- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OCTOBER 14, 1997
(DATE OF EARLIEST EVENT REPORTED)
GEOSCIENCE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DATE OF REPORT
NEVADA 76-0497775
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION)
0-28422
(COMMISSION FILE NUMBER)
10500 WESTOFFICE DRIVE, SUITE 210
HOUSTON, TEXAS 77042-5326
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE AND ZIP CODE)
(713) 780-1881
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
- -------------------------------------------------------------------------------
PAGE 1
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 14, 1997, GeoScience Corporation, a Nevada corporation (the
"Company"), closed the previously announced sale of its geoscientific software
business conducted by its subsidiary, CogniSeis Development, Inc. ("CogniSeis"),
to Paradigm Geophysical Corporation ("Paradigm") for $8.9 million in cash plus
future royalties ranging from between $8.5 million and the net present value as
of the closing date of $12 million.
A copy of the Stock Purchase Agreement dated September 5, 1997, by and
among the Company, Paradigm and Paradigm Geophysical Ltd. is attached as Exhibit
2.1 hereto and is incorporated herein by reference.
A copy of the press release dated October 15, 1997 issued by the Company
relating to the closing of the sale is attached as Exhibit 99.1 hereto and is
incorporated herein by reference.
ITEM 5. OTHER EVENTS.
The information set forth in the press release of the Company dated
October 28, 1997, which is filed as Exhibit 99.2 hereto, is incorporated herein
by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) PRO FORMA FINANCIAL INFORMATION.
The accompanying Pro Forma Consolidated Statements of Income for the six
months ended June 30, 1997 and 1996 and the years ended December 31, 1996, 1995
and 1994, and the Pro Forma Consolidated Balance Sheet as of June 30, 1997 are
based on historical financial statements, adjusted to give effect to the
disposal of the geoscientific software subsidiary as though it had occurred at
the beginning of the period presented. The pro forma financial information
should be read in conjunction with the historical financial statements and
related notes thereto. The pro forma financial information is not necessarily
indicative of the results that would have been attained had the disposal
occurred in the earlier period.
<PAGE>
GEOSCIENCE CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
June 30, 1997
(in thousands except per share amounts)
Sale of geoscientific
software Pro Forma
Historical subsidiary (1) as Adjusted
---------- -------------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,135 $ 8,700 $ 9,835
Receivables 21,848 21,848
Inventories 50,944 50,944
Other 3,208 3,208
--------- -------- --------
Total Current assets 77,135 8,700 85,835
Property, plant and equipment 22,432 22,432
Long-term receivables 3,161 3,161
Other Assets 2,363 8,500 10,863
Net assets of discontinued operation 12,385 (12,385)
--------- -------- --------
Total assets $ 117,476 $ 4,815 $122,291
========= ======== ========
Liabilities
Current liabilities:
Notes payable and current maturities
of long-term debt $ 13,208 $ 13,208
Trade Accounts Payable 6,978 6,978
Unearned revenue 2,330 2,330
Taxes on income 1,139 1,139
Payable to Tech-Sym Corporation 10,583 10,583
Other accrued liabilities 5,079 $ 1,015 6,094
--------- -------- --------
Total current liabilities 39,317 1,015 40,332
Long-term debt 5,023 5,023
Other liabilities and deferred credits 131 131
--------- -------- --------
Total liabilities 44,471 1,015 45,486
Shareholders' Investment
Common stock - authorized 35,000,000
shares, $.01 par value; issued
10,497,600 shares 105 105
Additional capital 44,877 44,877
Accumulated earnings 33,247 3,800 37,047
Common stock held in treasury
at cost (435,000 and 240,000 shares) (5,298) (5,298)
Cumulative translation adjustments 74 74
--------- -------- --------
Total shareholders' investment 73,005 3,800 76,805
--------- -------- --------
Total liabilities and
shareholders' investment $ 117,476 $ 4,815 $122,291
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
GEOSCIENCE CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1997
(in thousands except per share amounts)
Sale of geoscientific
software Pro Forma
Historical subsidiary (1) as Adjusted
---------- -------------- -----------
<S> <C> <C> <C>
Revenue $ 46,652 $ 46,652
Cost of revenue 27,612 27,612
--------- --------
Gross profit 19,040 19,040
--------- --------
Selling , general and administrative expenses 11,178 11,178
Research and development expenses 3,797 3,797
Interest expense 959 959
Interest and other (income), net (138) (138)
Gain on sale of geoscientific software subsidiary $ (5,900) (5,900)
--------- -------- --------
Income from continuing operations
before taxes 3,244 5,900 9,144
Provision for income taxes
from continuing operations (4) 1,006 2,100 3,106
--------- -------- --------
Net income from continuing operations $ 2,238 $ 3,800 6,038
========= ======== ========
Income per common share $ 0.22 $ 0.37 $ 0.59
========= ======== ========
Average number of shares outstanding(3) 10,162 10,162 $ 10,162
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
GEOSCIENCE CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1996
(in thousands except per share amounts)
Sale of geoscientific
software Pro Forma
Historical subsidiary (1) as Adjusted
---------- -------------- -----------
<S> <C> <C> <C>
REVENUE:
Equipment sales $ 41,333 $ (3,170) $ 38,163
Software sales 4,669 (4,669)
Maintenance and other 4,148 (3,442) 706
--------- -------- --------
Total revenue 50,150 (11,281) 38,869
COST OF REVENUE:
Cost of equipment sales 25,424 (2,810) 22,614
Cost of software sales 679 (679)
Cost of maintenance and other 1,347 (997) 350
--------- -------- --------
Total cost of revenue 27,450 (4,486) 22,964
--------- -------- --------
Gross profit 22,700 (6,795) 15,905
Selling , general and administrative expenses 14,274 (3,422) 10,852
Research and development expenses 7,036 (5,752) 1,284
Interest expense 877 (251) 626
Interest and other (income), net (373) 29 (344)
--------- -------- --------
Income from continuing operations before taxes 886 (2,601) 3,487
Provision for income taxes (2) 284 (833) 1,117
--------- -------- --------
Net income from continuing operations $ 602 $ (1,768) $ 2,370
========= ======== ========
Income per common share $ 0.07 $ (0.21) $ 0.28
========= ======== ========
Average number of shares outstanding(3) 8,542 8,542 8,542
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
GEOSCIENCE CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Year Ended December 31, 1996
(in thousands except per share amounts)
Sale of geoscientific
software Pro Forma
Historical subsidiary (1) as Adjusted
---------- -------------- -----------
<S> <C> <C> <C>
REVENUE:
Equipment sales $ 94,125 $ (4,511) $ 89,614
Software sales 10,973 (10,973)
Maintenance and other 8,656 (7,374) 1,282
--------- -------- --------
Total revenue 113,754 (22,858) 90,896
COST OF REVENUE:
Cost of equipment sales 60,543 (4,080) 56,463
Cost of software sales 1,106 (1,106)
Cost of maintenance and other 2,720 (2,049) 671
--------- -------- --------
Total cost of revenue 64,369 (7,235) 57,134
--------- -------- --------
Gross profit 49,385 (15,623) 33,762
Selling, general and administrative expense 29,348 (11,396) 17,952
Research and development expense 13,405 (6,698) 6,707
Interest expense 1,671 (297) 1,374
Interest and other (income), net (354) (584) (938)
--------- -------- --------
Income from continuing operations
before income taxes 5,315 (3,352) 8,667
Provision for income taxes (2) 1,648 (1,039) 2,687
--------- -------- --------
Net income from continuing operations $ 3,667 $ (2,313) $ 5,980
========= ======== ========
Income per common share $ 0.39 $ (0.24) $ 0.63
========= ======== ========
Average number of shares outstanding (3) 9,453 9,453 9,453
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
GEOSCIENCE CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Year Ended December 31, 1995
(in thousands except per share amounts)
Sale of geoscientific
software Pro Forma
Historical subsidiary (1) as Adjusted
---------- -------------- -----------
<S> <C> <C> <C>
REVENUE:
Equipment sales $ 67,470 $ (5,880) $ 61,590
Software sales 9,654 (9,654)
Maintenance and other 7,101 (7,101)
--------- -------- --------
Total revenue 84,225 (22,635) 61,590
COST OF REVENUE:
Cost of equipment sales 39,886 (4,434) 35,452
Cost of software sales 1,012 (1,012)
Cost of maintenance and other 3,077 (3,077)
--------- -------- --------
Total cost of revenue 43,975 (8,523) 35,452
--------- -------- --------
Gross profit 40,250 (14,112) 26,138
Selling, general and administrative expense 21,038 (8,165) 12,873
Research and development expense 12,827 (5,951) 6,876
Interest expense 2,005 (117) 1,888
Interest and other (income), net (1,415) 115 (1,300)
--------- -------- --------
Income from continuing operations
before income taxes 5,795 (6) 5,801
Provision for income taxes (2) 1,816 1,816
--------- -------- --------
Net income from continuing operations $ 3,979 $ (6) $ 3,985
========= ======== ========
Income per common share $ 0.50 $ $ 0.50
========= ======== ========
Average number of shares outstanding (3) 7,900 7,900 7,900
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
GEOSCIENCE CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Year Ended December 31, 1994
(in thousands except per share amounts)
Sale of geoscientific
software Pro Forma
Historical subsidiary (1) as Adjusted
---------- -------------- -----------
<S> <C> <C> <C>
REVENUE:
Equipment sales $ 49,076 $ (1,702) $ 47,374
Software sales 7,254 (7,254)
Maintenance and other 7,056 (7,056)
--------- -------- --------
Total revenue 63,386 (16,012) 47,374
COST OF REVENUE:
Cost of equipment sales 23,719 (1,018) 22,701
Cost of software sales 1,159 (1,159)
Cost of maintenance and other 3,304 (3,304)
--------- -------- --------
Total cost of revenue 28,182 (5,481) 22,701
--------- -------- --------
Gross profit 35,204 (10,531) 24,673
Selling, general and administrative expense 15,818 (5,721) 10,097
Research and development expense 10,364 (4,903) 5,461
Interest expense 997 997
Interest and other (income), net (469) 191 (278)
--------- -------- --------
Income from continuing operations
before income taxes 8,494 98 8,396
Provision for income taxes (2) 2,775 32 2,743
--------- -------- --------
Net income from continuing operations $ 5,719 $ 66 $ 5,653
========= ======== ========
Income per common share $ 0.72 $ 0.01 $ 0.71
========= ======== ========
Average number of shares outstanding (3) 7,900 7,900 7,900
</TABLE>
The accompanying notes are an integral part of these statements.
(1) Reflects the disposal of the net assets of the geoscientific software
subsidiary in October 1997. (See "Item 2. Disposition of Assets".)
(2) The provision of income taxes is based on the Company's historical
effective tax rate for the six months ended June 30, 1997 and 1996 and
for the years ended December 31, 1996, 1995 and 1994, respectively.
(3) Income per share is computed on the average number of shares outstanding
for the six months ended June 30, 1997 and 1996 and for the year ended
December 31, 1996 and assumes pro forma shares outstanding of 7,900,000
for the years ended December 31, 1995 and 1994.
(4) The provision for income taxes is based on the average historical
effective tax rate and the estimated effective tax rate on the gain on
the disposal of the geoscientific software subsidiary.
<PAGE>
(c) EXHIBITS.
2.1 Stock Purchase Agreement dated September 5, 1997, by and among
the Company, Paradigm and Paradigm Geophysical Ltd.
2.2 Amendment to Stock Purchase Agreement dated September 24, 1997,
by and among the Company, Paradigm and Paradigm Geophysical Ltd.
99.1 Press Release dated October 15, 1997.
99.2 Press Release dated October 28, 1997.
The Company agrees to furnish supplementally a copy of any omitted
schedule to the Commission upon request.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED HEREUNTO DULY AUTHORIZED.
GEOSCIENCE CORPORATION
By:/s/RAY F. THOMPSON
Ray F. Thompson
Vice President and Chief
Financial Officer
Date: October 29, 1997
PAGE 2
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
2.1 Stock Purchase Agreement dated September 5, 1997, by and among
the Company, Paradigm and Paradigm Geophysical Ltd.
2.2 Amendment to Stock Purchase Agreement dated September 24, 1997,
by and among the Company, Paradigm and Paradigm Geophysical Ltd.
