<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- -----------
Commission file number 1-7427
DIGICON INC.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0343152
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3701 KIRBY DRIVE, SUITE #112, HOUSTON, TEXAS 77098
Address of principal executive offices) (Zip Code)
(713) 526-5611
(Registrant's telephone number, including area code)
NO CHANGES
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT MARCH 14, 1996
Common Stock, $.01 par value 11,123,422
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DIGICON INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
January 31, 1996 and July 31, 1995 1
Consolidated Statements of Operations -
For the Three and Six Months Ended January 31, 1996 and 1995 3
Consolidated Statements of Cash Flows -
For the Six Months Ended January 31, 1996 and 1995 4
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 10
PART II. Other Information
Item 1. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other 16
Item 6. Exhibits and Reports on Form 8-K 16
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DIGICON INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
January 31, July 31,
1996 1995
----------- ------------
ASSETS (In thousands of dollars)
<S> <C> <C>
Current assets:
Cash $ 3,907 $ 4,209
Restricted cash investments 332 670
Accounts and notes receivable (net of allowance for
doubtful accounts: January, $595; July, $703) 42,130 40,662
Materials and supplies inventory (net of reserves:
January, $66; July, $66) 1,388 1,335
Prepayments and other 5,714 6,619
----------- ------------
Total current assets 53,471 53,495
Property and equipment:
Seismic equipment 57,855 53,615
Data processing equipment 23,737 26,703
Leasehold improvements and other 30,694 29,394
----------- ------------
Total 112,286 109,712
Less accumulated depreciation 63,390 60,874
----------- ------------
Property and equipment - net 48,896 48,838
Proprietary seismic data 24,859 28,444
Goodwill (net of accumulated amortization:
January, $1,379; July, $1,168) 2,866 3,077
Other assets 1,304 1,216
----------- ------------
Total $ 131,396 $ 135,070
=========== ============
</TABLE>
____________
See Notes to Consolidated Financial Statements.
1
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<TABLE>
<CAPTION>
(Unaudited)
January 31, July 31,
1996 1995
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (In thousands of dollars)
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 9,479 $ 10,915
Accounts payable - trade 15,112 18,875
Accrued interest 422 409
Other accrued liabilities 12,767 14,869
Income taxes payable 1,411 1,097
----------- ------------
Total current liabilities 39,191 46,165
Non-current liabilities:
Long-term debt-less current maturities 22,510 25,243
Deferred credits 3,669 3,675
Other non-current liabilities 1,343 1,105
----------- ------------
Total non-current liabilities 27,522 30,023
Stockholders' equity:
Common stock, $.01 par value; authorized:
20,000,000 shares; issued: 11,123,422 shares and
11,134,939 shares at January and July, respectively 111 111
Additional paid-in capital 71,095 71,895
Accumulated deficit from August 1, 1991 (6,523) (8,352)
Less: Treasury stock, at cost; 858,497 shares (4,772)
----------- ------------
Total stockholders' equity 64,683 58,882
----------- ------------
Total $ 131,396 $ 135,070
=========== ============
</TABLE>
____________
See Notes to Consolidated Financial Statements.
2
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DIGICON INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, January 31,
-------------------------- --------------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 40,068 $ 30,266 $ 78,246 $ 62,266
Costs and expenses:
Operating expenses 33,247 22,701 63,680 47,709
Depreciation and amortization 3,899 3,453 7,522 6,846
Selling, general and administrative 1,276 1,058 2,527 2,164
Interest 1,343 1,331 2,625 2,501
Equity in loss of 50% or less-
owned companies and joint ventures 5 279 5 640
Other (48) 298 63 (74)
--------- --------- --------- ---------
Total costs and expenses 39,722 29,120 76,422 59,786
--------- --------- --------- ---------
Income before provision for
(benefit from) income taxes 346 1,146 1,824 2,480
Provision for (benefit from)
income taxes (731) 317 (5) 1,044
--------- --------- --------- ---------
Net income $ 1,077 $ 829 $ 1,829 $ 1,436
========= ========= ========= =========
Per share of common stock:
Income per share of common stock $ .10 $ .07 $ .17 $ .13
========= ========= ========= =========
Weighted average shares (includes
common stock only) 11,123 11,135 10,848 11,046
========= ========= ========= =========
Cash dividends None None None None
========= ========= ========= =========
</TABLE>
____________
See Notes to Consolidated Financial Statements.
3
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DIGICON INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Six Months Ended January 31,
----------------------------
1996 1995
------------ -----------
(In thousands of dollars)
<S> <C> <C>
Operating activities:
Net income $ 1,829 $ 1,436
Non-cash items included in net income:
Depreciation and amortization 7,522 6,846
Amortization of deferred gain on sale/leaseback (90) (496)
(Gain) loss on disposition of property and equipment 52 (87)
Equity in loss of 50% or less-owned
companies and joint ventures 5 640
Write-down of proprietary seismic data to market 198 198
Restructuring accrual (537)
Amortization of warrants issued with short-term
related party loans 27
Change in operating assets/liabilities:
Accounts and notes receivable (1,468) (2,678)
Accounts and notes receivable from FSU joint venture 59
Materials and supplies inventory (53) 93
Prepayments and other 905 (2,296)
Proprietary seismic data 3,387 (6,540)
Other (118) 207
Accounts payable - trade (3,584) (5,403)
Accrued interest 13 131
Other accrued liabilities (2,012) 2,787
Income taxes payable 314 193
Deferred credits (6) (415)
Other non-current liabilities 238 83
-------- --------
Total cash provided (used) by operating activities 7,132 (5,752)
Financing activities:
Borrowings of short-term related party debt 30
Payments of short-term related party debt (1,052)
Payments of long-term debt (4,889) (2,505)
Net borrowings (payments) under credit agreements (2,068) 2,534
Net proceeds from sale of common stock (39)
Net proceeds from sale of treasury stock 3,972
-------- --------
Total cash used by financing activities (2,985) (1,032)
</TABLE>
____________
See Notes to Consolidated Financial Statements.
4
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DIGICON INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED) UNAUDITED
<TABLE>
<CAPTION>
Six Months Ended January 31,
----------------------------
1996 1995
----------- -----------
(In thousands of dollars)
<S> <C> <C>
Investing activities:
Purchase of property and equipment $ (5,185) $ (1,757)
Sale of property and equipment 370 1,095
(Increase) decrease in restricted cash investments 338 (432)
Increase in investment in FSU joint ventures (807)
Sale to Syntron, Inc.:
Inventories and technologies 1,630
Property and equipment 1,370
--------- ---------
Total cash provided (used) by investing activities (4,477) 1,099
Currency loss on foreign cash 28 39
--------- ---------
Change in cash and cash equivalents (302) (5,646)
Beginning cash and cash equivalents balance 4,209 8,365
--------- ---------
Ending cash and cash equivalents balance $ 3,907 $ 2,719
========= =========
</TABLE>
____________
See Notes to Consolidated Financial Statements.
5
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DIGICON INC. AND SUBSIDIARIES
SUPPLEMENTARY SCHEDULES TO CONSOLIDATED STATEMENTS
OF CASH FLOWS UNAUDITED
<TABLE>
<CAPTION>
Six Months Ended January 31,
----------------------------
1996 1995
---------- -----------
(In thousands of dollars)
<S> <C> <C>
Schedule of non-cash investing and financing activities:
Increase (decrease) in property and equipment for:
Equipment purchase obligations $ 2,788 $ 843
Accounts payable - trade (179) 257
Increase (decrease) in investment in FSU joint venture for:
Common stock 2,309
Accounts and note receivable from FSU joint venture (409)
Other accrued liabilities 841
Long-term debt 245
Sale of inventories, property and equipment, and technologies
to Syntron, Inc. resulting in an increase (decrease) in:
Accounts and notes receivable - deferred credits 3,255
Materials and supplies inventory (2,034)
Other assets - deferred credits receivable 857
Accounts payable - trade 957
Other accrued liabilities - deferred gain 1,011
Other non-current liabilities - deferred gain 110
Supplemental disclosures of cash flow information:
Cash paid during the six months ended for:
Interest -
Revolving credit agreements 1,036 930
Secured term loan 242 312
Equipment purchase obligations 901 560
Other 443 534
Income taxes 436 826
</TABLE>
6
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DIGICON INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OPINION OF MANAGEMENT
In the opinion of Management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present
fairly the financial position of Digicon Inc. and subsidiaries at
January 31, 1996, and the results of its operations and its cash flows
for the three and six months ended January 31, 1996 and 1995. The
results of operations for any interim period are not necessarily
indicative of the results to be expected for a full year, as such
results could be affected by changes in demand for geophysical services
and products, which is directly related to the level of oil and gas
exploration and development activity. Governmental actions, foreign
currency exchange rate fluctuations, seasonal factors, weather
conditions and equipment problems also could impact future operating
results.
EARNINGS PER SHARE
Weighted average shares and earnings per share for all periods
presented have been restated to reflect the effect of a one for three
reverse stock split consummated on January 17, 1995. Primary earnings
per share is computed based on the weighted average number of shares of
common stock plus common stock equivalents. Shares issuable upon the
conversion of stock options and warrants, which are common stock
equivalents, were disregarded since the treasury stock method of
calculation produced no incremental shares or resulted in dilution of
less than 3%.
Fully diluted earnings per share is not presented since common stock
equivalents referenced above had no dilutive effect.
7
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2. LONG-TERM DEBT
The Company's long-term debt is as follows:
<TABLE>
<CAPTION>
January 31, July 31,
1996 1995
----------- ---------
(In thousands of dollars)
<S> <C> <C>
Revolving credit agreement due April 1997, at prime plus
3% ( 11.50% at January 31, 1996) $ 12,937 $ 14,123
Secured term loan due June 1997, at 10.75% 4,500 4,500
Secured Indonesian Rupiah revolving credit agreement
due September 1995, at 19% 894
Equipment purchase obligations maturing through
February 1999, at an average rate of 11.11%
at January 31, 1996 14,552 16,641
--------- --------
Total 31,989 36,158
Less current maturities 9,479 10,915
--------- --------
Due after one year $ 22,510 $ 25,243
========= ========
</TABLE>
The revolving credit agreement is with a finance company and provides a
revolving credit facility of up to $17,000,000 (increased from
$15,000,000 in April 1995) through April 11, 1997. Advances under the
agreement are limited by a borrowing formula and are collateralized by a
majority of the assets of the Company. The agreement limits, among other
things, the Company's right, without consent of the lender, to take
certain actions, including creating indebtedness, prohibits paying
dividends and requires the Company to maintain certain financial ratios.
The agreement also provides for the deposit of collections of certain of
the Company's accounts receivable into cash collateral accounts and for
the repayment of outstanding advances and monthly interest with such
proceeds. Amounts applied against outstanding advances are available for
reborrowing upon presentation of evidence of adequate borrowing base
coverage. At January 31, 1996, approximately $3,500,000 was available
for borrowing under this agreement.
The secured term loan is due June 30, 1997, with interest at 10.75%
payable quarterly. A principal payment of $1,500,000 is due June 30,
1996, and the remaining unpaid principal is due June 30, 1997. The loan
agreement limits, but does not prohibit, the Company's ability to pay
dividends and to incur indebtedness for borrowed money and requires the
Company to maintain certain financial ratios. In April 1994, in
conjunction with the execution of the revolving credit agreement, the
lender was granted a security interest in a majority of the Company's
equipment. In connection with the loan, the Company issued common stock
purchase warrants to the lender.
8
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The secured Indonesian Rupiah revolving credit facility in the amount of
two billion Rupiahs was the obligation of P.T. Digicon Mega Pratama, a
consolidated subsidiary of the Company, and provided working capital and
certain bank guarantees for its Indonesian operations. The facility was
repaid September 1995.
The Company's equipment purchase obligations represent installment loans
and capitalized lease obligations primarily related to computing and
seismic equipment.
3. SALE OF TREASURY STOCK
In September 1995, the Company sold its 858,497 shares of treasury stock
to a group of institutional investors at a price of $4.6875 per share for
total cash proceeds of $4,024,204.
4. OTHER COSTS AND EXPENSES
Other costs and expenses consist of the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, January 31,
------------------ -------------------
1996 1995 1996 1995
------- ------ ------ -------
(In thousands of dollars)
<S> <C> <C> <C> <C>
Net foreign currency exchange
loss $ 57 $ 84 $ 55 $ 91
Net (gain) loss on disposition of
property and equipment (85) 262 52 (87)
Interest income (20) (48) (44) (85)
Other 7
------- ------ ------ -------
Total $ (48) $ 298 $ 63 $ (74)
======= ====== ====== =======
</TABLE>
5. COMMON STOCK AND WARRANTS
In January 1996, the Company cancelled 11,517 shares of common stock and
22,473 warrants previously held by an escrow agent for issuance in
conjunction with the cancellation in 1991 of a previous issue of common
and preferred stock and certain other liabilities.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended January 31, 1996 compared with Three Months Ended January
31, 1995
Revenues. For the three month period ended January 31, 1996, total revenues
increased 32% from $30.3 million to $40.1 million. Land revenues decreased 23%
from $9.1 million to $7.0 million, primarily due to downtime during a domestic
crew's conversion to an Input/Output System Two - Remote Seismic Recorder
system and permitting delays for another crew. These decreases were partially
offset by a domestic crew operating on higher revenue producing 3D and
transition zone surveys and the addition of a South American crew. Marine
revenues increased 60% from $7.6 million to $12.2 million, primarily due to the
addition of a new vessel and the reassignment of two vessels to contract work.
This increase was partially offset by a decline in revenues from the Company's
other vessels due to weather delays and lower prices in the Far East. Data
processing revenues increased 8% from $8.7 million to $9.3 million, due to
improved contract terms at the Assen, Holland center, increased capacity at the
Houston and Singapore centers and the improved Far East market. These
increases were partially offset by the closing of the Company's Bogota,
Colombia and Oklahoma City centers and depressed European data processing
prices. Proprietary seismic data revenues increased 139% from $4.8 million to
$11.5 million, resulting from an expansion of the Company's data library. This
expansion has been in response to modifications in oil and gas companies'
spending strategies.
Operating Expenses. Cost of services for the period increased 46% from $22.7
million to $33.2 million, and, as a percentage of total revenues, cost of
services increased from 75% to 83%. The increase as a percentage of total
revenues resulted from a weakness in marine acquisition margins, lower
profitability on the mix of proprietary data sales and $929,000 in Argentina
social security taxes retroactively applied to compensation of employees
converted from a temporary to permanent classification.
Depreciation and Amortization. Depreciation and amortization expense increased
13% from $3.5 million to $3.9 million, due to equipment purchases for South
American land crews, two of the Company's vessels and the Houston, Singapore
and London data processing centers.
Selling, General and Administrative. Selling, general and administrative
expenses increased 21% from $1.1 million to $1.3 million, resulting primarily
from additional costs incurred in implementing a new administrative data
processing system.
Interest. Interest expense increased from $1,331,000 to $1,343,000. Although
total debt and overall borrowing costs increased during the current quarter,
the prior year quarter included interest related to the deferral of payments on
certain trade accounts payable balances.
Equity in Loss. The FSU joint ventures were sold in June 1995, therefore
equity losses declined from $279,000 to $5,000.
Other. Other expenses (income) decreased from an expense of $298,000 to income
of $48,000 resulting primarily from losses on damaged cables in the prior
year's quarter.
10
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Income Taxes. Provision for (benefit from) income taxes decreased from an
expense of $317,000 to a benefit of $731,000. The benefit relates primarily to
taxable losses in South America generated by deductions for the Argentina
social security taxes and compensation previously discussed. The prior year's
provision related primarily to taxable income in Malaysia.
Six Months Ended January 31, 1996 compared with Six Months Ended January 31,
1995
Revenues. For the six month period ended January 31, 1996, total revenues
increased 26% from $62.3 million to $78.2 million. Land revenues increased 14%
from $18.5 million to $21.1 million, primarily from two of the Company's North
American crews operating on higher revenue producing 3D and transition zone
surveys and increased rates and production on Argentina land surveys. These
increases were partially offset by downtime during a domestic crew's conversion
to an Input/Output System Two - RSR system and permitting delays for another
crew. Marine revenues increased 15% from $18.5 million to $21.3 million,
primarily resulting from the addition of a new vessel and the reassignment of
two vessels to contract work. This increase was partially offset by a decline
in revenues from the Company's other vessels due to weather delays, lower
prices in the Far East and the start-up of the new vessel which is working in
tandem with two other vessels. Data processing revenues increased 7% from
$17.5 million to $18.7 million, due to improved contract terms at the Assen,
Holland center, increased capacity at the Houston and Singapore centers and the
improved Far East market. These increases were partially offset by the closing
of the Company's Bogota, Colombia and Oklahoma City centers and depressed
European data processing prices. Proprietary seismic data revenues increased
128% from $7.5 million to $17.1 million, resulting from an expansion of the
Company's library. This expansion has been in response to modifications in oil
and gas companies' spending strategies.
