DIGICON INC, S-2/A, 1996-03-05

DIGICON INC
S-2/A, 1996-03-05
OIL & GAS FIELD EXPLORATION SERVICES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 5, 1996

REGISTRATION NO. 333-01037

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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 1

FORM S-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

DIGICON INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 76-0343152
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>

3701 KIRBY DRIVE, SUITE 112
HOUSTON, TEXAS 77098
(713) 526-5611
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

RICHARD W. MCNAIRY
3701 KIRBY DRIVE, SUITE 112
HOUSTON, TEXAS 77098
(713) 526-5611
(Name, address, including zip code, and
telephone number, including area code, of agent for service)

With copies to:

<TABLE>
<S> <C>
T. WILLIAM PORTER J. MARK METTS
PORTER & HEDGES, L.L.P. VINSON & ELKINS L.L.P.
700 LOUISIANA, 35TH FLOOR 1001 FANNIN
HOUSTON, TEXAS 77002 2300 FIRST CITY TOWER
(713) 226-0600 HOUSTON, TEXAS 77002
(713) 758-2222
</TABLE>

Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act of 1933 registration statement number
of the earlier effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 registration statement number of the earlier effective
registration statement for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

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<PAGE> 2

DIGICON INC.

CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY FORM S-2
---------------------

<TABLE>
<CAPTION>
ITEM FORM S-2 CAPTION LOCATION IN PROSPECTUS
- ----- --------------------------------------------- ----------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus....... Facing Page; Outside Front Cover Page of
Prospectus

2. Inside Front and Outside Back Cover Pages of
Prospectus................................... Inside Front and Outside Back Cover
Pages of Prospectus

3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges................. Prospectus Summary; Risk Factors; The
Company; Selected Consolidated Financial
Data

4. Use of Proceeds.............................. Use of Proceeds

5. Determination of Offering Price.............. *

6. Dilution..................................... *

7. Selling Stockholders......................... Selling Stockholder

8. Plan of Distribution......................... Outside Front Cover Page of Prospectus;
Underwriting

9. Description of Securities to be Registered... Description of Capital Stock

10. Interests of Named Experts and Counsel....... Experts; Legal Matters

11. Information with Respect to the Registrant... Prospectus Summary; Risk Factors; The
Company; Use of Proceeds;
Capitalization; Price Range of Common
Stock and Dividend Policy; Selected
Consolidated Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management;
Description of Capital Stock;
Consolidated Financial Statements

12. Incorporation of Certain Information by
Reference.................................... Incorporation of Documents by Reference

13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................. *
</TABLE>

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* Omitted inasmuch as the response to the item is negative or inapplicable.
<PAGE> 3

***************************************************************************
* *
* Information contained herein is subject to completion or amendment. A *
* registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may not *
* be sold nor may offers to buy be accepted prior to the time the *
* registration statement becomes effective. This prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy *
* nor shall there be any sale of these securities in any State in which *
* such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of any State. *
* *
***************************************************************************

SUBJECT TO COMPLETION, DATED MARCH 5, 1996

3,700,000 SHARES

DIGICON INC.

LOGO COMMON STOCK

OF THE 3,700,000 SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE (THE
"COMMON STOCK"), OFFERED HEREBY, 3,500,000 SHARES ARE BEING OFFERED BY DIGICON
INC. (THE "COMPANY") AND 200,000 SHARES ARE BEING OFFERED BY A SELLING
STOCKHOLDER (THE "SELLING STOCKHOLDER"). SEE "SELLING STOCKHOLDER." THE COMPANY
WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF SHARES BY THE SELLING
STOCKHOLDER.

THE COMMON STOCK IS LISTED ON THE AMERICAN STOCK EXCHANGE UNDER THE SYMBOL
"DGC." ON MARCH 5, 1996, THE CLOSING SALES PRICE OF THE COMMON STOCK ON THE
AMERICAN STOCK EXCHANGE WAS $6.625 PER SHARE. SEE "PRICE RANGE OF COMMON STOCK
AND DIVIDEND POLICY."

FOR A DISCUSSION OF CERTAIN RISKS OF AN INVESTMENT IN THE SHARES OF COMMON
STOCK OFFERED HEREBY, SEE "RISK FACTORS" ON PAGES 7-8.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS* COMPANY+ STOCKHOLDER
<S> <C> <C> <C> <C>
PER SHARE........................ $ $ $ $
TOTAL++.......................... $ $ $ $
</TABLE>

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* THE COMPANY AND THE SELLING STOCKHOLDER HAVE AGREED TO INDEMNIFY THE
UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE
SECURITIES ACT OF 1933. SEE "UNDERWRITING."

+ BEFORE DEDUCTING EXPENSES OF THIS OFFERING PAYABLE BY THE COMPANY ESTIMATED
TO BE $380,000.

++ THE COMPANY HAS GRANTED THE UNDERWRITERS A 45-DAY OPTION TO PURCHASE UP TO
555,000 ADDITIONAL SHARES OF COMMON STOCK ON THE SAME TERMS PER SHARE
SOLELY TO COVER OVER-ALLOTMENTS, IF ANY. IF SUCH OPTION IS EXERCISED IN
FULL, THE TOTAL PRICE TO PUBLIC WILL BE $ , THE TOTAL UNDERWRITING
DISCOUNTS AND COMMISSIONS WILL BE $ AND THE TOTAL PROCEEDS TO
COMPANY WILL BE $ . SEE "UNDERWRITING."
---------------------
THE COMMON STOCK IS BEING OFFERED BY THE UNDERWRITERS AS SET FORTH UNDER
"UNDERWRITING" HEREIN. IT IS EXPECTED THAT THE DELIVERY OF THE CERTIFICATES
THEREFOR WILL BE MADE AT THE OFFICES OF DILLON, READ & CO. INC., NEW YORK, NEW
YORK, ON OR ABOUT , 1996, AGAINST PAYMENT THEREFOR IN NEW YORK
FUNDS. THE UNDERWRITERS INCLUDE:

DILLON, READ & CO. INC.
RAYMOND JAMES & ASSOCIATES, INC.
RODMAN & RENSHAW, INC.

THE DATE OF THIS PROSPECTUS IS MARCH , 1996

<PAGE> 4

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C., a Registration Statement on Form S-2
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Common Stock offered by this Prospectus. Certain portions of
the Registration Statement have not been included in this Prospectus. For
further information, reference is made to the Registration Statement. Statements
made in this Prospectus regarding the contents of any contract or document filed
as an exhibit to the Registration Statement are not necessarily complete and, in
each instance, reference is hereby made to the copy of such contract or document
so filed. Each such statement is qualified in its entirety by such reference.

The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. The Registration Statement, as well as such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and its regional offices at the
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and 7 World Trade Center, Suite 13, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at its principal office at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549. Such materials also can be inspected
at the offices of the American Stock Exchange, 86 Trinity Place, New York, New
York 10006, on which the Common Stock is listed.

The Company furnishes holders of its Common Stock with unaudited financial
statements for the first three quarters of each year and audited financial
statements for each year.

INCORPORATION OF DOCUMENTS BY REFERENCE

The following documents, which have been filed with the Commission by the
Company, are incorporated herein by reference (i) the Company's Annual Report on
Form 10-K for the year ended July 31, 1995, and (ii) the Company's Quarterly
Report on Form 10-Q for the quarter ended October 31, 1995. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.

The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request, a copy of any or all
of the documents incorporated by reference as a part of the Registration
Statement, other than exhibits to such documents. Requests should be directed to
Allan C. Pogach, Secretary, Digicon Inc., 3701 Kirby Drive, Suite 112, Houston,
Texas 77098, telephone (713) 526-5611.

2
<PAGE> 5

PROSPECTUS SUMMARY

The following summary should be read in conjunction with and is qualified
in its entirety by the information and consolidated financial statements
(including the notes thereto) appearing elsewhere in this Prospectus and the
documents incorporated by reference herein. Unless otherwise indicated, all
information in this Prospectus assumes no exercise of the Underwriters'
over-allotment option. See "Underwriting." Unless the context otherwise
requires, the number of shares, per share prices, weighted average number of
shares outstanding and per share amounts in this Prospectus have been adjusted
to reflect a one-for-three reverse stock split effected in January 1995.

THE COMPANY
GENERAL

The Company was founded in 1965 and provides seismic data acquisition and
processing services to the petroleum industry in selected markets worldwide. Oil
and gas companies utilize seismic data for the determination of suitable
locations for drilling exploratory wells and, increasingly, in reservoir
management for the development and production of oil and gas reserves. The
Company acquires seismic data in land, in marine and in marsh, swamp and tidal
("transition zone") environments and processes data acquired by its own crews
and crews of other operators. In addition, the Company acquires and processes
seismic data on a non-exclusive basis for future sale to multiple customers.

In conjunction with certain changes in senior management in 1994, the
Company initiated a comprehensive program designed to restructure and refocus
each of the Company's geographic and operational lines of business. The
Company's actions included: (i) selling its marine and land seismic equipment
manufacturing operations; (ii) selling its joint venture interests in the former
Soviet Union ("FSU"); (iii) deploying its land and transition zone crews and its
marine crews into markets where the Company's presence would likely be
significant, such as the Gulf Coast transition zone; (iv) expanding its
accumulation and sale of proprietary seismic data to exploit the historically
higher margins associated with non-exclusive data sales; (v) emphasizing its
research and development on the proprietary seismicTANGO software in order to
capitalize on its reputation for seismic data processing innovation; and (vi)
streamlining its cost structure through personnel reductions, office
consolidations, vessel deactivations and the outsourcing of certain development
and manufacturing functions. The continued implementation of this program has
increased revenues and significantly improved operating efficiencies.

INDUSTRY OVERVIEW

The seismic industry and its role in petroleum exploration, development and
production have changed substantially in recent years. Advances in seismic
technology have shifted the emphasis from two-dimensional ("2D") surveys to
three-dimensional ("3D") surveys. The greater precision and improved subsurface
resolution obtainable from 3D seismic data have assisted oil and gas companies
in finding new fields and more accurately delineating existing fields, as well
as enhancing existing reservoir management and production monitoring techniques.
Enhanced subsurface resolution obtainable from 3D studies has been a key factor
in improving success ratios and lowering finding and field extension costs
during the past several years. Accordingly, demand for 3D seismic data by the
major oil and gas companies and independents has increased.

Three-dimensional surveys involve the acquisition of a very dense grid of
seismic data over a precisely defined area. This heavy concentration of data
requires extensive computer processing, involving the use of sophisticated
proprietary mathematical techniques, to produce an accurate image of the
subsurface. Computer analysis of the 3D surveys allows explorationists to better
examine and interpret important subsurface features.

COMPANY OVERVIEW

The Company's principal areas of service include (i) land and transition
zone data acquisition, (ii) marine data acquisition, (iii) data processing and
(iv) sale of proprietary seismic data.

3
<PAGE> 6

Land and transition zone data acquisition. The Company's land and
transition zone data acquisition crews consist of (i) a surveying unit that lays
out the lines to be recorded, (ii) an explosives or mechanical vibrating unit
and (iii) a recording unit that lays out the geophones and recording
instruments. The Company's land and transition zone data acquisition services
are conducted by five seismic crews, three of which operate in the continental
United States and two of which are dedicated to South America and currently
operate in Argentina. In fiscal 1995, land and transition zone data acquisition
accounted for approximately 33% of the Company's revenues.

The success of 3D seismic offshore has led to a significant increase in
demand for 3D seismic onshore and in transition zone areas. In recent years,
exploration activity in land and transition zone areas by the major oil and gas
companies and independents has increased. In fiscal 1993, the Company acquired
GFS Company, a contractor in the Gulf Coast transition zone, and has
subsequently upgraded four crews utilizing advanced technology, high capacity
Input/Output ("I/O") equipment. Two of these land crews are working in the Gulf
Coast area and the other two have been dedicated to the expanding South American
marketplace. The Company expects to upgrade the fifth crew to I/O System Two
Remote Seismic Recorder ("RSR") equipment during calendar year 1996.

Marine data acquisition. The Company's marine data acquisition crews
operate on chartered vessels equipped with seismic, navigational and
communications equipment. All of the vessels operated by the Company are
equipped to perform both 3D and 2D seismic surveys. As of January 31, 1996, the
Company had six vessels in operation, with three located in the Gulf of Mexico
and one located in each of Australia, Indonesia and the North Sea. In fiscal
1995, marine data acquisition accounted for approximately 25% of the Company's
revenues.

Vessels with multiple streamers and multiple energy sources acquire more
lines of data with each pass, reducing time to completion and the effective
acquisition cost. Accordingly, the Company has upgraded one vessel so that it
can be configured with up to four streamers and two energy sources, which
enables that vessel to simultaneously record up to eight seismic lines. The
Company has also developed a multi-boat configuration as a cost effective
alternative to large multi-element vessels for simultaneously acquiring multiple
lines of data. The multi-boat configuration utilizes up to three smaller vessels
operating parallel to each other and working together to acquire multiple lines
of data. This configuration is particularly effective in obstructed areas, which
place a premium on maneuverability and versatility. The three vessels located in
the Gulf of Mexico are currently operating in this configuration. The two
vessels currently located in the Far East are acquiring predominantly 2D
surveys.

Data processing. The Company currently operates seven geophysical data
processing centers, including one under contract to a major oil and gas company.
These centers process data acquired by the Company's own crews and crews of
other operators. The centers are located in Houston, Texas; Singapore; London,
England; Brisbane, Australia; Jakarta, Indonesia; Kuala Lumpur, Malaysia; and
Assen, Holland. In each of these locations, the Company operates high capacity,
advanced technology data processing systems based on Convex and Hewlett Packard
computer systems with high speed networks. In fiscal 1995, data processing
accounted for approximately 27% of the Company's revenues.

The Company has developed seismicTANGO, advanced proprietary data
processing software which has been installed at all of the Company's data
processing centers and on three vessels and three land crews. The seismicTANGO
software is a fast, efficient and accurate system which enhances quality
control, facilitates the movement of data from the field to data processing
centers and may be used on a variety of hardware platforms. Current development
is aimed at enhancing the resolution of data from geologically complex
formations, such as those present in Gulf of Mexico subsalt plays.

Sale of proprietary seismic data. The Company also acquires and processes
seismic data for its own account through surveys partially funded by multiple
customers. Such surveys are offered for sale to other customers on a
nonexclusive basis. Since the beginning of fiscal 1995 through January 31, 1996,
117,000 line miles of new seismic data were added to the Company's library, and
the Company expects to continue its emphasis on sales of proprietary seismic
data.

4
<PAGE> 7

The industry has experienced a proliferation of both offshore and onshore
multi-customer surveys as a result of modifications in oil and gas company
spending strategies. In response to this increased demand, the Company has begun
and is expecting to continue to selectively add data to its library, primarily
in the Gulf of Mexico and the North Sea. Recent surveys have received
significant initial funding from customers, which has reduced the related risk
for the Company. Generally, the Company obtains pre-funding commitments for a
majority of the cost of such surveys. Historically, proprietary seismic data
sales have produced higher returns than the Company's other classes of services.

THE OFFERING

Common Stock offered by the
Company.......................... 3,500,000 shares

Common Stock offered by the
Selling Stockholder.............. 200,000 shares

Common Stock to be outstanding
after this Offering.............. 14,623,422 shares(1)

American Stock Exchange Symbol... DGC

Use of Proceeds.................. To repay outstanding indebtedness,
consisting of the Company's revolving
credit facility (approximately $12.9
million at January 31, 1996), a $4.5
million secured term loan and the balance
to retire outstanding equipment purchase
obligations. See "Use of Proceeds."

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(1) Excludes an aggregate of 1,356,401 shares reserved for issuance upon
exercise of outstanding warrants and options.

5
<PAGE> 8

SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JULY 31, JANUARY 31,
---------------------------------------------------------- ------------------
1991(1)(2) 1992(2) 1993(2) 1994 1995 1995 1996
---------- -------- -------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues...................... $ 94,217 | $111,428 $117,709 $117,978 $132,569 $62,266 $78,246
Net income (loss)(3).......... 20,311 | 4,554 (1,258) (14,426) 2,778 1,436 1,829
Earnings (loss) per share..... .23 | .74 (.15) (1.48) .25 .13 .17

STATEMENT OF CASH FLOWS DATA:
Net cash provided (used) by
operating activities........ 636 1,392 (1,999) 885 (3,520) (5,752) 7,132
Net cash provided (used) by
financing activities........ 3,895 10,880 17,981 7,865 (4,341) (1,032) (2,985)
Net cash provided (used) by
investing activities........ (4,137) (5,796) (18,861) (5,699) 3,660 1,099 (4,477)

OTHER FINANCIAL DATA:
EBITDA(4)..................... 9,178 13,699 11,426 11,567 22,229 12,393 12,039
EBIT(4)....................... 3,472 7,248 1,806 (2,191) 8,466 5,547 4,517
</TABLE>

<TABLE>
<CAPTION>
AS OF ADJUSTED AS OF
JANUARY 31, JANUARY 31,
1996 1996(5)
----------- --------------
<S> <C> <C>
(UNAUDITED)
BALANCE SHEET DATA:
Working capital.......................................................... $ 14,280 $ 16,648
Total assets............................................................. 131,396 131,396
Long-term debt........................................................... 22,510 3,478
Stockholders' equity..................................................... 64,683 86,083
</TABLE>

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(1) 1991 statement of operations data reflects results prior to the Company's
quasi-reorganization which was effected as of July 31, 1991 following its
emergence from Chapter 11 proceedings.

(2) Excludes financial results of GFS Company prior to October 30, 1992, the
acquisition date. See Note 9 of Notes to Consolidated Financial Statements.

(3) In fiscal 1991, net income includes extraordinary gains of $26,361,000.

(4) EBITDA represents earnings before interest, taxes, depreciation and
amortization, restructuring charges, write-off/reserve for impairment of
assets, equity in (earnings) loss of 50% or less owned companies and joint
ventures, reorganization costs, gain on sale of investment in FSU joint
ventures, other and extraordinary gains. EBIT consists of the same items but
includes depreciation and amortization. Neither EBITDA nor EBIT should be
considered as an alternative to net income as an indicator of the Company's
operating performance or as an alternative to cash flow as a better measure
of liquidity.

(5) Reflects the issuance of the 3,500,000 shares of the Common Stock offered by
the Company in this Offering and the application of the estimated net
proceeds as described in "Use of Proceeds."

6
<PAGE> 9

RISK FACTORS

Prospective investors should carefully consider the following factors, as
well as the other information contained in this Prospectus.

ENERGY INDUSTRY SPENDING

Demand for the Company's seismic services depends upon the level of capital
expenditures by oil and gas companies for exploration, production, development
and field management activities. These activities depend in part on oil and gas
prices, expectations about future prices, the cost of exploring for, producing
and delivering oil and gas, the sale and expiration dates of leases in the
United States and abroad, local and international political, regulatory and
economic conditions and the ability of oil and gas companies to obtain capital.
In addition, a decrease in oil and gas expenditures could result from such
factors as unfavorable tax and other legislation or uncertainty concerning
national energy policies. No assurance can be given that current levels of oil
and gas activities will be maintained or that demand for the Company's services
will reflect the level of such activities. Decreases in oil and gas activities
could have a significant adverse effect upon the demand for the Company's
services and the Company's results of operations.

COMPETITION FOR SEISMIC BUSINESS

Competition among seismic contractors historically has been intense.
Competitive factors include price, crew experience, equipment availability,
technological expertise and reputation for quality and dependability. Most of
the Company's major competitors operate more data acquisition crews than the
Company, have substantially greater revenues than the Company and are
subsidiaries or divisions of major industrial enterprises having far greater
financial and other resources than the Company. There can be no assurance that
the Company will be able to compete successfully against its competitors for
contracts to conduct seismic surveys and process data. See
"Business -- Competition and Other Business Conditions."

SEASONALITY; FLUCTUATIONS IN QUARTERLY RESULTS

The Company's seismic operations and quarterly financial results
historically have been subject to seasonal fluctuation, with the greatest volume
of both data acquisition and data processing occurring during the summer and
fall in the Northern Hemisphere. However, as a result of the expansion of the
Company's foreign operations and the deployment of its seismic vessels and crews
into regions having opposing seasons or less severe weather conditions, the
Company believes that the impact of seasonal fluctuations has been reduced. In
addition to seasonality, the Company historically has experienced quarterly
fluctuations in operating results. Operating results in any fiscal quarter may
vary as a result of (i) the magnitude of certain contracts for the acquisition
or sale of data, (ii) customers' budgetary cycles and (iii) seismic data sales
occurring as a result of offshore lease sales. In light of customer budgetary
considerations, the majority of the Company's sales of proprietary seismic data
has historically tended to occur in the Company's fiscal first and second
quarters.

HAZARDOUS OPERATING CONDITIONS

The Company's data acquisition activities involve operating under extreme
weather and other hazardous conditions. Accordingly, these operations are
subject to risks of loss to property and injury to personnel from such causes as
fires and accidental explosions. The Company carries insurance against these
risks in amounts that it considers adequate. The Company may not, however, be
able to obtain insurance against certain risks or for certain equipment located
from time to time in certain areas of the world.

HIGH FIXED COSTS; CAPITAL INTENSIVE BUSINESS; RISK OF TECHNOLOGICAL OBSOLESCENCE

Because of the high fixed costs involved in the major components of the
Company's business, downtime or low productivity due to reduced demand, weather
interruptions, equipment failures or other causes can result in significant
operating losses. In recent years, the Company's contracts for data acquisition
have been predominately on a turnkey or on a combination of turnkey/time basis.
Under the turnkey method, payments

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<PAGE> 10

for data acquisition services are based upon the amount of data collected, and
the Company bears substantially all of the risk of business interruption caused
by inclement weather and other hazards. When a combination of both turnkey and
time methods is used, the risk of business interruptions is shared in an agreed
percentage by the Company and the customer.

Seismic data acquisition and processing is a capital intensive business.
The development of seismic data acquisition and processing equipment has been
characterized by rapid technological advancements in recent years and the
Company expects this trend to continue. There can be no assurance that
manufacturers of seismic equipment will not develop new systems that have
competitive advantages over systems now in use that either render the Company's
current equipment obsolete or require the Company to make significant capital
expenditures. The Company intends to upgrade its data acquisition and processing
equipment as often as necessary to maintain its competitive position. However,
to do so may require large expenditures of capital in addition to the Company's
planned capital expenditures. There can be no assurance that the Company will
have the necessary capital or that financing will be available on favorable
terms. If the Company is unable to raise the capital necessary for its capital
expenditure program and to update its data acquisition and processing equipment
to the extent necessary, it may be materially and adversely affected as a
result.

RISKS INHERENT IN INTERNATIONAL OPERATIONS

In fiscal years 1994 and 1995, 55% and 54%, respectively, of the Company's
revenues were derived from international operations and export sales, which are
subject in varying degrees to risks inherent in doing business abroad. Such
risks include the possibility of unfavorable changes in tax or other laws. For
example, the Company has approximately 6,500 line miles of offshore Peru seismic
data (book value approximately $2.0 million) which will become saleable only
upon receipt of previously expected governmental licenses which have been
delayed for more than a year and a $2.6 million delinquent account receivable
from a foreign national oil company (no book carrying value) which will become
collectible only upon receipt of necessary host country tax authorization. In
addition, foreign operations include risks of partial or total expropriation;
currency exchange rate fluctuations and restrictions on currency repatriation;
the disruption of operations from labor and political disturbances, insurrection
or war; and the requirements of partial local ownership of operations in certain
countries. To minimize such risks, the Company generally denominates its
contracts in U.S. dollars and other currencies it believes to be stable. The
Company also obtains insurance against war, expropriation, confiscation and
nationalization when such insurance is available and when management considers
it advisable to do so. Such coverage is not always available, and when
available, is subject to unilateral cancellation by the insuring companies on
short notice.

GOVERNMENTAL REGULATION

The Company's operations are subject to a variety of federal, state,
foreign and local laws and regulations, including laws and regulations relating
to the protection of the environment. The Company is required to invest
financial and managerial resources to comply with such laws and related permit
requirements in its operations and anticipates that it will continue to do so in
the future. In recent years, an increased number of the Company's data
acquisition contracts have provided for customers to obtain all necessary
permits. Customers' failure to timely obtain the required permits may result in
crew downtime and operating losses. In the past, the Company's cost of complying
with governmental regulation has not been material, but the fact that such laws
or regulations are changed frequently makes it impossible for the Company to
predict the cost or impact of such laws and regulations on its future
operations. The adoption of laws and regulations which have the effect of
curtailing exploration by oil and gas companies could adversely affect the
Company's operations by reducing the demand for its geophysical services.

8
<PAGE> 11

THE COMPANY

The Company provides seismic data acquisition and processing services to
the petroleum industry in selected markets worldwide. The Company was
incorporated in Texas in 1965 and was reincorporated in Delaware in 1969. In
conjunction with the implementation of the Company's Second Amended Joint Plan
of Reorganization, on June 7, 1991, Digicon Inc. was merged into a newly-formed,
wholly-owned subsidiary incorporated under Delaware law. The Company's executive
offices are located at 3701 Kirby Drive, Houston, Texas 77098, and its telephone
number is (713) 526-5611. Unless the context otherwise requires, all references
in this Prospectus to the "Company" include Digicon Inc. and its subsidiaries.

