U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
ANNUAL REPORT UNDER SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1998
Commission File Number 0-14908
TGC INDUSTRIES, INC.
(Name of small business issuer of its charter)
Texas 74-2095844
______________________ _____________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1304 Summit, Suite 2
Plano, Texas 75074
_______________________ _____________________
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (972) 881-1099
_______________
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act:
Common Stock ($.30 Par Value)
Series C 8% Convertible Exchangeable Preferred Stock ($1.00 Par Value).
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 __
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will 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-
KSB or any amendment to this Form 10-KSB. (X)
State issuer's revenues (from continuing operations) for its most recent
fiscal year: $17,073,506
State the aggregate market value of the voting stock (Common Stock and Series
C Preferred Stock) held by non-affiliates computed by reference to the price
at which the stock was sold on March 18, 1999: $3,211,693
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at March 18, 1999
_____________________________ ______________________________
Common Stock ($.30 Par Value) 2,219,822
Documents Incorporated by Reference
___________________________________
Document Part of the Form 10-KSB Into Which
the Document is Incorporated
Portions of the Proxy Statement Items 9 through 12 of Part III
for Annual Meeting of Shareholders
to be held on June 3, 1999
Part I
ITEM 1. DESCRIPTION OF BUSINESS.
TGC Industries, Inc. ("TGC" or the "Company") is a Texas corporation
engaged in the geophysical service business, primarily conducting Three-D
("3-D") surveys for clients in the oil and gas business. TGC's principal
business office is located at 1304 Summit Avenue, Suite 2, Plano, Texas
75074. (Telephone: 972-881-1099).
History
In April 1980, Supreme Industries, Inc., formerly ESI Industries, Inc.,
("Supreme") formed a wholly owned subsidiary that acquired certain equipment,
instruments, and related supplies of Tidelands Geophysical Co., Inc.
("Tidelands"), a Houston-based corporation that had been organized in 1967
and was engaged in the business of conducting seismic, gravity, and magnetic
surveys under contracts to companies in the exploration for oil and gas. In
July 1986, Tidelands' name was changed to TGC Industries, Inc. ("TGC"). On
June 30, 1986, the Board of Directors of Supreme and TGC approved a spin-off
whereby substantially all of the shares of TGC owned by Supreme were
distributed as a stock dividend to Supreme security holders.
On July 30, 1993, TGC acquired, through a wholly owned subsidiary, Chase
Packaging Corporation ("Chase"), a specialty packaging business, principally
supplying products to the agricultural industry, through the purchase of
certain assets of the Chase Packaging division of Union Camp Corporation.
In June 1996, the Board of Directors of TGC approved the spin-off of
Chase, effective July 31, 1996, whereby all of the shares of Chase owned by
TGC were distributed as a stock dividend to the shareholders of TGC under the
terms of the spin-off transaction. Pursuant to the terms of the spin-off, and
following clearance by the Securities and Exchange Commission on March 7,
1997, the holders of TGC's Common Stock and, on an as-if-converted basis, the
holders of TGC's Series C 8% Convertible Exchangeable Preferred Stock
received the dividend distribution of Chase Common Stock.
During July 1996, the Company issued 1,150,350 shares of Series C 8%
Convertible Exchangeable Preferred Stock in a private placement offering with
gross proceeds of approximately $5,800,000.
The Preferred Stock sold in the private placement entitles the holder to
receive cumulative cash dividends as, when and if declared by the Board of
Directors at a rate of 8% per annum prior to any dividend or distribution in
cash or other property on any class or series of stock junior to the
preferred stock. The dividends on the Preferred Stock are payable as, when
and if declared by the Board of Directors on January 1 and July 1 of each
year, commencing January 1, 1997. The dividend on the Preferred Stock is
cumulative.
From the proceeds of the private placement, TGC made a capital
contribution to Chase of $2,716,403 to facilitate the spin-off; and TGC
retained $2,000,000 for the purchase of state-of-the-art geophysical
recording equipment. Under the terms of the spin-off, the effective date of
which was July, 31, 1996, TGC completed the spin-off of the business and
assets relating to the Chase operations, except TGC retained the Portland,
Oregon facility and canceled all inter-company debt owed by Chase to TGC.
The distribution of Chase Stock was March 7, 1997. On March 18, 1997, TGC
sold the Portland, Oregon facility for $2,430,000 and applied such proceeds
in satisfaction of the mortgage indebtedness with respect to such facility
and in satisfaction of a debt obligation owing by TGC to Chase to pay to
Chase any such proceeds in excess of the amount of the mortgage indebtedness.
As of July 31, 1996, the effective date of the spin-off, TGC Industries,
Inc.'s only business has been the geophysical service business, primarily
conducting Three-D ("3-D") surveys for clients in the oil and gas business.
General Description of the Company's Business
Geophysical Business
Since its formation, TGC has engaged in the domestic geophysical
services business principally through conducting seismic surveys and to a
lesser extent through sales of gravity information from the Company's Data
Bank to companies engaged in the exploration for oil and gas in the United
States. Geophysics is the study of the structure and composition of the
earth's interior and involves the measuring and interpretation of the earth's
properties with appropriate instruments. Such studies are generally
conducted by means of surveys performed by field crews employing seismic,
gravity, or magnetic instruments to acquire data that is then interpreted by
various means to obtain useful information for oil and gas companies. The
two survey techniques used by the Company in acquiring geophysical data are
seismic and gravity. Land seismic surveys are the Company's principal method
of data acquisition and are by far the most widely used geophysical
technique. TGC's seismic crews use dynamite as the primary energy source for
such surveys.
In July 1996, the Company purchased an Opseis Eagle 24-BIT 1500 channel
recording system, cables and geophones for approximately $2,900,000, using
$2,000,000 from proceeds from the Company's preferred stock private
placement, a $750,000 equipment loan, and funds from internal cash flow. In
late November 1996, the Company purchased a second 1000 channel Eagle system
using the proceeds and trade-in from TGC's two older systems along with
equipment financing of $855,000 and internal cash flow. In 1997, TGC
purchased an additional 1500 channels utilizing equipment financing of
$2,242,685. The greater precision and improved subsurface resolution
obtainable from 3-D seismic data have enabled energy companies in the U.S. to
better evaluate important subsurface features. The processing and
interpretation of seismic data acquired by TGC are transmitted by the Company
to data processing centers (not owned or operated by the Company) designated
by the clients for processing.
The Company's Data Bank contains gravity data, and to a lesser extent
magnetic data, from many of the major oil and gas producing areas located
within the United States. TGC does not have a seismic data bank. Data Bank
information has been amassed through participatory surveys as well as
speculative surveys funded by TGC alone. All data and interpretations may be
licensed to customers at a fraction of the cost of newly acquired data.
As a service business, the Company's domestic geophysical services
business is not dependent upon the supply of raw materials or any other
products and, therefore, the Company does not have arrangements with any raw
material suppliers.
The Company has the capability of utilizing two seismic crews to perform
its geophysical services and, in any given period, these crews may generate
a significant portion of their respective revenues from one or more clients.
For the year ended December 31, 1998, three customers accounted for twenty-
four percent (24%),twenty two percent (22%) and seventeen percent (17%) of
the Company's revenue, respectively. The Company enters into a general or
master agreement with each of its clients for the provision of geophysical
services and a supplementary agreement (which becomes a part of the general
agreement) with respect to each particular job that the Company performs for
a client. Under the terms of such agreements the Company generally contracts
to supply all personnel, transportation and equipment to perform seismic
surveys for a given prospect for a fixed price plus reimbursement for certain
third party charges. The Company generally bills its clients on a
progressive basis over the term of the contract. The Company is generally
obligated to maintain insurance against injury or damage to persons or
equipment arising from the performance of its services and to indemnify its
customers against all claims and liability arising therefrom. Management
believes this insurance coverage is sufficient.
Prior to the second half of 1998, activity in the U.S. Geophysical
Industry had increased with the success and acceptance of 3-D surveys. The
improved cost effectiveness gained from the data acquisition and processing
of 3-D surveys had resulted in increased profits for the U.S. operations of
the major and independent oil companies. With these cost advantages and the
uncertainty of foreign operations, many of the major U.S. oil companies
increased participation in the domestic oil industry. Beginning
approximately in mid 1998, activity declined significantly due to a decline
in the price of oil.
Due to a significant decline in spending for seismic services by a
number of oil and gas clients as a result of significantly lower oil prices,
TGC has reduced its operations to one seismic acquisition crew. This
decrease in spending was primarily a result of the significant decline in oil
and gas prices (principally oil prices) during 1998. TGC is continuing to
obtain contracts for work but at lower prices than in 1998. As a result of
this reduced activity the first half of 1999 will not compare favorably with
1998. Company management has activated expense reduction and cost
containment programs to remain highly competitive through this period of
reduced industry activity.
As of December 31, 1998, TGC employed 72 employees, supporting one
seismic crew with a total of 65 crewmembers and direct support members. The
Company believes its relationship with its employees to be satisfactory.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company's headquarters are in leased facilities located in Plano,
Texas from which it conducts all its current operations. These facilities
include 8,000 square feet of office and warehouse space and an outdoor
storage area of approximately 10,000 square feet. The monthly rent is
$4,460. This facility is used to house corporate offices and serves as the
headquarters for the geophysical business. The Company is not responsible for
insuring the facilities. The condition of the Company's facilities is good
and TGC management believes that these properties are suitable and adequate
for the Company's foreseeable needs.
On March 18, 1997, TGC sold the Portland, Oregon facility formerly
utilized by Chase Packaging Corporation for $2,430,000 and applied such
proceeds in satisfaction of the mortgage indebtedness with respect to such
facility and in satisfaction of a debt obligation owing by TGC to Chase to
pay to Chase any such proceeds in excess of the amount of the mortgage
indebtedness.