Operating Expenses. Cost of services for the period increased 33% from $47.7
million to $63.7 million, and, as a percentage of total revenues, cost of
services increased from 77% to 81%. The increase as a percentage of total
revenues resulted from a weakness in marine acquisition margins, lower
profitability on the mix of proprietary data sales and $929,000 in Argentina
social security taxes retroactively applied to compensation of employees
converted from a temporary to permanent employment classification.
Depreciation and Amortization. Depreciation and amortization expense increased
10% from $6.8 million to $7.5 million, due to equipment purchases for South
American land crews, two of the Company's vessels and the Houston, Singapore
and London data processing centers.
Selling, General and Administrative. Selling, general and administrative
expenses increased 17% from $2.2 million to $2.5 million, resulting primarily
from additional costs incurred in implementing a new administrative data
processing system.
Interest. Interest expense increased 5%, from $2.5 million to $2.6 million,
resulting from additional financing for equipment purchases and an increase in
overall borrowing costs.
11
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Equity in Loss. The FSU joint ventures were sold in June 1995, therefore
equity losses declined from $640,000 to $5,000.
Other. Other expenses (income) increased from income of $74,000 to an expense
of $63,000. The current year includes losses on damaged cables and the prior
year includes a gain on the sale of a seismic vessel partially offset by losses
on damaged cables.
Income Taxes. Provision for (benefit from) income taxes decreased from an
expense of $1.0 million to a benefit of $5,000. In the current year, provision
for income taxes from taxable income in Malaysia was offset by an $876,000 tax
benefit resulting from taxable losses in South America generated by deductions
for the Argentina social security taxes and compensation previously discussed.
Provision for income taxes in the prior year related primarily to taxable
income in Malaysia and South America and a tax assessment in Jakarta.
12
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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's internal sources of liquidity are cash balances ($3.9 million at
January 31, 1996) and cash flow from operations ($7.1 million for the six
months ended January 31, 1996). External sources include proceeds from the
sale of common stock, the unutilized portion of the working capital facility
described below (approximately $7.5 million at March 14, 1996), equipment
financing and trade credit. To provide additional working capital, the Company
maintains a $17.0 million revolving credit facility with a commercial finance
company which provides for borrowings of up to 80% of the majority of the
Company's domestic and foreign receivables at an interest rate of 3% over a
prime rate, secured by most of the Company's world-wide assets. On February
16, 1996, the Company filed a registration statement relating to a public
offering of up to 4,055,000 shares of common stock. As of the date of this
Form 10-Q report, the registration statement has not yet become effective. See
Part II. Other Information, Item 5. Other.
At January 31, 1996, the Company's backlog of commitments for services totaled
$82.5 million of which 34% relates to land acquisition, 37% relates to marine
acquisition and 29% relates to data processing. The Company expects to
complete 76% of these commitments during fiscal 1996.
The Company requires significant amounts of working capital to support its
operations and to fund its capital spending and research and development
programs. The Company's foreign operations, which accounted for 54% of fiscal
1995 revenues and 56% of revenues in the first half of fiscal 1996, require
greater amounts of working capital than similar domestic activities, as the
average collection period for foreign receivables is generally longer than for
comparable domestic accounts. In addition, the Company has increased its
participation in non-exclusive data surveys and has significantly expanded its
library of proprietary data. Because of the lead time between survey execution
and sale, non-exclusive surveys generally require greater amounts of working
capital than contract work. During the past six months, this problem was
exacerbated as, for budgeting purposes, several clients deferred payments on
data library purchases totaling in excess of $5.0 million until January and
February 1996, at which time substantially all of such receivables were
collected. Depending on the timing of future sales of the data and the
collection of the proceeds from such sales, the Company's liquidity will
continue to be affected; however, the Company believes that these non-exclusive
surveys have good long-term sales, earnings and cash flow potential.
In recent years, the Company has updated and increased its data processing
capabilities, invested significant capital to outfit a new seismic vessel and
has, more recently, allocated significant resources to its land and transition
zone activities. Since July 31, 1992, the Company has committed approximately
$77.6 million for new capital equipment and invested approximately $13.2
million in its research and development efforts.
During fiscal 1996, the Company expects to spend approximately $13.7 million
for capital expenditures and $2.7 million for research and development
activities. In addition, $6.2 million of equipment was purchased by a
commercial finance company and leased to the Company under an operating lease
entered into in December 1995. The majority of capital spending in 1996 will
be to upgrade and expand the Company's land and marine data acquisition
capabilities.
13
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The utilization of net operating loss carryforwards ("NOLs") is subject to
certain limitations. Additionally, when such NOLs are utilized, the benefit
will be recognized as an addition to paid-in capital and will not be reflected
in the consolidated statements of operations.
The Company believes that it possesses sufficient liquidity to continue
operations on a satisfactory basis. If additional working capital were to
become necessary as a result of deterioration in demand for or pricing of the
Company's services, and if additional financing were not available, the
Company's operating results and financial condition could be adversely
affected.
14
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As of March 14, 1996, the Company was not a party to, nor was its property the
subject of, any material pending legal proceedings, as defined by relevant
rules and regulations of the Securities and Exchange Commission.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of stockholders was held on December 19, 1995.
Common stockholders of record on October 31, 1995 were entitled to vote. The
following matters were voted on by the Company's stockholders at the meeting:
1. Each of the eight directors nominated for the board of directors was
elected by the stockholders as follows:
<TABLE>
<CAPTION>
FOR WITHHOLD
--------- --------
<S> <C> <C>
George F. Baker 6,598,055 398,511
James B. Clement 6,598,055 398,445
Clayton P. Cormier 6,598,055 407,345
Steven J. Gilbert 6,598,055 407,611
Stephen J. Ludlow 6,598,022 399,078
Edward R. Prince 6,582,823 424,000
Douglas B. Thompson 6,598,022 399,244
Jack C. Threet 6,598,055 408,768
</TABLE>
2. The stockholders approved an amendment to the 1992 Employee
Nonqualified Stock Option Plan whereby 1) the number of shares which
may be issued or covered by options pursuant to the Plan was increased
by 500,000 shares from 658,333 shares to 1,158,333 shares and 2) the
exercisability of all outstanding options may be accelerated in the
event of a change in control of the Company (as defined).
Stockholders holding 6,427,306 shares voted to affirm the matter;
542,338 negative votes were cast and 26,756 votes abstained.
15
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Item 5. Other
The Company is engaged in highly preliminary, exploratory discussions with a
smaller oilfield service company, which if successful, would result in a
substantial increase in the revenues of a combined enterprise. There is no
assurance that any transaction will result from these discussions; however,
until such time as discussions are concluded, the Company is deferring its
previously announced common stock offering.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits filed with this report:
10-A) First and Second Amendments dated April 11, 1994 and August 31,
1994, respectively, to the Warrant Agreement dated June 29,
1992, between Digicon Inc. and Hanseatic Corporation, as Agent.
10-B) Warrant dated January 30, 1995, certifying Soros Capital L.P.
as the holder of 43,200 warrants to purchase shares of Digicon
Inc. Common Stock.
10-C) Warrant dated January 30, 1995, certifying Jupiter Management
Co., Inc. as the holder of 42,000 warrants to purchase shares
of Digicon Inc. Common Stock.
10-D) Warrant dated January 30, 1995, certifying CCF Jupiter L.P. as
the holder of 34,800 warrants to purchase shares of Digicon
Inc. Common Stock.
11) Computation of income per common and common equivalent share
for the three and six months ended January 31, 1996 and 1995.
b) Reports on Form 8-K
1) There were no reports filed on Form 8-K during the quarter
ended January 31, 1996.
16
<PAGE> 19
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DIGICON INC.
-------------------------------------------
(Registrant)
Date: March 14, 1996 By: \s\ Stephen J. Ludlow
------------------ -------------------------------------------
Stephen J. Ludlow
(President and Chief Executive Officer)
Date: March 14, 1996 \s\ Richard W. McNairy
------------------ -------------------------------------------
Richard W. McNairy
(Principal Financial Officer)
17
<PAGE> 20
EXHIBIT INDEX
10-A) First and Second Amendments dated April 11, 1994 and August 31,
1994, respectively, to the Warrant Agreement dated June 29,
1992, between Digicon Inc. and Hanseatic Corporation, as Agent.
10-B) Warrant dated January 30, 1995, certifying Soros Capital L.P.
as the holder of 43,200 warrants to purchase shares of Digicon
Inc. Common Stock.
10-C) Warrant dated January 30, 1995, certifying Jupiter Management
Co., Inc. as the holder of 42,000 warrants to purchase shares
of Digicon Inc. Common Stock.
10-D) Warrant dated January 30, 1995, certifying CCF Jupiter L.P. as
the holder of 34,800 warrants to purchase shares of Digicon
Inc. Common Stock.
11) Computation of income per common and common equivalent share
for the three and six months ended January 31, 1996 and 1995.
27) Financial Data Schedule
<PAGE> 1
EXHIBIT 10-A
FIRST AMENDMENT TO WARRANT AGREEMENT
------------------------------------
THIS FIRST AMENDMENT TO WARRANT AGREEMENT ("Amendment"), dated as of April
11, 1994, is made and entered into by and between DIGICON INC., a Delaware
corporation (the "Company") and HANSEATIC CORPORATION, a New York corporation,
as Agent ("Hanseatic").
WITNESSETH:
----------
WHEREAS, the Company and Hanseatic are parties to that certain Warrant
Agreement (the "Agreement") dated as of June 29, 1992, pursuant to which the
Company issued to Deltec Securities Corporation, as Custodian ("Deltec") and to
Hanseatic warrants (the "Warrants") to purchase an aggregate of 340,000 shares
of common stock of the Company; and
WHEREAS, the Company has requested that Hanseatic enter into that certain
Intercreditor Agreement, of even date herewith, by and among Hanseatic,
Foothill Capital Corporation and the Company, and Hanseatic has agreed to enter
into such Intercreditor Agreement, on the condition that the Company enter into
this Amendment.
NOW THEREFORE, in consideration of the foregoing, the Company and
Hanseatic hereby agree as follows:
1. Amendment of Agreement. Section 8 of the Agreement is hereby deleted
in its entirety and replaced with the following:
SECTION 8. EXERCISE PRICE.
The price per share at which shares of Common Stock shall be
purchasable upon exercise of each Warrant (the "Exercise Price") shall be
$3.60 per share, as adjusted pursuant to subsection 9.1(f).
2. Deliveries by the Company. Simultaneously with the execution and
delivery of this Amendment, the Company is delivering the following items to
Hanseatic:
(a) Resolutions of the Board of Directors of the Company authorizing the
execution and delivery of this Amendment and the Security Agreement of even
date herewith between the Company, as debtor, and Hanseatic, as secured party
(the "Security Agreement") and the performance by the Company of its
obligations hereunder and thereunder;
(b) Copies of the Certificate of Incorporation and By-Laws of the Company,
as the same may have been amended to the date of this Amendment;
(c) The certificate of the president and the secretary of the Company,
certifying to Hanseatic and Deltec that (i) the resolutions described in
Section (2)(a) above were duly adopted and are true, correct and complete,
(ii) the certificate of incorporation and
<PAGE> 2
by-laws described in Section 2(b) above are true, correct and complete and
(iii) the Company is in compliance with its obligations under the Agrement, as
amended hereby; and
(d) An opinion of counsel to the Company, addressed to and in form and
substance satisfactory to Hanseatic and Deltec, stating that, in the opinion of
such counsel (i) the execution and delivery of this Amendment and the Security
Agreement was duly authorized by all necessary corporate actions of the
Company, and (ii) the Amendment and the Security Agreement constitute the valid
and binding obligation of the Company, enforceable against the Company in
accordance with their respective terms.
3. Replacement of Warrant Certificates. Upon surrender by the registered
holder thereof to the Company of any Warrant Certificate or Certificates issued
prior to the date hereof, the Company shall execute and deliver to such holder,
in exchange for the Warrant Certificate so surrendered, a new Warrant
Certificate or Certificates of like tenor and representing an equivalent right
or interest, which shall provide for the Exercise Price set forth in this
Amendment, as the same may be adjusted pursuant to the terms of the Agreement.
4. Notice to Holders. Promptly after the execution and delivery hereof,
the Company shall notify all of the registered holders of the Warrants of the
amendment to the Exercise Price provided for herein, which notice shall also
provide that copies of this Amendment will be furnished to such holders on
request.
5. Expenses. The Company shall pay all costs and expenses of Hanseatic
and Deltec incurred in connection with this Amendment, including, without
limitation, attorneys fees for the preparation hereof.
6. Definitions. All capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Agreement.
7. Effect on Agreement. Except as expressly modified hereby the
Agreement remains unmodified and in full force and effect.
8. Authority. Each of the Company and Hanseatic, represent and warrant
that they have all necessary power and authority to execute and deliver this
Agreement.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
Attest: DIGICON INC.
/s/ JUNE KIDWELL
- -------------------------- By: /s/ ALLAN C. POGACH
Name: June Kidwell ---------------------------------
--------------------- Name: Allan C. Pogach
Title: Assistant Secretary Title: Vice President & Treasurer
--------------------
Attest: HANSEATIC CORPORATION
/s/ ELIZABETH H. PARELLA By: /s/ PAUL A. BIDDELMAN
- -------------------------- ---------------------------------
Name: Elizabeth M. Parella Name: Paul A. Biddelman
--------------------- Title: Treasurer
Title: Secretary
--------------------
<PAGE> 4
SECOND AMENDMENT TO WARRANT AGREEMENT
THIS SECOND AMENDMENT TO WARRANT AGREEMENT ("Amendment"), dated as of
August 31, 1994, is made and entered into by and between DIGICON INC., a
Delaware corporation (the "Company"), and HANSEATIC CORPORATION, a New York
corporation, as Agent ("Hanseatic").
WITNESSETH:
WHEREAS, the Company and Hanseatic are parties to that certain Warrant
Agreement dated as of June 29, 1992, as amended pursuant to a First Amendment
to Warrant Agreement dated April 11, 1994 (the Warrant Agreement, as amended,
is referred to herein as the "Agreement"), pursuant to which the Company issued
to Deltec Securities Corporation, as Custodian ("Deltec"), and to Hanseatic
warrants (the "Warrants") to purchase an aggregate of 340,000 shares of common
stock of the Company; and
WHEREAS, the Company has requested that Hanseatic consent to the sale by
certain subsidiaries of the Company of certain assets relating to the business
conducted by the Company's Marine Engineering Development Group and Land
Engineering Development Group pursuant to an Asset Purchase Agreement entered
into with Syntron, Inc., and Hanseatic has agreed to provide such consent in
part on the condition that the Company enter into this Amendment.
NOW, THEREFORE, in consideration of the foregoing, the Company and
Hanseatic hereby agree as follows:
1. Amendment of Agreement. Section 8 of the Agreement is hereby deleted
in its entirety and replaced with the following:
SECTION 8. EXERCISE PRICE.
The price per share at which shares of Common Stock shall be
purchasable upon exercise of each Warrant (the "Exercise Price") shall be
$2.00 per share, as adjusted pursuant to subsection 9.1(f).
2. Deliveries by the Company. Simultaneously with the execution and
delivery of this Amendment, the Company is delivering the following items to
Hanseatic:
(a) Resolutions of the Board of Directors of the Company authorizing
the execution and delivery of this Amendment and the performance by the Company
of its obligations hereunder and thereunder;
(b) Copies of the Certificate of Incorporation and By-Laws of the
Company, as the same may have been amended to the date of this Amendment:
<PAGE> 5
(c) The certificate of the president and the secretary of the
Company, certifying to Hanseatic and Deltec that (i) the resolutions described
in Section (2)(a) above were duly adopted and are true, correct and complete,
(ii) the certificate of incorporation and by-laws described in section 2(b)
above are true, correct and complete and (iii) the Company is in compliance
with its obligations under the Agreement, as amended hereby; and
(d) An opinion of counsel to the Company, addressed to and in form
and substance satisfactory to Hanseatic and Deltec, stating that, in the
opinion of such counsel (i) the execution and delivery of this Amendment was
duly authorized by all necessary corporate actions of the Company, and (ii) the
Amendment constitutes the valid and binding obligations of the Company,
enforceable against the Company in accordance with its terms.
3. Replacement of Warrant Certificates. Upon surrender by the registered
holder thereof to the Company of any Warrant Certificate or Certificates issued
prior to the date hereof, the Company shall execute and deliver to such holder,
in exchange for the Warrant Certificate so surrendered, a new Warrant
Certificate or Certificates of like tenor and representing an equivalent right
or interest, which shall provide for the Exercise Price set forth in this
Amendment, as the same may be adjusted pursuant to the terms of the Agreement.
