lump sum payment (for an immediate or deferred annuity, as the
case may be) upon a qualified plan's termination under Pension Benefit Guaranty
Corporation regulations, be immediately paid to the Executive (or his spouse, as
the case may be) in a lump sum in cash (by check).
-3-
<PAGE>
1.5 CONTINUED HEALTH BENEFITS. On and after a Qualified Termination, the
Executive shall be entitled to continue, for as long as he lives, his
participation and that of his qualified dependents, if any, in the Company's
group health plan for active employees in which the Executive participated
immediately prior to such Qualified Termination provided that the Executive
continues to pay the regular active employee premium, if any, required by such
plan; however, in the event that continued participation by the Executive in
such plan after the date of his Qualified Termination is not permitted by the
plan or such plan is terminated or benefits under such plan would be taxable to
the Executive, the Company shall either obtain comparable coverage under another
group health plan of the Company (and under which benefits to the Executive
would not be taxable) or, if there is none, an individual insurance policy
providing comparable benefits with the Executive paying an amount of the premium
therefor that is not greater than that which he would have been required to pay
from time to time under the Company's group health plan for active employees had
his participation continued in such plan and the Company paying the balance of
such cost and any taxes on any income the Executive would have as a result of
such Company-provided coverage.
2. TERMINATION AND AMENDMENT
2.1 TERMINATION OR AMENDMENT. The Company, by action of the Board,
reserves the right to amend or terminate this Agreement for whatever reasons it
may deem appropriate as of the first day of the month following the delivery to
the Executive of written notice of such amendment or termination; however, no
such amendment shall impair, reduce or void the Executive's (or his Spouse's)
rights with respect to the continued health benefits provided by Section 1.5 or
the retirement (or death) benefits (whether or not in pay status) accrued under
this Agreement as of the date of such amendment and further, any termination of
this Agreement by the Company shall, notwithstanding anything herein to the
contrary, entitle the Executive (or his Spouse, as the case may be) to
immediately receive from the Company the lump sum present value of the accrued
retirement (or death) benefits as calculated in accordance with Section 1.4.
3. ADMINISTRATION
3.1 BOARD DECISION. The Board's decision whether or not to waive the
reduction in the amount of benefits payable in the event of the Executive's
Qualified Termination prior to reaching age 65, as provided in Section 1.2(a),
shall be totally discretionary with the Board and need not be based upon any
standard nor be consistent with any past practices and shall be conclusive on
all parties.
3.2 BENEFITS UNFUNDED. This Agreement is completely separate from and is
not a part of any other plan, qualified or nonqualified, of the Company and its
subsidiaries. The benefits payable hereunder, if any, are in addition to those
that may be provided to the Executive under any other plan, arrangement or
agreement. Further, the benefits payable hereunder are completely unfunded and
shall be payable by the Company solely out of its general assets and the
Executive and his spouse shall be unsecured, general creditors of the Company
with respect to such benefits; provided, however, the Company, in its
discretion, may establish a grantor or "rabbi" trust to pay all or part of the
benefits it may be required to pay under this Agreement, in which event this
Agreement shall be deemed to be a part of such trust agreement and the Executive
hereby waives, with respect to the assets of such rabbi trust, any preference he
may have under state law with respect to such assets and
-4-
<PAGE>
acknowledges that he shall be a general, unsecured creditor of the Company with
respect to the same.
4. MISCELLANEOUS
4.1 NO EMPLOYMENT RIGHTS. Nothing contained inthis Agreement shall
beconstrued as a contract of employment between the Company and the Executive,
or as a right of the Executive to be continued in the employment of the Company
or as a limitation of the right of the Company to discharge the Executive at any
time, with or without Cause.
4.2 ASSIGNMENT. The benefits payable under this Agreement may not be
assigned, alienated, pledged, transferred, sold, encumbered or hypothecated in
any manner by the Executive or his spouse. Any attempted sale, conveyance,
transfer, assignment, pledge or encumbrance of this Agreement or of such rights,
interest and benefits or the levy of any attachment or similar process thereupon
shall be null and void and without effect.
4.3 BINDING EFFECT. The Company will require any successor, whether direct
or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to the Executive, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent as
the Company would have been required if no such succession had taken place.
Notwithstanding anything herein to the contrary, failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall
constitute a termination of this Agreement pursuant to Section 2.1 and entitle
the Executive (or Spouse) as the case may be, to immediate payment thereunder.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid that
executes and delivers the agreement provided for in this Section 4.3 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
4.4 MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and by the President or other authorized
officer of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provision or conditions at the same or at any
prior or subsequent time.
4.5 PAYMENTS. The Company may make any payments required by this
Agreement, when in the judgment of the Company the recipient is incapacitated by
reasons of physical or mental illness or infirmity, to the recipient directly,
or to the legal guardian of the recipient.
4.6 TAXES. The Company shall have the right to deduct from all payments
made under this Agreement, any federal, state or local income taxes required by
law to be withheld with respect to such payments.
