SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission file number 1-4371
TECH-SYM CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 74-1509818
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10500 WESTOFFICE DRIVE, SUITE 200
HOUSTON, TEXAS 77042
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 785-7790
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT
TITLE OF EACH CLASS Name of each exchange on which registered
------------------- NEW YORK STOCK EXCHANGE
Common Stock (Par Value $.10 per
share) and Common Stock Purchase
Rights (the Rights are not currently
exercisable or transferable apart from
the Common Stock)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
As of March 14, 1997, 6,043,381 shares of the registrant's Common Stock
were issued and outstanding. The aggregate market value of the voting stock held
by non-affiliates of the registrant (assuming only for purposes of this
computation that directors and officers may be affiliates) was $181,543,518
(based on the March 14, 1997, closing sales price of $30.875 published in THE
WALL STREET JOURNAL reports of New York Stock Exchange Composite Transactions).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference into
the Part of the Form 10-K specified herein: (1) Annual Report to Shareholders
for 1996 (to the extent set forth in Parts I and II of this Annual Report); and
(2) Proxy Statement for the Annual Meeting of Shareholders to be held April 29,
1997 (to the extent set forth in Part III of this Annual Report).
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains certain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All
statements other than statements of historical facts included in this Form 10-K
, including without limitation the statements under "Item 1. Business," "Item 3.
Legal Proceedings" and "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" are forward-looking statements.
Although Tech-Sym Corporation believes that the expectations reflected in such
forward-looking statements are reasonable, no assurance can be given that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from expectations ("Cautionary Statements")
include without limitation (i) the risk of technological change relating to the
Company's products and the risk of the Company's inability to develop new
competitive products in a timely manner, (ii) the risk of decreased demand for
the Company's products due to fluctuations in energy industry activity,
communications industry activity, and levels of government expenditures on
defense equipment, (iii) the Company's reliance on certain significant
customers, (iv) the credit risk to the Company from certain sales arrangements,
(v) the risk of fluctuations in future operating results, (vi) the risks of
inadequate inventory levels, (vii) the risks of changing government regulations
or statutes, (viii) the risks of general market conditions, competition, and
pricing, and (ix) the risk of continued access to capital markets and commercial
bank financing on favorable terms. All subsequent written and oral
forward-looking statements attributable to Tech-Sym Corporation or persons
acting on its behalf are expressly qualified in their entirety by Cautionary
Statements.
PART I
ITEM 1. BUSINESS
GENERAL
Tech-Sym Corporation (the "Company" or "Registrant") is a
diversified electronics engineering and manufacturing company primarily involved
in the design, development, and manufacture of products used for communications,
the exploration and production of hydrocarbons, and defense systems.
The Company, incorporated in Nevada in 1944, is headquartered in
Houston, Texas. The Company operates through five principal subsidiaries:
Continental Electronics Corporation ("Continental") located in Dallas, Texas;
Enterprise Electronics Corporation ("EEC") located in Enterprise, Alabama;
GeoScience Corporation ("GeoScience") located in Houston, Texas; Metric Systems
Corporation ("Metric") located in Fort Walton Beach, Florida; and TRAK
Communications Inc. ("TRAK") located in Tampa, Florida. The business of the
Company is conducted as one segment comprised of three product areas.
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COMMUNICATIONS. The communications products include microwave
components and subsystems, antennas, broadcast transmitters, high power energy
sources, and weather information systems.
The microwave components and subsystems are used by customers to
make communications and radar products. Microwave components include energy
sources (oscillators and amplifiers), frequency multipliers, filters, ferrite
isolators and circulators, and a broad range of passive components for
modulation and control of microwave energy. Microwave subsystems consist of
synthesizers, frequency converters, and microwave receiver assemblies. These
microwave components and subsystems are used in such areas as wireless
communications, satellite communications, aircraft instruments, radars,
electronic warfare systems, and industrial microwave heating and cooking.
Original equipment manufacturers purchase these products to integrate into
systems.
The Company also builds extremely accurate timing systems for use
by government and commercial organizations, such as NASA, telephone companies,
and electric power utilities, to synchronize communication carrier signals,
initiate or time events, and extract timing information from the Global
Positioning System (GPS) satellites.
The Company has recently expanded its ferrite production
capabilities by acquiring the ceramic manufacturing facilities previously used
by the Department of Energy in Largo, Florida.
The Company designs and produces antennas for wireless voice and
data communication, satellite communication, surveillance, and range
instrumentation. The Company also supplies antennas, fiber optic controllers,
and positioners for information gathering by the U.S. surveillance community and
high power antennas for jamming enemy radars during electronic warfare missions.
Telemetry tracking systems and microprocessor-based antenna controllers are sold
to the U.S. and foreign governments for use on test and training ranges. The
Company has also designed and produces antennas for air and land mobile
satellite communications systems. In the emerging wireless local loop market,
the Company provides high performance base station and home subscriber antennas
for telephony systems.
Broadcast transmitter products include a complete line of
transmitters and related equipment for the radio broadcast industry such as high
power transmitters for use in the "short" and "medium" wave frequency bands as
well as transmitters that operate at the radio broadcast frequencies commonly
referred to as "AM" and "FM". High power radio frequency energy sources such as
large particle accelerators are also made for medical and physics research
installations. Communications and radar equipment for U.S. and foreign defense
agencies have also been designed and manufactured. Customers include the
commercial radio broadcast industry, private and government agencies that
operate radio broadcast stations, and organizations or government funded
operations that engage in scientific research.
Through its Continental-Lensa subsidiary in Santiago, Chile, the
Company designs and manufactures solid state AM transmitters for sale in North
and South America as well as Europe. The Company also participates in a joint
manufacturing agreement with the Ministry of Film, Radio, and Television in the
People's Republic of China. The agreement provides for the manufacture of FM and
shortwave broadcast transmitters at the Company's facility in Dallas as well as
in Beijing.
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The Company's TELEFUNKEN Sendertechnik GmbH subsidiary in Berlin,
Germany, is a designer and manufacturer of broadcast transmitters and antennas
in the world market. Its digital audio broadcast equipment produces CD quality
sound for specially designed FM radios and is currently in use in several test
markets. It also designs and manufactures solid state television transmitters
which can be used for High Definition Television broadcasts.
Meteorological agencies and television broadcasters use the
Company's Doppler weather radars to forecast weather and provide severe weather
warnings. The Doppler process measures both reflectivity and velocity of rain
droplets and is used to detect, quantify and display precipitation intensity,
velocity, and turbulence. It is extremely helpful in analyzing severe weather
conditions such as hurricanes, tornadoes, thunderstorms, and wind shear. EEC has
coupled its high performance Doppler radar with sophisticated data processing
systems. These systems range from low-cost PC-based display and control systems
through UNIX platform mid-range systems to larger scientific systems utilizing
Hewlett Packard, IBM, Silicon Graphics, and the DEC Alpha station computers. The
processing systems known as Weather Windows(R) and EDGE(R) (Enterprise Doppler
Graphics Environment) provide meteorologists with automated radar control as
well as enhanced meteorological displays and image processing capabilities. The
systems can be integrated into a network to obtain accurate weather information
for a large geographic area. More than 600 weather radars have been installed in
more than 60 countries.
GEOSCIENCE. The Company designs and manufactures products that
acquire, digitize, transmit, record, display, and analyze acoustic energy
produced on the surface by air guns, dynamite, or other sound sources and
reflected from underground or subsea geologic formations. After the stored data
is processed, potential locations of hydrocarbon deposits can be determined.
With the advent of more powerful computers, three dimensional ("3-D") seismic
surveys have become more routine. The 3-D surveys result in higher resolution
than two dimensional surveys and the success rate of oil and gas wells based on
3-D surveys is much greater. The demand for the Company's seismic equipment has
increased with the demand for 3-D surveys.
Principal seismic products include the digital SYNTRAK 480-24(TM)
Multiple Streamer Telemetry System consisting of one to twelve arrays, each up
to 12,000 meters in length, containing sensors, electronic modules, and
conductors. As the arrays are towed behind a boat, the acoustic energy is
collected by the sensors, digitized and transmitted via a patented, low power
telemetry communications scheme through the towed cable array to the boat. Once
on board, the data is saved on magnetic tape by the Company's high-speed
shipboard recording system.
A related product is the Ocean Bottom Cable which is placed on
the ocean floor instead of towed behind a boat. It is used in shallow water,
congested areas, and transition zones where large seismic vessels cannot operate
and in deep water primarily to monitor a reservoir as hydrocarbons are removed.
Another seismic product recently introduced is the PolySeis(TM)
system which the Company has developed with partial funding from the INSTITUTE
FRANCAIS DU PETROLE. The PolySeis(TM) system is a 24-bit modular radio and/or
wireline telemetry seismic data acquisition system that can be easily configured
by the user for most land or transition zone needs. The system is specifically
adaptive to the unique requirements associated with exploration in transition
zones or in areas that are inaccessible or difficult to reach such as lakes,
swamps, or mountainous areas.
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The Company maintains operations for the design, manufacture, and
repair of marine seismic cables in England, Singapore, and Houston. The ability
to design, manufacture and repair seismic cables enhances the Company's quality
control over critical processes and its ability to provide needed services to
its customers worldwide. A reduced diameter array marine cable has been
developed to reduce drag when towed trough the water and to reduce weight and
handling problems on board the seismic vessel. A subsidiary of the Company and
the China Oil Offshore Geophysical Corporation have formed a joint venture to
manufacture and repair marine seismic cables in the People's Republic of China.
Seismic cables for use on land as well as ocean bottom cables are also produced
by the Company in Houston.
The Company's geoscientific software applications products are
designed to process and manipulate geological and seismic data collected in the
field so that geologists and geophysicists can identify, define, and visualize
subsurface geologic formations in three dimensions.
The Company is in the process of integrating its line of seismic
processing, geological interpretation, and visualization applications into a
comprehensive three dimensional earth model interpretation package called
"TerraCube." By linking the individual applications into a framework, TerraCube
is expected to reduce the overall cycle time and expense involved in processing
seismic data and interpreting geological data, as well as improve the quality of
the data.
In May of 1996, the Company contributed all the outstanding stock
of Syntron, Inc., CogniSeis Development, Inc., and Symtronix Corporation to a
newly-formed, wholly owned subsidiary of the Company named GeoScience
Corporation. GeoScience subsequently sold 2,597,600 shares of Common Stock
(24.7% of the outstanding shares) in a public offering.
DEFENSE SYSTEMS. The principal defense systems products include
shipboard electronics, airborne training and instrumentation systems, and
mechanical systems.
The Company first became involved in shipboard electronics, when
it received a contract for the design, development, and qualification testing of
electronic control, monitoring, and power distribution equipment for the U.S.
Navy's Vertical Launching System (VLS). Upon successful completion of this
development effort, full scale production was initiated and has been continuous
since. Utilizing the expertise gained during the VLS development effort, the
Company expanded its business operations in this area to include subsystems for
the AN/SQQ-89 Surface Anti-Submarine Warfare Combat System, firing mechanisms
for the submarine launched Tomahawk and Trident missiles, radar cable assemblies
for the AEGIS weapon system., and electronic power switching and
intercommunications equipment primarily for U.S. Navy ships.
The airborne training systems consist of pods which are attached
to aircraft to collect data on the position, altitude, flight characteristics,
and weapons systems of the aircraft during simulated combat. The data inputs are
recorded in the pods or sent via telemetry to ground instrumentation equipment
for display, debriefing, and subsequent analysis by the participants. The
Company is producing airborne and ground equipment utilizing Global Positioning
Systems (GPS) receivers to precisely locate and track aircraft operated on the
training ranges. The use of this equipment
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reduces the cost of operating Air Combat Maneuvering Instrumentation (ACMI)
ranges since manned radar tracking sites and other equipment are unnecessary.
The mechanical systems designed and manufactured by the Company
include antenna support structures for large communications antennas, custom
containers with environmental controls for sensitive electronics equipment such
as satellites, torpedoes, and missiles, aircraft launcher rail assemblies for
the AMRAAM missile, and mobile ground equipment used to clean and lubricate
aircraft engines. The Company has also developed and manufactures air cargo
systems for airborne supply operations including on-board cargo roller/restraint
systems, air-drop platforms, and cargo handling equipment for many types of
aircraft.
The Company manufactures a variety of other systems including
custom automated test equipment such as the Common Rail and Launcher Test Set
used to test many types of airborne weapons launching systems.
GOVERNMENT CONTRACTS
Sales under contracts with or for the United States Government
accounted for $92.0 million or 28.6% of the Company's sales in 1996. Most of the
Company's Government contracts are fixed-price contracts. Under this type of
contract, the price paid to the Company is not subject to adjustment by reason
of the costs incurred by the Company in the performance of the contract, except
that adjustments are made for costs incurred due to contract changes ordered by
the Government. Cost overruns incurred in connection with fixed-price contracts,
particularly those involving engineering and development, could substantially
reduce the Company's profitability or cause losses.
Government contracts may be terminated for the convenience of the
Government at any time the Government believes that such termination would be in
its best interests. Under contracts terminated for the convenience of the
Government, the Company is entitled to receive payments for its allowable costs
and, in general, a proportionate share of its fee or profit for the work
actually performed. Under the Truth in Negotiations Act, the Government has a
right for three years after final payment on substantially all negotiated
Government contracts to examine all the Company's cost records with respect to
such contracts in order to determine whether the Company used and made available
to the Government, or to the prime contractor in the case of a subcontract,
accurate, complete and current cost or pricing information in preparing bids and
conducting negotiations on the contracts or any amendments thereto.
The Company recognizes revenue under its Government contracts on
the percentage of completion method generally measured by the percentage of
total costs incurred to date to estimated total costs for each contract.
Estimated losses on contracts are provided for in full when they become
apparent. Provided the job is on schedule, the Company normally recovers most of
its costs on large contracts under a progress payment system whereby 75% to 80%
of its allowable costs incurred in performing the contract, including applicable
indirect costs such as general and administrative expenses, may be collected
from the Government on a current basis, while related profit, if any, is
billable only upon completion of the contract, or in certain instances, as
delivery of units is made. The Company and Government representatives closely
monitor the Company's performance against the overall budget of cost and profit
for a job as the job progresses. Revisions of a budget may occur during the
course of the work for many reasons, including increases or decreases in the
scope of the work,
5
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change orders and funding adjustments, as well as for the
Company's performance against such budget. Budget revisions forecasting profit
reductions are recorded by the Company on a current basis, whereas forecasted
profit increases are recorded over the remaining period of performance.
The Company believes that business done under Government
contracts differs from ordinary commercial contracts in certain other ways.
Capital requirements tend to be smaller because of the progress payment system.
There is no significant bad debt loss risk and, in general, receivables are paid
promptly. The Company has also found that, in the case of Department of Defense
contracts, the contract dispute procedures are well defined and generally permit
expeditious and inexpensive resolutions of contract problems.
COMPETITION AND BUSINESS CONDITIONS
The Company faces significant competition in most aspects of its
business. Its principal competitors in each area of its activities include
corporations with substantially greater assets and access to larger financial
resources than the Company. The Company's products are of a highly technical
nature and involve the use of techniques and materials similar to those used by
its competitors. The principal competitive factors with respect to the Company's
products are technological innovation, product quality, price, adherence to
delivery schedules and product reliability. A significant portion of the
Company's sales are made under Government contracts awarded on the basis of
competitive proposals. In addition to price, the factors involved in the award
of such contracts include the quality of the proposal and reputation of the
bidder. While the Company faces competition with respect to each of its product
lines, the Company believes it is a principal supplier of (i) meteorological
radars to foreign government agencies, and (ii) marine seismic data acquisition
systems to the petroleum industry.
Demand for many of the products sold by the Company is dependent
on the level and nature of the nation's defense expenditures. See "Other
Information" included in Management's Discussion and Analysis set forth on page
21 of the Company's Annual Report to Shareholders for the year ended December
31, 1996, which information is incorporated herein by reference. The
defense-related electronic systems and components manufactured by the Company
are sold primarily to the United States armed forces, defense contractors, and
foreign countries for military and training use. General increases or decreases
in the level of defense appropriations tend to affect demand for defense-related
products, but do not necessarily have a corresponding effect on demand for the
specialized products manufactured by the Company. Due to the process by which
appropriations and contracts are approved for defense projects, it is common for
the Company to experience delays in the receipt of anticipated orders, which can
adversely affect operating results by shifting operating revenues from one
period to another. Because most of the Company's defense-related contracts are
awarded on a fixed-price basis, cost overruns can affect the Company's
profitability.
MARKETING AND CUSTOMERS
The Company's products are primarily marketed directly by the
sales force of each of its operating subsidiaries, with the assistance of
domestic and international independent technical sales representatives who
receive commissions on
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their sales. The principal customers for the communications products include the
United States Government (primarily the armed services), government contractors,
communication equipment manufacturers, government and commercial weather
services, foreign government agencies, radio broadcast companies and
organizations, and research organizations. The geoscience customers include
major independent and foreign national oil and gas companies, seismic
contractors, geophysical contractors and government agencies around the world.
The defense systems products are sold to the armed forces of the United States
and foreign governments, government contractors, and aircraft manufacturers.
The Company's largest customer is the United States Government,
its agencies and contractors, whose purchases accounted for approximately 28.6%
of the Company's consolidated sales in 1996. Of that amount, approximately 89.4%
was attributable to purchases by the Department of Defense and its contractors.
The loss of these Government contracts would have a material adverse effect on
the Company as a whole. Contracts with or for the United States Government and
most prime contractors may be terminated by the Government at will. See
"Government Contracts." The Company has not, however, experienced any
significant problems with contract cancellations.
PRODUCT DEVELOPMENT
Information concerning the amount spent during each of the last
three years on Company-sponsored research and development activities is set
forth in the Company's "Consolidated Statement of Income" on page 22 of the
Company's Annual Report to Shareholders for the year ended December 31, 1996,
which information is incorporated herein by reference. Certain of the Company's
research and development activities are undertaken pursuant to Government
contracts and subcontracts. The costs incurred under these contracts for product
research and development are charged to cost of sales, rather than to product
development costs.
PATENTS
Although the Company holds a number of United States and foreign
patents, the Company believes that its business is not materially dependent upon
the protection afforded by patents, but primarily upon the experience and
continued creative skills of its personnel. In many cases, because of rapidly
changing technology and the need for confidentiality, the Company does not seek
to obtain patents.
BACKLOG
The backlog of unshipped orders was $138,221,000 and $131,407,000
as of December 31, 1995 and 1996, respectively. The backlog as of such dates
which was reasonably expected to be filled within twelve months of such date was
$128,035,000 and $115,613,000, respectively.
The backlog figures include only the sales value of the equipment
or products for which the Company has received orders it believes to be firm.
Contracts with or for the United States Government and most prime contractors
may be terminated by the Government at will. See "Government Contracts." The
Company has not, however, experienced any significant problems with contract
cancellations.
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MATERIALS AND SUPPLIES
The Company's operations require a wide variety of electronic and
mechanical components and raw materials. Most of these items are available from
several commercial sources. The Company does not depend on any single source for
a significant portion of its supplies except for the 24-bit analog-to-digital
converters and hybrid processors used in Syntron's new SYNTRAK 480-24 towed
array system and ocean bottom cable.
ENVIRONMENTAL PROTECTION
No material effect on the operations of the Company is presently
anticipated in the compliance with Federal, State and local provisions
regulating the discharge of materials into the environment, or otherwise
relating to the protection of the environment, and the Company does not expect
to make any material capital expenditures in the next year in order to comply
with any such provisions.
EMPLOYEES
As of December 31, 1996, the Company employed a total of 2,426
persons. None of the Company's domestic employees is represented by a labor
union.
PRODUCT LINE SALES
Information concerning the Company's product line sales is set
forth under the caption "Product Line Sales" on page 20 of the Company's Annual
Report to Shareholders for the year ended December 31, 1996, which information
is incorporated herein by reference.
EXPORT SALES
Information concerning the Company's export sales is set forth in
Note 13 of the Notes to Consolidated Statements contained in the Company's
Annual Report to Shareholders for the year ended December 31, 1996, which
information is incorporated herein by reference.
ITEM 2. PROPERTIES
The Company's corporate headquarters are located in Houston,
Texas, in a company-owned building. The Company, through its Tech-Sym Management
Corporation subsidiary, occupies approximately 10,000 square feet of the 20,000
square foot building. The remaining portion of the building is leased to a third
party.
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Metric's defense systems manufacturing operations are conducted
from office and plant facilities comprising a total of 226,000 square feet
located on three tracts totaling 38 acres owned by the Company in Fort Walton
Beach, Florida. Metric also leases 5,000 square feet of office and storage space
in several nearby facilities.
EEC's weather information systems operations are conducted from
office and plant facilities comprising 43,000 square feet located on an 11 acre
tract owned by the Company in Enterprise, Alabama.
The manufacturing operations conducted by the subsidiaries of
TRAK Communications include (i) 123,000 square feet of office and plant
facilities on ten acres owned in Tampa, Florida, (ii) 45,500 square feet of
office and plant facilities owned in Dundee, Scotland, (iii) 14,500 square feet
of offices and plant facilities leased in San Clemente, California, (iv) 54,650
square feet of offices, plant facilities, and warehouse space leased in
Chatsworth, California, and (v) 12,000 square feet of office and plant
facilities leased in Largo, Florida.
