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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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GEOSCIENCE CORPORATION
(NAME OF SUBJECT COMPANY)
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GEOSCIENCE CORPORATION
(NAME OF PERSON FILING STATEMENT)
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COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
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373636 10 9
(CUSIP NUMBER OF CLASS OF SECURITIES)
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J. RANKIN TIPPINS
VICE PRESIDENT AND GENERAL COUNSEL
GEOSCIENCE CORPORATION
10500 WESTOFFICE DRIVE, SUITE 200
HOUSTON, TEXAS 77042
(713) 785-7790
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person Filing Statement)
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WITH A COPY TO:
THOMAS P. MASON, ESQ.
ANDREWS & KURTH L.L.P.
600 TRAVIS, SUITE 4200
HOUSTON, TEXAS 77002
(713) 220-4200
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is GeoScience Corporation, a Nevada
corporation ("GeoScience"), and the address of the principal executive offices
of GeoScience is 10500 Westoffice Drive, Suite 200, Houston, Texas 77042. The
title of the class of equity securities to which this statement relates is the
common stock, par value $0.01 per share, of GeoScience (the "GeoScience Common
Stock").
ITEM 2. TENDER OFFER OF THE BIDDER
This statement relates to the cash tender offer disclosed in the Tender
Offer Statement on Schedule 14D-1, dated October 29, 1999 (the
"Schedule 14D-1"), the Offer to Purchase filed as Exhibit (a)(1) thereto (the
"Offer to Purchase") and the related Letter of Transmittal filed as
Exhibit (a)(2) thereto, filed by Compagnie Generale de Geophysique ("Parent"),
Sercel, Inc. ("Sercel"), CGG Americas, Inc. ("CGG Americas"), Sercel Holding
S.A. ("Sercel Holding") and Sercel Acquisition Corp., a direct, wholly owned
subsidiary of Sercel and an indirect, wholly owned subsidiary of the Parent
("Purchaser"), relating to the offer by the Purchaser to purchase all
outstanding shares of GeoScience Common Stock (the "Shares") at a purchase price
of $6.71 per Share, net to the seller in cash, without interest (the "Per Share
Amount"), on the terms and subject to the conditions set forth in the Offer to
Purchase, and in the related Letter of Transmittal and any amendments or
supplements thereto (which collectively constitute the "Offer"). The Offer is
being made by the Purchaser pursuant to the Agreement and Plan of Merger dated
as of October 23, 1999 (the "Merger Agreement") by and among GeoScience, Parent
and Purchaser, a copy of which is filed as Exhibit 1 hereto and incorporated
herein by reference.
The Schedule 14D-1 states that the address of the principal executive
offices of the Purchaser is part of the principal executive offices of Sercel.
Sercel is an Oklahoma corporation with its principal executive offices located
at 17155 Park Row, Houston, Texas 77084. Sercel is owned 100% by CGG Americas.
CGG Americas is a Texas corporation, with its principal executive offices
located at 16430 Park Ten Place, Houston, Texas 77084 and is owned 40% by Sercel
Holding and 60% by the Parent. Sercel Holding is a French limited liability
company registered in the Registrar of Commerce of Nantes, with its principal
executive offices located at 16, rue de Bel-Air, 44470 Carquefou Loire
Atlantique and is wholly owned by the Parent. Parent is a French societe
anonyme, with its principal executive offices located at 1, rue Leon Migaux,
91341 Massy, France. A copy of the joint press release issued by Purchaser and
GeoScience on October 26, 1999 is filed as Exhibit 3 hereto and incorporated
herein by reference.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of GeoScience, which is the entity filing
this statement, are set forth in Item 1 above.
(b) Except as described or referred to below, there exists on the date
hereof no material contract, agreement, arrangement or understanding and no
actual or potential conflict of interest between GeoScience or its affiliates
and (i) GeoScience, its executive officers, directors or affiliates or
(ii) Purchaser, Parent or any of their executive officers, directors or
affiliates.
THE MERGER AGREEMENT.
The summary of the material terms of the Merger Agreement that follows is
qualified in its entirety by reference to the complete text of the Merger
Agreement, a copy of which has been filed with the Securities and Exchange
Commission (the "Commission") as an exhibit to this Schedule 14D-9 and is
incorporated herein by reference. This summary may not contain all the
information that is important to you. Accordingly, the Merger Agreement should
be read in its entirety for a more complete description of the matters
summarized below. Defined terms used under this caption "The Merger Agreement"
and not defined have the respective meanings assigned to those terms in the
Merger Agreement.
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THE OFFER. The Merger Agreement contemplates the commencement of the Offer
and prescribes conditions to the consummation of the Offer. For a description of
the Offer Conditions, see below under "--Certain Conditions of the Offer."
Assuming the prior satisfaction or waiver of the Offer Conditions, the Parent
will cause the Purchaser to accept for payment, and pay for, in accordance with
the terms of the Offer, all Shares validly tendered and not withdrawn pursuant
to the Offer as soon as practicable after the Expiration Date or any extension
thereof.
THE MERGER. The Merger Agreement provides that, on the terms and subject to
the conditions of the Merger Agreement and Nevada Law, at the Effective Time,
the Purchaser will be merged with and into GeoScience. In the event the
Purchaser acquires at least 90% of the Shares in the Offer, the Parent may elect
at its sole discretion instead to merge GeoScience into the Purchaser, which
would not require the approval of GeoScience's Stockholders under Nevada Law. In
either case, the directors and officers of the Purchaser immediately prior to
the Effective Time will be the directors and officers of the Surviving
Corporation, in each case until their successors are elected or appointed and
qualified or until their earlier death, resignation or removal.
CONVERSION OF SHARES. At the Effective Time, by virtue of the Merger and
without any action on the part of any Stockholder, each Share (except Shares
held in GeoScience's treasury and Shares owned by the Parent or any of its
Subsidiaries, which will be canceled and no consideration will be paid with
respect thereto) issued and outstanding immediately before the Effective Time
will be converted into the right to receive the Per Share Amount, or such higher
per share amount as is paid in the Offer. At the Effective Time, each share of
common stock of the Purchaser will be converted into one share of common stock
of the Surviving Corporation. As a result of the Merger, GeoScience will become
an indirect, wholly owned subsidiary of the Parent.
STOCK OPTION PLANS AND OPTIONS. The Merger Agreement provides that
GeoScience will use its reasonable best efforts to provide that, at the
Effective Time, each holder of a then-outstanding option to purchase Shares
under any of GeoScience's stock option plans, whether or not then exercisable,
will, in settlement thereof, receive from GeoScience for each Share subject to
such Option an amount (subject to any applicable withholding tax) in cash equal
to the difference between the Merger Consideration and the per Share exercise
price of such Option to the extent such difference is a positive number (the
"Option Consideration"). All Options will be terminated as of the Effective Time
and thereafter represent only the right to receive the Option Consideration. No
Option Consideration will be paid with respect to any Option unless, at or prior
to the time of such payment, such Option is canceled and the holder of such
Option has executed and delivered a release of any and all rights the holder had
or may have had in respect of such Option. GeoScience has agreed to use its
reasonable best efforts to assure that following the Effective Time no holder of
Options shall have the right to acquire equity securities of GeoScience, the
Surviving Corporation or any subsidiary and to terminate all Options and rights
to do so.
REPRESENTATIONS AND WARRANTIES OF GEOSCIENCE. Pursuant to the Merger
Agreement, GeoScience has made representations and warranties about, among other
things, (a) the organization, corporate powers and qualifications of GeoScience
and each of its Subsidiaries, (b) the corporate power and authority to enter
into the Merger Agreement and to consummate the transactions contemplated by the
Merger Agreement, (c) the capitalization of GeoScience, (d) GeoScience's
Subsidiaries, (e) interests in other companies, (f) the absence of any
conflicts, breaches or defaults triggered by the Merger Agreement and the
transactions contemplated by the Merger Agreement, (g) its compliance with Laws,
(h) the accuracy of GeoScience's documents filed with the Commission,
(i) GeoScience's financial statements and financial condition, (j) the absence
of certain litigation, (k) the absence of certain changes to GeoScience's
business, (l) Taxes, (m) Intellectual Property and real property,
(n) millennium compliance, (o) material contracts of GeoScience, (p) compliance
with Environmental Laws, (q) Company Benefit Plans and ERISA compliance, and
(r) brokerage or finders fees. Certain of the representations and warranties of
GeoScience will survive the Effective Time and may serve as the basis of a claim
for indemnification by the Parent from
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GeoScience's majority shareholder, Tech-Sym Corporation ("Tech-Sym"), subject to
the terms, conditions and limitations set forth in the Shareholder Agreement.
See "The Shareholder Agreement--Rights to Indemnification."
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE PURCHASER. Pursuant to
the Merger Agreement, the Parent and the Purchaser have made representations and
warranties about, among other things, (a) the organization, corporate powers and
qualifications of the Parent and the Purchaser, (b) the corporate power and
authority to execute and deliver the Merger Agreement and to consummate the
transactions contemplated by the Merger Agreement, (c) the absence of any
conflicts, breaches or defaults triggered by the Merger Agreement and the
transactions contemplated by the Merger Agreement, (d) the absence of brokerage
or finders fees, (e) the accuracy of documents filed by the Parent with the
Commission, (f) the Parent's financial statements and (g) the financing of the
Offer and the Merger. None of the representations and warranties of the Parent
or the Purchaser will survive the Effective Time.
CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The completion
of the Merger depends upon the satisfaction of a number of customary conditions,
including completion of the Offer in accordance with the terms of the Merger
Agreement, approval of the Merger by GeoScience's Stockholders in the manner
required by Nevada Law, and the absence of any legal restraint preventing
consummation of the Merger.
CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the
Offer, the Purchaser will not be required to accept for payment or, subject to
any applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to the Purchaser's obligation to pay for or
return tendered Shares promptly after expiration or termination of the Offer),
to pay for any Shares, and (subject to any such rules or regulations) may
postpone the acceptance for payment or payment for any Shares tendered, and,
subject to the terms of the Merger Agreement, may amend or terminate the Offer
(whether or not any Shares have theretofore been purchased or paid for pursuant
to the Offer) (a) unless the following conditions have been satisfied: (1) the
Minimum Condition and (2) the Regulatory Approvals and the Antitrust Approvals
or (b) if at any time on or after the date of the Merger Agreement and before
the Expiration Date (whether or not any Shares have theretofore been accepted
for payment or paid for pursuant to the Offer), any of the following shall have
occurred:
(1) Any Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order which is in effect and which
(i) restricts, prevents or prohibits consummation of the transactions
contemplated by any of the Merger Agreement, including the Offer or the
Merger, (ii) prohibits, limits or otherwise adversely affects the
ownership or operation by the Parent or any of its subsidiaries of all or
any material portion of the business or assets of GeoScience and its
subsidiaries or compels GeoScience, the Parent or any of their
subsidiaries to dispose of or hold separate all or any material portion
of the business or assets of GeoScience and its subsidiaries,
(iii) imposes material limitations on the ability of the Parent, the
Purchaser or any other Subsidiary of the Parent to exercise effectively
full rights of ownership of any Shares, including, without limitation,
the right to vote any Shares acquired by the Purchaser pursuant to the
Offer or otherwise on all matters properly presented to the Stockholders,
including, without limitation, the approval and adoption of the Merger
Agreement and the transactions contemplated thereby, or (iv) in
connection with the Offer or the Merger or the transactions contemplated
by the Merger Agreement, affects the Purchaser, GeoScience or any of
their respective affiliates in a manner which, in the sole judgment of
the Purchaser, may have or be likely to have a Company Material Adverse
Effect (as defined in the Merger Agreement) or a material adverse effect
on the Purchaser or any of its affiliates or otherwise makes consummation
of the Offer or the Merger or the consummation of the transactions
contemplated by the Merger Agreement unduly burdensome; or
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(2) There shall be instituted or pending any action or proceeding
before any United States or foreign court or Governmental Entity by any
United States or foreign Governmental Entity seeking any order, decree or
injunction having any effect set forth in paragraph (1) above; or
(3) The representations and warranties of GeoScience contained in
this Agreement (i) that are qualified by materiality or Company Material
Adverse Effect shall not be so true and correct as of the Expiration Date
(as the same may be extended from time to time) and (ii) that are not
qualified by materiality or Company Material Adverse Effect shall not be
true and correct in all material respects as of the Expiration Date (as
the same may be extended from time to time), in each case as though made
anew on and as of such date (except for representations and warranties
made as of a specified date, which shall be so true and correct as of the
specified date); or
(4) GeoScience shall not have performed or complied in all material
respects with its covenants under the Merger Agreement and such failure
continues until the later of (i) 15 calendar days after actual receipt by
it of written notice from the Parent setting forth in reasonable detail
the nature of such failure or (ii) the Expiration Date; or
(5) There shall have occurred any material adverse change, or any
development that is reasonably likely to result in a material adverse
change, in the business, financial condition, results of operations or
prospects of GeoScience and its subsidiaries, taken as a whole, other
than any such material adverse effect resulting from (i) factors
generally affecting the marine seismic industry, the oil field services
industry or the United States economy, (ii) the exercise or threatened
exercise by Petroleum Geophysical Services ("PGS") of the option to
acquire a non-exclusive right to use certain intellectual property of
GeoScience as described in the After Sales Support Agreement, dated as of
January 4, 1995, between PGS and Syntron, Inc., a copy of which has been
provided by GeoScience to the Purchaser, or (iii) any failure by
GeoScience to meet any specific financial projections or any change in
the financial projections provided to the Purchaser or the Parent, or any
of their representatives or advisors, whether provided before or after
the date of the Merger Agreement, provided, however, that this clause
(iii) shall not exclude any material adverse effect resulting from any
change, effect, event or condition that has had or could reasonably be
expected to have a material adverse effect on the business, assets,
financial condition or results of operations of GeoScience and its
subsidiaries, taken as a whole; or
(6) The Merger Agreement shall have been terminated in accordance
with its terms; or
(7) The GeoScience Board shall have (i) withdrawn or materially
modified or changed its recommendation of the Offer, the Merger or the
Merger Agreement (including by amendment of Schedule 14D-9) in a manner
adverse to the Purchaser or the Parent or failed to reconfirm its
approval or recommendation within five Business Days after a written
request to do so, (ii) approved or recommended, or proposed publicly to
approve or recommend, any Company Takeover Proposal, (iii) authorized or
caused GeoScience to enter into a Company Acquisition Agreement, or
(iv) resolved or publicly disclosed any intention to do any of the
foregoing; or
(8) There shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the NYSE or the Paris
BOURSE, (ii) a decline of at least 20% in either the Dow Jones Average of
Industrial Stocks, the Standard & Poor's 500 Index or CAC-40 index from
the date of the Merger Agreement, (iii) the declaration of a banking
moratorium or any limitation or suspension of payments in respect of the
extension of credit by banks or other lending institutions in the United
States, (iv) any commencement of war, armed hostilities or other
international or national calamity directly involving the United States
or having a significant adverse effect on the functionality of financial
markets in the United States, or (v) in the case of any of the foregoing,
existing at the time of commencement of the Offer, a material
acceleration or worsening thereof; or
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(9) The Parent Financing Approvals shall not have been obtained; or
(10) The Parent shall not have consummated the rights offering for
its ordinary shares in the United States and Europe with gross aggregate
proceeds of at least FRF 300,000,000 to the Parent; or
(11) At the time of the consummation of the Offer, the Parent shall
not have funds available to it from the Financing sufficient to
consummate the Offer and the Merger on the terms contemplated by the
Merger Agreement (the conditions referred to in paragraphs (9), (10) and
(11) are referred to herein collectively as the "Financing Conditions");
or
(12) The "Termination Date" under each of the Loan Agreement, dated
as of December 6, 1996 (as amended), between the Company and Wells Fargo
Bank (Texas), National Association, as agent, and the Loan Agreement,
dated as of December 6, 1996 (as amended), between Syntron, Inc. and
Wells Fargo Bank (Texas), National Association, as agent, shall not have
been extended to the Offer Completion Date.