ITEM 3. LEGAL PROCEEDINGS.
The Company is a defendant in various legal actions that arose out of
the normal course of business. In the opinion of Management, none of the
actions will result in any significant loss to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY. HOLDERS.
On November 5, 1998, shareholders approved an amendment to Article Four
of the Company's Articles of Incorporation, as amended, to effect a one-for-
three reverse stock split of the Company's Common Stock, whereby each three
shares of issued and outstanding Common Stock was converted and combined into
one share of Common Stock (the "Reverse Split"). The Common Stock commenced
trading on a post-Reverse Split basis on November 9, 1998.
Part II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER. MATTERS.
The Company's Common Stock has traded on the NASDAQ SmallCap Market
under the symbol "TGCI" since September 25, 1994.
The number of shareholders of record of TGCI's Common Stock as of March
12, 1999, was 392. Due to the number of shares held in nominee or street
name, the Company believes that there are a significantly greater number of
beneficial owners of its Common Stock. As of such date, CEDE & CO. held
748,746 shares in street name. On March 18, 1999, TGC's Common Stock was
quoted at a closing price of $1.094. High and low sales prices (adjusted for
the Reverse Split) of TGC's Common Stock for the period of January 1, 1997,
to December 31, 1998, were as follows:
Sales Price of TGC Common Stock
Date High Low
October 1 -- December 31, 1998 2 1/4 3/4
July 1 -- September 30, 1998 2 5/8 1 1/2
April 1 -- June 30, 1998 3 3/8 1 11/16
January 1 -- March 31, 1998 3 9/16 2 5/8
October 1 -- December 31, 1997 4 7/8 2 13/16
July 1 -- September 30, 1997 5 1/4 3
April 1 -- June 30, 1997 3 3/4 2 5/8
January 1 -- March 31, 1997 5 1/4 3 3/4
The above sale quotations were furnished to TGC by the NASD.
On November 6, 1998, the Company effected a one-for-three reverse stock
split of its Common Stock, whereby each three shares of issued and
outstanding Common Stock was converted and combined into one share of Common
Stock. The Common Stock commenced trading on a post-Reverse Split basis on
November 9, 1998.
As a consequence of the Reverse Split: (1) pursuant to the provisions
for adjustment of the conversion ratio of the Company's Preferred Stock, the
conversion price per share of Common Stock on a post-Reverse Split basis
increased from $0.75 to $2.25 per share; and (2) pursuant to the terms for
adjustment to the exercise price of the Company's Common Share Purchase
Warrants, each Warrant purchases on a post-Reverse Split basis, 1/3 of a
share of Common Stock at a price of $1.125 per share of Common Stock.
On November 2, 1998, the TGC Board of Directors voted to extend the
expiration date of its outstanding Common Stock Purchase Warrants and to
delay the increase in the conversion price of its Preferred Stock until
December 31, 1999. On December 10, 1998, the Board of Directors voted to
further extend the expiration date of its warrants and to delay the increase
in the conversion price of its Preferred Stock until December 31, 2000. The
Common Stock Purchase Warrants were otherwise scheduled to expire on December
31, 1998, and the conversion price of the Preferred Stock was otherwise
scheduled to increase, following the conversion price adjustment described
above, from $2.25 per share of Common Stock to $3.75 per share of Common
Stock on December 31, 1998. As modified, after December 31, 2000 and prior
to the close of business on December 31, 2001, the conversion price of the
Preferred Stock will be $3.75 per share of Common Stock. Thereafter, the
conversion price will be $6.00 per share of Common Stock.
Dividends are payable on the Company's Common Stock at the discretion of
the Board of Directors. In light of the working capital needs of the
Company, it is unlikely that cash dividends will be declared and paid on the
Company's Common Stock in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS.
Results of operations
Geophysical Operation (Continuing Operations)
Revenues for the year ended December 31, 1998, increased to $17,073,506
from revenue of $16,307,577 for the year ended December 31, 1997. Net
earnings before dividend requirements on preferred stock was $1,831,602 for
the year ended December 31, 1998. Net earnings before dividend requirements
on preferred stock was $1,306,039 for the year ended December 31, 1997.
Included in the 1997 net earnings was a $170,000 income tax benefit. EBITDA
was $3,872,761 or $.81 per share on a fully diluted basis for the year ended
December 31, 1998, compared with $2,764,014 or $.57 per share on a fully
diluted basis for the year ended December 31, 1997.
The Company's shareholders, at a special meeting of shareholders on November
5, 1998, approved an Amendment to the Company's Articles of Incorporation to
effect a one-for-three reverse stock split of its Common Stock (the "Reverse
Split"). The Reverse Split was effected on November 6, 1998, and the Common
Stock commenced trading on a post-Reverse Split basis on November 9, 1998.
All references to number of shares, except shares authorized, and to per
share information have been adjusted to reflect the reverse stock split on a
retroactive basis.
TGC's cost of services, as a percentage of revenue, decreased from 86.1% in
1997 to 80.9% in 1998. Selling, general and administrative expense, as a
percentage of revenues, increased from 5.6% in 1997 to 6.8% in 1998.
Interest expense increased by $59,322 in 1998 when compared to 1997 primarily
as a result of the financing of additional geophysical equipment in the
second half of 1997. Non-cash charges for depreciation and amortization were
$1,778,454 in 1998 compared with $1,425,817 in 1997.
During 1998, TGC purchased approximately $1,150,000 additional equipment to
better serve our clients in their pursuit of Three-D ("3-D") seismic data
acquisition. This additional equipment was financed with a combination of
equipment-related financing and internal cash flow.
Due to a significant decline in spending for seismic services by a number of
oil and gas clients as a result of significantly lower oil prices, TGC has
reduced its operations to one seismic acquisition crew. This decrease in
spending was primarily a result of the significant decline in oil and gas
prices (principally oil prices) during 1998. For over thirty years, TGC has
successfully served the geophysical industry. The Company is continuing to
obtain contracts for work but at lower prices than in 1998. As a result of
this reduced activity the first half of 1999 will not compare favorably with
1998. Company management has activated expense reduction and cost
containment programs to remain highly competitive through this period of
reduced industry activity. Management is aggressively pursuing contract
opportunities and believes that a recovery in the price of oil and gas in the
second half of 1999 would not have a significant upward effect on 1999
results, but it could stop further deterioration and constitute a clear
indication of better prospects for 2000 and 2001.
This report contains forward-looking statements which reflect the view of
Company's management with respect to future events. Although management
believes that the expectations reflected in such forward-looking statements
are reasonable, it can give no assurance that such expectations will prove to
have been correct. Important factors that could cause actual results to
differ materially from such expectations are disclosed in the Company's
Securities and Exchange Commission filings, and include, without limitation,
the unpredictable nature of forecasting weather, the potential for contract
delay or cancellation, and the potential for fluctuations in oil and gas
prices. The forward-looking statements contained herein reflect the current
views of the Company's management and the Company assumes no obligation to
update the forward-looking statements or to update the reasons actual results
could differ from those contemplated by such forward-looking statements.
At December 31, 1998, the Company had net operating loss carry forwards of
approximately $3,600,000 available to offset future taxable income, which
expires at various dates through 2013.
Discontinued Operations
During June 1996, the Board of Directors approved the spin-off of Chase
Packaging Corporation ("Chase"), whereby all of the shares of Chase would be
distributed as a stock dividend to the shareholders of TGC common stock and,
on an as if converted basis, TGC preferred stock, effective July 31, 1996.
The date of the distribution of Chase's stock was March 7, 1997. The spin-
off distribution of Chase to TGC stockholders reduced stockholders' equity by
$103,976, which represents the book value of the net assets of Chase as of
March 7, 1997. In addition, on March 18, 1997, TGC sold the Portland, Oregon
manufacturing facility of Chase for approximately $2,400,000, and applied
such proceeds in satisfaction of the mortgage indebtedness with respect to
such facility and in satisfaction of a debt obligation owing by TGC to Chase
to pay to Chase any such proceeds in excess of the amount of the mortgage
indebtedness.
Financial Condition
Cash of $2,259,490 was provided by operations for the twelve months
ended December 31, 1998, compared with cash provided by continuing operations
of $2,426,320 for the same period of the prior year. The funds generated in
1998 were primarily attributable to net earnings before non-cash depreciation
and amortization charges. Cash used in investing activities for 1998 was
primarily for additions to equipment for geophysical field operations. In
addition, during 1998, the Company financed the acquisition of geophysical
equipment through notes payable in the amount of $778,131. Cash used in
financing activities were primarily for the payment of principal payments on
debt obligations in the amount of $1,386,194.
Working capital deficit decreased $1,377,166 to $870,721 from the December
31, 1997, balance of $2,247,887, primarily as a result of a decrease in
billings in excess of costs and estimated earnings on uncompleted contracts
and trade accounts payable. The Company's current ratio increased to .72 to
1.0 at December 31, 1998, compared to .57 to 1.0 at December 31, 1997.
Stockholders' equity increased to $5,127,856 at December 31, 1998, from the
December 31, 1997, of $3,729,993 due primarily to the net earnings of the
Company.
During the fourth quarter of 1998, the Company renewed its revolving bank
line of credit with a major bank in an amount of up to $1,000,000. The line
of credit bears interest at prime plus 1.5%, is collateralized by equipment
and accounts receivable and requires the maintenance of certain financial
ratios.
The Company began preparation for the year 2000 issues during 1996. In late
1996, TGC upgraded and replaced its accounting software. In addition, TGC
installed a small personal computer network. The cost of these additions,
which are year 2000 compliant, was approximately $15,000. TGC uses an
outside source for its payroll services and has been assured by this vendor
that its software is year 2000 compliant. TGC will need to make a few
additional hardware upgrades in order for the total system to be year 2000
compliant. These upgrades will be completed by September 30, 1999, at which
time the Company will be fully year 2000 compliant. The cost of these
upgrades will be approximately $2,000.
