-----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, MjiH+ACBvuqnejzWQtfSjt45/6D6TeXwbGdOosgg/yOBoUf1vhfVFYXYYxM8RWVZ JQOwXUeHzk2iIuUyWLIeqg== 0000890566-97-000590.txt : 19970329 0000890566-97-000590.hdr.sgml : 19970329 ACCESSION NUMBER: 0000890566-97-000590 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970328 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04371 FILM NUMBER: 97567875 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-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 Commission file number 1-4371 TECH-SYM CORPORATION (Exact name of registrant as specified in its charter) NEVADA 74-1509818 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 10500 WESTOFFICE DRIVE, SUITE 200 HOUSTON, TEXAS 77042 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 785-7790 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT TITLE OF EACH CLASS Name of each exchange on which registered ------------------- NEW YORK STOCK EXCHANGE Common Stock (Par Value $.10 per share) and Common Stock Purchase Rights (the Rights are not currently exercisable or transferable apart from the Common Stock) SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of March 14, 1997, 6,043,381 shares of the registrant's Common Stock were issued and outstanding. The aggregate market value of the voting stock held by non-affiliates of the registrant (assuming only for purposes of this computation that directors and officers may be affiliates) was $181,543,518 (based on the March 14, 1997, closing sales price of $30.875 published in THE WALL STREET JOURNAL reports of New York Stock Exchange Composite Transactions). DOCUMENTS INCORPORATED BY REFERENCE Portions of the following documents are incorporated by reference into the Part of the Form 10-K specified herein: (1) Annual Report to Shareholders for 1996 (to the extent set forth in Parts I and II of this Annual Report); and (2) Proxy Statement for the Annual Meeting of Shareholders to be held April 29, 1997 (to the extent set forth in Part III of this Annual Report). NOTE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this Form 10-K , including without limitation the statements under "Item 1. Business," "Item 3. Legal Proceedings" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" are forward-looking statements. Although Tech-Sym Corporation believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from expectations ("Cautionary Statements") include without limitation (i) the risk of technological change relating to the Company's products and the risk of the Company's inability to develop new competitive products in a timely manner, (ii) the risk of decreased demand for the Company's products due to fluctuations in energy industry activity, communications industry activity, and levels of government expenditures on defense equipment, (iii) the Company's reliance on certain significant customers, (iv) the credit risk to the Company from certain sales arrangements, (v) the risk of fluctuations in future operating results, (vi) the risks of inadequate inventory levels, (vii) the risks of changing government regulations or statutes, (viii) the risks of general market conditions, competition, and pricing, and (ix) the risk of continued access to capital markets and commercial bank financing on favorable terms. All subsequent written and oral forward-looking statements attributable to Tech-Sym Corporation or persons acting on its behalf are expressly qualified in their entirety by Cautionary Statements. PART I ITEM 1. BUSINESS GENERAL Tech-Sym Corporation (the "Company" or "Registrant") is a diversified electronics engineering and manufacturing company primarily involved in the design, development, and manufacture of products used for communications, the exploration and production of hydrocarbons, and defense systems. The Company, incorporated in Nevada in 1944, is headquartered in Houston, Texas. The Company operates through five principal subsidiaries: Continental Electronics Corporation ("Continental") located in Dallas, Texas; Enterprise Electronics Corporation ("EEC") located in Enterprise, Alabama; GeoScience Corporation ("GeoScience") located in Houston, Texas; Metric Systems Corporation ("Metric") located in Fort Walton Beach, Florida; and TRAK Communications Inc. ("TRAK") located in Tampa, Florida. The business of the Company is conducted as one segment comprised of three product areas. COMMUNICATIONS. The communications products include microwave components and subsystems, antennas, broadcast transmitters, high power energy sources, and weather information systems. The microwave components and subsystems are used by customers to make communications and radar products. Microwave components include energy sources (oscillators and amplifiers), frequency multipliers, filters, ferrite isolators and circulators, and a broad range of passive components for modulation and control of microwave energy. Microwave subsystems consist of synthesizers, frequency converters, and microwave receiver assemblies. These microwave components and subsystems are used in such areas as wireless communications, satellite communications, aircraft instruments, radars, electronic warfare systems, and industrial microwave heating and cooking. Original equipment manufacturers purchase these products to integrate into systems. The Company also builds extremely accurate timing systems for use by government and commercial organizations, such as NASA, telephone companies, and electric power utilities, to synchronize communication carrier signals, initiate or time events, and extract timing information from the Global Positioning System (GPS) satellites. The Company has recently expanded its ferrite production capabilities by acquiring the ceramic manufacturing facilities previously used by the Department of Energy in Largo, Florida. The Company designs and produces antennas for wireless voice and data communication, satellite communication, surveillance, and range instrumentation. The Company also supplies antennas, fiber optic controllers, and positioners for information gathering by the U.S. surveillance community and high power antennas for jamming enemy radars during electronic warfare missions. Telemetry tracking systems and microprocessor-based antenna controllers are sold to the U.S. and foreign governments for use on test and training ranges. The Company has also designed and produces antennas for air and land mobile satellite communications systems. In the emerging wireless local loop market, the Company provides high performance base station and home subscriber antennas for telephony systems. Broadcast transmitter products include a complete line of transmitters and related equipment for the radio broadcast industry such as high power transmitters for use in the "short" and "medium" wave frequency bands as well as transmitters that operate at the radio broadcast frequencies commonly referred to as "AM" and "FM". High power radio frequency energy sources such as large particle accelerators are also made for medical and physics research installations. Communications and radar equipment for U.S. and foreign defense agencies have also been designed and manufactured. Customers include the commercial radio broadcast industry, private and government agencies that operate radio broadcast stations, and organizations or government funded operations that engage in scientific research. Through its Continental-Lensa subsidiary in Santiago, Chile, the Company designs and manufactures solid state AM transmitters for sale in North and South America as well as Europe. The Company also participates in a joint manufacturing agreement with the Ministry of Film, Radio, and Television in the People's Republic of China. The agreement provides for the manufacture of FM and shortwave broadcast transmitters at the Company's facility in Dallas as well as in Beijing. 2 The Company's TELEFUNKEN Sendertechnik GmbH subsidiary in Berlin, Germany, is a designer and manufacturer of broadcast transmitters and antennas in the world market. Its digital audio broadcast equipment produces CD quality sound for specially designed FM radios and is currently in use in several test markets. It also designs and manufactures solid state television transmitters which can be used for High Definition Television broadcasts. Meteorological agencies and television broadcasters use the Company's Doppler weather radars to forecast weather and provide severe weather warnings. The Doppler process measures both reflectivity and velocity of rain droplets and is used to detect, quantify and display precipitation intensity, velocity, and turbulence. It is extremely helpful in analyzing severe weather conditions such as hurricanes, tornadoes, thunderstorms, and wind shear. EEC has coupled its high performance Doppler radar with sophisticated data processing systems. These systems range from low-cost PC-based display and control systems through UNIX platform mid-range systems to larger scientific systems utilizing Hewlett Packard, IBM, Silicon Graphics, and the DEC Alpha station computers. The processing systems known as Weather Windows(R) and EDGE(R) (Enterprise Doppler Graphics Environment) provide meteorologists with automated radar control as well as enhanced meteorological displays and image processing capabilities. The systems can be integrated into a network to obtain accurate weather information for a large geographic area. More than 600 weather radars have been installed in more than 60 countries. GEOSCIENCE. The Company designs and manufactures products that acquire, digitize, transmit, record, display, and analyze acoustic energy produced on the surface by air guns, dynamite, or other sound sources and reflected from underground or subsea geologic formations. After the stored data is processed, potential locations of hydrocarbon deposits can be determined. With the advent of more powerful computers, three dimensional ("3-D") seismic surveys have become more routine. The 3-D surveys result in higher resolution than two dimensional surveys and the success rate of oil and gas wells based on 3-D surveys is much greater. The demand for the Company's seismic equipment has increased with the demand for 3-D surveys. Principal seismic products include the digital SYNTRAK 480-24(TM) Multiple Streamer Telemetry System consisting of one to twelve arrays, each up to 12,000 meters in length, containing sensors, electronic modules, and conductors. As the arrays are towed behind a boat, the acoustic energy is collected by the sensors, digitized and transmitted via a patented, low power telemetry communications scheme through the towed cable array to the boat. Once on board, the data is saved on magnetic tape by the Company's high-speed shipboard recording system. A related product is the Ocean Bottom Cable which is placed on the ocean floor instead of towed behind a boat. It is used in shallow water, congested areas, and transition zones where large seismic vessels cannot operate and in deep water primarily to monitor a reservoir as hydrocarbons are removed. Another seismic product recently introduced is the PolySeis(TM) system which the Company has developed with partial funding from the INSTITUTE FRANCAIS DU PETROLE. The PolySeis(TM) system is a 24-bit modular radio and/or wireline telemetry seismic data acquisition system that can be easily configured by the user for most land or transition zone needs. The system is specifically adaptive to the unique requirements associated with exploration in transition zones or in areas that are inaccessible or difficult to reach such as lakes, swamps, or mountainous areas. 3 The Company maintains operations for the design, manufacture, and repair of marine seismic cables in England, Singapore, and Houston. The ability to design, manufacture and repair seismic cables enhances the Company's quality control over critical processes and its ability to provide needed services to its customers worldwide. A reduced diameter array marine cable has been developed to reduce drag when towed trough the water and to reduce weight and handling problems on board the seismic vessel. A subsidiary of the Company and the China Oil Offshore Geophysical Corporation have formed a joint venture to manufacture and repair marine seismic cables in the People's Republic of China. Seismic cables for use on land as well as ocean bottom cables are also produced by the Company in Houston. The Company's geoscientific software applications products are designed to process and manipulate geological and seismic data collected in the field so that geologists and geophysicists can identify, define, and visualize subsurface geologic formations in three dimensions. The Company is in the process of integrating its line of seismic processing, geological interpretation, and visualization applications into a comprehensive three dimensional earth model interpretation package called "TerraCube." By linking the individual applications into a framework, TerraCube is expected to reduce the overall cycle time and expense involved in processing seismic data and interpreting geological data, as well as improve the quality of the data. In May of 1996, the Company contributed all the outstanding stock of Syntron, Inc., CogniSeis Development, Inc., and Symtronix Corporation to a newly-formed, wholly owned subsidiary of the Company named GeoScience Corporation. GeoScience subsequently sold 2,597,600 shares of Common Stock (24.7% of the outstanding shares) in a public offering. DEFENSE SYSTEMS. The principal defense systems products include shipboard electronics, airborne training and instrumentation systems, and mechanical systems. The Company first became involved in shipboard electronics, when it received a contract for the design, development, and qualification testing of electronic control, monitoring, and power distribution equipment for the U.S. Navy's Vertical Launching System (VLS). Upon successful completion of this development effort, full scale production was initiated and has been continuous since. Utilizing the expertise gained during the VLS development effort, the Company expanded its business operations in this area to include subsystems for the AN/SQQ-89 Surface Anti-Submarine Warfare Combat System, firing mechanisms for the submarine launched Tomahawk and Trident missiles, radar cable assemblies for the AEGIS weapon system., and electronic power switching and intercommunications equipment primarily for U.S. Navy ships. The airborne training systems consist of pods which are attached to aircraft to collect data on the position, altitude, flight characteristics, and weapons systems of the aircraft during simulated combat. The data inputs are recorded in the pods or sent via telemetry to ground instrumentation equipment for display, debriefing, and subsequent analysis by the participants. The Company is producing airborne and ground equipment utilizing Global Positioning Systems (GPS) receivers to precisely locate and track aircraft operated on the training ranges. The use of this equipment 4 reduces the cost of operating Air Combat Maneuvering Instrumentation (ACMI) ranges since manned radar tracking sites and other equipment are unnecessary. The mechanical systems designed and manufactured by the Company include antenna support structures for large communications antennas, custom containers with environmental controls for sensitive electronics equipment such as satellites, torpedoes, and missiles, aircraft launcher rail assemblies for the AMRAAM missile, and mobile ground equipment used to clean and lubricate aircraft engines. The Company has also developed and manufactures air cargo systems for airborne supply operations including on-board cargo roller/restraint systems, air-drop platforms, and cargo handling equipment for many types of aircraft. The Company manufactures a variety of other systems including custom automated test equipment such as the Common Rail and Launcher Test Set used to test many types of airborne weapons launching systems. GOVERNMENT CONTRACTS Sales under contracts with or for the United States Government accounted for $92.0 million or 28.6% of the Company's sales in 1996. Most of the Company's Government contracts are fixed-price contracts. Under this type of contract, the price paid to the Company is not subject to adjustment by reason of the costs incurred by the Company in the performance of the contract, except that adjustments are made for costs incurred due to contract changes ordered by the Government. Cost overruns incurred in connection with fixed-price contracts, particularly those involving engineering and development, could substantially reduce the Company's profitability or cause losses. Government contracts may be terminated for the convenience of the Government at any time the Government believes that such termination would be in its best interests. Under contracts terminated for the convenience of the Government, the Company is entitled to receive payments for its allowable costs and, in general, a proportionate share of its fee or profit for the work actually performed. Under the Truth in Negotiations Act, the Government has a right for three years after final payment on substantially all negotiated Government contracts to examine all the Company's cost records with respect to such contracts in order to determine whether the Company used and made available to the Government, or to the prime contractor in the case of a subcontract, accurate, complete and current cost or pricing information in preparing bids and conducting negotiations on the contracts or any amendments thereto. The Company recognizes revenue under its Government contracts on the percentage of completion method generally measured by the percentage of total costs incurred to date to estimated total costs for each contract. Estimated losses on contracts are provided for in full when they become apparent. Provided the job is on schedule, the Company normally recovers most of its costs on large contracts under a progress payment system whereby 75% to 80% of its allowable costs incurred in performing the contract, including applicable indirect costs such as general and administrative expenses, may be collected from the Government on a current basis, while related profit, if any, is billable only upon completion of the contract, or in certain instances, as delivery of units is made. The Company and Government representatives closely monitor the Company's performance against the overall budget of cost and profit for a job as the job progresses. Revisions of a budget may occur during the course of the work for many reasons, including increases or decreases in the scope of the work, 5 change orders and funding adjustments, as well as for the Company's performance against such budget. Budget revisions forecasting profit reductions are recorded by the Company on a current basis, whereas forecasted profit increases are recorded over the remaining period of performance. The Company believes that business done under Government contracts differs from ordinary commercial contracts in certain other ways. Capital requirements tend to be smaller because of the progress payment system. There is no significant bad debt loss risk and, in general, receivables are paid promptly. The Company has also found that, in the case of Department of Defense contracts, the contract dispute procedures are well defined and generally permit expeditious and inexpensive resolutions of contract problems. COMPETITION AND BUSINESS CONDITIONS The Company faces significant competition in most aspects of its business. Its principal competitors in each area of its activities include corporations with substantially greater assets and access to larger financial resources than the Company. The Company's products are of a highly technical nature and involve the use of techniques and materials similar to those used by its competitors. The principal competitive factors with respect to the Company's products are technological innovation, product quality, price, adherence to delivery schedules and product reliability. A significant portion of the Company's sales are made under Government contracts awarded on the basis of competitive proposals. In addition to price, the factors involved in the award of such contracts include the quality of the proposal and reputation of the bidder. While the Company faces competition with respect to each of its product lines, the Company believes it is a principal supplier of (i) meteorological radars to foreign government agencies, and (ii) marine seismic data acquisition systems to the petroleum industry. Demand for many of the products sold by the Company is dependent on the level and nature of the nation's defense expenditures. See "Other Information" included in Management's Discussion and Analysis set forth on page 21 of the Company's Annual Report to Shareholders for the year ended December 31, 1996, which information is incorporated herein by reference. The defense-related electronic systems and components manufactured by the Company are sold primarily to the United States armed forces, defense contractors, and foreign countries for military and training use. General increases or decreases in the level of defense appropriations tend to affect demand for defense-related products, but do not necessarily have a corresponding effect on demand for the specialized products manufactured by the Company. Due to the process by which appropriations and contracts are approved for defense projects, it is common for the Company to experience delays in the receipt of anticipated orders, which can adversely affect operating results by shifting operating revenues from one period to another. Because most of the Company's defense-related contracts are awarded on a fixed-price basis, cost overruns can affect the Company's profitability. MARKETING AND CUSTOMERS The Company's products are primarily marketed directly by the sales force of each of its operating subsidiaries, with the assistance of domestic and international independent technical sales representatives who receive commissions on 6 their sales. The principal customers for the communications products include the United States Government (primarily the armed services), government contractors, communication equipment manufacturers, government and commercial weather services, foreign government agencies, radio broadcast companies and organizations, and research organizations. The geoscience customers include major independent and foreign national oil and gas companies, seismic contractors, geophysical contractors and government agencies around the world. The defense systems products are sold to the armed forces of the United States and foreign governments, government contractors, and aircraft manufacturers. The Company's largest customer is the United States Government, its agencies and contractors, whose purchases accounted for approximately 28.6% of the Company's consolidated sales in 1996. Of that amount, approximately 89.4% was attributable to purchases by the Department of Defense and its contractors. The loss of these Government contracts would have a material adverse effect on the Company as a whole. Contracts with or for the United States Government and most prime contractors may be terminated by the Government at will. See "Government Contracts." The Company has not, however, experienced any significant problems with contract cancellations. PRODUCT DEVELOPMENT Information concerning the amount spent during each of the last three years on Company-sponsored research and development activities is set forth in the Company's "Consolidated Statement of Income" on page 22 of the Company's Annual Report to Shareholders for the year ended December 31, 1996, which information is incorporated herein by reference. Certain of the Company's research and development activities are undertaken pursuant to Government contracts and subcontracts. The costs incurred under these contracts for product research and development are charged to cost of sales, rather than to product development costs. PATENTS Although the Company holds a number of United States and foreign patents, the Company believes that its business is not materially dependent upon the protection afforded by patents, but primarily upon the experience and continued creative skills of its personnel. In many cases, because of rapidly changing technology and the need for confidentiality, the Company does not seek to obtain patents. BACKLOG The backlog of unshipped orders was $138,221,000 and $131,407,000 as of December 31, 1995 and 1996, respectively. The backlog as of such dates which was reasonably expected to be filled within twelve months of such date was $128,035,000 and $115,613,000, respectively. The backlog figures include only the sales value of the equipment or products for which the Company has received orders it believes to be firm. Contracts with or for the United States Government and most prime contractors may be terminated by the Government at will. See "Government Contracts." The Company has not, however, experienced any significant problems with contract cancellations. 7 MATERIALS AND SUPPLIES The Company's operations require a wide variety of electronic and mechanical components and raw materials. Most of these items are available from several commercial sources. The Company does not depend on any single source for a significant portion of its supplies except for the 24-bit analog-to-digital converters and hybrid processors used in Syntron's new SYNTRAK 480-24 towed array system and ocean bottom cable. ENVIRONMENTAL PROTECTION No material effect on the operations of the Company is presently anticipated in the compliance with Federal, State and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, and the Company does not expect to make any material capital expenditures in the next year in order to comply with any such provisions. EMPLOYEES As of December 31, 1996, the Company employed a total of 2,426 persons. None of the Company's domestic employees is represented by a labor union. PRODUCT LINE SALES Information concerning the Company's product line sales is set forth under the caption "Product Line Sales" on page 20 of the Company's Annual Report to Shareholders for the year ended December 31, 1996, which information is incorporated herein by reference. EXPORT SALES Information concerning the Company's export sales is set forth in Note 13 of the Notes to Consolidated Statements contained in the Company's Annual Report to Shareholders for the year ended December 31, 1996, which information is incorporated herein by reference. ITEM 2. PROPERTIES The Company's corporate headquarters are located in Houston, Texas, in a company-owned building. The Company, through its Tech-Sym Management Corporation subsidiary, occupies approximately 10,000 square feet of the 20,000 square foot building. The remaining portion of the building is leased to a third party. 8 Metric's defense systems manufacturing operations are conducted from office and plant facilities comprising a total of 226,000 square feet located on three tracts totaling 38 acres owned by the Company in Fort Walton Beach, Florida. Metric also leases 5,000 square feet of office and storage space in several nearby facilities. EEC's weather information systems operations are conducted from office and plant facilities comprising 43,000 square feet located on an 11 acre tract owned by the Company in Enterprise, Alabama. The manufacturing operations conducted by the subsidiaries of TRAK Communications include (i) 123,000 square feet of office and plant facilities on ten acres owned in Tampa, Florida, (ii) 45,500 square feet of office and plant facilities owned in Dundee, Scotland, (iii) 14,500 square feet of offices and plant facilities leased in San Clemente, California, (iv) 54,650 square feet of offices, plant facilities, and warehouse space leased in Chatsworth, California, and (v) 12,000 square feet of office and plant facilities leased in Largo, Florida. The manufacturing and services operations of the GeoScience subsidiaries are conducted from (i) 78,000 square feet of offices and plant facilities on a 15.2 acre tract owned in Houston, Texas, (ii) 188,000 square feet of leased offices and plant facilities at five locations in Houston, Texas, (iii) 52,000 square feet of office and plant facilities on a 2.8 acre tract owned in Derbyshire, England, (iv) a 33,300 square foot office and plant facility constructed on a 1.4 acre tract leased in Singapore, and (v) additional office space for development centers, service centers, and sales offices is leased in Colorado, Canada, England, The People's Republic of China, Russia, Singapore, Belarus, Azerbaijan, and Venezuela. The manufacturing operations for Continental Electronics' broadcast transmitters and high power energy sources are conducted from office and plant facilities comprising 160,000 square feet on a 14 acre tract owned by the company in Dallas, Texas. Continental also leases an 80,000 square foot building on a 4 acre tract contiguous to the Continental property. Continental-Lensa S.A. of Santiago, Chile, owns a 4,000 square foot facility for its assembly operations. TELEFUNKEN Sendertechnik GmbH operates from a leased facility of approximately 65,000 square feet in Berlin, Germany. The Company is the developer of a 9,000 acre residential & recreational project located near Concho, Arizona, in which Lake Investment Company, a wholly-owned subsidiary of the Company, owns a 100% interest. Approximately 550 acres of this development remains unsold. The Company intends to continue its efforts to liquidate its real estate operations and to use the proceeds in its manufacturing operations. Certain of the facilities of the Company and its subsidiaries are subject to mortgage debt as set forth in Note 7 of the Notes to Consolidated Financial Statements contained in the Company's Annual Report to Shareholders for the year ended December 31, 1996, which information is incorporated herein by reference. ITEM 3. LEGAL PROCEEDINGS 9 As previously reported, the Company received notice on October 18, 1994, that Thomcast A.G. ("Thomcast") commenced an action in the United States District Court for the Northern District of Alabama, Southern Division, alleging that Continental Electronics Corporation ("Continental"), a wholly-owned subsidiary of the Company, and Eternal Word Television Network, Inc. ("EWTN"), a customer of Continental, have infringed and are infringing two claims of United States Patent No. 4,560,944 (the "Patent") assigned to Thomcast. Thomcast has stated that its damages cannot presently be ascertained, but has computed its alleged damages on past sales at approximately $6,500,000 and has requested treble damages, prejudgment interest, costs and attorneys' fees. On September 16, 1996, the district court issued its final order declaring the Patent invalid and granting summary judgment in favor of Continental and EWTN. Thomcast filed an appeal with the United States Court of Appeals for the Federal Circuit. The parties have filed their respective briefs and are awaiting oral arguments, if ordered, and a decision. If the appeal is granted and the final order of the district court is reversed, the case would be remanded to the district court for further proceedings such as additional motions for summary judgment and a trial. There are various other lawsuits and claims pending against the Company's subsidiaries. In the opinion of Tech-Sym's management, based in part on advice of counsel, none of these actions will have a material adverse effect on the consolidated financial position of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTEOF SECURITY HOLDERS No matter was submitted during the fourth quarter of 1996 to a vote of the Company's security holders through the solicitation of proxies or otherwise. ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information concerning the current executive officers (as defined by the Securities and Exchange Commission rules) of the Company. These officers serve at the discretion of the Board of Directors of the Company and of various subsidiaries of the Company, as the case may be.