4. Notice to Holders. Promptly after the execution and delivery hereof,
the Company shall notify all of the registered holders of the Warrants of the
amendment to the Exercise Price provided for herein, which notice shall also
provide that copies of this Amendment will be furnished to such holders on
request.
5. Expenses. The Company shall pay all out-of-pocket costs and expenses
of Hanseatic and Deltec incurred in connection with this Amendment and the
other documents executed and delivered in connection with the transactions
described herein, including, without limitation, reasonable attorneys fees.
6. Definitions. All capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Agreement.
7. Effect on Agreement. Except as expressly modified hereby the
Agreement remains unmodified and in full force and effect.
8. Authority. Each of the Company and Hanseatic, represent and warrant
that they have all necessary power and authority to execute and deliver this
Agreement.
2
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
Attest: DIGICON INC.
/s/ TRACEY SHARP By: /s/ ALLAN C. POGACH
- -------------------------- -----------------------------------
Name: Tracey Sharp Allan C. Pogach, Vice President and
Treasurer
Attest: HANSEATIC CORPORATION
- -------------------------- By: /s/ PAUL BIDDELMAN
-----------------------------------
Name: Name: Paul Biddelman
--------------------- ----------------------------------
Title: Treasurer
---------------------------------
3
<PAGE> 1
EXHIBIT 10-B
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ARE
SUBJECT TO CERTAIN RESTRICTIONS, CONTAINED IN SECTION 5 HEREOF, WITH
RESPECT TO THEIR TRANSFER.
WARRANT TO PURCHASE SHARES OF COMMON STOCK OF
DIGICON INC.
NO. W-1 43,200 WARRANTS
This Warrant Certificate certifies that SOROS CAPITAL L.P. ("Holder")
is the holder of 43,200 Warrants (subject to adjustment as provided herein),
each of which represents the right to subscribe for and purchase from Digicon
Inc., a Delaware corporation (the "Company"), one share of the common stock,
par value $.01 per share, of the Company (the common stock, including any stock
into which it may be changed, reclassified or converted, is herein referred to
as the "Common Stock") at the purchase price (the "Exercise Price") of $4.50
per share (subject to adjustment as provided herein).
The Warrants represented by this Warrant Certificate are subject to
the following provisions, terms and conditions:
1. EXERCISE OF WARRANTS
EXERCISE OF WARRANTS. The Warrants may be exercised by the
Holder, in whole or in part (but not as to a fractional share of Common Stock),
by surrender of this Warrant Certificate at the principal office of the Company
at 3701 Kirby Drive, Suite 112, Houston, Texas 77098 (or such other office or
agency of the Company as may be designated by notice in writing to the Holder
at the address of such Holder appearing on the books of the Company) with the
appropriate form attached hereto duly exercised, at any time within the period
beginning on the date upon which the Company's shareholders approve the
issuance of the Warrants as required by the American Stock Exchange and
expiring at 5:00 p.m. Houston, Texas time, on July 26, 1999 (the "Exercise
Period"), and by payment to the Company by certified check or bank draft of the
Exercise Price for such shares. The Company agrees that the shares of Common
Stock so purchased shall be and are deemed to be issued to the Holder as the
record owner of such shares of Common Stock as of the close of business on the
date on which the Warrant Certificate shall have been surrendered and payment
made for such shares of Common Stock. Certificates representing the shares of
Common Stock so purchased, together with any cash for fractional shares of
Common Stock paid pursuant to Section 2D, shall be delivered to the Holder
promptly, and in no event later than ten (10) days after the Warrants shall
have been so exercised, and, unless the Warrants have expired, a new Warrant
Certificate representing the number of Warrants represented by the surrendered
Warrant Certificate, if any, that shall not have been exercised also shall be
delivered to the Holder within such time.
<PAGE> 2
2. ADJUSTMENTS
A. ADJUSTMENTS. The Exercise Price and the number of
shares of Common Stock issuable upon exercise of each Warrant shall be subject
to adjustment from time to time as follows:
(1) STOCK DIVIDENDS; STOCK SPLITS; REVERSE STOCK
SPLITS; RECLASSIFICATIONS. In case the Company shall (i) pay a
dividend with respect to its capital stock in shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock, (iii) combine
its outstanding shares of Common Stock into a smaller number of shares
of any class of Common Stock or (iv) issue any shares of its capital
stock in a reclassification of the Common Stock, other than
elimination of par value, a change in par value, or a change from par
value to no par value (any one of which actions is herein referred to
as an "Adjustment Event"), the number of shares of Common Stock
purchasable upon exercise of each Warrant immediately prior to the
record date for such Adjustment Event shall be adjusted so that the
Holder shall thereafter be entitled to receive the number of shares of
Common Stock or other securities of the Company (such other securities
thereafter enjoying the rights of shares of Common Stock under this
Warrant Certificate) that such Holder would have owned or have been
entitled to receive after the happening of such Adjustment Event, had
such Warrant been exercised immediately prior to the happening of such
Adjustment Event or any record date with respect thereto. An
adjustment made pursuant to this Section 2A(1) shall become effective
immediately after the effective date of such Adjustment Event
retroactive to the record date, if any, for such Adjustment Event.
(2) ADJUSTMENT OF EXERCISE PRICE. Whenever the
number of shares of Common Stock purchasable upon the exercise of each
Warrant is adjusted pursuant to Section 2A(1), the Exercise Price for
each share of Common Stock payable upon exercise of each Warrant shall
be adjusted by multiplying such Exercise Price immediately prior to
such adjustment by a fraction, the numerator of which shall be the
number of shares of Common Stock purchasable upon the exercise of each
Warrant immediately prior to such adjustment, and the denominator of
which shall be the number of shares of Common Stock so purchasable
immediately thereafter.
B. NOTICE OF ADJUSTMENT. Whenever the number of shares
of Common Stock purchasable upon the exercise of each Warrant or the Exercise
Price is adjusted, as herein provided, the Company shall promptly notify the
Holder in writing (such writing referred to as an "Adjustment Notice") of such
adjustment or adjustments and shall deliver to such Holder a statement setting
forth the number of shares of Common Stock purchasable upon the exercise of
each Warrant and the Exercise Price after such adjustment, setting forth a
brief statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made.
-2-
<PAGE> 3
C. STATEMENT ON WARRANT CERTIFICATES. The form of this
Warrant Certificate need not be changed because of any change in the Exercise
Price or in the number or kind of shares purchasable upon the exercise of a
Warrant. However, the Company may at any time in its sole discretion make any
change in the form of the Warrant Certificate that it may deem appropriate and
that does not affect the substance thereof and any Warrant Certificate
thereafter issued, whether in exchange or substitution for any outstanding
Warrant Certificate or otherwise, may be in the form so changed.
D. FRACTIONAL INTEREST. The Company shall not be
required to issue fractional shares of Common Stock on the exercise of the
Warrants. The number of full shares of Common Stock which shall be issuable
upon such exercise shall be computed on the basis of the aggregate number of
whole shares of Common Stock purchasable on exercise of the Warrants so
presented. If any fraction of a share of Common Stock would, except for the
provisions of this Section 2D be issuable on the exercise of the Warrants (or
specified proportion thereof), the Company shall pay an amount in cash
calculated by it to be equal to the then fair value of one share of Common
Stock, as determined by the Board of Directors of the Company in good faith,
multiplied by such fraction computed to the nearest whole cent.
3. RESERVATION AND AUTHORIZATION OF COMMON STOCK
The Company covenants and agrees (a) that all shares of Common
Stock which may be issued upon the exercise of the Warrants represented by this
Warrant Certificate will, upon issuance, be validly issued, fully paid and
nonassessable and free of all transfer taxes, liens and charges with respect to
the issue thereof, (b) that during the Exercise Period, the Company will at all
times have authorized, and reserved for the purpose of issue or transfer upon
exercise of the Warrants evidenced by this Warrant Certificate, sufficient
shares of Common Stock to provide for the exercise of the Warrants represented
by this Warrant Certificate and (c) that the Company will take all such action
as may be necessary to ensure that the shares of Common Stock issuable upon the
exercise of the Warrants may be so issued without violation of any applicable
law or regulation, or any requirement of any securities exchange upon which any
capital stock of the Company may be listed.
4. NO VOTING RIGHTS
This Warrant Certificate shall not entitle the holder hereof
to any voting rights or other rights as a stockholder of the Company.
5. RESTRICTIONS ON TRANSFER
A. WARRANTS. This Warrant Certificate and the Warrants
it evidences are not transferrable directly or indirectly, in whole or in part,
except in the case of any such transfer which is in compliance with applicable
federal and state securities laws, including but not limited to, the Securities
Act of 1933, as amended the ("Securities Act"), and for which the Company
-3-
<PAGE> 4
is provided with an opinion of counsel to the Holder, reasonably satisfactory
to the Company, to the effect that such transfer is not in violation of any of
said securities laws.
B. COMMON STOCK. The shares of Common Stock issuable
upon exercise of the Warrants have not been registered under the Securities
Act, or under any applicable state securities laws, and Holder shall not offer
for sale, sell, transfer, pledge or otherwise hypothecate any such shares of
Common Stock except in accordance with the registration requirements of the
Securities Act and applicable state securities laws or upon delivery to the
Company of an opinion of legal counsel satisfactory to the Company that an
exemption from registration is available. Each certificate evidencing shares
of Common Stock issued pursuant to any exercise of the Warrants evidenced
hereby will bear a conspicuous restrictive legend worded substantially as
follows:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR UNDER ANY APPLICABLE
STATE SECURITIES LAWS, AND THEY CANNOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE HYPOTHECATED EXCEPT IN ACCORDANCE
WITH THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH STATE LAWS OR
UPON DELIVERY TO THIS CORPORATION OF AN OPINION OF LEGAL COUNSEL
SATISFACTORY TO THE CORPORATION THAT AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
6. CLOSING OF BOOKS
The Company will at no time close its transfer books against
the transfer of any Warrant or of any shares of Common Stock or other
securities issuable upon the exercise of any Warrant in any manner which
interferes with the timely exercise of the Warrants.
7. WARRANTS EXCHANGEABLE; LOSS, THEFT
This Warrant Certificate is exchangeable, upon the surrender
hereof by any Holder at the office or agency of the Company referred to in
Section 1, for new Warrant Certificates of like tenor representing in the
aggregate the right to subscribe for and purchase the number of shares of
Common Stock which may be subscribed for and purchased hereunder, each such new
Warrant to represent the right to subscribe and purchase such number of shares
of Common Stock as shall be designated by said holder hereof at the time of
such surrender. Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction or mutilation, or upon surrender or cancellation of
this Warrant Certificate, the Company will issue to the holder hereof a new
Warrant Certificate of like tenor, in lieu of this Warrant Certificate,
representing the right to subscribe for and purchase the number of shares of
Common Stock which may be subscribed for and purchased hereunder.
-4-
<PAGE> 5
8. MERGERS, CONSOLIDATIONS
If the Company shall merge or consolidate with another
corporation, the holder of this Warrant Certificate shall thereafter have the
right, upon exercise hereof and payment of the Exercise Price, to receive
solely the kind and amount of shares of stock (including, if applicable, Common
Stock), other securities, property or cash or any combination thereof
receivable by a holder of the number of shares of Common Stock for which this
Warrant might have been exercised immediately prior to such merger or
consolidation (assuming, if applicable, that the holder of such Common Stock
failed to exercise its rights of election, if any, as to the kind or amount of
shares of stock, other securities, property or cash or combination thereof
receivable upon such merger or consolidation).
9. REGISTRATION RIGHTS
A. DEFINITIONS. For the purposes of this Section 9, the
following terms have the meanings set forth below:
"WARRANTHOLDERS" means the Lenders which are issued warrants
to purchase Common Stock pursuant to Section 2.3 of the Loan and
Security Agreement.
"LOAN AND SECURITY AGREEMENT" means the Loan and Security
Agreement between the Company, Digicon Geophysical Corp., Digicon/GFS
Inc., Digicon Exploration Limited and Digicon Exploration, Ltd., as
borrowers, Soros Capital L.P., CCF Jupiter L.P. and Jupiter Management
Co., Inc., as lenders, and Jupiter Management Co., Inc., as agent.
"REGISTRABLE SECURITIES" means the shares of Common Stock
issued upon exercise of the Warrants.
"WARRANTS" means all warrants to purchase Common Stock issued
pursuant to Section 2.3 of the Loan and Security Agreement.
"LENDERS" shall have the meaning given such term in the Loan
and Security Agreement.
B. DEMAND REGISTRATION.
(1) On one occasion prior to July 26, 2001, if
the Holder requests in writing to register under the Securities Act
any of the shares of Registrable Securities owned by it (which request
shall (i) specify the number of shares of Registrable Securities
intended to be offered and sold, (ii) express such person's present
intent to offer such Registrable Securities for distribution, (iii)
describe the nature or method of the proposed distribution thereof and
(iv) contain the undertaking of such party to provide all such
information and materials and take all such action as may be required
or
-5-
<PAGE> 6
appropriate in order to permit the Company to comply with all
applicable requirements of the Securities and Exchange Commission (the
"SEC") and to obtain acceleration of the effective date of the
registration statement), the Company will use its reasonable efforts
to cause the offering of the shares of Registrable Securities so
specified in such request to be registered as soon as practicable
thereafter so as to permit the sale or other distribution by the
requesting party, and in connection therewith the Company will prepare
and file on the appropriate form (or, if more than one form may be
used, on such appropriate form as is selected by the Company) a
registration statement under the Securities Act to effect such
registration and permit the sale of the shares of Registrable
Securities by the Holder. Notwithstanding the foregoing, the Holder
may exercise its one demand registration right with respect to any
shares of Registrable Securities which are not held by the Holder
because of a failure of the Holder to have exercised Warrants in
connection with such shares, provided, however, that in any such
event, the written request of the Holder set forth above shall also
contain an undertaking to exercise, on or prior to the effective date
of the registration statement, Warrants in connection with shares of
Registrable Securities to be registered.
(2) In the event that the Holder, after demanding
registration pursuant to subsection (1) of this Section B, determines
for any reason not to proceed with a registration pursuant to this
Section B at any time before the registration statement in respect of
such registration has been declared effective by the SEC, and such
registration statement, if theretofore filed with SEC, is withdrawn
and the Holder agrees to bear all costs and expenses (including, but
not limited to, underwriting fees, registration, SEC and blue sky
filing fees, printing expenses, and fees and expenses of legal counsel
and accountants) incurred in connection therewith (except that the
Holder need not bear any costs or expenses of any proposed offering
that is withdrawn pursuant to Section D(7) hereof), then such
withdrawn registration shall not be counted for purposes of
determining whether the Holder has exercised its one demand
registration right pursuant to this Section B.
C. PARTICIPATION REGISTRATION.
(1) Subject to the limitations of subsection (2)
of this Section C, if at any time prior to July 26, 2001, the Company
shall propose the registration under the Securities Act of an
offering of Common Stock, the Company shall give written notice
as promptly as practicable of such proposed registration (if
practicable, at least 30 days in advance of the initial filing with
the SEC of the registration statement used in connection with such
proposed offering, and in no event later than 20 days in advance of
such initial filling date) to the Holder and will offer to include in
any such offering the shares ofRegistrable Securities owned by the
Holder (or obtainable by the Holder upon the exercise of the
Warrants), upon the same terms (including the method of distribution)
as all other shares of Common Stock being sold pursuant to such
offering of which the Company shall have given notice, as aforesaid.
-6-
<PAGE> 7
(2) Notwithstanding the obligations of the
Company pursuant to subsection (1) of this Section C, (i) the Company
shall not be required to give notice or to include such Registrable
Securities in any such registration if the proposed registration is
exclusively (A) a registration of an employee stock option or other
employee incentive compensation plan or of Common Stock issued or
issuable pursuant to any such plan, (B) Common Stock issued or
issuable pursuant to a dividend or interest reinvestment plan, or
other similar plan, or (C) a registration of securities proposed to be
issued in exchange for securities or assets of, or in connection with
a merger or consolidation with, another corporation; and (ii) the
Company may, in its sole discretion and without the consent of the
Holder, withdraw any such registration statement and abandon such
proposed offering, notwithstanding the Holder's request to participate
therein in accordance with this provision.
D. LIMITATIONS, CONDITIONS AND QUALIFICATIONS TO
OBLIGATIONS OF THE COMPANY UNDER REGISTRATION PROVISIONS. The obligation of
the Company to cause the Registrable Securities owned by the Holder to be
registered under the Securities Act pursuant hereto is subject to each of the
following limitations, conditions and qualifications:
(1) The Company shall not be obligated to file or
proceed with any registration statement pursuant to Section B hereof
(i) unless such registration is demanded by the Holder and other
Warrantholders in connection with an aggregate of not less than 51% of
the shares of Registrable Securities held or which may be acquired
upon exercise by all of the Warrantholders, (ii) within three months
of the effective date of another registration statement, (iii) if the
filing of the registration statement would require a "special audit"
(as defined below) of the Company's financial statements (unless the
Holder agrees to pay the cost of such special audit), (iv) during any
period (not to exceed three months) when the Company has previously
commenced and is proceeding with efforts with respect to an
underwritten public offering of its securities and in the judgment of
the managing underwriter thereof such requested filing would have a
material adverse effect on the contemplated offering or (v) if the
Company determines, in its reasonable judgment after consultation with
its principal investment banker, that such registration would
materially interfere with any financing, acquisition, corporate
reorganization or other material transaction involving the Company or
any of its affiliates contemplated by the Company's Board of
Directors; provided, however, that any such delays may not exceed 180
days in the aggregate during any period of 12 consecutive calendar
months. For purposes of this paragraph, the term "special audit"
shall mean an audit not at year's end, requiring an opinion of any
independent accountant.
