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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMMISSION FILE NUMBER 0-28422
GEOSCIENCE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 76-0497775
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
10500 WESTOFFICE DRIVE, SUITE 210
HOUSTON, TEXAS 77042
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 780-1881
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
-------------------------------- ------------------------------
Common Stock (Par Value $.01 per Nasdaq
share)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g OF THE ACT
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 13, 1998, 9,979,850 shares of the registrant's Common Stock
were issued and outstanding. The aggregate market value of the voting stock held
by non-affiliates of the registrant (assuming for purposes of this computation
that Tech-Sym Corporation and directors and officers may be affiliates) was
$23,039,652 (based on the closing sales price published in THE WALL STREET
JOURNAL reports of Nasdaq Composite Transactions on March 13, 1998).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document are incorporated by reference into Part
III of this Annual Report on Form 10-K: the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held April 27, 1998.
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TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business............................. 1
General............................ 1
Business Strategy.................. 1
Products and Services.............. 2
Product Development................ 4
Marketing.......................... 4
Manufacturing and Raw Materials.... 5
Competition........................ 6
Backlog............................ 6
Intellectual Property.............. 6
Regulatory Matters................. 6
Employees.......................... 7
Geographical Information........... 7
Relationship with Tech-Sym......... 7
Year 2000.......................... 7
Item 2. Properties........................... 7
Item 3. Legal Proceedings.................... 8
Item 4. Submission of Matters to a Vote of
Security Holders................... 8
PART II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder
Matters............................ 8
Item 6. Selected Financial Data.............. 9
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 10
Item 7.a. Quantitative and Qualitative
Disclosures about Market Risk...... 13
Item 8. Financial Statements and
Supplementary Data................. 13
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure............... 13
PART III
Item 10. Directors and Executive Officers of
the Registrant..................... 14
Item 11. Executive Compensation............... 14
Item 12. Security Ownership of Certain
Beneficial Owners and Management... 14
Item 13. Certain Relationships and Related
Transactions....................... 14
PART IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form
8-K................................ 15
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PART I
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Forward-looking statements in this Form 10-K, future filings by the Company
with the Securities and Exchange Commission, the Company's press releases and
oral statements by authorized officers of the Company are intended to be subject
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Investors are cautioned that all forward-looking statements involve risks
and uncertainty, including without limitation (i) the risk of technological
change relating to the Company's products and the risk of the Company's
inability to develop new competitive products in a timely manner, (ii) the risk
of decreased demand for the Company's products due to fluctuations in energy
industry activity, (iii) the risk of disruption in vendor supplies and the risk
of quality control system problems with the Company's suppliers, (iv) the
Company's reliance on certain significant customers, (v) the credit risk to the
Company from certain sales arrangements, (vi) risks associated with a
significant amount of foreign sales, (vii) the risk of fluctuations in future
operating results, (viii) the risks of excess or inadequate inventory levels,
(ix) the control of the Company by Tech-Sym, (x) the potential conflicts of
interest between the Company and Tech-Sym, (xi) the effect of certain
anti-takeover provisions included in the Company's Articles of Incorporation and
Bylaws, (xii) changing governmental regulations, as well as general market
conditions, competition and pricing. The Company believes that forward-looking
statements made by it are based on reasonable expectations. However, no
assurances can be given that actual results will not differ materially from
those contained in such forward-looking statements. The words "estimate,"
"project," "anticipate," "plan," "forecast," "expect," "predict,"
"believe" and similar expressions are intended to identify forward-looking
statements.
ITEM 1. BUSINESS
GENERAL
GeoScience Corporation ("GeoScience" or the "Company"), through its
subsidiaries, designs, develops, manufactures and markets seismic data
acquisition systems and related products and services. The Company's products
are used by the oil and gas exploration and production industry to identify and
define subsurface geologic structures, primarily to identify and predict the
existence and location of oil and gas reserves.
The Company was formed in March 1996 as a wholly-owned subsidiary of
Tech-Sym Corporation ("Tech-Sym"). All the outstanding stock of Syntron, Inc.
("Syntron"), CogniSeis Development, Inc. ("CogniSeis"), and Symtronix
Corporation ("Symtronix") was contributed by Tech-Sym to GeoScience. In May
1996, the Company sold 2,597,600 shares of Common Stock (24.7% of the
outstanding shares on that date) in a public offering. The Company's Common
Stock began trading on the Nasdaq National Market on May 17, 1996.
In June 1997, the Company adopted a plan to sell its geoscientific software
subsidiary, CogniSeis. On October 14, 1997, the Company sold CogniSeis.
GeoScience received cash of $8.9 million, net of certain liabilities assumed
pursuant to the terms of the sales agreement, plus a note receivable that equals
approximately $12 million at the sale date. See Management's Discussion and
Analysis of Financial Condition and Results of Operations.
On December 18, 1997, the Company's subsidiary, Syntron, acquired all of
the shares of Innovative Transducers Inc. ("ITI"). ITI manufactures and sells
transducers and arrays used in connection with engineering applications and the
acquisition of seismic data, and provides repair services with respect to such
products. ITI is also developing a solid marine seismic cable in conjunction
with a major customer of the Company.
BUSINESS STRATEGY
The Company's strategy focuses on the development of technologically
advanced products to facilitate the process of and to decrease the time involved
in acquiring seismic data needed by the oil and gas
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exploration and production industry. Additionally, the Company seeks to acquire
product lines, technology and businesses that complement internal product
development.
PRODUCTS AND SERVICES
The Company's primary products are seismic data acquisition systems and
related products that are designed for use in marine, land and transition zone
environments. These systems collect acoustic energy produced by air guns,
dynamite or other sound sources that is reflected from underground or subsea
geological formations. The acoustic energy is collected by remote sensors in the
water, on the ocean floor, or on land and converted to digital signals that are
transmitted to a central recording unit or a portable recording unit. The
recording unit simultaneously records the digital signals transmitted from
multiple remote sensors.
The Company provides repair and maintenance services related to the
products it sells and on similar products manufactured by others. The Company
also leases its equipment under operating leases with terms up to three years.
Additionally, the Company provides specialized computer workstation services to
oil, gas and energy companies.
The following is a description of the Company's products and services and
their uses:
MARINE
SYNTRAK 960-24(TM) Multiple Streamer Telemetry System.
The Company's principal marine seismic data acquisition system is the
SYNTRAK 960-24(TM) Multiple Streamer Telemetry System. This system consists of a
shipboard central recording unit and streamer cable arrays that are towed behind
a seismic survey vessel. Each streamer cable array includes electronic data
acquisition modules which collect the analog acoustic energy signals produced by
air guns, convert the analog signals to digital signals and transmit the
digitized data to the shipboard central recording unit.
MultiTRAK(R) System.
The Company's MultiTRAK(R) System is used to control the depth and provide
data to calculate the position of streamers, which is important to meet the
energy source and receiver positioning needs of 3-D seismic surveys. The
MultiTRAK(R) System consists of a shipboard computer, in-water remote sensing
units and cable leveler modules. The remote sensing units are strategically
located on the streamers, source arrays, ships hull and tail buoys to measure
magnetic heading, cable depth, wing angle and temperature and acoustic ranges
from other remote sensing units. This information is transmitted to the
shipboard computer to calculate subsurface sources and sensor locations. Any
adjustments to cable position are made by sending commands from the shipboard
computer to the cable leveler modules attached to the streamers. The cable
leveler modules contain motor-driven wings that may be adjusted to control the
depth of the streamer.
GCS90(TM) Gun Controller System.
The GCS90(TM) Gun Controller System is a seismic source controller that
provides digitized source signatures to the operator, controls the firing time
and provides real-time monitoring of the seismic source and firing times. The
system is expandable from 8 to 128 guns.
Transducers and Arrays.
The Company, through ITI, manufactures Poly Vinylidene Fluoride ("PVDF")
hydrophones for use in down hole arrays and other engineering applications. ITI
also manufactures solid streamer cables for use in seismic markets.
Marine Seismic Streamer Cables.
The Company designs and manufactures a variety of marine seismic streamer
cables that consist of various weights, strengths, diameters and lengths in
order to satisfy customer specifications. The streamer cables are designed to be
neutrally buoyant in order to facilitate the control of the depth at which the
streamer cable is towed behind a seismic survey vessel. The Company has
developed and currently sells a
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reduced diameter array ("RDA") streamer cable that reduces towing friction and
increases the length of cable that may be placed on spools on the towing vessel
prior to deployment, and that weighs significantly less than larger diameter
streamer cables currently on the market. The reduced friction and less weight of
the RDA streamer cables are desired by companies that perform marine seismic
surveys because these factors reduce the fuel consumption of the towing vessels
and permit existing vessels to be reconfigured to tow a greater number of
arrays.
Ocean Bottom Cable System.
The Company's SYNTRAK 960-24(TM) Ocean Bottom Cable System is a digital
telemetry seismic data acquisition system designed for use in shallow water
environments as well as in ocean bottom operations in congested and obstructed
areas where conventional towed streamer arrays cannot be utilized efficiently.
The system typically utilizes air guns mounted on a shooting vessel to transmit
acoustic energy to the ocean floor and the seismic data reflected from subsea
geologic structures is collected by sensors (either hydrophones, geophones or
both, attached to either twisted-pair telemetry cables or fiber optic cables).
The analog acoustic signals received by the sensors are converted to digital
data by data acquisition modules and this data is transmitted to a shipboard
central recording unit.
Seismic contractors currently are developing techniques to deploy ocean
bottom cables in connection with 4-D seismic surveys useful in hydrocarbon
reservoir monitoring. The Company currently is extending the depth of operation
to 1,000 meters and beyond to address the future requirements in reservoir
monitoring and 4-D seismic operations. The SYNTRAK 960-24(TM) Ocean Bottom Cable
System's architecture has the flexibility to record multiple component data
which the Company believes will be an important attribute in connection with 4-D
reservoir monitoring. The Company has developed a small diameter ocean bottom
cable to reduce problems of storage, weight and handling.
LAND AND TRANSITION ZONES
PolySeis ATS(TM) System.
The Company developed the PolySeis ATS(TM) (All Terrain Seismic) System in
conjunction with the Institute Francais du Petrole ("IFP"), a French government
research agency, and introduced the system in late 1995. The PolySeis ATS(TM)
System is a modular 24-bit radio and/or wireline telemetry seismic data
acquisition system that can be configured by the user for either transition zone
or land environments, or a combination of both environments. The PolySeis
ATS(TM) System is specifically adaptive to the unique requirements associated
with exploration in transition zones or in regions that are inaccessible or
difficult to reach such as lakes, swamps, jungles or mountainous areas.
PolySeis ATS(TM)System acquires seismic data using a Remote Telemetry Unit
("RTU"). The PolySeis ATS(TM) System may be configured to use a combination of
three-channel marine buoy RTUs and six-channel land box RTUs which allow
synchronized signals to be transmitted to a portable recording unit or control
recording system. The ability to utilize a combination of transition zone and
land RTUs permits a large seismic survey to be conducted over diverse terrain.
Each RTU acquires channels of seismic data and remotely transmits the data to a
Data Concentrator Unit ("DCU") via radio or wireline telemetry. Depending upon
the acquisition requirements, data may be recorded at the DCU using a portable
recording unit attached to the DCU or at a remote central recording unit by way
of fiber optic cable.
PolyTrak(TM).
The Company's PolyTrak(TM) product is a radio carrier system used for
tracking and messaging purposes. The system makes use of radio bandwidth and
contains a range of mapping, navigation and database features utilized in
survey, HSE (health, safety and environment) and related operations. In addition
to its other software functions, the PolyTrak(TM) contains direct links to and
from the Company's PolySeis ATS(TM) products.
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CABLE SALES, MANUFACTURING, REPAIR AND MAINTENANCE
The Company provides repair and maintenance support services related to
streamer cables, whether manufactured by the Company or other vendors, at its
service facilities in the United Kingdom, Singapore and the United States.
Additionally, the Company's joint venture with China Oil Offshore Geophysical in
Tanggu, China has enhanced the Company's ability to provide services to the Far
East region.
The Company manufactures a variety of fiber optic and copper wire cables
for use with land seismic data acquisition systems. The cables are designed to
be compatible with the Company's PolySeis ATS(TM) System and land seismic data
acquisition systems manufactured by other companies. The Company manufactures
land cables to satisfy its customers' specifications, including specifications
relating to length, covering material and impedance.
PRODUCT DEVELOPMENT
The Company's ability to compete effectively and maintain a leading market
position in the manufacture and sale of seismic data acquisition systems and
related products depends to a substantial degree upon continued technological
innovation. While the market for these systems and related products is
characterized by continual and rapid changes in technology, development cycles
from initial conception through product introduction tend to extend over several
years. Over the past three years, the Company has invested an average of 8.7% of
its revenue toward the research and development of new products and the
enhancement of current products. In addition, the Company has been involved in
efforts with other companies to jointly develop technology. For example, the
PolySeis ATS(TM) System was developed by a consortium consisting of the Company,
IFP and two other companies. The Company is required to pay a negotiated amount
to the consortium based on sales of such products. The Company's recent
acquisition of ITI provides the Company with additional products and advances
the development of a new solid streamer cable for use in the military
surveillance area as well as in the seismic data acquisition area. The Company
actively solicits the views of its customers relating to their future needs with
respect to seismic data acquisition systems and related products to help
determine the direction and priority of its research and development activities.
The Company has developed an RDA streamer cable for use with marine seismic
data acquisition systems, and the Company currently is testing an RDA ocean
bottom cable for use in shallow water and in deeper ocean waters. See " --
Products and Services -- Marine -- Streamer Cables" and " -- Marine -- Ocean
Bottom Cable System." The Company also is developing products that will enable
the Company's existing 3-D seismic data acquisition systems to be used in
connection with 4-D seismic surveys. The 4-D process, or time-lapse 3-D,
measures the same length, depth and width of data acquired in 3-D surveys, but
also features the capability to record time intervals between two or more
surveys. The process is well-suited for reservoir monitoring applications, and
is intended to identify fluid movements and changes in the producing status of
the reservoir. In addition, the Company is developing a seismic data acquisition
system, utilizing the existing radio telemetry technology of the PolySeis
ATS(TM) System, that would be capable of simultaneously recording a
significantly greater number of channels than existing systems for use in
connection with large scale 3-D seismic surveys conducted on land or in
transition zones.
MARKETING
The Company's principal customers for its seismic data acquisition systems
are seismic contractors, which operate seismic data acquisition systems to
collect data in accordance with their customers specifications or for their own
seismic data libraries, and independent and foreign national oil and gas
companies, which typically specify seismic data acquisition program parameters
to contractors and consequently may stipulate use of the Company's equipment, or
may operate their own seismic crews. During 1997, 1996, and 1995, the largest
customers in each of those years, Customer A (1997, 1996, 1995), Customer B
(1997, 1996, 1995), Customer C (1996), and Customer D (1997), accounted for a
total of approximately 52%, 44%, and 39%, respectively, of the Company's
revenue, and the Company's single largest customer, Customer A, in those years
accounted for 29%, 16%, and 21%, respectively, of revenue.
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The Company focuses a significant portion of its marketing efforts on areas
outside the United States. The Company sells its products through a direct sales
force consisting of Company employees and through several international
third-party sales representatives responsible for key geographic areas. Sales
personnel generally have either (i) oil and gas exploration or production
expertise or (ii) experience in selling advanced technology-based systems.
During fiscal 1997, 1996, and 1995, approximately 77%, 76%, and 77%,
respectively, of the Company's revenue was derived from sales to customers
outside the United States. See Note 14 of Notes to Consolidated Financial
Statements for geographic distribution of sales. In addition, systems sold to
domestic customers are frequently deployed internationally. Company sales are
predominantly denominated in U.S. dollars. From time to time, certain foreign
sales require export licenses. See " -- Regulatory Matters" below.
In general, products are sold on standard 30-day credit terms. However,
sales are also made on extended credit arrangements or under lease/purchase
arrangements usually with the credit secured by a security interest in the
product. The Company's extended term credit arrangements in excess of one year
typically require a down payment with the remaining amount evidenced by a
promissory note from the customer that is secured by the equipment purchased.
The promissory notes typically have maturities of 12 to 36 months and bear
interest at an annual rate ranging from 1% to 3% above the prime rate. As of
December 31, 1997, the outstanding amounts of such notes totaled approximately
$15.4 million. The Company has an agreement with a commercial bank to sell up to
a total of $15 million of customer notes to the bank at 100% of the principal
amount thereof, subject to the satisfaction of certain conditions, including the
bank's approval of the creditworthiness of the customer issuing a note. The
Company is obligated to repurchase these notes from the bank in the event of
customer default or other covenant violations. As of December 31, 1997, the
outstanding amount of notes sold to a commercial bank totaled approximately $6.5
million. Although the Company has not experienced any material financial losses
on notes receivables due to nonpayment by its customers, the significant cost of
seismic survey equipment and the difficulty of repossessing such equipment
outside of the United States could adversely affect the financial condition of
the Company.
MANUFACTURING AND RAW MATERIALS
The Company manufactures or assembles its products, produces spare parts
and renovates and repairs seismic survey equipment at its various facilities in
Houston, Fort Worth, England, Singapore and China. Major components of the
PolySeis ATS(TM) System are manufactured at facilities in France operated by the
consortium that developed the system, of which a subsidiary of the Company is a
member. A substantial portion of the electronic components and molded shapes
used in its systems and products are purchased from third party vendors. The
Company's manufacturing and product assembly operations consist of machining the
necessary component parts, configuring these parts along with components
received from various vendors, and assembling a final product. The Company
maintains inventory, including work-in-process at different levels of
completion, to enable the Company to satisfy specific configuration requirements
of customers within the shortest amount of time.
The Company occasionally has experienced supply or vendor quality control
problems and the Company may experience supply or vendor quality control
problems from time to time in the future. Such problems, if incurred, could
significantly affect the Company's ability to meet production and sales
commitments. Certain items, such as the 24-bit analog-to-digital converters and
hybrid processors used in its SYNTRAK 960-24(TM) towed array system and ocean
bottom cable, and hydrophones with water depth limiting capability used with
marine seismic cables, are purchased from single vendors. Although the Company
attempts to maintain an adequate inventory of these single source items, the
loss of ready access to any of these items could temporarily disrupt the
Company's ability to manufacture and sell certain products. Since the Company's
components are designed for use with these single source items, replacing the
single source items with functional equivalents could require a redesign of the
Company's components and costly delays could result.
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The performance of the Company's seismic acquisition products can be
affected by the performance of the seismic cables. Customers of the Company have
occasionally experienced problems with their seismic data acquisition systems
due to deficiencies in cables purchased from third parties. The Company has
developed or acquired the capability to manufacture seismic cables for use with
all its seismic acquisition products in order to control the quality and lower
the cost of the cables.
COMPETITION
The markets for seismic data acquisition systems and related products are
highly competitive and are characterized by continual and rapid changes in
technology. The Company's principal competitors for its marine seismic data
acquisition systems are independent manufacturers of seismic equipment and
integrated seismic contractors that produce equipment for their own use and for
sale to others.
The Company believes that technology and reliability are the primary basis
of competition in the industry, as oil and gas exploration companies demand
higher quality seismic data and seismic contractors require improved
productivity from their equipment and crews. The remaining principal competitive
factors include price, financing, customer support, installed base size, and
first-to-market advantage. The Company believes that it competes effectively
with respect to each of these areas, although there can be no assurance that
sales of the Company's products will not be adversely affected if its current
competitors or new market entrants introduce new products with better
functionality, performance, price or other characteristics than the Company's
products.
BACKLOG
The Company forecasts sales for its products and therefore maintains an
inventory of components that can be used to assemble products on a relatively
rapid basis. As a result, the Company normally fills and ships customer orders
within 90 to 180 days of receipt and generally maintains no significant backlog.
The Company's backlog of firm orders at December 31, 1997, was approximately
$52.3 million. The unusually high level of backlog was a result of several
customers placing orders earlier than normal to insure their place in the
manufacturing cycle as demand for the Company's products increased and to avoid
announced price increases for 1998. The Company anticipates that substantially
all of the backlog will be shipped during 1998.
INTELLECTUAL PROPERTY
The Company presently holds U.S. patents that relate to many of the
components of the marine seismic survey, ocean bottom cable, PVDF hydrophone and
towed array product lines. The Company has used a combination of patents, trade
secrets, copyrights, contracts, and technical measures to protect its
proprietary hardware and software technologies. While certain key technologies
have been patented by the Company, it does not typically patent its proprietary
technology, even where regarded as patentable. The Company believes that in most
cases this technology is more effectively protected by system enhancements,
innovations and maintaining confidentiality rather than through disclosure and a
comprehensive patent enforcement program. Although the Company's patents are
considered important to its operations, no one patent is considered essential to
the success of the Company. Copyright and trade secret protection may be
unavailable or ineffective in certain foreign countries in which the Company
sells its products. In addition, the Company seeks to protect its trade secrets
through confidentiality agreements with its employees and agents. The Company
also owns a number of trademarks.
The Company pays royalties based on the net sales of certain products in
connection with assignments to the Company of all intellectual property rights
with respect to such products.