NAME AGE POSITIONS ---- --- --------- Wendell W. Gamel 67 Chairman of the Board, President and Director of the Company and officer and director of various subsidiaries of the Company
10
NAME AGE POSITIONS ---- --- --------- Coy J. Scribner 65 Vice President and Director of the Company, President and Director of Metric, and Chairman of the Board of EEC Ray F. Thompson 60 Vice President, Treasurer, and Chief Financial Officer of the Company and officer and director of various subsidiaries of the Company J. Rankin Tippins 44 Secretary and General Counsel of the Company and officer and director of various subsidiaries of the Company Paul L. Harp 48 Controller and Chief Accounting Officer of the Company O. Dale Burris 60 President of TRAK Communications Inc. Robert M. McDonald 66 President of Continental Electronics Corporation Richard F. Miles 48 President of GeoScience Corporation
There are no family relationships between any of the above persons. Executive officers are elected annually by the Board of Directors of the Company or a wholly-owned subsidiary of the Company, as the case may be, at their respective meetings of directors held immediately following the annual meeting of shareholders for such Company, to serve for the ensuing year or until their successors have been elected. The annual meetings of shareholders of the Company and GeoScience Corporation are normally held in April of each year and the annual meeting of each of the Company's principal, wholly-owned subsidiaries, including Metric, TRAK Communications, EEC, and Continental, are held in June of each year. There are no arrangements or understandings between any officer and any other person pursuant to which the officer was elected. Mr. Gamel has been Chairman of the Board and President of the Company for more than the past five years. Mr. Gamel has served as a director of the Company continuously since 1966. Mr. Scribner has been Vice President of the Company, President and a director of Metric, and Chairman of the Board of EEC, for more than the past five years. He has been a director of the Company continuously since 1983. Mr. Thompson has been Treasurer and Chief Financial Officer of the Company for more than the past five years. In February of 1993, he was elected to the additional office of Vice President of the Company. Mr. Tippins has been Secretary and General Counsel of the Company for more than the past five years. Mr. Harp was elected Controller of the Corporation effective July 1, 1996, and is the Chief Accounting Officer for the Company. He had previously served as Secretary, Treasurer, and Controller of Metric since 1982. 11 Mr. Burris served as President of TRAK Microwave for more than the past five years. In March of 1997 he was elected as President of TRAK Communications Inc. Mr. McDonald has served as President of Continental for more than the past five years. Mr. Miles was elected President of Syntron on January 29, 1990. In December of 1995, he resigned as President of Syntron and was elected Chairman of the Boards of both Syntron and CogniSeis. On March 28, 1996, he was elected as President of GeoScience Corporation and continues to serve in that capacity. PART II The information called for by Items 5 through 8, inclusive, of Part II of this form is contained in the following sections of the Company's Annual Report to Shareholders for 1996, which sections are incorporated herein by reference: Caption and Page of ANNUAL REPORT ------------------- Item 5.Market for Registrant's "Stockholder and Market Information"; page Common Equity and 41 Related Stockholder Matters. Item 6.Selected Financial Data "Selected Financial Data"; page 17 Item 7.Management's Discussion "Management's Discussion and Analysis of and Analysis of Financial Condition and Results of Financial Condition and Operations"; pages 18 through 21, Results of Operations inclusive Item 8.Financial Statements Tech-Sym Corporation and Subsidiaries and Supplementary Data Consolidated Financial Statements; pages 22 through 40, inclusive ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There were no such changes or disagreements. PART III 12 The information called for by Items 10, 11, 12 and 13 of Part III of this form (other than the information required by Item 10 with respect to executive officers which has been included in Part I above as Item 4A) is contained in the Company's definitive proxy statement for the Annual Meeting of Shareholders to be held April 29, 1997. Such information has been filed with the Securities and Exchange Commission and is incorporated herein. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) FINANCIAL STATEMENTS A list of the financial statements incorporated herein by reference is set forth in the Index to Financial Statements and Schedules submitted as a separate section of this report. (2) FINANCIAL STATEMENT SCHEDULES A list of the financial statement schedules included herein is contained in the accompanying Index to Financial Statements and Schedules. (3) EXHIBITS The following documents are included as Exhibits to this report. An asterisk (*) before an Exhibit number denotes that such Exhibit has been incorporated by reference to the registration statement or report specified in the brackets thereafter. *3(a) Articles of Incorporation of Registrant, as amended [Registrant's 10-K (1989), SEC File No. 1-4371, Exhibit 3(a)] *3(b) By-Laws of Registrant, as amended [Registrant's 10-K (1993), SEC File No. 1-4371, Exhibit 3(b)] *4(a) Amended and Restated Rights Agreement dated as of June 1, 1988, between the Registrant and Continental Stock Transfer and Trust Company, as rights agent, relating to Common Stock Purchase Rights [Registrant's 10-K (1993), SEC File No. 1-4371, Exhibit 4(a)] 13 *10(a) 1980 Stock Option Plan of Registrant [Registration Statement No. 2-68084, Exhibit 1.1] *10(b) First Amendment to 1980 Stock Option Plan of Registrant dated February 23, 1982 [Registration Statement No. 2-77742, Exhibit 10(b)] *10(c) Second Amendment to 1980 Stock Option Plan of Registrant dated February 17, 1983 [Registration Statement No. 2-87064, Exhibit 10(c)] *10(d) 1990 Stock Option Plan of Registrant [Registration Statement No. 33-38208, Exhibit 28.1] *10(e) 1990 Stock Option Plan, as amended, effective February 21, 1991 [Registrant's 10-K (1991) SEC File No. 1-4371, Exhibit 10(e)] *10(f) 1990 Stock Option Plan, as amended, effective February 17, 1994 [Registration No. 33-56535, Exhibit 4.1] *10(g) Written description of incentive bonus compensation plan effective February 20, 1992 [Registrant's 10-K (1991) SEC File No. 1-4371, Exhibit 10(f)] *10(h) Deferred Compensation Agreement dated January 1, 1978, between the Registrant and Robert E. Moore with attached Amendments through January 1, 1991 [Registrant's 10-K (1990) SEC File No. 1-4371, Exhibit 10 (g)] *10(i) Consulting Agreement dated January 1, 1988, between Registrant and Robert E. Moore [Registrant's 10-K (1987), SEC File No. 1-4371, Exhibit 10(dd)] *10(j) Form of Director's Stock Option Agreement dated as of December 10, 1987, entered into between Registrant and A. A. Gallotta, Jr. (5,000 shares), and Christopher C. Kraft, Jr. (5,000 shares) [Registrant's 10-K (1988), SEC File No. 1-4371, Exhibit 10(ii)] *10(k) Termination Agreement dated May 1, 1991, between the Registrant and Ray F. Thompson [Registrant's 10-K (1991) SEC File No. 1-4371, Exhibit 10(r)] *10(l) Termination Agreement dated May 1, 1991, between the Registrant and Richard F. Miles [Registrant's 10-K (1991) SEC File No. 1-4371, Exhibit 10(s)] 14 *10(m) First Amendment to Termination Agreement, dated April 26, 1994, between the Registrant and Richard F. Miles [Registration No. 33-56533, Exhibit 10(s)] *10(n) Termination Agreement dated May 1, 1991, between the Registrant and J. Rankin Tippins [Registrant's 10-K (1991) SEC File No. 1-4371, Exhibit 10(t)] *10(o) Termination Agreement dated May 1, 1991, between the Registrant and O. Dale Burris [Registrant's 10-K (1991) SEC File No. 1-4371, Exhibit 10(u)] *10(p) Termination Agreement dated August 15, 1996, between the Registrant and Paul L. Harp *10(q) Trust Agreement dated June 11, 1991 between the Registrant and Texas Commerce Bank National Association [Registrant's 10-K (1991) SEC File No. 1-4371, Exhibit 10(w)] *10(r) First Amendment dated June 1, 1992, to Trust Agreement dated June 11, 1991, between the Registrant and Texas Commerce Bank National Association [Registrant's 10-K (1992) SEC File No. 1-4371, Exhibit 10(x)] *10(s) Nonemployee Director Retirement Plan of the Registrant effective January 1, 1992 [Registrant's 10-K (1991) SEC File No. 1-4371, Exhibit 10(x)] 10(t) Executive Retirement Agreement, as amended and restated, dated April 30, 1992, between the Registrant and Wendell W. Gamel 10(u) Executive Retirement Agreement, as amended and restated, dated April 30, 1992, between the Registrant and Coy J. Scribner 10(v) Executive Retirement Agreement, as amended and restated, dated April 30, 1992, between the Registrant and Ray F. Thompson 10(w) Executive Retirement Agreement, as amended and restated, dated April 30, 1992, between the Registrant and O. Dale Burris 10(x) Executive Retirement Agreement, as amended and restated, dated April 30, 1992, between Registrant and J. Rankin Tippins 15 *10(y) Executive Retirement Agreement dated April 26, 1994, between the Registrant and Richard F. Miles [Registration No. 33-56533, Exhibit 10(ee)] 13 Pages 17-41 of the Annual Report to Shareholders of Registrant for the year ended December 31, 1996, are included as an Exhibit to this report for the information of the Securities and Exchange Commission, and, except for those portions thereof specifically incorporated by reference elsewhere herein, such pages of the Annual Report should not be deemed filed as a part of this report 21 Subsidiaries of the Registrant 22 Power of Attorney 23 Consent of independent accountants 27 Financial Data Schedule which is deemed not to be filed for purposes of liability under the federal securities laws (B) REPORTS ON FORM 8-K No reports on Form 8-K were required to be filed during the quarter ended December 31, 1996. 16 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TECH-SYM CORPORATION By: /S/RAY F. THOMPSON Ray F. Thompson, Vice Presidentm and Treasurer (principal financial officer) Date: March 28, 1997 By: /S/PAUL L. HARP Paul L. Harp, Controller (principal accounting officer) Date: March 28, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By: /S/WENDELL W. GAMEL Wendell W. Gamel, Chairman of the Board President and Director (principal executive officer) Date: March 28, 1997 By: *W. L. CREECH W. L. Creech Director Date: March 28, 1997 By: *MICHAEL C. FORREST Michael C. Forrest Director Date: March 28, 1997 17 By: *A. A. GALLOTTA, JR. A. A. Gallotta, Jr. Director Date: March 28, 1997 By: *CHRISTOPHER C. KRAFT, JR. Christopher C. Kraft, Jr. Director Date: March 28, 1997 By: *ROBERT E. MOORE Robert E. Moore Director Date: March 28, 1997 By: *COY J. SCRIBNER Coy J. Scribner Director Date: March 28, 1997 By: *CHARLES K. WATT Charles K. Watt Director Date: March 28, 1997 *Signed by Ray F. Thompson as attorney-in-fact pursuant to Power of Attorney. 18 INDEX TO FINANCIAL STATEMENTS AND SCHEDULES PAGE IN ANNUAL REPORT* (a) The following documents are filed as part of this report: (1) Financial Statements: Consolidated Statement of Income for the three years ended December 31, 1996 22 Consolidated Balance Sheet at December 31, 1996 and 1995 23 Consolidated Statement of Cash Flows for the three years ended December 31, 1996 24 Consolidated Statement of Changes in Shareholders' Investment for the three years ended December 31, 1996 25 Notes to Consolidated Financial Statements 26 Report of Independent Accountants 40 PAGE IN THIS REPORT ON FORM 10-K (2) Financial Statement Schedules: Report of Independent Accountants on Financial Statement Schedule S-2 Valuation and Qualifying Accounts and Reserves (Schedule II) for the three years ended December 31, 1996 S-3 *Incorporated by reference from the indicated pages of the 1996 Annual Report to Shareholders. 19 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. TECH-SYM CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) E X H I B I T S TO ANNUAL REPORT OF REGISTRANT FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 ON FORM 10-K (FILE NO. 1-4371) 20 EXHIBIT INDEX The following documents are included as Exhibits to this report. An asterisk (*) placed opposite of the description of an Exhibit denotes that such Exhibit has been incorporated by reference to the registration statement or report specified in the brackets in such Exhibit description. EXHIBIT NUMBER NUMBER EXHIBIT SEQUENTIAL ------- ------- ---------- 3(a) Articles of Incorporation of Registrant, as amended [Registrant's 10-K (1989), SEC File No. 1-4371, Exhibit 3(a)] * 3(b) By-Laws of Registrant, as amended[Registrant's 10-K (1993), SEC File No. 1-4371, Exhibit 3(b)] * 4(a) Amended and Restated Rights Agreement dated as of June 1, 1988,between the Registrant and Continental Stock Transfer & Trust Company, as rights agent, relating to Common Stock Purchase Rights [Registrant's 10-K (1993), SEC File No. 1-4371, Exhibit 4(a)] * 10(a) 1980 Stock Option Plan of Registrant [Registration Statement No. 2-68084, Exhibit 1.1] * 10(b) First Amendment to 1980 Stock Option Plan of Registrant dated February 23, 1982 [Registration Statement No. 2-77742, Exhibit 10(b)] * 10(c) Second Amendment to 1980 Stock Option Plan of Registrant dated February 17, 1983 [Registration Statement No. 2-87064, Exhibit 10(c)] * 10(d) 1990 Stock Option Plan of Registrant [Registration Statement No. 33-38208, Exhibit 28.1] * 10(e) 1990 Stock Option Plan, as amended, effective February 21, 1991 [Registrant's 10-K (1991) SEC File No. 1-4371, Exhibit 10(e)] * 10(f) 1990 Stock Option Plan, as amended, effective February 17, 1994 [Registration No. 33-56535, Exhibit 4.1] * 10(g) Written description of incentive bonus compensation plan [Registrant's 10-K (1991) SEC File No. 1-4371, Exhibit 10(f)] * 21 10(h) Deferred Compensation Agreement dated January 1, 1978, between the Registrant and Robert E. Moore with attached Amendments through January 1, 1991 [Registrant's 10-K (1990) SEC File No. 1-4371, Exhibit 10(g)] * I-1 10(i) Consulting Agreement dated January 1, 1988, between Registrant and Robert E. Moore [Registrant's 10-K (1987), SEC File No. 1-4371, Exhibit 10(dd)] * 10(j) Form of Director's Stock Option Agreement dated as of December 10, 1987, entered into between Registrant and A. A. Gallotta, Jr. (5,000 shares), and Christopher C. Kraft, Jr. (5,000 shares) [Registrant's 10-K (1988), SEC File No. 1-4371, Exhibit 10(ii) * 10(k) Termination Agreement dated May 1, 1991, between the Registrant and Ray F. Thompson Registrant's 10-K (1991) SEC File No. 1-4371, Exhibit 10(r] * 10(l) Termination Agreement dated May 1, 1991, between the Registrant and Richard F. Miles [Registrant's 10-K (1991) SEC File No. 1-4371, Exhibit 10(s)] * 10(m) First Amendment to Termination Agreement, dated April 26, 1994, between the Registrant and Richard F. Miles [Registration No. 33-56533, Exhibit 10(s)] * 10(n) Termination Agreement dated May 1, 1991, between the Registrant and J. Rankin Tippins [Registrant's 10-K (1991) SEC File No. 1-4371, Exhibit 10(t)] * 10(o) Termination Agreement dated May 1, 1991, between the Registrant and O. Dale Burris [Registrant's 10-K (1991) SEC File No. 1-4371, Exhibit 10(u)] * 10(p) Termination Agreement dated May 1, 1991, between the Registrant and Robert M. McDonald [Registrant's 10-K (1991) SEC File No. 1-4371, Exhibit 10(v)] * 10(q) Trust Agreement dated June 11, 1991 between the Registrant and Texas Commerce Bank National Association [Registrant's 10-K (1991) SEC File No. 1-4371, Exhibit 10(w)] * 22 10(r) First Amendment dated June 1, 1992, to Trust Agreement dated June 11, 1991 between the Registrant and Texas Commerce Bank National Association [Registrnt's 10-K (1992) SEC File No. 1-4371, Exhibit 10(x)] * 10(s) Nonemployee Director Retirement Plan of the Registrant effective January 1, 1992 [Registrant's 10-K (1991) SEC File No. 1-4371, Exhibit 10(x)] I-2 * 10(t) Executive Retirement Agreement, as amended and restated, dated April 30, 1992, between the Registrant and Wendell W. Gamel __ 10(u) Executive Retirement Agreement, as amended and restated, dated April 30, 1992, between the Registrant and Coy J. Scribner __ 10(v) Executive Retirement Agreement, as amended and restated, dated April 30, 1992, between the Registrant and Ray F. Thompson __ 10(w) Executive Retirement Agreement, as amended and restated, dated April 30, 1992, between the Registrant and O. Dale Burris __ 10(x) Executive Retirement Agreement, as amended and restated, dated April 30, 1992, between Registrant and J. Rankin Tippins __ 10(y) Executive Retirement Agreement dated April 26, 1994, between the Registrant and Richard F. Miles [Registration No. 33-56533, Exhibit 10(ee)] * 13 Pages 17 through 41 of the Annual Report to Stockholders of Registrant for the year ended December 31, 1996, are included as an Exhibit to this report for the information of the Securities and Exchange Commission, and, except for those portions thereof specifically incorporated by reference elsewhere herein, such pages of the Annual Report should not be deemed filed as a part of this report __ 21 Subsidiaries of the Registrant __ 22 Power of Attorney __ 23 Consent of independent accountants __ 27 Financial Data Schedule which is deemed not to be filed for purposes of liability under the federal securities laws __ 23 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Shareholders and Board of Directors of Tech-Sym Corporation: Our audits of the consolidated financial statements referred to in our report dated February 20, 1997 appearing in the 1996 Annual Report to Shareholders of Tech-Sym Corporation (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, these Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PRICE WATERHOUSE LLP Houston, Texas February 20, 1997 S-2 TECH-SYM CORPORATION AND SUBSIDIARIES Valuation and Qualifying Accounts and Reserves (Schedule II) For the Three Years Ended December 31, 1996 (In thousands)
Charged Charged Charged Balance to costs to costs to costs at and Balance and Balance and Balance beginning expenses Deductions at end expenses Deductions at end expenses Deductions at end Description of 1994 1994 1994 of 1994 1995 1995 of 1995 1996 1996 of 1996 - ----------- -------- -------- ---------- ------- ------- ---------- -------- -------- ---------- ------- Tech-Sym Corporation and Consolidated Subsidiaries - --------------- Reserves deducted from assets: Current receivables $222 $476 $234 $ 464 $1,836 $1,069 $1,231 $1,488 $ 739 $1,980 Long-term receivables 312 162 262 212 394 606 60 247 419 ---- ---- ---- ------ ------ ------ ------ ------ ------ ------ $534 $638 $496 $ 676 $2,230 $1,069 $1,837 $1,548 $ 986 $2,399 ==== ==== ==== ====== ====== ====== ====== ====== ====== ======
S-3 EX-10.T 2 EXHIBIT 10(t) EXECUTIVE RETIREMENT AGREEMENT AS AMENDED AND RESTATED) THIS AGREEMENT made and entered into as of April 30, 1992, between TECH-SYM CORPORATION (the "Company") and WENDELL W. GAMEL (the "Executive"). WITNESSETH: WHEREAS, the Executive has rendered outstanding service to the Company over a period of years and the Executive's experience and knowledge of the affairs Of the Company and his reputation and contacts are extremely valuable to the Company; and WHEREAS, in recognition of the Executive's service to the Company and to encourage the Executive's continued service, the Company is desirous of offering him, in addition to his regular compensation and termination benefits, certain retirement benefits; NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the Company and the Executive hereby agree as follows: 1. BENEFITS 1.1 QUALIFICATIONS FOR RETIREMENT BENEFITS. The Executive (or his surviving spouse, as the case may be) shall be entitled to receive the retirement (or death) benefits provided by this Agreement following his termination of employment with the Company unless his employment with the Company is terminated (i) voluntarily by the Executive prior to his attaining a 62, other than due to a Total Disability (as defined below), or (ii) by the Company for Cause (as defined below). A termination of employment that would entitle the Executive (or his spouse) to receive retirement (or death) benefits as provided hereunder is hereafter referred to as a "Qualified Termination." For the purposes of this Agreement, the Company shall have "Cause" to terminate the Executive's employment hereunder only upon (i) the willful and continued failure by the Executive to perform substantially the Executive's duties with the Company, other than any such failure resulting ' g from the Executive's incapacity due to physical or mental illness, after a demand for substantial performance is delivered to the Executive by the Board that specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties or (ii) the willful engaging by the Executive in gross misconduct materially and demonstrably injurious to the Company. For purposes of this paragraph, an act or failure to act on the Executive's part shall be considered "willful" if done or omitted to be done by the Executive otherwise than in good faith and without reasonable belief that the Executive's action or omission was in the best interest of the Company. For purposes of this Agreement, the term "Total Disability" means that, in the opinion of the Executive's physician, the Executive has suffered a mental or physical disability that is expected to be permanent or of long continued duration and which prevents the Executive from continuing full-time his duties with the Company or Subsidiary. 1.2 AMOUNT OF RETIREMENT BENEFITS. Following a Qualified Termination the Executive shall receive, beginning with the later of the date of such Qualified Termination or the Executive's 65th birthday (the "Commencement Date"), an annual retirement benefit equal to 65% of the highest rate of annual base salary in effect for the Executive with the Company at any time prior to the Executive's 61st birthday (the "Base Salary") with such benefit payable on each January 1 on or after the Commencement Date on which he is living; provided, however, that if the Executive's Commencement Date is other than on January 1, the Executive shall receive a partial annual retirement benefit for the remainder of the year in which such Commencement Date occurs in an amount equal to the full annual benefit that will commence on the next January 1 but reduced by a fraction, the numerator of which is the number of calendar months during such year that have elapsed prior to the Commencement Date (with any partial month rounded up to a complete month), and the denominator of which is 12 and such partial benefit shall be paid to the Executive on the first day of the month coinciding with or next following the Commencement Date; provided further, however, that: (a) if the Executive's employment terminates due to a Qualified Termination prior to his reaching age 65, the Executive may elect to commence receiving his retirement benefits hereunder as of the date of such Qualified Termination or any date thereafter, provided the Executive is at least age 62 as of such Early Commencement Date, by giving written notice of such election to the Company prior to such Early Commencement Date and the amount of the annual retirement benefit (and partial benefit, if any) payable hereunder shall be reduced by 1.39% for each full calendar month by which his Early Commencement Date precedes his 65th birthday unless the Board, in its sole discretion, elects to waive all or part of this reduction; and (b) if on the Early Commencement Date the Executive is also entitled to receive benefits under a separate Termination Agreement with the Company dated effective as of May 1, 1991 (as the same may be amended from time-to-time thereafter), then for purposes of subparagraph (a) above the Executive's age as of the Early Commencement Date shall be increased by (but not beyond age 65) the length of the Termination Period (as defined in the Termination Agreement) remaining as of the Early Commencement Date. 1.3 DEATH BENEFITS. If the Executive is married on his date of death and such death occurs while he is an employee of the Company or on or after a Qualified Termination, including one due to Total Disability, his surviving spouse ("Spouse") shall receive an annual survivor's benefit hereunder in an amount equal to 37 1/2% of the Executive's Base Salary. The Spouse's benefit shall commence on the first day of the month coinciding with or next following the Executive's date of death. Subsequent payment(s) of the Spouse's benefit shall be made on each anniversary of the date such survivor payments first began, provided that the Spouse is alive on such anniversary date, and shall cease when either a total of 10 annual survivor benefit payments have been paid to the Spouse hereunder or the Spouse dies, whichever occurs first. 