<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 22, 1998
REGISTRATION NO. 333-45681
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
REGISTRATION STATEMENT ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
Venture Seismic Ltd.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Alberta, Canada N/A
(State or other jurisdiction of Incorporation) (I.R.S. employer I.D. number)
</TABLE>
VENTURE SEISMIC LTD.
3110 80th Avenue, SE
Calgary, Alberta T2C 1J3
(403) 777-9070
(Address and telephone number of Registrant's principal executive offices)
Brian Kozun
Chief Executive Officer and President
VENTURE SEISMIC LTD.
3110 80th Avenue, SE
Calgary, Alberta T2C 1J3
(403) 777-9070
(Address and telephone number of agent for service)
Copies to:
JILL M. COHEN, ESQ.
BACHNER, TALLY, POLEVOY & MISHER LLP
380 MADISON AVENUE
NEW YORK, NEW YORK 10017
(212) 687-7000
APPROXIMATE DATE OF PROPOSED COMMENCEMENT OF SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. _
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. _ _________________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. _ _______________________
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. _
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT OFFERING PRICE AGGREGATE ADDITIONAL AMOUNT OF ADDITIONAL
SECURITIES TO BE REGISTERED TO BE REGISTERED PER UNIT (1) OFFERING PRICE REGISTRATION FEE (2)*
<S> <C> <C> <C> <C>
Common Shares,
no par value................. 100,000 $ (2) 5.44 $ 544,000 $ 160.48
Total......................... 100,000 $ (2) 5.44 $ 544,000 $ 160.48
</TABLE>
* Previously Paid.
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(a) under the Securities Act of 1933.
(2) Fee for common shares to be sold by the selling securityholder is based on
the average of the high and low price of the common shares on February 2,
1998, as reported by the Nasdaq National Market
Pursuant to Rule 416, there are also being registered for resale such
additional Common Shares as may become issuable pursuant to "anti-dilution"
provisions of the warrants.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PROSPECTUS
SUBJECT TO COMPLETION
DATED APRIL 22, 1998
VENTURE SEISMIC LTD.
100,000 COMMON SHARES
This Prospectus relates to 100,000 Common Shares, no par value (the "Common
Shares"), of Venture Seismic Ltd. (the "Company") issuable upon exercise of
warrants, which Common Shares may be offered and sold by a Securityholder named
herein (the "Selling Securityholder").
Except as otherwise set forth in a Prospectus Supplement, the Common Shares
covered by this Prospectus may be offered and sold from time to time in
transactions to purchase in certain states or U.S. territories on the Nasdaq
National Market or other exchanges or markets on which the Common Shares may be
traded, in the over-the counter market, in negotiated transactions, through the
writing of options on the Common Shares or a combination of such methods of sale
or through other means. Sales may be effected at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices, through registered broker-dealers (including broker-dealers
which may be affiliated with the Selling Securityholder) receiving compensation
in the form of discounts, concessions or commissions from the seller or the
purchasers of the Common Shares for whom such broker-dealers may act as agent or
to whom they sell as principal or both (which compensation to a particular
broker-dealer might be in excess of customary commissions). See "Selling
Securityholder" and "Plan of Distribution."
None of the proceeds from the sale of the Common Shares will be received by
the Company, although the Company will receive proceeds from any exercise of the
warrants. The Company has agreed to bear certain expenses in connection with
the registration and sale of the shares being offered by the Selling
Securityholder.
The Company's Common Shares are traded on the Nasdaq National Market
("Nasdaq") under the symbol VSEIF. On April 17, 1998, the closing bid price of
the Common Shares on Nasdaq was $7.25.
_______________
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED
ONLY BY PERSONS WHO CAN AFFORD TO SUSTAIN A TOTAL LOSS OF THEIR INVESTMENT. SEE
"RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
_______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is April , 1998
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. a Registration Statement on Form S-3 under the
Securities Act of 1993, as amended ("Act") covering the securities offered by
this Prospectus. This Prospectus does not contain all of the information set
forth in such Registration Statement and the exhibits thereto. For further
information with respect to the Company and the securities offered by this
Prospectus reference is hereby made to the Registration Statement and the
exhibits thereto, which may be inspected without charge at the public reference
facilities maintained at the principal office of the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549 and at the Commission's
regional offices at 7 World Trade Center, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials may be obtained upon written request
from the public reference section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Electronic registration statements
made through the Electronic Data Gathering, Analysis and Retrieval System are
publicly available through the Commission's Web site (http://www.sec.gov).
Statements contained in the Prospectus as to the contents of any contract or
other document referred to herein are not necessarily complete and in each
instance reference is made to the copy of such contract or other document filed
(or incorporated by reference) as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Commission. Such
reports and other information filed by the Company may be inspected and copied
at the public reference facilities maintained by the Commission at the
addresses shown above. Copies of such material can be obtained from the Public
Reference Section of the Commission at the address shown above at prescribed
rates or through the Commission's Web site. Reports and other information
concerning the Company may also be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
The Common Shares are listed on the Nasdaq National Market under the
symbol "VSEIF". Certain information, reports and proxy statements of the
Company are also available for inspection at the offices of the Nasdaq National
Market Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 0-27070)
pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1997 including any amendments thereto or documents or
portions thereof incorporated by reference therein;
2. The Company's definitive proxy statement dated January 27, 1998,
filed pursuant to Section 14 of the Exchange Act.
