-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L5vr+qHqG4MDi6Nn1JguQ9F7fztHV4jUx7d0MT5HqAWDakjVZdAxdlnnmjplBzM9 KSo2sK5kHW9Asg+0xj6jcg== 0000890566-97-001838.txt : 19970814 0000890566-97-001838.hdr.sgml : 19970814 ACCESSION NUMBER: 0000890566-97-001838 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TECH SYM CORP CENTRAL INDEX KEY: 0000096669 STANDARD INDUSTRIAL CLASSIFICATION: SEARCH, DETECTION, NAVIGATION, GUIDANCE, AERONAUTICAL SYS [3812] IRS NUMBER: 741509818 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04371 FILM NUMBER: 97659238 BUSINESS ADDRESS: STREET 1: 10500 WESTOFFICE DR STREET 2: SUITE 200 CITY: HOUSTON STATE: TX ZIP: 77042-5391 BUSINESS PHONE: 7137857790 MAIL ADDRESS: STREET 1: 10500 WESTOFFICE DRIVE STREET 2: SUITE 200 CITY: HOUSTON STATE: TX ZIP: 77042-5391 FORMER COMPANY: FORMER CONFORMED NAME: WESTEC CORP DATE OF NAME CHANGE: 19700721 FORMER COMPANY: FORMER CONFORMED NAME: WESTERN EQUITIES INC DATE OF NAME CHANGE: 19660921 10-Q 1 Form 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________. Commission file number 1-4371 Tech-Sym Corporation (Exact name of Registrant as specified in its charter) Nevada 74 1509818 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10500 Westoffice Drive, Suite 200, Houston, Texas 77042 (Address of principal executive offices) Zip Code Registrant's telephone number, including area code: 713/785-7790 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, and (2) has been subject to such filing requirements for the past 90 days. Yes [X]. No [_]. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Outstanding at July 31, 1997 ---------------------------- ---------------------------- Common Stock, $.10 par value 6,031,481 Form 10-Q Tech-Sym Corporation INDEX ----- Page No. -------- Part I. Financial Information: Consolidated Balance Sheet June 30, 1997 and December 31, 1996 1 Consolidated Statement of Income and Accumulated Earnings for the Quarter Ended June 30, 1997 and 1996 2 Consolidated Statement of Income and Accumulated Earnings for the Six Months Ended June 30, 1997 and 1996 3 Consolidated Statement of Cash Flows for the Six Months Ended June 30, 1997 and 1996 4 Notes to Consolidated Financial Statements 5-7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8-12 Part II. Other Information: Item 4. Submission of Matters to Vote of Security Holders 13 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 Page 1 Form 10-Q PART I. FINANCIAL INFORMATION Item 1. Financial Statements Tech-Sym Corporation Consolidated Balance Sheet (stated in thousands, except share amounts) June 30, 1997 December 31, 1996 ------------ ------------ Assets ........................................ (unaudited) Current assets: Cash and cash equivalents ................. $ 12,339 $ 20,450 Short-term investments .................... 5,810 6,380 Receivables - net ......................... 56,254 62,217 Unbilled revenue .......................... 51,776 48,814 Inventories ............................... 91,812 82,808 Other ..................................... 11,069 6,098 ------------ ------------ Total current assets ................ 229,060 226,767 Property, plant and equipment - net ......... 45,708 48,917 Long-term receivables - net ................. 9,276 16,695 Other assets ................................ 23,817 30,900 Net assets of discontinued operation ........ 12,385 ------------ ------------ Total assets ........................ $ 320,246 $ 323,279 ============ ============ Liabilities Current liabilities: Notes payable ............................. $ 38,798 $ 29,406 Current maturities of long-term debt ...... 2,631 4,251 Accounts payable .......................... 17,428 21,115 Billings in excess of cost and estimated earnings on uncompleted contracts ....... 8,293 9,728 Taxes on income ........................... 5,682 5,201 Other accrued liabilities ................. 16,774 21,331 ------------ ------------ Total current liablilites ........... 89,606 91,032 Long-term debt .............................. 14,626 13,974 Other liabilities and deferred credits ...... 39,010 43,022 ------------ ------------ Total liabilities ................... 143,242 148,028 Minority interest ............................. 15,690 17,179 Shareholders' Investment Preferred stock - authorized 2,000,000 shares, without par value; none issued Common stock - authorized 20,000,000 shares, $.10 par value; issued 7,964,181 and 7,941,231 shares ............. 796 794 Additional capital .......................... 40,083 39,753 Accumulated earnings ........................ 150,385 145,195 Cumulative translation adjustments .......... (2,303) (911) Common stock held in treasury at cost (1,936,400 and 1,905,400 shares) ........... (27,647) (26,759) ------------ ------------ Total shareholders' investment ...... 161,314 158,072 ------------ ------------ Total liabilities and shareholders' investment ........... $ 320,246 $ 323,279 ============ ============ The accompanying notes are an integral part of these consolidated financial statements. Page 2 Form 10-Q Tech-Sym Corporation Consolidated Statement of Income and Accumulated Earnings (stated in thousands, except per share amounts) For The Quarter Ended June 30, ----------------------------- 1997 1996 (unaudited) Sales ........................................ $ 73,725 $ 65,780 ------------ ------------ Costs and expenses: Cost of sales .............................. 49,632 42,832 Selling, general and administrative expenses ................................. 16,155 14,723 Company-sponsored product development ...... 3,394 3,561 Interest expense ........................... 1,081 706 Gain on issuance of stock by subsidiary .... (21,166) Interest and other (income) - net .......... (1,824) (1,103) ------------ ------------ 68,438 39,553 ------------ ------------ Income from continuting operations before income taxes, minority interest and extraordinary item ..... 5,287 26,227 Provision for income taxes from continuing operations ................. 1,491 8,998 Minority interest expense from continuing operations ................. 307 246 ------------ ------------ Income from continuing operations before extraordinary item ........... 3,489 16,983 Discontinued operation: Loss from discontinued operation net of applicable income taxes of $425 and $538 and minority interest expense of $206 and $205, respectively .............. 740 932 ------------ ------------ Income before extraordinary item ...... 2,749 16,051 Extraordinary item: Extraordinary loss on early extinguishment of debt net of applicable income taxes of $557 .......... 1,035 ------------ ------------ Net income ............................ 2,749 15,016 Accumulated earnings: Beginning of period ........................ 147,636 125,134 ------------ ------------ End of period .............................. $ 150,385 $ 140,150 ============ ============ Earnings (loss) per common share: Continuing operations before extraordinary item ....................... $ 0.58 $ 2.58 Discontinued operation ..................... (0.12) (0.14) Extraordinary item ......................... (0.16) ------------ ------------ Net income ............................ $ 0.46 $ 2.28 ============ ============ The accompanying notes are an integral part of these consolidated financial statements. Page 3 Form 10-Q Tech-Sym Corporation Consolidated Statement of Income and Accumulated Earnings (stated in thousands, except per share amounts) For The Six Months Ended June 30, ----------------------------- 1997 1996 (unaudited) Sales ........................................ $ 147,423 $ 131,588 ------------ ------------ Costs and expenses: Cost of sales .............................. 99,853 85,995 Selling, general and administrative expenses ................................. 31,594 28,704 Company-sponsored product development ...... 6,549 7,382 Interest expense ........................... 1,761 2,075 Gain on issuance of stock by subsidiary .... (21,166) Interest and other (income) - net .......... (2,133) (1,934) ------------ ------------ 137,624 101,056 ------------ ------------ Income from continuting operations before income taxes, minority interest and extraordinary item ..... 9,799 30,532 Provision for income taxes from continuing operations ................. 2,877 10,393 Minority interest expense from continuing operations ................. 496 246 ------------ ------------ Income from continuing operations before extraordinary item ........... 6,426 19,893 Discontinued operation: Loss from discontinued operation net of applicable income taxes of $713 and $833 and minority interest expense of $352 and $205, respectively .............. 1,236 1,563 ------------ ------------ Income before extraordinary item ...... 5,190 18,330 Extraordinary item: Extraordinary loss on early extinguishment of debt net of applicable income taxes of $557 .......... 1,035 ------------ ------------ Net income ............................ 5,190 17,295 Accumulated earnings: Beginning of period ........................ 145,195 122,855 ------------ ------------ End of period .............................. $ 150,385 $ 140,150 ============ ============ Earnings (loss) per common share: Continuing operations before extraordinary item ....................... $ 1.06 $ 3.03 Discontinued operation ..................... (0.20) (0.24) Extraordinary item ......................... (0.16) ------------ ------------ Net income ............................ $ 0.86 $ 2.63 ============ ============ The accompanying notes are an integral part of these consolidated financial statements. Page 4 Form 10-Q Tech-Sym Corporation Consolidated Statement of Cash Flows (stated in thousands) For the Six Months Ended June 30, ----------------------- 1997 1996 --------- ---------- (unaudited) Cash flows from operating activities: Net income ......................................... $ 5,190 $ 17,295 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ................... 6,836 6,019 Gain on issuance of stock by subsidiary ......... (21,166) Gain on foreign currency denominated debt ....... (641) Minority interest ............................... 144 41 Change in assets and liabilities: Receivables ..................................... (883) 23,528 Unbilled revenue ................................ (2,962) (6,038) Inventories ..................................... (9,205) (15,175) Accounts payable and taxes on income ............ (1,961) 14,777 Billing in excess and other accrued liabilites .. (9,785) (2,118) Long-term receivables - net and other assets .... (5,095) 885 Other liabilities and deferred credits .......... 