The Company anticipates that available funds, together with anticipated cash
flows generated from future operations and amounts available under its
revolving line of credit will be sufficient to meet the Company's cash needs
during 1999, so long as one of the Company's two crews is employed, of which
there is no assurance.
ITEM 7. FINANCIAL STATEMENTS.
Financial Statements
December 31, 1998 and 1997
CONTENTS
Report of Independent Certified Public Accountants p. 13
Financial Statements
Balance Sheets p. 14
Statements of Earnings p. 16
Statement of Stockholders' Equity p. 17
Statements of Cash Flows p. 18
Notes to Financial Statements p. 20
Report of Independent Certified Public Accountants
Board of Directors and Stockholders
TGC Industries, Inc.
We have audited the accompanying balance sheets of TGC Industries, Inc. as
of December 31, 1998 and 1997, and the related statements of earnings,
stockholders' equity and cash flows for the years then ended. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TGC Industries, Inc. as
of December 31, 1998 and 1997, and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ Grant Thornton LLP
Dallas, Texas
February 5, 1999
TGC Industries, Inc.
BALANCE SHEETS
December 31,
ASSETS 1998 1997
________ ________
CURRENT ASSETS
Cash and cash equivalents $702,999 $120,535
Trade accounts receivable 1,113,185 2,501,882
Costs and estimated earnings in excess
of billings on uncompleted contracts 144,972 -
Prepaid expenses and other 126,419 134,629
Deferred income taxes 202,000 170,000
_________ __________
Total current assets 2,289,575 2,927,046
PROPERTY AND EQUIPMENT - at cost
Machinery and equipment 10,836,839 9,876,691
Automobiles and trucks 706,810 672,515
Furniture and fixtures 317,167 317,167
Other 18,144 -
__________ __________
11,878,960 10,866,373
Less accumulated depreciation
and amortization (4,903,212) (3,258,778)
_________ __________
6,975,748 7,607,595
OTHER ASSETS 963 35,232
_________ __________
$9,266,286 $10,569,873
========= ==========
TGC Industries, Inc.
BALANCE SHEETS - CONTINUED
December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
_________ __________
CURRENT LIABILITIES
Line of credit $290,000 $ -
Trade accounts payable 576,305 1,410,668
Accrued liabilities 332,717 213,667
Federal income taxes payable 25,191 -
Billings in excess of costs and estimated
earnings on uncompleted contracts 532,446 2,225,711
Current maturities of long-term obligations 1,403,637 1,324,887
_________ __________
Total current liabilities 3,160,296 5,174,933
LONG-TERM OBLIGATIONS, less current maturities 978,134 1,664,947
COMMITMENTS - -
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value;
4,000,000 shares authorized;
1,129,350 shares issued and
outstanding in 1998 and 1997 1,129,350 1,129,350
Common stock, $.30 par value; 25,000,000
shares authorized; 2,203,940 and
2,190,439 shares issued in 1998
and 1997, respectively 661,182 657,132
Additional paid-in capital 4,939,344 5,377,133
Accumulated deficit (1,386,706) (3,218,308)
Treasury stock, at cost
(31,944 shares in 1998
and 1997) (215,314) (215,314)
_________ __________
5,127,856 3,729,993
_________ __________
$9,266,286 $10,569,873
========= ==========
The accompanying notes are an integral part of these statements.
TGC Industries, Inc.
STATEMENTS OF EARNINGS
Years ended December 31,
1998 1997
_________ __________
Revenue $17,073,506 $16,307,577
Cost and expenses
Cost of services 13,818,972 14,048,852
Selling, general and administrative 1,160,228 920,528
Interest expense 261,480 202,158
_________ __________
15,240,680 15,171,538
Income from operations
before income taxes 1,832,826 1,136,039
Income tax expense (benefit)
Current 33,224 -
Deferred (32,000) (170,000)
_________ __________
1,224 (170,000)
_________ __________
Net earnings 1,831,602 1,306,039
Less dividend requirements on preferred stock (451,740) (455,640)
__________ __________
Earnings allocable to
common stockholders $1,379,862 $850,399
========= =======
Earnings per common share
Basic $.64 $.40
Diluted $.38 $.27
Weighted average number of common shares
Basic 2,166,503 2,118,935
Diluted 4,789,015 4,888,973
The accompanying notes are an integral part of these statements.
TGC Industries, Inc.
STATEMENT OF STOCKHOLDERS' EQUITY
Preferred Stock Common Stock Additional
________________ ________________ paid-in Accumulated Treasury
Shares Amount Shares Amount capital deficit stock Total
Balances January 1,
1997, as
previously
reported 1,150,350 $1,150,350 6,338,652 $633,865 $5,932,960 $(4,524,347) $(175,522) $3,017,306
One-for-three
reverse
split of
common stock - - (4,225,768) - - - - -
_________ ________ _________ _______ ________ ________ ________ ________
Balances at
January 1, 1997,
as adjusted 1,150,350 1,150,350 2,112,884 633,865 5,932,960 (4,524,347) (175,522) 3,017,306
Conversion of
preferred stock (21,000) (21,000) 46,666 14,000 7,000 - - -
Exercise of
stock options - - 30,889 9,267 30,525 - (39,792) -
Spin-off of Chase
Packaging Corporation - - - - (103,976) - - (103,976)
Expenses associated
with private placement - - - - (33,736) - - (33,736)
Cash dividends
on preferred stock
($.40 per share) - - - - (455,640) - - (455,640)
Net earnings - - - - - 1,306,039 - 1,306,039
_________ _________ ________ _______ _________ _________ _______ _________
Balances at
December 31,
1997 1,129,350 1,129,350 2,190,439 657,132 5,377,133 (3,218,308) (215,314) 3,729,993
Issuance of
stock warrants - - - - 2,813 - - 2,813
Exercise of
stock options
and warrants - - 13,501 4,050 11,138 - - 15,188
Cash dividends
on preferred stock
($.40 per share) - - - - (451,740) - - (451,740)
Net earnings - - - - - 1,831,602 - 1,831,602
_________ _________ ________ _______ _________ _________ _______ _________
Balances at
December 31,
1998 1,129,350 $1,129,350 2,203,940 $661,182 $4,939,344 $(1,386,706) $(215,314) $5,127,856
========= ========= ========= ======= ========= ========= ======= =========
The accompanying notes are an integral part of these statements.
TGC Industries, Inc.
STATEMENTS OF CASH FLOWS
Years ended December 31,
1998 1997
_________ __________
Cash flows from operating activities
Net earnings $1,831,602 $1,306,039
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation and amortization 1,778,454 1,425,817
Loss (gain) on disposal of
property and equipment 4,487 (126,088)
Deferred income taxes (32,000) (170,000)
Changes in operating assets and liabilities
Trade accounts receivable 1,388,697 (1,743,689)
Billings in excess of costs and estimated
earnings on uncompleted contracts (1,838,237) 1,721,306
Prepaid expenses 8,210 71,127
Other assets 34,269 (3,840)
Accounts payable (834,363) (73,160)
Accrued liabilities (106,820) 18,808
Federal income taxes payable 25,191 -
_________ __________
Net cash provided by
operating activities 2,259,490 2,426,320
Cash flows from investing activities
Capital expenditures (376,363) (1,685,162)
Proceeds from sale of property and equipment 3,400 213,927
_________ __________
Net cash used in investing activities (372,963) (1,471,235)
Cash flows from financing activities
Dividends paid (225,870) (685,710)
Net borrowings under line of credit 290,000 -
Proceeds from issuance of debt - 181,000
Principal payments of debt obligations (1,386,194) (951,384)
Other 18,001 (33,736)
_________ __________
Net cash used in financing activities(1,304,063) (1,489,830)
_________ __________
Net increase (decrease) in cash
and cash equivalents 582,464 (534,745)
Cash and cash equivalents at beginning of year 120,535 655,280
_______ _______
Cash and cash equivalents at end of year $702,999 $120,535
======= =======
TGC Industries, Inc.
STATEMENTS OF CASH FLOWS - CONTINUED
Years ended December 31,
1998 1997
_________ __________
Supplemental cash flow information
Interest paid $247,931 $201,934
Income taxes paid $ 8,033 $ -
Noncash investing and financing activities
During 1997, the Company received 4,675 and 3,583 shares of common stock,
respectively, as payments for the exercise of options. The Company included
these shares as treasury stock at the fair market value of the Company's
common stock on the dates of the transactions.
During 1997, the Company financed the acquisition of equipment through
a note payable and capital leases in the amounts of $1,366,029 and $876,656,
respectively.
During 1997, the Company sold a manufacturing facility of its former
wholly-owned Subsidiary, Chase Packaging Corporation (Chase). All proceeds
were contributed to New Chase (Note C).
During 1997, the Company spun-off New Chase (Note C) resulting in a stock
dividend to TGC stockholders amounting to $103,976.
During 1997, holders of 21,000 shares of convertible exchangeable
preferred stock converted these shares into 46,666 shares of the Company's
common stock.
During 1998, the Company financed the acquisition of equipment through
notes payable of $778,131.
The accompanying notes are an integral part of these statements.
TGC Industries, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE A - NATURE OF OPERATIONS
TGC Industries, Inc. (TGC or the Company) is engaged in the domestic
geophysical services business and primarily conducts seismic surveys and
sells gravity data to companies engaged in exploration in the oil and gas
industry.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents
The Company considers all highly liquid investments with original maturity
dates of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
are provided using the straight-line method over the estimated useful lives
of the individual assets.
Income Taxes
Deferred income taxes reflect the impact of temporary differences between
the amounts of assets and liabilities recognized for financial reporting
purposes and such amounts recognized for tax purposes.