3. The Company's Quarterly Report on Form 10-QSB for the period ending
December 31, 1997;
4. The Company's current reports on Form 8-K as filed with the Commission
February 19 and March 30, 1998;
5. The description of the Company's Common Shares contained in the
Company's Registration Statement on Form 8-A declared effective on
November 6, 1995, as amended, registering the Common Shares under the
Exchange Act; and
6. All other documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of this offering.
Any statement contained in this Prospectus or in any document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as modified or superseded, to constitute a part of this Prospectus. The
Company will provide without charge to each person to whom this Prospectus is
delivered, upon written or oral request of any such person, a copy of any or all
of the documents incorporated herein by reference (other than exhibits to such
documents which are not specifically incorporated by reference into such
documents). Requests for such documents should be directed to the Company, 3110
80th Avenue SE, Calgary, Alberta T2C 1J3,
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Attention: Chief Financial Officer, telephone (403) 777-9074.
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this Prospectus or incorporated by reference herein. Investors
should also carefully consider the information set forth under the heading
"Risk Factors."
THE COMPANY
Venture Seismic Ltd. (the "Company") is engaged primarily in the
acquisition of land and water-based seismic data for use in the exploration for
and development and field management of oil and natural gas reserves. The
Company acquires both traditional two-dimensional ("2D") and three-dimensional
("3D") seismic data on possible oil and gas reserves for its customers, which
range from junior exploration companies to fully-integrated multi-national
corporations. Acquisition of seismic data, a principal technique used in oil
and gas exploration to determine geological conditions, involves using either
explosives, vibroseis (vibrations) or airguns to generate and transmit acoustic
energy downward into the earth and subsequently capturing and recording the
information which is reflected back toward the surface by the various
intervening geological layers.
The Company acquires seismic data only on a contract basis for its
customers, who retain all rights to the information obtained, and the Company's
seismic data acquisition crews operate at the customers' exploration and
development field locations. During the fiscal years ended September 30, 1995,
1996 and 1997, the Company performed a total of approximately 500 projects for
over 100 different customers. The Company believes its seismic data technology
assists its customers in enhancing their exploration for new reserves, better
delineating their existing oil and gas fields and improving their reservoir
management techniques. Use of the Company's seismic data acquisition technology
may also result in decreased oil and gas finding costs and associated drilling
risks and the elimination of prospects that are unlikely to be successful.
The Company currently operates nine land and transition zone crews in
North America, six of which operate in Canada and three of which operate in the
southern United States. Channel capacity of its crews in Canada is
approximately 5,700 channels and channel capacity in the United States is
approximately 5,000 channels. All of the Company's equipment employs 24 bit
technology and approximately 9,600 channels use telemetry technology to
transmit the seismic data from the remote acquisition modules to the central
recording unit. The telemetry technology employed by the Company permits the
Company to operate efficiently in marsh or swamp areas, rivers and shallow
lakes, areas of difficult terrain and areas of dense population. The telemetry
systems also operate very well in sensitive environmental areas by limiting
environmental contact and damage. Although there are several geophysical
services companies in Canada, the Company believes that it is currently the
only one providing telemetry technology based services in Canada.
The Company acquired a set of vibroseis units in December 1995 and in
October 1996. These units gave the Company the capability of performing
vibroseis projects for the first time in Western Canada (the Company does not
currently have vibroseis capability in the United States). Vibroseis projects
accounted for approximately 20% and 17% of the Company's revenues during fiscal
1996 and 1997, respectively.
In addition the Company has expanded its operations through certain
strategic acquisitions. In June 1996 the Company acquired Boone Geophysical,
Inc. ("Boone"), a Texas based company engaged in the acquisition of land and
transition zone seismic data in the southern United States. For the fiscal 1997
year approximately 35% of the consolidated revenue of the Company was derived
from projects conducted by Boone. In April 1997 the Company acquired
Hydrokinetic Surveys of Canada Inc. ("Hydrokinetic"), a company based in
Western Canada which provides shallow marine airgun and survey services.
Since 1994, the Company continued to increase its channel capacity, which
included, as of September 30, 1997 approximately 2,900 channels leased on a
short term basis with an option to purchase at the end of the lease term. In
December 1997 the Company exercised purchase options to purchase approximately
1,700 channels with the proceeds from the exercise of the Company's redeemable
warrants. Exercise of these purchase options will permit the Company to continue
to operate three 3D crews in the United States (with a combined channel capacity
of approximately 5,000 channels) and three 3D crews in Canada (with a channel
capacity of approximately 4,500 channels).
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The Company was organized under the laws of Alberta in August 1984. The
Company has three wholly owned subsidiaries, Boone Geophysical, Inc.,
Hydrokinetic Surveys of Canada Inc. and an inactive subsidiary, Venture Seismic
Inc. (Texas). The Company's executive offices are located at 3110 80th Avenue
SE, Calgary, Alberta T2C 1J3 and its telephone number is (403) 777-9070.