99.1 Press Release dated October 15, 1997.
99.2 Press Release dated October 28, 1997.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of this 5th day of September, 1997, by and among GEOSCIENCE CORPORATION, a
Nevada corporation (the "Seller") and PARADIGM GEOPHYSICAL CORPORATION, a
Delaware corporation (the "Purchaser"), and PARADIGM GEOPHYSICAL LTD., an
Israeli corporation ("PG Guarantor").
WITNESSETH:
WHEREAS, CogniSeis Development, Inc., a Delaware corporation (the
"Company"), has, at the date of this Agreement, an authorized capital of
8,000,000 shares of stock, consisting of 5,000,000 shares of common stock, par
value $0.001 per share (the "Common Stock"), and 3,000,000 shares of preferred
stock, par value $0.01 per share (the "Preferred Stock");
WHEREAS, the Company develops, markets, licenses and supports applications
software for use in time processing seismic data and interpreting and
visualizing geophysical and geological data;
WHEREAS, the Company has 1,000 shares of Common Stock issued and
outstanding and no shares of Preferred Stock outstanding;
WHEREAS, all the outstanding Common Stock of the Company is owned directly
by the Seller;
WHEREAS, the Seller proposes to sell all of the aforementioned outstanding
shares of the Common Stock to the Purchaser and the Purchaser proposes to
purchase such shares of Common Stock from the Seller; and
WHEREAS, the Purchaser is the wholly-owned subsidiary of the PG Guarantor;
NOW, THEREFORE, for and in consideration of the foregoing premises, the
mutual covenants herein contained, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows.
1. DEFINITIONS. For purposes of this Agreement:
(a) "Affiliate" means any Person that, directly or indirectly, controls,
or is controlled by or under common control with, another Person. For the
purposes of this definition, "CONTROL" (including the terms "CONTROLLED by" and
"UNDER COMMON CONTROL") as used with respect to any Person, means the power to
direct or cause the direction of the management and policies of such
STOCK PURCHASE AGREEMENT - PAGE 1
<PAGE>
Person, directly or indirectly, whether through the ownership of voting
securities or by contract or otherwise.
(b) "Closing" and "Closing Date" have the meanings specified in Section
7.
(c) "Intellectual Property" shall mean and include with respect to the
Purchased Business:
(i) national and multinational statutory invention registrations,
patents, patent registrations and patent applications and all
rights therein provided by international treaties or
conventions and all improvements to the inventions disclosed
in each such registration, patent or application;
(ii) trade marks, service marks, trade dress, get-up, logos, trade
names (whether or not registered) including all common law
rights, and registrations and applications for registrations
thereof, and all rights therein provided by all local laws in
any jurisdiction and by international treaties or convention;
(iii) copyrights (registered or otherwise) and registrations and
applications for registrations thereof, and all rights therein
provided by all local laws in any jurisdiction and by
international treaties or convention;
(iv) trade secrets and confidential, technical and business
information including formulas, compositions, inventions and
conceptions of inventions whether patentable or not, and
whether or not reduced to practice;
(v) all rights to apply for patents, and to register trademarks
and copyrights;
(vi) all rights to sue or recover damages and costs and to obtain
injunctive or other relief for present or past infringement of
any of the foregoing; and
(vii) all goodwill related to any of the foregoing.
(d) "Intercompany Account" shall refer to all items of a nature
historically included or reflected in the line item or items "Intercompany Debt,
Intercompany Payable, Intercompany Receivable" or similar line item on the
Company's balance sheet, as in existence at any given time or date.
(e) "Net Present Value" means the value as of the Closing Date of future
amounts to be received discounted at a rate of fifteen percent (15%) per annum,
with effect given to time periods less than one year. For example, (i) the
receipt of one dollar ($1.00) paid one year from the Closing
STOCK PURCHASE AGREEMENT - PAGE 2
<PAGE>
Date has a present value of $.869565 and (ii) one dollar ($1.00) to be paid in
five (5) years has a present value of $.497177. Factors are based upon the
following formula:
present value of $1.00 = 1/1.15^n, where ^n is the number of years and
fractions thereof.
(f) "Parties" means the parties to this Agreement.
(g) "Person" means an individual, partnership, joint venture, corporation,
limited liability company, bank, trust or unincorporated organization.
(h) "Purchased Business" shall refer to all of the business and operations
presently conducted by the Company and its Affiliates under the name "CogniSeis
Development," and including, without limitation, the development, marketing and
licensing of the Disco, Focus, DLPS, Welltie, ULA, VoxelGeo, SeisX and GeoSec
computer programs, including any subroutines, libraries, links and half-links.
(i) "Seller's Knowledge" means the actual knowledge of the executive
officers of the Seller.
2. SALE AND PURCHASE OF STOCK.
(a) SALE AND PURCHASE. Subject to the terms and conditions contained in
this Agreement and in reliance upon the representations, warranties, covenants
and agreements contained in this Agreement, at the Closing, the Seller shall
sell to the Purchaser, and the Purchaser shall purchase from the Seller, 1,000
shares of Common Stock of the Company owned by Seller, free and clear of all
liens, charges, encumbrances or third party rights whatsoever.
(b) PURCHASE PRICE.
(i) The cash portion of the purchase price (the "Cash Purchase
Price") for the Common Stock shall be $8,699,332.00 [an amount
equal to $11,000,000.00 reduced by: $2,211,506.00 of prepaid
maintenance pursuant to maintenance contracts for which there
is a remaining liability of the Company or CSD Canada;
$72,836.00 in cash; and $16,326.00 of any accounts payable in
excess of forty-five (45) days old as of June 30, 1997]; plus
the amount by which the Company's NationsBank credit facility
balance as of Closing exceeds $3,090,000.00 (the balance of
such facility as of June 30, 1997), or minus the amount by
which the Company's NationsBank credit facility balance as of
Closing is less than $3,090,000.00. Within three (3) business
days following the execution of this Agreement, sixty percent
(60%) of the Cash Purchase Price shall be placed in escrow
pending Closing with Texas
STOCK PURCHASE AGREEMENT - PAGE 3
<PAGE>
Commerce Bank (the "Escrow Agent") pursuant to the terms and
conditions of an Escrow Agreement among the Parties and the
Escrow Agent. Any escrow fees and interest on the funds placed
in escrow shall belong to/be the responsibility of the
recipient of the funds. The escrowed funds shall belong to the
Purchaser until the Closing when they shall be released to the
Seller for application to the Cash Purchase Price. If this
Agreement is terminated pursuant to Section 12 or does not
close as the result of an unsatisfied condition to the
Parties' obligations as provided in Section 6, the escrowed
funds shall be returned to the Purchaser.
(ii) In addition to the payment of the Cash Purchase Price,
commencing January 1, 1998, the Purchaser agrees to pay the
Seller in cash a royalty (the "Royalty") of twenty percent
(20%) of the gross revenue received by the Purchaser from the
sale of licenses of software which are part of the Purchased
Business as of the Closing Date, less the amount of any
existing royalties paid to the third parties listed on
Schedule 2(b) attached hereto with respect to the software
("Third Party Payments"). The Royalty shall be payable in cash
to the Seller on or before the forty-fifth (45th) day of each
quarter based on license fees received in the prior quarter
and shall be accompanied by a detailed report showing each
license fee payment received and each Third Party Payment made
during such quarter. If a product line other than Disco/Focus
and VoxelGeo as to which a Royalty is being paid under this
Agreement is sold to an unaffiliated third party prior to
payment in full of the Royalty, then as to such product line,
the Royalty shall continue and be payable at the same rate as
required to be paid with respect to the average of the last
four (4) fiscal quarters preceding the disposition of the
product line by the Company. If a product line other than
Disco/Focus and VoxelGeo as to which a Royalty is being paid
under this Agreement is proposed to be sold to an affiliated
third party prior to payment in full of the Royalty, then as
to such product line, the Royalty shall continue and the
Purchaser shall cause such affiliated entity to honor such
Royalty obligation in writing prior to the sale of such
product line.
(iii) Notwithstanding the foregoing to the contrary, the Royalty
payments shall terminate when the aggregate amount of payments
received by the Seller from the Purchaser, in addition to the
Cash Purchase Price, equals the amounts listed below during
the respective time periods:
(A) $8,500,000.00, if paid within ninety (90) days of
the Closing Date;
STOCK PURCHASE AGREEMENT - PAGE 4
<PAGE>
(B) $9,000,000.00, less the amount of any Royalty
payments previously paid to the Seller, if paid after ninety
(90) days, but on or before one hundred eighty (180) days
following the Closing Date;
(C) $9,500,000.00, less the amount of any Royalty
payments previously paid to the Seller, if paid after one
hundred eighty (180) days, but on or before two hundred
seventy (270) days following the Closing Date;
(D) $10,000,000.00, less the amount of any Royalty
payments previously paid to the Seller, if paid after two
hundred seventy (270) days, but on or before the first
anniversary of the Closing Date; or
(E) the Net Present Value of $12,000,000.00, less the
Net Present Value of any Royalty payments previously paid to
the Seller, if paid at any time after the first anniversary of
the Closing Date.
(iv) If the Purchaser has not terminated the Royalty payments in
accordance with paragraph 2(b)(iii) above, then Purchaser
shall pay to the Seller on December 30, 2003, the Net Present
Value of $12,000,000 less the Net Present Value of any Royalty
payments previously paid to the Seller during the seventy-two
(72) months following the Closing Date.
(v) The Purchaser shall render to the Seller with each Royalty
payment due under Section 2(b) a written report setting forth
the Royalty calculation for the fiscal quarter covered by such
report and used to determine the Royalty amount.
(vi) The Purchaser shall, and shall cause the Company to, keep
accurate records and books of account to establish the Royalty
amount during the term that payments under Section 2(b) may be
due. The Purchaser shall give the Seller reasonable access
upon advance written notice during normal business hours to
such books and records of the Company as are reasonably
required solely for the purpose of verifying the determination
of any Royalty amount; provided, however, the Seller may only
review the books and records once per calendar quarter (for
review of the prior quarter's activity) within thirty (30)
days of receipt of the Royalty payment and upon any
termination of the Royalty obligation the Seller's right of
review shall terminate.
(vii) If the Seller, as a result of any inquiry or investigation
conducted by it pursuant to Section 2(b)(vi) of this
Agreement, objects to any calculation of the Royalty amount
with respect to a particular fiscal quarter, then the Seller
shall provide the Purchaser with written objection to such
calculation. If the
STOCK PURCHASE AGREEMENT - PAGE 5
<PAGE>
Seller gives the Purchaser written notice of the Seller's
objection, then the Seller and the Purchaser shall attempt to
resolve the matter or matters in dispute. If a dispute with
respect to any calculation of the Royalty payment cannot be
resolved by the Seller and the Purchaser within thirty (30)
calendar days after the Purchaser receives written notice from
the Seller of the Seller's objection, then the specific
matters in dispute shall be submitted to such independent
accounting firm as may be approved by the Seller and the
Purchaser, which firm shall be given access to the Company's
books and records and shall render its opinion as to such
matters. Based on such opinion, such independent accounting
firm will then send to the Seller and the Purchaser within
forty-five (45) days of receipt its determination on the
specific matters in dispute and its calculation of the correct
Royalty payment in respect of the period in dispute taking
into account its determination on such matters, which
determination and calculation shall be final and binding on
the Parties hereto. Within five (5) business days after
delivery of such opinion to the Seller and the Purchaser, the
Purchaser shall pay to the Seller the amount, if any, by which
the Royalty amount payable as determined by such independent
accounting firm exceeds the Royalty payment made by the
Purchaser, plus interest on such amount from the date the
payment was due at U.S. prime rate plus three percent (3%), if
the amount due the Seller is more than five percent (5%) of
the Royalty payment for such quarter; or the Seller shall
reimburse the Purchaser the amount, if any, by which the
Royalty payment made by the Purchaser exceeds the Royalty
amount payable as determined by such independent accounting
firm. The reasonable fees and expenses of such accounting firm
shall be borne (i) by the party that is required to pay money
over to the other party as a result of the immediately
preceding sentence if the amount due under the preceding
sentence is more than five percent (5%) of the Royalty amount,
or (ii) otherwise by the Seller.
(c) SECURITY. The Purchaser's obligation to pay the Royalty to the
Seller shall be secured by a pledge by the Company of the Disco/Focus and
VoxelGeo software products pursuant to the terms of a Security Agreement among
the Seller, the Purchaser, and the Company to be entered into at the Closing.
The Security Agreement shall terminate upon satisfaction of the Royalty
obligation.
(d) TAX ELECTION.