1.4 LUMP SUMS. Notwithstanding Section 1.2 or Section 1.3 hereof to the contrary, the Board, in its sole discretion, may at any time direct that the actuarial present value of any retirement (or death) benefits accrued under this Agreement, as determined in accordance with the actuarial factors and rates then in effect for a lump sum payment (for an immediate or deferred annuity, as the case may be) upon a qualified plan's termination under Pension Benefit Guaranty Corporation regulations, be immediately paid to the Executive (or his spouse, as the case may be) in a lump sum in cash (by check). 1.5 CONTINUED HEALTH BENEFITS. On and after a Qualified Termination, the Executive shall be entitled to continue, for as long as he lives, his participation and that of his qualified dependents, if any, in the Company's group health plan for active employees in which the Executive participated immediately prior to such Qualified Termination provided that the Executive continues to pay the regular active employee premium, if any, required by such plan; however, in the event that continued participation by the Executive in such plan after the date of his Qualified Termination is not permitted by the plan or such plan is terminated or benefits under such plan would be taxable to the Executive, the Company shall either obtain comparable coverage under another group health plan of the Company (and under which benefits to the Executive would not be taxable) or, if there is none, an individual insurance policy providing comparable benefits with the Executive paying an amount of the premium therefor that is not greater than that which he would have been required to pay from time to time under the Company's group health plan for active employees had his participation continued in such plan and the Company paying the balance of such cost and any taxes on any income the Executive would have as a result of such Company-provided coverage. 2. TERMINATION AND AMENDMENT 2.1 TERMINATION OR AMENDMENT. The Company, by action of the Board, reserves the right to amend or terminate this Agreement for whatever reasons it may deem appropriate as of the first day of the month following the delivery to the Executive of written notice of such amendment or termination; however, no such amendment shall impair, reduce or void the Executive's (or his Spouse's) rights with respect to the continued health benefits provided by Section 1.5 or the retirement (or death) benefits (whether or not in pay status) accrued under this Agreement as of the date of such amendment and further, any termination of this Agreement by the Company shall, notwithstanding anything herein to the contrary, entitle the Executive (or his Spouse, as the case may be) to immediately receive from the Company the lump sum present value of the accrued retirement (or death) benefits as calculated in accordance with Section 1.4. 3. ADMINISTRATION 3.1 BOARD DECISION. The Board's decision whether or not to waive the reduction in the amount of benefits payable in the event of the Executive's Qualified Termination prior to reaching age 65, as provided in Section 1.2(a), shall be totally discretionary with the Board and need not be based upon any standard nor be consistent with any past practices and shall be conclusive on all parties. 3.2 BENEFITS UNFUNDED. This Agreement is completely separate from and is not a part of any other plan, qualified or nonqualified, of the Company and its subsidiaries. The benefits payable hereunder, if any, are in addition to those that "rabbi" trust to pay all or part of the benefits it may be required to pay under this Agreement, in which event this Agreement shall be deemed to be a part of such trust agreement and the Executive hereby waives, with respect to the assets of such rabbi trust, any preference he may have under state law with respect to such assets and acknowledges that he shall be a general, unsecured creditor of the Company with respect to the same. 4. MISCELLANEOUS 4.1 NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement shall be construed as a contract of employment between the Company and the Executive, or as a right of the Executive to be continued in the employment of the Company or as a limitation of the right of the Company to discharge the Executive at any time, with or without Cause. 4.2 ASSIGNMENT. The benefits payable under this Agreement may not be assigned, alienated, pledged, transferred, sold, encumbered or hypothecated in any manner by the Executive or his spouse. Any attempted sale, conveyance, transfer, assignment, pledge or encumbrance of this Agreement or of such rights, interest and benefits or the levy of any attachment or similar process thereupon shall be null and void and without affect. 4.3 BINDING EFFECT. The Company will require any successor, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all of the business and/or assets of the Company, by agreement in form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would have been required if no such succession had taken place. Notwithstanding anything herein to the contrary, failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall constitute a termination of this Agreement pursuant to Section 2.1 and entitle the Executive (or Spouse) as the case may be, to immediate payment thereunder. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that executes and delivers the agreement provided for in this Section 4.3 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. 4.4 MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and by the President or other authorized officer of the Company. No waiver by either party hereto at any time of any breach b the other party hereto of, or compliance with, any condition or provision be performed by such other party shall be deemed a waiver of provision or conditions at the same or at any prior or subsequent time. 4.5 PAYMENTS. The Company may make any payments required by this Agreement, when in the judgment of the Company the recipient is incapacitated by reasons of physical or mental illness or infirmity, to the recipient directly, or to the legal guardian of the recipient. 4.6 TAXES. The Company shall have the right to deduct from all payments made under this Agreement, any federal, state or local income taxes required by law to be withheld with respect to such payments. 4.7 VALIDITY. The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Texas without regard to the principle of conflicts of laws. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of a other provision of this Agreement, each of which shall remain in full force and effect. 4.8 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. 4.9 EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes of this Agreement includes employment with any corporation in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of all classes of stock. 4.10 ARBITRATION. Any dispute or controversy arising out of or in connection with this Agreement as to whether the Executive (or his spouse) is entitled to a retirement (or survivor's) benefit, the amount thereof or other matter shall be submitted to arbitration pursuant to the following procedure: (a) Either party may demand such arbitration in writing after the controversy arises, which demand shall include the name of the arbitrator appointed by the party demanding arbitration, together with a statement of the matter in controversy. (b) Within 15 days after such demand, the other party shall name an arbitrator, or in default thereof, such arbitrator shall be named by the Arbitration Committee of the American Arbitration Association, and the two arbitrators so selected shall name a third arbitrator within 15 days or, in lieu of such agreement on a third arbitrator by the two arbitrators so appointed a third arbitrator shall be appointed by the Arbitration Committee of the American Arbitration Association. (e) The Company shall bear all arbitration costs and expenses, including without limitation any legal fees and expenses incurred by the Executive (or his spouse) in connection with such arbitration procedure. (d) The arbitration hearing shall be held at a site in Houston, Texas, to be agreed to by a majority of the arbitrators on ten days' written notice to the parties. (e) The arbitration hearing shall be concluded within ten days unless otherwise ordered by a majority of the arbitrators, and the award thereon shall be made within ten days after the close of the submission of evidence. An award rendered by a majority of the arbitrators appointed pursuant to this Agreement shall be final and binding on all parties to the proceeding, and judgment on such award may be entered by either party in the highest court, state or federal, having jurisdiction. The parties stipulate that the provisions hereof shall be a complete defense to any suit, action, or proceeding instituted in any federal, state, or local court or before any administrative tribunal with respect to any controversy or dispute arising under this Agreement, and which is arbitrable as herein set forth. The arbitration provisions hereof shall, with respect to such controversy or dispute, survive the termination of this Agreement. 4.11 AMENDMENT AND RESTATEMENT OF PRIOR EXECUTIVE RETIREMENT AGREEMENT. The Company and the Executive hereby agree that concurrently with the execution and delivery of this Agreement, this Agreement shall operate and be construed as an amendment and restatement of that certain Executive Retirement Agreement, dated May 1, 1991 between the Company and the Executive (the Retirement Agreement"), and effective with such delivery the terms and provisions of the Prior Agreement shall be superseded by the terms and provisions of this Agreement. IN WITNESS WHEREOF the Company has caused this Agreement to be executed by its duly authorized officer, and the Executive has executed this Agreement effective for all purposes as of the date first written above. TECH-SYM CORPORATION Dated: 4/29/92 By:/s/Coy J. Scribner Title: Vice President EXECUTIVE Dated: 4/29/92 /s/Wendell W. Gamel WENDELL W. GAMEL EX-10.U 3 EXHIBIT 10(u) EXECUTIVE RETIREMENT AGREEMENT (AS AMENDED AND RESTATED) THIS AGREEMENT made and entered into as of April 30, 1992, between TECH-SYM CORPORATION (the "Company") and COY J. SCRIBNER (the "Executive"). W I T N E S S E T H: WHEREAS, the Executive has rendered outstanding service to the Company over a period of years and the Executive's experience and knowledge of the affairs of the Company and his reputation and contacts are extremely valuable to the Company; and WHEREAS, in recognition of the Executive's service to the Company and to encourage the Executive's continued service, the Company is desirous of offering him, in addition to his regular compensation and termination benefits, certain retirement benefits; NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the Company and the Executive hereby agree as follows: 1. BENEFITS 1.1 QUALIFICATIONS FOR RETIREMENT BENEFITS. The Executive (or his surviving spouse, as the case may be) shall be entitled to receive the retirement (or death) benefits provided by this Agreement following his termination of employment with the Company unless his employment with the Company is terminated (i) voluntarily by the Executive prior to his attaining age 62, other than due to a Total Disability (as defined below), or (ii) by the Company Cause (as defined below). A termination of employment that would entitle the Executive (or his spouse) to receive retirement (or death) benefits as provided hereunder is hereafter referred to as a "Qualified Termination." For the purposes of this Agreement, the Company shall have "Cause" to terminate the Executive's employment hereunder only upon (i) the willful and continued failure by the Executive to perform substantially the Executive's duties with the Company, other than any such failure resulting from the Executive's incapacity due to physical or mental illness, after a demand for substantial performance is delivered to the Executive by the Board that specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties or (ii) the willful engaging by the Executive in gross misconduct materially and demonstrably injurious to the Company. For purposes of this paragraph, an act or failure to act on the Executive's part shall be considered "willful" if done or omitted to be done by the Executive otherwise than in good faith and without reasonable belief that the Executive's action or omission was in the best interest of the Company. For purposes of this Agreement, the term "Total Disability" means that, in the opinion of the Executive's physician, the Executive has suffered a mental or physical disability that is expected to be permanent or of long continued duration and which prevents the Executive from continuing full-time his duties with the Company or Subsidiary. 1.2 AMOUNT OF RETIREMENT BENEFITS. Following a Qualified Termination the Executive shall receive, beginning with the later of the date of such Qualified Termination or the Executive's 65th birthday (the "Commencement Date"), an annual retirement benefit equal to 65% of the highest rate of annual base salary in effect for the Executive with the Company at any time prior to the Executive's 61st birthday (the "Base Salary") with such benefit payable on each January 1 on or after the Commencement Date on which he is living; provided, however, that if the Executive's Commencement Date is other than on January 1, the Executive shall receive a partial annual retirement benefit for the remainder of the year in which such Commencement Date occurs in an amount equal to the full annual benefit that will commence on the next January 1 but reduced by a fraction, the numerator of which is the number of calendar months during such year that have elapsed prior to the Commencement Date (with any partial month rounded up to a complete month), and the denominator of which is 12 and such partial benefit shall be paid to the Executive on the first day of the month coinciding with or next following the Commencement Date; provided further, however, that: (a) if the Executive's employment terminates due to a Qualified Termination prior to his reaching age 65, the Executive may elect to commence receiving his retirement benefits hereunder as of the date of such Qualified Termination or any date thereafter, provided the Executive is at least age 62 as of such Early Commencement Date, by giving written notice of such election to the Company prior to such Early Commencement Date and the amount of the annual retirement benefit (and partial benefit, if any) payable hereunder shall be reduced by 1.39% for each full calendar month by which his Early Commencement Date precedes his 65th birthday unless the Board, in its sole discretion, elects to waive all or part of this reduction; and (b) if on the Early Commencement Date the Executive is also entitled to receive benefits under a separate Termination Agreement with the Company dated effective as of May 1, 1991 (as the same may be amended from time-to-time thereafter), then for purposes of subparagraph (a) above the Executive's age as of the Early Commencement Date shall be increased by (but not beyond age 65) the length of the Termination Period (as defined in the Termination Agreement) remaining as of the Early Commencement Date. 1.3 DEATH BENEFITS. If the Executive is married on his date of death and such death occurs while he is an employee of the Company or on or after a Qualified Termination, including one due to Total Disability, his surviving spouse ("Spouse") shall receive an annual survivor's benefit hereunder in an amount equal to 37 1/2% of the Executive's Base Salary. The Spouse's benefit shall commence on the first day of the month coinciding with or next following the Executive's date of death. Subsequent payment(s) of the Spouse's benefit shall be made on each anniversary of the date such survivor payments first began, provided that the Spouse is alive on such anniversary date, and shall cease when either a total of 10 annual survivor benefit payments have been paid to the Spouse hereunder or the Spouse dies, whichever occurs first. 1.4 LUMP SUMS. Notwithstanding Section 1.2 or Section 1.3 hereof to the contrary, the Board, in its sole discretion, may at any time direct that the actuarial present value of any retirement (or death) benefits accrued under this Agreement, as determined in accordance with the actuarial factors and rates then in effect for a lump sum payment (for an immediate or deferred annuity, as the case may be) upon a qualified plan's termination under Pension Benefit Guaranty Corporation regulations, be immediately paid to the Executive (or his spouse, as the case may be) in a lump sum in cash (by check). 1.5 CONTINUED HEALTH BENEFITS. On and after a Qualified Termination, the Executive shall be entitled to continue, for as long as he lives, his participation and that of his qualified dependents, if any, in the Company's group health plan for active employees in which the Executive participated immediately prior to such Qualified Termination provided that the Executive continues to pay the regular active employee premium, if any, required by such plan; however, in the event that continued participation by the Executive in such plan after the date of his Qualified Termination is not permitted by the plan or such plan is terminated or benefits under such plan would be taxable to the Executive, the Company shall either obtain comparable coverage under another group health plan of the Company (and under which benefits to the Executive would not be taxable) or, if there is none, an individual insurance policy providing comparable benefits with the Executive paying an amount of the premium therefor that is not greater than that which he would have been required to pay from time to time under the Company's group health plan for active employees had his participation continued in such plan and the Company paying the balance of such cost and any taxes on any income the Executive would have as a result of such Company-provided coverage. 2. TERMINATION AND AMENDMENT 2.1 TERMINATION OR AMENDMENT. The Company, by action of the Board, reserves the right to amend or terminate this Agreement for whatever reasons it may deem appropriate as of the first day of the month following the delivery to the Executive of written notice of such amendment or termination; however, no such amendment shall impair, reduce or void the Executive's (or his Spouse's) rights with respect to the continued health benefits provided by Section 1.5 or the retirement (or death) benefits (whether or not in pay status) accrued under this Agreement as of the date of such amendment and further, any termination of this Agreement by the Company shall, notwithstanding anything herein to the contrary, entitle the Executive (or his Spouse, as the case may be) to immediately receive from the Company the lump sum present value of the accrued retirement (or death) benefits as calculated in accordance with Section 1.4. 3. ADMINISTRATION 3.1 BOARD DECISION. The Board's decision whether or not to waive the reduction in the amount of benefits payable in the event of the Executive's Qualified Termination prior to reaching age 65, as provided in Section 1.2(a), shall be totally discretionary with the Board and need not be based upon any standard nor be consistent with any past practices and shall be conclusive on all parties. 3.2 BENEFITS UNFUNDED. This Agreement is completely separate from and is not a part of any other plan, qualified or nonqualified, of the Company and its subsidiaries. The benefits payable hereunder, if any, are in addition to those that may be provided to the Executive under any other plan, arrangement or agreement. Further, the benefits payable hereunder are completely unfunded and shall be payable by the Company solely out of its general assets and the Executive and his spouse shall be unsecured, general creditors of the Company with respect to such benefits; provided, however, the Company, in its discretion, may establish a grantor or "rabbi" trust to pay all or part of the benefits it may be required to pay under this Agreement, in which event this Agreement shall be deemed @ be a part of such trust agreement and the Executive hereby waives, with respect to the assets of such rabbi trust, any preference he may have under state law with respect to such assets and acknowledges that he shall be a general, unsecured creditor of the Company with respect to the same. 4. MISCELLANEOUS 4.1 NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement shall be construed as a contract of employment between the Company and the Executive, or as a right of the Executive to be continued in the employment of the Company or as a limitation of the right of the Company to discharge the Executive at any time, with or without Cause. 4.2 ASSIGNMENT. The benefits payable under this Agreement may not be assigned, alienated, pledged, transferred, sold, encumbered or hypothecated in any manner by the Executive or his spouse. Any attempted sale, conveyance, transfer, assignment, pledge or encumbrance of this Agreement or of such rights, interest and benefits or the levy of any attachment or similar process thereupon shall be null and void and without effect. 4.3 BINDING EFFECT. The Company 'y will require any successor, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all of the business and/or assets of the Company, by agreement in form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company 'y would have been required if no such succession had taken place. Notwithstanding anything herein to the contrary, failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall constitute a termination of this Agreement pursuant to Section 2.1 and entitle the Executive (or Spouse) as the case may be, to immediate payment thereunder. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that executes and delivers the agreement provided for in this Section 4.3 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. 4.4 MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and by the President or other authorized officer of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provision or conditions at the same or at any prior or subsequent time. 4.5 PAYMENTS. The Company may make any payments required by this Agreement, when in the judgment of the Company the recipient is incapacitated by reasons of physical or mental illness or infirmity, to the recipient directly, or to the legal guardian of the recipient. 4.6 TAXES. The Company shall have the right to deduct from all payments made under this Agreement, any federal, state or local income taxes required by law to be withheld with respect to such payments. 4.7 VALIDITY. The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Texas without regard to the principle of conflicts of laws. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of a other provision of this Agreement, each of which shall remain in full force and effect. 4.8 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. 4.9 EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes of this Agreement includes employment with any corporation in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of all classes of stock. 4.10 ARBITRATION. Any dispute or controversy arising out of or in connection with this Agreement as to whether the Executive (or his spouse) is entitled to a retirement (or survivor's) benefit, the amount thereof or other matter shall be submitted to arbitration pursuant to the following procedure: (a) Either party may demand such arbitration in writing after the controversy arises, which demand shall include the name of the arbitrator appointed by the party demanding arbitration, together with a statement of the matter in controversy. (b) Within 15 days after such demand, the other party shall name an arbitrator, or in default thereof, such arbitrator shall be named by the Arbitration Committee of the American Arbitration Association, and the two arbitrators so selected shall name a third arbitrator within 15 days or, in lieu of such agreement on a third arbitrator by the two arbitrators so appointed a third arbitrator shall be appointed by the Arbitration Committee of the American Arbitration Association. (c) The Company shall bear all arbitration costs and expenses, including without limitation any legal fees and expenses incurred by the Executive (or his spouse) in connection with such arbitration procedure. (d) The arbitration hearing shall be held at a site in Houston, Texas, to be agreed to by a majority of the arbitrators on ten days' written notice to the parties. (e) The arbitration hearing shall be concluded within ten days unless otherwise ordered by a majority of the arbitrators, and the award thereon shall be made within ten days after the close of the submission of evidence. An award rendered by a majority of the arbitrators appointed pursuant to this Agreement shall be final and binding on all parties to the proceeding, and judgment on such award may be entered by either party in the highest court, state or federal, having jurisdiction. The parties stipulate that the provisions hereof shall be a complete defense to any suit, action, or proceeding instituted in any federal, state, or local court or before any administrative tribunal with respect to any controversy or dispute arising under this Agreement, and which is arbitrable as herein set forth. The arbitration provisions hereof shall, with respect to such controversy or dispute, survive the termination of this Agreement. 