RECENT DEVELOPMENTS
-------------------
Warrant Redemption. On November 7, 1997, the Company called for
redemption, at a redemption price of $.10 per Warrant, all of the outstanding
redeemable Warrants ("Warrants") of the Company which were outstanding after
5:00 p.m., New York Time, on January 5, 1998. Each Warrant entitled the holder
thereof to purchase one common share of the Company, no par value per share (the
"Shares") at an exercise price of $6.00 per Share. As of January 6, 1998
1,513,690 Warrants had been exercised, resulting in the issuance of 1,513,690
Shares and aggregate net proceeds of $9,082,140 to the Company. Under the terms
of the Warrant Agreement the remaining 96,310 Warrants were redeemed by the
Company at a price of $0.10 per Warrant, or $9,631 in the aggregate. The
Company used approximately $3,160,000 of the proceeds to exercise certain
purchase options on capital equipment leases in December 1997 and January 1998.
The Company intends to use the remaining proceeds from the exercise of the
Warrants to fund the acquisition of capital equipment and to fund a portion of
the acquisition cost of Continental Holdings Ltd.
Continental Acquisition. In March, 1998, the Company announced it had
entered into a definitive Securities Purchase Agreement (the "Purchase
Agreement") for the previously announced proposed acquisition (the "Continental
Acquisition") of 100% of the outstanding capital stock of Continental Holdings
Ltd. ("Continental"), for consideration of 2,080,000 Common Shares (valued at
approximately $12 million as of the date of execution of the amended Letter of
Intent) and cash payments aggregating $1.5 million. The Purchase Agreement also
includes provision for employment agreements with the existing management of
Continental for a period of three years, as well as the nomination of a director
selected by Continental to Venture's Board of Directors. If the Continental
Acquisition is consummated, the liabilities of Continental will be reflected on
a consolidated basis on the balance sheet of the Company. On a pro forma
consolidated basis, giving effect to the Continental Acquisition and the
additional borrowings related to the equipping of a second marine vessel, the
Company anticipates its long-term debt to increase by approximately $5 million
and its debt service requirements to increase by approximately $120,000 per
month. The closing of the Continental Acquisition is subject to a number of
conditions, including receipt of the requisite shareholder approval from the
shareholders of the Company, as well as receipt of certain third-party consents.
Continental is a privately held marine seismic data acquisition company,
based in Calgary, which currently leases and operates one marine seismic vessel
capable of performing 2D or 3D seismic surveys. Continental has completed
seismic surveys in the Persian-gulf, the North Sea, the Falkland Islands area,
the Mediterranean and off the coasts of West Africa and Norway. Audited revenue
for Continental's fiscal years ended December 31, 1996 and 1997 was $8.5 million
and $9.6 million, respectively, and net income was approximately $.6 million in
1996 and $1.9 million in 1997, after an adjustment to reflect normalized
owner/management compensation. The adjustments to net income accounts for the
declaration by Continental of a discretionary owner/management bonuses, and the
related income tax effect of such bonuses which, in 1997, was declared in
accordance with the terms of the Purchase Agreement. These bonuses do not
reflect the economic value of management services provided but rather are a
common tax planning transaction for Canadian private companies. Reference is
made to the Company's Annual Report on Form 10-KSB which includes certain
financial information relating to Continental.
Continental has entered into an agreement in principle to lease a second
marine vessel, for a five year period commencing in March 1998, at an annual
cost of $2.7 million increasing to $3.1 million by the end of the lease. In
addition Continental will be required to purchase capital assets, at an
estimated cost of $10 million to equip the vessel. Simultaneously with the
execution of the Purchase Agreement the Company agreed to loan, and in April
1998, loaned $4 million to Continental (the "Continental Loan"), pursuant to a
credit agreement (the "Credit Agreement") dated March 27, 1998, payable in
quarterly installments of principal and interest commencing December 1, 1999 and
bearing interest at the prime lending rate of the Royal Bank of Canada plus 1%.
The Continental Loan is to be used by Continental to fund a portion of the costs
of equipping a second marine vessel. The Continental Loan is secured by certain
assets of Continental. Should closing of the Continental Acquisition not occur,
the Continental Loan, including interest, is payable in quarterly instalments
commencing December 1, 1999, consisting of principal and accrued interest, and
is subject to an equity conversion provision, during the period from August 31,
1998 to December 1, 1999, equal to approximately 26% of the outstanding capital
of Continental. Upon the closing of the Continental Acquisition, the Continental
Loan will become an intercompany debt, due and payable to Venture.
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RISK FACTORS
The securities offered hereby are highly speculative in nature and involve
a high degree of risk. Prior to making an investment decision, prospective
investors in the Company's securities should give careful consideration to,
among other things, the risk factors set forth below. This Prospectus contains
forward-looking statements within the meaning of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995. Reference is made in
particular to the description of the Company's plans and objectives for future
operations, assumptions underlying such plans and objectives and other
forward-looking terminology such as "may," "will," "expect," "believe,"
"estimate," "anticipate," "continue," or similar terms, variations of such terms
or the negative of such terms. Such statements are based on management's current
expectations and are subject to a number of factors and uncertainties which
could cause actual results to differ materially from those described in the
forward-looking statements. The Company expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Company's expectations
with regard thereto or any change in events, conditions or circumstances on
which any such statement is based. Factors which could cause such results to
differ materially from those described in the forward-looking statements
include, amongst other items, those set forth herein under "Risk Factors".