The manufacturing and services operations of the GeoScience
subsidiaries are conducted from (i) 78,000 square feet of offices and plant
facilities on a 15.2 acre tract owned in Houston, Texas, (ii) 188,000 square
feet of leased offices and plant facilities at five locations in Houston, Texas,
(iii) 52,000 square feet of office and plant facilities on a 2.8 acre tract
owned in Derbyshire, England, (iv) a 33,300 square foot office and plant
facility constructed on a 1.4 acre tract leased in Singapore, and (v) additional
office space for development centers, service centers, and sales offices is
leased in Colorado, Canada, England, The People's Republic of China, Russia,
Singapore, Belarus, Azerbaijan, and Venezuela.
The manufacturing operations for Continental Electronics'
broadcast transmitters and high power energy sources are conducted from office
and plant facilities comprising 160,000 square feet on a 14 acre tract owned by
the company in Dallas, Texas. Continental also leases an 80,000 square foot
building on a 4 acre tract contiguous to the Continental property.
Continental-Lensa S.A. of Santiago, Chile, owns a 4,000 square foot facility for
its assembly operations. TELEFUNKEN Sendertechnik GmbH operates from a leased
facility of approximately 65,000 square feet in Berlin, Germany.
The Company is the developer of a 9,000 acre residential &
recreational project located near Concho, Arizona, in which Lake Investment
Company, a wholly-owned subsidiary of the Company, owns a 100% interest.
Approximately 550 acres of this development remains unsold. The Company intends
to continue its efforts to liquidate its real estate operations and to use the
proceeds in its manufacturing operations.
Certain of the facilities of the Company and its subsidiaries are
subject to mortgage debt as set forth in Note 7 of the Notes to Consolidated
Financial Statements contained in the Company's Annual Report to Shareholders
for the year ended December 31, 1996, which information is incorporated herein
by reference.
ITEM 3. LEGAL PROCEEDINGS
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As previously reported, the Company received notice on October
18, 1994, that Thomcast A.G. ("Thomcast") commenced an action in the United
States District Court for the Northern District of Alabama, Southern Division,
alleging that Continental Electronics Corporation ("Continental"), a
wholly-owned subsidiary of the Company, and Eternal Word Television Network,
Inc. ("EWTN"), a customer of Continental, have infringed and are infringing two
claims of United States Patent No. 4,560,944 (the "Patent") assigned to
Thomcast.
Thomcast has stated that its damages cannot presently be
ascertained, but has computed its alleged damages on past sales at approximately
$6,500,000 and has requested treble damages, prejudgment interest, costs and
attorneys' fees. On September 16, 1996, the district court issued its final
order declaring the Patent invalid and granting summary judgment in favor of
Continental and EWTN. Thomcast filed an appeal with the United States Court of
Appeals for the Federal Circuit. The parties have filed their respective briefs
and are awaiting oral arguments, if ordered, and a decision. If the appeal is
granted and the final order of the district court is reversed, the case would be
remanded to the district court for further proceedings such as additional
motions for summary judgment and a trial.
There are various other lawsuits and claims pending against the
Company's subsidiaries. In the opinion of Tech-Sym's management, based in part
on advice of counsel, none of these actions will have a material adverse effect
on the consolidated financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO
A VOTEOF SECURITY HOLDERS
No matter was submitted during the fourth quarter of 1996 to a
vote of the Company's security holders through the solicitation of proxies or
otherwise.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the
current executive officers (as defined by the Securities and Exchange Commission
rules) of the Company. These officers serve at the discretion of the Board of
Directors of the Company and of various subsidiaries of the Company, as the case
may be.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Wendell W. Gamel 67 Chairman of the Board, President and Director of the
Company and officer and director of various subsidiaries
of the Company
</TABLE>
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<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Coy J. Scribner 65 Vice President and Director of the Company, President
and Director of Metric, and Chairman of the Board of EEC
Ray F. Thompson 60 Vice President, Treasurer, and Chief Financial Officer
of the Company and officer and director of various
subsidiaries of the Company
J. Rankin Tippins 44 Secretary and General Counsel of the Company and officer
and director of various subsidiaries of the Company
Paul L. Harp 48 Controller and Chief Accounting Officer of the Company
O. Dale Burris 60 President of TRAK Communications Inc.
Robert M. McDonald 66 President of Continental Electronics Corporation
Richard F. Miles 48 President of GeoScience Corporation
</TABLE>
There are no family relationships between any of the above
persons. Executive officers are elected annually by the Board of Directors of
the Company or a wholly-owned subsidiary of the Company, as the case may be, at
their respective meetings of directors held immediately following the annual
meeting of shareholders for such Company, to serve for the ensuing year or until
their successors have been elected. The annual meetings of shareholders of the
Company and GeoScience Corporation are normally held in April of each year and
the annual meeting of each of the Company's principal, wholly-owned
subsidiaries, including Metric, TRAK Communications, EEC, and Continental, are
held in June of each year. There are no arrangements or understandings between
any officer and any other person pursuant to which the officer was elected.
Mr. Gamel has been Chairman of the Board and President of the
Company for more than the past five years. Mr. Gamel has served as a director of
the Company continuously since 1966.
Mr. Scribner has been Vice President of the Company, President
and a director of Metric, and Chairman of the Board of EEC, for more than the
past five years. He has been a director of the Company continuously since 1983.
Mr. Thompson has been Treasurer and Chief Financial Officer of
the Company for more than the past five years. In February of 1993, he was
elected to the additional office of Vice President of the Company.
Mr. Tippins has been Secretary and General Counsel of the Company
for more than the past five years.
Mr. Harp was elected Controller of the Corporation effective July
1, 1996, and is the Chief Accounting Officer for the Company. He had previously
served as Secretary, Treasurer, and Controller of Metric since 1982.
11
<PAGE>
Mr. Burris served as President of TRAK Microwave for more than
the past five years. In March of 1997 he was elected as President of TRAK
Communications Inc.
Mr. McDonald has served as President of Continental for more than
the past five years.
Mr. Miles was elected President of Syntron on January 29, 1990.
In December of 1995, he resigned as President of Syntron and was elected
Chairman of the Boards of both Syntron and CogniSeis. On March 28, 1996, he was
elected as President of GeoScience Corporation and continues to serve in that
capacity.
PART II
The information called for by Items 5 through 8, inclusive, of
Part II of this form is contained in the following sections of the Company's
Annual Report to Shareholders for 1996, which sections are incorporated herein
by reference:
Caption and Page of
ANNUAL REPORT
-------------------
Item 5.Market for Registrant's "Stockholder and Market Information"; page
Common Equity and 41
Related Stockholder
Matters.
Item 6.Selected Financial Data "Selected Financial Data"; page 17
Item 7.Management's Discussion "Management's Discussion and Analysis of
and Analysis of Financial Condition and Results of
Financial Condition and Operations"; pages 18 through 21,
Results of Operations inclusive
Item 8.Financial Statements Tech-Sym Corporation and Subsidiaries
and Supplementary Data Consolidated Financial Statements; pages
22 through 40, inclusive
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no such changes or disagreements.
PART III
12
<PAGE>
The information called for by Items 10, 11, 12 and 13 of Part III
of this form (other than the information required by Item 10 with respect to
executive officers which has been included in Part I above as Item 4A) is
contained in the Company's definitive proxy statement for the Annual Meeting of
Shareholders to be held April 29, 1997. Such information has been filed with the
Securities and Exchange Commission and is incorporated herein.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS
A list of the financial statements incorporated herein by
reference is set forth in the Index to Financial Statements and
Schedules submitted as a separate section of this report.
(2) FINANCIAL STATEMENT SCHEDULES
A list of the financial statement schedules included
herein is contained in the accompanying Index to Financial
Statements and Schedules.
(3) EXHIBITS
The following documents are included as Exhibits to this
report. An asterisk (*) before an Exhibit number denotes that
such Exhibit has been incorporated by reference to the
registration statement or report specified in the brackets
thereafter.
*3(a) Articles of Incorporation of Registrant, as
amended [Registrant's 10-K (1989), SEC File
No. 1-4371, Exhibit 3(a)]
*3(b) By-Laws of Registrant, as amended
[Registrant's 10-K (1993), SEC File No.
1-4371, Exhibit 3(b)]
*4(a) Amended and Restated Rights Agreement dated
as of June 1, 1988, between the Registrant
and Continental Stock Transfer and Trust
Company, as rights agent, relating to Common
Stock Purchase Rights [Registrant's 10-K
(1993), SEC File No. 1-4371, Exhibit 4(a)]
13
<PAGE>
*10(a) 1980 Stock Option Plan of Registrant
[Registration Statement No. 2-68084, Exhibit
1.1]
*10(b) First Amendment to 1980 Stock Option Plan of
Registrant dated February 23, 1982
[Registration Statement No. 2-77742, Exhibit
10(b)]
*10(c) Second Amendment to 1980 Stock Option Plan
of Registrant dated February 17, 1983
[Registration Statement No. 2-87064, Exhibit
10(c)]
*10(d) 1990 Stock Option Plan of Registrant
[Registration Statement No. 33-38208,
Exhibit 28.1]
*10(e) 1990 Stock Option Plan, as amended,
effective February 21, 1991 [Registrant's
10-K (1991) SEC File No. 1-4371, Exhibit
10(e)]
*10(f) 1990 Stock Option Plan, as amended,
effective February 17, 1994 [Registration
No. 33-56535, Exhibit 4.1]
*10(g) Written description of incentive bonus
compensation plan effective February 20,
1992 [Registrant's 10-K (1991) SEC File No.
1-4371, Exhibit 10(f)]
*10(h) Deferred Compensation Agreement dated
January 1, 1978, between the Registrant and
Robert E. Moore with attached Amendments
through January 1, 1991 [Registrant's 10-K
(1990) SEC File No. 1-4371, Exhibit 10 (g)]
*10(i) Consulting Agreement dated January 1, 1988,
between Registrant and Robert E. Moore
[Registrant's 10-K (1987), SEC File No.
1-4371, Exhibit 10(dd)]
*10(j) Form of Director's Stock Option Agreement
dated as of December 10, 1987, entered into
between Registrant and A. A. Gallotta, Jr.
(5,000 shares), and Christopher C. Kraft,
Jr. (5,000 shares) [Registrant's 10-K
(1988), SEC File No. 1-4371, Exhibit 10(ii)]
*10(k) Termination Agreement dated May 1, 1991,
between the Registrant and Ray F. Thompson
[Registrant's 10-K (1991) SEC File No.
1-4371, Exhibit 10(r)]
*10(l) Termination Agreement dated May 1, 1991,
between the Registrant and Richard F. Miles
[Registrant's 10-K (1991) SEC File No.
1-4371, Exhibit 10(s)]
14
<PAGE>
*10(m) First Amendment to Termination Agreement,
dated April 26, 1994, between the Registrant
and Richard F. Miles [Registration No.
33-56533, Exhibit 10(s)]
*10(n) Termination Agreement dated May 1, 1991,
between the Registrant and J. Rankin Tippins
[Registrant's 10-K (1991) SEC File No.
1-4371, Exhibit 10(t)]
*10(o) Termination Agreement dated May 1, 1991,
between the Registrant and O. Dale Burris
[Registrant's 10-K (1991) SEC File No.
1-4371, Exhibit 10(u)]
*10(p) Termination Agreement dated August 15, 1996,
between the Registrant and Paul L. Harp
*10(q) Trust Agreement dated June 11, 1991 between
the Registrant and Texas Commerce Bank
National Association [Registrant's 10-K
(1991) SEC File No. 1-4371, Exhibit 10(w)]
*10(r) First Amendment dated June 1, 1992, to Trust
Agreement dated June 11, 1991, between the
Registrant and Texas Commerce Bank National
Association [Registrant's 10-K (1992) SEC
File No. 1-4371, Exhibit 10(x)]
*10(s) Nonemployee Director Retirement Plan of the
Registrant effective January 1, 1992
[Registrant's 10-K (1991) SEC File No.
1-4371, Exhibit 10(x)]
10(t) Executive Retirement Agreement, as amended
and restated, dated April 30, 1992, between
the Registrant and Wendell W. Gamel
10(u) Executive Retirement Agreement, as amended
and restated, dated April 30, 1992, between
the Registrant and Coy J. Scribner
10(v) Executive Retirement Agreement, as amended
and restated, dated April 30, 1992, between
the Registrant and Ray F. Thompson
10(w) Executive Retirement Agreement, as amended
and restated, dated April 30, 1992, between
the Registrant and O. Dale Burris
10(x) Executive Retirement Agreement, as amended
and restated, dated April 30, 1992, between
Registrant and J. Rankin Tippins
15
<PAGE>
*10(y) Executive Retirement Agreement dated April
26, 1994, between the Registrant and Richard
F. Miles [Registration No. 33-56533, Exhibit
10(ee)]
13 Pages 17-41 of the Annual Report to
Shareholders of Registrant for the year
ended December 31, 1996, are included as an
Exhibit to this report for the information
of the Securities and Exchange Commission,
and, except for those portions thereof
specifically incorporated by reference
elsewhere herein, such pages of the Annual
Report should not be deemed filed as a part
of this report
21 Subsidiaries of the Registrant
22 Power of Attorney
23 Consent of independent accountants
27 Financial Data Schedule which is deemed not
to be filed for purposes of liability under
the federal securities laws
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were required to be filed during the
quarter ended December 31, 1996.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TECH-SYM CORPORATION
By: /S/RAY F. THOMPSON
Ray F. Thompson, Vice Presidentm and
Treasurer (principal financial officer)
Date: March 28, 1997
By: /S/PAUL L. HARP
Paul L. Harp, Controller (principal
accounting officer)
Date: March 28, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: /S/WENDELL W. GAMEL
Wendell W. Gamel, Chairman of the Board
President and Director (principal
executive officer)
Date: March 28, 1997
By: *W. L. CREECH
W. L. Creech
Director
Date: March 28, 1997
By: *MICHAEL C. FORREST
Michael C. Forrest
Director
Date: March 28, 1997
17
<PAGE>
By: *A. A. GALLOTTA, JR.
A. A. Gallotta, Jr.
Director
Date: March 28, 1997
By: *CHRISTOPHER C. KRAFT, JR.
Christopher C. Kraft, Jr.
Director
Date: March 28, 1997
By: *ROBERT E. MOORE
Robert E. Moore
Director
Date: March 28, 1997
By: *COY J. SCRIBNER
Coy J. Scribner
Director
Date: March 28, 1997
By: *CHARLES K. WATT
Charles K. Watt
Director
Date: March 28, 1997
*Signed by Ray F. Thompson as attorney-in-fact pursuant to Power of Attorney.
18
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
PAGE IN
ANNUAL REPORT*
(a) The following documents are filed as part of
this report:
(1) Financial Statements:
Consolidated Statement of Income for
the three years ended December 31, 1996 22
Consolidated Balance Sheet at
December 31, 1996 and 1995 23
Consolidated Statement of Cash Flows for
the three years ended December 31, 1996 24
Consolidated Statement of Changes in
Shareholders' Investment for the three
years ended December 31, 1996 25
Notes to Consolidated Financial Statements 26
Report of Independent Accountants 40
PAGE
IN THIS REPORT
ON FORM 10-K
(2) Financial Statement Schedules:
Report of Independent Accountants on
Financial Statement Schedule S-2
Valuation and Qualifying Accounts and
Reserves (Schedule II) for the three
years ended December 31, 1996 S-3
*Incorporated by reference from the indicated pages of the 1996 Annual Report
to Shareholders.
19
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
TECH-SYM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
E X H I B I T S
TO ANNUAL REPORT OF REGISTRANT
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
ON FORM 10-K (FILE NO. 1-4371)
20
<PAGE>
EXHIBIT INDEX
The following documents are included as Exhibits to this report.
An asterisk (*) placed opposite of the description of an Exhibit denotes that
such Exhibit has been incorporated by reference to the registration statement or
report specified in the brackets in such Exhibit description.
EXHIBIT NUMBER
NUMBER EXHIBIT SEQUENTIAL
------- ------- ----------
3(a) Articles of Incorporation of Registrant, as amended
[Registrant's 10-K (1989), SEC File No. 1-4371, Exhibit
3(a)] *
3(b) By-Laws of Registrant, as amended[Registrant's 10-K (1993),
SEC File No. 1-4371, Exhibit 3(b)] *
4(a) Amended and Restated Rights Agreement dated as of June 1,
1988,between the Registrant and Continental Stock Transfer &
Trust Company, as rights agent, relating to Common Stock
Purchase Rights [Registrant's 10-K (1993), SEC File No.
1-4371, Exhibit 4(a)] *
10(a) 1980 Stock Option Plan of Registrant [Registration Statement
No. 2-68084, Exhibit 1.1] *
10(b) First Amendment to 1980 Stock Option Plan of Registrant
dated February 23, 1982 [Registration Statement No. 2-77742,
Exhibit 10(b)] *
10(c) Second Amendment to 1980 Stock Option Plan of Registrant
dated February 17, 1983 [Registration Statement No. 2-87064,
Exhibit 10(c)] *
10(d) 1990 Stock Option Plan of Registrant [Registration Statement
No. 33-38208, Exhibit 28.1] *
10(e) 1990 Stock Option Plan, as amended, effective February 21,
1991 [Registrant's 10-K (1991) SEC File No. 1-4371, Exhibit
10(e)] *
10(f) 1990 Stock Option Plan, as amended, effective February 17,
1994 [Registration No. 33-56535, Exhibit 4.1] *
10(g) Written description of incentive bonus compensation plan
[Registrant's 10-K (1991) SEC File No. 1-4371, Exhibit
10(f)] *
21
<PAGE>
10(h) Deferred Compensation Agreement dated January 1, 1978,
between the Registrant and Robert E. Moore with attached
Amendments through January 1, 1991 [Registrant's 10-K (1990)
SEC File No. 1-4371, Exhibit 10(g)] *
I-1
10(i) Consulting Agreement dated January 1, 1988, between
Registrant and Robert E. Moore [Registrant's 10-K (1987),
SEC File No. 1-4371, Exhibit 10(dd)] *
10(j) Form of Director's Stock Option Agreement dated as of
December 10, 1987, entered into between Registrant and A. A.
Gallotta, Jr. (5,000 shares), and Christopher C. Kraft, Jr.
(5,000 shares) [Registrant's 10-K (1988), SEC File No.
1-4371, Exhibit 10(ii) *
10(k) Termination Agreement dated May 1, 1991, between the
Registrant and Ray F. Thompson Registrant's 10-K (1991) SEC
File No. 1-4371, Exhibit 10(r] *
10(l) Termination Agreement dated May 1, 1991, between the
Registrant and Richard F. Miles [Registrant's 10-K (1991)
SEC File No. 1-4371, Exhibit 10(s)] *
10(m) First Amendment to Termination Agreement, dated April 26,
1994, between the Registrant and Richard F. Miles
[Registration No. 33-56533, Exhibit 10(s)] *
10(n) Termination Agreement dated May 1, 1991, between the
Registrant and J. Rankin Tippins [Registrant's 10-K (1991)
SEC File No. 1-4371, Exhibit 10(t)] *
10(o) Termination Agreement dated May 1, 1991, between the
Registrant and O. Dale Burris [Registrant's 10-K (1991) SEC
File No. 1-4371, Exhibit 10(u)] *
10(p) Termination Agreement dated May 1, 1991, between the
Registrant and Robert M. McDonald [Registrant's 10-K (1991)
SEC File No. 1-4371, Exhibit 10(v)] *
10(q) Trust Agreement dated June 11, 1991 between the Registrant
and Texas Commerce Bank National Association [Registrant's
10-K (1991) SEC File No. 1-4371, Exhibit 10(w)] *
22
<PAGE>
10(r) First Amendment dated June 1, 1992, to Trust Agreement dated
June 11, 1991 between the Registrant and Texas Commerce Bank
National Association [Registrnt's 10-K (1992) SEC File No.
1-4371, Exhibit 10(x)] *
10(s) Nonemployee Director Retirement Plan of the Registrant
effective January 1, 1992 [Registrant's 10-K (1991) SEC File
No. 1-4371, Exhibit 10(x)] I-2 *
10(t) Executive Retirement Agreement, as amended and restated,
dated April 30, 1992, between the Registrant and Wendell
W. Gamel __
10(u) Executive Retirement Agreement, as amended and restated,
dated April 30, 1992, between the Registrant and Coy J.
Scribner __
10(v) Executive Retirement Agreement, as amended and restated,
dated April 30, 1992, between the Registrant and Ray F.
Thompson __
10(w) Executive Retirement Agreement, as amended and restated,
dated April 30, 1992, between the Registrant and O. Dale
Burris __
10(x) Executive Retirement Agreement, as amended and restated,
dated April 30, 1992, between Registrant and J. Rankin
Tippins __
10(y) Executive Retirement Agreement dated April 26, 1994, between
the Registrant and Richard F. Miles [Registration No.