4.11 AMENDMENT AND RESTATEMENT OF PRIOR EXECUTIVE RETIREMENT AGREEMENT. The Company and the Executive hereby agree that concurrently with the execution and delivery of this Agreement, this Agreement shall operate and be construed as an amendment and restatement of that certain Executive Retirement Agreement, dated May 1 , 1991 between the Company and the Executive (the "Prior Agreement"), and effective with such delivery the terms and provisions of the Prior Agreement shall be superseded by the terms and provisions of this Agreement. IN WITNESS WHEREOF the Company has caused this Agreement to be executed by its duly authorized officer , and the Executive has executed this Agreement effective for all purposes as of the date first written above. TECH-SYM CORPORATION DATED: BY:/S/WENDELL W. GAMEL Title: PRESIDENT EXECUTIVE DATED: 4/29/92 /S/COY J. SCRIBNER COY J. SCRIBNER EX-10.V 4 EXHIBIT 10(v) EXECUTIVE RETIREMENT AGREEMENT (AS AMENDED AND RESTATED) THIS AGREEMENT made and entered into as of April 30, 1992, between TECH-SYM CORPORATION (the "Company") and RAY F. THOMPSON (the "Executive"). WITNESSETH: WHEREAS, the Executive has rendered outstanding service to the Company over a period of years and the Executive's experience and knowledge of the affairs of the Company and his reputation and contacts are extremely valuable to the Company; and WHEREAS, in recognition of the Executive's service to the Company and to encourage the Executive's continued service, the Company is desirous or offering him, in addition to his regular compensation and termination benefits, certain retirement benefits; NOW, 'THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the Company and the Executive hereby agree as follows: I . BENEFITS 1.1 QUALIFICATIONS FOR RETIREMENT BENEFITS. The Executive (or his surviving spouse, as the case may be) shall be entitled to receive the retirement (or death) benefits provided by this Agreement following his termination of employment with the Company unless his employment with the Company is terminated (i) voluntarily by the Executive prior to his attaining age 62, other than due to a Total Disability (as defined below), or (ii) by the Company for Cause (as defined below). A termination of employment that would entitle the Executive (or his spouse) to receive retirement (or death) benefits as provided hereunder is hereafter referred to as a "Qualified Termination." For the purposes of this Agreement, the Company shall have "Cause" to terminate the Executive's employment hereunder only upon (i) the willful and continued failure by the Executive to perform substantially the Executive's duties with the Company, other than any such failure resulting from the Executive's incapacity due to physical or mental illness, after a demand for substantial performance is delivered to the Executive by the Board that specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties or (ii) the willful engaging by the Executive in gross misconduct materially and demonstrably injurious to the Company. For purposes of this paragraph, an act or failure to act on the Executive's part shall be considered "willful" if done or omitted to be done by the Executive otherwise than in good faith and without reasonable belief that the Executive's action or omission was in the best interest of the Company. For purposes of this Agreement, the term "Total Disability" means that, in the opinion of the Executive's physician, the Executive has suffered a mental or physical disability that is expected to be permanent or of long continued duration and which prevents the Executive from continuing full-time his duties with the Company or Subsidiary. 1.2 AMOUNT OF RETIREMENT BENEFITS. Following a Qualified Termination the Executive shall receive, beginning with the later of the date of such Qualified Termination or the Executive's 65th birthday (the "Commencement Date"), an annual retirement benefit equal to 65% of the highest rate of annual base salary in effect for the Executive with the Company at any time prior to the Executive's 61st birthday (the "Base Salary") with such benefit payable on each January 1 on or after the Commencement Date on which he is living; provided, however, that if the Executive's Commencement Date is other than on January 1, the Executive shall receive a partial annual retirement benefit for the remainder of the year in which such Commencement Date occurs in an amount equal to the full annual benefit that will commence on the next January 1 but reduced by a fraction, the numerator of which is the number of calendar months during such year that have elapsed prior to the Commencement Date (with an 'y partial month rounded up to a complete month), and the denominator of which is 12 and such partial benefit shall be paid to the Executive on the first day of the month coinciding with or next following the Commencement Date; provided further, however, that if on the Commencement Date: (a) if the Executive's employment terminates due to a Qualified Termination prior to his reaching age 65, the Executive may elect to commence receiving his retirement benefits hereunder as of the date of such Qualified Termination or any date thereafter, provided the Executive is at least age 62 as of such Early Commencement Date, by giving written notice of such election to the Company prior to such Early Commencement Date and the amount of the annual retirement benefit (and partial benefit, if any) payable hereunder shall be reduced by 1.39% for each full calendar month by which his Early Commencement Date precedes his 65th birthday unless the Board, in its sole discretion, elects to waive all or part of this reduction; and (b) if on the Early Commencement Date the Executive is also entitled to receive benefits under a separate Termination Agreement with the Company dated effective as of May 1, 1991 (as the same may be amended from time-to-time thereafter), then for purposes of subparagraph (a) above the Executive's age as of the Early Commencement Date shall be increased by (but not beyond age 65) the length of the Termination Period (as defined in the Termination Agreement) remaining as of the Early Commencement Date. 1.3 DEATH BENEFITS. If the Executive is married on his date of death and such death occurs while he is an employee of the Company or on or after a Qualified Termination, including one due to Total Disability, his surviving spouse ("Spouse") shall receive an annual survivor's benefit hereunder in an amount equal to 37 1/2% of the Executive's Base Salary. The Spouse's benefit shall commence on the first day of the month coinciding with or next following the Executive's date of death. Subsequent payment(s) of the Spouse's benefit shall be made on each anniversary of the date such survivor payments first began, provided that the Spouse is alive on such anniversary date, and shall cease when either a total of 10 annual survivor benefit payments have been paid to the Spouse hereunder or the Spouse dies, whichever occurs first. 1.4 LUMP SUMS. Notwithstanding Section 1.2 or Section 1.3 hereof to the contrary, the Board, in its sole discretion, may at any time direct that the actuarial present value of any retirement (or death) benefits accrued under this Agreement, as determined in accordance with the actuarial factors and rates then in effect for a lump sum payment (for an immediate or deferred annuity , as the case may be) upon a qualified plan's termination under Pension Benefit Guaranty Corporation regulations, be immediately paid to the Executive (or his spouse, as the case may be) in a lump sum in cash (by check). 1.5 CONTINUED HEALTH BENEFITS. On and after a Qualified Termination, the Executive shall be entitled to continue, for as long as he lives, his participation and that of his qualified dependents, if any, in the Company's group health plan for active employees in which the Executive participated immediately prior to such Qualified Termination provided that the Executive continues to pay the regular active employee premium, if any, required by such plan; however, in the event that continued participation by the Executive in such plan after the date of his Qualified Termination is not permitted by the plan or such plan is terminated or benefits under such plan would be taxable to the Executive, the Company shall either obtain comparable coverage under another group health plan of the Company (and under which benefits to the Executive would not be taxable) or, if there is none, an individual insurance policy providing comparable benefits with the Executive paying an amount of the premium therefor that is not greater than that which he would have been required to pay from time to time under the Company's group health plan for active employees had his participation continued in such plan and the Company paying the balance of such cost and any taxes on any income the Executive would have as a result of such Company-provided coverage. 2. TERMINATION AND AMENDMENT 2.1 TERMINATION OR AMENDMENT. The Company, by action of the Board, reserves the right to amend or terminate this Agreement for whatever reasons it may deem appropriate as of the first day of the month following the delivery to the Executive of written notice of such amendment or termination; however, no such amendment shall impair, reduce or void the Executive's (or his Spouse's) rights with respect to the continued health benefits provided by Section 1.5 or the retirement (or death) benefits (whether or not in pay status) accrued under this Agreement as of the date of such amendment and further, any termination of this Agreement by the Company shall, notwithstanding anything herein to the contrary, entitle the Executive (or his Spouse, as the case may be) to immediately receive from the Company the lump sum present value of the accrued retirement (or death) benefits as calculated in accordance with Section 1.4. 3. ADMINISTRATION 3.1 BOARD DECISION. The Board's decision whether or not to waive the reduction in the amount of benefits payable in the event of the Executive's Qualified Termination prior to reaching age 65, as provided in Section 1.2(a), shall be totally discretionary with the Board and need not be based upon any standard nor be consistent with any past practices and shall be conclusive on all parties. 3.2 BENEFITS UNFUNDED. This Agreement is completely separate from and is not a part of any other plan, qualified or nonqualified, of the Company and its subsidiaries. The benefits payable hereunder, if any, are in addition to those that may be provided to the Executive under any other plan, arrangement or agreement. Further, the benefits payable hereunder are completely unfunded and shall be payable by the Company solely out of its general assets and the Executive and his spouse shall be unsecured, general creditors of the Company with respect to such benefits; provided, however, the Company, in its discretion, may establish a grantor or "rabbi" trust to pay all or part of the benefits it may be required to pay under this Agreement, in which event this Agreement shall be deemed to be a part of such trust agreement and the Executive hereby waives, with respect to the assets of such rabbi trust, any preference he may have under state law with respect to such assets and acknowledges that he shall be a general, unsecured creditor of the Company with respect to the same. 4. MISCELLANEOUS 4.1 NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement shall be construed as a contract of employment between the Company and the Executive, or as a right of the Executive to be continued in the employment of the Company or as a limitation of the right of the Company to discharge the Executive at any time, with or without Cause. 4.2 ASSIGNMENT. The benefits payable under this Agreement may not be assigned, alienated, pledged, transferred, sold, encumbered or hypothecated in any manner by the Executive or his spouse. Any attempted sale, conveyance, transfer, assignment, pledge or encumbrance of this Agreement or of such rights, interest and benefits or the levy of any attachment or similar process thereupon shall be null and void and without effect. 4.3 BINDING EFFECT. The Company will require any successor, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all of the business and/or assets of the Company, by agreement in form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would have been required if no such succession had taken place. Notwithstanding anything herein to the contrary, failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall constitute a termination of this Agreement pursuant to Section 2.1 and entitle the Executive (or Spouse) as the case may be, to immediate payment thereunder. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that executes and delivers the agreement provided for in this Section 4.3 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. 4.4 MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and by the President or other authorized officer of the Company. No waiver by either party hereto at any time of any breach b the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provision or conditions at the same or at any prior or subsequent time. 4.5 PAYMENTS. The Company may make any payments required by this Agreement, when in the judgment of the Company the recipient is incapacitated by reasons of physical or mental illness or infirmity, to the recipient directly, or to the legal guardian of the recipient. 4.6 TAXES. The Company shall have the right to deduct from all payments made under this Agreement, any federal, state or local income taxes required by law to be withheld with respect to such payments. 4.7 VALIDITY. The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Texas without regard to the principle of conflicts of laws. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, each of which shall remain in full force and effect. 4.8 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. 4.9 EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes of this Agreement includes employment with any corporation in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of all classes of stock. 4.10 ARBITRATION. Any dispute or controversy arising out of or in connection with this Agreement as to whether the Executive (or his spouse) is entitled to a retirement (or survivor's) benefit, the amount thereof or other matter shall be submitted to arbitration pursuant to the following procedure: (a) Either party may demand such arbitration in writing after the controversy arises, which demand shall include the name of the arbitrator appointed by the party demanding arbitration, together with a statement of the matter in controversy. (b) Within 15 days after such demand, the other party shall name an arbitrator, or in default thereof, such arbitrator shall be named by the Arbitration Committee of the American Arbitration Association, and the two arbitrators so selected shall name a third arbitrator within 15 days or, in lieu of such agreement on a third arbitrator by the two arbitrators so appointed a third arbitrator shall be appointed by the Arbitration Committee of the American Arbitration Association. (c) The Company shall bear all arbitration costs and expenses, including without limitation any legal fees and expenses incurred by the Executive (or his spouse) in connection with such arbitration procedure. (d) The arbitration hearing shall be held at a site in Houston, Texas, to be agreed to by a majority of the arbitrators on ten days' written notice to the parties. (e) The arbitration hearing shall be concluded within ten days unless otherwise ordered by a majority of the arbitrators, and the award thereon shall be made within ten days after the close of the submission of evidence. An award rendered by a majority of the arbitrators appointed pursuant to this Agreement shall be final and binding on all parties to the proceeding, and judgment on such award may be entered by either party in the highest court, state or federal, having jurisdiction. The parties stipulate that the provisions hereof shall be a complete defense to any suit, action, or proceeding instituted in any federal, state, or local court or before any administrative tribunal with respect to any controversy or dispute arising under this Agreement, and which is arbitrable as herein set forth. The arbitration provisions hereof shall, with respect to such controversy or dispute, survive the termination of this Agreement. 4.11 AMENDMENT AND RESTATEMENT OF PRIOR EXECUTIVE RETIREMENT AGREEMENT. The Company and the Executive hereby agree that concurrently with the execution and delivery of this Agreement, this Agreement shall operate and be construed as an amendment and restatement of that certain Executive Retirement Agreement, dated May 1 , 1991 between the Company and the Executive (the "Prior Agreement"), and effective with such delivery the terms and provisions of the Prior Agreement shall be superseded by the terms and provisions of this Agreement. IN WITNESS WHEREOF the Company has caused this Agreement to be executed by its duly authorized officer , and the Executive has executed this Agreement effective for all purposes as of the date first written above. TECH-SYM CORPORATION Dated: 4/29/92 By: /s/ Wendell W. Gamel Title: President EXECUTIVE Dated: 4/29/92 /s/Ray F. Thompson Ray F. Thompson EX-10.W 5 EXHIBIT 10(w) EXECUTIVE RETIREMENT AGREEMENT (AS AMENDED AND RESTATED) THIS AGREEMENT made and entered into as of April 30, 1992, between TECH-SYM CORPORATION (the "Company") and 0. DALE BURRIS (the "Executive"). W I T N E S S E T H: WHEREAS, the Executive has rendered outstanding service to the Company over a period of years and the Executive's experience and knowledge of the affairs of the Company and his reputation and contacts are extremely valuable to the Company; and WHEREAS, in recognition of the Executive's service to the Company and to encourage the Executive's continued service, the Company is desirous of offering him, in addition to his regular compensation and termination benefits, certain retirement benefits; NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the Company and the Executive hereby agree as follows: 1. BENEFITS 1.1 QUALIFICATIONS FOR RETIREMENT BENEFITS. The Executive (or his surviving spouse, as the case may be) shall be entitled to receive the retirement (or death) benefits provided by this Agreement following his termination of employment with the Company unless his employment with the Company is terminated (i) voluntarily by the Executive prior to his attaining age 62, other than due to a Total Disability (as defined below), or (ii) by the Company for Cause (as defined below). A termination of employment that would entitle the Executive (or his spouse) to receive retirement (or death) benefits as provided hereunder is hereafter referred to as a "Qualified Termination." For the purposes of this Agreement, the Company shall have "Cause" to terminate the Executive's employment hereunder only upon (i) the willful and continued failure by the Executive to perform substantially the Executive's duties with the Company, other than any such failure resulting from the Executive's incapacity due to physical or mental illness, after a demand for substantial performance is delivered to the Executive by the Board that specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties or (ii) the willful engaging by the Executive in gross misconduct materially and demonstrably injurious to the company. For purposes of this paragraph, an act or failure to act on the Executive's part shall be CONSIDERED "willful" if done or omitted to be done by the Executive otherwise than in good faith and without reasonable belief that the Executive's action or omission was in the best interest of the Company. For purposes of this Agreement, the term "Total Disability" means that, in the opinion of the Executive's physician, the Executive has suffered a mental or physical disability that is expected to be permanent or of long continued duration and which prevents the Executive from continuing full-time his duties with the Company or Subsidiary. 1.2 AMOUNT OF RETIREMENT BENEFITS. Following a Qualified Termination the Executive shall receive, beginning with the later of the date of such Qualified Termination or the Executive's 65th birthday (the "Commencement Date"), an annual retirement benefit equal to 65% of the highest rate of annual base salary in effect for the Executive with the Company at any time prior to the Executive's 61st birthday (the "Base Salary") with such benefit payable on each JANUARY 1 on OR after the Commencement Date on which he is living; provided, however, that if the Executive's Commencement Date is other than on January 1, the Executive shall receive a partial annual retirement benefit for the remainder of the year in which such Commencement Date occurs in an amount equal to the full annual benefit that will commence on the next January 1 but reduced by a fraction, the numerator of which is the number of calendar months during such year that have elapsed prior to the Commencement Date (with any partial month rounded up to a complete month), and the denominator of which is 12 and such partial benefit shall be paid to the Executive on the first day of the month coinciding with or next following the Commencement Date; provided further, however, that: (a) if the Executive's employment terminates due to a Qualified Termination prior to his reaching age 65, the Executive may elect to commence receiving his retirement benefits hereunder as of the date of such Qualified Termination or any date thereafter, provided the Executive is at least age 62 as of such Early Commencement Date, by giving written notice of such election to the Company prior to such Early Commencement Date and the amount of the annual retirement benefit (and partial benefit, if any) payable hereunder shall be reduced by 1.39% for each full calendar month by which his Early Commencement Date precedes his 65th birthday unless the Board, in its sole discretion, elects to waive all or part of this reduction; and (b) if on the Early Commencement Date the Executive is also entitled to receive benefits under a separate Termination Agreement with the Company dated effective as of May 1, 1991 (as the same may be amended from time-to-time thereafter), then for purposes of subparagraph (a) above the Executive's age as of the Early Commencement Date shall be increased by (but not beyond age 65) the length of the Termination Period (as defined in the Termination Agreement) remaining as of the Early Commencement Date. 1.3 DEATH BENEFITS. If the Executive is married on his date of death and such death occurs while he is an employee of the Company or on or after a Qualified Termination, including one due to Total Disability, his surviving spouse ("Spouse") shall receive an annual survivor's benefit hereunder in an amount equal to 37 1/2% of the Executive's Base Salary. The Spouse's benefit shall commence on the first day of the month coinciding with or next following the Executive's date of death. Subsequent payment(s) of the Spouse's benefit shall be made on each anniversary of the date such survivor payments first began, provided that the Spouse is alive on such anniversary date, and shall cease when either a total of 10 annual survivor benefit payments have been paid to the Spouse hereunder or the Spouse dies, whichever occurs first. 1.4 LUMP SUMS. Notwithstanding Section 1.2 or Section 1.3 hereof to the contrary, the Board, in its sole discretion, may at any time direct that the actuarial present value of any retirement (or death) benefits accrued under this Agreement, as determined in accordance with the actuarial factors and rates then in effect for a lump sum payment (for an immediate or deferred annuity, as the case may be) upon a qualified plan's termination under Pension Benefit Guaranty Corporation regulations, be immediately paid to the Executive (or his spouse, as the case may be) in a lump sum in cash (by check). 