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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, 1999 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 (ZIP CODE)
OFFICES)
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
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Common Stock (Par Value $.10 per New York Stock Exchange
share)
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 be 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 17, 2000, 5,795,951 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 $96,929,915
(based on the March 17, 2000, closing sales price of $19.0625 published in THE
WALL STREET JOURNAL reports of New York Exchange Composite Transactions).
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TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business............................. 1
General.............................. 1
Description of Business Segments..... 1
Measurement of Segment Profit or Loss
and Segment Assets................. 2
Factors Management Used to Identify
Reportable Segments................ 2
Discontinued Operations.............. 2
Business Strategy.................... 3
Products and Services................ 3
Product Development.................. 5
Marketing and Customers.............. 5
Government Contracts................. 6
Manufacturing and Raw Materials...... 7
Competition and Business
Conditions......................... 7
Backlog.............................. 7
Intellectual Property................ 7
Regulatory Matters................... 8
Employees............................ 8
Geographical Information............. 8
Year 2000 Compliance................. 8
Item 2. Properties........................... 8
Item 3. Legal Proceedings.................... 9
Item 4. Submission of Matters to a Vote of
Security Holders................... 9
PART II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder
Matters............................ 10
Item 6. Selected Financial Data.............. 11
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 12
Item 7A. Quantitative and Qualitative
Disclosures about Market Risk...... 18
Item 8. Financial Statements and
Supplementary Data................. 18
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure............... 18
PART III
Item 10. Directors and Executive Officers of
the Registrant..................... 19
Item 11. Director and Executive
Compensation....................... 22
Item 12. Security Ownership of Certain
Beneficial Owners and Management... 29
Item 13. Certain Relationships and Related
Transactions....................... 30
PART IV
Item 14. Exhibits, Reports on Form 8-K and
Financial Statement Schedules...... 31
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PART I
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 as of the date hereof, no assurance
can be given that such expectations will prove to be correct. Readers are
cautioned not to place undue reliance on these forward-looking statements.
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
the communications industry and levels of government expenditures on defense
equipment and services, (iii) the Company's reliance on certain significant
customers, (iv) risk associated with a significant amount of foreign sales, (v)
the credit risk to the Company from certain sales arrangements, (vi) the risk of
fluctuations in future operating results, (vii) the risks of excess or
inadequate inventory levels, (viii) the risks of changing government regulations
or statutes, (ix) the risks of general market conditions, competition and
pricing, (x) the risk of continued access to capital markets and commercial bank
financing on favorable terms and (xi) the risk that planned dispositions of
operating units may not be completed in accordance with expectations or under
acceptable terms. The Company undertakes no obligation to revise or publicly
release the results of any revision to these forward-looking statements. 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.
ITEM 1. BUSINESS
GENERAL
Tech-Sym Corporation (the "Company" or "Registrant" or "Tech-Sym") is
a diversified electronics engineering and manufacturing company primarily
involved in the design, development and manufacture of products used for
communications, defense and weather information.
The Company, incorporated in Nevada in 1944, is headquartered in Houston,
Texas and has three reportable segments: communications, defense systems and
weather information systems.
DESCRIPTION OF BUSINESS SEGMENTS
The Company's communications segment designs, develops and manufactures
microwave components, magnetic materials, ceramic substrates and antennas for
wireless terrestrial and satellite voice and data communications, precision
timing and positioning equipment and electronics defense products. Its worldwide
customers include manufacturers of communication systems, defense electronics
systems and aerospace navigation and communications systems.
The Company's defense systems segment designs, develops and manufactures a
variety of electronic systems that includes electronic controls, guided
missiles/munitions electronics, monitoring and power distribution systems for
naval applications, systems for training and evaluating military pilots and
crews and cargo handling and aerial delivery systems. Its primary customers are
United States and foreign government agencies, government contractors and
aerospace companies.
The Company's weather information systems segment designs, develops and
manufactures meteorological information systems that detect, analyze and display
information on weather patterns and severe weather events through the use of
sophisticated Doppler radar and computer processing. Its worldwide
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customers include meteorology and hydrology departments of universities and
government agencies, military organizations, television stations and commercial
organizations that sell weather data.
The Company's "other" segment represents 2% of total 1999 sales and
consists of the activity of CrossLink, Inc. ("CrossLink"), which was acquired
in July 1999. The Company acquired 51% ownership of CrossLink, a Boulder,
Colorado based company providing advanced wireless data products and services,
for $2,000,000 in cash. CrossLink's primary products include both hardware and
software for wireless data transfer systems. These products provide customers
with the ability to track and monitor assets in a host of applications.
MEASUREMENT OF SEGMENT PROFIT OR LOSS AND SEGMENT ASSETS
The Company evaluates the performance of its segments and allocates
resources based on sales and profit or loss from operations before income taxes.
The accounting policies of the reportable segments are the same as those
described in the summary of Significant Accounting Policies in Note 1 of Notes
to Consolidated Financial Statements. There are currently no intersegment sales
or transfers.
FACTORS MANAGEMENT USED TO IDENTIFY REPORTABLE SEGMENTS
The Company's reportable segments are business units that design,
manufacture and distribute distinct products, with distinct customer bases and
are each managed separately.
DISCONTINUED OPERATIONS
During June 1998, the Company adopted a plan to sell its businesses
involved in real estate development, manufacture of air monitoring products and
manufacture of radio and television broadcast equipment, and during December
1998, the Company adopted a plan to sell its majority owned subsidiary,
GeoScience Corporation ("GeoScience"). The effective dates of June 30, 1998,
and December 31, 1998, are the respective measurement dates referred to when
discussing the results of operations of these businesses elsewhere in this
report. The discontinued businesses are reported as discontinued operations for
all periods presented. All discontinued businesses, except the radio and
television broadcast equipment manufacturer, Continental Electronics Corporation
("Continental"), had been sold, or otherwise disposed of, as of December 31,
1999.
The presentation of the discontinued operations includes segregation of the
operating results and the results of disposition of the discontinued businesses
in the Consolidated Statement of Operations for the years ended December 31,
1999, 1998 and 1997. The net assets of the discontinued operations are
segregated at December 31, 1999, and 1998 in the Consolidated Balance Sheet and
in the Consolidated Statement of Cash Flows at December 31, 1999, 1998 and 1997.
See (i) Management's Discussion and Analysis of Financial Condition and
Results of Operations and (ii) Note 2 of Notes to Consolidated Financial
Statements.
Continental, headquartered in Dallas, Texas, with subsidiaries in Germany
and Chile, designs and manufactures radio frequency transmitters and other
energy sources used for radio and television broadcasts, communications, radar
systems and special applications. Continental's customers include the
commercial radio and television broadcast industry, private and government
agencies that operate radio stations, government agencies that engage in
scientific research, industrial organizations whose applications include radio
frequency heating and government defense agencies. Continental's business
strategy focuses on the development of technologically advanced products
primarily for the radio and television broadcast industry. The Company is in the
process of liquidating the operations of its German subsidiary and is marketing
its product lines to potential purchasers.
Continental's products include (i) high power radio transmitters for use in
"short" and "medium" wave frequency bands, (ii) lower power transmitters
that operate at the radio broadcast frequencies commonly referred to as "AM"
and "FM", (iii) high power energy sources and amplifiers for use in scientific
projects, (iv) low frequency/very low frequency transmitters for communications
from shore to ship and/or submarines, (v) over-the-horizon radar transmitters
for the U.S. Air Force and high frequency
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communications transmitters for various branches of the military, (vi)
television broadcast transmitters and antennas and (vii) digital audio broadcast
("DAB") equipment.
Continental conducts its manufacturing operations from owned facilities
comprising 158,000 square feet on a 14 acre tract and 84,000 square feet of
leased facilities located in Dallas, Texas, a leased facility comprising 700
square feet in Grass Valley, California, owned facilities of 15,000 square feet
in Santiago, Chile, and leased facilities of approximately 7,000 square feet in
Berlin, Germany. At December 31, 1999, Continental employed approximately 266
persons worldwide, of whom 126 were employed in the United States.
BUSINESS STRATEGY
The Company's business strategy focuses on the development of
technologically advanced products within each business segment. The Company
attempts to develop business through growth of its internal product lines and
through the acquisition of product lines, technology and businesses that
complement internal product development. During December 1999, the Company
retained Quarterdeck Investment Partners, Inc., to assist in evaluating
strategic options for the Company. The possible alternatives include
recapitalization, merger, privatization and sale of all or part of the Company.
PRODUCTS AND SERVICES
COMMUNICATIONS
The Company's communications products include microwave components and
subsystems, magnetic materials, ceramic substrates, timing and positioning
equipment, antennas and electronic defense products which are designed and
manufactured by its subsidiary, TRAK Communications Inc. ("TRAK"). TRAK
conducts its operations through four principal facilities located in: (i) Tampa,
Florida; (ii) Dundee, Scotland; (iii) Chatsworth, California; and (iv)
Hagerstown, Maryland.
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, ferrite isolators and
circulators, filters 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 their systems. The
Company also produces high performance and compact Global Positioning System
("GPS") filter amplifiers for use in airborne and terrestrial navigation
guidance systems.
Magnetic materials and ceramic substrates manufactured by TRAK for radio
frequency and microwave applications are used internally in its other products,
as well as, sold to outside customers for use in many of the same markets and
applications as microwave components and subsystems discussed above.
The Company's products include 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 GPS satellites.
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
used by the military for jamming enemy radars. Telemetry tracking systems and
microprocessor-based antenna controllers are sold to the U.S. and foreign
governments for use on military test and training ranges. The Company designs
and produces antennas for air and land mobile satellite communications systems.
In the wireless local loop market, the Company provides high performance base
stations and home subscriber antennas for telephony systems. Its antennas are
also embedded in spread spectrum wireless systems used by merchandisers to read
bar codes and transfer information to and between computer information systems.
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DEFENSE SYSTEMS
The principal defense systems products include airborne training and
instrumentation systems, maritime surveillance radars, shipboard electronics,
guided missiles/munitions electronics and mechanical systems which are designed
and manufactured by the Company's subsidiary, Metric Systems Corporation
("Metric"), located in Fort Walton Beach, Florida. The Company also provides
support personnel and services to military training ranges.
The airborne training systems consist of instrumentation 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
most current version of the pod contains a high-performance GPS receiver
integrated with other state-of-the-art electronics to collect precise time and
position information, along with weapons data from the aircraft during simulated
combat. The data inputs are recorded in the pods and can be transmitted to
identical pods on other aircraft, allowing training exercises to be conducted
without being tethered to a fixed range location. The data can be downloaded or
sent via telemetry to ground instrumentation equipment for display, debriefing
and subsequent analysis by the participants. This equipment reduces the cost of
operating Air Combat Maneuvering Instrumentation ("ACMI") ranges since manned
radar tracking sites and other equipment are unnecessary. The Company also
produces a family of advanced threat radar emitters and simulators that operate
with the instrumentation pods to simulate a realistic combat environment for
pilot training.
The Company's shipboard electronic products are used on a variety of
platforms. Electronic control, monitoring and power distribution equipment
designed and produced by the Company has been used since the late 1970's on the
U.S. Navy's Vertical Launching Systems ("VLS") deployed on the Ticonderoga
(CG-47), Spruance (DD-963) and Arleigh Burke (DDG-51) classes of cruisers and
destroyers. Similar systems have also been sold to the governments of Canada,
Japan, Australia, New Zealand, Germany, Spain, South Korea and the Netherlands.
The Company also supplies shipboard product subsystems for the AN/SQQ-89 Surface
Anti-Submarine Warfare Combat System, firing mechanisms for the Tomahawk and
Trident missiles and cable assemblies for the AEGIS weapon system. The Company's
shipboard electrical switchgear, generator control, weapons control and internal
communications equipment also have been installed on several classes of U.S.
Navy and foreign military ships.
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 also has 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. The Company's maritime
surveillance radars are used for tracking low altitude aircraft and surface
vessels to provide safety at sea and coastal defense data. The Company provides
integration support for the U.S. Army Joint Surveillance and Target Attack Radar
System ("JSTARS") and Common Ground Station ("CGS"). The Company also
designs and manufactures electronic kits to upgrade "dumb" munitions with
"smart" electronic packages providing increased accuracy and extended range
capabilities for the users.
WEATHER INFORMATION SYSTEMS
The primary products of the Company's weather information systems segment
are high performance Doppler radars coupled with sophisticated data processing
systems. Both the hardware and software products are designed and produced by
the Company's subsidiary, Enterprise Electronics Corporation ("EEC"), located
in Enterprise, Alabama.
Doppler radar measures both reflectivity and velocity of rain droplets and
is used to detect, quantify and display precipitation intensity, velocity and
turbulence. The radar is extremely helpful in analyzing
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severe weather conditions such as hurricanes, tornadoes, thunderstorms and wind
shear. The addition of EEC's dual polarization feature provides information on
the size and shape of echo producing droplets, resulting in more accurate
calculations of precipitation levels and in the identification of hail.
The processing systems known as RADSYS 3000 TM, Weather Windows TM and
EDGE TM (Enterprise Doppler Graphics Environment) provide meteorologists with
automated radar control as well as enhanced meteorological displays and image
processing capabilities. Both Weather Windows TM and EDGE TM processing
systems can be utilized with WARN TM (Wide Area Radar Network) to generate a
countrywide or large geographic area weather composite. WARN TM is capable of
accepting data from a large number of radars for inclusion into the composite
picture thereby providing very accurate weather information for an entire
region.
A unique software utility program developed by EEC for meteorologists,
known as IMAGE TM (Integrated Meteorological Analysis and Graphics
Environment), provides displays of weather features such as wind field vectors
and the growth and decay of storm cells. The various processing systems can be
run on a range of computer platforms 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 Compaq Alpha station
computers.
Meteorological and hydrological agencies (international and domestic),
television broadcasters and the U.S. military use the Company's Doppler weather
radars to forecast weather and provide severe weather warnings. EEC's weather
radars with dual polarization and precision Doppler processing, coupled with
IMAGE TM and a full-featured computer based control and display subsystem,
provide meteorologists and forecasters with a large amount of critical weather
information. Historically, the majority of the Company's sales of weather
information systems have been in foreign countries. More than 700 of the
Company's weather radars have been installed in more than 65 countries.
OTHER SEGMENT
In July 1999, the Company acquired 51% ownership of CrossLink, Inc., a
Boulder, Colorado based company providing advanced wireless data products and
services. CrossLink's primary products include both hardware and software for
wireless data transfer systems. These products provide customers with the
ability to track and monitor assets in a wide host of applications.
PRODUCT DEVELOPMENT
Each of the Company's business segments is actively engaged in the design
and development of additional products and enhancements to their existing
products. Information concerning the amount spent during each of the last three
years on company-sponsored product development activities is set forth in the
Company's "Consolidated Statement of Operations" on page F-3. Certain of the
Company's product development activities are undertaken pursuant to government
contracts and subcontracts. The costs incurred for product research and
development under these contracts are charged to cost of sales rather than to
product development costs.
MARKETING AND CUSTOMERS
The Company's products primarily are marketed directly by the sales forces
of each of its business segments, with the assistance of domestic and
international independent technical sales representatives who receive
commissions on their sales. The principal customers for the communications
products include the United States Government (primarily the armed services),
communication and satellite equipment manufacturers, foreign government
agencies, research organizations and government contractors. The defense systems
products are sold to the armed forces of the United States and foreign
governments, government contractors and aircraft manufacturers. The principal
customers of the weather information systems segment include meteorology and
hydrology departments of universities and government agencies, military
organizations and television stations.
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The following table sets forth the percentage of total sales contributed by
each of the Company's business segments for each of the last three years:
YEAR ENDED DECEMBER 31,
------------------------
SEGMENT 1999 1998 1997
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Communications....................... 49% 48% 47%
Defense Systems...................... 35% 41% 42%
Weather Information Systems.......... 14% 11% 11%
Other................................ 2%
The Company's largest customer is the United States Government, its
agencies and contractors, whose purchases accounted for approximately 45% of the
Company's consolidated sales in 1999. The Department of Defense and its
contractors account for approximately 40% of that amount. The loss of these
government contracts would have a material adverse effect on the Company.
Contracts with or for the United States Government and most prime contractors
may be terminated by the government at will. See "Government Contracts" below.
The Company has not historically experienced any significant problems with
contract cancellations.
During fiscal 1999, 1998 and 1997, approximately 36%, 31% and 25%,
respectively, of the Company's revenue was derived from sales to customers
outside the United States. See Note 13 of Notes to Consolidated Financial
Statements for geographic distribution of revenue.
GOVERNMENT CONTRACTS
Sales under contracts with or for the United States Government accounted
for approximately $70,068,000 or 45% of the Company's revenue in 1999. Most of
the Company's government contracts are fixed-price contracts. Under a
fixed-price 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 interest. 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 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 most of its government contracts on
the percentage of completion method which generally is measured by comparing
total costs incurred to date to estimated total costs for each contract.
Estimated losses on contracts are recorded 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 selling, 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 as work on the
contract 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,
change orders and funding adjustments, and 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.
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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 risk and, in general, receivables are paid promptly. The
Company also has 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.
MANUFACTURING AND RAW MATERIALS
The Company manufactures or assembles its products, produces spare parts
and repairs equipment previously sold. The Company maintains inventory,
including work in process at different levels of completion, to enable the
Company to satisfy customer delivery schedule requirements.
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. Dependence on any one supplier is kept to a minimum.
On occasion, the failure of a supplier to deliver key parts can jeopardize the
on-time shipment of Company products.
COMPETITION AND BUSINESS CONDITIONS
The Company faces significant competition in most aspects of its business.
Its principal competitors to both the communications and defense systems
segments include corporations with substantially greater assets and access to
larger financial resources than the Company. The Company believes it is a
principal supplier of meteorological radars to foreign government agencies. 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.
Demand for many of the products sold by the Company depends upon the level
and nature of the nation's defense expenditures. 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, the Company commonly
experiences delays in the receipt of anticipated orders, which can adversely
impact operating results by shifting operating revenue 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.
BACKLOG
The Company's backlog was approximately $105,000,000 and $110,000,000 as of
December 31, 1999, and 1998, respectively. The backlog as of such dates which
was reasonably expected to be filled within twelve months of such dates, was
$82,000,000 and $89,000,000, 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 experienced any significant problems with contract
cancellations.
INTELLECTUAL PROPERTY
Although the Company holds a number of patents, the Company believes that
its business is not materially dependent upon the protection afforded by
patents, but primarily upon the experience and
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continued creative skills of its personnel. Because of rapidly changing
technology and the need for confidentiality, the Company does not seek to obtain
patents in many cases.
REGULATORY MATTERS
The Company's operations are subject to numerous local, state, federal and
foreign government laws and regulations governing the discharge of materials
into the environment as well as relating to the protection of public health and
the environment. Noncompliance with such laws and regulations could result in
the imposition of significant fines, penalties and other liabilities on the
Company. The Company believes that it is currently in substantial compliance
with the requirements of environmental and occupational health and safety laws
and regulations. Compliance with such laws and regulations has not represented a
significant expense for the Company in the past and the Company does not foresee
the need for material expenditures to ensure continued compliance with such laws
and regulations as they exist currently. Regulations in these areas are subject
to change, however, and there can be no assurance that future laws or
regulations will not have a material adverse effect on the Company.
The Company from time to time is required to obtain export licenses from
the United States government. There can be no assurance that the Company will
not experience difficulty in obtaining such licenses as may be required in
connection with export sales.
EMPLOYEES
As of December 31, 1999, the Company employed a total of 1,494 persons
worldwide in the Company's continuing operations, of which 1,253 were employed
in the United States. None of the Company's employees were represented by a
labor union.
GEOGRAPHICAL INFORMATION
Certain geographical information concerning the Company's business is set
forth in Note 13 of Notes to Consolidated Financial Statements.
YEAR 2000 COMPLIANCE
The Company is currently not aware of any Year 2000 problems in any of its
products or critical systems. However, the success to date, of the Company's
Year 2000 efforts cannot guarantee that a Year 2000 problem affecting third
parties, upon which it relies, will not become apparent in the future.
In 1998, the Company established cross-functional project teams at each of
its subsidiaries to address Year 2000 issues. Each subsidiary reviewed its
information technology ("IT"), operational systems and manufacturing processes
in order to evaluate those products, services or systems for Year 2000
compliance. Modifications and replacements were made in conjunction with each
subsidiary's overall systems initiatives. Each subsidiary also reviewed products
previously sold, currently being sold or in design for future sales for Year
2000 compliance. Fixes/modifications were developed and implemented for products
identified with Year 2000 non-compliance issues.
The Company estimates that the total cost of Year 2000 compliance
activities for both continuing and discontinued operations, consisting mainly of
employee and consultant labor expended, evaluating the Company's IT systems,
non-IT systems, products and vendor Year 2000 issues, was less than $1,000,000
and no future material expenditures are anticipated.
ITEM 2. PROPERTIES
The Company's corporate headquarters is located in Houston, Texas. The
Company, through its Tech-Sym Management Corporation subsidiary, occupies
approximately 8,000 square feet of the 20,000 square foot building owned by the
Company. Most of the remaining portion of the building is leased.
The communications segment conducts manufacturing operations through the
subsidiaries of TRAK Communications which include (i) 124,000 square feet of
office and plant facilities on nine acres owned in Tampa, Florida, (ii) 45,000
square feet of office and plant facilities owned in Dundee, Scotland, (iii)
78,500 square feet of offices, plant facilities and warehouse space leased in
Chatsworth, California, (iv) 32,000
8
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square feet of office and plant facilities leased in Hagerstown, Maryland and
(v) 7,500 square feet of plant facilities leased in Frederick, Maryland.
The defense systems segment conducts manufacturing operations from office
and plant facilities comprising a total of 224,000 square feet located on three
tracts totaling 39 acres owned by the Company's subsidiary, Metric Systems
Corporation, in Fort Walton Beach, Florida. Metric also leased 12,000 square
feet of office and storage space in several nearby facilities during 1999. On
January 1, 2000, Metric leased an additional 31,000 square feet for offices and
manufacturing operations. Metric has a one-year option to purchase this facility
for $1,125,000.
The weather information systems segment conducts manufacturing operations
from office and plant facilities comprising 54,000 square feet located on an 11
acre tract owned by the Company's subsidiary, Enterprise Electronics
Corporation, in Enterprise, Alabama.
The Company's 51% owned subsidiary, CrossLink, in Boulder, Colorado,
currently occupies leased office and assembly space totaling 11,000 square feet.
CrossLink has leased additional facilities totaling 32,800 square feet in
Boulder, Colorado and anticipates occupying this new facility by the second half
of 2000.
Certain facilities of the Company's subsidiaries are subject to mortgage
debt as set forth in Note 7 of Notes to Consolidated Financial Statements. The
Company believes that it has, or can obtain, adequate and suitable facilities
for the business level expected over the next several years. The Company
maintains customary compensation, liability and property insurance for all of
its operations.
ITEM 3. LEGAL PROCEEDINGS
There are various 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 is expected to have a material adverse effect
on the consolidated financial position, results of operations or cash flows of
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of 1999 to a vote of the
Company's shareholders through the solicitation of proxies or otherwise.
9
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock trades on the New York Stock Exchange under the
symbol TSY. At March 17, 2000, the Company had 1,684 stockholders of record.
The following table sets forth the high and low sales prices for the
Company's Common Stock for the quarters indicated.
PRICE RANGE OF COMMON STOCK
1999 1998
----------------- -----------------
QUARTER HIGH LOW HIGH LOW
- ------------------------------------- ----- --------- ----- ---------
First................................ $ 30 $ 20 3/8 $ 29 1/16 $ 25 1/8
Second............................... 24 1/16 19 1/2 31 7/8 25 3/8
Third................................ 26 18 1/2 30 11/16 22 3/16
Fourth............................... 20 1/16 16 1/4 25 1/8 20 1/2
The Company has not paid any dividends on its Common Stock and does not
expect to pay dividends on its Common Stock in the foreseeable future.
10
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ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected consolidated financial data, as of and for the five
years ended December 31, 1999, have been derived from audited consolidated
financial statements. This information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements as of December 31, 1999,
and 1998 and for each of the three years in the period ended December 31, 1999,
and the related notes thereto included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Revenue............................ $ 155,186 $ 140,479 $ 140,562 $ 142,083 $ 120,533
Cost and expenses of revenue....... 157,877 134,832 136,428 112,808 111,249
--------- --------- --------- --------- ---------
(Loss) income from continuing
operations before income taxes
and extraordinary item........... (2,691) 5,647 4,134 29,275 9,284
(Benefit) provision for income
taxes............................ (954) 1,861 1,063 8,580 2,887
--------- --------- --------- --------- ---------
(Loss) income from continuing
operations....................... (1,737) 3,786 3,071 20,695* 6,397
Discontinued operations:
(Loss) income from operations
(1)............................ (2,062) 2,593 (1,274) 1,781
Loss on disposal (1)............. (21,003) (4,597)
Income from operations (2)....... 4,348 1,785 3,954 4,857
(Loss) gain on disposal (2)...... (744) 3,620
--------- --------- --------- --------- ---------
(Loss) income before
extraordinary item............. (23,484) 5,095 7,449 23,375 13,035
Extraordinary item, less applicable
income taxes..................... (1,035)
--------- --------- --------- --------- ---------
Net (loss) income.................. $ (23,484) $ 5,095 $ 7,449 $ 22,340 $ 13,035
========= ========= ========= ========= =========
(LOSS) EARNINGS PER COMMON SHARE
Continuing operations
Basic....................... $ (.29) $ .63 $ .51 $ 3.26 $ .98
Diluted..................... (.29) .61 .50 3.19 .96
Discontinued operations
Basic....................... (3.60) .22 .72 .42 1.02
Diluted..................... (3.60) .21 .71 .41 .98
Extraordinary item
Basic and diluted........... (.16)
Net (loss) income
Basic....................... (3.89) .84 1.23 3.52 2.00
Diluted..................... (3.89) .83 1.21 3.44 1.95
Weighted average common shares
outstanding
Basic....................... 6,040 6,049 6,038 6,350 6,521
Diluted..................... 6,040 6,175 6,168 6,501 6,673
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Current assets (3)................. $ 130,701 $ 186,025 $ 193,371 $ 170,689 $ 171,375
Current liabilities................ 30,395 36,573 45,441 29,806 29,677
Working capital.................... 100,306 149,452 147,930 140,883 141,698
Property, plant and
equipment-net.................... 31,439 18,817 17,837 18,037 16,111
Long-term debt..................... 1,450 2,335 3,273 2,714 17,056
Total assets....................... 175,603 224,101 228,604 206,404 203,478
Total liabilities.................. 31,871 56,370 65,421 48,332 53,460
Shareholders' investment........... 143,732 167,731 163,183 158,072 150,018
</TABLE>
- ------------
(1) Relates to Continental Electronics Corporation, Anarad, Inc. and Lake
Investment Company, net of applicable income tax benefits and expenses. See
Note 2 of Notes to Consolidated Financial Statements.
(2) Relates to GeoScience Corporation (including its previously discontinued
businesses), net of applicable income tax benefits and expense and minority
interest.
(3) Including net assets of discontinued operations for all years presented.
* INCLUDES GAIN ON SALE OF SUBSIDIARY STOCK OF $13,758, NET OF TAXES.
No dividends were paid on common stock for any of the above years.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
During June 1998, the Company adopted a plan to sell its businesses
involved in real estate development, manufacture of air monitoring products and
manufacture of radio and television broadcast equipment, and during December
1998, the Company adopted a plan to sell its majority owned subsidiary, involved
in the manufacture of seismic data gathering equipment, GeoScience Corporation
("GeoScience"). The effective dates of June 30, 1998, and December 31, 1998,
are the respective measurement dates referred to when discussing the results of
operations of these businesses elsewhere in this report. The discontinued
businesses are reported as discontinued operations for all periods presented.
On November 18, 1998, the Company sold Lake to Consumer Loan Portfolios
Inc., for cash of $1,300,000 plus notes receivable of $3,600,000 collateralized
by real estate owned by Lake. The Company received $500,000 on a note receivable
in February 1999. During the remainder of 1999, the Company did not receive
scheduled payments on the remaining $3,100,000 notes receivable from Consumer
Loan Portfolios Inc. Due to the non-payment of the notes receivable, the Company
issued a demand for arbitration and statement of claim as provided in the
purchase agreement. The Company did not accrue interest income on the notes
receivable during 1999. The Company believes it will ultimately recover the
value of this asset.
On March 15, 1999, the Company sold substantially all of the assets of
Anarad, Inc. ("Anarad"). The results of operations and disposition of Anarad
are reflected in the Company's financial statements as part of discontinued
operations. In 1999, the Company recognized an additional loss of $117,000 as
part of discontinued operations on the final disposition of Anarad.
In December 1998, the Boards of Directors of the Company and GeoScience
committed to a plan to seek a strategic merger partner for GeoScience. On
January 18, 1999, the Company and GeoScience signed an agreement to merge
GeoScience with a third party, subject to shareholder and regulatory approval.
The Company, GeoScience and the third party subsequently terminated the proposed
merger. In 1999, the third party paid GeoScience $3,000,000 in connection with
such termination.
In December 1999, the Company tendered its shares in GeoScience to
Compagnie Generale de Geophysique ("CGG") pursuant to a tender offer related
to the merger of GeoScience and Sercel, Inc., a wholly owned subsidiary of CGG.
Under the terms of the agreement, the Company received $53,646,000 in cash for
its 7,995,000 shares, or $6.71 per share, and CGG assumed GeoScience's debt
obligations of approximately $29,000,000, eighty percent of which were
previously guaranteed by the Company. At December 31, 1998, the Company
estimated that a gain would result from the ultimate disposal of GeoScience in
an amount sufficient to cover actual and estimated operating losses during the
phase-out period. Accordingly, no estimated loss on disposal was recorded as of
December 31, 1998. As a result of the tender offer transaction in December 1999,
the Company recognized an after tax loss on disposal of $744,000, which includes
after tax operating losses during the phase-out period of $20,728,000. The after
tax losses reflect the downturn in the seismic industry that occurred during
1999 and the extended length of time that the Company owned GeoScience.
In June 1997, GeoScience adopted a plan to sell its geoscientific software
subsidiary, CogniSeis Development, Inc., ("CogniSeis"). CogniSeis has been
included in the Company's presentation of discontinued operations in the
Consolidated Statement of Operations for the years ended December 31, 1998, and
1997. On October 14, 1997, (the "disposal date"), CogniSeis was sold to Paradigm
Geophysical Corporation for cash of $8,929,000, net of certain liabilities
assumed pursuant to the terms of the sale agreement, plus a note receivable.
During 1998, the uncertainties surrounding certain provisions of the sales
agreement were resolved and GeoScience received payment in full of the note
receivable, resulting in the recognition of a gain on the sale of $3,620,000,
net of taxes and minority interest.
Under the original plan of disposal for Continental adopted at June 30,
1998, (the "measurement date"), the Company intended to sell Continental as a
whole, including the subsidiaries located in Chile and Germany. At December 31,
1998, the Company estimated a net gain on disposal and therefore deferred actual
and estimated after tax operating losses during the phase-out period of
$7,972,000. As a result of the
12
<PAGE>
Company's sales efforts and negotiations with potential buyers since the
measurement date, the Company has revised the original plan and is currently
attempting to sell certain product lines of Continental and to close down
certain operations. The effects of the revision in the plan, the extended
holding period and the occurrence of operating losses during the phase-out
period in excess of previous estimates have resulted in the recognition of an
estimated after tax loss on disposal of $20,886,000 in 1999, including actual
and estimated after tax operating losses during the phase-out period of
$19,816,000. The phase-out period after tax operating losses recognized in 1999
includes operating losses deferred in 1998.
In October 1999, Continental entered into a plan of liquidation of its
German subsidiary. Under the plan of liquidation, Continental is required to
fund the cash flow requirements of the German subsidiary's operations during the
liquidation phase and for the deficiency in cash required to retire the German
subsidiary's obligations. Under the terms of the plan, Continental's commitment
is not expected to exceed $6,079,000 and the plan is expected to be completed
during the year 2000. The Company has guaranteed Continental's commitment under
the plan of liquidation. At December 31, 1999, the liquidator had not negotiated
a settlement of the defined benefit pension plan obligation with the German
pension insurance trust, however the Company believes the liquidator will reach
a settlement.
In February 2000, Continental entered into a letter of intent to sell the
assets of its digital television product line ("DTV"). The transaction is
expected to close by April 30, 2000. Continental is conducting discussions with
other parties interested in its remaining product lines and real estate and
expects to complete sales transactions during the year 2000.
In July 1999, the Company acquired 51% of CrossLink, Inc., a wireless
communications product and services business, through the purchase of voting
preferred stock, for $2,000,000 in cash. CrossLink's third and fourth quarter
results are incorporated in the Company's Consolidated Statement of Operations,
Consolidated Statement of Cash Flows for the year ended December 31, 1999 and
CrossLink's assets and liabilities are included in the Company's Consolidated
Balance Sheet at December 31, 1999.
In December 1999, the Company retained Quarterdeck Investment Partners,
Inc., to assist in evaluating strategic options for the Company. The possible
alternatives include recapitalization, merger, privatization and sale of all or
part of the Company.
Management's discussion and analysis of the results of operations reflects
the reclassification of the discontinued operations. Note 2 of Notes to
Consolidated Financial Statements sets forth the financial results of the
discontinued operations.
1999 IN COMPARISON WITH 1998
REVENUE. Sales for the year ended December 31, 1999, were $155,186,000
compared to $140,479,000 in 1998. The improvement occurred primarily in the
communications segment, which increased $7,432,000 or 11% over the prior year
period. The increase was mostly due to major antenna programs under contract
that were not in process in the first half of 1998 and increased demand for
ceramic and ferrite products reflecting the growing market of the wireless
communications industry. The defense systems segment's revenue decreased
$2,512,000 or 4% as certain jobs that were in full production in the prior year
were completed in the earlier part of the current year. The weather information
systems segment's revenue increased $5,650,000 or 35% over the prior year period
due to the production of a greater number of weather radar systems during the
current year as a result of the large order backlog at the end of 1998. The
Company recognized $4,137,000 in revenue from CrossLink, which was acquired in
July 1999.
GROSS MARGIN. The Company's gross margin increased $1,683,000 or 4% to
$41,556,000 from $39,873,000 in 1998. As a percentage of sales, the gross margin
decreased to 27% from 28% in 1998 primarily as a result of (i) a $4,600,000
charge for inventory write-offs, of which $4,300,000 was within the
communication segment and (ii) program cost overruns of $2,300,000 within the
communications segment. Without these charges, the consolidated gross margin
percentage would have improved 3% over the prior year. The gross margin
percentage for the communications segment increased 1% from the prior year,
without these additional charges, primarily resulting from the increased revenue
at the Scotland facility. The gross margin percentage increased to 28% from 25%
for the defense systems segment and to 54% from
13
<PAGE>
53% in the weather information systems segment, primarily reflecting the mix and
stage of production of jobs in process at both segments between the two
reporting periods.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Consolidated selling, general
and administrative expenses for 1999 were $38,469,000 as compared to $31,663,000
in the prior year. These expenses, as a percentage of sales, increased 2% in
1999 over 1998. General and administrative expenses within the communications
segment were $2,045,000 greater in 1999 primarily as a result of additional
costs due to new staffing and employee severance costs related to the
restructuring efforts that began in the latter half of 1998, while selling costs
were $401,000 greater mainly due to selling commissions related to increased
sales. General and administrative expenses within the defense systems and
weather information systems segments were basically flat compared to the prior
year, while selling costs increased within both segments. The defense system
segment incurred a commission charge related to the sale of a product to a
foreign customer. The $360,000 increase within the weather information systems
segment related directly to commissions on increased sales within this segment.