2,512 (10,269) --------- --------- Net cash provided by (used for) operating activities (15,850) 7,779 --------- --------- Cash flows from investing activities: Capital expenditures ............................... (5,965) (8,411) Payment for purchase of business, net of cash acquired .............................. 7,656 Sale of equipment under operating lease ............ 731 Sale of investment securities ...................... 570 Other investing activities ......................... 270 (342) --------- --------- Net cash used for investing activities ............. (4,394) (1,097) --------- --------- Cash flows from financing activities: Net borrowings (payments) under bank line of credit agreements .............................. 9,392 (12,038) Proceeds from long-term debt ....................... 2,432 3,406 Payments on long-term debt ......................... (2,759) (20,431) Proceeds from sale of notes receivable ............. 7,268 Proceeds from exercise of stock options ............ 332 544 Acquisition of Tech-Sym and GeoScience treasury shares ........................ (3,140) (30) Proceeds from issuance of subsidiary common stock .. 39,525 Other .............................................. (1,392) (509) --------- --------- Net cash provided by financing activities .......... 12,133 10,467 --------- --------- Net increase (decrease) in Cash and cash equivalents .......................... (8,111) 17,149 Cash and cash equivalents at beginning of period ... 20,450 20,715 --------- --------- Cash and cash equivalents at end of period ......... $ 12,339 $ 37,864 ========= ========= Cash flow from operating activities include: Interest paid ...................................... $ 1,921 $ 2,864 Income taxes paid .................................. 4,664 2,553 The accompanying notes are an integral part of these consolidated financial statements. Page 5 Form 10-Q Tech-Sym Corporation Notes to Consolidated Financial Statements 1. The accompanying unaudited consolidated financial statements of Tech-Sym Corporation and its subsidiaries (the "Company") have been prepared in accordance with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the financial statements and notes thereto appearing in the Company's Annual Report for the year ended December 31, 1996. In the opinion of the Company's management ("Management"), all adjustments necessary for a fair presentation of the results of operations for all periods reported have been included. Such adjustments consist only of normal recurring items. The consolidated statements of income for the three and six months ended June 30, 1997, are not necessarily indicative of the results to be expected for the full year ending December 31, 1997. The consolidated financial statements have been restated to reflect the geoscientific software subsidiary of the Company's majority owned subsidiary, GeoScience Corporation ("GeoScience"), as a discontinued operation in accordance with Accounting Principles Board Opinion No. 30 (see Note 2). 2. Effective June 30, 1997 (the "measurement date"), GeoScience adopted a plan to sell its geoscientific software subsidiary, CogniSeis Development, Inc. ("CogniSeis"). Accordingly, CogniSeis is reported as a discontinued operation for the periods presented. Management anticipates CogniSeis will incur operating losses approximating $500,000 from the measurement date through the disposal date. Such losses have been deferred due to the fact that Management expects a gain on the sale of CogniSeis. On July 15, 1997, GeoScience signed a letter of intent to sell CogniSeis for cash and guaranteed future royalties with a combined estimated value between $19.5 and $23 million. The proposed sale is subject to the terms of a negotiated definitive agreement which could vary from the letter of intent, and no assurances can be made that this transaction will be completed. Management's current estimate indicates that the total sale proceeds from the disposal of CogniSeis will result in a gain on the transaction. However, the ultimate financial impact of the negotiated definitive agreement could differ from Management's current estimate. Page 6 Form 10-Q Tech-Sym Corporation Notes to Consolidated Financial Statements - Continued The operating results (unaudited) of the discontinued operation are summarized as follows (in thousands): Quarter Ended June 30, -------------------------- 1997 1996 ---------- ---------- Revenue ............................ $ 5,575 $ 5,404 ========== ========== Loss before provision for income taxes ...................... 1,371 1,675 Provision for income taxes ......... 425 538 Minority interest .................. 206 205 ---------- ---------- Net loss ........................... $ 740 $ 932 ========== ========== Six Months Ended June 30, -------------------------- 1997 1996 ---------- ---------- Revenue ............................ $ 11,398 $ 11,281 ========== ========== Loss before provision for income taxes ...................... 2,301 2,601 Provision for income taxes ......... 713 833 Minority interest .................. 352 205 ---------- ---------- Net loss ........................... $ 1,236 $ 1,563 ========== ========== The net assets (unaudited) of the discontinued operation are summarized as follows (in thousands): June 30, 1997 ------------- Current assets ................................ $ 7,465 Property, plant and equipment, net ............ 3,149 Other assets .................................. 5,747 Current liabilities ........................... (3,976) ------------- Net assets ............................... $ 12,385 ============= 3. Inventories, stated at the lower of cost (first-in, first- out) or market, are summarized as follows (in thousands): June 30, 1997 December 31, 1996 ------------- ------------- (unaudited) Raw Materials ............... $ 34,726 $ 28,613 Work in Process ............. 33,259 30,680 Finished Goods .............. 23,827 23,515 ------------- ------------- Total inventories ...... $ 91,812 $ 82,808 ============= ============= Page 7 Form 10-Q Tech-Sym Corporation Notes to Consolidated Financial Statements - Continued 4. Earnings per common share are based on the weighted average number of shares outstanding during each period (6,032,000 and 6,579,000 for the quarter ended June 30, 1997 and 1996 respectively, and 6,037,000 and 6,571,000 for the six month period ended June 30, 1997 and 1996, respectively). 5. In 1997, Statement of Financial Accounting Standards No. 128 (FAS 128), Earnings per Share was issued. FAS 128 is effective for earnings per share calculations for periods ending after December 15, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Adoption of FAS 128 is not expected to have a material effect on the Company's financial position or operational results. Quarter Ended June 30, ---------------------- 1997 1996 -------- -------- Pro-forma earnings per share Earnings per common share .......... $ 0.46 $ 2.28 -------- -------- Earnings per common share assuming dilution ................. $ 0.44 $ 2.20 -------- -------- Six Months Ended June 30, ------------------------- 1997 1996 -------- -------- Pro-forma earnings per share Earnings per common share .......... $ 0.86 $ 2.63 -------- -------- Earnings per common share assuming dilution ................. $ 0.83 $ 2.53 -------- -------- Page 8 Form 10-Q Tech-Sym Corporation Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS In June 1997, the Company's majority owned subsidiary, GeoScience Corporation ("GeoScience") adopted a plan to sell its geoscientific software subsidiary, CogniSeis Development, Inc. ("CogniSeis"). CogniSeis is accounted for as a discontinued operation. Accordingly, the consolidated financial statements have been presented to report separately the operating results of the continuing operations. All prior year amounts have been restated. RESULTS OF OPERATIONS - QUARTER ENDED JUNE 30, 1997 COMPARED TO THE QUARTER ENDED JUNE 30, 1996 Revenue increased $7,945,000 or 12% to $73,725,000 for the quarter ended June 30, 1997. The increase in revenue resulted primarily from increased shipments in the communications and geoscientific business which increased from the same quarter in the prior year $8,596,000 and $3,326,000, respectively. Within the communications business, shipments of broadcast equipment, microwave products and weather radar systems demonstrated revenue growth over the second quarter of 1996. In the geoscientific business, the increase primarily resulted from increased shipments of land and ocean bottom cables. The increases in the communications and geoscientific business more than offset the $3,199,000 decrease in revenue in the defense systems business which was a result of delayed bookings of government and foreign orders. The consolidated gross profit margin decreased from 35% to 33% of revenue for the quarter ended June 30, 1997, compared to the same quarter in the prior year. The majority of the decrease in gross profit margin was attributed to the communications business. Within the broadcast area of the communications business, the gross profit margin was negatively impacted by cost over-runs on several long-term projects and initial start-up costs on a number of new products. The gross profit of the microwave products' portion of the communications business suffered due to production labor costs increasing at a greater rate than the increase in product shipments. Increased material costs on several contracts within the defense systems business due to supplier problems also contributed to a lower than customary gross profit margin. The gross profit margin of the geoscientific business improved over the second quarter of 1996 primarily as a result of reduced costs derived from improved manufacturing efficiencies and decreased electronic component prices related to the 24-bit electronic module. Page 9 Form 10-Q Tech-Sym Corporation Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued Consolidated selling, general and administrative expenses increased 10% to $16,155,000 during the second quarter of 1997. These expenses as a percentage of revenue decreased slightly in comparison to the same quarter a year ago. The majority of the $1,432,000 increase occurred within the geoscientific business. The increase primarily resulted from additional costs for support personnel and royalties associated with the overall growth in the business and additional commissions associated with increased international sales. Furthermore, expenses related to managing the consolidated business and necessitated by being a publicly traded company were added. The Company-sponsored product development expenses were $3,394,000 for the quarter ended June 30, 1997 compared to $3,561,000 for the quarter ended June 30, 1996. The