SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported) July 31, 1996
TGC Industries, Inc.
(Exact name of registrant as specified in its charter)
Texas 0-14908 74-2095844
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
1304 Summit Avenue, Suite 2, Plano, Texas 75074
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 881-1099
Item 2. Disposition of Assets
The spin-off by TGC Industries, Inc. ("TGC" or the "Company") of TGC's
wholly-owned subsidiary, Chase Packaging Corporation, formerly New Chase
Corporation, a Texas corporation ("Chase"), was effective on July 31, 1996.
Prior to the spin-off, TGC liquidated its wholly-owned subsidiary, Chase
Packaging Corporation ("Old Chase"), with TGC receiving all of Old Chase's
properties and liabilities in cancellation of the Old Chase stock held by TGC.
TGC then formed Chase as a new wholly-owned subsidiary, and TGC transferred to
Chase all the properties and liabilities previously received by TGC as a result
of the liquidation of Old Chase, except TGC retained the Portland, Oregon
facility of Old Chase, which TGC intends to sell. TGC anticipates that most of
the proceeds from this sale will be contributed to Chase to be applied against
Chase's outstanding debt with respect to such facility.
TGC spun-off Chase as a dividend to the holders of TGC's Common Stock and,
on an as-if-converted basis, to the holders of TGC's Series C 8% Convertible
Exchangeable Preferred Stock (the "Preferred Stock"), which was sold in a
private placement. The record date was July 15, 1996 ("Record Date"); however,
the TGC Common Stock has traded with "due bills" since the Record Date and will
continue to do so through the distribution date of the Chase Common Stock, which
date will be the first business day following the effectiveness of the
Registration Statement which the Company intends to file with the Securities and
Exchange Commission. The holders of 6,252,694 shares of TGC Common Stock
outstanding and 1,150,350 shares of Preferred Stock outstanding will receive the
spin-off distribution of Chase Common Stock. An additional 539,837 shares of
Chase Common Stock will be held in escrow and distributed upon the exercise, if
any, of outstanding Warrants and options of TGC. On the Distribution Date, the
holders of TGC Common Stock will receive one-half share of Chase Common Stock
for every one share of TGC Common Stock held. The holders of Preferred Stock
of TGC will receive one-half share of Chase for each share of Common Stock of
TGC as if the Preferred stockholder had converted. The $5.00 per share
Preferred Stock is initially convertible at $.75 per share of Common Stock
through July 1, 1998.
The Company anticipates that the Chase Common Stock will trade over-the-
counter and will be quoted on the OTC Bulletin Board. However, no assurance can
be given that a market in Chase Common Stock will develop. Chase will continue
in the specialty packaging business, and TGC will continue in the geophysical
services business. Although the effective date of the spin-off was July 31,
1996, the Chase Common Stock will not begin trading until its Registration
Statement with the Securities and Exchange Commission has been declared
effective, which is expected to take place in September, 1996.
Item 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information
1) Unaudited Consolidated Pro Forma Balance Sheet for the Six Months
Ended June 30, 1996.
2) Consolidated Pro Forma Statement of Operations for the Year Ended
December 31, 1995.
3) Consolidated Pro Forma Statement of Operations for the Six Months
Ended June 30, 1996.
(c) Exhibits
1) Agreement for Spin-Off of Subsidiary Stock.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TGC INDUSTRIES, INC.
August 9, 1996 By: /s/ Rice M. Tilley, Jr.