The total 1999 expenses included $1,285,000 related to the newly acquired
business, CrossLink, and approximately $1,800,000 at corporate headquarters
associated with the termination of the Executive Retirement Agreements and the
Nonemployee Directors Retirement Plan.
COMPANY-SPONSORED PRODUCT DEVELOPMENT. Company-sponsored product
development costs decreased $606,000 or 17% to $2,899,000 for 1999 from
$3,505,000 in 1998. Expenditures decreased $155,000 within the communications
segment, $152,000 within the defense systems segment and $299,000 within the
weather information systems segment. The decreases reflected the completion of
internal projects that had been in process in the prior year. The Company
continues to invest in new product development to support future growth.
INTEREST EXPENSE. The Company's interest expense for 1999 increased to
$1,574,000 from $1,305,000 in 1998 due to higher interest rates and greater
borrowing on the Company's credit facilities. Additional borrowings were needed
in 1999 to support working capital requirements and to fund capital
expenditures, as well as, to provide funds related to the liquidation of its
German subsidiary.
OTHER EXPENSE, NET. The Company's 1999 net other expense was $1,305,000 as
compared to net other income of $2,247,000 in 1998. The net other expenses in
1999 included $872,000 associated with the shut down of the communications
segment's San Clemente, California, facility and a $558,000 provision for
disposal of fixed assets at that segment's Tampa, Florida, facility. Earnings
from equity and short-term investments in 1999 were lower than 1998. 1998 was
favorably impacted by the payment received at the weather information systems
segment regarding the settlement of a dispute.
PROVISION FOR INCOME TAXES. The effective tax rate for continuing
operations was 35.5% on the 1999 loss and 33% on the 1998 income. The Company's
overall effective tax rate was 48% on the 1999 loss and 46.9% on the 1998
income. Valuation allowances recorded on foreign losses adversely impacted both
years' rates. In 1999, one time tax benefits recorded relative to the GeoScience
disposition significantly increased the tax benefit.
LOSS FROM CONTINUING OPERATIONS. Loss from continuing operations for 1999
was $1,737,000 or $0.29 per share as compared to income of $3,786,000 or $0.61
per share in 1998. The 1999 results were due primarily to the write-offs
affecting cost of revenue as well as increased operational costs and other
expenses discussed above.
DISCONTINUED OPERATIONS. The 1999 net loss relating to discontinued
businesses was $21,747,000 or $3.60 per share as compared to net income from
these operations of $1,309,000 or $0.21 per share in 1998. The results of the
discontinued radio and television broadcast equipment manufacturing business was
a loss of $20,886,000 for the year which included recognition, in the second
quarter of 1999, of previously deferred after tax losses of $9,846,000 and an
after tax provision of $9,300,000 for anticipated additional losses in
operations and disposal, when it became apparent through the results of bidding
activity that the proceeds from the sale of this unit would fall short of
expectations. The radio and television broadcast equipment manufacturing
business loss includes a $1,740,000 provision in the fourth quarter of 1999 for
14
<PAGE>
anticipated disposal costs due to the liquidation of the German unit and higher
cost of sales at the U.S. unit. The net results of GeoScience was a loss of
$744,000 for the year, which included a tax benefit of $3,853,000 related to the
338(h)(10) election on the sale of GeoScience. An additional $117,000 loss on
disposal of the discontinued air monitoring business was recognized in 1999. The
1998 net income from discontinued operations reflected the operating results of
GeoScience through December 31, 1998, the operating results of other
discontinued businesses through June 30, 1998, and the results from the disposal
of a smaller discontinued operation. See Note 2 of Notes to Consolidated
Financial Statements.
NET LOSS. The Company's net loss of $23,484,000 or $3.89 per share for
1999 as compared to net income $5,095,000 or $0.83 per share in 1998, reflects
the net effect of the items discussed above.
1998 IN COMPARISON WITH 1997
REVENUE. Sales for the year ended December 31, 1998, were $140,479,000
compared to $140,562,000 in 1997. Sales by the communications segment increased
$1,146,000 or 2% to $67,906,000 from $66,760,000 in 1997 primarily due to
increased demand for wireless antennas, which offset decreases in the demand for
microwave components resulting from the Asian economic crisis during 1998. Sales
by the defense systems segment decreased $1,888,000 or 3% to $56,520,000 from
$58,408,000. The decrease occurred during the first quarter of 1998 and was
primarily due to the delay in receiving a follow-on Vertical Launching System
("VLS") contract. The delayed contract was awarded in March 1998 for
approximately $28,000,000 with options, when exercised, totaling an additional
$23,500,000. Sales by the weather information systems segment increased $659,000
or 4% to $16,053,000 from $15,394,000 in 1997 primarily as a result of increased
sales under a U.S. Navy contract placed with the Company in January 1997 for
various weather radar systems.
GROSS MARGIN. The Company's gross margin increased $1,997,000 or 5% to
$39,873,000 from $37,876,000 in 1997 on slightly lower sales as discussed above.
As a percentage of sales, the gross margin increased to 28% from 27% in 1997.
The gross margin percent remained constant at 25% in both 1998 and 1997 for the
communications and defense systems segments. The gross margin percent for the
weather information systems segment improved to 53% in 1998 from 44% in 1997
primarily as a result of manufacturing and operational efficiencies.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Consolidated selling, general
and administrative expenses for 1998 were $31,663,000 as compared to $31,648,000
in 1997. These expenses, as a percentage of sales, were constant at 22% for both
1998 and 1997. The communications segment's general and administrative expenses
increased as a result of reorganization costs incurred in the latter half of
1998. These costs included the expenses associated with the appointment of a new
president, the search for and hiring of several other key managers, expenditures
for severance payments and other expenditures typical for such organizational
changes. General and administrative expenses of the defense systems segment
decreased as a result of cost reduction efforts taken in response to the lower
sales volume of 1998 versus 1997. The selling expenses of the communications
segment decreased significantly reflecting the business downturn due to the
Asian economic crisis, while the selling expenses of the defense systems segment
increased as a result of the increased marketing activity for its
instrumentation pods and radar products.
COMPANY-SPONSORED PRODUCT DEVELOPMENT. Company-sponsored product
development costs increased $1,103,000 or 46% to $3,505,000 for 1998 from
$2,402,000 in 1997. Expenditures increased in the defense systems segment as a
result of efforts to upgrade and improve the instrumentation pods product line
and to develop a new digital temperature control unit for the "advanced
tactical forward-looking, infrared targeting system". The increased
expenditures by the weather information systems segment was primarily to upgrade
the EDGE TM and Weather Windows TM processing systems.
INTEREST EXPENSE. The Company's interest expense for 1998 decreased to
$1,305,000 from $1,429,000 in 1997. The decrease was due to the lower interest
rates on borrowings under the Company's line of credit facilities during 1998.
15
<PAGE>
INTEREST AND OTHER INCOME. The Company's 1998 net interest and other
income was $2,247,000 as compared to $1,737,000 in 1997. The $510,000 increase
was primarily due to a payment received by the weather information systems
segment regarding the settlement of a dispute.
PROVISION FOR INCOME TAXES. The effective tax rates for continuing
operations was 33% in 1998 as compared to 25.7% in 1997. The increase is
primarily due to lower benefits derived from the Company's Foreign Sales
Corporation and for lower qualifying expenditures for research and
experimentation in 1998 versus 1997. The Company's overall effective tax rate
for 1998 was 46.9% as compared to 29.5% in 1997. The main reason for the
difference between this effective rate and the U.S. statutory rate of 35% was
the lack of any tax benefit to the Company for the operational losses incurred
by its German subsidiary that is part of the discontinued broadcast equipment
business, Continental.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations for
1998 was $3,786,000 or $0.61 per share as compared to $3,071,000 or $0.50 per
share in 1997. The improved 1998 results were primarily a result of the
improvement in gross margin compared to 1997.
DISCONTINUED OPERATIONS. The 1998 net income of operations and disposals
relating to discontinued businesses was $1,309,000 or $0.21 per share as
compared to $4,378,000 or $0.71 per share in 1997. The primary reasons for the
decrease were the losses of the radio and television broadcast equipment
manufacturing business in 1998 versus profit in 1997 and the continued worsening
results through 1998 of the air monitoring products business, together with the
anticipated loss on its sale. These negative results more than offset the gain
recognized on the sale of GeoScience's previously discontinued subsidiary,
CogniSeis. See Note 2 of Notes to Consolidated Financial Statements.
NET INCOME. The Company's net income of $5,095,000 or $0.83 per share for
1998 as compared to $7,449,000 or $1.21 per share in 1997, reflects the net
effect of the items discussed above.
CURRENT BUSINESS OUTLOOK
During 1999, the Company continued its restructuring efforts within the
communications segment that began in 1998. The demand for products to support
the rapidly growing wireless communications industry is anticipated to continue
to benefit this business segment which expects to return to profitability during
2000 as a result of continued sales growth and the benefits resulting from its
restructuring efforts.
The defense systems segment experienced growth in its foreign sales during
1999. The Company believes that there are opportunities to continue growth in
both foreign sales and U.S. government activity in 2000.
Economic activity worldwide continues to improve, thereby enabling foreign
governments and their agencies to expend funds for weather information systems,
which is expected to provide a basis for continued growth of this segment.
The Company has received an offer for the assets of Continental's DTV
product line and expects to close by April 30, 2000. Continental's German
subsidiary has been placed in liquidation, a process that should be completed
during the year 2000. Discussions are currently being held with potential buyers
for the remaining parts of Continental.
The recently acquired business, CrossLink, Inc., has developed several new
products and anticipates substantial growth in its revenue in the year 2000.
Profitability is not anticipated until 2001 due to continued heavy investment in
infrastructure and product development.
The Company announced in December 1999, that it had retained Quarterdeck
Investment Partners, Inc., to assist in evaluating strategic options for the
Company. The possible alternatives include recapitalization, merger,
privatization and sale of all or part of the Company. Pursuant to invitation and
subject to nondisclosure agreements, the Company's investment bankers have
received written expressions of interest from several parties to acquire part or
all of the assets or outstanding stock of the Company. These expressions of
interest have not been reviewed by the Special Committee of the Board and no
assurances can be given that the Special Committee will determine to proceed
with the process after reviewing the expressions of interest. Any potential
transaction involving a sale of part or all of the assets or outstanding
16
<PAGE>
stock of the Company would require further due diligence by the interested
parties as well as negotiation of definitive terms for any such transaction. As
a result, there can be no assurance that any party that has submitted an
expression of interest will determine to proceed with negotiations of definitive
terms of a transaction or that the Special Committee will determine that any
such potential transaction is in the best interests of the shareholders of the
Company.
LIQUIDITY & CAPITAL RESOURCES
During 1999, the Company satisfied its working capital and capital
expenditure requirements through available cash, cash flows provided by
continuing operations, cash received on the sale of businesses and bank
borrowings. At December 31, 1999, the Company's working capital, net of assets
held for sale of discontinued operations was $88,314,000 as compared to
$62,646,000 at December 31, 1998, reflecting cash flows provided by continuing
operations, the sale of GeoScience, the repayment of certain lines of credit,
net cash requirements of discontinued operations and the purchase of treasury
stock shares. For the year, the Company's cash, cash equivalents and short-term
investments increased $25,558,000 to $29,203,000 from $3,645,000 in 1998,
principally due to the cash received, after debt repayment, on the sale of
GeoScience.
The Company's operations provided cash in the amount of $17,521,000,
$2,294,000 and $6,053,000 in 1999, 1998 and 1997, respectively. Concentrations
of credit risk with respect to the receivables, unbilled revenue and long-term
receivables from customers other than the U.S. Government are generally limited
due to the large number of customers in the Company's customer base, their
dispersion across different industries and geographic areas and the use of
letters of credit to guarantee payments on most foreign receivables. The
Company's operations outside the United States are subject to usual risks,
including changes in governmental policies, currency transfer restrictions and
currency fluctuations. The Company's foreign subsidiaries use their local
currency as their functional currency.
Capital expenditures were $17,677,000, $5,030,000 and $3,457,000 for 1999,
1998 and 1997, respectively. The 1999 expenditures included approximately
$12,000,000 at the defense systems segment to manufacture the pods for the U.S.
Air Force in Europe Rangeless Interim Training System ("URITS") lease and
services contract, which is expected to provide lease revenue in future years.
Because of the Company's approximate $105,000,000 backlog and anticipated new
business, it is expected that additional investments will be required in capital
equipment and facilities. In the year 2000, the Company expects to invest
approximately $8,800,000 in capital expenditures.
Net cash requirements of discontinued operations were $7,580,000,
$4,576,000 and $18,091,000 for 1999, 1998 and 1997, respectively. Due to
Continental's poor operational performance, the Company provided $19,511,000
during 1999, to support the subsidiary's operations and repay its previous
borrowings. GeoScience repaid its $11,931,000 intercompany debt to the Company
as a result of improved cash flow from operations during 1999.
On December 15, 1999, the Company repaid the outstanding debt related to
its credit facility with Wells Fargo Bank and Bank of America. In conjunction
with the debt repayment, the credit facility was terminated. At December 31,
1999, the Company had line of credit facilities aggregating approximately
$10,150,000, of which $8,474,000 was available for additional short-term
borrowings. On January 20, 2000, the Company terminated its credit facility with
First Union Bank after repaying the outstanding debt.
The Company believes that the funds required for working capital needs,
capital equipment additions and its discontinued operation will come from
available funds, cash flows provided by continuing operations, remaining unused
lines of credit totaling $7,692,000 after the First Union Bank credit agreement
termination, capital equipment financing and cash received from the sale of its
discontinued operation. In January 2000, the Company sold its 41.52% equity
investment in Scientific Research Corporation ("SRC") to SRC for $9,500,000 in
cash.
17
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The vast majority of the Company's financial transactions are U.S. dollar
based. However, Tech-Sym is exposed to market risks that include changes in U.S.
and international interest rates as well as changes in currency exchange rates
as measured against the U.S. dollar and each other. The loss on disposal of
Continental in 1999 included $1,935,000 related to the cumulative amount of
foreign currency translation losses applicable principally to Continental's
German subsidiary. Except for Continental, the Company has not experienced any
material effects, positively or negatively, to its financial position or results
of operations due to changes in either interest rates or currency exchange
rates. The Company has in the past engaged in hedging activities through the use
of forward exchange contracts. Such activity has been limited to transactions
involving borrowings between foreign subsidiaries and their U.S. parent
corporation. There were no open positions at December 31, 1999.
The Company's policy regarding investments of cash is to limit its
investments to marketable securities of investment grade rating and to limit the
amount of investment with any single institution. The emphasis is on capital
preservation and immediate access to funds. The Company had $1,804,000 and
$228,000 of marketable securities at December 31, 1999, and 1998, respectively.
See Note 1 of Notes to Consolidated Financial Statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth in a separate section of
this Report on Form 10-K. See the accompanying Index of Financial Statements at
Page F-1. Such information is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
18
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The Articles of Incorporation provide that the affairs of the Company shall
be conducted by a Board of Directors of not less than three nor more than twenty
members and empower the Board to increase or decrease its size within such
limits. The Board in its discretion and in accordance with such authority has
fixed its size at nine members.
The directors, and certain information with respect to each of them, are as
follows:
J. MICHAEL CAMP Special Committee Chairman Age 50
Director since 1998
Mr. Camp has served as President and Chief Executive Officer of the Company
since May of 1998 and also serves as Chairman of the Board to which he was
elected in July of 1999. Prior to joining Tech-Sym, Mr. Camp served as President
and Chief Executive Officer of Olicom, Inc., a company that develops and markets
computer network software and hardware products (from 1996 to 1998). Prior
thereto, he served in various capacities at Northern Telecom Inc., including
Vice President and General Manager of the Multimedia Business Applications
Division (from 1993 to 1996), Vice President and General Manager of the Data
Network Division (from 1992 to 1993), and General Manager of the Network
Integration Division (from 1991 to 1992).
W. L. CREECH Compensation Committee Chairman Age 73
Director since 1989 Special Committee Member
Since his retirement from the United States Air Force as a Four Star
General in 1984, General Creech has been an independent business consultant. He
is the author of THE FIVE PILLARS OF TQM. During his military career spanning
more than 37 years, General Creech held a succession of important posts,
including as his last assignment, Commander of the Tactical Air Command USAF.
General Creech also serves as a director of Comarco, Inc., and ESEA Corporation.
MICHAEL C. FORREST Compensation Committee Member Age 66
Director since 1995 Special Committee Member
Mr. Forrest has been a consultant to the petroleum exploration industry
since his retirement in 1997 from his position as the Senior Vice President of
Technology and Business Development at Maxus Energy Corporation, a position he
held since 1994. Mr. Forrest joined Maxus in 1992 as Vice Chairman and Chief
Operating Officer and served on its board from 1992 to 1995, at which time Maxus
was acquired by YPF S.A. Prior to that, Mr. Forrest was President of Pecten
International Co., a subsidiary of Shell U.S.A., and had worked within the
exploration and production divisions of Shell for 37 years. He is a director of
Matador Petroleum Corporation, a private oil company.
RICHARD S. FRIEDLAND Audit Committee Member Age 49
Director since 1998 Special Committee Member
Mr. Friedland was the Chairman of the Board and Chief Executive Officer of
NextLevel Systems, Inc., a worldwide supplier of communication networks created
by the three-way split of General Instrument Corporation, from July 1997 to
October 1997. He previously served as Chairman of the Board and Chief Executive
Officer of General Instrument Corporation from 1995 to 1997, its President and
Chief Operating Officer from 1993 until 1995 and Chief Financial Officer from
1992 to 1994. He also serves as a director of Applied Digital Solution, Inc.,
Zilog, Inc., and Video Network Communication, Inc.
A. A. GALLOTTA, JR. Audit Committee Chairman Age 67
Director since 1986 Special Committee Member
Admiral Gallotta has been President of AAG Associates, Inc., a consulting
firm for electronic companies, since 1985, the year that he retired from the
United States Navy as a Rear Admiral. From 1988 to 1990, he served as President
and Director of SWL, Inc., a technical support contractor to the United
19
<PAGE>
States Department of Defense and a subsidiary of Flow General Corporation.
Admiral Gallotta dedicated 23 years of his naval career to electronic warfare
related activities and was Vice Commander, Naval Electronics System Command, at
the time of his retirement.
WENDELL W. GAMEL Special Committee Member Age 70
Director since 1966
Mr. Gamel served the Company as its President and Chief Executive Officer
from 1975 to 1998 and as Chairman of the Board from 1980 until his retirement in
July 1999. Since his retirement from the Company, he has been an independent
business consultant and professional engineer.
JAMES R. HENDERSON Age 42
Director since 1999
Mr. Henderson has been an employee of Steel Partners L.L.C. since August
1999. Prior to that, Mr. Henderson was employed by Aydin Corporation, from June
1996 to June 1999, most recently as President and Chief Operating Officer. Prior
to that, Mr. Henderson was employed by the Unisys Corporation, from May 1980
until May 1996, most recently as a Senior Financial Executive. He also serves on
the board of ECC International Corp.
WARREN G. LICHTENSTEIN Age 35
Director since 1999
Mr. Lichtenstein has been the Chairman of the Board of Steel Partners
L.L.C., the general partner of Steel Partners II, L.P., since January 1996.
Prior to that, Mr. Lichtenstein was Chairman and a director of Steel Partners
Ltd. from 1993 until January 1996. Mr. Lichtenstein also serves on the boards of
Gateway Industries, Inc., Web Financial Corporation, PLM International, Inc.,
CPX Corp., ECC International Corp., Puroflow Incorporated, and Saratoga Beverage
Group, Inc.
CHARLES K. WATT Audit Committee Member Age 62
Director since 1987 Special Committee Member
Since 1988, Dr. Watt has served as Chairman of Scientific Research
Corporation, a company involved in advanced technology products and services.
Since April 1990, Professor Watt has been a faculty member and Executive
Assistant to the President at Clemson University. Prior to this appointment, he
served as a laboratory director and faculty member at the Georgia Institute of
Technology and as Director of Defense Test and Evaluation in the Office of the
Secretary of Defense.
The Board has standing audit and compensation committees (the "Audit
Committee" and the "Compensation Committee," respectively) that are composed
of directors of the Company. The Board does not have a standing nominating
committee, but considers and selects as a whole directors to fill Board
vacancies that arise between annual meetings of stockholders as well as
nominates candidates for election at such meetings. During 1999, the Audit
Committee had four meetings, the Compensation Committee had five meetings, and
the Board of Directors had six regular and eight special meetings. All members
of the Board of Directors attended 75% or more of the total number of meetings
of the Board and Board committees on which they served.
The Audit Committee makes recommendations concerning the engagement of
independent accountants, reviews with the independent accountants the plan and
results of the auditing engagement, approves professional services provided by
the independent accountants, reviews the independence of the independent
accountants and reviews the adequacy of the Company's internal accounting
controls.
The Compensation Committee makes recommendations to the Board as to
compensation to be paid to (i) the officers of the Company, (ii) the chief
executive officers and general managers of subsidiaries and divisions, and (iii)
all employees of the Company and its subsidiaries, regardless of position, whose
compensation exceeds a certain amount. The Compensation Committee also reviews,
and makes recommendations to the Board with respect to, all incentive
compensation plans proposed for the Company and its
20
<PAGE>
subsidiaries. The Board has final approval concerning the recommendations of the
Compensation Committee. The Compensation Committee administers the 1990 Stock
Option Plan and the 1998 Equity Incentive Plan of the Company and has sole
authority to grant awards under the 1998 Equity Incentive Plan.
On March 28, 2000, the Board established a Special Committee to exercise
all lawfully delegable powers of the Board in connection with any potential
transaction for the sale of the Company. All the Company's directors, except
Messrs. Henderson and Lichtenstein who are affiliated with one or more companies
that have expressed an interest in acquiring all or part of the Company, are
members of the Special Committee.
EXECUTIVE OFFICERS
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 POSITION
- ------------------------------------------ -----------------------------------------
<S> <C> <C>
J. Michael Camp........................... 50 Chairman of the Board, President and
Chief Executive Officer of the
Company and officer and director of
various subsidiaries of the Company
J. Rankin Tippins......................... 47 Vice President, General Counsel and
Secretary of the Company and officer
and director of various
subsidiaries of the Company
Paul L. Harp.............................. 51 Chief Financial Officer, Treasurer
and Controller of the Company and
officer and director of various
subsidiaries of the Company.
David F. Burkey........................... 41 President of Continental Electronics
Corporation
Aaron L. Collins.......................... 64 President of Enterprise Electronics
Corporation
Charles B. Johnson........................ 61 President of Metric Systems
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. There are no arrangements or understandings
between any officer and any other person pursuant to which the officer was
elected.
Mr. Tippins was elected Vice President in May of 1999 and has served as
General Counsel and Secretary of the Company since 1991. He is a member of the
State Bar of Texas and The Florida Bar.
Mr. Harp became Chief Financial Officer in February of 2000, served as
Treasurer since May of 1999 and has served as Controller of the Corporation
since July 1996. He previously had served as Secretary, Treasurer and Controller
of Metric Systems Corporation since 1982. He is a Certified Public Accountant in
Texas and Florida.
Mr. Burkey was elected President of Continental Electronics Corporation in
January of 1999, after serving as Vice President and Chief Operating Officer
from August 1998. Prior to that time, he was employed by Olicom A/S, as
Executive Vice President from February 1998 to August 1998, and as Chief
Financial Officer of its subsidiary, Olicom Inc., from August 1996 to February
1998. Prior thereto, he served in various capacities at Northern Telecom Ltd.,
including Controller, Multimedia Business Applications Division (from 1994 to
1996) and Senior Manager, Switching Networks (1993 to 1994).
Mr. Collins was elected President of Enterprise Electronics Corporation in
June of 1993 and has continuously served in that capacity ever since.
Mr. Johnson was elected President of Metric Systems Corporation in May of
1998. He had previously served as its Executive Vice President and General
Manager since 1982.
21
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and, if any, persons who own more than ten percent of the
Company's Common Stock to file with the Securities and Exchange Commission and
the New York Stock Exchange reports relating to ownership and changes in
ownership of such Common Stock. Copies of these reports must also be furnished
to the Company. Based on a review of these reports and on written
representations from the reporting persons that no other reports were required,
the Company believes that all applicable Section 16(a) reporting requirements
were fulfilled, except that Mr. Warren G. Lichtenstein was late in reporting his
election as a director of the Company and late in reporting the sale of shares
of the Company's Common Stock.
ITEM 11. DIRECTOR AND EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
Members of the Board of Directors who are not employees of the Company are
paid a fee of $2,000 for attendance at each Board meeting and, except for the
Special Committee, a fee of $750 for attendance at each Board committee meeting
except for committee chairmen who are paid $1,250 for attendance at each Board
committee meeting which they chair. Members of the Special Committee who are not
employees of the Company are paid a fee of $2,000 for attendance at each Special
Committee meeting. Board members who are employees of the Company receive a fee
of $100 for attendance at each Board meeting. Members of the Board who are not
current or former employees of the Company are also paid an Annual Director Fee
of $24,000.
Each director who was not a present or former officer or employee of the
Company covered by a Company retirement plan or agreement was automatically
covered by the Company's Nonemployee Directors Retirement Plan. Upon retirement
on or after reaching age 65 or termination of service due to disability, each
such director was entitled to receive from the Company an annual retirement
benefit equal to 65% of the Annual Director Fee in effect prior to retirement or
disability. If a director left the Board prior to reaching age 65 for reasons
other than disability, his retirement benefit would not begin until the director
reached age 65 and, if the director had served less than ten years as a
director, the retirement benefit would be reduced by 10% for each such year.
The surviving spouse of a deceased director who was entitled to receive a
retirement benefit under this plan would receive an annual benefit from the
Company, beginning with the director's death, equal to 37 1/2% of the Annual
Director Fee, subject to a reduction of 10% for each year less than 10 served as
a director unless such director was a member of the Board on the date of death
or had been previously terminated due to a disability. The spouse's benefit
would continue for ten years or until the spouse's death, whichever occurred
first.
In 1999, the members of the Board who were not participating in the
Nonemployee Directors Retirement Plan terminated the plan and Messrs. Creech,
Forrest, Friedland, Gallotta, Henderson, Lichtenstein, and Watt received
$146,615, $69,705, $7,732, $166,511, $5,580, $3,948, and $155,626, respectively,
in accordance with the plan, such amounts constituting the net present value of
the vested percentages of accrued benefits as determined by the Pension Benefit
Guaranty Corporation set of assumptions and interest rates.
The Company maintains a Directors and Officers Insurance Policy and a
Travel Accident Insurance Policy for the benefit of the Company and its
Directors.
The Company's 1998 Equity Incentive Plan (the "Plan") provides for the
automatic grant of non-qualified stock options to nonemployee directors of the
Company. An individual who becomes a nonemployee director, and has not
previously been an employee director, is automatically granted options with
respect to 10,000 shares of Common Stock as of the date such person first
becomes a member of the Board of Directors. Each nonemployee director is
automatically granted options with respect to an additional 5,000 shares of
Common Stock effective as of the date of each regular annual meeting at which
such person is reelected or continues to serve as a director. The exercise price
of such options may not be less than 100%
22
<PAGE>
of the fair market value per share of the Common Stock on the date of grant. The
stock options are fully exercisable on their date of grant and have a term of
ten years unless earlier terminated in the event a nonemployee director ceases
to be a member of the Board for any reason except death, disability, or
retirement.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The Company's executive compensation policies and practices are designed to
provide competitive levels of compensation that integrate pay with the Company's
annual and long-term performance goals. Compensation of the executive officers
of the Company is primarily comprised of salary, incentive bonus, and stock
options. In addition, all of the executive officers are eligible to participate
in the Company's Retirement (401(k)) Plan. Certain executive officers are also
parties to Termination Agreements and Executive Retirement Agreements with the
Company.
The base salaries of the executive officers are established at a level
deemed appropriate to attract and retain qualified executives. In establishing
its recommendations, the Compensation Committee considers the recommendations of
management, the responsibilities of the executive officers, the salaries of
others similarly situated both within and outside of the Company, the recent
performance in the executive's area of responsibility, the relative performance
of other companies in similar businesses, and any changes in the cost-of-living.
The salaries of the executive officers are usually reviewed annually with their
performance during the prior year taken into account. As a result, the salaries
received in 1999 were determined, in part, by each individual's performance in
1998.
The Company has an incentive bonus plan which provides for incentive
compensation for its officers and key employees, as well as, the presidents of
its wholly owned subsidiaries. The Company's subsidiaries have separate profit
sharing incentive bonus plans. Under the Company's plan, the aggregate bonus
pool from which such awards can be made in any year usually does not exceed 2%
of the Company's consolidated earnings before federal and state income taxes
plus an amount equal to 25% of the incentive bonus pool accrued by each wholly
owned subsidiary pursuant to its plan. The Committee recommended, and the Board
approved, a 1999 bonus pool exceeding such limitations in order to reward and
motivate key employees who had contributed to the successes of the Company
despite the overall adverse financial results. The apportionment of that part of
the Company's incentive bonus pool paid to the executive officers is determined
by the Company's Board of Directors, pursuant to recommendations of the
Compensation Committee, according to levels of responsibilities, individual
performance, and industry standards.
Under the incentive bonus plan for the Company's wholly owned subsidiaries,
officers and key employees of each of the subsidiaries, excluding the presidents
of the subsidiaries, are eligible to share in a bonus pool, calculated
separately for each subsidiary, amounting to not less than 6% and not more than
15% of such subsidiary's annual earnings before state and federal income taxes.
Bonus amounts earned in excess of 6% pre-tax earnings depend upon the degree by
which each subsidiary exceeds certain performance criteria, such as sales, net
profit and return on investment. The Committee recommended, and the Board
approved, a 1999 bonus pool exceeding such limitations for certain subsidiaries
of the Company in order to reward and motivate key employees who had contributed
to the successes of the subsidiaries despite the overall adverse financial
results. The apportionment of the total amount of the bonus and the recipients
thereof are determined by the senior management of the Company and the
respective subsidiary according to levels of responsibility and individual
performance except that approval of the Board of Directors of the Company
pursuant to recommendations of the Compensation Committee, is required for an
award to (i) any recipient whose annual salary is equal to or greater than
$125,000 and (ii) any division or subsidiary general manager or chief executive
officer, regardless of the amount of compensation.
23
<PAGE>
The amount of the bonus pool of the Company and of each subsidiary is
subject to reduction by the amount of (i) any bonuses such as year-end bonuses
paid to employees for such year and (ii) certain marketing incentives paid to
employees for such year.
The Company's Equity Incentive Plans are designed to align the long-term
interests of key employees with shareholder interests. The exercise price of
stock options may not be less than 100% of the fair market value per share of
the Common Stock on the date of the grant. The employees awarded stock options
benefit only when the market price of the Company's stock increases to the
benefit of all shareholders. The number of options granted to any individual is
dependent on the individual's level of responsibility and ability to influence
the performance of the Company and its subsidiaries. There is no practice or
guideline concerning the amount or timing of such grants.
As with the other executive officers, the compensation of the Chief
Executive Officer consists primarily of salary, incentive bonus, and stock
options. The CEO's salary is usually reviewed on an annual basis by the
Compensation Committee and the Board of Directors at the time of the annual
election of officers at the Director's meeting held in conjunction with the
annual stockholders' meeting each year. The incentive bonus is determined after
the end of each year when financial results are available. Stock option grants
are not automatic nor awarded on a regular basis.
In reviewing Mr. Camp's salary in May of 1999, the Compensation Committee
observed that the Company's earnings from continuing operations were 23% greater
in 1998 than the prior year, that the Company had taken significant steps to
divest its nonstrategic assets and focus on its core business, and that the
consumer price index had risen 2.1% since his employment with the Company. As a
result, the Compensation Committee recommended, and the Board approved, a 4.5%
increase in salary to an annual rate of $324,000 for Mr. Camp.
A major portion of Mr. Camp's compensation consists of an annual incentive
bonus under the Incentive Bonus Plan described above and, as such, fluctuates
with the financial performance of the Company. The Compensation Committee
observed that, although the Company's earnings in 1999 were substantially less
than the prior year, most of the events that contributed to the Company's
earnings decline were related to prior years and others were incurred to improve
future earnings. The Committee also observed that (i) Mr. Camp had conducted the
sale of GeoScience Corporation which enabled the Company to pay off all of the
Company's expiring lines of credit, (ii) the Company had significantly improved
its cash flow, (iii) management changes had been implemented at those operating
subsidiaries with performance problems, and (iv) progress had been accomplished
with respect to increasing shareholder value through the strategic analysis of
the Company with the assistance of an investment banking firm. The Committee,
after detailed consideration of an incentive bonus to Mr. Camp, further
discussed the matter with the full Board (excluding Mr. Camp) and subsequently
recommended, and the Board approved, a 1999 incentive bonus of $162,000 for Mr.
Camp, such amount being equal to half his rate of annual salary.
The foregoing report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement into any filing under the
Securities Act of 1933, as amended, (the "Securities Act"), or under the
Exchange Act, except to the extent that the Company specifically incorporated
this information by reference, and shall not otherwise be deemed filed under
such acts.
The foregoing report is given by the following members of the Compensation
Committee.
W. L. Creech Michael C. Forrest
24
<PAGE>
The Summary Compensation Table shows certain compensation information for
the Chief Executive Officer and the four other most highly compensated executive
officers in 1999 (as the term "executive officer" is defined by the Securities
and Exchange Commission) for services rendered in all capacities during the
years ended December 31, 1999, 1998, and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------------------------------
SECURITIES SECURITIES
ANNUAL COMPENSATION OTHER UNDERLYING UNDERLYING
------------------------- ANNUAL TECH-SYM GEOSCIENCE ALL OTHER
NAME AND SALARY BONUS COMPENSATION OPTIONS/SARS OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(A) ($)(B) (#) (#) ($)(C)
- ---------------------------------------- ----- ------- ------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. M. Camp(d)........................... 1999 319,333 162,000 -- 25,000 -0- 7,095(f)
Chairman of the Board, 1998 206,667 150,000 61,435(e) 100,000 25,000 143,471(g)
President and Chief Executive Officer
A. L. Collins(h)........................ 1999 163,076 178,200 -- 12,000 -0- 6,071
President of Enterprise Electronics
Corporation
C. B. Johnson(i)........................ 1999 210,938 101,000 -- 15,000 -0- 7,200
President of Metric Systems 1998 201,045 35,000 -- 9,500(j) -0- 7,847
Corporation
J. R. Tippins........................... 1999 178,667 91,500 -- 18,000 -0- 504,851(k)
Vice President, General 1998 165,667 86,000 -- 15,000(j) 5,000 7,684
Counsel and Secretary 1997 154,667 62,000 -- -0- 7,500 7,568
P. L. Harp.............................. 1999 150,500 76,000 -- 25,000 -0- 547,020(l)
Treasurer, Controller and 1998 137,667 82,000 -- 4,500(j) 5,000 7,652
Chief Accounting Officer 1997 129,000 43,928 -- -0- 5,000 7,496
</TABLE>
(a) Incentive bonus amounts were earned during the years indicated, but paid in
the first quarter of the following year.
(b) The dollar value of other annual compensation not properly categorized as
salary or bonus, such as perquisites and other personal benefits, did not
exceed the lesser of $50,000 or 10% of the total of annual salary and bonus
for any of the named executive officers in any of the years listed, except
for Mr. Camp in 1998.
(c) Except where otherwise footnoted, each of the amounts in this column are
matching contributions by the Company to the executive officer's account in
the Company's Retirement (401(k)) Plan.
(d) Mr. Camp was elected as President and Chief Executive Officer effective May
1, 1998.