USE OF PROCEEDS

The net proceeds from the sale of the Common Stock offered hereby are
estimated to be $21.4 million ($24.9 million if the overallotment option is
exercised in full). The net proceeds will be used as follows: first to repay the
outstanding balance under the Company's revolving credit facility (approximately
$12.9 million at January 31, 1996) bearing interest at a prime rate plus 3% and
maturing in April 1997; next to repay and retire a $4.5 million secured term
loan bearing interest at 10.75% per annum and maturing in June 1997; and then
any remaining proceeds to repay equipment purchase obligations bearing interest
at an average rate of 11.85% per annum and maturing through August 1998. A
portion of the equipment purchase obligations to be repaid has been incurred
during the past 12 months and was used to upgrade the data acquisition equipment
on a vessel.

The Company intends either to seek a reduction in the cost of its existing
revolving credit facility or to obtain a new credit facility with a commercial
lender. While the Company will seek to obtain such a modified or new facility on
more favorable terms than its existing facility, no assurances can be given that
any such facility will be available. The Company may reborrow amounts from time
to time under its revolving credit facility.

9
<PAGE> 12

CAPITALIZATION

The following table sets forth the consolidated short-term debt and
capitalization of the Company as of January 31, 1996, and as adjusted to reflect
the sale of the 3,500,000 shares of Common Stock offered by the Company hereby
and the application of the estimated net proceeds therefrom. See "Use of
Proceeds."

<TABLE>
<CAPTION>
JANUARY 31, 1996
----------------------
ACTUAL AS ADJUSTED
------- -----------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Short-term debt(1):
Current maturities of long-term debt.......................... $ 9,479 $ 7,111
======= =======
Long-term debt(1):
Revolving credit agreement due April, 1997, at prime plus
3%......................................................... $12,937 $ 0
Secured term loan due June 1997, at 10.75%.................... 3,000 0
Equipment purchase obligations maturing through February 1999,
at an average rate of 11.11% in fiscal 1996................ 6,573 3,478
------- -------
Total long-term debt....................................... 22,510 3,478
------- -------
Stockholders' equity:
Common Stock, $.01 par value; 20,000,000 shares authorized;
11,123,422 shares issued and outstanding; 14,623,422 shares
as adjusted(2)............................................. 111 146
Additional paid-in capital.................................... 71,095 92,460
Accumulated deficit from August 1, 1991....................... (6,523) (6,523)
------- -------
Total stockholders' equity................................. 64,683 86,083
------- -------
Total capitalization..................................... $87,193 $89,561
======= =======
</TABLE>

- ---------------

(1) For a description of the terms of the Company's debt, see Note 3 of Notes to
Consolidated Financial Statements.

(2) Excludes an aggregate of 1,356,401 shares reserved for issuance upon
exercise of outstanding warrants and options.

10
<PAGE> 13

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

PRICE RANGE OF COMMON STOCK

The Common Stock is traded on the American Stock Exchange under the symbol
"DGC." The following table sets forth the reported high and low sales prices for
the Common Stock on the American Stock Exchange for the periods shown.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Year ended July 31, 1994:
First Quarter........................................................ $9 3/8 $6 3/4
Second Quarter....................................................... 8 7/16 6
Third Quarter....................................................... 9 3/8 5 5/8
Fourth Quarter....................................................... 6 2 13/16

Year ended July 31, 1995:
First Quarter........................................................ $6 $3 3/8
Second Quarter....................................................... 5 13/16 3 3/8
Third Quarter........................................................ 5 1/8 3 1/8
Fourth Quarter....................................................... 6 4 1/4

Year ended July 31, 1996:
First Quarter........................................................ $6 3/8 $4 3/4
Second Quarter....................................................... 8 3/4 5 3/8
Third Quarter (through March 5, 1996)................................ 7 1/2 6 1/4
</TABLE>

On March 5, 1996, the last reported sales price for the Common Stock on the
American Stock Exchange was $6 5/8 per share. As of January 31, 1996, there were
approximately 300 record holders of the Common Stock.

DIVIDEND POLICY

Historically, the Company has not paid any dividends on its Common Stock
and has no present plans to pay any dividends. The payment of any future
dividends on Common Stock would depend, among other things, upon the current and
retained earnings and financial condition of the Company, and upon a
determination by its board of directors that the payment of dividends would be
desirable. In addition, the Company's principal revolving credit facility
prohibits, and its secured term loan contains certain restrictions, regarding
the payment of dividends.

11
<PAGE> 14

SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The selected financial data presented below is derived from the Company's
Consolidated Financial Statements. The selected financial data as of and for the
six-month periods ended January 31, 1995 and 1996, is unaudited and, in the
opinion of management, includes all adjustments that are of a normal recurring
nature and necessary for the fair presentation of the interim periods.

The following selected financial data should be read in conjunction with
the Consolidated Financial Statements, including the notes thereto, contained in
this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JULY 31, JANUARY 31,
------------------------------------------------------ ------------------
1991(1)(2) 1992(2) 1993(2) 1994 1995 1995 1996
---------- -------- -------- -------- -------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................... $ 94,217 | $111,428 $117,709 $117,978 $132,569 $ 62,266 $78,246
Costs and expenses: |
Operating expenses: |
Cost of services............... 81,959 | 93,546 101,866 101,310 105,912 47,709 63,680
Restructuring(3)............... | 1,363 800
Write-off/reserve for impairment |
of assets(4)................... | 6,523
Depreciation and amortization.... 5,706 | 6,451 9,620 13,758 13,763 6,846 7,522
Selling, general and |
administrative................. 3,080 | 4,183 4,417 5,101 4,428 2,164 2,527
Interest......................... 3,571 | 1,839 1,217 3,085 5,142 2,501 2,625
Equity in (earnings) loss of 50% |
or less-owned companies and |
joint ventures................. (115) | (121) 54 445 1,485 640 5
Reorganization costs............. 4,348 |
Gain on sale of investment in FSU |
joint ventures(4).............. | (4,370)
Other............................ (407) | (320) 184 (702) 598 (74) 63
------- | -------- -------- -------- -------- ------- -------
Total costs and |
expenses................ 98,142 | 105,578 117,358 130,883 127,758 59,786 76,422
------- | -------- -------- -------- -------- ------- -------
Income (loss) before provision for |
(benefit from) income taxes and |
extraordinary gains.............. (3,925) | 5,850 351 (12,905) 4,811 2,480 1,824
Provision for (benefit from) income |
taxes............................ 2,125 | 1,296 1,609 1,521 2,033 1,044 (5)
------- | -------- -------- -------- -------- ------- -------
Income (loss) before extraordinary |
gains............................ (6,050) | 4,554 (1,258) (14,426) 2,778 1,436 1,829
Extraordinary gains(5)............. 26,361 |
------- | -------- -------- -------- -------- ------- -------
Net income (loss).................. $ 20,311 | $ 4,554 $ (1,258) $(14,426) $ 2,778 $ 1,436 $ 1,829
======= | ======== ======== ======== ======== ======= =======
Earnings (loss) per share.......... $ .23 | $ .74 $ (.15) $ (1.48) $ .25 $ .13 $ .17
======= | ======== ======== ======== ======== ======= =======
Cash dividends -- common stock..... None | None None None None None None
======= | ======== ======== ======== ======== ======= =======

STATEMENT OF CASH FLOWS DATA:
Net cash provided (used) by
operating activities............. $ 636 $ 1,392 $ (1,999) $ 885 $ (3,520) $ (5,752) $ 7,132
Net cash provided (used) by
financing activities............. 3,895 10,880 17,981 7,865 (4,341) (1,032) (2,985)
Net cash provided (used) by
investing activities............. (4,137) (5,796) (18,861) (5,699) 3,660 1,099 (4,477)

OTHER FINANCIAL DATA:
EBITDA(6).......................... 9,178 13,699 11,426 11,567 22,229 12,393 12,039
EBIT(6)............................ 3,472 7,248 1,806 (2,191) 8,466 5,547 4,517
</TABLE>

12
<PAGE> 15

<TABLE>
<CAPTION>
ADJUSTED
AS OF AS OF
AS OF JULY 31, JANUARY 31, JANUARY 31,
-------------------------------------------------- ------------------- ------------
1991(2) 1992(2) 1993 1994 1995 1995 1996 1996(7)
------- ------- -------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
BALANCE SHEET DATA:
Working capital........................ $ 6,217 $19,342 $ 16,752 $ 6,152 $ 7,330 $ 6,303 $ 14,280 $ 16,648
Total assets........................... 60,619 84,487 126,000 131,856 135,070 135,200 131,396 131,396
Long-term debt......................... 19,076 8,813 17,444 23,922 25,243 24,077 22,510 3,478
Stockholders' equity................... 9,652 44,739 65,717 58,550 58,882 62,283 64,683 86,083
</TABLE>

- ---------------

(1) 1991 statement of operations data reflects results prior to the Company's
quasi-reorganization which was effected as of July 31, 1991 following its
emergence from Chapter 11 proceedings.

(2) Excludes financial results of GFS Company prior to October 30, 1992, the
acquisition date. See Note 9 of Notes to Consolidated Financial Statements.

(3) See Note 17 of Notes to Consolidated Financial Statements.

(4) Results for the year ended July 31, 1994 include $6,523,000 for the
write-off/reserve for the impairment of assets to their net realizable
value. Results for the year ended July 31, 1995 include a gain of $4,370,000
for the net effect of the sale of the Company's investment in the FSU joint
ventures. See Notes 17 and 16, respectively, of Notes to Consolidated
Financial Statements.

(5) In fiscal 1991, net income includes extraordinary gains of $1,153,000 for
utilization of net operating loss carryforwards and $25,208,000 related to
extinguishment of debt.

(6) EBITDA represents earnings before interest, taxes, depreciation and
amortization, restructuring charges, write-off/reserve for impairment of
assets, equity in (earnings) loss of 50% or less owned companies and joint
ventures, reorganization costs, gain on sale of investment in FSU joint
ventures, other and extraordinary gains. EBIT consists of the same items but
includes depreciation and amortization. Neither EBITDA nor EBIT should be
considered as an alternative to net income as an indicator of the Company's
operating performance or as an alternative to cash flow as a better measure
of liquidity.

(7) Reflects the issuance of the 3,500,000 shares of the Common Stock offered by
the Company in this Offering and the application of the estimated net
proceeds as described in "Use of Proceeds."

13
<PAGE> 16

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto and "Selected Consolidated
Financial Data" included elsewhere herein.

RESULTS OF OPERATIONS

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 I/O 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 a 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 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.

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 were 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.

14
<PAGE> 17

Fiscal Year 1995 Compared with Fiscal Year 1994

Revenues. For the fiscal year ended July 31, 1995, total revenues increased
12% from $118.0 million to $132.6 million. Land revenues increased 12% from
$38.5 million to $43.1 million, resulting from increased production in
Argentina, partially offset by reduced North America and Far East revenues. Land
acquisition revenues in the Far East declined as a result of the decommissioning
of an Australian crew. Marine revenues decreased 11% from $36.9 million to $32.8
million, resulting from the derigging of two seismic vessels, lower production
from three vessels due to offshore obstructions and bad weather, and the
reassignment of one vessel from contract work to proprietary data acquisition.
Improved market conditions for 2D surveys continued in the Far East where marine
revenues increased by $7.0 million during the current year. Data processing
revenues increased 20% from $30.0 million to $36.1 million, primarily resulting
from additional capacity. The improved data processing performance was partially
offset by lower revenues generated by the Company's processing center in
Jakarta, which is expected to be closed during 1997. Proprietary seismic data
sales increased 74% from $11.7 million to $20.4 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 increased 5% from $101.3 million to
$105.9 million, primarily resulting from increased operating levels. Cost of
services as a percentage of sales declined from 86% to 80% due to savings from
the restructuring program implemented during fiscal 1994 and higher
profitability of proprietary data sales.

During fiscal 1995, the Company accrued $800,000 of costs related to the
closing of the Jakarta processing center. In fiscal 1994, restructuring charges
of $1.4 million were recognized, primarily relating to severance costs
associated with a reduction in the Company's workforce.

Depreciation and Amortization. Depreciation and amortization expense
remained essentially unchanged at $13.8 million. Fiscal 1995 reflects decreases
in charges resulting from the prior year's restructuring program of $2.4
million, offset primarily by an increase in charges on new asset purchases.

Selling, General and Administrative. Selling, general and administrative
expenses decreased by 13% from $5.1 million to $4.4 million, primarily resulting
from the accrual of $607,000 in the prior year for benefits payable over five
years under an employment contract with a former executive.

Interest. Interest expense increased 67% from $3.1 million to $5.1 million
as a result of increased borrowings on working capital facilities and equipment
financing, as well as higher borrowing costs.

FSU Joint Venture. In April 1994, the Company acquired interests in joint
ventures that operate in the FSU. In acquiring these interests, the Company
exchanged common stock and cash commitments valued in excess of the fair market
value of the net assets received. The excess value was being amortized over a
20-year period, and the Company recorded $392,000 of amortization expense during
fiscal 1995. The joint ventures were in the start-up phase and the Company
recorded $1.5 million of equity losses during fiscal 1995. In June 1995, the
Company disposed of its FSU interests and recorded a $4.4 million gain on the
sale. See Note 16 to Notes to Consolidated Financial Statements.

Other. Other expenses (income) decreased from income of $702,000 to an
expense of $598,000. In fiscal 1995, net losses were recorded on the disposition
of property and equipment, partially offset by a gain on the sale of a vessel.
Income recorded in the prior year resulted primarily from a gain on the sale of
a vessel.

Income Taxes. Provisions for income taxes increased from $1.5 million to
$2.0 million resulting from higher taxable income (including a prior year
assessment) in foreign jurisdictions.

Fiscal Year 1994 Compared with Fiscal Year 1993

Revenues. During the year ended July 31, 1994, total revenue increased from
$117.7 million to $118.0 million. Land revenue increased 116% from $17.8 million
to $38.5 million, resulting from the addition of three land crews during fiscal
1993 and 1994. Marine revenue decreased 38% from $59.1 million to $36.9 million,
primarily resulting from the Company derigging four of its vessels during fiscal
1993 and 1994. Data processing revenues decreased 16% from $35.8 million to
$30.0 million, primarily resulting from excess

15
<PAGE> 18

capacity in the industry's marine segment. Proprietary seismic data sales
increased 232% from $3.5 million to $11.7 million, resulting from the increase
in the book value of the Company's proprietary data library from $10.3 million
to $19.6 million. This expansion has been in response to modifications in oil
and gas companies' spending strategies.

Operating Expenses. Cost of services decreased from $101.9 million to
$101.3 million, and as a percentage of total revenue, cost of services declined
from 87% to 86%. This decrease in operating expense as a percentage of revenue
resulted from improved margins on proprietary data sales and savings in the
fourth quarter as a result of the restructuring. In fiscal 1994, the Company
incurred restructuring charges of $1.4 million as discussed above.

Write-off of Assets. In fiscal 1994, the Company recorded $6.5 million in
expenses associated with the write-off/reserve of certain assets including $2.4
million of marine and $552,000 of land acquisition assets related to
decommissioned marine vessels and stacked land crews. The write-off/reserve also
included the write-down of other marine and land acquisition assets of $1.0
million. In addition, due to decreased activity in Indonesia the Company wrote
down data processing equipment by $2.1 million and wrote off $430,000 of
proprietary data.

Depreciation and Amortization. Depreciation and amortization expense
increased 43% from $9.6 million to $13.8 million. During fiscal 1993 and 1994,
the Company spent approximately $51.0 million for upgrades to marine vessels,
equipment for new land crews and new processing equipment to enhance its market
position. As a result, depreciation expense for the year ended July 31, 1994
increased a net $3.9 million. This increase includes approximately $600,000 in
depreciation savings recognized as a result of the write-off and reserve for
impairment of assets.

Selling, General and Administrative. Selling, general and administrative
expenses increased 15% from $4.4 million to $5.1 million, primarily resulting
from expensing severance benefits of $607,000.

Interest. Interest expense increased 153% from $1.2 million to $3.1
million. To provide additional working capital during fiscal 1994, the Company
obtained a new revolving credit facility providing advances up to $15.0 million,
borrowed approximately $900,000 against its Indonesian credit facility, borrowed
$6.1 million in short-term related party debt (of which $3.4 million was
outstanding for a majority of fiscal 1994) and financed approximately $4.2
million of equipment purchases.

FSU Joint Venture. During fiscal 1994, the Company exchanged 1,024,317
shares of Common Stock valued at $7.125 per share, or $7.3 million, and a cash
commitment in the amount of $1.0 million in return for interests in four joint
ventures which operate in the FSU. Subsequent to year-end, the Company increased
its ownership interest in two of the joint ventures by exchanging an additional
684,181 shares of Common Stock valued at $3.375 per share, or $2.3 million and
committing to an additional $2.0 million in cash plus loan guaranties. The
excess of the purchase price over the fair value of the net assets received was
being amortized over a 20-year period and for the fiscal year ended 1994, the
Company recorded $100,000 in amortization expense.

Other. Other expenses (income) decreased from an expense of $184,000 to
income of $702,000, resulting from improved U.S. to foreign currency exchange
rates and gains on the sale of property and equipment.

Income Taxes. Provisions for income taxes decreased from $1.6 million to
$1.5 million. The provision for income taxes in fiscal 1994 related primarily to
taxes on South American operations. The provision for income taxes in fiscal
1993 related primarily to operations in Mexico.

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 the proceeds of this
Offering, the unutilized portion of its working capital facility described below
(approximately $9.0 million at March 5, 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

16
<PAGE> 19

at an interest rate of 3% over a prime rate, secured by most of the Company's
world-wide assets. The Company plans to repay the entire outstanding balance on
this revolving credit facility with proceeds of this Offering. Following such
repayment, $17.0 million will be available under this revolver until its
maturity in April 1997, although the Company will seek to either reduce the cost
of the facility or replace it with a more cost-effective facility.

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 fiscal 1996 will be to
upgrade and expand the Company's land and marine data acquisition capabilities.

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. See "Income Taxes" in Note 1 to the
Consolidated Financial Statements, as well as Note 4 to the Consolidated
Financial Statements.

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.

17
<PAGE> 20

BUSINESS
GENERAL

The Company was founded in 1965 and provides seismic data acquisition and
processing services to the petroleum industry in selected markets worldwide. Oil
and gas companies utilize seismic data for the determination of suitable
locations for drilling exploratory wells and, increasingly, in reservoir
management for the development and production of oil and gas reserves. The
Company acquires seismic data in land, in marine, and in marsh, swamp and tidal
("transition zone") environments and processes data acquired by its own crews
and crews of other operators. In addition, the Company acquires and processes
seismic data on a non-exclusive basis for future sale to multiple customers.

In conjunction with certain changes in senior management in 1994, the
Company initiated a comprehensive program designed to restructure and refocus
each of the Company's geographic and operational lines of business. The
Company's actions included: (i) selling its marine and land seismic equipment
manufacturing operations; (ii) selling its joint venture interests in the FSU;
(iii) deploying its land and transition zone crews and its marine crews into
markets where the Company's presence would likely be significant, such as the
Gulf of Mexico transition zone; (iv) expanding its accumulation and sale of
proprietary seismic data to exploit the historically higher margins associated
with non-exclusive data sales; (v) emphasizing its research and development on
the proprietary seismicTANGO software in order to capitalize on its reputation
for seismic data processing innovation; and (vi) streamlining its cost structure
through personnel reductions, office consolidations, vessel deactivations and
the outsourcing of certain development and manufacturing functions. The
continued implementation of this program has increased revenues and
significantly improved operating efficiencies.

INDUSTRY OVERVIEW

Geophysical services enable oil and gas companies to determine whether
subsurface conditions are likely to be favorable for finding new oil and gas
accumulations and assist oil and gas companies in determining the size and
structure of previously identified oil and gas fields. These services consist of
the acquisition and processing of 3D and 2D seismic and other geophysical data,
which is used to produce computer-generated graphic cross-sections and maps of
the subsurface strata. The resulting cross-sections and maps are then analyzed
and interpreted by geophysicists and are used by oil and gas companies in the
acquisition of new leases, the selection of drilling locations on exploratory
prospects and in reservoir development and management.

Geophysical data is acquired by marine, land and transition zone crews. In
data acquisition, a source of acoustical energy is employed at or below the
earth's surface and an acoustical wave is produced through the discharge of
compressed air, the detonation of small explosive charges, or other energy
generating techniques. As the acoustical wave travels through the earth,
portions are reflected by variations in the underlying rock layers, and the
reflected energy is captured by geophones situated at intervals along specified
paths from the point of acoustical impulse. The resulting signals are then
transmitted to a recording unit which amplifies the reflected energy wave and
converts it into digital data. This data is then input into a specialized data
processing system that enhances the recorded signal by reducing noise and
distortion and improving resolution and arranges the input data to produce, with
the aid of plotting devices, an image of the subsurface strata. By interpreting
seismic data, oil and gas companies create detailed maps of prospective areas
and producing oil and gas reservoirs.

Advances in seismic technology have shifted the emphasis from 2D to 3D
seismic surveys. Three dimensional surveys generate extremely large data volumes
and involve the acquisition of a very dense grid of seismic data over a
precisely defined area. This heavy concentration of data requires extensive
computer processing to produce an accurate image of the subsurface. Processing
of 3D data is a complex operation involving the use of sophisticated proprietary
mathematical techniques to image the subsurface layers. Although 3D surveys are
acquired in a dense grid, computer analysis allows the geophysicist to focus the
data to closely examine and interpret important subsurface features.

18
<PAGE> 21

COMPANY OVERVIEW

The Company's principal areas of service include (i) land and transition
zone data acquisition, (ii) marine data acquisition, (iii) data processing and
(iv) sale of proprietary seismic data.

The success of 3D seismic offshore has led to a significant increase in
demand for 3D seismic onshore and in transition zone areas. In recent years,
exploration activity in land and transition zone areas by the major oil and gas
companies and independents has increased. In fiscal 1993, the Company acquired
GFS Company, a contractor in the Gulf Coast transition zone, and has
subsequently upgraded four crews utilizing advanced technology, high capacity
I/O equipment. Two of these land crews are working in the Gulf Coast area and
the other two have been dedicated to the expanding South American marketplace.
The Company expects to upgrade the fifth crew to RSR equipment during calendar
year 1996.

19
<PAGE> 22

miles of new seismic data were added to the Company's library, and the Company
expects to continue its emphasis on sales of proprietary seismic data.

SERVICES AND MARKETS

The Company acquires seismic data in marine, land and transition zone
environments and processes data acquired from its own crews as well as data
acquired by other geophysical crews. As of January 31, 1996, the Company
operated three land and transition zone crews in the U.S. and two land crews in
Argentina. The Company's six marine crews operate in selected markets worldwide.
The Company also operates seven seismic data processing facilities in major
petroleum centers around the world. In fiscal 1995 and the first half of fiscal
1996, 54% and 56%, respectively, of the Company's revenues were attributable to
international operations and export sales.

When performing geophysical services under contract for oil and gas
producers, the Company may be employed to acquire and/or process geophysical
data. Under any of these arrangements, the Company's entire work-product belongs
to the contracting party. The Company also accumulates and processes geophysical
data for its own account, preserving its work-product in a data library for
later sale to interested parties on a non-exclusive basis. When acquiring data
for its library, the Company generally obtains pre-funding commitments for a
majority of the cost of such surveys.

The following tables set forth the Company's revenues by service group and
geographical segment:

REVENUES BY SERVICE GROUP(1)

<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
------------------------------
1993 1994 1995
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Land and transition zone data acquisition.............. $ 17,801 $ 38,454 $ 43,108
Marine data acquisition................................ 59,104 36,871 32,781
Data processing........................................ 35,773 30,017 36,104
Sale of proprietary seismic data....................... 3,522 11,710 20,351
Other.................................................. 1,509 926 225
-------- -------- --------
Total........................................ $117,709 $117,978 $132,569
======== ======== ========
</TABLE>

- ---------------

(1) Revenues from data acquisition and data processing services are recorded as
revenues based on contractual rates set forth in the related contract if the
contract provides a separate rate for each segment. If the contract only
provides a rate for the overall service, revenue is recognized based on the
percentage of the work effort completed compared with the total work effort
involved in the contract.

20
<PAGE> 23

REVENUES BY GEOGRAPHICAL SEGMENT

<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
------------------------------
1993 1994 1995
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
United States(1)....................................... $ 37,476 $ 54,467 $ 63,048
Europe and Middle East................................. 24,699 29,891 20,230
Africa................................................. 13,020
Far East............................................... 38,569 19,401 27,360
South America.......................................... 3,945 14,219 21,931
-------- -------- --------
Total........................................ $117,709 $117,978 $132,569
======== ======== ========
</TABLE>

- ---------------

(1) Includes export sales of $10,138,000; $1,501,000; and $2,228,000 in fiscal
1993, 1994 and 1995, respectively.

See Note 11 of Notes to the Consolidated Financial Statements for
additional segment information.

Geophysical services are marketed from the Company's Houston offices and
from its regional administrative centers by personnel whose duties also
typically include technical, supervisory or executive responsibilities.
Contracts are obtained either through competitive bidding in response to
invitations for bids, by direct negotiation with the prospective customer or
through the initiation by the Company of surveys for its library of data, which
surveys are then offered for sale to oil and gas companies on a non-exclusive
basis.

Contracts for exclusive data acquisition involve payments on either a
"turnkey" or a "time" basis or on a combination of both methods. Under the
turnkey method, payments for data acquisition services are based upon the amount
of data collected, and the Company bears substantially all of the risk of
business interruption caused by inclement weather and other hazards. When
operating on a time basis, payments are based on agreed rates per unit of time,
which may be expressed in periods ranging from days to months, and most of the
risk of business interruption (except for interruptions caused by failure of the
Company's equipment) is borne by the customer. When a combination of both
turnkey and time methods is used, the risk of business interruptions is shared
in an agreed percentage by the Company and the customer. In each case, progress
payments are usually required unless it is expected that the job can be
accomplished in a brief period. In recent years, the Company's contracts for
data acquisition have been predominately on a turnkey or on a combination of
turnkey/time basis. Except for services performed at the Assen, Holland contract
data processing center, substantially all exclusive data processing work is done
on a turnkey basis.