33-56533, Exhibit 10(ee)] *
13 Pages 17 through 41 of the Annual Report to Stockholders of
Registrant for the year ended December 31, 1996, are
included as an Exhibit to this report for the information of
the Securities and Exchange Commission, and, except for
those portions thereof specifically incorporated by
reference elsewhere herein, such pages of the Annual Report
should not be deemed filed as a part of this report __
21 Subsidiaries of the Registrant __
22 Power of Attorney __
23 Consent of independent accountants __
27 Financial Data Schedule which is deemed not to be filed for
purposes of liability under the federal securities laws __
23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Shareholders and Board of Directors of
Tech-Sym Corporation:
Our audits of the consolidated financial statements referred to in our report
dated February 20, 1997 appearing in the 1996 Annual Report to Shareholders of
Tech-Sym Corporation (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, these Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PRICE WATERHOUSE LLP
Houston, Texas
February 20, 1997
S-2
<PAGE>
TECH-SYM CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves (Schedule II)
For the Three Years Ended December 31, 1996
(In thousands)
<TABLE>
<CAPTION>
Charged Charged Charged
Balance to costs to costs to costs
at and Balance and Balance and Balance
beginning expenses Deductions at end expenses Deductions at end expenses Deductions at end
Description of 1994 1994 1994 of 1994 1995 1995 of 1995 1996 1996 of 1996
- ----------- -------- -------- ---------- ------- ------- ---------- -------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tech-Sym
Corporation
and
Consolidated
Subsidiaries
- ---------------
Reserves
deducted
from assets:
Current
receivables $222 $476 $234 $ 464 $1,836 $1,069 $1,231 $1,488 $ 739 $1,980
Long-term
receivables 312 162 262 212 394 606 60 247 419
---- ---- ---- ------ ------ ------ ------ ------ ------ ------
$534 $638 $496 $ 676 $2,230 $1,069 $1,837 $1,548 $ 986 $2,399
==== ==== ==== ====== ====== ====== ====== ====== ====== ======
</TABLE>
S-3
EXHIBIT 10(t)
EXECUTIVE RETIREMENT AGREEMENT
AS AMENDED AND RESTATED)
THIS AGREEMENT made and entered into as of April 30, 1992, between
TECH-SYM CORPORATION (the "Company") and WENDELL W. GAMEL (the "Executive").
WITNESSETH:
WHEREAS, the Executive has rendered outstanding service to the
Company over a period of years and the Executive's experience and knowledge of
the affairs Of the Company and his reputation and contacts are extremely
valuable to the Company; and
WHEREAS, in recognition of the Executive's service to the Company
and to encourage the Executive's continued service, the Company is desirous of
offering him, in addition to his regular compensation and termination benefits,
certain retirement benefits;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and the Executive
hereby agree as follows:
1. BENEFITS
1.1 QUALIFICATIONS FOR RETIREMENT BENEFITS. The Executive (or his
surviving spouse, as the case may be) shall be entitled to receive the
retirement (or death) benefits provided by this Agreement following his
termination of employment with the Company unless his employment with the
Company is terminated (i) voluntarily by the Executive prior to his attaining a
62, other than due to a Total Disability (as defined below), or (ii) by the
Company for Cause (as defined below). A termination of employment that would
entitle the Executive (or his spouse) to receive retirement (or death) benefits
as provided hereunder is hereafter referred to as a "Qualified Termination."
For the purposes of this Agreement, the Company shall have "Cause"
to terminate the Executive's employment hereunder only upon (i) the willful and
continued failure by the Executive to perform substantially the Executive's
duties with the Company, other than any such failure resulting ' g from the
Executive's incapacity due to physical or mental illness, after a demand for
substantial performance is delivered to the Executive by the Board that
specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties or (ii) the
willful engaging by the Executive in gross misconduct materially and
demonstrably injurious to the Company. For purposes of this paragraph, an act or
failure to act on the Executive's part shall be considered "willful" if done or
omitted to be done by the Executive otherwise than in good faith and without
reasonable belief that the Executive's action or omission was in the best
interest of the Company.
For purposes of this Agreement, the term "Total Disability" means
that, in the opinion of the Executive's physician, the Executive has suffered a
mental or physical disability
<PAGE>
that is expected to be permanent or of long continued duration and which
prevents the Executive from continuing full-time his duties with the Company or
Subsidiary.
1.2 AMOUNT OF RETIREMENT BENEFITS. Following a Qualified Termination the
Executive shall receive, beginning with the later of the date of such Qualified
Termination or the Executive's 65th birthday (the "Commencement Date"), an
annual retirement benefit equal to 65% of the highest rate of annual base salary
in effect for the Executive with the Company at any time prior to the
Executive's 61st birthday (the "Base Salary") with such benefit payable on each
January 1 on or after the Commencement Date on which he is living; provided,
however, that if the Executive's Commencement Date is other than on January 1,
the Executive shall receive a partial annual retirement benefit for the
remainder of the year in which such Commencement Date occurs in an amount equal
to the full annual benefit that will commence on the next January 1 but reduced
by a fraction, the numerator of which is the number of calendar months during
such year that have elapsed prior to the Commencement Date (with any partial
month rounded up to a complete month), and the denominator of which is 12 and
such partial benefit shall be paid to the Executive on the first day of the
month coinciding with or next following the Commencement Date; provided further,
however, that:
(a) if the Executive's employment terminates due to a Qualified
Termination prior to his reaching age 65, the Executive may elect to
commence receiving his retirement benefits hereunder as of the date of
such Qualified Termination or any date thereafter, provided the
Executive is at least age 62 as of such Early Commencement Date, by
giving written notice of such election to the Company prior to such
Early Commencement Date and the amount of the annual retirement benefit
(and partial benefit, if any) payable hereunder shall be reduced by
1.39% for each full calendar month by which his Early Commencement Date
precedes his 65th birthday unless the Board, in its sole discretion,
elects to waive all or part of this reduction; and
(b) if on the Early Commencement Date the Executive is also
entitled to receive benefits under a separate Termination Agreement with
the Company dated effective as of May 1, 1991 (as the same may be
amended from time-to-time thereafter), then for purposes of subparagraph
(a) above the Executive's age as of the Early Commencement Date shall be
increased by (but not beyond age 65) the length of the Termination
Period (as defined in the Termination Agreement) remaining as of the
Early Commencement Date.
1.3 DEATH BENEFITS. If the Executive is married on his date of death and
such death occurs while he is an employee of the Company or on or after a
Qualified Termination, including one due to Total Disability, his surviving
spouse ("Spouse") shall receive an annual survivor's benefit hereunder in an
amount equal to 37 1/2% of the Executive's Base Salary. The Spouse's benefit
shall commence on the first day of the month coinciding with or next following
the Executive's date of death. Subsequent payment(s) of the Spouse's benefit
shall be made on each anniversary of the date such survivor payments first
began, provided that the Spouse is alive on such anniversary date, and shall
cease when either a total of 10 annual survivor benefit payments have been paid
to the Spouse hereunder or the Spouse dies, whichever occurs first.
1.4 LUMP SUMS. Notwithstanding Section 1.2 or Section 1.3 hereof to the
contrary, the Board, in its sole discretion, may at any time direct that the
actuarial present value of any retirement (or death) benefits accrued under this
Agreement, as determined in accordance with
<PAGE>
the actuarial factors and rates then in effect for a lump sum payment (for an
immediate or deferred annuity, as the case may be) upon a qualified plan's
termination under Pension Benefit Guaranty Corporation regulations, be
immediately paid to the Executive (or his spouse, as the case may be) in a lump
sum in cash (by check).
1.5 CONTINUED HEALTH BENEFITS. On and after a Qualified Termination, the
Executive shall be entitled to continue, for as long as he lives, his
participation and that of his qualified dependents, if any, in the Company's
group health plan for active employees in which the Executive participated
immediately prior to such Qualified Termination provided that the Executive
continues to pay the regular active employee premium, if any, required by such
plan; however, in the event that continued participation by the Executive in
such plan after the date of his Qualified Termination is not permitted by the
plan or such plan is terminated or benefits under such plan would be taxable to
the Executive, the Company shall either obtain comparable coverage under another
group health plan of the Company (and under which benefits to the Executive
would not be taxable) or, if there is none, an individual insurance policy
providing comparable benefits with the Executive paying an amount of the premium
therefor that is not greater than that which he would have been required to pay
from time to time under the Company's group health plan for active employees had
his participation continued in such plan and the Company paying the balance of
such cost and any taxes on any income the Executive would have as a result of
such Company-provided coverage.
2. TERMINATION AND AMENDMENT
2.1 TERMINATION OR AMENDMENT. The Company, by action of the Board,
reserves the right to amend or terminate this Agreement for whatever reasons it
may deem appropriate as of the first day of the month following the delivery to
the Executive of written notice of such amendment or termination; however, no
such amendment shall impair, reduce or void the Executive's (or his Spouse's)
rights with respect to the continued health benefits provided by Section 1.5 or
the retirement (or death) benefits (whether or not in pay status) accrued under
this Agreement as of the date of such amendment and further, any termination of
this Agreement by the Company shall, notwithstanding anything herein to the
contrary, entitle the Executive (or his Spouse, as the case may be) to
immediately receive from the Company the lump sum present value of the accrued
retirement (or death) benefits as calculated in accordance with Section 1.4.
3. ADMINISTRATION
3.1 BOARD DECISION. The Board's decision whether or not to waive the
reduction in the amount of benefits payable in the event of the Executive's
Qualified Termination prior to reaching age 65, as provided in Section 1.2(a),
shall be totally discretionary with the Board and need not be based upon any
standard nor be consistent with any past practices and shall be conclusive on
all parties.
3.2 BENEFITS UNFUNDED. This Agreement is completely separate from and is
not a part of any other plan, qualified or nonqualified, of the Company and its
subsidiaries. The benefits payable hereunder, if any, are in addition to those
that "rabbi" trust to pay all or part of the benefits it may be required to pay
under this Agreement, in which event this Agreement shall be deemed to be a part
of such trust agreement and the Executive hereby waives, with respect to the
assets of such rabbi trust, any preference he may have under state law with
respect to such
<PAGE>
assets and acknowledges that he shall be a general, unsecured creditor of the
Company with respect to the same.
4. MISCELLANEOUS
4.1 NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement shall be
construed as a contract of employment between the Company and the Executive, or
as a right of the Executive to be continued in the employment of the Company or
as a limitation of the right of the Company to discharge the Executive at any
time, with or without Cause.
4.2 ASSIGNMENT. The benefits payable under this Agreement may not be
assigned, alienated, pledged, transferred, sold, encumbered or hypothecated in
any manner by the Executive or his spouse. Any attempted sale, conveyance,
transfer, assignment, pledge or encumbrance of this Agreement or of such rights,
interest and benefits or the levy of any attachment or similar process thereupon
shall be null and void and without affect.
4.3 BINDING EFFECT. The Company will require any successor, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to the Executive, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent as
the Company would have been required if no such succession had taken place.
Notwithstanding anything herein to the contrary, failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall
constitute a termination of this Agreement pursuant to Section 2.1 and entitle
the Executive (or Spouse) as the case may be, to immediate payment thereunder.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid that
executes and delivers the agreement provided for in this Section 4.3 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
4.4 MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and by the President or other authorized
officer of the Company. No waiver by either party hereto at any time of any
breach b the other party hereto of, or compliance with, any condition or
provision be performed by such other party shall be deemed a waiver of provision
or conditions at the same or at any prior or subsequent time.
4.5 PAYMENTS. The Company may make any payments required by this
Agreement, when in the judgment of the Company the recipient is incapacitated by
reasons of physical or mental illness or infirmity, to the recipient directly,
or to the legal guardian of the recipient.
4.6 TAXES. The Company shall have the right to deduct from all payments
made under this Agreement, any federal, state or local income taxes required by
law to be withheld with respect to such payments.
4.7 VALIDITY. The interpretation, construction and performance of this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Texas without regard to the principle of conflicts of laws.
The invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of a other provision of this Agreement,
each of which shall remain in full force and effect.
4.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
4.9 EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes
of this Agreement includes employment with any corporation in which the Company
has a direct or indirect ownership interest of 50% or more of the total combined
voting power of all classes of stock.
4.10 ARBITRATION. Any dispute or controversy arising out of or in
connection with this Agreement as to whether the Executive (or his spouse) is
entitled to a retirement (or survivor's) benefit, the amount thereof or other
matter shall be submitted to arbitration pursuant to the following procedure:
(a) Either party may demand such arbitration in writing after the
controversy arises, which demand shall include the name of the
arbitrator appointed by the party demanding arbitration, together with a
statement of the matter in controversy.
(b) Within 15 days after such demand, the other party shall name an
arbitrator, or in default thereof, such arbitrator shall be named by the
Arbitration Committee of the American Arbitration Association, and the
two arbitrators so selected shall name a third arbitrator within 15 days
or, in lieu of such agreement on a third arbitrator by the two
arbitrators so appointed a third arbitrator shall be appointed by the
Arbitration Committee of the American Arbitration Association.
(e) The Company shall bear all arbitration costs and expenses, including
without limitation any legal fees and expenses incurred by the Executive
(or his spouse) in connection with such arbitration procedure.
(d) The arbitration hearing shall be held at a site in Houston, Texas,
to be agreed to by a majority of the arbitrators on ten days' written
notice to the parties.
(e) The arbitration hearing shall be concluded within ten days unless
otherwise ordered by a majority of the arbitrators, and the award
thereon shall be made within ten days after the close of the submission
of evidence. An award rendered by a majority of the arbitrators
appointed pursuant to this Agreement shall be final and binding on all
parties to the proceeding, and judgment on such award may be entered by
either party in the highest court, state or federal, having
jurisdiction.
The parties stipulate that the provisions hereof shall be a complete
defense to any suit, action, or proceeding instituted in any federal, state, or
local court or before any administrative tribunal with respect to any
controversy or dispute arising under this Agreement, and which is arbitrable as
herein set forth. The arbitration provisions hereof shall, with respect to such
controversy or dispute, survive the termination of this Agreement.
4.11 AMENDMENT AND RESTATEMENT OF PRIOR EXECUTIVE RETIREMENT AGREEMENT.
The Company and the Executive hereby agree that concurrently with the execution
and delivery of this Agreement, this Agreement shall operate and be construed as
an amendment and restatement of that certain Executive Retirement Agreement,
dated May 1, 1991 between the Company and the Executive (the Retirement
Agreement"), and effective with such delivery the terms and provisions of the
Prior Agreement shall be superseded by the terms and provisions of this
Agreement.
IN WITNESS WHEREOF the Company has caused this Agreement to be
executed by its duly authorized officer, and the Executive has executed this
Agreement effective for all purposes as of the date first written above.
TECH-SYM CORPORATION
Dated: 4/29/92 By:/s/Coy J. Scribner
Title: Vice President
EXECUTIVE
Dated: 4/29/92 /s/Wendell W. Gamel
WENDELL W. GAMEL
EXHIBIT 10(u)
EXECUTIVE RETIREMENT AGREEMENT
(AS AMENDED AND RESTATED)
THIS AGREEMENT made and entered into as of April 30, 1992, between
TECH-SYM CORPORATION (the "Company") and COY J. SCRIBNER (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive has rendered outstanding service to the
Company over a period of years and the Executive's experience and knowledge of
the affairs of the Company and his reputation and contacts are extremely
valuable to the Company; and
WHEREAS, in recognition of the Executive's service to the Company
and to encourage the Executive's continued service, the Company is desirous of
offering him, in addition to his regular compensation and termination benefits,
certain retirement benefits;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and the Executive
hereby agree as follows:
1. BENEFITS
1.1 QUALIFICATIONS FOR RETIREMENT BENEFITS. The Executive (or his
surviving spouse, as the case may be) shall be entitled to receive the
retirement (or death) benefits provided by this Agreement following his
termination of employment with the Company unless his employment with the
Company is terminated (i) voluntarily by the Executive prior to his attaining
age 62, other than due to a Total Disability (as defined below), or (ii) by the
Company Cause (as defined below). A termination of employment that would entitle
the Executive (or his spouse) to receive retirement (or death) benefits as
provided hereunder is hereafter referred to as a "Qualified Termination."
For the purposes of this Agreement, the Company shall have "Cause"
to terminate the Executive's employment hereunder only upon (i) the willful and
continued failure by the Executive to perform substantially the Executive's
duties with the Company, other than any such failure resulting from the
Executive's incapacity due to physical or mental illness, after a demand for
substantial performance is delivered to the Executive by the Board that
specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties or (ii) the
willful engaging by the Executive in gross misconduct materially and
demonstrably injurious to the Company. For purposes of this paragraph, an act or
failure to act on the Executive's part shall be considered "willful" if done or
omitted to be done by the Executive otherwise than in good faith and without
reasonable belief that the Executive's action or omission was in the best
interest of the Company.
For purposes of this Agreement, the term "Total Disability" means
that, in the opinion of the Executive's physician, the Executive has suffered a
mental or physical disability that is expected to be permanent or of long
continued duration and which prevents the Executive from continuing full-time
his duties with the Company or Subsidiary.
1.2 AMOUNT OF RETIREMENT BENEFITS. Following a Qualified Termination the
Executive shall receive, beginning with the later of the date of such Qualified
Termination or the Executive's 65th birthday (the "Commencement Date"), an
annual retirement benefit equal to 65% of the highest rate of annual base salary
in effect for the Executive with the Company at any time prior to the
Executive's 61st birthday (the "Base Salary") with such benefit payable on each
January 1 on or after the Commencement
<PAGE>
Date on which he is living; provided, however, that if the Executive's
Commencement Date is other than on January 1, the Executive shall receive a
partial annual retirement benefit for the remainder of the year in which such
Commencement Date occurs in an amount equal to the full annual benefit that will
commence on the next January 1 but reduced by a fraction, the numerator of which
is the number of calendar months during such year that have elapsed prior to the
Commencement Date (with any partial month rounded up to a complete month), and
the denominator of which is 12 and such partial benefit shall be paid to the
Executive on the first day of the month coinciding with or next following the
Commencement Date; provided further, however, that:
(a) if the Executive's employment terminates due to a Qualified
Termination prior to his reaching age 65, the Executive may elect to
commence receiving his retirement benefits hereunder as of the date of
such Qualified Termination or any date thereafter, provided the
Executive is at least age 62 as of such Early Commencement Date, by
giving written notice of such election to the Company prior to such
Early Commencement Date and the amount of the annual retirement benefit
(and partial benefit, if any) payable hereunder shall be reduced by
1.39% for each full calendar month by which his Early Commencement Date
precedes his 65th birthday unless the Board, in its sole discretion,
elects to waive all or part of this reduction; and
(b) if on the Early Commencement Date the Executive is also entitled to
receive benefits under a separate Termination Agreement with the Company
dated effective as of May 1, 1991 (as the same may be amended from
time-to-time thereafter), then for purposes of subparagraph (a) above
the Executive's age as of the Early Commencement Date shall be increased
by (but not beyond age 65) the length of the Termination Period (as
defined in the Termination Agreement) remaining as of the Early
Commencement Date.
1.3 DEATH BENEFITS. If the Executive is married on his date of death and
such death occurs while he is an employee of the Company or on or after a
Qualified Termination, including one due to Total Disability, his surviving
spouse ("Spouse") shall receive an annual survivor's benefit hereunder in an
amount equal to 37 1/2% of the Executive's Base Salary. The Spouse's benefit
shall commence on the first day of the month coinciding with or next following
the Executive's date of death. Subsequent payment(s) of the Spouse's benefit
shall be made on each anniversary of the date such survivor payments first
began, provided that the Spouse is alive on such anniversary date, and shall
cease when either a total of 10 annual survivor benefit payments have been paid
to the Spouse hereunder or the Spouse dies, whichever occurs first.
1.4 LUMP SUMS. Notwithstanding Section 1.2 or Section 1.3 hereof to the
contrary, the Board, in its sole discretion, may at any time direct that the
actuarial present value of any retirement (or death) benefits accrued under this
Agreement, as determined in accordance with the actuarial factors and rates then
in effect for a lump sum payment (for an immediate or deferred annuity, as the
case may be) upon a qualified plan's termination under Pension Benefit Guaranty
Corporation regulations, be immediately paid to the Executive (or his spouse, as
the case may be) in a lump sum in cash (by check).
1.5 CONTINUED HEALTH BENEFITS. On and after a Qualified Termination, the
Executive shall be entitled to continue, for as long as he lives, his
participation and that of his qualified dependents, if any, in the Company's
group health plan for active employees in which the Executive participated
immediately prior to such Qualified Termination provided that the Executive
continues to pay the regular active employee premium, if any, required by such
plan; however, in the event that continued participation by the Executive in
such plan after the date of his Qualified Termination is not permitted by the
plan or such plan is terminated or benefits under such plan would be taxable to
the Executive, the Company shall either obtain comparable coverage under another
group health plan of the Company (and under which benefits to the Executive
would not be taxable) or, if there is none, an individual insurance policy
providing comparable benefits with the Executive paying an amount of the premium
therefor that is not greater than that which he would have been required to pay
from time to time under the Company's group health plan for active employees had
his participation continued in such plan and the Company paying the balance of
<PAGE>
such cost and any taxes on any income the Executive would have as a result of
such Company-provided coverage.
2. TERMINATION AND AMENDMENT
2.1 TERMINATION OR AMENDMENT. The Company, by action of the Board,
reserves the right to amend or terminate this Agreement for whatever reasons it
may deem appropriate as of the first day of the month following the delivery to
the Executive of written notice of such amendment or termination; however, no
such amendment shall impair, reduce or void the Executive's (or his Spouse's)
rights with respect to the continued health benefits provided by Section 1.5 or
the retirement (or death) benefits (whether or not in pay status) accrued under
this Agreement as of the date of such amendment and further, any termination of
this Agreement by the Company shall, notwithstanding anything herein to the
contrary, entitle the Executive (or his Spouse, as the case may be) to
immediately receive from the Company the lump sum present value of the accrued
retirement (or death) benefits as calculated in accordance with Section 1.4.