(e) Includes (x) tax reimbursement payments of $57,426 related to certain
relocation costs and benefits paid by the Company in connection with Mr.
Camp's relocation to Houston, Texas, and (y) automobile allowance of $4,009
attributable to personal use.
(f) Includes (x) $5,895 in matching contributions by the Company to Mr. Camp's
account in the Company's Retirement (401(k)) Plan, and (y) $1,200 for
attending Board meetings.
(g) Includes (x) certain relocation costs and benefits of $142,871 paid by the
Company in connection with Mr. Camp's relocation to Houston, Texas, and (y)
$600 for attending Board meetings.
(h) Although Mr. Collins has been President of Enterprise Electronics
Corporation since 1993, he was not considered by the Board to be an
executive officer (as the term "executive officer" is defined by the
Securities and Exchange Commission) of the Company due to the relatively
small amount of revenue and earnings contributed by the subsidiary in 1999.
However, as a result of the increased revenue and earnings contributed, on a
relative basis, by the subsidiary, the Board designated Mr. Collins as an
executive officer in 1999. Accordingly, his compensation is included in the
table beginning with January 1, 1999, the year he first became an executive
officer.
(i) Mr. Johnson was elected as President of Metric Systems Corporation effective
May 1, 1998. The compensation shown includes amounts he received in 1998 as
Vice President of Metric Systems Corporation prior to his election as
President.
(j) The stock options were originally granted in 1996, but were repriced in
1998.
(k) Includes (x) $497,681 as the net present value of the Executive Retirement
Agreement terminated by the Board and (y) $7,170 in matching contributions
to Mr. Tippins' account in the Company's Retirement (401(k)) Plan.
(l) Includes (x) $540,319 as the net present value of the Executive Retirement
Agreement terminated by the Board and (y) $6,701, in matching contributions
to Mr. Harp's account in the Company's Retirement (401(k)) Plan.
25
<PAGE>
The following table sets forth information concerning grants of Tech-Sym
stock options during 1999 to each of the named executive officers:
OPTION/SAR GRANT TABLE
<TABLE>
<CAPTION>
% OF
NUMBER OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE GRANT DATE
GRANTED IN FISCAL PRICE EXPIRATION PRESENT VALUE
NAME (#) YEAR ($/SH) DATE ($)(A)
- ---------------------------------------- ---------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
J. M. Camp.............................. 25,000 11 20.875 5/10/09 234,250
A. L. Collins........................... 12,000 5 20.875 5/10/09 112,440
C. B. Johnson........................... 15,000 7 20.875 5/10/09 140,550
J. R. Tippins........................... 18,000 8 20.875 5/10/09 168,660
P. L. Harp.............................. 15,000 7 20.875 5/10/09 140,550
P. L. Harp.............................. 10,000 4 19.00 10/20/09 89,100
</TABLE>
(a) In accordance with Securities and Exchange Commission rules, the
Black-Scholes option pricing model was used to estimate the per share value
of the options as of the grant date to be $9.37 for those expiring 5/10/09
and $8.91 for those expiring 10/20/09. The model's mathematical formula is
primarily used to value traded stock options and is premised on immediate
exercisability and transferability of the options. This is not true for the
options granted to executive officers and other employees. Therefore, the
values shown are theoretical and are not intended to reflect the actual
values the recipients may eventually realize, if any. Any ultimate value
will depend on the excess of the stock price over the exercise price on the
date the optionee, in the optionee's sole discretion, exercises the option.
The following assumptions were used for the purpose of estimating the Grant
Date present value: (i) option term of eight years, (ii) volatility of 26%,
(iii) dividend yield of zero, and (iv) risk-free rate of return of 5.44% for
options expiring 5/10/09 and 6.03% for options expiring 10/20/09.
The following table summarizes for each of the named executive officers the
number of Tech-Sym stock options and stock appreciation rights ("SARs"), if
any, exercised during the year ended December 31, 1999, the aggregate dollar
value realized upon exercise, the total number of unexercised options and SARs,
if any, held at December 31, 1999, and the aggregate dollar value of
in-the-money, unexercised options and SARs, if any, held at December 31, 1999.
Value realized upon exercise is the difference between the fair market value of
the underlying stock on the exercise date and the exercise or base price of the
option. Value of the unexercised, in-the-money options or SARs at fiscal
year-end is the difference between its exercise or base price and the fair
market value of the underlying stock on December 31, 1999, which was $20.625 per
share. These values, unlike the amounts set forth in the column headed "Value
Realized," have not been, and may never be realized. The underlying options or
SARs have not been, and may not be, exercised; and actual gains, if any, on
exercise will depend on the value of Tech-Sym Common Stock on the date of
exercise. There can be no assurance that these values will be realized.
Unexercisable options are those which have not yet vested under the vesting
schedule in the Company's 1990 Stock Option Plan or the Company's 1998 Equity
Incentive Plan.
The Company's equity interest in its publicly traded GeoScience subsidiary
was sold effective December 13, 1999, at a price per share of $6.71. The
GeoScience stock options thereupon terminated and, since the exercise prices per
share of all the GeoScience options were greater than the sales price per share,
the options previously granted to Messrs. Camp, Tippins, and Harp, as well as
all other optionees, were worthless. There were no GeoScience shares acquired by
the named executive officers upon exercise of stock options during 1999.
26
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN 1999
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED
SHARES OPTIONS/SARS IN-THE-MONEY
ACQUIRED FY-END OPTIONS/SARS
ON VALUE (#) ($)(A)
EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. M. Camp........................... -0- -0- -0- 125,000 -0- -0-
A. L. Collins........................ -0- -0- 10,200 12,800 49,625 -0-
C. B. Johnson........................ -0- -0- 17,600 16,900 48,750 -0-
J. R. Tippins........................ 15,000 46,875 12,000 21,000 -0- -0-
P. L. Harp........................... 2,000 5,250 3,600 25,900 -0- 16,250
</TABLE>
(a) In-the-Money Options/SARs are those where the fair market value of the
underlying security exceeds the exercise or base price of the option or SAR.
Messrs. Tippins and Harp were each parties to retirement agreements with
the Company. The agreements provided for the payment to each such officer of an
annual retirement benefit for the remainder of his life commencing at his
retirement on or after age 65 in an amount equal to 65% of such executive's
highest rate of base salary in effect at any time prior to his reaching age 61
("Base Salary"). The agreements further provided for the payment of a surviving
spouses benefit equal to 37 1/2% of the officer's Base Salary payable annually
upon his death to his surviving spouse, if any, for the lesser of ten years or
the remainder of her life. The agreements also entitled the executive and his
qualified dependents, if any, to participate on or after a qualified termination
in the Company's group health plan for active employees for as long as he lived
provided the executive continued to pay the regular active employee premium.
In 1999, the Board directed that the actuarial present value of the annual
retirement benefits accrued under the agreements, as determined in accordance
with the actuarial factors and rates then in effect for a lump sum payment under
Pension Benefit Guaranty Corporation regulations, be paid to each executive in a
lump sum in cash. (See Summary Compensation Table). In conjunction with such
payments, the retirement benefits under these agreements were terminated. The
health benefits under the agreements were unaffected by such payments and
remained an obligation of the Company unless the executive voluntarily left the
employ of the Company prior to reaching age 62 (other than due to permanent
disability) or was terminated for cause.
In 2000, the Company entered into Incentive Agreements and Noncompetition
Agreements with Messrs. Camp, Johnson, Tippins, and Harp. These agreements
replaced the Termination Agreements between the Company and those executives
and, in addition, terminate the lifetime health benefits for Messrs. Tippins and
Harp under their Executive Retirement Agreements upon payment of $165,000 and
$248,400, respectively. The Incentive Agreements provide for payments of
$970,000, $425,000, $700,000 and $535,000 to Messrs. Camp, Johnson, Tippins and
Harp, respectively, in the event of a change in control of the Company unless
such executive's employment was previously terminated by the Company for cause
or by the executive for other than "good reason". The Noncompetition Agreements
provide for payments of $470,791, $220,690, $341,086 and $273,625 to Messrs.
Camp, Johnson, Tippins and Harp, respectively, upon termination of employment
(i) for any reason on or after a change in control of the Company, or (ii) prior
to a change of control if the termination was by the Company without cause or by
the executive for "good reason". The Noncompetition Agreements prohibit the
executives for a two year period after termination of employment from disclosing
confidential information, competing with the business or products of the Company
or its subsidiaries, soliciting employees of the Company to leave the Company,
or soliciting customers of the Company or its subsidiaries for the purpose of
selling competitive products. Mr. Collins has entered into an agreement with
Enterprise Electronics Corporation ("EEC") wherein he will receive $75,000 in
the event of a change in control of EEC or the Company.
The Company's 1998 Equity Incentive Plan provides for the grant of stock
options, SARs, restricted stock, dividend equivalents, performance units,
phantom shares, limited stock appreciation rights ("LSARs"), bonus stock and
cash tax rights to (i) all officers and employees of, and any consultants to,
the Company or any affiliate of the Company as determined by the Company's
Compensation Committee and (ii) the nonemployee directors of the Company who
receive automatic grants of Director options with
27
<PAGE>
tandem LSARs. The maximum number of shares of Tech-Sym Common Stock as to which
options or SARs may be granted under the 1998 Equity Incentive Plan is 750,000
shares, subject to certain adjustments to prevent dilution. The exercise price
of such options and SARs may not be less than 100% of the fair market value per
share of the Tech-Sym Common Stock on the date of grant. The 1998 Equity
Incentive Plan provides that, upon a change in control of the Company, all
outstanding stock options, SARs, and other awards under the plan would become
immediately vested and exercisable (with certain exceptions).
The following graph reflects a comparison of the cumulative total return
(change in stock price plus reinvested dividends) of the Company's Common Stock
from December 31, 1994, through December 31, 1999, with the cumulative total
returns reflected in the Media General Financial Services (MGFS) Composite
Market Value Index (a broad market index which includes over 7,000 publicly held
companies) and the MGFS Industry Group 837 Index -- Scientific/Tech Instruments
(a market index reflecting performance of the Company's peers and which includes
the Company). The data presented assumes a hypothetical investment of $100 in
the Company's stock and in the underlying stocks of each of the two indices as
of January 1, 1995, and that all dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
----------------------------------------------------------------
1994 1995 1996 1997 1998 1999
--- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Tech-Sym Corporation................. 100 134.57 126.60 108.24 94.68 87.77
Scientific/Tech Instrument
Companies............................ 100 137.35 160.36 198.48 199.57 322.44
Composite Market Value............... 100 129.66 156.58 203.33 248.56 303.21
</TABLE>
The foregoing price performance comparisons shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Form 10-K into any filing under the Securities Act or under the Exchange
Act, except to the extent that the Company specifically incorporates this graph
by reference, and shall not otherwise be deemed filed under such Acts.
28
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of February 29, 2000, the beneficial
ownership of the Company's Common Stock with respect to each person known by the
Company to be the beneficial owner of more than five percent of the Company's
currently outstanding shares of Common Stock:
NAME AND BUSINESS ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNERS BENEFICIAL OWNERSHIP OF CLASS
- ------------------------------------- -------------------- --------
Heartland Advisors, Inc. ............ 1,305,550(a) 22.32%
790 North Milwaukee Street
Milwaukee WI 53202
FMR Corp. ........................... 592,200(b) 10.18%
82 Devonshire Street
Boston MA 02109
Steel Partners II, L.P. ............. 556,400(c) 9.67%
150 East 52nd Street
21st Floor
New York NY 10022
Dimensional Fund Advisors, Inc. ..... 451,700(d) 7.72%
1299 Ocean Avenue, 11th Floor
Santa Monica CA 90401
Neuberger & Berman, LLC.............. 321,650(e) 5.50%
605 Third Avenue
New York NY 10158-3698
Merrill Lynch Trust Company of Texas
as Trustee of the Tech-Sym
Retirement Plan (the
"Trustee")....................... 299,102(f) 5.11%
Suite 1150
2121 San Jacinto Street
Dallas, Texas 752015
- ------------
(a) According to an amended Schedule 13G dated January 27, 2000, and filed with
the Securities and Exchange Commission by Heartland Advisors, Inc.,
Heartland Advisors, Inc., had sole voting power and sole dispositive power
with respect to all such shares.
(b) According to an amended Schedule 13G dated February 14, 2000, and filed with
the Securities and Exchange Commission by FMR Corp., FMR Corp. had sole
voting power with respect to 7,600 of such shares and sole dispositive power
with respect to all such shares.
(c) According to information provided by Steel Partners II, L.P., as of February
28, 2000.
(d) According to a Schedule 13G dated February 4, 2000, and filed with the
Securities and Exchange Commission by Dimensional Fund Advisors Inc.
("Dimensional"), a registered investment advisor, Dimensional is deemed to
have beneficial ownership of 451,700 shares as of December 31, 1999, all of
which shares are held in portfolios of DFA Investment Dimensions Group Inc.,
a registered open-end investment company, or in series of the DFA Investment
Trust Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional serves as investment manager.
Dimensional had sole voting power and sole dispositive power with respect to
all such shares. Dimensional disclaims beneficial ownership of all such
shares.
(e) According to an amended Schedule 13G dated January 28, 2000, and filed with
the Securities and Exchange Commission by Neuberger & Berman, LLC, Neuberger
& Berman, LLC, had sole voting power with respect to 204,250 of such shares
and shared dispositive power with respect to all such shares. An additional
19,400 shares are owned by employees of Neuberger Berman, LLC, and Neuberger
Berman Management, Inc., in which Neuberger Berman, LLC, disclaims
beneficial ownership.
(f) According to financial statements as of February 29, 2000, provided by the
Trustee. The shares are held for the benefit of employees and former
employees of the Company who participate in the Tech-Sym Retirement Plan.
Each participant may direct the Trustee regarding the voting of such shares
allocated to the participant's account. The total number of shares does not
include 12,502 shares allocated to the accounts of the executive officers
and directors which are included in the table of beneficial ownership by
officers and directors below.
29
<PAGE>
The following table sets forth as of February 29, 2000, the beneficial
ownership of the Common Stock of the Company by each director, each of the
executive officers named in the Summary Compensation Table below, and all
executive officers and directors of the Company as a group:
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP
--------------------------------------
SOLE VOTING OPTIONS
AND EXERCISABLE
NAME OF INDIVIDUAL INVESTMENT WITHIN PERCENT
OR GROUP POWER(A) 60 DAYS OF CLASS
- ------------------------------------- ----------- ----------- --------
J. Michael Camp...................... 81 0 *
A. L. Collins........................ 3,427 11,000 *
W. L. Creech......................... 1,000 21,000 *
Michael C. Forrest................... 1,500 26,000 *
Richard S. Friedland................. 0 15,000 *
A. A. Gallotta, Jr................... 10,300 21,000 *
Wendell W. Gamel..................... 90,982(b) 55,000 2.47%
Paul L. Harp......................... 5,665 4,500 *
James R. Henderson................... 0 10,000 *
Charles B. Johnson................... 5,340 19,500 *
Warren G. Lichtenstein............... 556,400(c) 10,000 9.67%
J. Rankin Tippins.................... 26,348 15,000 *
Charles K. Watt...................... 10,000 21,000 *
All directors and executive officers
as a group (14 persons)............ 711,103 229,000 15.47%
- ------------
* Less than one percent (1%)
(a) Includes shares allocated to the employee or director through his
participation in the Tech-Sym Retirement (401(k)) Plan.
(b) Includes 5,000 shares held in trust for Mr. Gamel's adult children in which
he disclaims beneficial ownership.
(c) Consists of the shares owned by Steel Partners II, L.P. Mr. Lichtenstein is
the Chairman of the Board of Steel Partners II, L.P., and as a result, may
be considered the beneficial owner of the shares owned by Steel Partners II,
L.P., although Mr. Lichtenstein disclaims such beneficial ownership, except
as to his pecuniary interest therein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Gamel received an annual payment of $156,000 in January of 1999
pursuant to an Executive Retirement Agreement with the Company dated April 30,
1992, which provided for such annual payments for life plus surviving spousal
benefits. He also received $58,333 during 1999 as compensation for serving as
Chairman of the Board, an executive officer position, until his retirement on
July 19, 1999. In August of 1999, the Board unilaterally terminated the
remaining cash benefits under the Executive Retirement Agreement with Mr. Gamel,
and other current and former executives, and paid him $1,538,810, constituting
the net present value of the remaining cash benefits determined in accordance
with Pension Benefit Guaranty Corporation regulations. Mr. Gamel has also
participated in the Company's group health plan, paying the regular active
employee premium, and is entitled to continued participation for life pursuant
to the Executive Retirement Agreement.
In January of 2000, the Company sold all its interest in Scientific
Research Corporation ("SRC"), a company in which Dr. Watt has an equity
interest, to SRC for $9,500,000 in cash.
30
<PAGE>
PART IV
ITEM 14. EXHIBITS, REPORTS ON FORM 8-K AND FINANCIAL STATEMENT SCHEDULES
(a) The Following documents are filed as a part of this report:
1. Financial Statements:
See the accompanying "Index of Financial Statements" at Page F-1.
2. Financial Statement Schedule:
See the accompanying "Index of Financial Statements" at Page F-1.
3. Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------------------------ ------------------------------------------------------------------------------------------
<C> <S>
*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-Q (filed 8/13/98), SEC File No. 1-4371,
Exhibit 3(b).]
*10(a)+ -- 1990 Stock Option Plan, as amended effective April 29, 1997. [Registrant's 10-K (1997),
SEC File No. 1-4371, Exhibit 10(a)].
*10(b)+ -- 1998 Equity Incentive Plan, second amendment and restatement [Registrant's 10-Q (filed
8/16/99), SEC File No. 1-4371, Exhibit 10(a)].
10(c)+ -- Incentive Agreement dated as of March 28, 2000, between the Registrant and J. Michael Camp.
10(d)+ -- Incentive Agreement dated March 28, 2000, between the Registrant and J. Rankin Tippins.
10(e)+ -- Incentive Agreement dated March 28, 2000, between the Registrant and Paul L. Harp.
10(f)+ -- Incentive Agreement dated March 28, 2000, between the Registrant and Charles B. Johnson.
10(g)+ -- Noncompetition Agreement dated March 28, 2000, between the Registrant and J. Michael Camp.
10(h)+ -- Noncompetition Agreement dated March 28, 2000, between the Registrant and J. Rankin Tippins.
10(i)+ -- Noncompetition Agreement dated March 28, 2000, between the Registrant and Paul L. Harp.
10(j)+ -- Noncompetition Agreement dated March 28, 2000, between the Registrant and Charles B. Johnson.
10(k)+ -- Retention Agreement dated as of February 17, 2000, between the Registrant and Larry Collins.
10(l)+ -- Employment Agreement dated August 28, 1999, between David F. Burkey and Continental
Electronics Corporation.
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.
</TABLE>
- ------------
* Incorporated by reference to prior filing, as indicated.
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to the requirements of Item 14(c) of Form 10-K.
(b) Reports on Form 8-K.
Current report on Form 8-K dated October 28, 1999, Item 5. Other
Events, reported the executed Agreement and Plan of Merger dated
October 23, 1999, between GeoScience Corporation, Compagnie Generale
de Geophysique and Sercel Acquisition Corp., the Shareholder Agreement
dated October 23, 1999, between the Company (80.067% owner of
GeoScience Corporation), Compagnie Generale de Geophysique and Sercel
Acquisition Corp. and the information set forth
31
<PAGE>
in the press release dated October 26, 1999. No financial statements
were filed as a part of this report.
Current report on Form 8-K dated December 28, 1999, Item 2.
Acquisition or Disposition of Assets and Item 7. Financial Statements
and Exhibits, reported the sale of the Company's interest in
GeoScience Corporation (80.067%) to Sercel, Inc., a wholly owned
subsidiary of Compagnie Generale de Geophysique and information set
forth in the press release dated December 13, 1999.
32
<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
Date: March 30, 2000 By: /s/J. Michael Camp
J. Michael Camp, Chairman of the
Board, President, Chief Executive
Officer and Director
Date: March 30, 2000 By: /s/Paul L. Harp
Paul L. Harp, Chief Financial
Officer, Treasurer and Controller
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.
Date: March 30, 2000 By: /s/*W. L. Creech
W. L. Creech, Director
Date: March 30, 2000 By: /s/*Michael C. Forrest
Michael C. Forrest, Director
Date: March 30, 2000 By: /s/*A. A. Gallotta, Jr.
A. A. Gallotta, Jr., Director
Date: March 30, 2000 By: /s/*Wendell W. Gamel
Wendell W. Gamel, Director
Date: March 30, 2000 By: /s/*Richard S. Friedland
Richard S. Friedland, Director
Date: March 30, 2000 By: /s/*James R. Henderson
James R. Henderson, Director
Date: March 30, 2000 By: /s/*Warren G. Lichtenstein
Warren G. Lichtenstein, Director
Date: March 30, 2000 By: /s/*Charles K. Watt
Charles K. Watt, Director
*Signed by J. Michael Camp as attorney-in-fact pursuant to Power of
Attorney.
33
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TECH-SYM CORPORATION
INDEX OF FINANCIAL STATEMENTS
PAGE
-----
Financial Statements:
Report of Independent
Accountants.................... F-2
Consolidated Statement of
Operations for the years ended
December 31,
1999, 1998 and 1997........... F-3
Consolidated Balance
Sheet -- December 31, 1999, and
1998........................... F-4
Consolidated Statement of Cash
Flows for the years ended
December 31, 1999, 1998 and
1997........................... F-5
Consolidated Statement of
Changes in Shareholders'
Investment for the years ended
December 31, 1999, 1998 and
1997........................... F-6
Notes to Consolidated Financial
Statements..................... F-7
Financial Statement Schedule:
Schedule II -- Valuation and
Qualifying Accounts and
Reserves....................... F-28
All other schedules have been omitted because they are not applicable or
the required information is presented in the financial statements or the notes
to the financial statements.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Tech-Sym Corporation
In our opinion, the consolidated financial statements listed in the index
appearing on page F-1, present fairly, in all material respects, the financial
position of Tech-Sym Corporation and its subsidiaries at December 31, 1999, and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. In addition, in our opinion,
the financial statement schedule listed in the index appearing on page F-1,
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
These financial statements and the financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and the financial statement schedule based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, 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.
/s/ PRICEWATERHOUSECOOPERS LLP
Houston, Texas
February 18, 2000
F-2
<PAGE>
TECH-SYM CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------
1999 1998 1997
---------- ---------- ----------
Revenue.............................. $ 155,186 $ 140,479 $ 140,562
---------- ---------- ----------
Costs and expenses
Cost of revenue.................... 113,630 100,606 102,686
Selling, general and administrative
expenses........................ 38,469 31,663 31,648
Company-sponsored product
development..................... 2,899 3,505 2,402
Interest expense................... 1,574 1,305 1,429
Other expense (income) -- net...... 1,305 (2,247) (1,737)
---------- ---------- ----------
157,877 134,832 136,428
---------- ---------- ----------
(Loss) income from continuing
operations before income
taxes...................... (2,691) 5,647 4,134
(Benefit) provision for income
taxes................................ (954) 1,861 1,063
---------- ---------- ----------
(Loss) income from continuing
operations................. (1,737) 3,786 3,071
---------- ---------- ----------
Discontinued operations (Note 2)
(Loss) income from operations
(except GeoScience), less
applicable income tax (benefit)
expense......................... (2,062) 2,593
Loss on disposal (except
GeoScience), including a
provision for operating losses
through estimated disposal date,
less applicable income tax
benefit......................... (21,003) (4,597)
Income from GeoScience operations,
less applicable income tax
expense and less minority
interest........................ 4,348 1,785
Loss on disposal of GeoScience,
less applicable income tax
benefit and minority interest... (744)
Gain on sale of GeoScience
subsidiary (CogniSeis), less
applicable income tax expense
and minority interest........... 3,620
---------- ---------- ----------
(Loss) income from
discontinued
operations.............. (21,747) 1,309 4,378
---------- ---------- ----------
Net (loss) income.......... $ (23,484) $ 5,095 $ 7,449
========== ========== ==========
(Loss) earnings per common share
Continuing operations
Basic........................... $ (.29) $ .63 $ .51
Diluted......................... (.29) .61 .50
Discontinued operations
Basic........................... (3.60) .22 .72
Diluted......................... (3.60) .21 .71
Net (loss) income
Basic........................... (3.89) .84 1.23
Diluted......................... (3.89) .83 1.21
Weighted average common shares
outstanding
Basic........................... 6,040 6,049 6,038
Diluted......................... 6,040 6,175 6,168
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
TECH-SYM CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS EXCEPT PAR VALUE AND NUMBER OF SHARES)
DECEMBER 31,
----------------------
1999 1998
---------- ----------
ASSETS
Current assets
Cash and cash equivalents....... $ 27,399 $ 3,417
Short-term investments.......... 1,804 228
Receivables -- net.............. 30,371 25,271
Unbilled revenue................ 34,150 39,315
Inventories -- net.............. 20,648 24,753
Deferred income taxes........... 3,771 4,697
Net assets of discontinued
operations (Note 2)............ 11,992 86,806
Other........................... 566 1,538
---------- ----------
Total current assets.......... 130,701 186,025
Property, plant and
equipment -- net................... 31,439 18,817
Long-term receivables................ 2,224
Long-term deferred tax assets........ 3,631
Other assets......................... 9,832 17,035
---------- ----------
Total assets.................. $ 175,603 $ 224,101
========== ==========
LIABILITIES
Current liabilities
Notes payable................... $ 1,630 $ 13,911
Current maturities of long-term
debt........................... 861 1,178
Accounts payable................ 8,074 8,152
Billings in excess of costs and
estimated earnings on
uncompleted contracts.......... 6,906 5,163
Income tax payable.............. 508
Other accrued liabilities....... 12,924 7,661
---------- ----------
Total current liabilities..... 30,395 36,573
Long-term debt....................... 1,450 2,335
Deferred income taxes................ 9,452
Other liabilities.................... 26 8,010
---------- ----------
Total liabilities............. 31,871 56,370
---------- ----------
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
8,118,831 and 8,044,881 shares,
respectively....................... 811 804
Additional capital................... 42,290 41,361
Accumulated earnings................. 134,255 157,739
Accumulated other comprehensive
loss -- net........................ (919) (3,489)
Common stock held in treasury, at
cost (2,183,050 and 1,980,400
shares, respectively).............. (32,705) (28,684)
---------- ----------
Total shareholders'
investment................... 143,732 167,731
---------- ----------
Total liabilities and
shareholders' investment..... $ 175,603 $ 224,101
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
TECH-SYM CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
--------- --------- ---------
Cash flows from operating activities:
Net (loss) income.................. $ (23,484) $ 5,095 $ 7,449
Loss (income) from discontinued
operations..................... 21,747 (1,309) (4,378)
Adjustments to reconcile (loss)
income from continuing operations
to net cash provided by (used
for) continuing operations:
Provision for inventory
write-down..................... 4,600
Depreciation and amortization.... 5,835 5,132 5,053
Provision for deferred income
taxes.......................... 622 259 1,043
Loss on disposal of property,
plant & equipment.............. 158
Change in operating assets and
liabilities, net of impact of
purchase of business:
Receivables...................... (2,375) (187) (5,795)
Unbilled revenue................. 5,165 2,969 (309)
Inventories...................... (468) (3,078) (3,138)
Other assets..................... (293) (1,068) 991
Accounts payable................. (340) (166) 1,377
Other accrued liabilities and
billings in excess............. 6,046 (3,596) 3,662
Taxes on income.................. (475) (1,616) 15
Other noncurrent liabilities..... 783 (141) 83
--------- --------- ---------
Net cash provided by operating
activities of continuing
operations.................. 17,521 2,294 6,053
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures............... (17,677) (5,030) (3,457)
Investment in grantor trust........ (1,611) (616) (516)
Purchase of business, net of cash
acquired......................... (1,899) (1,854)
Proceeds on sale of discontinued
operations (Note 2).............. 54,196 9,556 8,929
Purchases of GeoScience common
stock............................ (708)
Purchases of investment
securities....................... (1,841) (128)
Sale of investment securities...... 265
Other.............................. 73 151 8
--------- --------- ---------
Net cash provided by investing
activities of continuing
operations.................. 30,798 3,933 3,110
--------- --------- ---------
Cash flows from financing activities
of continuing operations:
Net (payments) borrowings under
line of credit agreements........ (12,267) (3,766) 10,227
Proceeds from long-term debt....... 369 597 1,700
Payments on long-term debt......... (1,774) (1,268) (755)
Proceeds from exercise of stock
options.......................... 936 689 929
Acquisition of treasury stock...... (4,021) (1,024) (901)
--------- --------- ---------
Net cash (used for) provided by
financing activities of
continuing
operations.................. (16,757) (4,772) 11,200
--------- --------- ---------
Net cash used for discontinued
operations......................... (7,580) (4,576) (18,091)
--------- --------- ---------
Net increase (decrease) in cash and
cash equivalents................... 23,982 (3,121) 2,272
Cash and cash equivalents at
beginning of year.................. 3,417 6,538 4,266
--------- --------- ---------
Cash and cash equivalents at end of
year............................... $ 27,399 $ 3,417 $ 6,538
========= ========= =========
Cash flows from operating activities
include:
Cash transactions:
Interest paid.................... $ 1,545 $ 698 $ 1,267
Income taxes paid, net........... 122 1,668 3,264
Noncash transactions:
Note receivable on sale of
discontinued operations........ 3,600
Investment in joint ventures..... 309 309 394
Settlement of CogniSeis note
receivable..................... 1,244
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
TECH-SYM CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' INVESTMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK OTHER TREASURY STOCK
---------------- ADDITIONAL ACCUMULATED COMPREHENSIVE ------------------
SHARES AMOUNT CAPITAL EARNINGS INCOME (LOSS) SHARES AMOUNT
------ ------ ---------- ----------- ------------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996........... 7,941 $794 $ 39,753 $ 145,195 $ (911) 1,905 $(26,759)
Comprehensive income for 1997
Net income......................... 7,449
Other comprehensive loss, net of
tax
Foreign currency translation
adjustments..................... (2,366)
Total comprehensive income.....
Issuance of common stock for stock
options............................. 54 5 768
Acquisition of treasury shares....... 32 (901)
Tax benefit associated with stock
options............................. 156
------ ------ ---------- ----------- ------------- ------ --------
Balance, December 31, 1997........... 7,995 779 40,677 152,644 (3,277) 1,937 (27,660)
Comprehensive income for 1998
Net income......................... 5,095
Other comprehensive income (loss),
net of tax
Foreign currency translation
adjustments..................... 439
Minimum pension liability
adjustment...................... (651)
Total comprehensive income.....
Issuance of common stock for stock
options............................. 50 5 684
Acquisition of treasury shares....... 43 (1,024)
------ ------ ---------- ----------- ------------- ------ --------
Balance, December 31, 1998........... 8,045 804 41,361 157,739 (3,489) 1,980 (28,684)
Comprehensive income for 1999
Net loss........................... (23,484)
Other comprehensive income, net of
tax
Foreign currency translation
adjustments..................... 1,919
Minimum pension liability
adjustment...................... 651
Total comprehensive loss.......
Issuance of common stock for stock
options............................. 74 7 929
Acquisition of treasury shares....... 203 (4,021)
------ ------ ---------- ----------- ------------- ------ --------
Balance, December 31, 1999........... 8,119 $811 $ 42,290 $ 134,255 $ (919) 2,183 $(32,705)
====== ====== ========== =========== ============= ====== ========
</TABLE>
SHAREHOLDERS'
INVESTMENT
TOTAL
--------------
Balance, December 31, 1996........... $158,072
Comprehensive income for 1997
Net income.........................
Other comprehensive loss, net of
tax
Foreign currency translation
adjustments.....................
Total comprehensive income..... 5,083
Issuance of common stock for stock
options............................. 773
Acquisition of treasury shares....... (901)
Tax benefit associated with stock
options............................. 156
--------------
Balance, December 31, 1997........... 163,183
Comprehensive income for 1998
Net income.........................
Other comprehensive income (loss),
net of tax
Foreign currency translation
adjustments.....................
Minimum pension liability
adjustment......................
Total comprehensive income..... 4,883
Issuance of common stock for stock
options............................. 689
Acquisition of treasury shares....... (1,024)
--------------
Balance, December 31, 1998........... 167,731
Comprehensive income for 1999
Net loss...........................
Other comprehensive income, net of
tax
Foreign currency translation
adjustments.....................
Minimum pension liability
adjustment......................
Total comprehensive loss....... (20,914)
Issuance of common stock for stock
options............................. 936
Acquisition of treasury shares....... (4,021)
--------------
Balance, December 31, 1999........... $143,732
==============
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
TECH-SYM CORPORATION
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, defense
and weather information. The Company operates in three business segments;
communications, defense systems and weather information systems.
The Company's communications' products include microwave components and
subsystems, magnetic materials, ceramic substrates, timing and positioning
equipment, antennas and electronic defense products. The principal defense
systems' products include airborne training and instrumentation systems,
maritime surveillance radars, shipboard electronics, guided missiles/munitions
electronics and mechanical systems. The primary products of the Company's
weather information systems segment are high performance Doppler radars coupled
with sophisticated data processing systems.
In July 1999, the Company acquired 51% of CrossLink, Inc. ("CrossLink"),
a wireless communications product and services business, through the purchase of
voting preferred stock, for $2,000,000 in cash. CrossLink's third and fourth
quarter results are incorporated in the Company's Consolidated Statement of
Operations and Consolidated Statement of Cash Flows for the year ended December
31, 1999, and CrossLink's assets and liabilities are included in the Company's
Consolidated Balance Sheet as of December 31, 1999. The results of operations of
CrossLink prior to the acquisition date were not material to the Company. These
financial statements do not reflect any minority interest related to CrossLink
because of the Company's preference in the net assets of CrossLink.
The Company adopted a plan, effective June 30, 1998, (the "measurement
date"), to sell its broadcast, air monitoring products and real estate
investment subsidiaries. Effective December 31, 1998, (the "measurement
date"), the Company adopted a plan to sell its majority owned subsidiary,
GeoScience Corporation ("GeoScience"). These businesses, including minority
interest attributable to GeoScience, are presented as discontinued operations in
these financial statements. See Note 2 for discussion on discontinued
operations.
In December 1999, the Company retained Quarterdeck Investment Partners,
Inc., to assist in evaluating strategic options for the Company. The possible
alternatives include recapitalization, merger, privatization and sale of all or
part of the Company.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Tech-Sym
Corporation and its subsidiaries after the elimination of intercompany
transactions. Investments in companies and joint ventures over which the Company
has significant influence, but not a controlling interest, are recorded using
the equity method of accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company's 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. It is possible that actual results could
differ significantly from those estimates and that significant changes to
estimates could occur. The Company's management believes that the estimates used
in these financial statements are reasonable.
F-7
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SHORT-TERM INVESTMENTS AND OTHER CASH EQUIVALENTS
Short-term investments are carried at market value and have maturities of
less than one year. The Company classifies short-term investments with original
maturities of three months or less as cash equivalents.
REVENUE RECOGNITION
The Company recognizes revenue on long-term contracts utilizing the
percentage of completion method, measured by comparing total costs incurred to
date to estimated total costs for each contract. Estimated losses on contracts
are recorded 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.
Revenue from the sale of products manufactured in standard manufacturing
operations is recognized at the time of shipment unless significant future
obligations remain. Where significant future obligations exist, revenue is not
recognized until such obligations have been satisfied or are no longer
significant.
The Company leases products to customers under operating leases. Revenues
from such leases are recognized on the straight-line method over the term of the
lease based on the total rentals to be paid under the lease. Revenues from
leased assets comprised less than 10% of total revenues reported in 1999. The
Company did not have assets under lease in 1998 and 1997.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined
principally using the first-in, first-out or weighted 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.