DATA ACQUISITION SERVICES

Land and Transition Zone. The Company's land and transition zone data
acquisition services are conducted by five seismic crews, three of which operate
in the continental United States and two of which are dedicated to South
American markets and currently operate in Argentina. Two of the Company's
domestic crews were acquired in October 1992 as a result of the purchase of GFS
Company, which had extensive 3D experience in the transition zone environment.

Each of the Company's crews consists of a surveying unit which lays out the
lines to be recorded and marks the site for shot-hole placement or equipment
location, an explosives or mechanical vibrating unit and a recording unit that
lays out the geophones and recording instruments, directs shooting operations
and records the acoustical signal reflected from subsurface strata. On the
typical land seismic survey, the seismic crew is supported by several drill
crews, which are furnished by third parties under short-term contracts. Drill
crews operate in advance of the seismic crew and bore shallow holes for
explosive charges which, when detonated by the seismic crew, produce the
necessary acoustical impulse. In locations where the use of explosives is
precluded due to population density, technical requirements or ecological
factors, a mechanical vibrating unit or compressed air is substituted for
explosives as the acoustical source.

21
<PAGE> 24

The Company's land and transition zone crews are equipped to perform both
3D and 2D surveys, utilizing seismic recording instruments, geophones and a
variety of other seismic equipment, tools and stores. Each crew is capable of
recording seismic data utilizing any energy source. Company vehicles assigned to
each crew consist of a recording truck, two or more cable and geophone trucks,
an explosives unit or vibrator trucks and several personnel vehicles with
off-road capability. A summary of the Company's land and transition zone seismic
recording equipment as of January 31, 1996, is shown below:

<TABLE>
<CAPTION>
SEISMIC RECORDING
CAPACITY
CREW NO. LOCATION EQUIPMENT TYPE (CHANNELS)
- -------- ------------- ------------------ -------------------
<S> <C> <C> <C>
301............................ United States I/O System Two 1,800
303............................ United States Seismic Group 2,200
Recorder
325............................ United States I/O System Two-RSR 1,800
309............................ Argentina I/O System Two 1,400
312............................ Argentina I/O System Two 600
</TABLE>

Marine. Marine data acquisition services are carried out by the Company's
crews operating from vessels which have been modified or equipped to Company
specifications and outfitted with a full complement of seismic, navigational and
communications equipment.

The following table sets forth certain information concerning the
geophysical vessels operated by the Company as of January 31, 1996:

<TABLE>
<CAPTION>
SEISMIC
YEAR LOCATION AT RECORDING
ENTERED JANUARY 31, CAPACITY
VESSEL SERVICE 1996 LENGTH BEAM (CHANNELS)
--------------------------- ------- --------------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Acadian Commander.......... 1981 Gulf of Mexico 217 feet 44 feet 240/3D
Acadian Searcher........... 1983 Australia 217 feet 44 feet 240/3D
Ross Seal.................. 1987 Indonesia 176 feet 38 feet 240/3D
Seacor Surf................ 1991 Gulf of Mexico 135 feet 35 feet 240/3D
Polar Search............... 1992 North Sea 300 feet 51 feet 1,920/3D
Pearl Chouest.............. 1995 Gulf of Mexico 210 feet 40 feet 240/3D
</TABLE>

The Polar Search is chartered from a ship operator for an initial term
which expires on December 31, 1999. The vessel has recently been upgraded and
equipped with advanced technology including the capability to simultaneously
record up to eight seismic lines utilizing any combination of up to four Syntrak
480 streamers and two energy sources, as well as the most advanced navigation
and positioning equipment obtainable.

The Company's vessels (other than the Polar Search) are operated under
charter arrangements expiring at various times through January 1997.
Historically, the Company has been able to extend its vessel charters on terms
and at rates closely approximating the expiring terms and rates. The Company has
the right to renew the charters for the Ross Seal, the Seacor Surf and the Polar
Search for periods ranging from two to six years. Decisions on whether to extend
or renew expiring vessel charters or enter into charters with other vessel
owners are pending and will be made prior to each charter expiration date.

All of the vessels operated by the Company are equipped to perform both 3D
and 2D seismic surveys. During the last several years, a majority of the marine
seismic data acquisition services performed by the Company involved 3D surveys.
The Company frequently upgrades seismic survey equipment on its vessels to
enhance performance quality and incorporate new technology. Each vessel has an
equipment complement consisting of seismic recording instrumentation, 4,500 to
6,000 meters of digital seismic streamer cable (21,000 meters on the Polar
Search), cable location and seismic data location (binning) systems, multiple
navigation systems, a source control system which controls the synchronization
of the energy source (except in the case of the Seacor Surf) and a firing system
which generates the acoustical impulses. The streamer cable contains hydrophones
(marine geophones) that receive the acoustical impulses reflected by variations
in the

22
<PAGE> 25

subsurface strata. Data acquired by each channel in the digital cable is
partially processed before it is transmitted to recording instruments for
storage on magnetic media, thus reducing subsequent processing time and the
effective acquisition costs to the customer. In August 1994, the Company signed
a series of agreements with Syntron, Inc. ("Syntron"), pursuant to which the
Company expects to upgrade the recording systems on each of its vessels (other
than the Polar Search which has recently been upgraded) to the Syntrak 480
marine digital telemetry system.

Each marine seismic crew consists of approximately 20 persons, excluding
the ship's captain and ship personnel. Seismic personnel live aboard ship during
their tours of duty, which are staggered to permit continuous operations. During
seismic operations, Company personnel direct the positioning of the vessel using
sophisticated navigational equipment, deploy and retrieve the seismic streamer
cable and energy-source array, and operate all other systems relating to data
collection activities. Company personnel do not, however, have ultimate
responsibility for the vessel, which is operated by the captain and personnel
who are employees of the vessel owner.

DATA PROCESSING

The Company currently operates seven geophysical data processing centers,
including one under contract to a major oil and gas company. At each of the
centers, data received from the field, both from Company and other geophysical
crews, is processed to produce an image of the earth's subsurface using
proprietary computer software and techniques developed by the Company. The
Company also reprocesses older seismic data using new techniques designed to
enhance the quality of the data. A majority of the Company's data processing
services are performed on 3D seismic data.

A summary of the Company's processing centers is as follows:

<TABLE>
<CAPTION>
YEAR
OPENED
----
<S> <C>
Houston, Texas.............................................. 1966
Singapore................................................... 1970
London, England............................................. 1973
Brisbane, Australia......................................... 1982
Jakarta, Indonesia(1)....................................... 1984
Kuala Lumpur, Malaysia...................................... 1991
Assen, Holland(2)........................................... 1982
</TABLE>

- ---------------

(1) Operated by an 80%-owned subsidiary. The minority owner has an option to
reduce the Company's ownership to 41%. The Company plans to close the center
in fiscal 1997.

(2) Operated under customer contract, which expires in December 1996.

The Company's centers operate high capacity, advanced technology data
processing systems based on Convex and Hewlett Packard ("HP") systems with high
speed networks. Recent installations in Houston, London and Singapore of HP's
new K class servers ("KittyHawk") have been carried out to take advantage of
price/performance improvements.

The Company has installed its proprietary software, seismicTANGO, on three
land acquisition crews (two in North America and one in South America) and three
marine vessels. These systems run seismicTANGO software identical to that
utilized in the Company's data processing centers, allowing for ease in the
movement of data from the field to the data processing centers. Continuing
development of seismicTANGO is aimed at enhancing the resolution of data from
geologically complex formations, such as those present in Gulf of Mexico subsalt
plays.

PROPRIETARY SEISMIC DATA

In its data acquisition and processing efforts, the Company acquires and
processes data for its own account through surveys partially funded by multiple
customers. Once acquired and processed, such surveys are then offered for sale
to other customers on a nonexclusive basis. Factors considered in determining

23
<PAGE> 26

whether to undertake such surveys include the availability of initial
participants to underwrite a majority of the costs, the location to be surveyed,
the probability and timing of future lease, concession and development activity
in the area, and the availability, quality and price of competing data.

During the past three years, the Company has increased its emphasis on its
proprietary data activities. Since the beginning of fiscal 1995 through January
31, 1996, 117,000 line miles of new seismic data were added to the Company's
library. The Company expects to continue its emphasis on the sale of proprietary
seismic data and in 1996 expects to selectively add additional Gulf of Mexico
and North Sea data to its library.

TECHNOLOGY

The geophysical industry is highly technical, and the requirements for the
acquisition and processing of seismic data have evolved continuously over the
past 50 years. Accordingly, it is of significance to the Company that its
technological capabilities remain comparable to those of its competitors,
whether through continuing research and development, strategic alliances with
equipment manufacturers or by acquiring technology under license from others.
The Company has introduced several technological innovations in its geophysical
service business, which have become industry standard practice in both
acquisition and processing. In August 1994, the Company sold certain inventory,
data acquisition equipment and technology and transferred its marine and land
engineering and manufacturing department personnel to Syntron. Syntron is a
leading manufacturer of advanced digital data acquisition systems which have
gained wide acceptance in the industry. The Company has upgraded one vessel and
plans to upgrade each of its other vessels to Syntron equipment pursuant to
agreements that continue for approximately 18 months. Until such time as
currently operated data acquisition equipment is replaced, the Company will
continue to have access to the equipment and technology sold to Syntron through
leasing arrangements.

Currently, the Company employs approximately 40 persons in its research and
development activities, substantially all of whom are scientists, engineers or
programmers. During fiscal year 1993, 1994 and 1995, research and development
expenditures were $4.2 million, $4.9 million and $2.9 million, respectively. The
reduced level of expenditures in 1995 reflects the transfer of the Company's
marine and land engineering department to Syntron in August 1994.

The Company only periodically applies for patents on internally developed
technology. This policy is based upon the belief that most proprietary
technology, even where regarded as patentable, can be more effectively protected
by maintaining confidentiality than through disclosure and a patent enforcement
program.

Certain of the equipment, processes and techniques used by the Company are
subject to the patent rights of others, and the Company holds non-exclusive
licenses with respect to a number of such patents. While the Company regards as
beneficial its access to others' technology through licensing, the Company
believes that substantially all presently licensed technology could be replaced
without significant disruption to the business should the need arise.

The Company's continual upgrading of technology, together with the purchase
of new equipment during the previous three years, has required a major
commitment to capital spending. The amount of future capital expenditures will
depend on the availability of funding and market requirements as dictated by oil
and gas company activity levels.

24
<PAGE> 27

The following table sets forth, for the three years ended July 31, 1995,
the Company's capital expenditures for each of its significant operations.

<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
---------------------------------
1993 1994 1995
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Land and transition zone seismic crews............ $ 8,670 $ 5,066 $ 5,791
Marine seismic crews.............................. 25,177(1) 3,370 8,296
Data processing centers........................... 6,257 1,931 3,438
Other............................................. 322 324 717
------- ------- -------
Total................................... $40,426 $10,691 $18,242
======= ======= =======
</TABLE>

- ---------------

(1) Includes $7,800,000 of assets purchased in exchange for deferred credits on
future seismic services. See Note 10 to Consolidated Financial Statements.

COMPETITION AND OTHER BUSINESS CONDITIONS

Competition. The acquisition and processing of seismic data for the oil and
gas exploration industry has historically been highly competitive worldwide.
However, as a result of changing technology and increased capital requirements,
the seismic industry has consolidated substantially since the late 1980's. The
consolidation has reduced the number of competitors, and the largest competitors
remaining in the market are Western Geophysical (a division of Western Atlas
Inc.), Geco-Prakla (a division of Schlumberger), Compagnie Generale Geophysique
and Petroleum Geo-Services A/S. Although reliable comparative figures are not
available in all cases, the Company believes that its largest competitors have
more extensive and diversified operations and have financial and operating
resources in excess of those available to the Company. Competition for available
seismic surveys is based on several competitive factors, including price,
performance, dependability, crew experience and equipment availability.

Operating Conditions/Seasonality. The Company's data acquisition activities
often are conducted under extreme weather and other hazardous conditions.
Accordingly, these operations are subject to risks of injury to personnel and
loss of equipment. The Company carries insurance against the destruction of, or
damage to, its chartered vessels and its geophysical equipment in amounts that
it considers adequate. The Company may not, however, be able to obtain insurance
against certain risks or for equipment located from time to time in certain
areas of the world. The Company obtains insurance against war, expropriation,
confiscation and nationalization when such insurance is available and when
management considers it advisable to do so. Such coverage is not always
available and, when available, is subject to unilateral cancellation by the
insuring companies on short notice. The Company also carries insurance against
pollution hazards and injury to persons and property that may result from its
operations and considers the amounts of such insurance to be adequate.

Fixed costs, including costs associated with vessel charters and operating
leases, labor costs, depreciation and interest expense, account for more than
one-half of the Company's costs and expenses. As a result, downtime or low
productivity resulting from reduced demand, equipment failures, weather
interruptions or otherwise, can result in significant operating losses.

25
<PAGE> 28

BACKLOG

At January 31, 1996, the Company's backlog of commitments for services was
$82.5 million, compared with $86.6 million at July 31, 1995. Such backlog
consisted of written orders or commitments believed to be firm. Contracts for
services are occasionally varied or modified by mutual consent and in certain
instances are cancelable by the customer on short notice without penalty;
consequently, the Company's backlog as of any particular date may not be
indicative of the Company's actual operating results for any succeeding fiscal
period. It is anticipated that approximately 76% of the orders and commitments
included in backlog at January 31, 1996, will be completed prior to the end of
fiscal 1996.

SIGNIFICANT CUSTOMERS

Historically, the Company's principal customers have been international oil
and gas companies, foreign national oil companies and independent oil and gas
companies. In fiscal 1993, Royal Dutch Shell and its subsidiaries and affiliates
accounted for 11% of the Company's revenues. In fiscal 1993 and 1994, Mobil Oil
Corporation and its subsidiaries and affiliates accounted for 16% and 10%
respectively, of the Company's revenues. In fiscal 1995, no single customer
accounted for 10% or more of total revenues. Due to the contractual nature of
the Company's operations, it is anticipated that significant portions of future
consolidated revenues may continue to be attributable to a few customers,
although it is likely that the identity of such customers may change from period
to period.

EMPLOYEES

At January 31, 1996, the Company employed approximately 1,200 full-time
personnel. The Company has no collective bargaining agreements with its United
States employees. However, the Company's employees in its data processing center
in Singapore have been organized by the Singapore Industrial and Services
Employees' Union. The Company considers the relations with its employees to be
good.

26
<PAGE> 29

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY

The table below sets forth certain information regarding the Company's
executive officers and directors.

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ----------------------------------- --- -------------------------------------------
<S> <C> <C>
Douglas B. Thompson................ 46 Chairman of the Board, Director

Stephen J. Ludlow.................. 45 President and Chief Executive Officer,
Director

Richard W. McNairy................. 55 Vice President and Chief Financial Officer

Nicholas A. C. Bright.............. 49 Regional Manager -- Europe, Africa, and
Middle East Operations

David E. Graham.................... 48 Regional Manager -- North America
Operations

Timothy L. Wells................... 42 Regional Manager -- Far East Operations

Allan C. Pogach.................... 51 Vice President, Secretary, and Treasurer

George F. Baker.................... 56 Director

James B. Clement................... 50 Director

Clayton P. Cormier................. 63 Director

Steven J. Gilbert.................. 48 Director

Jack C. Threet..................... 67 Director
</TABLE>

Douglas B. Thompson. Mr. Thompson has served as chairman of the board since
May 1994 and has been president of Jupiter Management Co., Inc. ("Jupiter
Management"), a general partner of Jupiter & Associates ("Jupiter"), since
Jupiter Management's formation in 1989. He is also the sole director and
shareholder of Jupiter Investment Company and J/D Funding Corp., both general
partners of Jupiter, and is the sole shareholder of Jupiter Management. In
addition, he is chairman of the board and president of WellTech, Inc., a well
servicing company based in Houston, Texas.

Stephen J. Ludlow. Mr. Ludlow has been employed by the Company for 24 years
and has served as chief executive officer since May 1994. He was executive vice
president of the Company for the preceding four years following eight years of
service in a variety of progressively more responsible management positions,
including several years of service as the executive responsible for operations
in Europe, Africa and the Middle East.

Richard W. McNairy. Mr. McNairy has served as vice president and chief
financial officer of the Company since February 1994, prior to which he was
corporate controller of Halliburton Energy Services Group for three years and
vice president -- finance for its geophysical services subsidiary for the
preceding two years. Prior to 1989 and since 1974 he was employed in various
financial and operational management capacities with predecessor companies
acquired by Halliburton. Mr. McNairy has 26 years of experience in the oil
service industry.

Nicholas A. C. Bright. Mr. Bright is the regional manager in charge of all
Company operations in Europe, Africa and the Middle East. He joined the Company
in 1980 and served in a succession of more responsible management positions
prior to assuming his present position in 1989.

David E. Graham. Mr. Graham joined the Company in July 1995, was designated
an executive officer in October 1995, and is the regional manager in charge of
North American geophysical operations. Mr. Graham has 26 years of experience in
the exploration business including the past eight years with Schlumberger, where
he most recently served as Western Hemisphere sales and marketing manager for
Geco-Prakla, a geophysical subsidiary of Schlumberger.

Timothy L. Wells. Mr. Wells was appointed to his present position as the
regional manager in charge of the Company's Far Eastern geophysical operations
in August 1995, was designated an executive officer in

27
<PAGE> 30

October 1995, and has been employed by the Company in a series of progressively
more responsible, technical, and managerial positions since 1981.

Allan C. Pogach. Mr. Pogach has served as vice president and treasurer of
the Company since 1981 and as corporate secretary since July 1994. Mr. Pogach
has 25 years of experience in energy-related companies.

George F. Baker. Mr. Baker has been president of Cambridge Capital
Holdings, Inc., a private investment firm, for more than five years. He also
serves as chairman of the board and president of Whitehall Corporation, a
manufacturer of seismic towed arrays for offshore oil exploration, and through
its Aerocorp subsidiary, is a provider of aircraft maintenance for the airline
industry.

James B. Clement. Mr. Clement has served as the president and chief
executive officer of Offshore Logistics, Inc., a supplier of helicopter,
transportation, and related services to the oil and gas industry since November
1987, where he is also a director. Mr. Clement also is a member of the board of
directors of Pride Petroleum Services, Inc.

Clayton P. Cormier. Mr. Cormier is currently a financial and insurance
consultant. From 1986 to 1991, Mr. Cormier was a senior vice president in the
oil and gas division of Johnson & Higgins, an insurance broker. From 1979 to
1986, he was the chairman of the board, president, and chief executive officer
of Ancon Insurance Company, S.A. Prior to that time, he was an assistant
treasurer of Exxon Corporation.

Steven J. Gilbert. Mr. Gilbert has been managing general partner of Soros
Capital L.P. since 1992. Soros Capital L.P. is the principal venture capital and
leveraged transaction entity of Quantum Group of Funds. He is also the managing
director of Commonwealth Capital Partners, L.P., a private equity investment
fund. From 1984 to 1988, Mr. Gilbert was the managing general partner of
Chemical Venture Partners, which he founded. Mr. Gilbert is a director of Katz
Media Group, Inc., NFO Research, Inc., The Asian Infrastructure Fund, Peregrine
Indonesia Fund, Inc., Terra Nova (Bermuda) Holdings, Ltd., GTS-Duratek, Inc.,
Sydney Harbour Casino Holdings, Ltd., and UroMed, Inc., and is a member of the
Advisory Committee of Donaldson, Lufkin & Jenrette Merchant Banking.

Jack C. Threet. Mr. Threet was formerly vice president for exploration of
Shell Oil Company. Prior to his retirement from Shell Oil Company in 1987, Mr.
Threet was also a member of the boards of directors of several affiliates of
Shell Oil Company.

DESCRIPTION OF CAPITAL STOCK

COMMON STOCK

The Company is authorized to issue 20,000,000 shares of Common Stock, par
value $.01 per share, and at March 5, 1996, there were 11,123,422 shares
outstanding, and 1,356,401 shares were reserved for issuance upon exercise of
outstanding warrants and options. Each share of Common Stock has one vote on all
matters presented to the stockholders. Subject to the rights and preferences of
any Preferred Stock (as defined below) which may be designated and issued, the
holders of Common Stock are entitled to receive dividends, if and when declared
by the board of directors, and are entitled on liquidation to all assets
remaining after the payment of liabilities. The Common Stock has no preemptive
or other subscription rights. Outstanding shares of Common Stock are and the
shares of Common Stock offered by the Company, when issued and paid for, will be
fully paid and nonassessable. Since the Common Stock does not have cumulative
voting rights, the holders of more than 50% of the shares may, if they choose to
do so, elect all of the directors and, in that event, the holders of the
remaining shares will not be able to elect any directors. For additional
provisions relating to the ability of certain persons to elect directors, see
"-- Certain Provisions of Governing Documents." Chemical Mellon Shareholder
Services, Dallas, Texas, is the transfer agent and registrar for the Common
Stock.

PREFERRED STOCK

The board of directors of the Company, without any action by the
stockholders of the Company, is authorized to issue up to 1,000,000 shares of
preferred stock, par value $.01 per share ("Preferred Stock"), in

28
<PAGE> 31

one or more series and to determine the voting rights (including the right to
vote as a series on particular matters), preferences as to dividends and in
liquidation and the conversion and other rights of each such series. There are
no shares of Preferred Stock outstanding, and no series of Preferred Stock has
been designated.

Although the board of directors has no present intention of doing so, it
could issue a series of Preferred Stock that could, depending on the terms of
such series, provide for a liquidation preference over the Common Stock or
impede the completion of a merger, tender offer or other takeover attempt. The
board of directors, in so acting, could issue Preferred Stock having terms that
could discourage an acquisition attempt through which an acquiror may be
otherwise able to change the composition of the board of directors, including a
tender or exchange offer or other transaction that some, or a majority, of the
Company's stockholders might believe to be in their best interests.

CERTAIN PROVISIONS OF GOVERNING DOCUMENTS

The Company's bylaws also contain provisions which may affect control of
the Company and restrict its ability to engage in certain transactions. In
general, the Company's bylaws require that, until such time as a group of
individual and institutional investors (collectively, the "Jupiter Group") and
Quantum Partners LDC, a Netherlands Antilles corporation ("Quantum"), no longer
own more than 20% of the Company's outstanding Common Stock, they will have the
right to (i) designate an aggregate of six nominees for election as directors
(out of a present seven positions) at each annual meeting of the stockholders,
(ii) appoint one additional director to an expanded board of directors if the
Company defaults in any payment obligation on any of its then outstanding debt
instruments or equity securities or if the Company were to incur losses for any
five consecutive fiscal quarters and (iii) designate two of the three members of
the executive committee of the board. Both the Jupiter Group and Quantum have
agreed that during such time they will vote their shares in favor of the other's
nominees.

Upon consummation of this Offering, the Jupiter Group and Quantum will
collectively own less than 20% of the Company's outstanding Common Stock, and
accordingly, they will no longer have the right to designate board members for
election pursuant to the Company's bylaws. See "Selling Stockholder."

In addition, the bylaws prohibit the Company from engaging in certain
transactions, except upon the prior approval of at least five of the directors
designated by the Jupiter Group and Quantum, including (i) mergers,
consolidations, restructuring and recapitalizations, (ii) any issuance of Common
Stock or securities convertible into or exchangeable for Common Stock in
quantities exceeding approximately 933,333 shares, (iii) any sale of
substantially all of the assets or a majority of the equity securities of any
"significant subsidiary" and certain other sales of assets outside the ordinary
course of business, (iv) any repurchase by the Company of its outstanding
securities, or (v) any transaction between the Company and Jupiter, any member
of the Jupiter Group or Quantum except for certain transactions in the ordinary
course of business and certain other transactions entered into in connection
with or contemplated by the plan of reorganization consummated in connection
with the Company's emergence from Chapter 11 proceedings in July 1991.

29
<PAGE> 32

SELLING STOCKHOLDER

The Selling Stockholder has agreed to sell the number of shares of Common
Stock set forth opposite its name. The table sets forth information with respect
to ownership of the Common Stock by the Selling Stockholder as of the date of,
and as adjusted to reflect, the sale of shares covered by this Prospectus.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE OFFERING OWNED AFTER OFFERING
---------------------- ------------------------
PERCENT SHARES TO NUMBER PERCENT OF
NAME NUMBER OF CLASS BE SOLD OF SHARES CLASS(1)
- ---------------------------------------- ---------- -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Quantum Partners LDC(2)................. 1,024,263 9.17% 200,000 824,263 5.62%
</TABLE>

- ---------------

(1) Assuming the Underwriters' over-allotment option is not exercised.

(2) Includes 40,443 shares of Common Stock which may be acquired upon the
exercise of warrants by Quantum.

For a discussion of Quantum's right to designate directors to the Company's
board of directors and their relationship to the Jupiter Group, see "Description
of Capital Stock -- Certain Provisions of Governing Documents."

UNDERWRITING

The names of the Underwriters of the shares of Common Stock offered hereby
and the aggregate number of shares which each has severally agreed to purchase
from the Company and the Selling Stockholder (subject to the terms and
conditions specified in the Underwriting Agreement) are as follows:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Dillon, Read & Co. Inc....................................................
Raymond James & Associates, Inc...........................................
Rodman & Renshaw, Inc.....................................................