The foregoing conditions are for the sole benefit of the Purchaser and its
Affiliates and may be asserted by the Purchaser, or the Parent on behalf of the
Purchaser, regardless of the circumstances (including, without limitation, any
action or inaction by the Purchaser or any of its Affiliates other than a
material breach by the Purchaser or the Parent of the Merger Agreement) giving
rise to any such condition or may be waived by the Purchaser, in whole or in
part, from time to time in its sole discretion, except as otherwise provided in
the Merger Agreement. The failure by the Purchaser at any time to exercise any
of the foregoing rights will not be deemed a waiver of any such right and each
such right will be deemed an ongoing right and may be asserted at any time and
from time to time. Any good faith determination by the Purchaser concerning any
of the events described herein will be final and binding.
COVENANTS. The Merger Agreement requires GeoScience and its Subsidiaries,
from the date of the Merger Agreement until the Effective Time, to operate their
respective businesses in the ordinary course and to use their reasonable efforts
to preserve intact their business organizations, to keep available the services
of their present officers and other key employees and to preserve their
relationships with all key customers, suppliers and other Persons having
business dealings with them. The Merger Agreement restricts GeoScience from
entering into certain types of transactions outside the ordinary course of
business without the consent of the Parent, including, among others, paying
dividends, making changes in its capital structure, redeeming its capital stock,
issuing additional shares of capital stock or rights to acquire its capital
stock, amending its organizational documents, making material dispositions of
assets, incurring certain additional indebtedness, amending its employee benefit
or compensation plans, permitting liens on its property or assets and entering
into or amending certain material contracts.
EMPLOYEE BENEFITS. The Merger Agreement provides that, for a one year
period from the Effective Time, the Surviving Corporation will provide benefits
to the employees of GeoScience and its Subsidiaries that are not materially less
favorable in the aggregate than those currently provided by GeoScience (other
than those related to the equity securities of GeoScience). Participants will be
credited with their service with GeoScience in determining their right to
participate and vesting under any successor employee plans.
DIRECTORS. Promptly upon the purchase of Shares pursuant to the Offer, the
Parent will be entitled to designate such number of directors, rounded up to the
next whole number, as will give the Parent representation on GeoScience Board
(including committees of GeoScience Board) that is proportionate to its
ownership interest in GeoScience, subject to compliance with Section 14(f) of
the Exchange Act. Notwithstanding the foregoing, at all times prior to the
Effective Time, the GeoScience Board will include at least two directors of
GeoScience who are currently directors of GeoScience (the "Continuing
Directors"). After the appointment of the Parent's designees to GeoScience
Board, all decisions on behalf of GeoScience with respect to the Merger
Agreement or any amendment of the Articles of Incorporation or Bylaws of
GeoScience must be approved by a majority of the Continuing Directors.
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AGREEMENT TO DEFEND AND INDEMNIFY. The Surviving Corporation will assume
all obligations to indemnify the current or former directors or officers of
GeoScience and its Subsidiaries for acts or omissions occurring at or prior to
the Effective Time. GeoScience and the Surviving Corporation, as applicable,
have agreed to maintain in effect for not less than six years after the Offer
Completion Date policies of directors' and officers' liability insurance
equivalent in all material respects to those maintained by or on behalf of
GeoScience and its Subsidiaries on the date of the Merger Agreement, with annual
premiums not to exceed 150% of the annual premium currently paid by GeoScience
and its Subsidiaries for such insurance.
DIVIDENDS AND DISTRIBUTIONS. If between the date of the Merger Agreement
and the Effective Time the outstanding Shares have been changed into a different
number of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares, the amount payable in the Offer will be correspondingly adjusted on a
per-share basis to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares. The Merger Agreement
provides that GeoScience and its Subsidiaries will not without the prior written
consent of the Parent (a) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, (b) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, (c) issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to acquire, any
such shares, voting securities or convertible securities, or (d) redeem,
purchase or otherwise acquire any shares of capital stock of GeoScience or any
of its Subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities.
NO SOLICITATION. The Merger Agreement requires GeoScience, its affiliates
and their respective representatives to cease any existing discussions or
negotiations immediately with any parties with respect to any Company Takeover
Proposal. In addition, GeoScience has agreed not to, and to not permit its
Subsidiaries to, solicit, initiate, encourage (including, without limitation, by
way of furnishing information), participate in any discussions or negotiations,
or take any other action designed or reasonably likely to facilitate, any
inquiries or the making of any proposal which constitutes or reasonably may give
rise to any Company Takeover Proposal, other than if the failure to do so would
result in a breach of GeoScience Board's fiduciary duties to the Stockholders
under applicable Law. If GeoScience Board receives a Company Takeover Proposal
that it did not solicit and that did not result from the breach of any of the
provisions in the Merger Agreement by GeoScience and that it determines in good
faith is a Superior Proposal, GeoScience Board may furnish information and
participate in negotiations regarding such Superior Proposal. If the GeoScience
Board determines that the failure to accept such Superior Proposal would result
in a breach of its fiduciary obligations under applicable Law, the GeoScience
Board may withdraw or modify its recommendation or approval of the Offer, the
Merger or the Merger Agreement, terminate the Merger Agreement and/or approve or
recommend a Superior Proposal. GeoScience, however, must provide the Parent with
at least five business days' notice of its intention to terminate the Merger
Agreement and information regarding the terms of any Superior Proposal to enable
the Parent the opportunity to modify its proposal so that such alternative
proposal would no longer be a Superior Proposal. The taking of certain actions
in connection with a Company Takeover Proposal will result in the payment by
GeoScience of a $1.5 million termination fee under certain circumstances. See
"--Termination Fees."
TERMINATION. The Merger Agreement may be terminated at any time whether or
not GeoScience Stockholder Approval or the Parent Stockholder Approval has been
obtained, by the mutual consent of the Parent and GeoScience, or by action of
the Board of Directors of either party under the following circumstances:
- - The Merger is not completed by February 15, 2000 (the "Outside Date"), other
than due to the breach of the terminating party, provided that the Outside
Date will be extended to March 31, 2000 if the
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Merger has not occurred by February 15, 2000 because (a) any applicable
Antitrust Approvals or waiting periods under the HSR Act or the antitrust laws
of the European Union or any member country thereof have not been obtained or
have not expired, as the case may be, or (b) at least 90% of the Voting
Securities were not tendered (and not withdrawn) in the Offer; or
- - A court or other Governmental Entity enjoins, restrains or otherwise prohibits
the Offer, the Merger or any other transactions contemplated by the Merger
Agreement pursuant to a final, nonappealable order; or
- - The Offer is not consummated due to the failure of any of the Offer Conditions
(See "--Certain Conditions of the Offer"); or
- - The other party is in material breach of its representations and warranties
contained in the Merger Agreement and such party has not cured such breach
within 15 days after written notice of such breach and such breach could
reasonably be expected to have a material adverse effect on the business,
assets, financial condition or results of operations of the breaching party;
or
- - The other party is in material breach of its covenants under the Merger
Agreement and such party has not cured such breach within 15 days after
written notice of such breach.
In addition, GeoScience may terminate the Merger Agreement as described above
under "No Solicitation" and the Parent may terminate the Merger Agreement if:
- The GeoScience Board authorizes or causes GeoScience to enter into an
agreement with respect to a Company Takeover Proposal; or
- The GeoScience Board changes in a manner adverse to the Parent, withdraws
or fails to reconfirm its recommendation of the Merger; or
- GeoScience approves or recommends a Company Takeover Proposal; or
- The GeoScience Board resolves to withdraw or modify its recommendation or
approve or recommend a Company Takeover Proposal; or
- GeoScience or any of its officers, directors, employees, representatives
or agents materially breaches the "No Solicitation" covenant; or
- The Parent's stockholders shall not have approved the reserved capital
increase necessary to consummate the Beacon Financing (the "Parent
Stockholder Approval").
TERMINATION FEES. GeoScience is required to pay the Parent a termination
fee of $1.5 million in any of the following circumstances set forth in items 1
through 5 below:
1. GeoScience terminates the Merger Agreement as described under "No
Solicitation" above; or
2. The Parent terminates the Merger Agreement because the GeoScience Board
accepts, or enters into, an agreement with respect to a Company Takeover
Proposal or the GeoScience Board changes in a manner adverse to the
Parent, withdraws or fails to reconfirm its recommendation of the Offer
or the Merger or approves or recommends a Company Takeover Proposal; or
3. The Parent terminates the Merger Agreement because GeoScience violates
the "No Solicitation" provisions described above; or
4. The Parent terminates the Merger Agreement and the Offer has not been
consummated prior to the Outside Date or the Offer has not been
consummated as a result of the failure of any of the Offer Conditions and
each of the following clauses (a), (b) and (c) shall be true:
(a) At the time of such termination:
- The Minimum Condition has not been satisfied; and
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- The Parent Stockholder Approval and the approval of the Parent's Board
of Directors of the capital increase necessary to consummate the Rights
Offering have been obtained; and
- GeoScience is in breach of its representations, warranties or covenants
under the Merger Agreement or there shall have occurred a material
adverse change in GeoScience or GeoScience's senior lender shall have
failed to extend the termination date of its loans to GeoScience to the
Offer Completion Date so as to result in any such case in a failure of
one of the Offer Conditions; and
- The Parent and the Purchaser are not in breach of their
representations, warranties or covenants under the Merger Agreement so
as to give GeoScience a right to terminate the Merger Agreement; and
(b) Prior to such termination, a Company Takeover Proposal or an intention
to make a Company Takeover Proposal shall have been publicly disclosed;
and
(c) Prior to such termination or within six months after such termination,
GeoScience or any Subsidiary shall have entered into a Company
Acquisition Agreement or closed a Company Takeover Proposal; or
5. The Parent terminates the Merger Agreement because GeoScience is in
material breach of any of its representations, warranties or covenants
and at the time of the termination (a) a Company Takeover Proposal or an
intention to make a Company Takeover Proposal had been publicly disclosed
and (b) prior to or within six months from the termination a Company
Acquisition Agreement is entered into or a Company Takeover Proposal is
closed.
The Parent is required to pay GeoScience a termination fee of $1.5 million
if all of the following have occurred:
- The Merger Agreement is terminated either (a) by the Parent or GeoScience
because the Offer has not been consummated prior to the Outside Date or
(b) by the Parent because the Parent Stockholder Approval was not obtained;
and
- At the time of such termination any Financing Condition shall not have been
satisfied; and
- At the time of such termination the Parent is not entitled to terminate the
Merger Agreement due to a material breach by GeoScience of its
representations, warranties or covenants under the Merger Agreement or under
circumstances relating to a Company Takeover Proposal or a change in the
recommendation of the GeoScience Board (in each case, as described under
"--Termination" above).
AMENDMENT. The Merger Agreement may be amended by GeoScience, the Parent
and the Purchaser, by action taken by their respective Boards of Directors (or
similar governing bodies), at any time before or after approval by the
Stockholders of matters presented in connection with the Merger. Notwithstanding
the foregoing, after any such Stockholder approval, no amendment may be made
which by Law requires the further approval of the Stockholders without obtaining
such further approval.
WAIVER. Subject to the limitations set forth in the Merger Agreement, at
any time prior to the Effective Time, any party to the Merger Agreement may
(a) extend the time for the performance of any of the obligations or other acts
of the other parties, (b) waive any inaccuracies in the representations and
warranties or in any document delivered under the Merger Agreement, and
(c) waive compliance with any of the agreements or conditions.
THE SHAREHOLDER AGREEMENT
The following is a summary of the material terms of the Shareholder
Agreement and is qualified in its entirety by reference to the complete text of
the Shareholder Agreement, a copy of which is filed as Exhibit 2 hereto and is
incorporated herein by reference. This summary may not contain all the
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information that is important to you. Accordingly, the Shareholder Agreement
should be read in its entirety for a more complete description of the matters
summarized below. Defined terms used under this caption "The Shareholder
Agreement" and not defined have the respective meanings assigned to those terms
in the Shareholder Agreement.