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting
for Stock-Based Compensation" encourages, but does not require, companies
to record compensation cost for stock-based employee compensation plans at
fair value. The Company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25 (APB 25), "Accounting for Stock Issued to
Employees" and provides the required pro forma disclosures prescribed by
SFAS 123.
Revenue Recognition
Revenues from conducting seismic surveys are recognized over the term of
the contract using the percentage-of-completion method. Under this method,
revenues are recognized on the units-of-production method. Revenues for
the sale of gravity data are recognized when services are rendered.
TGC Industries, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Earnings Per Share
Basic earnings per common share is based upon the weighted average number
of shares of common stock outstanding. Diluted earnings per share is based
upon the weighted average number of common shares outstanding and, when
dilutive, common shares issuable for stock options, warrants and
convertible securities.
Use of 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 assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
NOTE C - REORGANIZATION PLAN
In May 1996, a formal plan was adopted to reorganize TGC and its former
wholly-owned subsidiary. Pursuant to the plan, TGC liquidated the
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 formed a new wholly-owned subsidiary, New Chase
Corporation (New Chase), and subsequently changed the name to Chase
Packaging Corporation. TGC transferred all of the properties and
liabilities received in the liquidation of Old Chase to New Chase, except
TGC retained the manufacturing facility of Old Chase located in Portland,
Oregon. On March 18, 1997, TGC sold the facility for proceeds of
approximately $2,400,000. TGC applied such proceeds in satisfaction of the
mortgage indebtedness with respect to such facility and in satisfaction of
a debt obligation owing by TGC to New Chase to pay to New Chase any such
proceeds in excess of the amount of the mortgage indebtedness.
During June 1996, the Board of Directors approved the spin-off of New Chase
whereby all of the shares of New Chase would be distributed as a stock
dividend to the shareholders of TGC common stock and, on an as if converted
basis, TGC preferred stock, effective July 31, 1996. The New Chase common
stock was distributed on March 7, 1997. The spin-off distribution of New
Chase to TGC stockholders reduced stockholders' equity by $103,976, which
represents the book value of the net assets of New Chase as of March 7,
1997.
TGC Industries, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE D - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
The components of uncompleted contracts are as follows:
December 31,
1998 1997
_________ __________
Costs incurred on uncompleted contracts
and estimated earnings $1,511,088 $3,488,065
Less billings to date 1,898,562 5,713,776
_________ _________
$ (387,474) $(2,225,711)
========= =========
These components are included in the accompanying balance sheet under the
following captions:
December 31,
1998 1997
_________ __________
Costs and estimated earnings in excess of
billings on uncompleted contracts $144,972 $ -
Billings in excess of costs and estimated
earnings on uncompleted contracts (532,446) (2,225,771)
________ _________
$(387,474) $2,225,711)
======= =========
NOTE E - ACCRUED LIABILITIES
Accrued liabilities consist of the following:
December 31,
1998 1997
_________ __________
Compensation and payroll taxes $39,800 $137,751
Dividends payable 225,870 -
Insurance 26,686 8,424
Other 40,361 67,492
_______ _______
$332,717 $213,667
======= =======
TGC Industries, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE F - DEBT
Long-term obligations consist of the following:
December 31,
1998 1997
_________ __________
Note payable, interest at 4%, due in monthly
installments of $552 including interest;
collateralized by equipment and accounts
receivable $110,452 $112,480
Note payable, interest at 4%, due in monthly
installments of $1,130 including interest;
collateralized by equipment and accounts
receivable 52,357 63,288
Notes payable to a finance company, interest
at 11%, due in monthly installments of
$41,367 including interest; collateralized
by equipment 786,957 1,173,393
Note payable to a bank, interest at 9.83%, due
in monthly installments of $22,959 including
interest; collateralized by equipment and
accounts receivable 264,360 498,384
Note payable to a finance company, interest
at 9.5%, due in monthly installments of
$4,638 including interest; collateralized
by equipment 127,107 -
Note payable to a finance company, interest
at 8.7%, due in monthly installments of
$4,579 including interest; collateralized
by equipment 133,887 -
Note payable to a finance company, interest
at 8.8%, due in monthly installments of
$4,575 including interest; collateralized
by equipment 144,788 -
TGC Industries, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE F - DEBT - Continued
December 31,
1998 1997
_________ __________
Note payable to a finance company, interest
at 9.4%, due in monthly installments of
$10,968 including interest, collateralized
by equipment 309,436 -
Capital lease obligations 452,427 1,142,289
_________ _________
2,381,771 2,989,834
Less current maturities 1,403,637 1,324,887
_________ _________
$978,134 $1,664,947
======= =========
At December 31, 1998, the Company had $290,000 outstanding under a
revolving $1,000,000 bank line of credit which matures during November
1999. The line of credit bears interest at prime (7.75% at December 31,
1998), plus 1.5%, and is collateralized by equipment and accounts
receivable.
Some of the above notes have restrictive covenants which, among other
things, require the maintenance of certain financial ratios.
Capital Lease Obligations
The Company has entered into lease agreements which have been accounted for
as capital leases. Outstanding leases at December 31, 1998 have terms
ranging from 24 to 36 months. The leases mature from April 1999 through
October 1999, with interest rates ranging from 10% to 13%. Some of these
leases contain purchase options.
TGC Industries, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE F - DEBT - Continued
Aggregate maturities of long-term obligations at December 31, 1998 are as
follows:
Capital
Year ending Notes lease
December 31, payable obligations Total
____________ _______ ___________ _________
1999 $951,210 $469,116 $1,420,326
2000 634,717 - 634,717
2001 223,116 - 223,116
2002 15,475 - 15,475
2003 5,854 - 5,854
Thereafter 98,972 - 98,972
_________ _______ _________
1,929,344 469,116 2,398,460
Less amounts representing
interest - (16,689) (16,689)
_________ _______ _________
$1,929,344 $452,427 $2,381,771
========= ======= =========
The following is a schedule of property under capital leases:
December 31,
1998 1997
_________ __________
Machinery and equipment $1,732,066 $1,732,066
Less accumulated depreciation 463,552 216,114
_________ _________
$1,268,514 $1,515,952
========= =========
The fair value of debt obligations is estimated using discounted cash flows
based on the Company's incremental borrowing rate for similar types of
borrowings. A comparison of the carrying value and fair value of these
instruments is as follows:
December 31,
1998 1997
_________ __________
Carrying value $2,671,771 $2,989,834
Fair value $2,602,828 $2,897,020
TGC Industries, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE G - STOCKHOLDERS' EQUITY
Common Stock Split
On November 5, 1998, the Board of Directors declared a one-for-three
reverse stock split on the Company's common stock. Common stock as of
January 1, 1997 has been restated to reflect this reverse split. All
references to number of shares, except shares authorized, and to per share
information in the financial statements have been adjusted to reflect the
reverse stock split on a retroactive basis.
Earnings Per Share
A reconciliation of the numerators and denominators of the basic earnings
per common share and diluted earnings per common share for the year ended
December 31, 1998 is as follows:
Per share
Income Shares amount
______ ______ _________
Net earnings $1,831,602
Less dividend requirements on
preferred stock (451,740)
_________
Basic earnings per common share
Income allocable to
common stockholders 1,379,862 2,166,503 $.64
===
Effect of dilutive securities
Stock options 3,592
Warrants 109,253
Convertible preferred stock 451,740 2,509,667
_______ _________
Diluted earnings per common share
Income available to common
stockholders plus assumed
conversions $1,831,602 4,789,015 $.38
========= ========= ===
TGC Industries, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE G - STOCKHOLDERS' EQUITY - Continued
A reconciliation of the numerators and denominators of the basic earnings
per common share and diluted earnings per common share for the year ended
December 31, 1997 is as follows:
Per share
Income Shares amount
______ ______ _________
Net earnings $1,306,039
Less dividend requirements
on preferred stock (455,640)
_________
Basic earnings per common share
Income allocable to common
stockholders 850,399 2,118,935 $.40
===
Effect of dilutive securities
Stock options 41,405
Warrants 187,230
Convertible preferred stock 455,640 2,541,403
_______ _________
Diluted earnings per common share
Income available to common
stockholders plus assumed
conversions $1,306,039 4,888,973 $.27
========= ========= ===
Stock-Based Compensation Plans
The Company's 1986 Incentive Stock Option Plan (the "1986 Plan") expired
during July 1997. At December 31, 1998, options covering 6,335 shares of
the Company's common stock were outstanding under the 1986 Plan. All
options were exercisable at December 31, 1998, and will remain outstanding
until they are exercised or canceled.
TGC Industries, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE G - STOCKHOLDERS' EQUITY - Continued
The Company currently has in effect a 1993 Stock Option Plan (the "1993
Plan") covering a total of 283,334 shares of the Company's common stock,
and options must be granted at prices not less than the market price at
the date of grant. Options granted under the 1993 Plan must be exercised
within five years from the date of grant. Options covering 60,005 shares
are exercisable as follows: (i) one-third of the shares after the first
twelve-month period following the date of grant, (ii) up to two-thirds of
the shares after the first twenty-four month period following the date of
grant, and (iii) all of the shares of stock subject to the option at any
time after the first thirty-six month period following the date of grant.
Options covering 35,000 shares are exercisable as follows: (i) one-third
of the shares on January 1, 1999, and (ii) all of the shares after January
1, 2000. At December 31, 1998, outstanding options for 43,895 shares were
exercisable. Options covering 37,114 shares were available for future
grant.
In conjunction with the spin-off of New Chase, options held by employees of
New Chase under the 1993 Plan were converted into a nonqualified plan.
Options covering 53,058 shares are exercisable as follows: (i) 45,279
shares at date of grant, (ii) 3,890 shares after 18 months following the
date of grant, and (iii) 3,889 after 30 months following the date of grant.