Intangible assets, included in other assets and consisting primarily of
goodwill, are amortized using the straight-line method over 5 to 15 years.
Amortization expense was $800,000, $1,224,000 and $940,000 in 1999, 1998 and
1997, respectively. Net intangible assets were $4,491,000 and $5,229,000 at
December 31, 1999, and 1998, respectively, net of accumulated amortization of
$3,280,000 and $6,238,000 at December 31, 1999, and 1998, respectively.
LONG-LIVED ASSETS
The Company reviews for the impairment of long-lived assets and
identifiable intangibles whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The carrying amount
of a long-lived asset is considered impaired when anticipated undiscounted cash
flows expected to result from the use of the asset and its eventual disposition
is less than its carrying amount. The Company believes that no material
impairment exists at December 31, 1999.
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.
F-8
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
The provision for income taxes is computed based on the pretax income
included in the consolidated statement of income. 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 basis 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 since the Company intends to indefinitely reinvest the
undistributed earnings.
FOREIGN CURRENCY TRANSLATION
The Company's foreign subsidiaries use their local currency as their
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
comprehensive income within shareholders' investment.
STOCK-BASED COMPENSATION
The Company measures compensation expense for its stock-based employee
compensation plan using the intrinsic value method. Pro forma disclosures of the
effect on net income and earnings per share as if the fair value-based method
has been applied in measuring compensation expense is presented in Note 9.
EARNINGS PER SHARE
Earnings per share is reported as both basic earnings per share, which is
based on the weighted average number of common shares outstanding, and diluted
earnings per share, which is based on the weighted average number of common
shares outstanding and all dilutive potential common shares outstanding. Stock
options are the only potential dilutive shares the Company has outstanding. Due
to the Company's losses, diluted earnings per share presented on the
Consolidated Statement of Operations for the year ended December 31, 1999, do
not reflect the effect of outstanding stock options because to do so would be
anti-dilutive. Diluted earnings per share for 1998 and 1997 exclude the effects
of options to acquire 166,400 and 232,700 shares of Common Stock at weighted
average exercise prices of $31.23 and $34.46, respectively, because the options'
exercise prices were greater than the average market price of the common shares
and to do so would be anti-dilutive.
RECENT PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("FAS 133") ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, which established accounting and reporting
standards for derivative instruments. The Company has historically not engaged
in significant derivative instrument activity. In June 1999, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 137 ("FAS 137") ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES, which delayed implementation and the effective date of FAS 133 until
after June 15, 2000. Adoption of FAS 133 is not expected to have a material
effect on the Company's financial position or operational results.
In December 1999, the Securities and Exchange Commission ("SEC") released
Staff Accounting Bulletin No. 101 ("SAB 101"), REVENUE RECOGNITION, which
provides guidance on the recognition, presentation, and disclosure of revenue in
financial statements. SAB 101 was issued as a result of the increasing number of
revenue recognition issues encountered by registrants. The SEC staff indicated
that SAB 101 does not alter existing rules, but does explain how the rules apply
to transactions that are not specifically addressed in current guidance. The
staff believes that revenue generally is (i) realized or
F-9
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
realizable and (ii) earned when all of the following criteria have been
satisfied: persuasive evidence of an arrangement exists, delivery has occurred
or services have been rendered, the seller's price to the buyer is fixed or
determinable and collectibility is reasonably assured. All registrants are
expected to apply the accounting and disclosure requirements that are described
in SAB 101. The staff, however, will not object if registrants that have not
applied these accounting provisions do not restate prior financial statements,
provided that their prior policy was acceptable under generally accepted
accounting principals and they report the change as a cumulative effect of a
change in accounting principle. Any such change must be reported no later than
the first fiscal quarter of the fiscal year beginning after December 15, 1999.
The Company is undertaking a review of its revenue recognition policies to
determine whether such policies are consistent with the principals of SAB 101.
However, the Company does not expect that SAB 101 will have a significant impact
on the Company's revenue recognition policies.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
year presentation.
NOTE 2 -- DISCONTINUED OPERATIONS
Effective June 30, 1998, the Company adopted a plan to sell its businesses
involved in real estate development (Lake Investment Company or "Lake"),
manufacture of air monitoring products (Anarad, Inc., or "Anarad") and
manufacture of radio and television broadcast equipment (Continental Electronics
Corporation or "Continental"), and effective December 31, 1998, the Company
adopted a plan to sell its majority owned subsidiary, GeoScience Corporation.
The effective dates of June 30, 1998, and December 31, 1998, are the respective
measurement dates referred to when discussing the results of operations of these
businesses elsewhere in this report.
The presentation of the discontinued operations includes segregation of the
operating results and the gain or loss from disposition of the businesses in the
Consolidated Statement of Operations for the years ended December 31, 1999, 1998
and 1997. The gain or loss on disposal includes actual and estimated operating
results of the discontinued businesses from the measurement date through the
actual or estimated disposal date ("phase-out period"). The net assets and
cash flows of the discontinued operations are segregated in the Consolidated
Balance Sheet at December 31, 1999, and 1998 and in the Consolidated Statement
of Cash Flows at December 31, 1999, 1998 and 1997. Accordingly, the revenue,
costs and expenses, assets and liabilities and cash flows of these discontinued
operations have been excluded from the respective captions in the Consolidated
Statement of Operations, Consolidated Balance Sheet and Consolidated Statement
of Cash Flows and have been reported as "Income (loss) from discontinued
operations, net of applicable income taxes (benefits)," as "Net assets of
discontinued operations" and as "Net cash used in discontinued operations"
for all periods presented. The results of discontinued operations do not include
any interest expense or management fees allocated by the Company. Data presented
for earnings per share reflect the reclassification of the discontinued
operations.
On November 18, 1998, the Company sold Lake to Consumer Loan Portfolios
Inc., for cash of $1,300,000 plus notes receivable of $3,600,000 collateralized
by real estate owned by Lake. The Company received $500,000 on a note receivable
in February 1999. During the remainder of 1999, the Company did not receive
scheduled payments on the remaining $3,100,000 notes receivable from Consumer
Loan Portfolios Inc. Due to the non-payment of the notes receivable, the Company
issued a demand for arbitration and statement of claim as provided in the
purchase agreement. The Company did not accrue interest income on the notes
receivable during 1999. The Company believes it will ultimately recover the
value of this asset.
On March 15, 1999, the Company sold substantially all of the assets of
Anarad for cash of $550,000 plus 90% of the cash collected during the 90 days
following March 15, 1999, on outstanding trade accounts receivable as of that
date. The Company received a net of $219,000 on these outstanding trade accounts
F-10
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
receivable. In 1999, the Company recognized an additional loss of $117,000 on
the final disposition of Anarad.
In December 1998, the Boards of Directors of the Company and GeoScience
committed to a plan to seek a strategic merger partner for GeoScience. On
January 18, 1999, the Company and GeoScience signed an agreement to merge
GeoScience with a third party, subject to shareholder and regulatory approval.
The Company, GeoScience and the third party subsequently terminated the proposed
merger. The third party paid GeoScience $3,000,000 in connection with such
termination, which is included in the results of discontinued operations.
In December 1999, the Company tendered its shares in GeoScience to
Compagnie Generale de Geophysique ("CGG") pursuant to a tender offer related
to the merger of GeoScience and Sercel, Inc., a wholly-owned subsidiary of CGG.
Under the terms of the agreement, the Company received $53,646,000 in cash for
its 7,995,000 shares, or $6.71 per share, and CGG assumed GeoScience's debt
obligations of approximately $29,000,000, eighty percent of which were
previously guaranteed by the Company. At December 31, 1998, the Company
estimated that a gain would result from the ultimate disposal of GeoScience in
an amount sufficient to cover actual and estimated operating losses during the
phase-out period. Accordingly, no estimated gain on disposal was recorded as of
December 31, 1998. As a result of the anticipated sale of GeoScience to a third
party during the first quarter of 1999 as discussed above, the effect of
estimated operating results during the phase-out period were not significant to
the estimated gain on disposal at December 31, 1998. As a result of the tender
offer transaction in December 1999, the Company recognized an after tax loss on
disposal of $744,000, which includes after tax operating losses during the
phase-out period of $20,728,000. The after tax losses reflect the down turn in
the seismic industry that occurred during 1999 and the extended length of time
that the Company owned GeoScience.
In June 1997, GeoScience adopted a plan to sell its geoscientific software
subsidiary, CogniSeis Development, Inc., ("CogniSeis"). CogniSeis has been
included in the Company's presentation of discontinued operations in the
Consolidated Statement of Income for the years ended December 31, 1998, and
1997. On October 14, 1997, ("the disposal date"), CogniSeis was sold to Paradigm
Geophysical Corporation for cash of $8,929,000, net of certain liabilities
assumed pursuant to the terms of the sale agreement, plus a note receivable.
During 1998, the uncertainties surrounding certain provisions of the sales
agreement were resolved and GeoScience received payment in full of the note
receivable, resulting in the recognition of a gain on the sale of $3,620,000,
net of taxes and minority interest.
Under the original plan of disposal for Continental, adopted at June 30,
1998, (the "measurement date"), the Company intended to sell Continental as a
whole, including the subsidiaries located in Chile and Germany. At December 31,
1998, the Company estimated that a gain would result from the ultimate disposal
of Continental in an amount sufficient to cover actual and estimated operating
losses during the phase-out period. Accordingly, recognition of actual and
estimated after tax operating losses of $7,972,000 were deferred at December 31,
1998. The recorded amount of loss on disposal of $3,534,000 for the year ended
December 31, 1998, was related to income taxes of Continental's German
subsidiary. As a result of the Company's sales efforts and negotiations with
potential buyers since the measurement date, the Company revised the original
plan and is currently attempting to sell the product lines of Continental and to
close down operations the Company believes will not be sold. The effects of the
revision in the plan, the extended holding period and the occurrence of
operating losses during the phase-out period in excess of previous estimates
have resulted in an estimated after tax loss on disposal of $20,886,000 in 1999,
including actual and estimated after tax operating losses during the phase-out
period of $19,816,000. The phase-out period after tax operating losses
recognized in 1999 includes losses deferred in 1998.
In October 1999, Continental entered into a plan of liquidation of its
German subsidiary. Under the plan of liquidation, Continental is required to
fund the cash flow requirements of operating the German subsidiary during the
liquidation phase and for the deficiency in cash required to retire the German
F-11
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
subsidiary's obligations. Under the terms of the plan, Continental's commitment
is not expected to exceed $6,079,000 and the plan is expected to be completed
during the year 2000. The Company has guaranteed Continental's commitment under
the plan of liquidation. At December 31, 1999, the liquidator had not negotiated
a settlement of the defined benefit pension plan obligation with the German
pension insurance trust, however, the Company believes the liquidator will reach
a settlement.
In February 2000, Continental entered into a letter of intent to sell the
assets of its digital television product line ("DTV"). The transaction is
expected to close by April 30, 2000. Continental is conducting discussions with
other parties interested in its remaining product lines and real estate and
expects to complete sales transactions during June 2000.
The total revenue for the period January 1 through December 31, 1999, for
Continental was $39,970,000. The total revenue during 1999 for GeoScience and
Anarad, through the respective disposition dates, was $81,088,000 and $348,000,
respectively.
The total revenue for the period January 1 through December 31, 1998, for
Continental and Anarad was $39,991,000 and $2,605,000, respectively. The total
revenue for Lake during 1998 through the disposition date, November 18, 1998,
was $1,482,000.
The results of the discontinued operations through the appropriate
measurement dates are summarized as follows, as well as, the expected losses
from disposition (in thousands except per share data):
<TABLE>
<CAPTION>
GEOSCIENCE CONTINENTAL ANARAD LAKE TOTAL
---------- ----------- ------- ------ --------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998
Revenue......................... $ 122,933 $17,640 $ 1,761 $ 776 $143,110
Income (loss) before provision
for income taxes.............. 5,068 (2,640) (277) (160) 1,991
Income tax expense (benefit).... 111 (871) (91) (53) (904)
Income (loss) from operations,
net of income taxes and
minority interest............. 4,348 (1,769) (186) (107) 2,286
Gain on sale of CogniSeis, net
of taxes and minority
interest...................... 3,620 3,620
Loss on dispositions, net of
income taxes.................. (3,534) (1,063) (4,597)
Net income (loss)............... 7,968 (5,303) (1,249) (107) 1,309
Earnings (loss) per common share
Basic...................... $ 1.32 $ (.88) $ (.20) $ (.02) $ .22
Diluted.................... 1.29 (.88) (.20) (.02) .21
</TABLE>
<TABLE>
<CAPTION>
GEOSCIENCE CONTINENTAL ANARAD LAKE TOTAL
---------- ----------- ------- ------ --------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997
Revenue......................... $ 94,451 $54,094 $ 3,151 $1,842 $153,538
Income (loss) before provision
for income taxes.............. 5,283 4,822 (644) (489) 8,972
Income tax expense (benefit).... 1,743 1,432 (191) (145) 2,839
Income (loss) from operations,
net of income taxes and
minority interest............. 3,021 3,390 (453) (344) 5,614
Loss on operation of CogniSeis,
net of income taxes and
minority interest............. (1,236) (1,236)
Net income (loss)............... 1,785 3,390 (453) (344) 4,378
Earnings (loss) per common share
Basic...................... $ .29 $ .56 $ (.08) $ (.05) $ .72
Diluted.................... .29 .55 (.08) (.06) .71
</TABLE>
F-12
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For financial reporting purposes, the assets and liabilities attributable
to undisposed discontinued operations have been classified in the consolidated
balance sheet as net assets of discontinued operations and consists of the
following (in thousands):
CONTINENTAL
-----------
December 31, 1999
Current assets.................. $23,784
Total assets.................... 34,333
Current liabilities............. 15,715
Total liabilities............... 22,341
Net assets of the discontinued
operation...................... 11,992
<TABLE>
<CAPTION>
GEOSCIENCE CONTINENTAL ANARAD TOTAL
---------- ----------- ------ --------
<S> <C> <C> <C> <C>
December 31, 1998
Current assets.................. $ 107,199 $38,052 $ 750 $146,001
Total assets.................... 152,171 46,211 1,063 199,445
Current liabilities............. 54,644 29,083 587 84,314
Total liabilities............... 77,459 34,593 587 112,639
Net assets of discontinued
operations.................... 74,712 11,618 476 86,806
</TABLE>
NOTE 3 -- RECEIVABLES AND UNBILLED REVENUE
Receivables and unbilled revenue are summarized as follows (in thousands):
DECEMBER 31,
--------------------
1999 1998
--------- ---------
Current receivables
Commercial (less allowance for
doubtful accounts of $308 and
$339, respectively)........... $ 13,729 $ 15,630
U.S. Government................. 10,770 8,144
Other receivables............... 5,872 1,497
--------- ---------
$ 30,371 $ 25,271
========= =========
Long-term receivables
Other........................... $ $ 2,224
========= =========
Unbilled revenues
Commercial...................... $ 8,255 $ 9,218
U.S. Government................. 25,895 30,097
--------- ---------
$ 34,150 $ 39,315
========= =========
Government receivables and unbilled revenue include amounts from prime
contractors with the U.S. Government where the Company is the subcontractor.
Current receivables at December 31, 1999, include trade accounts, the $3,100,000
notes receivable due from the sale of Lake and a tax refund due of $2,490,000.
Current receivables at December 31, 1998, include trade accounts and the current
portion of long-term notes receivable of $1,394,000 related to the sale of Lake.
Long-term receivables at December 31, 1998, include the non-current portion of
the notes receivable related to the sale of Lake.
Unbilled revenues represent revenue recognized on contracts for which
billings had not been presented to the customers because the amounts were not
contractually billable at the balance sheet date. Substantially all unbilled
amounts receivable will be billed and collected within one year in accordance
with the terms of the related contracts.
F-13
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- INVENTORIES
Inventories, which consist principally of electronic components, are
summarized as follows (in thousands):
DECEMBER 31,
--------------------
1999 1998
--------- ---------
Raw materials........................ $ 13,204 $ 16,686
Work in process...................... 6,782 7,514
Finished goods....................... 2,579 2,430
--------- ---------
22,565 26,630
Less reserve......................... (1,917) (1,877)
--------- ---------
$ 20,648 $ 24,753
========= =========
NOTE 5 -- PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment are summarized as follows
(dollars in thousands):
DECEMBER 31,
ESTIMATED ----------------------
LIVES 1999 1998
---------- ---------- ----------
At cost:
Land, buildings and
improvements.................. 10 - 35 $ 19,485 $ 18,514
Machinery and equipment......... 3 - 12 66,940 52,041
---------- ----------
86,425 70,555
Less accumulated depreciation........ (54,986) (51,738)
---------- ----------
$ 31,439 $ 18,817
========== ==========
Depreciation expense was $5,035,000, $3,908,000 and $4,113,000 for 1999,
1998 and 1997, respectively.
The cost and accumulated depreciation, of equipment subject to an operating
lease with a customer, was $11,770,000 and $786,000, respectively, at December
31, 1999. The operating lease was phased-in, commencing May 1999, and is
renewable annually on October 1 at the customer's option, for four one-year
terms, with the last term ending on September 30, 2004. The Company did not have
assets under lease at December 31, 1998, and 1997.
NOTE 6 -- NOTES PAYABLE
On December 15, 1999, the Company repaid the outstanding debt related to
its credit facility with Wells Fargo Bank and Bank of America in the aggregate
amount of $23,422,000, of which $11,654,000 was related to a discontinued
operation. In conjunction with the debt repayment, the credit facility was
terminated.
At December 31, 1999, the Company had short-term line of credit facilities
aggregating approximately $10,150,000. Borrowings 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 including limitations on asset
sales, indebtedness, payments of dividends and acquisition of treasury shares,
investments and certain financial covenants and ratios. At December 31, 1999,
and 1998, borrowings under these lines totaled $1,630,000 and $13,911,000,
respectively. Weighted average interest rates on such borrowings outstanding at
December 31, 1999, and 1998 were 8.44% and 7.22%, respectively.
F-14
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On January 20, 2000, the Company repaid the outstanding debt related to its
credit facility with First Union Bank, of which $1,172,000 was outstanding as of
December 31, 1999. In conjunction with the repayment, the credit facility was
terminated, which reduced the total amount available to the Company under
remaining line of credit agreements to $7,692,000.
NOTE 7 -- LONG-TERM DEBT
The components of long-term debt are summarized as follows (dollars in
thousands):
DECEMBER 31,
--------------------
1999 1998
--------- ---------
Real estate mortgage notes, due in
monthly installments with interest
at 7.44% to 9.06%, maturity at
various dates through 2005......... $ 2,311 $ 3,458
Notes collateralized by equipment,
due in monthly installments with
interest at 13.0%, maturity at
various dates through 1999......... 55
--------- ---------
2,311 3,513
Less current maturities.............. (861) (1,178)
--------- ---------
$ 1,450 $ 2,335
========= =========
Future maturities of long-term debt are $861,000 in 2000, $489,000 in 2001,
$413,000 in 2002, $255,000 in 2003, $246,000 in 2004 and $47,000 thereafter.
At December 31, 1999, $3,325,000 of land, buildings and improvements was
pledged as collateral on various long-term debt obligations.
NOTE 8 -- INCOME TAXES
The components of (loss) income before income taxes, excluding minority
interest, are summarized as follows (in thousands):
YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
---------- --------- ---------
Continuing operations
Domestic........................ $ (5,416) $ 4,877 $ 2,982
Foreign......................... 2,455 770 1,152
---------- --------- ---------
Total continuing
operations.............. (2,691) 5,647 4,134
---------- --------- ---------
Discontinued operations
Domestic........................ (33,402) 11,982 2,381
Foreign......................... (19,208) (3,879) 4,289
---------- --------- ---------
Total discontinued
operations.............. (52,610) 8,103 6,670
---------- --------- ---------
Total (loss) income
before income
taxes.............. $ (55,301) $ 13,750 $ 10,804
========== ========= =========
F-15
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The (benefit) provision for income taxes, excluding minority interest,
consists of the following (in thousands):
YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
---------- --------- ---------
Continuing operations
Current tax (benefit) expense
U.S. Federal.................... $ (2,487) $ 1,123 $ (341)
State........................... 318 250 330
Foreign......................... 593 229 31
---------- --------- ---------
Total current continuing
operations.............. (1,576) 1,602 20
Deferred tax expense
U.S. Federal.................... 622 134 269
Foreign......................... 125 774
---------- --------- ---------
Total deferred continuing
operations.............. 622 259 1,043
---------- --------- ---------
Total continuing
operations............ (954) 1,861 1,063
---------- --------- ---------
Discontinued operations.............. (25,702) 4,582 2,125
---------- --------- ---------
Total (benefit)
provision............... $ (26,656) $ 6,443 $ 3,188
========== ========= =========
The overall income tax (benefit) expense, excluding minority interest, for
1999, 1998 and 1997 resulted in effective tax rates of 48.2%, 46.9% and 29.5%,
respectively. The income tax (benefit) expense for 1999, 1998 and 1997 related
to continuing operations resulted in effective tax rates of 35.5%, 33% and
25.7%, respectively. The reasons for the difference between these effective tax
rates and the U.S. statutory rate of 35% are as follows (in thousands):
YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
---------- --------- ---------
Continuing Operations
Federal taxes on income at
statutory rates............... $ (942) $ 1,976 $ 1,447
State income taxes, net......... 206 162 214
Foreign tax (rate
differential)................. (266) 87
Foreign Sales Corporation
benefit....................... (468) (602)
Research and experimentation tax
credit........................ (230) (100)
Nondeductible intangible
amortization.................. 65 204 169
Valuation allowance--foreign.... 146
Other, net...................... 67 (100) (65)
---------- --------- ---------
Total continuing operations... (954) 1,861 1,063
---------- --------- ---------
Discontinued Operations
Federal taxes on income at
statutory rates............... (18,414) 2,836 2,334
State income taxes, net......... 91 24
Foreign tax (rate
differential)................. 197
Foreign Sales Corporation
benefit....................... (1,067) (273)
Research and experimentation tax
credit........................ (114)
Nondeductible intangible
amortization.................. (88) 104 26
Valuation allowance--foreign.... 5,024 2,475
GeoScience disposition.......... (13,742)
Other, net...................... 1,518 (54) 128
---------- --------- ---------
Total discontinued
operations................. (25,702) 4,582 2,125
---------- --------- ---------
Total (benefit)
provision............... $ (26,656) $ 6,443 $ 3,188
========== ========= =========
F-16
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax (liabilities) assets of continuing operations are comprised of
the following (in thousands):
DECEMBER 31,
--------------------
1999 1998
--------- ---------
Deferred tax (liabilities)
Depreciation and amortization...... $ (721) $ (154)
Installment sales.................. 864
Equity in earnings of affiliate.... (1,571) (1,386)
Basis difference in affiliate
stock............................ (7,632)
Other.............................. (69) (1,144)
--------- ---------
Deferred tax (liabilities).... (2,361) (9,452)
--------- ---------
Deferred tax assets
Deferred compensation.............. 2,639
Compensatory absences accruals..... 1,176 659
Inventory accounting............... 961 1,107
Product warranty and related
accruals......................... 178
Contract percent of completion..... 1,197 281
Minimum tax credit................. 1,010
Research and experimentation tax
credits.......................... 1,525
Net operating losses............... 3,959
Other.............................. 514 (167)
--------- ---------
Gross deferred tax assets..... 10,342 4,697
--------- ---------
Deferred tax asset valuation
allowance.................. (579)
--------- ---------
Total deferred tax asset
(liability)........... $ 7,402 $ (4,755)
========= =========
At December 31, 1999, the Company had net operating loss carryforwards of
approximately $11,312,000 available to offset future U.S. Federal taxable income
which expire in 2019, if not utilized.
NOTE 9 -- STOCK OPTION PLANS
The Company's 1990 Stock Option Plan (the "1990 Plan") provided for the
granting of stock options and stock appreciation rights ("SARs") to key
employees of the Company and to the members of the Board of Directors who are
not employees of the Company. Each option granted under the 1990 Plan has an
exercise price of 100% of the fair market value on the date of grant and a term
of ten years. The options granted to key employees are exercisable as follows;
20% after one year, with an additional 20% exercisable each six months
thereafter. Options granted to nonemployee directors are exercisable in full
after one year. Upon the adoption of the 1998 Equity Incentive Plan (the "1998
Plan") by the shareholders on April 28, 1998, no further options were available
for grant under the 1990 Plan.
SARs were granted in tandem with each stock option granted under the 1990
Plan. Any SARs granted under the 1990 Plan 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 and in substitution for the holder's rights under the
related stock options, 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.
Effective October 15, 1998, approximately 278,700 employee stock options
previously granted were amended, with the consent of each optionee, to provide
for a revised exercise price of $21.25, the closing market price for the
Company's stock on such date. The vesting period for the amended stock options
was
F-17
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
extended one year from the original vesting schedule. However, none of the
repriced stock options were exercisable before October 16, 1999.
The 1998 Plan covers 750,000 shares of Common Stock and provides for the
granting of stock options to key employees of the Company and to nonemployee
directors. Each 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 granted to key
employees in 1998 are exercisable as follows; 25% after one year, with an
additional 25% exercisable each year thereafter. The options granted to key
employees in 1999 are exercisable as follows; 20% after one year, with an
additional 20% exercisable each six months thereafter. Options granted to
nonemployee directors are exercisable on the date of grant. Shares granted and
subsequently canceled are available for future grants. At December 31, 1999,
322,500 options were available for grant under the 1998 Plan.
Changes in outstanding options under the Company's stock option plans
during 1999, 1998 and 1997 were as follows:
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
------- ---------
Outstanding, December 31, 1996....... 630,020 $ 22.47
Options granted................. 82,500 28.00
Options canceled................ (16,300) 32.00
Options exercised............... (38,650) 15.79
-------
Outstanding, December 31, 1997....... 657,570 23.32
Options granted................. 150,000 28.88
Options canceled................ (6,800) 29.79
Options exercised............... (50,000) 13.79
-------
Outstanding, December 31, 1998....... 750,770 20.61
Options granted................. 277,500 21.12
Options canceled................ (25,000) 21.50
Options exercised............... (73,950) 13.31
-------
Outstanding, December 31, 1999....... 929,320 20.22
=======
Exercisable options
December 31, 1997............... 446,650 $ 19.18
December 31, 1998............... 342,070 16.83
December 31, 1999............... 557,800 19.72
The following table summarizes significant ranges of the Company's
outstanding and exercisable options at December 31, 1999:
<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 - 8.13....................... 38,000 0.52 $ 8.06 38,000 $ 8.06
12.38 - 15.75....................... 146,450 3.41 15.58 146,450 15.58
19.00 - 28.00....................... 717,870 7.95 21.38 346,350 21.83
30.38 - 34.63....................... 27,000 6.92 31.50 27,000 31.50
------- -------
8.00 - 34.63....................... 929,320 6.90 20.22 557,800 19.72
======= =======
</TABLE>
F-18
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pro forma information regarding net income and earnings per share is
required by FAS 123 and has been determined as if the Company had accounted for
its stock options under the fair value method of FAS 123. The fair value of the
options at date of grant was estimated using a Black-Scholes option pricing
model with the following weighted average assumptions:
1999 1998 1997
------- --------- ---------
Expected life........................ 7 years 8 years 5.4 years
Interest rate........................ 5.42% 5.17% 6.38%
Volatility........................... 26% 29% 24%
Dividend yield....................... 0% 0% 0%
Weighted average fair value of
options granted during the year.... $ 8.66 $ 13.49 $ 10.33
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized over the options' vesting period. The Company's pro forma
net income and earnings per share was as follows (in thousands except per share
data):
YEAR ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
--------- --------- ---------
(Loss) income from continuing
operations after tax, as
reported........................... $ (1,737) $ 3,786 $ 3,071
(Loss) income from continuing
operations after tax, pro forma.... (3,656) 2,179 2,242
(Loss) income from discontinued
operations after tax, as
reported........................... (21,747) 1,309 4,378
(Loss) income from discontinued
operations after tax, pro forma.... (22,268) 653 3,896
Net (loss) income, as reported....... (23,484) 5,095 7,449
Net (loss) income, pro forma......... (25,924) 2,832 6,138
(Loss) earnings per common share
Continuing operations, as
reported
Basic...................... (.29) .63 .51
Diluted.................... (.29) .61 .50
Continuing operations, pro forma
Basic...................... (.61) .36 .37
Diluted.................... (.61) .35 .36
Discontinued operations, as
reported
Basic...................... (3.60) .22 .72
Diluted.................... (3.60) .21 .71
Discontinued operations, pro
forma
Basic...................... (3.69) .11 .65
Diluted.................... (3.69) .11 .63
Net (loss) income, as
reported......................
Basic...................... (3.89) .84 1.23
Diluted.................... (3.89) .83 1.21
Net (loss) income, pro forma
Basic...................... (4.29) .47 1.02
Diluted.................... (4.29) .46 1.00
F-19
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pro forma income from discontinued operations includes stock option
compensation expense related to stock-based awards granted by the Company's
previously majority owned subsidiary, GeoScience, of $521,000, $656,000 and
$482,000 for the years 1999, 1998 and 1997, respectively.
The pro forma effect on net income for 1999, 1998 and 1997 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 and the effect of stock options that may be granted in
the future.
NOTE 10 -- SHAREHOLDERS' INVESTMENT
STOCK REPURCHASES
During the second quarter of 1999, the Company repurchased 71,700 shares of
its Common Stock under a previously approved repurchase program. On May 11,
1999, the Company's Board of Directors authorized the Company to repurchase
250,000 shares of its Common Stock and rescinded the 6,100 shares remaining on
the previous program. Additionally, the Company purchased 130,950 shares of its
Common Stock under the new repurchase plan during 1999. The shares are held by
the Company and reported at cost in the consolidated balance sheet.
NOTE 11 -- BENEFIT PLANS
The Company maintains a defined contribution retirement plan covering
substantially all domestic employees. The annual Company contribution and
administrative costs of the plan were $1,444,000, $1,328,000 and $1,314,000 for
1999, 1998 and 1997, respectively.
The Company has executive retirement agreements with certain executive
officers of the Company and a nonemployee directors' retirement plan (the
"Plan") for those directors that have never been employees of the Company.
Prior to the 1999 settlement described below, the executive retirement
agreements generally provided 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 and the nonemployee
directors' agreements generally provided for the payment of specified amounts
upon retirement on or after age 65 or upon termination of service due to
disability or death.
In August 1999, the Company elected to discontinue the accrual of benefits
under the Plan and to make lump-sum settlements to the participants. Lump-sum
settlements totaling $8,650,000 were paid as of December 31, 1999, resulting in
a remaining settlement obligation of $380,000 at December 31, 1999. The
remaining lump-sum settlements were paid in January 2000.
The Company had segregated certain assets in a grantor trust to meet the
obligations of the Plan. The assets were available to creditors of the Company
in the event of its bankruptcy or insolvency and, therefore, were reported as
assets of the Company rather than assets of the Plan. These assets aggregating
$441,000 and $7,317,000 at December 31, 1999, and 1998, respectively, were
included in other assets.
F-20
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The costs for the executive retirement agreements and the nonemployee
directors' retirement plan in 1999, 1998 and 1997 were $1,642,000, $988,000 and
$750,000, respectively. The status of the Plan at December 31, was as follows
(in thousands):
1999 1998
--------- ---------
Change in benefit obligation
Benefit obligation at beginning
of year....................... $ 7,881 $ 6,778
Service cost.................... 125 177
Interest cost................... 366 506
Special termination benefits.... 270
Benefits paid................... (547) (312)
Effects of settlements.......... (7,459)
Plan amendment.................. 251
Actuarial (gain) loss........... (366) 211
--------- ---------
Benefit obligations at end of
year.......................... $ $ 7,881
========= =========
Change in plan assets
Fair value of plan assets at
beginning of year............. $ $
Employer contributions.......... 9,060 312
Effect of settlements........... (8,513)
Benefits paid................... (547) (312)
--------- ---------
Fair value of plan assets at end
of year....................... $ $
========= =========
Reconciliation of funded status
Funded status................... $ $ (7,881)
Unrecognized actuarial loss..... 521
Unamortized transition
obligation.................... 245
Unamortized prior service
cost.......................... 221
--------- ---------
Net amount recognized........... $ $ (6,894)
========= =========
Amounts recognized in the statement
of financial position consist of
Accrued benefit liability....... $ $ (7,469)
Intangible asset................ 466
Accumulated other comprehensive
income........................ 109
--------- ---------
Net amount recognized........... $ $ (6,894)
========= =========
Weighted average assumptions as of
December 31,
Discount rate................... N/A 7.0%
Rate of compensation increase... N/A 5.0%
Components of net periodic benefit
cost
Service cost.................... $ 125 $ 177
Interest cost................... 366 506
Amortization of prior service
cost.......................... 22 57
Amortization of transitional
obligation.................... 60 80
Effect of settlements........... 1,592
--------- ---------
Net periodic benefit cost....... $ 2,165 $ 820
========= =========
F-21
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The projected benefit obligation was developed assuming a discount rate of
7% in 1999, 7% in 1998 and 7.5% in 1997, and an annual rate of increase in
compensation levels of 5% in 1999, 1998 and 1997. The accrued benefits liability
of $380,000 and $6,577,000 at December 31, 1999, and 1998, respectively, is
classified as other accrued liabilities on the Consolidated Balance Sheet.
Under the terms of the Plan, the Company is required to provide certain
future medical and insurance benefits to the participants and their family
members. At December 31, 1999, $589,000 was included in other accrued
liabilities related to such obligations.
NOTE 12 -- COMMITMENTS AND CONTINGENCIES
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk are primarily cash and cash equivalents, short-term
investments, trade 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 various agencies of the U.S.
Government. Concentrations of credit risk with respect to the receivables,
unbilled revenues and long-term receivables from customers other than the U.S.
Government are generally limited due to the large number of customers in the
Company's customer base, their dispersion across different industries and
geographic areas and the use of letters of credit to guarantee certain
receivables.
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.
The carrying value of the Company's financial instruments approximated fair
value at December 31, 1999, and 1998. Cash and cash equivalents, receivables,
accounts payable and accrued liabilities approximate fair value due to their
short maturities while the fair value of long-term receivables and debt is
estimated based on competitive interest rates.
LETTERS OF CREDIT
The Company has outstanding irrevocable letters of credit in the amounts of
$8,164,000 and $3,830,000 as of December 31, 1999, for continuing and
discontinued operations, respectively. These letters of credit, which have terms
from one month to two years, are primarily maintained as collateral for
performance and for advances received on long-term contracts. The letters of
credit reflect fair value as a condition of their underlying purpose and are
subject to fees competitively determined in the market place. At December 31,
1999, short-term investments include investments with a carrying value of
$1,704,000 that are pledged as collateral for outstanding letters of credit for
Continental.
LEASE COMMITMENTS
The Company leases manufacturing and other facilities and equipment under
certain long-term agreements which expire at various dates through 2004. Total
rentals charged to operations under such operating leases for 1999, 1998 and
1997 were $1,248,000, $805,000 and $723,000, respectively.
Future minimum rental commitments under all noncancelable operating leases
in effect at December 31, 1999, totaled $3,661,000 and are payable as follows:
$1,561,000 in 2000; $880,000 in 2001; $574,000 in 2002; $346,000 in 2003 and
$300,000 in 2004.
F-22
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
OTHER COMMITMENTS AND CONTINGENCIES
The Company has no commitments or contingent liabilities which, in the
judgment of management, would result in losses that would materially affect the
Company's consolidated financial position, operating results or cash flows.