Capital Intensive Business; Cash Flow Shortages; Need for Additional Funds. The
Company's business is highly capital intensive requiring continuous upgrading
and expansion of its equipment base. In addition, capital is required to operate
and expand the Company's operations. In the event that the Continental
Acquisition is consummated, the business of Continental is highly capital
intensive and will require continual expansion and upgrading of its existing
equipment base. At December 31, 1997 the Company had cash of $1,553,319 and
working capital of $706,549, which includes the current portion of long term
debt in the amount of $2,110,012. If the Continental Acquisition is consummated,
the Company's cash requirements will significantly increase in the future.
Because of the development of its 3D seismic data acquisition infrastructure,
the Company's working capital requirements increased significantly over the last
few years and are expected to continue to do so. In addition, because the
Company generally does not receive payment for a project until 30 to 60 days
following its completion, the Company is often required to commit significant
expenditures during the course of performing a project, prior to its receipt of
any payments from the customer. In addition, because fixed costs account for a
significant portion of the Company's costs and expenses, a reduction in
productivity or inability to obtain new contracts would result in significant
operating losses and cash flow shortages. Although the Company has funded
equipment purchases through bank borrowings and equipment lease purchase
contracts, it has no commitments to obtain any other additional debt or equity
financing for equipment purchases and there can be no assurance that additional
funds will be available, when required, on terms favorable to the Company or at
all. Any future issuances of equity securities would likely result in dilution
to the Company's then existing shareholders while the incurring of additional
indebtedness would result in increased interest expense and debt service
charges.
Debt Service Requirements; Consequences of Default and Covenants Under
Debenture. At December 31, 1997 the Company had long term debt consisting of
capital loans of $5,685,485 and an equipment financing of $1,246,661. The
capital loans bear interest at the lender's cost of funds plus 2.75% and are
repayable in monthly installments of approximately $141,200, plus interest and
mature in February and September 2001. All of the Company's equipment is pledged
as collateral for the capital loans. Debt service requirements relating to the
capital loans, based on the lender's interest rate of 7.9% at January 15, 1998,
are estimated to aggregate approximately $2,085,000 (including principal and
interest payments) during the twelve month period ending December 31, 1998. If
the Continental Acquisition is consummated, the liabilities of Continental will
be reflected on a consolidated basis on the balance sheet of the Company. On a
pro forma consolidated basis, giving effect to the Continental Acquisition and
the additional borrowings related to the equipping of a second marine vessel,
the Company anticipates its long-term debt to increase by approximately $5
million and its debt service requirements to increase by approximately $120,000
per month. In February 1998 the Company refinanced its one remaining lease
purchase contract, for 1,200 channels of seismic data acquisition equipment,
with a three year capital lease (the "capital lease") with an aggregate
obligation of approximately $2 million, as well as a purchase option. The
capital lease, which also provides additional funds for the purchase of 300
channels of seismic data acquisition equipment, bears interest at 10.0% and is
repayable in monthly installments of $63,500, including principal and interest.
In addition, the Company maintains an operating line of credit with a bank,
under which advances of up to $1,200,000 could be available to the Company
subject to certain limitations. As of March 31, 1998 the Company had advances of
approximately $70,000 under the operating line of credit and the Company
believes substantially all of the additional amounts under the operating line
were available for borrowing. All of the foregoing indebtedness is subject to
various financial and operating covenants, including requirements to maintain
certain financial ratios. The Company's ability to meet its debt service
obligations will depend on the Company's future operations, which are subject to
prevailing industry conditions and other factors, many of which are beyond the
Company's control. Because both the Company's term loan and its operating line
of credit bear interest at rates that fluctuate with prevailing interest rates,
increases in such prevailing rates would increase the Company's interest payment
obligations and could have a material adverse effect on the Company's financial
condition and results of operations. In addition, the Company's term loan
requires a consent of the bank prior to a change in control of the Company. Mr.
Kozun, the President of the Company and beneficial owner of approximately 17% of
the Company's outstanding Common Shares, has pledged 460,000 Common Shares, in
favor of a bank to secure certain outstanding personal indebtedness. In the
event that Mr. Kozun is unable to meet his obligations as they become due, the
bank may realize upon some or all of the Common Shares pledged in its favor,
which may trigger the change of control provisions under the Company's term
loan. In the event of a violation by the Company of any of its loan covenants or
any other default by the
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<PAGE> 9
Company on its obligations relating to its term indebtedness the lenders could
declare such indebtedness to be immediately due and payable and in certain
cases foreclose on the Company's assets. There can be no assurance that in the
event that the Company is in default of certain of its loan covenants in the
future, that the Company will be able to secure a waiver from the lender.
Moreover, to the extent that all of the Company's assets continue to be pledged
to secure outstanding indebtedness under the term loan and its line of credit,
such assets will not be available to secure additional indebtedness, which may
adversely affect the Company's ability to borrow in the future. In the event of
a default relating to the Company's indebtedness it is likely that the
Company's shareholders would forfeit all or a substantial portion of their
investment in the Company.
Risks Associated with the Consummation of the Continental Acquisition. Although
in March 1998, the company entered into a definitive purchase and sale
agreement, the consummation of the Continental Acquisition is subject to a
number of conditions, any of which may not occur, including receipt of requisite
shareholder, regulatory and/or third party approvals. Simultaneously with the
execution of the Purchase Agreement the Company agreed to loan, and in April
1998, the Company loaned $4 million to Continental, pursuant to the Credit
Agreement, payable in quarterly installments of principal and interest
commencing December 1, 1999 and bearing interest at the prime lending rate of
the Royal Bank of Canada plus 1%. The Continental Loan is to be used by
Continental to fund a portion of the costs of equipping a second marine vessel.