REGULATORY MATTERS
The Company's operations are subject to numerous local, state, federal and
foreign government laws and regulations governing the discharge of materials
into the environment as well as relating to the protection of public health and
the environment. Noncompliance with such laws and regulations could result in
the imposition of significant fines, penalties and other liabilities on the
Company. The Company believes that it is currently in substantial compliance
with the requirements of environmental and occupational health
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and safety laws and regulations. Compliance with such laws and regulations has
not represented a significant expense for the Company in the past and the
Company does not foresee the need for material expenditures to ensure continued
compliance with such laws and regulations as they exist currently. Regulations
in these areas are subject to change, however, and there can be no assurance
that future laws or regulations will not have a material adverse effect on the
Company.
The Company from time to time is required to obtain export licenses from
the United States government. There can be no assurance that the Company will
not experience difficulty in obtaining such licenses as may be required in
connection with export sales. In addition, the Company is required in some
countries to obtain licenses or permits in order to bid on contracts or
otherwise conduct business operations. Some foreign countries require that the
Company enter into a joint venture or similar arrangement with local individuals
or businesses in order to conduct business in such countries.
EMPLOYEES
At December 31, 1997, the Company and its subsidiaries employed
approximately 563 persons worldwide, of whom 387 were employed in the United
States. None of the Company's employees are unionized. The Company considers its
relationship with its employees to be satisfactory.
GEOGRAPHICAL INFORMATION
Certain geographical information with respect to the Company's business is
set forth in Note 14 of Notes to Consolidated Financial Statements and is
incorporated by reference herein.
RELATIONSHIP WITH TECH-SYM
Prior to the organization of GeoScience, Tech-Sym provided management and
administrative assistance and oversight to Syntron, CogniSeis and Symtronix.
Tech-Sym also provided working capital to Syntron, CogniSeis and Symtronix.
After the organization of GeoScience, Tech-Sym has continued to provide such
assistance and oversight to GeoScience, with the exception of CogniSeis due to
its October 1997 sale, under substantially the same procedures for allocating
costs as before the Company's organization. In 1996, Tech-Sym and GeoScience
entered into a Corporate Services Agreement, Tax Allocation Agreement,
Shareholder Agreement, Intercompany Credit Agreement, and Stock Restriction and
Registration Agreement for the purpose of defining the relationship between
them. As a result of its ownership of a majority of the outstanding common stock
of the Company, Tech-Sym is able, acting alone, to elect the entire Board of
Directors of the Company and to approve any action requiring shareholder
approval.
YEAR 2000
The Company currently is in the process of evaluating its information
technology infrastructure for the Year 2000 compliance. The Company does not
expect that the cost to modify its information technology infrastructure to be
Year 2000 compliant will be material to its financial condition or results of
operations. The Company does not anticipate any material disruptions in its
operations as a result of any failure by the Company to be in compliance.
ITEM 2. PROPERTIES
The Company leases 1,200 square feet of office space in Houston, Texas for
its executive offices pursuant to a lease with Tech-Sym Management Corporation.
Syntron operates from company-owned facilities comprising 110,000 square
feet located on a 17.4 acre tract and leased facilities totaling 100,000 square
feet located in Houston, Texas. ITI leases approximately 4,700 square feet in
Fort Worth, Texas. Syntron's European subsidiary, Syntron Europe Limited,
operates from a 52,000 square foot office and plant facility on a 2.8 acre tract
owned by the company in Derbyshire, England. Syntron's Asian subsidiary, Syntron
Asia Pte. Ltd., operates from a company-owned 33,300 square foot office and
plant facility on a 1.4 acre tract it leases in Singapore.
Symtronix conducts its operations from 6,600 square feet of office space
leased in Houston, Texas.
Syntron currently plans to begin and complete, within 1998, construction of
an 80,000 square foot production facility adjacent to its currently owned
facility in Houston, Texas, to replace certain leased
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facilities and consolidate operations. The Company believes that, with the
addition of the new Syntron facility, it will have adequate and suitable
facilities for the business levels expected over the next several years. The
Company maintains customary compensation, liability, and property insurance for
all of its operations.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is a party to what it believes is routine
litigation and proceedings that may be considered as part of the ordinary course
of its business. The Company is not aware of any current or pending litigation
or proceedings that could have a material adverse effect on the Company's
results of operations, financial condition or cash flow.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1997, no matter was submitted to a vote of the
Company's security holders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock trades on the Nasdaq National Market under the
symbol "GSCI". At March 13, 1998, the Company had 29 stockholders of record.
The following table sets forth the high and low sales prices for the
Company's Common Stock for the quarters indicated. The Company's common stock
commenced trading on May 17, 1996.
PRICE RANGE OF COMMON STOCK
1996 1997
-------------- --------------
QUARTER HIGH LOW HIGH LOW
------- ----- ----- ----- -----
First................................ $ -- $ -- $15 $11
Second............................... 21 1/2 12 1/2 13 3/4 9
Third................................ 15 1/2 9 7/8 14 5/8 9 5/8
Fourth............................... 13 3/4 9 3/4 13 1/2 9 3/8
The Company has not paid any dividends on its Common Stock and does not expect
to pay dividends on its Common Stock in the foreseeable future.
8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected consolidated financial data as of and for the five
years ended December 31, 1997, have been derived from audited consolidated
financial statements. This information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements as of December 31, 1997
and 1996 and for each of the three years in the period ended December 31, 1997,
and the related notes thereto included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenue.............................. $ 94,451 $ 90,896 $ 61,590 $ 47,374 $ 45,153
--------- --------- --------- --------- ---------
Cost of revenue...................... 60,566 57,134 35,452 22,701 21,393
--------- --------- --------- --------- ---------
Gross profit................ 33,885 33,762 26,138 24,673 23,760
--------- --------- --------- --------- ---------
Expenses:
Selling, general and
administrative expense......... 21,259 17,952 12,873 10,097 8,646
Research and development
expense........................ 7,902 6,707 6,876 5,461 3,903
Interest expense................. 2,442 1,374 1,888 997 869
Interest and other income, net... (1,252) (938) (1,300) (278) (68)
--------- --------- --------- --------- ---------
Total expenses.............. 30,351 25,095 20,337 16,277 13,350
--------- --------- --------- --------- ---------
Income from continuing
operations before income
taxes..................... 3,534 8,667 5,801 8,396 10,410
Provisions for income taxes.......... 1,096 2,687 1,818 2,743 3,225
--------- --------- --------- --------- ---------
Income from continuing
operations................ 2,438 5,980 3,983 5,653 7,185
Discontinued operations:
Income (loss) from
operations(1).................. (1,588) (2,313) (4) 66 (1,403)
Loss from operations(2).......... (435) (926) (931)
Loss on disposal(2).............. (144)
--------- --------- --------- --------- ---------
Net income.................. $ 850 $ 3,667 $ 3,400 $ 4,793 $ 4,851
--------- --------- --------- --------- ---------
PER SHARE DATA:
Earnings (loss) per common share:
Continuing operations
Basic and diluted........... $ .24 $ .63 $ .50 $ .72 $ .91
Discontinued operations
Basic and diluted........... $ (.16) $ (.24) $ (.07) $ (.11) $ (.30)
Net income
Basic and diluted........... $ .08 $ .39 $ .43 $ .61 $ .61
Weighted average common shares
outstanding:
Basic............................ 10,088 9,448 7,900 7,900 7,900
Diluted.......................... 10,109 9,451 7,900 7,900 7,900
OTHER DATA-CONTINUING OPERATIONS:
Capital expenditures................. $ 8,851 $ 6,601 $ 6,181 $ 3,316 $ 2,346
Depreciation and amortization........ 6,055 4,721 4,105 3,354 2,480
AS OF DECEMBER 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
BALANCE SHEET DATA (END OF PERIOD):
Working capital...................... $ 36,718 $ 36,863 $ 6,161 $ 10,225 $ 9,736
Total assets......................... 148,190 123,826 98,890 66,669 46,764
Notes payable........................ 29,832 16,197 11,681 4,343 216
Payable to Tech-Sym.................. 9,823 5,126 23,554 14,940 12,348
Long-term debt....................... 9,445 4,620 5,386 2,728 1,482
Shareholders' investment............. 71,767 74,804 33,268 29,866 24,864
</TABLE>
- ------------
(1) Relates to the discontinued geoscientific software subsidiary, CogniSeis
Development, Inc., net of applicable income taxes. See Note 3 of Notes to
Consolidated Financial Statements.
(2) Relates to the discontinued operation of the Syntron Pressure Controls
business (formerly known as Tri-Tech) acquired in 1992 and sold in 1995, net
of applicable income tax benefits.
9
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
In June 1997, the Company adopted a plan to sell its geoscientific software
subsidiary, CogniSeis Development, Inc. ("CogniSeis"). Accordingly, the
Consolidated Statement of Income of the Company has been reclassified for all
periods presented to report separately the results of the discontinued operation
through June 30, 1997 (the "measurement date").
On October 14, 1997 (the "disposal date"), The Company sold CogniSeis for
cash of $8,929,000, net of certain liabilities assumed pursuant to the terms of
the sale agreement, plus a note receivable. The total amount of the note
receivable due to the Company equals approximately $12,000,000 and is due in
full by December 30, 2003. The note receivable may be adjusted downward pursuant
to certain provisions of the sale agreement within a one year period. The
payment stream of the note receivable is based on sales of certain CogniSeis
developed software. The sale agreement also has a provision for early payout of
the note receivable as follows: $8,500,000 if paid within 90 days of the closing
date; $9,000,000 if paid between 90 and 180 days of the closing date; $9,500,000
if paid between 180 and 270 days of the closing date; and $10,000,000 if paid
between 270 days and one year of the closing date.
The results of the discontinued operation from the measurement date through
the disposal date, which were insignificant, as well as the expected gain on the
sale have been deferred at December 31, 1997, until estimates regarding certain
provisions of the sale agreement can be made with reasonable certainty.
Management's discussion and analysis of the results of operations reflects
the reclassification of the discontinued operation.
1997 COMPARED TO 1996
REVENUE. The Company's revenue for the year ended December 31, 1997,
increased 4% to $94,451,000 from $90,896,000 in 1996. The $3,555,000 increase in
revenue resulted from increased shipments of seismic cables and an unusually
large contract awarded in the first quarter of the year to provide technical
data services to potential bidders on oil exploration leases. The seismic
products shipped in 1997 as compared to 1996 included more seismic cables and
less data acquisition modules. Shipment of seismic cables increased 43% to
$40,900,000 as compared to 1996, while shipments of data acquisition modules
decreased 22% to $24,700,000 as compared to 1996. Aggressive competitive pricing
on seismic cables and digital acquisition modules plus customers' delays in
placing equipment orders until later in the third and fourth quarters hampered
further revenue growth. The delayed placement of the equipment orders resulted
in a year end backlog for seismic data acquisition equipment of approximately
$52,300,000, a $42,300,000 increase over the 1996 year end backlog. The Company
anticipates that substantially all of this backlog will be shipped in 1998.
GROSS MARGIN. The Company's gross margin increased $123,000, less than 1%,
to $33,885,000 compared to $33,762,000 in 1996. As a percentage of revenue,
gross margin decreased from 37% in 1996 to 36% in 1997. The margin decrease for
the year was primarily due to (i) a change in sales mix whereby seismic cables,
which typically carry lower margins than the digital data acquisition modules,
represented 43% of the 1997 revenue as compared to 31% of 1996 revenue, (ii)
increased engineering, manufacturing and warranty costs associated with the
24-bit seismic data acquisition module, and (iii) increased manufacturing costs
within the domestic seismic cable manufacturing facility.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. The Company's consolidated
selling, general and administrative expenses for 1997 increased $3,307,000, or
18% to $21,259,000. These expenses as a percentage of revenue increased from 20%
in 1996 to 23% in 1997. The primary reasons for the increase were (i) increased
commission costs associated with increased international sales, (ii) higher
consulting costs associated with seismic cable sales, (iii) additional support
personnel costs associated with employment levels added during the year in
anticipation of accelerated business growth, and (iv) the additional costs of
managing the consolidated business and being a publicly traded company.
10
<PAGE>
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense was
$7,902,000 for 1997, compared to $6,707,000 for 1996. The $1,195,000 or 18%
increase over the prior year primarily resulted from the costs incurred for
design changes to the 24-bit seismic data acquisition module and prototype costs
related to efforts to develop new reservoir monitoring equipment. The design
changes made to the 24-bit module during the year are expected to result in
lower manufacturing costs for the product in future periods. The Company
anticipates reservoir monitoring to be a major growth market for seismic
equipment manufacturers in the future.
INTEREST EXPENSE. Interest expense for 1997 increased to $2,442,000 from
$1,374,000 in 1996. The $1,068,000 increase resulted from higher borrowings to
support the increased expenditures for capital equipment and facilities, and to
finance the growth in inventories and accounts receivables. Inventory growth
occurred primarily in 24-bit data acquisition modules, seismic cables, and
PolySeis ATS(TM) System components. The increase in the receivable balance
throughout the year resulted from extended payment terms given to certain
customers combined with an increased level of product shipments.
INTEREST AND OTHER INCOME, NET. For 1997, net interest and other income
was $1,252,000 as compared to $938,000 in 1996. The $314,000, or 33% increase
resulted from increased income associated with financing certain customer sales
and increases in other miscellaneous income.
PROVISION FOR INCOME TAXES. Provision for income taxes for 1997 decreased
as a result of lower income from continuing operations. The Company's effective
tax rate of 31% on income from continuing operations remained the same from
1996.
INCOME FROM CONTINUING OPERATIONS. The Company's 1997 income from
continuing operations was $2,438,000 or $0.24 per share compared to $5,980,000
or $0.63 per share in 1996, reflecting the lower gross margin percentage and
higher operating expenses that more than offset the increase in revenue for the
year.
DISCONTINUED OPERATION. The 1997 loss from the discontinued operation,
$1,588,000, or $0.16 per share, included CogniSeis' operating results through
June 30, 1997, the measurement date, whereas the 1996 loss of $2,313,000, or
$0.24 per share, reflected a complete year of CogniSeis' operations.
NET INCOME. The Company's net income was $850,000 or $0.08 per share as
compared to $3,667,000 or $0.39 per share in 1996, reflecting the net effect of
the items described above.
1996 COMPARED TO 1995
REVENUE. The Company's revenue for the year ended December 31, 1996,
increased 48% to $90,896,000 from $61,590,000 in 1995. The increase in revenue
was primarily the result of increased seismic data acquisition equipment sales.
Major contributors to the increased equipment sales were (i) the newly
introduced reduced diameter array ("RDA") streamer cable and (ii) the 24-bit
digital seismic data acquisition modules designed in 1995. Further revenue
growth from equipment sales was hampered by aggressive competitive pricing that
restricted price increases of the 24-bit digital seismic data acquisition
modules and held new cable business worldwide at less than optimal price levels
and strategic pricing on the new ocean bottom cable products.
GROSS MARGIN. The Company's gross margin increased $7,624,000, or 29% to
$33,762,000 in 1996 compared to $26,138,000 in 1995. As a percentage of revenue,
gross margin decreased from 42% in 1995 to 37% in 1996. In addition to the
pricing considerations noted above, the costs of revenue increased due primarily
to (i) increased costs associated with increased sales, (ii) increased
manufacturing costs of the 24-bit digital acquisition modules as compared to the
16-bit modules, and (iii) start up costs of introducing new products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. The Company's selling,
general and administrative expenses for 1996 increased $5,079,000, or 39% over
the prior year. Such increase corresponded favorably to the 48% increase in
revenue and primarily was attributable to (i) additional royalties on increased
equipment sales, (ii) additional personnel associated with general business
growth, and (iii) additional costs of managing the consolidated business and
being a publicly traded company.
11
<PAGE>
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense for
1996 decreased $169,000 from the prior year. The decrease was due primarily to
lower development costs on the 24-bit module.
INTEREST EXPENSE. Interest expense for 1996 decreased $514,000, or 27%
from the prior year, primarily due to the Company utilizing proceeds from its
public stock offering to payoff interest bearing debt to outside parties and
Tech-Sym, and a reduction in the interest rate on its line of credit borrowings.
INTEREST AND OTHER INCOME, NET. Net interest and other income for 1996,
decreased $362,000 or 28% from the prior year primarily due to less interest
income for the year from customer financing.
PROVISION FOR INCOME TAXES. Provision for income taxes for 1996 increased
as a result of higher income from continuing operations. The Company's effective
tax rate of 31% on income from continuing operations remained the same in 1996
as in 1995.
INCOME FROM CONTINUING OPERATIONS. The Company's 1996 income from
continuing operations increased to $5,980,000 as compared to $3,983,000 in 1995.
The Company's large growth in revenue over the prior year more than offset the
decreased gross margin percentage and higher operating expenses incurred during
the year.
DISCONTINUED OPERATIONS. The increase in the loss from discontinued
operations from $583,000 in 1995 to $2,313,000 in 1996 resulted primarily from
increased selling, general and administrative expenses associated with
CogniSeis' acquisition of Photon Systems Ltd., in September 1995.
NET INCOME. The Company's net income for the year was $3,667,000 as
compared to $3,400,000 in 1995. The larger loss of the discontinued operations
in 1996 compared to that in 1995 offset the majority of the 1996 increase in
income from continuing operations.
LIQUIDITY & CAPITAL RESOURCES
During 1997, the Company satisfied its working capital and capital
expenditure requirements through borrowings from a financial institution and
loans from an affiliate, Tech-Sym Corporation.
At December 31, 1997, the Company's working capital was $36,718,000 as
compared to $36,863,000 at December 31, 1996. The Company's cash and cash
equivalents decreased to $799,000 during the period, while receivables,
inventories and other current assets increased to $101,787,000 from $79,270,000
in 1996. Current liabilities increased to $65,868,000 from $43,713,000 in 1996
primarily due to increased borrowings to support the growth in receivables and
inventories.
The Company's operations used cash in the amount of $17,109,000 and
$13,778,000 in 1997 and 1996, respectively, and provided cash in the amount of
$325,000 in 1995. In 1997, cash was used primarily for carrying customer
receivables and for maintaining additional inventory to support the Company's
overall growth strategy.
Receivables and long-term receivables are concentrated in large domestic
and foreign oil and gas exploration companies and a distributor located in
China. The Company performs periodic evaluations of the relative credit standing
of these companies and generally tries to limit the amount of exposure with any
company. Approximately 21% of receivables are with a foreign oil and gas
exploration company located in Russia and a distributor located in China.
At December 31, 1997 and 1996, inventories included $12,026,000 and
$9,408,000, respectively, of electronic components related to the land and
transition zone seismic data acquisition system product line, PolySeis ATS(TM).
The Company, together with members of a consortium, completed commerical
development of this product line in late 1995. This product uses the technology
of radio and/or wireline telemetry which is specifically adaptive to the unique
requirements of the land and transition zone market. Management believes this
product is in the early stage of its life cycle and certain risks of market
acceptance exist. The Company has recently experienced limited leasing activity
of this product and believes the demand for this product will significantly
increase and the related inventory will be sold in the normal course of
business.
12
<PAGE>
At December 31, 1997, the Company had short-term line of credit facilities
aggregating $30,361,000 of which $5,222,000 was available for additional
short-term borrowings. These lines of credit are substantially guaranteed by
Tech-Sym. In addition to the lines of credit, the Company has an agreement with
a financial institution to sell up to a total of $15,000,000 of eligible
customer notes receivable to the financial institution at 100% of the principal
amount thereof, subject to approval of the credit worthiness of the customers
issuing notes and the satisfaction of other conditions. The Company is obligated
to repurchase these notes from the financial institution in the event of
customer default or other covenant violations. As of December 31, 1997, the
financial institution had purchased notes which, in the aggregate, would
obligate the Company to repurchase $6,492,000 in principal amount of notes in
the event of customer defaults. To date, the Company has not experienced any
financial losses due to nonpayment by its customers or other covenant
violations. Tech-Sym currently guarantees the payment obligations of the Company
under the repurchase agreement.
Because of the Company's anticipated new business, it is expected that
additional investment will be required in capital equipment and new facilities.
During 1997 the Company purchased 31,000 square feet of additional production
and office space that had previously been leased. Additionally, in 1997 the
Company began negotiating a contract to construct an additional 80,000 square
foot production facility which should be completed by the end of 1998. Capital
expenditures for land, buildings and improvements, and machinery and equipment
were $9,552,000, $7,649,000, and $9,820,000 for 1997, 1996, and 1995,
respectively, and are expected to be approximately $7,020,000 in 1998. The
Company believes that the funds required for working capital needs and capital
expenditures will come from cash flows from operations, unused credit available
under credit facilities, long-term financing and loans from an affiliate,
Tech-Sym. The Company believes that cash flows from operations will improve
significantly in 1998 as receivables and inventories become better matched with
revenue growth.