(2) In the case of participation registration
pursuant to Section C hereof, if the managing underwriter of any
proposed registered offering advises that the inclusion in a
registration statement of some or all of the shares of Registrable
Securities sought to be registered by the Holder, together with shares
of Common Stock to be registered by the Company, creates a substantial
risk that the proceeds or price per share to be derived from such
public offering will be materially reduced or that the number of
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<PAGE> 8
shares of Common Stock (including the Registrable Securities) to be
registered is too large to be reasonably sold, then the shares of
Registrable Securities sought to be registered by the Holder (but not
the shares of Common Stock sought to be registered by the Company)
shall be reduced so that the total number of shares of Common Stock
(including the Registrable Securities) to be registered and sold in
such public offering does not exceed the number reasonably recommended
by such managing underwriter.
(3) The Holder, upon requesting registration,
shall provided the Company such information with respect to the shares
of Registrable Securities to be sold, the plans for the proposed
disposition thereof and such other information as shall, in the
opinion of counsel for the Company, be necessary to enable the Company
to include in the registration statement relating to the proposed
offering all material facts required to be disclosed with respect to
such prospective seller.
(4) The Company shall bear the cost of each
registration under the Securities Act, as well as the cost of any
registration and qualification under the blue sky laws of such states
as the Holder shall reasonably request, including but not limited to,
registration, SEC filing, National Association of Securities Dealers
and blue sky filing fees, printing expenses and fees and disbursements
of counsel and accountants for the Company; provided, however, that
the Holder shall pay (i) the underwriting fees and selling commissions
attributable to the shares of Registrable Securities (but not other
shares of Common Stock) offered and (ii) the fees and disbursements of
counsel for the Holder.
(5) The Company shall not be required to amend or
supplement such registration statement for more than nine months
following its effective date.
(6) The Company shall be entitled to postpone for
a reasonable period of time (not to exceed 30 days) the filing of any
registration statement otherwise required to be prepared and filed by
it pursuant to Section B if, at the time the Company receives a
request for such registration, the Company is engaged in any program
for the purchase of shares of its Common Stock.
(7) If the Company shall postpone the filing of a
registration statement pursuant to subsection (1)(iv) or (6) of this
Section D, the Holder shall have the right to withdraw the request for
registration by giving written notice to the Company within 30 days
after receipt of the notice of postponement and such withdrawn request
shall not be counted for purposes of determining the number of
registrations to which the Holder is entitled pursuant to Section B.
(8) In the event the Holder requests registration
pursuant to Section B hereof, (i) the offering or distribution of
Registrable Securities shall be pursuant to a firm commitment
underwriting, (ii) the managing underwriter shall be a nationally
recognized investment banking firm approved by the Company (such
approval not to be unreasonably
-8-
<PAGE> 9
withheld) and the Company will enter into an underwriting agreement
containing representations, warranties and agreements not
substantially different from those customarily made by an issuer in
underwriting agreements with respect to secondary distributions;
provided, however, that the Company will not be obligated to enter
into an agreement with respect to indemnification of the underwriters
materially less favorable to the Company than as set forth in Section
F below.
(9) The Company may require, as a condition to
fulfilling its obligations under this Section 9, the written
confirmation by the Holder and the underwriters to the effect that
such persons agree to be bound by the indemnification agreements
described in Section F(2) hereof.
(10) The Holder, if requested by the managing
underwriter with respect to an offering of Registrable Securities,
will agree not to sell publicly any shares of Common Stock held by it,
other than the shares of Registrable Securities so registered, for a
period of time (not to exceed 60 days) prior to and after the
effective date of the registration statement.
E. COMPANY OBLIGATIONS IN CONNECTION WITH REGISTRATIONS.
In connection with any registration of Registrable Securities undertaken by the
Company pursuant to this Section 9 and any registration statement filed in
connection therewith, the Company shall:
(1) furnish to the Holder or its underwriters
such number of copies of any prospectus (including any preliminary
prospectus or amended or supplemented prospectus) and such other
documents as the Holder may reasonably request in order to effect the
offering and sale of the Registrable Securities to be offered and sold
by such person, but such obligations shall survive only while the
Company is required to cause the registration statement to remain
effective pursuant to Section E(4) hereof;
(2) use its reasonable best efforts to qualify
the offering under applicable blue sky laws or such other state
securities laws as may be necessary or appropriate to enable the
Holder to offer and sell the Registrable Securities in the states
wherein such entity intends to offer such securities; provided,
however, that the Company shall not be obligated to qualify to do
business as a foreign corporation under the laws of any jurisdiction
wherein it is not then qualified or to file any general consent to
service of process;
(3) furnish to the Holder unlegended certificates
representing the shares of Registrable Securities theretofore owned by
such person that are sold pursuant to such registration, such
certificates to be furnished in such numbers and denominations as such
person may reasonably request;
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<PAGE> 10
(4) use its reasonable best efforts to cause the
registration statement to remain effective for nine months following
its effective date or such lesser period as the underwriters may
agreement;
(5) notify the Holder, promptly after if shall
receive notice thereof, of the time when such registration statement
has become effective or a supplement to any prospectus forming a part
of such registration statement has been filed;
(6) promptly notify the Holder of any request by
the SEC for the amending or supplementing of such registration
statement or prospectus or for additional information;
(7) prepare and file with the SEC, promptly upon
the request of the Holder, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel
for the Holder, is required under the Securities Act or the rules and
regulations thereunder in connection with the distribution of
Registrable Securities by the Holder;
(8) prepare and promptly file with the SEC, and
promptly notify the Holder of the filing of all amendments or
supplements to such registration statement or prospectus as may be
necessary to correct any statements therein or omissions therefrom,
if, at the time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event shall
have occurred as a result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they
were made, not misleading;
(9) advise the Holder, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any
stop order by the SEC suspending the effectiveness of such
registration statement or the initiation or threatening of any
proceeding for that purpose and promptly use its reasonable best
efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued;
(10) not file any amendment or supplement to such
registration statement or prospectus (i) unless a copy thereof shall
have been furnished to the Holder at least 24 hours prior to such
filing, and (ii) not file any such amendment or supplement in the
event the Holder shall have reasonably objected on the grounds that
such amendment or supplement does not comply in all material respects
with the requirements of the Securities Act or the rules and
regulations thereunder;
(11) at the request of the Holder, furnish on the
effective date of the registration statement, and, if such
registration includes an underwritten public offering, at the closing
provided for in the underwriting agreement: (i) opinions, dated such
respective dates, of the counsel representing the Company for the
purpose of such
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<PAGE> 11
registration, addressed to the underwriters, if any, and to the
Holder, covering such matters as such underwriters and the Holder may
reasonably request, in which opinion such counsel shall state, subject
to such qualifications as may be reasonably necessary under the
circumstances and without limiting the generality of the foregoing,
that (A) such registration statement has become effective under the
Securities Act; (B) to the best of such counsel's knowledge, no stop
order suspending the effectiveness thereof has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act; (C) the registration statement
and each amendment or supplement thereto comply as to form in all
material respects with the requirements of the Securities Act and
applicable rules and regulations of the SEC thereunder (except that
such counsel need express no opinion as to financial statements or
other reports of experts contained therein); (D) to the best of such
counsel's knowledge, neither the registration statement nor any
amendment nor supplement thereto contains any untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein in the light of
the circumstances in which they were made, not misleading (except that
such counsel need express no opinion as to financial statements or
other reports of experts contained therein); (E) the descriptions in
the registration statement or any amendment or supplement thereto of
legal and governmental proceedings and contracts are accurate and
fairly present the information required to be shown; (F) to the best
of such counsel's knowledge, there are no legal or governmental
proceedings, pending or threatened, required to be described in the
registration statement or any amendment or supplement thereto which
are not described as required; and (G) to the best of such counsel's
knowledge, there are no contracts or documents or instruments of the
character required to be described in the registration statement or
amendment or supplement thereto or to be filed as exhibits to the
registration statement, which are not described or filed as required;
and (ii) letters, dated such respective dates, from the independent
certified public accountants of the Company, addressed to the
underwriters, if any, and to the Holder, covering such matters as such
underwriters and the Holder may reasonably request, in which letters
such accountants shall state, subject to such qualifications as may be
reasonably necessary under the circumstances (without limiting the
generality of the foregoing), that they are independent certified
public accountants within the meaning of the Securities Act with
respect to the Company and that in the opinion of such accountants the
financial statements and other financial data of the Company included
in the registration statement or any amendment or supplement thereto
comply in all material respects with the applicable accounting
requirements of the Securities Act; and
(12) make available to the Holder, each
underwriter for the Holder and their respective attorneys all such
information and documents as they may reasonably request in order to
verify the accuracy and completeness of statements contained in such
registration statement; provided, however, that any underwriter or
counsel for such underwriter shall first agree in writing with the
Company that such information and documents that are clearly
identified to such underwriter or counsel as being confidential will
be keep confidential and will be used only for the purpose of
verifying the accuracy
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<PAGE> 12
and completeness of statements contained in such registration
statement (subject to reasonable exceptions including, but not limited
to, disclosure or information required by law).
F. INDEMNIFICATION.
(1) In the case of each registration effected by
the Company pursuant to this Section 9, the Company agrees to
indemnify and hold harmless the Holder, its officers and directors,
each underwriter of the shares of Registrable Securities so registered
and each person who controls the Holder or any such underwriter within
the meaning of Section 15 of the Securities Act, against any and all
losses, claims, damages or liabilities to which they or any of them
may become subject under the Securities Act or any other statute or
common law, including any amount paid in settlement of any litigation,
commenced or threatened, if such settlement is effected with the
written consent of the Company, and to reimburse them for any
reasonable legal or other reasonable expenses incurred by them in
connection with the investigation of any claims and defense of any
actions (subject to subsection (3) of this Section F), insofar as any
such losses, claims, damages, liabilities or actions arise out of or
are based upon: any untrue statement of a material fact contained in
the registration statement, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto,
or in any blue sky application, or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that the indemnification agreement contained in this
subsection (1) shall not (i) apply to such losses, claims, damages,
liabilities or actions arising out of, or based upon, any such untrue
statement or alleged untrue statement, or any such omission or alleged
omission, if such statement or omission was made in reliance upon and
in conformity with information furnished to the Company in writing by
the Holder or such underwriter claiming rights of indemnification
pursuant to this Section F for use in connection with the preparation
of the registration statement or any preliminary prospectus or
prospectus contained in the registration statement or any such
amendment thereof or supplement thereto, or (ii) inure to the benefit
of any underwriter (or to the benefit of any person controlling such
underwriter) from whom the person asserting any such losses, claims,
damages, expenses or liabilities purchased the securities which are
the subject thereof, if such underwriter failed to send or give a copy
of the final prospectus, as then amended or supplemented, to such
person and if the untrue statement or omission alleged had been
corrected in such final prospectus.
(2) In the case of each registration effected by
the Company pursuant to this Section 9, the Holder shall be obligated,
and shall cause each underwriter of the shares of Registrable
Securities to be registered on behalf of such person (the Holder and
such underwriters being referred to severally in this subsection (2)
as the "indemnifying person") to be obligated in the same manner and
to the same extent as set forth in subsection (1) of this Section F,
to indemnify and hold harmless the Company and each person, if any,
who controls the Company within the meaning of Section 15 of the
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<PAGE> 13
Securities Act, its directors and those officers of the Company who
shall have signed any such registration statement, with respect to any
statement or alleged untrue statement in, or omission or alleged
omission from, such registration statement or any post-effective
amendment thereof or any preliminary prospectus or final prospectus
(as amended or supplemented, if amended or supplemented as aforesaid)
contained in such registration statement, if such statement or
omission was made in reliance upon and in conformity with information
furnished in writing to the Company (except if such information
theretofore had been corrected and, as corrected, provided to the
Company) by such indemnifying person for use in connection with the
preparation of such registration statement or any preliminary
prospectus or final prospectus contained in such registration
statement or any such amendment thereof or supplement thereto;
provided, however, that the liability of the Holder hereunder shall be
limited to the proceeds received by the Holder from the sale of
Registrable Securities covered by such registration statement,
amendment, supplement, prospectus or blue sky application, as the case
may be.
(3) Each person indemnified pursuant to this
Section F will, promptly after its receipt of written notice of the
commencement of any action against such indemnified person in respect
of which indemnity may be sought from an indemnifying person on
account of an indemnity agreement contained in this Section F, notify
the indemnifying person in writing of the commencement thereof. The
omission of any indemnified person so to notify an indemnifying person
of the commencement of any such action shall relieve the indemnifying
person from any liability in respect of such action which it may have
to such indemnified person on account of the indemnity agreement
contained in this Section F, but shall not relieve the indemnifying
person from any other liability which it may have to such indemnified
person. If any such action shall be brought against any indemnified
person and it shall notify an indemnifying person of the commencement
thereof, the indemnifying person will be entitled to participate
therein and, to the extent it may desire, jointly with any other
indemnifying person similarly notified, to assume the defense thereof
with counsel satisfactory to such indemnified person, and after notice
from the indemnifying person to such indemnified person of its
election so to assume the defense thereof, the indemnifying person
will not be liable to such indemnified person under this Section F for
any legal or other expenses subsequently incurred by such indemnified
person in connection with the defense thereof other than reasonable
costs of investigation unless (i) the indemnified party shall have
employed counsel in an action in which the indemnified party and
indemnifying party are both defendants and there is a conflict of
interest between such parties that would prevent counsel from
adequately representing both parties, (ii) the indemnifying party
shall not have employed counsel satisfactory within the exercise of
reasonable judgment to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the
commencement of the action or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. The undertaking contained in this
Section F shall be in addition to any liabilities which the
indemnifying person may have pursuant to law.
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<PAGE> 14
10. MISCELLANEOUS.
A. GOVERNING LAW. This Agreement shall be governed in
all respects by the internal laws of the State of New York.
B. NO TRANSFER. This Warrant Certificate and the rights
contemplated herein are not transferable and shall not inure to the benefit of
any person other than the Holder.
C. ENTIRE AGREEMENT; AMENDMENT. This Agreement
constitutes the full and entire understanding and agreement between the parties
with regard to the subject hereof. This Agreement, or any provision hereof, may
be amended, waived, discharged or terminated upon the written consent of the
Company and the Holder.
D. NOTICES, ETC. All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed by
registered or certified mail, postage prepaid, or otherwise delivered by hand
or by messenger including Federal Express or similar courier service, addressed
(a) if to the Holder, to the address of the Holder appearing on the books of
the Company or at such other address as the Holder shall have furnished to the
Company in writing, or (b) if to the Company, to Digicon Inc., 3701 Kirby
Drive, Suite 112, Houston, Texas 77098, Attn: President, or at such other
address as the Company shall have furnished to the Holder in writing.
Each such notice or other communication shall for all purposes
of this Agreement be treated as effective upon receipt.
E. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be enforceable against the parties
actually executing such counterparts, and all of which together shall
constitute one instrument.
F. SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision.
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<PAGE> 15
G. TITLES AND SUBTITLES. The titles and subtitles used
in this Agreement are used for convenience only and are not considered in
construing or interpreting this Agreement.
Dated: January 30, 1995
DIGICON INC.
By:/s/ RICHARD W. MCNAIRY
------------------------------------
Name: Richard W. McNairy
Title: Vice President and Chief Financial
Officer
Attest:
/s/ AMY MATULA
- -------------------------------
Amy Matula, Assistant Secretary
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<PAGE> 16
[FORM OF ELECTION TO PURCHASE]
(To be executed upon exercise of Warrant.)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _____ shares of Common
Stock and herewith tenders in payment for such shares a certified check or bank
draft payable to the order of Digicon Inc. in the amount of $__________, all in
accordance with the terms hereof. The undersigned requests that a certificate
for such shares be registered in the name of
______________________________________________________________ whose address is
______________________________________________________ and that such
certificate (or any payment in lieu thereof) be delivered to
________________________ whose address is ____________________________________.
Dated:____________________ _______________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant.)
<PAGE> 1
EXHIBIT 10-C
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ARE
SUBJECT TO CERTAIN RESTRICTIONS, CONTAINED IN SECTION 5 HEREOF, WITH
RESPECT TO THEIR TRANSFER.