NOTE 13 -- SEGMENT INFORMATION
The Company's reportable segments are business units that design,
manufacture and distribute distinct products, with distinct customer bases and
are each managed separately. The Company's reportable segments are
communications, defense systems and weather information systems. The reportable
segment provides products as described in Note 1. The accounting policies of the
segments are the same as those described in the "Summary of Significant
Accounting Policies" in Note 1.
The Company evaluates the performance of its segments and allocates
resources to them based on revenue and income from continuing operations,
however, there is a charge to allocate corporate headquarters' cost to each of
its operating segments.
The table below presents selected information as of and for the year ended
December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
WEATHER
DEFENSE INFORMATION RECONCILING
COMMUNICATIONS SYSTEMS SYSTEMS OTHER ITEMS TOTAL
--------------- -------- ----------- ------ ----------- --------
Revenue from unaffiliated
customers.......................... $75,338 $ 54,008 $21,703 $4,137 $ $155,186
<S> <C> <C> <C> <C> <C> <C>
Operating (loss) income.............. (5,068) 5,902 6,335 28 7,197
Corporate centralized general and
administrative expenses............ 1,500 1,372 380 3,757(1) 7,009
Interest expense..................... 586 134 12 2 840 1,574
Other expense and (income), net...... 3,134 (44) (228) (11) (1,546) 1,305
(Loss) income before income
(benefits) taxes................... (10,288)(2) 4,440(2) 6,171(2) 37 (3,051) (2,691)
Depreciation and amortization........ 3,057 2,176 282 55 265(3) 5,835
Capital expenditures................. 3,584 12,738(4) 1,157 159 39 17,677
Total assets......................... 53,647 51,791(4) 13,368 2,258 54,539(5) 175,603
</TABLE>
Notes for the year ended December 31, 1999.
(1) Corporate expenses not allocated to subsidiaries for financial reporting.
(2) Includes the allocated corporate expenses.
(3) Corporate depreciation and amortization, which is included in the allocated
and unallocated corporate expenses above.
(4) Includes expenditures of $11,770 for equipment manufactured for lease.
(5) Net assets of discontinued operations of $11,992 and corporate assets of
$42,547.
F-23
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The table below presents selected information as of and for the year ended
December 31, 1998 (in thousands):
<TABLE>
<CAPTION>
WEATHER
DEFENSE INFORMATION RECONCILING
COMMUNICATIONS SYSTEMS SYSTEMS ITEMS TOTAL
--------------- --------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Revenue from unaffiliated
customers.......................... $67,906 $ 56,520 $ 16,053 $ $ 140,479
Operating income..................... 1,131 4,755 3,757 9,643
Corporate centralized general and
administrative expenses............ 1,275 1,042 230 2,391(1) 4,938
Interest expense..................... 598 9 698 1,305
Other expense and (income), net...... 1,285 (573) (717) (2,242) (2,247)
(Loss) income before income
(benefits) taxes................... (2,027)(2) 4,277(2) 4,244(2) (847) 5,647
Depreciation and amortization........ 2,931 1,324 270 607(3) 5,132
Capital expenditures................. 4,104 685 186 55 5,030
Total assets......................... 57,896 46,668 14,252 105,285(4) 224,101
</TABLE>
Notes for the year ended December 31, 1998.
(1) Corporate expenses not allocated to subsidiaries for financial reporting.
(2) Includes the allocated corporate expenses.
(3) Corporate depreciation and amortization, which is included in the allocated
and unallocated corporate expenses above.
(4) Net assets of discontinued operations of $86,806 and corporate assets of
$18,479.
The table below presents selected information as of and for the year ended
December 31, 1997 (in thousands):
<TABLE>
<CAPTION>
WEATHER
DEFENSE INFORMATION RECONCILING
COMMUNICATIONS SYSTEMS SYSTEMS ITEMS TOTAL
--------------- --------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Revenue from unaffiliated
customers.......................... $66,760 $ 58,408 $ 15,394 $ $ 140,562
Operating income..................... 1,816 5,391 3,079 10,286
Corporate centralized general and
administrative expenses............ 1,074 950 216 4,220(1) 6,460
Interest expense..................... 630 15 784 1,429
Other expense and (income), net...... 1,031 (725) (299) (1,744) (1,737)
(Loss) income before income
(benefits) taxes................... (919)(2) 5,151(2) 3,162(2) (3,260) 4,134
Depreciation and amortization........ 2,772 1,495 253 533(3) 5,053
Capital expenditures................. 2,356 800 225 76 3,457
Total assets......................... 54,433 54,332 16,409 103,430(4) 228,604
</TABLE>
Notes for the year ended December 31, 1997.
(1) Corporate expenses not allocated to subsidiaries for financial reporting.
(2) Includes the allocated corporate expenses.
(3) Corporate depreciation and amortization, which is included in the allocated
and unallocated corporate expenses above.
(4) Net assets of discontinued operations of $94,315 and corporate assets of
$9,115.
F-24
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Included in the interest and other income caption of the Consolidated
Statement of Operations is the Company's equity in the net income of joint
venture investments. The net income of such investments totaled $309,000,
$534,000, and $648,000 for the years ended December 31, 1999, 1998 and 1997,
respectively. Investments in the joint ventures are classified within the other
long-term assets caption of the balance sheet.
Revenue and long-lived assets related to continuing operations in the
United States and other foreign countries for the years ended December 31, 1999,
1998 and 1997 are as follows (in thousands):
YEAR ENDED DECEMBER 31,
----------------------------------
1999 1998 1997
---------- ---------- ----------
Revenues from unaffiliated customers:
United States................... $ 98,560 $ 96,596 $ 105,927
Foreign......................... 56,626 43,883 34,635
---------- ---------- ----------
Total...................... $ 155,186 $ 140,479 $ 140,562
========== ========== ==========
Long-lived assets at end of year:
United States................... $ 32,298 $ 20,652 $ 20,802
Scotland........................ 3,632 3,391 3,189
---------- ---------- ----------
Total...................... $ 35,930 $ 24,043 $ 23,991
========== ========== ==========
Sales under contracts and subcontracts where the U.S. Government is the
ultimate customer accounted for approximately 45%, 53% and 57% of the Company's
sales in 1999, 1998 and 1997, respectively.
NOTE 14 -- OTHER FINANCIAL INFORMATION
Other accrued liabilities are comprised of the following (in thousands):
DECEMBER 31,
--------------------
1999 1998
--------- ---------
Commissions payable.................. $ 907 $ 774
Employee related payables............ 5,792 4,071
Accrued product warranty and related
reserves........................... 731 365
Other................................ 5,494 2,451
--------- ---------
$ 12,924 $ 7,661
========= =========
NOTE 15 -- OTHER SUBSEQUENT EVENTS
On January 24, 2000, the Company's Board of Directors authorized the
Company to repurchase an additional 250,000 shares of its Common Stock.
Subsequent to December 31, 1999, 171,230 shares were purchased at an average
price of $18.88 per share.
In January 2000, the Company sold its 41.52% equity investment in
Scientific Research Corporation ("SRC") to SRC for $9,500,000 in cash. The
Company previously accounted for SRC as an equity investment.
F-25
<PAGE>
TECH-SYM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16 -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of unaudited quarterly financial data for the
years 1999 and 1998 (in thousands except per share amounts):
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
--------- -------- ------------- ------------
<S> <C> <C> <C> <C>
1999
Revenue......................... $37,996 $ 35,331 $42,197 $ 39,662
Gross margin.................... 11,022 7,342 13,352 9,840
Income (loss) from continuing
operations.................... 1,031 (1,712) 684 (1,740)
(Loss) income from discontinued
operations.................... (19,146) (4,597) 1,996
Net income (loss)............... 1,031 (20,858) (3,913) 256
Earnings (loss) per common share
Continuing operations
Basic...................... $ .17 $ (.28) $ .11 $ (.29)
Diluted.................... .17 (.28) .11 (.29)
Discontinued operations
Basic...................... (3.17) (.76) .33
Diluted.................... (3.17) (.76) .33
Net income (loss)
Basic...................... .17 (3.45) (.65) .04
Diluted.................... .17 (3.45) (.65) .04
1998
Revenue......................... $33,293 $ 32,607 $35,038 $ 39,541
Gross margin.................... 9,327 10,020 9,296 11,230
Income from continuing
operations.................... 1,127 836 971 852
Income (loss) from discontinued
operations.................... 2,125 3,389 1,957 (6,162)
Net income (loss)............... 3,252 4,225 2,928 (5,310)
Earnings (loss) per common share
Continuing operations.........
Basic...................... $ .19 $ .14 $ .16 $ .14
Diluted.................... .18 .13 .16 .14
Discontinued operations
Basic...................... .35 .56 .32 (1.02)
Diluted.................... .35 .55 .32 (1.02)
Net income (loss)
Basic...................... .54 .70 .48 (.88)
Diluted.................... .53 .68 .48 (.88)
</TABLE>
Earnings (loss) per common share are computed independently for each of the
quarters presented and therefore may not sum to the totals for the year.
F-26
<PAGE>
TECH-SYM CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
(IN THOUSANDS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CHARGED CHARGED
BALANCE TO COSTS AND BALANCE TO COSTS AND
RESERVES DEDUCTED AT END EXPENSES DEDUCTIONS AT END EXPENSES DEDUCTIONS
FROM ASSETS OF 1996 1997 1997 OF 1997 1998 1998
- ---------------------------------------- -------- ------------ ---------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Inventory............................... $1,542 $ 419 $ $1,961 $533 $617
Current receivables..................... 266 214 313 167 268 96
Deferred tax asset allowance............
<CAPTION>
CHARGED
BALANCE TO COSTS AND BALANCE
RESERVES DEDUCTED AT END EXPENSES DEDUCTIONS AT END
FROM ASSETS OF 1998 1999 1999 OF 1999
- ---------------------------------------- -------- ------------ ---------- --------
<S> <C> <C> <C> <C>
Inventory............................... $1,877 $5,740 $5,700 $1,917
Current receivables..................... 339 175 206 308
Deferred tax asset allowance............ 579 579
</TABLE>
F-27
<PAGE>
The exhibits indicated by an asterisk (*) are incorporated by reference to
a prior filing as indicated in parentheses.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------------------------ ------------------------------------------------------------------------------------------
<C> <S>
*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-Q (filed 8/13/98), SEC File No. 1-4371,
Exhibit 3(b).]
*10(a)+ -- 1990 Stock Option Plan, as amended effective April 29, 1997. [Registrant's 10-K (1997),
SEC File No. 1-4371, Exhibit 10(a)].
*10(b)+ -- 1998 Equity Incentive Plan, second amendment and restatement [Registrant's 10-Q (filed
8/16/99), SEC File No. 1-4371, Exhibit 10(a)].
10(c)+ -- Incentive Agreement dated as of March 28, 2000, between the Registrant and J. Michael Camp.
10(d)+ -- Incentive Agreement dated March 28, 2000, between the Registrant and J. Rankin Tippins.
10(e)+ -- Incentive Agreement dated March 28, 2000, between the Registrant and Paul L. Harp.
10(f)+ -- Incentive Agreement dated March 28, 2000, between the Registrant and Charles B. Johnson.
10(g)+ -- Noncompetition Agreement dated March 28, 2000, between the Registrant and J. Michael Camp.
10(h)+ -- Noncompetition Agreement dated March 28, 2000, between the Registrant and J. Rankin Tippins.
10(i)+ -- Noncompetition Agreement dated March 28, 2000, between the Registrant and Paul L. Harp.
10(j)+ -- Noncompetition Agreement dated March 28, 2000, between the Registrant and Charles B. Johnson.
10(k)+ -- Retention Agreement dated as of February 17, 2000, between the Registrant and Larry Collins.
10(l)+ -- Employment Agreement dated August 28, 1999, between David F. Burkey and Continental
Electronics Corporation.
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.
</TABLE>
- ------------
* Incorporated by reference to prior filing, as indicated.
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to the requirements of Item 14(c) of Form 10-K.
X-1
EXHIBIT 10.c
INCENTIVE AGREEMENT
This INCENTIVE AGREEMENT (the "Agreement") made and entered into effective
as of March 28, 2000, is by and between TECH-SYM CORPORATION, a Nevada
corporation (the "Company"), and J. MICHAEL CAMP (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company considers it essential to the best interests of its
stockholders to foster the continued employment of key management personnel; and
WHEREAS, the Company's Board of Directors has determined that it is
appropriate to reinforce and encourage the continued attention and dedication of
members of the Company's management, including Employee, to their assigned
duties without distraction in potentially disturbing circumstances arising from
the possibility of a Change in Control (as defined herein) of the Company:
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and Employee hereby agree
as follows:
1. DEFINED TERMS. The definitions of capitalized terms used in this
Agreement are provided in ATTACHMENT "A" hereto.
2. TERM. This Agreement shall commence on the Effective Date and shall
continue until the earliest of (a) Employee's 65th birthday, (b) termination of
Employee's employment by the Company for Cause prior to a Change in Control, and
(c) termination of Employee's employment by Employee for other than Good Reason
prior to a Change in Control; provided, however, that the Company may terminate
this Agreement by giving written notice to Employee any time after December 31,
2000, that the Agreement will terminate not earlier than fifteen months after
the date notice is received by Employee. Termination of this Agreement shall not
alter or impair the rights of Employee arising hereunder prior to such
termination.
3. EMPLOYEE BENEFIT. Unless Employee's employment is terminated prior to a
Change in Control by (i) the Company for Cause, or (ii) Employee without Good
Reason, then within five days following a Change in Control the Company shall
pay to Employee a cash, lump sum payment of $970,000 (the "Incentive Payment"),
less applicable income and FICA tax withholdings. Except as provided in Section
7 hereof, the Incentive Payment shall not be payable under this Agreement unless
there shall have been a Change in Control.
4. NO EMPLOYMENT CONTRACT. This Agreement shall not be construed as
creating an express or implied contract of employment and, except as otherwise
agreed in writing between Employee and the Company, Employee shall not have any
right to be retained in the employ of the Company.
1
<PAGE>
5. NO OBLIGATION TO MITIGATE DAMAGES. Employee shall not be required to
mitigate damages or the amount of any payment provided for in this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by
Employee as a result of employment by another employer or by retirement
benefits, or otherwise.
6. EFFECT ON OTHER CONTRACTUAL RIGHTS. The provisions of this Agreement,
and any payment provided for hereunder, shall not reduce any amounts otherwise
payable, or in any way diminish Employee's existing rights, or rights which
would accrue solely as a result of the passage of time, under any benefit plan,
severance agreement or other contract, plan or arrangement, except that the
Termination Agreement dated May 1, 1998, between the parties shall be terminated
and rendered null and void upon the execution of this Agreement by both parties.
7. SUCCESSORS
(A) The Company shall require any successor or assign (whether direct or
indirect), by purchase, merger, consolidation or otherwise, to more than half of
the business and/or assets of the Company, by agreement in form and substance
reasonably satisfactory to Employee, expressly, absolutely and unconditionally
to assume and agree to perform this Agreement in the same manner and to the same
extent as the Company would be required to perform it if no such succession had
taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle Employee to compensation from the Company in the same amount as
provided in this Agreement immediately upon the effectiveness of such
succession.
(B) This Agreement shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Employee should die
while any amounts or benefits would still be payable to Employee if Employee had
continued to live, all such amounts and benefits, unless otherwise provided
herein, shall be paid or provided in accordance with the terms of this Agreement
to the Employee's devisee, legatee, or other designee or, if there be no such
designee, to Employee's estate.
8. NOTICE. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when actually delivered or five days after deposit in the
United States mail, certified or registered, postage prepaid and addressed to
the respective addressees as set forth on the signature page(s) of this
Agreement, or to such other address as either party shall have furnished to the
other in writing in accordance herewith.
9. LIMITED INDEMNITY. In the event the payment under the Noncompetition
Agreement to be entered into by the parties providing for a two-year period of
noncompetition after termination of employment (x) for any reason on or after a
Change in Control, or (y) prior to a Change in Control, by the Company other
than for Cause or by the Employee for Good Reason is determined to be part of
all payments or benefits received or to be received by Employee which are or
will be subject to the Excise Tax, the Company shall fully indemnify Employee
against any such Excise Tax by paying to
2
<PAGE>
Employee an additional amount of cash in a lump sum, within five days of written
notice to the Company, such that after such additional payment Employee is in
the same net after-tax position that Employee would have been in had he not been
subject to the Excise Tax.
10. INCENTIVE PAYMENT REDUCTION. In the event the net present value of
accelerated stock options is or will be subject to the Excise Tax, the Incentive
Payment shall be reduced to the largest amount as will result in no portion of
the Incentive Payment not being fully deductible by the Company as a result of
Section 280G of the Code. The paragraph shall not limit in any way the
provisions of paragraph 9 above.
11. NONWAIVER. No provisions of this Agreement may be modified, waived or
discharged unless such modification, waiver, or discharge is agreed to in
writing signed by both parties. No waiver of 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 provisions or conditions at the same or at any
prior or subsequent time.
12. GOVERNING LAW. The interpretation, construction and performance of
this Agreement shall be governed by and construed in accordance with the laws of
the State of Texas without regard to the principle of conflicts of laws. Both
parties hereto consent to the nonexclusive jurisdiction of the state and federal
courts sitting in Harris County, Texas.
13. VALIDITY. The invalidity or unenforceability of any provision 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.
14. 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
shall constitute one and the same instrument.
15. DESCRIPTIVE HEADINGS. Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of any provision of
this Agreement.
16. CORPORATE APPROVAL. This Agreement has been approved by the Company's
Board of Directors and has been duly executed and delivered to Employee on
behalf of the Company by its duly authorized representative.
17. LEGAL AND ACCOUNTING FEES AND EXPENSES. The Company shall pay all
legal and accounting fees and expenses incurred by Employee in disputing in good
faith any issue hereunder relating to the termination of Employee's employment,
in seeking in good faith to obtain or enforce any benefit or right provided by
this Agreement on in connection with any actual or threatened tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code to any payment or benefit provided hereunder or otherwise in connection
with a Change in Control or termination of employment. Such payments shall be
made within five days after delivery of Employee's written requests for payment
accompanied with such evidence of fees and expenses as the Company may
reasonably require.
3
<PAGE>
18. INTEREST. The Company shall pay to Employee interest at the maximum
rate allowed by law on any payment not paid when due.
IN WITNESS WHEREOF, the parties have entered into this Agreement for all
purposes as of the day and year first above written.
EMPLOYEE TECH-SYM CORPORATION
/S/J. MICHAEL CAMP By:/S/J. RANKIN TIPPINS
------------------ ---------------------
J. Michael Camp J. Rankin Tippins
Vice President
Address:
Suite 200
10500 Westoffice Drive
Houston TX 77042-5391
4
<PAGE>
Attachment A
DEFINITIONS
BENEFICIAL OWNER shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.
BOARD shall mean the Board of Directors of the Company.
BONUS PLAN shall mean the Company's Incentive Bonus Plan as the same may be
modified from time to time, but substantially in the form in effect on the
Effective Date.
CAUSE for termination by the Company of Employee's employment shall mean (a) the
willful and continued failure by Employee to substantially perform the
Employee's duties with the Company (other than any such failure resulting from
or anticipated to result from Employee's death or incapacity due to physical or
mental illness) which continues unabated for another thirty days after a written
demand for substantial performance is delivered to Employee by the Board, which
demand specifically identifies the manner in which the Board believes Employee
has not substantially performed Employee's duties, or (b) the willful engaging
by the Employee in gross misconduct which is demonstrably and materially
monetarily injurious to the Company and its subsidiaries taken as a whole. For
purpose of this paragraph, (x) no act, or failure to act, on Employee's part
shall be deemed "willful" unless done, or omitted to be done, by Employee not in
good faith and without reasonable belief that Employee's act, or failure to act,
was in the interest of the Company and (y) in the event of a dispute concerning
the application of this provision, no claim by the Company that Cause exists
shall be given effect unless the Company establishes to the Compensation
Committee of the Board by clear and convincing evidence that Cause exists.
Notwithstanding the foregoing, Employee shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to
Employee a certified copy of a resolution adopted pursuant to the recommendation
of the Compensation Committee, by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
which was called and held for the purpose of considering such termination (after
reasonable notice to the Employee and an opportunity for Employee, together with
Employee's counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, Employee was guilty of conduct set forth in clause
(a) or (b) of the definition of Cause herein, and specifying the particulars
thereof in detail.
A CHANGE IN CONTROL shall be deemed to have occurred if the event set forth in
any one of the following paragraphs shall have occurred:
(A) any person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities;
(B) during any period of two consecutive years commencing with the annual
meeting of stockholders on May 11, 1999, individuals who at the beginning of
such period constitute the Board cease for any reason to constitute at least
two-thirds of the directors constituting the Board;
5
<PAGE>
(C) there is consummated a merger or consolidation of the Company or any
direct or indirect subsidiary of the Company with any other company other than
(a) merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 80% of the combined voting power of the securities
of the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities; or
(D) the stockholders of the Company approve a plan of a complete or
substantially complete liquidation or dissolution of the Company; or
(E) there is consummated an agreement for the sale or disposition by the
Company of a significant portion of the Company's assets. For the purposes of
this paragraph, the phrase "the sale or disposition by the Company of a
significant portion of the Company's assets" shall mean a transaction or series
of transactions involving the sale or disposition of assets of the Company or
any subsidiaries (including the stock of any subsidiaries) in which the value of
the assets or stock being sold or otherwise disposed of (as measured by the
consideration being paid or received therefor) constitutes more than 60% of the
fair market value of the Company as determined by the aggregate market value of
the Company's outstanding equity securities on the date of the transaction or,
in the event of a series of transactions, on the date of the last transaction
constituting a significant portion of the Company's assets.
CODE shall mean the Internal Revenue Code of 1986, as amended from time to time.
EFFECTIVE DATE of this Agreement shall mean March 28, 2000.
EMPLOYEE shall mean the individual named in the first paragraph of this
Agreement.
EXCISE TAX shall mean any excise tax imposed under section 4999 of the Code or
any successor section.
GOOD REASON for termination by the Employee of Employee's employment shall mean
the occurrence of any of the following without Employee's express written
consent:
(A) an adverse change in Employee's positions, duties, responsibilities,
titles or offices as in effect on the Effective Date or any removal of Employee
from or any failure to re-elect or appoint Employee to any of such
responsibilities, titles, offices or positions, except in connection with the
termination of Employee's employment for Cause;
(B) a reduction in Employee's annual base salary as in effect on the
Effective Date or as the same may be increased from time to time;
(C) the failure by the Company to continue the Bonus Plan, or a failure by
the Company to continue Employee as a significant participant in the Bonus Plan
in at least the same amount as the lowest annual amount paid or payable to
Employee with respect to the three calendar years preceding the Effective Date;
6
<PAGE>
(D) the failure by the Company to continue in effect any other material
employee benefit or compensation plan, program or policy in which Employee is
participating as of the Effective Date, unless the Company establishes such new
plans, programs or policies as is necessary to provide Employee with
substantially comparable benefits, the taking of any action by the Company not
required by law that would adversely affect Employee's participation in or
materially reduce Employee's benefits under any of such plans, programs or
policies, or deprive Employee of any material fringe benefit enjoyed by Employee
immediately prior to the Effective Date;
(E) the relocation of the Company's principal executive offices to a
location outside the greater Houston area, or the Company's requiring the
Employee to relocate anywhere other than the location of the Company's principal
executive offices except for required travel on the Company's business to an
extent substantially consistent with Employee's business travel obligations as
of the Effective Date;
(F) the amendment, modification or repeal of any provision of the
Certificate of Incorporation, as amended, or the ByLaws of the Company which was
in effect as of the Effective Date, if such amendment, modification or repeal
would materially adversely effect Employee's right to indemnification by the
Company;
(G) the failure of the Company to obtain the assumption of this Agreement
by any successor;
(H) any purported termination of the Employee's employment which is not
effected pursuant to the requirements stated in the definition of "Cause;" for
purposes of this Agreement, no such purported termination shall be effective.
The Employee's right to terminate the Employee's employment shall not be
affected by the Employee's incapacity due to physical or mental illness.
The Employee's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act constituting Good
Reason hereunder.
For purposes of any determination regarding the existence of Good Reason,
any claim by the Employee that Good Reason exists shall be presumed to be
correct unless the Company establishes by clear and convincing evidence that
Good Reason does not exist.
INCENTIVE PAYMENT shall have the meaning set forth in Section 3.
7
EXHIBIT 10.d
INCENTIVE AGREEMENT
This INCENTIVE AGREEMENT (the "Agreement") made and entered into effective
as of March 28, 2000, is by and between TECH-SYM CORPORATION, a Nevada
corporation (the "Company"), and J. RANKIN TIPPINS (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company considers it essential to the best interests of its
stockholders to foster the continued employment of key management personnel; and
WHEREAS, the Company's Board of Directors has determined that it is
appropriate to reinforce and encourage the continued attention and dedication of
members of the Company's management, including Employee, to their assigned
duties without distraction in potentially disturbing circumstances arising from
the possibility of a Change in Control (as defined herein) of the Company:
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and Employee hereby agree
as follows:
1. DEFINED TERMS. The definitions of capitalized terms used in this
Agreement are provided in ATTACHMENT "A" hereto.
2. TERM. This Agreement shall commence on the Effective Date and shall
continue until the earliest of (a)Employee's 65th birthday, (b) termination of
Employee's employment by the Company for Cause prior to a Change in Control, and
(c) termination of Employee's employment by Employee for other than Good Reason
prior to a Change in Control; provided, however, that the Company may terminate
this Agreement by giving written notice to Employee any time after December 31,
2000, that the Agreement will terminate not earlier than fifteen months after
the date notice is received by Employee. Termination of this Agreement shall not
alter or impair the rights of Employee arising hereunder prior to such
termination.
3. EMPLOYEE BENEFIT. Unless Employee's employment is terminated prior to a
Change in Control by (i) the Company for Cause, or (ii) Employee without Good
Reason, then within five days following a Change in Control the Company shall
pay to Employee a cash, lump sum payment of $700,000 (the "Incentive Payment"),
less applicable income and FICA tax withholdings. Except as provided in Section
7 hereof, the Incentive Payment shall not be payable under this Agreement unless
there shall have been a Change in Control.
4. NO EMPLOYMENT CONTRACT. This Agreement shall not be construed as
creating an express or implied contract of employment and, except as otherwise
agreed in writing between Employee and the Company, Employee shall not have any
right to be retained in the employ of the Company.
1
<PAGE>
5. NO OBLIGATION TO MITIGATE DAMAGES. Employee shall not be required to
mitigate damages or the amount of any payment provided for in this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by
Employee as a result of employment by another employer or by retirement
benefits, or otherwise.
6. EFFECT ON OTHER CONTRACTUAL RIGHTS. The provisions of this Agreement,
and any payment provided for hereunder, shall not reduce any amounts otherwise
payable, or in any way diminish Employee's existing rights, or rights which
would accrue solely as a result of the passage of time, under any benefit plan,
severance agreement or other contract, plan or arrangement, except that the
Termination Agreement dated May 1, 1991, between the parties shall be terminated
and rendered null and void upon the execution of this Agreement by both parties.
7. SUCCESSORS
(A) The Company shall require any successor or assign (whether direct or
indirect), by purchase, merger, consolidation or otherwise, to more than half of
the business and/or assets of the Company, by agreement in form and substance
reasonably satisfactory to Employee, expressly, absolutely and unconditionally
to assume and agree to perform this Agreement in the same manner and to the same
extent as the Company would be required to perform it if no such succession had
taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle Employee to compensation from the Company in the same amount as
provided in this Agreement immediately upon the effectiveness of such
succession.
(B) This Agreement shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Employee should die
while any amounts or benefits would still be payable to Employee if Employee had
continued to live, all such amounts and benefits, unless otherwise provided
herein, shall be paid or provided in accordance with the terms of this Agreement
to the Employee's devisee, legatee, or other designee or, if there be no such
designee, to Employee's estate.
8. NOTICE. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when actually delivered or five days after deposit in the
United States mail, certified or registered, postage prepaid and addressed to
the respective addressees as set forth on the signature page(s) of this
Agreement, or to such other address as either party shall have furnished to the
other in writing in accordance herewith.
9. LIMITED INDEMNITY. In the event either or both of (i) the payment under
the Noncompetition Agreement to be entered into by the parties providing for a
two-year period of noncompetition after termination of employment (x) for any
reason on or after a Change in Control, or (y) prior to a Change in Control, by
the Company other than for Cause or by the Employee for Good Reason or, (ii) the
payment previously made in 1999 of a lump sum amount under the Executive
Retirement Agreement between the parties pursuant to the Rabbi Trust dissolution
is determined to be part of all payments
2
<PAGE>
or benefits received or to be received by Employee which are or will be subject
to the Excise Tax, the Company shall fully indemnify Employee against any such
Excise Tax by paying to Employee an additional amount of cash in a lump sum,
within five days of written notice to the Company, such that after such
additional payment Employee is in the same net after-tax position that Employee
would have been in had he not been subject to the Excise Tax.
10. INCENTIVE PAYMENT REDUCTION. In the event the net present value of
accelerated stock options is or will be subject to the Excise Tax, the Incentive
Payment shall be reduced to the largest amount as will result in no portion of
the Incentive Payment not being fully deductible by the Company as a result of
Section 280G of the Code. The paragraph shall not limit in any way the
provisions of paragraph 9 above.
11. NONWAIVER. No provisions of this Agreement may be modified, waived or
discharged unless such modification, waiver, or discharge is agreed to in
writing signed by both parties. No waiver of 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 provisions or conditions at the same or at any
prior or subsequent time.
12. GOVERNING LAW. The interpretation, construction and performance of
this Agreement shall be governed by and construed in accordance with the laws of
the State of Texas without regard to the principle of conflicts of laws. Both
parties hereto consent to the nonexclusive jurisdiction of the state and federal
courts sitting in Harris County, Texas.
13. VALIDITY. The invalidity or unenforceability of any provision 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.
14. 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
shall constitute one and the same instrument.
15. DESCRIPTIVE HEADINGS. Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of any provision of
this Agreement.
16. CORPORATE APPROVAL. This Agreement has been approved by the Company's
Board of Directors and has been duly executed and delivered to Employee on
behalf of the Company by its duly authorized representative.
17. LEGAL AND ACCOUNTING FEES AND EXPENSES. The Company shall pay all
legal and accounting fees and expenses incurred by Employee in disputing in good
faith any issue hereunder relating to the termination of Employee's employment,
in seeking in good faith to obtain or enforce any benefit or right provided by
this Agreement on in connection with any actual or threatened tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code to any payment or benefit provided hereunder or otherwise in connection
with a Change in Control or termination of employment. Such payments shall be
made within five days after delivery of
3
<PAGE>
Employee's written requests for payment accompanied with such evidence of fees
and expenses as the Company may reasonably require.
18. INTEREST. The Company shall pay to Employee interest at the maximum
rate allowed by law on any payment not paid when due.
19. HEALTH BENEFIT PAYMENT PAY-OUT. Not later than five days following a
Change in Control, the Company will pay $165,000 to Employee in a cash, lump sum
in full satisfaction of the health benefits due Employee pursuant to the
Executive Retirement Agreement between the Company and Executive and, upon
receipt of such amount, Employee shall have no further rights to such health
benefit.
IN WITNESS WHEREOF, the parties have entered into this Agreement for all
purposes as of the day and year first above written.
EMPLOYEE TECH-SYM CORPORATION
/S/J. RANKIN TIPPINS By: /s/ J. MICHAEL CAMP
-------------------- -------------------
J. Rankin Tippins J. Michael Camp
Chairman of the Board
Address:
Suite 200
10500 Westoffice Drive
Houston TX 77042-5391
4
<PAGE>
Attachment A
DEFINITIONS
BENEFICIAL OWNER shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.
BOARD shall mean the Board of Directors of the Company.
BONUS PLAN shall mean the Company's Incentive Bonus Plan as the same may be
modified from time to time, but substantially in the form in effect on the
Effective Date.
CAUSE for termination by the Company of Employee's employment shall mean (a) the
willful and continued failure by Employee to substantially perform the
Employee's duties with the Company (other than any such failure resulting from
or anticipated to result from Employee's death or incapacity due to physical or
mental illness) which continues unabated for another thirty days after a written
demand for substantial performance is delivered to Employee by the Board, which
demand specifically identifies the manner in which the Board believes Employee
has not substantially performed Employee's duties, or (b) the willful engaging
by the Employee in gross misconduct which is demonstrably and materially
monetarily injurious to the Company and its subsidiaries taken as a whole. For
purpose of this paragraph, (x) no act, or failure to act, on Employee's part
shall be deemed "willful" unless done, or omitted to be done, by Employee not in
good faith and without reasonable belief that Employee's act, or failure to act,
was in the interest of the Company and (y) in the event of a dispute concerning
the application of this provision, no claim by the Company that Cause exists
shall be given effect unless the Company establishes to the Compensation
Committee of the Board by clear and convincing evidence that Cause exists.
Notwithstanding the foregoing, Employee shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to
Employee a certified copy of a resolution adopted pursuant to the recommendation
of the Compensation Committee, by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
which was called and held for the purpose of considering such termination (after
reasonable notice to the Employee and an opportunity for Employee, together with
Employee's counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, Employee was guilty of conduct set forth in clause
(a) or (b) of the definition of Cause herein, and specifying the particulars
thereof in detail.
A CHANGE IN CONTROL shall be deemed to have occurred if the event set forth in
any one of the following paragraphs shall have occurred:
(A) any person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities;
(B) during any period of two consecutive years commencing with the annual
meeting of stockholders on May 11, 1999, individuals who at the beginning of
such period constitute the Board cease for any reason to constitute at least
two-thirds of the directors constituting the Board;
5
<PAGE>
(C) there is consummated a merger or consolidation of the Company or any
direct or indirect subsidiary of the Company with any other company other than
(a) merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 80% of the combined voting power of the securities
of the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities; or
(D) the stockholders of the Company approve a plan of a complete or
substantially complete liquidation or dissolution of the Company; or
(E) there is consummated an agreement for the sale or disposition by the
Company of a significant portion of the Company's assets. For the purposes of
this paragraph, the phrase "the sale or disposition by the Company of a
significant portion of the Company's assets" shall mean a transaction or series
of transactions involving the sale or disposition of assets of the Company or
any subsidiaries (including the stock of any subsidiaries) in which the value of
the assets or stock being sold or otherwise disposed of (as measured by the
consideration being paid or received therefor) constitutes more than 60% of the
fair market value of the Company as determined by the aggregate market value of
the Company's outstanding equity securities on the date of the transaction or,
in the event of a series of transactions, on the date of the last transaction
constituting a significant portion of the Company's assets.
CODE shall mean the Internal Revenue Code of 1986, as amended from time to time.
EFFECTIVE DATE of this Agreement shall mean March 28, 2000.
EMPLOYEE shall mean the individual named in the first paragraph of this
Agreement.
EXCISE TAX shall mean any excise tax imposed under section 4999 of the Code or
any successor section.