The Continental Loan is secured by certain assets of Continental. Should closing
of the Continental Acquisition not occur, the Continental Loan, including
interest, is payable in quarterly instalments commencing December 1, 1999,
consisting of principal and accrued interest, and is subject to an equity
conversion provision, during the period from August 31, 1998 to December 1,
1999, equal to approximately 26% of the outstanding capital of Continental. Upon
the closing of the Continental Acquisition, the Continental Loan will become an
intercompany debt, due and payable to Venture. Continental has indicated to the
Company that the remainder of the cost of equipping the second marine vessel
will be funded by borrowings of approximately $5 million. Therefore, as a result
of the consummation of the Continental Acquisition, the Company's long-term
debt, on a consolidated basis will increase by approximately $5 million. In the
event that the Continental Acquisition is not consummated, there can be no
assurance that the Company will be able to convert its advance to equity of
Continental, on terms acceptable to the Company, if at all, or that if the
Continental Loan is converted, that the Company will be able to liquidate its
interest in Continental on acceptable terms, if and when it chooses to do so.
There can be no assurance that all preconditions to the Continental Acquisition
will be met in a timely or satisfactory matter, or without undue expense to the
Company.
Risks Associated with the Operations of the Company upon Consummation of the
Continental Acquisition. In the event that the Continental Acquisition is
consummated, the Company will be subject to a number of potential risks: capital
requirements; assimilation of new operations and personnel, including
management; adverse short-term effects on reported operating results; the
potential loss of key employees; the diversion of resources from the Company's
existing business, capabilities, equipment and technologies; coordination of
geographically separated facilities and work forces; management challenges
associated with the integration of the companies in addition to the other
requirements associated with growth of the Company's infrastructure and
capabilities; and maintenance of the Company's existing standards, controls,
procedures and policies. No assurance can be given that difficulties encountered
in integrating the operations of Continental will be overcome. In the event
that the Company consummates the Continental Acquisition, the process of
integrating Continental's operations, including its personnel, could cause
interruption of, or loss of momentum in, the activities of the Company's
business and operations, including those of the business to be acquired.
In addition, there can be no assurance that the Company will not incur
additional charges in subsequent periods to reflect other costs associated with
the Continental Acquisition or from the integration of operations after the
Continental Acquisition. As a result of the Continental Acquisition the
Company's annual amortization charge will increase significantly. There can be
no assurance that the Continental Acquisition will not have a material adverse
effect on the business, financial condition and results of operations of the
Company, will not result in significant unexpected liabilities or that the
Company will realize the benefits and strategic objectives sought through the
Continental Acquisition, including the addition of new capabilities, equipment
and technologies. Costs associated with the Continental Acquisition, or
liabilities and expenses associated with the operations of Continental, that
exceed the expectations of the Company, could have a material adverse effect on
the Company's financial condition and results of operations.
Continental has entered into an agreement in principle to lease a second marine
vessel, for a five year term commencing in March 1998, at an initial annual cost
of approximately $2.7 million increasing to $3.1 million by the end of the
lease. In addition, Continental will be required to purchase capital assets, at
an estimated cost of $10 million, to equip the vessel. In connection with these
capital asset expenditures, and pursuant to the Credit Agreement entered into
upon the execution of the Purchase Agreement, the Company has advanced $4
million to Continental, subject to an equity conversion feature in the event
that the Continental Acquisition is not consummated. The Continental Loan is
secured by certain assets of Continental. In the event that the Continental Loan
Acquisition is not consummated, there can be no assurance that the Company will
be able to convert its advance to equity of Continental on terms acceptable to
the Company, if at all. Further, in the event that the Continental Acquisition
is not consummated and the Company converts the Continental Loan into equity of
Continental, there can be no assure that the Company will be able to liquidate
its position in Continental, especially since Continental is a privately held
company.
In order to manage any future growth, the Company will be required to continue
to improve its operating systems, attract and retain superior management, and
update and expand the Company's equipment. If the Company is unable to
effectively manage its growth, the Company's business, operating results and
financial condition could be adversely affected. Future growth, if achieved,
may also strain the Company's capital resources. There can be no assurance
that the Company will be able to successfully negotiate or obtain additional
financing, or that such financing will be on terms favorable or acceptable to
the Company. The failure to secure necessary financing could have a material
adverse impact on the Company.
Dependence Upon Principal Customers. During the fiscal years ended September 30,
1995, 1996 and 1997 three, two and two customers, respectively, each accounted
for over 10% of the Company's revenues. One customer accounted for over 10% of
the Company's revenues in each period, including 43% in fiscal 1995, 54% in
fiscal 1996 and 32% in fiscal 1997; one other customer accounted for over 10% in
fiscal 1996 and two other customers accounted for over 10% of revenues in fiscal
1995. The Company's three largest customers accounted for 71%, 71%, and 53% of
revenues during fiscal 1995, 1996 and 1997, respectively, and at September 30,
1997, approximately 35% of the Company's accounts receivable were represented by
three customers. Although the projects performed by the Company for its
customers are generally short term, the inability to replace significant
customers would cause the Company's revenues and operating results to fluctuate
significantly from period to period and the loss of certain customers would have
a material adverse impact on the Company's business. Because of the limited
number of data acquisition systems owned by the Company and thus the limited
number of data acquisition crews that the Company is able to deploy at any given
time, the Company anticipates that a substantial portion of future revenues will
continue to be attributable to a few customers, who may change from period to
period. Further, on an historical basis, a substantial portion of Continental's
revenue has been attributed to a few customers, and should the Continental
Acquisition be consummated, the Company anticipates a substantial portion of
Continental's revenue will continue to be attributable to a few customers, who
may change from time to time. Since Continental's projects are generally longer
in duration Continental provides its offshore seismic acquisition services to a
small group of customers annually.