(i) With respect to the acquisition of the shares of Common Stock
hereunder, the Purchaser shall make a timely election under
Section 338(g) of the Internal Revenue Code of 1986, as
amended (the "Code") and the Seller and the Purchaser shall
jointly make an election under Section 338(h)(10) of the Code
and any corresponding elections under state or local tax law
(collectively, a "Section 338(h)(10) Election"). The Seller
and the Purchaser shall (i) take,
STOCK PURCHASE AGREEMENT - PAGE 6
<PAGE>
and cooperate with each other to take, all actions necessary
and appropriate (including filing such forms, returns,
elections, schedules and other documents as may be required)
to effect and preserve a timely Section 338(h)(10) Election in
accordance with Section 338 of the Code and the Regulations
thereunder, or any successor provisions as promptly as
practicable following the Closing Date, but not later than the
date which is the latest date for making such Section
338(h)(10) Election, and from time to time thereafter; and
(ii) the Seller and the Purchaser shall report the sale of the
shares of Common Stock pursuant to this Agreement consistent
with the Section 338(h)(10) Election and shall take no
position contrary thereto or inconsistent therewith in any
federal, state, local or other tax return, any discussion with
or proceeding before any taxing authority, or otherwise. To
the extent required for purposes of the Section 338(h)(10)
election, the Seller and the Purchaser shall cooperate to
properly allocate of the Purchase Price and the liabilities of
the Company to the assets of the Company in a manner
consistent with the fair market value of the assets as
required by the Code.
(ii) The Purchaser agrees to pay the Seller any increase in federal
income tax liability incurred by the Seller as a result of the
Section 338(h)(10) election; provided, however, no amount is
due by the Purchaser unless Seller's tax liability is
increased by more than $100,000.00 over the Seller's tax
liability had the Section 338(h)(10) election not been made
and the Purchaser's maximum liability pursuant to this
paragraph shall not exceed $500,000.00. The Seller shall
notify the Purchaser in writing of any request for payment
pursuant to this paragraph which notice shall be accompanied
by an analysis of the Seller's tax liability with and without
the Section 338(h)(10) election. The Seller shall allow the
Purchaser, or its independent accounting firm, reasonable
access upon advance written notice during normal business
hours to the Seller's books and records for purposes of
verifying such analysis. If as a result of any such inquiry or
investigation the Purchaser objects in writing to the Seller's
request, the Purchaser and the Seller shall attempt to resolve
the disputed items. If any such dispute cannot be resolved by
the Purchase and the Seller within thirty (30) calendar days
of the date of the Purchaser's written notice of objection,
then the specific matters in dispute shall be submitted to an
independent accounting firm approved by the Purchaser and the
Seller which from shall render its opinion on such matters.
Based on such opinion, such independent accounting firm will
then send to the Seller and the Purchaser within forty-five
(45) days of receipt its determination on the specific matters
in dispute and its calculation of the correct tax liability
increase taking into account its determination on such
matters, which determination and calculation shall be final
and binding on the Parties hereto. Within five (5) business
days after delivery of such opinion
STOCK PURCHASE AGREEMENT - PAGE 7
<PAGE>
to the Seller and the Purchaser, the Purchaser shall pay to
the Seller the amount, if any, of the tax liability increase.
The reasonable fees and expenses of such accounting firm shall
be borne by the Purchaser unless the amount owed by the
Purchaser is less than ninety-five percent (95%) of that
requested by the Seller in which case the Seller shall pay the
fees and expenses of the independent accounting firm.
(iii) Any tax sharing arrangement between the Seller and the Company
and any of its subsidiaries shall be terminated as of the
Closing Date.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller hereby
represents and warrants to the Purchaser and the PG Guarantor as follows:
(a) ORGANIZATION. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada with
corporate power to carry on its business as presently conducted. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware with corporate power to carry on its business as
presently conducted. CogniSeis Development (Canada), Inc. ("CSD Canada") is a
corporation duly organized, validly existing and in good standing under the laws
of the Province of Alberta with corporate power to carry on its business as
presently conducted.
(b) POWER AND AUTHORITY; ENFORCEABILITY. The Seller has requisite
corporate power to enter into this Agreement and to perform its obligations
hereunder. This Agreement has been duly authorized, executed and delivered on
behalf of the Seller, and, assuming due authorization, execution and delivery by
the Purchaser and PG Guarantor, constitutes a legal, valid and binding
obligation of the Seller enforceable in accordance with its terms, except that
(i) such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting creditors' rights generally
and (ii) the remedy of specific performance and injunction and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. Upon the
execution and delivery by the Seller of any conveyancing documents to be
executed and delivered at the Closing, each such document will constitute the
valid and binding obligation of the Seller enforceable against it in accordance
with its terms subject, in each case, to clauses (i) and (ii) above.
(c) QUALIFICATION OF THE COMPANY. The Company is duly qualified to do
business and is in good standing as a foreign corporation in the States of Texas
and Colorado, such states being the only jurisdictions where the character of
its properties or the nature of its business requires it to be so qualified, and
has the corporate power to own, operate and lease its properties and to carry on
its business as presently conducted. There is no jurisdiction other than
Alberta, Canada where the character of the properties of CSD Canada or the
nature of its business requires it to qualify to do business.
STOCK PURCHASE AGREEMENT - PAGE 8
<PAGE>
(d) CAPITALIZATION AND OWNERSHIP. The authorized capital stock of the
Company consists of 5,000,000 shares of Common Stock and 3,000,000 shares of
Preferred Stock. The Company has no shares of capital stock outstanding except
for 1,000 shares of Common Stock. All of the shares of the outstanding capital
stock of the Company are duly authorized, validly issued, fully paid and
non-assessable and were not issued in violation of any preemptive or other
rights of any person to acquire securities of the Company. Except for this
Agreement, there are no outstanding options, convertible securities, rights
(preemptive or other), warrants, calls or agreements relating to the Company's
capital stock. The Seller is, and immediately prior to the Closing will be, the
lawful owner of all the outstanding Common Stock of the Company, with full
right, power and authority to sell and transfer the Common Stock, free and clear
of any and all security interests, proxies, shareholder agreements, voting
agreements, voting trusts, encumbrances and adverse claims, to the Purchaser
pursuant to the provisions of this Agreement. The Common Stock will be so sold
and transferred by the Seller to the Purchaser at the Closing. The Company is,
and will be as of the Closing, the lawful owner of all of the issued and
outstanding capital stock of CSD Canada, the only subsidiary of the Company,
free and clear of any and all security interests, proxies, shareholder
agreements, voting agreements, voting trusts, encumbrances and adverse claims.
All of the shares of the outstanding capital stock of CSD Canada are duly
authorized, validly issued, fully paid and non-assessable and were not issued in
violation of any preemptive or other rights of any person to acquire securities
of CSD Canada. Except for this Agreement, there are no outstanding options,
convertible securities, rights (preemptive or other), warrants, calls or
agreements relating to CSD Canada's capital stock.
(e) NO CONFLICTS. Neither the execution and delivery of this Agreement or
any other documents required to be delivered hereunder nor the consummation of
the transactions contemplated herein (i) will conflict with or result in a
breach, default or violation of (A) any of the terms, provisions or conditions
of the Articles of Incorporation or By-Laws of the Seller or of the Company or
(B) any material agreement, document, instrument, judgment, decree, order,
governmental permit, certificate or license to which the Seller or the Company
is a party or to which it is subject or by which its property is bound, or (ii)
will result in the creation of any lien, charge or other encumbrance on any
material property or asset of the Seller or the Company, or (iii) will require
the Seller or the Company to obtain the consent of any private nongovernmental
third party, except as set forth on Schedule 3(e). Except as otherwise referred
to in Section 5(e), no consent, action, approval or authorization of, or
registration, declaration or filing with any governmental department,
commission, agency or other instrumentality having jurisdiction over the Seller
is required by the Seller to authorize the execution and delivery of this
Agreement by the Seller or the performance of its terms by the Seller.
(f) FINANCIAL STATEMENTS.
(i) Schedule 3(f)(1) attached hereto contains the unaudited
consolidated balance sheets of the Company (including CSD
Canada) at December 31, 1996 and 1995, and the related
unaudited consolidated statements of income and
STOCK PURCHASE AGREEMENT - PAGE 9
<PAGE>
retained earnings and cash flows for the years then ended
(collectively, the "Annual Financial Statements"). To the
Seller's Knowledge, all fixed or contingent obligations,
liabilities, or commitments of the Company as of December 31,
1996, are reserved against or disclosed in the Annual
Financial Statements to the extent required to be reserved
against or disclosed therein by generally accepted accounting
principles.
(ii) Schedule 3(f)(2) attached hereto contains the unaudited
consolidated balance sheet of the Company at June 30, 1997,
and the unaudited consolidated income statement of the Seller
for the period then ended (such financial statements are
referred to herein as the "Interim Financial Statements"). To
the Seller's Knowledge, all fixed or contingent obligations,
liabilities or commitments of the Company as of June 30, 1997,
are reserved against or disclosed in the Interim Financial
Statements to the extent required to be reserved against or
disclosed therein by generally accepted accounting principles
applied on a basis consistent with the Annual Financial
Statements, subject only to normal recurring year-end
adjustments that are not material to the financial condition
of the Company.
(iii) The Annual Financial Statements fairly present, in accordance
with generally accepted accounting principles applied on a
consistent basis throughout the periods involved, the
financial position and results of operations of the Company at
December 31, 1996 and 1995, and for the years then ended. The
Interim Financial Statements fairly present, in accordance
with generally accepted accounting principles applied on a
basis consistent with the Annual Financial Statements, the
financial position and results of operations of the Company as
of June 30, 1997, and for the period then ended, subject only
to normal recurring year-end adjustments.
(g) APPLICABLE LAWS. The Company and CSD Canada are each in compliance
with all federal, state and local laws, rules, regulations, ordinances, decrees
and orders, including, but not limited to, building, zoning, environmental,
pollution, wage, working conditions, labor, political contribution or related
laws ("Laws"), and possesses all currently required governmental approvals,
authorizations, consents, licenses and permits ("Permits") applicable to the
operation of its business, except for the failure to comply with any Law or the
failure to possess any Permit which, either individually or in the aggregate,
would not have a material adverse effect on the business, financial condition or
results of operations of the Company (a "Material Adverse Effect").
(h) TITLE TO ASSETS. The Company has good title to all of the assets
reflected in the Interim Financial Statements, other than those sold or disposed
of in the ordinary course of business subsequent to June 30, 1997, in each case
free and clear of any lien, encumbrance, mortgage, deed of trust, pledge or
other similar security interest ("Lien") except (i) Liens for property and ad
valorem
STOCK PURCHASE AGREEMENT - PAGE 10
<PAGE>
taxes, assessments and other applicable governmental charges, if such taxes,
assessments and charges shall not be due and payable; or if currently payable,
if the Company shall concurrently be contesting the validity thereof in good
faith in accordance with applicable rules, regulations or ordinances, (ii) Liens
that do not materially interfere with the Company's ability to conduct its
business as presently conducted, and (iii) Liens specifically identified on
Schedule 3(h) attached hereto.
(i) INTELLECTUAL PROPERTY. The Company (including for purposes of this
paragraph CSD Canada) owns or possesses adequate licenses or other rights to use
all "Intellectual Property" presently used to conduct its business. Neither the
validity of the Intellectual Property nor the title thereto or use thereof by
the Company is being questioned in any pending litigation, nor to the Seller's
Knowledge, is there any challenge to or questioning of the validity or
effectiveness of any of the Intellectual Property; and the conduct of the
Company's business, as currently conducted, does not conflict with licenses,
copyrights, uncopyrighted works, trade marks, service marks, trade names, trade
name rights, patents, patent rights, unpatented inventions or trade secrets of
others and to Seller's Knowledge there is no basis for any such claim. The
Company has the unrestricted right to produce, market, license and sell all
hardware, software and manuals which it uses or used, produces or produced,
markets or marketed, licenses or licensed, or sells or sold or which are or were
material for the ordinary conduct of its business and the consummation of the
transactions contemplated hereby will not alter or impair such rights.