In connection with the execution of the Merger Agreement, Tech-Sym, the
Purchaser and the Parent have entered into the Shareholder Agreement. Tech-Sym
beneficially owns 80.1% of the currently outstanding Shares and 73.3% of the
Shares calculated on a fully diluted basis as of the date hereof. All of the
Shares beneficially owned by Tech-Sym, including any Shares acquired by Tech-Sym
and its affiliates after the date of the Shareholder Agreement (collectively,
the "Offer Shares"), are subject to the terms of the Shareholder Agreement.
SALE OF SHARES. Tech-Sym has agreed to tender, pursuant to and in
accordance with the terms of the Offer, all of the Offer Shares not later than
the fifth Business Day after commencement of the Offer, and to not withdraw such
Shares. In the event that, notwithstanding the foregoing sentence, any Offer
Shares are for any reason withdrawn from the Offer or are not purchased pursuant
to the Offer, such Offer Shares will remain subject to the terms of the
Shareholder Agreement.
PROXY. Tech-Sym has granted the Parent, the Purchaser or any nominee
thereof, an irrevocable proxy to vote all the Shares Tech-Sym beneficially owns
at the time of such vote, (a) in favor of the approval and adoption of the
Merger Agreement and approval of the Merger and the other transactions
contemplated thereby and (b) against (1) any Company Takeover Proposal, (2) any
action or agreement that would result in a breach in any respect of any
covenant, agreement, representation or warranty of GeoScience under the Merger
Agreement, and (3) certain material transactions or other actions that could
reasonably be expected to impede, interfere with, delay, postpone or adversely
affect the Merger and the other transactions contemplated by the Shareholder
Agreement and the Merger Agreement.
THE PARENT OPTION. Tech-Sym has granted the Parent an irrevocable option to
purchase for cash any or all of the Shares beneficially owned by Tech-Sym at the
Per Share Amount (the "Parent Option"). Subject to the closing conditions set
forth above, the Parent Option may be exercised by the Parent, in whole or in
part, if (a) Tech-Sym has not validly tendered, or has withdrawn, Tech-Sym's
Shares prior to the Expiration Date or (b) the Merger Agreement becomes
terminable under circumstances that could entitle the Parent to termination fees
(regardless of whether the Merger Agreement is actually terminated). The Parent
Option terminates upon termination of the Merger Agreement; however, if such
termination arose under circumstances that could entitle the Parent to receive
the Company Termination Fee, the Parent Option will not terminate until
180 days after such termination of the Merger Agreement. The 180-day period
referred to above will be extended in order to obtain any required Regulatory or
Antitrust Approvals that, if not obtained, would have the effect of making the
purchase of Tech-Sym's Shares illegal.
The obligation of Tech-Sym to sell the Shares to the Parent or the Parent's
nominee is subject to the conditions that (a) all waiting periods for the
Antitrust Approvals have expired or have been terminated, (b) all Regulatory
Approvals have been obtained or made, the failure of which to have obtained or
made would have the effect of making the purchase of Shares by the Parent or the
Parent's nominee illegal, and (c) no preliminary or permanent injunction or
other order by any court of competent jurisdiction prohibiting or otherwise
restraining such sale or acquisition is in effect.
SHARE TRANSACTIONS. During the term of the Shareholder Agreement, Tech-Sym
has agreed not to take certain actions that could frustrate the performance by
Tech-Sym of its obligations under the Shareholder Agreement, including, among
others, accepting any tender or exchange offer for the Shares (other than the
Offer) or otherwise selling, transferring, pledging, assigning, hypothecating or
otherwise disposing of, or encumbering with any Lien, any of the Shares, or
depositing the Shares into a voting trust, entering into a voting agreement or
arrangement with respect to the Shares, or granting any proxy or power of
attorney with respect to the Shares, except pursuant to the Shareholder
Agreement.
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NO SOLICITATION. Tech-Sym has agreed not to solicit, participate in any
negotiations or discussions regarding, initiate or encourage submission of
proposals or offers from any Person relating to, or that could reasonably be
expected to lead to, any Company Takeover Proposal. Tech-Sym has agreed to
advise the Parent immediately in writing of the receipt of request for
information or any inquiries or proposals relating to any Company Takeover
Proposal.
RELATED TRANSACTIONS. The Parent has agreed that, within five business days
after a majority of the GeoScience Board is comprised of Parent's designees, it
shall (i) deliver to Tech-Sym releases from the guarantees given by Tech-Sym to
lenders under two of GeoScience's bank credit facilities and (ii) pay, or cause
to be paid, all amounts owed by GeoScience to Tech-Sym for loans made, if any,
by Tech-Sym to GeoScience after the date of the Shareholder Agreement and all
amounts owed by GeoScience to Tech-Sym pursuant to the terms of the Corporate
Services Agreement and the Tax Allocation Agreement entered into between
Tech-Sym and GeoScience in May 1996.
TAX ELECTION. Tech-Sym and the Purchaser have agreed to join in a timely
election pursuant to Section 338(h)(10) of the Internal Revenue Code (and under
any comparable provision of any state or local law) ("338(h)(10) Election") with
respect to the Shares and each target affiliate, as such term is defined in
Section 338(h)(6) of the Internal Revenue Code, of GeoScience ("Target
Affiliate"), the effect of which be that the purchase of the Shares by the
Purchaser will be treated as a sale of assets by GeoScience and each Target
Affiliate for federal income tax purposes and for applicable state and local tax
purposes. Any tax liability arising with respect to the 338(h)(10) Election will
be the responsibility of Tech-Sym.
RIGHTS TO INDEMNIFICATION. Tech-Sym has agreed to indemnify the Parent, the
Purchaser and their respective affiliates for (i) breach of any representation,
warranty or covenant of Tech-Sym in the Shareholder Agreement, (ii) breach of
any covenant of GeoScience in the Merger Agreement, (iii) breach by GeoScience
of its representations and warranties in the Merger Agreement as to
organization, authority and good standing; authorization and effectiveness of
the Merger Agreement; GeoScience's capital structure; GeoScience's Subsidiaries;
and other interests; GeoScience's Commission filings and financial statements;
litigation; required approvals; and brokers and finders fees, and (iv) subject
to individual exceptions, claims by Persons who are not employees of GeoScience
or any of its Subsidiaries resulting from the termination of their Options as of
the Effective Time. Tech-Sym's obligation to indemnify the Parent, the Purchaser
and their respective affiliates for breaches of GeoScience's representations and
warranties under the Merger Agreement applies only with respect to claims
asserted prior to April 30, 2001. Tech-Sym has no such liability unless the
aggregate liability of the Parent and its affiliates resulting from a breach of
such representations and warranties exceeds $500,000. Its aggregate liability
for breaches of GeoScience's representations and warranties is limited to $10
million.
The Parent and the Purchaser have agreed to indemnify Tech-Sym and its
affiliates for damages resulting from the breach of any representation, warranty
or covenant of the Parent or the Purchaser contained in the Merger Agreement or
the Shareholder Agreement. Parent and Purchaser have also agreed to indemnify,
reimburse and hold harmless Tech-Sym and its affiliates from and against all
damages asserted against or incurred by Tech-Sym and its affiliates, and for all
payments made or required to be made by Tech-Sym and its affiliates, in respect
of any of the guarantees issued by Tech-Sym with respect to indebtedness of
GeoScience to the extent such damages or payments arise out of (i) the change in
control of GeoScience due to the consummation of the Offer or the Merger or
(ii) events occurring after a majority of the GeoScience Board is comprised of
Parent's designees (other than damages arising from a GeoScience breach prior to
such change in the GeoScience Board).
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ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) RECOMMENDATION.
THE GEOSCIENCE BOARD BELIEVES THE TERMS OF THE MERGER ARE FAIR TO AND IN THE
BEST INTERESTS OF GEOSCIENCE AND ITS STOCKHOLDERS. THE BOARD (WITH ONE DIRECTOR
DISSENTING) HAS APPROVED THE MERGER AND RECOMMENDS THAT THE GEOSCIENCE
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR GEOSCIENCE COMMON STOCK. The
Board's determination and recommendation were made at the Board's October 22,
1999 meeting at which all of GeoScience's directors were present in person or by
conference telephone.
Any determination of fairness involves many different issues and
considerations, and is inherently subjective. Each member of the GeoScience
Board is or was either an officer or director of Tech-Sym or a subsidiary of
Tech-Sym. Further, although Tech-Sym is entitled to the same Per Share Amount in
the Offer and the Merger as all other holders of GeoScience Common Stock,
Tech-Sym has interests that may be different from those of the other
stockholders of GeoScience. In particular, Tech-Sym has guaranteed eighty
percent (80%) of the indebtedness of GeoScience under two bank credit facilities
of GeoScience. The outstanding principal amount under these facilities was
approximately $25 million as of September 30, 1999. Tech-Sym and GeoScience are
also parties to a Tax Allocation Agreement and a Corporate Services Agreement,
each of which was entered at the time GeoScience completed its initial public
offering of common stock in May 1996.
The Corporate Services Agreement specifies that Tech-Sym will provide to
GeoScience advisory management services, certain accounting, financial
reporting, auditing, finance and treasury services, employee benefits
administration, insurance procurement, tax planning, governmental reporting and
legal services. Charges for the services or products provided by third parties
are based on the actual costs incurred. Charges for all other services or
products are based on an allocation of direct and indirect costs. Indirect
costs, which consist of general and administrative expenses related to the
management personnel of Tech-Sym (including salaries and bonuses), are allocated
pursuant to a formula that takes into account the relative payroll, operating
revenue, tangible capital assets and inventory of GeoScience in relation to
those of Tech-Sym's subsidiaries in the aggregate. For the years 1997 and 1998,
and for the nine months ended September 30, 1999, Tech-Sym allocated
$1.7 million, $2.0 million and $1.1 million to GeoScience, pursuant to the
Corporate Services Agreement.
The Tax Allocation Agreement provides for (i) the allocation and payment of
taxes for periods during which GeoScience and Tech-Sym (or its affiliates other
than GeoScience and its subsidiaries) are included in the same consolidated
group for federal income tax purposes or the same consolidated, combined or
unitary returns for state tax purposes, (ii) the allocation of responsibility
for the filing of tax returns, (iii) the conduct of tax audits and the handling
of tax controversies and (iv) various related matters. For periods during which
GeoScience is included in Tech-Sym's consolidated federal income tax returns or
state consolidated, combined, or unitary tax returns, GeoScience is required to
pay to or entitled to receive from Tech-Sym its allocable portion of the
consolidated federal income and state tax liability or credits. In August 1999,
Tech-Sym purchased additional shares of GeoScience Common Stock which increased
its percentage ownership to approximately 80% and enabled Tech-Sym to file a
consolidated tax return with respect to periods, or partial periods, from and
after the date of achieving ownership at the 80% level.
Pursuant to the Shareholder Agreement, Tech-Sym has (a) agreed to tender to
the Purchaser in the Offer all Shares beneficially owned by Tech-Sym, which
represented as of the date of the Shareholder Agreement 73% of the outstanding
shares on a fully diluted basis, (b) granted to the Parent an irrevocable proxy
to vote Tech-Sym's Shares in favor of the Merger and against proposals adverse
to or conflicting with the transactions contemplated by the Merger Agreement,
and (c) granted to the Purchaser an option to purchase the Shares beneficially
owned by it at the Per Share Amount under certain circumstances. The option is
exercisable in whole or in part if, among other things, the Merger Agreement
becomes terminable under circumstances that could entitle the Purchaser to
termination fees under the Merger Agreement (regardless of whether the Merger
Agreement is actually terminated).
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In addition, the Shareholder Agreement provides that Parent shall, within
five business days after a majority of the GeoScience Board is comprised of
Parent's designees, (i) deliver to Tech-Sym releases from guarantees that
Tech-Sym has provided to certain lenders of GeoScience and (ii) pay, or cause to
be paid, amounts owed by GeoScience to Tech-Sym pursuant to the Corporate
Services Agreement and the Tax Allocation Agreement. The Shareholder Agreement
also provides that Tech-Sym and the Purchaser shall jointly make an election
under Section 338(h)(10) of the Internal Revenue Code with respect to the
Shares. Tech-Sym's acceptance of a Section 338(h)(10) election allowed for
maximization of the stock selling pricing by permitting the Purchaser to obtain
full fair market value tax basis in each of the operating assets purchased. Net
after-tax proceeds received by Tech-Sym were not compromised by the election.
Finally, the Shareholder Agreement provides that (i) Tech-Sym will indemnify the
Parent and its affiliates with respect to certain matters, including breach of
representations and warranties made by GeoScience in the Merger Agreement and
(ii) the Parent and the Purchaser will indemnify Tech-Sym for certain matters.
See "Item 3. Identity and Background--Shareholder Agreement."
Tech-Sym's interests are different from those of the other holders of
GeoScience Common Stock and, as each of the members of the GeoScience Board are
also either an officer or director of Tech-Sym or one of its subsidiaries, we
encourage you not to rely solely on the recommendation of the GeoScience Board
in determining whether to accept the Offer and tender your Shares, but rather to
independently consider the information included herein as well as other
available information about GeoScience.
The GeoScience Board's recommendation is based in part on the oral opinion
delivered by Morgan Keegan on October 20, 1999, that as of that date, the
consideration to be received by the stockholders of GeoScience pursuant to the
Merger Agreement was fair from a financial point of view to the stockholders of
GeoScience. Morgan Keegan subsequently confirmed its opinion in writing on
October 22, 1999, following the board meeting. The full text of the opinion,
which sets forth the assumptions made, the matters considered and the
limitations on the review undertaken by Morgan Keegan, is set forth as
Exhibit 5 hereto and is incorporated by reference herein.
(b) REASONS FOR THE RECOMMENDATION.
BACKGROUND OF THE MERGER AND OFFER
In 1995 and again in 1997, representatives of Parent discussed with the
managements of GeoScience and Tech-Sym the possibility of a strategic alliance
between Sercel, Inc. and GeoScience's subsidiary Syntron, Inc. The purposes of
the alliance would have been to develop jointly a new marine seismic data
acquisition system and to cooperatively market both marine and land seismic
acquisition systems. In order to facilitate the purposes of the alliance, the
Parent expressed interest in exchanging shares of the Parent or Sercel for
shares in GeoScience or Syntron, or purchasing from GeoScience newly issued
shares. On both occasions, those discussions terminated, largely because of the
inability of the parties to agree on the relative value of the companies, the
structure for the transaction, or the control of the companies.