1.5 CONTINUED HEALTH BENEFITS. On and after a Qualified Termination, the Executive shall be entitled to continue, for as long as he lives, his participation and that of his qualified dependents, if any, in the Company's group health plan for active employees in which the Executive participated immediately prior to such Qualified Termination provided that the Executive continues to pay the regular active employee premium, if any, required by such plan; however, in the event that continued participation by the Executive in such plan after the date of his Qualified Termination is not permitted by the plan or such plan is terminated or benefits under such plan would be taxable to the Executive, the Company shall either obtain comparable coverage under another group health plan of the Company (and under which benefits to the Executive would not be taxable) or, if there is none, an individual insurance policy providing comparable benefits with the Executive paying an amount of the premium therefor that is not greater than that which he would have been required to pay from time to time under the Company's group health plan for active employees had his participation continued in such plan and the Company paying the balance of such cost and any taxes on any income the Executive would have as a result of such Company-provided coverage. 2. TERMINATION AND AMENDMENT 2.1 TERMINATION OR AMENDMENT. The Company, by action of the Board, reserves the right to amend or terminate this Agreement for whatever reasons it may deem appropriate as of the first day of the month following the delivery to the Executive of written notice of such amendment or termination; however, no such amendment shall impair, reduce or void the Executive's (or his Spouse's) rights with respect to the continued health benefits provided by Section 1.5 or the retirement (or death) benefits (whether or not in pay status) accrued under this Agreement as of the date of such amendment and further, any termination of this Agreement by the Company shall, notwithstanding anything herein to the contrary, entitle the Executive (or his Spouse, as the case may be) to immediately receive from the Company the lump sum present value of the accrued retirement (or death) benefits as calculated in accordance with Section 1.4. 3. ADMINISTRATION 3.1 BOARD DECISION. The Board's decision whether or not to waive the reduction in the amount of benefits payable in the event of the Executive's Qualified Termination prior to reaching age 65, as provided in Section 1.2(a), shall be totally discretionary with the Board and need not be based upon any standard nor be consistent with any past practices and shall be conclusive on all parties. 3.2 BENEFITS UNFUNDED. This Agreement is completely separate from and is not a part of any other plan, qualified or nonqualified, of the Company and its subsidiaries. The benefits payable hereunder, if any, are in addition to those that may be provided to the Executive under any other plan, arrangement or agreement. Further, the benefits payable hereunder are completely unfunded and shall be payable by the Company solely out of its general assets and the Executive and his spouse shall be unsecured, general creditors of the Company with respect to such benefits; provided, however, the Company, in its discretion, may establish a grantor or "rabbi" trust to pay all or part of the benefits it may be required to pay under this Agreement, in which event this Agreement shall be deemed to be a part of such trust agreement and the Executive hereby waives, with respect to the assets of such rabbi trust, any preference he may have under state law with respect to such assets and acknowledges that he shall be a general, unsecured creditor of the Company with respect to the same. 4. MISCELLANEOUS 4.1 NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement shall be construed as a contract of employment between the Company and the Executive, or as a right of the Executive to be continued in the employment of the Company or as a limitation of the right of the Company to discharge the Executive at any time, with or without Cause. 4.2 ASSIGNMENT. The benefits payable under this Agreement may not be assigned, alienated, pledged, transferred, sold, encumbered or hypothecated in any manner by the Executive or his spouse. Any attempted sale, conveyance, transfer, assignment, pledge or encumbrance of this Agreement or of such rights, interest and benefits or the levy of any attachment or similar process thereupon shall be null and void and without effect. 4.3 BINDING EFFECT. The Company will requiring any successor, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all of the business and/or assets of the Company, by agreement in form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would have been required if no such succession had taken place. Notwithstanding anything herein to the contrary, failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall constitute a termination of this Agreement pursuant to Section 2.1 and entitle the Executive (or Spouse) as the case may be, to immediate payment thereunder. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that executes and delivers the agreement provided for in this Section 4.3 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. 4.4 MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and by the President or other authorized officer of the Company. No waiver by either party hereto at any time of any breach b the other party hereto of, or compliance with, any condition or provision be performed by such other party shall be deemed a waiver of provision or conditions at the same or at any prior or subsequent time. 4.5 PAYMENTS. The Company may make any payments required by this Agreement, when in the judgment of the Company the recipient is incapacitated by reasons of physical or mental illness or infirmity, to the recipient directly, or to the legal guardian of the recipient. 4.6 TAXES. The Company shall have the right to deduct from all payments made under this Agreement, any federal, state or local income taxes required by law to be withheld with respect to such payments. 4.7 VALIDITY. The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Texas without regard to the principle of conflicts of laws. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, each of which shall remain in full force and effect. 4.8 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. 4.9 EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes of this Agreement includes employment with any corporation in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of all classes of stock. 4.10 ARBITRATION. Any dispute or controversy arising out of or in connection with this Agreement as to whether the Executive (or his spouse) is entitled to a retirement (or survivor's) benefit, the amount thereof or other matter shall be submitted to arbitration pursuant to the following procedure: (a) Either party may demand such arbitration in writing after the controversy arises, which demand shall include the name of the arbitrator appointed by the party demanding arbitration, together with a statement of the matter in controversy. (b) Within 15 days after such demand, the other party shall name an arbitrator, or in default thereof, such arbitrator shall be named by the Arbitration Committee of the American Arbitration Association, and the two arbitrators so selected shall name a third arbitrator within 15 days or, in lieu of such agreement on a third arbitrator by the two arbitrators so appointed a third arbitrator shall be appointed by the Arbitration Committee of the American Arbitration Association. (c) The Company shall bear all arbitration costs and expenses, including without limitation any legal fees and expenses incurred by the Executive(or his spouse) in connection with such arbitration procedure. (d) The arbitration hearing shall be held at a site in Houston, Texas, to be agreed to by a majority of the arbitrators on ten days' written notice to the parties. (e) The arbitration hearing shall be concluded within ten days unless otherwise ordered by a majority of the arbitrators, and the award thereon shall be made within ten days after the close of the submission of evidence. An award rendered by a majority of the arbitrators appointed pursuant to this Agreement shall be final and binding on all parties to the proceeding, and judgment on such award may be entered by either party in the highest court, state or federal, having jurisdiction. The parties stipulate that the provisions hereof shall be a complete defense to any suit, action, or proceeding instituted in any federal, state, or local court or before any administrative tribunal with respect to any controversy or dispute arising under this Agreement, and which is arbitrable as herein set forth. The arbitration provisions hereof shall, with respect to such controversy or dispute, survive the termination of this Agreement. 4.11 AMENDMENT AND RESTATEMENT OF PRIOR EXECUTIVE RETIREMENT AGREEMENT. The Company and the Executive hereby agree that concurrently with the execution and delivery of this Agreement, this Agreement shall operate and be construed as an amendment and restatement of that certain Executive Retirement Agreement, dated May 1, 1991 between the Company and the Executive (the "Prior Agreement"), and effective with such delivery the terms and provisions of the Prior Agreement shall be superseded by the terms and provisions of this Agreement. IN WITNESS WHEREOF the Company has caused this Agreement to be executed by its duly authorized officer , and the Executive has executed this Agreement effective for all purposes as of the date first written above. TECH-SYM CORPORATION Dated: 4/29/92 By:/S/WENDELL W. GAMEL Title: President EXECUTIVE Dated: 6/2/92 /S/O. DALE BURRIS O. Dale Burris EX-10.X 6 EXHIBIT 10(x) EXECUTIVE RETIREMENT AGREEMENT (AS AMENDED AND RESTATED) THIS AGREEMENT made and entered into as of April 30, 1992, between TECH-SYM CORPORATION (the "Company") and J. RANKIN TIPPINS (the "Executive"). W I T N E S S E T H: WHEREAS, the Executive has rendered outstanding service to the Company over a period of years and the Executive's experience and knowledge of the affairs of the Company and his reputation and contacts are extremely valuable to the Company; and WHEREAS, in recognition of the Executive's service to the Company and to encourage the Executive's continued service, the Company is desirous of offering him, in addition to his regular compensation and termination benefits, certain retirement benefits; NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the Company and the Executive hereby agree as follows: 1. BENEFITS 1.1 QUALIFICATIONS FOR RETIREMENT BENEFITS. The Executive (or his surviving spouse, as the case may be) shall be entitled to receive the retirement (or death) benefits provided by this Agreement following his termination of employment with the Company unless his employment with the Company is terminated (i) voluntarily by the Executive prior to his attaining age 62, other than due to a Total Disability (as defined below), or (ii) by the Company for Cause (as defined below). A termination of employment that would entitle the Executive (or his spouse) to receive retirement (or death) benefits as provided hereunder is hereafter referred to as a "Qualified Termination." For the purposes of this Agreement, the Company shall have "Cause" to terminate the Executive's employment hereunder only upon (i) the willful and continued failure by the Executive to perform substantially the Executive's duties with the Company, other than any such failure resulting from the Executive's incapacity due to physical or mental illness, after a demand for substantial performance is delivered to the Executive by the Board that specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties or (ii) the willful engaging by the Executive in gross misconduct materially and demonstrably injurious to the Company. For purposes of this paragraph, an act or failure to act on the Executive's part shall be considered to willful" if done or omitted to be done by the Executive otherwise than in good faith and without reasonable belief that the Executive's action or omission was in the best interest of the Company. For purposes of this Agreement, the term "Total Disability" means that, in the opinion of the Executive's physician, the Executive has suffered a mental or physical disability that is expected to be permanent or of long continued duration and which prevents the Executive from continuing full-time his duties with the Company or Subsidiary. 1.2 AMOUNT OF RETIREMENT BENEFITS. Following a Qualified Termination the Executive shall receive, beginning with the later of the date of such Qualified Termination or the Executive's 65th birthday (the "Commencement Date"), an annual retirement benefit equal to 65% of the highest rate of annual base salary in effect for the Executive with the Company at any time prior to the Executive's 61st birthday (the "Base Salary") with such benefit payable on each January I on or after the Commencement Date on which he is living; provided, however, that if the Executive's Commencement Date is other than on January 1, the Executive shall receive a partial annual retirement benefit for the remainder of the year in which such Commencement Date occurs in an amount equal to the full annual benefit that will commence on the next January 1 but reduced by a fraction, the numerator of which is the number of calendar months during such year that have elapsed prior to the Commencement Date (with any partial month rounded up to a complete month), and the denominator of which is 12 and such partial benefit shall b-e paid to the Executive on the first day of the month coinciding with or next following the Commencement Date; provided further, however, that: (a) if the Executive's employment terminates due to a Qualified Termination prior to his reaching age 65, the Executive may elect to commence receiving his retirement benefits hereunder as of the date of such Qualified Termination or any date thereafter, provided the Executive is at least age 62 as of such Early Commencement Date, by giving written notice of such election to the Company prior to such Early Commencement Date and the amount of the annual retirement benefit (and partial benefit, if any) payable hereunder shall be reduced by 1.39% for each full calendar month by which his Early Commencement Date precedes his 65th birthday unless the Board, in its sole discretion, elects to waive all or part of this reduction; and (b) if on the Early Commencement Date the Executive is also entitled to receive benefits under a separate Termination Agreement with the Company dated effective as of May 1, 1991 (as the same may be amended from time-to-time thereafter), then for purposes of subparagraph (a) above the Executive's age as of the Early Commencement Date shall be increased by (but not beyond age 65) the length of the Termination Period (as defined in the Termination Agreement) remaining as of the Early Commencement Date. 1.3 DEATH BENEFITS. If the Executive is married on his date of death and such death occurs while he is an employee of the Company or on or after a Qualified Termination, including one due to Total Disability, his surviving spouse ("Spouse") shall receive an annual survivor's benefit hereunder in an amount equal to 37 1/2% of the Executive's Base Salary. The Spouse's benefit shall commence on the first day of the month coinciding with or next following the Executive's date of death. Subsequent payment(s) of the Spouse's benefit shall be made on each anniversary of the date such survivor payments first began, provided that the Spouse is alive on such anniversary date, and shall cease when either a total of 10 annual survivor benefit payments have been paid to the Spouse hereunder or the Spouse dies, whichever occurs first. 1.4 LUMP SUMS. Notwithstanding Section 1.2 or Section 1.3 hereof to the contrary, the Board, in its sole discretion, may at any time direct that the actuarial present value of any retirement (or death) benefits accrued under this Agreement, as determined in accordance with the actuarial factors and rates then in effect for a lump sum payment (for an immediate or deferred annuity, as the case may be) upon a qualified plan's termination under Pension Benefit Guaranty Corporation regulations, be immediately paid to the Executive (or his spouse, as the case may be) in a lump sum in cash (by check). 1.5 CONTINUED HEALTH BENEFITS. On and after a Qualified Termination, the Executive shall be entitled to continue, for as long as he lives, his participation and that of his qualified dependents, if any, in the Company's group health plan for active employees in which the Executive participated immediately prior to such Qualified Termination provided that the Executive continues to pay the regular active employee premium, if any, required by such plan; however, in the event that continued participation by the Executive in such plan after the date of his Qualified Termination is not permitted by the plan or such plan is terminated or benefits under such plan would be taxable to the Executive, the Company shall either obtain comparable coverage under another group health plan of the Company (and under which benefits to the Executive would not be taxable) or, if there is none, an individual insurance policy providing comparable benefits with the Executive paying an amount of the premium therefor that is not greater than that which he would have been required to pay from time to time under the Company's group health plan for active employees had his participation continued in such plan and the Company paying the balance of such cost and any taxes on any income the Executive would have as a result of such Company-provided coverage. 2. TERMINATION AND AMENDMENT 2.1 TERMINATION OR AMENDMENT. The Company, by action of the Board, reserves the right to amend or terminate this Agreement for whatever reasons it may deem appropriate as of the first day of the month following the delivery to the Executive of written notice of such amendment or termination; however, no such amendment shall impair, reduce or void the Executive's (or his Spouse's) rights with respect to the continued health benefits provided by Section 1.5 or the retirement (or death) benefits (whether or not in pay status) accrued under this Agreement as of the date of such amendment and further, any termination of this Agreement by the Company shall, notwithstanding anything herein to the contrary, entitle the Executive (or his Spouse, as the case may be) to immediately receive from the Company the lump sum present value of the accrued retirement (or death) benefits as calculated in accordance with Section 1.4. 3. ADMINISTRATION 3.1 BOARD DECISION. The Board's decision whether or not to waive the reduction in the amount of benefits payable in the event of the Executive's Qualified Termination prior to reaching age 65, as provided in Section 1.2(a), shall be totally discretionary with the Board and need not be based upon any standard nor be consistent with any past practices and shall be conclusive on all parties. 3.2 BENEFITS UNFUNDED. This Agreement is completely separate from and is not a part of any other plan, qualified or nonqualified, of the Company and its subsidiaries. The benefits payable hereunder, if any, are in addition to those that may be provided to the Executive under any other plan, arrangement or agreement. Further, the benefits payable hereunder are completely unfunded and shall be payable by the Company solely out of its general assets and the Executive and his spouse shall be unsecured, general creditors of the Company with respect to such benefits; provided, however, the Company, in its discretion, may establish a grantor or "rabbi" trust to pay all or part of the benefits it may be required to pay under this Agreement, in which event this Agreement shall be deemed to be a part of such trust agreement and the Executive hereby waives, with respect to the assets of such rabbi trust, any preference he may have under state law with respect to such assets and acknowledges that he shall be a general, unsecured creditor of the Company with respect to the same. 4. MISCELLANEOUS 4.1 NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement shall be construed as a contract of employment between the Company and the Executive, or as a right of the Executive to be continued in the employment of the Company or as a limitation of the right of the Company to discharge the Executive at any time, with or without Cause. 4.2 ASSIGNMENT. The benefits payable under this Agreement may not be assigned, alienated, pledged, transferred, sold, encumbered or hypothecated in any manner by the Executive or his spouse. Any attempted sale, conveyance, transfer, assignment, pledge or encumbrance of this Agreement or of such rights, interest and benefits or the levy of any attachment or similar process thereupon shall be null and void and without effect. 4.3 BINDING EFFECT. The Company will require any successor, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all of the business and/or assets of the Company, by agreement in form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would have been required if no such succession had taken place. Notwithstanding anything herein to the contrary, failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall constitute a termination of this Agreement pursuant to Section 2.1 and entitle the Executive (or Spouse) as the case may be, to immediate payment thereunder. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that executes and delivers the agreement provided for in this Section 4.3 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. 4.4 MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and by the President or other authorized officer of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provision or conditions at the same or at any prior or subsequent time. 4.5 PAYMENTS. The Company may make any payments required by this Agreement, when in the judgment of the Company the recipient is incapacitated by reasons of physical or mental illness or infirmity, to the recipient directly, or to the legal guardian of the recipient. 4.6 TAXES. The Company shall have the right to deduct from all payments made under this Agreement, any federal, state or local income taxes required by law to be withheld with respect to such payments. 4.7 VALIDITY. The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Texas without regard to the principle of conflicts of laws. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of a other provision of this Agreement, each of which shall remain in full force and effect. 4.8 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. 4.9 EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for purposes of this Agreement includes employment with any corporation in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of all classes of stock. 4.10 ARBITRATION. Any dispute or controversy arising out of or in connection with this Agreement as to whether the Executive (or his spouse) is entitled to a retirement (or survivor's) benefit, the amount thereof or other matter shall be submitted to arbitration pursuant to the following procedure: (a) Either party may demand such arbitration in writing after the controversy arises, which demand shall include the name of the arbitrator appointed by the party demanding arbitration, together with a statement of the matter in controversy. (b) Within 15 days after such demand, the other party shall name an arbitrator, or in default thereof, such arbitrator shall be named by the Arbitration Committee of the American Arbitration Association, and the two arbitrators so selected shall name a third arbitrator within 15 days or, in lieu of such agreement on a third arbitrator by the two arbitrators so appointed a third arbitrator shall be appointed by the Arbitration Committee of the American Arbitration Association. (c) The Company shall bear all arbitration costs and expenses, including without limitation any legal fees and expenses incurred by the Executive(or his spouse) in connection with such arbitration procedure. (d) The arbitration hearing shall be held at a site in Houston, Texas, to be agreed to by a majority of the arbitrators on ten days' written notice to the parties. (e) The arbitration hearing shall be concluded within ten days unless otherwise ordered by a majority of the arbitrators, and the award thereon shall be made within ten days after the close of the submission of evidence. An award rendered by a majority of the arbitrators appointed pursuant to this Agreement shall be final and binding on all parties to the proceeding, and judgment on such award may be entered by either party in the highest court, state or federal, having jurisdiction. The parties stipulate that the provisions hereof shall be a complete defense to any suit, action, or proceeding instituted in any federal, state, or local court or before any administrative tribunal with respect to any controversy or dispute arising under this Agreement, and which is arbitrable as herein set forth. The arbitration provisions hereof shall, with respect to such controversy or dispute, survive the termination of this Agreement. 4.11 AMENDMENT AND RESTATEMENT OF PRIOR EXECUTIVE RETIREMENT AGREEMENT. The Company and the Executive hereby agree that concurrently with the execution and delivery of this Agreement, this Agreement shall operate and be construed as an amendment and restatement of that certain Executive Retirement Agreement, dated July 1, 1991 between the Company and the Executive (the "Prior Agreement"), and effective with such delivery the terms and provisions of the Prior Agreement shall be superseded by the terms and provisions of this Agreement. IN WITNESS WHEREOF the Company has caused this Agreement to be executed by its duly authorized officer, and the Executive has executed this Agreement effective for all purposes as of the date first written above. TECH-SYM CORPORATION Dated: 4/29/92 By:/s/Wendell W. Gamel Title: President EXECUTIVE Dated:4/29/92 /s/J. Rankin Tippins J. RANKIN TIPPINS EX-13 7 SELECTED FINANCIAL DATA (In thousands except per share amounts)