(j) TAX MATTERS. All federal, state and other tax returns and reports
required to be filed by or on behalf of the Company or CSD Canada and their
respective predecessors as of the date hereof have been duly filed, except those
for which extensions have been obtained. All taxes and other assessments and
levies (including all interest and penalties) and all installments of estimated
taxes required to be paid, withheld or collected by the Company or CSD Canada as
of the date hereof have been duly paid, withheld or collected, as the case may
be, and the same have been paid over to the proper governmental agencies or
segregated and set aside for such payment as required by law. Neither the
Company nor CSD Canada has received any notice of an assessment, deficiency
notice, 30-day letter, or similar notice with respect to income tax, sales tax
or other taxes from the Internal Revenue Service, Revenue Canada or any other
taxing authority with respect to any taxable period ending on or before the
Closing Date; neither the Company nor CSD Canada has executed or filed with the
Internal Revenue Service or Revenue Canada or any other taxing authority any
agreement extending the period for assessment or collection of any income or
other taxes; and neither the Company nor CSD Canada is a party to any pending
action or proceeding by any governmental authority for assessment or collection
of taxes and no claim for assessment or collection of taxes has been asserted
against it.
(k) EMPLOYEE MATTERS. As of the date of this Agreement, (i) there is no
unfair labor practice complaint against the Company or CSD Canada pending or to
Seller's Knowledge threatened before the National Labor Relations Board or any
state or local governmental agency and to Seller's knowledge there is no basis
for such a claim, (ii) there is no charge of age, sex, race or
STOCK PURCHASE AGREEMENT - PAGE 11
<PAGE>
other discrimination against the Company or CSD Canada pending or to Seller's
Knowledge threatened with the Equal Employment Opportunity Commission or any
other state or federal anti- discrimination agency and to Seller's Knowledge
there is no basis for such a claim, (iii) there is no strike or similar labor
action actually pending or to Seller's Knowledge threatened against the Company
or CSD Canada nor has there been any such action within the last two (2) years,
and (iv) there is no collective bargaining agreement between the Company or CSD
Canada and any labor organization or other employee group. Schedule 3(k)(1)
attached hereto is a complete and accurate list of each material employee
benefit plan or program that the Company or CSD Canada maintains, contributes
to, or is required to contribute to or with respect to which the Company or CSD
Canada has any obligation or liability (whether or not current, contingent or
secondary) on behalf of any of its current or former employees (or any
beneficiary thereof) providing current or deferred compensation or health, life
insurance, disability, severance or similar benefits (other than workers'
compensation) to such persons (collectively, "Employee Plans"). No such plan is
a multiemployer plan described in Section 3(37) and Section 4001 (a)(3) of the
Employee Retirement Income Security Act of 1974 as amended ("ERISA"), or an
employee pension benefit plan within the meaning of Section 3(2) of ERISA.
Except as described on Schedule 3(k)(2), neither the Company nor CSD Canada is a
party to any written employment agreement, termination agreement, severance
agreement or similar agreement.
(l) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in Schedule
3(l), neither the Company nor CSD Canada has, between June 30, 1997, and the
date of this Agreement, taken any action of the type described in clauses (A)
through (I) of Section 5(b)(i) hereof. Since June 30, 1997, there has not
occurred any material adverse change in the operations, assets, financial
condition or results of operations of the Company and CSD Canada, taken as a
whole (a "Material Adverse Change").
(m) LITIGATION; JUDGMENTS, ETC. Except as described on Schedule 3(m)
attached hereto, there are no actions, suits, investigations or proceedings to
which the Company or any subsidiary of the Company or the Seller is a party
pending in any court or before or by any federal, state or other governmental
department, commission, agency or other instrumentality (excluding any rule
making, investigation, or similar proceeding of general applicability and any
appeal or petition for review relating thereto), or before any arbitrator, that
reasonably may be expected to result in a Material Adverse Effect or which would
prohibit or restrain the consummation of the transactions contemplated hereby,
and neither the Seller nor the Company has received written notice threatening
any such matter. Neither the Seller nor the Company is in default with respect
to any judgment, order, writ, injunction, decree or award applicable to it of
any court or other governmental instrumentality or arbitrator having
jurisdiction over it, the results of which would have a Material Adverse Effect
or which would prohibit or restrain the consummation of the transactions
contemplated hereby.
(n) MINUTE BOOK AND CHARTER DOCUMENTS. The minute books of the Company and
CSD Canada that have been made available to the Purchaser for review constitute
the sole minute book
STOCK PURCHASE AGREEMENT - PAGE 12
<PAGE>
of each such corporation and contain a complete and accurate record of all
actions of the stockholders and Board of Directors (and any committees thereof)
of the Company and CSD Canada, respectively. Seller has delivered to the
Purchaser true and correct copies of the Articles of Incorporation and By-Laws
of the Company and CSD Canada as currently in effect.
(o) BROKER'S OR FINDER'S FEE. No person acting on behalf of the Seller or
the Company or any of their Affiliates or under the authority of any of them is
or will be entitled to any broker's or finder's fee or any other commission or
similar fee, directly or indirectly, from the Company in connection with any of
the transactions contemplated hereby.
(p) ABSENCE OF CERTAIN LIABILITIES. Neither the Seller or any of its
Affiliates, including, without limitation, the Company, have incurred any
indebtedness for borrowed money as to which a creditor has a claim against the
Common Stock.
(q) ABSENCE OF DEFAULTS. Except as described on Schedule 3(q), there are
no defaults by the Seller or the other party to any contract, agreement, license
or similar document constituting a part of the Purchased Business, except for
defaults which, either individually or in the aggregate, would not have a
Material Adverse Affect.
(r) DISCLOSURE. To Seller's Knowledge, there is no fact material to the
Common Stock or the Purchased Business that has not been made available to the
Purchaser, set forth in this Agreement, including the exhibits and schedules
hereto, or otherwise disclosed in writing to the Purchaser.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE PG GUARANTOR.
The Purchaser and the PG Guarantor, jointly and severally, hereby represent and
warrant to the Seller as follows:
(a) ORGANIZATION. The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of Delaware, with corporate power
to carry on its business as now being conducted. The PG Guarantor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Israel, with corporate power to carry on its business as
presently conducted.
(b) POWER AND AUTHORITY; ENFORCEABILITY. The Purchaser and the PG
Guarantor each have all requisite corporate power to enter into this Agreement
and to perform their respective obligations hereunder. This Agreement has been
duly authorized, executed and delivered on behalf of the Purchaser and the PG
Guarantor and, assuming due authorization, execution and delivery by the Seller
and the CSD Guarantor, constitutes a legal, valid and binding obligation of the
Purchaser and the PG Guarantor, enforceable in accordance with its terms, except
that (i) such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors'
rights generally and (ii) the remedy of specific performance and injunction and
STOCK PURCHASE AGREEMENT - PAGE 13
<PAGE>
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(c) NO CONFLICTS. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated herein (A) will conflict with
or result in a breach, default or violation of (i) any of the terms, provisions
or conditions of the Certificate of Incorporation or By-Laws of the Purchaser or
the Memorandum or Articles of Association of the PG Guarantor or (ii) any
material agreement, document, instrument, judgment, decree, order, governmental
permit, certificate or license to which the Purchaser or the PG Guarantor is a
party or to which it is subject or by which its property is bound, or (B) will
result in the creation of any lien, charge or other encumbrance on any material
property or asset of the Purchaser or the PG Guarantor, or (C) will require the
Purchaser or the PG Guarantor to obtain the consent of any private
nongovernmental third party. Except as otherwise referred to in Sections 5(e),
no consent, action, approval or authorization of, or registration, declaration
or filing with, any governmental department, commission, agency or other
instrumentality having jurisdiction over the Purchaser or the PG Guarantor is
required by the Purchaser or the PG Guarantor to authorize the execution and
delivery of this Agreement by the Purchaser or the PG Guarantor or the
performance of its terms by the Purchaser or the PG Guarantor.
(d) BROKER'S OR FINDER'S FEE. No person acting on behalf of the Purchaser
or any Affiliates or under the authority of any of them is or will be entitled
to any broker's or finder's fee or any other commission or similar fee, directly
or indirectly, from the Seller in connection with any of the transactions
contemplated hereby.
(e) PURCHASE FOR INVESTMENT. The Purchaser is acquiring the shares of
Common Stock for its own account, for investment only and without a view to
distribute such shares. The Purchaser acknowledges that the shares of Common
Stock being acquired have not been registered under the Securities Act of 1933,
as amended, and the Purchaser understands that it must hold such shares
indefinitely unless subsequently registered under applicable federal and state
securities laws or unless an exemption therefrom is available at the time of any
proposed sale or other transfer thereof. The Purchaser is an "accredited
investor" as that term is defined in Rule 501 adopted under eh Securities Act of
1933, as amended. The Purchaser acknowledges that it has such knowledge and
experience in financial and business matters so that it is capable of evaluating
the merits and risks of the purchase of the Common Stock.
(f) INDEPENDENT INVESTIGATION. The Purchaser acknowledges that it has had,
and pursuant to this Agreement will have prior to Closing access to the
officers, employees, assets, operations, books, records and files of the
Company; and in making the decision to enter into this Agreement and to
consummate the transactions contemplated hereby, the Purchaser has relied solely
on the basis of its own independent investigation of the Company and upon the
express representations, warranties and covenants in this Agreement.
STOCK PURCHASE AGREEMENT - PAGE 14
<PAGE>
5. COVENANTS OF PARTIES. The Parties hereby covenant and agree as follows:
(a) ACCESS. The Seller will cause the Company to permit the Purchaser and
its authorized employees, agents, accountants, legal counsel and other
representatives to have access to the books, records, facilities, properties,
personnel and officers of the Company; provided, however, that such
investigation shall be conducted in a manner that does not interfere with normal
operations of the Company and its employees or its relationships with suppliers
and customers. The Seller will cause the employees, legal counsel, accountants,
engineers and other representatives of the Company to be available to the
Purchaser and its authorized employees, agents, accountants, legal counsel and
other representatives at all reasonable times for such purposes.
(b) OPERATION OF BUSINESS AND CONSENTS.
(i) Prior to the Closing and except as otherwise contemplated in
this Agreement, the Seller will not permit the Company,
without the consent of the Purchaser, which consent will not
be unreasonably withheld, to:
(A) increase the rate or form of compensation payable to any
employee or increase any employee benefits, except
increases in compensation and benefit changes made in
the ordinary course of business in accordance with
established policies and past practice;
(B) dispose of any properties or assets, except in the
ordinary course of business;
(C) engage in any one or more activities or transactions
outside the ordinary course of business;
(D) commit to any customer pricing or configuration
modifications or changes, other than in the ordinary
course of business in accordance with past practice;
(E) create, incur, assume, guarantee or otherwise become
liable or obligated with respect to any indebtedness, or
make any loan or advance to, or investment in, any
person or entity, except in each case in the ordinary
course of business or, even if in the ordinary course of
business, involving a liability in excess of $50,000.00;
(F) file any motions, orders, briefs, settlement agreements
or other papers in any proceeding before any court or
any federal, state or other governmental department,
commission or agency or any arbitrator
STOCK PURCHASE AGREEMENT - PAGE 15
<PAGE>
except with respect to pending proceedings where
positions advanced are substantially consistent with
previous positions;
(G) issue any securities relating to its capital stock or
grant, or enter into any agreement to grant any options,
convertibility rights, other rights, warrants, calls or
agreements relating to its capital stock; or redeem,
repurchase or otherwise reacquire any of its capital
stock;
(H) maintain its books of account other than in the usual,
regular and ordinary manner in accordance with generally
accepted accounting principles and on a basis consistent
with prior periods or make any change in any of its
accounting methods or practices; or
(I) pay any dividend on or make any distribution with
respect to, or purchase or redeem, any of its capital
stock.
(ii) The Seller shall use best efforts (and the Purchaser and the
PG Guarantor shall in good faith cooperate with the Seller) to
obtain all approvals, consents or waivers from private third
parties to the assignment of all contracts, agreements,
licenses and similar instruments listed on Schedule 3(e) which
require approval, consent or a waiver to permit assignment as
a result of the transfer of the Common Stock to the Purchaser.
(iii) Following the execution of this Agreement and pending the
Closing, the Seller will permit Eldad Weiss, Chief Executive
Officer of the PG Guarantor, to direct the activities of the
Company, substantially in accordance with existing practices,
subject to review by the Seller.
(c) REGULATORY COMPLIANCE. Prior to the Closing, the Seller will cause the
Company and CSD Canada to comply in all material respects with all applicable
local, state and federal laws, rules and regulations, judgments, decrees,
orders, governmental permits, certificates and licenses, including, without
limitation, those relating to the filing of reports and the payment of income,
franchise and other taxes due to be paid prior to the Closing.