In July, 1998, Mr. Lesage, the Chairman and Chief Executive Officer of the
Parent, contacted Wendell W. Gamel, Chairman of the Board of Tech-Sym, and J.
Michael Camp, who had just been elected as the President and Chief Executive
Officer of Tech-Sym. In Paris, France, on July 23, 1998, Messrs. Lesage, Camp
and Richard F. Miles, President of GeoScience, exchanged ideas about the
possible combination of Sercel and Syntron. However, subsequent discussions
terminated when the seismic exploration industry suffered a sharp decline in
August, 1998, due to the fall in global crude oil prices.
In December 1998, the Boards of Directors of GeoScience and Tech-Sym
received an unsolicited offer from Core Laboratories, N.V. to merge with
GeoScience. During the following weeks, GeoScience representatives negotiated
with representatives of Core Laboratories and on January 18, 1999, Core
Laboratories, GeoScience and Tech-Sym executed a definitive merger agreement
pursuant to which GeoScience would merge with and into a wholly owned subsidiary
of Core Laboratories, subject to customary conditions including stockholder and
regulatory approvals. Under the terms of the merger
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agreement, GeoScience stockholders would have received in the merger 0.6788 of a
Core Laboratories common share and $2.46 in cash for each Share owned by them at
the time of the merger (which implied a price of $17.90 per Share based on the
closing price of Core Laboratories' common shares on January 15, 1999).
Tech-Sym, GeoScience and Core Laboratories subsequently terminated the
proposed merger in March 1999. GeoScience believes that the continuing malaise
among marine oilfield service contractors, which could result in reduced orders
at Syntron, caused Core Laboratories to reassess the proposed transaction. As
part of the termination, Core Laboratories paid GeoScience $3 million through
the cancellation of an equal amount of working capital advances previously made
by Core Laboratories to GeoScience.
In June, 1999, representatives of The Beacon Group Energy Investment Fund
II, L.P. pursued discussions with management of GeoScience and Tech-Sym
regarding a management-led buyout of GeoScience to be financed by Beacon. On
June 28, 1999, Richard Aube, Director of Beacon, and John Reynolds of Lime Rock
Partners, met with Messrs. Miles and Camp regarding Tech-Sym's willingness to
entertain a management buyout of GeoScience with lead funding by Beacon and Lime
Rock. Mr. Camp responded that he would report their interest to the Tech-Sym and
GeoScience Boards and reply to Beacon.
During a telephone conference with the Tech-Sym Board of Directors on
July 1, 1999, Mr. Camp advised the Board of the indication of interest received
from Beacon and Lime Rock. The Tech-Sym Board concluded that its management
should continue discussions regarding a GeoScience management-led buyout and
further agreed that Mr. Miles' participation in the activity would be acceptable
to the Board. Mr. Camp subsequently called Mr. Aube and reported that the Board
held no reservations regarding Mr. Miles participating in a management buyout.
On July 8, 1999, Mike Harris, a representative from Morgan Keegan, and
Mr. Camp met with representatives of a seismic equipment manufacturer ("Offeror
2") to discuss Tech-Sym's objectives regarding GeoScience. Mr. Camp, during a
special telephonic meeting of the Tech-Sym Board on July 12, 1999, reported to
the directors concerning his meeting with Offeror 2. On July 27, 1999,
representatives of Offeror 2 met with Messrs. Miles, Harris and Camp to initiate
discussions regarding the possibility of a merger of GeoScience with Offeror 2.
On August 4, 1999, Mr. Camp telephoned representatives of a manufacturer of
marine acoustic equipment used for anti-submarine warfare ("Offeror 3") and
discussed a possible transaction involving GeoScience and Offeror 3. Two days
later, management of Tech-Sym and GeoScience met with management of Offeror 3.
Mr. Camp and a representative of Offeror 2 had a telephonic discussion on
August 5, 1999 regarding the possible terms of a cash and stock merger between
Offeror 2 and GeoScience. Several weeks later, on August 27, 1999, Mr. Camp met
with representatives of Offeror 2 to discuss their perspectives regarding
relative valuations in a cash and stock merger of Offeror 2 and GeoScience.
Mr. Camp also spoke by telephone with a representative of a marine seismic
streamer manufacturer ("Offeror 4") concerning its interest in acquiring
GeoScience.
Beacon submitted a draft letter agreement on September 3, 1999, to Tech-Sym
and GeoScience, setting forth the proposed terms of the acquisition of all of
the equity of GeoScience. The letter agreement proposed an offering price of
$75 million, less forgiveness of $5.8 million of indebtedness to Tech-Sym,
provided Tech-Sym remained obligated on its guarantee of GeoScience's
indebtedness for a period of three years following closing. In addition, Beacon
proposed a break-up fee of $1 million plus expenses. When third-party debt to be
assumed or paid was considered, the transaction value was approximately
$104 million. On September 7, 1999, Messrs. Camp and Aube spoke by telephone
regarding the terms in the draft letter agreement. Mr. Camp suggested that
certain terms be eliminated, including the Tech-Sym
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guarantee of GeoScience debt, forgiveness of GeoScience debt to Tech-Sym, and
the $1 million break-up fee. In a telephonic briefing of the Tech-Sym Board of
Directors on September 9, 1999, Mr. Camp reported to the directors regarding the
discussions with representatives from Beacon and the other offerors.
On September 10 and September 13, 1999, Mr. Camp and a Beacon representative
spoke by telephone concerning the draft letter agreement. Mr. Camp suggested
that the price should be increased to $7.50 per share and that Tech-Sym would
consider a $10 million unsecured promissory note as part of the consideration
for Tech-Sym's shares of GeoScience Common Stock so that Beacon could close the
transaction within its cash constraints.
On September 14, 1999, Mr. Camp spoke with a representative of Offeror 4
regarding alternative offer approaches such as using a combination of stock and
cash as consideration. The representative of Offeror 4 provided Mr. Camp with an
update on its progress toward establishing a definitively valued offer for
GeoScience.
After several conversations between Mr. Aube and J. Rankin Tippins, Vice
President and General Counsel of both GeoScience and Tech-Sym, Beacon submitted
a revised draft letter agreement on September 17, 1999. The draft letter
proposed that Beacon would pay $75 million for all the equity of GeoScience,
$10 million of which would be paid to Tech-Sym in the form of a subordinated
promissory note, all debt and intercompany payables due by GeoScience to
Tech-Sym would be forgiven, and Tech-Sym would be released from its guarantees
of GeoScience debt. Further, the letter agreement provided that GeoScience would
pay Beacon a fee of $350,000 plus expenses if GeoScience entered into another
transaction during a 45-day exclusivity period, and that the agreement would not
be legally binding upon the parties. Messrs. Camp and Aube discussed by
telephone on September 18, 1999, a future timetable of events. Mr. Aube stated
that GeoScience would have until September 21, 1999, to decide whether to
proceed with Beacon's letter agreement or the offer would be rescinded.
On September 20, 1999, Mr. Camp met with representatives of another seismic
streamer manufacturer ("Offeror 5") to discuss its interest in merging with
GeoScience. Mr. Camp also spoke by telephone with Offeror 4 during which a range
of potential offer prices was discussed. Mr. Camp informed Offeror 4 that its
suggested price range was not acceptable. Mr. Camp telephoned Robert Semmens of
Beacon to request an extension of the deadline from September 21, 1999 to
September 22, 1999, which extension was granted.
On September 21, 1999, the Board of Directors of Tech-Sym held a special
meeting by telephone to review the proposal from Beacon, the status of
discussions with other interested parties, and to discuss possible courses of
action with management and the Company's legal and financial advisors. The Board
authorized Tech-Sym's management to proceed with negotiations with Beacon. Based
on that authorization, Mr. Camp spoke by telephone with Beacon representatives
on September 22, 1999 to address certain minor revisions to the draft letter
agreement. Mr. Camp received an updated letter of interest from Offeror 2 but
informed Offeror 2 that its suggested price range was not acceptable. Beacon
submitted a final version of its letter agreement, which Tech-Sym and Beacon
executed on September 22, 1999.
A Beacon representative telephoned Mr. Camp on October 2, 1999 to advise him
that the Parent was interested in acquiring GeoScience, utilizing cash to be
invested in Parent by Beacon, on substantially the same terms as set forth in
the Beacon letter agreement. Mr. Camp was also advised that a condition to
Beacon's funding of the acquisition would be a successful share capital increase
by Parent. After preliminary discussions, on October 4, 1999, Mr. Camp met with
a representative of Beacon and Thierry La Roux, Senior Executive Vice President
of Parent, to establish a schedule for due diligence and the process by which a
definitive agreement could be negotiated. Mr. Camp met with the staff of
Tech-Sym and telephoned Mr. Miles of GeoScience and Mr. Harris of Morgan Keegan
to inform them of the status of, and proposed schedule for, the transaction.
Mr. Camp also individually notified, in written form, the Tech-Sym Board of
Directors of the changes and proposed schedule via electronic messaging with
further telephonic briefings of several Directors in reply. The following day, a
meeting was held at Syntron with
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the executive staffs of GeoScience and Parent to begin the due diligence
investigation process which continued for more than two weeks.
Between October 6 and October 15, 1999, numerous meetings and discussions
were held between representatives of GeoScience, Parent, Beacon and their
respective legal and financial advisers concerning various business and legal
issues with respect to the proposed transaction and the operations of
GeoScience.
On October 14, 1999, the Tech-Sym Board held a telephone conference to
receive reports from management regarding the status of the negotiations and to
discuss various issues relating to the proposed transaction.
On October 18, 1999, Messrs. Camp and Tippins met a representative of Beacon
and Messrs. La Roux, Jean-Maurice Dalongeville, Chief Financial Officer of
Sercel, S.A., George Wood and Pascal Rouiller, executives of Sercel, S.A., and
Ms. Valerie Fery, an in-house attorney at the Parent at the offices of Sercel,
to finalize all business issues regarding the form of the proposed acquisition.
During the negotiations that followed, the executive staff of Tech-Sym continued
their review of the various transaction agreements and issues relating thereto.
Mr. Camp conversed by telephone with W. Lichtenstein and W. L. Creech, members
of the Board of Directors of Tech-Sym regarding the status of negotiations.
Mr. Camp also agreed by telephone with Beacon and the Parent that the purchase
price would be reduced to $67 million since GeoScience had paid its debts to
Tech-Sym following the last published financial statement and the $10 million
subordinated note to Tech-Sym was eliminated. A telephone conference with
representatives of Tech-Sym and the Parent occurred to address remaining
identified issues. Tech-Sym required that the Parent would make an offer for all
remaining shares of GeoScience on terms and conditions no less favorable than
those that might be agreed for its majority interest. In addition to the value
of GeoScience, the issues discussed included Tech-Sym's willingness to indemnify
the Parent for various matters relating to GeoScience, the implications of an
election under Section 338(h)(10) of the Internal Revenue Code to treat the
transaction as an asset sale, and the circumstances under which either the
Parent or GeoScience would be entitled to terminate the transaction and the
consequences of any such termination. At the conclusion of such discussions, the
parties agreed to recommend to their respective Board of Directors an all cash
offer for all Shares at the Per Share Amount, or an aggregate of $67 million,
and on the other terms and conditions described herein. Tech-Sym valued the
transaction at approximately $102 million when debt to be assumed or paid by the
Parent was considered.
On October 20 and October 22, 1999, meetings of the GeoScience Board were
held with all members present. At the meetings, the Board received presentations
from management and GeoScience's legal and financial advisors regarding Parent's
offer and reviewed the proposed forms of Merger Agreement and Shareholder
Agreement. The Board considered Morgan Keegan's oral opinion (subsequently
confirmed in writing) that, as of that date and subject to the matters described
by it and set forth in the written opinion, the consideration to be received by
the stockholders of GeoScience pursuant to the Merger Agreement was fair from a
financial point of view to the stockholders of GeoScience. Following the
discussion, five members of the Board voted in favor of the transactions
contemplated by the Merger Agreement and one member voted against.
On Saturday, October 23, 1999, Mr. Camp met in New York City with
representatives of Beacon and the Parent to execute the Merger Agreement and the
Shareholder Agreement. On October 26, 1999, GeoScience and the Parent jointly
announced that they had entered into the Merger Agreement.
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FACTORS CONSIDERED BY THE GEOSCIENCE BOARD.
In determining to recommend to GeoScience's stockholders that they accept
the Offer and tender their Common Stock pursuant thereto, the GeoScience Board
considered a number of factors, including, without limitation, the following:
(i) the Board's familiarity with and review of GeoScience's business, financial
condition, results of operations, business strategy and prospects, including
the current weakness in the marine seismic industry and the anticipated
continuation of such weakness for the near future;
(ii) the financial and other terms and conditions of the Merger Agreement and
the Shareholder Agreement, and the fact that the $6.71 per share cash
consideration offered for the Common Stock in the Offer and Merger was
higher than the consideration proposed by any other interested party in
connection with the Board's process of evaluating strategic alternatives;
(iii) the written opinion, dated October 22, 1999, of Morgan Keegan that, as of
such date, the consideration to be received by the stockholders of
GeoScience pursuant to the Merger Agreement was fair from a financial point
of view to the stockholders of GeoScience (a copy of the opinion, setting
forth procedures followed, assumptions made, areas of reliance and other
matters considered by Morgan Keegan in arriving at their opinion, is
attached as Exhibit 5 to this Schedule and is incorporated herein by
reference, and should be read in its entirety); in considering such opinion,
the Board was aware that, upon delivery thereof, Morgan Keegan became
entitled to certain fees described in Item 5 below in connection with its
engagement by GeoScience and that, in addition, Morgan Keegan expressed no
opinion or recommendation as to how the stockholders of GeoScience should
vote with respect to the Merger;
(iv) the presentations of Morgan Keegan in connection with such opinion as to
various financial and other considerations deemed relevant to the Board's
evaluation of the Offer and the Merger;
(v) the historic and recent market prices of the Shares and the fact that the
$6.71 per share Offer price represents, among other things, a premium of 8%
over the closing price for the Common Stock on the Nasdaq National Market on
the trading day before the Board's recommendation of the Offer, a premium of
5% over such closing price on the day one week before the Board's
recommendation of the Offer and a discount of 4% under such closing price
four weeks before such recommendation;
(vi) the terms and conditions of the Offer and the Merger Agreement, including
that the Offer is subject to minimum tender conditions and that the Board is
entitled, prior to the consummation of the Offer, to terminate the Merger
Agreement and withdraw its recommendation of the Offer in order to approve
an alternative transaction with a third party on terms more favorable to
GeoScience's stockholders from a financial point of view than the Offer and
the Merger taken together, provided that GeoScience is obligated to pay
Parent a fee of $1.5 million upon any such termination (such amount
representing approximately 2.2% of the aggregate cash consideration of
$67 million); in assessing the termination fee, the Board of Directors
considered the likelihood of any third party making a proposal for a third
party transaction and that the effect of the termination fee would be to
increase by the amount of such termination fee the costs to a third party of
acquiring GeoScience;
(vii) the terms of the Shareholder Agreement, including those terms which would
make it unlikely that a third party would make a bid to acquire GeoScience
prior to the termination of the Merger Agreement and, in certain
circumstances, for a period of six months thereafter;
(vii) the financial ability of Parent to consummate the Offer and the Merger;
(ix) the possible impact of the Offer and the Merger and of alternatives thereto
on GeoScience's business and prospects; and
17
<PAGE>
(x) the fact that, following the consummation of the Offer and the Merger, the
current stockholders of GeoScience will no longer be able to participate in
any increases or decreases in the value of GeoScience business and profits.