4.7 VALIDITY. The interpretation, construction and performance of this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Texas without regard to the principle of conflicts of laws.
The invalidity or unenforceability of any provisions of this Agreement shall not
affect the
-5-
<PAGE>
validity or enforceability of any other provision of this Agreement, each of
which shall remain in full force and effect.
4.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
4.9 EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes
of this Agreement includes employment with any corporation in which the Company
has a direct or indirect ownership interest of 50% or more of the total combine
voting power of all classes of stock.
4.10 ARBITRATION. Any dispute or controversy arising out of or in
connection with this Agreement as to whether the Executive (or his spouse) is
entitled to a retirement (or survivor's) benefit, the amount thereof or other
matter shall be submitted to arbitration pursuant to the following procedure:
(a) Either party may demand such arbitration in writing after
the controversy arises, which demand shall include the name of the
arbitrator appointed by the party demanding arbitration, together with a
statement of the matter in controversy.
(b) Within 15 days after such demand, the other party shall name
an arbitrator, or in default thereof, such arbitrator shall be named by
the Arbitration Committee of the American Arbitration Association, and
the two arbitrators so selected shall name a third arbitrator within 15
days or, in lieu of such agreement on a third arbitrator by the two
arbitrators so appointed a third arbitrator shall be appointed by the
Arbitration Committee of the American Arbitration Association.
(c) The Company shall bear all arbitration costs and expenses,
including without limitation any legal fees and expenses incurred by the
Executive (or his spouse) in connection with such arbitration procedure.
(d) The arbitration hearing shall be held at a site in Houston,
Texas, to be agreed to by a majority of the arbitrators on ten days'
written notice to the parties.
(e) The arbitration hearing shall be concluded within ten days
unless otherwise ordered by a majority of the arbitrators, and the award
thereon shall be made within ten days after the close of the submission
of evidence. An award rendered by a majority of the arbitrators
appointed pursuant to this Agreement shall be final an(binding on all
parties to the proceeding, and judgment on such award may be entered by
either party in the highest court, state or federal, havingjurisdiction.
The parties stipulate that the provisions hereof shall be a complete
defense to any suit, action, or proceeding instituted in any federal, state, or
local court or before any administrative tribunal with respect to any
controversy or dispute arising under this Agreement, and which is arbitrable as
herein set forth. The arbitration provisions hereof shall, with respect to such
controversy or dispute, survive the termination of this Agreement.
-6-
<PAGE>
IN WITNESS WHEREOF the Company has caused this Agreement to be
executed by its duly authorized officer, and the Executive has executed this
Agreement effective for all purposes as of the date first written above.
TECH-SYM CORPORATION
Dated: 6/21/94 By:/s/ Wendell W. Gamel
Title: President
EXECUTIVE
Dated: 6/21/94 /s/ RICHARD F. MILES
Richard F. Miles
-7-
EXHIBIT 21
SUBSIDIARIES OF GEOSCIENCE CORPORATION
STATE OF
INCORPORATION OR
NAME FORMATION
Syntron, Inc. Delaware
CogniSeis Development, Inc. Delaware
Symtronix Corporation Nevada
Syntron Europe Limited Scotland
Syntron (UK) Limited Scotland
PolySeis Limited Scotland
Syntron Asia Pte. Ltd. Singapore
Zhong Hai Syntron (TianJin) Geophysical Cable Company Ltd. China
CogniSeis Development (Canada), Inc. Canada
GRP Software, Ltd. Canada
Photon Systems, Ltd. Canada
Photon Systems U.K. UK
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-14683), of GeoScience Corporation of our report
dated February 20, 1997, appearing on page F-2 of this Annual Report on Form
10-K.
PRICE WATERHOUSE LLP
Houston, Texas
March 27, 1997
POWER OF ATTORNEY
Each of the undersigned, a director of GeoScience Corporation (the
"Company"), does hereby constitute and appoint Richard F. Miles and Ray F.
Thompson his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, to
sign the Company's Form 10-K Annual Report pursuant to Section 13 of the
Securities Exchange Act of 1934 for the fiscal year ended December 31, 1996, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto the
attorneys-in-fact full power and authority to sign such documents on behalf of
the undersigned and to make such filing, as fully to all intents and purposes as
the undersigned might or could do in person, hereby ratifying and confirming all
that the attorneys-in-fact, or his substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: February 19, 1997
GEOSCIENCE CORPORATION
/s/ W. L. CREECH /s/ CHRISTOPHER C. KRAFT, JR.
W. L. Creech Christopher C. Kraft, Jr.
Director Director
/s/ MICHAEL C. FORREST /s/ EDWARD R. PRINCE, JR.
Michael C. Forrest Edward R. Prince, Jr.
Director Director
/s/ WENDELL W. GAMEL /s/ J. RANKIN TIPPINS
Wendell W. Gamel J. Rankin Tippins
Director Director
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