Rice M. Tilley, Jr., Assistant Secretary
PRO FORMA FINANCIAL INFORMATION
TGC INDUSTRIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
(First Table Includes 3 Columns of
Balance Sheet)
UNAUDITED CLOSING PROCEEDS
JUNE 30, PRIVATE TO
CURRENT ASSETS 1996 PLACEMENT CHASE
CASH AND CASH EQUIVALENTS $ 131,082 $4,712,797(A) $(2,712,797)(F)
ACCOUNTS RECEIVABLE 2,328,109
PREPAID EXPENSE 819,134
INVENTORIES 2,378,718
TOTAL CURRENT ASSETS 5,657,043
PROPERTY PLANT &
EQUIPT - AT COST
BUILDING 380,999
MACHINERY & EQUIPMENT 8,160,844
LESS: ACCUM DEPRECIATION 4,177,672
4,364,171
LAND 72,890
PROPERTY HELD FOR
SALE (NET)(H) 1,331,834
5,768,895
OTHER ASSETS (NET) 20,449
TOTAL ASSETS $11,446,387 $4,712,797 $(2,712,797)
DEFERRED REVENUE $ 745,489
ACCOUNTS PAYABLE 2,506,852
ACCRUED EXPENSES 1,290,375
CURRENT NOTE PAYABLE 5,860,532
PRIVATE PLACEMENT PROCEEDS 150,000 $ (150,000)(B)
TOTAL CURRENT LIABILITIES 10,553,248
PAYABLE TO CHASE PACKAGING(H) -- --
LONG-TERM DEBT OBLIGATIONS 394,980 (365,813)(C)
STOCKHOLDERS' EQUITY
PREFERRED STOCK -- 1,150,350(D)
COMMON STOCK 625,415 --
PAID-IN CAPITAL 4,702,924 4,078,260(E) $(2,712,797)(F)
ACCUMULATED DEFICIT (4,662,658)
TREASURY STOCK, AT COST
(66,134 SHARES) (167,522) -- --
TOTAL STOCKHOLDERS' EQUITY 498,159 -- --
TOTAL LIABILITIES & EQUITY $11,446,387 $4,712,797 $(2,712,797)
(Second Table Includes last 2
Columns of Balance Sheet)
PRO FORMA
UNAUDITED
SPIN-OFF JUNE 30,
CURRENT ASSETS 1996 1996
CASH AND CASH EQUIVALENTS (1,473)(G) $ 2,129,609
ACCOUNTS RECEIVABLE (1,334,522)(G) 993,587
PREPAID EXPENSE (41,382)(G) 777,752
INVENTORIES (2,378,718)(G) --
TOTAL CURRENT ASSETS -- 3,900,948
PROPERTY PLANT &
EQUIPT - AT COST
BUILDING (380,999)(G) --
MACHINERY & EQUIPMENT (3,974,792)(G) 4,186,052
LESS: ACCUM DEPRECIATION (1,220,686)(G) 2,956,986
-- 1,229,066
LAND (72,890)(G) --
PROPERTY HELD FOR
SALE (NET)(H) -- 1,331,834
-- 2,560,900
OTHER ASSETS (NET) (18,232)(G) 2,217
TOTAL ASSETS $(9,423,694) $ 6,464,065
DEFERRED REVENUE $ (34,476)(G) $ 711,013
ACCOUNTS PAYABLE (1,640,480)(G) 866,372
ACCRUED EXPENSES (789,708)(G) 500,667
CURRENT NOTE PAYABLE (5,791,693)(G) 68,839
PRIVATE PLACEMENT PROCEEDS -- --
TOTAL CURRENT LIABILITIES -- 2,146,891
PAYABLE TO CHASE PACKAGING(H) 1,331,834(H) 1,331,834
LONG-TERM DEBT OBLIGATIONS (29,167)(G) --
STOCKHOLDERS' EQUITY
PREFERRED STOCK -- 1,150,350
COMMON STOCK -- 625,415
PAID-IN CAPITAL (28,632)(G) 6,039,755
ACCUMULATED DEFICIT -- (4,662,658)
TREASURY STOCK, AT COST
(66,134 SHARES) -- (167,522)
TOTAL STOCKHOLDERS' EQUITY -- 2,985,340
TOTAL LIABILITIES &
EQUITY $(6,982,322) $ 6,464,065
TGC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
The following items are explanations of the adjustments to the unaudited balance
sheet at June 30, 1996, reflecting the closing of the private placement and the
spin-off of Chase, assuming these transactions were consummated as of the
balance sheet date, June 30, 1996.
Item (A) The closing of the private placement resulted in net proceeds to TGC,
of approximately $4,712,797. This is gross proceeds of $5,156,250 less
previously advanced proceeds of $150,000, cash sales commissions and estimated
expenses of $293,453.
Item (B) This is the amount of private placement proceeds advanced to TGC prior
to the closing of the private placement.
Item (C) The principal amount certain holders of subordinated debt of TGC are
converting into 73,162 shares of preferred stock.
Item (D) The number of $1 par preferred shares issued upon the closing of the
private placement. Gross proceeds represents 1,031,250 shares, conversion of
debt 73,162 shares, and 45,938 shares represent payment of sales commissions.
Item (E) Gross proceeds of $5,156,250 plus the debt conversion of $365,813,
less the $1 par preferred stock of $1,150,350 and the sales commissions and
estimated expenses of $293,453.
Item (F) Net cash proceeds to TGC of $4,712,797, of which $2,000,000, will be
retained by TGC for the acquisition of certain equipment to be utilized by it
in its geophysical operations. The balance of $2,712,797 will be a cash
contribution to the capital of Chase.
Item (G) The adjustments necessary to reflect the spin-off of Chase assuming
the transaction was consummated as of the balance sheet date, June 30, 1996.
Item (H) The property held for sale is the Portland, Oregon facility of Chase.
TGC intends to subsequently sell this facility and anticipates that most of the
sale proceeds will be contributed to Chase to be applied against the mortgage
indebtedness currently encumbering such facility. The payable to Chase will not
be paid until the facility has been sold and the proceeds received by TGC.