GOOD REASON for termination by the Employee of Employee's employment shall mean
the occurrence of any of the following without Employee's express written
consent:
(A) an adverse change in Employee's positions, duties, responsibilities,
titles or offices as in effect on the Effective Date or any removal of Employee
from or any failure to re-elect or appoint Employee to any of such
responsibilities, titles, offices or positions, except in connection with the
termination of Employee's employment for Cause;
(B) a reduction in Employee's annual base salary as in effect on the
Effective Date or as the same may be increased from time to time;
(C) the failure by the Company to continue the Bonus Plan, or a failure by
the Company to continue Employee as a significant participant in the Bonus Plan
in at least the same amount as the lowest annual amount paid or payable to
Employee with respect to the three calendar years preceding the Effective Date;
6
<PAGE>
(D) the failure by the Company to continue in effect any other material
employee benefit or compensation plan, program or policy in which Employee is
participating as of the Effective Date, unless the Company establishes such new
plans, programs or policies as is necessary to provide Employee with
substantially comparable benefits, the taking of any action by the Company not
required by law that would adversely affect Employee's participation in or
materially reduce Employee's benefits under any of such plans, programs or
policies, or deprive Employee of any material fringe benefit enjoyed by Employee
immediately prior to the Effective Date;
(E) the relocation of the Company's principal executive offices to a
location outside the greater Houston area, or the Company's requiring the
Employee to relocate anywhere other than the location of the Company's principal
executive offices except for required travel on the Company's business to an
extent substantially consistent with Employee's business travel obligations as
of the Effective Date;
(F) the amendment, modification or repeal of any provision of the
Certificate of Incorporation, as amended, or the ByLaws of the Company which was
in effect as of the Effective Date, if such amendment, modification or repeal
would materially adversely effect Employee's right to indemnification by the
Company;
(G) the failure of the Company to obtain the assumption of this Agreement
by any successor;
(H) any purported termination of the Employee's employment which is not
effected pursuant to the requirements stated in the definition of "Cause;" for
purposes of this Agreement, no such purported termination shall be effective.
The Employee's right to terminate the Employee's employment shall not be
affected by the Employee's incapacity due to physical or mental illness.
The Employee's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act constituting Good
Reason hereunder.
For purposes of any determination regarding the existence of Good Reason,
any claim by the Employee that Good Reason exists shall be presumed to be
correct unless the Company establishes by clear and convincing evidence that
Good Reason does not exist.
INCENTIVE PAYMENT shall have the meaning set forth in Section 3.
7
EXHIBIT 10.e
INCENTIVE AGREEMENT
This INCENTIVE AGREEMENT (the "Agreement") made and entered into effective
as of March 28, 2000, is by and between TECH-SYM CORPORATION, a Nevada
corporation (the "Company"), and PAUL L. HARP ("EMPLOYEE").
W I T N E S S E T H:
WHEREAS, the Company considers it essential to the best interests of its
stockholders to foster the continued employment of key management personnel; and
WHEREAS, the Company's Board of Directors has determined that it is
appropriate to reinforce and encourage the continued attention and dedication of
members of the Company's management, including Employee, to their assigned
duties without distraction in potentially disturbing circumstances arising from
the possibility of a Change in Control (as defined herein) of the Company:
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and Employee hereby agree
as follows:
1. DEFINED TERMS. The definitions of capitalized terms used in this
Agreement are provided in ATTACHMENT "A" hereto.
2. TERM. This Agreement shall commence on the Effective Date and shall
continue until the earliest of (a) Employee's 65th birthday, (b) termination of
Employee's employment by the Company for Cause prior to a Change in Control, and
(c) termination of Employee's employment by Employee for other than Good Reason
prior to a Change in Control; provided, however, that the Company may terminate
this Agreement by giving written notice to Employee any time after December 31,
2000, that the Agreement will terminate not earlier than fifteen months after
the date notice is received by Employee. Termination of this Agreement shall not
alter or impair the rights of Employee arising hereunder prior to such
termination.
3. EMPLOYEE BENEFIT. Unless Employee's employment is terminated prior to a
Change in Control by (i) the Company for Cause, or (ii) Employee without Good
Reason, then within five days following a Change in Control the Company shall
pay to Employee a cash, lump sum payment of $535,000 (the "Incentive Payment"),
less applicable income and FICA tax withholdings. Except as provided in Section
7 hereof, the Incentive Payment shall not be payable under this Agreement unless
there shall have been a Change in Control.
4. NO EMPLOYMENT CONTRACT. This Agreement shall not be construed as
creating an express or implied contract of employment and, except as otherwise
agreed in writing between Employee and the Company, Employee shall not have any
right to be retained in the employ of the Company.
1
<PAGE>
5. NO OBLIGATION TO MITIGATE DAMAGES. Employee shall not be required to
mitigate damages or the amount of any payment provided for in this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by
Employee as a result of employment by another employer or by retirement
benefits, or otherwise.
6. EFFECT ON OTHER CONTRACTUAL RIGHTS. The provisions of this Agreement,
and any payment provided for hereunder, shall not reduce any amounts otherwise
payable, or in any way diminish Employee's existing rights, or rights which
would accrue solely as a result of the passage of time, under any benefit plan,
severance agreement or other contract, plan or arrangement, except that the
Termination Agreement dated August 15, 1996, between the parties shall be
terminated and rendered null and void upon the execution of this Agreement by
both parties.
7. SUCCESSORS
(A) The Company shall require any successor or assign (whether direct or
indirect), by purchase, merger, consolidation or otherwise, to more than half of
the business and/or assets of the Company, by agreement in form and substance
reasonably satisfactory to Employee, expressly, absolutely and unconditionally
to assume and agree to perform this Agreement in the same manner and to the same
extent as the Company would be required to perform it if no such succession had
taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle Employee to compensation from the Company in the same amount as
provided in this Agreement immediately upon the effectiveness of such
succession.
(B) This Agreement shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Employee should die
while any amounts or benefits would still be payable to Employee if Employee had
continued to live, all such amounts and benefits, unless otherwise provided
herein, shall be paid or provided in accordance with the terms of this Agreement
to the Employee's devisee, legatee, or other designee or, if there be no such
designee, to Employee's estate.
8. NOTICE. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when actually delivered or five days after deposit in the
United States mail, certified or registered, postage prepaid and addressed to
the respective addressees as set forth on the signature page(s) of this
Agreement, or to such other address as either party shall have furnished to the
other in writing in accordance herewith.
9. LIMITED INDEMNITY. In the event either or both of (i) the payment under
the Noncompetition Agreement to be entered into by the parties providing for a
two-year period of noncompetition after termination of employment (x) for any
reason on or after a Change in Control, or (y) prior to a Change in Control, by
the Company other than for Cause or by the Employee for Good Reason or, (ii) the
payment previously made in 1999 of a lump sum amount under the Executive
Retirement Agreement between the parties pursuant to the Rabbi Trust dissolution
is determined to be part of all payments
2
<PAGE>
or benefits received or to be received by Employee which are or will be subject
to the Excise Tax, the Company shall fully indemnify Employee against any such
Excise Tax by paying to Employee an additional amount of cash in a lump sum,
within five days of written notice to the Company, such that after such
additional payment Employee is in the same net after-tax position that Employee
would have been in had he not been subject to the Excise Tax.
10. INCENTIVE PAYMENT REDUCTION. In the event the net present value of
accelerated stock options is or will be subject to the Excise Tax, the Incentive
Payment shall be reduced to the largest amount as will result in no portion of
the Incentive Payment not being fully deductible by the Company as a result of
Section 280G of the Code. The paragraph shall not limit in any way the
provisions of paragraph 9 above.
11. NONWAIVER. No provisions of this Agreement may be modified, waived or
discharged unless such modification, waiver, or discharge is agreed to in
writing signed by both parties. No waiver of 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 provisions or conditions at the same or at any
prior or subsequent time.
12. GOVERNING LAW. The interpretation, construction and performance of
this Agreement shall be governed by and construed in accordance with the laws of
the State of Texas without regard to the principle of conflicts of laws. Both
parties hereto consent to the nonexclusive jurisdiction of the state and federal
courts sitting in Harris County, Texas.
13. VALIDITY. The invalidity or unenforceability of any provision 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.
14. 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
shall constitute one and the same instrument.
15. DESCRIPTIVE HEADINGS. Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of any provision of
this Agreement.
16. CORPORATE APPROVAL. This Agreement has been approved by the Company's
Board of Directors and has been duly executed and delivered to Employee on
behalf of the Company by its duly authorized representative.
17. LEGAL AND ACCOUNTING FEES AND EXPENSES. The Company shall pay all
legal and accounting fees and expenses incurred by Employee in disputing in good
faith any issue hereunder relating to the termination of Employee's employment,
in seeking in good faith to obtain or enforce any benefit or right provided by
this Agreement on in connection with any actual or threatened tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code to any payment or benefit provided hereunder or otherwise in connection
with a Change in Control or termination of employment. Such payments shall be
made within five days after delivery of
3
<PAGE>
Employee's written requests for payment accompanied with such evidence of fees
and expenses as the Company may reasonably require.
18. INTEREST. The Company shall pay to Employee interest at the maximum
rate allowed by law on any payment not paid when due.
19. HEALTH BENEFIT PAYMENT PAY-OUT. Not later than five days following a
Change in Control, the Company will pay $248,400 to Employee in a cash, lump sum
in full satisfaction of the health benefits due Employee pursuant to the
Executive Retirement Agreement between the Company and Executive and, upon
receipt of such amount, Employee shall have no further rights to such health
benefit.
IN WITNESS WHEREOF, the parties have entered into this Agreement for all
purposes as of the day and year first above written.
EMPLOYEE TECH-SYM CORPORATION
/S/PAUL L. HARP By: /s/ J. MICHAEL CAMP
--------------- -------------------
Paul L. Harp J. Michael Camp
Chairman of the Board
Address:
Suite 200
10500 Westoffice Drive
Houston TX 77042-5391
4
<PAGE>
Attachment A
DEFINITIONS
BENEFICIAL OWNER shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.
BOARD shall mean the Board of Directors of the Company.
BONUS PLAN shall mean the Company's Incentive Bonus Plan as the same may be
modified from time to time, but substantially in the form in effect on the
Effective Date.
CAUSE for termination by the Company of Employee's employment shall mean (a) the
willful and continued failure by Employee to substantially perform the
Employee's duties with the Company (other than any such failure resulting from
or anticipated to result from Employee's death or incapacity due to physical or
mental illness) which continues unabated for another thirty days after a written
demand for substantial performance is delivered to Employee by the Board, which
demand specifically identifies the manner in which the Board believes Employee
has not substantially performed Employee's duties, or (b) the willful engaging
by the Employee in gross misconduct which is demonstrably and materially
monetarily injurious to the Company and its subsidiaries taken as a whole. For
purpose of this paragraph, (x) no act, or failure to act, on Employee's part
shall be deemed "willful" unless done, or omitted to be done, by Employee not in
good faith and without reasonable belief that Employee's act, or failure to act,
was in the interest of the Company and (y) in the event of a dispute concerning
the application of this provision, no claim by the Company that Cause exists
shall be given effect unless the Company establishes to the Compensation
Committee of the Board by clear and convincing evidence that Cause exists.
Notwithstanding the foregoing, Employee shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to
Employee a certified copy of a resolution adopted pursuant to the recommendation
of the Compensation Committee, by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
which was called and held for the purpose of considering such termination (after
reasonable notice to the Employee and an opportunity for Employee, together with
Employee's counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, Employee was guilty of conduct set forth in clause
(a) or (b) of the definition of Cause herein, and specifying the particulars
thereof in detail.
A CHANGE IN CONTROL shall be deemed to have occurred if the event set forth in
any one of the following paragraphs shall have occurred:
(A) any person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities;
(B) during any period of two consecutive years commencing with the annual
meeting of stockholders on May 11, 1999, individuals who at the beginning of
such period constitute the Board cease for any reason to constitute at least
two-thirds of the directors constituting the Board;
5
<PAGE>
(C) there is consummated a merger or consolidation of the Company or any
direct or indirect subsidiary of the Company with any other company other than
(a) merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 80% of the combined voting power of the securities
of the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities; or
(D) the stockholders of the Company approve a plan of a complete or
substantially complete liquidation or dissolution of the Company; or
(E) there is consummated an agreement for the sale or disposition by the
Company of a significant portion of the Company's assets. For the purposes of
this paragraph, the phrase "the sale or disposition by the Company of a
significant portion of the Company's assets" shall mean a transaction or series
of transactions involving the sale or disposition of assets of the Company or
any subsidiaries (including the stock of any subsidiaries) in which the value of
the assets or stock being sold or otherwise disposed of (as measured by the
consideration being paid or received therefor) constitutes more than 60% of the
fair market value of the Company as determined by the aggregate market value of
the Company's outstanding equity securities on the date of the transaction or,
in the event of a series of transactions, on the date of the last transaction
constituting a significant portion of the Company's assets.
CODE shall mean the Internal Revenue Code of 1986, as amended from time to time.
EFFECTIVE DATE of this Agreement shall mean March 28, 2000.
EMPLOYEE shall mean the individual named in the first paragraph of this
Agreement.
EXCISE TAX shall mean any excise tax imposed under section 4999 of the Code or
any successor section.
GOOD REASON for termination by the Employee of Employee's employment shall mean
the occurrence of any of the following without Employee's express written
consent:
(A) an adverse change in Employee's positions, duties, responsibilities,
titles or offices as in effect on the Effective Date or any removal of Employee
from or any failure to re-elect or appoint Employee to any of such
responsibilities, titles, offices or positions, except in connection with the
termination of Employee's employment for Cause;
(B) a reduction in Employee's annual base salary as in effect on the
Effective Date or as the same may be increased from time to time;
(C) the failure by the Company to continue the Bonus Plan, or a failure by
the Company to continue Employee as a significant participant in the Bonus Plan
in at least the same amount as the lowest annual amount paid or payable to
Employee with respect to the three calendar years preceding the Effective Date;
6
<PAGE>
(D) the failure by the Company to continue in effect any other material
employee benefit or compensation plan, program or policy in which Employee is
participating as of the Effective Date, unless the Company establishes such new
plans, programs or policies as is necessary to provide Employee with
substantially comparable benefits, the taking of any action by the Company not
required by law that would adversely affect Employee's participation in or
materially reduce Employee's benefits under any of such plans, programs or
policies, or deprive Employee of any material fringe benefit enjoyed by Employee
immediately prior to the Effective Date;
(E) the relocation of the Company's principal executive offices to a
location outside the greater Houston area, or the Company's requiring the
Employee to relocate anywhere other than the location of the Company's principal
executive offices except for required travel on the Company's business to an
extent substantially consistent with Employee's business travel obligations as
of the Effective Date;
(F) the amendment, modification or repeal of any provision of the
Certificate of Incorporation, as amended, or the ByLaws of the Company which was
in effect as of the Effective Date, if such amendment, modification or repeal
would materially adversely effect Employee's right to indemnification by the
Company;
(G) the failure of the Company to obtain the assumption of this Agreement
by any successor;
(H) any purported termination of the Employee's employment which is not
effected pursuant to the requirements stated in the definition of "Cause;" for
purposes of this Agreement, no such purported termination shall be effective.
The Employee's right to terminate the Employee's employment shall not be
affected by the Employee's incapacity due to physical or mental illness.
The Employee's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act constituting Good
Reason hereunder.
For purposes of any determination regarding the existence of Good Reason,
any claim by the Employee that Good Reason exists shall be presumed to be
correct unless the Company establishes by clear and convincing evidence that
Good Reason does not exist.
INCENTIVE PAYMENT shall have the meaning set forth in Section 3.
7
EXHIBIT 10.f
INCENTIVE AGREEMENT
This INCENTIVE AGREEMENT (the "Agreement") made and entered into effective
as of March 28, 2000, is by and between TECH-SYM CORPORATION, a Nevada
corporation (the "Company"), and CHARLES B. JOHNSON (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company considers it essential to the best interests of its
stockholders to foster the continued employment of key management personnel; and
WHEREAS, the Company's Board of Directors has determined that it is
appropriate to reinforce and encourage the continued attention and dedication of
members of the Company's management, including Employee, to their assigned
duties without distraction in potentially disturbing circumstances arising from
the possibility of a Change in Control (as defined herein) of the Company:
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and Employee hereby agree
as follows:
1. DEFINED TERMS. The definitions of capitalized terms used in this
Agreement are provided in ATTACHMENT "A" hereto.
2. TERM. This Agreement shall commence on the Effective Date and shall
continue until the earliest of (a) Employee's 65th birthday, (b) termination of
Employee's employment by the Company for Cause prior to a Change in Control, and
(c) termination of Employee's employment by Employee for other than Good Reason
prior to a Change in Control; provided, however, that the Company may terminate
this Agreement by giving written notice to Employee any time after December 31,
2000, that the Agreement will terminate not earlier than fifteen months after
the date notice is received by Employee. Termination of this Agreement shall not
alter or impair the rights of Employee arising hereunder prior to such
termination.
3. EMPLOYEE BENEFIT. Unless Employee's employment is terminated prior to a
Change in Control by (i) the Company for Cause, or (ii) Employee without Good
Reason, then within five days following a Change in Control the Company shall
pay to Employee a cash, lump sum payment of $425,000 (the "Incentive Payment"),
less applicable income and FICA tax withholdings. Except as provided in Section
7 hereof, the Incentive Payment shall not be payable under this Agreement unless
there shall have been a Change in Control.
4. NO EMPLOYMENT CONTRACT. This Agreement shall not be construed as
creating an express or implied contract of employment and, except as otherwise
agreed in writing between Employee and the Company, Employee shall not have any
right to be retained in the employ of the Company.
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5. NO OBLIGATION TO MITIGATE DAMAGES. Employee shall not be required to
mitigate damages or the amount of any payment provided for in this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by
Employee as a result of employment by another employer or by retirement
benefits, or otherwise.
6. EFFECT ON OTHER CONTRACTUAL RIGHTS. The provisions of this Agreement,
and any payment provided for hereunder, shall not reduce any amounts otherwise
payable, or in any way diminish Employee's existing rights, or rights which
would accrue solely as a result of the passage of time, under any benefit plan,
severance agreement or other contract, plan or arrangement, except that the
Termination Agreement dated May 1, 1991, between the parties shall be terminated
and rendered null and void upon the execution of this Agreement by both parties.
7. SUCCESSORS
(A) The Company shall require any successor or assign (whether direct or
indirect), by purchase, merger, consolidation or otherwise, to more than half of
the business and/or assets of the Company, by agreement in form and substance
reasonably satisfactory to Employee, expressly, absolutely and unconditionally
to assume and agree to perform this Agreement in the same manner and to the same
extent as the Company would be required to perform it if no such succession had
taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle Employee to compensation from the Company in the same amount as
provided in this Agreement immediately upon the effectiveness of such
succession.
(B) This Agreement shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Employee should die
while any amounts or benefits would still be payable to Employee if Employee had
continued to live, all such amounts and benefits, unless otherwise provided
herein, shall be paid or provided in accordance with the terms of this Agreement
to the Employee's devisee, legatee, or other designee or, if there be no such
designee, to Employee's estate.
8. NOTICE. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when actually delivered or five days after deposit in the
United States mail, certified or registered, postage prepaid and addressed to
the respective addressees as set forth on the signature page(s) of this
Agreement, or to such other address as either party shall have furnished to the
other in writing in accordance herewith.
9. LIMITED INDEMNITY. In the event the payment under the Noncompetition
Agreement to be entered into by the parties providing for a two-year period of
noncompetition after termination of employment (x) for any reason on or after a
Change in Control, or (y) prior to a Change in Control, by the Company other
than for Cause or by the Employee for Good Reason is determined to be part of
all payments or benefits received or to be received by Employee which are or
will be subject to the Excise Tax, the Company shall fully indemnify Employee
against any such Excise Tax by paying to
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Employee an additional amount of cash in a lump sum, within five days of written
notice to the Company, such that after such additional payment Employee is in
the same net after-tax position that Employee would have been in had he not been
subject to the Excise Tax.
10. INCENTIVE PAYMENT REDUCTION. In the event the net present value of
accelerated stock options is or will be subject to the Excise Tax, the Incentive
Payment shall be reduced to the largest amount as will result in no portion of
the Incentive Payment not being fully deductible by the Company as a result of
Section 280G of the Code. The paragraph shall not limit in any way the
provisions of paragraph 9 above.
11. NONWAIVER. No provisions of this Agreement may be modified, waived or
discharged unless such modification, waiver, or discharge is agreed to in
writing signed by both parties. No waiver of 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 provisions or conditions at the same or at any
prior or subsequent time.
12. GOVERNING LAW. The interpretation, construction and performance of
this Agreement shall be governed by and construed in accordance with the laws of
the State of Texas without regard to the principle of conflicts of laws. Both
parties hereto consent to the nonexclusive jurisdiction of the state and federal
courts sitting in Harris County, Texas.
13. VALIDITY. The invalidity or unenforceability of any provision 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.
14. 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
shall constitute one and the same instrument.
15. DESCRIPTIVE HEADINGS. Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of any provision of
this Agreement.
16. CORPORATE APPROVAL. This Agreement has been approved by the Company's
Board of Directors and has been duly executed and delivered to Employee on
behalf of the Company by its duly authorized representative.
17. LEGAL AND ACCOUNTING FEES AND EXPENSES. The Company shall pay all
legal and accounting fees and expenses incurred by Employee in disputing in good
faith any issue hereunder relating to the termination of Employee's employment,
in seeking in good faith to obtain or enforce any benefit or right provided by
this Agreement on in connection with any actual or threatened tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code to any payment or benefit provided hereunder or otherwise in connection
with a Change in Control or termination of employment. Such payments shall be
made within five days after delivery of Employee's written requests for payment
accompanied with such evidence of fees and expenses as the Company may
reasonably require.
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18. INTEREST. The Company shall pay to Employee interest at the maximum
rate allowed by law on any payment not paid when due.
IN WITNESS WHEREOF, the parties have entered into this Agreement for all
purposes as of the day and year first above written.
EMPLOYEE TECH-SYM CORPORATION
/S/CHARLES B. JOHNSON By:/s/ J. MICHAEL CAMP
--------------------- -------------------
Charles B. Johnson J. Michael Camp
Chairman of the Board
Address:
Suite 200
10500 Westoffice Drive
Houston TX 77042-5391
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Attachment A
DEFINITIONS
BENEFICIAL OWNER shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.
BOARD shall mean the Board of Directors of the Company.
BONUS PLAN shall mean the Company's Incentive Bonus Plan as the same may be
modified from time to time, but substantially in the form in effect on the
Effective Date.
CAUSE for termination by the Company of Employee's employment shall mean (a) the
willful and continued failure by Employee to substantially perform the
Employee's duties with the Company (other than any such failure resulting from
or anticipated to result from Employee's death or incapacity due to physical or
mental illness) which continues unabated for another thirty days after a written
demand for substantial performance is delivered to Employee by the Board, which
demand specifically identifies the manner in which the Board believes Employee
has not substantially performed Employee's duties, or (b) the willful engaging
by the Employee in gross misconduct which is demonstrably and materially
monetarily injurious to the Company and its subsidiaries taken as a whole. For
purpose of this paragraph, (x) no act, or failure to act, on Employee's part
shall be deemed "willful" unless done, or omitted to be done, by Employee not in
good faith and without reasonable belief that Employee's act, or failure to act,
was in the interest of the Company and (y) in the event of a dispute concerning
the application of this provision, no claim by the Company that Cause exists
shall be given effect unless the Company establishes to the Compensation
Committee of the Board by clear and convincing evidence that Cause exists.
Notwithstanding the foregoing, Employee shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to
Employee a certified copy of a resolution adopted pursuant to the recommendation
of the Compensation Committee, by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
which was called and held for the purpose of considering such termination (after
reasonable notice to the Employee and an opportunity for Employee, together with
Employee's counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, Employee was guilty of conduct set forth in clause
(a) or (b) of the definition of Cause herein, and specifying the particulars
thereof in detail.
A CHANGE IN CONTROL shall be deemed to have occurred if the event set forth in
any one of the following paragraphs shall have occurred:
(A) any person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities;
(B) during any period of two consecutive years commencing with the annual
meeting of stockholders on May 11, 1999, individuals who at the beginning of
such period constitute the Board cease for any reason to constitute at least
two-thirds of the directors constituting the Board;
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(C) there is consummated a merger or consolidation of the Company or any
direct or indirect subsidiary of the Company with any other company other than
(a) merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 80% of the combined voting power of the securities
of the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities; or
(D) the stockholders of the Company approve a plan of a complete or
substantially complete liquidation or dissolution of the Company; or
(E) there is consummated an agreement for the sale or disposition by the
Company of a significant portion of the Company's assets. For the purposes of
this paragraph, the phrase "the sale or disposition by the Company of a
significant portion of the Company's assets" shall mean a transaction or series
of transactions involving the sale or disposition of assets of the Company or
any subsidiaries (including the stock of any subsidiaries) in which the value of
the assets or stock being sold or otherwise disposed of (as measured by the
consideration being paid or received therefor) constitutes more than 60% of the
fair market value of the Company as determined by the aggregate market value of
the Company's outstanding equity securities on the date of the transaction or,
in the event of a series of transactions, on the date of the last transaction
constituting a significant portion of the Company's assets.
(F) the Company does not own a majority of the outstanding stock of Metric
Systems Corporation.
CODE shall mean the Internal Revenue Code of 1986, as amended from time to time.
EFFECTIVE DATE of this Agreement shall mean March 28, 2000.
EMPLOYEE shall mean the individual named in the first paragraph of this
Agreement.
EXCISE TAX shall mean any excise tax imposed under section 4999 of the Code or
any successor section.
GOOD REASON for termination by the Employee of Employee's employment shall mean
the occurrence of any of the following without Employee's express written
consent:
(A) an adverse change in Employee's positions, duties, responsibilities,
titles or offices as in effect on the Effective Date or any removal of Employee
from or any failure to re-elect or appoint Employee to any of such
responsibilities, titles, offices or positions, except in connection with the
termination of Employee's employment for Cause;
(B) a reduction in Employee's annual base salary as in effect on the
Effective Date or as the same may be increased from time to time;
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(C) the failure by the Company to continue the Bonus Plan, or a failure by
the Company to continue Employee as a significant participant in the Bonus Plan
in at least the same amount as the lowest annual amount paid or payable to
Employee with respect to the three calendar years preceding the Effective Date;
(D) the failure by the Company to continue in effect any other material
employee benefit or compensation plan, program or policy in which Employee is
participating as of the Effective Date, unless the Company establishes such new
plans, programs or policies as is necessary to provide Employee with
substantially comparable benefits, the taking of any action by the Company not
required by law that would adversely affect Employee's participation in or
materially reduce Employee's benefits under any of such plans, programs or
policies, or deprive Employee of any material fringe benefit enjoyed by Employee
immediately prior to the Effective Date;
(E) the relocation of the principal executive offices of Metric Systems
Corporation ("Metric") to a location outside the greater Fort Walton Beach area,
or the Company's requiring the Employee to relocate anywhere other than the
location of Metric's principal executive offices except for required travel on
the Company's business to an extent substantially consistent with Employee's
business travel obligations as of the Effective Date;
(F) the amendment, modification or repeal of any provision of the
Certificate of Incorporation, as amended, or the ByLaws of the Company which was
in effect as of the Effective Date, if such amendment, modification or repeal
would materially adversely effect Employee's right to indemnification by the
Company;
(G) the failure of the Company to obtain the assumption of this Agreement
by any successor;
(H) any purported termination of the Employee's employment which is not
effected pursuant to the requirements stated in the definition of "Cause;" for
purposes of this Agreement, no such purported termination shall be effective.
The Employee's right to terminate the Employee's employment shall not be
affected by the Employee's incapacity due to physical or mental illness.
The Employee's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act constituting Good
Reason hereunder.
For purposes of any determination regarding the existence of Good Reason,
any claim by the Employee that Good Reason exists shall be presumed to be
correct unless the Company establishes by clear and convincing evidence that
Good Reason does not exist.
INCENTIVE PAYMENT shall have the meaning set forth in Section 3.
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EXHIBIT 10.g
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (the "Agreement") made and entered into
effective as of March 28, 2000, is by and between TECH-SYM CORPORATION, a Nevada
corporation (the "Company", which shall include any successor), and J. MICHAEL
CAMP ("Employee").
RECITALS
WHEREAS, Employee is employed by the Company in a confidential
relationship wherein Employee, in the course of his employment with the Company,
will be provided with confidential business information as to the Company and
its subsidiaries, including, without limitation, trade secrets utilized by the
Company and its subsidiaries, and future plans with respect thereto, all of
which have been and will be established and maintained at great expense to the
Company;
THEREFORE, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
AGREEMENT
1. DEFINED TERMS. The definitions of capitalized terms used in this
Agreement are provided in ATTACHMENT "A" hereto.
2. NON-COMPETITION PERIOD.
(a) Employee acknowledges that during his employment with the
Company, the Company shall furnish Employee with, and provide Employee
access to, Confidential Information (as defined below). Employee
understands and acknowledges that the Company's willingness to provide
Employee with such Confidential Information is based in material part on
Employee's entering into this Agreement and that Employee's breach of the
provisions of this Agreement could materially damage the Company. Subject
to the further provisions of this Agreement, Employee agrees that, during
the Restricted Period, Employee will not:
(i) engage in activities or render services that are in direct
competition with the business activities of the Company or its
subsidiaries, as the same are conducted at the time of his Qualified
Termination. Such restriction shall apply to all geographic areas
where the Company and its subsidiaries, at such time, are conducting
such business or have plans, which Employee is aware of, to conduct
such business in the next year;
(ii) call upon any person who is, at that time, an employee of
the Company or a subsidiary for the purpose or with the intent of
enticing such employee away from or out of the employ of the Company
or a subsidiary; or
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(iii) call upon any person or entity which is, at that time,
or which has been, within one year prior to that time, a customer of
the Company or a subsidiary for the purpose of selling products or
services in direct competition with the Company or a subsidiary.
Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit Employee from (1) acquiring as an investment not more
than 5% of the equity interests of a company engaged in competition with
the Company or a subsidiary or (2) performing services for any competitor
of the Company or a subsidiary, provided that the services performed by
Employee do not directly compete with the business of, or are not directly
related to, a product or service of the competitor that directly competes
with a product or service of the Company or a subsidiary.
(b) Because of the difficulty of measuring economic losses to the
Company as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to the Company
for which it would have no other adequate remedy, Employee agrees that
foregoing covenant may be enforced by the Company, in the event of breach
by him, by injunctions, restraining orders and orders of specific
performance issued by a court of competent jurisdiction.
(c) It is agreed by the parties that the foregoing covenants impose
a reasonable restraint on Employee in light of the activities and business
of the Company on the date of the execution of this Agreement and the
current plans of the Company.
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3. CONFIDENTIALITY.
(a) Employee acknowledges and agrees that all Confidential
Information of the Company is confidential and a valuable, special and
unique asset of the Company that gives the Company an advantage over its
actual and potential, current and future competitors. Employee further
acknowledges and agrees that Employee owes the Company a fiduciary duty to
preserve and protect all Confidential Information from unauthorized
disclosure or unauthorized use, that certain Confidential Information
constitutes "trade secrets" under applicable laws and, that unauthorized
disclosure or unauthorized use of the Confidential Information would
irreparably injure the Company.
(b) Both during Employee's employment, and after the termination of
Employee's employment with the Company for any reason, Employee shall hold
all Confidential Information in strict confidence, and shall not use any
Confidential Information except for the benefit of the Company, in
accordance with the duties assigned to Employee. Employee shall not, at
any time (either during or after the term of Employee's employment),
disclose any Confidential Information to any person or entity (except
other employees of the Company who have a need to know the information in
connection with the performance of their employment duties), or copy,
reproduce, modify, transmit, including electronic transmission, decompile
or reverse engineer any Confidential Information. Employee shall take
reasonable precautions to protect the physical security of all documents
and other material containing Confidential Information (regardless of the
medium on which the Confidential Information is stored). This Agreement
applies to all Confidential Information, whether now known or later to
become known to Employee.
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(c) Upon the termination of Employee's employment with the Company
for any reason, and upon written request of the Company at any other time,
Employee shall promptly surrender and deliver to the Company all documents
and other written material in his possession of any nature containing or
pertaining to any Confidential Information and shall not retain any such
document or other material. Within five business days of any such written
request, Employee shall certify to the Company in writing that all such
materials have been returned.
4. NONCOMPETE PAYMENT. Upon a Qualified Termination, Employee shall be
paid $470,791 by the Company in a lump sum in cash within five days following
the date of such Qualified Termination. Notwithstanding anything in this
Agreement to the contrary, Employee's termination shall not alter or impair any
of Employee's rights or benefits, if any, under any (i) employee benefit plan of
the Company or (ii) incentive or deferred compensation plan, including, without
limitation, any stock option plan, of the Company.
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5. LITIGATION AND OTHER COOPERATION. During the Restricted Period,
Employee shall reasonably cooperate with the Company in the defense or
prosecution of any claims or actions now in existence or which may be brought in
the future against or on behalf of the Company which relate to events or
occurrences that transpired while Employee was employed by the Company;
provided, however, that such cooperation in Employee's good faith opinion shall
not materially and adversely affect Employee or expose Employee to an increased
probability of civil or criminal litigation or materially interfere, in
Employee's good faith opinion, with Employee's personal and business activities.
During the Restricted Period, to the extent that it does not materially
interfere, in Employee's good faith opinion, with Employee's personal and
business activities, Employee also shall cooperate with the Company in
connection with any investigation or review of any federal, state or local
regulatory authority as any such investigation or review relates to events or
occurrences that transpired while Employee was employed by the Company. The
Company shall provide Employee with Consulting Compensation on an hourly basis
for requested litigation and regulatory cooperation that occurs after his
termination of employment, and pay in advance upon request by Employee all costs
and expenses incurred in connection with his performance under this Paragraph,
including, but not limited to, reasonably attorneys' fees and costs.
6. NO MITIGATION OR OFFSET. Employee shall not be required to mitigate the
amount of any Company payment provided for in this Agreement by seeking other
employment or otherwise. The amount of any payment required to be paid to
Employee by the Company pursuant to this Agreement shall not be reduced by any
amounts that are owed to the Company by Employee, or by any setoff,
counterclaim, recoupment, defense or other claim, right or action.
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7. COMPLETE AGREEMENT. This Agreement supersedes, and replaces in full,
all representations, understandings and agreements (oral or written) between
Employee and the Company or any of its officers, directors or representatives
existing as of the Effective Date and covering the same subject matter as this
Agreement. This written Agreement is the final, complete and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be modified after the Effective Date except by a
further writing signed by a duly authorized officer of the Company and Employee,
and no term of this Agreement may be waived except by writing signed by the
party waiving the benefit of such term. Without limiting the generality of the
foregoing, either party's failure to insist on strict compliance with this
Agreement shall not be deemed a waiver thereof.
8. NOTICE. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:
To the Company: Tech-Sym Corporation
10500 Westoffice Dr., Suite 200
Houston, TX 77042
Attn: Chief Executive Officer
To Employee: J. Michael Camp
Notice shall be deemed given and effective on the earlier of five days after the
deposit in the U.S. mail of a writing addressed as above and sent first class
mail, certified or registered, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 7.
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9. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
10. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses incurred by Employee in disputing in good faith any issue hereunder or
seeking in good faith to obtain or enforce any benefit or right provided by this
Agreement. Such payments shall be made within five days after delivery of
Employee's written requests for payment accompanied with such evidence of fees
and expenses as the Company may reasonably require.
11. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas without regard to its conflicts of
law provisions. The parties hereto consent to the nonexclusive jurisdiction of
the state and federal courts sitting in Harris County, Texas.
12. INTEREST. The Company shall pay to Employee interest at the maximum
rate allowed by law on any payment not paid when due.
13. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.
TECH-SYM CORPORATION
By:/s/ J. J. RANKIN TIPPINS
------------------------
Name: J. Rankin Tippins
Title: Vice President
EMPLOYEE
By: /s/J. Michael Camp
J. Michael Camp
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Attachment A
DEFINITIONS
BENEFICIAL OWNER shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.
BOARD shall mean the Board of Directors of the Company.
BONUS PLAN shall mean the Company's Incentive Bonus Plan as the same may be
modified from time to time, but substantially in the form in effect on the
Effective Date.