FLUCTUATIONS IN OPERATING RESULTS
Due to the relatively high sales price of a seismic data acquisition system
(typically ranging from $1,500,000 to more than $8,000,000) and relatively low
unit sales volume, the timing in the shipment of systems and the mix of other
seismic products and services sold can produce significant fluctuations in
quarter-to-quarter and year-to-year financial results. The Company believes that
factors affecting such timing may include, among others, fluctuations in world
oil and gas prices, political changes in other countries, seasonality of
end-user markets, availability of customer financing, lease/purchase decisions
by customers, manufacturing lead times, shortages and quality control problems
relating to system components manufactured by third parties, and environmental
issues.
ITEM 7.A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth in a separate section of
this Report on Form 10-K. See the accompanying "Index of Financial Statements"
at Page F-1. Such information is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
13
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the caption "Election of Directors" and
"Executive Officers of the Registrant" in the Company's Proxy Statement for
its 1998 Annual Meeting of Stockholders (the "Proxy Statement"), which is to
be filed with the Securities and Exchange Commission (the "Commission") within
120 days of December 31, 1997 pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended ("the Act"), is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation" in
the Company's Proxy Statement, which is to be filed with the Commission within
120 days of December 31, 1997, pursuant to Regulation 14A under the Act, is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Company's Proxy Statement, which is to
be filed with the Commission within 120 days of December 31, 1997, pursuant to
Regulation 14A under the Act, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Certain Transactions with
Management" in the Company's Proxy Statement, which is to be filed with the
Commission within 120 days of December 31, 1997, pursuant to Regulation 14A
under the Act, is incorporated herein by reference.
14
<PAGE>
PART IV
ITEM 14. EXHIBITS, REPORTS ON FORM 8-K, AND FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as a part of this report:
1. FINANCIAL STATEMENTS: SEE THE ACCOMPANYING "INDEX OF FINANCIAL
STATEMENTS" AT PAGE F-1.
2. FINANCIAL STATEMENT SCHEDULE: SEE THE ACCOMPANYING "INDEX OF
FINANCIAL STATEMENTS" AT PAGE F-1.
3. EXHIBITS:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
3.1* -- Articles of Incorporation of GeoScience Corporation (Exhibit 3.1 to
Registrant's Registration Statement (No. 333-2986) on Form S-1, as
amended).
3.2* -- Bylaws of GeoScience Corporation (Exhibit 3.2 to Registrant's
Registration Statement (No. 333-2986) on Form S-1, as amended).
4.1* -- Specimen Common Stock Certificate (Exhibit 4.2 to Registrant's
Registration Statement (No. 333-2986) on Form S-1, as amended).
10.1* -- Amended and Restated 1996 Equity Incentive Plan (Exhibit 10 (b) to
Registrant's Quarterly Report for the quarterly period ended June 30,
1997 (No. 0-28922)
10.2* -- Form of Corporate Services Agreement (Exhibit 10.2 to Registrant's
Registration Statement (No. 333-2986) on Form S-1, as amended).
10.3* -- Form of Intercompany Credit Agreement (Exhibit 10.3 to
Registrant's Registration Statement (No. 333-2986) on Form S-1, as
amended).
10.4* -- Form of Tax Allocation Agreement (Exhibit 10.4 to Registrant's
Registration Statement (No. 333-2986) on Form S-1, as amended).
10.5* -- Form of Shareholder Agreement (Exhibit 10.5 to Registrant's
Registration Statement (No. 333-2986) on Form S-1, as amended).
10.6* -- Form of Stock Restriction and Registration Agreement (Exhibit 10.6
to Registrant's Registration Statement (No. 333-2986) on Form S-1, as
amended).
10.7* -- Loan Agreement dated December 6, 1996 between Registrant and Wells
Fargo Bank (Texas) N.A. (Exhibit 10.7 to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 (No. 0-28422)).
10.8 -- First Amendment dated April 30, 1997 to Loan Agreement dated
December 6, 1996 between Registrant and Wells Fargo Bank (Texas) N.A.
10.9 -- Second Amendment dated December 10, 1997 to Loan Agreement dated
December 6, 1996 between Registrant and Wells Fargo Bank (Texas) N.A.
10.10*-- Amended and Restated Loan Agreement dated December 6, 1996
between Syntron and Wells Fargo Bank (Texas) N.A. (Exhibit 10.11 to
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (No. 0-28422)).
10.11 -- First Amendment dated April 30, 1997 to Amended and Restated Loan
Agreement dated December 6, 1996 between Syntron and Wells Fargo Bank
(Texas) N.A.
10.12 -- Second Amendment dated December 10, 1997 to Amended and Restated
Loan Agreement dated December 6, 1996 between Syntron and Wells Fargo
Bank (Texas) N.A.
10.13*-- Form of Nonemployee Director Stock Option Agreement (Exhibit
10.12 to Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (No. 0-28422)).
10.14*-- Termination Agreement dated August 15, 1996, between Tech-Sym
Corporation and Bruce H. Nelson. (Exhibit 10.13 to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996 (No.
0-28422)).
10.15*-- Termination Agreement dated May 1, 1991 between Tech-Sym
Corporation and J. Rankin Tippins. (Exhibit 10.14 to Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996
(No. 0-28422)).
15
<PAGE>
10.16* -- Termination Agreement dated May 1, 1991 between Tech-Sym
Corporation and Ray F. Thompson. (Exhibit 10.15 to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996 (No.
0-28422)).
10.17* -- Termination Agreement dated May 1, 1991 between Tech-Sym
Corporation and Richard F. Miles. (Exhibit 10.16 to Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996
(No. 0-28422)).
10.18* -- First Amendment dated June 21, 1994 to Termination Agreement
dated May 1, 1991 between Tech-Sym Corporation and Richard F. Miles.
(Exhibit 10.17 to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 (No. 0-28422)).
10.19* -- Stock Purchase Agreement dated September 5, 1997, by and among
the Registrant, Paradigm Geophysical Corporation and Paradigm
Geophysical Ltd. (Exhibit 2.1 to Registrant's Current Report on Form
8-K dated October 14, 1997 (No. 0-28422)).
10.20* -- Executive Retirement Agreement, as amended and restated, dated
April 30, 1992 between Tech-Sym Corporation and Wendell W. Gamel.
(Exhibit 10.18 to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 (No. 0-28422)).
10.21* -- Executive Retirement Agreement, as amended and restated, dated April
30, 1992 for Ray F. Thompson. (Exhibit 10.19 to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996 (No.
0-28422)).
10.22* -- Executive Retirement Agreement, as amended and restated, dated April
30, 1992 between Tech-Sym Corporation and J. Rankin Tippins. (Exhibit
10.20 to Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (No. 0-28422)).
10.23* -- Executive Retirement Agreement dated April 26, 1994 between Tech-Sym
Corporation and Richard F. Miles. (Exhibit 10.21 to Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996
(No. 0-28422)).
21 -- Subsidiaries of GeoScience.
23 -- Consent of Independent Accountants.
24 -- Power of Attorney.
27 -- Financial Data Schedule.
The exhibits indicated by an asterisk (*) are incorporated by reference to
a prior filing as indicated in parentheses.
(b) REPORTS ON FORM 8-K.
Current Report on Form 8-K dated October 14, 1997 [Item 2. Acquisition or
Disposition of Assets (reporting sale of geoscientific software business,
CogniSeis Development, Inc.) and Item 7. Financial Statements and Exhibits].
16
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
GEOSCIENCE CORPORATION
(Registrant)
By: /s/ RICHARD F. MILES
RICHARD F. MILES, PRESIDENT
(PRINCIPAL EXECUTIVE OFFICER
AND DIRECTOR)
March 26, 1998
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
- -------------------- ------------------------------------ --------------
/s/ RAY F. THOMPSON Vice President, Chief March 26, 1998
(RAY F. THOMPSON) Financial Officer,
Treasurer (Principal
Financial and Accounting
Officer) and Director
______
/s/ W. L. CREECH* |
(W. L. CREECH) |
|
/s/ MICHAEL C. FORREST* |
(MICHAEL C. FORREST) |
|
/s/ WENDELL W. GAMEL* |
(WENDELL W. GAMEL) |
|
/s/ CHRISTOPHER C. KRAFT, JR.* |--Directors of the Registrant March 26, 1998
(CHRISTOPHER C. KRAFT, JR.) |
|
/s/ EDWARD R. PRINCE, JR.* |
(EDWARD R. PRINCE, JR.) |
|
/s/ J. RANKIN TIPPINS* |
(J. RANKIN TIPPINS) |
______|
*By: /s/ RAY F. THOMPSON
RAY F. THOMPSON
(ATTORNEY-IN-FACT)
17
<PAGE>
GEOSCIENCE COPORATION
INDEX OF FINANCIAL STATEMENTS
PAGE
----
Financial Statements:
Report of Independent
Accountants..................... F-2
Consolidated Statement of Income
for the years ended December
31, 1997, 1996, and 1995....... F-3
Consolidated Balance
Sheet -- December 31, 1997 and
1996........................... F-4
Consolidated Statement of Cash
Flows for the years ended
December 31, 1997, 1996, and
1995........................... F-5
Consolidated Statement of
Changes in Shareholders'
Investment for the
years ended December 31, 1997,
1996, and 1995................. F-6
Notes to Consolidated Financial
Statements..................... F-7
Financial Statement Schedule:
Schedule II -- Valuation and
Qualifying Accounts............ F-22
All other schedules have been omitted because they are not applicable or
the required information is presented in the financial statements or the notes
to the financial statements.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of GeoScience Corporation
In our opinion, the consolidated financial statements listed in the
accompanying index on page F-1 present fairly, in all material respects, the
financial position of GeoScience Corporation and its subsidiaries at December
31, 1997 and 1996, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
February 18, 1998
F-2
<PAGE>
GEOSCIENCE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
Revenue.............................. $ 94,451 $ 90,896 $ 61,590
Cost of revenue...................... 60,566 57,134 35,452
--------- --------- ---------
Gross profit............... 33,885 33,762 26,138
--------- --------- ---------
Expenses:
Selling, general and
administrative expense........ 21,259 17,952 12,873
Research and development
expense....................... 7,902 6,707 6,876
Interest expense................ 2,442 1,374 1,888
Interest and other income,
net........................... (1,252) (938) (1,300)
--------- --------- ---------
30,351 25,095 20,337
--------- --------- ---------
Income from continuing
operations
before income taxes..... 3,534 8,667 5,801
Provision for income taxes........... 1,096 2,687 1,818
--------- --------- ---------
Income from comtinuing
operations.............. 2,438 5,980 3,983
Discontinued operations:
Loss from operations of
CogniSeis, less applicable
income tax benefits of $714,
$1,039 and $2, respectively... (1,588) (2,313) (4)
Loss from operations of Syntron
Pressure Controls less
applicable income tax
benefits ..................... (435)
Loss on disposal of Syntron
Pressure Controls less
applicable income tax
benefits...................... (144)
--------- --------- ---------
Net income................. $ 850 $ 3,667 $ 3,400
========= ========= =========
Earnings (loss) per common share:
Continuing operations -- basic
and diluted................... $ .24 $ .63 $ .50
Discontinued operations -- basic
and diluted................... (.16) (.24) (.07)
--------- --------- ---------
Net income -- basic and
diluted....................... $ .08 $ .39 $ .43
========= ========= =========
Weighted average common shares
outstanding:
Basic........................... 10,088 9,448 7,900
Diluted......................... 10,109 9,451 7,900
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
GEOSCIENCE CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PAR VALUE AND NUMBER OF SHARES)
DECEMBER 31,
----------------------
1997 1996
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents....... $ 799 $ 1,306
Receivables..................... 44,348 30,793
Inventories..................... 54,940 45,845
Other........................... 2,499 2,632
---------- ----------
Total current assets....... 102,586 80,576
Property, plant and equipment........ 25,440 25,093
Long-term receivables................ 13,548 9,899
Other assets......................... 6,616 8,258
---------- ----------
Total assets............... $ 148,190 $ 123,826
========== ==========
LIABILITIES
Current Liabilities:
Notes payable and current
maturities of long-term debt... $ 29,832 $ 16,197
Accounts payable................ 12,689 9,542
Unearned revenue................ 1,831 3,232
Taxes on income................. 4,210 2,813
Payable to Tech-Sym
Corporation..................... 9,823 5,126
Other accrued liabilities....... 7,483 6,803
---------- ----------
Total current
liabilities.............. 65,868 43,713
Long-term debt....................... 9,445 4,620
Other liabilities.................... 1,110 689
---------- ----------
Total liabilities.......... 76,423 49,022
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 13)
SHAREHOLDERS' INVESTMENT
Common stock -- authorized 35,000,000
shares, $0.01 par value; issued
10,498,850 and 10,497,600 shares... 105 105
Additional capital................... 44,893 44,877
Accumulated earnings................. 33,447 32,597
Cumulative translation adjustments... (364) 271
Common stock held in treasury, at
cost (519,000 and 240,000
shares)............................ (6,314) (3,046)
---------- ----------
Total shareholders'
investment.............. 71,767 74,804
---------- ----------
Total liabilities and
shareholders'
investment.............. $ 148,190 $ 123,826
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
GEOSCIENCE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
--------- ---------- ----------
Cash flows from operating activities:
Net income...................... $ 850 $ 3,667 $ 3,400
Adjustments to reconcile net
income to net cash provided by
(used for) operating
activities:
Depreciation and
amortization............ 8,016 7,149 6,108
Deferred income taxes...... (671) (624) (485)
Change in operating assets and
liabilities:
Receivables................ (20,794) (2,502) (3,861)
Inventories................ (9,141) (12,929) (15,694)
Other current assets....... (627) 200 (701)
Long-term receivables...... (640) (6,909) (219)
Other assets............... (859) (2,334) (767)
Accounts payable........... 3,541 (3,034) 4,058
Unearned revenue........... 2,344 (2,665) 4,893
Taxes on income............ (229) 2,331 128
Other liabilities.......... (646) 2,233 (540)
Payable to Tech-Sym........ 1,747 1,639 4,005
--------- ---------- ----------
Net cash (used for) provided by
operating activities.......... (17,109) (13,778) 325
--------- ---------- ----------
Cash flows from investing activities:
Capital expenditures............ (9,552) (7,649) (9,820)
Proceeds from sale of
CogniSeis..................... 8,929
Payments for acquisitions....... (3,480) (4,078)
Investment in joint ventures.... (435)
--------- ---------- ----------
Net cash used for investing
activities.................... (4,538) (7,649) (13,898)
--------- ---------- ----------
Cash flows from financing activities:
Net borrowings from (payments
to) Tech-Sym Corporation...... 2,950 (20,067) 4,609
Net borrowings under lines of
credit agreements............. 10,376 5,100 3,641
Proceeds from long-term debt.... 3,492 103 7,284
Payments on long-term debt...... (1,400) (1,453) (2,177)
Sale of notes receivable with
recourse...................... 8,974
Proceeds from issuance of common
stock......................... 40,428
Proceeds from exercise of stock
options....................... 16
Purchase of treasury stock...... (3,268) (3,046)
--------- ---------- ----------
Net cash provided by financing
activities.................... 21,140 21,065 13,357
--------- ---------- ----------
Net decrease in cash and cash
equivalents........................ (507) (362) (216)
Cash and cash equivalents at
beginning of period........... 1,306 1,668 1,884
--------- ---------- ----------
Cash and cash equivalents at end
of period..................... $ 799 $ 1,306 $ 1,668
========= ========== ==========
Supplemental Cash Flow Information:
Cash Transactions:
Interest paid to third parties.. $ 2,804 $ 1,226 $ 535
========= ========== ==========
Income taxes paid to third
parties, net.................. $ 1,198 $ 738 $ 63
========= ========== ==========
Non-Cash Transactions:
Reduction in balance of notes
receivable sold with
recourse...................... $ 2,482
=========
Note receivable, net, on sale of
CogniSeis..................... $ 5,883
=========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
GEOSCIENCE CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' INVESTMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE TREASURY STOCK
--------------- ADDITIONAL ACCUMULATED TRANSLATION ----------------
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENTS SHARES AMOUNT TOTAL
------ ------ ---------- ----------- ----------- ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994........... 100 $ 1 $ 4,553 $25,530 $(218) $ $ 29,866
Net income........................... 3,400 3,400
Currency translation adjustment...... 2 2
------ ------ ---------- ----------- ----------- ------ ------- ---------
Balance, December 31, 1995........... 100 1 4,553 28,930 (216) 33,268
Net income........................... 3,667 3,667
Currency translation adjustment...... 487 487
Issuance of GeoScience common
stock.............................. 10,398 104 40,324 40,428
Acquisition of treasury shares....... 240 (3,046) (3,046)
------ ------ ---------- ----------- ----------- ------ ------- ---------
Balance, December 31, 1996........... 10,498 105 44,877 32,597 271 240 (3,046) 74,804
Net income........................... 850 850
Issuance of common stock for stock
option............................. 1 16 16
Currency translation adjustment...... (718) (718)
Currency translation adjustment
associated with the sale of
Cogniseis.......................... 83 83
Acquisition of treasury shares....... 279 (3,268) (3,268)
------ ------ ---------- ----------- ----------- ------ ------- ---------
Balance, December 31, 1997........... 10,499 $105 $ 44,893 $33,447 $(364) 519 $(6,314) $ 71,767
====== ====== ========== =========== =========== ====== ======= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
GeoScience Corporation (the "Company"), a majority-owned (79.16%)
subsidiary of Tech-Sym Corporation ("Tech-Sym"), and its subsidiaries designs,
develops and manufactures seismic data acquisition systems and related products
and provides services for the oil and gas exploration and production industry.
The Company was formed in March 1996 to effect the combination of certain
wholly-owned subsidiaries of Tech-Sym: Syntron, Inc. and subsidiaries
("Syntron"); CogniSeis Development, Inc. and subsidiaries ("CogniSeis"); and
Symtronix Corporation ("Symtronix"). The reorganization was accounted for as
combination of entities under common control and, accordingly, the net assets of
the Company were recorded at their historical cost basis at that time.
As discussed in Note 3, the Company sold its geoscientific software
subsidiary, CogniSeis, on October 14, 1997. CogniSeis is presented as a
discontinued operation in these financial statements. The presentation of the
discontinued operation includes segregation of the operating results of
CogniSeis in the Consolidated Statement of Income for the years ended December
31, 1997, 1996 and 1995 and the related income and expense footnotes. The net
assets of the discontinued operation are not segregated at December 31, 1996 in
the Consolidated Balance Sheet and related footnotes or in the Consolidated
Statement of Cash Flows at December 31, 1996 and 1995.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of GeoScience
Corporation and its subsidiaries after the elimination of intercompany
transactions. A 1997 minor investment in a Chinese joint venture over which the
Company has significant influence, but not a controlling interest, is carried on
the equity basis.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company's management to make
estimates and assumptions that affect the reported amounts of certain assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the related reported amounts of revenue and
expenses during the reporting period. It is reasonably possible that actual
results could differ significantly from those estimates and significant changes
to estimates could occur. The Company's management believes that the estimates
used in these financial statements are reasonable.
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid investments purchased with an
original maturity of three months or less when purchased to be cash equivalents.
REVENUE RECOGNITION:
Revenue from the sale of equipment is recognized at the time of shipment
unless significant future obligations remain. Where significant future
obligations exist, revenue is not recognized until obligations have been
satisfied or are no longer significant. Revenue from equipment operating leases,
which has been historically insignificant, is recognized ratably over the
contract period.
INVENTORIES:
Inventories are valued at the lower of cost or market. Cost is determined
principally using the first-in, first-out method.
F-7
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DEPRECIATION AND AMORTIZATION:
Depreciation of plant and equipment is provided using the straight-line
method over the estimated useful lives of the related assets. Major renewals and
betterments are capitalized while minor replacements, maintenance and repairs
which do not extend useful lives are expensed. The costs and accumulated
depreciation applicable to assets retired or sold are removed from the
respective accounts and the resultant gain or loss is recognized at that time.
Intangible assets are amortized using the straight-line method over 5 to 15
years. Amortization expense from continuing operations was $666,000, $1,231,000
and $770,000 in 1997, 1996 and 1995, respectively. Amortization expense related
to the discontinued operation was $1,068,000, $1,345,000 and $549,000 in 1997,
1996 and 1995, respectively. Intangible assets of $4,941,000 and $6,853,000 at
December 31, 1997 and 1996, respectively, are included in other long-term assets
and are net of accumulated amortization of $3,541,000 and $7,840,000 at December
31, 1997 and 1996, respectively.
LONG-LIVED ASSETS:
The Company reviews for the impairment of long-lived assets and certain
identifiable intangibles whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The carrying amount
of a long-lived asset is considered impaired when anticipated undiscounted cash
flows expected to result from the use of the asset and its eventual disposition
is less than its carrying amount. The Company believes that no material
impairment existed at December 31, 1997.
INCOME TAXES:
The provision for income taxes is computed based on the pretax income
included in the consolidated statement of income. For the period January 1
through May 17, 1996 and for the year ended December 31, 1995, the Company was
included in a consolidated U.S. Federal income tax return with Tech-Sym. The
Company's 1996 provision for income taxes was based on a tax sharing arrangement
with Tech-Sym and was not significantly different from that which would result
from a separate consolidated return for the Company. For the year ended December
31, 1997, the Company will file a separate consolidated tax return.