At December 31, 1998, outstanding options for 49,168 shares were
exercisable.
The Company has adopted only the disclosure provisions of SFAS 123. The
Company will continue to apply APB 25 and related interpretations in
accounting for its stock-based compensation plans. Had compensation cost
for the Company's stock grants been determined consistent with SFAS 123,
the Company's net earnings and net earnings per common share for 1998 and
1997 would approximate the pro forma amounts indicated below:
1998 1997
As reported Pro forma As reported Pro forma
Net earnings $1,831,602 $1,780,453 $1,306,039 $1,221,249
========= ========= ========= =========
Net earnings allocable to
common stockholders $1,379,862 $1,362,475 $850,399 $765,609
========= ========= ========= =========
Earnings per common share
Basic $.64 $.63 $.40 $.36
Diluted $.38 $.37 $.27 $.25
TGC Industries, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE G - STOCKHOLDERS' EQUITY - Continued
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future disclosures because they do not take into effect pro
forma compensation expense related to grants made before December 31, 1994.
The fair value of these options was estimated at the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1998: expected volatility of 135%; risk-
free interest rate of 5.41%; and expected life of 7 years. The weighted
average fair value of options granted during 1998 was $.70. No
options were granted during 1997.
The following table summarizes activity under the Plans:
Weighted
Shares under average
option exercise price
____________ ______________
Balance at January 1, 1997 193,389 $2.49
Granted - -
Exercised (30,889) 1.29
Canceled (37,100) 2.40
______
Balance at December 31, 1997 125,400 2.79
Granted 35,000 1.00
Exercised (1,000) 1.13
Canceled (5,002) 3.00
_______
Balance at December 31, 1998 154,398 $2.39
======= ====
Exercisable at December 31:
1997 85,397 $2.76
1998 99,398 $2.78
TGC Industries, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE G - STOCKHOLDERS' EQUITY - Continued
The following information applies to options outstanding at December 31,
1998:
Weighted
average
remaining Weighted
Range of Number contractual average
exercise prices outstanding life exercise price
_______________ ___________ ___________ ______________
$1.00 - 1.13 41,335 4.6 $1.02
$2.40 - 2.63 53,058 2.5 2.52
$3.00 - 4.13 60,005 2.0 3.22
_______
154,398 $2.39
======= ====
The following information applies to options exercisable at December 31,
1998:
Range of Number Weighted average
exercise prices exercisable exercise price
_______________ ___________ _________________
$1.00 - 1.13 6,335 $1.13
$2.40 - 2.63 49,168 2.53
$3.00 - 4.13 43,895 3.30
______
99,398 $2.78
====== ====
Stock Warrants
At December 31, 1998, warrants covering 286,575 were outstanding. Warrants
covering 233,240 shares have a strike price of $1.13 per share. Warrants
covering 50,001 shares have a strike price of $2.40. Warrants to purchase
3,334 common shares have a strike price of $3.19. All warrants expire on
December 31, 2000.
TGC Industries, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE G - STOCKHOLDERS' EQUITY - Continued
Preferred Stock
During 1996, the Company issued 1,150,350 shares of Series C 8% convertible
exchangeable preferred stock at $5.00 per share in a private placement
offering with gross proceeds of approximately $5,800,000. The preferred
stock is, at the option of the Company, exchangeable into 8% subordinated
convertible debentures. The preferred stock and debentures are convertible
into shares of the Company's common stock at the conversion price of (i)
$2.25 per share if exercised by December 31, 2000, (ii) $3.75 per share if
exercised from January 1, 2001 through December 31, 2001 (iii) $6.00 per
share thereafter.
Dividends
Holders of the Company's Series C 8% convertible exchangeable preferred
stock will receive, when, as and if declared by the Board of Directors of
the Company, dividends at a rate of 8% per annum. The dividends are
payable semi-annually during January and July of each year.
NOTE H - INCOME TAXES
The income tax provision (benefit) reconciled to the tax computed at the
statutory Federal rate is as follows:
Years ended
December 31
1998 1997
_________ __________
Federal tax expense at statutory rate $623,161 $386,253
Meals and entertainment 4,100 7,135
Other 9,548 (77,240)
Change in valuation allowance (635,585) (486,148)
_______ _______
$1,224 $(170,000)
===== =======
TGC Industries, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE H - INCOME TAXES - Continued
Deferred tax assets and liabilities consist of the following:
Years ended
December 31
1998 1997
_________ __________
Deferred tax assets
Net operating loss carryforwards $1,208,233 $1,575,887
Other 47,864 10,341
Deferred tax liability
Property and equipment (789,503) (516,049)
________ _________
466,594 1,070,179
Less valuation allowance (264,594) (900,179)
________ _________
Net deferred tax asset $202,000 $170,000
======= =======
At December 31, 1998, the Company had net operating loss carryforwards of
approximately $3,600,000 available to offset future taxable income, which
expire at various dates through 2013. Future tax benefits, such as net
operating loss carryforwards, are recognized to the extent that realization
of such benefits are more likely than not.
NOTE I - 401(k) PLAN
The Company has a 401(k) salary deferral plan which covers all employees
who have reached the age of 20.5 years and have been employed by the
Company for at least one year. The covered employees may elect to have an
amount deducted from their wages for investment in a retirement plan. The
Company makes contributions to the plan equal to 100% of each participant's
salary reduction contributions to the plan up to 4.75% of the participant's
compensation. The Company's matching contribution to the plan was
approximately $44,000 and $41,000 for the years ended December 31, 1998 and
1997, respectively.
TGC Industries, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE J - CONCENTRATION OF CREDIT RISK
The Company sells its geophysical services to large oil and gas companies
operating in the United States. The Company performs ongoing credit
evaluations of its customer's financial condition and, generally, requires
no collateral from its customers. At December 31, 1998, two customers
accounted for approximately 99% of accounts receivable. Three customers
accounted for approximately 85% of accounts receivable at December 31,
1997.
During 1998, three customers accounted for 24%, 22%, and 17% of the
revenues of the Company, respectively. During 1997, two customers
accounted for 31% and 28% of the revenues of the Company, respectively.
NOTE K - CONTINGENCIES
In conducting its activities, the Company from time to time is the subject
of various claims arising from the ordinary course of business. In the
opinion of management, the ultimate resolution of such claims is not
expected to have a material adverse effect upon the financial position of
the Company.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTER AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Certain information required by Item 9 of the Form 10-KSB is hereby
incorporated by reference from the Company's definitive proxy statement,
which will be filed pursuant to Regulation 14A within 120 days after the
Company's year end for the year covered by this report, under the caption
"Nominees for Directors" in the proxy statement.
ITEM 10. EXECUTIVE COMPENSATION.
The information required by Item 10 of Form 10-KSB is hereby
incorporated by reference from the Company's definitive proxy statement,
which will be filed pursuant to Regulation 14A within 120 days after the
Company's year end for the year covered by this report, under the caption
"Executive Compensation" in the proxy statement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by Item 11 of Form 10-KSB is hereby
incorporated by reference from the Company's definitive proxy statement,
which will be filed pursuant to Regulation 14A within 120 days after the
Company's year end for the year covered by this report, under the caption
"Security Ownership of Certain Beneficial Owners and Management" in the proxy
statement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information provided by Item 12 of Form 10-KSB is hereby
incorporated by reference from the Company's definitive proxy statement,
which will be filed pursuant to Regulation 14A within 120 days after the
Company's year end for the year covered by this report, under the caption
"Transactions with Management" in the proxy statement.
ITEM 13. EXHIBITS.
Item 13 (a). The following is a list of exhibits to this Form 10-KSB:
3.1 Restated Articles of Incorporation as of July 31,
1986, filed as Exhibit 3(a) to the Company's
Registration Statement on Form 10 (Registration No.
0-14908), filed with the Commission and incorporated
herein by reference.
3.2 Certificate of Amendment to the Company's Restated
Articles of Incorporation, as of July 5, 1988, filed
as Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31,
1988, and incorporated herein by reference
3.3 Restated Articles of Incorporation (with amendment)
as of November 6, 1998.
3.4 First Amended Bylaws of the Company as amended,
filed as Exhibit 3.2 to the Company's annual report
on Form 10-K for the fiscal year ended December 31,
1987, and incorporated herein by reference.
3.5 Amendment to the Company's First Amended Bylaws as
adopted by the Board of Directors on March 7, 1988,
filed as Exhibit 3.3 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31,
1987, and incorporated herein by reference.
4.1 Statement of Resolution Establishing Series of
Preferred Stock of TGC Industries, Inc. filed with
the Secretary of State of Texas on July 16, 1993,
filed as Exhibit 2 to the Company's Current Report
on Form 8-K dated August 11, 1993, and incorporated
herein by reference.
4.2 Statement of Resolution Establishing Series C 8%
convertible Exchangeable Preferred Stock of TGC
Industries, Inc. as filed with the Secretary of
State of Texas on July 9, 1996, filed as Exhibit B
to the Company's current report on Form 8-K dated
July 11, 1996, filed with the Commission and
incorporated herein by reference.
4.3 Statement of Resolution Regarding Series C 8%
Convertible Exchangeable Preferred Stock of TGC
Industries, Inc. as filed with the Secretary of
State of Texas on December 30, 1998.
4.4 Form of Debenture Agreement and Debenture for 8%
Subordinated Convertible Debentures, Series A, filed
as Exhibit 4.2 to the Company's Registration
Statement on Form SB-2 (Registration No. 333-12269),
as amended, filed with the Commission and
incorporated herein by reference.
4.5 Form of Warrant Agreement dated July 28, 1995, as
amended, and Warrant, filed as Exhibit 4.3 to the
Company's Registration Statement on Form SB-2
(Registration No. 333-12269), as amended, filed with
the Commission and incorporated herein by reference.