3. ADMINISTRATION
3.1 BOARD DECISION. The Board's decision whether or not to waive the
reduction in the amount of benefits payable in the event of the Executive's
Qualified Termination prior to reaching age 65, as provided in Section 1.2(a),
shall be totally discretionary with the Board and need not be based upon any
standard nor be consistent with any past practices and shall be conclusive on
all parties.
3.2 BENEFITS UNFUNDED. This Agreement is completely separate from and is
not a part of any other plan, qualified or nonqualified, of the Company and its
subsidiaries. The benefits payable hereunder, if any, are in addition to those
that may be provided to the Executive under any other plan, arrangement or
agreement. Further, the benefits payable hereunder are completely unfunded and
shall be payable by the Company solely out of its general assets and the
Executive and his spouse shall be unsecured, general creditors of the Company
with respect to such benefits; provided, however, the Company, in its
discretion, may establish a grantor or "rabbi" trust to pay all or part of the
benefits it may be required to pay under this Agreement, in which event this
Agreement shall be deemed @ be a part of such trust agreement and the Executive
hereby waives, with respect to the assets of such rabbi trust, any preference he
may have under state law with respect to such assets and acknowledges that he
shall be a general, unsecured creditor of the Company with respect to the same.
4. MISCELLANEOUS
4.1 NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement shall be
construed as a contract of employment between the Company and the Executive, or
as a right of the Executive to be continued in the employment of the Company or
as a limitation of the right of the Company to discharge the Executive at any
time, with or without Cause.
4.2 ASSIGNMENT. The benefits payable under this Agreement may not be
assigned, alienated, pledged, transferred, sold, encumbered or hypothecated in
any manner by the Executive or his spouse. Any attempted sale, conveyance,
transfer, assignment, pledge or encumbrance of this Agreement or of such rights,
interest and benefits or the levy of any attachment or similar process thereupon
shall be null and void and without effect.
4.3 BINDING EFFECT. The Company 'y will require any successor, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to the Executive, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent as
the Company 'y would have been required if no such succession had taken place.
Notwithstanding anything herein to the contrary, failure of the Company to
obtain such agreement prior to the effectiveness of any such succession
<PAGE>
shall constitute a termination of this Agreement pursuant to Section 2.1 and
entitle the Executive (or Spouse) as the case may be, to immediate payment
thereunder. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid that executes and delivers the agreement provided for in this Section
4.3 or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
4.4 MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and by the President or other authorized
officer of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provision or conditions at the same or at any
prior or subsequent time.
4.5 PAYMENTS. The Company may make any payments required by this
Agreement, when in the judgment of the Company the recipient is incapacitated by
reasons of physical or mental illness or infirmity, to the recipient directly,
or to the legal guardian of the recipient.
4.6 TAXES. The Company shall have the right to deduct from all payments
made under this Agreement, any federal, state or local income taxes required by
law to be withheld with respect to such payments.
4.7 VALIDITY. The interpretation, construction and performance of this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Texas without regard to the principle of conflicts of laws.
The invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of a other provision of this Agreement,
each of which shall remain in full force and effect.
4.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
4.9 EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes
of this Agreement includes employment with any corporation in which the Company
has a direct or indirect ownership interest of 50% or more of the total combined
voting power of all classes of stock.
4.10 ARBITRATION. Any dispute or controversy arising out of or in
connection with this Agreement as to whether the Executive (or his spouse) is
entitled to a retirement (or survivor's) benefit, the amount thereof or other
matter shall be submitted to arbitration pursuant to the following procedure:
(a) Either party may demand such arbitration in writing after the
controversy arises, which demand shall include the name of the
arbitrator appointed by the party demanding arbitration, together with a
statement of the matter in controversy.
(b) Within 15 days after such demand, the other party shall name
an arbitrator, or in default thereof, such arbitrator shall be named by
the Arbitration Committee of the American Arbitration Association, and
the two arbitrators so selected shall name a third arbitrator within 15
days or, in lieu of such agreement on a third arbitrator by the two
arbitrators so appointed a third arbitrator shall be appointed by the
Arbitration Committee of the American Arbitration Association.
(c) The Company shall bear all arbitration costs and expenses,
including without limitation any legal fees and expenses incurred by the
Executive (or his spouse) in connection with such arbitration procedure.
<PAGE>
(d) The arbitration hearing shall be held at a site in Houston,
Texas, to be agreed to by a majority of the arbitrators on ten days'
written notice to the parties.
(e) The arbitration hearing shall be concluded within ten days
unless otherwise ordered by a majority of the arbitrators, and the award
thereon shall be made within ten days after the close of the submission
of evidence. An award rendered by a majority of the arbitrators
appointed pursuant to this Agreement shall be final and binding on all
parties to the proceeding, and judgment on such award may be entered by
either party in the highest court, state or federal, having
jurisdiction.
The parties stipulate that the provisions hereof shall be a complete
defense to any suit, action, or proceeding instituted in any federal, state, or
local court or before any administrative tribunal with respect to any
controversy or dispute arising under this Agreement, and which is arbitrable as
herein set forth. The arbitration provisions hereof shall, with respect to such
controversy or dispute, survive the termination of this Agreement.
4.11 AMENDMENT AND RESTATEMENT OF PRIOR EXECUTIVE RETIREMENT AGREEMENT.
The Company and the Executive hereby agree that concurrently with the execution
and delivery of this Agreement, this Agreement shall operate and be construed as
an amendment and restatement of that certain Executive Retirement Agreement,
dated May 1 , 1991 between the Company and the Executive (the "Prior
Agreement"), and effective with such delivery the terms and provisions of the
Prior Agreement shall be superseded by the terms and provisions of this
Agreement.
IN WITNESS WHEREOF the Company has caused this Agreement to be
executed by its duly authorized officer , and the Executive has executed this
Agreement effective for all purposes as of the date first written above.
TECH-SYM CORPORATION
DATED: BY:/S/WENDELL W. GAMEL
Title: PRESIDENT
EXECUTIVE
DATED: 4/29/92 /S/COY J. SCRIBNER
COY J. SCRIBNER
EXHIBIT 10(v)
EXECUTIVE RETIREMENT AGREEMENT
(AS AMENDED AND RESTATED)
THIS AGREEMENT made and entered into as of April 30, 1992, between
TECH-SYM CORPORATION (the "Company") and RAY F. THOMPSON (the "Executive").
WITNESSETH:
WHEREAS, the Executive has rendered outstanding service to the
Company over a period of years and the Executive's experience and knowledge of
the affairs of the Company and his reputation and contacts are extremely
valuable to the Company; and
WHEREAS, in recognition of the Executive's service to the Company
and to encourage the Executive's continued service, the Company is desirous or
offering him, in addition to his regular compensation and termination benefits,
certain retirement benefits;
NOW, 'THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and the Executive
hereby agree as follows:
I . BENEFITS
1.1 QUALIFICATIONS FOR RETIREMENT BENEFITS. The Executive (or his
surviving spouse, as the case may be) shall be entitled to receive the
retirement (or death) benefits provided by this Agreement following his
termination of employment with the Company unless his employment with the
Company is terminated (i) voluntarily by the Executive prior to his attaining
age 62, other than due to a Total Disability (as defined below), or (ii) by the
Company for Cause (as defined below). A termination of employment that would
entitle the Executive (or his spouse) to receive retirement (or death) benefits
as provided hereunder is hereafter referred to as a "Qualified Termination."
For the purposes of this Agreement, the Company shall have "Cause"
to terminate the Executive's employment hereunder only upon (i) the willful and
continued failure by the Executive to perform substantially the Executive's
duties with the Company, other than any such failure resulting from the
Executive's incapacity due to physical or mental illness, after a demand for
substantial performance is delivered to the Executive by the Board that
specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties or (ii) the
willful engaging by the Executive in gross misconduct materially and
demonstrably injurious to the Company. For purposes of this paragraph, an act or
failure to act on the Executive's part shall be considered "willful" if done or
omitted to be done by the Executive otherwise than in good faith and without
reasonable belief that the Executive's action or omission was in the best
interest of the Company.
For purposes of this Agreement, the term "Total Disability" means
that, in the opinion of the Executive's physician, the Executive has suffered a
mental or physical disability that is expected to be permanent or of long
continued duration and which prevents the Executive from continuing full-time
his duties with the Company or Subsidiary.
<PAGE>
1.2 AMOUNT OF RETIREMENT BENEFITS. Following a Qualified Termination the
Executive shall receive, beginning with the later of the date of such Qualified
Termination or the Executive's 65th birthday (the "Commencement Date"), an
annual retirement benefit equal to 65% of the highest rate of annual base salary
in effect for the Executive with the Company at any time prior to the
Executive's 61st birthday (the "Base Salary") with such benefit payable on each
January 1 on or after the Commencement Date on which he is living; provided,
however, that if the Executive's Commencement Date is other than on January 1,
the Executive shall receive a partial annual retirement benefit for the
remainder of the year in which such Commencement Date occurs in an amount equal
to the full annual benefit that will commence on the next January 1 but reduced
by a fraction, the numerator of which is the number of calendar months during
such year that have elapsed prior to the Commencement Date (with an 'y partial
month rounded up to a complete month), and the denominator of which is 12 and
such partial benefit shall be paid to the Executive on the first day of the
month coinciding with or next following the Commencement Date; provided further,
however, that if on the Commencement Date:
(a) if the Executive's employment terminates due to a Qualified
Termination prior to his reaching age 65, the Executive may elect to
commence receiving his retirement benefits hereunder as of the date of
such Qualified Termination or any date thereafter, provided the
Executive is at least age 62 as of such Early Commencement Date, by
giving written notice of such election to the Company prior to such
Early Commencement Date and the amount of the annual retirement benefit
(and partial benefit, if any) payable hereunder shall be reduced by
1.39% for each full calendar month by which his Early Commencement Date
precedes his 65th birthday unless the Board, in its sole discretion,
elects to waive all or part of this reduction; and
(b) if on the Early Commencement Date the Executive is also
entitled to receive benefits under a separate Termination Agreement with
the Company dated effective as of May 1, 1991 (as the same may be
amended from time-to-time thereafter), then for purposes of subparagraph
(a) above the Executive's age as of the Early Commencement Date shall be
increased by (but not beyond age 65) the length of the Termination
Period (as defined in the Termination Agreement) remaining as of the
Early Commencement Date.
1.3 DEATH BENEFITS. If the Executive is married on his date of death and
such death occurs while he is an employee of the Company or on or after a
Qualified Termination, including one due to Total Disability, his surviving
spouse ("Spouse") shall receive an annual survivor's benefit hereunder in an
amount equal to 37 1/2% of the Executive's Base Salary. The Spouse's benefit
shall commence on the first day of the month coinciding with or next following
the Executive's date of death. Subsequent payment(s) of the Spouse's benefit
shall be made on each anniversary of the date such survivor payments first
began, provided that the Spouse is alive on such anniversary date, and shall
cease when either a total of 10 annual survivor benefit payments have been paid
to the Spouse hereunder or the Spouse dies, whichever occurs first.
1.4 LUMP SUMS. Notwithstanding Section 1.2 or Section 1.3 hereof to the
contrary, the Board, in its sole discretion, may at any time direct that the
actuarial present value of any retirement (or death) benefits accrued under this
Agreement, as determined in accordance with the actuarial factors and rates then
in effect for a lump sum payment (for an immediate or deferred annuity , as the
case may be) upon a qualified plan's termination under Pension Benefit Guaranty
Corporation regulations, be immediately paid to the Executive (or his spouse, as
the
<PAGE>
case may be) in a lump sum in cash (by check).
1.5 CONTINUED HEALTH BENEFITS. On and after a Qualified Termination, the
Executive shall be entitled to continue, for as long as he lives, his
participation and that of his qualified dependents, if any, in the Company's
group health plan for active employees in which the Executive participated
immediately prior to such Qualified Termination provided that the Executive
continues to pay the regular active employee premium, if any, required by such
plan; however, in the event that continued participation by the Executive in
such plan after the date of his Qualified Termination is not permitted by the
plan or such plan is terminated or benefits under such plan would be taxable to
the Executive, the Company shall either obtain comparable coverage under another
group health plan of the Company (and under which benefits to the Executive
would not be taxable) or, if there is none, an individual insurance policy
providing comparable benefits with the Executive paying an amount of the premium
therefor that is not greater than that which he would have been required to pay
from time to time under the Company's group health plan for active employees had
his participation continued in such plan and the Company paying the balance of
such cost and any taxes on any income the Executive would have as a result of
such Company-provided coverage.
2. TERMINATION AND AMENDMENT
2.1 TERMINATION OR AMENDMENT. The Company, by action of the Board,
reserves the right to amend or terminate this Agreement for whatever reasons it
may deem appropriate as of the first day of the month following the delivery to
the Executive of written notice of such amendment or termination; however, no
such amendment shall impair, reduce or void the Executive's (or his Spouse's)
rights with respect to the continued health benefits provided by Section 1.5 or
the retirement (or death) benefits (whether or not in pay status) accrued under
this Agreement as of the date of such amendment and further, any termination of
this Agreement by the Company shall, notwithstanding anything herein to the
contrary, entitle the Executive (or his Spouse, as the case may be) to
immediately receive from the Company the lump sum present value of the accrued
retirement (or death) benefits as calculated in accordance with Section 1.4.
3. ADMINISTRATION
3.1 BOARD DECISION. The Board's decision whether or not to waive the
reduction in the amount of benefits payable in the event of the Executive's
Qualified Termination prior to reaching age 65, as provided in Section 1.2(a),
shall be totally discretionary with the Board and need not be based upon any
standard nor be consistent with any past practices and shall be conclusive on
all parties.
3.2 BENEFITS UNFUNDED. This Agreement is completely separate from and is
not a part of any other plan, qualified or nonqualified, of the Company and its
subsidiaries. The benefits payable hereunder, if any, are in addition to those
that may be provided to the Executive under any other plan, arrangement or
agreement. Further, the benefits payable hereunder are completely unfunded and
shall be payable by the Company solely out of its general assets and the
Executive and his spouse shall be unsecured, general creditors of the Company
with respect to such benefits; provided, however, the Company, in its
discretion, may establish a grantor or "rabbi" trust to pay all or part of the
benefits it may be required to pay under this Agreement, in which event this
Agreement shall be deemed to be a part of such trust agreement and the Executive
hereby waives, with respect to the assets of such rabbi trust, any preference he
may
<PAGE>
have under state law with respect to such assets and acknowledges that he shall
be a general, unsecured creditor of the Company with respect to the same.
4. MISCELLANEOUS
4.1 NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement shall
be construed as a contract of employment between the Company and the Executive,
or as a right of the Executive to be continued in the employment of the Company
or as a limitation of the right of the Company to discharge the Executive at any
time, with or without Cause.
4.2 ASSIGNMENT. The benefits payable under this Agreement may not
be assigned, alienated, pledged, transferred, sold, encumbered or hypothecated
in any manner by the Executive or his spouse. Any attempted sale, conveyance,
transfer, assignment, pledge or encumbrance of this Agreement or of such rights,
interest and benefits or the levy of any attachment or similar process thereupon
shall be null and void and without effect.
4.3 BINDING EFFECT. The Company will require any successor, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to the Executive, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent as
the Company would have been required if no such succession had taken place.
Notwithstanding anything herein to the contrary, failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall
constitute a termination of this Agreement pursuant to Section 2.1 and entitle
the Executive (or Spouse) as the case may be, to immediate payment thereunder.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid that
executes and delivers the agreement provided for in this Section 4.3 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
4.4 MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and by the President or other authorized
officer of the Company. No waiver by either party hereto at any time of any
breach b the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provision or conditions at the same or at any
prior or subsequent time.
4.5 PAYMENTS. The Company may make any payments required by this
Agreement, when in the judgment of the Company the recipient is incapacitated by
reasons of physical or mental illness or infirmity, to the recipient directly,
or to the legal guardian of the recipient.
4.6 TAXES. The Company shall have the right to deduct from all
payments made under this Agreement, any federal, state or local income taxes
required by law to be withheld with respect to such payments.
4.7 VALIDITY. The interpretation, construction and performance of
this Agreement shall be governed by and construed and enforced in accordance
with the laws of the
<PAGE>
State of Texas without regard to the principle of conflicts of laws. The
invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
each of which shall remain in full force and effect.
4.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
4.9 EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for
purposes of this Agreement includes employment with any corporation in which the
Company has a direct or indirect ownership interest of 50% or more of the total
combined voting power of all classes of stock.
4.10 ARBITRATION. Any dispute or controversy arising out of or in
connection with this Agreement as to whether the Executive (or his spouse) is
entitled to a retirement (or survivor's) benefit, the amount thereof or other
matter shall be submitted to arbitration pursuant to the following procedure:
(a) Either party may demand such arbitration in writing after the
controversy arises, which demand shall include the name of the
arbitrator appointed by the party demanding arbitration, together with a
statement of the matter in controversy.
(b) Within 15 days after such demand, the other party shall name an
arbitrator, or in default thereof, such arbitrator shall be named by the
Arbitration Committee of the American Arbitration Association, and the
two arbitrators so selected shall name a third arbitrator within 15 days
or, in lieu of such agreement on a third arbitrator by the two
arbitrators so appointed a third arbitrator shall be appointed by the
Arbitration Committee of the American Arbitration Association.
(c) The Company shall bear all arbitration costs and expenses, including
without limitation any legal fees and expenses incurred by the Executive
(or his spouse) in connection with such arbitration procedure.
(d) The arbitration hearing shall be held at a site in Houston, Texas,
to be agreed to by a majority of the arbitrators on ten days' written
notice to the parties.
(e) The arbitration hearing shall be concluded within ten days unless
otherwise ordered by a majority of the arbitrators, and the award
thereon shall be made within ten days after the close of the submission
of evidence. An award rendered by a majority of the arbitrators
appointed pursuant to this Agreement shall be final and binding on all
parties to the proceeding, and judgment on such award may be entered by
either party in the highest court, state or federal, having
jurisdiction.
The parties stipulate that the provisions hereof shall be a complete
defense to any suit, action, or proceeding instituted in any federal, state, or
local court or before any administrative tribunal with respect to any
controversy or dispute arising under this Agreement, and which is arbitrable as
herein set forth. The arbitration provisions hereof shall, with respect to such
controversy or dispute,
<PAGE>
survive the termination of this Agreement.
4.11 AMENDMENT AND RESTATEMENT OF PRIOR EXECUTIVE RETIREMENT AGREEMENT.
The Company and the Executive hereby agree that concurrently with the execution
and delivery of this Agreement, this Agreement shall operate and be construed as
an amendment and restatement of that certain Executive Retirement Agreement,
dated May 1 , 1991 between the Company and the Executive (the "Prior
Agreement"), and effective with such delivery the terms and provisions of the
Prior Agreement shall be superseded by the terms and provisions of this
Agreement.
IN WITNESS WHEREOF the Company has caused this Agreement to be
executed by its duly authorized officer , and the Executive has executed this
Agreement effective for all purposes as of the date first written above.
TECH-SYM CORPORATION
Dated: 4/29/92 By: /s/ Wendell W. Gamel
Title: President
EXECUTIVE
Dated: 4/29/92 /s/Ray F. Thompson
Ray F. Thompson
EXHIBIT 10(w)
EXECUTIVE RETIREMENT AGREEMENT
(AS AMENDED AND RESTATED)
THIS AGREEMENT made and entered into as of April 30, 1992, between
TECH-SYM CORPORATION (the "Company") and 0. DALE BURRIS (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive has rendered outstanding service to the
Company over a period of years and the Executive's experience and knowledge of
the affairs of the Company and his reputation and contacts are extremely
valuable to the Company; and
WHEREAS, in recognition of the Executive's service to the Company
and to encourage the Executive's continued service, the Company is desirous of
offering him, in addition to his regular compensation and termination benefits,
certain retirement benefits;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and the Executive
hereby agree as follows:
1. BENEFITS
1.1 QUALIFICATIONS FOR RETIREMENT BENEFITS. The Executive (or his
surviving spouse, as the case may be) shall be entitled to receive the
retirement (or death) benefits provided by this Agreement following his
termination of employment with the Company unless his employment with the
Company is terminated (i) voluntarily by the Executive prior to his attaining
age 62, other than due to a Total Disability (as defined below), or (ii) by the
Company for Cause (as defined below). A termination of employment that would
entitle the Executive (or his spouse) to receive retirement (or death) benefits
as provided hereunder is hereafter referred to as a "Qualified Termination."
For the purposes of this Agreement, the Company shall have "Cause"
to terminate the Executive's employment hereunder only upon (i) the willful and
continued failure by the Executive to perform substantially the Executive's
duties with the Company, other than any such failure resulting from the
Executive's incapacity due to physical or mental illness, after a demand for
substantial performance is delivered to the Executive by the Board that
specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties or (ii) the
willful engaging by the Executive in gross misconduct materially and
demonstrably injurious to the company. For purposes of this paragraph, an act or
failure to act on the Executive's part shall be CONSIDERED "willful" if done or
omitted to be done by the Executive otherwise than in good faith and without
reasonable belief that the Executive's action or omission was in the best
interest of the Company.