WARRANT TO PURCHASE SHARES OF COMMON STOCK OF
DIGICON INC.
NO. W-3 42,000 WARRANTS
This Warrant Certificate certifies that JUPITER MANAGEMENT CO., INC.
("Holder") is the holder of 42,000 Warrants (subject to adjustment as provided
herein), each of which represents the right to subscribe for and purchase from
Digicon Inc., a Delaware corporation (the "Company"), one share of the common
stock, par value $.01 per share, of the Company (the common stock, including
any stock into which it may be changed, reclassified or converted, is herein
referred to as the "Common Stock") at the purchase price (the "Exercise Price")
of $4.50 per share (subject to adjustment as provided herein).
The Warrants represented by this Warrant Certificate are subject to
the following provisions, terms and conditions:
1. EXERCISE OF WARRANTS
EXERCISE OF WARRANTS. The Warrants may be exercised by the
Holder, in whole or in part (but not as to a fractional share of Common Stock),
by surrender of this Warrant Certificate at the principal office of the Company
at 3701 Kirby Drive, Suite 112, Houston, Texas 77098 (or such other office or
agency of the Company as may be designated by notice in writing to the Holder
at the address of such Holder appearing on the books of the Company) with the
appropriate form attached hereto duly exercised, at any time within the period
beginning on the date upon which the Company's shareholders approve the
issuance of the Warrants as required by the American Stock Exchange and
expiring at 5:00 p.m. Houston, Texas time, on July 26, 1999 (the "Exercise
Period"), and by payment to the Company by certified check or bank draft of the
Exercise Price for such shares. The Company agrees that the shares of Common
Stock so purchased shall be and are deemed to be issued to the Holder as the
record owner of such shares of Common Stock as of the close of business on the
date on which the Warrant Certificate shall have been surrendered and payment
made for such shares of Common Stock. Certificates representing the shares of
Common Stock so purchased, together with any cash for fractional shares of
Common Stock paid pursuant to Section 2D, shall be delivered to the Holder
promptly, and in no event later than ten (10) days after the Warrants shall
have been so exercised, and, unless the Warrants have expired, a new Warrant
Certificate representing the number of Warrants represented by the surrendered
Warrant Certificate, if any, that shall not have been exercised also shall be
delivered to the Holder within such time.
<PAGE> 2
2. ADJUSTMENTS
A. ADJUSTMENTS. The Exercise Price and the number of
shares of Common Stock issuable upon exercise of each Warrant shall be subject
to adjustment from time to time as follows:
(1) STOCK DIVIDENDS; STOCK SPLITS; REVERSE STOCK
SPLITS; RECLASSIFICATIONS. In case the Company shall (i) pay a
dividend with respect to its capital stock in shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock, (iii) combine
its outstanding shares of Common Stock into a smaller number of shares
of any class of Common Stock or (iv) issue any shares of its capital
stock in a reclassification of the Common Stock, other than
elimination of par value, a change in par value, or a change from par
value to no par value (any one of which actions is herein referred to
as an "Adjustment Event"), the number of shares of Common Stock
purchasable upon exercise of each Warrant immediately prior to the
record date for such Adjustment Event shall be adjusted so that the
Holder shall thereafter be entitled to receive the number of shares of
Common Stock or other securities of the Company (such other securities
thereafter enjoying the rights of shares of Common Stock under this
Warrant Certificate) that such Holder would have owned or have been
entitled to receive after the happening of such Adjustment Event, had
such Warrant been exercised immediately prior to the happening of such
Adjustment Event or any record date with respect thereto. An
adjustment made pursuant to this Section 2A(1) shall become effective
immediately after the effective date of such Adjustment Event
retroactive to the record date, if any, for such Adjustment Event.
(2) ADJUSTMENT OF EXERCISE PRICE. Whenever the
number of shares of Common Stock purchasable upon the exercise of each
Warrant is adjusted pursuant to Section 2A(1), the Exercise Price for
each share of Common Stock payable upon exercise of each Warrant shall
be adjusted by multiplying such Exercise Price immediately prior to
such adjustment by a fraction, the numerator of which shall be the
number of shares of Common Stock purchasable upon the exercise of each
Warrant immediately prior to such adjustment, and the denominator of
which shall be the number of shares of Common Stock so purchasable
immediately thereafter.
B. NOTICE OF ADJUSTMENT. Whenever the number of shares
of Common Stock purchasable upon the exercise of each Warrant or the Exercise
Price is adjusted, as herein provided, the Company shall promptly notify the
Holder in writing (such writing referred to as an "Adjustment Notice") of such
adjustment or adjustments and shall deliver to such Holder a statement setting
forth the number of shares of Common Stock purchasable upon the exercise of
each Warrant and the Exercise Price after such adjustment, setting forth a
brief statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made.
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<PAGE> 3
C. STATEMENT ON WARRANT CERTIFICATES. The form of this
Warrant Certificate need not be changed because of any change in the Exercise
Price or in the number or kind of shares purchasable upon the exercise of a
Warrant. However, the Company may at any time in its sole discretion make any
change in the form of the Warrant Certificate that it may deem appropriate and
that does not affect the substance thereof and any Warrant Certificate
thereafter issued, whether in exchange or substitution for any outstanding
Warrant Certificate or otherwise, may be in the form so changed.
D. FRACTIONAL INTEREST. The Company shall not be
required to issue fractional shares of Common Stock on the exercise of the
Warrants. The number of full shares of Common Stock which shall be issuable
upon such exercise shall be computed on the basis of the aggregate number of
whole shares of Common Stock purchasable on exercise of the Warrants so
presented. If any fraction of a share of Common Stock would, except for the
provisions of this Section 2D be issuable on the exercise of the Warrants (or
specified proportion thereof), the Company shall pay an amount in cash
calculated by it to be equal to the then fair value of one share of Common
Stock, as determined by the Board of Directors of the Company in good faith,
multiplied by such fraction computed to the nearest whole cent.
3. RESERVATION AND AUTHORIZATION OF COMMON STOCK
The Company covenants and agrees (a) that all shares of Common
Stock which may be issued upon the exercise of the Warrants represented by this
Warrant Certificate will, upon issuance, be validly issued, fully paid and
nonassessable and free of all transfer taxes, liens and charges with respect to
the issue thereof, (b) that during the Exercise Period, the Company will at all
times have authorized, and reserved for the purpose of issue or transfer upon
exercise of the Warrants evidenced by this Warrant Certificate, sufficient
shares of Common Stock to provide for the exercise of the Warrants represented
by this Warrant Certificate and (c) that the Company will take all such action
as may be necessary to ensure that the shares of Common Stock issuable upon the
exercise of the Warrants may be so issued without violation of any applicable
law or regulation, or any requirement of any securities exchange upon which any
capital stock of the Company may be listed.
4. NO VOTING RIGHTS
This Warrant Certificate shall not entitle the holder hereof
to any voting rights or other rights as a stockholder of the Company.
5. RESTRICTIONS ON TRANSFER
A. WARRANTS. This Warrant Certificate and the Warrants
it evidences are not transferrable directly or indirectly, in whole or in part,
except in the case of any such transfer which is in compliance with applicable
federal and state securities laws, including but not limited to, the Securities
Act of 1933, as amended the ("Securities Act"), and for which the Company
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<PAGE> 4
is provided with an opinion of counsel to the Holder, reasonably satisfactory
to the Company, to the effect that such transfer is not in violation of any of
said securities laws.
B. COMMON STOCK. The shares of Common Stock issuable
upon exercise of the Warrants have not been registered under the Securities
Act, or under any applicable state securities laws, and Holder shall not offer
for sale, sell, transfer, pledge or otherwise hypothecate any such shares of
Common Stock except in accordance with the registration requirements of the
Securities Act and applicable state securities laws or upon delivery to the
Company of an opinion of legal counsel satisfactory to the Company that an
exemption from registration is available. Each certificate evidencing shares
of Common Stock issued pursuant to any exercise of the Warrants evidenced
hereby will bear a conspicuous restrictive legend worded substantially as
follows:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR UNDER ANY APPLICABLE
STATE SECURITIES LAWS, AND THEY CANNOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE HYPOTHECATED EXCEPT IN ACCORDANCE
WITH THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH STATE LAWS OR
UPON DELIVERY TO THIS CORPORATION OF AN OPINION OF LEGAL COUNSEL
SATISFACTORY TO THE CORPORATION THAT AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
6. CLOSING OF BOOKS
The Company will at no time close its transfer books against
the transfer of any Warrant or of any shares of Common Stock or other
securities issuable upon the exercise of any Warrant in any manner which
interferes with the timely exercise of the Warrants.
7. WARRANTS EXCHANGEABLE; LOSS, THEFT
This Warrant Certificate is exchangeable, upon the surrender
hereof by any Holder at the office or agency of the Company referred to in
Section 1, for new Warrant Certificates of like tenor representing in the
aggregate the right to subscribe for and purchase the number of shares of
Common Stock which may be subscribed for and purchased hereunder, each such new
Warrant to represent the right to subscribe and purchase such number of shares
of Common Stock as shall be designated by said holder hereof at the time of
such surrender. Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction or mutilation, or upon surrender or cancellation of
this Warrant Certificate, the Company will issue to the holder hereof a new
Warrant Certificate of like tenor, in lieu of this Warrant Certificate,
representing the right to subscribe for and purchase the number of shares of
Common Stock which may be subscribed for and purchased hereunder.
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<PAGE> 5
8. MERGERS, CONSOLIDATIONS
If the Company shall merge or consolidate with another
corporation, the holder of this Warrant Certificate shall thereafter have the
right, upon exercise hereof and payment of the Exercise Price, to receive
solely the kind and amount of shares of stock (including, if applicable, Common
Stock), other securities, property or cash or any combination thereof
receivable by a holder of the number of shares of Common Stock for which this
Warrant might have been exercised immediately prior to such merger or
consolidation (assuming, if applicable, that the holder of such Common Stock
failed to exercise its rights of election, if any, as to the kind or amount of
shares of stock, other securities, property or cash or combination thereof
receivable upon such merger or consolidation).
9. REGISTRATION RIGHTS
A. DEFINITIONS. For the purposes of this Section 9, the
following terms have the meanings set forth below:
"WARRANTHOLDERS" means the Lenders which are issued warrants
to purchase Common Stock pursuant to Section 2.3 of the Loan and
Security Agreement.
"LOAN AND SECURITY AGREEMENT" means the Loan and Security
Agreement between the Company, Digicon Geophysical Corp., Digicon/GFS
Inc., Digicon Exploration Limited and Digicon Exploration, Ltd., as
borrowers, Soros Capital L.P., CCF Jupiter L.P. and Jupiter Management
Co., Inc., as lenders, and Jupiter Management Co., Inc., as agent.
"REGISTRABLE SECURITIES" means the shares of Common Stock
issued upon exercise of the Warrants.
"WARRANTS" means all warrants to purchase Common Stock issued
pursuant to Section 2.3 of the Loan and Security Agreement.
"LENDERS" shall have the meaning given such term in the Loan
and Security Agreement.
B. DEMAND REGISTRATION.
(1) On one occasion prior to July 26, 2001, if
the Holder requests in writing to register under the Securities Act
any of the shares of Registrable Securities owned by it (which request
shall (i) specify the number of shares of Registrable Securities
intended to be offered and sold, (ii) express such person's present
intent to offer such Registrable Securities for distribution, (iii)
describe the nature or method of the proposed distribution thereof and
(iv) contain the undertaking of such party to provide all such
information and materials and take all such action as may be required
or
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<PAGE> 6
appropriate in order to permit the Company to comply with all
applicable requirements of the Securities and Exchange Commission (the
"SEC") and to obtain acceleration of the effective date of the
registration statement), the Company will use its reasonable efforts
to cause the offering of the shares of Registrable Securities so
specified in such request to be registered as soon as practicable
thereafter so as to permit the sale or other distribution by the
requesting party, and in connection therewith the Company will prepare
and file on the appropriate form (or, if more than one form may be
used, on such appropriate form as is selected by the Company) a
registration statement under the Securities Act to effect such
registration and permit the sale of the shares of Registrable
Securities by the Holder. Notwithstanding the foregoing, the Holder
may exercise its one demand registration right with respect to any
shares of Registrable Securities which are not held by the Holder
because of a failure of the Holder to have exercised Warrants in
connection with such shares, provided, however, that in any such
event, the written request of the Holder set forth above shall also
contain an undertaking to exercise, on or prior to the effective date
of the registration statement, Warrants in connection with shares of
Registrable Securities to be registered.
(2) In the event that the Holder, after demanding
registration pursuant to subsection (1) of this Section B, determines
for any reason not to proceed with a registration pursuant to this
Section B at any time before the registration statement in respect of
such registration has been declared effective by the SEC, and such
registration statement, if theretofore filed with SEC, is withdrawn
and the Holder agrees to bear all costs and expenses (including, but
not limited to, underwriting fees, registration, SEC and blue sky
filing fees, printing expenses, and fees and expenses of legal counsel
and accountants) incurred in connection therewith (except that the
Holder need not bear any costs or expenses of any proposed offering
that is withdrawn pursuant to Section D(7) hereof), then such
withdrawn registration shall not be counted for purposes of
determining whether the Holder has exercised its one demand
registration right pursuant to this Section B.
C. PARTICIPATION REGISTRATION.
(1) Subject to the limitations of subsection (2)
of this Section C, if at any time prior to July 26, 2001, the Company
shall propose the registration under the Securities Act of an offering
of Common Stock, the Company shall give written notice as promptly as
practicable of such proposed registration (if practicable, at least 30
days in advance of the initial filing with the SEC of the registration
statement used in connection with such proposed offering, and in no
event later than 20 days in advance of such initial filling date) to
the Holder and will offer to include in any such offering the shares
of Registrable Securities owned by the Holder (or obtainable by the
Holder upon the exercise of the Warrants), upon the same terms
(including the method of distribution) as all other shares of Common
Stock being sold pursuant to such offering of which the Company shall
have given notice, as aforesaid.
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<PAGE> 7
(2) Notwithstanding the obligations of the
Company pursuant to subsection (1) of this Section C, (i) the Company
shall not be required to give notice or to include such Registrable
Securities in any such registration if the proposed registration is
exclusively (A) a registration of an employee stock option or other
employee incentive compensation plan or of Common Stock issued or
issuable pursuant to any such plan, (B) Common Stock issued or
issuable pursuant to a dividend or interest reinvestment plan, or
other similar plan, or (C) a registration of securities proposed to be
issued in exchange for securities or assets of, or in connection with
a merger or consolidation with, another corporation; and (ii) the
Company may, in its sole discretion and without the consent of the
Holder, withdraw any such registration statement and abandon such
proposed offering, notwithstanding the Holder's request to participate
therein in accordance with this provision.
D. LIMITATIONS, CONDITIONS AND QUALIFICATIONS TO
OBLIGATIONS OF THE COMPANY UNDER REGISTRATION PROVISIONS. The obligation of
the Company to cause the Registrable Securities owned by the Holder to be
registered under the Securities Act pursuant hereto is subject to each of the
following limitations, conditions and qualifications:
(1) The Company shall not be obligated to file or
proceed with any registration statement pursuant to Section B hereof
(i) unless such registration is demanded by the Holder and other
Warrantholders in connection with an aggregate of not less than 51% of
the shares of Registrable Securities held or which may be acquired
upon exercise by all of the Warrantholders, (ii) within three months
of the effective date of another registration statement, (iii) if the
filing of the registration statement would require a "special audit"
(as defined below) of the Company's financial statements (unless the
Holder agrees to pay the cost of such special audit), (iv) during any
period (not to exceed three months) when the Company has previously
commenced and is proceeding with efforts with respect to an
underwritten public offering of its securities and in the judgment of
the managing underwriter thereof such requested filing would have a
material adverse effect on the contemplated offering or (v) if the
Company determines, in its reasonable judgment after consultation with
its principal investment banker, that such registration would
materially interfere with any financing, acquisition, corporate
reorganization or other material transaction involving the Company or
any of its affiliates contemplated by the Company's Board of
Directors; provided, however, that any such delays may not exceed 180
days in the aggregate during any period of 12 consecutive calendar
months. For purposes of this paragraph, the term "special audit"
shall mean an audit not at year's end, requiring an opinion of any
independent accountant.
(2) In the case of participation registration
pursuant to Section C hereof, if the managing underwriter of any
proposed registered offering advises that the inclusion in a
registration statement of some or all of the shares of Registrable
Securities sought to be registered by the Holder, together with shares
of Common Stock to be registered by the Company, creates a substantial
risk that the proceeds or price per share to be derived from such
public offering will be materially reduced or that the number of
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<PAGE> 8
shares of Common Stock (including the Registrable Securities) to be
registered is too large to be reasonably sold, then the shares of
Registrable Securities sought to be registered by the Holder (but not
the shares of Common Stock sought to be registered by the Company)
shall be reduced so that the total number of shares of Common Stock
(including the Registrable Securities) to be registered and sold in
such public offering does not exceed the number reasonably recommended
by such managing underwriter.