10.1 Service Mark License Agreement dated as of July 31,
1986, between the Company and Supreme Industries,
Inc. (formerly ESI Industries, Inc.), relating to
the use of the Company's logo, filed as Exhibit
10(b) to the Company's Registration Statement on
Form 10 (Registration No. 0-14908), filed with the
Commission and incorporated herein by reference.
10.2 The Company's 1986 Incentive and Nonqualified Stock
Option Plan, filed as Exhibit 10(c) to the Company's
Registration Statement on Form 10 (Registration No.
0-14908), filed with the Commission and incorporated
herein by reference.
10.3 Amendment Number one to the Company's 1986 Incentive
and Nonqualified Stock Option Plan as adopted by the
Board of Directors on May 1, 1987, filed as Exhibit
10.4 to the Company's annual report on Form 10-K for
the fiscal year ended December 31, 1987, and
incorporated herein by reference.
10.4 The Company's 1993 Stock Option Plan as adopted by
the Board of Directors on June 3, 1993, filed as
Exhibit 10.4 to the Company's Registration Statement
on Form S-2 (Registration No. 33-73216), filed
with the Commission and incorporated by reference.
10.5 Master Contract for Geophysical Services-Onshore
dated April 18, 1990 between Marathon Oil Co. and
the Company together with a form of Supplementary
Agreement thereto, filed as Exhibit 10.8 to
the Company's Registration Statement on Form S-2
(Registration No. 33-73216), filed with the
Commission and incorporated herein by reference.
10.6 Agreement for Geophysical Services dated May 19,
1992, between DLB Oil & Gas, Inc. and the Company
together with a form of Supplementary Agreement
thereto filed as Exhibit 10.9 to the Company's
Registration Statement on Form S-2 (Registration No.
33-73216), filed with the Commission and incorporated
herein by reference.
10.7 Agreement for Spin-off of Subsidiary Stock filed as
Exhibit 1 to the Company's Form 8-K filed with the
Commission on August 9, 1996 and incorporated herein
by reference.
10.8 Bill of Sale dated July 31, 1996 between TGC
Industries, Inc. and Chase Packaging Corporation,
filed as Exhibit 10.8 to the Company's annual report
on Form 10-KSB for the fiscal year ended December 31,
1996, and incorporated herein by reference.
10.9 Amendment No. 1 to the 1993 Stock Option Plan
as adopted by the Board of Directors on July 24, 1996.
10.10 Amendment No. 2 to the 1993 Stock Option Plan as
adopted by the Board of Directors and as approved by
Company's Shareholders on June 4, 1998.
27. Financial Data Schedule.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
TGC INDUSTRIES, INC.
Date: March 26, 1999 /s/ Wayne A. Whitener
By:
Wayne A. Whitener
President(Principal Executive
Officer)
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
Date: March 26, 1999 By: /s/ Allen T. McInnes
Allen T. McInnes
Chairman of the Board
and Secretary
Date: March 26, 1999 By: /s/ Edward L. Flynn
Edward L. Flynn
Director
Date: March 26, 1999 By: /s/ Wayne A. Whitener
Wayne A. Whitener
President, Chief Executive Officer
and Director
Date: March 26, 1999 By: /s/ Kenneth Uselton
Kenneth Uselton
(Principal Financial and
Accounting Officer)
Date: March 26, 1999 By: /s/ William J. Barrett
William J. Barrett
Director
Date: March 26, 1999 By: /s/ Herbert M. Gardner
Herbert M. Gardner
Director
EXHIBIT 3.3
RESTATED ARTICLES OF INCORPORATION
(with amendment)
OF
TGC INDUSTRIES, INC.
ARTICLE ONE
TGC INDUSTRIES, INC., pursuant to the provisions of Article 4.07 of
the Texas Business Corporation Act, hereby adopts Restated Articles of
Incorporation which accurately copy the Articles of Incorporation and all
amendments thereto that are in effect to date and as further amended by such
Restated Articles of Incorporation as hereinafter set forth and which contain
no other change in any provision thereof.
ARTICLE TWO
The Articles of Incorporation of the Corporation are amended by the
Restated Articles of Incorporation as follows:
A. Article 4 is amended by adding new Article 4.c. to read as
follows:
4.c. Reverse Stock Split. Upon the filing of this amendment with
the Secretary of State of Texas, and effective as of 5:00 p.m.
Central Standard Time, on the date of filing(referred to herein as
"Effective Time"), every three shares of the Common Stock, par
value $.10, issued and outstanding as of the Effective Time shall
automatically, and without action on the part of the stockholders,
be converted and combined into one validly issued, fully paid and
non-assessable share of Common Stock, par value $.30, (the "Reverse
Split"). In the case of a holder of shares not evenly divisible by
three, such holders shall receive in lieu of any fraction of a
share, an additional share of Common Stock. As of the Effective
Time and thereafter, a certificate(s) representing shares of Common
Stock prior to the Reverse Split shall be deemed to represent the
number of new shares into which the old shares are convertible.
ARTICLE THREE
Each such amendment made by these Restated Articles of
Incorporation has been effected in conformity with the provisions of the
Texas Business Corporation Act, and each such amendment made by the Restated
Articles of Incorporation was duly adopted by the shareholders of the
Corporation on the 5th day of November, 1998.
ARTICLE FOUR
The number of shares of the Corporation outstanding at the time of
such adoption was 7,630,335; and the number of shares entitled to vote
thereon was 7,630,335.
The designation and number of outstanding shares of each class or
series entitled to vote thereon as a class were as follows:
Number of Shares Outstanding
Class or Series and Entitled to Vote
Common Stock 6,500,985
ARTICLE FIVE
The number of shares voted for such amendment was 6,207,764 and the
number of shares voted against such amendment was 168,348.
Number of Shares Voted
Class or Series For Against
Common Stock 5,597,721 168,148
ARTICLE SIX
These Restated Articles of Incorporation provide for an exchange of
issued shares of the corporation's Common Stock in the manner of a reverse
stock split which is effected as follows: On the effective date of the
Restated Articles of Incorporation each three shares of issued and
outstanding Common Stock, par value $.10, will be changed into one share of
Common Stock, par value $.30. No certificates or scrip representing
fractional shares of Common Stock will be issued as a result of the reverse
stock split. Rather, each fractional share interest shall be rounded up to
the next whole share.
ARTICLE SEVEN
The Articles of Incorporation and all amendments and supplements
thereto are hereby superseded by the following Restated Articles of
Incorporation which accurately copy the entire text thereof and as amended as
above set forth:
1. Name. The name of the Corporation is TGC INDUSTRIES, INC.
2. Duration. The period of its duration is perpetual.
3. Purposes. The Corporation is being organized under the Texas
Business Corporation Act for the purpose of carrying out any lawful purpose
or purposes.
4. Shares. The Corporation may issue two classes of shares as
follows:
a. Common Stock. The aggregate number of shares of Common Stock
which the Corporation may issue is 25,000,000 shares, each having a par value
of $.30. The shares shall be designated as Common Stock and shall have
identical rights and privileges in every respect.
b. Preferred Stock. The aggregate number of shares of Preferred
Stock which the Corporation may issue is 4,000,000, each having a par value
of $1.00. The Preferred Stock authorized by these Restated Articles of
Incorporation may be issued from time to time in series. The shares of each
series shall be subject not only to the provisions of this Article 4b which
is applicable to all series of preferred shares, but also to the additional
provisions with respect to such series as are fixed from time to time by the
Board of Directors. All preferred shares of each series shall be identical
and of equal rank, except as may be modified by the Board of Directors. Each
share of each series shall be identical in all respects with the other shares
of such series, except as to the date from which dividends thereon shall be
cumulative in the event the Board designates any such series to be cumulative
preferred. The Board of Directors is hereby authorized and required to fix,
in the manner and to the full extent provided and permitted by law, all
provisions of the shares of each series not otherwise set forth in these
Articles, including, but not limited to:
(1) Designation of Series-Number of Shares. The distinctive
designation of each series and the number of shares constituting such series,
which number may be increased (except where otherwise provided by the Board
of Directors in its resolution creating such series) or decreased (but not
below the number of shares thereof then outstanding) from time to time by
resolution of the Board of Directors;
(2) Dividend Rates and Rights. The annual rate and frequency of
payment of dividends payable on the shares of all series and the dividend
rights applicable thereto, including, in the event of Cumulative Preferred
Stock, the date from which dividends shall be cumulative on all shares of any
series issued prior to the record date for the first dividend on shares of
such series;
(3) Redemption. The rights, if any, of the Corporation to redeem;
the terms and conditions of redemption; and the redemption price or prices,
if any, for the shares of each, any, or all series;
(4) Sinking Fund. The obligation, if any, of the Corporation to
maintain a sinking fund for the periodic redemption of shares of any series
and to apply the sinking fund to the redemption of such shares;
(5) Voluntary Liquidation Preferences. The amount payable on
shares of each series in the event of any voluntary liquidation, dissolution,
or winding up of the affairs of the Corporation;
(6) Conversion Rights. The rights, if any, of the holders of
shares of each series to convert such shares into the Corporation's Common
Stock and the terms and conditions of such conversion; and
(7) Voting Rights. The voting rights, if any, of the holders of
the shares of each series, and any other preferences, and relative,
participating, optional, or other special rights, and any qualifications,
limitations, or restrictions thereof.
c. Reverse Stock Split. Upon the filing of this amendment with
the Secretary of State of Texas, and effective as of 5:00 p.m. Central
Standard Time, on the date of filing (referred to herein as "Effective
Time"), every three shares of the Common Stock, par value $.10, issued and
outstanding as of the Effective Time shall automatically, and without action
on the part of the stockholders, be converted and combined into one validly
issued, fully paid and non-assessable share of Common Stock, par value $.30,
(the "Reverse Split"). In the case of a holder of shares not evenly
divisible by three, such holders shall receive in lieu of any fraction of a
share, an additional share of Common Stock. As of the Effective Time and
thereafter, a certificate(s) representing shares of Common Stock prior to the
Reverse Split shall be deemed to represent the number of new shares into
which the old shares are convertible.