The asset and liability approach is used to recognize deferred tax
liabilities and assets for the expected future tax consequences of temporary
differences between the carrying amounts and the tax bases of assets and
liabilities.
The Company has not recorded a deferred income tax liability for additional
U.S. Federal income taxes that would result from the distribution of earnings of
its foreign subsidiaries, if they were actually repatriated. The Company intends
to indefinitely reinvest the undistributed earnings of its foreign subsidiaries.
FOREIGN CURRENCY TRANSLATION:
The Company's foreign subsidiaries use the local currency as their
functional currency. Accordingly, assets and liabilities of the Company's
foreign subsidiaries are translated using the exchange rates in effect at the
balance sheet date, while income and expenses are translated using average
rates. Translation adjustments are reported as a separate component of
shareholders' investment.
EARNINGS PER SHARE:
In February 1997, Financial Accounting Standard No. 128 ("FAS 128")
EARNINGS PER SHARE was issued. FAS 128 is effective for both interim and annual
periods ending after December 15, 1997. The Company adopted the pronouncement
for the year ended December 31, 1997. FAS 128 requires the Company to report
both basic earnings per share, which is based on the weighted average number of
common shares outstanding, and diluted earnings per share, which is based on the
weighted average number
F-8
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of common shares outstanding and all dilutive potential common shares
outstanding. Stock options are the only dilutive potential shares the Company
has outstanding for all periods presented. All prior years' earnings per share
data in this report have been recalculated to reflect the provisions of FAS 128.
At December 31, 1997 and 1996 options to acquire 374,225 and 443,600 shares of
common stock at weighted average exercise prices of $13.22 and $13.13,
respectively, were not included in the computations of dilutive earnings per
share because the options' exercise price was greater than the average market
price of the common shares.
The weighted average common shares outstanding was 7,900,000 for all
periods presented prior to the Company's public offering in May 1996. The public
offering increased the shares outstanding by 2,597,600 shares giving effect to
the issuance of 10,497,600 shares of GeoScience common stock.
STOCK-BASED COMPENSATION:
In 1996, the Company adopted Statement of Financial Accounting Standard No.
123 ("FAS 123") ACCOUNTING FOR STOCK-BASED COMPENSATION. Upon adoption of FAS
123, the Company continued to measure compensation expense for its stock-based
employee compensation plan using the intrinsic value method prescribed by APB
No. 125, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and has provided in Note 10
pro forma disclosures of the effect on net income and earnings per share as if
the fair value-based methods prescribed by FAS 123 had been applied in measuring
compensation expense.
TRANSFER OF FINANCIAL ASSETS:
In 1997, the Company adopted Financial Accounting Standard No. 125 ("FAS
125") ACCOUNTING FOR TRANSFER AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES. FAS 125 is effective for transfers and servicing
of financial assets and extinguishments of liabilities occurring after December
31, 1996. During 1997, the Company sold $8,974,000 notes receivable to a
financial institution. In accordance with FAS 125, the balance of the notes
receivable at December 31, 1997, of $6,492,000 is reflected as a note receivable
and a corresponding note payable to the financial institution because the
Company is contingently liable for the collection of the notes receivable sold.
RECENT PRONOUNCEMENTS:
In 1997, the Financial Accounting Standards Board Issued Statement of
Financial Accounting Standards No. 130 ("FAS 130") REPORTING COMPREHENSIVE
INCOME. FAS 130 requires the adoption of its provisions for fiscal years
beginning after December 15, 1997. The Company will adopt the statement in 1998.
FAS 130 calls for disclosure of comprehensive income in a financial statement
that is displayed with the same prominence as other financial statements that
constitute a full set of financial statements. Comprehensive income includes all
changes in the equity of a business enterprise during a period except those
resulting from investments by shareholders and distributions to shareholders.
Such changes would include net income and the cumulative translation adjustment.
The adoption of FAS 130 is not expected to have a material impact on the
Company's financial position or results of operations.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 131 ("FAS 131") DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION in June 1997. FAS 131 requires a business
enterprise to determine segments based on the "management approach." The
management approach means reporting segment information similar to the way
management reviews operating results and makes management decisions regarding
its various operating divisions. The requirements of this statement are
effective for fiscal years beginning after December 15, 1997, with no interim
application required in the initial year of application. The Company will adopt
FAS 131 in 1998.
RECLASSIFICATIONS:
Certain prior year amounts have been reclassified to conform to the current
year presentation.
F-9
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- ACQUISITIONS
On December 18, 1997, the Company's subsidiary, Syntron, acquired all of
the outstanding shares of Innovative Transducers Inc. ("ITI") for $3,480,000
in cash. ITI manufactures and sells transducers and arrays used in connection
with engineering applications and the acquisition of seismic data, and provides
repair services with respect to such products. The acquisition was accounted for
under the purchase method and, accordingly, the purchase price was allocated to
the net assets acquired based upon their estimated fair market values. The
excess of the purchase price over the estimated fair market value of the net
assets approximated $3,500,000, which has been accounted for as an intangible
asset and is being amortized over seven years using the straight-line method.
The following table reflects unaudited pro forma combined results of the
Company and ITI on the basis that the acquisition had taken place at the
beginning of each year presented and includes the impact of certain adjustments
such as intangible amortization, interest expense and the related income tax
effects thereof (in thousands, except per share amounts):
DECEMBER 31,
--------------------
1997 1996
--------- ---------
(UNAUDITED)
Revenue.............................. $ 95,532 $ 92,306
Net income from continuing operations 1,160 5,330
Net income per common share from
continuing operations:
Basic and diluted............... $ .11 $ .56
In management's opinion, the unaudited pro forma combined results of
operations are not indicative of the actual results that would have occurred had
the acquisition been consummated at the beginning of 1996 or at the beginning of
1997 or of the future operations of the combined companies under the ownership
and management of the Company.
NOTE 3 -- DISCONTINUED OPERATIONS
In June 1997, the Company adopted a plan to sell its geoscientific software
subsidiary, CognSeis Development, Inc. Accordingly, the Consolidated Statement
of Income of the Company has been reclassified for all periods presented to
report separately the results of the discontinued operation through June 30,
1997 (the "measurement date").
On October 14, 1997 (the "disposal date"), the Company sold CogniSeis for
cash of $8,929,000, net of certain liabilities assumed pursuant to the terms of
the agreement, plus a note receivable. The total amount of the note receivable
due to the Company equals approximately $12,000,000 and is due in full by
December 30, 2003. The note receivable may be adjusted downward pursuant to
certain provisions of the sale agreement within a one year period. The payment
stream of the note receivable is based on sales of certain CogniSeis developed
software. The sale agreement also has a provision for early payout of the note
receivable as follows: $8,500,000 if paid within 90 days of the closing date;
$9,000,000 if paid between 90 and 180 days of the closing date; $9,500,000 if
paid between 180 and 270 days of the closing date; and $10,000,000 if paid
between 270 days and one year of the closing date.
The results of the discontinued operation from the measurement date through
the disposal date, which were insignificant, as well as the expected gain on the
sale, have been deferred at December 31, 1997 until estimates regarding certain
provisions of the sale agreement can be made with reasonable certainty. The
estimated range of the expected gain is $0-$3,000,000. The note receivable, net
of an allowance, of $5,883,000 related to the sale of CogniSeis is included in
long-term notes receivable at December 31, 1997.
F-10
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Summarized financial information for CogniSeis through the measurement date
is as follows (in thousands except per share data):
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
Revenue.............................. $ 11,398 $ 22,858 $ 22,635
Loss before provision for income
taxes................................ 2,302 3,352 6
Loss from the discontinued operation,
net of income taxes................ 1,588 2,313 4
Loss per common share from the
discontinued operation:
Basic and diluted............... $ .16 $ .24
In 1995, the Company sold substantially all the operating assets of Syntron
Pressure Controls to an unrelated party for $1,270,000 in cash and the right to
receive future royalties. The royalties have not been nor are expected to be
significant to the Company in the future. Revenue from this operation in 1995
was $1,472,000.
NOTE 4 -- RECEIVABLES AND LONG-TERM NOTES RECEIVABLE
Receivables at December 31, 1997 and 1996 include trade accounts and the
current portion of long-term notes receivable of $7,653,000 and $7,240,000,
respectively, and are net of reserves for doubtful accounts of $895,000 and
$1,331,000, respectively. Included in the December 31, 1996 reserve for doubtful
accounts is $537,000 related to CogniSeis.
The long-term portion of notes receivable on seismic equipment sales are
net of reserves for doubtful accounts of $117,000 and $66,000 at December 31,
1997 and 1996, respectively. Long-term notes receivable on seismic equipment
sales bear interest at rates between 6.72%-13% and are due to the Company in
monthly installments through October 1999. These long-term notes receivable are
generally secured by equipment sold. The current and long-term portion of notes
receivable includes $3,471,000 and $3,021,000, respectively, sold to a financial
institution with recourse at December 31, 1997 (Notes 1 and 13).
NOTE 5 -- INVENTORIES
Inventories which consist principally of electronic components are
summarized as follows (in thousands):
DECEMBER 31,
--------------------
1997 1996
--------- ---------
Raw materials........................ $ 14,958 $ 12,669
Work in process...................... 16,154 16,292
Finished goods....................... 25,209 18,138
--------- ---------
56,321 47,099
Less reserve for obsolescence........ (1,381) (1,254)
--------- ---------
$ 54,940 $ 45,845
========= =========
At December 31, 1997 and 1996, inventories included $12,026,000 and
$9,408,000, respectively, of electronic components related to the land and
transition zone seismic data acquisition system product line, PolySeis ATS(TM).
The Company, together with members of a consortium completed commercial
development of this product line in late 1995. This product uses the technology
of radio and/or wireline telemetry which is specifically adaptive to the unique
requirements of the land and transition zone market. Management believes this
product is in the early stage of its life cycle and certain risks of market
acceptance exist.
F-11
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has recently experienced limited leasing activity of this product
and believes the demand for this product will significantly increase and the
related inventory will be sold in the normal course of business. Also included
in finished goods inventories reflected above are components on loan to
customers of $1,034,000 and $2,304,000 at December 31, 1997 and 1996,
respectively.
NOTE 6 -- PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment are summarized as follows
(dollars in thousands):
DECEMBER 31,
ESTIMATED --------------------
LIVES 1997 1996
--------- --------- ---------
At cost:
Land, buildings and
improvements.................... 10-35 $ 9,120 $ 8,381
Machinery and equipment......... 3-12 24,585 29,321
Lease units..................... 1- 3 7,303 6,349
--------- ---------
41,008 44,051
Less accumulated depreciation........ (15,568) (18,958)
--------- ---------
$ 25,440 $ 25,093
========= =========
Lease units represent systems at customer sites under operating leases.
Such units are depreciated over the term of the lease. Accumulated depreciation
on lease units reflected above totaled $2,718,000 and $2,082,000 as of December
31, 1997 and 1996, respectively.
Depreciation expense from continuing operations was $5,389,000, $4,023,000
and $3,804,000 for 1997, 1996 and 1995, respectively. Depreciation expense
related to the discontinued operation was $893,000, $1,083,000 and $1,455,000
for 1997, 1996 and 1995, respectively.
NOTE 7 -- NOTES PAYABLE AND LONG-TERM DEBT
At December 31, 1997, the Company had short-term line of credit facilities
aggregating approximately $30,361,000. Borrowings under these lines may be made
in such amounts and at such maturities and interest rates as are offered by the
banks and accepted by the Company at the time of each borrowing. The lines of
credit contain certain restrictive covenants including limitations on asset
sales, limitations on indebtedness, limitations on investments and certain
financial covenants and ratios. At December 31, 1997 and 1996, borrowings under
lines of credit were $25,139,000 and $15,263,000, respectively, and $5,222,000
was available for additional short-term borrowings at December 31, 1997. These
borrowings were at a weighted average interest rate of 7.6% and 8.2% at December
31, 1997 and 1996. Included in the amounts outstanding at December 31, 1997 and
1996 are $24,928,000 and $9,705,000, respectively, which are guaranteed by
Tech-Sym at 75.3%.
F-12
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of long-term debt are summarized as followings (dollars in
thousands):
DECEMBER 31,
--------------------
1997 1996
--------- ---------
Other obligations:
Term loan, unsecured at 5.30%, due
in semi-annual installments
maturing in 2000................. $ 1,783 $ 2,501
Other notes:
Real estate mortgage notes, due in
monthly installments with
interest at 8.15% to 9.9%
maturity at various dates through
2012............................. 2,597 1,727
Notes secured by equipment, due in
monthly installments with
interest at 4.7% to 11.0%
maturing at various dates through
2002............................. 3,197 1,176
Notes sold to a financial
institution with recourse, due in
quarterly installments with
interest at 6.72% maturing in
1999............................. 5,848
Notes sold to a financial
institution with recourse, due in
monthly installments with
interest at prime plus 2.5%
maturing in 1998................. 644
Other.............................. 69 150
--------- ---------
14,138 5,554
Less current maturities................. (4,693) (934)
--------- ---------
$ 9,445 $ 4,620
========= =========
Future maturities of long-term debt are $4,693,000 in 1998, $4,276,000 in
1999, $2,148,000 in 2000, $972,000 in 2001, $657,000 in 2002 and $1,392,000
thereafter.
At December 31, 1997, $2,994,000 of machinery and equipment and $3,785,000
of land, buildings and improvements were pledged as collateral to secure various
long-term debt obligations. The term loan is denominated in Singapore Dollars
and is guaranteed by Tech-Sym under a letter of credit.
NOTE 8 -- INCOME TAXES
The components of income (loss) before income taxes were as follows (in
thousands):
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
Continuing operations:
Domestic........................ $ (504) $ 7,567 $ 4,757
Foreign......................... 4,038 1,100 1,044
--------- --------- ---------
3,534 8,667 5,801
Discontinued operations:
Domestic........................ (2,302) (3,352) (897)
--------- --------- ---------
$ 1,232 $ 5,315 $ 4,904
========= ========= =========
F-13
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes consists of the following (in thousands):
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
Current tax expense:
U.S. Federal.................... $ 448 $ 1,513 $ 1,516
State and local................. 35 103 186
Foreign......................... 570 656 287
--------- --------- ---------
Total current.............. 1,053 2,272 1,989
--------- --------- ---------
Deferred tax expense:
U.S. Federal.................... (1,416) (26) (669)
Foreign......................... 745 (598) 184
--------- --------- ---------
Total deferred............. (671) (624) (485)
--------- --------- ---------
Total provision............ $ 382 $ 1,648 $ 1,504
========= ========= =========
The total provision for (benefit from) income taxes is as follows (in
thousands):
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
Continuing operations................ $ 1,096 $ 2,687 $ 1,818
Discontinued operations:
Loss from operations............ (714) (1,039) (236)
Loss on disposal................ (78)
--------- --------- ---------
$ 382 $ 1,648 $ 1,504
========= ========= =========
The income tax expense for 1997, 1996 and 1995 resulted in effective tax
rates of 31.0%, 31.0% and 30.7%, respectively. The reasons for the differences
between these effective tax rates and the U.S. statutory rate of 35% are as
follows (in thousands):
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
Federal taxes on income at statutory
rates................................ $ 431 $ 1,860 $ 1,716
State income taxes, net.............. 23 67 121
Foreign Sales Corporation benefit.... (273) (651) (305)
Research and development tax
credits............................ (114) (33) 23
Foreign tax expense, net............. (98) (327) (229)
Nondeductible amortization........... 202 352 98
Other, net........................... 211 380 80
--------- --------- ---------
Total provision................. $ 382 $ 1,648 $ 1,504
========= ========= =========
F-14
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax liabilities (assets) at December 31, 1997 and 1996 are
comprised of the following (in thousands):
DECEMBER 31,
--------------------
1997 1996
--------- ---------
Deferred tax liabilities:
Depreciation....................... $ 1,378 $ 461
Software development costs......... 323
Intangible amortization............ 402
Other.............................. 101 101
--------- ---------
Gross deferred tax
liabilities................ 1,479 1,287
--------- ---------
Deferred tax assets:
Compensated absence accruals....... (110)
Inventory accounting and valuation
allowance........................ (1,158) (737)
Net operating loss carryforwards... (640)
Receivable valuation allowances.... (326) (464)
Warranty accrual................... (175) (104)
Accrual for self insurance......... (99) (109)
Intangible amortization............ (417)
Research and development tax
credit........................... (579) (979)
Installment income on sale of
CogniSeis........................ (1,272)
Other.............................. (93) (163)
--------- ---------
Gross deferred tax assets..... (4,119) (3,306)
--------- ---------
Deferred tax asset valuation
allowance........................ 579 579
--------- ---------
$ (2,061) $ (1,440)
========= =========
A deferred tax asset valuation allowance is provided to reduce deferred tax
assets to a level which, more likely than not, will be realized. Such assets
relate to research and development tax credits which are expected to expire
unused.
Net operating loss carryforwards of $1,505,000, incurred by the Company's
foreign subsidiaries, were fully utilized during 1997.
Deferred tax assets of $1,759,000 and $1,533,000 were included in other
current assets at December 31, 1997 and 1996, respectively. Deferred tax assets
of $302,000 were included in other noncurrent assets at December 31, 1997.
Deferred tax liabilities of $93,000 were included in other long-term liabilities
at December 31, 1996.
NOTE 9 -- SHAREHOLDERS' INVESTMENT
The Company's Board of Directors (the "Board") has authorized the Company
to repurchase shares of its common stock through open market purchases or
privately negotiated transactions. Since 1996, the Company has repurchased an
aggregate of 519,000 shares. The shares are held by the Company and accounted
for using the treasury stock method. The Company is authorized to purchase up to
281,000 additional shares.
NOTE 10 -- EQUITY INCENTIVE PLAN
The Company's 1996 Equity Incentive Plan (the "Plan") covers 1,500,000
shares of common stock and permits the granting of any or all of the following
types of awards: stock appreciation rights, stock
F-15
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
options, resticted stock, dividend equivalents, performance units, automatic
Director options, phantom shares, limited stock appreciation rights, bonus stock
and cash tax rights. These types of awards are available to key employees of the
Company. Members of the Board of Directors who are not employees of the Company
are eligible to receive stock options and automatic Director options only.
Shares granted and subsequently cancelled are available for future grants.
Options covering a total of 745,400 shares have been granted to key
employees of the Company, Tech-Sym, and affiliates under the Plan. Each such
option has an exercise price of 100% of the fair market value on the date of
grant and has a term of ten years. The options are exercisable 25% after one
year, with an additional 25% exercisable each year thereafter. At December 31,
1997, options to employees under the Plan covering 61,681 shares were
exercisable at a weighted average exercise price of $12.75. At December 31,
1996, no options to employees under the Plan were exercisable.
The Plan provides for the grant of stock options to nonemployee directors
of the Company and Tech-Sym (the "Nonemployee Director Options"). The Plan
provides that newly elected GeoScience Nonemployee Directors will automatically
receive options covering 10,000 shares at the time of his or her election and
that each GeoScience Nonemployee Director will automatically receive options
covering 2,000 shares each year at the time of his or her reelection to the
Board. Nonemployee Director Options covering a total of 123,000 shares have been
granted under the Plan. These options have a ten-year life and are exercisable
in full after six months. At December 31, 1997 and 1996, Nonemployee Director
Options under the Plan covering a total of 118,000 and 45,000 shares were
exercisable at weighted average exercise prices of $14.02 and $17.55,
respectively.
Using the Black-Scholes model, the weighted average fair value at date of
grant for options granted during 1997 and 1996 were $6.35 and $7.43 per share,
respectively. The fair value of options at date of grant was estimated using the
following weighted average assumptions:
1997 1996
---------- ----------
Expected Life........................... 6.7 years 6.5 years
Interest Rate........................... 6.09% 6.58%
Volatility.............................. 54% 51%
Dividend Yield.......................... 0% 0%
Stock based compensation costs would have reduced pretax income by $566,000
in 1997 ($368,000 after tax and $.03 per share) and $714,000 in 1996 ($464,000
after tax and $.05 per share) if the fair value of the options granted had been
recognized as compensation expense on a straight-line basis over the vesting
period of the grant.
Changes in outstanding options under the Plan during 1996 and 1997 were as
follows:
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE PRICE WEIGHTED AVERAGE
SHARES PER SHARE PRICE PER SHARE
-------- ----------------- -----------------
<S> <C> <C> <C>
Granted.............................. 481,300 $12.00 - 17.55 $ 13.15
Canceled............................. (37,700) 12.75 - 17.55 13.39
-------- ----------------- --------
Outstanding, December 31, 1996....... 443,600 12.00 - 17.55 13.13
Granted.............................. 387,100 9.375 - 13.00 10.42
Canceled............................. (92,625) 9.375 - 17.55 12.52
Exercised............................ (1,250) 12.75 12.75
-------- ----------------- --------
Outstanding, December 31, 1997....... 736,825 $9.375 - 17.55 $ 11.78
======== ================= ========
</TABLE>
There were 761,925 shares available for grant under the plan at December
31, 1997.