CAUSE for termination by the Company of Employee's employment shall mean (a) the
willful and continued failure by Employee to substantially perform the
Employee's duties with the Company (other than any such failure resulting from
or anticipated to result from Employee's death or incapacity due to physical or
mental illness) which continues unabated for another thirty days after a written
demand for substantial performance is delivered to Employee by the Board, which
demand specifically identifies the manner in which the Board believes Employee
has not substantially performed Employee's duties, or (b) the willful engaging
by the Employee in gross misconduct which is demonstrably and materially
monetarily injurious to the Company and its subsidiaries taken as a whole. For
the purpose of this definition, (x) no act, or failure to act, on Employee's
part shall be deemed "willful" unless done, or omitted to be done, by Employee
not in good faith and without reasonable belief that Employee's act, or failure
to act, was in the interest of the Company and (y) in the event of a dispute
concerning the application of this provision, no claim by the Company that Cause
exists shall be given effect unless the Company establishes to the Compensation
Committee of the Board by clear and convincing evidence that Cause exists.
Notwithstanding the foregoing, Employee's Employment shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
Employee a certified copy of a resolution adopted pursuant to the recommendation
of the Compensation Committee, by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
which was called and held for the purpose of considering such termination (after
reasonable notice to the Employee and an opportunity for Employee, together with
Employee's counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, Employee was guilty of conduct set forth in clause
(a) or (b) of the definition of Cause herein, and specifying the particulars
thereof in detail.
A CHANGE IN CONTROL shall be deemed to have occurred if the event set forth in
any one of the following paragraphs shall have occurred:
(A) any person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities;
(B) during any period of two consecutive years commencing with the annual
meeting of stockholders on May 11, 1999, individuals who at the beginning of
such period constitute the Board cease for any reason to constitute at least
two-thirds of the directors constituting the Board;
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(C) there is consummated a merger or consolidation of the Company or any
direct or indirect subsidiary of the Company with any other company other than
(a) merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 80% of the combined voting power of the securities
of the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities; or
(D) the stockholders of the Company approve a plan of a complete or
substantially complete liquidation or dissolution of the Company; or
(E) there is consummated one or more agreement(s) for the sale or
disposition by the Company of a significant portion of the Company's assets. For
the purposes of this paragraph, the phrase "the sale or disposition by the
Company of a significant portion of the Company's assets" shall mean a
transaction or series of transactions involving the sale or disposition of
assets of the Company or any subsidiaries (including the stock of any
subsidiaries) in which the value of the assets or stock being sold or otherwise
disposed of (as measured by the consideration being paid or received therefor)
constitutes more than 60% of the fair market value of the Company as determined
by the aggregate market value of the Company's outstanding equity securities on
the date of the transaction or, in the event of a series of transactions, on the
date of the last transaction constituting a significant portion of the Company's
assets.
CONFIDENTIAL INFORMATION shall mean any information or material known to or used
by or for the Company (whether or not owned or developed by the Company and
whether or not developed by Employee) that is not generally known to other
persons in the business of the Company or its subsidiaries. Confidential
Information includes, but is not limited to, the following: all trade secrets of
the Company; all information that the Company has marked as confidential; all
nonpublic information concerning the Company's products, services, prospective
products or services, research, product designs, prices, discounts, costs,
marketing plans, marketing techniques, market studies, test data, customers,
customer lists and records, suppliers and contracts; all Company business
records and plans; all Company personnel files; all financial information of or
concerning the Company; all information relating to operating system software,
application software, software and system methodology, hardware platforms,
technical information, inventions, computer programs and listings, source codes,
object codes, copyrights and other intellectual property; all technical
specifications; any proprietary information belonging to the Company; all
computer hardware or software manuals; all training or instruction manuals; and
all data and all computer system passwords and user codes. For purposes hereof,
Confidential Information shall not include such information (i) which becomes or
is already known to the public through no fault of Employee; or (ii) the
disclosure of which (x) is required by law (including regulations and rulings)
or the order of any competent governmental authority or (y) Employee reasonably
believes is required in connection with the defense of a lawsuit against
Employee, provided that in either case, prior to disclosing any information,
Employee shall give prior written notice
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thereof to the Company and provide the Company with the opportunity to contest
such disclosure.
CONSULTING COMPENSATION shall mean the Employee's highest rate of annual taxable
compensation prior to termination of employment divided by 2,000.
EFFECTIVE DATE of this Agreement shall mean March 28, 2000.
EMPLOYEE shall mean the individual named in the first paragraph of this
Agreement.
GOOD REASON for termination by the Employee of Employee's employment shall mean
the occurrence of any of the following without Employee's express written
consent:
(A) an adverse change in Employee's positions, duties, responsibilities,
titles or offices as in effect on the Effective Date or any removal of Employee
from or any failure to re-elect or appoint Employee to any of such
responsibilities, titles, offices or positions, except in connection with the
termination of Employee's employment for Cause;
(B) a reduction in Employee's annual base salary as in effect on the
Effective Date or as the same may be increased from time to time;
(C) the failure by the Company to continue the Bonus Plan, or a failure by
the Company to continue Employee as a significant participant in the Bonus Plan
in at least the same amount as the lowest annual amount paid or payable to
Employee with respect to the three calendar years preceding the Effective Date;
(D) the failure by the Company to continue in effect any other material
employee benefit or compensation plan, program or policy in which Employee is
participating as of the Effective Date, unless the Company establishes such new
plans, programs or policies as is necessary to provide Employee with
substantially comparable benefits, the taking of any action by the Company not
required by law that would adversely affect Employee's participation in or
materially reduce Employee's benefits under any of such plans, programs or
policies, or deprive Employee of any material fringe benefit enjoyed by Employee
immediately prior to the Effective Date;
(E) the relocation of the Company's principal Employee offices to a
location outside the greater Houston area, or the Company's requiring the
Employee to relocate anywhere other than the location of the Company's principal
executive offices except for required travel on the Company's business to an
extent substantially consistent with Employee's business travel obligations as
of the Effective Date;
(F) the amendment, modification or repeal of any provision of the
Certificate of Incorporation, as amended, or the ByLaws of the Company which was
in effect as of the Effective Date, if such amendment, modification or repeal
would materially adversely effect Employee's right to indemnification by the
Company;
(G) the failure of the Company to obtain the assumption of this Agreement
by any successor;
(H) any purported termination of the Employee's employment which is not
effected pursuant to the requirements stated in the definition of "Cause;" for
purposes of
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this Agreement, no such purported termination shall be effective. The Employee's
right to terminate the Employee's employment shall not be affected by the
Employee's incapacity due to physical or mental illness.
The Employee's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act constituting Good
Reason hereunder.
For purposes of any determination regarding the existence of Good Reason,
any claim by the Employee that Good Reason exists shall be presumed to be
correct unless the Company establishes by clear and convincing evidence that
Good Reason does not exist.
A QUALIFIED TERMINATION shall mean a termination of Employee's employment with
the Company (a) on or following a Change in Control for any reason other than
death, or (b) prior to a Change of Control by the Company other than for Cause
or by the Employee for a Good Reason.
RESTRICTED PERIOD shall mean the two-year period following a Qualified
Termination.
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EXHIBIT 10.h
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (the "Agreement") made and entered into
effective as of March 28, 2000, is by and between TECH-SYM CORPORATION, a Nevada
corporation (the "Company", which shall include any successor), and J. RANKIN
TIPPINS ("Employee").
RECITALS
WHEREAS, Employee is employed by the Company in a confidential
relationship wherein Employee, in the course of his employment with the Company,
will be provided with confidential business information as to the Company and
its subsidiaries, including, without limitation, trade secrets utilized by the
Company and its subsidiaries, and future plans with respect thereto, all of
which have been and will be established and maintained at great expense to the
Company;
THEREFORE, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
AGREEMENT
1. DEFINED TERMS. The definitions of capitalized terms used in this
Agreement are provided in ATTACHMENT "A" hereto.
2. NON-COMPETITION PERIOD.
(a) Employee acknowledges that during his employment with the
Company, the Company shall furnish Employee with, and provide Employee
access to, Confidential Information (as defined below). Employee
understands and acknowledges that the Company's willingness to provide
Employee with such Confidential Information is based in material part on
Employee's entering into this Agreement and that Employee's breach of the
provisions of this Agreement could materially damage the Company. Subject
to the further provisions of this Agreement, Employee agrees that, during
the Restricted Period, Employee will not:
(i) engage in activities or render services that are in direct
competition with the business activities of the Company or its
subsidiaries, as the same are conducted at the time of his Qualified
Termination. Such restriction shall apply to all geographic areas
where the Company and its subsidiaries, at such time, are conducting
such business or have plans, which Employee is aware of, to conduct
such business in the next year;
(ii) call upon any person who is, at that time, an employee of
the Company or a subsidiary for the purpose or with the intent of
enticing such employee away from or out of the employ of the Company
or a subsidiary; or
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(iii) call upon any person or entity which is, at that time,
or which has been, within one year prior to that time, a customer of
the Company or a subsidiary for the purpose of selling products or
services in direct competition with the Company or a subsidiary.
Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit Employee from (1) acquiring as an investment not more
than 5% of the equity interests of a company engaged in competition with
the Company or a subsidiary or (2) performing services for any competitor
of the Company or a subsidiary, provided that the services performed by
Employee do not directly compete with the business of, or are not directly
related to, a product or service of the competitor that directly competes
with a product or service of the Company or a subsidiary.
(b) Because of the difficulty of measuring economic losses to the
Company as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to the Company
for which it would have no other adequate remedy, Employee agrees that
foregoing covenant may be enforced by the Company, in the event of breach
by him, by injunctions, restraining orders and orders of specific
performance issued by a court of competent jurisdiction.
(c) It is agreed by the parties that the foregoing covenants impose
a reasonable restraint on Employee in light of the activities and business
of the Company on the date of the execution of this Agreement and the
current plans of the Company.
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3. CONFIDENTIALITY.
(a) Employee acknowledges and agrees that all Confidential
Information of the Company is confidential and a valuable, special and
unique asset of the Company that gives the Company an advantage over its
actual and potential, current and future competitors. Employee further
acknowledges and agrees that Employee owes the Company a fiduciary duty to
preserve and protect all Confidential Information from unauthorized
disclosure or unauthorized use, that certain Confidential Information
constitutes "trade secrets" under applicable laws and, that unauthorized
disclosure or unauthorized use of the Confidential Information would
irreparably injure the Company.
(b) Both during Employee's employment, and after the termination of
Employee's employment with the Company for any reason, Employee shall hold
all Confidential Information in strict confidence, and shall not use any
Confidential Information except for the benefit of the Company, in
accordance with the duties assigned to Employee. Employee shall not, at
any time (either during or after the term of Employee's employment),
disclose any Confidential Information to any person or entity (except
other employees of the Company who have a need to know the information in
connection with the performance of their employment duties), or copy,
reproduce, modify, transmit, including electronic transmission, decompile
or reverse engineer any Confidential Information. Employee shall take
reasonable precautions to protect the physical security of all documents
and other material containing Confidential Information (regardless of the
medium on which the Confidential Information is stored). This Agreement
applies to all Confidential Information, whether now known or later to
become known to Employee.
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<PAGE>
(c) Upon the termination of Employee's employment with the Company
for any reason, and upon written request of the Company at any other time,
Employee shall promptly surrender and deliver to the Company all documents
and other written material in his possession of any nature containing or
pertaining to any Confidential Information and shall not retain any such
document or other material. Within five business days of any such written
request, Employee shall certify to the Company in writing that all such
materials have been returned.
4. NONCOMPETE PAYMENT. Upon a Qualified Termination, Employee shall
be paid $341,086 by the Company in a lump sum in cash within five days following
the date of such Qualified Termination. Notwithstanding anything in this
Agreement to the contrary, Employee's termination shall not alter or impair any
of Employee's rights or benefits, if any, under any (i) employee benefit plan of
the Company or (ii) incentive or deferred compensation plan, including, without
limitation, any stock option plan, of the Company.
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5. LITIGATION AND OTHER COOPERATION. During the Restricted Period,
Employee shall reasonably cooperate with the Company in the defense or
prosecution of any claims or actions now in existence or which may be brought in
the future against or on behalf of the Company which relate to events or
occurrences that transpired while Employee was employed by the Company;
provided, however, that such cooperation in Employee's good faith opinion shall
not materially and adversely affect Employee or expose Employee to an increased
probability of civil or criminal litigation or materially interfere, in
Employee's good faith opinion, with Employee's personal and business activities.
During the Restricted Period, to the extent that it does not materially
interfere, in Employee's good faith opinion, with Employee's personal and
business activities, Employee also shall cooperate with the Company in
connection with any investigation or review of any federal, state or local
regulatory authority as any such investigation or review relates to events or
occurrences that transpired while Employee was employed by the Company. The
Company shall provide Employee with Consulting Compensation on an hourly basis
for requested litigation and regulatory cooperation that occurs after his
termination of employment, and pay in advance upon request by Employee all costs
and expenses incurred in connection with his performance under this Paragraph,
including, but not limited to, reasonably attorneys' fees and costs.
6. NO MITIGATION OR OFFSET. Employee shall not be required to mitigate the
amount of any Company payment provided for in this Agreement by seeking other
employment or otherwise. The amount of any payment required to be paid to
Employee by the Company pursuant to this Agreement shall not be reduced by any
amounts that are owed to the Company by Employee, or by any setoff,
counterclaim, recoupment, defense or other claim, right or action.
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<PAGE>
7. COMPLETE AGREEMENT. This Agreement supersedes, and replaces in full,
all representations, understandings and agreements (oral or written) between
Employee and the Company or any of its officers, directors or representatives
existing as of the Effective Date and covering the same subject matter as this
Agreement. This written Agreement is the final, complete and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be modified after the Effective Date except by a
further writing signed by a duly authorized officer of the Company and Employee,
and no term of this Agreement may be waived except by writing signed by the
party waiving the benefit of such term. Without limiting the generality of the
foregoing, either party's failure to insist on strict compliance with this
Agreement shall not be deemed a waiver thereof.
8. NOTICE. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:
To the Company: Tech-Sym Corporation
10500 Westoffice Dr., Suite 200
Houston, TX 77042
Attn: Chief Executive Officer
To Employee: J. Rankin Tippins
Notice shall be deemed given and effective on the earlier of five days after the
deposit in the U.S. mail of a writing addressed as above and sent first class
mail, certified or registered, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 7.
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<PAGE>
9. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
10. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses incurred by Employee in disputing in good faith any issue hereunder or
seeking in good faith to obtain or enforce any benefit or right provided by this
Agreement. Such payments shall be made within five days after delivery of
Employee's written requests for payment accompanied with such evidence of fees
and expenses as the Company may reasonably require.
11. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas without regard to its conflicts of
law provisions. The parties hereto consent to the nonexclusive jurisdiction of
the state and federal courts sitting in Harris County, Texas.
12. INTEREST. The Company shall pay to Employee interest at the maximum
rate allowed by law on any payment not paid when due.
13. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.
TECH-SYM CORPORATION
By:/s/ J. MICHAEL CAMP
Name: J. Michael Camp
Title: Chairman of the Board and President
EMPLOYEE
By: /s/ J. RANKIN TIPPINS
J. Rankin Tippins
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<PAGE>
Attachment A
DEFINITIONS
BENEFICIAL OWNER shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.
BOARD shall mean the Board of Directors of the Company.
BONUS PLAN shall mean the Company's Incentive Bonus Plan as the same may be
modified from time to time, but substantially in the form in effect on the
Effective Date.
CAUSE for termination by the Company of Employee's employment shall mean (a) the
willful and continued failure by Employee to substantially perform the
Employee's duties with the Company (other than any such failure resulting from
or anticipated to result from Employee's death or incapacity due to physical or
mental illness) which continues unabated for another thirty days after a written
demand for substantial performance is delivered to Employee by the Board, which
demand specifically identifies the manner in which the Board believes Employee
has not substantially performed Employee's duties, or (b) the willful engaging
by the Employee in gross misconduct which is demonstrably and materially
monetarily injurious to the Company and its subsidiaries taken as a whole. For
the purpose of this definition, (x) no act, or failure to act, on Employee's
part shall be deemed "willful" unless done, or omitted to be done, by Employee
not in good faith and without reasonable belief that Employee's act, or failure
to act, was in the interest of the Company and (y) in the event of a dispute
concerning the application of this provision, no claim by the Company that Cause
exists shall be given effect unless the Company establishes to the Compensation
Committee of the Board by clear and convincing evidence that Cause exists.
Notwithstanding the foregoing, Employee's Employment shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
Employee a certified copy of a resolution adopted pursuant to the recommendation
of the Compensation Committee, by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
which was called and held for the purpose of considering such termination (after
reasonable notice to the Employee and an opportunity for Employee, together with
Employee's counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, Employee was guilty of conduct set forth in clause
(a) or (b) of the definition of Cause herein, and specifying the particulars
thereof in detail.
A CHANGE IN CONTROL shall be deemed to have occurred if the event set forth in
any one of the following paragraphs shall have occurred:
(A) any person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities;
(B) during any period of two consecutive years commencing with the annual
meeting of stockholders on May 11, 1999, individuals who at the beginning of
such period constitute the Board cease for any reason to constitute at least
two-thirds of the directors constituting the Board;
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<PAGE>
(C) there is consummated a merger or consolidation of the Company or any
direct or indirect subsidiary of the Company with any other company other than
(a) merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 80% of the combined voting power of the securities
of the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities; or
(D) the stockholders of the Company approve a plan of a complete or
substantially complete liquidation or dissolution of the Company; or
(E) there is consummated one or more agreement(s) for the sale or
disposition by the Company of a significant portion of the Company's assets. For
the purposes of this paragraph, the phrase "the sale or disposition by the
Company of a significant portion of the Company's assets" shall mean a
transaction or series of transactions involving the sale or disposition of
assets of the Company or any subsidiaries (including the stock of any
subsidiaries) in which the value of the assets or stock being sold or otherwise
disposed of (as measured by the consideration being paid or received therefor)
constitutes more than 60% of the fair market value of the Company as determined
by the aggregate market value of the Company's outstanding equity securities on
the date of the transaction or, in the event of a series of transactions, on the
date of the last transaction constituting a significant portion of the Company's
assets.
CONFIDENTIAL INFORMATION shall mean any information or material known to or used
by or for the Company (whether or not owned or developed by the Company and
whether or not developed by Employee) that is not generally known to other
persons in the business of the Company or its subsidiaries. Confidential
Information includes, but is not limited to, the following: all trade secrets of
the Company; all information that the Company has marked as confidential; all
nonpublic information concerning the Company's products, services, prospective
products or services, research, product designs, prices, discounts, costs,
marketing plans, marketing techniques, market studies, test data, customers,
customer lists and records, suppliers and contracts; all Company business
records and plans; all Company personnel files; all financial information of or
concerning the Company; all information relating to operating system software,
application software, software and system methodology, hardware platforms,
technical information, inventions, computer programs and listings, source codes,
object codes, copyrights and other intellectual property; all technical
specifications; any proprietary information belonging to the Company; all
computer hardware or software manuals; all training or instruction manuals; and
all data and all computer system passwords and user codes. For purposes hereof,
Confidential Information shall not include such information (i) which becomes or
is already known to the public through no fault of Employee; or (ii) the
disclosure of which (x) is required by law (including regulations and rulings)
or the order of any competent governmental authority or (y) Employee reasonably
believes is required in connection with the defense of a lawsuit against
Employee, provided that in either case, prior to disclosing any information,
Employee shall give prior written notice
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thereof to the Company and provide the Company with the opportunity to contest
such disclosure.
CONSULTING COMPENSATION shall mean the Employee's highest rate of annual taxable
compensation prior to termination of employment divided by 2,000.
EFFECTIVE DATE of this Agreement shall mean March 28, 2000.
EMPLOYEE shall mean the individual named in the first paragraph of this
Agreement.
GOOD REASON for termination by the Employee of Employee's employment shall mean
the occurrence of any of the following without Employee's express written
consent:
(A) an adverse change in Employee's positions, duties, responsibilities,
titles or offices as in effect on the Effective Date or any removal of Employee
from or any failure to re-elect or appoint Employee to any of such
responsibilities, titles, offices or positions, except in connection with the
termination of Employee's employment for Cause;
(B) a reduction in Employee's annual base salary as in effect on the
Effective Date or as the same may be increased from time to time;
(C) the failure by the Company to continue the Bonus Plan, or a failure by
the Company to continue Employee as a significant participant in the Bonus Plan
in at least the same amount as the lowest annual amount paid or payable to
Employee with respect to the three calendar years preceding the Effective Date;
(D) the failure by the Company to continue in effect any other material
employee benefit or compensation plan, program or policy in which Employee is
participating as of the Effective Date, unless the Company establishes such new
plans, programs or policies as is necessary to provide Employee with
substantially comparable benefits, the taking of any action by the Company not
required by law that would adversely affect Employee's participation in or
materially reduce Employee's benefits under any of such plans, programs or
policies, or deprive Employee of any material fringe benefit enjoyed by Employee
immediately prior to the Effective Date;
(E) the relocation of the Company's principal Employee offices to a
location outside the greater Houston area, or the Company's requiring the
Employee to relocate anywhere other than the location of the Company's principal
executive offices except for required travel on the Company's business to an
extent substantially consistent with Employee's business travel obligations as
of the Effective Date;
(F) the amendment, modification or repeal of any provision of the
Certificate of Incorporation, as amended, or the ByLaws of the Company which was
in effect as of the Effective Date, if such amendment, modification or repeal
would materially adversely effect Employee's right to indemnification by the
Company;
(G) the failure of the Company to obtain the assumption of this
Agreement by any successor;
(H) any purported termination of the Employee's employment which is not
effected pursuant to the requirements stated in the definition of "Cause;" for
purposes of
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this Agreement, no such purported termination shall be effective. The Employee's
right to terminate the Employee's employment shall not be affected by the
Employee's incapacity due to physical or mental illness.
The Employee's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act constituting Good
Reason hereunder.
For purposes of any determination regarding the existence of Good Reason,
any claim by the Employee that Good Reason exists shall be presumed to be
correct unless the Company establishes by clear and convincing evidence that
Good Reason does not exist.
A QUALIFIED TERMINATION shall mean a termination of Employee's employment with
the Company (a) on or following a Change in Control for any reason other than
death, or (b) prior to a Change of Control by the Company other than for Cause
or by the Employee for a Good Reason.
RESTRICTED PERIOD shall mean the two-year period following a Qualified
Termination.
12
EXHIBIT 10.i
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (the "Agreement") made and entered into
effective as of March 28, 2000, is by and between TECH-SYM CORPORATION, a Nevada
corporation (the "Company", which shall include any successor), and PAUL L. HARP
("Employee").
RECITALS
WHEREAS, Employee is employed by the Company in a confidential
relationship wherein Employee, in the course of his employment with the Company,
will be provided with confidential business information as to the Company and
its subsidiaries, including, without limitation, trade secrets utilized by the
Company and its subsidiaries, and future plans with respect thereto, all of
which have been and will be established and maintained at great expense to the
Company;
THEREFORE, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
AGREEMENT
1. DEFINED TERMS. The definitions of capitalized terms used in this
Agreement are provided in ATTACHMENT "A" hereto.
2. NON-COMPETITION PERIOD.
(a) Employee acknowledges that during his employment with the
Company, the Company shall furnish Employee with, and provide Employee
access to, Confidential Information (as defined below). Employee
understands and acknowledges that the Company's willingness to provide
Employee with such Confidential Information is based in material part on
Employee's entering into this Agreement and that Employee's breach of the
provisions of this Agreement could materially damage the Company. Subject
to the further provisions of this Agreement, Employee agrees that, during
the Restricted Period, Employee will not:
(i) engage in activities or render services that are in direct
competition with the business activities of the Company or its
subsidiaries, as the same are conducted at the time of his Qualified
Termination. Such restriction shall apply to all geographic areas
where the Company and its subsidiaries, at such time, are conducting
such business or have plans, which Employee is aware of, to conduct
such business in the next year;
(ii) call upon any person who is, at that time, an employee of
the Company or a subsidiary for the purpose or with the intent of
enticing such employee away from or out of the employ of the Company
or a subsidiary; or
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(iii) call upon any person or entity which is, at that time,
or which has been, within one year prior to that time, a customer of
the Company or a subsidiary for the purpose of selling products or
services in direct competition with the Company or a subsidiary.
Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit Employee from (1) acquiring as an investment not more
than 5% of the equity interests of a company engaged in competition with
the Company or a subsidiary or (2) performing services for any competitor
of the Company or a subsidiary, provided that the services performed by
Employee do not directly compete with the business of, or are not directly
related to, a product or service of the competitor that directly competes
with a product or service of the Company or a subsidiary.
(b) Because of the difficulty of measuring economic losses to the
Company as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to the Company
for which it would have no other adequate remedy, Employee agrees that
foregoing covenant may be enforced by the Company, in the event of breach
by him, by injunctions, restraining orders and orders of specific
performance issued by a court of competent jurisdiction.
(c) It is agreed by the parties that the foregoing covenants impose
a reasonable restraint on Employee in light of the activities and business
of the Company on the date of the execution of this Agreement and the
current plans of the Company.
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3. CONFIDENTIALITY.
(a) Employee acknowledges and agrees that all Confidential
Information of the Company is confidential and a valuable, special and
unique asset of the Company that gives the Company an advantage over its
actual and potential, current and future competitors. Employee further
acknowledges and agrees that Employee owes the Company a fiduciary duty to
preserve and protect all Confidential Information from unauthorized
disclosure or unauthorized use, that certain Confidential Information
constitutes "trade secrets" under applicable laws and, that unauthorized
disclosure or unauthorized use of the Confidential Information would
irreparably injure the Company.
(b) Both during Employee's employment, and after the termination of
Employee's employment with the Company for any reason, Employee shall hold
all Confidential Information in strict confidence, and shall not use any
Confidential Information except for the benefit of the Company, in
accordance with the duties assigned to Employee. Employee shall not, at
any time (either during or after the term of Employee's employment),
disclose any Confidential Information to any person or entity (except
other employees of the Company who have a need to know the information in
connection with the performance of their employment duties), or copy,
reproduce, modify, transmit, including electronic transmission, decompile
or reverse engineer any Confidential Information. Employee shall take
reasonable precautions to protect the physical security of all documents
and other material containing Confidential Information (regardless of the
medium on which the Confidential Information is stored). This Agreement
applies to all Confidential Information, whether now known or later to
become known to Employee.
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(c) Upon the termination of Employee's employment with the Company
for any reason, and upon written request of the Company at any other time,
Employee shall promptly surrender and deliver to the Company all documents
and other written material in his possession of any nature containing or
pertaining to any Confidential Information and shall not retain any such
document or other material. Within five business days of any such written
request, Employee shall certify to the Company in writing that all such
materials have been returned.
4. NONCOMPETE PAYMENT. Upon a Qualified Termination, Employee shall
be paid $273,625 by the Company in a lump sum in cash within five days following
the date of such Qualified Termination. Notwithstanding anything in this
Agreement to the contrary, Employee's termination shall not alter or impair any
of Employee's rights or benefits, if any, under any (i) employee benefit plan of
the Company or (ii) incentive or deferred compensation plan, including, without
limitation, any stock option plan, of the Company.
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5. LITIGATION AND OTHER COOPERATION. During the Restricted Period,
Employee shall reasonably cooperate with the Company in the defense or
prosecution of any claims or actions now in existence or which may be brought in
the future against or on behalf of the Company which relate to events or
occurrences that transpired while Employee was employed by the Company;
provided, however, that such cooperation in Employee's good faith opinion shall
not materially and adversely affect Employee or expose Employee to an increased
probability of civil or criminal litigation or materially interfere, in
Employee's good faith opinion, with Employee's personal and business activities.
During the Restricted Period, to the extent that it does not materially
interfere, in Employee's good faith opinion, with Employee's personal and
business activities, Employee also shall cooperate with the Company in
connection with any investigation or review of any federal, state or local
regulatory authority as any such investigation or review relates to events or
occurrences that transpired while Employee was employed by the Company. The
Company shall provide Employee with Consulting Compensation on an hourly basis
for requested litigation and regulatory cooperation that occurs after his
termination of employment, and pay in advance upon request by Employee all costs
and expenses incurred in connection with his performance under this Paragraph,
including, but not limited to, reasonably attorneys' fees and costs.
6. NO MITIGATION OR OFFSET. Employee shall not be required to mitigate the
amount of any Company payment provided for in this Agreement by seeking other
employment or otherwise. The amount of any payment required to be paid to
Employee by the Company pursuant to this Agreement shall not be reduced by any
amounts that are owed to the Company by Employee, or by any setoff,
counterclaim, recoupment, defense or other claim, right or action.
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7. COMPLETE AGREEMENT. This Agreement supersedes, and replaces in full,
all representations, understandings and agreements (oral or written) between
Employee and the Company or any of its officers, directors or representatives
existing as of the Effective Date and covering the same subject matter as this
Agreement. This written Agreement is the final, complete and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be modified after the Effective Date except by a
further writing signed by a duly authorized officer of the Company and Employee,
and no term of this Agreement may be waived except by writing signed by the
party waiving the benefit of such term. Without limiting the generality of the
foregoing, either party's failure to insist on strict compliance with this
Agreement shall not be deemed a waiver thereof.
8. NOTICE. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:
To the Company: Tech-Sym Corporation
10500 Westoffice Dr., Suite 200
Houston, TX 77042
Attn: Chief Executive Officer
To Employee: Paul L. Harp
Notice shall be deemed given and effective on the earlier of five days after the
deposit in the U.S. mail of a writing addressed as above and sent first class
mail, certified or registered, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 7.
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9. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
10. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses incurred by Employee in disputing in good faith any issue hereunder or
seeking in good faith to obtain or enforce any benefit or right provided by this
Agreement. Such payments shall be made within five days after delivery of
Employee's written requests for payment accompanied with such evidence of fees
and expenses as the Company may reasonably require.
11. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas without regard to its conflicts of
law provisions. The parties hereto consent to the nonexclusive jurisdiction of
the state and federal courts sitting in Harris County, Texas.
12. INTEREST. The Company shall pay to Employee interest at the maximum
rate allowed by law on any payment not paid when due.
13. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.
TECH-SYM CORPORATION
By:/S/J. MICHAEL CAMP
Name: J. Michael Camp
Title: Chairman of the Board and President
EMPLOYEE
By: /s/Paul L. Harp
Paul L. Harp
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Attachment A
DEFINITIONS
BENEFICIAL OWNER shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.
BOARD shall mean the Board of Directors of the Company.
BONUS PLAN shall mean the Company's Incentive Bonus Plan as the same may be
modified from time to time, but substantially in the form in effect on the
Effective Date.
CAUSE for termination by the Company of Employee's employment shall mean (a) the
willful and continued failure by Employee to substantially perform the
Employee's duties with the Company (other than any such failure resulting from
or anticipated to result from Employee's death or incapacity due to physical or
mental illness) which continues unabated for another thirty days after a written
demand for substantial performance is delivered to Employee by the Board, which
demand specifically identifies the manner in which the Board believes Employee
has not substantially performed Employee's duties, or (b) the willful engaging
by the Employee in gross misconduct which is demonstrably and materially
monetarily injurious to the Company and its subsidiaries taken as a whole. For
the purpose of this definition, (x) no act, or failure to act, on Employee's
part shall be deemed "willful" unless done, or omitted to be done, by Employee
not in good faith and without reasonable belief that Employee's act, or failure
to act, was in the interest of the Company and (y) in the event of a dispute
concerning the application of this provision, no claim by the Company that Cause
exists shall be given effect unless the Company establishes to the Compensation
Committee of the Board by clear and convincing evidence that Cause exists.
Notwithstanding the foregoing, Employee's Employment shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
Employee a certified copy of a resolution adopted pursuant to the recommendation
of the Compensation Committee, by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
which was called and held for the purpose of considering such termination (after
reasonable notice to the Employee and an opportunity for Employee, together with
Employee's counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, Employee was guilty of conduct set forth in clause
(a) or (b) of the definition of Cause herein, and specifying the particulars
thereof in detail.
A CHANGE IN CONTROL shall be deemed to have occurred if the event set forth in
any one of the following paragraphs shall have occurred:
(A) any person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities;
(B) during any period of two consecutive years commencing with the annual
meeting of stockholders on May 11, 1999, individuals who at the beginning of
such period constitute the Board cease for any reason to constitute at least
two-thirds of the directors constituting the Board;
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(C) there is consummated a merger or consolidation of the Company or any
direct or indirect subsidiary of the Company with any other company other than
(a) merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 80% of the combined voting power of the securities
of the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities; or
(D) the stockholders of the Company approve a plan of a complete or
substantially complete liquidation or dissolution of the Company; or
(E) there is consummated one or more agreement(s) for the sale or
disposition by the Company of a significant portion of the Company's assets. For
the purposes of this paragraph, the phrase "the sale or disposition by the
Company of a significant portion of the Company's assets" shall mean a
transaction or series of transactions involving the sale or disposition of
assets of the Company or any subsidiaries (including the stock of any
subsidiaries) in which the value of the assets or stock being sold or otherwise
disposed of (as measured by the consideration being paid or received therefor)
constitutes more than 60% of the fair market value of the Company as determined
by the aggregate market value of the Company's outstanding equity securities on
the date of the transaction or, in the event of a series of transactions, on the
date of the last transaction constituting a significant portion of the Company's
assets.
CONFIDENTIAL INFORMATION shall mean any information or material known to or used
by or for the Company (whether or not owned or developed by the Company and
whether or not developed by Employee) that is not generally known to other
persons in the business of the Company or its subsidiaries. Confidential
Information includes, but is not limited to, the following: all trade secrets of
the Company; all information that the Company has marked as confidential; all
nonpublic information concerning the Company's products, services, prospective
products or services, research, product designs, prices, discounts, costs,
marketing plans, marketing techniques, market studies, test data, customers,
customer lists and records, suppliers and contracts; all Company business
records and plans; all Company personnel files; all financial information of or
concerning the Company; all information relating to operating system software,
application software, software and system methodology, hardware platforms,
technical information, inventions, computer programs and listings, source codes,
object codes, copyrights and other intellectual property; all technical
specifications; any proprietary information belonging to the Company; all
computer hardware or software manuals; all training or instruction manuals; and
all data and all computer system passwords and user codes. For purposes hereof,
Confidential Information shall not include such information (i) which becomes or
is already known to the public through no fault of Employee; or (ii) the
disclosure of which (x) is required by law (including regulations and rulings)
or the order of any competent governmental authority or (y) Employee reasonably
believes is required in connection with the defense of a lawsuit against
Employee, provided that in either case, prior to disclosing any information,
Employee shall give prior written notice
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thereof to the Company and provide the Company with the opportunity to contest
such disclosure.
CONSULTING COMPENSATION shall mean the Employee's highest rate of annual taxable
compensation prior to termination of employment divided by 2,000.
EFFECTIVE DATE of this Agreement shall mean March 28, 2000.
EMPLOYEE shall mean the individual named in the first paragraph of this
Agreement.