(d) CONTINUED OPERATION OF BUSINESS. Prior to the Closing, the Seller
will, to the extent required for continued operation of the business of the
Company and CSD Canada without impairment, use commercially reasonable efforts
(i) to preserve substantially intact the business organization of the Company
and CSD Canada, (ii) to keep available the services of the employees of the
Company and (ii) to preserve the present relationships of the Company and CSD
Canada with persons having significant business relations therewith.
STOCK PURCHASE AGREEMENT - PAGE 16
<PAGE>
(e) HSR ACT COMPLIANCE. The Seller and the Purchaser will each use
reasonable efforts to (i) file, within one (1) week after the execution of this
Agreement, with the Department of Justice and the Federal Trade Commission the
premerger notifications required by the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended ("HSR Act"), if any such notification is required to be
filed, and (ii) respond promptly to inquiries from the Federal Trade Commission
or the Department of Justice resulting from the filing of such premerger
notifications.
(f) PRESS RELEASES. Neither the Purchaser or the PG Guarantor nor the
Seller or the Company shall issue or cause publication of any press release or
other announcement or public communication with respect to this Agreement or the
transactions contemplated hereby without the consent of the other, which consent
shall not unreasonably be withheld; provided that nothing herein shall prohibit
either Party from issuing or causing publication of any such press release,
announcement or public communication to the extent that such Party reasonably
determines that such action is required by law.
(g) PENDING OR THREATENED LITIGATION; UNDISCLOSED DISCOVERIES. Between the
date of this Agreement and the Closing Date, the Seller and the Purchaser shall
each inform the other promptly upon obtaining knowledge thereof, of any pending
litigation or any litigation threatened which could reasonably be anticipated to
prohibit or restrain the consummation of the transactions which are contemplated
hereby. The Purchaser and the Seller shall provide notice to the other of any
items which prior to the Closing constitute or appear to constitute a breach of
the representations and warranties or covenants made by the other and set forth
in this Agreement, promptly upon becoming aware of any such item.
(h) EMPLOYEE BENEFITS AND EMPLOYMENT. The Seller shall assist the
Purchaser in retaining such employees of the Company and CSD Canada as elected
by the Purchaser. The Company shall be responsible for compliance with the
Worker Adjustment and Retraining Notification Act applicable to employees not to
be retained by the Company. The Purchaser shall indemnify and hold the Seller
harmless from and against any claim, demand, action, suit, liability, damage,
cost or expense (including reasonable attorneys' fees) relating to the Company's
failure to comply with the Worker Adjustment and Retraining Notification Act.
The Seller agrees that for a period of twelve (12) months following the Closing
Date it will not solicit for employment any person who is an employee of the
Company or CSD Canada as of the Closing Date unless and until such employee's
employment with the Company, CSD Canada, the Purchaser or any Affiliate has been
terminated. If within one (1) year following the Closing, the Purchaser or any
Affiliate of the Purchaser hires or rehires as an employee or independent
contractor [other than a consulting arrangement of less than thirty (30) days
duration], an employee of the Company as to whom the Seller made any
indemnification payments for severance payments to such individual under the
Company's Severance Plan (as defined in Exhibit "B") to the Purchaser or the PG
Guarantor pursuant to Section 8(a)(i) of this Agreement, the Purchaser shall
immediately reimburse the Seller for such indemnification payments.
STOCK PURCHASE AGREEMENT - PAGE 17
<PAGE>
(j) PAYMENT OF BROKERS' OR FINDERS' FEE. The Seller shall pay any and all
brokers' or finders' fees, or any other commission or similar fee, payable to
any Person acting on behalf of the Seller or any of its Affiliates or under the
authority of any of them in connection with any of the transactions contemplated
herein. The Purchaser shall pay any and all brokers' or finders' fees, or any
other commission or similar fee, payable to any Person acting on behalf of the
Purchaser or any of its Affiliates or under the authority of any of them in
connection with any of the transactions contemplated herein The foregoing
covenants shall be applicable regardless of whether any claim for payment is
asserted before or after the Closing of the transactions contemplated hereby or
before or after any termination of this Agreement.
(l) GUARANTY OF RECEIVABLES. The Seller hereby guarantees payment in full
of the outstanding amount of the accounts receivable (net of reserves) as shown
on the August 31, 1997, balance sheet. A schedule of such accounts receivable
shall be provided to the Purchaser within twenty-one (21) days after the date
hereof, but not later than the Closing Date. In the event any accounts
receivables (net of reserves) have not been paid in full within two hundred
forty (240) days of Closing, the Seller shall pay the amount of any unpaid
accounts receivable to the Purchaser (or the Company if requested by the
Purchaser) whereupon the Purchaser shall assign (or cause to be assigned) to the
Seller those accounts receivable. The Purchaser hereby agrees that if within two
hundred forty (240) days following the transfer of an account to the Seller the
Company enters into a transaction with a customer whose account was transferred
to the Seller, then the Purchaser will reimburse the Seller for the amount paid
to the Purchaser (or the Company) for such account.
6. CONDITIONS TO THE CLOSING.
(a) THE SELLER. The obligations of the Seller to consummate the
transactions contemplated by this Agreement are subject, at the option of the
Seller, to the satisfaction or waiver of the following conditions
(i) The Purchaser shall have furnished the Seller with certified
copies of resolutions duly adopted by the Board of Directors
of the Purchaser authorizing the execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby;
(ii) The representations and warranties of the Purchaser contained
herein will be accurate in all material respects at and as of
the Closing Date as though such representations and warranties
had been made at and as of such date; all terms, covenants and
conditions of this Agreement to be complied with and performed
by the Purchaser at or prior to the Closing will have been
duly complied with and performed; and the Purchaser will have
delivered to the Seller a certificate dated as of the Closing
Date and signed on behalf of the Purchaser by the President or
Vice President thereof to the foregoing effect;
STOCK PURCHASE AGREEMENT - PAGE 18
<PAGE>
(iii) All statutory requirements for the valid consummation of the
transactions contemplated herein shall have been fulfilled
(including, without limitation, the expiration of any
applicable waiting period under the HSR Act) and all
governmental consents, approvals or authorizations necessary
for the valid consummation of the transactions contemplated
herein shall have been obtained;
(iv) As of the Closing, no order, writ, injunction or decree shall
have been entered into and be in effect that restrains,
enjoins or invalidates any of the transactions contemplated
hereby, and no action, suit or other proceeding shall be
pending (irrespective of whether instituted by the U.S.
government or any agency thereof or by any private party) or
threatened by the U.S. government or any agency thereof that
has a reasonable likelihood of resulting in (A) an award of
substantial damages by reason of any of the transactions
contemplated hereby payable by the Seller or any direct or
indirect subsidiary thereof or (B) the divestiture of any
material assets by the Seller or any direct or indirect
subsidiary thereof by reason of any of the transactions
contemplated hereby; and
(v) The Seller will have received an opinion from Ginsberg and
Brusilow, P.C., counsel for the Purchaser, dated the Closing
Date, in form and substance reasonably satisfactory to counsel
for the Seller that:
(A) the Purchaser is a corporation duly incorporated,
validly existing and in good standing under the laws of
the State of Delaware;
(B) the Purchaser has full corporate power, authority and
legal right to enter into this Agreement and to
consummate the transactions contemplated hereby by the
Purchaser; and this Agreement has been duly authorized
and approved by proper corporate action of the
Purchaser, has been duly executed by the Purchaser and
constitutes a legal, valid and binding agreement of the
Purchaser, enforceable in accordance with its terms,
except that (i) such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting creditors' rights
generally and (ii) the remedy of specific performance
and injunction and other forms of equitable relief may
be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be
brought; and
(C) To such counsel's knowledge, the consummation of the
transactions contemplated by this Agreement will not
result in the breach of any
STOCK PURCHASE AGREEMENT - PAGE 19
<PAGE>
term or provisions of or constitute a default under any
material indenture, mortgage, deed of trust or other
loan agreement or debt instrument to which the Purchaser
is a party or by which the Purchaser or the properties
of the Purchaser are bound and will not conflict with
any provision of the Certificate of Incorporation or
ByLaws of the Purchaser.
(vi) The Seller will have received an opinion from Efrati, Galili &
Co., Israeli counsel for the PG Guarantor, dated the Closing
Date, in form and substance reasonably satisfactory to counsel
for the Seller that:
(A) the PG Guarantor is a corporation duly incorporated,
validly existing and in good standing under the laws of
the State of Israel;
(B) the PG Guarantor has full corporate power, authority and
legal right to enter into this Agreement and to
consummate the transactions contemplated hereby by the
PG Guarantor; and this Agreement has been duly
authorized and approved by proper corporate action of
the PG Guarantor, has been duly executed by the PG
Guarantor and constitutes a legal, valid and binding
agreement of the PG Guarantor, enforceable in accordance
with its terms, except that (i) such enforcement may be
limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting
creditors' rights generally and (ii) the remedy of
specific performance and injunction and other forms of
equitable relief may be subject to equitable defenses
and to the discretion of the court before which any
proceeding therefor may be brought; and
(C) To such counsel's knowledge, the consummation of the
transactions contemplated by this Agreement by the PG
Guarantor will not result in the breach of any term or
provisions of or constitute a default under any material
indenture, mortgage, deed of trust or other loan
agreement or debt instrument to which the PG Guarantor
is a party or by which the PG Guarantor or the
properties of the PG Guarantor are bound and will not
conflict with any provision of the Memorandum or
Articles of Association of the PG Guarantor.
(b) THE PURCHASER. The obligations of the Purchaser to consummate the
transactions contemplated by this Agreement are subject, at the option of the
Purchaser, to the satisfaction or waiver of the following conditions:
STOCK PURCHASE AGREEMENT - PAGE 20
<PAGE>
(i) The Seller shall have furnished the Purchaser with certified
copies of resolutions duly adopted by the Board of Directors
of the Seller authorizing the execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby;
(ii) The representations and warranties of the Seller contained
herein will be accurate in all material respects at and as of
the Closing Date as though such representations and warranties
had been made at and as of such date; all terms, covenants and
conditions of this Agreement to be complied with and performed
by the Seller at or prior to the Closing will have been duly
complied with and performed; and the Seller will have
delivered to the Purchaser a certificate dated as of the
Closing Date and signed on behalf of the Seller by the
President or any Vice President thereof to the foregoing
effect;
(iii) All statutory requirements for the valid consummation of the
transactions contemplated herein shall have been fulfilled
(including, without limitation, the expiration of any
applicable waiting period under the HSR Act) and all
governmental consents, approvals or authorizations necessary
for the valid consummation of the transactions contemplated
herein;
(iv) As of the Closing, no order, writ, injunction or decree shall
have been entered and be in effect that restrains, enjoins or
invalidates any of the transactions contemplated hereby, and
no action, suit or other proceeding shall be pending
(irrespective of whether instituted by the U.S. government or
any agency thereof or by any private party) or threatened by
the U.S. government or any agency thereof that has a
reasonable likelihood of resulting in (A) an award of
substantial damages by reason of any of the transactions
contemplated hereby payable by the Seller or any direct or
indirect subsidiary thereof or (B) the divestiture of any
material assets by the Seller or any direct or indirect
subsidiary thereof by reason of any of the transactions
contemplated hereby;
(v) Consent to the assignments or deemed assignments as a result
of the transfer of the Common Stock to the Purchaser of all
contracts, licenses and agreements listed on Schedule 3(e)
shall have been obtained; and
(vi) The Seller will have received an opinion of Andrews & Kurth
L.L.P., counsel for the Seller, or as to the opinions in (A)
below as to the Seller and CSD Canada from such other counsel
to the Seller as are reasonably acceptable to the Purchaser,
dated the Closing Date, in form and substance reasonably
satisfactory to counsel for the Purchaser, that:
STOCK PURCHASE AGREEMENT - PAGE 21
<PAGE>
(A) The Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of Nevada.
The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of
Delaware, with corporate power to carry on its business
as now being conducted. CSD Canada is a corporation duly
incorporated, validly existing and in good standing
under the laws of the Province of Alberta.