F-16
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes significant ranges of outstanding and
exercisable options at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------ OPTIONS EXERCISABLE
WEIGHTED --------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF CONTRACTUAL EXERCISE EXERCISE
EXERCISE PRICES SHARES LIFE PRICE SHARES PRICE
- ------------------------------------- ------- ------------ --------- ------- ---------
<S> <C> <C> <C> <C> <C>
$9.375 to $14.06..................... 691,825 9.14 $ 11.41 134,681 $ 12.26
$14.07 to $17.55..................... 45,000 8.50 17.55 45,000 17.55
------- -------
$9.375 to $17.55..................... 736,825 9.10 $ 11.78 179,681 $ 13.58
======= =======
</TABLE>
NOTE 11 -- BENEFIT PLANS
The Company maintains a defined contribution retirement plan covering
substantially all employees in the United States. The annual Company
contributions to the plan from continuing operations were $400,000 for 1997,
$328,000 for 1996 and $360,000 for 1995. The discontinued operation's
contributions to the plan were $185,000, $230,000 and $0 for 1997, 1996 and
1995, respectively. The Company's policy is to fund these retirement costs
concurrently.
NOTE 12 -- RELATED PARTY TRANSACTIONS
Tech-Sym provides management, financial and legal services to the Company
and charges the Company a fee for such services in accordance with a Corporate
Services Agreement. These fees represent reimbursements to Tech-Sym for
corporate management and administrative services as well as charges for
third-party services. Direct costs incurred by Tech-Sym on behalf of the Company
are charged to the Company as incurred, and indirect costs incurred by Tech-Sym
are allocated to the Company based on payroll costs, operating revenue, tangible
capital assets and inventory of the Company relative to Tech-Sym and its
subsidiaries in the aggregate. Management believes that the fees charged and
costs allocated to the Company by Tech-Sym are reasonable.
In addition, the Company had outstanding indebtedness to Tech-Sym and was
charged interest on the indebtedness of $738,000, $1,040,000 and $1,338,000 for
1997, 1996 and 1995, respectively, on the outstanding balances pursuant to the
Intercompany Credit Agreement. Interest was charged at a rate of 8.5% per annum
in 1997 and 8% per annum in 1996 and 1995 which was the same rate charged under
the Company's short-term lines of credit. Interest accrued on indebtedness to
Tech-Sym is included in the payable to Tech-Sym. The borrowings from Tech-Sym
are due on demand.
The following table presents changes in the payable to Tech-Sym for years
1997, 1996 and 1995 (in thousands):
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
--------- ---------- ---------
Beginning balance.................... $ 5,126 $ 23,554 $ 14,940
Income tax allocations............... (1,213) 1,337
Management, financial and legal
services............................. 1,748 1,812 1,274
Interest charges..................... 738 1,040 1,338
Payments on interest and services.... (752)
Net borrowings (payments)............ 2,950 (20,067) 4,609
Other................................ 13 56
--------- ---------- ---------
Ending balance....................... $ 9,823 $ 5,126 $ 23,554
========= ========== =========
F-17
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The weighted average noninterest bearing borrowings from Tech-Sym
outstanding during 1997, 1996 and 1995 were $387,000, $1,517,000 and $2,842,000,
respectively.
NOTE 13 -- COMMITMENTS AND CONTINGENCIES
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash and cash equivalents,
receivables and long-term receivables. The Company places its cash and cash
equivalents in investment grade, short-term debt instruments and limits the
amount of credit exposure to any one commercial issuer. Credit risk with respect
to receivables and long-term receivables is concentrated in large domestic and
foreign oil and gas exploration companies and a distributor located in China.
The Company performs periodic evaluations of the relative credit standing of
these companies and generally tries to limit the amount of exposure with any
company. Approximately 21% of receivables are with a foreign oil and gas
exploration company located in Russia and a distributor located in China.
FINANCIAL INSTRUMENTS
The Company enters into various types of financial instruments in the
normal course of business. The Company does not hold or issue financial
instruments for trading purposes nor does it hold interest rate, leveraged or
other types of derivative financial instruments.
Fair values for financial instruments are based on quoted market prices.
The amounts ultimately realized upon settlement of these financial instruments
will depend on actual market conditions during the remaining life of the
instruments. Fair values of cash and cash equivalents, receivables, long-term
receivables, notes payable, accounts payable, other accrued liabilities, and
long-term debt reflected in the December 31, 1997 and 1996 balance sheet
approximate carrying value at that date.
LEASE COMMITMENTS
The Company leases manufacturing and other facilities and equipment under
certain long-term agreements which expire at various dates through 2020. Total
rentals charged to operations under such operating leases for 1997, 1996 and
1995 were $697,000, $713,000 and $1,647,000, respectively.
Future minimum rental commitments under noncancelable operating leases in
effect at December 31, 1997 totaled $3,554,000 and are payable as follows:
1998 -- $460,000; 1999 -- $451,000; 2000 -- $451,000; 2001 -- $391,000;
2002 -- $337,000 and $1,464,000 thereafter.
LITIGATION
In the ordinary course of business the Company is involved in various
pending or threatened legal actions. While management is unable to predict the
ultimate outcome of these actions, it believes that any ultimate liability
arising from these actions will not have a material adverse effect on the
Company's consolidated financial position, operating results or cash flows.
OTHER COMMITMENTS AND CONTINGENCIES
In accordance with the provisions of a note purchase agreement with a
financial institution, the Company has the ability to sell up to $15,000,000 of
eligible notes receivable. At December 31, 1997, the Company is contingently
liable (in the event of customer default or covenant violations) for notes
receivable sold to the financial institution of $6,492,000. During 1997, the
Company sold $8,974,000 of notes receivable to the financial institution under
this arrangement.
In the ordinary course of business, the Company pays royalties on a
percentage of the net sales of certain products in connection with assignments
to the Comapny of all intellectual property rights with respect to such
products. Generally these royalties are payable until the Company is no longer
using the
F-18
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
intellectual property rights. Royalty expense from continuing operations
aggregated $1,352,000, $2,104,000 and $1,464,000 in 1997, 1996 and 1995,
respectively. Royalty expense related to the discontinued operation was
$368,000, $47,000 and $0 in 1997, 1996 and 1995, respectively.
The Company has no commitments or contingent liabilities which, in the
judgment of management, would result in losses that would materially affect the
Company's consolidated financial position, operating results or cash flows.
NOTE 14 -- GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS
The Company operates predominantly in one industry segment which includes
the design, development and manufacture of seismic data acquisition systems and
related products and provides services for the oil and gas exploration and
production industry.
The Company's areas of operation outside the United States principally
include Europe and Asia. Sales between geographic regions are accounted for at
prices intended to yield a reasonable return to the selling affiliate. The
Company's geographic information from continuing operations is as follows (in
thousands):
YEAR ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
---------- ---------- ---------
Revenue from unaffiliated customers:
United States................... $ 79,781 $ 80,660 $ 46,520
Europe.......................... 9,063 5,494 9,311
Asia............................ 4,945 4,419 5,458
Other foreign................... 662 323 301
---------- ---------- ---------
Total...................... $ 94,451 $ 90,896 $ 61,590
========== ========== =========
Sales or transfers between geographic
areas:
Unites States................... $ 5,806 $ 7,991 $ 2,979
Europe.......................... 4,582 8,950 741
Asia............................ 2,452 1,942 180
---------- ---------- ---------
Total...................... $ 12,840 $ 18,883 $ 3,900
========== ========== =========
Net income from continuing
operations:
United States................... $ 95 $ 4,421 $ 3,033
Europe.......................... 1,090 916 445
Asia............................ 1,121 592 472
Other foreign................... 132 51 33
---------- ---------- ---------
Total...................... $ 2,438 $ 5,980 $ 3,983
========== ========== =========
Identifiable assets at end of year:
United States................... $ 129,809 $ 104,396 $ 84,942
Europe.......................... 11,353 8,813 6,235
Asia............................ 6,163 6,357 5,487
Other foreign................... 865 4,260 2,226
---------- ---------- ---------
Total...................... $ 148,190 $ 123,826 $ 98,890
========== ========== =========
Net income from continuing operations includes all costs and expenses
directly related to the geographic area. Identifiable assets of geographic areas
are those assets related to the Company's operations in each area and include
the identifiable assets of the discontinued operations at December 31, 1996 and
F-19
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1995. The Company's investment in consolidated foreign subsidiaries at December
31, 1997, 1996 and 1995 approximated $9,025,000, $5,563,000 and $4,408,000,
respectively.
Total export revenue consisting of sales from the Company's U.S. operating
subsidiaries by geographic area are as follows (in thousands):
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
Europe.................................. $ 38,249 $ 42,593 $ 18,311
Asia.................................... 12,704 3,888 10,847
Other................................... 6,646 5,573 3,145
--------- --------- ---------
Total.............................. $ 57,599 $ 52,054 $ 32,303
========= ========= =========
Foreign currency transaction gains and losses included in the Consolidated
Statement of Income were immaterial in fiscal 1997, 1996 and 1995.
A relatively small number of customers have accounted for a large portion
of the Company's revenue. The Company's largest customers in 1997, 1996 and 1995
accounted for 52%, 44% and 33% of total revenue, respectively. Customers
accounting for 10% or more of total revenue during 1997, 1996 and 1995 are as
follows:
1997 1996 1995
----------- ----------- -----------
Customer A.............................. 29% 16% 21%
Customer B.............................. 11 15 12
Customer C.............................. 13
Customer D.............................. 12
F-20
<PAGE>
GEOSCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15 -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of unaudited quarterly financial data for the
years 1997 and 1996 (in thousands except per share amounts):
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
------------ ------------- -------- --------
<S> <C> <C> <C> <C>
1997:
Revenue............................ $ 29,636 $18,163 $ 23,322 $23,330
Gross profit....................... 10,281 5,584 10,014 8,006
Net income from continuing
operations...................... 2,337 (1,434) 1,111 424
Loss from discontinued operation... (946) (642)
Net income (loss).................. 2,337 (1,434) 165 (218)
Earnings (loss) per common
share:..........................
Continuing operations-Basic
and diluted................ $ .23 $ (.14) $ .11 $ .04
Discontinued operation-Basic
and diluted................ (.09) (.06)
Net income-Basic and
diluted.................... .23 (.14) .02 (.02)
QUARTER ENDED
-----------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
------------ ------------- -------- --------
1996:
Revenue............................ $ 24,019 $28,008 $ 19,996 $18,873
Gross profit....................... 8,459 9,398 8,132 7,773
Net income from continuing
operations...................... 1,745 1,865 1,365 1,005
Income (loss) from discontinued
operation....................... 182 (727) (1,137) (631)
Net income......................... 1,927 1,138 228 374
Earnings (loss) per common share:
Continuing operations-Basic
and diluted................ $ .17 $ .18 $ .15 $ .13
Discontinued operation-Basic
and diluted................ .02 (.07) (.12) (.08)
Net income-Basic and
diluted.................... .19 .11 .03 .05
</TABLE>
Earnings per common share are computed for each of the quarters presented
and therefore may not sum to the totals for the year.
F-21
<PAGE>
GEOSCIENCE CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (SCHEDULE II)
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED CHARGED
BALANCE TO COSTS TO COSTS
AT AND BALANCE AND BALANCE
BEGINNING EXPENSES DEDUCTIONS AT END EXPENSES DEDUCTIONS AT END
DESCRIPTION OF 1995 1995 1995 OF 1995 1996 1996 OF 1996
- ------------------------------------- --------- --------- ----------- -------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
GEOSCIENCE CORPORATION AND
CONSOLIDATED SUBSIDIARIES
Reserves deducted from assets:
Current receivables $ 504 $ 602 $ 777 $329 $ 591 $ 126 $ 794
Long-term receivables 246 160 406 340 66
--------- --------- ----------- -------- --------- ----------- --------
$ 750 $ 762 $ 777 $735 $ 591 $ 466 $ 860
========= ========= =========== ======== ========= =========== ========
</TABLE>
CHARGED
TO COSTS
AND BALANCE
EXPENSES DEDUCTIONS AT END
DESCRIPTION 1997 1997 OF 1997
- ------------------------------------- --------- ----------- --------
GEOSCIENCE CORPORATION AND
CONSOLIDATED SUBSIDIARIES
Reserves deducted from assets:
Current receivables $ 227 $ 126 $ 895
Long-term receivables 51 117
--------- ----------- --------
$ 278 $ 126 $1,012
========= =========== ========
F-22
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
3.1* -- Articles of Incorporation of GeoScience Corporation (Exhibit 3.1 to
Registrant's Registration Statement (No. 333-2986) on Form S-1, as
amended).
3.2* -- Bylaws of GeoScience Corporation (Exhibit 3.2 to Registrant's
Registration Statement (No. 333-2986) on Form S-1, as amended).
4.1* -- Specimen Common Stock Certificate (Exhibit 4.2 to Registrant's
Registration Statement (No. 333-2986) on Form S-1, as amended).
10.1* -- Amended and Restated 1996 Equity Incentive Plan (Exhibit 10 (b) to
Registrant's Quarterly Report for the quarterly period ended June 30,
1997 (No. 0-28922)
10.2* -- Form of Corporate Services Agreement (Exhibit 10.2 to Registrant's
Registration Statement (No. 333-2986) on Form S-1, as amended).
10.3* -- Form of Intercompany Credit Agreement (Exhibit 10.3 to
Registrant's Registration Statement (No. 333-2986) on Form S-1, as
amended).
10.4* -- Form of Tax Allocation Agreement (Exhibit 10.4 to Registrant's
Registration Statement (No. 333-2986) on Form S-1, as amended).
10.5* -- Form of Shareholder Agreement (Exhibit 10.5 to Registrant's
Registration Statement (No. 333-2986) on Form S-1, as amended).
10.6* -- Form of Stock Restriction and Registration Agreement (Exhibit 10.6
to Registrant's Registration Statement (No. 333-2986) on Form S-1, as
amended).
10.7* -- Loan Agreement dated December 6, 1996 between Registrant and Wells
Fargo Bank (Texas) N.A. (Exhibit 10.7 to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 (No. 0-28422)).
10.8 -- First Amendment dated April 30, 1997 to Loan Agreement dated
December 6, 1996 between Registrant and Wells Fargo Bank (Texas) N.A.
10.9 -- Second Amendment dated December 10, 1997 to Loan Agreement dated
December 6, 1996 between Registrant and Wells Fargo Bank (Texas) N.A.
10.10*-- Amended and Restated Loan Agreement dated December 6, 1996
between Syntron and Wells Fargo Bank (Texas) N.A. (Exhibit 10.11 to
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (No. 0-28422)).
10.11 -- First Amendment dated April 30, 1997 to Amended and Restated Loan
Agreement dated December 6, 1996 between Syntron and Wells Fargo Bank
(Texas) N.A.
10.12 -- Second Amendment dated December 10, 1997 to Amended and Restated
Loan Agreement dated December 6, 1996 between Syntron and Wells Fargo
Bank (Texas) N.A.
10.13*-- Form of Nonemployee Director Stock Option Agreement (Exhibit
10.12 to Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (No. 0-28422)).
10.14*-- Termination Agreement dated August 15, 1996, between Tech-Sym
Corporation and Bruce H. Nelson. (Exhibit 10.13 to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996 (No.
0-28422)).
10.15*-- Termination Agreement dated May 1, 1991 between Tech-Sym
Corporation and J. Rankin Tippins. (Exhibit 10.14 to Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996
(No. 0-28422)).
X-1
<PAGE>
10.16* -- Termination Agreement dated May 1, 1991 between Tech-Sym
Corporation and Ray F. Thompson. (Exhibit 10.15 to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996 (No.
0-28422)).
10.17* -- Termination Agreement dated May 1, 1991 between Tech-Sym
Corporation and Richard F. Miles. (Exhibit 10.16 to Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996
(No. 0-28422)).
10.18* -- First Amendment dated June 21, 1994 to Termination Agreement
dated May 1, 1991 between Tech-Sym Corporation and Richard F. Miles.
(Exhibit 10.17 to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 (No. 0-28422)).
10.19* -- Stock Purchase Agreement dated September 5, 1997, by and among
the Registrant, Paradigm Geophysical Corporation and Paradigm
Geophysical Ltd. (Exhibit 2.1 to Registrant's Current Report on Form
8-K dated October 14, 1997 (No. 0-28422)).
10.20* -- Executive Retirement Agreement, as amended and restated, dated
April 30, 1992 between Tech-Sym Corporation and Wendell W. Gamel.
(Exhibit 10.18 to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 (No. 0-28422)).
10.21* -- Executive Retirement Agreement, as amended and restated, dated April
30, 1992 for Ray F. Thompson. (Exhibit 10.19 to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996 (No.
0-28422)).
10.22* -- Executive Retirement Agreement, as amended and restated, dated April
30, 1992 between Tech-Sym Corporation and J. Rankin Tippins. (Exhibit
10.20 to Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (No. 0-28422)).
10.23* -- Executive Retirement Agreement dated April 26, 1994 between Tech-Sym
Corporation and Richard F. Miles. (Exhibit 10.21 to Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996
(No. 0-28422)).
21 -- Subsidiaries of GeoScience.
23 -- Consent of Independent Accountants.
24 -- Power of Attorney.
27 -- Financial Data Schedule.
The exhibits indicated by an asterisk (*) are incorporated by reference to
a prior filing as indicated in parentheses.
X-2
EXHIBIT 10.8
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (the "Amendment"), dated as of
April 30, 1997, is between GEOSCIENCE CORPORATION (the "Company"), and WELLS
FARGO BANK (TEXAS), NATIONAL ASSOCIATION (the "Bank").
R E C I T A L S:
A. The Company and the Bank entered into that certain Loan Agreement
(the "Agreement"), dated as of December 6, 1996, pursuant to which the Bank
agreed to make available to the Company revolving credit loans.
B. The Company and the Bank now desire to amend the Agreement to extend
the Revolving Credit Termination Date and as may otherwise herein be set forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows intending to be legally
bound:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. Capitalized terms used in this Amendment, to
the extent not otherwise defined herein, shall have the same meanings as in the
Agreement, as amended hereby.
ARTICLE II
AMENDMENTS
Section 2.1 AMENDMENTS TO SECTION 1.1. (a) Effective as of the date
hereof, each reference to the date "December 5, 1997" contained in the
definition of the term "REVOLVING CREDIT TERMINATION DATE" is hereby amended to
read "April 30, 1998."
(b) Effective as of the date hereof, the term "CAPITAL
EXPENDITURES" is amended in its entirety to read as follows:
"CAPITAL EXPENDITURES" means expenditures which, in
accordance with GAAP, would be required to be capitalized on a
consolidated balance sheet of the Borrower and its Subsidiaries;
provided, however, that the term Capital Expenditures does not
include "systems" manufactured, fabricated or assembled by the
Borrower for sale or lease or other equipment held by the
Borrower for sale or lease.
<PAGE>
Section 2.2 AMENDMENT TO SECTION 9.5. Section 9.5 is amended by deleting
the number "6,000,000" and inserting in lieu thereof the number "12,000,000."
Section 2.3 AMENDMENT TO EXHIBITS. Effective as of the date hereof,
EXHIBIT "A" to the Agreement is hereby amended to conform to ANNEX "I", attached
hereto.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS. The effectiveness of this Amendment is subject
to the satisfaction of the following conditions precedent:
(a) The Bank shall have received the Revolving Credit Promissory
Note executed by the Company and dated as of a date satisfactory to the Bank.
(b) The representations and warranties contained herein and in
all other Loan Documents, as amended hereby, shall be true and correct as of the
date hereof as if made on the date hereof.
(c) No Event of Default shall have occurred and be continuing and
no event or condition shall have occurred that with the giving of notice or
lapse of time or both would be an Event of Default.
(d) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents, instruments, and
other legal matters incident thereto shall be satisfactory to the Bank and its
legal counsel.
ARTICLE IV
RATIFICATIONS, REPRESENTATIONS AND WARRANTIES
Section 4.1 RATIFICATIONS. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and the other Loan Documents and except as expressly
modified and superseded by this Amendment, the terms and provisions of the
Agreement and the other Loan Documents are ratified and confirmed and shall
continue in full force and effect. The Company and the Bank agree that the
Agreement as amended hereby shall continue to be legal, valid, binding and
enforceable in accordance with its terms.
Section 4.2 REPRESENTATIONS AND WARRANTIES. The Company hereby
represents and warrants to the Bank that (i) the execution, delivery and
performance of this Amendment and any and all other Loan Documents executed or
delivered in connection herewith have been authorized by all requisite corporate
action on the part of the Company and will not violate the articles of
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<PAGE>
incorporation or bylaws of the Company, (ii) the representations and warranties
contained in the Agreement, as amended hereby, and any other Loan Document are
true and correct on and as of the date hereof as though made on and as of the
date hereof, (iii) no Event of Default has occurred and is continuing and no
event or condition has occurred that with the giving of notice or lapse of time
or both would be an Event of Default, and (iv) the Company is in full compliance
with all covenants and agreements contained in the Agreement as amended hereby.
ARTICLE V
MISCELLANEOUS
Section 5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in this Amendment or any other Loan Document
including any Loan Document furnished in connection with this Amendment shall
survive the execution and delivery of this Amendment and the other Loan
Documents, and no investigation by the Bank or any closing shall affect the
representations and warranties or the right of the Bank to rely upon them.