1996 1995 1994 1993 1992 ----------------------------------------------------------------------- For the Year: Sales ........................................... $ 321,910 $246,487 $213,605 $199,248 $202,172 Costs and expenses .............................. 285,624 227,552 195,172 184,765 190,681 ----------------------------------------------------------------------- Income before income taxes, minority interest and extraordinary item ............................. 36,286 18,935 18,433 14,483 11,491 Provision for income taxes ...................... 12,157 5,900 6,318 5,234 3,952 Minority interest ............................... 754 ----------------------------------------------------------------------- Income before extraordinary item ................ 23,375 13,035 12,115 9,249 7,539 Extraordinary item, net of applicable incomes taxes of $557 ............... (1,035) ----------------------------------------------------------------------- Net income ...................................... $ 22,340* $ 13,035 $ 12,115 $ 9,249 $ 7,539 ======================================================================= Earnings per common share: Income before extraordinary item ............................ $ 3.68 $ 2.00 $ 1.86 $ 1.44 $ 1.16 Extraordinary item ............................. (.16) ----------------------------------------------------------------------- Net Income ...................................... $ 3.52* $ 2.00 $ 1.86 $ 1.44 $ 1.16 ======================================================================= * Includes gain on sale of subsidiary stock of $13,758, net of taxes; and write-off of goodwill of $3,627, which is not tax deductible. At Year End: Current assets .................................. $ 226,767 $178,318 $152,067 $135,719 $124,312 Current liabilities ............................. 91,032 74,561 56,284 35,634 30,012 Working capital ................................. 135,735 103,757 95,783 100,085 94,300 Property, plant and equipment - net ............. 48,917 42,469 39,993 35,047 36,641 Long-term debt .................................. 13,974 29,522 21,587 23,317 26,635 Total assets .................................... 323,279 265,026 225,803 194,732 181,077 Total liabilities and minority interest .............................. 165,207 115,008 90,016 71,395 68,176 Shareholders' investment ........................ 158,072 150,018 135,787 123,337 112,901
Amounts related to 1992 through 1994 were restated in 1995 to reflect the acquisition of CogniSeis Development, Inc. in a transaction accounted for as a pooling of interests. Page 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources [Bar Graph Plotted From Data in Table Below] Working Capital In Millions of Dollars 1992 94.3 1993 101.1 1994 95.8 1995 103.8 1996 135.7 At December 31, 1996, the Company's working capital was $135,735,000 as compared to $103,757,000 at December 31, 1995. During 1996, the Company's GeoScience subsidiary made a public offering of 24.7% of its common stock. The offering provided the Company with a gain of $21,166,000 prior to taxes and after expenses of the offering. For the year, the Company's cash, cash equivalents and short-term investments increased $6,015,000 to $26,830,000 from $20,815,000 in 1995. Due to rapid sales growth over the prior year, the Company invested heavily in capital equipment and inventory to ensure its ability to meet customer orders in a timely manner. As a result of the increased sales volume, receivables, and unbilled revenue (work in process) on long-term contracts increased. Continuing pressure for financing of purchases by commercial customers, primarily for seismic exploration systems and radio transmitters, also increased the Company's cash requirements. In June 1996 due to favorable interest rate changes, the Company elected to prepay the outstanding balance, $14,286,000, of the long-term unsecured senior notes. During the year, the Company negotiated increases to several lines of credit and at December 31, 1996, the Company had unused lines of credit which aggregated approximately $38,000,000. Because of the Company's $131,000,000 backlog and anticipated new business, it is expected that additional investments will be required in capital equipment and new facilities. Capital expenditures for land, buildings and improvements, and machinery and equipment were $16,182,000, $8,875,000, and $10,231,000, for 1996, 1995, and 1994, respectively, and are expected to be approximately $15,000,000 in 1997. The Company believes that the funds required for working capital needs and capital equipment additions will come from available funds on hand, unused lines of credit, long-term borrowings and capital equipment financing. The Company has undertaken an aggressive effort to determine proper inventory levels needed to support our customers' requirements, and anticipates a reduction in inventory levels to free up additional cash. The Company is also working to enhance its cash flow from operations by improving the average collection time on receivables. The Company believes these actions, along with the available sources of funds discussed, will provide the necessary liquidity to meet the Company's growth strategy. Page 18 RESULTS OF OPERATIONS [Bar Chart Plotted from Data In Table Below] Debt To Capital Ratio In Percent 1992 21.6 1993 17.7 1994 20.9 1995 28.1 1996 23.2 1996 IN COMPARISON WITH 1995: Sales for the year 1996 increased $75,423,000 or 31% as compared with 1995 while costs and expenses increased $75,611,000 or 33% before income taxes, minority interest, extraordinary item of $1,035,000, net of tax, gain on sale of GeoScience Corporation (GeoScience) common stock of $21,166,000, and write-off of goodwill associated with the acquisition of Anarad, Inc. of $3,627,000. The increase in sales for the year 1996 was the result of (i) greater sales in the communications area of $38,104,000 or 41%, primarily due to strong international demand for microwave components and high power broadcast equipment including sales related to the acquisition of TELEFUNKEN Sendertechnik, GmbH, (TELEFUNKEN) effective January 1, 1996, and (ii) increased sales in the seismic exploration area of $28,057,000 or 33%, primarily equipment sales, resulting from acquisition systems, repair of seismic cables and accessories, and sales of new seismic processing and geological interpretation products. The sales of the defense systems group increased, $10,579,000 or 17% mainly due to increased production on two major programs that transitioned from the development stage into the production stage during the year. Cost of sales increased $50,342,000 or 31% while selling, general and administrative expenses increased $17,659,000 or 34% as compared to 1995. The increase in cost of sales compared favorably with the increase in sales for 1996 despite downward pressure on margins due to additional competition in the areas of seismic exploration and defense and the additional costs of introducing new products in both the seismic exploration and communications area. The increase in selling and general and administrative expenses was slightly higher than the increase in sales and was primarily due to the additional costs associated with several acquired businesses including (i) Photon Systems Ltd. in the geoscience area and (ii) TELEFUNKEN Sendertechnik GmbH in the communications area. Company sponsored product development increased $5,814,000 or 38% for the year 1996 primarily due to higher costs of product development within the communications area. Interest expense was lower than the prior year mainly due to the retirement of the higher interest rate senior notes. Interest and other income decreased $1,921,000 or 47% from the prior year primarily due to the lower interest income on long-term receivables in the geoscience area and less interest earnings due to lower average cash balances throughout the year. The tax rate for the year increased to 34.2% from 31.2% for the prior year due to the requirement to provide for taxes at the statutory rate on the gain on the sale of GeoScience common stock. 1995 IN COMPARISON WITH 1994: Sales for the year 1995 increased $32,882,000 or 15.4% as compared with 1994 while costs and expense increased $32,380,000 or 16.6% which resulted in a $502,000 or 2.7% increase in income before income taxes. The increase in sales for the year 1995 was the result of (i) increased sales in the seismic exploration area of $19,950,000 or 30.3% primarily due to a new customer for marine seismic data acquisition systems, increased sales and repair of seismic cables and accessories, and sales of new seismic processing and geological interpretation products, as well as the acquisition of Photon Systems Ltd., effective September 1, 1995 and (ii) greater sales in the communications area of $13,865,000 or 17.5% primarily due to strong international demand for microwave components, high power broadcast equipment and meteorological radars. The sales of the defense systems group were essentially the same as the previous year. Page 19 All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. Cost of sales increased $25,224,000 or 18.6% while selling, general and administrative expenses increased $5,090,000 or 10.8% as compared to 1994. The increase in cost of sales was primarily due to the increase in sales for 1995 as well as generally lower margins in all areas primarily due to (i) additional competition in the areas of seismic exploration and defense, (ii) costs of introducing new products in the areas of seismic exploration and communications, and (iii) supplier quality problems in the seismic exploration area. The increase in selling, general and administrative expenses was in line with the increase in sales. Company sponsored product development increased $2,927,000 or 23.9% for the year 1995 and was heavily weighted to the seismic exploration area. In addition, the high power broadcast equipment in the communications area contributed to the increase. Interest expense increased $884,000 or 29.9% on a 42% increase in average borrowings for the period. Interest and other income increased $1,745,000 or 74.5% for the period due to an increase in interest income during 1995. The effective income tax rate decreased primarily due to utilization of loss carry forwards on certain foreign operations, research and development credits, and foreign investments credits. PRODUCT LINE SALES The following table sets forth the percentages for each of the last three years of total sales contributed by each of the Company's product lines which accounted for five percent of more of consolidated sales in any of such years: Year Ended December 31, ---------------------------------- 1996 1995 1994 ---------------------------------- Communications .................... 41% 38% 37% Geoscience ........................ 35% 35% 31% Defense Systems ................... 22% 25% 29% The majority of the Company's operations are located in the United States. Page 20 OTHER INFORMATION In 1996, the Company has continued its attempts to develop business through product development and acquisitions which are not related to government defense spending, and for the year, more than 70% of the Company's revenue was derived from customers other than the U.S. Department of Defense. The Company's communications and geoscience areas experienced rapid growth during 1996. The acquisition of TELEFUNKEN provided the most significant increase to our sales volume for the year. This acquisition also brings new technology to the Company in the area of digital broadcast for radio and television markets. The Company anticipates that it will continue to develop business which is unrelated to defense, however, the Company is not averse to making acquisitions in the defense area. The Company's growth strategy in all areas of the Company's business may require additional expenditures for company-sponsored product development and investment in property, plant and equipment in order to maximize future opportunities. Sales and earnings in the commercial market, especially those in the seismic exploration area, are more volatile than under long-term military programs. Management believes it has diversified the Company's markets to minimize any adverse effects resulting from this volatility and intends to continue to diversify the business as appropriate for the Company's future. [Bar Chart Plotted from Data In Table Below] Shareholders' Investment In Millions of Dollars 1992 112.9 1993 123.3 1994 135.8 1995 150.0 1996 158.1 [Bar Chart Plotted from Data In Table Below] Capital Expenditures In Millions of Dollars 1992 7.53 1993 7.00 1994 10.23 1995 8.88 1996 16.26 Page 21 Consolidated Statement of Income (In thousands except per share amounts)
For the Year Ended December 31, -------------------------------------------------- 1996 1995 1994 -------------------------------------------------- Sales .................................................................. $ 321,910 $ 246,487 $ 213,605 -------------------------------------------------- Costs and expenses: Cost of sales .................................................. 210,851 160,509 135,285 Selling, general and administrative expenses ................... 69,762 52,103 47,013 Company-sponsored product development .......................... 21,001 15,187 12,260 Interest expense ............................................... 3,715 3,840 2,956 Gain on issuance of subsidiary stock ........................... (21,166) Goodwill impairment ............................................ 3,627 Interest and other income - net ................................ (2,166) (4,087) (2,342) -------------------------------------------------- 285,624 227,552 195,172 -------------------------------------------------- Income before income taxes, minority interest and extraordinary item ....................................... 36,286 18,935 18,433 Provision for income taxes ............................................. 12,157 5,900 6,318 Minority interest ...................................................... 754 -------------------------------------------------- Income before extraordinary item ............................... 23,375 13,035 12,115 Extraordinary item: Loss on early extinguishment of debt, net of applicable income taxes of $557 ............................. 1,035 -------------------------------------------------- Net income ..................................................... $ 22,340 $ 13,035 $ 12,115 ================================================== Earnings per common share Income before extraordinary item ............................... $ 3.68 $ 2.00 $ 1.86 Extraordinary item ............................................. (.16) -------------------------------------------------- Net income ..................................................... $ 3.52 $ 2.00 $ 1.86 ==================================================
The accompanying notes are an integral part of these consolidated financial statements. Page 22 Consolidated Balance Sheet (In thousands except par value and number of shares)
December 31, ----------------------------- 1996 1995 ----------------------------- Assets Current assets: Cash and cash equivalents .......................................................... $ 20,450 $ 20,715 Short-term investments ............................................................. 6,380 100 Receivables - net .................................................................. 62,217 54,199 Unbilled revenue ................................................................... 48,814 39,137 Inventories ........................................................................ 82,808 59,492 Other .............................................................................. 6,098 4,675 ----------------------------- Total current assets ............................................................... 226,767 178,318 Property, plant and equipment - net ........................................................ 48,917 42,469 Long-term receivables - net ................................................................ 16,695 10,567 Other assets ............................................................................... 30,900 33,672 ----------------------------- Total assets ....................................................................... $ 323,279 $ 265,026 ============================= Liabilities Current liabilities: Notes payable ...................................................................... $ 29,406 $ 24,237 Current maturities of long-term debt ............................................... 4,251 4,861 Accounts payable ................................................................... 21,115 14,480 Billings in excess of costs and estimated earnings on uncompleted contracts ........................................................... 9,728 6,880 Taxes on income .................................................................... 5,201 1,366 Other accrued liabilities .......................................................... 21,331 22,737 ----------------------------- Total current liabilities .......................................................... 91,032 74,561 Long-term debt ............................................................................. 13,974 29,522 Other liabilities and deferred credits ..................................................... 43,022 10,925 ----------------------------- Total liabilities .................................................................. 148,028 115,008 ----------------------------- Minority interest .......................................................................... 17,179 ----------------------------- Commitments and contingencies (Note 12) Shareholders' Investment Preferred stock - authorized 2,000,000 shares, without par value, none issued Common stock - authorized 20,000,000 shares, $.10 par value; issued 7,941,231 and 7,860,351 shares .............................................. 794 786 Additional capital ......................................................................... 39,753 38,486 Accumulated earnings ....................................................................... 145,195 122,855 Cumulative translation adjustments ......................................................... (911) (1,095) Common stock held in treasury, at cost (1,905,400 and 1,307,592 shares) .................... (26,759) (11,014) ----------------------------- Total shareholders' investment ..................................................... 158,072 150,018 ----------------------------- Total liabilities, minority interest and shareholders' investment .................. $ 323,279 $ 265,026 =============================
The accompanying notes are an integral part of these consolidated financial statements. Page 23 Consolidated Statement Of Cash Flows (In thousands)
For the Year Ended December 31, ---------------------------------------- 1996 1995 1994 ---------------------------------------- Cash flows from operating activities: Net income ........................................................ $ 22,340 $ 13,035 $ 12,115 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization ..................................... 13,938 11,887 9,277 Deferred income taxes ............................................. 6,232 (677) (3,233) Gain on issuance of stock by subsidiary ........................... (21,166) Gain on foreign currency denominated debt ......................... (600) Loss on extinguishment of goodwill ................................ 3,627 Minority interest ................................................. 754 Change in operating assets and liabilities net of impact of purchase of businesses: Receivables ....................................................... 18,112 (5,277) (10,829) Unbilled revenue .................................................. (9,677) (4,808) 3,602 Inventories ....................................................... (12,232) (16,392) (6,712) Other assets ...................................................... (10,638) (9,349) (1,009) Accounts payable .................................................. 5,696 (192) 5,526 Other accrued liabilities and billings in excess .................. (15,371) 3,363 (3,726) Taxes on income ................................................... 3,835 (1,741) 980 Other - net ....................................................... 162 (1,069) 341 ---------------------------------------- Net cash provided by (used for) operating activities .............. 5,012 (11,220) 6,332 ---------------------------------------- Cash flows from investing activities: Capital expenditures .............................................. (16,182) (8,875) (10,231) Investment in grantor trust ....................................... (519) (518) (695) Payments for purchases of businesses, net of cash acquired ........ 7,791 (5,942) (8,945) Purchases of investment securities ................................ (6,280) (100) Sales of investment securities .................................... 300 7,573 Other investing activities ........................................ 151 (23) (37) ---------------------------------------- Net cash used for investing activities ............................ (15,039) (15,158) (12,335) ---------------------------------------- Cash flows from financing activities: Net borrowings under line of credit agreements .................... 8,416 10,730 10,533 Proceeds from long-term debt ...................................... 2,447 17,910 1,709 Payments on long-term debt ........................................ (24,197) (6,826) (3,438) Proceeds from issuance of subsidiary common stock ................. 40,428 Proceeds from exercise of stock options ........................... 1,275 1,127 645 Acquisition of Tech-Sym and GeoScience treasury stock ............. (18,791) (801) Other ............................................................. 184 69 130 ---------------------------------------- Net cash provided by financing activities ......................... 9,762 23,010 8,778 ---------------------------------------- Net increase (decrease) in cash and cash equivalents ...................... (265) (3,368) 2,775 Cash and cash equivalents at beginning of year .................... 20,715 24,083 21,308 ---------------------------------------- Cash and cash equivalents at end of year .......................... $ 20,450 $ 20,715 $ 24,083 ======================================== Cash flows from operating activities include: Interest paid ..................................................... $ 3,895 $ 3,742 $ 2,749 ======================================== Income taxes paid - net ........................................... $ 1,909 $ 7,441 $ 8,358 ========================================
The accompanying notes are an integral part of these consolidated financial statements. Page 24 Consolidated Statement of Changes in Shareholders' Investment (In thousands)