decrease was primarily in the communications business as a result of the completion of several projects relating to broadcast and antenna equipment that were under development in the second quarter of 1996. The overall decreases exceeded the increases incurred within the geoscientific business due to design changes on the 24-bit electronic module. Interest expense increased to $1,081,000 during the second quarter of 1997 from $706,000 during the second quarter of 1996 as a result of the increase in interest bearing debt incurred primarily to support the growth of the business and, to a lesser extent, to fund the Company's stock buy-back program. Other income increased to $1,824,000 from $1,103,000 primarily due to foreign currency transaction gains within the communications business. Income from continuing operations before the extraordinary item for the second quarter of 1997 was $3,489,000 compared to $16,983,000 for the corresponding quarter a year ago. The results of the second quarter of 1996 included a net gain of $13,700,000 related to the spin-off of 24.7% of GeoScience. Loss from the discontinued operation for the quarter ended June 30, 1997, decreased $192,000 or $.02 per share from the same quarter in the prior year as a result of an increase in interest income recognized on contract installment sales. RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO JUNE 30, 1996 Revenue increased 12% to $147,423,000 for the six months ended June 30, 1997, from $131,588,000 for the same period in the prior year. The increase in revenue resulted from increased shipments Page 10 Form 10-Q Tech-Sym Corporation Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued in the communications and geoscientific business of $13,037,000 and $7,783,000, respectively. Revenue relating to the defense systems business decreased $4,032,000 from the same period in the prior year due to continued delays in the receipt of new government and foreign orders. Within the communications business, shipments in all major product areas (broadcast equipment, microwave products and weather radar systems) increased 20% or more over the six months ended June 30, 1996. Increased shipments of land, ocean bottom and marine seismic cables and revenue relating to the technical data services provided to oil exploration and production customers resulted in a 20% growth in the revenue of the geoscientific business over the same period in the prior year. The consolidated gross profit margin decreased from 34% to 32% of revenue for the six months ended June 30, 1997. The overall decrease is primarily related to the communications business. The reasons for the decrease within the communications business are essentially the same as those discussed for the quarter, along with a change in the product mix within the broadcast area. The gross profit margin for the geoscientific business was consistent as a percent of revenue for the six months ended June 30, 1997 and 1996, while the gross profit margin as a percent of revenue for the defense systems business improved from 22% to 24% over the same period in the prior year. Consolidated selling, general and administrative expenses increased to $31,594,000 for the period ended June 30, 1997, from $28,704,000. These expenses as a percentage of revenue decreased slightly in comparison to the same quarter in the prior year. The increase occurred in the geoscientific business. The increase in the geoscientific business resulted from (1) the growth in support personnel associated with the growth in the business, (2) additional royalty costs associated with the overall increase in revenue, (3) additional commissions associated with the increased international sales and (4) the added costs of managing the consolidated geoscientific business as a publicly traded company. Company-sponsored product development expenses were $6,549,000 for the period ended June 30, 1997 compared to $7,382,000 for the period ended June 30, 1996. The decrease occurred primarily within the broadcast area of the communications business. The reasons for the decrease are as discussed in the results for the quarter ended June 30, 1997. Interest expense was $1,761,000 for the six month period ended June 30, 1997, as compared to $2,075,000 for the six month period ended June 30, 1996. The decrease was derived from the first Page 11 Form 10-Q Tech-Sym Corporation Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued three months of the year due to a reduction in interest bearing debt that occurred in the second quarter of 1996 as a result of proceeds generated from the sale of stock of GeoScience. Other income increased to $2,133,000 from $1,934,000 primarily due to foreign currency transaction gains within the communications business that more than offset the decrease in interest income on interest bearing receivables within the geoscientific business. The effective tax rate for the six months ended June 30, 1997 was 31% compared to 34% for the same period in the prior year. The Company's effective tax rate is lower than the statutory United States rate due to tax benefits generated from foreign sales. Income from continuing operations before the extraordinary item for the six month period of 1997 was $6,426,000 compared to $19,893,000 for the corresponding period a year ago. The six months ended June 30, 1996 included a net gain of $13,700,000 as discussed in the results for the quarter ended June 30, 1997. Loss from the discontinued operation for the six months ended June 30, 1997 decreased $327,000 from the same period in the prior year as a result of an increase in interest income recognized on contract installment sales and the change in minority ownership interest between the two periods. Backlog at June 30, 1997 was $122,000,000 compared to $147,000,000 at June 30, 1996. The decrease occurred primarily in the defense systems business and the broadcast area within the communications business. The decrease in backlog may unfavorably affect the Company's operating results for the third and fourth quarter if orders are not received in time to ship during the respective periods. LIQUIDITY AND CAPITAL RESOURCES The Company is currently satisfying its working capital and capital expenditure requirements through internally generated cash from operations and bank borrowings. At June 30, 1997, the Company's working capital balance was $139,454,000 compared to $135,735,000 at December 31, 1996. The increase in working capital is a result of a decrease in liabilities which resulted from segregating the net assets of the discontinued operation as a non-current asset at June 30, 1997 and an increase in inventory levels. Cash used for operations was $15,850,000 for the six months ended June 30, 1997, compared to cash provided by operations of $7,779,000 for the same period in the prior year. Page 12 Form 10-Q Tech-Sym Corporation Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued As of June 30, 1997, the Company had uncommitted bank lines of credit aggregating approximately $84,295,000. Borrowings under these lines were $38,798,000, including the discontinued operation. The Company had a working capital ratio of 2.56 to 1.0 and debt to total capitalization of 26%. The Company believes that its current financial position and available lines of credit will provide ample sources of funds to meet foreseeable requirements. Purchases of property, plant and equipment totaled $5,965,000 for the six months ended June 30, 1997, compared to $8,411,000 for the corresponding prior year period. The Company estimates that capital expenditures for property, plant and equipment during the remainder of 1997 will be approximately $9,830,000. Most of the anticipated capital expenditures are not subject to firm commitments and the Company may modify its plans depending on future results of operations or other factors. Forward-looking statements in this document are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including, without limitation, risks associated with the uncertainty of market acceptance of the Company's products, limited number of customers, as well as risks of downturns in economic conditions generally, risks associated with competition and competitive pricing pressures, and other risks detailed in the Company's filings with the Securities and Exchange Commission. Page 13 Form 10-Q Tech-Sym Corporation PART II. OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS The shareholders of Registrant took the following action at the Annual Meeting held April 29, 1997: 1. Elected all eight (8) management nominees for directors pursuant to proxies solicited without opposition under regulation 14A, as stated below: Votes in Votes Nominee Favor Withheld ------- --------- -------- W.L. Creech 4,576,398 430,199 M.C. Forrest 4,582,203 424,394 A.A. Gallotta, Jr. 4,582,203 424,394 W.W. Gamel 4,582,203 424,394 C.C. Kraft, Jr. 4,582,203 424,394 R.E. Moore 4,576,403 430,194 C.J. Scribner 4,582,203 424,394 C.K. Watt 4,582,203 424,394 2. Ratified the appointment of Price Waterhouse LLP as independent accountants of the Registrant for the year ending December 31, 1997 (4,984,800 shares voted for, 13,601 shares voted against and 8,196 shares abstained). 3. Approved the Third Amendment to the 1990 Stock Option Plan (3,388,109 shares voted for, 1,565,545 shares voted against and 52,943 shares abstained). Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS. 10(a) -- 1990 Stock Option Plan, as amended and restated. 10(b) -- Form of Employee Stock Option Agreement. 10(c) -- Incentive Bonus Compensation Plan, effective January 1, 1997. (b) REPORTS ON FORM 8-K. None. Page 14 Form 10-Q Tech-Sym Corporation No financial statements were filed as a part of this report. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TECH-SYM CORPORATION Registrant Date: August 13, 1997 /s/ Wendell W. Gamel Wendell W. Gamel, Chairman of the Board and President Date: August 13, 1997 /s/ Ray F. Thompson Ray F. Thompson, Vice- President, Treasurer, and Chief Financial Officer Form 10-Q Tech-Sym Corporation EXHIBIT INDEX Number Exhibit 10(a) 1990 Stock Option Plan, as amended and restated. 10(b) Form of Employee Stock Option Agreement. 10(c) Incentive Bonus Compensation Plan, effective January 1, 1997. EX-10.A 2 EXHIBIT 10(a) TECH-SYM CORPORATION 1990 STOCK OPTION PLAN (THIRD AMENDMENT) This Third Amendment shall be effective upon its approval by the stockholders of Tech-Sym Corporation (the "Company") at the 1997 annual meeting of the stockholders. However, if the stockholders of the Company do not approve this Third Amendment at the 1997 annual meeting of stockholders of the Company, this amendment shall be null and void for all purposes. Further, no grants shall be made pursuant to this amendment prior to the date this amendment is approved by the stockholders. The terms of the Plan, as amended and restated by this Third Amendment, are as set forth below. 