---------
Total........................................................... 3,700,000
=========
</TABLE>

The Managing Underwriters are Dillon, Read & Co. Inc., Raymond James &
Associates, Inc. and Rodman & Renshaw, Inc.

If any shares of Common Stock offered hereby are purchased by the
Underwriters, all such shares will be so purchased. The Underwriting Agreement
contains certain provisions whereby if any Underwriter defaults in its
obligation to purchase such shares and if the aggregate obligations of the
Underwriters so defaulting do not exceed 10% of the shares hereby, the remaining
Underwriters, or some of them, must assume such obligations.

The shares of Common Stock offered hereby are being offered severally by
the Underwriters for sale at the price set forth on the cover page hereof, or at
such price less a concession not to exceed $ per share on sales to certain
dealers. The Underwriters may allow, and such dealers may reallow a concession
not to exceed $ per share on sales to certain other dealers. The offering of
the shares of Common Stock is made for delivery when, as, and if accepted by the
Underwriters and subject to prior sale and to withdrawal, cancellation, or
modification of the offer without notice. The Underwriters reserve the right to
reject any order for the purchase of the shares. After the shares are released
for sale to the public, the public offering price, the concession and the
reallowance may be changed by the Managing Underwriters.

30
<PAGE> 33

The Company has granted to the Underwriters an option to purchase up to an
additional 555,000 shares of Common Stock on the same terms per share. If the
Underwriters exercise this option, each of the Underwriters will have a firm
commitment, subject to certain conditions, to purchase approximately the same
proportion of the aggregate shares so purchased as the number of shares to be
purchased by it shown in the above table bears to the total number of shares in
such table. The Underwriters may exercise such option on or before the 45th day
from the date of the public offering of the shares offered hereby and only to
cover over-allotments made of the shares in connection with this Offering.

The Company and certain of its directors and executive officers have agreed
not to offer, sell, contract to sell, grant any option to sell or otherwise
dispose of, directly or indirectly, any shares of Common Stock or securities
convertible or exchangeable into or exercisable for Common Stock other than the
shares offered hereby for a period of 120 days after the date of this Prospectus
without the prior written consent of Dillon, Read & Co. Inc., except that the
Company may, without that consent, issue shares of Common Stock pursuant to its
existing stock and benefit plans.

The Company and the Selling Stockholder have agreed in the Underwriting
Agreement to indemnify the Underwriters against certain civil liabilities,
including liabilities under the Securities Act, or to contribute to payments
that the Underwriters may be required to make in respect thereof.

LEGAL MATTERS

Certain legal matters in connection with the validity of the shares of
Common Stock offered hereby will be passed upon for the Company and the Selling
Stockholder by Porter & Hedges, L.L.P., Houston, Texas. Certain legal matters in
connection with the Common Stock offered hereby are being passed upon for the
Underwriters by Vinson & Elkins L.L.P., Houston, Texas.

EXPERTS

The financial statements as of July 31, 1994 and 1995 and for each of the
three years in the period ended July 31, 1995, included in this prospectus have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and have been so included in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.

31
<PAGE> 34

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Independent Auditors' Report......................................................... F-2
Consolidated Statements of Operations for the years ended July 31, 1993, 1994 and
1995 and for the six months ended January 31, 1995 and 1996........................ F-3
Consolidated Balance Sheets as of July 31, 1994 and 1995 and January 31, 1996........ F-4
Consolidated Statements of Cash Flows for the years ended July 31, 1993, 1994 and
1995 and for the six months ended January 31, 1995 and 1996........................ F-5
Consolidated Statements of Changes in Stockholders' Equity for the years ended July
31, 1993, 1994 and 1995 and for the six months ended January 31, 1996.............. F-7
Notes to Consolidated Financial Statements........................................... F-8
</TABLE>

F-1
<PAGE> 35

INDEPENDENT AUDITORS' REPORT

Digicon Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Digicon
Inc. and Subsidiaries (the "Company") as of July 31, 1994 and 1995, and the
related consolidated statements of operations, cash flows and changes in
stockholders' equity for each of the three years in the period ended July 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at July 31, 1994
and 1995, and the results of its operations and its cash flows for each of the
three years in the period ended July 31, 1995 in conformity with generally
accepted accounting principles.

DELOITTE & TOUCHE LLP

Houston, Texas
October 12, 1995

F-2
<PAGE> 36

DIGICON INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE SIX
FOR THE YEARS ENDED MONTHS ENDED
JULY 31, JANUARY 31,
-------------------------------- ------------------
1993 1994 1995 1995 1996
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
REVENUES.................................. $117,709 $117,978 $132,569 $62,266 $78,246
COSTS AND EXPENSES:
Operating expenses:
Cost of services..................... 101,866 101,310 105,912 47,709 63,680
Restructuring........................ 1,363 800
Write-off/reserve for impairment of
assets............................... 6,523
Depreciation and amortization........... 9,620 13,758 13,763 6,846 7,522
Selling, general and administrative..... 4,417 5,101 4,428 2,164 2,527
Interest................................ 1,217 3,085 5,142 2,501 2,625
Equity in loss of 50% or less-owned
companies and joint ventures......... 54 445 1,485 640 5
Gain on sale of investment in FSU joint
ventures............................. (4,370)
Other................................... 184 (702) 598 (74) 63
-------- -------- -------- ------- -------
Total........................... 117,358 130,883 127,758 59,786 76,422
-------- -------- -------- ------- -------
Income (loss) before provision for
(benefit from) income taxes............. 351 (12,905) 4,811 2,480 1,824
Provision for (benefit from) income
taxes................................... 1,609 1,521 2,033 1,044 (5)
-------- -------- -------- ------- -------
NET INCOME (LOSS)......................... $ (1,258) $(14,426) $ 2,778 $ 1,436 $ 1,829
======== ======== ======== ======= =======
PER SHARE OF COMMON STOCK:
Earnings (loss) per share............... $ (.15) $ (1.48) $ .25 $ .13 $ .17
======== ======== ======== ======= =======
Weighted average shares................. 8,674 9,769 10,958 11,046 10,848
======== ======== ======== ======= =======
Cash dividends -- common stock.......... None None None None None
======== ======== ======== ======= =======
</TABLE>

See Notes to Consolidated Financial Statements

F-3
<PAGE> 37

DIGICON INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR PAR VALUE AND NUMBER OF SHARES)

<TABLE>
<CAPTION>
JULY 31, (UNAUDITED)
---------------------- JANUARY 31,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash............................................................. $ 8,365 $ 4,209 $ 3,907
Restricted cash investments...................................... 320 670 332
Accounts and notes receivable (net of allowance for doubtful
accounts: 1994, $701; 1995, $703; January 31, 1996, $595)...... 30,427 40,662 42,130
Note receivable from FSU joint venture, current portion.......... 443
Materials and supplies inventory (net of reserves: 1994, $68;
1995, $66; January 31, 1996, $66).............................. 5,410 1,335 1,388
Prepayments and other............................................ 4,692 6,619 5,714
-------- -------- --------
Total current assets...................................... 49,657 53,495 53,471
Property and equipment:
Seismic equipment................................................ 48,622 53,615 57,855
Data processing equipment........................................ 27,795 26,703 23,737
Seismic ships.................................................... 8,291
Leasehold improvements and other................................. 30,809 29,394 30,694
-------- -------- --------
Total..................................................... 115,517 109,712 112,286
Less accumulated depreciation.................................. 66,625 60,874 63,390
-------- -------- --------
Property and equipment -- net............................. 48,892 48,838 48,896
Proprietary seismic data........................................... 19,638 28,444 24,859
Investment in FSU joint ventures................................... 8,478
Goodwill (net of accumulated amortization: 1994, $743; 1995,
$1,168; January 31, 1996, $1,379)................................ 3,502 3,077 2,866
Other assets....................................................... 802 1,216 1,304
Note receivable from FSU joint venture, non-current portion........ 887
-------- -------- --------
Total..................................................... $131,856 $135,070 $131,396
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term related party loans................................... $ 2,695
Current maturities of long-term debt............................. 6,166 $ 10,915 $ 9,479
Accounts payable -- trade........................................ 23,740 18,875 15,112
Accrued interest................................................. 293 409 422
Other accrued liabilities........................................ 9,205 14,869 12,767
Income taxes payable............................................. 1,406 1,097 1,411
-------- -------- --------
Total current liabilities................................. 43,505 46,165 39,191
Non-current liabilities:
Long-term debt--less current maturities.......................... 23,922 25,243 22,510
Deferred credits................................................. 5,538 3,675 3,669
Other non-current liabilities.................................... 341 1,105 1,343
-------- -------- --------
Total non-current liabilities............................. 29,801 30,023 27,522
Commitments and contingent liabilities (Note 7)
Stockholders' equity:
Common stock, $.01 par value; July 31, 1994 -- authorized:
60,000,000 shares; issued: 31,352,273 shares; July 31, 1995 and
January 31, 1996 -- authorized: 20,000,000 shares; issued:
11,134,939 shares and 11,123,422 shares, respectively.......... 314 111 111
Additional paid-in capital....................................... 69,366 71,895 71,095
Accumulated deficit from August 1, 1991.......................... (11,130) (8,352) (6,523)
Less: Treasury stock, at cost; 858,497 shares.................... (4,772)
-------- -------- --------
Stockholders' equity...................................... 58,550 58,882 64,683
-------- -------- --------
Total..................................................... $131,856 $135,070 $131,396
======== ======== ========
</TABLE>

See Notes to Consolidated Financial Statements

F-4
<PAGE> 38

DIGICON INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE SIX
FOR THE YEARS ENDED MONTHS ENDED
JULY 31, JANUARY 31,
------------------------------ -----------------
1993 1994 1995 1995 1996
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)................................................. $ (1,258) $(14,426) $ 2,778 $ 1,436 $ 1,829
Non-cash items included in income (loss):
Restructuring accrual........................................... 777 14 (537)
Write-off/reserve for impairment of assets...................... 6,523
Depreciation and amortization................................... 9,620 13,758 13,763 6,846 7,522
Amortization of warrants issued with short-term related party
loans......................................................... 89 27
Amortization of deferred gain on sale/leaseback................. (898) (496) (90)
(Gain) loss on disposition of property and equipment............ (129) (746) 755 (87) 52
Equity in loss of 50% or less-owned companies and joint
ventures...................................................... 54 445 1,485 640 5
Gain on sale of investment in FSU joint ventures................ (4,370)
Gain on settlement of deferred credits.......................... (864)
Write-down of proprietary seismic data to market................ 589 348 1,786 198 198
Other........................................................... (131) (148)
Change in operating assets/liabilities (exclusive of the effects
of the purchase of GFS):
Accounts and notes receivable................................... 2,937 5,203 (7,314) (2,678) (1,468)
Accounts and notes receivable from FSU joint ventures........... 59
Materials and supplies inventory................................ (2,312) 1,145 291 93 (53)
Prepayments and other........................................... (608) (610) (1,326) (2,296) 905
Proprietary seismic data........................................ (4,174) (10,153) (10,592) (6,540) 3,387
Other........................................................... (515) 508 207 (118)
Accounts payable -- trade....................................... (2,623) (4,500) (5,331) (5,403) (3,584)
Accrued interest................................................ (68) 133 116 131 13
Other accrued liabilities....................................... (1,188) 3,679 5,551 2,787 (2,012)
Income taxes payable............................................ (1,361) 546 (309) 193 314
Deferred credits................................................ (832) (1,430) (414) (415) (6)
Other non-current liabilities................................... 341 762 83 238
-------- -------- -------- -------- --------
Total cash provided (used) by operating activities......... (1,999) 885 (3,520) (5,752) 7,132

FINANCING ACTIVITIES:
Payment of long-term debt......................................... (8,102) (3,158) (7,206) (2,505) (4,889)
Net borrowings (payments) under credit agreements................. 5,000 8,368 1,648 2,534 (2,068)
Net proceeds from sale of common stock............................ 21,083 (40) (72) (39)
Net proceeds from sale of treasury stock.......................... 3,984 3,972
Borrowings of short-term related party loans...................... 6,081 30 30
Payments of short-term related party loans........................ (3,386) (2,725) (1,052)
-------- -------- -------- -------- --------
Total cash provided (used) by financing activities......... 17,981 7,865 (4,341) (1,032) (2,985)

INVESTING ACTIVITIES:
(Increase) decrease in restricted cash investments................ 79 304 (350) (432) 338
Increase in investment in FSU joint ventures...................... (1,535) (1,875) (807)
Sale to Syntron, Inc.:
Inventories and technologies.................................... 1,630 1,630
Property and equipment.......................................... 1,370 1,370
Sale of investment in FSU joint ventures.......................... 6,000
Purchase of property and equipment................................ (21,485) (5,406) (4,552) (1,757) (5,185)
Sale of property and equipment.................................... 2,545 938 1,437 1,095 370
-------- -------- -------- -------- --------
Total cash provided (used) by investing activities......... (18,861) (5,699) 3,660 1,099 (4,477)
Currency (gain) loss on foreign cash.............................. (241) (88) 45 39 28
-------- -------- -------- -------- --------
Change in cash and cash equivalents............................... (3,120) 2,963 (4,156) (5,646) (302)
Beginning cash and cash equivalents balance....................... 8,522 5,402 8,365 8,365 4,209
-------- -------- -------- -------- --------
Ending cash and cash equivalents balance.......................... $ 5,402 $ 8,365 $ 4,209 $ 2,719 $ 3,907
======== ======== ======== ======== ========
</TABLE>

See Notes to Consolidated Financial Statements

F-5
<PAGE> 39

DIGICON INC. AND SUBSIDIARIES

SUPPLEMENTARY SCHEDULES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE SIX
FOR THE YEARS ENDED MONTHS ENDED
JULY 31, JANUARY 31,
------------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Increase in materials and supplies inventories for deferred credits..... $ 987
Increase in assets/liabilities due to purchase of GFS Company:
Cash.................................................................. 65
Restricted cash investments........................................... 75
Accounts and notes receivable......................................... 3,025
Materials and supplies inventory...................................... 183
Prepayments and other................................................. 363
Property and equipment -- net......................................... 3,168
Goodwill.............................................................. 4,245
Long-term debt........................................................ 2,431
Accounts payable -- trade............................................. 6,558
Accrued interest...................................................... 13
Other accrued liabilities............................................. 969
Common stock.......................................................... 1,153
Increase (decrease) in investment in FSU joint ventures for:
Common stock.......................................................... $ 7,299 $ 2,309 $ 2,309
Accounts and note receivable from FSU joint ventures.................. (409) (409)
Other assets.......................................................... 135
Other accrued liabilities............................................. 841
Long-term debt........................................................ 245
Increase (decrease) in property and equipment for:
Accounts and notes receivable......................................... 2,045
Execution of capital leases and notes................................. 9,844 4,227 11,224 843 2,788
Accounts payable -- trade............................................. 2,289 1,058 334 257 (179)
Deferred credits payable.............................................. 6,813 (1,449)
Prepayments and other................................................. (1,104)
Increase in prepayments on property and equipment for notes payable..... 601
Increase in notes receivable for:
Sale of property and equipment........................................ 250
Sale of other assets.................................................. 1,330
Sale of investment in FSU joint ventures resulting in an increase
(decrease) in:
Accounts and notes receivable from purchaser.......................... 1,790
Accounts and note receivable from FSU joint ventures.................. (1,740)
Accounts payable -- trade............................................. 78
Treasury stock........................................................ 8,756
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 3,255
Materials and supplies inventory...................................... (2,154) (2,034)
Other assets -- deferred credits receivable........................... 857 857
Accounts payable -- trade............................................. 957 957
Other accrued liabilities -- deferred gain............................ 891 1,011
Other non-current liabilities -- deferred gain........................ 110 110
Sale of accounts receivable and property and equipment resulting in a
decrease in:
Accounts and notes receivable......................................... (78)
Property and equipment -- net......................................... (247)
Long-term debt........................................................ (199)
Accounts payable -- trade............................................. (18)
Other non-current liabilities......................................... (108)
Increase in additional paid-in capital as a result of warrants issued
with short-term related party loans................................... 89

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest --
Equipment purchase obligations and unsecured notes payable.......... 384 879 1,060 560 901
Secured term loan................................................... 584 585 635 312 242
Credit agreements................................................... 227 664 1,915 930 1,036
Short-term related party loans...................................... 206 199
Other............................................................... 239 339 1,388 534 443
Income taxes.......................................................... 3,178 1,293 1,963 826 436
</TABLE>

See Notes to Consolidated Financial Statements

F-6
<PAGE> 40

DIGICON INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED JULY 31, 1993, 1994 AND 1995 AND THE SIX MONTHS ENDED
JANUARY 31, 1996

(IN THOUSANDS, EXCEPT FOR NUMBER OF SHARES)

ADDITIONAL ACCUMULATED
PAID-IN CAPITAL EARNINGS
COMMON STOCK ISSUED TREASURY STOCK, ------------------- (DEFICIT)
------------------- AT COST EMPLOYEE FROM
PAR --------------------- NOTES AUGUST 1,
SHARES VALUE SHARES AMOUNT OTHER RECEIVABLE 1991
----------- ---- ---------- ------ ------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 31, 1992........... 22,597,423 $226 $40,007 $ (48) $ 4,554
Common stock issued in
acquisition of GFS, net of
issue costs.................... 225,000 2 1,137
Common stock issued for cash, net
of issue costs................. 5,456,900 55 20,994
Collections of employee notes
receivable..................... 48
Net loss......................... (1,258)
---------- ---- -------- ------ ------- -------- --------
BALANCE, JULY 31, 1993........... 28,279,323 283 62,138 3,296
Common stock issued for
investment in FSU joint
ventures, net of issue costs... 3,072,950 31 7,228
Net loss......................... (14,426)
---------- ---- -------- ------ ------- -------- --------
BALANCE, JULY 31, 1994........... 31,352,273 314 69,366 (11,130)
Common stock issued for
investment in FSU joint
ventures, net of issue costs... 2,052,543 20 2,265
One for three reverse stock
split, net of issue costs...... (22,269,877) (223) 175
Warrants issued in conjunction
with short-term related party
loans.......................... 89
Common stock reacquired in sale
of investment in FSU joint
ventures....................... (1,708,497) $(8,756)
Treasury stock issued for cash... 850,000 3,984
Net income....................... 2,778
---------- ---- -------- ------ ------- -------- --------
BALANCE, JULY 31, 1995........... 11,134,939 111 (858,497) (4,772) 71,895 (8,352)
Treasury stock issued for cash,
net of issue costs
(unaudited).................... 858,497 4,772 (800)
Common stock, previously held in
escrow, cancelled
(unaudited).................... (11,517)
Net income (unaudited)........... 1,829
---------- ---- -------- ------ ------- -------- --------
BALANCE, JANUARY 31, 1996
(UNAUDITED).................... 11,123,422 $111 $ $71,095 $ $( 6,523)
========== ==== ======== ====== ======= ======== ========
</TABLE>

See Notes to Consolidated Financial Statements

F-7
<PAGE> 41

DIGICON INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JULY 31, 1993, 1994 AND 1995 AND THE SIX MONTHS ENDED
JANUARY 31, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
Digicon Inc. ("the Company") and all majority-owned domestic and foreign
subsidiaries. Investments in 50% or less-owned companies and joint ventures are
carried on the equity basis. All material intercompany balances and transactions
have been eliminated in consolidation.

RESTRICTED CASH INVESTMENTS

Restricted cash investments in the amounts of $320,000 at July 31, 1994 and
$670,000 at July 31, 1995 were pledged as collateral on certain bank guarantees.

TRANSLATION OF FOREIGN CURRENCIES

The Company has determined that the U.S. dollar is its functional currency.
Property and equipment (and related depreciation) and inventories are translated
into U.S. dollars at the exchange rates in effect at the time of their
acquisition. Other assets and liabilities are translated at year-end rates.
Operating results (other than depreciation) are translated at the average rates
of exchange prevailing during the year. Remeasurement gains and losses are
included in the determination of net income and are reflected in other costs and
expenses. See Note 5.

REVENUES

Revenues from data acquisition and data processing services are recorded as
revenues based on contractual rates set forth in the related contract if the
contract provides a separate rate for each segment. If the contract only
provides a rate for the overall service, revenue is recognized based on the
percentage of the work effort completed compared with the total work effort
involved in the contract.

ACCOUNTS RECEIVABLE

Included in accounts and notes receivable at July 31, 1994 and 1995 are
unbilled amounts of approximately $8,800,000 and $10,700,000, respectively. Such
amounts are either not billable to the customer at July 31 in accordance with
the provisions of the contract and generally will be billed in one to four
months or are currently billable and will be invoiced in the next monthly
statement cycle.

PROPRIETARY SEISMIC DATA

The direct cost of collecting and processing seismic data for the Company's
own account is capitalized using a percentage of estimated sales method. The
cost of proprietary seismic data is charged to operations either in (i) the
periods in which sales occur as a percentage of the revenue obtained, or (ii) in
periods when the estimated market value of such data is less than the cost of
the data.

MOBILIZATION COST

Transportation and make-ready expenses of seismic operations prior to
commencement of business in an area are amortized over the period of expected
operations in that area. Amounts applicable to operations for the Company's own
account are included in the cost of proprietary seismic data. Unamortized
mobilization costs, if any, are shown as a prepaid expense.

F-8
<PAGE> 42

DIGICON INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INVENTORIES

Inventories of materials and supplies are stated at the lower of average
cost or market.

DEPRECIATION

Provision for depreciation is computed using the straight-line method based
on estimated useful lives as follows:

<TABLE>
<CAPTION>
AVERAGE
YEARS
---
<S> <C>
Seismic equipment...................................... 5
Data processing equipment.............................. 5-6
Seismic ships.......................................... 14
Leasehold improvements and other....................... 3-7
</TABLE>

Expenditures for routine repairs and maintenance are charged to expense as
incurred; expenditures for additions and improvements are capitalized and
depreciated over the estimated remaining life of the related asset. Significant
vessel repairs and biennial drydocking expenses are recorded as deferred charges
in prepayments and other and are amortized over a six to 24 month period. The
net gain or loss on items of property and equipment retired or disposed of is
included in other costs and expenses. See Note 5.

It is the Company's policy to periodically review property and equipment
lives. In fiscal 1993, a study indicated that the actual lives for certain asset
categories generally were longer than the useful lives used for depreciation
purposes in the Company's financial statements and the Company extended the
estimated useful lives for certain of its seismic acquisition equipment. The
effect of this change was to reduce 1993 depreciation expense by $490,000 and
decrease the net loss by $490,000, or $.06 per share (as restated for the
Reverse Split -- See Note 19).

In fiscal 1994, the Company wrote off or reserved for the impairment of
assets to their net realizable value the amount of $6,523,000, or $.67 per share
(as restated for the Reverse Split -- See Notes 17 and 19).

RESEARCH AND DEVELOPMENT

Research and development costs are charged to expense when incurred.
Research and development costs for the years ended July 31, 1993, 1994 and 1995
were $4,235,000, $4,908,000 and $2,851,000, respectively.

INCOME TAXES

The Company's policy is not to provide for the income taxes, if any, which
would be payable if undistributed earnings of foreign consolidated subsidiaries
were paid as dividends to the parent company, since such earnings have been or
will be reinvested in the business.

In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes", which requires the use of the "liability method" in place of the
previously required "deferred method". Under the liability method, deferred
income taxes reflect the net tax effects of (a) temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes, and (b) operating loss and tax
credit carryforwards. SFAS 109 allows recognition of all or a portion of
benefits from the utilization of net operating loss carryforwards as deferred
tax assets if realization is "more likely than not". In periods of changing
income tax rates, the liability method will cause fluctuations in net income of
companies with deferred taxes. The Company adopted SFAS 109 effective August 1,
1993. The adoption of this standard did not result in a cumulative effect
adjustment to equity or income for the year ended July 31, 1994.

F-9
<PAGE> 43

DIGICON INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Recognition is given in the accompanying consolidated balance sheets to the
future income tax benefits of loss carryforwards only to the extent that they
can be used to offset existing deferred taxes. Since the Company's
quasi-reorganization on July 31, 1991, in accordance with Staff Accounting
Bulletin No. 86, the tax benefits of loss carryforwards existing at the date of
the quasi-reorganization, when realized, have been recognized in the
consolidated statements of operations by a charge in lieu of income taxes,
representing the additional income taxes which otherwise would have been
provided, with an equal and offsetting direct addition to paid-in capital
reflecting the utilization of the loss carryforward.

EARNINGS (LOSS) PER SHARE

Weighted average shares and earnings (loss) per share have been restated
for all periods presented to reflect the effect of the Reverse Split consummated
on January 17, 1995. See Note 19.

Primary loss per share is computed based on the weighted average number of
shares of common stock. Primary earnings per share is computed based on the
weighted average number of shares of common stock plus common stock equivalents.
Common stock equivalents include (i) stock options (see Note 6), (ii) warrants
(see Note 8) and (iii) contingent shares issuable. Shares issuable upon the
conversion of stock options and warrants were disregarded since the treasury
stock method of calculation produced no incremental shares or resulted in
dilution of less than 3%. For the year ended July 31, 1994, contingent shares
issuable under the second stage of the agreements discussed in Note 16 were
disregarded due to net losses incurred.

Fully diluted earnings per share is not presented for the year ended July
31, 1993 and 1994 due to net losses incurred. Fully diluted earnings per share
is not presented for the year ended July 31, 1995 and the six months ended
January 31, 1995 and 1996 since stock options and warrants referenced above had
no dilutive effect.