For purposes of this Agreement, the term "Total Disability" means
that, in the opinion of the Executive's physician, the Executive has suffered a
mental or physical disability that is expected to be permanent or of long
continued duration and which prevents the Executive from continuing full-time
his duties with the Company or Subsidiary.
1.2 AMOUNT OF RETIREMENT BENEFITS. Following a Qualified Termination the
Executive shall receive, beginning with the later of the date of such Qualified
Termination or the Executive's 65th birthday (the "Commencement Date"), an
annual retirement benefit equal to 65% of the highest rate of annual base salary
in effect for the Executive with the Company at any time prior to the
Executive's 61st birthday (the "Base Salary") with such benefit payable on each
JANUARY 1 on OR after the Commencement Date on which he is living; provided,
however, that if the Executive's Commencement Date is other than on January 1,
the Executive shall receive a partial annual retirement benefit for the
remainder of the year in
<PAGE>
which such Commencement Date occurs in an amount equal to the full annual
benefit that will commence on the next January 1 but reduced by a fraction, the
numerator of which is the number of calendar months during such year that have
elapsed prior to the Commencement Date (with any partial month rounded up to a
complete month), and the denominator of which is 12 and such partial benefit
shall be paid to the Executive on the first day of the month coinciding with or
next following the Commencement Date; provided further, however, that:
(a) if the Executive's employment terminates due to a Qualified
Termination prior to his reaching age 65, the Executive may elect to
commence receiving his retirement benefits hereunder as of the date of
such Qualified Termination or any date thereafter, provided the
Executive is at least age 62 as of such Early Commencement Date, by
giving written notice of such election to the Company prior to such
Early Commencement Date and the amount of the annual retirement benefit
(and partial benefit, if any) payable hereunder shall be reduced by
1.39% for each full calendar month by which his Early Commencement Date
precedes his 65th birthday unless the Board, in its sole discretion,
elects to waive all or part of this reduction; and
(b) if on the Early Commencement Date the Executive is also
entitled to receive benefits under a separate Termination Agreement with
the Company dated effective as of May 1, 1991 (as the same may be
amended from time-to-time thereafter), then for purposes of subparagraph
(a) above the Executive's age as of the Early Commencement Date shall be
increased by (but not beyond age 65) the length of the Termination
Period (as defined in the Termination Agreement) remaining as of the
Early Commencement Date.
1.3 DEATH BENEFITS. If the Executive is married on his date of death and
such death occurs while he is an employee of the Company or on or after a
Qualified Termination, including one due to Total Disability, his surviving
spouse ("Spouse") shall receive an annual survivor's benefit hereunder in an
amount equal to 37 1/2% of the Executive's Base Salary. The Spouse's benefit
shall commence on the first day of the month coinciding with or next following
the Executive's date of death. Subsequent payment(s) of the Spouse's benefit
shall be made on each anniversary of the date such survivor payments first
began, provided that the Spouse is alive on such anniversary date, and shall
cease when either a total of 10 annual survivor benefit payments have been paid
to the Spouse hereunder or the Spouse dies, whichever occurs first.
1.4 LUMP SUMS. Notwithstanding Section 1.2 or Section 1.3 hereof to the
contrary, the Board, in its sole discretion, may at any time direct that the
actuarial present value of any retirement (or death) benefits accrued under this
Agreement, as determined in accordance with the actuarial factors and rates then
in effect for a lump sum payment (for an immediate or deferred annuity, as the
case may be) upon a qualified plan's termination under Pension Benefit Guaranty
Corporation regulations, be immediately paid to the Executive (or his spouse, as
the case may be) in a lump sum in cash (by check).
1.5 CONTINUED HEALTH BENEFITS. On and after a Qualified Termination, the
Executive shall be entitled to continue, for as long as he lives, his
participation and that of his qualified dependents, if any, in the Company's
group health plan for active employees in which the Executive participated
immediately prior to such Qualified Termination provided that the Executive
continues to pay the regular active employee premium, if any, required by such
plan; however, in the event that continued participation by the Executive in
such plan after the date of his Qualified Termination is not permitted by the
plan or such plan is terminated or benefits under such plan would be taxable to
the Executive, the Company shall either obtain comparable coverage under another
group health plan of the Company (and under which benefits to the Executive
would not be taxable) or, if there is none, an individual insurance policy
providing comparable benefits with the Executive paying an amount of the premium
therefor that is not greater than that which he would have been required to pay
from time to time under the Company's group health plan for active employees had
his participation continued in such plan and the Company paying the balance of
such cost and any taxes on any income the Executive would have as a result of
such Company-provided coverage.
<PAGE>
2. TERMINATION AND AMENDMENT
2.1 TERMINATION OR AMENDMENT. The Company, by action of the Board,
reserves the right to amend or terminate this Agreement for whatever reasons it
may deem appropriate as of the first day of the month following the delivery to
the Executive of written notice of such amendment or termination; however, no
such amendment shall impair, reduce or void the Executive's (or his Spouse's)
rights with respect to the continued health benefits provided by Section 1.5 or
the retirement (or death) benefits (whether or not in pay status) accrued under
this Agreement as of the date of such amendment and further, any termination of
this Agreement by the Company shall, notwithstanding anything herein to the
contrary, entitle the Executive (or his Spouse, as the case may be) to
immediately receive from the Company the lump sum present value of the accrued
retirement (or death) benefits as calculated in accordance with Section 1.4.
3. ADMINISTRATION
3.1 BOARD DECISION. The Board's decision whether or not to waive the
reduction in the amount of benefits payable in the event of the Executive's
Qualified Termination prior to reaching age 65, as provided in Section 1.2(a),
shall be totally discretionary with the Board and need not be based upon any
standard nor be consistent with any past practices and shall be conclusive on
all parties.
3.2 BENEFITS UNFUNDED. This Agreement is completely separate from and is
not a part of any other plan, qualified or nonqualified, of the Company and its
subsidiaries. The benefits payable hereunder, if any, are in addition to those
that may be provided to the Executive under any other plan, arrangement or
agreement. Further, the benefits payable hereunder are completely unfunded and
shall be payable by the Company solely out of its general assets and the
Executive and his spouse shall be unsecured, general creditors of the Company
with respect to such benefits; provided, however, the Company, in its
discretion, may establish a grantor or "rabbi" trust to pay all or part of the
benefits it may be required to pay under this Agreement, in which event this
Agreement shall be deemed to be a part of such trust agreement and the Executive
hereby waives, with respect to the assets of such rabbi trust, any preference he
may have under state law with respect to such assets and acknowledges that he
shall be a general, unsecured creditor of the Company with respect to the same.
4. MISCELLANEOUS
4.1 NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement shall be
construed as a contract of employment between the Company and the Executive, or
as a right of the Executive to be continued in the employment of the Company or
as a limitation of the right of the Company to discharge the Executive at any
time, with or without Cause.
4.2 ASSIGNMENT. The benefits payable under this Agreement may not be
assigned, alienated, pledged, transferred, sold, encumbered or hypothecated in
any manner by the Executive or his spouse. Any attempted sale, conveyance,
transfer, assignment, pledge or encumbrance of this Agreement or of such rights,
interest and benefits or the levy of any attachment or similar process thereupon
shall be null and void and without effect.
4.3 BINDING EFFECT. The Company will requiring any successor, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to the Executive, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent as
the Company would have been required if no such succession had taken place.
Notwithstanding anything herein to the contrary, failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall
constitute a termination of this Agreement pursuant to Section 2.1 and entitle
the Executive (or Spouse) as the case may be, to immediate payment thereunder.
As used in this Agreement, "Company"
<PAGE>
shall mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid that executes and delivers the agreement provided for
in this Section 4.3 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
4.4 MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and by the President or other authorized
officer of the Company. No waiver by either party hereto at any time of any
breach b the other party hereto of, or compliance with, any condition or
provision be performed by such other party shall be deemed a waiver of provision
or conditions at the same or at any prior or subsequent time.
4.5 PAYMENTS. The Company may make any payments required by this
Agreement, when in the judgment of the Company the recipient is incapacitated by
reasons of physical or mental illness or infirmity, to the recipient directly,
or to the legal guardian of the recipient.
4.6 TAXES. The Company shall have the right to deduct from all payments
made under this Agreement, any federal, state or local income taxes required by
law to be withheld with respect to such payments.
4.7 VALIDITY. The interpretation, construction and performance of this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Texas without regard to the principle of conflicts of laws.
The invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
each of which shall remain in full force and effect.
4.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
4.9 EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes
of this Agreement includes employment with any corporation in which the Company
has a direct or indirect ownership interest of 50% or more of the total combined
voting power of all classes of stock.
4.10 ARBITRATION. Any dispute or controversy arising out of or in
connection with this Agreement as to whether the Executive (or his spouse) is
entitled to a retirement (or survivor's) benefit, the amount thereof or other
matter shall be submitted to arbitration pursuant to the following procedure:
(a) Either party may demand such arbitration in writing after the
controversy arises, which demand shall include the name of the
arbitrator appointed by the party demanding arbitration, together with a
statement of the matter in controversy.
(b) Within 15 days after such demand, the other party shall name an
arbitrator, or in default thereof, such arbitrator shall be named by the
Arbitration Committee of the American Arbitration Association, and the
two arbitrators so selected shall name a third arbitrator within 15 days
or, in lieu of such agreement on a third arbitrator by the two
arbitrators so appointed a third arbitrator shall be appointed by the
Arbitration Committee of the American Arbitration Association.
(c) The Company shall bear all arbitration costs and expenses, including
without limitation any legal fees and expenses incurred by the
Executive(or his spouse) in connection with such arbitration procedure.
(d) The arbitration hearing shall be held at a site in Houston, Texas,
to be agreed to by a majority of the arbitrators on ten days' written
notice to the parties.
<PAGE>
(e) The arbitration hearing shall be concluded within ten days unless
otherwise ordered by a majority of the arbitrators, and the award
thereon shall be made within ten days after the close of the submission
of evidence. An award rendered by a majority of the arbitrators
appointed pursuant to this Agreement shall be final and binding on all
parties to the proceeding, and judgment on such award may be entered by
either party in the highest court, state or federal, having
jurisdiction.
The parties stipulate that the provisions hereof shall be a complete
defense to any suit, action, or proceeding instituted in any federal, state, or
local court or before any administrative tribunal with respect to any
controversy or dispute arising under this Agreement, and which is arbitrable as
herein set forth. The arbitration provisions hereof shall, with respect to such
controversy or dispute, survive the termination of this Agreement.
4.11 AMENDMENT AND RESTATEMENT OF PRIOR EXECUTIVE RETIREMENT AGREEMENT.
The Company and the Executive hereby agree that concurrently with the execution
and delivery of this Agreement, this Agreement shall operate and be construed as
an amendment and restatement of that certain Executive Retirement Agreement,
dated May 1, 1991 between the Company and the Executive (the "Prior Agreement"),
and effective with such delivery the terms and provisions of the Prior Agreement
shall be superseded by the terms and provisions of this Agreement.
IN WITNESS WHEREOF the Company has caused this Agreement to be
executed by its duly authorized officer , and the Executive has executed this
Agreement effective for all purposes as of the date first written above.
TECH-SYM CORPORATION
Dated: 4/29/92 By:/S/WENDELL W. GAMEL
Title: President
EXECUTIVE
Dated: 6/2/92 /S/O. DALE BURRIS
O. Dale Burris
EXHIBIT 10(x)
EXECUTIVE RETIREMENT AGREEMENT
(AS AMENDED AND RESTATED)
THIS AGREEMENT made and entered into as of April 30, 1992, between
TECH-SYM CORPORATION (the "Company") and J. RANKIN TIPPINS (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive has rendered outstanding service to the
Company over a period of years and the Executive's experience and knowledge of
the affairs of the Company and his reputation and contacts are extremely
valuable to the Company; and
WHEREAS, in recognition of the Executive's service to the Company
and to encourage the Executive's continued service, the Company is desirous of
offering him, in addition to his regular compensation and termination benefits,
certain retirement benefits;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and the Executive
hereby agree as follows:
1. BENEFITS
1.1 QUALIFICATIONS FOR RETIREMENT BENEFITS. The Executive (or his
surviving spouse, as the case may be) shall be entitled to receive the
retirement (or death) benefits provided by this Agreement following his
termination of employment with the Company unless his employment with the
Company is terminated (i) voluntarily by the Executive prior to his attaining
age 62, other than due to a Total Disability (as defined below), or (ii) by the
Company for Cause (as defined below). A termination of employment that would
entitle the Executive (or his spouse) to receive retirement (or death) benefits
as provided hereunder is hereafter referred to as a "Qualified Termination."
For the purposes of this Agreement, the Company shall have "Cause"
to terminate the Executive's employment hereunder only upon (i) the willful and
continued failure by the Executive to perform substantially the Executive's
duties with the Company, other than any such failure resulting from the
Executive's incapacity due to physical or mental illness, after a demand for
substantial performance is delivered to the Executive by the Board that
specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties or (ii) the
willful engaging by the Executive in gross misconduct materially and
demonstrably injurious to the Company. For purposes of this paragraph, an act or
failure to act on the Executive's part shall be considered to willful" if done
or omitted to be done by the Executive otherwise than in good faith and without
reasonable belief that the Executive's action or omission was in the best
interest of the Company.
For purposes of this Agreement, the term "Total Disability" means
that, in the opinion of the Executive's physician, the Executive has suffered a
mental or physical disability that is expected to be permanent or of long
continued duration and which prevents the Executive
<PAGE>
from continuing full-time his duties with the Company or Subsidiary.
1.2 AMOUNT OF RETIREMENT BENEFITS. Following a Qualified Termination the
Executive shall receive, beginning with the later of the date of such Qualified
Termination or the Executive's 65th birthday (the "Commencement Date"), an
annual retirement benefit equal to 65% of the highest rate of annual base salary
in effect for the Executive with the Company at any time prior to the
Executive's 61st birthday (the "Base Salary") with such benefit payable on each
January I on or after the Commencement Date on which he is living; provided,
however, that if the Executive's Commencement Date is other than on January 1,
the Executive shall receive a partial annual retirement benefit for the
remainder of the year in which such Commencement Date occurs in an amount equal
to the full annual benefit that will commence on the next January 1 but reduced
by a fraction, the numerator of which is the number of calendar months during
such year that have elapsed prior to the Commencement Date (with any partial
month rounded up to a complete month), and the denominator of which is 12 and
such partial benefit shall b-e paid to the Executive on the first day of the
month coinciding with or next following the Commencement Date; provided further,
however, that:
(a) if the Executive's employment terminates due to a Qualified
Termination prior to his reaching age 65, the Executive may elect to
commence receiving his retirement benefits hereunder as of the date of
such Qualified Termination or any date thereafter, provided the
Executive is at least age 62 as of such Early Commencement Date, by
giving written notice of such election to the Company prior to such
Early Commencement Date and the amount of the annual retirement benefit
(and partial benefit, if any) payable hereunder shall be reduced by
1.39% for each full calendar month by which his Early Commencement Date
precedes his 65th birthday unless the Board, in its sole discretion,
elects to waive all or part of this reduction; and
(b) if on the Early Commencement Date the Executive is also
entitled to receive benefits under a separate Termination Agreement with
the Company dated effective as of May 1, 1991 (as the same may be
amended from time-to-time thereafter), then for purposes of subparagraph
(a) above the Executive's age as of the Early Commencement Date shall be
increased by (but not beyond age 65) the length of the Termination
Period (as defined in the Termination Agreement) remaining as of the
Early Commencement Date.
1.3 DEATH BENEFITS. If the Executive is married on his date of death and
such death occurs while he is an employee of the Company or on or after a
Qualified Termination, including one due to Total Disability, his surviving
spouse ("Spouse") shall receive an annual survivor's benefit hereunder in an
amount equal to 37 1/2% of the Executive's Base Salary. The Spouse's benefit
shall commence on the first day of the month coinciding with or next following
the Executive's date of death. Subsequent payment(s) of the Spouse's benefit
shall be made on each anniversary of the date such survivor payments first
began, provided that the Spouse is alive on such anniversary date, and shall
cease when either a total of 10 annual survivor benefit payments have been paid
to the Spouse hereunder or the Spouse dies, whichever occurs first.
1.4 LUMP SUMS. Notwithstanding Section 1.2 or Section 1.3 hereof to the
contrary, the Board, in its sole discretion, may at any time direct that the
actuarial present value of any retirement (or death) benefits accrued under this
Agreement, as determined in accordance with the actuarial factors and rates then
in effect for a lump sum payment (for an immediate or
<PAGE>
deferred annuity, as the case may be) upon a qualified plan's termination under
Pension Benefit Guaranty Corporation regulations, be immediately paid to the
Executive (or his spouse, as the case may be) in a lump sum in cash (by check).
1.5 CONTINUED HEALTH BENEFITS. On and after a Qualified Termination, the
Executive shall be entitled to continue, for as long as he lives, his
participation and that of his qualified dependents, if any, in the Company's
group health plan for active employees in which the Executive participated
immediately prior to such Qualified Termination provided that the Executive
continues to pay the regular active employee premium, if any, required by such
plan; however, in the event that continued participation by the Executive in
such plan after the date of his Qualified Termination is not permitted by the
plan or such plan is terminated or benefits under such plan would be taxable to
the Executive, the Company shall either obtain comparable coverage under another
group health plan of the Company (and under which benefits to the Executive
would not be taxable) or, if there is none, an individual insurance policy
providing comparable benefits with the Executive paying an amount of the premium
therefor that is not greater than that which he would have been required to pay
from time to time under the Company's group health plan for active employees had
his participation continued in such plan and the Company paying the balance of
such cost and any taxes on any income the Executive would have as a result of
such Company-provided coverage.
2. TERMINATION AND AMENDMENT
2.1 TERMINATION OR AMENDMENT. The Company, by action of the Board,
reserves the right to amend or terminate this Agreement for whatever reasons it
may deem appropriate as of the first day of the month following the delivery to
the Executive of written notice of such amendment or termination; however, no
such amendment shall impair, reduce or void the Executive's (or his Spouse's)
rights with respect to the continued health benefits provided by Section 1.5 or
the retirement (or death) benefits (whether or not in pay status) accrued under
this Agreement as of the date of such amendment and further, any termination of
this Agreement by the Company shall, notwithstanding anything herein to the
contrary, entitle the Executive (or his Spouse, as the case may be) to
immediately receive from the Company the lump sum present value of the accrued
retirement (or death) benefits as calculated in accordance with Section 1.4.
3. ADMINISTRATION
3.1 BOARD DECISION. The Board's decision whether or not to waive the
reduction in the amount of benefits payable in the event of the Executive's
Qualified Termination prior to reaching age 65, as provided in Section 1.2(a),
shall be totally discretionary with the Board and need not be based upon any
standard nor be consistent with any past practices and shall be conclusive on
all parties.
3.2 BENEFITS UNFUNDED. This Agreement is completely separate from and is
not a part of any other plan, qualified or nonqualified, of the Company and its
subsidiaries. The benefits payable hereunder, if any, are in addition to those
that may be provided to the Executive under any other plan, arrangement or
agreement. Further, the benefits payable hereunder are completely unfunded and
shall be payable by the Company solely out of its general assets and the
Executive and his spouse shall be unsecured, general creditors of the Company
with respect to such benefits; provided, however, the Company, in its
discretion, may establish a grantor or "rabbi" trust to pay all or part of the
benefits it may be required to pay under this Agreement, in
<PAGE>
which event this Agreement shall be deemed to be a part of such trust agreement
and the Executive hereby waives, with respect to the assets of such rabbi trust,
any preference he may have under state law with respect to such assets and
acknowledges that he shall be a general, unsecured creditor of the Company with
respect to the same.
4. MISCELLANEOUS
4.1 NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement shall be
construed as a contract of employment between the Company and the Executive, or
as a right of the Executive to be continued in the employment of the Company or
as a limitation of the right of the Company to discharge the Executive at any
time, with or without Cause.
4.2 ASSIGNMENT. The benefits payable under this Agreement may not be
assigned, alienated, pledged, transferred, sold, encumbered or hypothecated in
any manner by the Executive or his spouse. Any attempted sale, conveyance,
transfer, assignment, pledge or encumbrance of this Agreement or of such rights,
interest and benefits or the levy of any attachment or similar process thereupon
shall be null and void and without effect.
4.3 BINDING EFFECT. The Company will require any successor, whether direct
or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to the Executive, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent as
the Company would have been required if no such succession had taken place.
Notwithstanding anything herein to the contrary, failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall
constitute a termination of this Agreement pursuant to Section 2.1 and entitle
the Executive (or Spouse) as the case may be, to immediate payment thereunder.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid that
executes and delivers the agreement provided for in this Section 4.3 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
4.4 MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and by the President or other authorized
officer of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provision or conditions at the same or at any
prior or subsequent time.
4.5 PAYMENTS. The Company may make any payments required by this
Agreement, when in the judgment of the Company the recipient is incapacitated by
reasons of physical or mental illness or infirmity, to the recipient directly,
or to the legal guardian of the recipient.
4.6 TAXES. The Company shall have the right to deduct from all payments
made under this Agreement, any federal, state or local income taxes required by
law to be withheld with respect to such payments.
<PAGE>
4.7 VALIDITY. The interpretation, construction and performance of this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Texas without regard to the principle of conflicts of laws.
The invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of a other provision of this Agreement,
each of which shall remain in full force and effect.