(B) The Seller has full corporate power, authority and legal
right to enter into this Agreement; and this Agreement
has been duly authorized and approved by the proper
corporate action of the Seller has been duly executed by
the Seller and constitutes a legal, valid and binding
agreement of the Seller, enforceable in accordance with
its terms, except that (i) such enforcement may be
limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting
creditors' rights generally and (ii) the remedy of
specific performance and injunction and other forms of
equitable relief may be subject to equitable defenses
and to the discretion of the court before which any
proceeding therefor may be brought; and
(C) To such counsel's knowledge, the consummation of the
transactions contemplated by this Agreement by the
Seller will not result in the breach of any term or
provision of or constitute a default under any material
indenture, mortgage, deed of trust or other loan
agreement or debt instrument to which the Seller or the
Company is a party or by which the Seller or the Company
or the respective properties of the Seller or the
Company are bound and will not conflict with the
Articles of Incorporation or By-Laws of the Seller or
the Company.
(vii) There shall have been no Material Adverse Change in the
Company and CSD Canada, taken as a whole, between June 30,
1997, and the date of Closing.
7. CLOSING.
(a) Subject to the conditions stated in Section 6 of this Agreement, the
consummation of the transactions contemplated by this Agreement (the "Closing")
shall be held at the offices of Andrews & Kurth L.L.P., 4200 Texas Commerce
Tower, Houston, Texas on the later of the third business day after the
expiration of all waiting periods associated with any premerger or other
notification required by any governmental authority, or at such other date, time
or place as the parties may agree in writing (the date upon which the Closing
takes place being referred to herein as the "Closing Date"). At the Closing, the
following events shall occur, each such event under the control
STOCK PURCHASE AGREEMENT - PAGE 22
<PAGE>
of one Party hereto being a condition precedent to the events under the control
of the other Party, and each such event being deemed to have occurred
simultaneously with the other events.
(b) At the Closing, the Seller shall deliver to Purchaser (i) one or more
stock certificates representing the Common Stock, with stock powers attached
thereto duly executed in blank, in form and substance satisfactory to the
Purchaser and its counsel, as are requested by the Purchaser to transfer good
and marketable title to the Common Stock to the Purchaser, free and clear of any
and all liens, charges and encumbrances; (ii) all consents of private third
parties set forth on Schedule 3(e); (iii) the books and records of the Company
and CSD Canada, including, without limitation, the corporate minute books,
corporate seals and stock records; and (iv) evidence reasonably satisfactory to
the Purchaser and its counsel that: the Intercompany Account has been satisfied
and reflects a zero (0) balance (without creating any additional liability or
reducing the assets of the Company which remain with the Company following
Closing); the bank loans referenced in Item 5 of Exhibit "B" have been paid in
full and the credit facilities terminated; and that the transfer of the Assets
listed on Exhibit "A" to the Seller has occurred. The Cash Purchase Price, as
adjusted pursuant to the terms of this Agreement, shall be paid in United States
dollars and, unless the Seller shall agree otherwise, shall be made by wire or
intrabank transfer of immediately available funds by 2:00 p.m. Houston time on
the Closing Date to such account as the Seller may designate at least two (2)
business days prior to the Closing Date.
(c) The Seller will deliver to the Purchaser resignations of, and a waiver
of all claims by, all of the directors of the Company and CSD Canada.
8. POST-CLOSING INDEMNITY.
(a)
(i) Subject to the provisions of Sections 9 and 10, from and after
the Closing, the Seller shall indemnify and hold harmless the
Company, the Purchaser and the PG Guarantor from and against
any claim, liability, loss, cost, damage or expense
(including, without limitation, expert fees, court costs and
reasonable attorneys' fees) arising out of, resulting from or
in any way related to: the breach of, or the failure to
perform or satisfy any of, the representations, warranties and
covenants made by the Seller in this Agreement; or all
liabilities or obligations listed on Exhibit "B" [with payment
for all severance costs covered by such indemnity to be made
thirty (30) days following the Closing Date and within ten
(10) business days following notification accompanied by the
appropriate information with respect to the terminated
employees]; or any additional tax liability (including
penalties and interest) with respect to tax returns filed or
which should have been filed for periods ending prior to or
including the Closing Date with respect to the business,
STOCK PURCHASE AGREEMENT - PAGE 23
<PAGE>
operations or properties of the Company or CSD Canada prior to
or including the Closing Date.
(ii) Subject to the provisions of Sections 9 and 10, from and after
the Closing, the Purchaser and the PG Guarantor shall
indemnify and hold harmless the Seller from and against any
claim, liability, loss, cost, damage or expense (including,
without limitation, expert fees, court costs and reasonable
attorneys' fees) arising out of, resulting from or in any way
related to a breach of, or the failure to perform or satisfy
any of, the representations, warranties and covenants made by
the Purchaser or the PG Guarantor in this Agreement; the
liabilities or obligations under agreements listed on Exhibit
"C" attached hereto; and severance payments under the
Company's Severance Program (as defined in Exhibit "B"
attached hereto) associated with employees terminated at any
time after thirty (30) days after the Closing Date.
(b) All claims for indemnification under Section 8(a) of this Agreement
shall be asserted and resolved as follows:
(i) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall promptly (A) notify the party from
whom indemnification is sought (the "Indemnifying Party") of
any third-party claim or claims asserted against the
Indemnified Party ("Third Party Claim") which could give rise
to a right of indemnification under this Agreement and (B)
transmit to the Indemnifying Party a written notice ("Claim
Notice") describing in reasonable detail the nature of the
Third Party Claim, a copy of all papers served with respect to
such claim (if any), an estimate of the amount of damages
attributable to the Third Party Claim and the basis of the
Indemnified Party's request for indemnification under this
Agreement.
Within 30 days after receipt of any Claim Notice (the
"Election Period"), the Indemnifying Party shall notify the
Indemnified Party (C) whether the Indemnifying Party disputes
its potential liability to the Indemnified Party under this
Section 8 with respect to such Third Party Claim and (D)
whether the Indemnifying Party desires, at the sole cost and
expense of the Indemnifying Party, to defend the Indemnified
Party against such Third Party Claims.
(ii) If the Indemnifying Party notifies the Indemnified Party
within the Election Period that the Indemnifying Party does
not dispute its potential liability to the Indemnified Party
under this Section 8 and that the Indemnifying Party elects to
assume the defense of the Third Party Claim, then the
Indemnifying Party shall have the right to defend, at its sole
cost and expense, such Third
STOCK PURCHASE AGREEMENT - PAGE 24
<PAGE>
Party Claim by all appropriate proceedings, which proceedings
shall be prosecuted diligently by the Indemnifying Party to a
final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this Section 8(b)(ii).
The Indemnifying Party shall have full control of such defense
and proceedings, including any compromise or settlement
thereof; provided, however, the selection of counsel shall be
subject to the approval of the Indemnified Party, which
approval shall not be unreasonably withheld or delayed. The
Indemnified Party is hereby authorized, at the sole cost and
expense of the Indemnifying Party (but only if the Indemnified
Party is actually entitled to indemnification hereunder or if
the Indemnifying Party assumes the defense with respect to the
Third Party Claim), to file, during the Election Period, any
motion, answer or other pleadings which the Indemnified Party
shall deem necessary or appropriate to protect its interests
or those of the Indemnifying Party and not prejudicial to the
Indemnifying Party; provided, however, if an Indemnified Party
takes any such action which is prejudicial and conclusively
established to have caused a final adjudication which is
adverse to the Indemnifying Party, the Indemnifying Party
shall be relieved of its obligations hereunder with respect to
such Third Party Claim. If requested by the Indemnifying
Party, the Indemnified Party agrees, at the sole cost and
expense of the Indemnifying Party, to cooperate with the
Indemnifying Party and its counsel in contesting any Third
Party Claim which the Indemnifying Party elects to contest,
including, without limitation, the making of any related
counterclaim against the person asserting the Third Party
Claim or any cross-complaint against any person. The
Indemnified Party may participate in, but not control, any
defense or settlement of any Third Party Claim controlled by
the Indemnifying Party pursuant to this Section 8(b) and shall
bear its own costs and expenses with respect to such
participation.
(iii) If the Indemnifying Party fails to notify the Indemnified
Party within the Election Period that the Indemnifying Party
elects to defend the Indemnified Party pursuant to Section
8(b)(ii), or if the Indemnifying Party elects to defend the
Indemnified Party pursuant to Section 8(b)(ii) but fails to
diligently and promptly prosecute or settle the Third Party
Claim, then the Indemnified Party shall have the right to
defend, at the sole cost and expense of the Indemnifying
Party, the Third Party Claim by all appropriate proceedings,
which proceedings shall be promptly and vigorously prosecuted
by the Indemnified Party to a final conclusion or settled. The
Indemnified Party shall have full control of such defense and
proceedings, provided, however, that the Indemnified Party may
not enter into, without the Indemnifying Party's consent,
which shall not be unreasonably withheld, any compromise or
settlement of such Third Party Claim. Notwithstanding the
STOCK PURCHASE AGREEMENT - PAGE 25
<PAGE>
foregoing, if the Indemnifying Party has delivered a written
notice to the Indemnified Party to the effect that the
Indemnifying Party disputes its potential liability to the
Indemnified Party under this Section 8 and if such dispute is
resolved in favor of the Indemnifying Party by final,
nonappealable order of a court of competent jurisdiction, the
Indemnifying Party shall not be required to bear the costs and
expenses of the Indemnified Party's defense pursuant to this
Section 8 or of the Indemnifying Party's participation therein
at the Indemnified Party's request and the Indemnified Party
shall reimburse the Indemnifying Party in full for all costs
and expenses of such litigation. The Indemnifying Party may
participate in, but not control, any defense or settlement
controlled by the Indemnified Party pursuant to this Section
8, and the Indemnifying Party shall bear its own costs and
expenses with respect to such participation.
(iv) In the event any Indemnified Party should have a claim against
any Indemnifying Party hereunder which does not involve a
Third Party Claim, the Indemnified Party shall transmit to the
Indemnifying Party a written notice ("Indemnity Notice")
describing in reasonable detail the nature of the claim,
estimate of the amount of damages attributable to such claim
and the basis of the Indemnified Party's request for
indemnification under this Agreement. If the Indemnifying
Party does not notify the Indemnified Party within sixty (60)
days from its receipt of the Indemnity Notice that the
Indemnifying Party disputes such claim, the claim specified by
the Indemnified Party in the Indemnity Notice shall be deemed
a liability of the Indemnifying Party hereunder. If the
Indemnifying Party timely disputes such claim, as provided
above, such dispute shall be resolved by litigation in an
appropriate court of competent jurisdiction.
(v) Payments of all amounts owing by the Indemnifying Party
pursuant to this Section 8 shall be made within sixty (60)
days after the latest of (A) the settlement of the Third Party
Claim, (B) the expiration of the period for appeal of a final
adjudication of such Third Party Claim or (C) the expiration
of the period for appeal of a final adjudication of the
Indemnifying Party's liability to the Indemnified Party under
this Agreement. Payments of all amounts owing by the
Indemnifying Party pursuant to Section 8(b)(iv) shall be made
within sixty (60) days after the later of (D) the expiration
of the 60- day Indemnity Notice period or (E) the expiration
of the period for appeal of a final adjudication of the
Indemnifying Party's liability to the Indemnified Party under
this Agreement.
(c) In addition to the indemnification provided by Section 8(a), the
Seller (i) shall indemnify and hold harmless the Company and the Purchaser from
and against any liability, loss,
STOCK PURCHASE AGREEMENT - PAGE 26
<PAGE>
cost, damage or expense (including, without limitation expert fees, court costs
and reasonable attorneys' fees) arising out of, resulting from or in any way
related to the claims made against the Company, the Purchaser or the PG
Guarantor with respect to the subject matter of the litigation described in
Schedule 3(m) attached hereto (the "Claims") and (ii) defend, at the sole cost
and expense of the Seller, the Claims by all appropriate proceedings. The Seller
shall have full control of such defense and proceedings. If requested by the
Seller, the Purchaser and the PG Guarantor agree to cooperate with the Seller
and its counsel in contesting any Claim, including, without limitation, the
making of any related counterclaim against the person asserting such Claim or
any cross-complaint against any person; provided that all out-of-pocket expenses
of the Purchaser and the PG Guarantor related thereto, not including salary and
benefits, shall be reimbursed by the Seller. The Purchaser and the PG Guarantor
may participate in, but not control (except as provided in the next sentence),
any defense or settlement of any Claim controlled by the Seller pursuant to this
Section 8(c) and the Purchaser and PG Guarantor shall bear their own costs and
expenses with respect to such participation. Payments of all amounts owing by
the Seller pursuant to this Section 8(c) shall be made within sixty (60) days
after the latest of (i) the settlement of any Claim or (ii) the expiration of
the period for appeal of a final adjudication of any Claim.