LEASES

Operating leases include those for office space, specialized seismic
equipment rented for short periods of time, and the Company's seismic ships
which generally are chartered on a short-term basis.

CASH EQUIVALENTS

For purposes of the Consolidated Statements of Cash Flows, the Company has
elected to define "cash equivalents" as items readily convertible into known
amounts of cash with original maturities of three months or less.

QUASI-REORGANIZATION

The Company effected a quasi-reorganization adjustment as of July 31, 1991
in which the accumulated deficit at July 31, 1991 of $139,751,000 was offset
against additional paid-in capital.

GOODWILL

The Company has recorded the purchase price of businesses or joint venture
interests in excess of the fair value of net assets acquired as goodwill which
is amortized over the period benefits are expected to be derived. The Company
periodically reviews the carrying value of goodwill in relation to the current
and expected operating results of the businesses or joint ventures in order to
assess whether there has been a permanent impairment of such amounts.

See also Notes 9 and 16 relating to the purchase of GFS Company and
investment in FSU joint ventures.

F-10
<PAGE> 44

DIGICON INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

RECLASSIFICATION OF PRIOR YEAR BALANCES

Certain balances as of July 31, 1994 have been reclassified for consistent
presentation.

UNAUDITED INTERIM FINANCIAL INFORMATION

In the opinion of Management, the unaudited consolidated financial
statements as of January 31, 1996 contain all adjustments necessary to present
fairly the financial position of Digicon Inc. and subsidiaries, and the results
of its operations and its cash flows for the six-month periods ended January 31,
1995 and 1996. 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.

2. SHORT-TERM RELATED PARTY LOANS

The short-term related party loans provided for up to $3,000,000 in
advances and were collateralized, on a subordinated basis, by a majority of the
assets of the Company. Interest was payable at prime plus 3% through January 26,
1995 and at prime plus 6% thereafter. Interest expense for the years ended July
31, 1994 and 1995 was $206,000 and $376,000, respectively. The loans were
subject to mandatory prepayment from a portion of the proceeds of certain
specified transactions, if and when such transactions occurred. As a result of
the completion of several such transactions, the loans were fully repaid on June
13, 1995. As further consideration for the facility, the Company issued common
stock purchase warrants in an amount directly related to the average outstanding
balance of the loans. See Notes 8 and 13.

3. LONG-TERM DEBT

The Company's long-term debt is as follows:

<TABLE>
<CAPTION>
(UNAUDITED)
JULY JULY JANUARY
31, 31, 31,
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
Revolving credit agreement due April 1997, at prime
plus 3% (11.50% at January 31, 1996)................ $12,446 $14,123 $12,937
Secured term loan due June 1997, at 10.75%............ 6,000 4,500 4,500
Secured Indonesian Rupiah revolving credit agreement
due September 1995, at 19%.......................... 922 894
Unsecured notes maturing through January 1995, at
10%................................................. 35
Equipment purchase obligations maturing through
February 1999, at an average rate of 11.11% at
January 31, 1996.................................... 10,605 16,641 14,552
Real estate note maturing April 1995, at prime plus
1.25%............................................... 80
------- ------- -------
Total....................................... 30,088 36,158 31,989
Less current maturities............................... 6,166 10,915 9,479
------- ------- -------
Due after one year.......................... $23,922 $25,243 $22,510
======= ======= =======
</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

F-11
<PAGE> 45

DIGICON INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 July 31, 1995,
$2,877,000 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. The Company has obtained a waiver for noncompliance at July
31, 1995 with the debt service coverage ratio. The ratio has been revised
subsequent to year-end. 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. See Note 8.

The secured Indonesian Rupiah revolving credit facility in the amount of
two billion Rupiahs is the obligation of P.T. Digicon Mega Pratama, a
consolidated subsidiary of the Company, and provides working capital and certain
bank guarantees for its Indonesian operations. The facility was repaid in
September 1995.

The unsecured notes payable represented agreements executed in settlement
of certain unsecured obligations.

The Company's equipment purchase obligations represent installment loans
and capitalized lease obligations primarily related to computing and seismic
equipment.

The real estate note was secured by land and a building and was payable in
installments of $8,987 per month plus interest through April 1995.

Annual maturities of long-term debt for the next five years are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR MATURITIES
--------------------------------------------------- -------
<S> <C>
(IN
THOUSANDS
OF
DOLLARS)
1996............................................. $10,915
1997............................................. 21,931
1998............................................. 3,105
1999............................................. 207
</TABLE>

During the year ended July 31, 1993, the Company incurred interest costs of
$1,421,000. The Company capitalized $204,000 of this amount as a cost of
leasehold improvements to a chartered vessel. No interest was capitalized during
the years ended July 31, 1994 and 1995.

F-12
<PAGE> 46

DIGICON INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. INCOME TAXES

The tax effects of significant items comprising the Company's net deferred
tax position are as follows:

<TABLE>
<CAPTION>
JULY 31, JULY 31,
1994 1995
-------- --------
<S> <C> <C>
(IN THOUSANDS OF
DOLLARS)
Deferred tax assets:
Difference between book and tax basis of property
and equipment.................................... $ 3,488 $ 4,544
Reserves not currently deductible................... 396 156
Operating loss carryforwards........................ 47,046 50,920
Tax credit carryforwards............................ 6,023 5,761
Other............................................... 2,142 4,526
-------- --------
Total....................................... 59,095 65,907
Deferred tax liabilities:
Other............................................... (483) (314)
-------- --------
Net deferred tax assets............................... 58,612 65,593
Valuation allowance................................... (58,612) (65,593)
-------- --------
Net deferred tax position............................. $ 0 $ 0
======== ========
</TABLE>

Provision for income taxes consists of the following:

<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE SIX
FOR THE YEARS ENDED MONTHS ENDED
JULY 31, JANUARY 31,
---------------------------- -----------------
1993 1994 1995 1995 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
Current -- U.S................ $ 54 $ 34 $ (2) $ (56)
Current -- foreign............ 1,601 $1,675 2,112 1,085 $ 118
Deferred -- foreign........... (46) (154) (113) (39) (67)
----- ----- ----- ----- -----
Total............... $1,609 $1,521 $2,033 $1,044 $ (5)
===== ===== ===== ===== =====
</TABLE>

As of July 31, 1995, the Company had U.S. net operating loss carryforwards
("NOL's") of approximately $88,756,000 which expire in the years 1998 through
2010. Included in such amounts are $76,885,000 of NOL's that existed prior to
the quasi-reorganization. See Note 1. As of July 31, 1995, approximately
$5,761,000 of investment tax credit carryforwards, which will expire in the
years 1996 through 1998, were available to reduce future U.S. income taxes.

Foreign operations had NOL's of approximately $64,681,000 at July 31, 1995,
which are available indefinitely to reduce future foreign taxable income in
specific jurisdictions. Included in such amounts are $48,900,000 of NOL's that
existed prior to the quasi-reorganization. See Note 1. The foreign component of
income (loss) before provision for income taxes was $(5,315,000), $(8,982,354)
and $(9,038,919) for the years ended July 31, 1993, 1994 and 1995, respectively.

Income tax expense is different from the amount computed by multiplying
income (loss) before provision for income taxes by the corporate tax rate of 34%
for the years ended July 31, 1993, 1994 and 1995 because of the inability to
obtain any income tax benefits from operating losses in foreign countries.
Additionally, during 1995 other permanent differences arose for both U.S. and
foreign income tax purposes. For U.S. income tax purposes, such differences
included approximately $16,500,000 relating to the write-off of uncollectible

F-13
<PAGE> 47

DIGICON INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

advances to certain foreign subsidiaries. For foreign income tax purposes, such
differences included a payment of approximately $600,000 for prior year tax
assessments and the payment of approximately $1,400,000 in withholding taxes.

IRS regulations restrict utilization of NOL's for any company in which an
"ownership change" (as defined in Section 382 of the Internal Revenue Code) has
occurred. The Company has performed required testing and has concluded that an
"ownership change" occurred in connection with the issuance of common stock
through a public offering made by the Company on January 6, 1992. As a result,
the future utilization of U.S. NOL's existing at the date of the "ownership
change" will be limited to approximately $4,000,000 per year. This limitation
had no effect on the provision for income taxes for the years ended July 31,
1993, 1994 and 1995. To the extent that any portion of this annual limitation is
not used in any year, it may be carried over and added to the annual limitation
of succeeding years. At July 31, 1995, the accumulated unused limitation on
NOL's existing at the date of the "ownership change" was approximately
$12,373,000.

5. OTHER COSTS AND EXPENSES

Other costs and expenses consist of the following:

<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE SIX
FOR THE YEARS ENDED MONTHS ENDED
JULY 31, JANUARY 31,
------------------------ ---------------
1993 1994 1995 1995 1996
---- ----- ----- ----- -----
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Net foreign currency exchange losses..... $532 $ 94 $ 51 $ 91 $ 55
Net (gain) loss on disposition of
property and equipment................. (129) (746) 755 (87) 52
Interest income.......................... (255) (82) (208) (85) (44)
Other.................................... 36 32 7
---- ---- ---- ---- ----
Total.......................... $184 $(702) $ 598 $ (74) $ 63
==== ==== ==== ==== ====
</TABLE>

6. EMPLOYEE BENEFITS

The Company maintains a 401(k) plan in which employees of all the
majority-owned domestic subsidiaries and certain foreign subsidiaries are
eligible to participate. However, employees of foreign subsidiaries who are
covered under a foreign deferred compensation plan are not eligible. Employees
are permitted to make contributions of up to 10% of their salary to a maximum of
$9,240 per year. Generally, the Company will contribute an amount equal to
one-half of the employee's contribution up to $6,000 or 6% (whichever is less)
of the employee's salary; however, if consolidated pre-tax income for any fiscal
year is less than the amount required to be contributed by the Company, the
Company may elect to reduce its contribution, but in no event may it reduce the
total contribution to less than 25% of the employee contribution. The Company
may make additional contributions from its current or cumulative net profits in
an amount to be determined by the Board of Directors. Employer matching
contributions to the 401(k) plan were $136,981 in 1993, $286,471 in 1994 and
$280,981 in 1995.

The Company initiated an employee nonqualified stock option plan on
September 1, 1992. Options are granted to key employees and are exercisable
beginning six months after the date of grant. The option price per share shall
not be less than the lesser of (i) fair market value of the common stock on the
date the option is granted or (ii) the average fair market value for the common
stock during the 30 trading days ending on the trading day next preceding the
date the option is granted. Options expire ten years from the date of grant. No
options under the plan have been exercised. The exercise prices and number of
options existing prior to

F-14
<PAGE> 48

DIGICON INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

January 17, 1995 have been adjusted for the Reverse Split. See Note 19. The
Company has authorized 658,333 shares of post-Reverse Split common stock to be
issued under the plan.

<TABLE>
<CAPTION>
NUMBER
OF EXERCISE
OPTIONS PRICE
------- ------------
<S> <C> <C>
Balance, July 31, 1993.............................. 560,000 $13.50
Options cancelled................................. (70,667) $13.50
-------
Balance, July 31, 1994.............................. 489,333 $13.50
Options issued.................................... 13,333 $6.00
Options cancelled................................. (79,666) $13.50
-------
Balance, July 31, 1995.............................. 423,000 $6.00-$13.50
=======
</TABLE>

The Company also initiated a stock option plan for non-employee directors
(the "Director Plan") providing for stock options to be granted to each
non-employee director of the Company. The Director Plan provides that on
December 31 of each year, each eligible director shall be granted an option to
purchase 3,333 shares of the Company's post-Reverse Split common stock, subject
to an aggregate limit of 16,667 shares for each director. The exercise price for
each option granted shall be the average closing price of the common stock for
the 30 trading days prior to the date of grant. The exercise prices of options
existing prior to January 17, 1995 have been adjusted for the Reverse Split.
Options may be exercised at any time (i) after the later of six months following
the date of grant or the first anniversary of the director's service on the
board and (ii) before the sixth anniversary of the date of grant, when the
option expires. No options under the Director Plan have been exercised. The
Company has authorized 200,000 shares of post-Reverse Split common stock to be
issued under the Director Plan.

<TABLE>
<CAPTION>
NUMBER
OF EXERCISE
OPTIONS PRICE
------ ------------
<S> <C> <C>
Balance, July 31, 1993............................... 20,000 $12.87
Options issued..................................... 16,667 $6.72
------
Balance, July 31, 1994............................... 36,667 $6.72-$12.87
Options issued..................................... 19,998 $4.13
------
Balance, July 31, 1995............................... 56,665 $4.13-$12.87
======
</TABLE>

The Company maintains a contributory defined benefit pension plan (the
"Pension Plan") for eligible participating employees in its United Kingdom
offices. Monthly contributions by employees are equal to 3.5% of their salaries
with the Company providing an additional contribution in an actuarially
determined amount necessary to fund future benefits to be provided under the
Pension Plan. Benefits provided are based upon 1/60 of the employee's final
pensionable salary (as defined) for each complete year of service up to 2/3 of
the employee's final pensionable salary and increase annually at 5%. The Pension
Plan also provides for 50% of such actual or expected benefits to be paid to a
surviving spouse upon the death of a participant. Pension Plan

F-15
<PAGE> 49

DIGICON INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

assets consist mainly of investments in marketable securities which are held and
managed by an independent trustee. The net periodic pension costs are as
follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JULY 31,
-------------------
1994 1995
----- -----
<S> <C> <C>
(IN THOUSANDS OF
DOLLARS)
Service costs (benefits earned during the period)...... $ 288 $ 275
Interest costs on projected benefit obligation......... 249 253
Return on assets....................................... (226) (275)
Net amortization and deferral.......................... 4 5
----- -----
Net periodic pension costs............................. $ 315 $ 258
===== =====
</TABLE>

The funded status of the Pension Plan is as follows:

<TABLE>
<CAPTION>
JULY JULY
31, 31,
1994 1995
------- -------
<S> <C> <C>
(IN THOUSANDS OF
DOLLARS)
Plan assets at fair value.............................. $ 2,841 $ 3,444
Actuarial present value of accumulated vested benefit
obligations.......................................... 2,472 3,026
Effect of future salary increases...................... 437 517
------- -------
Projected benefit obligation......................... 2,909 3,543
------- -------
Projected benefit obligation in excess of plan
assets............................................... (68) (99)
Unrecognized prior service cost........................ 68 13
------- -------
Pension liability...................................... $ $ (86)
======= =======
</TABLE>

The weighted average assumptions used to determine the projected benefit
obligation and the expected long-term rate of return on assets for the years
ended July 31, 1994 and 1995 are as follows:

<TABLE>
<S> <C>
Discount rate......................................................... 8.5%
Rates of increase in compensation levels.............................. 6.5%
Expected long-term rate of return on assets........................... 9.0%
</TABLE>

7. COMMITMENTS AND CONTINGENT LIABILITIES

Total rentals of vessels, equipment and office facilities charged to
operations amounted to $19,105,000, $21,914,000 and $24,884,000 for the years
ended July 31, 1993, 1994 and 1995, respectively.

F-16
<PAGE> 50

DIGICON INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Minimum rentals payable under operating leases, principally for office
space, and vessel charters with remaining noncancellable terms are as follows:

<TABLE>
<CAPTION>
FISCAL
YEAR MINIMUM RENTALS
------- ---------------
(IN THOUSANDS OF
DOLLARS)
<S> <C>
1996............................................. $14,583
1997............................................. 8,113
1998............................................. 7,244
1999............................................. 6,758
2000............................................. 3,546
2001-2013.......................................... 7,562
</TABLE>

At July 31, 1995, the Company had placed orders for the purchase of certain
equipment and services with an aggregate purchase price of $1,748,000.

The Company has an employment agreement with an employee, who is also a
director, that provides for salary payments of $25,417 per month plus certain
employee benefits through December 31, 1995, the end of the employment period as
defined. The agreement also contains a non-compete clause for a period of three
years after the employment period during which time the employee will receive
payments of $12,709 per month plus certain employee benefits.

8. WARRANTS

The following number of warrants issued and exercise prices have been
adjusted for the Reverse Split consummated on January 17, 1995. See Note 19.

In conjunction with the cancellation of a previous issue of common and
preferred stock and certain other liabilities, the Company authorized 454,545
warrants which may be exercised for 454,545 shares of common stock. The warrants
were issued for a term of five years beginning July 5, 1991 at an exercise price
of $18.00 per share. The warrants may only be exercised for cash.

In conjunction with the Company's term loan due June 30, 1997, the Company
issued 113,333 warrants which expire June 29, 1997. The warrants were
exercisable for cash at a price of $18.00 per share. In conjunction with an
amendment to the loan in August 1994, which revised certain financial ratio
covenants, the price of the warrants was reduced to $6.00 per share.

In conjunction with the Company's short-term related party loans, the
Company issued to the lenders warrants to purchase 120,000 common shares. The
warrants may be exercised for cash at a price of $4.50 per share and will expire
July 26, 1999.

9. PURCHASE OF GFS COMPANY

On October 30, 1992, the Company acquired GFS Company ("GFS") of Jackson,
Mississippi. GFS operates land and transition zone seismic crews. Under the
agreement, Digicon issued 225,000 shares of its pre-Reverse Split common stock
(valued at $1,153,000) and $117,000 in notes in exchange for all of the
outstanding stock of GFS. On completion of the transaction, GFS became a
wholly-owned subsidiary of the Company. The acquisition was accounted for using
the purchase method of accounting, and accordingly, goodwill of $4,245,000 was
recorded representing the excess of the purchase price over the fair value of
the net assets acquired. The goodwill is being amortized over a ten-year period
and the operations of GFS are included in the consolidated financial statements
beginning November 1, 1992.

F-17
<PAGE> 51

DIGICON INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. DEFERRED CREDITS

In August 1992, the Company entered into agreements with a customer
pursuant to which the Company was obligated to allow $7,800,000 in discounts at
specified rates on future seismic services performed by the Company for such
customer. Discounts were payable only out of a portion of the revenues received
by the Company for the performance of the seismic services for such customer. At
July 31, 1994, remaining discounts due were included in accounts
payable -- trade in the amount of $536,000 and in deferred credits in the amount
of $5,538,000. The agreement also required the customer to utilize the services
of certain Company vessels for a minimum period of 15 months during a period
ending in June 1995. In July 1995, the agreements were amended to terminate the
remaining vessel usage requirement, revise the discount rates available on
future seismic services and allow the customer to apply the discounts against
the Company's invoices in return for a reduction in discounts allowed. As a
result, the Company recognized a gain of $864,000 which is included in operating
expenses for the year ended July 31, 1995. At July 31, 1995, remaining discounts
of $3,675,000 are included in deferred credits.

The Company also has $1,500,000 and $880,000 at July 31, 1994 and 1995,
respectively, included in other accrued liabilities relating to deferred credits
earned by certain customers in conjunction with their original participation in
one of the Company's proprietary data surveys. These credits may be applied by
the customers against future invoiced amounts.

F-18
<PAGE> 52

DIGICON INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. GEOGRAPHICAL INFORMATION

Substantially all of the Company's operations consist of geophysical
services. The following tables provide relevant information for the three years
ended July 31, 1993, 1994 and 1995, grouped by major geographic areas.
Intersegment sales between geographic areas are valued at current market prices.

<TABLE>
<CAPTION>
REVENUES
-------------------------------- OPERATING
UNAFFILIATED INTERSEGMENT PROFIT IDENTIFIABLE
CUSTOMERS SALES TOTAL (LOSS) ASSETS
------------ ------------ ----- -------- ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED JULY 31, 1993:
Geographic areas:
Europe & Middle East............. $ 24,699 $ 108 $ 24,807 $ 4,374 $ 38,516
Africa........................... 13,020 13,020 2,392 3,850
Far East......................... 38,569 74 38,643 (2,107) 26,267
South America.................... 3,945 3,945 638 7,723
Eliminations..................... (182) (182)
-------- ------- -------- ------- --------
Totals...................... 80,233 80,233 5,297 76,356
United States.................... 37,476* 3,639 41,115* (908) 49,035
Eliminations..................... (3,639) (3,639)
-------- ------- -------- ------- --------
Totals...................... 117,709 117,709 4,389 125,391
Other............................ (184)
Corporate, general and
administrative expenses........ (2,583)
Interest......................... (1,217)
Income taxes..................... (1,609)
Investments in 50% or less-owned
companies and joint ventures... (54) 254
Corporate assets................. 355
-------- ------- -------- ------- --------
Totals...................... $117,709 $ $117,709 $(1,258) $126,000
======== ======= ======== ======= ========
</TABLE>

- ---------------

* Includes export sales of $10,138.

During 1993, United States, Europe & Middle East, Africa and Far East
revenues include sales to two clients which accounted for 16% and 11% of total
revenues. Depreciation and amortization expense was $2,345,000 for Europe &
Middle East, $230,000 for Africa, $2,209,000 for Far East, $140,000 for South
America and $4,678,000 for United States. Capital expenditures were $21,310,000
for Europe & Middle East, $275,000 for Africa, $4,295,000 for Far East,
$3,692,000 for South America and $10,809,000 for United States.

F-19
<PAGE> 53

DIGICON INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
REVENUES
-------------------------------- OPERATING
UNAFFILIATED INTERSEGMENT PROFIT IDENTIFIABLE
CUSTOMERS SALES TOTAL (LOSS) ASSETS
------------ ----------- ----- --------- ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED JULY 31, 1994:
Geographic areas:
Europe & Middle East............. $ 29,891 $1,697 $ 31,588 $ (3,120) $ 33,063
Far East......................... 19,401 19,401 (11,325) 19,330
South America.................... 14,219 14,219 (799) 9,758
Eliminations..................... (1,697) (1,697)
-------- ------ -------- -------- --------
Totals...................... 63,511 63,511 (15,244) 62,151
United States.................... 54,467* 315 54,782* 7,187 60,649
Eliminations..................... (315) (315)
-------- ------ -------- -------- --------
Totals...................... 117,978 117,978 (8,057) 122,800
Other............................ 702
Corporate, general and
administrative expenses........ (2,020)
Interest......................... (3,085)
Income taxes..................... (1,521)
Investments in 50% or less-owned
companies and joint ventures... (445) 8,543
Corporate assets................. 513
-------- ------ -------- -------- --------
Totals...................... $117,978 $ $117,978 $(14,426) $131,856
======== ====== ======== ======== ========
</TABLE>

- ---------------

* Includes export sales of $1,501.

During 1994, United States, Europe & Middle East and Far East revenues
include sales to a client which accounted for 10% of total revenues. Operating
profit (loss) includes restructuring charges and write-off/reserve for
impairment of assets of $1,258,000 for Europe & Middle East, $3,317,000 for Far
East, and $3,808,000 for United States. Depreciation and amortization expense
was $4,214,000 for Europe & Middle East, $1,942,000 for Far East, $1,551,000 for
South America and $6,030,000 for United States. Capital expenditures were
$2,031,000 for Europe & Middle East, $458,000 for Far East, $1,471,000 for South
America and $6,720,000 for United States.

F-20
<PAGE> 54

DIGICON INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
REVENUES
-------------------------------- OPERATING
UNAFFILIATED INTERSEGMENT PROFIT IDENTIFIABLE
CUSTOMERS SALES TOTAL (LOSS) ASSETS
------------ ------------ ----- --------- ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED JULY 31, 1995:
Geographic areas:
Europe & Middle East............... $ 20,230 $ 579 $ 20,809 $ 2,188 $ 11,976
Far East........................... 27,360 22 27,382 (262) 23,436
South America...................... 21,931 21,931 (1,996) 16,998
Eliminations....................... (601) (601)
-------- ----- -------- ------- --------
Totals........................ 69,521 69,521 (70) 52,410
United States...................... 63,048* 126 63,174* 9,263 82,227
Eliminations....................... (126) (126)
-------- ----- -------- ------- --------
Totals........................ 132,569 132,569 9,193 134,637
Other.............................. (598)
Corporate, general and
administrative expenses.......... (1,527)
Interest........................... (5,142)
Income taxes....................... (2,033)
Gain on sale of investment in FSU
joint ventures................... 4,370
Investments in 50% or less-owned
companies and joint ventures..... (1,485) 57
Corporate assets................... 376
-------- ----- -------- ------- --------
Totals........................ $132,569 $ $132,569 $ 2,778 $135,070
======== ===== ======== ======= ========
</TABLE>

- ---------------

* Includes export sales of $2,228.

There was no single client that accounted for 10% or more of total revenues
during the year ended July 31, 1995. During 1995, depreciation and amortization
expense was $3,984,000 for Europe & Middle East, $1,470,000 for Far East,
$2,149,000 for South America and $5,762,000 for United States. Capital
expenditures were $1,709,000 for Europe & Middle East, $1,240,000 for Far East,
$4,252,000 for South America and $11,041,000 for United States.

12. ISSUANCE OF COMMON STOCK

See Note 19 relating to the Reverse Split consummated on January 17, 1995.

In December 1992, the Company sold, in an underwritten public offering,
5,456,900 shares of pre-Reverse Split common stock at $4.25 per share. The
Company incurred approximately $2,104,000 of issuance costs in conjunction with
the offering and these costs have been charged to additional paid-in capital.

See also Notes 9 and 16 relating to the issuance of pre-Reverse Split
common stock for the purchase of GFS Company and investment in FSU joint
ventures.

On June 6, 1995, 850,000 shares of treasury stock were sold to an
institutional investor at a price of $4.6875 per share. See Note 15.