Common Stock Cumulative Treasury Stock ------------------ Additional Accumulated Translation --------------- Shares Amount Capital Earnings Adjustments Shares Amount Total ----------------------------------------------------------------------------------- Balance, December 31, 1993 ............... 7,772 $ 777 $ 36,734 $ 97,705 $(1,537) 1,289 $(10,342) $123,337 Net income for year ...................... 12,115 12,115 Issuance of common stock for stock options .................... 26 3 442 445 Issuance of common stock from treasury for stock options ...... 71 (22) 129 200 Currency translation adjustment .......... 373 373 Acquisition of treasury shares ........... 41 (801) (801) Tax benefit associated with stock options ................... 118 118 ----------------------------------------------------------------------------------- Balance, December 31, 1994 ............... 7,798 780 37,365 109,820 (1,164) 1,308 (11,014) 135,787 Net income for year ...................... 13,035 13,035 Issuance of common stock for stock options .................... 62 6 853 859 Currency translation adjustment .......... 69 69 Tax benefit associated with stock options ................... 268 268 ----------------------------------------------------------------------------------- Balance, December 31, 1995 ............... 7,860 786 38,486 122,855 (1,095) 1,308 (11,014) 150,018 Net income for year ...................... 22,340 22,340 Issuance of common stock for stock options .................... 81 8 1,267 1,275 Currency translation adjustment .......... 184 184 Acquisition of treasury shares ........... 597 (15,745) (15,745) ----------------------------------------------------------------------------------- Balance, December 31, 1996 ............... 7,941 $ 794 $ 39,753 $145,195 $ (911) 1,905 $(26,759) $158,072 ===================================================================================
The accompanying notes are an integral part of these consolidated financial statements. Page 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Description of Business and Significant Accounting Policies THE BUSINESS: Tech-Sym Corporation (the Company or Tech-Sym) is a diversified electronics engineering and manufacturing company primarily involved in the design, development, and manufacture of products used for communications, the exploration and production of hydrocarbons, and defense systems. The Company operates through five principal subsidiaries from its headquarters in Houston, Texas. On May 17, 1996, GeoScience Corporation (GeoScience), a subsidiary of the Company, completed a sale of 2,597,600 shares of its common stock at $17.00 per share in an initial public offering. The sale generated net proceeds to the Company of $40,428,000 and a gain of $21,166,000, reducing the Company's ownership in GeoScience from 100.0 to 75.3 percent. ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the related reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management believes that the estimates are reasonable. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of Tech-Sym Corporation and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. SHORT-TERM INVESTMENTS AND OTHER CASH EQUIVALENTS: Short-term investments are carried at market value and have maturities of less than one year. Short-term investments with original maturities of three months or less are classified as cash equivalents by the Company. Included in short-term investments at December 31, 1996 are short-term bonds in the amount of $6,280,000, and at December 31, 1996 and 1995, short-term investments also include certificates of deposit of $100,000 with original maturities greater than three months. REVENUE RECOGNITION: The Company recognizes revenue on contracts utilizing the percentage of completion method, measured by the percentage of total costs incurred to date to estimated total costs for each contract. Estimated losses on contracts are provided for in full when they become apparent. Substantially all unbilled revenue amounts are expected to be billed and collected within one year in accordance with the terms of the related contracts. The Company recognizes revenue from sales of products manufactured in standard manufacturing operations, primarily seismic exploration systems, at the time the products are shipped to the customer. Revenue from the sale of hardware products and software licenses are recognized at the time of shipment unless significant future obligations remain. INVENTORIES: Inventories are valued at the lower of cost or market. Cost is determined on the first-in, first-out or average cost method. DEPRECIATION AND AMORTIZATION: Depreciation of plant and equipment is provided using the straight-line method over the estimated useful lives of the related assets. Major renewals and betterments are capitalized while minor replacements, maintenance, and repairs which do not extend useful lives are expensed. The cost and accumulated depreciation applicable to assets retired or sold are removed from the respective accounts and the resultant gain or loss is recognized at that time. Page 26 Intangible assets including purchased technology and goodwill are amortized by the straight-line method over 5 to 15 years. Amortization expense was $4,035,000, $2,295,000, and $645,000, in 1996, 1995, and 1994, respectively. Intangible assets of $13,001,000, and $18,584,000 at December 31, 1996 and 1995, respectively, are included in other assets and are net of accumulated amortization of $11,099,000 and $7,701,000 at December 31, 1996 and 1995, respectively. LONG-LIVED ASSETS: In 1996, the Company adopted Statement of Financial Accounting Standards No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". In accordance with FAS 121, the Company reviews for the impairment of long-lived assets and certain identifiable intangibles whenever events or changes in circumstance indicate that the carrying amount of an asset may not be recoverable. Under FAS 121, an impairment loss is recognized when estimated cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. At December 31, 1996, the Company, in accordance with FAS 121 wrote off the unamortized goodwill of $3,627,000 associated with the acquisition of Anarad, Inc. in 1994. RESEARCH AND DEVELOPMENT: The Company performs research and development under both company-sponsored programs and contracts with others, primarily the U. S. Government. Costs related to company-sponsored research and development for new products and major product improvements are expensed as incurred. INCOME TAXES: The provision for income taxes is computed based on the pretax income included in the consolidated statement of income. Research and development tax credits are recorded to the extent allowable as a reduction of the provision for federal income taxes in the year the qualified research and development expenditures are incurred. The asset and liability approach is used to recognize deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. The Company has not recorded a deferred income tax liability for additional U.S. Federal income taxes that would result from the distribution of earnings of its foreign subsidiaries, if they were actually repatriated. The Company intends to indefinitely reinvest the undistributed earnings of its foreign subsidiaries. Any federal income taxes on such earnings, if remitted, would generally be offset by available foreign tax credits. FOREIGN CURRENCY TRANSLATION: The Company's foreign subsidiaries use the local currency as the functional currency. Accordingly, assets and liabilities of the Company's foreign subsidiaries are translated using the exchange rates in effect at the balance sheet date, while income and expenses are translated using average rates. Translation adjustments are reported as a separate component of shareholders' investment. EARNINGS PER SHARE: Earnings per common share are based on the weighted average number of shares outstanding during each year (6,350,000 for 1996, 6,522,000 for 1995, and 6,498,000 for 1994). The effect of common stock equivalents (stock options) has not been significant during 1996, 1995, and 1994. STOCK-BASED COMPENSATION: In 1996, the Company adopted Statement of Financial Accounting Standard No. 123 (FAS 123), "Accounting for Stock-Based Compensation". Upon adoption of FAS 123, the Company continued to measure compensation expense for its stock-based employee compensation plan using the intrinsic value method prescribed in APB No. 25, "Accounting for Stock Issued to Employees", and has provided in Note 9 pro forma disclosures of the effect on net income and earnings per share as if the fair value-based method prescribed in FAS 123 had been applied in measuring compensation expense. Page 27 Note 2 - Acquisitions OTHER RECENT PRONOUNCEMENTS: In 1996 Statement of Financial Accounting Standards No. 125 (FAS 125), "Accounting for Transfer and Servicing of Financial Assets and Extinguishment of Liabilities", was issued. FAS 125 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after December 31, 1996. The Company will adopt FAS 125 in 1997. Adoption of FAS 125 is not expected to have a material effect on the Company's financial position or operating results. On January 1, 1996, the Company acquired, through its subsidiary, Continental Electronics Corporation, all of the capital stock of TELEFUNKEN Sendertechnik, GmbH (TELEFUNKEN), from Daimler-Benz Aerospace AG (DASA). TELEFUNKEN is a designer and manufacturer of broadcast transmitters and antenna systems worldwide. The transaction has been accounted for as a purchase. The purchase price for the acquisition was denominated in Deutsche Marks and aggregated $9,221,000 based on exchange rates at December 31, 1995. The purchase price was comprised of $6,986,000 cash and a $2,235,000 note payable to DASA, due January 31, 1997. The purchase price approximated the fair value of the net assets acquired. The fair value of assets acuired and liablities assumed at the acquisition date were $53,199,000 and 43,978,000, respectivily. Assets aquired included approximately $14,000,000 in cash and cash equivalents. The following unaudited pro forma consolidated results of operations have been prepared as if the acquisition of TELEFUNKEN had occurred at the beginning of fiscal 1995 (in thousands, except per share amounts): Pro Forma Year Ended December 31, 1995 -------------------- Net sales ................................... $ 267,437 Net loss .................................... (9,474) Loss per common share ....................... (1.45) On June 30, 1995, the Company acquired CogniSeis Development, Inc. (CogniSeis), a company which develops, markets and licenses seismic processing and geologic interpretation systems. In connection with the acquisition, the Company issued a total of 737,781 of its shares in exchange for all of the outstanding shares of common stock of CogniSeis. The transaction has been accounted for as a pooling of interests, and accordingly, the consolidated financial statements for the year ended December 31, 1994 were restated during 1995 to include CogniSeis. Separate results of operations for the periods prior to the merger with CogniSeis are as follows (in thousands): Unaudited Six Months Ended Year Ended June 30, December 31, -------------------------------------- 1995 1994 -------------------------------------- Sales Tech-Sym ................... $ 108,273 $ 197,593 CogniSeis .................. 9,716 16,012 -------------------------------------- Combined ................ $ 117,989 $ 213,605 ====================================== Net income (loss) Tech-Sym ................... $ 6,406 $ 12,235 CogniSeis .................. (46) (120) -------------------------------------- Combined ................ $ 6,360 $ 12,115 ====================================== No adjustments were necessary in order to conform the accounting policies of CogniSeis to the Company's accounting policies. Page 28 During 1995 and 1994, the Company made several other acquisitions which were insignificant individually and in the aggregate. Note 3 - Receivables and Unbilled Revenue Receivables and unbilled revenue are summarized as follows (in thousands): December 31, ----------------- 1996 1995 ----------------- Current receivables: Commercial, less allowance for losses of $1,980 and $1,231 $53,898 $44,709 U.S. Government .......................................... 8,319 9,490 ----------------- $62,217 $54,199 ================= Unbilled revenue: Commercial ............................................... $15,378 $12,718 U.S. Government .......................................... 33,436 26,419 ----------------- $48,814 $39,137 ================= Long-term receivables: Commercial, less allowance for losses of $419 and $606 ... $16,695 $10,567 ================= U.S. Government receivables and unbilled revenue include amounts from prime contractors with the U.S. Government where the Company is the subcontractor. Long-term receivables include notes receivable on seismic equipment sales, in the amounts of $9,899,000 and $3,290,000, at December 31, 1996 and 1995, respectively, generally secured by equipment sold. Also included in long-term receivables are notes receivable on the sale of real estate lots in the amounts of $6,796,000 and $7,277,000 at December 31, 1996 and 1995, respectively, secured by real estate sold. Long-term receivables bear interest rates between 6.72% and 13% which are due to the Company in monthly installments. Note 4 - Inventories Inventories, which consist principally of electronic parts, are summarized as follows (in thousands): December 31, --------------------------- 1996 1995 --------------------------- Raw materials .................... $28,613 $26,570 Work in process .................. 30,680 24,500 Finished goods ................... 23,515 8,422 --------------------------- $82,808 $59,492 =========================== Note 5 - Property, Plant and Equipment The components of property, plant and equipment are summarized as follows (dollars in thousands): December 31, ---------------------- Estimated Lives 1996 1995 --------------------------------- At cost: Land, buildings and improvements .. 10-35 $ 30,286 $ 28,779 Machinery and equipment ........... 3-12 86,249 75,363 ---------------------- 116,535 104,142 Less accumulated depreciation ............. (67,618) (61,673) ---------------------- $ 48,917 $ 42,469 ====================== Page 29 Note 6 - Notes Payable At December 31, 1996 and 1995, the Company had unused short-term lines of credit aggregating approximately $38,000,000 and $32,500,000, respectively. Loans under these lines may be made in such amounts and at such maturities and interest rates as are offered by the banks and accepted by the Company at the time of each borrowing. The lines of credit contain certain restrictive covenants, the more significant of which require that the Company and its designated principal subsidiaries (a) maintain defined tangible net worth of at least $75,000,000; (b) restrict the aggregate of certain future payments, including those for dividends and acquisitions of treasury shares, to 75% of the Company's cumulative post-December 31, 1988 consolidated net income (at December 31, 1996 accumulated earnings of $29,610,000 was available for dividends and acquisition of treasury shares); (c) limit future borrowings and related pledges of assets to certain levels; and (d) limit future dispositions (except in the ordinary course of business) of assets, including stock of domestic subsidiaries, such that the aggregate (greater of book or fair market) value during any twelve month period does not exceed 20% of defined tangible net worth. At December 31, 1996 and 1995, borrowings under these lines totaled $29,406,000 and $24,237,000, respectively. Interest rates on such borrowings outstanding at December 31, 1996 and 1995 were 8.25% to 9.25%, and 8.5%, respectively. Note 7 - Long-term Debt The components of long-term debt are summarized as follows (dollars in thousands):
December 31, --------------------------- 1996 1995 --------------------------- Notes to insurance group: Senior unsecured notes at 10.28% interest payable semi-annually; paid in full in 1996 ......................................................... $ $ 17,143 Other obligations: Unsecured note (denominated in Deutsche Marks) at Frankfurt interbank overnight rate (4.365% at December 31, 1996) interest payable quarterly; due September 30, 2000 ........................ 6,344 6,986 Real estate mortgage notes, due in monthly installments with interest at 8.0% to 9.9% maturing at various dates through 2009 .................... 5,126 5,204 Term loan, unsecured, with interest at 5.3% maturing in 2000 ................. 2,501 2,825 Notes secured by equipment, due in monthly installments with interest at 4.125% to 11.5% maturing at various dates through 2002 .............................................................. 1,176 1,369 Other ................................................................................ 3,078 856 --------------------------- 18,225 34,383 Less current maturities .............................................................. (4,251) (4,861) --------------------------- $ 13,974 $ 29,522 ===========================
The unsecured note contains certain restrictive covenants similar to those for the lines of credit. Aggregate maturities of long-term debt due after 1997 are $2,722,000 in 1998, $2,688,000 in 1999, $6,322,000 in 2000, $714,000 in 2001, $382,000 in 2002, and $1,146,000 thereafter. In 1996, the Company elected to retire the senior unsecured notes with the proceeds received in connection with the GeoScience public offering. The Company paid a premium of $1,035,000 net of income taxes due to early extinguishment of this debt, which has been recorded as an extraordinary charge to operations. At December 31, 1996, $1,047,000 of machinery and equipment and $9,328,000 of land, buildings and improvements were pledged as collateral to secure various long-term debt obligations. Page 30 Note 8 - Income Taxes The components of income before income taxes , minority interest and extraordinary item were as follows (in thousands): Year Ended December 31, -------------------------------- 1996 1995 1994 -------------------------------- Domestic ........................... $ 33,999 $ 17,029 $ 16,527 Foreign ............................ 2,287 1,906 1,906 -------------------------------- $ 36,286 $ 18,935 $ 18,433 ================================ The provision for income taxes consists of the following (in thousands): Year Ended December 31, -------------------------------- 1996 1995 1994 -------------------------------- Current tax expense U.S. Federal ....................... $ 4,592 $ 5,658 $ 8,812 State .............................. 399 506 376 Foreign ............................ 934 413 363 -------------------------------- Total Current ...................... $ 5,925 $ 6,577 $ 9,551 -------------------------------- Deferred tax expense U.S. Federal ....................... 7,334 (861) (3,408) Foreign ............................ (1,102) 184 175 -------------------------------- Total deferred ..................... 6,232 (677) (3,233) -------------------------------- Total provision .................... $ 12,157 $ 5,900 $ 6,318 ================================ The income tax expense for 1996, 1995, and 1994 resulted in effective tax rates of 34.2%, 31.2%, and 34.3%, respectively. The reasons for the differences between these effective tax rates and the U.S. statutory rate of 35% are as follows (in thousands): Year Ended December 31, -------------------------------- 1996 1995 1994 -------------------------------- Federal taxes on income at statutory rates . $ 12,436 $ 6,627 $ 6,452 State income taxes - net ................... 260 329 244 Foreign Sales Corporation benefit .......... (946) (590) (472) Non-deductible intangible amortization ..... 1,827 256 195 Change in valuation allowance .............. (653) (64) (81) Other - net ................................ (767) (658) (20) -------------------------------- $ 12,157 $ 5,900 $ 6,318 ================================ Page 31 Deferred tax (liabilities) assets at December 31, 1996 and 1995 are comprised of the following (in thousands): December 31, ----------------------- 1996 1995 ----------------------- Deferred tax liabilities Depreciation ................................ $ 315 $ 1,204 Installment sales ........................... 750 743 Equity in earnings of affiliate .............. 1,049 776 Basis difference in affiliate stock ......... 7,632 Intangible amortization ..................... 232 Other ....................................... 657 883 ----------------------- Gross deferred tax liabilities .............. 10,635 3,606 ----------------------- Deferred tax assets Deferred compensation ....................... (2,106) (1,825) Compensatory absences accruals .............. (835) (825) Inventory accounting and valuation allowance (1,894) (1,469) Net operating loss carry forwards ........... (1,144) (667) Accrued losses on contracts ................. (86) (90) Product warranty and related accruals ....... (368) (300) Receivable valuation allowances ............. (758) (620) Percent of completion ....................... (1,092) (764) Intangible amortization ..................... (419) Research and experimentation tax credit ..... (979) (957) Other ....................................... (653) (585) ----------------------- Gross deferred tax assets ................... (9,915) (8,521) Deferred tax asset valuation allowance ...... 579 1,232 ----------------------- $ 1,299 $(3,683) ======================== A deferred tax asset valuation allowance is provided to reduce deferred tax assets to a level which, more likely than not, will be realized. These amounts at December 31, 1996 relate to research and development tax credits which are expected to expire unused due to change in ownership limitations. Net operating loss carry forwards incurred by the company's foreign subsidiaries total $3,034,000. Of this amount, $1,529,000 will carry forward indefinitely, $178,000 will expire in the year 2002, and the remaining $1,327,000 will expire in the year 2003. Based on recent foreign earnings trends, management determined in 1996 that these net operating loss carry forwards will be fully utilized and reduced by $653,000 the Company's deferred tax valuation allowance accordingly. Deferred tax assets of $5,240,000 and $2,668,000 were included in other current assets at December 31, 1996 and 1995, respectively. As a result of an acquisition, deferred tax assets at December 31, 1996 include an addition of $1,250,000 which did not impact the provision for income taxes. Deferred tax liabilities of $6,539,000 were included in other liabilities at December 31, 1996. Deferred tax assets of $1,015,000 were included in other long-term assets at December 31, 1995. Note 9 - Stock Option Plans STOCK OPTION PLANS: The Company's 1980 Stock Option Plan (the 1980 Plan) provided for the granting of options and stock appreciation rights (SARs) in tandem therewith to key employees of the Company for the purchase of the Company's common shares. Each option under the 1980 Plan was granted at an exercise price of 100% of fair market value at date of grant. The options expire ten years from date of grant and were exercisable 20% after one year, with an additional 20% exercisable each six months thereafter. All of the outstanding options covering a total of 600 shares at December 31, 1996, were exercisable at a price of $10.625 per share. At December 31, 1996 and 1995, there were 600 and 29,300 shares, respectively, of the Company's common stock reserved for issuance under the 1980 Plan. The 1980 Plan expired by its terms on December 31, 1989, and no additional options can be granted under the plan. Page 32 The Company's 1990 Stock Option Plan (the 1990 Plan) covers 858,000 shares of common stock and provides for the granting of stock options and/or SARs to key employees of the Company and to the members of the Board of Directors who are not employees of the Company. Shares granted and subsequently cancelled are available for future grants. Options covering a total of 753,500 shares and related SARs have been granted to key employees under the 1990 Plan. Each such option has an exercise price of 100% of the fair market value on the date of grant and has a term of ten years. The options are exercisable 20% after one year, with an additional 20% exercisable each six months thereafter. At December 31, 1996, options to employees under the 1990 Plan covering a total of 271,496 shares were exercisable. The 1990 Plan provides for the automatic grant of stock options and SARs to nonemployee Directors. Each nonemployee Director of the Company was granted effective February 15, 1990, options and SARs with respect to 10,000 shares of common stock, and each optionee was required to surrender for cancellation options previously granted by the Company with respect to the lesser of 10,000 shares or the number of shares covered by such previously granted options. The 1990 Plan further provides that newly-elected nonemployee Directors will automatically receive options and SARs covering 10,000 shares at the time of his or her election and that each nonemployee Director will automatically receive options and SARs covering 1,000 shares each year at the time of his or her reelection to the Board. Options covering a total of 131,000 shares and SARs have been granted to nonemployee Directors under the 1990 Plan. These options and SARs have an exercise price of $8.125 to $34.625, the fair market price on the date of grant, have a ten year term and are exercisable in full after one year. At December 31, 1996, options to nonemployee Directors under the 1990 Plan covering a total of 104,000 shares were exercisable. The SARs granted under the 1980 and 1990 Stock Option Plans cannot be exercised without the consent of the Compensation Committee of the Board of Directors except in certain defined instances involving a change in control of the Company. Since any exercises of SARs are expected to be allowed by the Committee only in extenuating circumstances, any liability for benefits derived therefrom will be recognized only at the time the Committee gives its approval to such exercises. No SARs have been exercised to date. Changes in outstanding options under the 1980 and 1990 Plan during 1994, 1995, and 1996 were as follows: Exercise price Weighted average Shares per share price per share ------------------------------------------- Outstanding, December 31, 1993 .. 