TGC INDUSTRIES, INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
PRO FORMA UNAUDITED
1995 ADJUSTMENTS PRO FORMA
1995
REVENUE
SERVICE REVENUE $ 7,543,240 $ 7,543,240
SALES 14,278,262 $(14,278,262)(A) __
21,821,502 7,543,240
COST AND EXPENSES
COST OF SERVICES 6,758,716 6,758,716
COST OF SALES 13,068,812 (13,068,812)(A) __
SELLING, GENERAL AND
ADMINISTRATIVE 3,141,455 (2,385,493)(A) 755,962
INTEREST EXPENSE 803,582 (750,934)(A) 52,648
WRITE-DOWN FOR IMPAIRMENT
OF GOODWILL 701,378 (701,378)(A) __
24,473,943 (16,906,617) 7,567,326
(LOSS) BEFORE INCOME TAXES (2,652,441)
(LOSS) FROM CONTINUING OPERA-
TIONS BEFORE INCOME TAXES (24,086)
INCOME TAXES __ __
NET (LOSS) $ (2,652,441) $ (24,086)
LESS DIVIDEND REQUIREMENT ON
PREFERRED STOCK 460,140(B) 460,140
(LOSS) ALLOCABLE TO COMMON
STOCKHOLDERS (484,226)
EARNINGS (LOSS) PER COMMON
AND COMMON EQUIVALENT
SHARE $(.46) $(.08)
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES 5,740,067 5,740,067
(A) PRO FORMA ADJUSTMENTS REFLECTING THE SPIN-OFF OF TGC'S WHOLLY OWNED
SUBSIDIARY, CHASE, ASSUMING THE TRANSACTION WAS CONSUMMATED ON JANUARY 1, 1995.
(B) PRO FORMA ADJUSTMENT REFLECTING THE DIVIDEND REQUIREMENT ON THE 8%
CONVERTIBLE EXCHANGEABLE PREFERRED STOCK ASSUMING THE STOCK WAS ISSUED ON
JANUARY 1, 1995.
TGC INDUSTRIES, INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
UNAUDITED PRO FORMA
1996 ADJUSTMENTS
REVENUE
SERVICE REVENUE $ 4,459,927 --
SALES 4,714,683 $(4,714,683)(A)
9,174,610 --
COST AND EXPENSES
COST OF SERVICES 3,774,410 --
COST OF SALES 4,656,976 (4,656,976)(A)
PROVISION FOR OPERATING LOSSES
DURING PHASE OUT PERIOD 180,000 (180,000)(A)
SELLING, GENERAL AND
ADMINISTRATIVE 1,356,814 (957,237)(A)
INTEREST EXPENSE 358,728 (325,585)(A)
10,326,928 (6,119,798)
(LOSS) BEFORE INCOME TAXES (1,152,318) --
INCOME FROM CONTINUING OPERA-
TIONS BEFORE INCOME TAXES
INCOME TAXES __ --
NET EARNINGS (LOSS) $ (1,152,318) --
LESS DIVIDEND REQUIREMENT ON
PREFERRED STOCK -- 230,070(B)
INCOME ALLOCABLE TO COMMON
STOCKHOLDERS
EARNINGS (LOSS) PER COMMON
AND COMMON EQUIVALENT
SHARE $(.19)
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES 6,171,359
UNAUDITED
PRO FORMA
1996
REVENUE
SERVICE REVENUE $ 4,459,927
SALES --
4,459,927
COST AND EXPENSES
COST OF SERVICES 3,774,410
COST OF SALES --
PROVISION FOR OPERATING LOSSES
DURING PHASE OUT PERIOD
SELLING, GENERAL AND
ADMINISTRATIVE 399,577
INTEREST EXPENSE 33,143
4,207,130
(LOSS) BEFORE INCOME TAXES --
INCOME FROM CONTINUING OPERA-
TIONS BEFORE INCOME TAXES 252,797
INCOME TAXES __
NET EARNINGS (LOSS) $ 252,797
LESS DIVIDEND REQUIREMENT ON
PREFERRED STOCK 230,070
INCOME ALLOCABLE TO COMMON
STOCKHOLDERS 22,727
EARNINGS (LOSS) PER COMMON
AND COMMON EQUIVALENT
SHARE $(.0)
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES 6,171,359
(A) PRO FORMA ADJUSTMENTS REFLECTING THE SPIN-OFF OF TGC'S WHOLLY OWNED
SUBSIDIARY, CHASE, ASSUMING THE TRANSACTION WAS CONSUMMATED ON JANUARY 1, 1996.