F-21
<PAGE> 55

DIGICON INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. CERTAIN TRANSACTIONS

During fiscal 1994, the Company entered into two credit facilities with
shareholders SOROS Capital L.P., CCF Jupiter L.P. and Jupiter Management Co.,
Inc. (collectively, "the Lenders"). In November 1993, the Company executed a
secured term loan agreement with the Lenders which provided loans totaling
$3,386,000. The loans were repaid in full in April 1994, and the facility was
terminated. In July 1994, the Company executed a second secured loan agreement
with the Lenders providing up to $3,000,000 of advances. See Note 2. The second
facility was repaid in full in June 1995. In connection with the second
facility, the Lenders received warrants to purchase the Company's common stock.
See Note 8. During the fiscal year ended July 31, 1994 and 1995, $206,000 and
$376,000, respectively, was paid to the Lenders as interest and fees under the
two facilities.

In fiscal 1994 and 1995, the Company performed certain data acquisition,
processing, marketing and training services for various co-venturers and
recorded sales in the amount of $1,279,000 and $1,633,000, respectively. At July
31, 1994 and 1995, there was approximately $310,000 and $300,000, respectively,
in outstanding receivables related to these transactions.

The Company sold certain assets during July 1994 to Caspian Geophysical, a
joint venture in which the Company had an indirect 10% interest, for a note
receivable payable in 36 monthly installments of $41,667 with an imputed
interest rate of 10%. The net gain recorded after eliminating intercompany
profits was $148,000. The note receivable was repaid in June 1995 as a result of
the sale of the Company's interest in the joint venture. See Note 16.

14. EMPLOYEE STOCK PURCHASE

In July 1991, the Company authorized 707,547 shares of pre-Reverse Split
common stock for sale to its employees at a price of $2.12 per share. Employee
purchases were voluntary and the stock was fully subscribed at the Closing Date.
On the Closing Date, the Company issued the stock to the employees upon receipt
of cash in an amount of par value. At the employee's option, the remaining
purchase price could be paid in cash on the Closing Date or by payroll
deductions over a period of 24 months.

At July 31, 1992, agreements in the amount of $48,000 were outstanding and
in accordance with Staff Accounting Bulletin No. 40, Topic 4-E were excluded
from additional paid-in capital. As of July 31, 1993, all proceeds due under the
agreements had been received and are included in additional paid-in capital.

15. SUBSEQUENT EVENTS

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.

16. INVESTMENT IN FSU JOINT VENTURES

During the year ended July 31, 1994, the Company entered into a joint
venture agreement with MD Seis International Ltd. to perform geophysical
services in the former Soviet Union ("FSU"). In connection with the agreement,
the Company placed 5,431,615 shares of its pre-Reverse Split common stock in
escrow to be distributed in stages upon the execution and completion of certain
conditions.

The first stage was completed on April 1, 1994 and the Company exchanged
3,072,950 shares of pre-Reverse Split common stock valued at $2.375 per share,
or $7,298,256, and a $1,000,000 cash commitment in return for interests in
certain jointly owned companies. The second stage of the agreement was completed
on August 25, 1994, and the Company increased its ownership interest in certain
of these companies by exchanging 2,052,543 shares of pre-Reverse Split common
stock valued at $1.125 per share, or $2,309,111, and an additional $2,000,000
cash commitment. In addition, the Company agreed to guarantee certain

F-22
<PAGE> 56

DIGICON INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

liabilities of the joint ventures. After adjustment for the Reverse Split
consummated on January 17, 1995, MD Seis owned 1,708,497 shares of common stock.

The investments were being accounted for under the equity method. The FSU
joint ventures generated total revenues of approximately $300,000 and $6,994,000
and net losses of approximately $921,000 and $2,954,000 during the years ended
July 31, 1994 and 1995, respectively. The Company's share of net losses was
approximately $391,000 and $1,477,000 during the years ended July 31, 1994 and
1995, respectively. The excess purchase price over the fair value of the net
assets acquired in the amount of $9,292,000 was being amortized over a 20 year
period. Amortization expense for the years ended July 31, 1994 and 1995 was
$100,000 and $392,000, respectively.

On June 6, 1995, the Company sold its interests in the joint ventures for
$6,000,000 in cash and the return of the 1,708,497 shares of the post-Split
common stock owned by MD Seis (valued at $5.125 per share). In addition, the
Company received $2,992,144 in short-term notes, which were collected on July
31, 1995, representing payments for equipment sold and a return of amounts
previously advanced to the joint ventures and is entitled to receive royalties
of up to $1,500,000 based on future sales of speculative data currently being
acquired by the joint ventures. The net effect of these transactions was a gain
of $4,370,000.

17. RESTRUCTURING CHARGES AND EXIT COSTS

In response to operating losses in certain markets which adversely impacted
the Company's liquidity during the year ended July 31, 1994, management made a
decision to restructure its operations and revalue certain assets in April 1994,
including plans to close the Indonesian processing center, and accordingly
incurred $9,116,000 in total expenses relating to such decision. Costs of
$1,230,000 are included in cost of services and include non-recurring expenses
associated with certain contract liabilities. Also included in the $9,116,000 is
$6,523,000 for the write-off/reserve for the impairment of assets to their net
realizable value. A portion of the write-off pertains to marine ($2,437,000) and
land ($552,000) acquisition assets related to decommissioned marine vessels and
stacked land crews. The write-off/reserve for impairment of assets also includes
the write-down of certain other marine and land acquisition assets that were not
a direct result of the restructuring program ($1,048,000). In addition, the
Company wrote down data processing equipment ($2,056,000), particularly in the
Far East, based on the declining market and the plan to close the Indonesian
processing center, and Indonesian proprietary data ($430,000), since the
Company's license to sell such data will not be extended by the Indonesian
government. The remaining costs are restructuring charges of $1,363,000 of which
$1,226,000 relates to severance costs for a reduction in the Company's workforce
of 122 employees and $137,000 relates to office restoration expenses in the
Indonesian processing center. Employees to be terminated are from the processing
centers (including the Indonesian center), marine and land crews, marine
support, manufacturing, research and development and corporate groups. The
Company accrued an additional $450,000 of severance costs for 37 employees and
$350,000 in lease obligations in the Indonesian processing center during the
year ended July 31, 1995. As of July 31, 1995, 119 employees have been
terminated and $1,061,000 in severance costs have been paid. The Company
estimates that all remaining liabilities in the amount of $1,102,000 will be
paid during fiscal 1996.

18. SALE OF INVENTORIES, ASSETS AND TECHNOLOGIES

On August 31, 1994, the Company entered into a series of agreements with
Syntron, Inc. ("Syntron") that provided for the sale of certain assets,
inventories, and technologies by the Company to Syntron and the assumption of
certain liabilities by Syntron. The sale price was $7,500,000 payable in cash of
$3,000,000 and $4,500,000 in credits to be applied against future purchases from
Syntron by the Company. The agreements also provide that for a period of three
years, Syntron will be the sole supplier to the Company of certain acquisition,
monitoring, and recording equipment that is competitively priced, deliverable on
a timely basis and is technologically competitive. In addition, the Company has
agreed to lease back certain marine and land

F-23
<PAGE> 57

DIGICON INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

recording equipment from Syntron for a period of up to 36 months with minimum
lease terms ranging from 7 1/2 to 17 1/2 months. The difference between the sale
price and the net book value of the net assets sold after discounting the
credits by 2 1/2% was a $1,001,000 gain which is being recognized on a pro rata
basis over the minimum lease terms as a reduction in rental expense. Unused
credits in the amount of $1,210,000 and $857,000 are included in accounts and
notes receivable and other assets, respectively, at July 31, 1995.

19. REVERSE STOCK SPLIT

On December 14, 1994, shareholders approved a one for three reverse stock
split (the "Reverse Split") to holders of record on January 17, 1995, with no
change in par value. On January 17, 1995, there were 33,404,816 shares of common
stock outstanding which were converted into 11,134,939 shares of post-Reverse
Split common stock. The net effect of these transactions was a charge to common
stock and a credit to additional paid-in capital of approximately $223,000.

On January 17, 1995, there were 1,363,637 publicly traded common stock
purchase warrants expiring on July 5, 1996 with an exercise price of $6.00 per
share. In connection with the Reverse Split and as required by the American
Stock Exchange, the publicly traded warrants were converted, effective January
17, 1995, into approximately 454,545 post-Reverse Split common stock purchase
warrants with an exercise price of $18.00. Also on January 17, 1995, there were
340,000 common stock purchase warrants expiring on June 29, 1997 with an
exercise price of $2.00 per share which were adjusted in connection with the
Reverse Split to represent 113,333 shares of post-Reverse Split common stock
issuable upon exercise of these warrants at an exercise price of $6.00.
Additionally, there were 1,975,000 and 600,000 shares of pre-Reverse Split
common stock authorized under the 1992 Employee Nonqualified Stock Option Plan
and 1992 Non-Employee Director Stock Option Plan, respectively. In connection
with the Reverse Split, these authorized shares were decreased to 658,333 and
200,000 authorized shares of post-Reverse Split common stock under the Employee
Plan and Director Plan, respectively, and the new exercise prices were tripled.

F-24
<PAGE> 58

DIGICON INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

20. SELECTED UNAUDITED QUARTERLY FINANCIAL DATA

FOR THE YEARS ENDED JULY 31, 1994 AND 1995
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)(*)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED JULY 31, 1994
--------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
------- ------- -------- -------
<S> <C> <C> <C> <C>
Revenues........................................... $32,274 $30,475 $ 25,463 $29,766
Operating expense:
Cost of services................................. 26,305 25,708 24,968 24,329
Restructuring.................................... 1,363
Write-off/reserve for impairment of assets......... 6,523
Depreciation and amortization...................... 3,374 3,560 3,541 3,283
Selling, general and administrative................ 1,080 1,716 1,438 867
Income (loss) before provision for income taxes.... 956 (735) (13,210) 84
Net income (loss).................................. 717 (982) (13,688) (473)
Net income (loss) per share of common stock(*)..... .08 (.10) (1.40) (.05)
</TABLE>

<TABLE>
<CAPTION>
FOR THE YEAR ENDED JULY 31, 1995
--------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
------- ------- -------- -------
<S> <C> <C> <C> <C>
Revenues........................................... $32,000 $30,266 $ 34,448 $35,855
Operating expense:
Cost of services................................. 25,008 22,701 27,767 30,436
Restructuring.................................... 800
Depreciation and amortization...................... 3,393 3,453 3,469 3,448
Selling, general and administrative................ 1,106 1,058 1,244 1,020
Income before provision for income taxes........... 1,334 1,146 509 1,822
Net income......................................... 607 829 479 863
Net income per share of common stock(*)............ .06 .07 .04 .08
</TABLE>

- ------------

(*) Reported quarterly earnings (loss) per share is based on each quarter's
weighted average shares outstanding. The quarters may not total to the
reported annual earnings (loss) per share due in part to fluctuations in
common shares outstanding. Weighted average shares for all periods presented
have been restated for the Reverse Split consummated on January 17, 1995.
See Note 19.

F-25
<PAGE> 59

- ------------------------------------------------------
- ------------------------------------------------------

NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY, SHARES OF
COMMON STOCK IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
The Company........................... 9
Use of Proceeds....................... 9
Capitalization........................ 10
Price Range of Common Stock and
Dividend Policy..................... 11
Selected Consolidated Financial
Data................................ 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 14
Business.............................. 18
Management............................ 27
Description of Capital Stock.......... 28
Selling Stockholder................... 30
Underwriting.......................... 30
Legal Matters......................... 31
Experts............................... 31
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------

[DIGICON LOGO]

DIGICON INC.
---------------------------------
3,700,000 SHARES

COMMON STOCK

PROSPECTUS

MARCH , 1996

---------------------------------

DILLON, READ & CO. INC.

RAYMOND JAMES &
ASSOCIATES, INC.

RODMAN & RENSHAW, INC.

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 60

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The estimated expenses payable by the Company in connection with the
offering of the Common Stock to be registered and offered hereby are as follows:

<TABLE>
<S> <C>
Commission registration fee............................................... $ 9,629
National Association of Securities Dealers, Inc. fees..................... 3,293
American Stock Exchange listing fee....................................... 17,500
Printing expenses......................................................... 120,000
Legal fees and expenses................................................... 150,000
Blue Sky fees and expenses (including legal expenses)..................... 10,000
Accounting fees and expenses.............................................. 60,000
Transfer agent and registrar fees and expenses............................ 5,000
Miscellaneous............................................................. 4,578
--------
Total........................................................... $380,000
========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the General Corporation Law of the State of Delaware permits
a corporation to indemnify any person who was or is a party or is threatened to
be made a party to any threatened pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action.

In a suit brought to obtain a judgment in the corporation's favor, whether
by the corporation itself or derivatively by a stockholder, the corporation may
only indemnify for expenses, including attorney's fees, actually and reasonably
incurred in connection with the defense or settlement of the case, and the
corporation may not indemnify for amounts paid in satisfaction of a judgment or
in settlement of the claim. In any such action, no indemnification may be paid
in respect of any claim, issue or matter as to which such persons shall have
been adjudged liable to the corporation except as otherwise approved by the
Delaware Court of Chancery or the court in which the claim was brought. In any
other type of proceeding, the indemnification may extend to judgments, fines and
amounts paid in settlement, actually and reasonably incurred in connection with
such other proceeding, as well as to expenses (including attorneys' fees).

The statute does not permit indemnification unless the person seeking
indemnification has acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of the corporation and, in the
case of criminal actions or proceedings, the person had no reasonable cause to
believe his conduct was unlawful. There are additional limitations applicable to
criminal actions and to actions brought by or in the name of the corporation.
The determination as to whether a person seeking indemnification has met the
required standard of conduct is to be made (i) by a majority vote of a quorum of
disinterested members of the board of directors, or (ii) by independent legal
counsel in a written opinion, if such a quorum does not exist or if the
disinterested directors so direct, or (iii) by the stockholders.

The certificate of incorporation and bylaws of the Company require the
Company to indemnify the Company's directors and officers to the fullest extent
permitted under Delaware law, and to implement provisions pursuant to
contractual indemnity agreements the Company has entered into with its directors
and executive officers. The Company's Certificate of Incorporation limits the
personal liability of a director to the corporation or its stockholders to
damages for breach of the director's fiduciary duty.

II-1
<PAGE> 61

The Company has purchased insurance on behalf of its directors and officers
against certain liabilities that may be asserted or incurred by, such persons in
their capacities as directors or officers of the registrant, or that may arise
out of their status as directors or officers of the registrant, including
liabilities under the federal and state securities laws.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

The following is a list of all the exhibits and financial statement
schedules filed as part of the Registration Statement.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
**1 -- Form of Underwriting Agreement by and among Dillon, Read & Co. Inc.,
Raymond James & Associates, Inc., Rodman & Renshaw, Inc., Digicon
Inc., and the Selling Stockholder.

3-A -- Restated Certificate of Incorporation (with Amendments) of Digicon
Inc. dated December 17, 1992. (Exhibit 3-A to Digicon's Annual Report
on Form 10-K for the year ended July 31, 1994)

3-B -- Certificate of Ownership and Merger of New Digicon Inc. and Digicon
Inc. (Exhibit 3-B to Digicon's Registration Statement No. 33-43873,
dated November 12, 1991)

3-C -- By-laws of New Digicon Inc. dated June 24, 1991. (Exhibit 3-C to
Digicon's Registration Statement No. 33-43873, dated November 12,
1991).

3-D -- Certificate of Amendment of Certificate of Incorporation of Digicon
Inc. dated February 6, 1992. (Exhibit 3-D to Digicon's Annual Report
on Form 10-K for the year ended July 31, 1994)

*3-E -- Certificate of Amendment of Restated Certificate of Incorporation of
Digicon Inc. dated January 16, 1995.

*4 -- Specimen Digicon Inc. Common Stock certificate.

*5 -- Opinion of Porter & Hedges, L.L.P. with respect to legality of
securities.

10-A -- Salary Continuation Agreement executed by Nicholas A. C. Bright,
Kevin P. Callaghan, Richard W. McNairy and Allan C. Pogach. (Exhibit
10-E to Digicon Inc.'s Annual Report on Form 10-K for the year ended
July 31, 1994)

*10-B -- Salary Continuation Agreement executed by Stephen J. Ludlow.

10-C -- Funding and Stockholders' Agreement dated April 9, 1991. (Exhibit
10.23 to Digicon Inc.'s Amendment No. 3 to Registration Statement No.
33-40197, dated June 7, 1991)

10-D -- Note Purchase Agreement dated June 29, 1992, between Digicon Inc. and
Hanseatic Corporation, as Agent. (Exhibit 10-O to Digicon Inc.'s
Annual Report on Form 10-K for the year ended July 31, 1992)

10-E -- Memorandum of Agreement dated August 13, 1992, between Digicon Inc.
and Mobil Tankships (U.S.A.) with respect to the purchase and sale of
the M/V MOBIL SEARCH. (Exhibit 10-R to Digicon's Annual Report on
Form 10-K for the year ended July 31, 1992)

10-F -- Asset Purchase Agreement dated August 31, 1994, between Syntron, Inc.
and Digicon Geophysical Corp., Euroseis, Inc., Digicon/GFS Inc., and
Digicon Inc. (Exhibit 10-M to Digicon Inc.'s Annual Report on Form
10-K for the year ended July 31, 1994)
</TABLE>

II-2
<PAGE> 62

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10-G -- Loan and Security Agreement dated April 11, 1994, between Foothill
Capital Corporation and Digicon Inc., Digicon Geophysical Corp.,
Digicon/GFS Inc., Digital Exploration Ltd. and Digicon Exploration
Ltd. (Exhibit 10-N to Digicon Inc.'s Annual Report on Form 10-K for
the year ended July 31, 1994)

10-H -- 1992 Non-Employee Director Stock Option Plan. (Exhibit 10-T to
Digicon Inc.'s Amendment No. 3 to Registration Statement No.
33-54384, dated December 17, 1992)

*10-I -- Amended and Restated 1992 Employee Nonqualified Stock Option Plan.

10-J -- Stock Purchase Agreement dated June 6, 1995, among Digicon Inc. and
MD Seis International relating to the sale of the Company's interest
in certain joint ventures established to pursue business
opportunities in the former Soviet Union. (Exhibit 10-a to Digicon
Inc.'s Quarterly Report on Form 10-Q for the quarter ended April 30,
1995)

*10-K -- Stock Purchase and Registration Rights Agreement dated June 6, 1995,
between Digicon Inc. and Acorn Fund.

*10-L -- Stock Purchase and Registration Rights Agreement dated September 19,
1995, between Digicon Inc. and Artform, N.V., Christian Humann and
Francois Sicart Trustee under a deed of trust dated 2/2/88, Montber,
S.A., Mellon Bank, N.A., as trustee for National Intergroup, Inc.,
Trace Inc., Jomacim, Inc., WKDL Investments Ltd., and The Tocqueville
Fund.

*10-M -- Stock Purchase and Registration Rights Agreement dated September 28,
1995, between Digicon Inc. and Value Partners, Ltd.

11-A -- Computation of Income (Loss) Per Common and Common Equivalent Share
for the years ended July 31, 1993, 1994 and 1995. (Exhibit 11 to
Digicon Inc.'s Annual Report on Form 10-K for the year ended July 31,
1995)

11-B -- Computation of Income Per Common and Common Equivalent Share for the
three-month period ended October 31, 1994 and 1995. (Exhibit 11 to
Digicon Inc.'s Quarterly Report on Form 10-Q for the period ended
October 31, 1995)

**23-A -- Consent of Deloitte & Touche LLP.

*23-B -- Consent of Porter & Hedges, L.L.P. (included in Exhibit 5 opinion)

24 -- Power of Attorney. (included on the signature page hereto)
</TABLE>

- ---------------

* Previously filed.

** Filed herewith.

(b) Financial Statement Schedules

Schedules are omitted since the information required to be submitted has
been included in the Consolidated Financial Statements of Digicon Inc. or the
notes thereto, or the required information is not required.

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act: (i) the information omitted
from the form of prospectus filed as part of a registration statement in
reliance upon Rule 430A and contained in the form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be
deemed to be part of the registration statement as of the time it was declared
effective; and (ii) each post-effective amendment that contains a form of

II-3
<PAGE> 63

prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.

II-4
<PAGE> 64

SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Houston, State of Texas, on March 5, 1996.

DIGICON INC.

By: /s/ STEPHEN J. LUDLOW
--------------------------------------
Stephen J. Ludlow, President and
Chief Executive Officer

Pursuant to the requirements of the Securities Act, this Amendment to the
Registration Statement has been signed by the following persons in the indicated
capacities and on the 5th day of March, 1996.

<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<S> <C>
DOUGLAS B. THOMPSON* Director and Chairman of the Board
- ---------------------------------------------
Douglas B. Thompson

STEPHEN J. LUDLOW* Director, President and Chief Executive
- --------------------------------------------- Officer
Stephen J. Ludlow

RICHARD W. McNAIRY* Chief Financial Officer
- ---------------------------------------------
Richard W. McNairy

CHARLES H. ACKERMAN* Principal Accounting Officer
- ---------------------------------------------
Charles H. Ackerman

GEORGE F. BAKER* Director
- ---------------------------------------------
George F. Baker

JAMES B. CLEMENT* Director
- ---------------------------------------------
James B. Clement

CLAYTON P. CORMIER* Director
- ---------------------------------------------
Clayton P. Cormier

STEVEN J. GILBERT* Director
- ---------------------------------------------
Steven J. Gilbert

*By: /s/ STEPHEN J. LUDLOW
- ---------------------------------------------
Stephen J. Ludlow
Individually and as Attorney-in-Fact
</TABLE>

II-5
<PAGE> 65

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C> <C>
**1 -- Form of Underwriting Agreement by and among Dillon, Read & Co. Inc.,
Raymond James & Associates, Inc., Rodman & Renshaw, Inc., Digicon
Inc., and the Selling Stockholder.

3-A -- Restated Certificate of Incorporation (with Amendments) of Digicon
Inc. dated December 17, 1992. (Exhibit 3-A to Digicon's Annual Report
on Form 10-K for the year ended July 31, 1994)

3-B -- Certificate of Ownership and Merger of New Digicon Inc. and Digicon
Inc. (Exhibit 3-B to Digicon's Registration Statement No. 33-43873,
dated November 12, 1991)

3-C -- By-laws of New Digicon Inc. dated June 24, 1991. (Exhibit 3-C to
Digicon's Registration Statement No. 33-43873, dated November 12,
1991).

3-D -- Certificate of Amendment of Certificate of Incorporation of Digicon
Inc. dated February 6, 1992. (Exhibit 3-D to Digicon's Annual Report
on Form 10-K for the year ended July 31, 1994)

*3-E -- Certificate of Amendment of Restated Certificate of Incorporation of
Digicon Inc. dated January 16, 1995.

*4 -- Specimen Digicon Inc. Common Stock certificate.

*5 -- Opinion of Porter & Hedges, L.L.P. with respect to legality of
securities.

*10-B -- Salary Continuation Agreement executed by Stephen J. Ludlow.

10-C -- Funding and Stockholders' Agreement dated April 9, 1991. (Exhibit
10.23 to Digicon Inc.'s Amendment No. 3 to Registration Statement No.
33-40197, dated June 7, 1991)

10-G -- Loan and Security Agreement dated April 11, 1994, between Foothill
Capital Corporation and Digicon Inc., Digicon Geophysical Corp.,
Digicon/GFS Inc., Digital Exploration Ltd. and Digicon Exploration
Ltd. (Exhibit 10-N to Digicon Inc.'s Annual Report on Form 10-K for
the year ended July 31, 1994)

10-H -- 1992 Non-Employee Director Stock Option Plan. (Exhibit 10-T to
Digicon Inc.'s Amendment No. 3 to Registration Statement No.
33-54384, dated December 17, 1992)

*10-I -- Amended and Restated 1992 Employee Nonqualified Stock Option Plan.
</TABLE>
<PAGE> 66

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10-J -- Stock Purchase Agreement dated June 6, 1995, among Digicon Inc. and
MD Seis International relating to the sale of the Company's interest
in certain joint ventures established to pursue business
opportunities in the former Soviet Union. (Exhibit 10-a to Digicon
Inc.'s Quarterly Report on Form 10-Q for the quarter ended April 30,
1995)

*10-K -- Stock Purchase and Registration Rights Agreement dated June 6, 1995,
between Digicon Inc. and Acorn Fund.

*10-M -- Stock Purchase and Registration Rights Agreement dated September 28,
1995, between Digicon Inc. and Value Partners, Ltd.

**23-A -- Consent of Deloitte & Touche LLP.

*23-B -- Consent of Porter & Hedges, L.L.P. (included in Exhibit 5 opinion)

24 -- Power of Attorney. (included on the signature page hereto)
</TABLE>

- ---------------

* Previously filed.

** Filed herewith.

<PAGE> 1
EXHIBIT (1)

3,700,000 Shares
Common stock
($.01 Par Value)

UNDERWRITING AGREEMENT

, 1996
<PAGE> 2
UNDERWRITING AGREEMENT

, 1996

DILLON, READ & CO. INC.
RAYMOND JAMES & ASSOCIATES, INC.
RODMAN & RENSHAW, INC.
as Managing Underwriters
535 Madison Avenue
New York, New York 10022

Dear Sirs:

Digicon Inc. (the "Company") proposes to issue and sell and
the persons named in Schedule B annexed hereto (the "Selling Stockholders")
propose to sell to the underwriters named in Schedule A annexed hereto (the
"Underwriters") an aggregate of 3,700,000 shares (the "Firm Shares") of Common
Stock, $.01 par value (the "Common Stock"), of the Company, of which 3,500,000
shares are to be issued and sold by the Company and an aggregate of 200,000
shares are to be sold by the Selling Stockholders in the respective amounts set
forth under the caption "Firm Shares" in Schedule B annexed hereto. In
addition, solely for the purpose of covering over-allotments, the Company
proposes to grant to the Underwriters the option to purchase from the Company
up to an additional 555,000 shares of Common Stock (the "Additional Shares").
The Firm Shares and the Additional Shares are hereinafter collectively
sometimes referred to as the "Shares." The Shares are described in the
Prospectus which is referred to below.