Section 5.2 REFERENCE TO AGREEMENT. Each of the Loan Documents,
including the Agreement and any and all other agreements, documents, or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Agreement as amended hereby, are hereby amended
so that any reference in such Loan Documents to the Agreement shall mean a
reference to the Agreement as amended hereby.
Section 5.3 EXPENSES OF THE BANK. The Company agrees to pay on demand
all reasonable costs and expenses incurred by the Bank in connection with the
preparation, negotiation, and execution of this Amendment and the other Loan
Documents executed pursuant hereto and any and all amendments, modifications,
and supplements thereto, including without limitation the costs and fees of the
Bank's legal counsel, and all reasonable costs and expenses incurred by the Bank
in connection with the enforcement or preservation of any rights under the
Agreement, as amended hereby, or any other Loan Document, including without
limitation the costs and fees of the Bank's legal counsel.
Section 5.4 SEVERABILITY. Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 5.5 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS
EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE
IN HOUSTON, HARRIS COUNTY, TEXAS AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
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<PAGE>
Section 5.6 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and
shall inure to the benefit of the Bank and the Company and their respective
successors and assigns, except the Company may not assign or transfer any of its
rights or obligations hereunder without the prior written consent of the Bank.
Section 5.7 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
Section 5.8 EFFECT OF WAIVER. No consent or waiver, express or implied,
by the Bank to or for any breach of or deviation from any covenant, condition or
duty by the Company shall be deemed a consent or waiver to or of any other
breach of the same or any other covenant, condition or duty.
Section 5.9 HEADINGS. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 5.10 NON-APPLICATION OF CHAPTER 15 OF TEXAS CREDIT CODE. The
provisions of Chapter 15 of the Texas Credit Code (Vernon's Annotated Texas
Statutes, Article 5069-15) are specifically declared by the parties not to be
applicable to this Amendment or any of the Loan Documents or the transactions
contemplated hereby.
Section 5.11 ENTIRE AGREEMENT. THIS AMENDMENT, THE AGREEMENT AND THE
OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO
RELATING TO THIS AMENDMENT AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
Section 5.12 ARBITRATION. This Agreement and the Loan Documents are
subject to the arbitration provisions found in Sectin 12.16 of the Agreement.
Executed as of the date first written above.
Company:
GEOSCIENCE CORPORATION
By:
Richard F. Miles, President
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<PAGE>
Agent:
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By:
David M. Anderson, Vice President
Bank:
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By:
David M. Anderson, Vice President
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<PAGE>
The undersigned in its capacity as a guarantor hereby consents to the
execution of this Amendment to Loan Agreement and agrees that its guaranty
issued pursuant to that certain Limited Guaranty Agreement dated December 6,
1996 (the "Guaranty") shall remain in full force and effect and continue to be
the legal, valid and binding obligation of the undersigned enforceable in
accordance with its terms to guaranty the Obligations as herein modified and
extended. Notwithstanding anything to the contrary contained in the Guaranty,
the undersigned hereby irrevocably waives any and all rights it may now or
hereafter have under any agreement, at law or in equity (including, without
limitation, any law subrogating the undersigned to the rights of Bank) to assert
any claim against or seek contribution, indemnification or any other form of
reimbursement from the Company or any other party liable for payment of any or
all of the indebtedness guaranteed under the Guaranty for any payment made by
the undersigned under or in connection with the Guaranty or otherwise.
Guarantor:
TECH-SYM CORPORATION
By:
Wendell W. Gamel
Chairman of the Board and President
-6-
<PAGE>
ANNEX "I"
REVOLVING CREDIT PROMISSORY NOTE
$3,000,000.00 Houston, Texas April 30, 1997
FOR VALUE RECEIVED, the undersigned, GEOSCIENCE CORPORATION, a Nevada
corporation ("Maker"), hereby promises to pay to the order of WELLS FARGO BANK
(TEXAS), NATIONAL ASSOCIATION, a national banking association ("Payee"), at its
offices at 1000 Louisiana, Houston, Harris County, Texas, in lawful money of the
United States of America, the principal sum of THREE MILLION AND NO/100 DOLLARS
($3,000,000.00), or so much thereof as may be advanced and outstanding
hereunder, together with interest on the outstanding principal balance from day
to day remaining, at a varying rate per annum which shall from day to day be
equal to the lesser of (a) the Maximum Rate (hereinafter defined) or (b) the
Selected Rate [as defined in the Agreement]); PROVIDED, HOWEVER, if at any time
the rate of interest specified in clause (b) preceding shall exceed the Maximum
Rate, thereby causing the interest rate hereon to be limited to the Maximum
Rate, then any subsequent reduction in the Selected Rate shall not reduce the
rate of interest hereon below the Maximum Rate until the total amount of
interest accrued hereon equals the amount of interest which would have accrued
hereon if the rate specified in clause (b) preceding had at all times been in
effect. Accrued and unpaid interest computed on the outstanding principal
balance hereof from day to day outstanding shall be due and payable on (i) the
last day of each respective Interest Period with respect to such respective
Eurodollar Borrowing (as such terms are defined in the Agreement) and (ii) on
the first day of each calendar month with respect to Floating Rate Borrowings
(as such term is defined in the Agreement). All principal of and accrued and
unpaid interest on this Note shall be due and payable on the Revolving Credit
Termination Date (as defined in the Agreement), and at any earlier maturity
(regardless of how such maturity is brought about, whether by acceleration or
otherwise). All past due principal and interest shall bear interest at the
Default Rate (hereinafter defined).
As used in this Note, the following terms shall have the respective meanings
indicated below:
"AGREEMENT" means that certain Loan Agreement dated December 6,
1996, as the same was, from time to time, amended, between Maker and Payee,
as amended the same has been amended by that certain First Amendement to
Loan Agreement, dated of even date herewith, as the same may be amended,
restated, modified, supplemented or otherwise changed from time to time.
"DEFAULT RATE" means the Maximum Rate of, if no Maximum Rate
exists, the sum of the Prime Rate in effect from day to day plus five
percent.
Page 1 of 5 Pages
<PAGE>
"MAXIMUM RATE" means the maximum rate of nonusurious interest
permitted from day to day by applicable law, including as to Article
5069-1.04, Vernon's Texas Civil Statutes (and as the same may be
incorporated by reference in other Texas statutes), but otherwise without
limitation, that rate based upon the "indicated rate ceiling" and calculated
after taking into account any and all relevant fees, payments, and other
charges in respect of this Note which are deemed to be interest under
applicable law.
"PRIME RATE" means that variable rate of interest per annum
established by Payee from time to time as its "prime rate." Such rate is set
by Payee as a general reference rate of interest, taking into account such
factors as Payee may deem appropriate, it being understood that many of
Payee's commercial or other loans are priced in relation to such rate, that
it is not necessarily the lowest or best rate charged to any customer and
that Payee may make various commercial or other loans at rates of interest
having no relationship to such rate.
This Note is the Note provided for in the Agreement. Maker may prepay the
principal of this Note upon the terms and conditions specified in the Agreement.
Maker may borrow, repay, and reborrow hereunder upon the terms and conditions
specified in the Agreement.
Notwithstanding anything to the contrary contained herein, no provisions of
this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance,
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid or
payable exceeds the Maximum Rate. Maker and Payee shall, to the extent permitted
by applicable law, (i) characterize any non-principal payment as an expense,
fee, or premium rather than as interest, (ii) exclude voluntary prepayments and
the effects thereof, and (iii) amortize, prorate, allocate, and spread in equal
or unequal parts the total amount of interest throughout the entire contemplated
term of the indebtedness evidenced by this Note so that the interest for the
entire term does not exceed the Maximum Rate.
If a default occurs in the payment of principal, interest or any other
amounts due under this Note, or upon the occurrence of any other Event of
Default, as such term is defined in the Agreement, the holder hereof may, at its
option, take any and all action available to the holder hereof to enforce
payment and performance of this Note, under this Note, the Agreement, the Loan
Documents, as such term is defined in the Agreement, at law, in equity or
otherwise. All such remedies shall be cumulative and not exclusive. Without
limiting the generality of the foregoing, the holder hereof may:
Page 2 of 5 Pages
<PAGE>
(i) declare the entire unpaid principal balance of and accrued
and unpaid interest on this Note immediately due and payable without
notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable; provided, however, that upon the occurrence of an Event of
Default under Sections 9.01(d) or (e) of the Agreement, the entire
unpaid principal balance of and accrued and unpaid interest on this Note
shall become immediately due and payable without notice, demand or
presentment, all of which are without notice, demand or presentment, all
of which are hereby waived, and upon such declaration, the same shall
become and shall be immediately due and payable;
(ii) foreclose or otherwise enforce all liens or security interest
securing payment hereof, or any part hereof;
(iii) pursue Maker, any guarantor, surety endorser or other party
ever liable for any amounts due and owing under this Note by whatever
legal means are available to the holder hereof; and
(iv) setoff against this Note any amounts owed by the holder
hereof to Maker.
If the holder hereof expends any effort in any attempt to enforce
payment of all or any part of installment of any sum due the holder hereunder,
or if this Note is placed in the hands of an attorney for collection, or if it
is collected through any legal proceedings, Maker agrees to pay all costs,
expenses, and fees incurred by the holder, including all reasonable attorneys'
fees.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
THIS NOTE IS PERFORMABLE IN HARRIS COUNTY, TEXAS. ANY ACTION OR PROCEEDING UNDER
OR IN CONNECTION WITH THIS NOTE AGAINST MAKER OR ANY OTHER PARTY EVER LIABLE FOR
PAYMENT OF ANY SUMS OF MONEY PAYABLE ON THIS NOTE MAY BE BROUGHT IN ANY STATE OR
FEDERAL COURT IN HARRIS COUNTY, TEXAS. MAKER AND EACH SUCH OTHER PARTY HEREBY
IRREVOCABLY (I) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND
(II) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY
SUCH ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF PAYEE TO BRING ANY
ACTION OR PROCEEDING AGAINST MAKER OR ANY OTHER PARTY LIABLE HEREUNDER OR WITH
RESPECT TO ANY COLLATERAL IN ANY STATE OR FEDERAL COURT IN ANY OTHER
JURISDICTION. ANY ACTION OR PROCEEDING BY MAKER OR ANY OTHER PARTY LIABLE
HEREUNDER AGAINST PAYEE SHALL BE BROUGHT ONLY IN A COURT LOCATED IN HARRIS
COUNTY, TEXAS.
Page 3 of 5 Pages
<PAGE>
Maker and each surety, guarantor, endorser, and other party ever liable
for payment of any sums of money payable on this Note jointly and severally
waive notice, presentment, demand for payment, protest, notice of protest and
non-payment or dishonor, notice of acceleration, notice of intent to accelerate,
notice of intent to demand, diligence in collecting, grace, and all other
formalities of any kind, and consent to all extensions without notice for any
period or periods of time and partial payments, before or after maturity, and
any impairment of any collateral securing this Note, all without prejudice to
the holder. The holder shall similarly have the right to deal in any way, at any
time, with one or more of the foregoing parties without notice to any other
party, and to grant any such party any extensions of time for payment of any of
said indebtedness, or to release or substitute part or all of the collateral
securing this Note, or to grant any other indulgences or forebearances
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder.
This Note is executed in renewal, extension, modification and
rearrangement of, but not in discharge of, that certain promissory note dated
December 6, 1996, executed by the Maker and payable to the order of the Payee in
the original principal amount of $3,000,000.
GEOSCIENCE CORPORATION
By:
Richard F. Miles, President
Page 4 of 5 Pages
EXHIBIT 10.9
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT (the "AMENDMENT"), dated as of
December 10, 1997, is between GEOSCIENCE CORPORATION (the "COMPANY"), and WELLS
FARGO BANK (TEXAS), NATIONAL ASSOCIATION (the "BANK").
R E C I T A L S:
A. The Company and the Bank entered into that certain Loan Agreement (as
heretofore amended as of April 30, 1997 and as hereafter amended, modified or
supplemented from time to time, the "AGREEMENT"), dated as of December 6, 1996,
pursuant to which the Bank agreed to make available to the Company revolving
credit loans.
B. The Company and the Bank now desire to amend the Agreement to
increase the Revolving Credit Commitment, to change the rate of interest
applicable to Floating Rate Borrowings, and as may otherwise herein be set
forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows intending to be legally
bound:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. Capitalized terms used in this Amendment, to
the extent not otherwise defined herein, shall have the same meanings as in the
Agreement, as amended hereby.
ARTICLE II
AMENDMENTS
Section 2.1 AMENDMENTS TO SECTION 1.1. (a) Effective as of the date
hereof, the reference to "$3,000,000" contained in the definition of the term
"REVOLVING CREDIT COMMITMENT" is hereby amended to read "$6,000,000".
(b) Effective as of the date hereof, the definition of the term
"SELECTED RATE" is hereby amended and restated in its entirety to read
as follows:
"SELECTED RATE" means a rate of interest equal to either (a) the
Adjusted Eurodollar Rate, with respect to all Eurodollar Borrowings or
(b) the Prime Rate MINUS one-half of one percent, with respect to all
Floating Rate Borrowings, which rate shall be applicable to the
Principal Balance under the Revolving Credit Note, or portions thereof,
and shall
<PAGE>
be designated by the Company in accordance with SECTION 2.5 hereof,
subject to the limitations of ARTICLE IV hereof.
Section 2.2 AMENDMENT TO SECTION 9.5. Section 9.5 is amended by adding
the following phrase at the end thereof:
", except that during the 1997 fiscal year, the Borrower may make
aggregate Capital Expenditures not to exceed $9,500,000."
Section 2.3 REFERENCES TO PRIME RATE. Effective as of the date hereof,
all references in the Agreement to "at the Prime Rate" are hereby amended to
read "based on the Prime Rate".
Section 2.4 AMENDMENT TO EXHIBIT A. Effective as of the date hereof,
EXHIBIT "A" to the Agreement is hereby amended to conform to ANNEX "I", attached
hereto.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS. The effectiveness of this Amendment is
subject to the satisfaction of the following conditions precedent:
(a) The Bank shall have received the Note executed by the Company
and dated as of a date satisfactory to the Bank.
(b) The representations and warranties contained herein and in
all other Loan Documents, as amended hereby, shall be true and correct as of the
date hereof as if made on the date hereof.
(c) No Event of Default shall have occurred and be continuing and
no event or condition shall have occurred that with the giving of notice or
lapse of time or both would be an Event of Default.
(d) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents, instruments, and
other legal matters incident thereto shall be satisfactory to the Bank and its
legal counsel.
ARTICLE IV
RATIFICATIONS, REPRESENTATIONS AND WARRANTIES
Section 4.1 RATIFICATIONS. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and the other Loan Documents and except as expressly
modified and superseded by this Amendment, the
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<PAGE>
terms and provisions of the Agreement and the other Loan Documents are ratified
and confirmed and shall continue in full force and effect. The Company and the
Bank agree that the Agreement as amended hereby shall continue to be legal,
valid, binding and enforceable in accordance with its terms.
Section 4.2 REPRESENTATIONS AND WARRANTIES. The Company hereby
represents and warrants to the Bank that (i) the execution, delivery and
performance of this Amendment and any and all other Loan Documents executed or
delivered in connection herewith have been authorized by all requisite corporate
action on the part of the Company and will not violate the articles of
incorporation or bylaws of the Company, (ii) the representations and warranties
contained in the Agreement, as amended hereby, and any other Loan Document are
true and correct on and as of the date hereof as though made on and as of the
date hereof, (iii) no Event of Default has occurred and is continuing and no
event or condition has occurred that with the giving of notice or lapse of time
or both would be an Event of Default, and (iv) the Company is in full compliance
with all covenants and agreements contained in the Agreement as amended hereby.
ARTICLE V
MISCELLANEOUS
Section 5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in this Amendment or any other Loan Document
including any Loan Document furnished in connection with this Amendment shall
survive the execution and delivery of this Amendment and the other Loan
Documents, and no investigation by the Bank or any closing shall affect the
representations and warranties or the right of the Bank to rely upon them.
Section 5.2 REFERENCE TO AGREEMENT. Each of the Loan Documents,
including the Agreement and any and all other agreements, documents, or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Agreement as amended hereby, are hereby amended
so that any reference in such Loan Documents to the Agreement shall mean a
reference to the Agreement as amended hereby.
Section 5.3 EXPENSES OF THE BANK. The Company agrees to pay on demand
all reasonable costs and expenses incurred by the Bank in connection with the
preparation, negotiation, and execution of this Amendment and the other Loan
Documents executed pursuant hereto and any and all amendments, modifications,
and supplements thereto, including without limitation the costs and fees of the
Bank's legal counsel, and all reasonable costs and expenses incurred by the Bank
in connection with the enforcement or preservation of any rights under the
Agreement, as amended hereby, or any other Loan Document, including without
limitation the costs and fees of the Bank's legal counsel.
Section 5.4 SEVERABILITY. Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder
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<PAGE>
of this Amendment and the effect thereof shall be confined to the provision so
held to be invalid or unenforceable.
Section 5.5 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS
EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE
IN HOUSTON, HARRIS COUNTY, TEXAS AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
Section 5.6 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and
shall inure to the benefit of the Bank and the Company and their respective
successors and assigns, except the Company may not assign or transfer any of its
rights or obligations hereunder without the prior written consent of the Bank.
Section 5.7 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
Section 5.8 EFFECT OF WAIVER. No consent or waiver, express or implied,
by the Bank to or for any breach of or deviation from any covenant, condition or
duty by the Company shall be deemed a consent or waiver to or of any other
breach of the same or any other covenant, condition or duty.
Section 5.9 HEADINGS. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 5.10 NON-APPLICATION OF CHAPTER 346 OF TEXAS FINANCE CODE. The
provisions of Chapter 346 of the Texas Finance Code (Vernon's Annotated Texas
Statutes) are specifically declared by the parties not to be applicable to this
Amendment or any of the Loan Documents or the transactions contemplated hereby.
Section 5.11 ENTIRE AGREEMENT. THIS AMENDMENT, THE AGREEMENT AND THE
OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG
THE PARTIES HERETO.
Section 5.12 ARBITRATION. This Agreement and the Loan Documents are
subject to the arbitration provisions found in Sectin 12.16 of the Agreement.
-4-
<PAGE>
Executed as of the date first written above.
COMPANY:
GEOSCIENCE CORPORATION
By:
Richard F. Miles, President
-5-
<PAGE>
AGENT:
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By:
David M. Anderson, Vice President
BANK:
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By:
David M. Anderson, Vice President
-6-
<PAGE>
The undersigned in its capacity as a guarantor hereby consents to the
execution of this Second Amendment to Loan Agreement pursuant to which the
Revolving Credit Commitment shall be increased from $3,000,000 to $6,000,000 and
agrees that its guaranty issued pursuant to that certain Limited Guaranty
Agreement dated December 6, 1996 (the "Guaranty") shall remain in full force and
effect and continue to be the legal, valid and binding obligation of the
undersigned enforceable in accordance with its terms to guaranty the Obligations
as herein modified and extended. Notwithstanding anything to the contrary
contained in the Guaranty, the undersigned hereby irrevocably waives any and all
rights it may now or hereafter have under any agreement, at law or in equity
(including, without limitation, any law subrogating the undersigned to the
rights of Bank) to assert any claim against or seek contribution,
indemnification or any other form of reimbursement from the Company or any other
party liable for payment of any or all of the indebtedness guaranteed under the
Guaranty for any payment made by the undersigned under or in connection with the
Guaranty or otherwise.
GUARANTOR:
TECH-SYM CORPORATION
By:
Wendell W. Gamel
Chairman of the Board and President
-7-
<PAGE>
ANNEX "I"
REVOLVING CREDIT PROMISSORY NOTE
$6,000,000.00 Houston, Texas December 10, 1997
FOR VALUE RECEIVED, the undersigned, GEOSCIENCE CORPORATION, a Nevada
corporation ("MAKER"), hereby promises to pay to the order of WELLS FARGO BANK
(TEXAS), NATIONAL ASSOCIATION, a national banking association ("PAYEE"), at its
offices at 1000 Louisiana, Houston, Harris County, Texas, in lawful money of the
United States of America, the principal sum of SIX MILLION AND NO/100 DOLLARS
($6,000,000.00), or so much thereof as may be advanced and outstanding
hereunder, together with interest on the outstanding principal balance from day
to day remaining, at a varying rate per annum which shall from day to day be
equal to the lesser of (a) the Maximum Rate (hereinafter defined) or (b) the
Selected Rate (as defined in the Agreement); PROVIDED, HOWEVER, if at any time
the rate of interest specified in clause (b) preceding shall exceed the Maximum
Rate, thereby causing the interest rate hereon to be limited to the Maximum
Rate, then any subsequent reduction in the Selected Rate shall not reduce the
rate of interest hereon below the Maximum Rate until the total amount of
interest accrued hereon equals the amount of interest which would have accrued
hereon if the rate specified in clause (b) preceding had at all times been in
effect. Accrued and unpaid interest computed on the outstanding principal
balance hereof from day to day outstanding shall be due and payable on (i) the
last day of each respective Interest Period with respect to such respective
Eurodollar Borrowing (as such terms are defined in the Agreement) and (ii) on
the first day of each calendar month with respect to Floating Rate Borrowings
(as such term is defined in the Agreement). All principal of and accrued and
unpaid interest on this Note shall be due and payable on the Revolving Credit
Termination Date (as defined in the Agreement), and at any earlier maturity
(regardless of how such maturity is brought about, whether by acceleration or
otherwise). All past due principal and interest shall bear interest at the
Default Rate (hereinafter defined).
