UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange
Act of 1934
Date of Report (Date of earliest event reported):
October 18, 1995
GEODYNAMICS CORPORATION
(Exact name of registrant as specified in its charter)
California 0-15034 95-2502865
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
21171 Western Avenue, Suite 110, Torrance, California
(Address of Principal Executive Offices)
90501
(Zip Code)
Registrant's telephone number, including area code
(310) 782-7277
N/A
(Former name or former address, if changed since last report.)
This report, including exhibits, contains 10 pages.
The Exhibit Index is located on page 2.
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Item 5. Other Events.
Exhibit 10.1, which was previously filed with the Form 8-K on
November 20, 1995, did not include as a part thereof the
attachment. The entire exhibit is included herein.
INDEX TO EXHIBITS
The following exhibit is filed as part of this report:
Exhibit Sequential
Number Exhibit Description Page Number
- ------- ------------------------------------ -----------
10.1 Agreement with Attachment 4
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly
authorized.
GEODYNAMICS CORPORATION
Registrant
Date: November 27, 1995 By: /s/ David P. Nelson
David P. Nelson
Vice President and Chief
Financial Officer
Date: November 27, 1995 By: /s/ Robert G. Cook
Robert G. Cook
Corporate Controller and
Chief Accounting Officer
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October 18, 1995
BY FAX - (713) 558-8384
Dr. Kwok C. Chan
LCT, Inc.
1155 Dairy Ashford Road, Suite 500
Houston, Texas 77079
BY FAX - (713) 558-8384
Mr. John E. Bain
LCT, Inc.
1155 Dairy Ashford Road, Suite 500
Houston, Texas 77079
BY FAX - (713) 558-8384
Dr. Thomas R. LaFehr
LCT, Inc.
1155 Dairy Ashford Road, Suite 500
Houston, Texas 77079
Dear Kwok, John and Tom:
This letter will set forth our agreement with respect
to the acquisition by the employees of LaFehr & Chan
Technologies, Inc. ("LCT") of a partial ownership therein.
As you know, Geodynamics Corporation ("Geodynamics") is
entering into an agreement for the acquisition of
Geodynamics by Logicon Inc. ("Logicon"). Because the
business of LCT is very different from the business of
Logicon and from the other businesses of Geodynamics,
Logicon does not wish its acquisition of Geodynamics to
include the ownership of LCT and accordingly Geodynamics has
concluded to distribute its stock of LCT to the Geodynamics
shareholders at the time of the Logicon acquisition. The
acquisition of Geodynamics by Logicon, and therefore also
the distribution of the LCT stock to the Geodynamics
shareholders, is subject to the approval of the shareholders
of Geodynamics at a special meeting to be called for that
purpose. Substantially all of the former shareholders of
LCT are employees of LCT. Those same persons are entitled
to an Earnout Amount provided for in the June 9, 1994
Acquisition Agreement (the "Acquisition Agreement") between
Geodynamics and the former LCT shareholders. The LCT
employee - former shareholders - wish to have a substantial
ownership in LCT if its stock is to be distributed to the
Geodynamics shareholders and if it is consequently to become
an independent public company. The Board of Directors of
Geodynamics has concluded that such substantially increased
ownership by the LCT employees is in the best interests of
the Geodynamics shareholders as it will maximize the
incentive of the employees to enhance the performance and
value of LCT.
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In view of the foregoing, you and we hereby agree as
follows:
1. The Earnout Amount under the Acquisition Agreement
will be $2,057,750, based on a margin determination of 18
percent and a revenue determination of $6,500,000. The
Earnout Amount will be paid in accordance with the
provisions of the Acquisition Agreement. Notwithstanding
the foregoing, if Geodynamics or you in good faith believe,
for various reasons including as a result of the financial
performance of LCT during the final months of 1995, that the
Earnout Amount will vary by more than five percent in either
direction from $2,057,750, either party may elect, in
consideration for a cash payment to the other of $10,000 on
or before January 15, 1996, to cause the Earnout Amount to
be determined and paid in accordance with the provisions of
the Acquisition Agreement.
2. Provided that the acquisition of Geodynamics by
Logicon is to be completed and the stock of LCT is to be
distributed to the Geodynamics shareholders, the employees
of LCT who are its former shareholders will purchase a
number of shares of LCT sufficient to constitute them the
owners of an additional 33 percent of its stock after the
distribution of its stock to the Geodynamics shareholders as
described above. The price for such LCT stock shall be
determined as set forth on Exhibit A attached hereto. You
recognize that the foregoing price for 33 percent of LCT's
stock may well represent a premium over the traded market
price of the stock in view of the effective corporate
control in all likelihood represented by such 33 percent.