(B) PRO FORMA ADJUSTMENT REFLECTING THE DIVIDEND REQUIREMENT ON THE 8%
CONVERTIBLE EXCHANGEABLE PREFERRED STOCK ASSUMING THE STOCK WAS ISSUED ON
JANUARY 1, 1996.
TGC INDUSTRIES, INC. AND SUBSIDIARY
COMPUTATION OF FULLY DILUTED EARNINGS (LOSS) PER COMMON SHARE*
SIX MONTHS ENDED JUNE 30, 1996
SIX MONTHS
ENDED
JUNE 30,
1996
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 6,171,359
SHARES ISSUABLE ASSUMING EXERCISE
OF CONVERTIBLE PREFERRED STOCK 7,669,000
SHARES ISSUABLE ASSUMING EXERCISE
OF OUTSTANDING WARRANTS (A)
SHARES REPURCHASED FROM PROCEEDS
OF WARRANT EXERCISE (A)
SHARES ISSUABLE ASSUMING EXERCISE
OF OUTSTANDING INCENTIVE STOCK
OPTIONS (A)
SHARES REPURCHASED FROM PROCEEDS
OF INCENTIVE STOCK OPTION EXERCISE (A)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING, ASSUMING
FULL DILUTION 13,840,359
NET EARNINGS FOR THE PERIOD
ALLOCABLE TO COMMON
SHAREHOLDERS $ 22,727
PREFERRED STOCK DIVIDENDS 230,070
EARNINGS ON A FULLY DILUTED
BASIS $ 252,797
FULLY DILUTED EARNINGS PER
SHARE $ .02
*COMPUTATION IS FURNISHED EVEN THOUGH THE AMOUNTS OF PER SHARE EARNINGS ON A
FULLY DILUTED BASIS ARE NOT REQUIRED TO BE PRESENTED IN THE INCOME STATEMENT
UNDER THE PROVISIONS OF ACCOUNTING PRINCIPLES BOARD OPINION NO. 15 AS THE
COMPUTATION ON A FULLY DILUTED BASIS RESULTS IN AN IMPROVEMENT OF THE EARNINGS
PER SHARE.
(A) NO SHARES ARE SHOWN AS ISSUABLE FROM THE EXERCISE OF WARRANTS OR INCENTIVE
STOCK OPTIONS AS THE MARKET PRICE OF THE STOCK WAS NOT IN EXCESS OF THE EXERCISE
PRICE FOR SUBSTANTIALLY ALL OF THREE CONSECUTIVE MONTHS ENDING JUNE 30, 1996.
EXHIBIT "1"
Agreement for Spin-Off of Subsidiary Stock
This Agreement is executed to be effective as of the 31st day of July,
1996, by and between TGC Industries, Inc., a Texas corporation ("TGC"), and
Chase Packaging Corporation, formerly New Chase Corporation, a Texas corporation
("Chase").
W I T N E S S E T H:
WHEREAS, TGC owns 100% of the issued and outstanding shares of Common Stock
of Chase and thereby holds 100% of the voting stock in Chase;
WHEREAS, TGC will distribute to the holders of its Common Stock and Series
C 8% Convertible Exchangeable Preferred Stock, except for the escrow for the
holders of TGC Derivative Securities (as defined below), all Chase Common Stock
currently held by TGC; and
NOW, THEREFORE, on the basis of the respective representations and
warranties herein set forth and of the covenants and agreements herein
contained, the parties hereto agree as follows:
ARTICLE I.
Plan for Distribution of Chase Common Stock
A. For financial and accounting purposes, the effective date (the
"Effective Date") of the spin-off transaction herein contemplated shall be
July 31, 1996.
B. Promptly after the effective date of the Form 10 Registration
Statement to be filed with the SEC by TGC and Chase, TGC shall make a
distribution to the holders of its Common Stock and to the holders of Series C
8% Convertible Exchangeable Preferred Stock ("Preferred Stock") of all of its
shares of Chase Common Stock except as provided in Article I.C below. The
record date was July 15, 1996 ("Record Date"); however, the Common Stock of TGC
has traded with "due bills" since the Record Date and will continue to do so
through the distribution date of the Chase Common Stock. On the distribution
date, the holders of Common Stock of TGC will receive one-half (1/2) share of
Chase Common Stock for each share of TGC Common Stock held. The holders of TGC
Preferred Stock will receive one-half (1/2) share of Chase Common Stock for each
share of Common Stock of TGC as if the Preferred Stockholder had converted. The
$5.00 per share Preferred Stock is initially convertible at $.75 per share of
Common Stock through July 1, 1998.