(d) Upon written notice to the Seller specifying in reasonable detail the
basis for such set-off, the Purchaser may set off any amount to which it may be
entitled under this Section 8 against the Royalty due the Seller by placing such
amount in escrow and submitting the claim to arbitration in accordance with the
provisions of Section 16 below. The exercise of such right of set-off by the
Purchaser in good faith, whether or not ultimately determined to be justified,
will not constitute an event of default under this Agreement. Neither the
exercise of or the failure to exercise such right of set-off will constitute an
election of remedies or limit the Purchaser in any manner in the enforcement of
any other remedies that may be available to it.
(e) To secure the Seller's indemnity obligations under this Section 8, the
Purchaser may, if it prepays the Royalty within one (1) year following Closing
hereof, place with the Escrow Agent an amount equal to ten percent (10%) of the
amount being prepaid. Any such escrowed amount shall remain in escrow until one
(1) year following Closing and shall be utilized to pay any amounts due and
payable to the Purchaser, the PG Guarantor or a third party with respect to
claims, liabilities, damages, costs or expenses for which the Seller has
indemnified the Company, the Purchaser or the PG Guarantor hereunder. The terms
of the escrow agreement, to be entered into at Closing, shall be mutually
acceptable to the Seller and the Purchaser. Notwithstanding the foregoing to the
contrary, the existence or amount of any escrow fund shall not reduce the
indemnity liability of the Seller hereunder or constitute an election of
remedies by the Purchase or the PG Guarantor.
(f) In determining the amount of any loss, liability or expense for which
any party is entitled to indemnification under this Agreement, the gross amount
thereof will be reduced by any correlative insurance proceeds realized or to be
realized by such party (or, in the case of the Purchaser by the Company) and
such correlative insurance benefit shall be net of any insurance premium which
becomes due as a result of such claim.
STOCK PURCHASE AGREEMENT - PAGE 27
<PAGE>
9. LIMITATION OF LIABILITY. Notwithstanding any other provision of this
Agreement: (a) the liability of the Purchaser and the Seller under this
Agreement for any breach of representation, warranty or covenant herein shall be
limited to actual damages only and shall not include incidental, consequential
or indirect damages; (b) the Seller shall not have any liability for any such
breaches or any indemnification unless the aggregate liabilities exceed
$500,000.00; (c) the aggregate liability of the Seller for indemnification for
the obligations listed in item number 4 of Exhibit "B" shall not exceed
$550,000; and (d) the aggregate liability of the Seller for all other such
breaches and indemnification shall not exceed $5,000,000.00.
10. SURVIVAL. The representations, warranties and covenants of the Seller
and the Purchaser set forth in this Agreement shall survive the Closing;
provided, however, that the rights of the Parties to initiate any action for
breach of any representation, warranty or covenant (other than actions relating
to indemnity obligations which survive the Closing) made by the Purchaser, the
PG Guarantor or the Seller herein shall survive only until the close of business
on the 365th day following the Closing Date. Notwithstanding the foregoing to
the contrary, the Seller's representation as set forth in Section 3(r) hereof
shall only survive Closing for sixty (60) days. Any actions relating to an
indemnity obligation must be brought within thirty (30) days following the
expiration of the applicable statute of limitations applicable to the underlying
subject matter of the indemnity. Any claim by the Purchaser and the Seller for
the breach of a representation, warranty or covenant set forth in this Agreement
must be accompanied by a notice sufficient to apprise the recipient of the
nature of the claim.
11. POST-CLOSING COOPERATION AND ACCESS; LOGO
(a) From and after the Closing, the Purchaser shall make available to the
Seller, and to any federal, state, municipal or local government, governmental
authority, regulatory or administrative agency, governmental commission,
department, board, agency, governmental commission, department, board, agency or
instrumentality, court, tribunal, arbitrator or arbitral body responsible for
the imposition or collection of any taxes ("Taxing Authority") as reasonably
requested by the Seller, all information, records or documents relating to tax
liabilities or potential tax liabilities of or relating to the Company for all
periods prior to or including the Closing Date and shall preserve all such
information, records and documents until the expiration of any applicable
statute of limitations or extensions thereof. The Purchaser shall prepare and
provide to the Seller any federal, state, local or foreign tax data and other
information, including such information required by Seller's customary tax and
accounting questionnaires, requested by the Seller for the Seller's use in
preparing its tax returns for any period prior to or including the Closing Date.
Such tax data and other information shall be prepared by the Purchaser and
provided to the Seller within sixty (60) days after any request for such data or
other information. Each Party shall bear its own expenses in complying with the
foregoing provisions.
(b) The Purchaser shall promptly notify the Seller in writing upon receipt
by the Purchaser or the Company of notice of any pending or threatened action
relating to any tax on the
STOCK PURCHASE AGREEMENT - PAGE 28
<PAGE>
Company or its business, operations or properties, or relating to tax returns
reflecting operations of the Company, for periods ending prior to or including
the Closing Date. The Seller shall have the sole right to represent the
taxpayer's interest in any such action, and to employ counsel of its choice at
its expense in connection therewith. The Purchaser agrees that it will cooperate
fully with the Seller and its counsel in the defense against or compromise of
any claim in any such action.
(c) The Seller shall have no liability for any taxes, assessments or
levies of any kind relating to the business, operations or properties of the
Company for any period or partial period after the Closing, subject to the
accuracy of the disclosures, representations and warranties of the Seller
hereunder.
(d) From and after the Closing, the Purchaser shall make available to the
Seller all information, records and documents of the Company relating to, and
all personnel of the Company who have knowledge of the facts relating to, the
subject matter of the litigation referred to in Schedule 3(m) attached hereto,
in each case promptly following the request of the Seller in connection with the
rights of the Seller and its Affiliates set forth in Section 8(c).
(e) From and immediately after the Closing, the Company and the Purchaser
will terminate all uses of the GeoScience Corporation logo and will use their
reasonable efforts to remove such logo from all buildings, stationary, equipment
and other assets of the Company.
12. TERMINATION OF AGREEMENT. Anything herein to the contrary
notwithstanding, this Agreement shall terminate upon the occurrence of any of
the following events:
(a) MUTUAL CONSENT. By mutual consent of the Purchaser and the Seller
evidenced in writing;
(b) EXPIRATION DATE. The written notice from the Seller to the Purchaser,
or from the Purchaser to the Seller, if the Closing has not occurred on or
before October 31, 1997, or such later date as such Parties shall have agreed to
in writing; provided, however, that any termination pursuant to this Section
12(b) shall not relieve any Party of any liabilities to the other Parties for
its willful breach of the provisions hereof occurring before such termination,
it being understood and agreed that, if all of the conditions to a Party's
obligations set forth in Section 6(a) or 6(b) have been satisfied or waived by
the date scheduled for the Closing pursuant to Section 7, the failure of such
Party to perform, its obligations under Section 7 on such date shall be deemed
to be a willful breach by such Party;
(c) MATERIAL ADVERSE CHANGE. Upon written notice from the Purchaser to the
Seller within twenty (20) days from the date of this Agreement (or termination
of the waiting period under the HSR Act, if earlier) if there has been a
Material Adverse Change in the Company and CSD Canada, taken as a whole, since
the date of the Interim Financial Statements or there are material additional
liabilities of the Company which the Seller failed to disclose to the Purchaser
in writing or failed to
STOCK PURCHASE AGREEMENT - PAGE 29
<PAGE>
make available to the Purchaser prior to the date of this Agreement and which
are discovered by the Purchaser as a result of such additional due diligence; or
(d) HSR FILING. Upon written notice from the Seller to the Purchaser if
the required filing under the HSR Act is not made on or before September 12,
1997.
In the event of termination of this Agreement as provided in this Section 12,
this Agreement shall forthwith become void and there shall be no liability on
the part of any Party hereto with respect thereto, except as provided in Section
12(b) and Section 13.
13. EXPENSES. Except as otherwise provided in this Agreement to the
contrary, regardless of whether the transactions contemplated herein occur, each
of the Parties will be responsible for its own expenses and fees incurred in
connection with the transaction contemplated herein.
14. NOTICE. Any notice, request, instruction, correspondence or other
document to be given hereunder by any Party to another (herein collectively
called "Notice") shall be in writing and delivered personally or mailed by
certified mail, postage prepaid and return receipt requested, or by telegram or
telecopier, as follows:
To the Seller: GeoScience Corporation
10500 Westoffice Drive
Suite 210
Houston, Texas 77042-5391
Attention: Richard Miles
Telecopier: (713) 780-3524
With a copy to: Thomas P. Mason, Esq.
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Telecopier: (713) 220-4285
To the Purchaser or
the PG Guarantor: Paradigm Geophysical Corporation
Merkazim House
32 Maskit Street
POB 2061
Herzlia B 46120 Israel
Attention: Michael Burstein
Telecopier: 011 972 99 589 327
STOCK PURCHASE AGREEMENT - PAGE 30
<PAGE>
With a copy to: Paul B. Sander, Esq.
Ginsberg and Brusilow, P.C.
14785 Preston Road, Suite 750
Dallas, Texas 75240
Telecopier: (972) 702-0662
Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telegram or telecopier shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. All Notices by telegram or
telecopier shall be confirmed promptly after transmission in writing by
certified mail or personal delivery. No Notice shall be given to or by the
Company. Any Party may change any address to which Notice is to be given to it
by giving Notice as provided above of such change of address.
15. GUARANTY. The PG Guarantor is the sole shareholder of Purchaser. The
PG Guarantor acknowledges and agrees that it will, directly or indirectly,
benefit from the purchase of the Common Stock by the Purchaser. Therefore, the
PG Guarantor hereby guarantees to the Seller the full and faithful performance
of all obligations of the Purchaser hereunder, including, without limitation,
the payment of the Royalty and any other obligations which survive the Closing.
16. ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, except controversies involving less than
$10,000 or those for which an alternate dispute resolution procedure is
specifically provided herein, shall be settled by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association, and
judgment on the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof. Any arbitration brought under the terms of this
Agreement shall be conducted in the following manner:
(a) Each of the parties hereto shall appoint one person as an arbitrator.
The two arbitrators so chosen shall select a third impartial arbitrator within
ten (10) days of the date on which the second arbitrator is selected. The three
arbitrators shall determine all questions presented to them by majority vote.
The decision of a majority of the arbitrators shall be final and conclusive on
the Parties hereto.
(b) The arbitration hearing shall be held in Harris County, Texas, and the
award of the arbitrators may be entered in any District Court of Harris County,
Texas.
(c) The parties agree that the following time limitations shall govern the
arbitration proceedings conducted under the terms of this Agreement: (i) any
demand for arbitration must be filed within thirty (30) days of the date on
which the dispute arises or the alleged breach occurs; (ii) each Party must
select an arbitrator within fifteen (15) days of receipt of notice that an
arbitration proceeding has commenced. In the event that no such selection is
made, the arbitrator selected by
STOCK PURCHASE AGREEMENT - PAGE 31
<PAGE>
the other Party may conduct the arbitration proceeding without selecting any
other arbitrator; (iii) the hearing must be held within thirty (30) days of the
date on which the third arbitrator is selected; (iv) hearing briefs must be
selected within fifteen (15) days of the hearing date; and (v) the arbitration
award must be made within ten (10) days of the receipt of hearing briefs.
(d) The expenses of such arbitration shall be borne in such proportion as
the arbitrators shall decide.
17. FURTHER ASSURANCE. The Seller and the Purchaser shall execute and
deliver such further instruments of conveyance and transfer and take such
additional action as the other may reasonably request to effect, consummate,
document, confirm or evidence the consummation of the transactions which are the
subject of this Agreement. Each Party hereto shall also do such acts as are
reasonably necessary to perform its representations, warranties, covenants and
agreements herein.
18. GOVERNING LAW. The provisions of this Agreement and the documents
delivered pursuant hereto shall be governed by and construed in accordance with
the laws of the State of Texas (excluding any conflicts-of-law rule or principle
that might refer same to the laws of another jurisdiction), except to the extent
that same are mandatorily subject to the laws of another jurisdiction pursuant
to the laws of such other jurisdiction.
19. ENTIRE AGREEMENT: AMENDMENTS AND WAIVERS. This Agreement, together
with all Schedules attached hereto, constitutes the entire agreement among the
Parties pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the Parties, and there are no warranties, representations or other
agreements among the Parties in connection with the subject matter hereof except
as set forth specifically herein or contemplated hereby. No supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the Party to be bound thereby. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (regardless of whether similar), nor shall any such waiver
constitute a continuing waiver unless otherwise expressly provided.