1. PURPOSE The purpose of the Tech-Sym corporation 1990 Stock Option Plan (the "Plan") is to advance the interests of Tech-Sym Corporation (the "Company") and its Subsidiaries (as defined below) by providing incentive awards and stock ownership opportunities to those key employees including officers and directors who are employees) who contribute significantly to the performance of the Company and its Subsidiaries ("Key Employees") and stock ownership opportunities to the members of the Board of Directors of the company (the "Board") who are not employees of the Company or a Subsidiary ("Nonemployee Directors"). In addition, the Plan is intended to enhance the ability of the Company and its Subsidiaries to attract and retain individuals of superior managerial ability and to motivate such individuals to exert their best efforts towards future progress and profitability of the Company and its Subsidiaries. For purposes of the Plan, a Subsidiary shall be any corporation in which the Company has a direct or indirect ownership interest of 50% or more the total combined voting power of all classes of stock in such corporation. 2. ADMINISTRATION AND INTERPRETATION a. ADMINISTRATION. The Plan shall be administered by a committee (the "Committee") consisting of not less than three members of the Board appointed by and serving at the pleasure of the Board; provided that each member shall be a "nonemployee director" within the meaning of Rule 16b-3 which has been adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as such Rule or its equivalent is in effect from time to time. The Board may from time to time appoint members of the Committee in substitution for or in addition to members previously appointed and may fill vacancies, however caused, in the Committee. The Committee may prescribe, amend and rescind rules and regulations for the administration of the Plan and shall have the full power and authority to construe and interpret the Plan. A majority of the members of the Committee shall constitute a quorum and the acts of a majority of the members present at a meeting or the acts of a majority of the members evidenced in writing shall be the acts of the Committee. The Committee may correct any defect or any omission or reconcile any inconsistency in the Plan or in any award or grant made hereunder in the manner and to the extent it shall deem desirable. The Committee shall have the full and exclusive right to grant all Options and SARs (both as defined below), other than the automatic grant of Options and SARs to Nonemployee Directors as provided in Section 5 below. In granting Options or SARs, the Committee shall take into consideration the contribution the employee has made or may make to the success of the Company or its Subsidiaries and such other considerations as the Committee shall determine. The Committee shall also have the authority to consult with and receive recommendations from officers and other employees of the Company and its Subsidiaries with regard to these matters. In no event shall any employee, his legal representatives, heirs, legatees, distributees, or successors have any right to participate in the Plan, except to such extent, if any, as the Committee shall determine. The Committee may from time to time in granting Options or SARs under the Plan prescribe such other terms and conditions concerning such Options or SARs as it deems appropriate, provided that such terms and conditions are not more favorable to the Key Employee than those expressly set forth in the Plan. The day-to-day administration of the Plan may be carried out by such officers and employees of the Company and its Subsidiaries as shall be designated from time to time by the Committee. b. INTERPRETATION. The interpretation and construction by the Committee of any provisions of the Plan or of any award or grant under the Plan and any determination by the Committee under any provision of the Plan or any such award or grant shall be final and conclusive for all purposes. c. LIMITATION ON LIABILITY. Neither the Committee nor any member thereof shall be liable for any act, omission, interpretation, construction or determination made in connection with the Plan in good faith, and the members of the Committee shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including counsel fees) arising therefrom to the full extent permitted by law and under any directors and officers liability insurance coverage that may be in effect from time to time. 3. SHARES SUBJECT TO AWARDS UNDER THE PLAN a. LIMITATION ON NUMBER OF SHARES. The shares subject to grants of Options and SARs shall be shares of the Company's authorized but unissued common stock, par value $.10 per share, and shares, if any, of such common stock that are issued but not outstanding and held as treasury stock by the Company ("Common Stock"). Subject to adjustment as hereinafter provided, the aggregate number of shares of Common Stock as to which Options and/or SARs may be granted under the Plan shall not exceed 1,158,000 shares. Shares of Common Stock ceasing to be subject to an Option or SAR because of the exercise of such Option or SAR shall no longer be subject to any further grant under the Plan. If any outstanding Option or SAR, in whole or in part, expires or terminates unexercised or is cancelled for any reason prior to January 1, 2000, the shares of Common Stock allocable to the unexercised, terminated, cancelled or forfeited portion of such Option or SAR may again be made the subject of grants under the Plan. b. ADJUSTMENTS OF AGGREGATE NUMBER OF SHARES. The aggregate number of shares of Common Stock stated in Section 3(a) shall be subject to appropriate adjustment, from time to time, in accordance with the provisions of Section 6 hereof. In the event of a change in the Common Stock of the Company that is limited to a change in the designation thereof to "Capital Stock" or other similar designation, or to a change in the par value thereof, or from par value to no par value, without increase or decrease in the number of issued shares, the shares resulting from any such change shall be deemed to be Common Stock within the meaning of the Plan. 2 4. ELIGIBILITY The individuals eligible to receive Options and/or SARs under the Plan shall be those Key Employees as the Committee from time to time shall determine. In addition, each Nonemployee Director shall automatically receive Options and SARs under the Plan as provided in Section 5 below. 5. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS a. GRANTS OF OPTIONS. (1) IN GENERAL. Options granted under the Plan may be either "Incentive Stock Options" or "Non-qualified Stock Options" (both as defined below and collectively referred to as "Options"), or both. Options granted under the Plan shall be such type and for such number of shares of Common Stock, subject to such terms and conditions as the Committee shall designate. The Committee may grant Incentive Stock Options and/or Non-qualified Stock Options to Key Employees at any time and from time to time before January 1, 2000. (2) INCENTIVE STOCK OPTIONS. The term "Incentive Stock Option" shall mean an Option, or portion thereof, that is intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). (3) NON-QUALIFIED STOCK OPTIONS. The term "Non-qualified Stock Option" shall mean any Option, or portion thereof, that is not an Incentive Stock Option. Except as specifically provided herein, the provisions of this Plan shall apply in the same manner to Incentive Stock Options and to Non-qualified Stock Options. b. GRANTS OF STOCK APPRECIATION RIGHTS. (1) IN GENERAL. The term stock appreciation right or "SAR" shall mean the right to receive from the Company an amount equal to the Market Value Per Share (as defined in Section 5c.(4) below) on the exercise date, over the Market Value Per Share on the date of grant, multiplied by the total number of shares of Common Stock for which the SAR is exercised. The amount payable by the Company upon the exercise of a SAR may be paid in cash or in shares of Common Stock or in any combination thereof as the Committee in its sole discretion shall determine, but no fractional shares shall be issuable pursuant to any SAR. SARs may be granted by the Committee to any Key Employee at any time and from time to time before January 1, 2000. A SAR may, but need not, relate to a specific Option granted under this Plan. If a SAR relates to a specific Option, it may be granted either concurrently with the Option or at any time prior to the exercise, termination, cancellation or expiration of such Option. (2) LIMITATIONS ON SARS. The Committee may fix such waiting periods, exercise dates or other limitations as it shall deem appropriate with respect to SARs granted under the Plan; provided, however, that each SAR granted hereunder shall be exercisable only upon consent of the Committee; and provided further, that a SAR that relates to a specific Option shall be exercisable only when and to the extent that the Option to which it relates is exercisable. c. TERMS OF OPTIONS AND SARS. Options and SARs granted pursuant to this Plan shall be evidenced by stock option agreements and/or SAR agreements respectively (collectively referred to herein as "agreements") that shall comply with and be subject to the following terms and conditions and may contain such other provisions, consistent with this Plan, as the Committee shall deem advisable. SARs that relate to a specific Option, however, may be evidenced by stock option agreements or agreements amending 3 and/or forming a part of the stock option agreements to which such SARs relate. Reference herein to agreements shall include, to the extent applicable, any amendments to such agreements. (1) PAYMENT OF OPTION EXERCISE PRICE. Upon exercise of an Option, the full option exercise price for the shares with respect to which the Option is being exercised shall be payable to the Company (i) in cash or by check payable and acceptable to the Company or (ii) subject to the approval of the Committee, (a) by tendering to the Company shares of Common Stock owned by the optionee having an aggregate Market Value Per Share as of the date of exercise and tender that is not greater than the full option exercise price for the shares with respect to which the Option is being exercised and by paying any remaining amount of the option exercise price as provided in (i) above (provided that the Committee