The foregoing discussion of the information and facts considered by the
Board is not intended to be exclusive. In view of the wide variety of factors
considered in connection with its evaluation of the Offer and the Merger, the
Board did not find it practicable to, and did not, quantify or otherwise assign
relative weights to the individual factors considered in reaching its
determination. In addition, individual members of the Board may have given
different weights to different factors.
OPINION OF GEOSCIENCE AND TECH-SYM'S FINANCIAL ADVISOR. The GeoScience and
Tech-Sym Boards of Directors engaged Morgan Keegan to act as their financial
advisor in connection with the transaction contemplated by the Merger Agreement.
Morgan Keegan was selected on the basis of its knowledge of GeoScience as well
as of the oil services industry. The GeoScience and Tech-Sym Boards of Directors
instructed Morgan Keegan, in its role as financial advisor, to evaluate the
fairness, from a financial point of view, to the holders of shares of GeoScience
Common Stock, of the consideration to be paid by such holders pursuant to the
Merger Agreement and, in such regard, to conduct such investigations as Morgan
Keegan deemed appropriate for such purpose. No limitations were placed by the
Boards of Directors or management of GeoScience and Tech-Sym with respect to the
investigations made or the procedures followed by Morgan Keegan in preparing and
rendering its opinion, and GeoScience and Tech-Sym and their management
cooperated fully with Morgan Keegan in connection therewith.
On October 22, 1999, Morgan Keegan rendered its written opinion to the
GeoScience and Tech-Sym Boards of Directors to the effect that, based upon and
subject to certain matters stated therein, as of the date of such opinion, the
consideration to be received was fair to the holders of GeoScience and Tech-Sym
Common Stock from a financial point of view (the "Morgan Keegan Opinion").
Certain financial analyses used by Morgan Keegan in connection with rendering
the Morgan Keegan Opinion to the GeoScience and Tech-Sym Boards of Directors are
summarized under "Analyses by Morgan Keegan" below.
The full text of the Morgan Keegan Opinion, which sets forth, among other
things, assumptions made, procedures followed, matters considered, and
limitations on the review undertaken, is attached as Exhibit 5 to this
Schedule 14D-9. GeoScience shareholders are urged to, and should, read the
Morgan Keegan Opinion carefully and in its entirety. The Morgan Keegan Opinion
was provided to the GeoScience and Tech-Sym Boards of Directors and is directed
only to the fairness, from a financial point of view of the consideration to be
received by holders of shares of GeoScience Common Stock pursuant to the Merger
Agreement, and it does not address any other aspect of the merger. The summary
of the Morgan Keegan Opinion set forth herein is qualified in its entirety by
reference to the full text of such opinion.
In conducting its analysis and rendering its opinion, Morgan Keegan reviewed
and considered such financial and other factors it deemed appropriate under the
circumstances including, among others, the following:
(1) reviewed certain publicly available consolidated financial statements of
GeoScience and certain other relevant financial and operating data of
GeoScience made available to Morgan Keegan from published sources and by
officers of GeoScience;
(2) reviewed certain internal financial and operating information, including
certain projections, relating to GeoScience prepared by the management
of GeoScience;
(3) discussed the business, financial condition and prospects of GeoScience
with certain officers of GeoScience;
(4) reviewed the financial terms of the Transaction;
(5) reviewed the financial terms, to the extent publicly available, of
certain similar transactions Morgan Keegan deemed relevant;
18
<PAGE>
(6) reviewed certain publicly available information relating to certain
companies Morgan Keegan deemed appropriate in analyzing GeoScience;
(7) reviewed the trading history of GeoScience's Common Stock;
(8) reviewed a draft of the Merger Agreement;
(9) reviewed certain publicly available consolidated financial statements of
Compagnie Generale de Geophysique ("CGG") and certain other relevant
financial and operating data of CGG made available to Morgan Keegan from
published sources and by officers of CGG;
(10) performed such other analyses and examinations and considered such other
information, financial studies, analysis and investigations and
financial, economic and market data as Morgan Keegan deemed relevant.
In preparing its opinion, Morgan Keegan did not independently verify any of
the foregoing information and assumed and relied upon the accuracy and
completeness of all such information and further relied upon the assurances of
management of GeoScience that they are not aware of any facts that would make
such information inaccurate. With respect to the financial forecasts and
projections made available to Morgan Keegan and used in Morgan Keegan's
analysis, Morgan Keegan assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of GeoScience as to the expected future financial performance of
GeoScience. Morgan Keegan was not engaged to assess the ability of GeoScience to
achieve such projections or assumptions. In addition, Morgan Keegan did not
conduct a physical inspection or appraisal of any of the assets, properties, or
facilities of GeoScience nor has it been furnished with any such evaluation or
appraisal.
ANALYSES BY MORGAN KEEGAN. The following is a summary of analyses presented
by Morgan Keegan to the Board of Directors on October 22, 1999 (the "Morgan
Keegan Report") in connection with its opinion. In performing its analyses,
Morgan Keegan used closing stock prices as of October 21, 1999 and assumed the
consideration to be received by the stockholders of GeoScience to be $6.71 per
GeoScience share ("Merger Consideration").
COMPARABLE COMPANY ANALYSIS. Morgan Keegan compared selected historical and
projected market value multiples of a group of publicly-traded companies which
manufacture seismic data acquisition equipment or utilize such equipment to
acquire and process seismic data that it deemed to be comparable to GeoScience
(the "Peer Group"). This group consisted of Compagnie Generale de Geophysique,
Core Laboratories N.V., Dawson Geophysical Company, Eagle Geophysical, Inc.,
Input/Output, Inc., OMNI Energy Services Corporation, OYO Geospace Corporation,
Paradigm Geophysical Ltd., Petroleum Geo-Services ASA (PGS), Seitel, Inc., and
Veritas DGC Inc. No company used in Morgan Keegan's analysis was identical to
GeoScience. Accordingly, Morgan Keegan considered the market multiples for the
composite of the Peer Group to be more relevant than the market multiples of any
single company.
Morgan Keegan calculated a range of implied values based upon the market
multiples of companies in the Peer Group and applied them to the historical and
projected results of GeoScience in order to determine a range of implied values
for the shares of GeoScience. Morgan Keegan calculated the multiples of adjusted
market value (i.e., equity market capitalization plus debt and the
liquidation/book value of preferred stock less cash and equivalents) to latest
twelve months ("LTM") revenues, Earnings Before Interest, Taxes, Depreciation
and Amortization ("EBITDA"), Earnings Before Interest and Taxes ("EBIT") and
multiples of market value (equity market capitalization) to net income and
tangible book value (book value less goodwill and other intangible assets).
Morgan Keegan applied the multiples of the Peer Group to GeoScience's LTM
revenues, EBITDA, EBIT, net income and tangible book value.
19
<PAGE>
The following table summarizes the composite market multiples for the Peer
Group based upon closing prices as of October 21, 1999:
<TABLE>
<CAPTION>
PEER GROUP
--------------------------------------------
LOW HIGH MEAN MEDIAN
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
MULTIPLES OF ADJ. MARKET VALUE
LTM Revenue................................................ 0.7x 4.2x 1.7x 1.4x
LTM EBITDA................................................. 3.5x 13.0x 7.6x 7.9x
LTM EBIT................................................... 8.8x 23.2x 17.2x 19.5x
MULTIPLES OF MARKET VALUE
LTM Net Income............................................. 8.0x 34.8x 21.3x 19.6x
Tangible Book Value of Equity.............................. 0.1x 12.1x 2.2x 1.1x
</TABLE>
In order to derive an implied equity value per share for GeoScience based
upon the market multiples of the Peer Group, Morgan Keegan applied the median
Peer Group multiples to GeoScience's LTM EBITDA and tangible book value. Morgan
Keegan excluded LTM EBIT and LTM net income because both measures yielded a
negative implied equity value, thereby making the application of a Peer Group
multiple not meaningful. Application of the median Peer Group multiples to
GeoScience resulted in an implied price per share of $2.07 based on LTM EBITDA
and $6.50 based on tangible book value of equity.
PREMIUM ANALYSIS. Morgan Keegan reviewed publicly available information
concerning percentage premiums paid in 11 oil services industry transactions
announced since January 1, 1998, and derived an implied price per share based
upon the median premiums paid in these transactions. Morgan Keegan then
calculated the median premiums represented by the offer price per share in those
transactions over the market price of the securities four weeks, one week and
one day prior to the public announcement of the proposed transaction.
The following table summarizes the median percentage premiums paid in the
transactions reviewed by Morgan Keegan as well as the implied equity value per
share resulting from the application of the median premiums to GeoScience. The
following information is calculated based on implied Merger Consideration of
$6.71.
<TABLE>
<CAPTION>
IMPLIED PREMIUM
(DISCOUNT) PER
LOW HIGH MEAN MEDIAN GEOSCIENCE SHARE
--------- --------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
PREMIUM (DISCOUNT) BASE UPON:
One Day Prior to Announcement............... -10.7% 47.0% 18.6% 13.7% 7.4%
One Week Prior to Announcement.............. -14.5% 59.6% 23.8% 16.3% 18.6%
Four Weeks Prior to Announcement............ -7.2% 66.7% 21.6% 18.3% -9.8%
</TABLE>
The implied price resulting from the application of these median premiums to
GeoScience ranged from $7.11 to $7.39 per share, as compared to the Merger
Consideration of $6.71 per share.
DISCOUNTED CASH FLOW ANALYSIS. Morgan Keegan performed a discounted cash
flow analysis to calculate GeoScience's implied price per share based on
management's projections through December 31, 2003. Using this information,
Morgan Keegan calculated the net present value of free cash flows GeoScience
could generate through December 31, 2003, using discount rates ranging from
15.0% to 18.0%. Morgan Keegan also calculated the terminal value of GeoScience
in the year 2003 based on multiples ranging from 5.5x to 6.5x EBITDA and
discounted these terminal values using discount rates ranging from 15.0% to
18.0%. Morgan Keegan's judgment concerning the risks associated with the cash
flows was a key factor in its determination of an appropriate discount rate to
use in its analysis. The sum of
20
<PAGE>
the present value of the free cash flows and terminal values less outstanding
debt (net of cash) yielded an implied price per share ranging from $5.56 to
$8.21.
The discounted cash flow analysis employs a number of assumptions, including
the accuracy of management's projections and the subjective determination of an
appropriate terminal value and discount rate to apply to the projected cash
flows of the entity under examination. Variations in any of these assumptions or
judgments could significantly alter the results of a discounted cash flow
analysis.
MERGERS AND ACQUISITIONS TRANSACTIONS ANALYSIS. In order to assess market
pricing for oil service company acquisitions, Morgan Keegan identified six
transactions in the oil service industry completed since January 1, 1998, or
currently pending. Morgan Keegan considered this time period relevant to this
analysis due to the significant change in market conditions for energy related
companies and the corresponding effect on market valuations over the past
twenty-four months. Morgan Keegan analyzed the range of revenue, EBITDA, EBIT,
net income and book value multiples represented by the purchase price paid in
the following transactions:
<TABLE>
<CAPTION>
STATUS ACQUIROR TARGET
- ------------ ---------------------------- --------------------------------------
<S> <C> <C>
Completed Key Energy Group, Inc. Dawson Production Services, Inc.
Completed R&B Falcon Corporation Cliffs Drilling Company
Completed Nabors Industries, Inc. Bayard Drilling Technologies, Inc.
Completed Veritas DEC Inc. Entertec Resource Services, Inc.
Pending Nabors Industries, Inc. Pool Energy Services Company
Pending Tuboscope, Inc. Newpark Resources, Inc.
</TABLE>
The following table summarizes the range of multiples represented by the
purchase prices paid in the transactions reviewed by Morgan Keegan:
<TABLE>
<CAPTION>
PEER GROUP
--------------------------------------------
LOW HIGH MEAN MEDIAN
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
MULTIPLES OF ADJ. MARKET VALUE
LTM Revenue................................................ 0.7x 3.5x 1.7x 1.5x
LTM EBITDA................................................. 3.5x 28.0x 10.4x 7.9x
LTM EBIT................................................... 4.4x 24.4x 12.3x 10.1x
MULTIPLES OF MARKET VALUE
LTM Net Income............................................. 4.6x 28.9x 16.1x 15.5x
Tangible Book Value of Equity.............................. 0.5x 2.6x 1.3x 1.0x
</TABLE>
In order to derive an implied equity value per share for GeoScience based
upon the acquisition multiples of the related oil service company acquisitions,
Morgan Keegan applied the median acquisition multiples to GeoScience's LTM
EBITDA and tangible book value. Morgan Keegan excluded LTM EBIT and LTM net
income because both measures yielded a negative implied equity value, thereby
making the application of a Peer Group multiple not meaningful. Application of
the median transaction multiples to GeoScience resulted in an implied price per
share of $2.05 based on LTM EBITDA and $5.70 based on tangible book value of
equity.