5. Commencement of Business. The corporation will not commence
business until it has received for the issuance of its shares consideration
having a minimum value of ONE THOUSAND AND N0/100 DOLLARS ($1,000.00) and
consisting only of labor done or money or property actually received.
6. No preemptive Rights. No shareholder or other person may have
any preemptive rights.
7. Special Provisions Permitted To Be Set Forth In Articles of
Incorporation:
a. Interested Directors, Officers, and Shareholders.
(1) If paragraph (2) below is satisfied, no contract or
transaction between the corporation and one or more of its directors or
officers, or between the corporation and any other corporation, partnership,
association or other organization in which one or more of the corporation's
directors or officers are directors or officers or have a financial interest,
shall be void or voidable solely for this reason, solely because the director
or officer is present at or participates in the meeting of the Board of
Directors or committee thereof which authorizes the contract or transaction,
or solely because his or their votes are counted for such purpose.
(2) Paragraph (1) above will apply only if:
(a) The contract or transaction is fair as to the
corporation as of the time it is authorized, approved, or ratified by the
Board of Directors, a committee of the board, or the shareholders;
(b) The material facts as to the relationship or
interest of the director or officer and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the
Board or committee in good faith authorizes the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or
(c) The material facts as to the relationship or
interest of the director or officer and as to the contract or transaction are
disclosed or are known to the shareholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by a vote of
the shareholders.
(3) For purposes of paragraphs (1) and (2) above, common or
interested directors may be counted in determining the presence of a quorum
at a meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
b. Indemnification.
(1) The corporation shall indemnify, to the extent provided in
the following paragraphs, any person who is or was a director, officer,
agent, or employee of the corporation and any person who serves or served at
the corporation's request as a director, officer, agent, employee, partner,
or trustee of another corporation or of a partnership, joint venture, trust,
or other enterprise. In the event the provisions of indemnification set forth
below are more restrictive than the provisions of indemnification allowed by
Article 2.02-1 of the Texas Business Corporation Act, then such persons named
above shall be indemnified to the full extent permitted by Article 2.02-1 of
the Texas Business Corporation Act as it may exist from time to time.
(2) In case of a suit by or in the right of the corporation
against a person named in paragraph (1) above by reason of such person's
holding a position named in such paragraph (1) hereafter referred to as a
derivative suit, the corporation shall indemnify such person for reasonable
expenses actually incurred by such person in connection with the defense or
settlement of the suit, but only if such person satisfies the standard in
paragraph (4) to follow.
(3) In case of a threatened or pending suit, action, or
proceeding (whether civil, criminal, administrative, or investigative), other
than a derivative suit, hereafter referred to as a non-derivative suit,
against a person named in paragraph (1) above by reason of such person's
holding a position named in such paragraph (1), the corporation shall
indemnify such person if such person satisfies the standard contained in
paragraph (4), for amounts actually and reasonably incurred by such person in
connection with the defense or settlement of the non-derivative suit as
expenses (including court costs and attorneys' fees), amounts paid in
settlement, judgments, and fines.
(4) Whether in the nature of a derivative suit or non-derivative
suit, a person named in Paragraph (1) above will be indemnified only if it is
determined in accordance with paragraph (5) above that such person:
(a) acted in good faith in the transaction which is the subject
of the suit;
(b) reasonably believed:
(i) his conduct was in the best interests of the
corporation; and
(ii) in all other cases, that his conduct was not
opposed to the best interests of the corporation;
and
(c) in the case of any criminal proceeding, had no reasonable
cause to believe his conduct was unlawful.
The termination of a proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent will not, of itself,
create a presumption that this person failed to satisfy the standard
contained in this paragraph.
(5) A determination that the standard of paragraph (4) above has
been satisfied must be made:
(a) by a majority vote of a quorum consisting of directors who at the
time of the vote are not named defendants or respondents in the proceeding; or
(b) if such quorum cannot be obtained, by a majority vote of a
committee of the board of directors, designated to act in the matter by a
majority vote of all directors, consisting solely of two or more directors who
at the time of the vote are not named defendants or respondents in the
proceeding; or
(c) by special legal counsel selected by the board of directors or a
committee of a board by vote as set forth in subparagraphs (a) and (b) above,
or, if such quorum cannot be obtained and such committee cannot be
established, by a majority vote of all directors; or
(d) by the shareholders in a vote that excludes the vote of directors
who are named defendants or respondents in the proceeding.
(6) Authorization of indemnification and determination as to
reasonableness of expenses must be made in the same manner as the
determination that indemnification is permissible, except that if the
determination that indemnification is permissible is made by special legal
counsel, authorization of indemnification and determination as to
reasonableness of expenses must be made in the manner specified by
subparagraph (5)(c) above for the selection of special legal counsel.
(7) The corporation may reimburse or pay in advance any reasonable
expenses (including court costs and attorneys' fees) which may become subject
to indemnification under paragraphs (1) through (6) above, but only in
accordance with the provisions as stated in paragraph (5) above, and only
after the person to receive the payment (i) signs a written affirmation of his
good faith belief that he has met the standard of conduct necessary for
indemnification under paragraph (4), and (ii) undertakes in writing to repay
such advances unless it is ultimately determined that such person is entitled
to indemnification by the corporation. The written undertaking required by
this paragraph must be an unlimited general obligation of the director but
need not be secured. It may be accepted without reference to financial ability
to make repayment.
(8) The indemnification provided by paragraphs (1) through (6) above
will not be exclusive of any other rights to which a person may be entitled by
law, bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise.
(9) Indemnification and advance payment provided by paragraphs (1)
through (7) above will continue as to a person who has ceased to hold a
position named in paragraph (1) above and will inure to such person's heirs,
executors, and administrators.
(10) The corporation may purchase and maintain insurance on behalf of
any person who holds or has held any position named in paragraph (1) above
against any liability incurred by such person in any such position, or arising
out of such person's status as such, whether or not the corporation would have
power to indemnify such person against such liability under paragraphs (1)
through (7) above.
(11) Indemnification payments and advance payments made under
paragraphs (1) through (10) above are to be reported in writing to the
shareholders of the corporation in the next notice or waiver of notice of
annual meeting, or within twelve months, whichever is sooner.
c. Bylaws. The power to alter, amend, or repeal the Bylaws is hereby
vested in the Board of Directors.
d. Non-Cumulative Voting. Directors are to be elected by plurality
vote. Cumulative voting is not permitted.
e. Purchase Own Stock. The corporation may, directly or indirectly,
purchase its own shares to the extent of the aggregate of unrestricted capital
surplus available therefor and unrestricted reduction surplus available
therefor.
f. Supermajority Vote for Business Combinations.
The affirmative vote of the holders of eighty percent (80%) or
more of the issued and outstanding shares of the Corporation at a duly called
meeting of the stockholders shall be required for the approval or
authorization of (1) any merger or consolidation of the Corporation with or
into another corporation or entity, or (2) any sale of all or substantially
all of the Corporation's assets to another corporation or entity.
g. Consideration of Fairness of Business Combinations.
The Board of Directors of the Corporation, when evaluating any
offer of another party to (1) purchase or otherwise acquire all or
substantially all of the properties or assets of the Corporation, (2) merge or
consolidate the Corporation with or into another corporation or entity, or (3)
make a tender or exchange offer for any equity security of the Corporation,
may, in connection with the exercise of its judgment in determining what is in
the best interests of the Corporation and its shareholders, give due
consideration to all relevant factors, including, without limitation: (a) the
fairness of the price or financial terms of the proposal, (b) the relationship
of the proposal to the value of the Corporation in a transaction of a similar
type resulting from arm's length negotiations; and (c) the social and economic
effects of the proposed transaction on the employees, shareholders and other
constituents of the Corporation and on the communities in which the
Corporation operates or is located.
h. Number and Classification of Directors.
The Board of Directors shall consist of not less than three (3)
nor more than nine (9) directors. The number of Directors may be increased or
decreased (within the limits stated above) by resolution of the Board of
Directors, but no decrease may have the effect of shortening the term of any
incumbent director. A director may be removed prior to the end of the term for
which he is elected only for cause and by the affirmative vote of the holders
of eighty percent (80%) or more of the issued and outstanding shares of the
Corporation at a meeting of the stockholders duly called for the consideration
of such removal. At any such time as the Board of Directors shall consist of
nine (9) directors, the Board of Directors may by resolution classify the
Board into three (3) classes, each class to consist of three (3) directors.
The term of office of directors of the first class shall expire at the first
annual meeting of shareholders after their election, that of the second class
shall expire at the second annual meeting after their election, and that of
the third class shall expire at the third annual meeting after their election.
At each annual meeting after such classification the number of directors equal
to the number of the class whose term expires at the time of such meeting
shall be elected to hold office until the third succeeding annual meeting.
i. Supermajority Vote for Amendment of this Article.
The provisions set forth in this Article 7 may not be amended,
altered, changed or repealed in any respect unless such action is approved by
the affirmative vote of the holders of eighty percent (80%) or more of the
issued and outstanding shares of the corporation at a meeting of the
stockholders duly called for the consideration of such amendment, alteration,
change or repeal.
j. Limitation of Liability.