(3) The Holder, upon requesting registration,
shall provided the Company such information with respect to the shares
of Registrable Securities to be sold, the plans for the proposed
disposition thereof and such other information as shall, in the
opinion of counsel for the Company, be necessary to enable the Company
to include in the registration statement relating to the proposed
offering all material facts required to be disclosed with respect to
such prospective seller.
(4) The Company shall bear the cost of each
registration under the Securities Act, as well as the cost of any
registration and qualification under the blue sky laws of such states
as the Holder shall reasonably request, including but not limited to,
registration, SEC filing, National Association of Securities Dealers
and blue sky filing fees, printing expenses and fees and disbursements
of counsel and accountants for the Company; provided, however, that
the Holder shall pay (i) the underwriting fees and selling commissions
attributable to the shares of Registrable Securities (but not other
shares of Common Stock) offered and (ii) the fees and disbursements of
counsel for the Holder.
(5) The Company shall not be required to amend or
supplement such registration statement for more than nine months
following its effective date.
(6) The Company shall be entitled to postpone for
a reasonable period of time (not to exceed 30 days) the filing of any
registration statement otherwise required to be prepared and filed by
it pursuant to Section B if, at the time the Company receives a
request for such registration, the Company is engaged in any program
for the purchase of shares of its Common Stock.
(7) If the Company shall postpone the filing of a
registration statement pursuant to subsection (1)(iv) or (6) of this
Section D, the Holder shall have the right to withdraw the request for
registration by giving written notice to the Company within 30 days
after receipt of the notice of postponement and such withdrawn request
shall not be counted for purposes of determining the number of
registrations to which the Holder is entitled pursuant to Section B.
(8) In the event the Holder requests registration
pursuant to Section B hereof, (i) the offering or distribution of
Registrable Securities shall be pursuant to a firm commitment
underwriting, (ii) the managing underwriter shall be a nationally
recognized investment banking firm approved by the Company (such
approval not to be unreasonably
-8-
<PAGE> 9
withheld) and the Company will enter into an underwriting agreement
containing representations, warranties and agreements not
substantially different from those customarily made by an issuer in
underwriting agreements with respect to secondary distributions;
provided, however, that the Company will not be obligated to enter
into an agreement with respect to indemnification of the underwriters
materially less favorable to the Company than as set forth in Section
F below.
(9) The Company may require, as a condition to
fulfilling its obligations under this Section 9, the written
confirmation by the Holder and the underwriters to the effect that
such persons agree to be bound by the indemnification agreements
described in Section F(2) hereof.
(10) The Holder, if requested by the managing
underwriter with respect to an offering of Registrable Securities,
will agree not to sell publicly any shares of Common Stock held by it,
other than the shares of Registrable Securities so registered, for a
period of time (not to exceed 60 days) prior to and after the
effective date of the registration statement.
E. COMPANY OBLIGATIONS IN CONNECTION WITH REGISTRATIONS.
In connection with any registration of Registrable Securities undertaken by the
Company pursuant to this Section 9 and any registration statement filed in
connection therewith, the Company shall:
(1) furnish to the Holder or its underwriters
such number of copies of any prospectus (including any preliminary
prospectus or amended or supplemented prospectus) and such other
documents as the Holder may reasonably request in order to effect the
offering and sale of the Registrable Securities to be offered and sold
by such person, but such obligations shall survive only while the
Company is required to cause the registration statement to remain
effective pursuant to Section E(4) hereof;
(2) use its reasonable best efforts to qualify
the offering under applicable blue sky laws or such other state
securities laws as may be necessary or appropriate to enable the
Holder to offer and sell the Registrable Securities in the states
wherein such entity intends to offer such securities; provided,
however, that the Company shall not be obligated to qualify to do
business as a foreign corporation under the laws of any jurisdiction
wherein it is not then qualified or to file any general consent to
service of process;
(3) furnish to the Holder unlegended certificates
representing the shares of Registrable Securities theretofore owned by
such person that are sold pursuant to such registration, such
certificates to be furnished in such numbers and denominations as such
person may reasonably request;
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<PAGE> 10
(4) use its reasonable best efforts to cause the
registration statement to remain effective for nine months following
its effective date or such lesser period as the underwriters may
agreement;
(5) notify the Holder, promptly after if shall
receive notice thereof, of the time when such registration statement
has become effective or a supplement to any prospectus forming a part
of such registration statement has been filed;
(6) promptly notify the Holder of any request by
the SEC for the amending or supplementing of such registration
statement or prospectus or for additional information;
(7) prepare and file with the SEC, promptly upon
the request of the Holder, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel
for the Holder, is required under the Securities Act or the rules and
regulations thereunder in connection with the distribution of
Registrable Securities by the Holder;
(8) prepare and promptly file with the SEC, and
promptly notify the Holder of the filing of all amendments or
supplements to such registration statement or prospectus as may be
necessary to correct any statements therein or omissions therefrom,
if, at the time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event shall
have occurred as a result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they
were made, not misleading;
(9) advise the Holder, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any
stop order by the SEC suspending the effectiveness of such
registration statement or the initiation or threatening of any
proceeding for that purpose and promptly use its reasonable best
efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued;
(10) not file any amendment or supplement to such
registration statement or prospectus (i) unless a copy thereof shall
have been furnished to the Holder at least 24 hours prior to such
filing, and (ii) not file any such amendment or supplement in the
event the Holder shall have reasonably objected on the grounds that
such amendment or supplement does not comply in all material respects
with the requirements of the Securities Act or the rules and
regulations thereunder;
(11) at the request of the Holder, furnish on the
effective date of the registration statement, and, if such
registration includes an underwritten public offering, at the closing
provided for in the underwriting agreement: (i) opinions, dated such
respective dates, of the counsel representing the Company for the
purpose of such
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<PAGE> 11
registration, addressed to the underwriters, if any, and to the
Holder, covering such matters as such underwriters and the Holder may
reasonably request, in which opinion such counsel shall state, subject
to such qualifications as may be reasonably necessary under the
circumstances and without limiting the generality of the foregoing,
that (A) such registration statement has become effective under the
Securities Act; (B) to the best of such counsel's knowledge, no stop
order suspending the effectiveness thereof has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act; (C) the registration statement
and each amendment or supplement thereto comply as to form in all
material respects with the requirements of the Securities Act and
applicable rules and regulations of the SEC thereunder (except that
such counsel need express no opinion as to financial statements or
other reports of experts contained therein); (D) to the best of such
counsel's knowledge, neither the registration statement nor any
amendment nor supplement thereto contains any untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein in the light of
the circumstances in which they were made, not misleading (except that
such counsel need express no opinion as to financial statements or
other reports of experts contained therein); (E) the descriptions in
the registration statement or any amendment or supplement thereto of
legal and governmental proceedings and contracts are accurate and
fairly present the information required to be shown; (F) to the best
of such counsel's knowledge, there are no legal or governmental
proceedings, pending or threatened, required to be described in the
registration statement or any amendment or supplement thereto which
are not described as required; and (G) to the best of such counsel's
knowledge, there are no contracts or documents or instruments of the
character required to be described in the registration statement or
amendment or supplement thereto or to be filed as exhibits to the
registration statement, which are not described or filed as required;
and (ii) letters, dated such respective dates, from the independent
certified public accountants of the Company, addressed to the
underwriters, if any, and to the Holder, covering such matters as such
underwriters and the Holder may reasonably request, in which letters
such accountants shall state, subject to such qualifications as may be
reasonably necessary under the circumstances (without limiting the
generality of the foregoing), that they are independent certified
public accountants within the meaning of the Securities Act with
respect to the Company and that in the opinion of such accountants the
financial statements and other financial data of the Company included
in the registration statement or any amendment or supplement thereto
comply in all material respects with the applicable accounting
requirements of the Securities Act; and
(12) make available to the Holder, each
underwriter for the Holder and their respective attorneys all such
information and documents as they may reasonably request in order to
verify the accuracy and completeness of statements contained in such
registration statement; provided, however, that any underwriter or
counsel for such underwriter shall first agree in writing with the
Company that such information and documents that are clearly
identified to such underwriter or counsel as being confidential will
be keep confidential and will be used only for the purpose of
verifying the accuracy
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<PAGE> 12
and completeness of statements contained in such registration
statement (subject to reasonable exceptions including, but not limited
to, disclosure or information required by law).
F. INDEMNIFICATION.
(1) In the case of each registration effected by
the Company pursuant to this Section 9, the Company agrees to
indemnify and hold harmless the Holder, its officers and directors,
each underwriter of the shares of Registrable Securities so registered
and each person who controls the Holder or any such underwriter within
the meaning of Section 15 of the Securities Act, against any and all
losses, claims, damages or liabilities to which they or any of them
may become subject under the Securities Act or any other statute or
common law, including any amount paid in settlement of any litigation,
commenced or threatened, if such settlement is effected with the
written consent of the Company, and to reimburse them for any
reasonable legal or other reasonable expenses incurred by them in
connection with the investigation of any claims and defense of any
actions (subject to subsection (3) of this Section F), insofar as any
such losses, claims, damages, liabilities or actions arise out of or
are based upon: any untrue statement of a material fact contained in
the registration statement, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto,
or in any blue sky application, or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that the indemnification agreement contained in this
subsection (1) shall not (i) apply to such losses, claims, damages,
liabilities or actions arising out of, or based upon, any such untrue
statement or alleged untrue statement, or any such omission or alleged
omission, if such statement or omission was made in reliance upon and
in conformity with information furnished to the Company in writing by
the Holder or such underwriter claiming rights of indemnification
pursuant to this Section F for use in connection with the preparation
of the registration statement or any preliminary prospectus or
prospectus contained in the registration statement or any such
amendment thereof or supplement thereto, or (ii) inure to the benefit
of any underwriter (or to the benefit of any person controlling such
underwriter) from whom the person asserting any such losses, claims,
damages, expenses or liabilities purchased the securities which are
the subject thereof, if such underwriter failed to send or give a copy
of the final prospectus, as then amended or supplemented, to such
person and if the untrue statement or omission alleged had been
corrected in such final prospectus.
(2) In the case of each registration effected by
the Company pursuant to this Section 9, the Holder shall be obligated,
and shall cause each underwriter of the shares of Registrable
Securities to be registered on behalf of such person (the Holder and
such underwriters being referred to severally in this subsection (2)
as the "indemnifying person") to be obligated in the same manner and
to the same extent as set forth in subsection (1) of this Section F,
to indemnify and hold harmless the Company and each person, if any,
who controls the Company within the meaning of Section 15 of the
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<PAGE> 13
Securities Act, its directors and those officers of the Company who
shall have signed any such registration statement, with respect to any
statement or alleged untrue statement in, or omission or alleged
omission from, such registration statement or any post-effective
amendment thereof or any preliminary prospectus or final prospectus
(as amended or supplemented, if amended or supplemented as aforesaid)
contained in such registration statement, if such statement or
omission was made in reliance upon and in conformity with information
furnished in writing to the Company (except if such information
theretofore had been corrected and, as corrected, provided to the
Company) by such indemnifying person for use in connection with the
preparation of such registration statement or any preliminary
prospectus or final prospectus contained in such registration
statement or any such amendment thereof or supplement thereto;
provided, however, that the liability of the Holder hereunder shall be
limited to the proceeds received by the Holder from the sale of
Registrable Securities covered by such registration statement,
amendment, supplement, prospectus or blue sky application, as the case
may be.
(3) Each person indemnified pursuant to this
Section F will, promptly after its receipt of written notice of the
commencement of any action against such indemnified person in respect
of which indemnity may be sought from an indemnifying person on
account of an indemnity agreement contained in this Section F, notify
the indemnifying person in writing of the commencement thereof. The
omission of any indemnified person so to notify an indemnifying person
of the commencement of any such action shall relieve the indemnifying
person from any liability in respect of such action which it may have
to such indemnified person on account of the indemnity agreement
contained in this Section F, but shall not relieve the indemnifying
person from any other liability which it may have to such indemnified
person. If any such action shall be brought against any indemnified
person and it shall notify an indemnifying person of the commencement
thereof, the indemnifying person will be entitled to participate
therein and, to the extent it may desire, jointly with any other
indemnifying person similarly notified, to assume the defense thereof
with counsel satisfactory to such indemnified person, and after notice
from the indemnifying person to such indemnified person of its
election so to assume the defense thereof, the indemnifying person
will not be liable to such indemnified person under this Section F for
any legal or other expenses subsequently incurred by such indemnified
person in connection with the defense thereof other than reasonable
costs of investigation unless (i) the indemnified party shall have
employed counsel in an action in which the indemnified party and
indemnifying party are both defendants and there is a conflict of
interest between such parties that would prevent counsel from
adequately representing both parties, (ii) the indemnifying party
shall not have employed counsel satisfactory within the exercise of
reasonable judgment to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the
commencement of the action or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. The undertaking contained in this
Section F shall be in addition to any liabilities which the
indemnifying person may have pursuant to law.
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<PAGE> 14
10. MISCELLANEOUS.
A. GOVERNING LAW. This Agreement shall be governed in
all respects by the internal laws of the State of New York.
B. NO TRANSFER. This Warrant Certificate and the rights
contemplated herein are not transferable and shall not inure to the benefit of
any person other than the Holder.
C. ENTIRE AGREEMENT; AMENDMENT. This Agreement
constitutes the full and entire understanding and agreement between the parties
with regard to the subject hereof. This Agreement, or any provision hereof, may
be amended, waived, discharged or terminated upon the written consent of the
Company and the Holder.
D. NOTICES, ETC. All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed by
registered or certified mail, postage prepaid, or otherwise delivered by hand
or by messenger including Federal Express or similar courier service, addressed
(a) if to the Holder, to the address of the Holder appearing on the books of
the Company or at such other address as the Holder shall have furnished to the
Company in writing, or (b) if to the Company, to Digicon Inc., 3701 Kirby
Drive, Suite 112, Houston, Texas 77098, Attn: President, or at such other
address as the Company shall have furnished to the Holder in writing.
Each such notice or other communication shall for all purposes
of this Agreement be treated as effective upon receipt.
E. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be enforceable against the parties
actually executing such counterparts, and all of which together shall
constitute one instrument.
F. SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision.
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<PAGE> 15
G. TITLES AND SUBTITLES. The titles and subtitles used
in this Agreement are used for convenience only and are not considered in
construing or interpreting this Agreement.
Dated: January 30, 1995
DIGICON INC.
By:/s/ RICHARD W. MCNAIRY
------------------------------------
Name: Richard W. McNairy
Title: Vice President and Chief Financial
Officer
Attest:
/s/ AMY MATULA
- -------------------------------
Amy Matula, Assistant Secretary
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<PAGE> 16
[FORM OF ELECTION TO PURCHASE]
(To be executed upon exercise of Warrant.)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _____ shares of Common
Stock and herewith tenders in payment for such shares a certified check or bank
draft payable to the order of Digicon Inc. in the amount of $__________, all in
accordance with the terms hereof. The undersigned requests that a certificate
for such shares be registered in the name of
______________________________________________________________ whose address is
______________________________________________________ and that such
certificate (or any payment in lieu thereof) be delivered to
________________________ whose address is ____________________________________.
Dated:____________________ _______________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant.)
<PAGE> 1
EXHIBIT 10-D
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ARE
SUBJECT TO CERTAIN RESTRICTIONS, CONTAINED IN SECTION 5 HEREOF, WITH
RESPECT TO THEIR TRANSFER.
WARRANT TO PURCHASE SHARES OF COMMON STOCK OF
DIGICON INC.
NO. W-4 34,800 WARRANTS
This Warrant Certificate certifies that CCF JUPITER L.P. ("Holder") is
the holder of 34,800 Warrants (subject to adjustment as provided herein), each
of which represents the right to subscribe for and purchase from Digicon Inc.,
a Delaware corporation (the "Company"), one share of the common stock, par
value $.01 per share, of the Company (the common stock, including any stock
into which it may be changed, reclassified or converted, is herein referred to
as the "Common Stock") at the purchase price (the "Exercise Price") of $4.50
per share (subject to adjustment as provided herein).