None of the transactions used in the mergers and acquisitions transactions
analysis for comparative purposes was deemed to be identical to the transaction
contemplated by the GeoScience and Tech-Sym Boards of Directors. Accordingly, an
analysis of the results of the foregoing necessarily involves complex
considerations and judgements concerning differences in financial and operating
characteristics of the companies, including differences in pre-transaction
operating performance, intangible or other assets associated with a target's
business and not reflected in historical operating performance and/or other
transaction specific factors such as the strategic nature of particular
transactions. Mathematical analysis
21
<PAGE>
(such as determining the average or median) is not, in itself, a meaningful
method of using comparable transaction data.
The summary of the Morgan Keegan Report set forth above does not purport to
be a complete description of the presentation by Morgan Keegan of the Morgan
Keegan Report to the Boards or of the analyses performed by Morgan Keegan. The
preparation of a fairness opinion is not necessarily susceptible to partial
analysis or summary description. Morgan Keegan believes that its analyses and
the summary set forth above must be considered as a whole and that selecting
portions of its analyses, without considering all analyses, or the above
summary, without considering all factors and analyses, would create an
incomplete view of the process underlying the analyses set forth in the Morgan
Keegan Report and the Fairness Opinion. In addition, Morgan Keegan may have
deemed various assumptions more or less probable than other assumptions, so that
the ranges of valuations resulting from any particular analysis described above
should not be taken to represent the actual value of GeoScience.
In performing its analyses, Morgan Keegan made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of GeoScience. The analyses
performed by Morgan Keegan are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of Morgan
Keegan's analysis of the fairness of the consideration to be paid pursuant to
the Merger and were provided to the Board in connection with the delivery of the
Fairness Opinion. The analyses do not purport to be appraisals or to reflect the
prices at which a company might actually be sold or the prices at which any
securities may trade at the present time or at any time in the future. In
addition, as described above, the Fairness Opinion and presentation to the
Boards were one of many factors taken into consideration by the Boards in making
their determination to approve the Merger Agreement.
Morgan Keegan has expressed no opinion as to the prices at which GeoScience
shares or CCG may trade following the date of its opinion.
GeoScience has agreed to pay Morgan Keegan a fee of $250,000 at the time
Morgan Keegan's opinion is delivered. An advisory fee of $300,000 less the
opinion fee is payable upon the closing of the transaction. GeoScience also has
agreed to indemnify Morgan Keegan against certain liabilities, including
liabilities under the Federal securities laws. Tech-Sym has agreed to pay Morgan
Keegan an advisory fee of $180,000 upon the closing of the transaction.
FIDUCIARY DUTY
The GeoScience Board believes that the Offer and the Merger are fair to and
in the best interests of holders of GeoScience Common Stock. Federal securities
rules require full and accurate disclosure of the Offer, the Merger, and the
other transactions contemplated by the Merger Agreement, including disclosure
regarding the basis for a belief as to the fairness of the Offer and the Merger.
GeoScience, Tech-Sym and their respective officers and directors do not disclaim
any duties imposed upon them under the Federal securities laws.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
On January 6, 1999, the GeoScience Board engaged Morgan Keegan as its
exclusive financial advisor for the purpose of providing financial advisory
services to the GeoScience Board in connection with a potential sale of
GeoScience. In consideration of such services, GeoScience has agreed to pay
Morgan Keegan a fee of $250,000 at the time Morgan Keegan's opinion is
delivered. An advisory fee of $300,000 less the opinion fee is payable upon the
closing of the transaction. GeoScience also has agreed to indemnify Morgan
Keegan against certain liabilities, including liabilities under the Federal
securities laws. Tech-Sym has agreed to pay Morgan Keegan an advisory fee of
$180,000 upon the closing of the transaction.
22
<PAGE>
Neither GeoScience nor any person acting on its behalf has employed,
retained or compensated any other person to make solicitations or
recommendations to stockholders on its behalf concerning the Offer or the
Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) During the week of August 27, 1999, Tech-Sym acquired 95,000 additional
shares of GeoScience Common Stock for an aggregate consideration of
approximately $708,192, or an average price of $7.45 per share. As a result of
the stock purchases, Tech-Sym's ownership of GeoScience exceeded 80% of the
outstanding stock, thereby enabling Tech-Sym to consolidate the financial
results of GeoScience for tax purposes. During the past sixty days, no other
transactions in the GeoScience Common Stock have been effected by GeoScience or,
to the best of GeoScience's knowledge, by any affiliate or subsidiary of
GeoScience or any executive officer or director of Tech-Sym.
(b) To the best of GeoScience's knowledge, all of its affiliates or
subsidiaries and all of the executive officers and directors of Tech-Sym
currently intend to tender all shares of GeoScience Common Stock which are held
of record or beneficially owned by such persons pursuant to the Offer, other
than GeoScience Common Stock, if any, held by such persons which, if tendered,
could cause such person to incur liability under the provisions of
Section 16(b) of the Securities Exchange Act of 1934, as amended.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Negotiations.
Except as set forth in this Schedule, no negotiation is being undertaken or
is underway by GeoScience or Tech-Sym in response to the Offer which relates to
or would result in: (i) an extraordinary transaction, such as a merger or
reorganization, involving GeoScience or any Subsidiary thereof; (ii) a purchase,
sale or transfer of a material amount of assets by GeoScience or any Subsidiary
thereof; (iii) a tender offer for or other acquisition of securities by or of
GeoScience; or (iv) any material change in the present capitalization or
dividend policy of GeoScience.
(b) Transactions and Other Matters.
Except as set forth in this Schedule, there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to in
Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
CERTAIN FORWARD-LOOKING INFORMATION. During the course of discussions among
the Parent, the Purchaser and GeoScience that led to the execution of the Merger
Agreement, GeoScience provided the Parent with certain business and financial
information that was not publicly available, including GeoScience's internal
business plan for fiscal years 1999 and 2000 for its principal subsidiary,
Syntron, Inc. (the information for GeoScience and its other subsidiaries not
being material to the Parent's analysis). GeoScience's business plan for the
year 1999 projects net revenue of Syntron, Inc. of between $90.2 and
$95 million and a net operating loss of between $31.0 and $26.5 million.
GeoScience's consolidated results are not expected to differ materially from
Syntron, Inc.'s results. GeoScience's business plan for year 2000 projects net
revenue of GeoScience of between $60 and $113 million and net operating income
between $0 and $12 million. The actual results will depend largely on the
conditions of the marine seismic industry and the success of GeoScience's new
solid streamer cable product line. The foregoing forecasts make certain
assumptions regarding GeoScience's revenues, variable and fixed costs, expenses,
including interest expense, growth rates and certain other future conditions
affecting GeoScience's results of operations. Under the Merger Agreement,
GeoScience is under no obligation to update the forecast. These forecasts should
be read together with the financial statements of GeoScience referred to herein.
23
<PAGE>
THE GEOSCIENCE FORECASTS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE
OR COMPLIANCE WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES
ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING
FINANCIAL FORECASTS, AND ARE INCLUDED IN THIS OFFER TO PURCHASE ONLY BECAUSE
THEY WERE PROVIDED TO THE PARENT. NONE OF THE PARENT, THE PURCHASER OR ANY OF
THEIR REPRESENTATIVES ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OF THESE
FORECASTS. WHILE PRESENTED WITH NUMERICAL SPECIFICITY, THESE FORECASTS ARE BASED
UPON A VARIETY OF ASSUMPTIONS (NOT ALL OF WHICH WERE STATED THEREIN AND NOT ALL
OF WHICH WERE PROVIDED TO THE PARENT OR THE PURCHASER) RELATING TO THE
BUSINESSES OF GEOSCIENCE, WHICH MAY NOT BE REALIZED AND ARE SUBJECT TO
SIGNIFICANT FINANCIAL, MARKET, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND
CONTINGENCIES WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY, MANY OF
WHICH ARE BEYOND THE CONTROL OF GEOSCIENCE AND THE PARENT. THERE CAN BE NO
ASSURANCE THAT THESE FORECASTS WILL BE REALIZED, AND ACTUAL RESULTS MAY VARY
MATERIALLY FROM THOSE SHOWN. THE INCLUSION OF THE FORECASTS SET FORTH ABOVE
SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE PARENT, THE PURCHASER OR ANY
OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES OR BY GEOSCIENCE OR ANY OF ITS
AFFILIATES OR REPRESENTATIVES THAT THE FORECASTED RESULTS WILL BE ACHIEVED.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
(1) Agreement and Plan of Merger, dated as of October 23, 1999, by and
among GeoScience Corporation, Compagnie Generale de Geophysique and Sercel
Acquisition Corp. (incorporated by reference to Exhibit 99.1 of GeoScience's
Current Report on Form 8-K, filed October 28, 1999)
(2) Shareholder Agreement, dated as of October 23, 1999, by and among
Tech-Sym Corporation, Compagnie Generale de Geophysique and Sercel
Acquisition Corp. (incorporated by reference to Exhibit 99.2 of GeoScience's
Current Report on Form 8-K, filed October 28, 1999)
(3) Joint Press Release issued by Compagnie Generale de Geophysique and
GeoScience Corporation on October 26, 1999. (incorporated by reference to
Exhibit 99.3 of GeoScience's Current Report on Form 8-K, filed October 28,
1999)
(4) Letter to holders of GeoScience Common Stock dated November 1,
1999.+
(5) Opinion of Morgan Keegan dated October 22, 1999.+
- ------------------------
+ Included in copies mailed to holders of GeoScience Common Stock.
24
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: November 1, 1999
GEOSCIENCE CORPORATION
By: /s/ J. Michael Camp
--------------------------------------
Name: J. Michael Camp
Title: Chairman of the Board
25
<PAGE>
ANNEX
GEOSCIENCE CORPORATION
10500 WESTOFFICE DRIVE, SUITE 200
HOUSTON, TEXAS 77042
------------------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
------------------------
NO VOTE OR OTHER ACTION OF GEOSCIENCE STOCKHOLDERS
IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED AND
YOU ARE REQUESTED NOT TO SEND A PROXY TO GEOSCIENCE
------------------------
This Information Statement is being mailed on or about November 1, 1999 as
part of a Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of GeoScience Corporation, a Nevada corporation ("GeoScience"
or the "Company") to the holders of shares of GeoScience Common Stock, par value
$0.01 per share (the "Common Stock"). Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in the Schedule 14D-9. This
Information Statement is being furnished in connection with the possible
designation by Compagnie Generale de Geophysique, a French societe anonyme
("Parent"), and the direct parent of Sercel Acquisition Corp., a Nevada
corporation ("Purchaser"), of persons to the Board of Directors of GeoScience
(the "GeoScience Board"). Such designation is to be made pursuant to an
Agreement and Plan of Merger dated October 23, 1999 (the "Merger Agreement")
among GeoScience, Parent and Purchaser.
The Merger Agreement provides that, promptly upon the purchase of Shares
pursuant to the Offer, and from time to time thereafter, the Parent is entitled
to designate such number of directors, rounded up to the next whole number, as
will give the Parent representation on the GeoScience Board (including
committees of the Company Board) that is proportionate to its ownership interest
in the Company (the "Parent Designees"). Notwithstanding the foregoing, at all
times prior to the Effective Time, the GeoScience Board will include at least
two directors who are currently directors of GeoScience (the "Continuing
Directors"). After the appointment of the Parent Designees to the GeoScience
Board, all decisions on behalf of GeoScience with respect to the Merger
Agreement and amendments of the Company's Articles of Incorporation and By-laws
must be approved by a majority of the Continuing Directors. The Merger Agreement
provides that, at the request of the Parent, GeoScience will promptly satisfy
the Board Percentage by (a) increasing the size of GeoScience Board or
(b) using its reasonable best efforts to secure the resignations of such number
of directors as is necessary to enable the Parent Designees to be elected by the
Company Board, or both, and will use its reasonable best efforts to cause the
Parent Designees promptly be so elected.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
GENERAL
The outstanding voting securities of GeoScience as of October 26, 1999
consisted of 9,985,350 shares of Common Stock, with 919,325 shares reserved for
issuance pursuant to outstanding stock options. The holders of Common Stock are
entitled to one vote for each share held of record by them.
1
<PAGE>
BENEFICIAL OWNERSHIP
The following table indicates the beneficial ownership of Common Stock, as
well as the common stock of Tech-Sym Corporation ("Tech-Sym"), as of
October 26, 1999, with respect to (i) each person who was known by the Company
to own beneficially more than 5% of the outstanding shares of Common Stock,
(ii) each director, (iii) each executive officer named in the Summary
Compensation Table herein and (iv) all directors and executive officers as a
group.
<TABLE>
<CAPTION>
GEOSCIENCE TECH-SYM
SOLE VOTING OPTIONS SOLE VOTING OPTIONS
AND EXERCISABLE AND EXERCISABLE
INVESTMENT WITHIN 60 % OF INVESTMENT WITHIN 60 % OF
BENEFICIAL OWNER POWER DAYS CLASS POWER DAYS CLASS
- -------------------------------------- ----------- ----------- --------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Michael Camp....................... -0- 6,250 * -0- -0- *
W. L. Creech.......................... 41,000 24,000 * 1,000 21,000 *
Michael C. Forrest.................... 2,500 24,000 * 1,500 26,000 *
Wendell W. Gamel...................... 7,000 31,250 * 84,995(a)(b) 46,000 *
Richard F. Miles...................... 3,200(a) 35,000 * 826(a) 2,000 *
Paul L. Harp.......................... 1,900 7,500 * 3,559(a) 3,800 *
J. Rankin Tippins..................... 6,000 16,250 * 11,260 15,000 *
Tech-Sym Corporation.................. 7,995,000(c) -0- 80.1
10500 Westoffice Drive
Houston, Texas 77042
Directors and executive officers as a
group (7 persons)................... 61,600 144,250 * 103,140 113,800 1.7%
<CAPTION>
BENEFICIAL OWNER
- --------------------------------------
<S> <C>
J. Michael Camp.......................
W. L. Creech..........................
Michael C. Forrest....................