472,130 8.000-20.000 $ 13.49 Options granted ............... 85,050 21.000-21.750 21.30 Options cancelled ............. (4,300) 10.625-15.750 13.61 Options exercised ............. (46,060) 8.000-20.000 9.33 ------------------------------------------- Outstanding, December 31, 1994 .. 506,820 8.000-21.750 14.78 Options granted ............... 17,000 25.125-30.375 28.21 Options cancelled ............. (9,320) 15.750-21.750 20.04 Options exercised ............. (50,700) 8.000-21.750 14.43 ------------------------------------------- Outstanding, December 31, 1995 .. 463,800 8.000-30.375 15.20 Options granted ............... 237,000 34.625-35.875 34.64 Options cancelled ............. (2,000) 21.00-34.625 27.89 Options exercised ............. (68,780) 8.000-21.750 15.27 ------------------------------------------- Outstanding, December 31, 1996 .. 630,020 8.000-35.875 22.47 =========================================== There were 600, 29,000 and 42,250 exercisable options under the 1980 Plan at December 31, 1996, 1995 and 1994, respectively. There were 375,496, 237,480 and 235,050 exercisable options under the 1990 Plan at December 31, 1996, 1995 and 1994, respectively. Page 33 In 1996, the Company's substantially owned subsidiary, GeoScience, established the 1996 Equity Incentive Plan (the "1996 Plan") which covers 1,500,000 shares of GeoScience common stock and permits the granting of any or all of the following types of awards: stock appreciation rights, stock options, restricted stock, dividend equivalents, performance units, automatic Director options, phantom shares, limited stock appreciation rights ("LSARs"), bonus stock and cash tax rights. Options covering a total of 336,300 GeoScience shares plus 1,000 phantom shares of GeoScience have been granted to key employees of GeoScience, Tech-Sym, and affiliates under the 1996 Plan. Each such option has an exercise price of 100% of the fair market value on the date of grant and has a term of ten years. The options are exercisable 25% after one year, with an additional 25% exercisable each year thereafter. At December 31, 1996, no options to employees under the 1996 Plan were exercisable. The phantom shares awarded were payable two years after award in cash and/or stock at GeoScience's option, and were forfeited in early 1997. Director Options covering a total of 115,000 GeoScience shares, including those subject to approval and ratification by GeoScience's stockholders, have been granted under the 1996 Plan. These options have exercise prices of $12.00 to $17.55 per share, have a ten year life and are exercisable in full after six months. At December 31, 1996, Director Options under the 1996 Plan covering a total of 45,000 shares were exercisable. The following table summarizes significant ranges of Tech-Sym's outstanding and exercisable options at December 31, 1996:
Options Outstanding Options Exercisable ----------------------------------- --------------------- Weighted Weighted Weighted Average Average Average Range of Remaining Exercise Exercise Exercise Prices Shares Life in Years Price Shares Price - ---------------------------------------------------------------------------------------------- $ 8.00-12.00 95,250 3.5 $8.10 95,250 $8.10 12.01-18.00 215,900 6.3 15.39 215,900 15.39 18.01-27.00 72,870 7.8 21.71 54,946 21.88 27.01-35.875 246,000 9.5 34.47 10,000 30.38
The weighted average fair value at date of grant for options granted during 1996, 1995 and 1994 was $14.09, $14.71 and $11.14 per option, respectively. The fair value of options at date of grant was estimated using the Black-Scholes model with the following weighted average assumptions: 1996 1995 1994 --------------------------------------- Expected life ........ 6.3 years 8 years 5.7 years Interest rate ........ 6.18% 5.99% 7.10% Volatility ........... 28.77% 37.15% 38.79% Dividend yield ....... 0% 0% 0% The weighted average fair value at date of grant for options granted at GeoScience during 1996 was $7.43. The fair value of the options granted was estimated using the Black-Sholes model with the following assumptions for expected life, interest rate, volatility and dividend yield, respectively, 6.5 years, 6.58%, 51% and 0%. Stock based compensation costs would have reduced pretax income by $1,259,000 (including $550,000 attributable to GeoScience) in 1996 and $81,000 in 1995. The after tax and per share impact for 1996 and 1995, respectively, was $818,000 and $53,000 and $.18 and $.05 if the fair value of the options granted in that year had been recognized as compensation expense on a straight-line basis over the vesting period of the grant. The pro forma effect on net income for 1996 and 1995 is not representative of the pro forma effect on net income in future years because it does not take into consideration pro forma compensation expense related to grants made prior to 1995. Page 34 NONEMPLOYEE DIRECTOR OPTIONS: During the period from December 8, 1983 to December 31, 1989, options covering a total of 115,000 shares were granted to nonemployee Directors by the Board of Directors and approved by the shareholders of the Company. Each option was granted at an exercise price of 100% of the fair market value at date of grant. Each option is exercisable in whole or in part until ten years after the date of grant except that, absent a change in control of the Company, each option terminates seven months after the option holder ceases to be a Director for any reason except retirement, death, or disability. At December 31, 1996 and 1995, there were 15,000 and 27,000 shares, respectively, of the Company's common stock reserved for issuance upon exercise of the nonemployee Director stock options at an exercise price per share of $10.875 to $13.25. The weighted average exercise price and remaining life of the nonemployee Director stock options at December 31, 1996, was $10.875 and one year, respectively. Note 10 - Shareholders' Investment SHAREHOLDER RIGHTS PLAN: The Board of Directors adopted a Shareholder Rights Plan in 1988 which in certain limited circumstances would permit shareholders to purchase securities at prices which would be substantially below market value. STOCK REPURCHASES: The Company's Board of Directors has authorized the Company to repurchase shares of its common stock through open market purchases or privately negotiated transactions. Since 1987 the Company has repurchased an aggregate of 1,834,797 shares related to these authorizations. The unreissued shares are held by the Company and accounted for using the treasury stock method. The Company is authorized to repurchase up to 152,800 additional shares under transactions approved by the Board. Note 11 - Benefit Plans The Company has a defined contribution retirement plan covering substantially all employees. The annual Company contribution and administrative costs of the plan were $2,126,000 for 1996, $1,898,000 for 1995, and $1,912,000 for 1994. The Company's policy is to fund these retirement costs currently. The Company has executive retirement agreements with certain executive officers of the Company and a nonemployee directors' retirement plan for those directors that have never been employees of the Company. The executive retirement agreements generally provide for the payment of specified amounts in the event of retirement at or after age 62, total and permanent disability, death, or termination of employment by the Company without cause. The nonemployee directors' retirement plan generally provides for the payment of specified amounts upon retirement on or after age 65 or upon termination of service due to disability or death. The Company has segregated certain assets in a grantor trust to meet these obligations, but those assets are available to creditors of the Company in the event of its bankruptcy or insolvency. These assets aggregating $5,638,000 and $4,887,000 at December 31, 1996 and 1995, respectively, are included other assets. Page 35 The costs for the executive retirement agreements and the nonemployee directors' retirement plan in 1996, 1995, and 1994 were $813,000, $855,000, and $695,000, respectively. The status of the retirement plans at December 31 was as follows (in thousands):
1996 1995 -------------------------------- Actuarial present value of: Vested benefit obligation ................................... $ 6,182 $ 5,650 ================================ Accumulated benefit obligation .............................. $ 6,188 $ 5,669 ================================ Projected benefit obligation ................................ $ 6,483 $ 5,903 Plan assets at fair value -------------------------------- Projected benefit obligation in excess of plan assets ....... 6,483 5,903 Unrecognized net gain ............................................... (507) (427) Unrecognized prior service cost ..................................... (87) (147) Unrecognized net obligation at transition ........................... (405) (486) Adjustment to recognize minimum liability ........................... 704 826 ================================ Net deferred pension cost ........................................... $ 6,188 $ 5,669 ================================
The projected benefit obligation was developed assuming a beginning discount rate of 7.5% in 1996 and 9% in 1995 and 1994 and an annual rate of increase in compensation levels of 5% in 1996, 1995, and 1994. A foreign subsidiary which was acquired in January 1996 sponsored a noncontributory defined benefit pension plan for employees that provides benefits based upon specified percentages of the participants' salaries and the number of months of continuous service as of the date of retirement. In accordance with the purchase agreement, the Company was required to assume the pension liability for the employees which were active at the acquisition date. Additionally, the Company received cash and assumed pension liabilities related to non-active employees at the acquisition date pending transfer thereof to the seller at a later date. At December 31, 1996, the pension liability for non-active employees of approximately $7,000,000 was included in long-term liabilities. The cost for the foreign subsidiary's noncontributory defined benefit pension plan was $342,000 in 1996. The status of the plan at December 31, 1996 is as follows for active employees (in thousands): 1996 ------- Actuarial present value of: Vested benefit obligation ................................. $ 3,539 ======= Accumulated benefit obligation ............................ $ 3,806 ======= Projected benefit obligation .............................. $ 4,578 ======= Plan assets at fair value Projected benefit obligation in excess of plan assets ..... 4,578 Unrecognized net gain ............................................. (772) ------- Net deferred pension cost ......................................... $ 3,806 ======= The projected benefit obligation was developed assuming a beginning discount rate of 6.75% and an annual rate of increase in compensation levels of 3%. Page 36 Note 12 - Commitments and Contingencies CONCENTRATION OF CREDIT RISK: Financial instruments which potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents, short-term investments, receivables, unbilled revenue, and long-term receivables. The Company places its cash, cash equivalents, and marketable securities investments in investment grade, short-term debt instruments and limits the amount of credit exposure to any one commercial issuer. A portion of the Company's receivables and unbilled revenue are concentrated with the U.S. Government. Concentrations of credit risk with respect to the receivables, unbilled revenue, and long-term receivables from customers other than the U.S. Government are limited due to the large number of customers in the Company's customer base, and their dispersion across different industries and geographic areas. FINANCIAL INSTRUMENTS: The Company enters into various types of financial instruments in the normal course of business. The Company does not hold or issue financial instruments for trading purposes nor does it hold interest rate, leveraged, or other types of derivative financial instruments. Fair values for financial instruments are based on quoted market prices. The amounts ultimately realized upon settlement of these financial instruments will depend on actual market conditions during the remaining life of the instruments. Fair values of cash and cash equivalents, short-term investments, receivables, unbilled revenue, long-term receivables, accounts payable, other accrued liabilities, notes payable, and long-term debt reflected in the December 31, 1996 and 1995 balance sheet approximate carrying value at that date. LEASE COMMITMENTS: The Company leases manufacturing and other facilities under certain long-term agreements which expire at various dates to 2002. Total rentals charged to operations under such operating leases for years 1996, 1995, and 1994 were $1,721,000, $2,439,000, and $2,039,000, respectively. Future minimum rental commitments under all noncancellable operating leases in effect at December 31, 1996 total $3,831,000 as follows: 1997 - $1,532,000; 1998 - $731,000; 1999 - $611,000; 2000 - $609,000; 2001 - $197,000 and $151,000 thereafter. LITIGATION: In the ordinary course of business, the Company is involved in various pending or threatened legal actions. While management is unable to predict the ultimate outcome of these actions, it believes that any ultimate liability arising from these actions will not have a material adverse effect on the Company's consolidated financial position, operating results, or cash flows. Page 37 CONTINGENCIES: The Company is contingently liable for notes aggregating $2,559,000 at December 31, 1996, which were sold to a financial institution during 1995. During 1996, the Company did not sell any notes receivable to the financial institution under this arrangement and has not experienced any material financial losses to date under this arrangement. During 1995, the Company sold $14,168,000 of notes receivable to the financial institution under this arrangement. Note 13 - Other Financial Information Sales under contracts and subcontracts where the U.S. Government is the ultimate customer accounted for approximately 29%, 32%, and 38% of the Company's sales in 1996, 1995, and 1994, respectively. Foreign sales (primarily exports from the U.S.) as a percentage of total sales are summarized by geographic area as follows: 1996 1995 1994 --------------------------- Europe .................... 32.7% 17.8% 17.9% Far East .................. 9.7 18.7 12.2 Middle East ............... 4.0 4.8 1.8 Other areas ............... 5.8 5.1 7.1 --------------------------- 52.2% 46.4% 39.0% =========================== Other accrued liabilities comprised the following (in thousands): December 31, -------------------- 1996 1995 -------------------- Commissions payable ................................ $ 2,840 $ 3,046 Incentive bonus accruals ........................... 2,159 1,727 Vacation accruals .................................. 2,970 2,670 Accrued product warranty and related reserves ...... 878 1,594 Accrued interest payable ........................... 454 843 Other .............................................. 12,030 12,857 -------------------- $21,331 $22,737 ==================== Other long-term liabilities and deferred credits include deferred gains on installment sales contracts of $3,575,000 and $3,753,000 at December 31, 1996 and 1995, respectively. Retained earnings of the Company's foreign subsidiaries totaled $14,828,000 and $2,611,000 at December 31, 1996 and 1995, respectively. Page 38 Note 14 - Quarterly Financial Information (Unaudited) The following is a summary of unaudited quarterly financial data for the years 1996 and 1995 (in thousands except per share amounts): Earnings Per Gross Net Common Sales Profit Income Share ------------------------------------------------- March 31, 1996 ........ $ 71,685 $ 26,191 $ 2,279 $ .35 June 30, 1996 ......... 71,184 26,197 15,016 2.28 September 30, 1996 .... 88,110 27,947 3,297 .53 December 31, 1996 ..... 90,931 30,724 1,748 .29 ------------------------------------------------- $321,910 $111,059 $22,340* $ 3.52* ================================================= March 31, 1995 ........ $ 52,794 $ 17,731 $ 1,158 $ .18 June 30, 1995 ......... 59,101 19,924 3,328 .51 September 30, 1995 .... 65,260 23,130 3,903 .60 December 31, 1995 ..... 69,332 25,193 4,646 .71 ------------------------------------------------- $246,487 $ 85,978 $13,035 $ 2.00 ================================================= As more fully discussed in Note 2, on June 30, 1995, the Company acquired CogniSeis Development, Inc., in a business combination accounted for as a pooling of interests. Accordingly, the Company's quarterly financial information for the quarter ended March 31, 1995 has been restated to present the results of the combined companies. During the quarter ended December 31,1995, sales, gross profit and earnings per common share amounts for the quarters ended March 31, 1995 and June 30, 1995 were restated from previously reported amounts to reflect the deferral of revenue recognition on certain sales where the right of exchange for credit existed. As a result, net income was reduced by $1,457,000 or $.22 per common share, for the quarter ended March 31, 1995 and by $385,000, or $.06 per common share, for the quarter ended June 30, 1995. Net income for the quarter ended December 31, 1995 increased $613,000 or $.09 per common share as a result of the recognition of a portion of such deferrals in the fourth quarter. The remaining deferred revenue totaling approximately $4,000,000 was recognized during 1996. * Includes gain on sale of subsidiary stock of $13,758, net of taxes; write-off of goodwill of $3,627, which is not tax deductible; and premium cost on the early extinguishment of debt of $1,035, net of taxes. Page 39 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of Tech-Sym Corporation: In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of cash flows and of changes in shareholders' investment present fairly, in all material respects, the financial position of Tech-Sym Corporation and its subsidiaries at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Houston, Texas February 20, 1997 40 CORPORATE INFORMATION Stockholder and Market Information Comparative Common Stock Data 1995 1996 ---------------- --------------- Quarter High Low High Low - ------- ------ ------ ------ ------ First 23 5/8 21 1/8 36 3/4 28 3/8 Second 28 1/2 23 1/8 40 28 1/8 Third 30 5/8 26 3/8 30 1/8 23 Fourth 31 7/8 28 1/8 29 7/8 26 No dividends were paid on such stock in 1995 or 1996, and the Company has no present intention of paying dividends. Record number of holders of Common Stock at February 28, 1997: 1,986. CORPORATE OFFICE 10500 Westoffice Drive, Suite 200 Houston, Texas 77042-5391 Telephone 713/785-7790 FAX 713/780-3524 TRANSFER AGENT AND REGISTRAR Continental Stock Transfer & Trust Company 2 Broadway New York, New York 10004 Telephone 212/509-4000 FAX 212/509-5150 STOCK EXCHANGE LISTING Tech-Sym Common Stock is listed on the New York Stock Exchange (Stock Symbol: TSY) INDEPENDENT ACCOUNTANTS Price Waterhouse LLP 1201 Louisiana, Suite 2900 Houston, Texas 77002 Stockholders are invited to attend the Tech-Sym Corporation Annual Meeting of Stockholders which will be held at 10:00 am on Tuesday, April 29, 1997, in the Omni Ballroom of the Westchase Hilton and Towers at 9999 Westheimer, Houston, Texas. A Proxy Statement will be sent to stockholders of record as of March 14, 1997. 41 EX-21 8 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Set forth below is certain information with respect to each of the Registrant's subsidiaries: State of Registrant's SUBSIDIARY DOMICILE OWNERSHIP -------- ------------ Anarad, Inc. (California) 100% Continental Electronics Corporation (Nevada) 100% Continental-Lensa S.A. (Chile) 75% TELEFUNKEN Sendertechnik GmbH (Germany) 100% Enterprise Electronics Corporation (Alabama) 100% GeoScience Corporation (Nevada) 77.02% CogniSeis Development, Inc. (Delaware) 100% Cognieis Development (Canada), Inc. (Canada) 100% GRP Software Ltd. (Canada) 100% Photon Systems (UK) Ltd. (UK) 100% Photon Systems, Inc. (Texas) 100% Photon Systems, Ltd. (Canada) 100% Symtronix Corporation (Nevada) 100% Syntron, Inc. (Delaware) 100% Syntron Europe Limited (Scotland) 100% Syntron Asia Pte. Ltd. (Singapore) 100% Synton (UK) Limited (Scotland) Zhong Hai Syntron(Tianjin) Geophysical Cable Co., Ltd. (China) 50% Lake Investment Company (Arizona) 100% Concho Valley Country Club, Inc. (Arizona) 100% Livco Water Company (Arizona) 100% Metric Systems Corporation (Florida) 100% Paratech Corporation (Delaware) 100% TreadMarks(TM), L.L.C. Texas 50% T-S Holding Corporation (Texas) 100% (formerly All Woods/Schroeder, Inc.) Tech-Sym Management Corporation (Delaware) 100% Tech-Sym International (FSC), Inc. (Barbados) 100% TRAK Communications Inc. (Delaware) 100% Daden-Anthony Associates, Inc. (Nevada) 100% Tecom Industries, Incorporated (California) 100% Tecom Limited (Scotland) 100% TRAK Ceramics Inc. (Delaware) 100% TRAK Microwave Corporation (Delaware) 100% TRAK Microwave Limited (Scotland) 100% The Registrant has certain other subsidiaries which are not named above. Such subsidiaries, when considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. EX-22 9 EXHIBIT 22 POWER OF ATTORNEY Each of the undersigned, a director of Tech-Sym Corporation (the "Company"), does hereby constitute and appoint Wendell W. Gamel and Ray F. Thompson his true and lawful attorney-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, to sign the Company's Form 10-K Annual Report pursuant to Section 13 of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1996, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto the attorneys-in-fact full power and authority to sign such documents on behalf of the undersigned and to make such filing, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that the attorneys-in-fact, or his substitutes, may lawfully do or cause to be done by virtue hereof. Dated: February 20, 1997 TECH-SYM CORPORATION /S/W. L. CREECH /S/ROBERT E. MOORE W. L. Creech Robert E. Moore Director Director /S/MICHAEL C. FORREST /S/COY J. SCRIBNER Michael C. Forrest Coy J. Scribner Director Director /S/A. A. GALLOTTA, JR. /S/CHARLES K. WATT A. A. Gallotta, Jr. Charles K. Watt Director Director /S/CHRISTOPHER C. KRAFT, JR. Christopher C. Kraft, Jr. Director EX-23 10 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (SEC File No. 2-77162, 33-38208, 33-61846, 33-56535), and in the Prospectus constituting part of the Registration Statement on Form S-3 (SEC File No. 33-56533), of Tech-Sym Corporation of our report dated February 20, 1997, appearing on page 40 of the Annual Report to Shareholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page S-2 of this Form 10-K. PRICE WATERHOUSE LLP Houston, Texas March 28, 1997 EX-27 11
5 THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TECH-SYM'S ANNUAL REPORT FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR DEC-31-1996 DEC-31-1996 20,450 6,380 62,217 0 82,808 226,767 48,917 0 323,279 91,032 0 0 0 794 0 323,279 321,910 0 210,851 285,624 0 0 3,715 36,286 12,157 0 0 1,035 0 22,340 3.52 0
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