4.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
4.9 EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes
of this Agreement includes employment with any corporation in which the Company
has a direct or indirect ownership interest of 50% or more of the total combined
voting power of all classes of stock.
4.10 ARBITRATION. Any dispute or controversy arising out of or in
connection with this Agreement as to whether the Executive (or his spouse) is
entitled to a retirement (or survivor's) benefit, the amount thereof or other
matter shall be submitted to arbitration pursuant to the following procedure:
(a) Either party may demand such arbitration in writing after the
controversy arises, which demand shall include the name of the
arbitrator appointed by the party demanding arbitration, together with a
statement of the matter in controversy.
(b) Within 15 days after such demand, the other party shall name an
arbitrator, or in default thereof, such arbitrator shall be named by the
Arbitration Committee of the American Arbitration Association, and the
two arbitrators so selected shall name a third arbitrator within 15 days
or, in lieu of such agreement on a third arbitrator by the two
arbitrators so appointed a third arbitrator shall be appointed by the
Arbitration Committee of the American Arbitration Association.
(c) The Company shall bear all arbitration costs and expenses, including
without limitation any legal fees and expenses incurred by the
Executive(or his spouse) in connection with such arbitration procedure.
(d) The arbitration hearing shall be held at a site in Houston, Texas,
to be agreed to by a majority of the arbitrators on ten days' written
notice to the parties.
(e) The arbitration hearing shall be concluded within ten days unless
otherwise ordered by a majority of the arbitrators, and the award
thereon shall be made within ten days after the close of the submission
of evidence. An award rendered by a majority of the arbitrators
appointed pursuant to this Agreement shall be final and binding on all
parties to the proceeding, and judgment on such award may be entered by
either party in the highest court, state or federal, having
jurisdiction.
The parties stipulate that the provisions hereof shall be a complete
defense to any suit, action, or proceeding instituted in any federal, state, or
local court or before any administrative tribunal with respect to any
controversy or dispute arising under this Agreement,
<PAGE>
and which is arbitrable as herein set forth. The arbitration provisions hereof
shall, with respect to such controversy or dispute, survive the termination of
this Agreement.
4.11 AMENDMENT AND RESTATEMENT OF PRIOR EXECUTIVE RETIREMENT AGREEMENT.
The Company and the Executive hereby agree that concurrently with the execution
and delivery of this Agreement, this Agreement shall operate and be construed as
an amendment and restatement of that certain Executive Retirement Agreement,
dated July 1, 1991 between the Company and the Executive (the "Prior
Agreement"), and effective with such delivery the terms and provisions of the
Prior Agreement shall be superseded by the terms and provisions of this
Agreement.
IN WITNESS WHEREOF the Company has caused this Agreement to be
executed by its duly authorized officer, and the Executive has executed this
Agreement effective for all purposes as of the date first written above.
TECH-SYM CORPORATION
Dated: 4/29/92 By:/s/Wendell W. Gamel
Title: President
EXECUTIVE
Dated:4/29/92 /s/J. Rankin Tippins
J. RANKIN TIPPINS
SELECTED FINANCIAL DATA
(In thousands except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the Year:
Sales ........................................... $ 321,910 $246,487 $213,605 $199,248 $202,172
Costs and expenses .............................. 285,624 227,552 195,172 184,765 190,681
-----------------------------------------------------------------------
Income before income taxes,
minority interest and
extraordinary item ............................. 36,286 18,935 18,433 14,483 11,491
Provision for income taxes ...................... 12,157 5,900 6,318 5,234 3,952
Minority interest ............................... 754
-----------------------------------------------------------------------
Income before extraordinary item ................ 23,375 13,035 12,115 9,249 7,539
Extraordinary item, net of
applicable incomes taxes of $557 ............... (1,035)
-----------------------------------------------------------------------
Net income ...................................... $ 22,340* $ 13,035 $ 12,115 $ 9,249 $ 7,539
=======================================================================
Earnings per common share:
Income before
extraordinary item ............................ $ 3.68 $ 2.00 $ 1.86 $ 1.44 $ 1.16
Extraordinary item ............................. (.16)
-----------------------------------------------------------------------
Net Income ...................................... $ 3.52* $ 2.00 $ 1.86 $ 1.44 $ 1.16
=======================================================================
* Includes gain on sale of subsidiary stock of $13,758, net of taxes; and
write-off of goodwill of $3,627, which is not tax deductible.
At Year End:
Current assets .................................. $ 226,767 $178,318 $152,067 $135,719 $124,312
Current liabilities ............................. 91,032 74,561 56,284 35,634 30,012
Working capital ................................. 135,735 103,757 95,783 100,085 94,300
Property, plant and equipment - net ............. 48,917 42,469 39,993 35,047 36,641
Long-term debt .................................. 13,974 29,522 21,587 23,317 26,635
Total assets .................................... 323,279 265,026 225,803 194,732 181,077
Total liabilities and
minority interest .............................. 165,207 115,008 90,016 71,395 68,176
Shareholders' investment ........................ 158,072 150,018 135,787 123,337 112,901
</TABLE>
Amounts related to 1992 through 1994 were restated in 1995 to reflect the
acquisition of CogniSeis Development, Inc. in a transaction accounted for as a
pooling of interests.
Page 17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
[Bar Graph Plotted From Data in Table Below]
Working Capital
In Millions of Dollars
1992 94.3
1993 101.1
1994 95.8
1995 103.8
1996 135.7
At December 31, 1996, the Company's working capital was $135,735,000 as
compared to $103,757,000 at December 31, 1995. During 1996, the Company's
GeoScience subsidiary made a public offering of 24.7% of its common stock. The
offering provided the Company with a gain of $21,166,000 prior to taxes and
after expenses of the offering. For the year, the Company's cash, cash
equivalents and short-term investments increased $6,015,000 to $26,830,000 from
$20,815,000 in 1995. Due to rapid sales growth over the prior year, the Company
invested heavily in capital equipment and inventory to ensure its ability to
meet customer orders in a timely manner. As a result of the increased sales
volume, receivables, and unbilled revenue (work in process) on long-term
contracts increased. Continuing pressure for financing of purchases by
commercial customers, primarily for seismic exploration systems and radio
transmitters, also increased the Company's cash requirements.
In June 1996 due to favorable interest rate changes, the Company elected
to prepay the outstanding balance, $14,286,000, of the long-term unsecured
senior notes. During the year, the Company negotiated increases to several lines
of credit and at December 31, 1996, the Company had unused lines of credit which
aggregated approximately $38,000,000.
Because of the Company's $131,000,000 backlog and anticipated new business,
it is expected that additional investments will be required in capital equipment
and new facilities. Capital expenditures for land, buildings and improvements,
and machinery and equipment were $16,182,000, $8,875,000, and $10,231,000, for
1996, 1995, and 1994, respectively, and are expected to be approximately
$15,000,000 in 1997. The Company believes that the funds required for working
capital needs and capital equipment additions will come from available funds on
hand, unused lines of credit, long-term borrowings and capital equipment
financing. The Company has undertaken an aggressive effort to determine proper
inventory levels needed to support our customers' requirements, and anticipates
a reduction in inventory levels to free up additional cash. The Company is also
working to enhance its cash flow from operations by improving the average
collection time on receivables. The Company believes these actions, along with
the available sources of funds discussed, will provide the necessary liquidity
to meet the Company's growth strategy.
Page 18
<PAGE>
RESULTS OF OPERATIONS
[Bar Chart Plotted from Data In Table Below]
Debt To Capital Ratio
In Percent
1992 21.6
1993 17.7
1994 20.9
1995 28.1
1996 23.2
1996 IN COMPARISON WITH 1995: Sales for the year 1996 increased $75,423,000
or 31% as compared with 1995 while costs and expenses increased $75,611,000 or
33% before income taxes, minority interest, extraordinary item of $1,035,000,
net of tax, gain on sale of GeoScience Corporation (GeoScience) common stock of
$21,166,000, and write-off of goodwill associated with the acquisition of
Anarad, Inc. of $3,627,000. The increase in sales for the year 1996 was the
result of (i) greater sales in the communications area of $38,104,000 or 41%,
primarily due to strong international demand for microwave components and high
power broadcast equipment including sales related to the acquisition of
TELEFUNKEN Sendertechnik, GmbH, (TELEFUNKEN) effective January 1, 1996, and (ii)
increased sales in the seismic exploration area of $28,057,000 or 33%, primarily
equipment sales, resulting from acquisition systems, repair of seismic cables
and accessories, and sales of new seismic processing and geological
interpretation products. The sales of the defense systems group increased,
$10,579,000 or 17% mainly due to increased production on two major programs that
transitioned from the development stage into the production stage during the
year.
Cost of sales increased $50,342,000 or 31% while selling, general and
administrative expenses increased $17,659,000 or 34% as compared to 1995. The
increase in cost of sales compared favorably with the increase in sales for 1996
despite downward pressure on margins due to additional competition in the areas
of seismic exploration and defense and the additional costs of introducing new
products in both the seismic exploration and communications area.
The increase in selling and general and administrative expenses was
slightly higher than the increase in sales and was primarily due to the
additional costs associated with several acquired businesses including (i)
Photon Systems Ltd. in the geoscience area and (ii) TELEFUNKEN Sendertechnik
GmbH in the communications area. Company sponsored product development increased
$5,814,000 or 38% for the year 1996 primarily due to higher costs of product
development within the communications area. Interest expense was lower than the
prior year mainly due to the retirement of the higher interest rate senior
notes. Interest and other income decreased $1,921,000 or 47% from the prior year
primarily due to the lower interest income on long-term receivables in the
geoscience area and less interest earnings due to lower average cash balances
throughout the year. The tax rate for the year increased to 34.2% from 31.2% for
the prior year due to the requirement to provide for taxes at the statutory rate
on the gain on the sale of GeoScience common stock.
1995 IN COMPARISON WITH 1994: Sales for the year 1995 increased $32,882,000
or 15.4% as compared with 1994 while costs and expense increased $32,380,000 or
16.6% which resulted in a $502,000 or 2.7% increase in income before income
taxes. The increase in sales for the year 1995 was the result of (i) increased
sales in the seismic exploration area of $19,950,000 or 30.3% primarily due to a
new customer for marine seismic data acquisition systems, increased sales and
repair of seismic cables and accessories, and sales of new seismic processing
and geological interpretation products, as well as the acquisition of Photon
Systems Ltd., effective September 1, 1995 and (ii) greater sales in the
communications area of $13,865,000 or 17.5% primarily due to strong
international demand for microwave components, high power broadcast equipment
and meteorological radars. The sales of the defense systems group were
essentially the same as the previous year.
Page 19
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
<PAGE>
Cost of sales increased $25,224,000 or 18.6% while selling, general and
administrative expenses increased $5,090,000 or 10.8% as compared to 1994. The
increase in cost of sales was primarily due to the increase in sales for 1995 as
well as generally lower margins in all areas primarily due to (i) additional
competition in the areas of seismic exploration and defense, (ii) costs of
introducing new products in the areas of seismic exploration and communications,
and (iii) supplier quality problems in the seismic exploration area. The
increase in selling, general and administrative expenses was in line with the
increase in sales. Company sponsored product development increased $2,927,000 or
23.9% for the year 1995 and was heavily weighted to the seismic exploration
area. In addition, the high power broadcast equipment in the communications area
contributed to the increase. Interest expense increased $884,000 or 29.9% on a
42% increase in average borrowings for the period. Interest and other income
increased $1,745,000 or 74.5% for the period due to an increase in interest
income during 1995. The effective income tax rate decreased primarily due to
utilization of loss carry forwards on certain foreign operations, research and
development credits, and foreign investments credits.
PRODUCT LINE SALES
The following table sets forth the percentages for each of the last three
years of total sales contributed by each of the Company's product lines which
accounted for five percent of more of consolidated sales in any of such years:
Year Ended December 31,
----------------------------------
1996 1995 1994
----------------------------------
Communications .................... 41% 38% 37%
Geoscience ........................ 35% 35% 31%
Defense Systems ................... 22% 25% 29%
The majority of the Company's operations are located in the United
States.
Page 20
<PAGE>
OTHER INFORMATION
In 1996, the Company has continued its attempts to develop business through
product development and acquisitions which are not related to government defense
spending, and for the year, more than 70% of the Company's revenue was derived
from customers other than the U.S. Department of Defense. The Company's
communications and geoscience areas experienced rapid growth during 1996. The
acquisition of TELEFUNKEN provided the most significant increase to our sales
volume for the year. This acquisition also brings new technology to the Company
in the area of digital broadcast for radio and television markets. The Company
anticipates that it will continue to develop business which is unrelated to
defense, however, the Company is not averse to making acquisitions in the
defense area.
The Company's growth strategy in all areas of the Company's business may
require additional expenditures for company-sponsored product development and
investment in property, plant and equipment in order to maximize future
opportunities. Sales and earnings in the commercial market, especially those in
the seismic exploration area, are more volatile than under long-term military
programs. Management believes it has diversified the Company's markets to
minimize any adverse effects resulting from this volatility and intends to
continue to diversify the business as appropriate for the Company's future.
[Bar Chart Plotted from Data In Table Below]
Shareholders' Investment
In Millions of Dollars
1992 112.9
1993 123.3
1994 135.8
1995 150.0
1996 158.1
[Bar Chart Plotted from Data In Table Below]
Capital Expenditures
In Millions of Dollars
1992 7.53
1993 7.00
1994 10.23
1995 8.88
1996 16.26
Page 21
<PAGE>
Consolidated Statement of Income
(In thousands except per share amounts)
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------
1996 1995 1994
--------------------------------------------------
<S> <C> <C> <C>
Sales .................................................................. $ 321,910 $ 246,487 $ 213,605
--------------------------------------------------
Costs and expenses:
Cost of sales .................................................. 210,851 160,509 135,285
Selling, general and administrative expenses ................... 69,762 52,103 47,013
Company-sponsored product development .......................... 21,001 15,187 12,260
Interest expense ............................................... 3,715 3,840 2,956
Gain on issuance of subsidiary stock ........................... (21,166)
Goodwill impairment ............................................ 3,627
Interest and other income - net ................................ (2,166) (4,087) (2,342)
--------------------------------------------------
285,624 227,552 195,172
--------------------------------------------------
Income before income taxes, minority interest
and extraordinary item ....................................... 36,286 18,935 18,433
Provision for income taxes ............................................. 12,157 5,900 6,318
Minority interest ...................................................... 754
--------------------------------------------------
Income before extraordinary item ............................... 23,375 13,035 12,115
Extraordinary item:
Loss on early extinguishment of debt, net
of applicable income taxes of $557 ............................. 1,035
--------------------------------------------------
Net income ..................................................... $ 22,340 $ 13,035 $ 12,115
==================================================
Earnings per common share
Income before extraordinary item ............................... $ 3.68 $ 2.00 $ 1.86
Extraordinary item ............................................. (.16)
--------------------------------------------------
Net income ..................................................... $ 3.52 $ 2.00 $ 1.86
==================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 22
<PAGE>
Consolidated Balance Sheet
(In thousands except par value and number of shares)
<TABLE>
<CAPTION>
December 31,
-----------------------------
1996 1995
-----------------------------
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents .......................................................... $ 20,450 $ 20,715
Short-term investments ............................................................. 6,380 100
Receivables - net .................................................................. 62,217 54,199
Unbilled revenue ................................................................... 48,814 39,137
Inventories ........................................................................ 82,808 59,492
Other .............................................................................. 6,098 4,675
-----------------------------
Total current assets ............................................................... 226,767 178,318
Property, plant and equipment - net ........................................................ 48,917 42,469
Long-term receivables - net ................................................................ 16,695 10,567
Other assets ............................................................................... 30,900 33,672
-----------------------------
Total assets ....................................................................... $ 323,279 $ 265,026
=============================
Liabilities
Current liabilities:
Notes payable ...................................................................... $ 29,406 $ 24,237
Current maturities of long-term debt ............................................... 4,251 4,861
Accounts payable ................................................................... 21,115 14,480
Billings in excess of costs and estimated earnings
on uncompleted contracts ........................................................... 9,728 6,880
Taxes on income .................................................................... 5,201 1,366
Other accrued liabilities .......................................................... 21,331 22,737
-----------------------------
Total current liabilities .......................................................... 91,032 74,561
Long-term debt ............................................................................. 13,974 29,522
Other liabilities and deferred credits ..................................................... 43,022 10,925
-----------------------------
Total liabilities .................................................................. 148,028 115,008
-----------------------------
Minority interest .......................................................................... 17,179
-----------------------------
Commitments and contingencies (Note 12)
Shareholders' Investment
Preferred stock - authorized 2,000,000 shares,
without par value, none issued
Common stock - authorized 20,000,000 shares, $.10 par value;
issued 7,941,231 and 7,860,351 shares .............................................. 794 786
Additional capital ......................................................................... 39,753 38,486
Accumulated earnings ....................................................................... 145,195 122,855
Cumulative translation adjustments ......................................................... (911) (1,095)
Common stock held in treasury, at cost (1,905,400 and 1,307,592 shares) .................... (26,759) (11,014)
-----------------------------
Total shareholders' investment ..................................................... 158,072 150,018
-----------------------------
Total liabilities, minority interest and shareholders' investment .................. $ 323,279 $ 265,026
=============================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 23
<PAGE>
Consolidated Statement Of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------
1996 1995 1994
----------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ........................................................ $ 22,340 $ 13,035 $ 12,115
Adjustments to reconcile net income to net
cash provided by (used for) operating activities:
Depreciation and amortization ..................................... 13,938 11,887 9,277
Deferred income taxes ............................................. 6,232 (677) (3,233)
Gain on issuance of stock by subsidiary ........................... (21,166)
Gain on foreign currency denominated debt ......................... (600)
Loss on extinguishment of goodwill ................................ 3,627
Minority interest ................................................. 754
Change in operating assets and liabilities net of impact of purchase of
businesses:
Receivables ....................................................... 18,112 (5,277) (10,829)
Unbilled revenue .................................................. (9,677) (4,808) 3,602
Inventories ....................................................... (12,232) (16,392) (6,712)
Other assets ...................................................... (10,638) (9,349) (1,009)
Accounts payable .................................................. 5,696 (192) 5,526
Other accrued liabilities and billings in excess .................. (15,371) 3,363 (3,726)
Taxes on income ................................................... 3,835 (1,741) 980
Other - net ....................................................... 162 (1,069) 341
----------------------------------------
Net cash provided by (used for) operating activities .............. 5,012 (11,220) 6,332
----------------------------------------
Cash flows from investing activities:
Capital expenditures .............................................. (16,182) (8,875) (10,231)
Investment in grantor trust ....................................... (519) (518) (695)
Payments for purchases of businesses, net of cash acquired ........ 7,791 (5,942) (8,945)
Purchases of investment securities ................................ (6,280) (100)
Sales of investment securities .................................... 300 7,573
Other investing activities ........................................ 151 (23) (37)
----------------------------------------
Net cash used for investing activities ............................ (15,039) (15,158) (12,335)
----------------------------------------
Cash flows from financing activities:
Net borrowings under line of credit agreements .................... 8,416 10,730 10,533
Proceeds from long-term debt ...................................... 2,447 17,910 1,709
Payments on long-term debt ........................................ (24,197) (6,826) (3,438)
Proceeds from issuance of subsidiary common stock ................. 40,428
Proceeds from exercise of stock options ........................... 1,275 1,127 645
Acquisition of Tech-Sym and GeoScience treasury stock ............. (18,791) (801)
Other ............................................................. 184 69 130
----------------------------------------
Net cash provided by financing activities ......................... 9,762 23,010 8,778
----------------------------------------
Net increase (decrease) in cash and cash equivalents ...................... (265) (3,368) 2,775
Cash and cash equivalents at beginning of year .................... 20,715 24,083 21,308
----------------------------------------
Cash and cash equivalents at end of year .......................... $ 20,450 $ 20,715 $ 24,083
========================================
Cash flows from operating activities include:
Interest paid ..................................................... $ 3,895 $ 3,742 $ 2,749
========================================
Income taxes paid - net ........................................... $ 1,909 $ 7,441 $ 8,358
========================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 24
<PAGE>
Consolidated Statement of Changes in Shareholders' Investment
(In thousands)
<TABLE>
<CAPTION>
Common Stock Cumulative Treasury Stock
------------------ Additional Accumulated Translation ---------------
Shares Amount Capital Earnings Adjustments Shares Amount Total
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 ............... 7,772 $ 777 $ 36,734 $ 97,705 $(1,537) 1,289 $(10,342) $123,337
Net income for year ...................... 12,115 12,115
Issuance of common stock
for stock options .................... 26 3 442 445
Issuance of common stock
from treasury for stock options ...... 71 (22) 129 200
Currency translation adjustment .......... 373 373
Acquisition of treasury shares ........... 41 (801) (801)
Tax benefit associated
with stock options ................... 118 118
-----------------------------------------------------------------------------------
Balance, December 31, 1994 ............... 7,798 780 37,365 109,820 (1,164) 1,308 (11,014) 135,787
Net income for year ...................... 13,035 13,035
Issuance of common stock
for stock options .................... 62 6 853 859
Currency translation adjustment .......... 69 69
Tax benefit associated
with stock options ................... 268 268
-----------------------------------------------------------------------------------
Balance, December 31, 1995 ............... 7,860 786 38,486 122,855 (1,095) 1,308 (11,014) 150,018
Net income for year ...................... 22,340 22,340
Issuance of common stock
for stock options .................... 81 8 1,267 1,275
Currency translation adjustment .......... 184 184
Acquisition of treasury shares ........... 597 (15,745) (15,745)
-----------------------------------------------------------------------------------
Balance, December 31, 1996 ............... 7,941 $ 794 $ 39,753 $145,195 $ (911) 1,905 $(26,759) $158,072
===================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Description of Business and Significant Accounting Policies
THE BUSINESS: Tech-Sym Corporation (the Company or Tech-Sym) is a
diversified electronics engineering and manufacturing company primarily involved
in the design, development, and manufacture of products used for communications,
the exploration and production of hydrocarbons, and defense systems. The Company
operates through five principal subsidiaries from its headquarters in Houston,
Texas.