Wendell W. Gamel......................
Richard F. Miles......................
Paul L. Harp..........................
J. Rankin Tippins.....................
Tech-Sym Corporation..................
10500 Westoffice Drive
Houston, Texas 77042
Directors and executive officers as a
group (7 persons)...................
</TABLE>
* Represents ownership of less than 1.0%.
(a) Includes shares allocated to the employee through his participation in
the GeoScience Retirement Plan or the Tech-Sym Retirement Plan.
(b) Includes 5,000 shares held in trust for Mr. Gamel's adult children in
which he disclaims beneficial ownership.
(c) Pursuant to the arrangements described in Item 3(b) hereof, the Parent
and Purchaser may be deemed to be the beneficial owners of all such
Shares.
THE BOARD OF DIRECTORS
The information contained in this Information Statement concerning the
Parent Designees has been furnished to GeoScience by such persons, and
GeoScience assumes no responsibility for the accuracy or completeness of the
information.
PARENT DESIGNEES
The Parent has informed GeoScience that it will choose the Parent Designees
from the individuals shown in the table below to serve on the GeoScience Board.
Each of the following individuals has consented to serve as a director of
GeoScience if appointed or elected. None of the Parent Designees currently is a
director of, or holds any position with the Company. To the Parent's knowledge,
except as set forth below and in the Offer To Purchase, none of the Parent
Designees or any of their associates beneficially owns any equity securities or
rights to acquire securities of GeoScience, nor has any such person been
involved in any transaction with GeoScience or any of its directors, executive
officers or affiliates that are required to be disclosed pursuant to the rules
and regulations of the Commission. The name, age, present principal occupation
or employment and five-year employment history of each of the Parent Designees
are set forth below. Unless otherwise indicated, each person is a citizen of the
Republic of France and the business address of each person is c/o Compagnie
Generale de Geophysique, l, rue Leon Migaux, 91341 Massy, France.
2
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR OCCUPATIONS AND
NAME AGE DIRECTORSHIPS
- ---------------------------------------------- --------- -----------------------------------------------------------
<S> <C> <C>
Robert Brunck................................. 50....... Chairman and Chief Executive Officer of the Parent
(1999-Present); Vice Chairman and President (1998-1999) of
the Parent; President and Chief Operating Officer of the
Parent (1995-1998); Vice President of Administration and
Development (1991-1995) of the Parent.
Thierry Le Roux............................... 45 Senior Executive Vice President of the Parent's Geophysical
Equipment (1998-Present); Executive Vice President of the
Parent's Geophysical Equipment (1995-1998); Business
Development Manager of the Parent (1992-1995).
Pascal Rouiller............................... 65 Chief Operating Officer of Sercel (1996-Present); Vice
President for East Region of the Parent (1992-1996).
Jean-Maurice Dalongeville..................... 52 Chief Financial Officer and Secretary of Sercel
(1998-Present); Vice President, Investor Relations, Audit
and Secretary of the Parent (1995-1998).
George Wood................................... 50 Executive Vice President of Sercel (1998-Present); Vice
President for Manufacturing and Product Development, Tulsa,
of Sercel, Inc. (1997-1998); Western Geophysical, various
positions (1994-1997) (Citizen of the United States).
Pierre Baliguet............................... 43 Senior Vice President, Products Development of Sercel
(1999-Present); Vice President, Products Development of
Sercel (1996-1998); Research & Development Manager of
Sercel (1995-1996).
Michel Ponthus................................ 53 Senior Executive Vice President, Administration & Finance,
and Group Chief Financial Officer of the Parent
(1998-Present); Group Chief Financial Officer of the Parent
(1995-1998); Administrative and Financial Vice President of
Petitjean Industries (1990-1995).
Didier Treussier.............................. 54 Vice President, Corporate Human Resources of the Parent
(1997-Present); Deputy Vice President, Land Acquisition of
the Parent (1996-1997); Vice President, Equipment and
Logistics of the Parent (1994-1996).
</TABLE>
CURRENT DIRECTORS
The following sets forth the name, age as of the date hereof, term and
current principal occupation or employment and five-year employment history for
the six members currently serving on the GeoScience Board of Directors. The
Company's Articles of Incorporation provide for the classification of the
Company's Board of Directors into three classes (Class I, Class II and Class
III), having staggered terms. The terms of the persons currently serving on the
Board expire at the annual meetings for the years indicated: Messrs. Camp,
Forrest and Tippins, 2000; Messrs. Creech and Miles, 2001; and Mr. Gamel, 2002.
3
<PAGE>
WENDALL W. GAMEL, age 70, was Chairman of the Board of GeoScience from
March 1996 until August 1999. He is currently a director of Tech-Sym Corporation
("Tech-Sym"), the parent company of GeoScience and an independent business
consultant. Mr. Gamel served as President and Chief Executive Officer of
Tech-Sym from 1975 to April 30, 1998 and was Chairman of the Board of Tech-Sym
from September 1980 to July 1999.
J. MICHAEL CAMP, age 49, Director since 1998 and Chairman of the Board since
August 1999. Mr. Camp has served as President and Chief Executive Officer of
Tech-Sym since May of 1998 and Chairman of the Board of Tech-Sym since July
1999. Prior to joining Tech-Sym, Mr. Camp served as President and Chief
Executive Officer of Olicom, Inc., a company that develops and markets computer
network software and hardware products (from 1996 to 1998). Prior thereto, he
served in various capacities at Northern Telecom Inc. including Vice President
and General Manager of the Multimedia Business Applications Division (from 1993
to 1996), Vice President and General Manager of the Data Network Division (from
1992 to 1993), and General Manager of the Network Integration Division (from
1991 to 1992). Mr. Camp also serves as a director of Tech-Sym.
MICHAEL C. FORREST, age 66, has been a director of the Company since
April 1996. Mr. Forrest has been a consultant for petroleum exploration since
his retirement as the Senior Vice President of Technology and Business
Development at Maxus Energy Corporation (an oil and gas exploration and
production company), a position he held from 1994 to 1997. He originally joined
Maxus in 1992 as Vice Chairman and Chief Operating Officer and served on its
Board of Directors until it was acquired by YPF, S.A. in 1995. Previously, he
was President of Pecten International Co., a company engaged in the business of
oil and gas exploration that is a subsidiary of Shell U.S.A. During his
37 years of service with Shell, Mr. Forrest served in various exploration and
management positions. Mr. Forrest also is a director of Tech-Sym Corporation.
J. RANKIN TIPPINS, age 46, has been a director, Vice President, and General
Counsel of the Company since March 1996, and served as Secretary of the Company
from March 1996 until April 1997. Mr. Tippins also has been the General Counsel
and Secretary of Tech-Sym for more than the past five years and has served as
Vice President of Tech-Sym since May 1999.
W. L. CREECH, age 72, has been a director of the Company since April 1996.
Since his retirement from the United States Air Force as a Four Star General in
1984, General Creech has been an independent business consultant and speaker. He
is the author of THE FIVE PILLARS OF TQM. General Creech also serves as a
director of Tech-Sym, Comarco, Inc., and ESEA Corporation.
RICHARD F. MILES, age 51, has been a director and the President of the
Company since March 1996. In January 1998, Mr. Miles was elected President of
Syntron, Inc. ("Syntron"), a subsidiary of the Company, a position he also held
from January 1990 until November 1995 at which time he was elected Chairman of
Syntron. In addition, Mr. Miles served as Chairman of CogniSeis
Development, Inc. ("CogniSeis"), a former subsidiary of the Company, from
June 1995 to October 1997, and President of CogniSeis from January 1996 to
October 1996. Prior to his association with Syntron and CogniSeis, Mr. Miles had
been General Manager of Geosource Marine starting in 1984 and, when Halliburton
Geophysical Services ("HGS") acquired Geosource Marine in 1988, he became the
Manager of the HGS North America Marine and Central Marine Support, which
continued the former marine seismic data acquisition business of Geosource
Marine. Mr. Miles served as Chairman of the International Association of
Geophysical Contractors (IAGC), an industry trade group, from March 1997 until
March 1998.
BOARD COMMITTEES
During 1998, the Board of Directors held five regular meetings and one
special meeting. Committees of the Board of Directors included a Compensation
Committee and an Audit Committee.
The Audit Committee currently is composed of Messrs. Creech and Forrest. The
Audit Committee held three meetings in 1998. The Audit Committee examines and
considers matters relating to (i) the financial affairs of the Company,
including reviewing the Company's annual financial statements, (ii) the scope
and adequacy of the independent annual audit and internal audits, and (iii) the
effectiveness and
4
<PAGE>
adequacy of the Company's internal and accounting controls, including matters
addressed in the independent public accountants' letter to management.
The Compensation Committee currently is composed of Messrs. Creech and
Forrest. The Compensation Committee held four meetings during 1998. The
Compensation Committee (i) considers and makes recommendations to the Board of
Directors with respect to programs for human resource development and management
organization and succession, (ii) approves changes in senior executive
compensation, (iii) makes recommendations to the Board of Directors regarding
compensation matters and policies over which the Board of Directors has final
approval, and (iv) administers the Company's 1996 Equity Incentive Plan, as
amended and restated ("Stock Plan"), including the selection of participants,
the determination of the type and number of awards to be granted and any
interpretation of the Stock Plan.
During 1998, each of the directors of GeoScience attended at least 75% of
the aggregate number of meetings of the Board of Directors and the respective
committees on which he served.
COMPENSATION OF DIRECTORS
Those members of the Board who are not employees of either the Company or
Tech-Sym are paid (i) a fee of $1,000 for attendance at each Board meeting,
(ii) a fee of $250 for attendance at each meeting of a committee of the Board,
and (iii) a fee of $500 for attendance at each meeting of a committee of the
Board which they chair. Board members who are either employees of the Company or
Tech-Sym do not receive any fees. Members of the Board who are not current or
former employees of the Company or Tech-Sym also are paid an annual retainer of
$12,000.
EXECUTIVE COMPENSATION
The following table summarizes compensation with respect to the fiscal years
ended December 31, 1998, 1997 and 1996 for services to the Company in all
capacities awarded to, earned by or paid to the Company's chief executive
officer. The remaining executive officers, Messrs. Camp, Tippins and Harp, are
full-time employees of Tech-Sym but devote such time to the affairs of the
Company as the Company's needs reasonably require from time to time. The time
and effort devoted by these individuals to the Company's affairs is provided to
the Company under a Corporate Services Agreement between the Company and
Tech-Sym. Accordingly, the cash compensation for these individuals is not paid
by the Company and is not reported in the following table.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
--------------------------
NO. OF SHARES
ANNUAL COMPENSATION(1) UNDERLYING ALL OTHER
OPTIONS GRANTED COMPENSATION
NAME AND ---------------------- -------------------------- ---------------
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(2) GSCI TSY(3) ($)(4)
- ------------------------------------------------ --------- --------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard F. Miles 1998 218,333 75,000 40,000 -0- 7,200
President 1997 201,667 35,000 12,500 -0- 7179
1996 195,000 140,350(5) 25,000 5,000 6,854
</TABLE>
"GSCI"--GeoScience Corporation
"TSY"--Tech-Sym Corporation
(1) Does not include perquisites and other personal benefits because the value
of these items did not exceed the lesser of $50,000 or 10% of reported
salary and bonus of Mr. Miles.
(2) Bonus amounts were earned during the years indicated, but paid in the first
quarter of the following year.
(3) Represents options granted in connection with services rendered to
Tech-Sym.
(4) Each of the amounts in this column are contributions by the Company to the
executive officer's account in GeoScience's Retirement (401(k)) Plan.
(5) Includes $66,000 paid by Tech-Sym.
5
<PAGE>
The following table sets forth information concerning an individual grant of
stock options by the Company made during fiscal 1998 to Mr. Miles. It has not
been the Company's policy to grant stock appreciation rights, and no such rights
were granted during fiscal 1998.
STOCK OPTIONS GRANTED DURING FISCAL 1998
<TABLE>
<CAPTION>
NO. OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR PER SHARE DATE VALUE(A)
- ----------------------------------------- ----------- ----------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Richard F. Miles......................... 40,000 16 $ 13.75 4/26/2008 $ 365,560
</TABLE>
- ------------------------
(a) In accordance with Securities and Exchange Commission rules, the
Black-Scholes option pricing model was used to estimate the value of the
GeoScience options to be $9.139 for each option share as of the grant date
of 4/27/98. The model's mathematical formula primarily is used to value
traded stock options and is premised on immediate exercisability and
transferability of the options. This is not true for the GeoScience options
granted to executive officers and other employees. Therefore, the values
shown are theoretical and are not intended to reflect the actual values the
recipients eventually may realize, if any. Any ultimate value will depend on
the excess of the stock price over the exercise price on the date the
optionee, in his sole discretion, exercises the options. The following
assumptions were used for the purpose of estimating the Grant Date Present
Value: (i) option term of eight years, (ii) volatility of 56%,
(iii) dividend yield of zero, (iv) and risk-free rate of return of 5.70%.