Seasonality of Operations; Fluctuations in Quarterly Performance. The Company's
business is subject to substantial quarterly variations as a result of activity
variations in the Canadian seismic industry. Generally, increased activity
occurs in the Canadian seismic industry during the Canadian winter season, from
November to March. During this period the colder weather freezes the ground and
permits easier access to marshy terrain in the northern areas of Western Canada
and agricultural areas. During the spring, bans are placed on road use, which
temporarily limits access to many areas where the Company conducts its
operations. Further, due to the soft wet ground conditions and marshy terrain
in the northern areas of Western Canada, both of which are extremely sensitive
to traffic and heavy equipment, the extent to which the Company can conduct its
operations during the spring and summer is significantly reduced. As a result
the Company has historically experienced a fluctuation in cash flow and results
of operation with generally increased activity in the Company's first and
second fiscal quarters and a significant decrease in revenues and net income
during the third and fourth fiscal quarters. With the acquisition of Boone in
June 1996 the Company has expanded and diversified its operations into the
United States, which has somewhat reduced the seasonality traditionally
associated with the Company's Canadian operations. However, due to the factors
noted above, the Company's results of operations may be subject to
fluctuations, particularly on a quarterly basis and the Company's stock price
may be affected by such results.
Fixed Price Contracts; Lack of Written Contracts. A substantial portion of the
Company's contracts with its customers are fixed price or "turn-key" contracts
pursuant to which the Company bears substantially all the risk associated with
inclement weather or other productivity delays. To the extent the Company
incurs costs in excess of those estimated to complete a project its margins are
reduced, and, in some cases, the Company has incurred, and may in the future
incur, a loss on a particular contract as a result of such excess costs. In
addition, a large portion of the projects entered into by the Company are not
governed by any written contract or other documentation, including, for the
fiscal years ended September 30, 1997, 1996 and 1995, projects which were
performed for a single customer and which accounted for approximately 32%, 54%
and 43%, respectively, of the Company's revenues. As a result, in the event of
a dispute with regard to work performed in connection with a project or
relating to the collection of fees for a project, the Company may not be able
to resolve such dispute as quickly or effectively as it might have been able to
do if a written contract existed. In addition, in the absence of a written
agreement, there may be discrepancies with regard to payment terms, project
scope or other matters which may, in turn, result in delays, cash flow
shortages, increased costs and lower revenues or profits.
- 8 -
<PAGE> 10
If the Company consummates the Continental Acquisition, it will be subject to a
number of risks in completing such transaction, including the need to rely upon
certain representations and warranties made by Continental and the shareholders
of Continental with respect to Continental and its operations as well as it own
due diligence investigation of Continental. There can be no assurance that such
representations and warranties will be true in all respects or that the
Company's due diligence will uncover all materially adverse facts relating to
the assets, liabilities, capabilities and operations of Continental.
Dilution to Existing Shareholders as a Result of the Continental Acquisition.
In the event that the Continental Acquisition is consummated, the Purchase
Price for the Continental Acquisition will involve cash and the issuance of
approximately 2,100,000 Common Shares, which, as of March 31, 1998, equal 45% of
the outstanding Common Shares of the Company, which will result in dilution to
existing shareholders of the Company and to purchasers of the Shares offered
hereby and which may not be accretive in earnings per share.
Dependence on Activity of Oil and Gas Industry. Demand for the Company's
services depends primarily upon the level of spending by oil and gas companies
for exploration, production and development and field management activities.
These spending levels, in turn, tend to correspond to fluctuations in the
commodity prices for oil and gas. Consequently, demand for the Company's
services is affected to some degree by market prices for natural gas and crude
oil, which have historically been very volatile. A decrease in oil and gas
exploration expenditures could result from such factors as unfavorable tax and
other legislation, international economic or political turmoil or uncertainty
concerning governmental energy policies. A substantial or extended decline in
oil and gas prices could have a material adverse effect on the Company's
financial position and results of operations and could cause the Company to
alter its capital spending plans. There can be no assurance that current levels
of oil and gas activities will be maintained or that demand for the Company's
services will reflect the level of
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<PAGE> 11
such activities.
Weather and Productivity. Since the Company's operations are especially
sensitive to hazardous conditions and certain inclement weather, particularly
rain, the Company may periodically experience equipment failures, accidents,
shortages and delays in the delivery of equipment or loss of productivity as a
result of such conditions. Loss of productivity could materially adversely
affect the Company due to the high fixed costs associated with the Company's
business, including debt service costs, equipment acquisition and lease costs,
and depreciation expense.