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for an act or omission in
the director's capacity as a director, except that this paragraph does not
eliminate or limit the liability of a director for (1) breach of a director's
duty of loyalty to the corporation, (2) an act or omission not in good faith
or that involves intentional misconduct or a knowing violation of the law, (3)
a transaction from which a director received an improper benefit, whether or
not the benefit resulted from an action taken within the scope of the
director's office, (4) an act or omission for which the liability of a
director is expressly provided for by statute, or (5) an act related to an
unlawful corporate distribution. Neither the amendment nor repeal of this
paragraph shall eliminate or reduce the effect of this paragraph in respect of
any matter occurring, or any cause of action, suit or claim that, but for this
paragraph, would accrue or arise, prior to such amendment or repeal. If the
Texas Business Corporation Act or the Texas Miscellaneous Corporation Laws Act
is hereinafter amended to authorize corporate action further eliminating or
limiting their personal liability of directors, then the liability of a
director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Texas Business Corporation Act or the Texas
Miscellaneous Corporation Laws Act, as so amended from time to time.
8. Registered Office and Agent. The street address of the
Corporation's initial registered office and the name of its initial registered
agent at such address are as follows:
Robert J. Campbell
1304 Summit Avenue, Suite 2
Plano, Texas 75074
9. Directors. The number of directors constituting the present board
of directors is five, and the names and addresses of the persons who will
serve as directors until the next annual meeting and until their successors
are duly elected and qualified are:
Name Address
William J. Barrett 26 Broadway, Suite 815
New York, New York 10004
Robert J. Campbell 1304 Summit Ave., Suite 2
Plano, Texas 75074
Herbert M. Gardner 26 Broadway, Suite 815
New York, New York 10004
Allen T. McInnes 25025 Interstate 45 North,
Ste 600
Houston, Texas 77380
Wayne A. Whitener 1304 Summit Ave., Suite 2
Plano, Texas 75074
10. These Restated Articles of Organization (with amendment) will
become effective at 5:00 p.m. on November 6, 1998.
DATED this 5th day of November, 1998.
TGC INDUSTRIES, INC.
By:/s/ ROBERT J. CAMPBELL
Robert J. Campbell, Vice President
of the Board and Chief Executive
Officer
Exhibit 4.3
Statement of Resolution Regarding
Series of Preferred Stock
of
TGC Industries, Inc.
Pursuant to the provisions of Article 2.13 of the Texas Business
Corporation Act, and the Articles of Incorporation, as amended, of the
undersigned Corporation, the Corporation submits the following with respect to
its Statement of Resolution Establishing its Series C 8% Convertible
Exchangeable Preferred Stock for the purpose of modifying certain terms of the
Series C Preferred Stock, which Statement of Resolution was originally filed
with the Secretary of State of Texas on July 9, 1996, and was modified by
Statements of Resolution filed with the Secretary of State of Texas on July
22, 1998 and December 9, 1998.
1. The name of the Corporation is TGC Industries, Inc.; and
2. A resolution adopting the Statement of Resolution Regarding Series
C 8% Convertible Exchangeable Preferred Stock is attached as Exhibit "A"
hereto and incorporated herein by reference. Such resolution was duly adopted
by all necessary action on the part of the Corporation at a special meeting of
the Board of Directors of the Corporation held on December 10, 1998.
Dated December 16, 1998.
TGC INDUSTRIES, INC.
By: /s/ RICE M. TILLEY, JR.
Rice M. Tilley, Jr. Assistant
Secretary
EXHIBIT "A"
STATEMENT OF RESOLUTION REGARDING
SERIES C 8% CONVERTIBLE EXCHANGEABLE PREFERRED STOCK OF
TGC INDUSTRIES, INC.
Pursuant to the provisions of Article 2.13 of the Texas Business
Corporation Act and the Articles of Incorporation, as amended, of TGC
Industries, Inc., a Texas corporation (the "Corporation" or the "Company"),
the Corporation has adopted the following resolution by all necessary action
on the part of the Corporation, at a special meeting of the Board of Directors
on December 10, 1998, for the purpose of modifying certain terms of its Series
C 8% Convertible Exchangeable Preferred Stock as provided therein:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by Article 4.b of the Corporation's Articles of
Incorporation, as amended, the Corporation hereby approves a modification with
respect to its Statement of Resolution Establishing Series C 8% Convertible
Exchangeable Preferred Stock (the "Preferred Stock"), which Statement of
Resolution was originally filed with the Secretary of State of Texas on July
9, 1996, and was modified by a Statements of Resolution filed with the
Secretary of State of Texas on July 22, 1998 and December 9, 1998, by
adopting the following modification to subparagraph 3(d) thereof to delay the
date of the increase of the conversion price of the Preferred Stock from
December 31, 1999 until December 31, 2000 and the subsequent date of the
increase of the conversion price of the Preferred Stock from December 31, 2000
to December 31, 2001, so that subparagraph 3(d) of such Statement of
Resolution shall read in its entirety as set forth below. Except as modified
as set forth below, the Statement of Resolution Establishing Series C 8%
Convertible Exchangeable Preferred Stock as filed with the Secretary of State
on July 9, 1996, shall remain in full force and effect.
"(d) Conversion Ratio. Each share of
Preferred Stock may, at the discretion of the holder
thereof, be converted into shares of Common Stock of
the Corporation at the conversion price per share of
(i) prior to the close of business on December 31,
2000, the conversion price per share of Common Stock
of Two Dollars and Twenty-Five Cents ($2.25), (ii)
after December 31, 2000 and prior to the close of
business on December 31, 2001, the conversion price
per share of Common Stock of Three Dollars and
Seventy-Five Cents ($3.75), and (iii) thereafter, the
conversion price per share of Common Stock of Six
Dollars ($6.00), as such conversion price may be
adjusted and readjusted from time to time in
accordance with subparagraph 3(g) hereof (such
conversion price, as adjusted and readjusted and in
effect at any time, being herein called the
"Conversion Price" or the "Conversion Ratio"), into
the number of fully paid and non-assessable shares of
Common Stock determined by dividing (x) the $5.00 per
share price of the Preferred Stock to be so converted
by (y) the Conversion Price in effect at the time of
such conversion. The Conversion Ratios referred to
above will be subject to adjustment as set forth in
subparagraph 3(g)."
[END]
EXHIBIT 10.9
Amendment No. 1
to the 1993 Stock Option Plan
of
TGC Industries, Inc.
This is AMENDMENT NO. 1 TO THE 1993 STOCK OPTION PLAN (the "Plan") of
TGC Industries, Inc., a Texas corporation (hereinafter referred to as the
"Company"), under which incentive and non-statutory stock options may be
granted to the officers, employees, and/or directors of the Company and/or its
subsidiaries (now existing or hereafter acquired).
Article VIII of the Plan provides that the Company's Board of
Directors may at any time amend the Plan, insofar as permitted by law.
The purpose of this Amendment No. 1 is to enable holders of options
under the Plan to have the maximum period permissible for exercising their
options following the termination of their employment "without cause" from the
Company or one of its affiliates.
Accordingly, the following change is hereby made to the Plan:
Sec. 6:4 of the Plan is hereby amended by inserting the words "three
(3) months" in substitution for the words "thirty [30] days" in the fifth line
from the bottom of Sec. 6:4.A.1.c.
This Amendment No.1 to the 1993 Stock Option Plan is dated to be
effective July 24, 1996.
/S/ WILLIAM J. BARRETT
__________________________________
William J. Barrett, Secretary
ATTEST:
/S/ ROBERT J. CAMPBELL
___________________________________
Robert J. Campbell,
Vice Chairman of the Board
EXHIBIT 10.10
Amendment No. 2
to
1993 Stock Option Plan
of
TGC Industries, Inc.
On June 3, 1993, the Board of Directors of TGC Industries, Inc. (the
"Company") approved and adopted the Company's 1993 Stock Option Plan (the
"Plan"). At the 1994 annual meeting of shareholders, the Company's
shareholders approved the 1993 Stock Option Plan.
Sec. 2:1. of the Plan provides that the aggregate number of shares of
Stock to be issued pursuant to the exercise of all Options granted under the
Plan may equal, but may not exceed, 750,000 shares of the Company's Stock.
Article VIII of the Plan permits the Board of Directors to amend the
Plan; provided, however, that, without the approval of the holders of a
majority of the outstanding shares of voting stock of all classes of the
Company, no such amendment may change the number of shares of Stock subject to
the Plan.
The purpose of the Plan is to provide an incentive for key employees of
the Company to remain in the service of the Company and to apply their best
efforts for the benefit of the Company so as to continually improve the
Company's financial performance. However, as of the date of this Amendment,
options have already been granted under the Plan which cover nearly all of the
750,000 shares of Company Stock initially authorized under the Plan.
In order to provide the possibility for the grant of additional options
under the Plan so as to promote the incentives referred to above, the Board of
Directors has determined that the Plan should be amended so as to permit the
issuance of additional shares of the Company's Stock pursuant to options
granted under the Plan. Accordingly, Sec. 2:1. of the Plan is hereby amended
so as to replace the figure 750,000 with the figure 850,000.
This Amendment shall not be deemed to have become effective unless and
until the necessary shareholder ratification of such Amendment is given by the
shareholders of the Company at their annual meeting to be held on June 4,
1998.
IN WITNESS WHEREOF, TGC Industries, Inc., acting by and through its
officers thereunto duly authorized, has executed this instrument to be
effective June 5, 1998.
TGC INDUSTRIES, INC.
By:/S/ ALLEN T. MCINNES
_______________________________
Allen T. McInnes,
Chairman of the Board
5
YEAR
DEC-31-1998
DEC-31-1998
702,999
0
1,113,185
0
0
2,289,575
11,878,960
4,903,212
9,266,286
3,160,296
978,134
0
1,129,350
661,182
3,337,324
9,266,286
0
17,073,506
0
13,818,972
1,160,228
0
261,480
1,381,086
1,224
1,379,862
0
0
0
1,379,862
.64
.38