The following table summarizes for Mr. Miles the number of Tech-Sym and
GeoScience stock options and stock appreciation rights (SARs), if any, exercised
during the year ended December 31, 1998, the aggregate dollar value realized
upon exercise, the total number of unexercised options and SARs, if any, held at
December 31, 1998, and the aggregate dollar value of in-the-money, unexercised
options and SARs, if any, held at December 31, 1998. Value realized upon
exercise is the difference between the fair market value of the underlying stock
on the exercise date and the exercise or base price of the option or SAR. Value
of the unexercised, in-the-money options or SARs at fiscal year-end is the
difference between its exercise or base price and the fair market value of the
underlying stock on December 31, 1998, which was $22.25 per share for Tech-Sym
and $10.9375 per share for GeoScience. These values, unlike the amounts set
forth in the column headed "value realized," have not been, and may never be
realized. The underlying options or SARs have not been, and may not be,
exercised; and actual gains, if any, on exercise will depend on the value of
Tech-Sym and GeoScience Common Stock on the date of exercise. There can be no
assurance that these values will be realized. Unexercisable options are those
which have not yet vested under the vesting schedule in Tech-Sym's 1990 Stock
Option Plan or GeoScience's 1996 Equity Incentive Plan.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED,
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS
OPTIONS AT FISCAL YEAR- AT FISCAL
SHARES END(#)(A) YEAR-END($)(B)
ACQUIRED ON VALUE -------------------------- -------------
NAME COMPANY EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE
- ----------------------------------- ----------- ------------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard F. Miles................... GSCI -0- -0- 15,625 61,875 4,883
TSY 5,000 $ 73,750 -0- 5,000 -0-
<CAPTION>
NAME UNEXERCISABLE
- ----------------------------------- -------------
<S> <C>
Richard F. Miles................... 14,648
5,000
</TABLE>
- ------------------------
"GSCI"--GeoScience Corporation
"TSY"--Tech-Sym Corporation
(a) Includes SARs awarded in tandem with each Tech-Sym stock option.
(b) In-the-Money Options/SARs are those where the fair market value of the
underlying security exceeds the exercise or base price of the option or
SAR.
6
<PAGE>
EXECUTIVE RETIREMENT AGREEMENT
Mr. Miles is a party to a retirement agreement entered into with Tech-Sym in
1994 which provides for the payment to him of an annual retirement benefit for
the remainder of his life commencing at his retirement on or after age 65 in an
amount equal to 65% of his highest rate of base salary payable by Tech-Sym and
its subsidiaries that is in effect at any time prior to his reaching age 61
("Base Salary"). If Mr. Miles voluntarily terminates his employment prior to age
65, but on or after age 62, he shall commence receiving his retirement benefit
reduced by 1.39% for each full calendar month which his date of termination
precedes his 65th birthday, unless such reduction is waived by the Board of
Tech-Sym. The applicable Base Salary of Mr. Miles for purposes of this agreement
is $234,000. The agreement further provides for the payment of a surviving
spouse's benefit equal to 37 1/2% of the Base Salary, which is payable annually
upon his death to his surviving spouse, if any, for the lesser of ten years or
the remainder of her life. Tech-Sym's obligation under the agreement to pay the
retirement benefits terminates if Mr. Miles voluntarily leaves the employ of
Tech-Sym prior to reaching age 62 (other than due to death or total and
permanent disability) or is terminated for cause. The benefits remain payable in
the event of the termination of employment prior to age 62 because of his total
and permanent disability or his termination after reaching age 62, but in both
instances are subject to reduction for their early commencement unless such
reduction is waived by the board. Under the agreement, the surviving spouse's
benefit is not payable if Mr. Miles voluntarily leaves the employ of Tech-Sym
prior to age 62 or is terminated for cause, but is payable if he dies while
still in the employ of Tech-Sym, or after his termination of employment after
reaching age 62 or after his termination due to a disability. The agreement also
provides Mr. Miles with continued company-provided health benefits after his
retirement. The benefits under the agreement become 50% vested after ten years
of continuous employment with an additional 10% each year thereafter until fully
vested.
TERMINATION AGREEMENT
Tech-Sym entered into a termination agreement with Mr. Miles in 1991 which
provides that if Mr. Miles' employment is terminated during the three-year
period following a Change in Control of Tech-Sym Corporation, as defined in the
agreement, other than for cause or by Mr. Miles for other than "good reason,"
Mr. Miles will continue to be paid his Base Salary, participate in the Bonus
Plan and receive certain other benefits for the remainder of such three-year
period. Such payments to Mr. Miles would be reduced by (i) any amounts payable
to Mr. Miles from other employment, and (ii) any amounts paid pursuant to the
Executive Retirement Agreement entered into by and between Tech-Sym and
Mr. Miles.
INCENTIVE BONUS PLANS
The Company and its subsidiaries have incentive bonus plans which provide
for incentive compensation for their officers and key employees. Under the
Company's plan, the aggregate bonus pool from which such awards were made for
1998 did not exceed 2% of the Company's consolidated earnings before federal and
state income taxes. The apportionment of that part of the Company's bonus pool
paid to the executive officers is determined by the Board of Directors, pursuant
to recommendations of the Compensation Committee, according to levels of
responsibilities and individual performance. No bonus is payable if the Company
fails to earn a profit.
Under the incentive bonus plan for the Company's subsidiaries, directors,
officers, and key employees of each of the subsidiaries are eligible to share in
a bonus pool, calculated separately for each subsidiary, amounting to not less
than 8% and not more than 15% of such subsidiary's annual earnings before state
and federal income taxes. Bonus amounts earned in excess of 8% pre-tax earnings
depend upon the degree by which each subsidiary exceeds certain performance
criteria, such as sales, net profit and return on investment. The Committee
recommended, and the Board approved, a 1998 bonus pool exceeding such
limitations due to the unusual write down of inventory by a subsidiary. The
apportionment of the total amount of the bonus and the recipients thereof are
determined by the senior management of the Company
7
<PAGE>
and the respective subsidiary according to levels of responsibility and
individual performance except that approval of the Board of Directors of the
Company, pursuant to recommendations of the Compensation Committee, is required
for an award to (i) any recipient whose annual salary is equal to or greater
than $100,000 and (ii) any division or subsidiary general manager or chief
executive officer, regardless of the amount of compensation. No bonus is payable
if the subsidiary fails to earn a profit.
The amount of the bonus pool of the Company and of each subsidiary is
subject to reduction by the amount of (i) any bonuses such as year-end bonuses
paid to employees for such year, (ii) the matching contributions which each such
company would be required to make to the retirement plan, if any, on the total
bonus pool amount for the accounts of its bonus recipients and (iii) certain
marketing incentives paid to employees for such year.
CERTAIN TRANSACTIONS WITH MANAGEMENT
The Company paid approximately $1.8 million, $1.7 million and $2.0 million
to Tech-Sym in 1996, 1997 and 1998, respectively, in connection with management,
financial, and legal services provided by Tech-Sym to the Company. The amount of
the fee payable by the Company was determined by Tech-Sym as the allocable
portion of certain general and administrative expenses incurred by Tech-Sym
based on the Company's net sales, payroll, and capital employed (fixed assets
and inventory) in relation to the net sales, payroll and capital employed of
Tech-Sym's subsidiaries in the aggregate. In May of 1996, the Company and
Tech-Sym entered into a Corporate Services Agreement that provides for a payment
of a fee by the Company to Tech-Sym for providing management, financial, and
legal services on substantially the same basis as Tech-Sym has been compensated
for such services historically. The Company believes that the fees paid to
Tech-Sym in 1996, 1997 and 1998 for management, financial and legal services
provided by Tech-Sym to the Company were not more than those that would have
been payable to an unaffiliated third party for providing such services, and
that the fees payable to Tech-Sym under the Corporate Services Agreement for the
services to be provided thereunder for 1999 will not be more than the fees that
would be required to be paid to an unaffiliated third party to provide such
services. In addition, during 1996, 1997 and 1998 the Company paid to Tech-Sym
approximately $1.0 million, $700,000 and $400,000, respectively, in interest on
outstanding indebtedness owed to Tech-Sym.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who own
more than 10% of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission (the "Commission") and the Nasdaq
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Directors, officers and greater than
10% stockholders are required by the Exchange Act regulations to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1998, all
reports required by Section 16(a) to be filed by its directors, officers and
greater than 10% beneficial owners were filed on a timely basis, except that
Mr. Camp was late in reporting his election as a Director.
8
\<PAGE>
Exhibit 4
[letterhead of GeoScience]
November 1, 1999
Dear Stockholder:
I am pleased to inform you that on October 23, 1999, GeoScience
Corporation ("GeoScience") entered into a merger agreement with Compagnie
Generale de Geophysique ("CGG" or the "Parent") and one of its subsidiaries that
provides for the acquisition of GeoScience by CGG. Under the terms of the merger
agreement, a subsidiary of CGG has commenced a tender offer for all outstanding
shares of GeoScience common stock at $6.71 per share.
YOUR BOARD OF DIRECTORS HAS APPROVED THE OFFER AND THE MERGER AND HAS
DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE GEOSCIENCE STOCKHOLDERS. ACCORDINGLY, THE BOARD OF
DIRECTORS RECOMMENDS THAT ALL STOCKHOLDERS OF GEOSCIENCE ACCEPT THE OFFER AND
TENDER THEIR SHARES OF GEOSCIENCE COMMON STOCK IN THE TENDER OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors. These factors included, among other
things, the opinion dated October 22, 1999 of Morgan Keegan & Company, Inc.,
financial advisor to GeoScience, that, as of such date, the consideration to be
received by the GeoScience stockholders pursuant to the offer and the merger was
fair to stockholders of GeoScience.
Attached to this letter is a copy of GeoScience's
Solicitation/Recommendation Statement on Schedule 14D-9. Also enclosed is the
Offer to Purchase of CGG, together with related materials. These documents set
forth the terms and conditions of the offer and other important information.
We encourage you to read the enclosed materials carefully.
On behalf of myself, the other members of management and the directors
of GeoScience, I want to thank you for the support you have given to our
company.
Sincerely,
/s/ J. Michael Camp
J. Michael Camp
CHAIRMAN OF THE BOARD
<PAGE>
Exhibit 99.5
October 28, 1999
Board of Directors
GeoScience Corporation
1700 Park Row
Houston, TX 77084
Gentlemen:
We have acted as financial advisor to GeoScience Corporation (the
"Company") in connection with the proposed acquisition by Compagnie Generale
de Geophysique ("CGG" or the "Buyer") of all of the Company's outstanding
shares (the "Transaction"). The Transaction, including the consideration to
be received by the shareholders of the Company and other financial terms
contemplated, is described more fully in the draft of the Merger Agreement
dated as of October 19, 1999. For the purpose of this opinion, the final
Merger Agreement is considered to be substantially the same as the draft of
the Merger Agreement. You have requested our opinion as to whether the
consideration to be received by the Company's shareholders in connection with
the Transaction is fair to such shareholders from a financial point of view.
Our opinion does not address or express any view as to the relative merits of
the Transaction as compared to the other business strategies being considered
by the Board of Directors of the Company, nor does it address the decision of
the Board to proceed with the Transaction.
In connection with our review of the Transaction, and in arriving at
our opinion, we have, among other things:
(1) reviewed certain publicly available consolidated financial
statements of the Company and certain other relevant financial
and operating data of the Company made available to us from
published sources and by officers of the Company;
(2) reviewed certain internal financial and operating information
relating to the Company and its prospects prepared by the management
of the Company;
(3) discussed the business, financial condition and prospects of the
Company with certain officers of the Company;
(4) reviewed the financial terms of the Transaction as set forth in
the Merger Agreement;
(5) reviewed the financial terms, to the extent publicly available,
of certain similar transactions we deemed relevant;
<PAGE>
GeoScience Corporation
October 28, 1999
Page 2
(6) reviewed certain publicly available information relating to
certain companies we deemed appropriate in analyzing the Company;
(7) reviewed the trading history of the Company's Common Stock;
(8) reviewed a draft of the Merger Agreement;
(9) reviewed certain publicly available consolidated financial
statements of the Buyer and certain other relevant financial and
operating data of the Buyer made available to us from published
sources;
(10) performed such other analyses and examinations and considered
such other information, financial studies, analysis and
investigations and financial, economic and market data as we
deemed relevant.
We have not independently verified any of the financial and other
information and data publicly available or furnished to or otherwise reviewed
by or discussed with us in connection with our review of the Transaction and,
for purposes of the opinion set forth herein, we have assumed and relied upon
the accuracy and completeness of all such information and have further relied
upon the assurances of management of the Company that they are not aware of
any facts that would make such information inaccurate. With respect to the
estimates of future prospects made available to us and used in our analysis,
we have assumed that they have been reasonably prepared on bases reflecting
the best currently available estimates and judgments of the management of the
Company as to the expected future financial performance of the Company. We
have not been engaged to assess the Company's ability to achieve such
estimates or assumptions. In addition, we have not conducted a physical
inspection or appraisal of any of the assets, properties, or facilities of
the Company nor have we been furnished with any such evaluation or appraisal.
Our opinion is necessarily based upon market, economic, financial and other
conditions as they exist on, and can be evaluated as of, the date of this
letter. Any change in such conditions would require a reevaluation of this
opinion.
In connection with our opinion, we have assumed that the Transaction
will be consummated on the terms and subject to the conditions described in
the Merger Agreement. We also have assumed that all necessary governmental
and regulatory approvals and third-party consents will be obtained on terms
and conditions that will not have a material adverse effect on the Company.
Morgan Keegan & Company, Inc., as part of its investment banking
services, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, corporate
restructurings, strategic alliances, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and
<PAGE>
GeoScience Corporation
October 28, 1999
Page 3
other purposes. We have acted as financial advisor to the Board of Directors
of the Company in connection with the Transaction and will receive a fee for
our services. In addition, the Company has agreed to indemnify us for
certain liabilities arising out of the rendering of this opinion. In the
ordinary course of our business, we may trade in the debt and equity
securities of the Company and Buyer for our own account or for the accounts
of our customers and, accordingly, may at any time hold a long or short
position in such securities. We also acted as the lead-managing underwriter
for the Company's stock offering on May 17, 1996.
This letter and the opinion stated herein are solely for the use of
the Company's Board of Directors in their evaluation of the proposed
Transaction, and our opinion is not intended to be and does not constitute a
recommendation to any shareholder as to how such shareholder should vote in
any matters relating to the proposed Transaction. This letter may not be
reproduced, summarized, excerpted from or otherwise publicly referred to in
any manner without our prior written consent. Based upon and subject to the
foregoing and such other matters as we deem relevant, we are of the opinion
that as of the date hereof, the consideration to be received by the Company's
shareholders in connection with the Merger Agreement is fair to the Company's
shareholders from a financial point of view.
We hereby consent to the inclusion of the full text of our opinion
and summary thereof in any disclosure document or proxy statement relating to
the Transaction that the Company must file under the Securities Act of 1933,
as amended and distribute to its shareholders.
Sincerely,
MORGAN KEEGAN & COMPANY, INC.