The Company has filed, in accordance with the provisions of
the Securities Act of 1993, as amended, and the rules and regulations
thereunder (collectively called the "Act"), with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-2, including a
prospectus, relating to the Shares, which incorporates by reference documents
which the Company has filed or will file in accordance with the provisions of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (collectively called the "Exchange Act"). The Company has furnished
to you, for use by the Underwriters and by dealers, copies of one or more
preliminary prospectuses and the documents incorporated by reference therein
(each thereof, including the documents incorporated therein by reference, being
herein called a Preliminary Prospectus) relating to the Shares. Except where
the context otherwise requires, the registration statement, as amended when it
becomes effective, including all documents filed as a part thereof or
incorporated by reference therein, and including any information contained in a
prospectus subsequently filed with the Commission pursuant to Rule 424(b) under
the Act and deemed to be part of the registration statement at the time of
effectiveness pursuant to Rule 430(A) under the Act, is herein called the
Registration Statement, and the prospectus, including all documents
incorporated

<PAGE> 3
therein by reference, in the form filed by the Company with the Commission
pursuant to Rule 424(b) under the Act or, if no such filing is required, the
form of final prospectus included in the Registration Statement at the time it
became effective, is herein called the Prospectus.

The Company, the Selling Stockholders and the Underwriters agree as
follows:

1. Sale and Purchase. Upon the basis of the warranties and
representations and the other terms and conditions herein set forth, the
Company and each of the Selling Stockholders, severally and not jointly,
agree to sell to the respective Underwriters and each of the Underwriters,
severally and not jointly, agrees to purchase from the Company and each
Selling Stockholder the respective number of Firm Shares (subject to such
adjustment as you may determine to avoid fractional shares) which bears the
same proportion to the number of Firm Shares to be sold by the Company or
by such Selling Stockholders, as the case may be, as the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule A
annexed hereto bears to the total number of Firm Shares to be sold by the
Company and the Selling Stockholders, in each case at a purchase price of
$_____ per Share. You shall release the Firm Shares for public sale
promptly after this Agreement becomes effective. You may from time to time
increase or decrease the public offering price after the initial public
offering to such extent as you may determine.

In addition, the Company hereby grants to the several Underwriters the
option to purchase, and upon the basis of the warranties and representations and
the other terms and conditions herein set forth, the Underwriters shall have the
right to purchase, severally and not jointly, from the Company, ratably in
accordance with the number of Firm Shares to be purchased by each of them
(subject to such adjustment as you shall determine to avoid fractional shares),
all or a portion of the Additional Shares as may be necessary to cover
over-allotments made in connection with the offering of the Firm Shares, at the
same purchase price per share to be paid by the Underwriters to the Company and
the Selling Stockholders listed on Schedule B hereto for the Firm Shares. This
option may be exercised at any time (but not more than once) on or before the
forty-fifth day following the date hereof, by written notice to the Company and
the Selling Stockholders listed on Schedule B hereto. Such notice shall set
forth the aggregate number of Additional Shares as to which the option is being
exercised, and the date and time when the Additional Shares are to be delivered
(such date and time being herein referred to as the additional time of
purchase); provided, however, that the additional time of purchase shall not be
earlier than the time of purchase (as defined below) nor earlier than the second
business day after the date on which the option shall have been exercised nor
later than the eighth business day after the date on which the option shall have
been exercised. The number of Additional Shares to be sold to each Underwriter
shall be the number which bears the same proportion to the aggregate number of
Additional Shares being purchased as the number of Firm Shares set forth
opposite the name of such Underwriter on Schedule A hereto bears to the total
number of Firm Shares (subject, in each case, to such adjustment as you may
determine to eliminate fractional shares).

-2-
<PAGE> 4

Pursuant to powers of attorney, which shall be satisfactory to counsel for
the Underwriters, granted by each Selling Stockholder, ______________ and
________________ will act as representatives of the Selling Stockholders. The
foregoing representatives (the "Representatives of the Selling Stockholders")
are authorized, on behalf of each Selling Stockholder, to execute any documents
necessary or desirable in connection with the sale of the Shares to be sold
hereunder by each Selling Stockholder, to make delivery of the certificates of
such Shares, to receive the proceeds of the sale of such Shares, to give
receipts for such proceeds, to pay therefrom the expenses to be borne by each
Selling Stockholder in connection with the sale and public offering of the
Shares, to distribute the balance of such proceeds to each Selling Stockholder
in proportion to the number of Shares sold by each Selling Stockholder, to
receive notices on behalf of each Selling Stockholder and to take such other
action as may be necessary or desirable in connection with the transactions
contemplated by this Agreement.

2. Payment and Delivery. Payment of the purchase price for the Firm
Shares shall be made to the Company and each of the Selling Stockholders by
certified or official bank check, in New York Clearing House funds, at the
office of Dillon, Read & Co. Inc. in New York City, against delivery of the
certificates for the Firm Shares to you for the respective accounts of the
Underwriters. Such payment and delivery shall be made at 10:00 A.M., New
York City time, on , 1996 (unless another time shall be agreed
to by you, the Company and the Representatives of the Selling Stockholders
or unless postponed in accordance with the provisions of Section 10
hereof). The time at which such payment and delivery are actually made
is hereinafter sometimes called the "time of purchase." Certificates for
the Firm Shares shall be delivered to you in definitive form in such names
and in such denominations as you shall specify on the second business day
preceding the time of purchase. For the purpose of expediting the checking
of the certificates for the Firm Shares by you, the Company and the Selling
Stockholders agree to make such certificates available to you for such
purpose at least one full business day preceding the time of purchase.

Payment of the purchase price for the Additional Shares shall be made at
the additional time of purchase in the same manner and at the same office as the
payment for the Firm Shares. Certificates for the Additional Shares shall be
delivered to you in definitive form in such names and in such denominations as
you shall specify on the second business day preceding the additional time of
purchase. For the purpose of expediting the checking of the certificates for
the Additional Shares by you, the Company agrees to make such certificates
available to you for such purpose at least one full business day preceding the
additional time of purchase.

3. Representations and Warranties of the Company. The Company
represents and warrants to each of the Underwriters that:

(a) when the Registration Statement becomes effective, the
Registration Statement and the Prospectus will fully comply in
all material respects with the provisions of the Act,

-3-
<PAGE> 5
and the Registration Statement will not contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and the Prospectus will not contain an
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that the
Company makes no warranty or representation with respect to any
statement contained in the Registration Statement or the
Prospectus in reliance upon and in conformity with information
concerning the Underwriters and furnished in writing by or on
behalf of any Underwriter through you to the Company expressly
for use in the Registration Statement or the Prospectus; the
documents incorporated by reference in the Prospectus, at the
time they were filed with the Commission, complied in all
material respects with the requirements of the Exchange Act, and
do not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances
under which they were made, not misleading;

(b) as of the date of this Agreement, the Company has
authorized capital stock as set forth under the heading entitled
"Actual" in the section of the Registration Statement and the
Prospectus entitled "Capitalization" and, as of the time of
purchase and the additional time of purchase, as the case may be,
the Company shall have authorized capital stock as set forth
under the heading entitled "As Adjusted" in the section of the
Registration Statement and the Prospectus entitled
"Capitalization"; all of the issued and outstanding shares of
capital stock including Common Stock of the Company have been
duly and validly authorized and issued and are fully paid and
non-assessable; the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws
of the State of Delaware, with full power and authority to own
its properties and conduct its business as described in the
Registration Statement and the Prospectus, to execute and deliver
this Agreement and to issue and sell the Shares as herein
contemplated;

-4-
<PAGE> 6
(c) the Company and each of its subsidiaries (the
"Subsidiaries") are duly qualified or licensed by and are in good
standing in each jurisdiction in which they conduct their
respective businesses and in which the failure, individually or
in the aggregate, to be so licensed or qualified could have a
material adverse effect on the operations, business or condition
of the Company and its Subsidiaries, taken as a whole; and the
Company and each of its Subsidiaries are in compliance in all
material respects with the laws, orders, rules, regulations and
directives issued or administered by such jurisdictions;

(d) neither the Company nor any of its Subsidiaries is in
breach of, or in default under (nor has any event occurred which
with notice, lapse of time, or both would constitute a breach of,
or default under), its respective charter or by-laws or in the
performance or observance of any obligation, agreement, covenant
or condition contained in any indenture, mortgage, deed of trust,
bank loan or credit agreement or other agreement or instrument to
which the Company or any of its Subsidiaries is a party or by
which any of them is bound, and the execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby will not conflict with, or
result in any breach of or constitute a default under (nor
constitute any event which with notice, lapse of time, or both
would constitute a breach of, or default under), any provisions
of the charter or by-laws, of the Company or any of its
Subsidiaries or under any provision of any license, indenture,
mortgage, deed of trust, bank loan or credit agreement or other
agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which any of them or their
respective properties may be bound or affected, or under any
federal, state, local or foreign law, regulation or rule or any
decree, judgment or order applicable to the Company or any of its
Subsidiaries;

(e) this Agreement has been duly authorized, executed and
delivered by the Company and is a legal, valid and binding
agreement of the Company enforceable in accordance with its
terms, subject to applicable laws of bankruptcy, insolvency or
similar laws relating to creditors' rights

-5-
<PAGE> 7
generally and to general principles of equity (whether applied in
a proceeding in law or equity);

(f) the capital stock of the Company, including the Shares,
conforms in all material respects to the description thereof
contained in the Registration Statement and Prospectus and the
certificates for the Shares are in due and proper form and the
holders of the Shares will not be subject to personal liability
by reason of being such holders;

(g) no approval, authorization, consent or order of or filing
with any national, state or local governmental or regulatory
commission, board, body, authority or agency is required in
connection with the issuance and sale of the Shares as
contemplated hereby other than registration of the Shares under
the Act and any necessary qualification under the securities or
blue sky laws of the various jurisdictions in which the Shares
are being offered by the Underwriters;

(h) except pursuant to registration rights that have been
exercised in the manner set forth in the Prospectus or pursuant
to the registration statement on Form S-3 dated __________, 1995
and except for registration rights that have been unconditionally
waived or otherwise terminated, no person has the right,
contractual or otherwise, to cause the Company to issue to it, or
register pursuant to the Act, any shares of capital stock of the
Company upon the issue and sale of the Shares to the Underwriters
hereunder, nor does any person have preemptive rights, rights of
first refusal or other rights to purchase any of the Shares;

(i) Deloitte & Touche LLP, whose reports on the consolidated
financial statements of the Company and its Subsidiaries are
filed with the Commission as part of the Registration Statement
and Prospectus, are independent public accountants as required by
the Act and the applicable published rules and regulations
thereunder;

(j) each of the Company and its Subsidiaries has all necessary
licenses, authorizations, consents and approvals and has made all
necessary filings required under any federal, state, local or
foreign law, regulation or rule, and has obtained all necessary
authorizations, consents and approvals from

-6-
<PAGE> 8
other persons, in order to conduct its respective business;
neither the Company nor any of its Subsidiaries is in violation
of, or in default under, any such license, authorization, consent
or approval or any federal, state, local or foreign law,
regulation or rule or any decree, order or judgment applicable to
the Company or any of its Subsidiaries the effect of which could
have a material adverse effect on the Company and its
Subsidiaries taken as a whole;

(k) all legal or governmental proceedings, contracts or
documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement have been so described or
filed as required;

(l) there are no actions, suits or proceedings pending or
threatened against the Company or any of its Subsidiaries or any
of their respective properties, at law or in equity, or before or
by any federal, state, local or foreign governmental or
regulatory commission, board, body, authority or agency which
could result in a judgment, decree or order having a material
adverse effect on the business, condition, prospects or property
of the Company and its Subsidiaries taken as a whole;

(m) the audited financial statements included in the
Registration Statement and the Prospectus present fairly the
consolidated financial position of the Company and its
Subsidiaries as of the dates indicated and the consolidated
results of operations and changes in financial position of the
Company and its Subsidiaries for the periods specified; such
financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent
basis during the periods involved;

(n) subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, and except
as may be otherwise stated in the Registration Statement or
Prospectus, there has not been (A) any material and unfavorable
change, financial or otherwise, in the business, properties,
prospects, regulatory environment, results of operations or
condition (financial or otherwise), present or prospective, of
the Company and its

-7-
<PAGE> 9
Subsidiaries taken as a whole, (B) any transaction, which is
material to the Company and its Subsidiaries taken as a whole,
contemplated or entered into by the Company or any of its
Subsidiaries or (C) any obligation, contingent or otherwise,
directly or indirectly incurred by the Company or any of its
Subsidiaries which is material to the Company and its
Subsidiaries taken as a whole;

(o) the Company has obtained the agreement of each of the
Selling Stockholders and of each of its directors and officers
not to offer to sell, sell, contract to sell, grant any option
to sell or otherwise dispose of, directly or indirectly, any
shares of Common Stock or securities convertible into or
exchangeable for Common Stock or warrants or other rights to
purchase Common Stock for a period of 120 days after the date
of the Prospectus; and

(p) none of the assets, liabilities, revenues or expenses of
the Company's Subsidiaries other than the Significant
Subsidiaries (as hereinafter defined), when each such financial
statement item is considered separately but aggregated for all
such non-Significant Subsidiaries, is material to the assets,
liabilities, revenues or expenses, respectively, of the Company
and its Subsidiaries, taken as a whole.

4. Representations and Warranties of the Selling Stockholders. Each
Selling Stockholder, severally and not jointly, represents and warrants to
each Underwriter that:

(a) such Selling Stockholder now is and at the time of
delivery of such Shares (whether the time of purchase or
additional time of purchase, as the case may be) will be, the
lawful owner of the number of Shares to be sold by such Selling
Stockholder pursuant to this Agreement and has and, at the time
of delivery thereof, will have valid and marketable title to such
Shares, and upon delivery of and payment for such Shares (whether
at the time of purchase or the additional time of purchase, as
the case may be), the Underwriters will acquire valid and
marketable title to such Shares free and clear of any claim,
lien, encumbrance, security interest, community property right,
restriction on transfer or other defect in title;

(b) such Selling Stockholder has and at the time of delivery
of such Shares will have, full legal right, power and capacity,
and any approval required by law (other than those

-8-
<PAGE> 10
imposed by the Act and the securities or blue sky laws of certain
jurisdictions), to sell, assign, transfer and deliver such Shares
in the manner provided in this Agreement;

(c) this Agreement and the Custody Agreement among
______________, as custodian, and the Selling Stockholders (the
"Custody Agreement") have been duly executed and delivered by
such Selling Stockholder and each is a legal, valid and binding
agreement of such Selling Stockholder enforceable in accordance
with its terms, subject to applicable laws of bankruptcy,
insolvency or similar laws relating to creditors' rights
generally and to general principles of equity (whether applied in
a proceeding in law or equity);

(d) when the Registration Statement becomes effective and at
all times subsequent thereto through the latest of the time of
purchase, additional time of purchase or the termination of the
offering of the Shares, the Registration Statement and
Prospectus, and any supplements or amendments thereto as relate
to such Selling Stockholder (to the extent based upon information
supplied in writing to the Company or any Underwriter) will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading; and

(e) such Selling Stockholder has duly and irrevocably
authorized the Representatives of the Selling Stockholders, on
behalf of such Selling Stockholder, to execute and deliver this
Agreement and any other document necessary or desirable in
connection with the transactions contemplated thereby and to
deliver the Shares to be sold by such Selling Stockholder and
receive payment therefor pursuant hereto.

5. Certain Covenants of the Company. The Company hereby agrees:

(a) to furnish such information as may be required and
otherwise to cooperate in qualifying the Shares for offering and
sale under the securities or blue sky laws of such states as you
may designate and to maintain such qualifications in effect so
long as required for the distribution of the Shares, provided
that the Company shall not be required to qualify as a foreign
corporation or to consent to the service of process

-9-
<PAGE> 11
under the laws of any such state (except services of process with
respect to the offering and sale of the Shares); and to promptly
advise you of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose;

(b) to make available to you in New York City, as soon as
practicable after the Registration Statement becomes effective,
and thereafter from time to time to furnish to the Underwriters,
as many copies of the Prospectus (or of the Prospectus as amended
or supplemented if the Company shall have made any amendments or
supplements thereto after the effective date of the Registration
Statement) as the Underwriters may request for the purposes
contemplated by the Act;

(c) to advise you promptly and (if requested by you) to
confirm such advice in writing, (i) when the Registration
Statement has become effective and when any post-effective
amendment thereto becomes effective and (ii) if Rule 430A under
the Act is used, when the Prospectus is filed with the Commission
pursuant to Rule 424(b) under the Act (which the Company agrees
to file in a timely manner under such Rules);

(d) to advise you promptly, confirming such advice in
writing, of any request by the Commission for amendments or
supplements to the Registration Statement or Prospectus or for
additional information with respect thereto, or of notice of
institution of proceedings for, or the entry of a stop order
suspending the effectiveness of the Registration Statement and,
if the Commission should enter a stop order suspending the
effectiveness of the Registration Statement, to make every
reasonable effort to obtain the lifting or removal of such order
as soon as possible; to advise you promptly of any proposal to
amend or supplement the Registration Statement or Prospectus
including by filing any documents that would be incorporated
therein by reference and to file no such amendment or supplement
to which you shall object in writing;

-10-
<PAGE> 12

(e) to furnish to you and, upon request, to each of the other
Underwriters for a period of five years from the date of this
Agreement (i) copies of any reports or other communications which
the Company shall send to its stockholders or shall from time to
time published or publicly disseminate, (ii) copies of all
annual, quarterly and current reports filed with the Commission
on Forms 10-K, 10-Q and 8-K, or such other similar form as may be
designated by the Commission, and (iii) such other information as
you may reasonably request regarding the Company or its
Subsidiaries;

(f) to advise the Underwriters promptly of the happening of
any event known to the Company within the time during which a
prospectus relating to the Shares is required to be delivered
under the Act which, in the judgment of the Company, would
require the making of any change in the Prospectus then being
used, or in the information incorporated therein by reference, so
that the Prospectus would not include an untrue statement of
material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under
which they are made, not misleading, and, during such time, to
prepare and furnish, at the Company's expense, to the
Underwriters promptly such amendments or supplements to such
Prospectus as may be necessary to reflect any such change and to
furnish you a copy of such proposed amendment or supplement
before filing any such amendment or supplement with the
Commission;

(g) to make generally available to its security holders, and
to deliver to you, an earnings statement of the Company (which
will satisfy the provisions of Section 11(a) of the Act) covering
a period of twelve months beginning after the effective date of
the Registration Statement but no later than September 30, 1997,
as soon as is reasonably practicable after the termination of
such twelve-month period;

(h) to furnish to you four signed copies of the Registration
Statement, as initially filed with the Commission, and of all
amendments thereto (including all exhibits thereto and documents
incorporated by reference therein) and sufficient conformed
copies of the foregoing (other than exhibits) for distribution of
a copy to each of the other Underwriters;

-11-
<PAGE> 13

(i) to furnish to you as early as practicable prior to the
time of purchase and the additional time of purchase, as the
case may be, but not later than two business days prior thereto,
a copy of the latest available unaudited interim consolidated
financial statements, if any, of the Company and its
Subsidiaries which have been read by the Company's independent
certified public accountants, as stated in their letter to be
furnished pursuant to Section 8(c) of this Agreement;

(j) to apply the net proceeds from the sale of the Shares
in the manner set forth under the caption "Use of Proceeds" in
the Prospectus;

(k) to furnish to you, before filing with the Commission
subsequent to the effective date of the Registration Statement
and during the period referred to in paragraph (f) above, a copy
of any document proposed to be filed pursuant to Sections 13,
14, or 15(d) of the Exchange Act;

(l) not to offer to sell, sell, contract to sell, grant
any option to sell or otherwise dispose of, directly or
indirectly, any shares of Common Stock or securities
convertible into or exchangeable for Common Stock or warrants
or other rights to purchase Common Stock or permit the
registration under the Act of any shares of Common Stock,
except for the registration of the Shares and the sales to the
Underwriters pursuant to this Agreement and except for
issuances of Common Stock upon the exercise of outstanding
options and warrants, for a period of 120 days after the date
hereof, without the prior written consent of the Managing
Underwriters; and

(m) to use its best efforts to cause the Common Stock to
be listed on the American Stock Exchange.

6. Certain Covenants of the Company and the Selling
Stockholders. The Company and each of the Selling Stockholders
agree with each Underwriter as follows:

(a) the Company will pay all expenses, fees and taxes
(other than any transfer taxes and fees and disbursements of
counsel for the Underwriters except as set forth under

-12-
<PAGE> 14
Section 7 hereof or (iii) or (iv) below) in connection with (i)
the preparation and filing of the Registration Statement, each
Preliminary Prospectus, the Prospectus, and any amendments or
supplements thereto, and the printing and furnishing of copies of
each thereof to the Underwriters and to dealers (including costs
of mailing and shipment), (ii) the issuance, sale and delivery of
the Shares by the Company and the Selling Stockholders, (iii) the
word processing and/or printing of this Agreement, any Agreement
Among Underwriters, any dealer agreements, any Statements of
Information, the Custody Agreement and the Powers of Attorney and
the reproduction and/or printing and furnishing of copies of each
thereof to the Underwriters and to dealers (including costs of
mailing and shipment), (iv) the qualification of the Shares for
offering and sale under state laws and the determination of their
eligibility for investment under state law as aforesaid
(including the legal fees and filing fees and other disbursements
of counsel to the Underwriters) and the printing and furnishing
of copies of any blue sky surveys or legal investment surveys to
the Underwriters and to dealers, (v) any listing of the Shares on
any securities exchange or qualification of the Shares for
quotation on the Nasdaq Stock Market and any registration thereof
under the Exchange Act, (vi) the filing for review of the public
offering of the Shares by the National Association of Securities
Dealers, Inc. (the "NASD"), and (vii) the performance of the
Company's and the Selling Stockholders' other obligations
hereunder; provided, however, that, notwithstanding the
foregoing, in addition to their proporationate share of any
underwriting discounts and commissions, the Selling Stockholders
shall bear all legal fees and disbursements of their counsel; and

(b) the Company and the Selling Stockholders will not issue,
sell, grant any option to sell or otherwise dispose of, directly
or indirectly, any shares of Common Stock or securities
convertible into or exchangeable for Common Stock or warrants or
other rights to purchase Common Stock or, in the case of the
Company, permit the registration under the Act of any shares of
Common Stock, except for the registration of the Shares and the
sales to the Underwriters pursuant to this Agreement and except
for issuances of Common Stock upon the exercise of outstanding
options or

-13-
<PAGE> 15
warrants for a period of 120 days after the date of the
Prospectus, without the prior written consent of the Managing
Underwriters.

7. Reimbursement of Underwriters' Expenses. If the Shares are not
delivered for any reason other than the termination of this Agreement
pursuant to the first two paragraphs of Section 10 hereof or the default by
one or more of the Underwriters in its or their respective obligations
hereunder, the Company shall reimburse the Underwriters for all of their
out-of-pocket expenses, including the fees and disbursements of their
counsel.