The Warrants represented by this Warrant Certificate are subject to
the following provisions, terms and conditions:
1. EXERCISE OF WARRANTS
EXERCISE OF WARRANTS. The Warrants may be exercised by the
Holder, in whole or in part (but not as to a fractional share of Common Stock),
by surrender of this Warrant Certificate at the principal office of the Company
at 3701 Kirby Drive, Suite 112, Houston, Texas 77098 (or such other office or
agency of the Company as may be designated by notice in writing to the Holder
at the address of such Holder appearing on the books of the Company) with the
appropriate form attached hereto duly exercised, at any time within the period
beginning on the date upon which the Company's shareholders approve the
issuance of the Warrants as required by the American Stock Exchange and
expiring at 5 p.m. Houston, Texas time, on July 26, 1999, (the "Exercise
Period"), and by payment to the Company by certified check or bank draft of the
Exercise Price for such shares. The Company agrees that the shares of Common
Stock so purchased shall be and are deemed to be issued to the Holder as the
record owner of such shares of Common Stock as of the close of business on the
date on which the Warrant Certificate shall have been surrendered and payment
made for such shares of Common Stock. Certificates representing the shares of
Common Stock so purchased, together with any cash for fractional shares of
Common Stock paid pursuant to Section 2D, shall be delivered to the Holder
promptly, and in no event later than ten (10) days after the Warrants shall
have been so exercised, and, unless the Warrants have expired, a new Warrant
Certificate representing the number of Warrants
<PAGE> 2
represented by the surrendered Warrant Certificate, if any, that shall not have
been exercised also shall be delivered to the Holder within such time.
2. ADJUSTMENTS
A. ADJUSTMENTS. The Exercise Price and the number of
shares of Common Stock issuable upon exercise of each Warrant shall be subject
to adjustment from time to time as follows:
(1) STOCK DIVIDENDS; STOCK SPLITS; REVERSE STOCK
SPLITS; RECLASSIFICATIONS. In case the Company shall (i) pay a
dividend with respect to its capital stock in shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock, (iii) combine
its outstanding shares of Common Stock into a smaller number of shares
of any class of Common Stock or (iv) issue any shares of its capital
stock in a reclassification of the Common Stock, other than
elimination of par value, a change in par value, or a change from par
value to no par value (any one of which actions is herein referred to
as an "Adjustment Event"), the number of shares of Common Stock
purchasable upon exercise of each Warrant immediately prior to the
record date for such Adjustment Event shall be adjusted so that the
Holder shall thereafter be entitled to receive the number of shares of
Common Stock or other securities of the Company (such other securities
thereafter enjoying the rights of shares of Common Stock under this
Warrant Certificate) that such Holder would have owned or have been
entitled to receive after the happening of such Adjustment Event, had
such Warrant been exercised immediately prior to the happening of such
Adjustment Event or any record date with respect thereto. An
adjustment made pursuant to this Section 2A(1) shall become effective
immediately after the effective date of such Adjustment Event
retroactive to the record date, if any, for such Adjustment Event.
(2) ADJUSTMENT OF EXERCISE PRICE. Whenever the
number of shares of Common Stock purchasable upon the exercise of each
Warrant is adjusted pursuant to Section 2A(1), the Exercise Price for
each share of Common Stock payable upon exercise of each Warrant shall
be adjusted by multiplying such Exercise Price immediately prior to
such adjustment by a fraction, the numerator of which shall be the
number of shares of Common Stock purchasable upon the exercise of each
Warrant immediately prior to such adjustment, and the denominator of
which shall be the number of shares of Common Stock so purchasable
immediately thereafter.
B. NOTICE OF ADJUSTMENT. Whenever the number of shares
of Common Stock purchasable upon the exercise of each Warrant or the Exercise
Price is adjusted, as herein provided, the Company shall promptly notify the
Holder in writing (such writing referred to as an "Adjustment Notice") of such
adjustment or adjustments and shall deliver to such Holder a statement setting
forth the number of shares of Common Stock purchasable upon the exercise of
each Warrant and the Exercise Price after such adjustment, setting forth a
brief statement of the
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<PAGE> 3
facts requiring such adjustment and setting forth the computation by which such
adjustment was made.
C. STATEMENT ON WARRANT CERTIFICATES. The form of this
Warrant Certificate need not be changed because of any change in the Exercise
Price or in the number or kind of shares purchasable upon the exercise of a
Warrant. However, the Company may at any time in its sole discretion make any
change in the form of the Warrant Certificate that it may deem appropriate and
that does not affect the substance thereof and any Warrant Certificate
thereafter issued, whether in exchange or substitution for any outstanding
Warrant Certificate or otherwise, may be in the form so changed.
D. FRACTIONAL INTEREST. The Company shall not be
required to issue fractional shares of Common Stock on the exercise of the
Warrants. The number of full shares of Common Stock which shall be issuable
upon such exercise shall be computed on the basis of the aggregate number of
whole shares of Common Stock purchasable on exercise of the Warrants so
presented. If any fraction of a share of Common Stock would, except for the
provisions of this Section 2D be issuable on the exercise of the Warrants (or
specified proportion thereof), the Company shall pay an amount in cash
calculated by it to be equal to the then fair value of one share of Common
Stock, as determined by the Board of Directors of the Company in good faith,
multiplied by such fraction computed to the nearest whole cent.
3. RESERVATION AND AUTHORIZATION OF COMMON STOCK
The Company covenants and agrees (a) that all shares of Common
Stock which may be issued upon the exercise of the Warrants represented by this
Warrant Certificate will, upon issuance, be validly issued, fully paid and
nonassessable and free of all transfer taxes, liens and charges with respect to
the issue thereof, (b) that during the Exercise Period, the Company will at all
times have authorized, and reserved for the purpose of issue or transfer upon
exercise of the Warrants evidenced by this Warrant Certificate, sufficient
shares of Common Stock to provide for the exercise of the Warrants represented
by this Warrant Certificate and (c) that the Company will take all such action
as may be necessary to ensure that the shares of Common Stock issuable upon the
exercise of the Warrants may be so issued without violation of any applicable
law or regulation, or any requirement of any securities exchange upon which any
capital stock of the Company may be listed.
4. NO VOTING RIGHTS
This Warrant Certificate shall not entitle the holder hereof
to any voting rights or other rights as a stockholder of the Company.
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5. RESTRICTIONS ON TRANSFER
A. WARRANTS. This Warrant Certificate and the Warrants
it evidences are not transferrable directly or indirectly, in whole or in part,
except in the case of any such transfer which is in compliance with applicable
federal and state securities laws, including but not limited to, the Securities
Act of 1933, as amended the ("Securities Act"), and for which the Company is
provided with an opinion of counsel to the Holder, reasonably satisfactory to
the Company, to the effect that such transfer is not in violation of any of
said securities laws.
B. COMMON STOCK. The shares of Common Stock issuable
upon exercise of the Warrants have not been registered under the Securities
Act, or under any applicable state securities laws, and Holder shall not offer
for sale, sell, transfer, pledge or otherwise hypothecate any such shares of
Common Stock except in accordance with the registration requirements of the
Securities Act and applicable state securities laws or upon delivery to the
Company of an opinion of legal counsel satisfactory to the Company that an
exemption from registration is available. Each certificate evidencing shares
of Common Stock issued pursuant to any exercise of the Warrants evidenced
hereby will bear a conspicuous restrictive legend worded substantially as
follows:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR UNDER ANY APPLICABLE
STATE SECURITIES LAWS, AND THEY CANNOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE HYPOTHECATED EXCEPT IN ACCORDANCE
WITH THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH STATE LAWS OR
UPON DELIVERY TO THIS CORPORATION OF AN OPINION OF LEGAL COUNSEL
SATISFACTORY TO THE CORPORATION THAT AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
6. CLOSING OF BOOKS
The Company will at no time close its transfer books against
the transfer of any Warrant or of any shares of Common Stock or other
securities issuable upon the exercise of any Warrant in any manner which
interferes with the timely exercise of the Warrants.
7. WARRANTS EXCHANGEABLE; LOSS, THEFT
This Warrant Certificate is exchangeable, upon the surrender
hereof by any Holder at the office or agency of the Company referred to in
Section 1, for new Warrant Certificates of like tenor representing in the
aggregate the right to subscribe for and purchase the number of shares of
Common Stock which may be subscribed for and purchased hereunder, each such new
Warrant to represent the right to subscribe and purchase such number of shares
of Common Stock as shall be designated by said holder hereof at the time of
such surrender. Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction or mutilation, or upon surrender or cancellation of
this Warrant Certificate, the Company will issue to the holder hereof a new
Warrant Certificate of like tenor, in lieu of this Warrant Certificate,
representing the right
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<PAGE> 5
to subscribe for and purchase the number of shares of Common Stock which may be
subscribed for and purchased hereunder.
8. MERGERS, CONSOLIDATIONS
If the Company shall merge or consolidate with another
corporation, the holder of this Warrant Certificate shall thereafter have the
right, upon exercise hereof and payment of the Exercise Price, to receive
solely the kind and amount of shares of stock (including, if applicable, Common
Stock), other securities, property or cash or any combination thereof
receivable by a holder of the number of shares of Common Stock for which this
Warrant might have been exercised immediately prior to such merger or
consolidation (assuming, if applicable, that the holder of such Common Stock
failed to exercise its rights of election, if any, as to the kind or amount of
shares of stock, other securities, property or cash or combination thereof
receivable upon such merger or consolidation).
9. REGISTRATION RIGHTS
A. DEFINITIONS. For the purposes of this Section 9, the
following terms have the meanings set forth below:
"WARRANTHOLDERS" means the Lenders which are issued warrants
to purchase Common Stock pursuant to Section 2.3 of the Loan and
Security Agreement.
"LOAN AND SECURITY AGREEMENT" means the Loan and Security
Agreement between the Company, Digicon Geophysical Corp., Digicon/GFS
Inc., Digicon Exploration Limited and Digicon Exploration, Ltd., as
borrowers, Soros Capital L.P., CCF Jupiter L.P. and Jupiter Management
Co., Inc., as lenders, and Jupiter Management Co., Inc., as agent.
"REGISTRABLE SECURITIES" means the shares of Common Stock
issued upon exercise of the Warrants.
"WARRANTS" means all warrants to purchase Common Stock issued
pursuant to Section 2.3 of the Loan and Security Agreement.
"LENDERS" shall have the meaning given such term in the Loan
and Security Agreement.
B. DEMAND REGISTRATION.
(1) On one occasion prior to July 26, 2001, if
the Holder requests in writing to register under the Securities Act
any of the shares of Registrable Securities owned by it (which request
shall (i) specify the number of shares of Registrable Securities
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intended to be offered and sold, (ii) express such person's present
intent to offer such Registrable Securities for distribution, (iii)
describe the nature or method of the proposed distribution thereof and
(iv) contain the undertaking of such party to provide all such
information and materials and take all such action as may be required
or appropriate in order to permit the Company to comply with all
applicable requirements of the Securities and Exchange Commission (the
"SEC") and to obtain acceleration of the effective date of the
registration statement), the Company will use its reasonable efforts
to cause the offering of the shares of Registrable Securities so
specified in such request to be registered as soon as practicable
thereafter so as to permit the sale or other distribution by the
requesting party, and in connection therewith the Company will prepare
and file on the appropriate form (or, if more than one form may be
used, on such appropriate form as is selected by the Company) a
registration statement under the Securities Act to effect such
registration and permit the sale of the shares of Registrable
Securities by the Holder. Notwithstanding the foregoing, the Holder
may exercise its one demand registration right with respect to any
shares of Registrable Securities which are not held by the Holder
because of a failure of the Holder to have exercised Warrants in
connection with such shares, provided, however, that in any such
event, the written request of the Holder set forth above shall also
contain an undertaking to exercise, on or prior to the effective date
of the registration statement, Warrants in connection with shares of
Registrable Securities to be registered.
(2) In the event that the Holder, after demanding
registration pursuant to subsection (1) of this Section B, determines
for any reason not to proceed with a registration pursuant to this
Section B at any time before the registration statement in respect of
such registration has been declared effective by the SEC, and such
registration statement, if theretofore filed with SEC, is withdrawn
and the Holder agrees to bear all costs and expenses (including, but
not limited to, underwriting fees, registration, SEC and blue sky
filing fees, printing expenses, and fees and expenses of legal counsel
and accountants) incurred in connection therewith (except that the
Holder need not bear any costs or expenses of any proposed offering
that is withdrawn pursuant to Section D(7) hereof), then such
withdrawn registration shall not be counted for purposes of
determining whether the Holder has exercised its one demand
registration right pursuant to this Section B.
C. PARTICIPATION REGISTRATION.
(1) Subject to the limitations of subsection (2)
of this Section C, if at any time prior to July 26, 2001, the Company
shall propose the registration under the Securities Act of an offering
of Common Stock, the Company shall give written notice as promptly as
practicable of such proposed registration (if practicable, at least 30
days in advance of the initial filing with the SEC of the registration
statement used in connection with such proposed offering, and in no
event later than 20 days in advance of such initial filling date) to
the Holder and will offer to include in any such offering the shares
of
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<PAGE> 7
Registrable Securities owned by the Holder (or obtainable by the
Holder upon the exercise of the Warrants), upon the same terms
(including the method of distribution) as all other shares of Common
Stock being sold pursuant to such offering of which the Company shall
have given notice, as aforesaid.
(2) Notwithstanding the obligations of the
Company pursuant to subsection (1) of this Section C, (i) the Company
shall not be required to give notice or to include such Registrable
Securities in any such registration if the proposed registration is
exclusively (A) a registration of an employee stock option or other
employee incentive compensation plan or of Common Stock issued or
issuable pursuant to any such plan, (B) Common Stock issued or
issuable pursuant to a dividend or interest reinvestment plan, or
other similar plan, or (C) a registration of securities proposed to be
issued in exchange for securities or assets of, or in connection with
a merger or consolidation with, another corporation; and (ii) the
Company may, in its sole discretion and without the consent of the
Holder, withdraw any such registration statement and abandon such
proposed offering, notwithstanding the Holder's request to participate
therein in accordance with this provision.
D. LIMITATIONS, CONDITIONS AND QUALIFICATIONS TO
OBLIGATIONS OF THE COMPANY UNDER REGISTRATION PROVISIONS. The obligation of
the Company to cause the Registrable Securities owned by the Holder to be
registered under the Securities Act pursuant hereto is subject to each of the
following limitations, conditions and qualifications:
(1) The Company shall not be obligated to file or
proceed with any registration statement pursuant to Section B hereof
(i) unless such registration is demanded by the Holder and other
Warrantholders in connection with an aggregate of not less than 51% of
the shares of Registrable Securities held or which may be acquired
upon exercise by all of the Warrantholders, (ii) within three months
of the effective date of another registration statement, (iii) if the
filing of the registration statement would require a "special audit"
(as defined below) of the Company's financial statements (unless the
Holder agrees to pay the cost of such special audit), (iv) during any
period (not to exceed three months) when the Company has previously
commenced and is proceeding with efforts with respect to an
underwritten public offering of its securities and in the judgment of
the managing underwriter thereof such requested filing would have a
material adverse effect on the contemplated offering or (v) if the
Company determines, in its reasonable judgment after consultation with
its principal investment banker, that such registration would
materially interfere with any financing, acquisition, corporate
reorganization or other material transaction involving the Company or
any of its affiliates contemplated by the Company's Board of
Directors; provided, however, that any such delays may not exceed 180
days in the aggregate during any period of 12 consecutive calendar
months. For purposes of this paragraph, the term "special audit"
shall mean an audit not at year's end, requiring an opinion of any
independent accountant.
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(2) In the case of participation registration
pursuant to Section C hereof, if the managing underwriter of any
proposed registered offering advises that the inclusion in a
registration statement of some or all of the shares of Registrable
Securities sought to be registered by the Holder, together with shares
of Common Stock to be registered by the Company, creates a substantial
risk that the proceeds or price per share to be derived from such
public offering will be materially reduced or that the number of
shares of Common Stock (including the Registrable Securities) to be
registered is too large to be reasonably sold, then the shares of
Registrable Securities sought to be registered by the Holder (but not
the shares of Common Stock sought to be registered by the Company)
shall be reduced so that the total number of shares of Common Stock
(including the Registrable Securities) to be registered and sold in
such public offering does not exceed the number reasonably recommended
by such managing underwriter.
(3) The Holder, upon requesting registration,
shall provide the Company such information with respect to the shares
of Registrable Securities to be sold, the plans for the proposed
disposition thereof and such other information as shall, in the
opinion of counsel for the Company, be necessary to enable the Company
to include in the registration statement relating to the proposed
offering all material facts required to be disclosed with respect to
such prospective seller.
(4) The Company shall bear the cost of each
registration under the Securities Act, as well as the cost of any
registration and qualification under the blue sky laws of such states
as the Holder shall reasonably request, including but not limited to,
registration, SEC filing, National Association of Securities Dealers
and blue sky filing fees, printing expenses and fees and disbursements
of counsel and accountants for the Company; provided, however, that
the Holder shall pay (i) the underwriting fees and selling commissions
attributable to the shares of Registrable Securities (but not other
shares of Common Stock) offered and (ii) the fees and disbursements of
counsel for the Holder.
(5) The Company shall not be required to amend or
supplement such registration statement for more than nine months
following its effective date.
(6) The Company shall be entitled to postpone for
a reasonable period of time (not to exceed 30 days) the filing of any
registration statement otherwise required to be prepared and filed by
it pursuant to Section B if, at the time the Company receives a
request for such registration, the Company is engaged in any program
for the purchase of shares of its Common Stock.