may, upon confirming that the optionee owns the number of shares being tendered, authorize the issuance of a new certificate for the number of shares being acquired pursuant to the exercise of the Option less the number of shares being tendered upon the exercise and return to the optionee (or not require surrender of) the certificate for the shares being tendered upon the exercise) or (b) by the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the company to pay the option exercise price; provided that in the event the optionee chooses to pay the option exercise price as provided in (ii)(b) above, the optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Committee shall prescribe as a condition of such payment procedure. Payment instruments will be received subject to collection. (2) NUMBER OF SHARES. Each agreement shall state the total number of shares of Common Stock that are subject to the Option and/or SAR. (3) EXERCISE PRICE. The exercise price for each Option and SAR shall be fixed by the Committee at the date of grant, but in no event may such exercise price per share be less than the Market Value Per Share (as defined below) on the date of the grant of the Option or SAR. (4) MARKET VALUE PER SHARE. The Market Value Per Share as of any particular date shall be determined by any fair and reasonable means determined by the Committee, which may include, if the Common Stock is listed for trading on the New York Stock Exchange, the closing price published in THE WALL STREET JOURNAL reports of New York Stock Exchange -- Composite Transactions for the day of the grant, or if no trade of the Common Stock shall have been reported for such date, the closing price which is published in THE WALL STREET JOURNAL reports of the New York Stock Exchange -- Composite Transactions for the next day prior thereto on which a trade of the Common Stock was so reported. (5) TERM. The term of each Option and/or SAR shall be determined by the Committee at the date of grant; provided, however, that each Option and/or SAR shall, notwithstanding anything in the Plan or an agreement to the contrary, expire ten years from the date the Option or SAR is granted or, if earlier, the date specified in the agreement at the date of grant of such Option or SAR. (6) DATE OF EXERCISE. In the discretion of the Committee, each agreement may contain a provision not inconsistent with Section 8 hereof stating that the Option and/or SAR granted therein may not be exercised in whole or in part for a period or periods of time specified in such agreement, subject to Section 8, and except as so specified therein, any Option or SAR may be exercised in whole at any time or in part from time to time during its term. The Committee may, however, at any time, in its sole discretion amend any outstanding Option or SAR to accelerate the time that such Option or 4 SAR shall be exercisable or to provide that the time for exercising such Option or SAR shall be accelerated upon the occurrence of a specified event. (7) TERMINATION OF EMPLOYMENT. In the event that an individual's employment with the Company and its Subsidiaries shall terminate, for reasons other than (i) retirement with the consent of the Company or the individual's employing Subsidiary, as the case may be, ("retirement"), (ii) permanent disability or (iii) death, the individual's Options and/or SARs shall be exercisable by him, subject to subsections (5) and (6) above, only within three months after such termination, but only to the extent the Option and/or SAR was exercisable immediately prior to such termination of employment. If, however, any termination of employment is due to retirement or permanent disability, the individual shall have the right after such termination of employment, subject to the provisions of subsections (5) and (6) above, to exercise any outstanding Option and/or SAR in full at any time during the remaining term provided therefor in the related agreements. Whether any termination of employment is due to retirement or permanent disability shall be determined by the Committee. If an individual shall die while entitled to exercise an Option and/or SAR, the individual's estate, personal representative or beneficiary, as the case may be, shall have the right, subject to the provisions of subsections (5) and (6) above, to exercise such Option and/or SAR at any time within 12 months from the date of the optionee's death, to the extent that the optionee was entitled to exercise the same on the day immediately prior to the optionee's death. d. EFFECTS OF EXERCISE OF OPTIONS AND SARS. The right of an individual to exercise an Option or SAR shall terminate to the extent that such Option or SAR is exercised and, to the extent that a SAR relates to a specific Option, the exercise of the SAR shall terminate a corresponding portion of the related Option and, conversely, to the extent that such optionee exercises the related Option, a corresponding portion of such SAR shall terminate. e. OPTIONS AND SARS GRANTED BY OTHER CORPORATIONS. Options and SARs may be granted under the Plan from time to time in substitution for stock options and stock appreciation rights held by employees of corporations who become Key Employees as a result of a merger or consolidation of the employer corporation with the Company or a Subsidiary, or the acquisition by the Company or a Subsidiary of assets of the employer corporation, or the acquisition by the Company or a Subsidiary of stock of the employer corporation, with the result that such employer corporation becomes a Subsidiary. f. OPTIONS AND SARS GRANTED TO NONEMPLOYEE DIRECTORS. Options and SARs granted to Nonemployee Directors shall be subject to all provisions and terms of this Plan otherwise applicable thereto, except that notwithstanding such other provisions and terms of this Plan to the contrary, all Options and SARs granted to Nonemployee Directors shall be subject to the following provisions: (1) TYPE AND TERMS OF AWARDS. Each Option granted to a Nonemployee Director shall be a Non-qualified Stock Option and shall be automatically accompanied by an SAR for the entire number of shares subject to the Option. The agreement with respect to each such grant shall provide that the accompanying SAR, if and to the extent exercised, shall be automatically paid one-half in cash and one-half in shares of Common Stock except that no fractional shares of Common Stock shall be issued. All Options and SARs granted to Directors shall have an exercise price equal to the Market Value Per Share on the date of grant, shall become exercisable on and after the first anniversary of the date of grant (except as provided in Section 8) and shall have a term of ten years unless earlier terminated as provided in (3) below. 5 (2) GRANTING OF AWARDS. Each person who is elected or appointed to the Board as a Nonemployee Director for the first time shall automatically receive, on the date of his or her election or appointment, an Option for 10,000 shares of Common Stock. On the date of the regular annual meeting of the stockholders of the Company in each year that this Plan is in effect (commencing with the 1997 annual meeting of stockholders), each Nonemployee Director who is in office on that day and who was not elected for the first time at such annual meeting shall automatically receive an Option for 2,000 shares of Common Stock. (3) TERMINATION OF SERVICE. In the event that a Nonemployee Director ceases to be a member of the Board, Options and SARs then held by such individual shall be exercisable, subject to subsections c.(5) and (6) above, only within 12 months after such termination of service and only to the same extent that such Options and SARs were exercisable on the date of such termination; provided, however, that if the termination is due to the death, permanent disability or retirement of the individual pursuant to a Company policy, all Options and SARs held by such Nonemployee Director shall be exercisable after the date of such termination of service in full at any time during the remaining term provided therefor in the related agreements, subject to subsections c.(5) and (6) above. g. INDIVIDUAL LIMITS. Notwithstanding anything in the Plan to the contrary, no person may receive Options and SARs with respect to more than 250,000 shares of Common Stock during any calendar year, but disregarding any SAR granted in tandem with an Option. 6. RECAPITALIZATION The aggregate number of shares stated in Section 3a, the number of shares of Common Stock to which each outstanding Option and SAR relates, and the exercise price in respect of each such Option and SAR shall be adjusted in an equitable manner determined by the Committee, in its sole discretion and without liability to any person, in the event of (i) a subdivision or consolidation of shares of Common Stock or other capital adjustments, (ii) the payment of a stock dividend or a recapitalization or (iii) a "corporate transaction", as such term is deemed in Treasury Regulation ^1.425-1(a)(1)(ii), or any other transaction which, in the opinion of the Committee, is similar to a "corporate transaction", as deemed by the said Treasury Regulations as in effect on January 1, 1990, including without limitation any spin-off or other distribution to the security holders of the Company of securities or property of the Company or a Subsidiary. The Committee may exercise its discretion to make any such adjustments on an optionee-by-optionee basis and with respect to all or only some of the Options or SARs held by an optionee. 7. MERGER OR CONSOLIDATION Except as otherwise provided in Section 8 below, after a merger of one or more corporations into the Company in which the Company shall survive, or after a consolidation of the Company and one or more corporations, in which the resulting corporation remains, as an independent, publicly-owned corporation, an optionee shall, at the same cost, be entitled upon the exercise of an Option or SAR to receive (subject to any required action by stockholders and the discretion of the Committee as to the payment of cash with respect to a SAR) such stock, cash and/or securities of the surviving or resulting corporation as the board of directors of such corporation, in its sole discretion and without liability to any person, shall determine to be equivalent, as nearly as practicable, to the nearest whole number and class of shares of Common Stock or other securities that were then subject to such Option or SAR and such shares of stock or other securities shall, after such merger or consolidation, be deemed to be shares of Common Stock for all purposes of the Plan and any agreement. 