Competition and Technological Obsolescence. The seismic data acquisition
industry is highly competitive. Many of the Company's competitors are
substantially larger than the Company or are subsidiaries or divisions of major
industrial enterprises with much greater financial and technical resources and
longer operating histories than the Company. In addition, the Company is
experiencing and will continue to face substantially increased competition as
it expands outside of Canada, particularly in the United States. There can be
no assurance that the Company will compete effectively in the industry. In
addition, the seismic data services industry is characterized by constantly
evolving technology. There can be no assurance that the Company's current
systems will not become obsolete before the Company has the resources to
replace them or that, in the future, the Company will have sufficient resources
to acquire new technology, as needed, or be able to use new technology to
compete effectively.
Risks Relating to Growth and Expansion. Growth of the Company's business may
place significant pressure on the Company's management, operational and
technical resources. The Company intends to pursue a strategy for expansion and
to acquire equipment to enable it to expand its operations in Canada and the
United States. Although the Company intends to focus its marketing and
operational efforts on the Canadian and U.S. marketplaces and is not currently
marketing its services internationally, the Company may, from time to time, as
market conditions permit, consider pursuing operations in the international
market through joint ventures or other arrangements with strategic partners in
geophysics services or related industries in the United States, South America,
and Asia and/or by contracting directly with oil and gas companies located in
such markets. The success of the Company's growth and expansion will depend upon
a number of factors not entirely within the Company's control, including, among
others, the cost and availability of equipment, the ability to meet project
schedules, the securing of required government permits and other regulatory
approvals, the hiring and training of management and other personnel,
competition in the industry, demand for seismic data, the terms and availability
of financing and other general economic and business conditions. Any problems or
delays encountered in any one of these areas could result in substantial
increases in costs to the Company. In connection with any growth or expansion,
the Company will be required to develop and improve operational, management and
financial systems and controls. There can be no assurance that the Company will
be able to effectively manage its expanding operations and anticipate all of the
changing demands that growth will impose on its systems and controls. Failure to
manage growth would have a material adverse effect on the Company's business.
See -- "Risks Associated with the Operation of the Company upon Consummation of
the Continental Acquisition".
Geographical Concentration of Operations; Risks Associated with International
Expansion. Until fiscal 1997, other than a number of projects conducted in the
United States and one project conducted in Pakistan, the Company's operations
had been conducted exclusively in Western Canada, and the majority of the
Company's revenues were derived therefrom. The Company is still currently highly
dependent upon demand for data acquisition services in Western Canada and
approximately 65% of revenue in fiscal 1997 resulted from operations based in
Western Canada. To the extent that the Company continues to conduct
substantially all of its operations in this region, the Company's operating
results may be materially adversely affected by unfavorable economic, weather,
industry trends or other conditions in this region that are beyond the Company's
control. The Company may be unable to mitigate the effects of any unfavorable
regional condition due to the lack of geographical diversity of its operations.
Although the Company intends to focus its marketing and operational efforts on
the Canadian and U.S. marketplaces and is not currently marketing its services
internationally, the Company may, from time to time, as market conditions
permit, consider pursuing operations in the international market through joint
ventures or other arrangements with strategic partners in geophysics services or
related industries in the United States, South America and Asia and/or by
contracting directly with oil and gas exploration companies located in such
markets. There can be no assurance that the Company will be successful in
penetrating international markets or that any international operations will be
profitable. International operations can also be expected to be subject to a
number of risks, including greater difficulties in accounts receivable
collection, longer payment cycles, exposure to currency fluctuations, political
and economic instability and the burdens of complying with a wide variety of
foreign laws and regulatory requirements. With the acquisition of Boone in June
1996 the Company has expanded and diversified its operations into the United
States, which has somewhat reduced its dependence on demand for data acquisition
services in Canada. In addition, in the United States and other international
markets, the Company will face intense competition from established entities
offering competitive technology.
Dependence on Suppliers. Currently, the Company obtains its seismic data
acquisition equipment from a few select vendors, and, in the case of its
telemetry based 3D, 24 bit data acquisition systems, from a sole source. The
Company does not have long-term supply contracts with any of its suppliers and
purchases its equipment on a purchase order basis. No assurance can
- 10 -
<PAGE> 12
be given that shortages will not occur in the future or that the sole or
limited sources of such equipment will be able to support the future equipment
requirements of the Company. In addition, there can be no assurance that the
Company will not experience delays or other supply problems that may materially
adversely affect the Company's operations or that the Company will be able to
obtain supplies, including additional data acquisition systems, in a timely
manner in the event of an increase in demand for its services. The inability to
obtain seismic data acquisition equipment as required, or to develop
alternative sources as required in the future, could materially adversely
affect the Company's business, operating results and financial condition.
Income tax Contingency. The Company has recently received notice that the
Canadian taxation authorities have disallowed certain expenses related to the
1994, 1995 and 1996 taxation years. The Company has also deducted similar
expenses in 1997. These reassessments and the potential reassessment for the
current year, would result in additional income taxes of approximately $340,000
($485,000 Canadian). Based on a recently decided court case, involving another
company with a set of circumstances similar to the Company's situation, the
Company is in disagreement with the basis of the reassessment and has filed
notices of objection. The Company does not expect to receive a decision
regarding the outcome of these notice of objections until the similar court case
proceeds through the appeal process. There can be no assurance that the
reassessment will not be upheld. Should the reassessments be upheld, any
resulting loss would be charged to operations in the year the outcome was
determined.