8. Conditions of Underwriters' Obligations. The several obligations of
the Underwriters hereunder are subject to the accuracy of the
representations and warranties on the part of the Company and the Selling
Stockholders on the date hereof and at the time of purchase (and the
several obligations of the Underwriters at the additional time of purchase
are subject to the accuracy of the representations and warranties on the
part of the Company and the Selling Stockholders on the date hereof and at
the time of purchase (unless previously waived) and at the additional time
of purchase, as the case may be), the performance by the Company and the
Selling Stockholders of their obligations hereunder and to the following
conditions:

(a) The Company shall furnish to you at the time of purchase
and at the additional time of purchase, as the case may be, an
opinion of Porter & Hedges, L.L.P., counsel for the Company,
addressed to the Underwriters, and dated the time of purchase or
the additional time of purchase, as the case may be, with
reproduced copies for each of the other Underwriters and in form
satisfactory to Vinson & Elkins L.L.P., counsel for the
Underwriters, stating that:

(i) the Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware, with full corporate power and
authority to own its properties and conduct its business as
described in the Registration Statement and the Prospectus,
to execute and deliver this Agreement and to issue, sell and
deliver the Shares as herein contemplated;

(ii) each of the Company's significant subsidiaries
named in Schedule C ("Significant Subsidiaries") has been
duly incorporated and is validly existing as a corporation
in good standing under the laws of its respective
jurisdiction of incorporation with full

-14-
<PAGE> 16

corporate power and authority to own its respective
properties and to conduct its respective business;

(iii) the Company and its Significant Subsidiaries are
duly qualified or licensed by each jurisdiction in which
they conduct their respective businesses and in which the
failure, individually or in the aggregate, to be so licensed
or qualified could have a material adverse effect on the
operations, business or condition of the Company and its
Significant Subsidiaries taken as a whole, and the Company
and its Significant Subsidiaries are duly qualified, and are
in good standing, in each jurisdiction in which they own or
lease real property or maintain an office and in which such
qualification is necessary;

(iv) this Agreement has been duly authorized, executed
and delivered by the Company;

(v) the Shares, when issued and delivered to and paid
for by the Underwriters, will be duly and validly authorized
and issued and will be fully paid and non- assessable;

(vi) the Company has authorized capital stock as set
forth in the Registration Statement and the Prospectus; the
outstanding shares of capital stock of the Company have been
duly and validly authorized and issued, and are fully paid,
nonassessable and free of statutory and contractual
preemptive rights; the Shares when issued will be free of
statutory and contractual preemptive rights; the
certificates for the Shares are in due and proper form and
the holders of the Shares will not be subject to personal
liability by reason of being such holders;

(vii) the capital stock of the Company, including the
Shares, conforms in all material respects to the description
thereof contained in the Registration Statement and
Prospectus;

(viii) the Registration Statement and the Prospectus
(except as to the financial statements and schedules

-15-
<PAGE> 17
and other financial and statistical data contained or
incorporated by reference therein, as to which such counsel
need express no opinion) comply as to form in all material
respects with the requirements of the Act;

(ix) the Registration Statement has become effective
under the Act and, to the best of such counsel's knowledge,
no stop order proceedings with respect thereto are pending
or threatened under the Act;

(x) no approval, authorization, consent or order of or
filing with any national, state or local governmental or
regulatory commission, board, body, authority or agency is
required in connection with the issuance and sale of the
Shares as contemplated hereby other than registration of the
Shares under the Act (except such counsel need express no
opinion as to any necessary qualification under the state
securities or blue sky laws of the various jurisdictions in
which the Shares are being offered by the Underwriters);

(xi) the execution, delivery and performance of this
Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby do not and will not
conflict with, or result in any breach of, or constitute a
default under (nor constitute any event which with notice,
lapse of time, or both, would constitute a breach of or
default under), any provisions of the charter or by-laws of
the Company or any of its Subsidiaries or under any
provision of any license, indenture, mortgage, deed of
trust, bank loan, credit agreement or other agreement or
instrument to which the Company or any of its Subsidiaries
is a party or by which any of them or their respective
properties may be bound or affected, or under any law,
regulation or rule or any decree, judgment or order
applicable to the Company or any of its Subsidiaries;

(xii) to the best of such counsel's knowledge, neither
the Company nor any of its Subsidiaries is in

-16-
<PAGE> 18
breach of, or in default under (nor has any event occurred
which with notice, lapse of time, or both would constitute a
breach of, or default under), any license, indenture,
mortgage, deed of trust, bank loan or any other agreement or
instrument to which the Company or any of its Subsidiaries
is a party or by which any of them or their respective
properties may be bound or affected or under any law,
regulation or rule or any decree, judgment or order
applicable to the Company or any of its Subsidiaries;

(xiii) to the best of such counsel's knowledge, there
are no contracts, licenses, agreements, leases or documents
of a character which are required to be filed as exhibits to
the Registration Statement or to be summarized or described
in the Prospectus which have not been so filed, summarized
or described;

(xiv) to the best of such counsel's knowledge, there are
no actions, suits or proceedings pending or threatened
against the Company or any of its Subsidiaries or any of
their respective properties, at law or in equity or before
or by any commission, board, body, authority or agency which
are required to be described in the Prospectus but are not
so described;

(xv) the documents incorporated by reference in the
Registration Statement and Prospectus, when they were filed
(or, if an amendment with respect to any such document was
filed when such amendment was filed), complied as to form in
all material respects with the Exchange Act (except as to
the financial statements and schedules and other financial
and statistical data contained or incorporated by reference
therein as to which such counsel need express no opinion);
and

(xvi) such counsel have participated in conferences with
officers and other representatives of the Company,
representatives of the independent public accountants of the
Company and representatives of the Underwriters at which the
contents of the

-17-
<PAGE> 19
Registration Statement and Prospectus were discussed and,
although such counsel is not passing upon and does not
assume responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration
Statement or Prospectus (except as and to the extent stated
in subparagraphs (vi) and (vii) above), on the basis of the
foregoing (relying as to materiality to a large extent upon
the opinions of officers and other representatives of the
Company) nothing has come to the attention of such counsel
that causes them to believe that the Registration Statement
or any amendment thereto at the time such Registration
Statement or amendment became effective contained an untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus or
any supplement thereto at the date of such Prospectus or
such supplement, and at all times up to and including the
time of purchase or additional time of purchase, as the case
may be, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading (it being understood that such counsel need
express no opinion with respect to the financial statements
and schedules and other financial and statistical data
included in the Registration Statement or Prospectus).

(b) The Selling Stockholders shall furnish to you at the time
of purchase and at the additional time of purchase, as the case
may be, an opinion of Porter & Hedges, L.L.P., counsel for the
Selling Stockholders, addressed to the Underwriters, and dated
the time of purchase or the additional time of purchase, as the
case may be, with reproduced copies for each of the other
Underwriters, and in form and substance satisfactory to Vinson &
Elkins L.L.P., counsel for the Underwriters, stating that:

(i) this Agreement and the Custody Agreement have been
duly executed and delivered by or on behalf of each of the
Selling Stockholders;

-18-
<PAGE> 20

(ii) each Selling Stockholder has full legal right and
power, and has obtained any authorization or approval
required by law (other than those imposed by the Act and the
securities or blue sky laws of certain jurisdictions), to
sell, assign, transfer and deliver the Shares to be sold by
such Selling Stockholder in the manner provided in this
Agreement;

(iii) delivery of certificates for the Shares by each
Selling Stockholder pursuant hereto will pass valid and
marketable title thereto to the Underwriters, free and clear
of any claim, lien, encumbrance, security interest,
community property right, restriction on transfer or other
defect in title;

(iv) each of the Representatives of the Selling
Stockholders has been duly authorized by each Selling
Stockholder to execute and deliver on behalf of such Selling
Stockholder this Agreement and any other document necessary
or desirable in connection with the transactions
contemplated hereby and to deliver the Shares to be sold by
such Selling Stockholder; and

(v) to the best of such counsel's knowledge, the
statements in the Prospectus under the caption "Selling
Stockholder" insofar as such statements constitute a summary
of the matters referred to therein present fairly the
information called for with respect to such matters.

(c) You shall have received from Deloitte & Touche LLP,
letters dated, respectively, the date of this Agreement and the
time of purchase and additional time of purchase, as the case may
be, and addressed to the Underwriters (with reproduced copies for
each of the Underwriters) in the forms heretofore approved by the
Managing Underwriters.

(d) You shall have received at the time of purchase and at
the additional time of purchase, as the case may be, the
favorable opinion of Vinson & Elkins L.L.P., counsel for the

-19-
<PAGE> 21
Underwriters, dated the time of purchase or the additional time
of purchase, as the case may be, as to the matters referred to in
subparagraphs (iv), (v), (vii), (viii) and (ix) of paragraph (a)
of this Section 8.

In addition, such counsel shall state that such counsel have participated
in conferences with officers and other representatives of the Company, counsel
for the Company, representatives of the independent public accountants of the
Company and representatives of the Underwriters at which the contents of the
Registration Statement and Prospectus and related matters were discussed and,
although such counsel is not passing upon and does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement and Prospectus (except as to matters referred to under
subparagraph (vii) of paragraph (a) of this Section 8), on the basis of the
foregoing (relying as to materiality to a large extent upon the opinions of
officers and other representatives of the Company), no facts have come to the
attention of such counsel which lead them to believe that the Registration
Statement or any amendment thereto at the time such Registration Statement or
amendment became effective contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus as of its date
or any supplement thereto as of its date contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (it being understood that such counsel need
express no comment with respect to the financial statements and schedules and
other financial and statistical data included in the Registration Statement or
Prospectus).

(e) No amendment or supplement to the Registration Statement
or Prospectus, including documents deemed to be incorporated by
reference therein, shall be filed prior to the time the
Registration Statement becomes effective to which you object in
writing.

(f) The Registration Statement shall become effective, or if
Rule 430A under the Act is used, the Prospectus shall have been
filed with the Commission pursuant to Rule 424(b) under the Act,
at or before 5:00 P.M., New York City time, on the date of this
Agreement, unless a later time (but not later than 5:00 P.M., New
York City time, on the second full business day after the date of
this Agreement) shall be agreed to by the Company, the
Representatives of the Selling Stockholders and you in writing or
by telephone, confirmed in writing; provided, however, that the
Company, the Representatives of the Selling Stockholders and you
and any

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<PAGE> 22
group of Underwriters, including you, who have agreed hereunder
to purchase in the aggregate at least 50% of the Firm Shares may
from time to time agree on a later date.

(g) Prior to the time of purchase or the additional time of
purchase, as the case may be, (i) no stop order with respect to
the effectiveness of the Registration Statement shall have been
issued under the Act or proceedings initiated under Section 8(d)
or 8(e) of the Act; (ii) the Registration Statement and all
amendments thereto, or modifications thereof, if any, shall not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading; and (iii) the Prospectus
and all amendments or supplements thereto, or modifications
thereof, if any, shall not contain an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
the light of the circumstances under which they are made, not
misleading.

(h) Between the time of execution of this Agreement and the
time of purchase or the additional time of purchase, as the case
may be, (i) no material and unfavorable change, financial or
otherwise (other than as referred to in the Registration
Statement and Prospectus), in the business, condition or
prospects of the Company and its Subsidiaries taken as a whole
shall occur or become known and (ii) no transaction which is
material and unfavorable to the Company shall have been entered
into by the Company or any of its Subsidiaries.

(i) The Company will, at the time of purchase or additional
time of purchase, as the case may be, deliver to you a
certificate of two of its executive officers to the effect that
the representations and warranties of the Company as set forth in
this Agreement and the conditions set forth in paragraph (g) and
paragraph (h) have been met and that they are true and correct as
of each such date.

(j) You shall have received signed letters, dated the date of
this Agreement, from each of the Selling Stockholders and each of
the directors and officers of the Company to the effect that such
persons shall not offer to sell, sell, contract to sell, grant
any option to sell or otherwise dispose of, directly or

-21-
<PAGE> 23
indirectly, any shares of Common Stock of the Company or
securities convertible into or exchangeable for Common Stock or
warrants or other rights to purchase Common Stock for a period of
120 days after the date of the Prospectus without the prior
written consent of the Managing Underwriters.

(k) The Company and the Selling Stockholders shall have
furnished to you such other documents and certificates as to the
accuracy and completeness of any statement in the Registration
Statement and the Prospectus as of the time of purchase and the
additional time of purchase, as the case may be, as you may
reasonably request.

(l) The Company and the Selling Stockholders shall perform
such of their respective obligations under this Agreement as are
to be performed by the terms hereof at or before the time of
purchase and at or before the additional time of purchase, as the
case may be.

(m) The Shares shall have been approved for listing on the
Exchange, subject only to notice of issuance at or prior to the
time of purchase.

(n) The Selling Stockholders will at the time of purchase and
the additional time of purchase, as the case may be deliver to
you a certificate of the Representatives of the Selling
Stockholders to the effect that the representations and the
warranties of the Selling Stockholders as set forth in this
Agreement are true and correct as of each such date.

9. Effective Date of Agreement; Termination: This Agreement shall
become effective (i) if Rule 430A under the Act is not used, when you shall
have received notification of the effectiveness of the Registration
Statement, or (ii) if Rule 430A under the Act is used, when the parties
hereto have executed and delivered this Agreement.

The obligations of the several Underwriters hereunder shall be subject to
termination in the absolute discretion of you or any group of Underwriters
(which may include you) which has agreed to purchase in the aggregate at least
50% of the Firm Shares, if, at any time prior to the time of purchase or, with
respect to the purchase of any Additional Shares, the additional time of
purchase, as the case may be, trading in securities on the New York Stock
Exchange or American Stock Exchange shall have been suspended or minimum prices
shall have been established on the New York Stock Exchange or American Stock
Exchange, or if a banking moratorium shall have

-22-
<PAGE> 24
been declared either by the United States or New York State authorities, or if
the United States shall have declared war in accordance with its constitutional
processes or there shall have occurred any material outbreak or escalation of
hostilities or other national or international calamity or crisis of such
magnitude in its effect on the financial markets of the United States as, in
your judgment or in the judgment of such group of Underwriters, to make it
impracticable to market the Shares.

If you or any group of Underwriters elects to terminate this agreement as
provided in this Section 9, the Company, the Representatives of the Selling
Stockholders and each other Underwriter shall be notified promptly by letter or
telegram.

If the sale to the Underwriters of the Shares, as contemplated by this
Agreement, is not carried out by the Underwriters for any reason permitted under
this Agreement or if such sale is not carried out because the Company or the
Selling Stockholders, as the case may be, shall be unable to comply with any of
the terms of this Agreement, the Company or the Selling Stockholders, as the
case may be, shall not be under any obligation or liability under this Agreement
(except to the extent provided in Sections 6(a), 7 and 11 hereof), and the
Underwriters shall be under no obligation or liability to the Company and the
Selling Stockholders under this Agreement (except to the extent provided in
Section 11 hereof) or to one another hereunder.

10. Increase in Underwriters' Commitments: If any Underwriter shall
default in its obligation to take up and pay for the Firm Shares to be
purchased by it hereunder and if the number of Firm Shares which all
Underwriters so defaulting shall have agreed but failed to take up and pay
for does not exceed 10% of the total number of Firm Shares, the
non-defaulting Underwriters shall take up and pay for (in addition to the
aggregate principal amount of Firm Shares they are obligated to purchase
pursuant to Section 1 hereof) the number of Firm Shares agreed to be
purchased by all such defaulting Underwriters, as hereinafter provided.
Such Shares shall be taken up and paid for by such non- defaulting
Underwriter or Underwriters in such amount or amounts as you may designate
with the consent of each Underwriter so designated or, in the event no such
designation is made, such Shares shall be taken up and paid for by all
non-defaulting Underwriters pro rata in proportion to the aggregate number
of Firm Shares set opposite the names of such non-defaulting Underwriters
in Schedule A.

Without relieving any defaulting Underwriter from its obligations
hereunder, the Company and the Selling Stockholders agree with the
non-defaulting Underwriters that they will not sell any Firm Shares hereunder
unless all of the Firm Shares are purchased by the Underwriters (or by
substituted Underwriters selected by you with the approval of the Company or
selected by the Company with your approval).

If a new Underwriter or Underwriters are substituted by the Underwriters or
by the Company for a defaulting Underwriter or Underwriters in accordance with
the foregoing provision, the Company or you shall have the right to postpone the
time of purchase for a period not exceeding

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<PAGE> 25
five business days in order that any necessary changes in the Registration
Statement and Prospectus and other documents may be effected.

The term Underwriter as used in this agreement shall refer to and include
any Underwriter substituted under this Section 10 with like effect as if such
substituted Underwriter had originally been named in Schedule A.

11. Indemnity by the Company, the Selling Stockholders and the
Underwriters.

(a) The Company and the Selling Stockholders jointly and
severally agree to indemnify, defend and hold harmless each
Underwriter and any person who controls any Underwriter within
the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, from and against any loss, expense, liability or
claim (including the reasonable cost of investigation) which,
jointly or severally, any such Underwriter or any such
controlling person may incur under the Act, the Exchange Act or
otherwise insofar as such loss, expense, liability or claim
arises out of or is based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement (or in the Registration Statement as amended by any
post- effective amendment thereof by the Company) or in a
Prospectus (the term "Prospectus" for the purpose of this Section
11 being deemed to include any Preliminary Prospectus, the
Prospectus and the Prospectus as amended or supplemented by the
Company), or arises out of or is based upon any omission or
alleged omission to state a material fact required to be stated
in either such Registration Statement or Prospectus or necessary
to make the statements made therein not misleading, except
insofar as any such loss, expense, liability or claim arises out
of or is based upon any untrue statement or alleged untrue
statement of a material fact contained in and in conformity with
information furnished in writing by any Underwriter through you
to the Company expressly for use with reference to such
Underwriter in such Registration Statement or such Prospectus or
arises out of or is based upon any omission or alleged omission
to state a material fact in connection with such information
required to be stated in either such Registration Statement or
Prospectus or necessary to make such information not misleading;
provided, further, that no Selling Stockholder shall be
responsible, either pursuant to this indemnity or as a result of
any breach of this Agreement,

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<PAGE> 26
for losses, expenses, liability or claims arising out of or based
upon such untrue statement or omission or allegation thereof
based upon information furnished by any party other than such
Selling Stockholder and, in any event, no Selling Stockholder
shall be responsible, either pursuant to this indemnity or as a
result of any breach of this Agreement, for losses, expenses,
liability or claims for an amount in excess of the proceeds to be
received by such Selling Stockholder (before deducting expenses)
from the sale of Shares hereunder.

If any action is brought against an Underwriter or controlling person in
respect of which indemnity may be sought against the Company or any Selling
Stockholder pursuant to the foregoing paragraph, such Underwriter shall promptly
notify the Company and the Representatives of the Selling Stockholders in
writing of the institution of such action and the Company or such Selling
Stockholder, as the case may be, shall assume the defense of such action,
including the employment of counsel and payment of expenses. Such Underwriter or
such controlling person shall have the right to employ its or their own counsel
in any such case, but the fees and expenses of such counsel shall be at the
expense of such Underwriter or of such controlling person unless the employment
of such counsel shall have been authorized in writing by the Company or such
Selling Stockholder in connection with the defense of such action or the Company
or such Selling Stockholder shall not have employed counsel to have charge of
the defense of such action or such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to the Company or such
Selling Stockholder (in which case the Company or such Selling Stockholder shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses
shall be borne by the Company or such Selling Stockholder, as the case may be,
and paid as incurred (it being understood, however, that the Company or such
Selling Stockholder shall not be liable for the expenses of more than one
separate counsel in any one action or series of related actions in the same
jurisdiction representing the indemnified parties who are parties to such
action). Anything in this paragraph to the contrary notwithstanding, the
Company or such Selling Stockholder shall not be liable for any settlement of
any such claim or action effected without its written consent.

(b) Each Underwriter severally agrees to indemnify, defend
and hold harmless the Company, its directors and officers, each
Selling Stockholder and any person who controls the Company or
any Selling Stockholder within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act from and against any loss,
expense, liability or claim (including the reasonable cost of
investigation) which,

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<PAGE> 27
jointly or severally, the Company, any Selling Stockholder or any
such person may incur under the Act or otherwise, insofar as such
loss, expense, liability or claim arises out of or is based upon
any untrue statement or alleged untrue statement of a material
fact contained in and in conformity with information furnished in
writing by or on behalf of such Underwriter through you to the
Company expressly for use with reference to such Underwriter in
the Registration Statement (or in the Registration Statement as
amended by any post-effective amendment thereof by the Company)
or in a Prospectus, or arises out of or is based upon any
omission or alleged omission to state a material fact in
connection with such information required to be stated either in
such Registration Statement or Prospectus or necessary to make
such information not misleading.

If any action is brought against the Company, any Selling Stockholder or
any such person in respect of which indemnity may be sought against any
Underwriter pursuant to the foregoing paragraph, the Company, such Selling
Stockholder or such person shall promptly notify such Underwriter in writing of
the institution of such action and such Underwriter shall assume the defense of
such action, including the employment of counsel and payment of expenses. The
Company, such Selling Stockholder or such person shall have the right to employ
its own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of the Company, such Selling Stockholder or such person
unless the employment of such counsel shall have been authorized in writing by
such Underwriter in connection with the defense of such action or such
Underwriter shall not have employed counsel to have charge of the defense of
such action or such indemnified party or parties shall have reasonably concluded
that there may be defenses available to it or them which are different from or
additional to those available to such Underwriter (in which case such
Underwriter shall not have the right to direct the defense of such action on
behalf of the indemnified party or parties), in any of which events such fees
and expenses shall be borne by such Underwriter and paid as incurred (it being
understood, however, that such Underwriter shall not be liable for the expenses
of more than one separate counsel in any one action or series of related actions
in the same jurisdiction representing the indemnified parties who are parties to
such action). Anything in this paragraph to the contrary notwithstanding, no
Underwriter shall be liable for any settlement of any such claim or action
effected without the written consent of such Underwriter.

(c) If the indemnification provided for in this Section 11 is
unavailable to an indemnified party under subsections (a) and (b)
of this Section 11 in respect of any losses, expenses,
liabilities or claims referred to therein, then each applicable
indemnifying party, in lieu of indemnifying such indemnified

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<PAGE> 28
party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, expenses,
liabilities or claims (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the
Selling Stockholders on the one hand and the Underwriters on the
other hand from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above
but also the relative fault of the Company and the Selling
Stockholders on the one hand and of the Underwriters on the other
in connection with the statements or omissions which resulted in
such losses, expenses, liabilities or claims, as well as any
other relevant equitable considerations. The relative benefits
received by the Company and the Selling Stockholders on the one
hand and the Underwriters on the other shall be deemed to be in
the same proportion as the total proceeds from the offering (net
of underwriting discounts and commissions but before deducting
expenses) received by the Company and the Selling Stockholders
bear to the total underwriting discounts and commissions received
by the Underwriters. The relative fault of the Company and the
Selling Stockholders on the one hand and of the Underwriters on
the other shall be determined by reference to, among other
things, whether the untrue statement or alleged untrue statement
of a material fact or omission or alleged omission relates to
information supplied by the Company, by the Selling Stockholders
or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable
by a party as a result of the losses, expenses, liabilities and
claims referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such party in
connection with investigating or defending any claim or action.

(d) The Company, the Selling Stockholders and the
Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 11 were determined by pro
rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations
referred to in subsection (c) above.

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<PAGE> 29
Notwithstanding the provisions of this Section 11, no Underwriter
shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten
by such Underwriter and distributed to the public were offered to
the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such
untrue statements or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The
Underwriter's obligations to contribute pursuant to this Section
11 are several in proportion to their respective underwriting
commitments and not joint.

(e) The indemnity and contribution agreements contained in
this Section 11 and the covenants, warranties and representations
of the Company and the Selling Stockholders contained in this
Agreement shall remain in full force and effect regardless of any
investigation made by or on behalf of any Underwriter, or any
person who controls any Underwriter within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, or by or on
behalf of the Company, its directors and officers, any Selling
Stockholder or any person who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange
Act, and shall survive any termination of this Agreement or the
issuance and delivery of the Shares. The Company, each Selling
Stockholder and each Underwriter agree promptly to notify the
others of the commencement of any litigation or proceeding
against it and, in the case of the Company, against any of the
Company's officers and directors in connection with the issuance
and sale of the Shares, or in connection with the Registration
Statement or Prospectus.

12. Notices. Except as otherwise herein provided, all statements,
requests, notices and agreements shall be in writing or by telegram and, if
to the Underwriters, shall be sufficient in all respects if delivered or
sent to Dillon, Read & Co. Inc., 535 Madison Avenue, New York, N.Y. 10022,
Attention: Syndicate Department, if to the Company, shall be sufficient in
all respects if delivered or sent to the Company at the offices of the
Company at 3701 Kirby Drive, Houston, Texas 77098, Attention:
______________ and, if to any of the Selling

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<PAGE> 30
Stockholders, shall be sufficient in all respects if delivered or sent to
the Representatives of the Selling Stockholders at ______________,
Attention: ______________.

13. Construction. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York. The Section
headings in this Agreement have been inserted as a matter of convenience of
reference and are not a part of this Agreement.

14. Parties at Interest. The Agreement herein set forth has been and
is made solely for the benefit of the Underwriters, the Company, the
Selling Stockholders and the controlling persons, directors and officers
referred to in Section 11 hereof, and their respective successors, assigns,
executors and administrators. No other person, partnership, association or
corporation (including a purchaser, as such purchaser, from any of the
Underwriters) shall acquire or have any right under or by virtue of this
Agreement.

15. Counterparts. This agreement may be signed by the parties in
counterparts which together shall constitute one and the same agreement
among the parties.

If the foregoing correctly sets forth the understanding among the Company,
the Selling Stockholders and the Underwriters, please so indicate in the space
provided below for the purpose, whereupon this letter and your acceptance shall
constitute a binding agreement among the Company, the Selling Stockholders and
the Underwriters, severally.

Very truly yours,

DIGICON INC.

By ________________________________
Title:

THE SELLING STOCKHOLDERS NAMED IN
SCHEDULE B ATTACHED HERETO

By _________________________________
Attorney-in-Fact

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<PAGE> 31

Accepted and agreed to as of the date
first above written, on behalf of themselves
and the other several Underwriters named
in Schedule A.

DILLON, READ & CO. INC.
RAYMOND JAMES & ASSOCIATES, INC.
RODMAN & RENSHAW, INC.

By: DILLON, READ & CO. INC.

By:
---------------------------------
Title:

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<PAGE> 32
SCHEDULE A

Number of
Underwriter Firm Shares
- ----------- -----------
DILLON, READ & CO. INC.
RAYMOND JAMES & ASSOCIATES, INC.
RODMAN & RENSHAW, INC.

__________

Total __________

<PAGE> 33
SCHEDULE B

Number of
Selling Stockholders Firm Shares
- -------------------- -----------

__________ ____________

Total __________ ____________

<PAGE> 34
SCHEDULE C

SIGNIFICANT SUBSIDIARIES

<PAGE> 1

EXHIBIT 23-A

INDEPENDENT AUDITORS' CONSENT

We consent to the use in Amendment No. 1 to this Registration Statement No.
333-01037 of Digicon Inc. on Form S-2 of our report dated October 12, 1995,
appearing in the Prospectus, which is part of this Registration Statement.

We also consent to the reference to us under the heading "Experts" in such
Prospectus.

DELOITTE & TOUCHE LLP

Houston, Texas

March 5, 1996