On May 17, 1996, GeoScience Corporation (GeoScience), a subsidiary of the
Company, completed a sale of 2,597,600 shares of its common stock at $17.00 per
share in an initial public offering. The sale generated net proceeds to the
Company of $40,428,000 and a gain of $21,166,000, reducing the Company's
ownership in GeoScience from 100.0 to 75.3 percent.
ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of certain assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the related reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Management believes that the estimates are reasonable.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of Tech-Sym Corporation and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
SHORT-TERM INVESTMENTS AND OTHER CASH EQUIVALENTS: Short-term investments
are carried at market value and have maturities of less than one year.
Short-term investments with original maturities of three months or less are
classified as cash equivalents by the Company. Included in short-term
investments at December 31, 1996 are short-term bonds in the amount of
$6,280,000, and at December 31, 1996 and 1995, short-term investments also
include certificates of deposit of $100,000 with original maturities greater
than three months.
REVENUE RECOGNITION: The Company recognizes revenue on contracts utilizing
the percentage of completion method, measured by the percentage of total costs
incurred to date to estimated total costs for each contract. Estimated losses on
contracts are provided for in full when they become apparent. Substantially all
unbilled revenue amounts are expected to be billed and collected within one year
in accordance with the terms of the related contracts.
The Company recognizes revenue from sales of products manufactured in
standard manufacturing operations, primarily seismic exploration systems, at the
time the products are shipped to the customer.
Revenue from the sale of hardware products and software licenses are
recognized at the time of shipment unless significant future obligations remain.
INVENTORIES: Inventories are valued at the lower of cost or market. Cost is
determined on the first-in, first-out or average cost method.
DEPRECIATION AND AMORTIZATION: Depreciation of plant and equipment is
provided using the straight-line method over the estimated useful lives of the
related assets. Major renewals and betterments are capitalized while minor
replacements, maintenance, and repairs which do not extend useful lives are
expensed. The cost and accumulated depreciation applicable to assets retired or
sold are removed from the respective accounts and the resultant gain or loss is
recognized at that time.
Page 26
<PAGE>
Intangible assets including purchased technology and goodwill are amortized
by the straight-line method over 5 to 15 years. Amortization expense was
$4,035,000, $2,295,000, and $645,000, in 1996, 1995, and 1994, respectively.
Intangible assets of $13,001,000, and $18,584,000 at December 31, 1996 and 1995,
respectively, are included in other assets and are net of accumulated
amortization of $11,099,000 and $7,701,000 at December 31, 1996 and 1995,
respectively.
LONG-LIVED ASSETS: In 1996, the Company adopted Statement of Financial
Accounting Standards No. 121 (FAS 121), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of". In accordance
with FAS 121, the Company reviews for the impairment of long-lived assets and
certain identifiable intangibles whenever events or changes in circumstance
indicate that the carrying amount of an asset may not be recoverable. Under FAS
121, an impairment loss is recognized when estimated cash flows expected to
result from the use of the asset and its eventual disposition is less than its
carrying amount.
At December 31, 1996, the Company, in accordance with FAS 121 wrote off the
unamortized goodwill of $3,627,000 associated with the acquisition of Anarad,
Inc. in 1994.
RESEARCH AND DEVELOPMENT: The Company performs research and development
under both company-sponsored programs and contracts with others, primarily the
U. S. Government. Costs related to company-sponsored research and development
for new products and major product improvements are expensed as incurred.
INCOME TAXES: The provision for income taxes is computed based on the
pretax income included in the consolidated statement of income. Research and
development tax credits are recorded to the extent allowable as a reduction of
the provision for federal income taxes in the year the qualified research and
development expenditures are incurred. The asset and liability approach is used
to recognize deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
bases of assets and liabilities.
The Company has not recorded a deferred income tax liability for additional
U.S. Federal income taxes that would result from the distribution of earnings of
its foreign subsidiaries, if they were actually repatriated. The Company intends
to indefinitely reinvest the undistributed earnings of its foreign subsidiaries.
Any federal income taxes on such earnings, if remitted, would generally be
offset by available foreign tax credits.
FOREIGN CURRENCY TRANSLATION: The Company's foreign subsidiaries use the
local currency as the functional currency. Accordingly, assets and liabilities
of the Company's foreign subsidiaries are translated using the exchange rates in
effect at the balance sheet date, while income and expenses are translated using
average rates. Translation adjustments are reported as a separate component of
shareholders' investment.
EARNINGS PER SHARE: Earnings per common share are based on the weighted
average number of shares outstanding during each year (6,350,000 for 1996,
6,522,000 for 1995, and 6,498,000 for 1994). The effect of common stock
equivalents (stock options) has not been significant during 1996, 1995, and
1994.
STOCK-BASED COMPENSATION: In 1996, the Company adopted Statement of
Financial Accounting Standard No. 123 (FAS 123), "Accounting for Stock-Based
Compensation". Upon adoption of FAS 123, the Company continued to measure
compensation expense for its stock-based employee compensation plan using the
intrinsic value method prescribed in APB No. 25, "Accounting for Stock Issued to
Employees", and has provided in Note 9 pro forma disclosures of the effect on
net income and earnings per share as if the fair value-based method prescribed
in FAS 123 had been applied in measuring compensation expense.
Page 27
<PAGE>
Note 2 - Acquisitions
OTHER RECENT PRONOUNCEMENTS: In 1996 Statement of Financial Accounting
Standards No. 125 (FAS 125), "Accounting for Transfer and Servicing of Financial
Assets and Extinguishment of Liabilities", was issued. FAS 125 is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996. The Company will adopt FAS 125 in 1997.
Adoption of FAS 125 is not expected to have a material effect on the Company's
financial position or operating results.
On January 1, 1996, the Company acquired, through its subsidiary,
Continental Electronics Corporation, all of the capital stock of TELEFUNKEN
Sendertechnik, GmbH (TELEFUNKEN), from Daimler-Benz Aerospace AG (DASA).
TELEFUNKEN is a designer and manufacturer of broadcast transmitters and antenna
systems worldwide. The transaction has been accounted for as a purchase.
The purchase price for the acquisition was denominated in Deutsche Marks
and aggregated $9,221,000 based on exchange rates at December 31, 1995. The
purchase price was comprised of $6,986,000 cash and a $2,235,000 note payable to
DASA, due January 31, 1997. The purchase price approximated the fair value of
the net assets acquired. The fair value of assets acuired and liablities assumed
at the acquisition date were $53,199,000 and 43,978,000, respectivily. Assets
aquired included approximately $14,000,000 in cash and cash equivalents. The
following unaudited pro forma consolidated results of operations have been
prepared as if the acquisition of TELEFUNKEN had occurred at the beginning of
fiscal 1995 (in thousands, except per share amounts):
Pro Forma Year Ended
December 31, 1995
--------------------
Net sales ................................... $ 267,437
Net loss .................................... (9,474)
Loss per common share ....................... (1.45)
On June 30, 1995, the Company acquired CogniSeis Development, Inc.
(CogniSeis), a company which develops, markets and licenses seismic processing
and geologic interpretation systems. In connection with the acquisition, the
Company issued a total of 737,781 of its shares in exchange for all of the
outstanding shares of common stock of CogniSeis. The transaction has been
accounted for as a pooling of interests, and accordingly, the consolidated
financial statements for the year ended December 31, 1994 were restated during
1995 to include CogniSeis.
Separate results of operations for the periods prior to the merger with
CogniSeis are as follows (in thousands):
Unaudited
Six Months Ended Year Ended
June 30, December 31,
--------------------------------------
1995 1994
--------------------------------------
Sales
Tech-Sym ................... $ 108,273 $ 197,593
CogniSeis .................. 9,716 16,012
--------------------------------------
Combined ................ $ 117,989 $ 213,605
======================================
Net income (loss)
Tech-Sym ................... $ 6,406 $ 12,235
CogniSeis .................. (46) (120)
--------------------------------------
Combined ................ $ 6,360 $ 12,115
======================================
No adjustments were necessary in order to conform the accounting
policies of CogniSeis to the Company's accounting policies.
Page 28
<PAGE>
During 1995 and 1994, the Company made several other acquisitions which
were insignificant individually and in the aggregate.
Note 3 - Receivables and Unbilled Revenue
Receivables and unbilled revenue are summarized as follows (in thousands):
December 31,
-----------------
1996 1995
-----------------
Current receivables:
Commercial, less allowance for losses of $1,980 and $1,231 $53,898 $44,709
U.S. Government .......................................... 8,319 9,490
-----------------
$62,217 $54,199
=================
Unbilled revenue:
Commercial ............................................... $15,378 $12,718
U.S. Government .......................................... 33,436 26,419
-----------------
$48,814 $39,137
=================
Long-term receivables:
Commercial, less allowance for losses of $419 and $606 ... $16,695 $10,567
=================
U.S. Government receivables and unbilled revenue include amounts from prime
contractors with the U.S. Government where the Company is the subcontractor.
Long-term receivables include notes receivable on seismic equipment sales,
in the amounts of $9,899,000 and $3,290,000, at December 31, 1996 and 1995,
respectively, generally secured by equipment sold. Also included in long-term
receivables are notes receivable on the sale of real estate lots in the amounts
of $6,796,000 and $7,277,000 at December 31, 1996 and 1995, respectively,
secured by real estate sold. Long-term receivables bear interest rates between
6.72% and 13% which are due to the Company in monthly installments.
Note 4 - Inventories
Inventories, which consist principally of electronic parts, are summarized
as follows (in thousands):
December 31,
---------------------------
1996 1995
---------------------------
Raw materials .................... $28,613 $26,570
Work in process .................. 30,680 24,500
Finished goods ................... 23,515 8,422
---------------------------
$82,808 $59,492
===========================
Note 5 - Property, Plant and Equipment
The components of property, plant and equipment are summarized as follows
(dollars in thousands):
December 31,
----------------------
Estimated
Lives 1996 1995
---------------------------------
At cost:
Land, buildings and improvements .. 10-35 $ 30,286 $ 28,779
Machinery and equipment ........... 3-12 86,249 75,363
----------------------
116,535 104,142
Less accumulated depreciation ............. (67,618) (61,673)
----------------------
$ 48,917 $ 42,469
======================
Page 29
<PAGE>
Note 6 - Notes Payable
At December 31, 1996 and 1995, the Company had unused short-term lines of
credit aggregating approximately $38,000,000 and $32,500,000, respectively.
Loans under these lines may be made in such amounts and at such maturities and
interest rates as are offered by the banks and accepted by the Company at the
time of each borrowing. The lines of credit contain certain restrictive
covenants, the more significant of which require that the Company and its
designated principal subsidiaries (a) maintain defined tangible net worth of at
least $75,000,000; (b) restrict the aggregate of certain future payments,
including those for dividends and acquisitions of treasury shares, to 75% of the
Company's cumulative post-December 31, 1988 consolidated net income (at December
31, 1996 accumulated earnings of $29,610,000 was available for dividends and
acquisition of treasury shares); (c) limit future borrowings and related pledges
of assets to certain levels; and (d) limit future dispositions (except in the
ordinary course of business) of assets, including stock of domestic
subsidiaries, such that the aggregate (greater of book or fair market) value
during any twelve month period does not exceed 20% of defined tangible net
worth. At December 31, 1996 and 1995, borrowings under these lines totaled
$29,406,000 and $24,237,000, respectively. Interest rates on such borrowings
outstanding at December 31, 1996 and 1995 were 8.25% to 9.25%, and 8.5%,
respectively.
Note 7 - Long-term Debt
The components of long-term debt are summarized as follows (dollars in
thousands):
<TABLE>
<CAPTION>
December 31,
---------------------------
1996 1995
---------------------------
<S> <C> <C>
Notes to insurance group:
Senior unsecured notes at 10.28% interest payable semi-annually;
paid in full in 1996 ......................................................... $ $ 17,143
Other obligations:
Unsecured note (denominated in Deutsche Marks) at Frankfurt interbank
overnight rate (4.365% at December 31, 1996)
interest payable quarterly; due September 30, 2000 ........................ 6,344 6,986
Real estate mortgage notes, due in monthly installments with interest
at 8.0% to 9.9% maturing at various dates through 2009 .................... 5,126 5,204
Term loan, unsecured, with interest at 5.3% maturing in 2000 ................. 2,501 2,825
Notes secured by equipment, due in monthly installments with interest at
4.125% to 11.5% maturing at various dates
through 2002 .............................................................. 1,176 1,369
Other ................................................................................ 3,078 856
---------------------------
18,225 34,383
Less current maturities .............................................................. (4,251) (4,861)
---------------------------
$ 13,974 $ 29,522
===========================
</TABLE>
The unsecured note contains certain restrictive covenants similar to those
for the lines of credit.
Aggregate maturities of long-term debt due after 1997 are $2,722,000 in
1998, $2,688,000 in 1999, $6,322,000 in 2000, $714,000 in 2001, $382,000 in
2002, and $1,146,000 thereafter. In 1996, the Company elected to retire the
senior unsecured notes with the proceeds received in connection with the
GeoScience public offering. The Company paid a premium of $1,035,000 net of
income taxes due to early extinguishment of this debt, which has been recorded
as an extraordinary charge to operations.
At December 31, 1996, $1,047,000 of machinery and equipment and $9,328,000
of land, buildings and improvements were pledged as collateral to secure various
long-term debt obligations.
Page 30
<PAGE>
Note 8 - Income Taxes
The components of income before income taxes , minority interest and
extraordinary item were as follows (in thousands):
Year Ended December 31,
--------------------------------
1996 1995 1994
--------------------------------
Domestic ........................... $ 33,999 $ 17,029 $ 16,527
Foreign ............................ 2,287 1,906 1,906
--------------------------------
$ 36,286 $ 18,935 $ 18,433
================================
The provision for income taxes consists of the following (in thousands):
Year Ended December 31,
--------------------------------
1996 1995 1994
--------------------------------
Current tax expense
U.S. Federal ....................... $ 4,592 $ 5,658 $ 8,812
State .............................. 399 506 376
Foreign ............................ 934 413 363
--------------------------------
Total Current ...................... $ 5,925 $ 6,577 $ 9,551
--------------------------------
Deferred tax expense
U.S. Federal ....................... 7,334 (861) (3,408)
Foreign ............................ (1,102) 184 175
--------------------------------
Total deferred ..................... 6,232 (677) (3,233)
--------------------------------
Total provision .................... $ 12,157 $ 5,900 $ 6,318
================================
The income tax expense for 1996, 1995, and 1994 resulted in effective tax
rates of 34.2%, 31.2%, and 34.3%, respectively. The reasons for the differences
between these effective tax rates and the U.S. statutory rate of 35% are as
follows (in thousands):
Year Ended December 31,
--------------------------------
1996 1995 1994
--------------------------------
Federal taxes on income at statutory rates . $ 12,436 $ 6,627 $ 6,452
State income taxes - net ................... 260 329 244
Foreign Sales Corporation benefit .......... (946) (590) (472)
Non-deductible intangible amortization ..... 1,827 256 195
Change in valuation allowance .............. (653) (64) (81)
Other - net ................................ (767) (658) (20)
--------------------------------
$ 12,157 $ 5,900 $ 6,318
================================
Page 31
<PAGE>
Deferred tax (liabilities) assets at December 31, 1996 and 1995 are
comprised of the following (in thousands):
December 31,
-----------------------
1996 1995
-----------------------
Deferred tax liabilities
Depreciation ................................ $ 315 $ 1,204
Installment sales ........................... 750 743
Equity in earnings of affiliate .............. 1,049 776
Basis difference in affiliate stock ......... 7,632
Intangible amortization ..................... 232
Other ....................................... 657 883
-----------------------
Gross deferred tax liabilities .............. 10,635 3,606
-----------------------
Deferred tax assets
Deferred compensation ....................... (2,106) (1,825)
Compensatory absences accruals .............. (835) (825)
Inventory accounting and valuation allowance (1,894) (1,469)
Net operating loss carry forwards ........... (1,144) (667)
Accrued losses on contracts ................. (86) (90)
Product warranty and related accruals ....... (368) (300)
Receivable valuation allowances ............. (758) (620)
Percent of completion ....................... (1,092) (764)
Intangible amortization ..................... (419)
Research and experimentation tax credit ..... (979) (957)
Other ....................................... (653) (585)
-----------------------
Gross deferred tax assets ................... (9,915) (8,521)
Deferred tax asset valuation allowance ...... 579 1,232
-----------------------
$ 1,299 $(3,683)
========================
A deferred tax asset valuation allowance is provided to reduce deferred tax
assets to a level which, more likely than not, will be realized. These amounts
at December 31, 1996 relate to research and development tax credits which are
expected to expire unused due to change in ownership limitations.
Net operating loss carry forwards incurred by the company's foreign
subsidiaries total $3,034,000. Of this amount, $1,529,000 will carry forward
indefinitely, $178,000 will expire in the year 2002, and the remaining
$1,327,000 will expire in the year 2003. Based on recent foreign earnings
trends, management determined in 1996 that these net operating loss carry
forwards will be fully utilized and reduced by $653,000 the Company's deferred
tax valuation allowance accordingly.
Deferred tax assets of $5,240,000 and $2,668,000 were included in other
current assets at December 31, 1996 and 1995, respectively. As a result of an
acquisition, deferred tax assets at December 31, 1996 include an addition of
$1,250,000 which did not impact the provision for income taxes. Deferred tax
liabilities of $6,539,000 were included in other liabilities at December 31,
1996. Deferred tax assets of $1,015,000 were included in other long-term assets
at December 31, 1995.
Note 9 - Stock Option Plans
STOCK OPTION PLANS: The Company's 1980 Stock Option Plan (the 1980 Plan)
provided for the granting of options and stock appreciation rights (SARs) in
tandem therewith to key employees of the Company for the purchase of the
Company's common shares. Each option under the 1980 Plan was granted at an
exercise price of 100% of fair market value at date of grant. The options expire
ten years from date of grant and were exercisable 20% after one year, with an
additional 20% exercisable each six months thereafter. All of the outstanding
options covering a total of 600 shares at December 31, 1996, were exercisable at
a price of $10.625 per share. At December 31, 1996 and 1995, there were 600 and
29,300 shares, respectively, of the Company's common stock reserved for issuance
under the 1980 Plan. The 1980 Plan expired by its terms on December 31, 1989,
and no additional options can be granted under the plan.
Page 32
<PAGE>
The Company's 1990 Stock Option Plan (the 1990 Plan) covers 858,000 shares
of common stock and provides for the granting of stock options and/or SARs to
key employees of the Company and to the members of the Board of Directors who
are not employees of the Company. Shares granted and subsequently cancelled are
available for future grants.
Options covering a total of 753,500 shares and related SARs have been
granted to key employees under the 1990 Plan. Each such option has an exercise
price of 100% of the fair market value on the date of grant and has a term of
ten years. The options are exercisable 20% after one year, with an additional
20% exercisable each six months thereafter. At December 31, 1996, options to
employees under the 1990 Plan covering a total of 271,496 shares were
exercisable.
The 1990 Plan provides for the automatic grant of stock options and SARs to
nonemployee Directors. Each nonemployee Director of the Company was granted
effective February 15, 1990, options and SARs with respect to 10,000 shares of
common stock, and each optionee was required to surrender for cancellation
options previously granted by the Company with respect to the lesser of 10,000
shares or the number of shares covered by such previously granted options. The
1990 Plan further provides that newly-elected nonemployee Directors will
automatically receive options and SARs covering 10,000 shares at the time of his
or her election and that each nonemployee Director will automatically receive
options and SARs covering 1,000 shares each year at the time of his or her
reelection to the Board. Options covering a total of 131,000 shares and SARs
have been granted to nonemployee Directors under the 1990 Plan. These options
and SARs have an exercise price of $8.125 to $34.625, the fair market price on
the date of grant, have a ten year term and are exercisable in full after one
year. At December 31, 1996, options to nonemployee Directors under the 1990 Plan
covering a total of 104,000 shares were exercisable.
The SARs granted under the 1980 and 1990 Stock Option Plans cannot be
exercised without the consent of the Compensation Committee of the Board of
Directors except in certain defined instances involving a change in control of
the Company. Since any exercises of SARs are expected to be allowed by the
Committee only in extenuating circumstances, any liability for benefits derived
therefrom will be recognized only at the time the Committee gives its approval
to such exercises. No SARs have been exercised to date.