C. Additional shares of Chase Common Stock shall be placed in escrow with
an escrow agent so that if, and when, holders as of the Record Date of all
outstanding Warrants of TGC and all outstanding Options of TGC exercisable as
of the Record Date ("Derivative Securities") exercise such Derivative Securities
for shares of TGC Common Stock, they will receive from such escrow account Chase
Common Stock.
D. No fractional shares will be distributed.
ARTICLE II.
No Ruling from the Commissioner of Internal Revenue
Neither TGC nor Chase will apply to the Commissioner of Internal Revenue
for a ruling regarding the federal income tax consequences of any of the
transactions contemplated herein.
ARTICLE III.
Representations and Warranties
A. TGC REPRESENTS AND WARRANTS THAT:
1. Organization and Good Standing. TGC is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Texas and
has corporate power to carry on its business as it is now being conducted.
Copies of TGC's Certificate of Incorporation and Bylaws (certified to be correct
by the Secretary of TGC) have been delivered to Chase and are complete and
correct as of the date hereof. TGC's minute book contains a complete and
accurate record of all meetings and other corporate action of its shareholders
and Board of Directors.
2. Capitalization. As of the date of this Agreement, TGC's authorized
capital stock consists of 25,000,000 shares of $.10 par value Common Stock, of
which 6,252,694 shares were issued and outstanding as of the Effective Date; and
4,000,000 shares of $1.00 par value Preferred Stock, of which 1,150,350 shares
of Series C 8% Convertible Exchangeable Preferred Stock are issued and
outstanding as of the Effective Date. All of the outstanding shares of Common
Stock and Preferred Stock of TGC are validly issued, fully paid, and
non-assessable.
3. Litigation. There is no pending litigation, proceeding,
governmental investigation, or other action that, if successful, would prevent
TGC from performing its agreements and covenants and fulfilling its obligations
under this Agreement; and, to the knowledge of TGC, there is no threat of, or
reasonable basis for, any such litigation, proceeding, governmental
investigation, or other action.
4. No Violation. The execution of this Agreement and the performance
hereunder will not violate the provisions of TGC's Articles of Incorporation,
Bylaws, any note of which TGC is the maker, or any indenture, agreement, or
other instrument to which TGC is party, except insofar as any such instrument
may require consent by a lender, mortgagee, lessor, or other party to such
actions, whose consent TGC agrees to obtain before the Closing Date hereof.
5. Authorization. The execution, delivery, and performance of this
Agreement have been duly authorized and approved by TGC's Board of Directors.
This Agreement and the consummation of the transactions contemplated herein have
been duly and validly authorized by all necessary corporate action on the part
of TGC, and this Agreement is binding upon and enforceable against TGC in
accordance with its terms.
B. CHASE REPRESENTS AND WARRANTS AS FOLLOWS:
1. Organization and Good Standing. Chase is duly organized, validly
existing, and in good standing under the laws of the State of Texas and has
corporate power to carry on its business as it is now being conducted. Copies
of the Articles of Incorporation and Bylaws of Chase (certified to be correct
by the Secretary of Chase) have been delivered to TGC and are complete and
correct as of the date hereof.
2. Litigation. There is no pending litigation, proceeding,
governmental investigation, or other action that, if successful, would prevent
Chase from performing its agreements and covenants and fulfilling its
obligations under this Agreement; and, to the knowledge of Chase, there is no
threat of or reasonable basis for any such litigation, proceeding, governmental
investigation, or other action.
3. Disclosure. To the knowledge of Chase, no representation or
warranty by it and no statement or certificate furnished or to be furnished by
it to TGC pursuant to the provisions hereof contains or will contain any untrue
statement of a material fact, or omits or will omit to provide the information
required by the provisions hereof relating to such representation, warranty,
statement, or certificate.
4. No Violation. The execution of this Agreement by Chase does not,
and performance hereof will not, violate the provisions of the Articles of
Incorporation or Bylaws of Chase, the provisions of any note of which Chase is
the maker, or the provisions of any indenture, agreement, or other instrument
to which Chase is a party.
5. Authorization. The execution, delivery, and performance of this
Agreement by Chase have been duly and validly authorized and approved by all
necessary corporate action.
6. Capitalization. The authorized common capital stock of Chase
consists of 25,000,000 shares of .10 par value Common Stock of which 7,500,684
shares of Common Stock were issued and outstanding as of the Effective Date.
ARTICLE IV.
General Provisions
A. Escrow Agreement. In addition to paragraph "A" above, an express
condition precedent to the obligations of TGC under this Agreement is that Chase
must execute an escrow agreement (in the form of Agreement attached hereto as
"Exhibit A") to cover TGC's obligation to issue Chase Common Stock to holders
of TGC Derivative Securities as required by Article I.C. hereof.
B. Benefit and Assignment. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto, TGC and Chase. The rights of TGC
and Chase hereunder may not be assigned except by an agreement in writing signed
by TGC and Chase.
C. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
D. Notices. All notices, requests, demands, and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or mailed, certified mail, first class, postage prepaid, to TGC at:
Mr. Herbert M. Gardner
26 Broadway, Suite 815
New York, New York 10004
and
Mr. Rice M. Tilley, Jr.
Law, Snakard & Gambill
500 Throckmorton Street, Suite 3200
Fort Worth, Texas 76102
or if to Chase, to
Mr. Doug Kirkpatrick
Chief Financial Officer
Chase Packaging Corp.
2550 Northwest Nicolai Street
Portland, OR 97210
E. Expenses. All expenses incurred in connection with this Agreement and
the transactions herein provided for shall be paid by TGC.
F. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
G. Headings. All paragraph headings herein are inserted for convenience
only and shall not modify or affect the construction or interpretation of any
provision of this Agreement.
H. Amendment, Modification, and Waiver. This Agreement may be modified,
amended, and supplemented by mutual written agreement of the parties hereto.
I. Entire Agreement. This Agreement, the Exhibits attached hereto, and
the other agreements specifically provided for herein represent the entire
Agreement of the parties hereto with respect to the subject matter hereof.
J. Prior Negotiations. All prior negotiations and discussions by and
among the parties hereto which are not reflected or set forth in this Agreement
or the Exhibits attached hereto are merged into this Agreement and shall have
no force or effect.
K. Termination. This Agreement may be terminated at any time prior to
the Closing Date as follows:
1. By the consents of the Boards of Directors of both TGC and Chase;
2. By TGC if the conditions contained herein to which Chase's
obligations are subject have not been fulfilled or waived by Chase;
3. By Chase if the conditions contained herein to which TGC's
obligations are subject have not been fulfilled or waived by TGC.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
TGC INDUSTRIES, INC.
By: /s/ Robert J. Campbell
Name: Robert J. Campbell
Title:Vice Chairman of the Board
CHASE PACKAGING CORPORATION
By: /s/ William J. Barrett
Name: William J. Barrett
Title: Secretary
EXHIBIT "A" TO AGREEMENT FOR SPIN-OFF OF SUBSIDIARY STOCK
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is entered into as of July 31,
1996, by and among TGC Industries, Inc., a Texas corporation ("TGC"), Chase
Packaging Corporation, formerly New Chase Corporation, a Texas corporation
("Chase"), and American Stock Transfer & Trust Company (the "Escrow Agent") for
the benefit of the holders (as of a record date of July 15, 1996) of those TGC
Warrants and Options (the "Derivative Securities") which are listed in the
Exhibit "A" attached hereto and which are convertible into TGC's Common Stock
(the maximum number of shares of TGC Common Stock into which such securities are
convertible being specifically set out in such Exhibit "A").
Effective as of the date of this Agreement, TGC has effected a spin-off
(the "Spin-Off") to its shareholders of all of the Common Stock of Chase, a
wholly-owned operating subsidiary of TGC. As a result of such Spin-Off
transaction, the holders of TGC Common Stock and Preferred Stock will receive
Chase Common Stock. The record date is July 15, 1996 ("Record Date"); however,
the Common Stock of TGC has traded with "due bills" since the Record Date and
will continue to do so through the distribution date of the Chase Common Stock,
which date will be the first business day following the effectiveness of the
Registration Statement which the Company intends to file with the Securities and
Exchange Commission. On the distribution date, the holders of TGC Common Stock
will receive one-half (1/2) share of Chase Common Stock for each share of TGC
Common Stock held. The holders of TGC Preferred Stock will receive one-half
(1/2) share of Chase Common Stock for each share of Common Stock of TGC as if
the Preferred Stockholder had converted. The $5.00 per share Preferred Stock
is initially convertible at $.75 per share of Common Stock through July, 1998.
No fractional shares will be distributed.
Under the terms of the Derivative Securities, the holders thereof will be
entitled to receive, in the event of exercise of their option or right to
convert, Chase Common Stock. Upon any such exercise of Derivative Securities,
Chase will issue and deliver the Chase Common Stock to be received by the holder
of the Derivative Securities.
In order to insure that there will be available for delivery to the holders
of the Derivative Securities the Chase Common Stock to which each holder will
be entitled upon conversion of his, her, or its Derivative Securities, Chase has
issued 539,837 shares of its Common Stock to TGC in connection with the
organization of Chase, and TGC shall thereupon deliver to the Escrow Agent a
certificate or certificates representing such 539,837 shares of Chase Common
Stock.