As used in this Note, the following terms shall have the respective meanings
indicated below:
"AGREEMENT" means that certain Loan Agreement dated December 6,
1996, between Maker and Payee, as the same has been amended by that certain
First Amendment to Loan Agreement, dated April 30, 1997 and that certain
Second Amendment to Loan Agreement of even date herewith, as the same may be
further amended, restated, modified, supplemented or otherwise changed from
time to time.
"DEFAULT RATE" means the Maximum Rate of, if no Maximum Rate
exists, the sum of the Prime Rate in effect from day to day plus five
percent.
Page 1 of 4 Pages
<PAGE>
"MAXIMUM RATE" means the maximum rate of nonusurious interest
permitted from day to day by applicable law, including as to Article
5069-1D.001 et seq., Vernon's Texas Civil Statutes (and as the same may be
incorporated by reference in other Texas statutes), but otherwise without
limitation, that rate based upon the "applicable rate ceiling" and
calculated after taking into account any and all relevant fees, payments,
and other charges in respect of this Note which are deemed to be interest
under applicable law.
"PRIME RATE" means that variable rate of interest per annum
established by Payee from time to time as its "prime rate." Such rate is set
by Payee as a general reference rate of interest, taking into account such
factors as Payee may deem appropriate, it being understood that many of
Payee's commercial or other loans are priced in relation to such rate, that
it is not necessarily the lowest or best rate charged to any customer and
that Payee may make various commercial or other loans at rates of interest
having no relationship to such rate.
This Note is the Note provided for in the Agreement. Maker may prepay the
principal of this Note upon the terms and conditions specified in the Agreement.
Maker may borrow, repay, and reborrow hereunder upon the terms and conditions
specified in the Agreement.
Notwithstanding anything to the contrary contained herein, no provisions of
this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance,
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid or
payable exceeds the Maximum Rate. Maker and Payee shall, to the extent permitted
by applicable law, (i) characterize any non-principal payment as an expense,
fee, or premium rather than as interest, (ii) exclude voluntary prepayments and
the effects thereof, and (iii) amortize, prorate, allocate, and spread in equal
or unequal parts the total amount of interest throughout the entire contemplated
term of the indebtedness evidenced by this Note so that the interest for the
entire term does not exceed the Maximum Rate.
If a default occurs in the payment of principal, interest or any other
amounts due under this Note, or upon the occurrence of any other Event of
Default, as such term is defined in the Agreement, the holder hereof may, at its
option, take any and all action available to the holder hereof to enforce
payment and performance of this Note, under this Note, the Agreement, the Loan
Documents, as such term is defined in the Agreement, at law, in equity or
otherwise. All
Page 2 of 4 Pages
<PAGE>
such remedies shall be cumulative and not exclusive. Without limiting the
generality of the foregoing, the holder hereof may:
(i) declare the entire unpaid principal balance of and accrued
and unpaid interest on this Note immediately due and payable without
notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable; provided, however, that upon the occurrence of an Event of
Default under Sections 9.01(d) or (e) of the Agreement, the entire
unpaid principal balance of and accrued and unpaid interest on this Note
shall become immediately due and payable without notice, demand or
presentment, all of which are without notice, demand or presentment, all
of which are hereby waived, and upon such declaration, the same shall
become and shall be immediately due and payable;
(ii) foreclose or otherwise enforce all liens or security interest
securing payment hereof, or any part hereof;
(iii) pursue Maker, any guarantor, surety endorser or other party
ever liable for any amounts due and owing under this Note by whatever
legal means are available to the holder hereof; and
(iv) setoff against this Note any amounts owed by the holder
hereof to Maker.
If the holder hereof expends any effort in any attempt to enforce
payment of all or any part of installment of any sum due the holder hereunder,
or if this Note is placed in the hands of an attorney for collection, or if it
is collected through any legal proceedings, Maker agrees to pay all costs,
expenses, and fees incurred by the holder, including all reasonable attorneys'
fees.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
THIS NOTE IS PERFORMABLE IN HARRIS COUNTY, TEXAS. ANY ACTION OR PROCEEDING UNDER
OR IN CONNECTION WITH THIS NOTE AGAINST MAKER OR ANY OTHER PARTY EVER LIABLE FOR
PAYMENT OF ANY SUMS OF MONEY PAYABLE ON THIS NOTE MAY BE BROUGHT IN ANY STATE OR
FEDERAL COURT IN HARRIS COUNTY, TEXAS. MAKER AND EACH SUCH OTHER PARTY HEREBY
IRREVOCABLY (I) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND
(II) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY
SUCH ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF PAYEE TO BRING ANY
ACTION OR PROCEEDING AGAINST MAKER OR ANY OTHER PARTY LIABLE HEREUNDER OR WITH
RESPECT TO ANY COLLATERAL IN ANY STATE OR FEDERAL COURT IN ANY OTHER
JURISDICTION. ANY ACTION OR PROCEEDING BY MAKER OR ANY OTHER
Page 3 of 4 Pages
<PAGE>
PARTY LIABLE HEREUNDER AGAINST PAYEE SHALL BE BROUGHT ONLY IN A COURT LOCATED IN
HARRIS COUNTY, TEXAS.
Maker and each surety, guarantor, endorser, and other party ever liable
for payment of any sums of money payable on this Note jointly and severally
waive notice, presentment, demand for payment, protest, notice of protest and
non-payment or dishonor, notice of acceleration, notice of intent to accelerate,
notice of intent to demand, diligence in collecting, grace, and all other
formalities of any kind, and consent to all extensions without notice for any
period or periods of time and partial payments, before or after maturity, and
any impairment of any collateral securing this Note, all without prejudice to
the holder. The holder shall similarly have the right to deal in any way, at any
time, with one or more of the foregoing parties without notice to any other
party, and to grant any such party any extensions of time for payment of any of
said indebtedness, or to release or substitute part or all of the collateral
securing this Note, or to grant any other indulgences or forebearances
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder.
This Note is executed in renewal, extension, modification and
rearrangement of, but not in discharge of, that certain promissory note dated
April 30, 1997, executed by the Maker and payable to the order of the Payee in
the original principal amount of $3,000,000.
GEOSCIENCE CORPORATION
By:
Richard F. Miles, President
Page 4 of 4 Pages
EXHIBIT 10.11
FIRST AMENDMENT TO
AMENDED AND RESTATED LOAN AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT
(the "Amendment"), dated as of April 30, 1997, is between SYNTRON, INC. (the
"Company"), and WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION (the "Bank").
R E C I T A L S:
A. The Company and the Bank entered into that certain Amended and
Restated Loan Agreement (the "Agreement"), dated as of December 6, 1996,
pursuant to which the Bank agreed to make available to the Company revolving
credit loans.
B. The Company and the Bank now desire to amend the Agreement to extend
the Revolving Credit Termination Date and as may otherwise herein be set forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows intending to be legally
bound:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. Capitalized terms used in this Amendment, to
the extent not otherwise defined herein, shall have the same meanings as in the
Agreement, as amended hereby.
ARTICLE II
AMENDMENTS
Section 2.1 AMENDMENT TO SECTION 1.1. Effective as of the date hereof,
each reference to the date "April 30, 1997" contained in the definition of the
term "REVOLVING CREDIT TERMINATION DATE" is hereby amended to read "April 30,
1998."
Section 2.2 AMENDMENT TO EXHIBIT. Effective as of the date hereof,
EXHIBIT "A" to the Agreement is hereby amended to conform to ANNEX "I", attached
hereto.
<PAGE>
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS. The effectiveness of this Amendment is subject
to the satisfaction of the following conditions precedent:
(a) The Bank shall have received the Revolving Credit Note
executed by the Company and dated as of a date satisfactory to the Bank.
(b) The representations and warranties contained herein and in
all other Loan Documents, as amended hereby, shall be true and correct as of the
date hereof as if made on the date hereof.
(c) No Event of Default shall have occurred and be continuing and
no event or condition shall have occurred that with the giving of notice or
lapse of time or both would be an Event of Default.
(d) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents, instruments, and
other legal matters incident thereto shall be satisfactory to the Bank and its
legal counsel.
ARTICLE IV
RATIFICATIONS, REPRESENTATIONS AND WARRANTIES
Section 4.1 RATIFICATIONS. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and the other Loan Documents and except as expressly
modified and superseded by this Amendment, the terms and provisions of the
Agreement and the other Loan Documents are ratified and confirmed and shall
continue in full force and effect. The Company and the Bank agree that the
Agreement as amended hereby shall continue to be legal, valid, binding and
enforceable in accordance with its terms.
Section 4.2 REPRESENTATIONS AND WARRANTIES. The Company hereby
represents and warrants to the Bank that (i) the execution, delivery and
performance of this Amendment and any and all other Loan Documents executed or
delivered in connection herewith have been authorized by all requisite corporate
action on the part of the Company and will not violate the articles of
incorporation or bylaws of the Company, (ii) the representations and warranties
contained in the Agreement, as amended hereby, and any other Loan Document are
true and correct on and as of the date hereof as though made on and as of the
date hereof, (iii) no Event of Default has occurred and is continuing and no
event or condition has occurred that with the giving of notice or lapse of time
or both would be an Event of Default, and (iv) the Company is in full compliance
with all covenants and agreements contained in the Agreement as amended hereby.
-2-
<PAGE>
ARTICLE V
MISCELLANEOUS
Section 5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in this Amendment or any other Loan Document
including any Loan Document furnished in connection with this Amendment shall
survive the execution and delivery of this Amendment and the other Loan
Documents, and no investigation by the Bank or any closing shall affect the
representations and warranties or the right of the Bank to rely upon them.
Section 5.2 REFERENCE TO AGREEMENT. Each of the Loan Documents,
including the Agreement and any and all other agreements, documents, or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Agreement as amended hereby, are hereby amended
so that any reference in such Loan Documents to the Agreement shall mean a
reference to the Agreement as amended hereby.
Section 5.3 EXPENSES OF THE BANK. The Company agrees to pay on demand
all reasonable costs and expenses incurred by the Bank in connection with the
preparation, negotiation, and execution of this Amendment and the other Loan
Documents executed pursuant hereto and any and all amendments, modifications,
and supplements thereto, including without limitation the costs and fees of the
Bank's legal counsel, and all reasonable costs and expenses incurred by the Bank
in connection with the enforcement or preservation of any rights under the
Agreement, as amended hereby, or any other Loan Document, including without
limitation the costs and fees of the Bank's legal counsel.
Section 5.4 SEVERABILITY. Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 5.5 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS
EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE
IN HOUSTON, HARRIS COUNTY, TEXAS AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
Section 5.6 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and
shall inure to the benefit of the Bank and the Company and their respective
successors and assigns, except the Company may not assign or transfer any of its
rights or obligations hereunder without the prior written consent of the Bank.
Section 5.7 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
-3-
<PAGE>
Section 5.8 EFFECT OF WAIVER. No consent or waiver, express or implied,
by the Bank to or for any breach of or deviation from any covenant, condition or
duty by the Company shall be deemed a consent or waiver to or of any other
breach of the same or any other covenant, condition or duty.
Section 5.9 HEADINGS. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 5.10 NON-APPLICATION OF CHAPTER 15 OF TEXAS CREDIT CODE. The
provisions of Chapter 15 of the Texas Credit Code (Vernon's Annotated Texas
Statutes, Article 5069-15) are specifically declared by the parties not to be
applicable to this Amendment or any of the Loan Documents or the transactions
contemplated hereby.
Section 5.11 ENTIRE AGREEMENT. THIS AMENDMENT, THE AGREEMENT AND THE
OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO
RELATING TO THIS AMENDMENT AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
Section 5.12 ARBITRATION. This Amendment and the Loan Documents are
subject to the arbitration provisions found in Section 12.16 of the Agreement.
-4-
<PAGE>
Executed as of the date first written above.
Company:
SYNTRON, INC.
By:
Richard F. Miles
Chairman
Bank:
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By:
David M. Anderson
Vice President
-5-
<PAGE>
The undersigned in its capacity as a guarantor hereby consents to the
execution of this Amendment to Amended and Restated Loan Agreement and agrees
that its guaranty issued pursuant to that ceratin Limited Guaranty Agreement
dated December 6, 1996 (the "Guaranty") shall remain in full force and effect
and continue to be the legal, valid and binding obligation of the undersigned
enforceable in accordance with its terms to guaranty the Obligations as herein
modified and extended. Notwithstanding anything to the contrary contained in the
Guaranty, the undersigned hereby irrevocably waives any and all rights it may
now or hereafter have under any agreement, at law or in equity (including,
without limitation, any law subrogating the undersigned to the rights of Bank)
to assert any claim against or seek contribution, indemnification or any other
form of reimbursement from the Company or any other party liable for payment of
any or all of the indebtedness guaranteed under the Guaranty for any payment
made by the undersigned under or in connection with the Guaranty or otherwise.
Guarantor:
TECH-SYM CORPORATION
By:
Wendell W. Gamel
Chairman of the Board and President
-6-
<PAGE>
The undersigned in its capacity as a guarantor hereby consents to the
execution of this Amendment to Amended and Restated Loan Agreement and agrees
that its guaranty issued pursuant to that certain Guaranty Agreement dated
December 6, 1996 (the "Guaranty") shall remain in full force and effect and
continue to be the legal, valid and binding obligation of the undersigned
enforceable in accordance with its terms to guaranty the Obligations as herein
modified and extended. Notwithstanding anything to the contrary contained in the
Guaranty, the undersigned hereby irrevocably waives any and all rights it may
now or hereafter have under any agreement, at law or in equity (including,
without limitation, any law subrogating the undersigned to the rights of Bank)
to assert any claim against or seek contribution, indemnification or any other
form of reimbursement from the Company or any other party liable for payment of
any or all of the indebtedness guaranteed under the Guaranty for any payment
made by the undersigned under or in connection with the Guaranty or otherwise.
Guarantor:
GEOSCIENCE CORPORATION
By:
Richard F. Miles
President
-7-
<PAGE>
EXHIBIT A
REVOLVING CREDIT PROMISSORY NOTE
$12,000,000.00 Houston, Texas April 30, 1997
FOR VALUE RECEIVED, the undersigned, SYNTRON, INC., a Delaware corporation
("Maker"), hereby promises to pay to the order of WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION, a national banking association ("Payee"), at its offices
at 1000 Louisiana, Houston, Harris County, Texas, in lawful money of the United
States of America, the principal sum of TWELVE MILLION AND NO/100 DOLLARS
($12,000,000.00), or so much thereof as may be advanced and outstanding
hereunder, together with interest on the outstanding principal balance from day
to day remaining, at a varying rate per annum which shall from day to day be
equal to the lesser of (a) the Maximum Rate (hereinafter defined) or (b) the
Selected Rate [as defined in the Agreement]); PROVIDED, HOWEVER, if at any time
the rate of interest specified in clause (b) preceding shall exceed the Maximum
Rate, thereby causing the interest rate hereon to be limited to the Maximum
Rate, then any subsequent reduction in the Selected Rate shall not reduce the
rate of interest hereon below the Maximum Rate until the total amount of
interest accrued hereon equals the amount of interest which would have accrued
hereon if the rate specified in clause (b) preceding had at all times been in
effect. Accrued and unpaid interest computed on the outstanding principal
balance hereof from day to day outstanding shall be due and payable on (i) the
last day of each respective Interest Period with respect to such respective
Eurodollar Borrowing (as such terms are defined in the Agreement) and (ii) on
the first day of each calendar month with respect to Floating Rate Borrowings
(as such term is defined in the Agreement). All principal of and accrued and
unpaid interest on this Note shall be due and payable on the Revolving Credit
Termination Date (as defined in the Agreement), and at any earlier maturity
(regardless of how such maturity is brought about, whether by acceleration or
otherwise). All past due principal and interest shall bear interest at the
Default Rate (hereinafter defined).
As used in this Note, the following terms shall have the respective meanings
indicated below:
"AGREEMENT" means that certain Amended and Restated Loan
Agreement dated December 6, 1996, between Maker and Payee, as the same has
been amended and modified by that certain First Amendment to Amended and
Restated Loan Agreement, dated of even date hereof, as the same may be
amended, restated, modified, supplemented or otherwise changed from time to
time.
"DEFAULT RATE" means the Maximum Rate of, if no Maximum Rate
exists, the sum of the Prime Rate in effect from day to day plus five
percent.
Page 1 of 5 Pages
<PAGE>
"MAXIMUM RATE" means the maximum rate of nonusurious interest
permitted from day to day by applicable law, including as to Article
5069-1.04, Vernon's Texas Civil Statutes (and as the same may be
incorporated by reference in other Texas statutes), but otherwise without
limitation, that rate based upon the "indicated rate ceiling" and calculated
after taking into account any and all relevant fees, payments, and other
charges in respect of this Note which are deemed to be interest under
applicable law.
"PRIME RATE" means that variable rate of interest per annum
established by Payee from time to time as its "prime rate." Such rate is set
by Payee as a general reference rate of interest, taking into account such
factors as Payee may deem appropriate, it being understood that many of
Payee's commercial or other loans are priced in relation to such rate, that
it is not necessarily the lowest or best rate charged to any customer and
that Payee may make various commercial or other loans at rates of interest
having no relationship to such rate.
This Note is the Note provided for in the Agreement. Maker may prepay the
principal of this Note upon the terms and conditions specified in the Agreement.
Maker may borrow, repay, and reborrow hereunder upon the terms and conditions
specified in the Agreement.
Notwithstanding anything to the contrary contained herein, no provisions of
this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance,
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid or
payable exceeds the Maximum Rate. Maker and Payee shall, to the extent permitted
by applicable law, (i) characterize any non-principal payment as an expense,
fee, or premium rather than as interest, (ii) exclude voluntary prepayments and
the effects thereof, and (iii) amortize, prorate, allocate, and spread in equal
or unequal parts the total amount of interest throughout the entire contemplated
term of the indebtedness evidenced by this Note so that the interest for the
entire term does not exceed the Maximum Rate.
If a default occurs in the payment of principal, interest or any other
amounts due under this Note, or upon the occurrence of any other Event of
Default, as such term is defined in the Agreement, the holder hereof may, at its
option, take any and all action available to the holder hereof to enforce
payment and performance of this Note, under this Note, the Agreement, the Loan
Documents, as such term is defined in the Agreement, at law, in equity or
otherwise. All such remedies shall be cumulative and not exclusive. Without
limiting the generality of the foregoing, the holder hereof may:
Page 2 of 5 Pages
<PAGE>
(i) declare the entire unpaid principal balance of and accrued
and unpaid interest on this Note immediately due and payable without
notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable; provided, however, that upon the occurrence of an Event of
Default under Sections 9.01(d) or (e) of the Agreement, the entire
unpaid principal balance of and accrued and unpaid interest on this Note
shall become immediately due and payable without notice, demand or
presentment, all of which are without notice, demand or presentment, all
of which are hereby waived, and upon such declaration, the same shall
become and shall be immediately due and payable;
(ii) foreclose or otherwise enforce all liens or security interest
securing payment hereof, or any part hereof;
(iii) pursue Maker, any guarantor, surety endorser or other party
ever liable for any amounts due and owing under this Note by whatever
legal means are available to the holder hereof; and
(iv) setoff against this Note any amounts owed by the holder
hereof to Maker.
If the holder hereof expends any effort in any attempt to enforce
payment of all or any part of installment of any sum due the holder hereunder,
or if this Note is placed in the hands of an attorney for collection, or if it
is collected through any legal proceedings, Maker agrees to pay all costs,
expenses, and fees incurred by the holder, including all reasonable attorneys'
fees.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
THIS NOTE IS PERFORMABLE IN HARRIS COUNTY, TEXAS. ANY ACTION OR PROCEEDING UNDER
OR IN CONNECTION WITH THIS NOTE AGAINST MAKER OR ANY OTHER PARTY EVER LIABLE FOR
PAYMENT OF ANY SUMS OF MONEY PAYABLE ON THIS NOTE MAY BE BROUGHT IN ANY STATE OR
FEDERAL COURT IN HARRIS COUNTY, TEXAS. MAKER AND EACH SUCH OTHER PARTY HEREBY
IRREVOCABLY (I) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND
(II) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY
SUCH ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF PAYEE TO BRING ANY
ACTION OR PROCEEDING AGAINST MAKER OR ANY OTHER PARTY LIABLE HEREUNDER OR WITH
RESPECT TO ANY COLLATERAL IN ANY STATE OR FEDERAL COURT IN ANY OTHER
JURISDICTION. ANY ACTION OR PROCEEDING BY MAKER OR ANY OTHER PARTY LIABLE
HEREUNDER AGAINST PAYEE SHALL BE BROUGHT ONLY IN A COURT LOCATED IN HARRIS
COUNTY, TEXAS.