You also acknowledge that you have made your investment
decision to purchase LCT stock independently and without any
warranties or representations by Geodynamics.
3. The LCT stock provided for in paragraph 2 shall be
registered under applicable federal and state securities
laws. Notwithstanding the foregoing, the three of you agree
that without the consent of the Board of Directors of LCT,
your portions of the purchased LCT stock will not be resold
in the public market for 180 days after your purchase of the
stock.
4. You have expressed understandable concern about
certain aspects of the structure of LCT following the stock
purchase described above and accordingly it is hereby agreed
that:
(a) Geodynamics and LCT will each utilize their best
efforts to obtain for LCT a working capital line
of credit of $1 million, or as large a portion
thereof as possible, on reasonable terms and
conditions.
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(b) LCT will bear up to $165,000 of legal, accounting
and printing expenses in connection with the
transfer of its stock from Geodynamics to the
Geodynamics shareholders and the purchase of its
stock by the LCT employees, with such expenses
subject to reasonable verification by LCT.
Notwithstanding the foregoing, the amount of such
expenses to be borne by LCT shall not exceed
16.5 percent of the line of credit described in
paragraph (a) above.
(c) LCT shall adopt an incentive stock option plan
covering shares equal to ten percent of its
initial outstanding shares following the stock
distribution to the Geodynamics shareholders and
the stock purchase by the LCT employees. Options
covering one-half of such shares shall be
initially issued to key employees of LCT in such
amounts and with such terms as is determined by
the management and Board of Directors of LCT.
(d) LCT shall issue warrants to each of the three of
you to allow each of you to purchase LCT stock
equal to .5 percent of its initial outstanding
shares following the above described stock
distribution and stock purchase. The price for
the exercise of such warrants shall be the average
closing market price of LCT stock for its first
ten trading days following the first Monday after
your purchase of the LCT stock and such warrants
shall be exercisable in whole or in part for up to
ten years. The special stock options previously
issued by Geodynamics to each of the three of you
shall upon the issuance of such warrants be
cancelled and of no further effect.
(e) The spec data limited liability company arranged
by the former LCT shareholders pursuant to the
provision therefor in the Acquisition Agreement
will not be utilized (but the Earnout Amount will
be computed as if such limited liability company
had been utilized in the event the election
described in paragraph1 above is made).
(f) To the extent that the participation in the LCT
stock purchase is less than that of one hundred
percent of the LCT employee-former shareholders,
the 33 percent ownership of LCT acquired and the
purchase price therefor will be proportionately
reduced. The three of you will purchase your pro
rata share of the 33 percent of LCT stock and the
remaining former LCT shareholders may acquire
their pro rata interest up to an aggregate of 33
percent ownership of the LCT stock.
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(g) Prior to the completion of the acquisition of
Geodynamics by Logicon, LCT will be operated by
the management of LCT, subject to the supervision
of the Board of Directors of Geodynamics, in the
ordinary course of business consistent with past
practices including maintenance of normal and
reasonable working capital (considering
historical, current and foreseeable circumstances)
and the distribution of any available cash in
excess of the foregoing to Geodynamics. LCT shall
be responsible for the payment from and after
September 1, 1995 of all of its expenses and
liabilities, including expenses of Santa Barbara-
based personnel for that period and any liability
for that period for income taxes arising from its
operations, but excluding any expense or liability
with respect to any other indebtedness to
Geodynamics and Bank of America. This provision
will not apply to the Earnout Amount computation
which will be determined in accordance with the
Acquisition Agreement except as otherwise
expressly set forth herein.
5. Upon the completion of the transactions provided
for in this agreement, the parties hereto, including LCT,
shall unconditionally, irrevocably and forever release
Geodynamics (and its successors), and their respective
officers, directors, attorneys, accountants (except with
respect to the opinion described in Section 6 below), agents
and financial advisors with respect to all claims and
matters, of any kind or nature, including claims and matters
related to the transactions provided for in this Agreement.
LCT will endeavor on a reasonable best efforts basis to
obtain the execution by each former LCT shareholder who
participates in the purchase of LCT's stock hereunder, after
consultation with counsel as they deem appropriate, of a
similar agreement containing the above described release in
favor of Geodynamics, et al.