6 8. CHANGE IN CONTROL In the event of a Change in Control (as defined below), then, notwithstanding any other term of this Plan or any agreement to the contrary, any and all outstanding Options and SARs not fully vested shall automatically vest in full and, except as provided below with respect to a person subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), be immediately exercisable. The date on which such accelerated vesting and immediate exercisability shall occur (the "Acceleration Date") shall be the date of the occurrence of the Change in Control. A "Change in Control" shall be deemed to have occurred if: (a) any "person," as such term is used in Section 13(d) and 14(d) of the Exchange Act (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company) together with its "Affiliates" and "Associates", as such term is defined in Rule 12b-2 of the Exchange Act, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), 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 (not including any period prior to the effective date of this Plan), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this definitions) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (c) the stockholders of the Company approve a merger or consolidation of the Company with any other company other than (i) 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 voting securities of the Company (or such surviving entity) outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as herein above defined) acquires more than 25% of the combined voting power of the Company's then outstanding securities; or (d) the stockholders of the Company adopt a plan of complete liquidation of the Company or approve an agreement for the sale, exchange or disposition by the Company of all or a significant portion of the Company's assets. For purposes of this clause (d), the term "the sale, exchange or disposition by the Company of all or a significant portion of the Company's assets" shall mean a sale or other disposition transaction or series of related transactions involving assets of the Company or any Subsidiary (including the stock of any Subsidiary) in which the value of the assets or stock being sold or otherwise disposed of (as measured by the purchase price being paid therefor or by such other method as the Board determines is appropriate in a case where there is no readily ascertainable purchase price) constitutes more than 25% of the fair market value of the Company (as hereinafter defined). For purposes of the preceding sentence, the "fair market value of the Company" shall be the aggregate market value of the outstanding shares of common stock of the Company (on a fully diluted 7 basis) plus the aggregate market value of the Company's other outstanding equity securities. The aggregate market value of the shares of common stock of the Company shall be determined by multiplying the number of shares of the Company's common stock (on a fully diluted basis) outstanding on the date of the execution and delivery of a definitive agreement with respect to the transaction or series of related transactions (the "Transaction Date") by the average closing price of the shares of common stock of the Company for the ten trading days immediately preceding the Transaction Date. The aggregate market value of any other equity securities of the Company shall be determined in a manner similar to that prescribed in the immediately preceding sentence for determining the aggregate market value of the shares of common stock of the Company or by such other method as the Board shall determine is appropriate. Notwithstanding the foregoing however, a Change in Control shall not be deemed to have occurred if, prior to the time a Change in Control would otherwise be deemed to have occurred pursuant to the above provisions, the Board determines otherwise. If during the 60-day period following any such Acceleration Date or, with respect to an Option or SAR granted to an officer or director subject to Section 16(b) of the Exchange Act, the 60-day period following the earlier of the date that Section 16(b) of the Exchange Act ceases to apply to such person or six months following the date of grant of such Option or SAR (but not to exceed the remaining term of such Option or SAR), a participant (or beneficiary thereof) elects to exercise an Option or SAR, the holder shall receive in cash whichever of the following amounts is applicable: (i) with respect to an acquisition of Common Stock described in clause (a) of the definition of Change in Control, an amount equal to the Acquisition Spread (as defined below); (ii) with respect to a change in composition of the Board described in clause (b) of the definition of Change in Control, an amount equal to the Spread (as defined below); or (iii) with respect to stockholder approval of an agreement or adoption of a plan described in clause (c) or (d) of the definition of Change in Control, an amount equal to the Merger Spread (as defined below). Notwithstanding the foregoing provisions of this Section 8, in the case of an exercise in respect of an Incentive Stock Option, the holder may not receive an amount in excess of the maximum amount that will enable such option to continue to qualify as an Incentive Stock Option. As used in this Section 8, the following terms shall have the meaning indicated: (1) The term "Acquisition Price Per Share" shall mean the greater of (i) the highest price paid by a person (or an Affiliate or Associate thereof) for any share of Common Stock acquired prior to, but in connection with, a Change in Control described in clause (a) of the definition of a Change in Control or (ii) the highest Market Value Per Share for any day during the 60-day period ending on the date the Option or SAR is exercised. (2) The term "Acquisition Spread" shall mean an amount equal to the product obtained by multiplying (i) the excess of (A) the Acquisition Price Per Share over (B) the price per share of Common Stock at which the Option or SAR is exercisable, by (ii) the number of shares of Common Stock with respect to which such Option or SAR is being exercised. (3) The term "Merger Price Per Share" shall mean the greater of (i) the fixed or formula price for the acquisition of shares of Common Stock specified in such agreement or adoption, if such fixed or formula price is determinable on the date on which such Option or SAR is exercised, and (ii) the 8 highest Market Value Per Share for any day during the 60-day period ending on the date on which such Option or SAR is exercised. (4) The term "Merger Spread" shall mean an amount equal to the product obtained by multiplying (i) the excess of (A) the Merger Price Per Share over (B) the price per share of Common Stock at which the Option or SAR is exercisable, by (ii) the number of shares of Common Stock with respect to which such Option or SAR is being exercised. (5) The term "Spread" shall mean an amount equal to the product obtained by multiplying (i) the excess of (A) the highest Market Value Per Share for any day during the 60-day period ending on the date the Option or SAR is exercised over (B) the price per share of Common Stock at which the Option or SAR is exercisable, by (ii) the number of shares of Common Stock with respect to which the Option or SAR is being exercised. The Company intends that this Section 8 shall comply with the requirements of Rule 16b-3 and any future rules promulgated in substitution therefor ("the Rule") under the Exchange Act during the term of the Plan. Should any provision of this Section 8 not be necessary to comply with the requirements of the Rule or should any additional provisions be necessary for this Section 8 to comply with the requirements of the Rule, the Board may amend the Plan to add to or modify the provisions of the Plan accordingly. 9. EMPLOYEE'S AGREEMENT If, at the time of the exercise of any Option or SAR, in the opinion of counsel for the Company, it is necessary or desirable, in order to comply with any then applicable laws or regulations relating to the sale of securities, for the individual exercising the Option or SAR to agree to hold any shares issued to the individual for investment and without intention to resell or distribute the same and for the individual to agree to dispose of such shares only in compliance with such laws and regulations, the individual will, upon the request of the Company, execute and deliver to the Company a further agreement to such effect. 10. WITHHOLDING FOR TAXES Any cash payment under the Plan shall be reduced by any amounts required to be withheld or paid with respect thereto under all present or future federal, state and local tax and other laws and regulations that may be in effect as of the date of each such payment ("Tax Amounts"). Any issuance of Common Stock pursuant to the exercise of an Option or other distribution of Common Stock under the Plan shall not be made until appropriate arrangements have been made for the payment of any amounts that may be required to be withheld or paid with respect thereto. Such arrangements may, at the discretion of the Committee, include allowing the optionee to tender to the Company shares of Common Stock owned by optionee, or to request the Company to withhold a portion of the shares of Common Stock being acquired pursuant to the exercise or otherwise distributed to optionee, which have a Market Value Per Share as of the date of such exercise, tender or withholding that is not greater than the sum of all Tax Amounts, together with payment of any remaining portion of all Tax Amounts in cash or by check payable and acceptable to the Company. 11. TERMINATION OF AUTHORITY TO GRANT AWARDS No Options or SARs may be granted pursuant to this Plan after December 31, 1999. 12. AMENDMENT AND TERMINATION The Board may from time to time and at any time alter, amend, suspend, discontinue or terminate this Plan and any grants hereunder; provided, however, that no such action of the Board may, without the 9 approval of the stockholders of the Company, alter the provisions of the Plan so as to (i) increase the maximum number of shares of Common Stock that may be subject to grants and distributed in the payment of exercises under the Plan (except as provided in Section 3b); (ii) change the class of employees eligible to receive grants under the Plan; (iii) extend beyond ten years the maximum terms of Options or SARs granted under the Plan or extend the term of the Plan; or (iv) change the operation of Section 5f., concerning automatic grants to Nonemployee Directors, unless, in each case, such approval is not required to meet the requirements of the Rule. 13. PREEMPTION BY APPLICABLE LAWS AND REGULATIONS Anything in the Plan or any agreement entered into pursuant to the Plan to the contrary notwithstanding, if, at any time specified herein or therein for the making of any determination, the issuance or other distribution of shares of Common Stock, or the payment of consideration to an employee as a result of the exercise of any SAR, as the case may be, any law, regulation or requirement of any governmental authority having jurisdiction in the premises shall require either the Company or the employee (or the employee's beneficiary), as the case may be, to take any action in connection with any such determination, the shares then to be issued or distributed, or such payment, the issue or distribution of such shares or the making of such determination or payment, as the case may be, shall be deferred until such action shall have been taken. 