Page 3 of 5 Pages
<PAGE>
Maker and each surety, guarantor, endorser, and other party ever liable
for payment of any sums of money payable on this Note jointly and severally
waive notice, presentment, demand for payment, protest, notice of protest and
non-payment or dishonor, notice of acceleration, notice of intent to accelerate,
notice of intent to demand, diligence in collecting, grace, and all other
formalities of any kind, and consent to all extensions without notice for any
period or periods of time and partial payments, before or after maturity, and
any impairment of any collateral securing this Note, all without prejudice to
the holder. The holder shall similarly have the right to deal in any way, at any
time, with one or more of the foregoing parties without notice to any other
party, and to grant any such party any extensions of time for payment of any of
said indebtedness, or to release or substitute part or all of the collateral
securing this Note, or to grant any other indulgences or forebearances
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder.
This Note renews and extends prior promissory notes issued pursuant to
the Agreement.
SYNTRON, INC.
By:
Richard F. Miles
Chairman
Page 4 of 5 Pages
EXHIBIT 10.12
SECOND AMENDMENT TO
AMENDED AND RESTATED LOAN AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT
(the "AMENDMENT"), dated as of December 10, 1997, is between SYNTRON, INC. (the
"COMPANY"), and WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION (the "BANK").
R E C I T A L S:
A. The Company and the Bank entered into that certain Amended and
Restated Loan Agreement (as heretofore amended as of April 30, 1997 and as
hereafter amended, modified, or supplemented from time to time, the
"AGREEMENT"), dated as of December 6, 1996, pursuant to which the Bank agreed to
make available to the Company revolving credit loans.
B. The Company and the Bank now desire to amend the Agreement to
increase the Revolving Credit Commitment, to change the rate of interet
applicable to Floating Rate Borrowings, and as may otherwise herein be set
forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows intending to be legally
bound:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. Capitalized terms used in this Amendment, to
the extent not otherwise defined herein, shall have the same meanings as in the
Agreement, as amended hereby.
ARTICLE II
AMENDMENTS
Section 2.1 AMENDMENTS TO SECTION 1.1. (a) Effective as of the date
hereof, the reference to "$12,000,000" contained in the definition of the term
"REVOLVING CREDIT COMMITMENT" is hereby amended to read "$22,000,000".
(b) Effective as of the date hereof, the definition of the term
"SELECTED RATE" is hereby amended and restated in its entirety to read
as follows:
"SELECTED RATE" means a rate of interest equal to either (a) the
Adjusted Eurodollar Rate, with respect to all Eurodollar Borrowings or
(b) the Prime Rate MINUS one-half of one percent, with respect to all
Floating Rate Borrowings, which rate shall be applicable to the
Principal Balance under the Revolving Credit Note, or portions thereof,
and shall be designated by the Company in accordance with SECTION 2.5
hereof, subject to the limitations of ARTICLE IV hereof.
<PAGE>
Section 2.2 AMENDMENT TO SECTION 9.5. Section 9.5 is amended by adding
the following phrase at the end thereof:
", except that during the 1997 fiscal year, the Borrower may make
aggregate Capital Expenditures not to exceed $9,500,000."
Section 2.3 REFERENCES TO PRIME RATE. Effective as of the date hereof,
all references in the Agreement to "at the Prime Rate" are hereby amended to
read "based on the Prime Rate".
Section 2.4 AMENDMENT TO EXHIBIT A. Effective as of the date hereof,
EXHIBIT "A" to the Agreement is hereby amended to conform to ANNEX "I", attached
hereto.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS. The effectiveness of this Amendment is subject
to the satisfaction of the following conditions precedent:
(a) The Bank shall have received the Revolving Credit Note
executed by the Company and dated as of a date satisfactory to the Bank.
(b) The representations and warranties contained herein and in
all other Loan Documents, as amended hereby, shall be true and correct
as of the date hereof as if made on the date hereof.
(c) No Event of Default shall have occurred and be continuing and
no event or condition shall have occurred that with the giving of notice
or lapse of time or both would be an Event of Default.
(d) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents,
instruments, and other legal matters incident thereto shall be
satisfactory to the Bank and its legal counsel.
ARTICLE IV
RATIFICATIONS, REPRESENTATIONS AND WARRANTIES
Section 4.1 RATIFICATIONS. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and the other Loan Documents and except as expressly
modified and superseded by this Amendment, the terms and provisions of the
Agreement and the other Loan Documents are ratified and confirmed and shall
continue in full force and effect. The Company and the Bank agree that the
Agreement
-2-
<PAGE>
as amended hereby shall continue to be legal, valid, binding and enforceable in
accordance with its terms.
Section 4.2 REPRESENTATIONS AND WARRANTIES. The Company hereby
represents and warrants to the Bank that (i) the execution, delivery and
performance of this Amendment and any and all other Loan Documents executed or
delivered in connection herewith have been authorized by all requisite corporate
action on the part of the Company and will not violate the articles of
incorporation or bylaws of the Company, (ii) the representations and warranties
contained in the Agreement, as amended hereby, and any other Loan Document are
true and correct on and as of the date hereof as though made on and as of the
date hereof, (iii) no Event of Default has occurred and is continuing and no
event or condition has occurred that with the giving of notice or lapse of time
or both would be an Event of Default, and (iv) the Company is in full compliance
with all covenants and agreements contained in the Agreement as amended hereby.
ARTICLE V
MISCELLANEOUS
Section 5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in this Amendment or any other Loan Document
including any Loan Document furnished in connection with this Amendment shall
survive the execution and delivery of this Amendment and the other Loan
Documents, and no investigation by the Bank or any closing shall affect the
representations and warranties or the right of the Bank to rely upon them.
Section 5.2 REFERENCE TO AGREEMENT. Each of the Loan Documents,
including the Agreement and any and all other agreements, documents, or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Agreement as amended hereby, are hereby amended
so that any reference in such Loan Documents to the Agreement shall mean a
reference to the Agreement as amended hereby.
Section 5.3 EXPENSES OF THE BANK. The Company agrees to pay on demand
all reasonable costs and expenses incurred by the Bank in connection with the
preparation, negotiation, and execution of this Amendment and the other Loan
Documents executed pursuant hereto and any and all amendments, modifications,
and supplements thereto, including without limitation the costs and fees of the
Bank's legal counsel, and all reasonable costs and expenses incurred by the Bank
in connection with the enforcement or preservation of any rights under the
Agreement, as amended hereby, or any other Loan Document, including without
limitation the costs and fees of the Bank's legal counsel.
Section 5.4 SEVERABILITY. Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
-3-
<PAGE>
Section 5.5 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS
EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE
IN HOUSTON, HARRIS COUNTY, TEXAS AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
Section 5.6 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and
shall inure to the benefit of the Bank and the Company and their respective
successors and assigns, except the Company may not assign or transfer any of its
rights or obligations hereunder without the prior written consent of the Bank.
Section 5.7 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
Section 5.8 EFFECT OF WAIVER. No consent or waiver, express or implied,
by the Bank to or for any breach of or deviation from any covenant, condition or
duty by the Company shall be deemed a consent or waiver to or of any other
breach of the same or any other covenant, condition or duty.
Section 5.9 HEADINGS. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 5.10 NON-APPLICATION OF CHAPTER 346 OF TEXAS FINANCE CODE. The
provisions of Chapter 346 of the Texas Finance Code (Vernon's Annotated Texas
Statutes) are specifically declared by the parties not to be applicable to this
Amendment or any of the Loan Documents or the transactions contemplated hereby.
Section 5.11 ENTIRE AGREEMENT. THIS AMENDMENT, THE AGREEMENT AND THE
OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG
THE PARTIES HERETO.
Section 5.12 ARBITRATION. This Amendment and the Loan Documents are
subject to the arbitration provisions found in Section 12.16 of the Agreement.
-4-
<PAGE>
Executed as of the date first written above.
COMPANY:
SYNTRON, INC.
By:
Richard F. Miles
Chairman
BANK:
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By:
David M. Anderson
Vice President
-5-
<PAGE>
The undersigned in its capacity as a guarantor hereby consents to the
execution of this Second Amendment to Amended and Restated Loan Agreement
pursuant to which the Revolving Credit Commitment shall be increased from
$12,000,000 to $22,000,000 and agrees that its guaranty issued pursuant to that
ceratin Limited Guaranty Agreement dated December 6, 1996 (the "GUARANTY") shall
remain in full force and effect and continue to be the legal, valid and binding
obligation of the undersigned enforceable in accordance with its terms to
guaranty the Obligations as herein modified and extended. Notwithstanding
anything to the contrary contained in the Guaranty, the undersigned hereby
irrevocably waives any and all rights it may now or hereafter have under any
agreement, at law or in equity (including, without limitation, any law
subrogating the undersigned to the rights of Bank) to assert any claim against
or seek contribution, indemnification or any other form of reimbursement from
the Company or any other party liable for payment of any or all of the
indebtedness guaranteed under the Guaranty for any payment made by the
undersigned under or in connection with the Guaranty or otherwise.
GUARANTOR:
TECH-SYM CORPORATION
By:
Wendell W. Gamel
Chairman of the Board and President
-6-
<PAGE>
The undersigned in its capacity as a guarantor hereby consents to the
execution of this Second Amendment to Amended and Restated Loan Agreement
pursuant to which the Revolving Credit Commitment shall be increased from
$12,000,000 to $22,000,000 and agrees that its guaranty issued pursuant to that
certain Guaranty Agreement dated December 6, 1996 (the "GUARANTY") shall remain
in full force and effect and continue to be the legal, valid and binding
obligation of the undersigned enforceable in accordance with its terms to
guaranty the Obligations as herein modified and extended. Notwithstanding
anything to the contrary contained in the Guaranty, the undersigned hereby
irrevocably waives any and all rights it may now or hereafter have under any
agreement, at law or in equity (including, without limitation, any law
subrogating the undersigned to the rights of Bank) to assert any claim against
or seek contribution, indemnification or any other form of reimbursement from
the Company or any other party liable for payment of any or all of the
indebtedness guaranteed under the Guaranty for any payment made by the
undersigned under or in connection with the Guaranty or otherwise.
GUARANTOR:
GEOSCIENCE CORPORATION
By:
Richard F. Miles
President
-7-
<PAGE>
ANNEX I
REVOLVING CREDIT PROMISSORY NOTE
$22,000,000.00 Houston, Texas December 10, 1997
FOR VALUE RECEIVED, the undersigned, SYNTRON, INC., a Delaware corporation
("MAKER"), hereby promises to pay to the order of WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION, a national banking association ("PAYEE"), at its offices
at 1000 Louisiana, Houston, Harris County, Texas, in lawful money of the United
States of America, the principal sum of TWENTY-TWO MILLION AND NO/100 DOLLARS
($22,000,000.00), or so much thereof as may be advanced and outstanding
hereunder, together with interest on the outstanding principal balance from day
to day remaining, at a varying rate per annum which shall from day to day be
equal to the lesser of (a) the Maximum Rate (hereinafter defined) or (b) the
Selected Rate (as defined in the Agreement); PROVIDED, HOWEVER, if at any time
the rate of interest specified in clause (b) preceding shall exceed the Maximum
Rate, thereby causing the interest rate hereon to be limited to the Maximum
Rate, then any subsequent reduction in the Selected Rate shall not reduce the
rate of interest hereon below the Maximum Rate until the total amount of
interest accrued hereon equals the amount of interest which would have accrued
hereon if the rate specified in clause (b) preceding had at all times been in
effect. Accrued and unpaid interest computed on the outstanding principal
balance hereof from day to day outstanding shall be due and payable on (i) the
last day of each respective Interest Period with respect to such respective
Eurodollar Borrowing (as such terms are defined in the Agreement) and (ii) on
the first day of each calendar month with respect to Floating Rate Borrowings
(as such term is defined in the Agreement). All principal of and accrued and
unpaid interest on this Note shall be due and payable on the Revolving Credit
Termination Date (as defined in the Agreement), and at any earlier maturity
(regardless of how such maturity is brought about, whether by acceleration or
otherwise). All past due principal and interest shall bear interest at the
Default Rate (hereinafter defined).
As used in this Note, the following terms shall have the respective meanings
indicated below:
"AGREEMENT" means that certain Amended and Restated Loan
Agreement dated December 6, 1996, between Maker and Payee, as the same has
been amended by that certain First Amendment to Loan Agreement, dated April
30, 1997 and that certain Second Amendment to Loan Agreement of even date
herewith, as the same may be further amended, restated, modified,
supplemented or otherwise changed from time to time.
"DEFAULT RATE" means the Maximum Rate of, if no Maximum Rate
exists, the sum of the Prime Rate in effect from day to day plus five
percent.
Page 1 of 4 Pages
<PAGE>
"MAXIMUM RATE" means the maximum rate of nonusurious interest
permitted from day to day by applicable law, including as to Article
5069-1D.001, Vernon's Texas Civil Statutes (and as the same may be
incorporated by reference in other Texas statutes), but otherwise without
limitation, that rate based upon the "applicable rate ceiling" and
calculated after taking into account any and all relevant fees, payments,
and other charges in respect of this Note which are deemed to be interest
under applicable law.
"PRIME RATE" means that variable rate of interest per annum
established by Payee from time to time as its "prime rate." Such rate is set
by Payee as a general reference rate of interest, taking into account such
factors as Payee may deem appropriate, it being understood that many of
Payee's commercial or other loans are priced in relation to such rate, that
it is not necessarily the lowest or best rate charged to any customer and
that Payee may make various commercial or other loans at rates of interest
having no relationship to such rate.
This Note is the Note provided for in the Agreement. Maker may prepay the
principal of this Note upon the terms and conditions specified in the Agreement.
Maker may borrow, repay, and reborrow hereunder upon the terms and conditions
specified in the Agreement.
Notwithstanding anything to the contrary contained herein, no provisions of
this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance,
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid or
payable exceeds the Maximum Rate. Maker and Payee shall, to the extent permitted
by applicable law, (i) characterize any non-principal payment as an expense,
fee, or premium rather than as interest, (ii) exclude voluntary prepayments and
the effects thereof, and (iii) amortize, prorate, allocate, and spread in equal
or unequal parts the total amount of interest throughout the entire contemplated
term of the indebtedness evidenced by this Note so that the interest for the
entire term does not exceed the Maximum Rate.
If a default occurs in the payment of principal, interest or any other
amounts due under this Note, or upon the occurrence of any other Event of
Default, as such term is defined in the Agreement, the holder hereof may, at its
option, take any and all action available to the holder hereof to enforce
payment and performance of this Note, under this Note, the Agreement, the Loan
Documents, as such term is defined in the Agreement, at law, in equity or
otherwise. All such remedies shall be cumulative and not exclusive. Without
limiting the generality of the foregoing, the holder hereof may:
Page 2 of 4 Pages
<PAGE>
(i) declare the entire unpaid principal balance of and accrued
and unpaid interest on this Note immediately due and payable without
notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable; provided, however, that upon the occurrence of an Event of
Default under Sections 9.01(d) or (e) of the Agreement, the entire
unpaid principal balance of and accrued and unpaid interest on this Note
shall become immediately due and payable without notice, demand or
presentment, all of which are without notice, demand or presentment, all
of which are hereby waived, and upon such declaration, the same shall
become and shall be immediately due and payable;
(ii) foreclose or otherwise enforce all liens or security interest
securing payment hereof, or any part hereof;
(iii) pursue Maker, any guarantor, surety endorser or other party
ever liable for any amounts due and owing under this Note by whatever
legal means are available to the holder hereof; and
(iv) setoff against this Note any amounts owed by the holder
hereof to Maker.
If the holder hereof expends any effort in any attempt to enforce
payment of all or any part of installment of any sum due the holder hereunder,
or if this Note is placed in the hands of an attorney for collection, or if it
is collected through any legal proceedings, Maker agrees to pay all costs,
expenses, and fees incurred by the holder, including all reasonable attorneys'
fees.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
THIS NOTE IS PERFORMABLE IN HARRIS COUNTY, TEXAS. ANY ACTION OR PROCEEDING UNDER
OR IN CONNECTION WITH THIS NOTE AGAINST MAKER OR ANY OTHER PARTY EVER LIABLE FOR
PAYMENT OF ANY SUMS OF MONEY PAYABLE ON THIS NOTE MAY BE BROUGHT IN ANY STATE OR
FEDERAL COURT IN HARRIS COUNTY, TEXAS. MAKER AND EACH SUCH OTHER PARTY HEREBY
IRREVOCABLY (I) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND
(II) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY
SUCH ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF PAYEE TO BRING ANY
ACTION OR PROCEEDING AGAINST MAKER OR ANY OTHER PARTY LIABLE HEREUNDER OR WITH
RESPECT TO ANY COLLATERAL IN ANY STATE OR FEDERAL COURT IN ANY OTHER
JURISDICTION. ANY ACTION OR PROCEEDING BY MAKER OR ANY OTHER PARTY LIABLE
HEREUNDER AGAINST PAYEE SHALL BE BROUGHT ONLY IN A COURT LOCATED IN HARRIS
COUNTY, TEXAS.
Page 3 of 4 Pages
<PAGE>
Maker and each surety, guarantor, endorser, and other party ever liable
for payment of any sums of money payable on this Note jointly and severally
waive notice, presentment, demand for payment, protest, notice of protest and
non-payment or dishonor, notice of acceleration, notice of intent to accelerate,
notice of intent to demand, diligence in collecting, grace, and all other
formalities of any kind, and consent to all extensions without notice for any
period or periods of time and partial payments, before or after maturity, and
any impairment of any collateral securing this Note, all without prejudice to
the holder. The holder shall similarly have the right to deal in any way, at any
time, with one or more of the foregoing parties without notice to any other
party, and to grant any such party any extensions of time for payment of any of
said indebtedness, or to release or substitute part or all of the collateral
securing this Note, or to grant any other indulgences or forebearances
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder.
This Note is executed in renewal, extension, modification and
rearrangement of, but not in discharge of, that certain promissory note dated
April 30, 1997, executed by the Maker and payable to the order of the Payee in
the original principal amount of $12,000,000.
SYNTRON, INC.
By:
Richard F. Miles
Chairman
Page 4 of 4 Pages
EXHIBIT 21
SUBSIDIARIES OF GEOSCIENCE CORPORATION
STATE OF INCORPORATION
NAME OR FORMATION
- ---------------------------------------- ----------------------
Syntron, Inc............................ Delaware
Syntron Europe Limited............. Scotland
Polyseis Limited.............. Scotland
Syntron (UK) Limited.......... Scotland
Syntron Asia Pte. Ltd.............. Singapore
Innovative Transducers Inc......... Delaware
Zhong Hai Syntron (TianJin)
Geophysical Cable Company,
Ltd.............................. China
GeoSensor Corporation................... Delaware
GeoScience International Foreign Sales
Corporation........................... Barbados
Symtronix Corporation................... Nevada
Symtronix Company....................... Russia
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-14683) of GeoScience Corporation of our report
dated February 18, 1998, appearing on page F-2 of this Annual Report on Form
10-K.
PRICE WATERHOUSE LLP
Houston, Texas
March 26, 1998
EXHIBIT 24
POWER OF ATTORNEY
Each of the undersigned, a director of GeoScience Corporation (the
"Company"), does hereby constitute and appoint Richard F. Miles and Ray F.
Thompson his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, to
sign the Company's Form 10-K Annual Report pursuant to Section 13 of the
Securities Exchange Act of 1934 for the fiscal year ended December 31, 1997, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto the
attorneys-in-fact full power and authority to sign such documents on behalf of
the undersigned and to make such filing, as fully to all intents and purposes as
the undersigned might or could do in person, hereby ratifying and confirming all
that the attorneys-in-fact, or his substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: February 18, 1998
GEOSCIENCE CORPORATION
/s/W. L. CREECH /s/CHRISTOPHER C. KRAFT, JR.
W. L. Creech Christopher C. Kraft, Jr.
Director Director
/s/MICHAEL C. FORREST /s/EDWARD R. PRINCE, JR.
Michael C. Forrest Edward R. Prince, Jr.
Director Director
/s/WENDELL W. GAMEL /s/J. RANKIN TIPPINS
Wendell W. Gamel J. Rankin Tippins
Director Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM GEOSCIENCE CORPORATION - 10K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 799
<SECURITIES> 0
<RECEIVABLES> 44,348
<ALLOWANCES> 0
<INVENTORY> 54,940
<CURRENT-ASSETS> 102,586
<PP&E> 25,440
<DEPRECIATION> 0
<TOTAL-ASSETS> 148,190
<CURRENT-LIABILITIES> 65,868
<BONDS> 0
0
0
<COMMON> 105
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 148,190
<SALES> 94,451
<TOTAL-REVENUES> 0
<CGS> 60,566
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 30,351
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,442
<INCOME-PRETAX> 3,534
<INCOME-TAX> 1,096
<INCOME-CONTINUING> 2,438
<DISCONTINUED> (1,588)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 850
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