20. SEVERABILITY. In the event that any provision contained in this
Agreement shall be determined to be invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of any such
provision in every other respect and the remaining provisions of this Agreement
shall not, at the election of the party for whose benefit the provision exists,
be in any way impaired.
21. HEADINGS, EXHIBITS AND SCHEDULES. The headings of the several Sections
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement. The
Exhibits and Schedules referred to herein are attached hereto and incorporated
herein by this reference.
STOCK PURCHASE AGREEMENT - PAGE 32
<PAGE>
22. ASSIGNMENT; SUCCESSORS BOUND. This Agreement may not be assigned by
any Party without the consent of the other Party, provided, however, that the
Purchaser may assign its right to acquire the Common Stock to the PG Guarantor
so long as the Purchaser is not relieved of its obligations hereunder. Subject
to the foregoing, this Agreement shall be binding upon and inure to the benefit
of the Parties and their respective successors and assigns.
23. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute a full and complete Agreement. A telecopied facsimile of an executed
counterpart of this Agreement shall be sufficient to evidence the binding
agreement of each Party to the terms hereof. However, each Party agrees to
return to the other parties an original, duly executed counterpart of this
Agreement promptly after delivery of a telecopied facsimile thereof.
STOCK PURCHASE AGREEMENT - PAGE 33
<PAGE>
IN WITNESS WHEREOF, the Seller, the Purchaser and the PG Guarantor have
caused this Agreement to be signed in multiple originals by their respective
officers thereunto duly authorized, all as of the date first above written.
GEOSCIENCE CORPORATION
By: /s/ RICHARD F. MILES
Name: Richard F. Miles
Title: President
PARADIGM GEOPHYSICAL CORPORATION
By: /s/ ELDAD WEISS
Name: Eldad Weiss
Title: Chief Executive Officer
PARADIGM GEOPHYSICAL LTD.
By: /s/ ELDAD WEISS
Name: Eldad Weiss
Title: Chief Executive Officer
STOCK PURCHASE AGREEMENT - PAGE 34
AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT TO STOCK PURCHASE AGREEMENT (this "Amendment") is made and
entered into this 24th day of September, 1997, by and among GEOSCIENCE
CORPORATION, a Nevada corporation ("Seller"), PARADIGM GEOPHYSICAL CORP., a
Delaware corporation ("Purchaser"), and PARADIGM GEOPHYSICAL LTD., a corporation
formed under the laws of Israel ("PG Guarantor").
WITNESSETH:
WHEREAS, Seller, Purchaser and PG Guarantor entered into that certain
Stock Purchase Agreement (the "Agreement") dated September 5, 1997, with respect
to the sale and purchase of all of the outstanding stock of CogniSeis
Development, Inc., a Delaware corporation; and
WHEREAS, Seller, Purchaser and PG Guarantor now desire to amend the
Agreement;
NOW, THEREFORE, for and in consideration of the foregoing premises, the
mutual covenants and agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto do hereby agree as follows.
1. Indemnity. Section 9 of the Agreement is hereby amended to read in its
entirety as follows:
"LIMITATION OF LIABILITY. Notwithstanding any other provision of this
Agreement: (a) the liability of the Purchaser and the Seller under this
Agreement for any breach of representation, warranty or covenant herein
shall be limited to actual damages only and shall not include incidental,
consequential or indirect damages; (b) the Seller shall not have any
liability for any such breaches or any indemnification unless the
aggregate liabilities exceed $500,000.00; (c) the aggregate liability of
the Seller for indemnification for the obligations listed in item number 4
of Exhibit "B" shall not exceed $550,000; and (d) the aggregate liability
of the Seller for all other such breaches and indemnification shall not
exceed $5,000,000.00. Notwithstanding the foregoing to the contrary, the
limitations of clauses (b) and (d) shall not apply to the Seller's
indemnity obligations under Section 8(c)."
2. CORPORATE NAME OF PURCHASER. It is acknowledged and agreed that
Purchaser's proper corporate name is "Paradigm Geophysical Corp." not "Paradigm
Geophysical Corporation" as set forth in the Agreement. Purchaser does hereby
ratify and confirm the terms of the Agreement in its proper corporate name.
3. COUNTERPARTS. This Amendment may be executed in one or more
counterparts all of which together shall constitute one and the same instrument.
In making proof hereof, it shall be
AMENDMENT TO STOCK
PURCHASE AGREEMENT - Page 1
<PAGE>
necessary to produce only one such counterpart. A telecopied facsimile of a duly
executed counterpart of this Amendment shall be sufficient to evidence the
binding agreement of each party to the terms hereof. However, the parties agree
to promptly return an original, duly executed counterpart of this Amendment
following the delivery of a telecopied facsimile thereof.
4. DEFINED TERMS. Any capitalized terms used herein and not defined herein
shall have the same meaning as in the Contract. In the event of a conflict
between the terms of this Amendment and the terms of the Contract, the terms of
this Amendment shall control.
5. CAPTIONS. The section headings used in this Amendment are for
convenience of reference only and shall not control or affect the meaning or
interpretation of the terms hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.
GEOSCIENCE CORPORATION
By: /s/ RICHARD F. MILES
Name: Richard F. Miles
Title: President
PARADIGM GEOPHYSICAL CORPORATION
By: /s/ ELDAD WEISS
Name: Eldad Weiss
Title: Chief Executive Officer
PARADIGM GEOPHYSICAL LTD.
By: /s/ ELDAD WEISS
Name: Eldad Weiss
Title: Chief Executive Officer
AMENDMENT TO STOCK
PURCHASE AGREEMENT - Page 2
[GEOSCIENCE LETTERHEAD]
GEOSCIENCE CORPORATION COMPLETES SALE OF SOFTWARE COMPANY
HOUSTON, TEXAS, October 15, 1997 - GeoScience Corporation (Nasdaq:GSCI)
today announced that it has completed the sale of the geoscientific software
business of its CogniSeis Development, Inc. subsidiary to Paradigm Geophysical
Corporation for cash and guaranteed future royalties, with an estimated total
value between $19.5 million and $23 million. The Company expects to recognize an
after-tax gain of approximately $5 million after royalties, payment of certain
retained liabilities and expenses of the sale.
"The sale of CogniSeis is an important stepping stone in GeoScience's
strategy of focusing its full attention on its seismic instrumentation business.
We are now ready to take advantage of the strong demand for seismic products
while better serving our customers," stated Richard F. Miles, President.
GeoScience Corporation designs, develops and manufactures seismic data
acquisition systems and provides services for the oil and gas exploration and
production industry.
FORWARD-LOOKING STATEMENTS IN THIS RELEASE ARE MADE PURSUANT 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
UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, RISKS ASSOCIATED WITH THE
UNCERTAINTY OF MARKET ACCEPTANCE OF THE COMPANY'S PRODUCTS, LIMITED NUMBER OF
CUSTOMERS, AS WELL AS RISKS OF DOWNTURNS IN ECONOMIC CONDITIONS GENERALLY, RISKS
ASSOCIATED WITH COMPETITION AND COMPETITIVE PRICING PRESSURES, AND OTHER RISKS
DETAILED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
For further information contact:
Richard F. Miles Ed Bisno/Stacy Lipschitz
President Media contact: Lee Foley
GeoScience Corporation Morgen-Walke Associates
10500 Westoffice Drive, Ste. 210 380 Lexington Avenue, 50th Floor
Houston, TX 77042 New York, NY 10168
(713) 780-1881 (212) 850-5600
EXHIBIT 99.2
(GeoScience Logo)
GEOSCIENCE CORPORATION ANNOUNCES THIRD QUARTER AND
NINE MONTHS RESULTS
HOUSTON, TEXAS, October 28, 1997 - GeoScience Corporation (Nasdaq:GSCI)
today announced results for the third quarter and nine month period ended
September 30, 1997.
Revenue from continuing operations for the third quarter of 1997 was $18.2
million compared to $28.0 million reported in last year's comparable restated
quarter. The Company experienced a net operating loss from continuing operations
for the period of $2.1 million, or $0.21 per share versus net income from
continuing operations of $1.9 million, or $0.18 per share, for the restated
third quarter of 1996.
For the nine month period ended September 30, 1997, revenue from
continuing operations was $64.8 million compared to $66.9 million for the same
restated period last year. Net income from continuing operations was $100,000,
or $0.01 per share, versus net income from continuing operations of $4.2
million, or $0.46 per share, for the restated first nine months of 1996.
As announced by the Company on September 2, 1997, the loss from continuing
operations reported for the third quarter of 1997 was partially the result of
approximately $16 million of anticipated sales shifting to the fourth quarter of
1997 and the first quarter of 1998. The Company believes that none of these
sales opportunities have been lost to competition, but rather have been
postponed due to internal logistical issues at their customers. Additionally,
higher engineering, manufacturing and warranty costs contributed to the
Company's loss from continuing operations. The Company believes that a portion
of the increased manufacturing costs recorded in the third quarter of 1997,
approximately $700,000 or $0.07 per share after tax, more properly relates to
the operations of the first and second quarters. The Company is currently
determining the appropriate impact by quarter. Upon completion thereof, the
Company will amend its first and second quarter Form 10-Q filings as required.
The most recent improvements to the 24-bit seismic data acquisition module have
enhanced the product's reliability and are expected to reduce engineering ,
manufacturing and warranty costs going forward.
"Despite the timing of large orders for our type of products often being
unpredictable, we still believe there is a growing demand for our equipment. We
remain confident that we will benefit from the increased activity in the oil
industry, continued exploration in deep ocean waters and more demand for 3D
technology than ever before," commented Richard F. Miles, President.
"Additionally, the completion of the sale of our geoscientific software
business, CogniSeis Development, Inc., has positioned us to better serve our
customers by focusing our full attention on our seismic data instrumentation
business while at the same time strengthening our financial position."
GeoScience Corporation designs, develops and manufactures seismic data
acquisition systems and provides services for the oil and gas exploration and
production industry.
***
FORWARD-LOOKING STATEMENTS IN THIS RELEASE ARE MADE PURSUANT 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
UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, RISKS ASSOCIATED WITH THE
UNCERTAINTY OF MARKET ACCEPTANCE OF THE COMPANY'S PRODUCTS, LIMITED NUMBER OF
CUSTOMERS, AS WELL AS RISKS OF DOWNTURNS IN ECONOMIC CONDITIONS GENERALLY, RISKS
ASSOCIATED WITH COMPETITION AND COMPETITIVE PRICING PRESSURES, AND OTHER RISKS
DETAILED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
For further information contact:
Richard F. Miles Ed Bisno/Stacy Lipschitz
President Media Relations - Lee Foley
GeoScience Corporation Morgen-Walke Associates
10500 Westoffice Drive, Ste. 210 380 Lexington Avenue, 50th Floor
Houston, TX 77042 New York, New York 10168
(713) 780-1881 (212) 850-5600
<PAGE>
GEOSCIENCE CORPORATION
CONSOLIDATED SUMMARY OF RESULTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Quarter Ended
September 30,
--------------------
1997 1996
-------- --------
Sales ............................................. $ 18,163 $ 28,008
Income (loss) from continuing operations ....... (2,137) 1,865
Loss from discontinued operation ............... (727)
-------- --------
Net income (loss) .......................... $ (2,137) $ 1,138
======== ========
Earnings (loss) per common share:
Continuing operations .......................... $ 0.21 $ 0.18
Discontinued operation ......................... -- (0.07)
-------- --------
Net income (loss) .......................... $ (0.21) $ 0.11
======== ========
Average common shares outstanding ................. 10,046 10,437
======== ========
Nine Months Ended
September 30,
--------------------
1997 1996
-------- --------
Sales ............................................. $ 64,815 $ 66,877
Income from continuing operations .............. 101 4,235
Loss from discontinued operation ............... (1,588) (2,495)
-------- --------
Net income (loss) .......................... $ (1,487) $ 1,740
======== ========
Earnings (loss) per common share:
Continuing operations .......................... $ 0.01 $ 0.46
Discontinued operation ......................... (0.16) (0.27)
-------- --------
Net income (loss) .......................... $ (0.15) $ 0.19
======== ========
Average common shares outstanding ................. 10,123 9,179
======== ========
1996 results have been restated for the discontinued geoscientific software
subsidiary.