14. CHANGE IN CONTROL LIMITATION Notwithstanding any other provision in the Plan, to the extent that the acceleration of exercisability of an Option or SAR under this Plan following a Change in Control, when aggregated with other payments or benefits to the participant, whether or not payable pursuant to this Plan, would, as determined by tax counsel selected by the Company, result in "excess parachute payments" (as defined in Section 280G of the Code) such parachute payments or benefits provided to a participant under this Plan shall be reduced to the extent necessary so that no portion thereof shall be subject to the excise tax imposed by Section 4999 of the Code, but only if, by reason of such reduction, the participant's net after tax benefit shall exceed the net after tax benefit if such reduction were not made. "Net after tax benefit" shall mean the sum of (i) all payments and benefits which a participant receives or is then entitled to receive that would constitute a "parachute payment" within the meaning of Section 280G of the Code, less (ii) the amount of federal income taxes payable with respect to the payments and benefits described in (i) above calculated at the maximum marginal income tax rate for the year in which such payments and benefits shall be paid to the participant (based upon the rate for such year as set forth in the Code at the time of the first payment of the foregoing), less (iii) the amount of excise taxes imposed with respect to the payments and benefits described in (i) above by Section 4999 of the Code. 15. MISCELLANEOUS a. NO EMPLOYMENT CONTRACT. Nothing contained in the Plan shall be construed as conferring upon any employee the right to continue in the employ of the Company or any Subsidiary. b. EMPLOYMENT WITH SUBSIDIARIES. Employment by the Company for the purpose of this Plan shall be deemed to include employment by, and to continue during any period in which an employee is in the employment of, any Subsidiary. c. NO RIGHTS AS A STOCKHOLDER. A participant shall have no rights as a stockholder with respect to shares covered by such participant's Option or SAR until the date of the issuance of shares to the participant 10 pursuant thereto. No adjustment will be made for dividends or other distributions or rights for which the record date is prior to the date of such issuance. d. NO RIGHT TO CORPORATE ASSETS. Nothing contained in the Plan shall be construed as giving any participant, such participant's beneficiaries or any other person any equity or other interest of any kind in any assets of the Company or any Subsidiary or creating a trust of any kind or a fiduciary relationship of any kind between the Company or a Subsidiary and any such person. e. NO RESTRICTION ON CORPORATE ACTION. Nothing contained in the Plan shall be construed to prevent the Company or any Subsidiary from taking any corporate action that is deemed by the Company or such Subsidiary to be appropriate or in its best interest, whether or not such action would have an adverse effect on the Plan or any grant made under the Plan. No participant, beneficiary or other person shall have any claim against the Company or any Subsidiary as a result of any such action. f. NON-ASSIGNABILITY. A participant shall not have the power or right to sell, exchange, pledge, transfer, assign or otherwise encumber or dispose of such participant's interest in any grant under the Plan nor shall such interest be subject to seizure for the payment of a participant's debts, judgments, alimony, or separate maintenance or be transferable by operation of law in the event of a participant's bankruptcy or insolvency and to the extent any such interest arising under the Plan is awarded to a spouse pursuant to any divorce proceeding, such interest shall be deemed to be terminated and forfeited notwithstanding an vesting provisions or other terms herein or in the agreement evidencing such aware. g. APPLICATION OF FUNDS. The proceeds received by the Company from the sale of shares pursuant to the Plan will be used for general corporate purposes. h. SALE OF SUBSIDIARY OR ASSETS. In the event a Key Employee ceases to be employed by the Company or a Subsidiary as a result of a sale or other disposition by the Company of a Subsidiary or all or part of the business operations of the Company or a Subsidiary, the Committee, in its sole discretion, may accelerate the exercisability of any grant under the Plan, in whole or in part, as it deems appropriate. i. GOVERNING LAW; CONSTRUCTION. All rights and obligations under the Plan shall be governed by, and the Plan shall be construed in accordance with, the laws of the State of Texas without regard to the principles of conflicts of laws. Titles and headings to Sections herein are for purposes of reference only, and shall in no way limit, define or otherwise affect the meaning or interpretation of any provisions of the Plan. Effective Date of Plan: February 15, 1990. Effective Date of Third Amendment: April 29, 1997. 11 EX-10.B 3 EXHIBIT 10(b) TECH-SYM CORPORATION INCENTIVE STOCK OPTION AND STOCK APPRECIATION RIGHT AGREEMENT AGREEMENT made effective the ___ day of _______, 199_, (the "Grant Date") between TECH-SYM CORPORATION, a Nevada corporation (the "Company"), and Optionee ("Optionee"). To carry out the purposes of the Tech-Sym Corporation 1990 Stock Option Plan, as amended, to which this Agreement is expressly subject and a copy of which is attached hereto as EXHIBIT "A", by affording Optionee the opportunity to purchase shares of Common Stock, par value $.10 per share, of the Company ("Stock"), and in consideration of the mutual agreements and other matters set forth herein and in the Plan, the Company and Optionee hereby agree as follows: 1. GRANT OF OPTION. The Company hereby grants to the Optionee the right and option (the "Option") to purchase all or any part of an aggregate of - -Shares~- shares of Stock, on the terms and conditions set forth herein and in the Plan. It is intended that the Option qualify as an "incentive stock option" within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"). 2. GRANT OF SAR. The Company also hereby grants the Optionee a stock appreciation right ("SAR") entitling the Optionee to surrender (upon the terms and conditions hereinafter set forth, including the consent of the Committee with respect to any such exercise) to the Company unexercised the Option granted pursuant to this Agreement, or any portion thereof, and to receive from the Company in exchange therefor cash, Stock or a combination thereof (as determined in the discretion of the Committee) having an aggregate value equal to the excess of the Market Value Per Share on the date of exercise over the Market Value Per Share on the Grant Date (such amount herein referred to as the "Spread"), multiplied by the total number of shares of Stock for which the SAR is exercised. 3. EXERCISE PRICE. The exercise price of the Option shall be $_____ per share. 4. EXERCISE OF OPTION. (a) Subject to the further provisions of this Agreement, the Option granted pursuant to this Agreement shall not become exercisable until after one year following the date hereof and thereafter may be exercised upon the following terms: (i) after such one year, this Option shall be exercisable for any number of shares up to and including, but not in excess of, 20% of the aggregate number of shares subject to this Option; (ii) after one and one-half years, this Option shall be exercisable for any number of shares up to and including but not in excess of, 40% of the aggregate number of shares subject to this Option; (iii) after two years, this Option shall be exercisable for any number of shares up to and including, but not in excess of, 60% of the aggregate number of shares subject to this Option; 1 (iv) after two and one-half years, this Option shall be exercisable for any number of shares up to and including, but not in excess of, 80% of the aggregate number of shares subject to this Option; and (v) after three years, this Option shall be fully exercisable. (b) Subject to the earlier expiration of the Option as herein provided and subject to the terms and conditions contained herein, the Option may be exercised by written notice (which complies in all respects with the provisions of this Agreement) to the Company at its principal executive office addressed to the attention of the Secretary of the Company, identifying the Option and specifying the number of shares that the Optionee decides to purchase, such exercise to be effective at the time of receipt of such written notice at the Company's principal executive office during normal business hours. The notice shall not be considered to be properly given unless accompanied by all documentation deemed appropriate by the Committee to reflect exercise of the Option and compliance with all applicable laws, rules and regulations. (c) The vesting and exercisability of the Option shall be subject to acceleration on the terms and conditions stated in Section 8 of the Plan, which relate to a "Change in Control" of the Company (as defined in the Plan). (d) Notwithstanding anything herein to the contrary, in no event shall the Option, or any part thereof, be exercisable after the tenth anniversary of the Grant Date. 5. EXERCISE OF SAR. (a) The SAR granted pursuant to this Agreement may be exercised, subject to the following limitations set forth herein, as the Optionee may from time to time elect in whole or in part; provided, however, that subject to the terms and conditions stated in Section 8 of the Plan, the SAR may only be exercised (i) at such time or times and to such extent as the underlying Option may be exercised, (ii) only upon consent of the Committee and (iii) only when there is a positive Spread; and provided further that the Committee shall be entitled to elect to settle the Company's obligation, or any portion thereof, arising out of the permitted exercise of the SAR, by the payment of cash, Stock or a combination thereof having an aggregate value equal to the Spread on the date of exercise, but no fractional shares shall be issuable. The SAR granted pursuant to this Agreement shall expire at such time as the Option expires. (b) The SAR granted herein may be exercised by the Optionee by giving a written request to the Secretary of the Company identifying the SAR and specifying the part of the related Option being surrendered. The request shall not be considered to be given unless accompanied by all documentation deemed appropriate by the Committee to reflect exercise of the SAR and compliance with all applicable laws, rules and regulations. The Committee shall within fifteen days of the delivery of such request give notice to the Optionee of approval or disapproval of the request. If the request is approved, payment shall be made not more than twenty days from delivery of the request. If the request is disapproved, the request shall be considered null and void. The request may be withdrawn at any time by the Optionee prior to its being acted upon by the Committee by giving written notice of such withdrawal to the Secretary of the Company. 