The purpose of this Agreement is to state the rights and obligations of the
parties hereto concerning such 539,837 shares of Chase Common Stock which will
be held by the Escrow Holder in escrow pursuant to the terms of this Agreement
for the benefit of the holders of the Derivative Securities.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties do hereby represent, warrant, and agree with each other, and
the Escrow Agent, as follows:
1. Issuance and Delivery of Stock into Escrow.
a. Chase Stock. Under the terms of the Spin-Off Agreement between TGC
and Chase, Chase hereby agrees to issue 539,837 shares of its Common
Stock to TGC for issuance upon the exercise of the TGC Derivative
Securities, which are listed in Exhibit A, together with such other
documents and instruments as may be required to effectuate such delivery
and to transfer title to such shares to the Escrow Agent and to satisfy
the other intents and purposes of this Agreement. TGC agrees to deliver
to the Escrow Agent the certificate or certificates representing such
shares of Chase Common Stock.
b. Obligation of Escrow Agent. The Escrow Agent agrees to dispose of
the securities to be deposited in escrow hereby in accordance with the
terms and provisions of this Agreement.
2. Beneficial Ownership. Pending exercise of the Derivative Securities,
beneficial ownership of such shares shall be in the Escrow Agent. The Escrow
Agent hereby waives the right to receive any dividends or other considerations
with respect to such shares (except in connection with the "stock adjustments"
referred to in Section "5" to follow). Neither the Escrow Agent nor anyone else
may vote the shares.
3. Termination. The shares deposited in escrow shall remain in escrow
until disposed of in accordance with the terms of this Agreement; provided,
however, that to the extent and only to the extent that the Derivative
Securities have not been exercised within the time limitation prescribed in the
Derivtaive Securities, this Agreement shall terminate and the Escrow Agent shall
release to Chase all of the shares of Common Stock which remain deposited
hereunder.
4. Exercise. If, as, and when the holders of the Derivative Securities
elect to exercise their exercise privilege, they will be entitled to receive the
number of Shares that they would have owned had they exercised their Derivative
Securities prior to the July 15, 1996 record date for the Spin-off. In the event
of any adjustment in the number and/or type of shares (held in escrow or
issuable upon exercise of other securities held in escrow), the securities to
be received upon exercise of the Derivative Securities outstanding as of the
date of adjustment shall be proportionately increased or decreased to reflect
such adjustment. Upon TGC's receipt of notice that a holder of a Derivative
Security has exercised his, her, or its exercise privilege, TGC shall notify
Chase and the Escrow Agent of the number of Shares to be transferred to such
holder. The Escrow Agent shall then return to Chase for cancellation the
certificate representing the Common Stock and any other Chase securities held
by it and shall instruct Chase to: (a) issue a new certificate or certificates
to such holder representing the number of shares of Common Stock which he, she,
or it is entitled to receive and to deliver such certificate or certificates to
the Escrow Agent for further delivery to such holder; and (b) issue a new
certificate to the Escrow Agent representing the number of shares (if any) of
Common Stock not covered by such exercise of the exercise privilege.
Until all shares held in escrow have been released from escrow, Chase shall
issue and deliver to the Escrow Agent one or more new certificates evidencing
ownership of the number of shares of Common Stock equal to the difference
between 539,837 and the total number previously released from escrow, together
with such other documents and instruments as may be required to effectuate the
transfer of title to the Common Stock and the other intents and purposes of this
Agreement which instruments shall include one or more stock powers duly endorsed
in blank with signatures guaranteed. If the number of shares to be transferred
to one or more holders of Derivative Securities exceeds the number of shares
held by the Escrow Agent, Chase shall issue one or more new certificates
evidencing the ownership by the holders of the Derivative Securities of the
number of shares equal to the difference between the number they are entitled
to receive and the number actually held by the Escrow Agent.
5. Stock Adjustments. Chase agrees to make adjustments in the securities
held in escrow upon the occurrence of the events and in the manner set forth
below:
a. Stock dividends. In the event Chase declares a dividend payable
otherwise than out of consolidated earnings or consolidated earned
surplus, determined in accordance with generally-accepted accounting
principles, Chase agrees to add such dividend to the escrow pursuant to
this Escrow Agreement. For purposes of the foregoing, a dividend other
than in cash shall be considered payable out of earnings or surplus
(other than revaluation or paid-in surplus) only to the extent that such
earnings or surplus are charged an amount equal to the fair value of
such dividend as determined by the Board of Directors of Chase;
b. Subdivision or Combination of Stock. In case Chase at any time
subdivides its outstanding shares of Common Stock into a greater number
of shares, the increased number of shares of Common Stock resulting from
such subdivision shall be held in escrow pursuant to this Escrow
Agreement. Conversely, in case the outstanding number of shares of
Common Stock of Chase are combined into a smaller number of shares, the
shares of Common Stock held in escrow pursuant to this Escrow Agreement
shall be reduced to reflect such combinations; and
c. Reorganization, Reclassification, Consolidation, Merger, or Sale.