(7) If the Company shall postpone the filing of a
registration statement pursuant to subsection (1)(iv) or (6) of this
Section D, the Holder shall have the right to withdraw the request for
registration by giving written notice to the Company within 30 days
after receipt of the notice of postponement and such withdrawn request
shall not be
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<PAGE> 9
counted for purposes of determining the number of registrations to
which the Holder is entitled pursuant to Section B.
(8) In the event the Holder requests registration
pursuant to Section B hereof, (i) the offering or distribution of
Registrable Securities shall be pursuant to a firm commitment
underwriting, (ii) the managing underwriter shall be a nationally
recognized investment banking firm approved by the Company (such
approval not to be unreasonably withheld) and the Company will enter
into an underwriting agreement containing representations, warranties
and agreements not substantially different from those customarily made
by an issuer in underwriting agreements with respect to secondary
distributions; provided, however, that the Company will not be
obligated to enter into an agreement with respect to indemnification
of the underwriters materially less favorable to the Company than as
set forth in Section F below.
(9) The Company may require, as a condition to
fulfilling its obligations under this Section 9, the written
confirmation by the Holder and the underwriters to the effect that
such persons agree to be bound by the indemnification agreements
described in Section F(2) hereof.
(10) The Holder, if requested by the managing
underwriter with respect to an offering of Registrable Securities,
will agree not to sell publicly any shares of Common Stock held by it,
other than the shares of Registrable Securities so registered, for a
period of time (not to exceed 60 days) prior to and after the
effective date of the registration statement.
E. COMPANY OBLIGATIONS IN CONNECTION WITH REGISTRATIONS.
In connection with any registration of Registrable Securities undertaken by the
Company pursuant to this Section 9 and any registration statement filed in
connection therewith, the Company shall:
(1) furnish to the Holder or its underwriters
such number of copies of any prospectus (including any preliminary
prospectus or amended or supplemented prospectus) and such other
documents as the Holder may reasonably request in order to effect the
offering and sale of the Registrable Securities to be offered and sold
by such person, but such obligations shall survive only while the
Company is required to cause the registration statement to remain
effective pursuant to Section E(4) hereof;
(2) use its reasonable best efforts to qualify
the offering under applicable blue sky laws or such other state
securities laws as may be necessary or appropriate to enable the
Holder to offer and sell the Registrable Securities in the states
wherein such entity intends to offer such securities; provided,
however, that the Company shall not be obligated to qualify to do
business as a foreign corporation under the laws of any jurisdiction
wherein it is not then qualified or to file any general consent to
service of process;
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<PAGE> 10
(3) furnish to the Holder unlegended certificates
representing the shares of Registrable Securities theretofore owned by
such person that are sold pursuant to such registration, such
certificates to be furnished in such numbers and denominations as such
person may reasonably request;
(4) use its reasonable best efforts to cause the
registration statement to remain effective for nine months following
its effective date or such lesser period as the underwriters may
agree;
(5) notify the Holder, promptly after it shall
receive notice thereof, of the time when such registration statement
has become effective or a supplement to any prospectus forming a part
of such registration statement has been filed;
(6) promptly notify the Holder of any request by
the SEC for the amending or supplementing of such registration
statement or prospectus or for additional information;
(7) prepare and file with the SEC, promptly upon
the request of the Holder, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel
for the Holder, is required under the Securities Act or the rules and
regulations thereunder in connection with the distribution of
Registrable Securities by the Holder;
(8) prepare and promptly file with the SEC, and
promptly notify the Holder of the filing of all amendments or
supplements to such registration statement or prospectus as may be
necessary to correct any statements therein or omissions therefrom,
if, at the time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event shall
have occurred as a result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they
were made, not misleading;
(9) advise the Holder, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any
stop order by the SEC suspending the effectiveness of such
registration statement or the initiation or threatening of any
proceeding for that purpose and promptly use its reasonable best
efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued;
(10) not file any amendment or supplement to such
registration statement or prospectus (i) unless a copy thereof shall
have been furnished to the Holder at least 24 hours prior to such
filing, and (ii) not file any such amendment or supplement in the
event the Holder shall have reasonably objected on the grounds that
such amendment or
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<PAGE> 11
supplement does not comply in all material respects with the
requirements of the Securities Act or the rules and regulations
thereunder;
(11) at the request of the Holder, furnish on the
effective date of the registration statement, and, if such
registration includes an underwritten public offering, at the closing
provided for in the underwriting agreement: (i) opinions, dated such
respective dates, of the counsel representing the Company for the
purpose of such registration, addressed to the underwriters, if any,
and to the Holder, covering such matters as such underwriters and the
Holder may reasonably request, in which opinion such counsel shall
state, subject to such qualifications as may be reasonably necessary
under the circumstances and without limiting the generality of the
foregoing, that (A) such registration statement has become effective
under the Securities Act; (B) to the best of such counsel's knowledge,
no stop order suspending the effectiveness thereof has been issued and
no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act; (C) the registration statement
and each amendment or supplement thereto comply as to form in all
material respects with the requirements of the Securities Act and
applicable rules and regulations of the SEC thereunder (except that
such counsel need express no opinion as to financial statements or
other reports of experts contained therein); (D) to the best of such
counsel's knowledge, neither the registration statement nor any
amendment nor supplement thereto contains any untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein in the light of
the circumstances in which they were made, not misleading (except that
such counsel need express no opinion as to financial statements or
other reports of experts contained therein); (E) the descriptions in
the registration statement or any amendment or supplement thereto of
legal and governmental proceedings and contracts are accurate and
fairly present the information required to be shown; (F) to the best
of such counsel's knowledge, there are no legal or governmental
proceedings, pending or threatened, required to be described in the
registration statement or any amendment or supplement thereto which
are not described as required; and (G) to the best of such counsel's
knowledge, there are no contracts or documents or instruments of the
character required to be described in the registration statement or
amendment or supplement thereto or to be filed as exhibits to the
registration statement, which are not described or filed as required;
and (ii) letters, dated such respective dates, from the independent
certified public accountants of the Company, addressed to the
underwriters, if any, and to the Holder, covering such matters as such
underwriters and the Holder may reasonably request, in which letters
such accountants shall state, subject to such qualifications as may be
reasonably necessary under the circumstances (without limiting the
generality of the foregoing), that they are independent certified
public accountants within the meaning of the Securities Act with
respect to the Company and that in the opinion of such accountants the
financial statements and other financial data of the Company included
in the registration statement or any amendment or supplement thereto
comply in all material respects with the applicable accounting
requirements of the Securities Act; and
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(12) make available to the Holder, each
underwriter for the Holder and their respective attorneys all such
information and documents as they may reasonably request in order to
verify the accuracy and completeness of statements contained in such
registration statement; provided, however, that any underwriter or
counsel for such underwriter shall first agree in writing with the
Company that such information and documents that are clearly
identified to such underwriter or counsel as being confidential will
be kept confidential and will be used only for the purpose of
verifying the accuracy and completeness of statements contained in
such registration statement (subject to reasonable exceptions
including, but not limited to, disclosure or information required by
law).
F. INDEMNIFICATION.
(1) In the case of each registration effected by
the Company pursuant to this Section 9, the Company agrees to
indemnify and hold harmless the Holder, its officers and directors,
each underwriter of the shares of Registrable Securities so registered
and each person who controls the Holder or any such underwriter within
the meaning of Section 15 of the Securities Act, against any and all
losses, claims, damages or liabilities to which they or any of them
may become subject under the Securities Act or any other statute or
common law, including any amount paid in settlement of any litigation,
commenced or threatened, if such settlement is effected with the
written consent of the Company, and to reimburse them for any
reasonable legal or other reasonable expenses incurred by them in
connection with the investigation of any claims and defense of any
actions (subject to subsection (3) of this Section F), insofar as any
such losses, claims, damages, liabilities or actions arise out of or
are based upon: any untrue statement of a material fact contained in
the registration statement, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto,
or in any blue sky application, or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that the indemnification agreement contained in this
subsection (1) shall not (i) apply to such losses, claims, damages,
liabilities or actions arising out of, or based upon, any such untrue
statement or alleged untrue statement, or any such omission or alleged
omission, if such statement or omission was made in reliance upon and
in conformity with information furnished to the Company in writing by
the Holder or such underwriter claiming rights of indemnification
pursuant to this Section F for use in connection with the preparation
of the registration statement or any preliminary prospectus or
prospectus contained in the registration statement or any such
amendment thereof or supplement thereto, or (ii) inure to the benefit
of any underwriter (or to the benefit of any person controlling such
underwriter) from whom the person asserting any such losses, claims,
damages, expenses or liabilities purchased the securities which are
the subject thereof, if such underwriter failed to send or give a copy
of the final prospectus, as then amended or supplemented, to such
person and if the untrue statement or omission alleged had been
corrected in such final prospectus.
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(2) In the case of each registration effected by
the Company pursuant to this Section 9, the Holder shall be obligated,
and shall cause each underwriter of the shares of Registrable
Securities to be registered on behalf of such person (the Holder and
such underwriters being referred to severally in this subsection (2)
as the "indemnifying person") to be obligated in the same manner and
to the same extent as set forth in subsection (1) of this Section F,
to indemnify and hold harmless the Company and each person, if any,
who controls the Company within the meaning of Section 15 of the
Securities Act, its directors and those officers of the Company who
shall have signed any such registration statement, with respect to any
statement or alleged untrue statement in, or omission or alleged
omission from, such registration statement or any post- effective
amendment thereof or any preliminary prospectus or final prospectus
(as amended or supplemented, if amended or supplemented as aforesaid)
contained in such registration statement, if such statement or
omission was made in reliance upon and in conformity with information
furnished in writing to the Company (except if such information
theretofore had been corrected and, as corrected, provided to the
Company) by such indemnifying person for use in connection with the
preparation of such registration statement or any preliminary
prospectus or final prospectus contained in such registration
statement or any such amendment thereof or supplement thereto;
provided, however, that the liability of the Holder hereunder shall be
limited to the proceeds received by the Holder from the sale of
Registrable Securities covered by such registration statement,
amendment, supplement, prospectus or blue sky application, as the case
may be.
(3) Each person indemnified pursuant to this
Section F will, promptly after its receipt of written notice of the
commencement of any action against such indemnified person in respect
of which indemnity may be sought from an indemnifying person on
account of an indemnity agreement contained in this Section F, notify
the indemnifying person in writing of the commencement thereof. The
omission of any indemnified person so to notify an indemnifying person
of the commencement of any such action shall relieve the indemnifying
person from any liability in respect of such action which it may have
to such indemnified person on account of the indemnity agreement
contained in this Section F, but shall not relieve the indemnifying
person from any other liability which it may have to such indemnified
person. If any such action shall be brought against any indemnified
person and it shall notify an indemnifying person of the commencement
thereof, the indemnifying person will be entitled to participate
therein and, to the extent it may desire, jointly with any other
indemnifying person similarly notified, to assume the defense thereof
with counsel satisfactory to such indemnified person, and after notice
from the indemnifying person to such indemnified person of its
election so to assume the defense thereof, the indemnifying person
will not be liable to such indemnified person under this Section F for
any legal or other expenses subsequently incurred by such indemnified
person in connection with the defense thereof other than reasonable
costs of investigation unless (i) the indemnified party shall have
employed counsel in an action in which the indemnified party and
indemnifying party are both defendants and there is a conflict of
interest between such parties that would prevent counsel from
adequately
-13-
<PAGE> 14
representing both parties, (ii) the indemnifying party shall not have
employed counsel satisfactory within the exercise of reasonable
judgment to the indemnified party to represent the indemnified party
within a reasonable time after the notice of the commencement of the
action or (iii) the indemnifying party has authorized the employment
of counsel for the indemnified party at the expense of the
indemnifying party. The undertaking contained in this Section F shall
be in addition to any liabilities which the indemnifying person may
have pursuant to law.
10. MISCELLANEOUS.
A. GOVERNING LAW. This Agreement shall be governed in
all respects by the internal laws of the state of New York.
B. NO TRANSFER. This Warrant Certificate and the rights
contemplated herein are not transferable and shall not inure to the benefit of
any person other than the Holder.
C. ENTIRE AGREEMENT; AMENDMENT. This Agreement
constitutes the full and entire understanding and agreement between the parties
with regard to the subject hereof. This Agreement, or any provision hereof, may
be amended, waived, discharged or terminated upon the written consent of the
Company and the Holder.
D. NOTICES, ETC. All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed by
registered or certified mail, postage prepaid, or otherwise delivered by hand
or by messenger including Federal Express or similar courier service, addressed
(a) if to the Holder, to the address of the Holder appearing on the books of
the Company or at such other address as the Holder shall have furnished to the
Company in writing, or (b) if to the Company, to Digicon Inc., 3701 Kirby
Drive, Suite 112, Houston, Texas 77098, Attn: President, or at such other
address as the Company shall have furnished to the Holder in writing.
Each such notice or other communication shall for all purposes
of this Agreement be treated as effective upon receipt.
E. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be enforceable against the parties
actually executing such counterparts, and all of which together shall
constitute one instrument.
F. SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision.
-14-
<PAGE> 15
G. TITLES AND SUBTITLES. The titles and subtitles used
in this Agreement are used for convenience only and are not considered in
construing or interpreting this Agreement.
Dated effective January 30, 1995
DIGICON INC.
By:/s/ ALLAN C. POGACH
------------------------------------------
Name: Allan C. Pogach
Title: Vice President Treasurer and Secretary
Attest:
/s/ AMY MATULA
- -------------------------------
Amy Matula, Assistant Secretary
-15-
<PAGE> 16
[FORM OF ELECTION TO PURCHASE]
(To be executed upon exercise of Warrant.)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _____ shares of Common
Stock and herewith tenders in payment for such shares a certified check or bank
draft payable to the order of Digicon Inc. in the amount of $__________, all in
accordance with the terms hereof. The undersigned requests that a certificate
for such shares be registered in the name of
_____________________________________________________________ whose address is
____________________________________________________ and that such certificate
(or any payment in lieu thereof) be delivered to ________________________ whose
address is ____________________________________.
Dated:____________________ _______________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant.)
<PAGE> 1
- --------------------------------------------------------------------------------
EXHIBIT 11
COMPUTATION OF INCOME
PER COMMON AND COMMON EQUIVALENT SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, January 31,
-------------------------- ------------------------
1996 1995 1996 1995
--------- --------- -------- --------
<S> <C> <C> <C> <C>
PRIMARY INCOME PER SHARE:
Weighted average shares of common stock
outstanding (1) 11,123 11,135 10,848 11,046
========= ========= ======== ========
Primary income per share $ .10 $ .07 $ .17 $ .13
========= ========= ======== ========
FULLY DILUTED INCOME PER SHARE:
Weighted average shares of common stock
outstanding (1) 11,123 11,135 10,848 11,046
Shares issuable from assumed conversion of:
Warrants 80 46
Stock options 16 8
--------- --------- -------- --------
Weighted average shares of common
stock outstanding, as adjusted 11,219 11,135 10,902 11,046
========= ========= ======== ========
Fully diluted income per share $ .10 (3) $ .07 (2) $ .17 (3) $ .13 (2)
========= ========= ======== ========
NET INCOME FOR PRIMARY AND
FULLY DILUTED COMPUTATION:
Net income $ 1,077 $ 829 $1,829 $1,436
========= ========= ======== ========
</TABLE>
____________
(1) Weighted average shares of common stock outstanding for all periods
have been restated for a one for three reverse stock split consummated
on January 17, 1995.
(2) This calculation is submitted in accordance with Item 601(b)11 of
Regulation S-K although warrants and stock options had no dilutive
effect.
(3) This calculation is submitted in accordance with Item 601(b)11 of
Regulation S-K although not required by footnote 2 to paragraph 14 of
APB Opinion No. 15 because warrants and options result in dilution of
less than 3%.
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
DIGICON INC.'S FORM 10-Q FOR THE QUARTER ENDED JANUARY 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) 10-Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1996
<PERIOD-END> JAN-31-1996
<CASH> 4,239
<SECURITIES> 0
<RECEIVABLES> 42,130
<ALLOWANCES> 595
<INVENTORY> 1,388
<CURRENT-ASSETS> 53,471
<PP&E> 112,286
<DEPRECIATION> 63,390
<TOTAL-ASSETS> 131,396
<CURRENT-LIABILITIES> 39,191
<BONDS> 22,510
<COMMON> 111
0
0
<OTHER-SE> 64,572
<TOTAL-LIABILITY-AND-EQUITY> 131,396
<SALES> 0
<TOTAL-REVENUES> 78,246
<CGS> 0
<TOTAL-COSTS> 76,422
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,625
<INCOME-PRETAX> 1,824
<INCOME-TAX> (5)
<INCOME-CONTINUING> 1,829
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,829
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