6. PAYMENT OF OPTION EXERCISE PRICE. Upon exercise of an Option, the full option exercise price for the shares with respect to which the Option is being exercised shall be payable to the Company (i) in cash or by check payable and acceptable to the Company or (ii) subject to the approval of the Committee, (a) by tendering to the Company shares of Stock owned by the Optionee having an aggregate Market Value Per Share as of the date of exercise 2 and tender that is not greater than the full Option exercise price for the shares with respect to which the Option is being exercised and by paying any remaining amount of the Option exercise price as provided in (i) above (provided that the Committee may, upon confirming that the Optionee owns the number of shares being tendered, authorize the issuance of a new certificate for the number of shares being acquired pursuant to the exercise of the Option less the number of shares being tendered upon the exercise and return to the Optionee (or not require surrender of) the certificate for the shares being tendered upon the exercise) or (b) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option exercise price; provided that in the event the Optionee chooses to pay the Option exercise as provided in (ii)(b) above, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Committee shall prescribe as a condition of such payment procedure. Payment instructions will be received subject to collection. 7. NON-TRANSFERABILITY. The Option and SAR may not be transferred by Optionee separately or otherwise than by will or the laws of descent and distribution. 8. TERMINATION OF EMPLOYMENT. (a) If the Optionee's employment with the Company and its Subsidiaries is terminated for reasons other than (i) retirement with the consent of the Company or the individual's employing Subsidiary, as the case may be, ("retirement"), (ii) permanent disability or (iii) death, the Option and/or SAR shall be exercisable by him, subject to Section 4(d) above, only within three months after such termination and only to the extent the Option was exercisable on the date of termination of employment. (b) If, however, any termination of employment is due to retirement or permanent disability, the Option and/or SAR shall be exercisable by the Optionee in full at any time, subject to Section 4(d) above, after such termination of employment. (c) If the Optionee shall die while entitled to exercise the Option and/or SAR, the Optionee's estate, personal representative or beneficiary, as the case may be, shall have the right subject to the provisions of Section 4(d) above, to exercise the Option or SAR at any time within 12 months after the date of the Optionee's death, to the extent that the Optionee was entitled to exercise the same on the day immediately prior to the Optionee's death. (d) Except as provided above in this Section 8, to the extent the Option and SAR is not exercisable on such termination of employment, the Option and SAR, or applicable portion thereof, shall be terminated and forfeited in full. 9. WITHHOLDING OF TAX. Any cash payment under this Agreement shall be reduced by any amounts required to be withheld or paid with respect thereto under all present or future federal, state and local tax and other laws and regulations that may be in effect as of the date of each such payment ("Tax Amounts"). Any issuance of Stock pursuant to the exercise of the Option or SAR under this Agreement shall not be made until appropriate arrangements have been made for the payment of any amounts that may be required to be withheld or paid with respect thereto. Such arrangements may, at the discretion of the Committee, include allowing the Optionee to tender to the Company shares of Stock owned by Optionee, or to request the Company to withhold a portion of the shares of Stock being acquired pursuant to the exercise or otherwise distributed to Optionee, which have a Market Value Per Share as of the date of such exercise, tender or withholding that is not greater than the sum of all Tax Amounts, together with payment of any remaining portion of all Tax Amounts in cash or by check payable and acceptable to the Company. Payment instruments will be received subject to collection. 3 10. SECURITIES MATTERS. The Option and SAR granted herein shall be subject to the requirement that, if at any time the Board shall determine, in its discretion, that the listing, registration or qualification of the shares subject to such Option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the issue or purchase of shares hereunder, such Option and SAR may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not reasonably acceptable to the Board. 11. EMPLOYMENT RELATIONSHIP. For purposes of this Agreement, the Optionee shall be considered to be in the employment of the Company as long as the Optionee remains an employee of either the Company, a parent or subsidiary corporation (as defined in Section 425 of the Code) of the Company, or a corporation or a parent or subsidiary of such corporation assuming or substituting a new agreement for this Agreement. Any question as to whether and when there has been a termination of such employment, for purposes of this Agreement, and the cause of such termination, for purposes of this Agreement, shall be determined by the Committee, and its determination shall be final. Nothing herein shall give the Optionee any right to continued employment or affect in any manner the right of the Company or any Subsidiary or parent corporation to terminate the employment of the Optionee. 12. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of any successors to the Company and all persons lawfully claiming under the Optionee. This Agreement and all actions taken shall be governed by and constructed in accordance with the laws of the State of Texas. In the event of conflict between this Agreement and the Plan, the terms of the Plan shall control. All undefined capitalized terms used herein shall have the meaning assigned to them in the Plan. The Committee shall have authority to construe the terms of this Agreement, and the Committee's determinations shall be final and binding on the Optionee and the Company. IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed and the Optionee has executed this Agreement as of the day and year first above written. By:____________________ Chairman and President OPTIONEE ---------------------- Optionee EX-10.C 4 EXHIBIT 10(c) TECH-SYM CORPORATION WRITTEN DESCRIPTION OF INCENTIVE BONUS COMPENSATION PLAN ADOPTED BY THE BOARD OF DIRECTORS OF TECH-SYM CORPORATION EFFECTIVE JANUARY 1, 1997 The Board of Directors, pursuant to the recommendations of its Compensation Committee, is authorized to make incentive bonus awards after the end of each fiscal year to selected employees including the officers and employees of Tech-Sym Management Corporation and the presidents of the Company's wholly owned subsidiaries. The aggregate bonus pool from which such awards can be made in any year cannot exceed 2% of the Company's consolidated earnings before Federal and state income taxes plus an amount equal to 25% of the aggregate subsidiary bonus pools. After the close of each fiscal year, key employees of each of the subsidiaries, except for the subsidiary presidents, shall 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 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. The 6% minimum will be increased (up to the maximum of 15%) one additional percentage point for each fifteen points earned by the subsidiary in accordance with the following: (a) 1 point for each 2% increase in sales in excess of 15% over the prior year. (b) 1 point for each .1% increase in net profit as a percent of sales over the average of the previous three years. (c) 2 points for each 1%, in excess of 8%, for return on investment. (Investment to be defined as Stockholders' Equity plus or minus intercompany accounts). (d) 5 points if 90% of forecasted pretax profits is achieved. 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 Christmas bonuses paid to employees for such year; (ii) the contributions which each such company would be required to make to its retirement and/or thrift plan(s), if any, on the total bonus pool amount for the accounts of its bonus recipients; and (iii) any marketing incentives paid to employees for such year other than sales commissions comprising all or part of an individuals regular compensation. The apportionment of the total amount of the bonus and the recipients thereof are determined by the management of each subsidiary subject to the approval of either (i) the President or any Vice President of the Company regarding employees with annual salaries of $60,000 or more, or (ii) the Board of Directors of the Company, pursuant to recommendations of the Compensation Committee, when the annual salary of any recipient exceeds $100,000 and in the case of any recipient who is a division or subsidiary general manager or chief executive officer, regardless of such person's compensation. EX-27 5
5 THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TECH SYM'S 2ND QUARTER 1997 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1997 JUN-30-1997 12,339 5,810 56,254 0 91,812 229,060 45,708 0 320,246 89,606 0 0 0 796 0 320,246 147,423 0 99,853 137,624 0 0 1,761 0 0 6,426 (1,236) 0 0 5,190 0.86 0
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