In the event of any capital reorganization or reclassification of the
capital stock of Chase, a consolidation or merger of Chase with another
corporation, or the sale of all or substantially all of its assets to
another corporation effected in such a way that the holders of Common
Stock are entitled to receive stock, securities, or assets with respect
to or in exchange for the Common Stock or other types of securities then
held in escrow, then, as a condition to such reorganization,
reclassification, consolidation, merger, or sale, Chase shall place the
stock, securities, or assets that would have been distributed to holders
of outstanding Common Stock or other securities in the amount of such
Common Stock or other securities then held in escrow into escrow
pursuant to this Escrow Agreement. Chase further agrees not to effect
any such consolidation, merger, or sale unless prior to the consummation
thereof the successor corporation (if other than Chase) resulting from
such consolidation or merger, or the corporation into or for which the
outstanding shares of Common Stock or other securities held in escrow
are changed or exchanged in connection with such merger or
consolidation, or the corporation purchasing such assets, agrees by an
instrument in writing, satisfactory in form and substance to the holders
of the Derivative Securities, to be bound by the terms of this Escrow
Agreement as the full or partial successor, as the case may be, of
Chase.
6. Escrow Agent. In acting hereunder, the Escrow Agent shall not be
liable for any act done or omitted by it in good faith. The Escrow Agent shall
have no duties or obligations other than those stated herein and shall be
protected in acting upon any notice, certificate, or other communication, not
only as to its due execution and the validity and effectiveness of its
provisions, but also as to the truth and acceptability of the information
therein contained. The Escrow Agent shall be entitled to receive from TGC a
reasonable fee for its services. In addition, in the event of any actual or
threatened litigation concerning the role of the Escrow Agent under this
Agreement, the Escrow Agent shall be entitled to receive from TGC reimbursement
for all reasonable costs and disbursements which may be imposed upon the Escrow
Agent or incurred in connection with its acceptance of appointment as Escrow
Agent hereunder or the performance of its duties hereunder. However, under no
circumstances will the Escrow Agent have a security interest, lien, or other
type of encumbrance on the securities or other properties held in escrow.
7. Interpleader. Should any controversy arise between the undersigned
with respect to this Agreement or with respect to the right to receive the
Shares, the Escrow Agent may institute a bill of interpleader or other
appropriate legal proceeding in any court of competent jurisdiction to determine
the rights of the parties.
8. Notices. All notices, requests, demands, and other communication
hereunder shall be in writing and shall be deemed to have been duly delivered
if delivered in person or sent by certified United States mail, postage prepaid:
a. If to the Escrow Agent, to American Stock Transfer & Trust Company,
40 Wall Street, 46th Floor, New York, New York, 10005;
b. If to Chase, to Mr. Doug Kirkpatrick, Chase Packaging Corp., 2550
Northwest Nicolai Street, Portland, OR 97210;
c. If to TGC, to Mr. Herbert M. Gardner, 26 Broadway, Suite 815, New
York, New York, 10004.
9. Controlling Law. This Escrow Agreement shall be controlled,
construed, and enforced in accordance with the laws of the State of Texas,
cannot be changed or terminated orally, and shall be binding upon and inure to
the benefit of the parties hereto, and their respective successors or personal
representatives.
TGC INDUSTRIES, INC.
By:
Name: ______________________________
Title: _______________________________
CHASE PACKAGING CORP.
By:
Name: ______________________________
Title: _______________________________
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By:
Name: ______________________________
Title: _______________________________
The undersigned hereby acknowledges completion of the services of the
Escrow Agent in the handling of the Escrow Agreement described above in a manner
satisfactory and acceptable to us, and in consideration of the premises we do
hereby release and discharge the Escrow Agent from any and all liability
thereunder.
Date:
TGC INDUSTRIES, INC.
By:
Name: ______________________________
Title: _______________________________
CHASE PACKAGING CORP.
By:
Name: ______________________________
Title: _______________________________
Exhibit "A"
DERIVATIVE SECURITIES
The following table sets forth the securities of TGC Industries, Inc.,
("TGC") which are exercisable into TGC's Common Stock ("TGC Common Stock") and,
following the Spin-Off, Chase Packaging Corporation ("Chase") Common Stock
("Chase Common Stock"), and the maximum number of shares of TGC Common Stock and
Chase Common Stock into which such Derivative Securities are exercisable.
TGC Number of Shares
Derivative of TGC Number of Shares of
Securities Common Stock Chase Common Stock
Warrants 887,174 443,587
Options (1986 Plan) 39,168 19,584
Options (1993 Plan) 153,333 76,666
TOTAL 1,079,675 539,837