Changes in outstanding options under the 1980 and 1990 Plan during 1994,
1995, and 1996 were as follows:
Exercise price Weighted average
Shares per share price per share
-------------------------------------------
Outstanding, December 31, 1993 .. 472,130 8.000-20.000 $ 13.49
Options granted ............... 85,050 21.000-21.750 21.30
Options cancelled ............. (4,300) 10.625-15.750 13.61
Options exercised ............. (46,060) 8.000-20.000 9.33
-------------------------------------------
Outstanding, December 31, 1994 .. 506,820 8.000-21.750 14.78
Options granted ............... 17,000 25.125-30.375 28.21
Options cancelled ............. (9,320) 15.750-21.750 20.04
Options exercised ............. (50,700) 8.000-21.750 14.43
-------------------------------------------
Outstanding, December 31, 1995 .. 463,800 8.000-30.375 15.20
Options granted ............... 237,000 34.625-35.875 34.64
Options cancelled ............. (2,000) 21.00-34.625 27.89
Options exercised ............. (68,780) 8.000-21.750 15.27
-------------------------------------------
Outstanding, December 31, 1996 .. 630,020 8.000-35.875 22.47
===========================================
There were 600, 29,000 and 42,250 exercisable options under the 1980 Plan
at December 31, 1996, 1995 and 1994, respectively. There were 375,496, 237,480
and 235,050 exercisable options under the 1990 Plan at December 31, 1996, 1995
and 1994, respectively.
Page 33
<PAGE>
In 1996, the Company's substantially owned subsidiary, GeoScience,
established the 1996 Equity Incentive Plan (the "1996 Plan") which covers
1,500,000 shares of GeoScience common stock and permits the granting of any or
all of the following types of awards: stock appreciation rights, stock options,
restricted stock, dividend equivalents, performance units, automatic Director
options, phantom shares, limited stock appreciation rights ("LSARs"), bonus
stock and cash tax rights.
Options covering a total of 336,300 GeoScience shares plus 1,000 phantom
shares of GeoScience have been granted to key employees of GeoScience, Tech-Sym,
and affiliates under the 1996 Plan. Each such option has an exercise price of
100% of the fair market value on the date of grant and has a term of ten years.
The options are exercisable 25% after one year, with an additional 25%
exercisable each year thereafter. At December 31, 1996, no options to employees
under the 1996 Plan were exercisable. The phantom shares awarded were payable
two years after award in cash and/or stock at GeoScience's option, and were
forfeited in early 1997.
Director Options covering a total of 115,000 GeoScience shares, including
those subject to approval and ratification by GeoScience's stockholders, have
been granted under the 1996 Plan. These options have exercise prices of $12.00
to $17.55 per share, have a ten year life and are exercisable in full after six
months. At December 31, 1996, Director Options under the 1996 Plan covering a
total of 45,000 shares were exercisable.
The following table summarizes significant ranges of Tech-Sym's outstanding
and exercisable options at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Range of Remaining Exercise Exercise
Exercise Prices Shares Life in Years Price Shares Price
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 8.00-12.00 95,250 3.5 $8.10 95,250 $8.10
12.01-18.00 215,900 6.3 15.39 215,900 15.39
18.01-27.00 72,870 7.8 21.71 54,946 21.88
27.01-35.875 246,000 9.5 34.47 10,000 30.38
</TABLE>
The weighted average fair value at date of grant for options granted during
1996, 1995 and 1994 was $14.09, $14.71 and $11.14 per option, respectively. The
fair value of options at date of grant was estimated using the Black-Scholes
model with the following weighted average assumptions:
1996 1995 1994
---------------------------------------
Expected life ........ 6.3 years 8 years 5.7 years
Interest rate ........ 6.18% 5.99% 7.10%
Volatility ........... 28.77% 37.15% 38.79%
Dividend yield ....... 0% 0% 0%
The weighted average fair value at date of grant for options granted at
GeoScience during 1996 was $7.43. The fair value of the options granted was
estimated using the Black-Sholes model with the following assumptions for
expected life, interest rate, volatility and dividend yield, respectively, 6.5
years, 6.58%, 51% and 0%.
Stock based compensation costs would have reduced pretax income by
$1,259,000 (including $550,000 attributable to GeoScience) in 1996 and $81,000
in 1995. The after tax and per share impact for 1996 and 1995,
respectively, was $818,000 and $53,000 and $.18 and $.05 if the fair value of
the options granted in that year had been recognized as compensation expense on
a straight-line basis over the vesting period of the grant. The pro forma effect
on net income for 1996 and 1995 is not representative of the pro forma effect on
net income in future years because it does not take into consideration pro forma
compensation expense related to grants made prior to 1995.
Page 34
<PAGE>
NONEMPLOYEE DIRECTOR OPTIONS: During the period from December 8, 1983 to
December 31, 1989, options covering a total of 115,000 shares were granted to
nonemployee Directors by the Board of Directors and approved by the shareholders
of the Company. Each option was granted at an exercise price of 100% of the fair
market value at date of grant. Each option is exercisable in whole or in part
until ten years after the date of grant except that, absent a change in control
of the Company, each option terminates seven months after the option holder
ceases to be a Director for any reason except retirement, death, or disability.
At December 31, 1996 and 1995, there were 15,000 and 27,000 shares,
respectively, of the Company's common stock reserved for issuance upon exercise
of the nonemployee Director stock options at an exercise price per share of
$10.875 to $13.25.
The weighted average exercise price and remaining life of the nonemployee
Director stock options at December 31, 1996, was $10.875 and one year,
respectively.
Note 10 - Shareholders' Investment
SHAREHOLDER RIGHTS PLAN: The Board of Directors adopted a Shareholder
Rights Plan in 1988 which in certain limited circumstances would permit
shareholders to purchase securities at prices which would be substantially below
market value.
STOCK REPURCHASES: The Company's Board of Directors has authorized the
Company to repurchase shares of its common stock through open market purchases
or privately negotiated transactions. Since 1987 the Company has repurchased an
aggregate of 1,834,797 shares related to these authorizations. The unreissued
shares are held by the Company and accounted for using the treasury stock
method. The Company is authorized to repurchase up to 152,800 additional shares
under transactions approved by the Board.
Note 11 - Benefit Plans
The Company has a defined contribution retirement plan covering
substantially all employees. The annual Company contribution and administrative
costs of the plan were $2,126,000 for 1996, $1,898,000 for 1995, and $1,912,000
for 1994. The Company's policy is to fund these retirement costs currently.
The Company has executive retirement agreements with certain executive
officers of the Company and a nonemployee directors' retirement plan for those
directors that have never been employees of the Company. The executive
retirement agreements generally provide for the payment of specified amounts in
the event of retirement at or after age 62, total and permanent disability,
death, or termination of employment by the Company without cause. The
nonemployee directors' retirement plan generally provides for the payment of
specified amounts upon retirement on or after age 65 or upon termination of
service due to disability or death. The Company has segregated certain assets in
a grantor trust to meet these obligations, but those assets are available to
creditors of the Company in the event of its bankruptcy or insolvency. These
assets aggregating $5,638,000 and $4,887,000 at December 31, 1996 and 1995,
respectively, are included other assets.
Page 35
<PAGE>
The costs for the executive retirement agreements and the nonemployee
directors' retirement plan in 1996, 1995, and 1994 were $813,000, $855,000, and
$695,000, respectively. The status of the retirement plans at December 31 was as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------------------------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation ................................... $ 6,182 $ 5,650
================================
Accumulated benefit obligation .............................. $ 6,188 $ 5,669
================================
Projected benefit obligation ................................ $ 6,483 $ 5,903
Plan assets at fair value
--------------------------------
Projected benefit obligation in excess of plan assets ....... 6,483 5,903
Unrecognized net gain ............................................... (507) (427)
Unrecognized prior service cost ..................................... (87) (147)
Unrecognized net obligation at transition ........................... (405) (486)
Adjustment to recognize minimum liability ........................... 704 826
================================
Net deferred pension cost ........................................... $ 6,188 $ 5,669
================================
</TABLE>
The projected benefit obligation was developed assuming a beginning
discount rate of 7.5% in 1996 and 9% in 1995 and 1994 and an annual rate of
increase in compensation levels of 5% in 1996, 1995, and 1994.
A foreign subsidiary which was acquired in January 1996 sponsored a
noncontributory defined benefit pension plan for employees that provides
benefits based upon specified percentages of the participants' salaries and the
number of months of continuous service as of the date of retirement. In
accordance with the purchase agreement, the Company was required to assume the
pension liability for the employees which were active at the acquisition date.
Additionally, the Company received cash and assumed pension liabilities related
to non-active employees at the acquisition date pending transfer thereof to the
seller at a later date. At December 31, 1996, the pension liability for
non-active employees of approximately $7,000,000 was included in long-term
liabilities.
The cost for the foreign subsidiary's noncontributory defined benefit
pension plan was $342,000 in 1996. The status of the plan at December 31, 1996
is as follows for active employees (in thousands):
1996
-------
Actuarial present value of:
Vested benefit obligation ................................. $ 3,539
=======
Accumulated benefit obligation ............................ $ 3,806
=======
Projected benefit obligation .............................. $ 4,578
=======
Plan assets at fair value
Projected benefit obligation in excess of plan assets ..... 4,578
Unrecognized net gain ............................................. (772)
-------
Net deferred pension cost ......................................... $ 3,806
=======
The projected benefit obligation was developed assuming a beginning
discount rate of 6.75% and an annual rate of increase in compensation levels of
3%.
Page 36
<PAGE>
Note 12 - Commitments and Contingencies
CONCENTRATION OF CREDIT RISK: Financial instruments which potentially
subject the Company to concentrations of credit risk are primarily cash and cash
equivalents, short-term investments, receivables, unbilled revenue, and
long-term receivables. The Company places its cash, cash equivalents, and
marketable securities investments in investment grade, short-term debt
instruments and limits the amount of credit exposure to any one commercial
issuer. A portion of the Company's receivables and unbilled revenue are
concentrated with the U.S. Government. Concentrations of credit risk with
respect to the receivables, unbilled revenue, and long-term receivables from
customers other than the U.S. Government are limited due to the large number of
customers in the Company's customer base, and their dispersion across different
industries and geographic areas.
FINANCIAL INSTRUMENTS: The Company enters into various types of financial
instruments in the normal course of business. The Company does not hold or issue
financial instruments for trading purposes nor does it hold interest rate,
leveraged, or other types of derivative financial instruments.
Fair values for financial instruments are based on quoted market prices.
The amounts ultimately realized upon settlement of these financial instruments
will depend on actual market conditions during the remaining life of the
instruments. Fair values of cash and cash equivalents, short-term investments,
receivables, unbilled revenue, long-term receivables, accounts payable, other
accrued liabilities, notes payable, and long-term debt reflected in the December
31, 1996 and 1995 balance sheet approximate carrying value at that date.
LEASE COMMITMENTS: The Company leases manufacturing and other facilities
under certain long-term agreements which expire at various dates to 2002. Total
rentals charged to operations under such operating leases for years 1996, 1995,
and 1994 were $1,721,000, $2,439,000, and $2,039,000, respectively.
Future minimum rental commitments under all noncancellable operating
leases in effect at December 31, 1996 total $3,831,000 as follows: 1997 -
$1,532,000; 1998 - $731,000; 1999 - $611,000; 2000 - $609,000; 2001 - $197,000
and $151,000 thereafter.
LITIGATION: In the ordinary course of business, the Company is involved in
various pending or threatened legal actions. While management is unable to
predict the ultimate outcome of these actions, it believes that any ultimate
liability arising from these actions will not have a material adverse effect on
the Company's consolidated financial position, operating results, or cash flows.
Page 37
<PAGE>
CONTINGENCIES: The Company is contingently liable for notes aggregating
$2,559,000 at December 31, 1996, which were sold to a financial institution
during 1995. During 1996, the Company did not sell any notes receivable to the
financial institution under this arrangement and has not experienced any
material financial losses to date under this arrangement. During 1995, the
Company sold $14,168,000 of notes receivable to the financial institution under
this arrangement.
Note 13 - Other Financial Information
Sales under contracts and subcontracts where the U.S. Government is the
ultimate customer accounted for approximately 29%, 32%, and 38% of the Company's
sales in 1996, 1995, and 1994, respectively.
Foreign sales (primarily exports from the U.S.) as a percentage of
total sales are summarized by geographic area as follows:
1996 1995 1994
---------------------------
Europe .................... 32.7% 17.8% 17.9%
Far East .................. 9.7 18.7 12.2
Middle East ............... 4.0 4.8 1.8
Other areas ............... 5.8 5.1 7.1
---------------------------
52.2% 46.4% 39.0%
===========================
Other accrued liabilities comprised the following (in thousands):
December 31,
--------------------
1996 1995
--------------------
Commissions payable ................................ $ 2,840 $ 3,046
Incentive bonus accruals ........................... 2,159 1,727
Vacation accruals .................................. 2,970 2,670
Accrued product warranty and related reserves ...... 878 1,594
Accrued interest payable ........................... 454 843
Other .............................................. 12,030 12,857
--------------------
$21,331 $22,737
====================
Other long-term liabilities and deferred credits include deferred gains on
installment sales contracts of $3,575,000 and $3,753,000 at December 31, 1996
and 1995, respectively.
Retained earnings of the Company's foreign subsidiaries totaled
$14,828,000 and $2,611,000 at December 31, 1996 and 1995, respectively.
Page 38
<PAGE>
Note 14 - Quarterly Financial Information (Unaudited)
The following is a summary of unaudited quarterly financial data for the
years 1996 and 1995
(in thousands except per share amounts):
Earnings
Per
Gross Net Common
Sales Profit Income Share
-------------------------------------------------
March 31, 1996 ........ $ 71,685 $ 26,191 $ 2,279 $ .35
June 30, 1996 ......... 71,184 26,197 15,016 2.28
September 30, 1996 .... 88,110 27,947 3,297 .53
December 31, 1996 ..... 90,931 30,724 1,748 .29
-------------------------------------------------
$321,910 $111,059 $22,340* $ 3.52*
=================================================
March 31, 1995 ........ $ 52,794 $ 17,731 $ 1,158 $ .18
June 30, 1995 ......... 59,101 19,924 3,328 .51
September 30, 1995 .... 65,260 23,130 3,903 .60
December 31, 1995 ..... 69,332 25,193 4,646 .71
-------------------------------------------------
$246,487 $ 85,978 $13,035 $ 2.00
=================================================
As more fully discussed in Note 2, on June 30, 1995, the Company acquired
CogniSeis Development, Inc., in a business combination accounted for as a
pooling of interests. Accordingly, the Company's quarterly financial information
for the quarter ended March 31, 1995 has been restated to present the results of
the combined companies.
During the quarter ended December 31,1995, sales, gross profit and earnings
per common share amounts for the quarters ended March 31, 1995 and June 30, 1995
were restated from previously reported amounts to reflect the deferral of
revenue recognition on certain sales where the right of exchange for credit
existed. As a result, net income was reduced by $1,457,000 or $.22 per common
share, for the quarter ended March 31, 1995 and by $385,000, or $.06 per common
share, for the quarter ended June 30, 1995. Net income for the quarter ended
December 31, 1995 increased $613,000 or $.09 per common share as a result of the
recognition of a portion of such deferrals in the fourth quarter. The remaining
deferred revenue totaling approximately $4,000,000 was recognized during 1996.
* Includes gain on sale of subsidiary stock of $13,758, net of taxes; write-off
of goodwill of $3,627, which is not tax deductible; and premium cost on the
early extinguishment of debt of $1,035, net of taxes.
Page 39
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders
and Board of Directors
of Tech-Sym Corporation:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of cash flows and of changes in shareholders'
investment present fairly, in all material respects, the financial position of
Tech-Sym Corporation and its subsidiaries at December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
February 20, 1997
40
<PAGE>
CORPORATE INFORMATION
Stockholder and Market Information
Comparative Common Stock Data
1995 1996
---------------- ---------------
Quarter High Low High Low
- ------- ------ ------ ------ ------
First 23 5/8 21 1/8 36 3/4 28 3/8
Second 28 1/2 23 1/8 40 28 1/8
Third 30 5/8 26 3/8 30 1/8 23
Fourth 31 7/8 28 1/8 29 7/8 26
No dividends were paid on such stock in 1995 or 1996, and the Company has no
present intention of paying dividends.
Record number of holders of Common Stock at February 28, 1997: 1,986.
CORPORATE OFFICE
10500 Westoffice Drive, Suite 200
Houston, Texas 77042-5391
Telephone 713/785-7790
FAX 713/780-3524
TRANSFER AGENT AND REGISTRAR
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
Telephone 212/509-4000
FAX 212/509-5150
STOCK EXCHANGE LISTING
Tech-Sym Common Stock is listed on the New York Stock Exchange (Stock Symbol:
TSY)
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1201 Louisiana, Suite 2900
Houston, Texas 77002
Stockholders are invited to attend the Tech-Sym Corporation Annual Meeting of
Stockholders which will be held at 10:00 am on Tuesday, April 29, 1997, in the
Omni Ballroom of the Westchase Hilton and Towers at 9999 Westheimer, Houston,
Texas. A Proxy Statement will be sent to stockholders of record as of March 14,
1997.
41
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Set forth below is certain information with respect to each of the Registrant's
subsidiaries:
State of Registrant's
SUBSIDIARY DOMICILE OWNERSHIP
-------- ------------
Anarad, Inc. (California) 100%
Continental Electronics Corporation (Nevada) 100%
Continental-Lensa S.A. (Chile) 75%
TELEFUNKEN Sendertechnik GmbH (Germany) 100%
Enterprise Electronics Corporation (Alabama) 100%
GeoScience Corporation (Nevada) 77.02%
CogniSeis Development, Inc. (Delaware) 100%
Cognieis Development
(Canada), Inc. (Canada) 100%
GRP Software Ltd. (Canada) 100%
Photon Systems (UK) Ltd. (UK) 100%
Photon Systems, Inc. (Texas) 100%
Photon Systems, Ltd. (Canada) 100%
Symtronix Corporation (Nevada) 100%
Syntron, Inc. (Delaware) 100%
Syntron Europe Limited (Scotland) 100%
Syntron Asia Pte. Ltd. (Singapore) 100%
Synton (UK) Limited (Scotland)
Zhong Hai Syntron(Tianjin)
Geophysical Cable Co., Ltd. (China) 50%
Lake Investment Company (Arizona) 100%
Concho Valley Country Club, Inc. (Arizona) 100%
Livco Water Company (Arizona) 100%
Metric Systems Corporation (Florida) 100%
Paratech Corporation (Delaware) 100%
TreadMarks(TM), L.L.C. Texas 50%
T-S Holding Corporation (Texas) 100%
(formerly All Woods/Schroeder, Inc.)
Tech-Sym Management Corporation (Delaware) 100%
Tech-Sym International (FSC), Inc. (Barbados) 100%
TRAK Communications Inc. (Delaware) 100%
Daden-Anthony Associates, Inc. (Nevada) 100%
Tecom Industries, Incorporated (California) 100%
Tecom Limited (Scotland) 100%
TRAK Ceramics Inc. (Delaware) 100%
TRAK Microwave Corporation (Delaware) 100%
TRAK Microwave Limited (Scotland) 100%
The Registrant has certain other subsidiaries which are not named above. Such
subsidiaries, when considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary.
EXHIBIT 22
POWER OF ATTORNEY
Each of the undersigned, a director of Tech-Sym Corporation (the
"Company"), does hereby constitute and appoint Wendell W. Gamel and Ray F.
Thompson his true and lawful attorney-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, to
sign the Company's Form 10-K Annual Report pursuant to Section 13 of the
Securities Exchange Act of 1934 for the fiscal year ended December 31, 1996, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto the
attorneys-in-fact full power and authority to sign such documents on behalf of
the undersigned and to make such filing, as fully to all intents and purposes as
the undersigned might or could do in person, hereby ratifying and confirming all
that the attorneys-in-fact, or his substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: February 20, 1997
TECH-SYM CORPORATION
/S/W. L. CREECH /S/ROBERT E. MOORE
W. L. Creech Robert E. Moore
Director Director
/S/MICHAEL C. FORREST /S/COY J. SCRIBNER
Michael C. Forrest Coy J. Scribner
Director Director
/S/A. A. GALLOTTA, JR. /S/CHARLES K. WATT
A. A. Gallotta, Jr. Charles K. Watt
Director Director
/S/CHRISTOPHER C. KRAFT, JR.
Christopher C. Kraft, Jr.
Director
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (SEC File No. 2-77162, 33-38208, 33-61846, 33-56535), and
in the Prospectus constituting part of the Registration Statement on Form S-3
(SEC File No. 33-56533), of Tech-Sym Corporation of our report dated February
20, 1997, appearing on page 40 of the Annual Report to Shareholders which is
incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears on page S-2 of this Form 10-K.
PRICE WATERHOUSE LLP
Houston, Texas
March 28, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM TECH-SYM'S ANNUAL REPORT FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 20,450
<SECURITIES> 6,380
<RECEIVABLES> 62,217
<ALLOWANCES> 0
<INVENTORY> 82,808
<CURRENT-ASSETS> 226,767
<PP&E> 48,917
<DEPRECIATION> 0
<TOTAL-ASSETS> 323,279
<CURRENT-LIABILITIES> 91,032
<BONDS> 0
0
0
<COMMON> 794
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 323,279
<SALES> 321,910
<TOTAL-REVENUES> 0
<CGS> 210,851
<TOTAL-COSTS> 285,624
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,715
<INCOME-PRETAX> 36,286
<INCOME-TAX> 12,157
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 1,035
<CHANGES> 0
<NET-INCOME> 22,340
<EPS-PRIMARY> 3.52
<EPS-DILUTED> 0
</TABLE>