LCT will unconditionally and irrevocably indemnify
and hold harmless Geodynamics, and its successors and
assigns, and their respective officers, directors,
attorneys, accountants, employees, and agents with respect
to all claims of any kind or nature relating to the
transactions provided in this Agreement, including attorneys
fees and costs incurred to enforce this indemnification,
which claims are made by a former LCT shareholder who does
not execute the above described release.
Upon the completion of the transactions provided
for in this Agreement, Geodynamics shall unconditionally,
irrevocably and forever release you and LCT, and its
successors, and its officers, directors, attorneys,
accountants (except with respect to the opinion described in
Section 6 below), agents and financial advisors, with
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respect to all claims and matters, of any kind or nature,
including claims and matters relating to the transactions
provided for in this agreement.
6. The obligations of Geodynamics Corporation, and
you, will be subject to, and the agreements hereunder are
conditioned upon, a favorable written tax opinion approved
by Geodynamics and you, which approvals will not be
unreasonably withheld, and if this opinion is not secured,
this agreement will terminate ab initio.
7. You acknowledge that you have sought the advice of
independent legal counsel prior to the execution of this
Agreement.
8. In the event of a sale of LCT to a third party,
the terms hereof will continue to bind the parties. In that
connection, Geodynamics shall take all steps that it can to
protect LCT's confidential information from disadvantageous
disclosure to and use by LCT's competitors, and LCT shall
do the same.
9. Nothing herein contained shall be used to modify
the Acquisition Agreement if either party exercises its
right to request a recomputed earnout as set forth in
Paragraph 1 hereof (except for the limited liability company
agreement in paragraph 4(e)).
10. This agreement shall not be modified except in
writing with the concurrence of all parties hereto.
The agreement set forth herein shall to the extent
deemed appropriate by our respective counsel be supplemented
by mutually agreed upon more detailed documentation. Please
indicate your concurrence in this agreement by signing
below. This agreement may be executed in counterparts by
facsimile.
Very truly yours,
GEODYNAMICS CORPORATION
/s/ Bruce J. Gordon
By: BRUCE J. GORDON
President
Attachment: Pricing of LCT Shares for Acquisition by
Prior LCT Shareholders
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Agreed to this 18th day of October, 1995.
/s/ Kwok Chan
KWOK CHAN
/s/ John Bain
JOHN BAIN
/s/ Thomas R. LaFehr
THOMAS R. LAFEHR
LaFehr & Chan Technologies, Inc.
By: /s/ Kwok C. Chan
KWOK C. CHAN
President
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Attachment to Exhibit 10.1
Pricing of LCT Shares for Acquisition by Prior LCT Shareholders
Attachment to Letter Agreement between LaFehr, Chan, Bain, and Geodynamics
October 18, 1995
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MGN = 94-95 pre-tax avg. margin as determined in accordance with the
AA and this agreement.
REV = 94-95 avg. revenue as calculated in accordance with the AA and
this agreement.
OPINC = 94-95 avg. operating income = MGN x REV.
AA is the Acquisition Agreement of June 1994.
S = the number of LCT shares to be spun off upon closing (not
counting shares herein).
N = the number of LCT shares to be purchased under this agreement.
P = the price to be paid per share of LCT purchased.
The following formula prices are based on projected fair market
values of LCT as a function of Operating Income, Margins, and
Revenues. N shares will be purchased at P, where P is:
Case MGN The price paid per share is 2.0303, times the
formula below, divided by S:
A < 20% 11.7 OPINC - 1.24 REV - $28,000,000 (MGN-.20) -
$4,130,000
B 20%-24% 6.682 OPINC - .237 REV - $4,130,000
C > 24% (4/3) REV - $4,130,000
But in no case shall the aggregate price for the 33% stake, NxP, be
less than $1,000,000.
The number of shares purchased at this price will be N, where:
N = .33 x (S+N)
These LCT shares will be purchased 50% with cash, and 50% with a
share exchange of purchasers' Geodynamics' stock, assigned a
value as determined by the AA.
Example:
Assume there are S = 1.08 million shares of LCT spun off to
Geodynamics shareholders.
Using the agreed determination of MGN = 18% and REV = $6.5
million,
P = $3.87073 per share
N = 531,940 shares purchased
NxP = $2,058,996 paid for 33% of aggregate shares
S+N = 1,611,940 total LCT shares
This $2,058,996 transaction imputes a market value of $6,239,385
for the total equity of LCT.
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