GOOD REASON for termination by the Employee of Employee's employment shall mean
the occurrence of any of the following without Employee's express written
consent:
(A) an adverse change in Employee's positions, duties, responsibilities,
titles or offices as in effect on the Effective Date or any removal of Employee
from or any failure to re-elect or appoint Employee to any of such
responsibilities, titles, offices or positions, except in connection with the
termination of Employee's employment for Cause;
(B) a reduction in Employee's annual base salary as in effect on the
Effective Date or as the same may be increased from time to time;
(C) the failure by the Company to continue the Bonus Plan, or a failure by
the Company to continue Employee as a significant participant in the Bonus Plan
in at least the same amount as the lowest annual amount paid or payable to
Employee with respect to the three calendar years preceding the Effective Date;
(D) the failure by the Company to continue in effect any other material
employee benefit or compensation plan, program or policy in which Employee is
participating as of the Effective Date, unless the Company establishes such new
plans, programs or policies as is necessary to provide Employee with
substantially comparable benefits, the taking of any action by the Company not
required by law that would adversely affect Employee's participation in or
materially reduce Employee's benefits under any of such plans, programs or
policies, or deprive Employee of any material fringe benefit enjoyed by Employee
immediately prior to the Effective Date;
(E) the relocation of the Company's principal Employee offices to a
location outside the greater Houston area, or the Company's requiring the
Employee to relocate anywhere other than the location of the Company's principal
executive offices except for required travel on the Company's business to an
extent substantially consistent with Employee's business travel obligations as
of the Effective Date;
(F) the amendment, modification or repeal of any provision of the
Certificate of Incorporation, as amended, or the ByLaws of the Company which was
in effect as of the Effective Date, if such amendment, modification or repeal
would materially adversely effect Employee's right to indemnification by the
Company;
(G) the failure of the Company to obtain the assumption of this Agreement
by any successor;
(H) any purported termination of the Employee's employment which is not
effected pursuant to the requirements stated in the definition of "Cause;" for
purposes of
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this Agreement, no such purported termination shall be effective. The Employee's
right to terminate the Employee's employment shall not be affected by the
Employee's incapacity due to physical or mental illness.
The Employee's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act constituting Good
Reason hereunder.
For purposes of any determination regarding the existence of Good Reason,
any claim by the Employee that Good Reason exists shall be presumed to be
correct unless the Company establishes by clear and convincing evidence that
Good Reason does not exist.
A QUALIFIED TERMINATION shall mean a termination of Employee's employment with
the Company (a) on or following a Change in Control for any reason other than
death, or (b) prior to a Change of Control by the Company other than for Cause
or by the Employee for a Good Reason.
RESTRICTED PERIOD shall mean the two-year period following a Qualified
Termination.
12
EXHIBIT 10.j
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (the "Agreement") made and entered into
effective as of March 28, 2000, is by and between TECH-SYM CORPORATION, a Nevada
corporation (the "Company", which shall include any successor), and CHARLES B.
JOHNSON ("Employee").
RECITALS
WHEREAS, Employee is employed by the Company in a confidential
relationship wherein Employee, in the course of his employment with the Company,
will be provided with confidential business information as to the Company and
its subsidiaries, including, without limitation, trade secrets utilized by the
Company and its subsidiaries, and future plans with respect thereto, all of
which have been and will be established and maintained at great expense to the
Company;
THEREFORE, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
AGREEMENT
1. DEFINED TERMS. The definitions of capitalized terms used in this
Agreement are provided in ATTACHMENT "A" hereto.
2. NON-COMPETITION PERIOD.
(a) Employee acknowledges that during his employment with the
Company, the Company shall furnish Employee with, and provide Employee
access to, Confidential Information (as defined below). Employee
understands and acknowledges that the Company's willingness to provide
Employee with such Confidential Information is based in material part on
Employee's entering into this Agreement and that Employee's breach of the
provisions of this Agreement could materially damage the Company. Subject
to the further provisions of this Agreement, Employee agrees that, during
the Restricted Period, Employee will not:
(i) engage in activities or render services that are in direct
competition with the business activities of the Company or its
subsidiaries, as the same are conducted at the time of his Qualified
Termination. Such restriction shall apply to all geographic areas
where the Company and its subsidiaries, at such time, are conducting
such business or have plans, which Employee is aware of, to conduct
such business in the next year;
(ii) call upon any person who is, at that time, an employee of
the Company or a subsidiary for the purpose or with the intent of
enticing such employee away from or out of the employ of the Company
or a subsidiary; or
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(iii) call upon any person or entity which is, at that time,
or which has been, within one year prior to that time, a customer of
the Company or a subsidiary for the purpose of selling products or
services in direct competition with the Company or a subsidiary.
Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit Employee from (1) acquiring as an investment not more
than 5% of the equity interests of a company engaged in competition with
the Company or a subsidiary or (2) performing services for any competitor
of the Company or a subsidiary, provided that the services performed by
Employee do not directly compete with the business of, or are not directly
related to, a product or service of the competitor that directly competes
with a product or service of the Company or a subsidiary.
(b) Because of the difficulty of measuring economic losses to the
Company as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to the Company
for which it would have no other adequate remedy, Employee agrees that
foregoing covenant may be enforced by the Company, in the event of breach
by him, by injunctions, restraining orders and orders of specific
performance issued by a court of competent jurisdiction.
(c) It is agreed by the parties that the foregoing covenants impose
a reasonable restraint on Employee in light of the activities and business
of the Company on the date of the execution of this Agreement and the
current plans of the Company.
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<PAGE>
3. CONFIDENTIALITY.
(a) Employee acknowledges and agrees that all Confidential
Information of the Company is confidential and a valuable, special and
unique asset of the Company that gives the Company an advantage over its
actual and potential, current and future competitors. Employee further
acknowledges and agrees that Employee owes the Company a fiduciary duty to
preserve and protect all Confidential Information from unauthorized
disclosure or unauthorized use, that certain Confidential Information
constitutes "trade secrets" under applicable laws and, that unauthorized
disclosure or unauthorized use of the Confidential Information would
irreparably injure the Company.
(b) Both during Employee's employment, and after the termination of
Employee's employment with the Company for any reason, Employee shall hold
all Confidential Information in strict confidence, and shall not use any
Confidential Information except for the benefit of the Company, in
accordance with the duties assigned to Employee. Employee shall not, at
any time (either during or after the term of Employee's employment),
disclose any Confidential Information to any person or entity (except
other employees of the Company who have a need to know the information in
connection with the performance of their employment duties), or copy,
reproduce, modify, transmit, including electronic transmission, decompile
or reverse engineer any Confidential Information. Employee shall take
reasonable precautions to protect the physical security of all documents
and other material containing Confidential Information (regardless of the
medium on which the Confidential Information is stored). This Agreement
applies to all Confidential Information, whether now known or later to
become known to Employee.
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<PAGE>
(c) Upon the termination of Employee's employment with the Company
for any reason, and upon written request of the Company at any other time,
Employee shall promptly surrender and deliver to the Company all documents
and other written material in his possession of any nature containing or
pertaining to any Confidential Information and shall not retain any such
document or other material. Within five business days of any such written
request, Employee shall certify to the Company in writing that all such
materials have been returned.
4. NONCOMPETE PAYMENT. Upon a Qualified Termination, Employee shall
be paid $220,690 by the Company in a lump sum in cash within five days following
the date of such Qualified Termination. Notwithstanding anything in this
Agreement to the contrary, Employee's termination shall not alter or impair any
of Employee's rights or benefits, if any, under any (i) employee benefit plan of
the Company or (ii) incentive or deferred compensation plan, including, without
limitation, any stock option plan, of the Company.
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<PAGE>
5. LITIGATION AND OTHER COOPERATION. During the Restricted Period,
Employee shall reasonably cooperate with the Company in the defense or
prosecution of any claims or actions now in existence or which may be brought in
the future against or on behalf of the Company which relate to events or
occurrences that transpired while Employee was employed by the Company;
provided, however, that such cooperation in Employee's good faith opinion shall
not materially and adversely affect Employee or expose Employee to an increased
probability of civil or criminal litigation or materially interfere, in
Employee's good faith opinion, with Employee's personal and business activities.
During the Restricted Period, to the extent that it does not materially
interfere, in Employee's good faith opinion, with Employee's personal and
business activities, Employee also shall cooperate with the Company in
connection with any investigation or review of any federal, state or local
regulatory authority as any such investigation or review relates to events or
occurrences that transpired while Employee was employed by the Company. The
Company shall provide Employee with Consulting Compensation on an hourly basis
for requested litigation and regulatory cooperation that occurs after his
termination of employment, and pay in advance upon request by Employee all costs
and expenses incurred in connection with his performance under this Paragraph,
including, but not limited to, reasonably attorneys' fees and costs.
6. NO MITIGATION OR OFFSET. Employee shall not be required to mitigate the
amount of any Company payment provided for in this Agreement by seeking other
employment or otherwise. The amount of any payment required to be paid to
Employee by the Company pursuant to this Agreement shall not be reduced by any
amounts that are owed to the Company by Employee, or by any setoff,
counterclaim, recoupment, defense or other claim, right or action.
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7. COMPLETE AGREEMENT. This Agreement supersedes, and replaces in full,
all representations, understandings and agreements (oral or written) between
Employee and the Company or any of its officers, directors or representatives
existing as of the Effective Date and covering the same subject matter as this
Agreement. This written Agreement is the final, complete and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be modified after the Effective Date except by a
further writing signed by a duly authorized officer of the Company and Employee,
and no term of this Agreement may be waived except by writing signed by the
party waiving the benefit of such term. Without limiting the generality of the
foregoing, either party's failure to insist on strict compliance with this
Agreement shall not be deemed a waiver thereof.
8. NOTICE. Whenever any notice is required hereunder, it shall be
given in writing addressed as follows:
To the Company: Tech-Sym Corporation
10500 Westoffice Dr., Suite 200
Houston, TX 77042
Attn: Chief Executive Officer
To Employee: Charles B. Johnson
Notice shall be deemed given and effective on the earlier of five days after the
deposit in the U.S. mail of a writing addressed as above and sent first class
mail, certified or registered, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 7.
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9. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
10. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses incurred by Employee in disputing in good faith any issue hereunder or
seeking in good faith to obtain or enforce any benefit or right provided by this
Agreement. Such payments shall be made within five days after delivery of
Employee's written requests for payment accompanied with such evidence of fees
and expenses as the Company may reasonably require.
11. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas without regard to its conflicts of
law provisions. The parties hereto consent to the nonexclusive jurisdiction of
the state and federal courts sitting in Harris County, Texas.
12. INTEREST. The Company shall pay to Employee interest at the maximum
rate allowed by law on any payment not paid when due.
13. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.
TECH-SYM CORPORATION
By: /s/ J. MICHAEL CAMP
Name: J. Michael Camp
Title: Chairman of the Board and President
EMPLOYEE
By: /s/ CHARLES B. JOHNSON
Charles B. Johnson
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Attachment A
DEFINITIONS
BENEFICIAL OWNER shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.
BOARD shall mean the Board of Directors of the Company.
BONUS PLAN shall mean the Company's Incentive Bonus Plan as the same may be
modified from time to time, but substantially in the form in effect on the
Effective Date.
CAUSE for termination by the Company of Employee's employment shall mean (a) the
willful and continued failure by Employee to substantially perform the
Employee's duties with the Company (other than any such failure resulting from
or anticipated to result from Employee's death or incapacity due to physical or
mental illness) which continues unabated for another thirty days after a written
demand for substantial performance is delivered to Employee by the Board, which
demand specifically identifies the manner in which the Board believes Employee
has not substantially performed Employee's duties, or (b) the willful engaging
by the Employee in gross misconduct which is demonstrably and materially
monetarily injurious to the Company and its subsidiaries taken as a whole. For
the purpose of this definition, (x) no act, or failure to act, on Employee's
part shall be deemed "willful" unless done, or omitted to be done, by Employee
not in good faith and without reasonable belief that Employee's act, or failure
to act, was in the interest of the Company and (y) in the event of a dispute
concerning the application of this provision, no claim by the Company that Cause
exists shall be given effect unless the Company establishes to the Compensation
Committee of the Board by clear and convincing evidence that Cause exists.
Notwithstanding the foregoing, Employee's Employment shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
Employee a certified copy of a resolution adopted pursuant to the recommendation
of the Compensation Committee, by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
which was called and held for the purpose of considering such termination (after
reasonable notice to the Employee and an opportunity for Employee, together with
Employee's counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, Employee was guilty of conduct set forth in clause
(a) or (b) of the definition of Cause herein, and specifying the particulars
thereof in detail.
A CHANGE IN CONTROL shall be deemed to have occurred if the event set forth in
any one of the following paragraphs shall have occurred:
(A) any person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities;
(B) during any period of two consecutive years commencing with the annual
meeting of stockholders on May 11, 1999, individuals who at the beginning of
such period constitute the Board cease for any reason to constitute at least
two-thirds of the directors constituting the Board;
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(C) there is consummated a merger or consolidation of the Company or any
direct or indirect subsidiary of the Company with any other company other than
(a) merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 80% of the combined voting power of the securities
of the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities; or
(D) the stockholders of the Company approve a plan of a complete or
substantially complete liquidation or dissolution of the Company; or
(E) there is consummated one or more agreement(s) for the sale or
disposition by the Company of a significant portion of the Company's assets. For
the purposes of this paragraph, the phrase "the sale or disposition by the
Company of a significant portion of the Company's assets" shall mean a
transaction or series of transactions involving the sale or disposition of
assets of the Company or any subsidiaries (including the stock of any
subsidiaries) in which the value of the assets or stock being sold or otherwise
disposed of (as measured by the consideration being paid or received therefor)
constitutes more than 60% of the fair market value of the Company as determined
by the aggregate market value of the Company's outstanding equity securities on
the date of the transaction or, in the event of a series of transactions, on the
date of the last transaction constituting a significant portion of the Company's
assets.
(F) the Company does not own a majority of the outstanding stock of Metric
Systems Corporation.
CONFIDENTIAL INFORMATION shall mean any information or material known to or used
by or for the Company (whether or not owned or developed by the Company and
whether or not developed by Employee) that is not generally known to other
persons in the business of the Company or its subsidiaries. Confidential
Information includes, but is not limited to, the following: all trade secrets of
the Company; all information that the Company has marked as confidential; all
nonpublic information concerning the Company's products, services, prospective
products or services, research, product designs, prices, discounts, costs,
marketing plans, marketing techniques, market studies, test data, customers,
customer lists and records, suppliers and contracts; all Company business
records and plans; all Company personnel files; all financial information of or
concerning the Company; all information relating to operating system software,
application software, software and system methodology, hardware platforms,
technical information, inventions, computer programs and listings, source codes,
object codes, copyrights and other intellectual property; all technical
specifications; any proprietary information belonging to the Company; all
computer hardware or software manuals; all training or instruction manuals; and
all data and all computer system passwords and user codes. For purposes hereof,
Confidential Information shall not include such information (i) which becomes or
is already known to the public through no fault of Employee; or (ii) the
disclosure of which (x) is required by law (including regulations and rulings)
or the order of any competent governmental authority or (y) Employee reasonably
believes is required in connection with the defense of a lawsuit against
Employee, provided that in
10
<PAGE>
either case, prior to disclosing any information, Employee shall give prior
written notice thereof to the Company and provide the Company with the
opportunity to contest such disclosure.
CONSULTING COMPENSATION shall mean the Employee's highest rate of annual taxable
compensation prior to termination of employment divided by 2,000.
EFFECTIVE DATE of this Agreement shall mean March 28, 2000.
EMPLOYEE shall mean the individual named in the first paragraph of this
Agreement.
GOOD REASON for termination by the Employee of Employee's employment shall mean
the occurrence of any of the following without Employee's express written
consent:
(A) an adverse change in Employee's positions, duties, responsibilities,
titles or offices as in effect on the Effective Date or any removal of Employee
from or any failure to re-elect or appoint Employee to any of such
responsibilities, titles, offices or positions, except in connection with the
termination of Employee's employment for Cause;
(B) a reduction in Employee's annual base salary as in effect on the
Effective Date or as the same may be increased from time to time;
(C) the failure by the Company to continue the Bonus Plan, or a failure by
the Company to continue Employee as a significant participant in the Bonus Plan
in at least the same amount as the lowest annual amount paid or payable to
Employee with respect to the three calendar years preceding the Effective Date;
(D) the failure by the Company to continue in effect any other material
employee benefit or compensation plan, program or policy in which Employee is
participating as of the Effective Date, unless the Company establishes such new
plans, programs or policies as is necessary to provide Employee with
substantially comparable benefits, the taking of any action by the Company not
required by law that would adversely affect Employee's participation in or
materially reduce Employee's benefits under any of such plans, programs or
policies, or deprive Employee of any material fringe benefit enjoyed by Employee
immediately prior to the Effective Date;
(E) the relocation of the principal Employee offices of Metric Systems
Corporation ("Metric") to a location outside the greater Fort Walton Beach area,
or the Company's requiring the Employee to relocate anywhere other than the
location of Metric's principal executive offices except for required travel on
the Company's business to an extent substantially consistent with Employee's
business travel obligations as of the Effective Date;
(F) the amendment, modification or repeal of any provision of the
Certificate of Incorporation, as amended, or the ByLaws of the Company which was
in effect as of the Effective Date, if such amendment, modification or repeal
would materially adversely effect Employee's right to indemnification by the
Company;
(G) the failure of the Company to obtain the assumption of this Agreement
by any successor;
11
<PAGE>
(H) any purported termination of the Employee's employment which is not
effected pursuant to the requirements stated in the definition of "Cause;" for
purposes of this Agreement, no such purported termination shall be effective.
The Employee's right to terminate the Employee's employment shall not be
affected by the Employee's incapacity due to physical or mental illness.
The Employee's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act constituting Good
Reason hereunder.
For purposes of any determination regarding the existence of Good Reason,
any claim by the Employee that Good Reason exists shall be presumed to be
correct unless the Company establishes by clear and convincing evidence that
Good Reason does not exist.
A QUALIFIED TERMINATION shall mean a termination of Employee's employment with
the Company (a) on or following a Change in Control for any reason other than
death, or (b) prior to a Change of Control by the Company other than for Cause
or by the Employee for a Good Reason.
RESTRICTED PERIOD shall mean the two-year period following a Qualified
Termination.
12
EXHIBIT 10.k
RETENTION AGREEMENT
This RETENTION AGREEMENT (the "Agreement") is entered into as of February
17, 2000, between ENTERPRISE ELECTRONICS CORPORATION (the "Company") and LARRY
COLLINS (the "Employee").
WHEREAS, the stock or assets of the Company may be sold or a change in
control of the Company's beneficial owner, Tech-Sym Corporation ("Tech-Sym") may
occur; and
WHEREAS, the Company recognizes the Employee's contributions to the
success of the Company and wants to provide an incentive to the Employee to
alleviate concerns regarding personal status so that the Employee will fully
support such a sale or change in control;
NOW, THEREFORE, the parties hereto agree to the following:
1. In the event the stock or substantially all of the assets of the
Company are sold or there is a change in control of Tech-Sym, either of which
shall constitute a "Sale," the Company shall pay Employee $75,000 (the
"Retention Payment"), within five (5) business days after the effective date of
the Sale.
2. For the purposes of this Agreement, the following definitions shall
apply:
(a) Cause shall mean gross misconduct materially and demonstrably
injurious to the Company.
(b) Change in control of Tech-Sym shall have the same meaning as
stated in Tech-Sym's 1998 Equity Incentive Plan.
3. Employee shall be entitled to recover reasonable attorney's fees in the
event Employee prevails in any litigation regarding this Agreement.
4. 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, 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.
1
<PAGE>
Company Confidential Page 1
5. This Agreement may be canceled by either party effective one year after
written notice is received by the other party. This Agreement shall
automatically terminate if Employee voluntarily terminates his employment with
the Company or his employment is terminated by the Company for cause.
IN WITNESS WHEREOF, the parties have entered into this Agreement for all
purposes as of the day and year first above written.
[Employee] ENTERPRISE ELECTRONICS CORPORATION
/s/ LARRY COLLINS By:/s/ J. MICHAEL CAMP
----------------- ---------------------
Larry Collins J. Michael Camp
Chairman of the Board
2
EXHIBIT 10.l
EMPLOYMENT AND NONCOMPETITION AGREEMENT
This EMPLOYMENT AND NONCOMPETITION AGREEMENT ("Agreement") is entered into
the 28th day of August, 1999 (the "Effective Date"), by and between DAVID F.
BURKEY ("Employee"), and CONTINENTAL ELECTRONICS CORPORATION, a Nevada
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company wants to engage the services and labor of Employee
and to preclude Employee from engaging in any competitive business or soliciting
any customers of the Company during the term of this Agreement and for a period
of time thereafter; and
WHEREAS, Employee wishes to be employed by the Company under the terms and
conditions stated herein;
NOW THEREFORE, in consideration of the mutual agreements, representations,
warranties and undertakings of the parties hereto, the parties hereto do agree
as follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee accepts
such employment, upon the terms and conditions hereinafter set forth.
2. TERM OF EMPLOYMENT. Subject to the provisions for termination
hereinafter provided, Employee's term of employment by the Company shall be for
a period of one (1) year from the Effective Date hereof (the "Employment
Period"). If Employee continues to be employed by the Company after the
Employment Period, he shall be deemed to be an employee at the will of the
Company, unless the parties expressly extend the term of this Agreement or enter
into a new agreement, and this Agreement shall not be construed to confer any
rights upon Employee beyond the Employment Period. However, the noncompetition
covenants set forth in Section 9 below shall survive the expiration of the
Employment Period.
3. SERVICES TO BE RENDERED BY EMPLOYEE. Employee shall perform such
services and such duties as from time to time may be reasonably decided upon by
the President or the Board of Directors of the Company. Employee shall devote
his full productive time, energy and ability to the proper and efficient conduct
of Company's business. Employee shall observe and comply with all lawful and
reasonable directions and instructions by and on the part of the Company,
endeavor to promote the interests of Company and not at any time do anything
which may cause or tend to be likely to cause any loss or damage to the Company
in business, reputation or otherwise. Employee's initial assignment shall be as
President of the Company.
<PAGE>
4. COMPENSATION. For the services to be rendered by the Employee
hereunder, the Company shall pay Employee, and Employee agrees to accept:
(a) a salary at the rate of $208,000 per year; provided, that the
Board of Directors of the Company may review Employee's rate of salary
from time to time and increase or decrease such salary based upon
Employee's performance of services for the Company, but in no event shall
such rate of salary be less than $208,000 per year. Employee's salary
shall be payable in semi-monthly installments from which shall be deducted
income tax withholding, social security and other customary employee
deductions in conformity with the Company's payroll policies in effect
from time to time;
(b) car allowance of $500 a month; and
(c) a bonus upon the sale of the Company during the Employment
Period, or while Employee is assigned to CEC, whichever is longer, payable
at the time of closing, equal to the greater of $100,000 or 1.5% of the
excess of the sales price over the book value provided, however, that such
bonus shall not be paid if, prior to the closing, Employee voluntarily
terminates his employment with the Company or Employee's employment is
terminated by the Company pursuant to Section 6 below.
5. BENEFITS. Employee shall be entitled to participate in the employee
benefit plans, programs, group insurance policies, vacation and sick leave that
from time to time may be reasonably established for the general benefit of the
employees of the Company by its Board of Directors.
6. TERMINATION OF EMPLOYMENT. During the term of this Agreement, the
Company shall have the right, if exercised in good faith, to terminate the
employment of Employee hereunder by giving written notice thereof to Employee in
the event of any of the following:
(a) If Employee has (i) failed or refused to carry out or to perform
the reasonable duties required of him hereunder or otherwise breached any
material provision of this Agreement, or (ii) breached any statutory or
common law duty of loyalty to the Company;
(b) If the Board of Directors of the Company, or a duly authorized
committee thereof, acting in good faith and upon reasonable grounds,
determines that Employee has engaged in personal conduct which would
injure the reputation of the Company or otherwise adversely affect either
of their interests if Employee were retained as an employee of the
Company; or
(c) If the Employee dies or becomes unable by reason of physical
disability or other incapacity to carry out or to perform the duties
required of him hereunder for a continuous period of 30 days; provided,
however, that Employee's salary during any period in which he is unable to
perform the duties required of him hereunder shall be reduced by any
disability payments (excluding any reimbursements for medical expenses and
the like) which Employee is entitled to receive under group or other
disability insurance policies of Company of Tech-Sym during such period.
2
<PAGE>
In the event of any termination of employment pursuant to this Section 6,
Employee (or Employee's estate, as the case may be) shall be entitled to receive
the salary herein provided prorated to the date of such termination.
7. CONFIDENTIAL INFORMATION. Employee, both during the term of this
Agreement and thereafter, will not, directly or indirectly (without the
Company's prior written consent), use for himself or use for, or disclose to,
any party other than the Company, any secret, confidential or proprietary
information, technology or data regarding the business of the Company or its
subsidiaries or any secret, confidential or proprietary information, technology
or data regarding the costs, uses, methods, applications, customers, accounts or
suppliers (and pertinent information respecting prior transactions and
prospective transactions therewith) of products made, produced and sold by the
Company, or regarding any secret, confidential or proprietary apparatus,
process, system, manufacturing or other method at any time used, developed or
investigated by or for the Company, whether or not invented, developed,
acquired, discovered or investigated by Employee. At the termination of
Employee's employment or at any other time that the Company may request,
Employee shall promptly deliver to the Company all memoranda, notes, records,
plats, sketches, plans, customer lists or other documents made or compiled by,
delivered to, or otherwise acquired by Employee concerning secret, confidential
or proprietary costs, uses, methods, designs, technology, applications, systems
or purchasers of products made or sold by the Company, or any secret or
confidential product, apparatus or process, manufactured, used, developed,
acquired or investigated by the Company.
8. DISCOVERIES. Any and all inventions, discoveries, processes, methods,
designs, systems, technology and know-how, whether or not patentable, which
Employee may conceive, develop or make, either alone or in conjunction with
others, during Employee's term of employment with the Company relating to, or in
any way pertaining to or in connection with the business of the Company, shall
be the sole and exclusive property of the Company; and Employee, whenever
requested to do so by the Company or without further compensation or
consideration, shall promptly execute any and all applications, assignments and
other instruments which the Company shall deem necessary in order to apply for
and obtain letters patent of the United States and of foreign countries for said
inventions, discoveries and technology and in order to assign and convey to the
Company, the sole and exclusive right, title and interest in and to said
inventions, discoveries, processes, methods, designs, systems, technology and
know-how, or any applications or patents thereon. Employee hereby confirms that
he neither holds nor has any interest in any patent, patent right, patent
application, trademark, trademark application, license agreement, trade secret
or other proprietary information and technology now owned or heretofore used by
the Company in the conduct of its business.
3
<PAGE>
9. COMPETITION WITH THE COMPANY.
(a) While employed by the Company, Employee will not engage in or
carry on, directly or indirectly, either for himself or as a member of a
partnership or as a stockholder (except as a stockholder of less than one
percent (1%) of the issued and outstanding stock of a publicly held
corporation), investor, partner, officer or director of a corporation, or
as an employee, agent, partner, representative, associate or consultant of
any person, partnership, corporation or other entity any business of any
kind whatsoever in competition with that carried on by the Company and its
subsidiaries.
(b) In addition, Employee hereby covenants and agrees that for a
period of one year from and after the termination of his employment with
the Company, he will not engage in or carry on, directly or indirectly,
either for himself or as a member of a partnership or as a stockholder
(other than as a stockholder of less than one percent (1%) of the issued
and outstanding stock of a publicly held corporation), investor, partner,
officer or director of a corporation, or as an employee, agent, partner,
representative, associate or consultant of any person, partnership,
corporation or other entity in any business of any kind whatsoever in
competition with those carried on by the Company.
(c) It is acknowledged and agreed that, because of the national and
international scope of the Company's business and customers, that the
noncompetition covenants contained in this Section 9 shall be applicable
to and enforceable in all States of the United States.
10. EFFECT OF TERMINATION OR BREACH.
(a) If (i) Employee voluntarily terminates his employment with the
Company prior to the expiration of the Employment Period or (ii)
Employee's employment is terminated by the Company pursuant to Section
6(a) or 6(b) of this Agreement prior to the expiration of the Employment
Period, then the noncompetition covenants of Employee contained in Section
9(b) above shall continue to be in full force and effect for the remainder
of the Employment Period plus the one-year period thereafter and the
Company shall be under no obligation to pay Employee any compensation or
provide any benefits. This remedy is in addition to any and all other
equitable, statutory, or common law remedies available to the Company.
(b) If the Company terminates the employment of Employee for any
other reason prior to the expiration of the Employment Period, then the
noncompetition covenants set forth in Section 9 shall be void and of no
further force and effect unless the Company continues for the remainder of
the Employment Period to pay Employee compensation and provide benefits at
the same or higher level than Employee was receiving at the time of his
termination, in which case such noncompetition covenants shall continue
for the remainder of the Employment Period plus the one-year period
thereafter as set forth in Section 9; provided, however, that the Company
shall be entitled to deduct from such compensation the amount of any
compensation (including without limitation any "earned income" as that
term is defined in Section 401(c)(2) of the Internal Revenue Code of 1986,
as amended) received or accrued by Employee from any other source during
the Employment Period.
4
<PAGE>
(c) In the event that Employee is terminated by the Company pursuant
to Section 6(a) or 6(b) of this Agreement and Employee disputes whether
such termination was for cause as described in such Sections, then
Employee shall give written notice to the Company within ten (10) business
days of termination stating the grounds for such dispute. The dispute
shall then be settled by arbitration in accordance with the rules of the
American Arbitration Association (or any successor thereto) then in
effect. The sole function of the arbitrator will be to decide whether
Employee was terminated for cause as described in Section 6(a) and 6(b)
hereof, and the decision of the arbitrator with respect thereto shall be
final, conclusive and binding on Employee and the Company. The losing
party in such arbitration shall pay all the costs and expenses of such
arbitration and all the reasonable attorney's fees and expenses of the
prevailing party. During the pendency of any arbitration proceeding,
Employee agrees not to compete with the Company in accordance with Section
9(b) of this Agreement.
11. MERGER OR REORGANIZATION. This Agreement shall not be terminated by
the merger or consolidation, dissolution or reorganization of the Company
(including but not limited to any reorganization where the Company is not the
surviving or resulting corporation), or any transfer of all or substantially all
of the assets of the Company. In the event of any such merger, consolidation,
reorganization liquidation or transfer of assets, the provisions of this
Agreement shall inure to the benefit of and shall be binding upon the surviving
or resulting corporation or the corporation or person(s) to which such assets
shall be transferred.
12. REMEDIES. Except as it may elect otherwise, the Company shall
severally or jointly have all remedies provided by law or equity for breach of
this Agreement available to it. Without limiting the generality of the
foregoing, Employee agrees that, in addition to all other rights and remedies
available at law or in equity, the Company shall each be entitled to enforcement
of this Agreement in accordance with the principles of equity, the remedy at law
being hereby agreed and acknowledged by Employee to be inadequate.
13. ASSIGNMENT. The rights of the Company hereunder may, without the
consent of Employee, be assigned by the Company to any parent, subsidiary,
affiliate or successor of the Company. Except as provided in the preceding
sentence or in Section 10 hereof, the Company may not assign all or any of its
rights, duties or obligations hereunder without prior written consent of
Employee. This Agreement is not assignable by Employee.
14. NOTICES. All notices, requests, demands and other communications
permitted or required hereunder shall be in writing and shall be deemed to have
been duly given if delivered or if mailed, registered or certified United States
mail, postage prepaid:
5
<PAGE>
(a) If to Employee, addressed to him at the address set forth below
his name on the execution pages hereof.
(b) If to the Company, addressed to:
Tech-Sym Corporation
10500 Westoffice Drive, Suite 200
Houston, Texas 77042-5391
Attn: J. Michael Camp
or to such other address as either party hereto may request by
notice.
15. SEVERABILITY. Any provision hereof prohibited by or unenforceable
under any applicable law of any jurisdiction shall as to such jurisdiction be
deemed ineffective and deleted herefrom without affecting any other provision of
this Agreement. It is the desire of the parties hereto that this Agreement be
enforced to the maximum extent permitted by law, and should any provision
contained herein be held unenforceable, the parties hereby agree and consent
that such provision shall be reformed to make it a valid and enforceable
provision to the maximum extent permitted by law.
16. CHOICE OF LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
17. ENTIRE AGREEMENT AND AMENDMENT. This Agreement contains the entire
agreement of the parties with respect to the subject matter covered hereby and
may be amended, waived or terminated only by an instrument in writing signed by
the party or parties against whom such change, waiver or termination is sought
to be enforced. This Agreement supersedes and replaces that Employment and
Noncompetition Agreement dated August 28,1998, between Tech-Sym Corporation and
David F. Burkey.
IN WITNESS WHEREOF, this Agreement is EXECUTED AND EFFECTIVE as of the
Effective Date.
EMPLOYEE CONTINENTAL ELECTRONICS
CORPORATION
/s/ DAVID F. BURKEY By: /s/ J. MICHAEL CAMP
David F. Burkey J. Michael Camp
Continental Electronics Corporation Chairman
4212 South Buckner Blvd.
Dallas TX 75227-0879
6
EXHIBIT 21
SUBSIDIARIES OF TECH-SYM CORPORATION
Set forth below is certain information with respect to each of the
Registrant's subsidiaries:
STATE OR
OTHER
JURISDICTION
OF INCORPORATION
SUBSIDIARY OR ORGANIZATION
- ------------------------------------- -----------------
Continental Electronics
Corporation.......................... Nevada
Continental Electronics
Corporation -- Chile S.A. .... Chile
TELEFUNKEN Sendertechnik GmbH... Germany
CrossLink, Inc. ..................... Colorado
Enterprise Electronics Corporation... Alabama
Metric Systems Corporation........... Florida
Paratech Corporation................. Delaware
T-S Holding Corporation.............. Texas
Tech-Sym Management Corporation...... Delaware
Tech-Sym International Foreign Sales
Corporation........................ Barbados
TRAK Communications Inc. ............ Delaware
Daden-Anthony Associates,
Inc. ......................... Nevada
Tecom Industries,
Incorporated.................. California
TRAK Ceramics Inc. ............. Delaware
TRAK Microwave Corporation...... Delaware
TRAK Microwave Limited.......... Scotland
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 J. Michael Camp and J. Rankin
Tippins and each of them, any one of whom may act without the joinder of the
other, as 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, and all amendments thereto that such
attorney-in-fact may deem necessary or appropriate, pursuant to Section 13 of
the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1999,
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 17, 2000
TECH-SYM CORPORATION
/s/ W. L. CREECH /s/ A. A. GALLOTTA, JR.
W. L. Creech A. A. Gallotta, Jr.
Director Director
/s/ MICHAEL C. FORREST /s/ JAMES R. HENDERSON
Michael C. Forrest James R. Henderson
Director Director
/s/ RICHARD S. FRIEDLAND /s/ WARREN G. LICHTENSTEIN
Richard S. Friedland Warren G. Lichtenstein
Director Director
/s/ WENDELL W. GAMEL /s/ CHARLES K. WATT
Wendell W. Gamel Charles K. Watt
Director Director
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-38208, 33-61846, 33-56535, 333-85635) of
Tech-Sym Corporation of our report dated February 18, 2000, relating to the
financial statements and financial statement schedule, which appears in this
Annual Report on Form 10-K on page F-2.
/s/ PRICEWATERHOUSECOOPERS LLP
Houston, Texas
March 30, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM TECH-SYM CORPORATION 1999 10K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 27,399
<SECURITIES> 1,804
<RECEIVABLES> 30,679
<ALLOWANCES> 308
<INVENTORY> 20,648
<CURRENT-ASSETS> 130,701
<PP&E> 86,425
<DEPRECIATION> 54,986
<TOTAL-ASSETS> 175,603
<CURRENT-LIABILITIES> 30,395
<BONDS> 0
0
0
<COMMON> 811
<OTHER-SE> 142,921
<TOTAL-LIABILITY-AND-EQUITY> 175,603
<SALES> 155,186
<TOTAL-REVENUES> 155,186
<CGS> 113,630
<TOTAL-COSTS> 154,998
<OTHER-EXPENSES> 1,305
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,574
<INCOME-PRETAX> (2,691)
<INCOME-TAX> (954)
<INCOME-CONTINUING> (1,737)
<DISCONTINUED> (21,747)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,484)
<EPS-BASIC> (3.89)
<EPS-DILUTED> (3.89)
</TABLE>