Operating Hazards and Insurance. The Company's operations are subject to the
general risks incident to land and water based seismic data acquisition
activities, including the use of explosives, which subject personnel to risk of
injury due to accidental explosions resulting from the mishandling of equipment
and supplies. Further, the Company operates in remote areas, often
characterized by difficult terrain, and under extreme weather conditions. The
Company's crews are mobile and its equipment and personnel are subject to
vehicular accidents. Some or all of these hazards may result in personal injury
and loss of life, severe damage to or destruction of property and equipment,
environmental damage or suspension of operations. The Company has not
experienced any material losses or environmental claims to date, but there can
be no assurance that it will not experience such losses or claims in the
future. To the extent available, the Company maintains general liability
insurance coverage against these potential claims, the nature and amount of
which the Company believes to be customary in the industry. There can be no
assurance that adequate insurance will be available in the future or that the
Company will be able to maintain adequate insurance on terms and conditions it
finds acceptable. In the event of an uninsured or inadequately insured claim,
the Company's business and financial condition could be materially adversely
affected.
Compliance with Governmental Regulations. The oil and gas industry is subject to
an extensive array of federal, provincial, state and local laws and regulations,
which may be changed from time to time in response to economic or political
conditions. Laws and regulations that have the effect of reducing or curtailing
exploration and production activities by energy companies could also adversely
affect the Company's operations and its financial condition by reducing the
demand for its services. In addition, oil and gas exploration is subject to
regulations governing environmental quality and pollution control. The Company
is required to expend financial and managerial resources to comply with such
laws in its operations, and anticipates that it will continue to be required to
do so in the future. Further, in many instances, the Company must abide by
permit requirements in order to conduct its operations and must abide by
environmental operating restrictions during the breeding period of certain
specific wildlife. To date the Company's cost of complying with such laws and
regulations has not been material, but because such laws and regulations are
changed frequently, it is not possible for the Company to enumerate or to
accurately predict the cost or impact of such laws and regulations on its future
operations. There can be no assurance that in the future the Company will be
able to acquire all of the necessary permits to conduct its business or that the
costs associated with complying with laws and regulations affecting its business
will not have a material adverse effect upon the Company. In the past, certain
environmental operating restrictions by which the Company was required to abide
have adversely affected the Company's operating results, and contributed to a
significant decrease in revenues and a net loss, during certain periods.
Further, there can be no assurance that such laws or regulations will not change
frequently. In recent years, there has been a trend toward more expansive and
stricter environmental laws and regulations.
Dependence on Key Personnel. The Company is highly dependent on the services and
expertise provided to it by its executive officers and key personnel, especially
those of its President, Chief Executive Officer, and principal shareholder, Mr.
Brian Kozun, the loss of which could substantially impair the Company's
operations. The Company has a key person life insurance policy on the life of
Mr. Kozun in the amount of $2,100,000 ($3,000,000 Canadian), the proceeds of
which are pledged as collateral to the Company's lenders. Because of the
specialized nature of the business of the Company, the future success of the
Company depends in large part upon its ability to attract and retain highly
qualified personnel. The Company faces intense competition for such highly
qualified personnel from other geophysical services companies, as well as from
oil, gas and other natural resource organizations, and may have to pay higher
salaries to attract and retain such personnel. There can be no assurance that
the Company will be able to hire sufficient qualified personnel on a timely
basis or
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<PAGE> 13
retain such personnel. Although the Company has entered into multiple-year
employment contracts with each of its executive officers, the loss of these or
other personnel or the failure to recruit additional key personnel by the
Company could have a material adverse effect on the Company's business,
financial condition and results of operations.
Year 2000. The Company has commenced review of its computer systems to identify
the systems that could be affected by the "Year 2000" issue and will develop an
implementation plan to resolve the issue. The Year 2000 issue is the result of
computer programs being written using two digits rather than four to define the
applicable year. Any of the Company's programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a major system failure or miscalculations. The
Company expects to identify Year 2000 problems in its existing software and if
necessary to modify its existing software or convert to new software in
1998/99, in order to address Year 2000 problems, if any. If necessary
modifications or conversions to new software are not completed on a timely
basis, the Year 2000 problem may have an adverse effect on the Company's
business, financial condition and results of operations.
Control by Current Management; Control by Former Continental Shareholders. The
Company's current officers and directors own approximately 21% of the Company's
outstanding Common Shares. Mr. Kozun, the Company's President, owns
approximately 17% of the Company's Common Shares, of which approximately 460,000
have been pledged in favor of a bank to secure certain outstanding personal
indebtedness. As a result, such individuals will likely be able to determine the
outcome of corporate transactions or other matters submitted for shareholder
approval. Should the Continental Acquisition be consummated, the former
shareholders of Continental will acquire in the aggregate approximately 2.1
million, or as of March 31, 1998, 31% of the issued and outstanding Shares of
the Company, after the issuance of such Shares to them. As a result the former
shareholders of Continental will be able to significantly influence the outcome
of corporate transactions or other matters submitted for shareholder approval.
Such control could preclude any unsolicited acquisition of the Company and
consequently adversely affect the market price of the Common Shares. In
addition, the terms of the Company's indebtedness require the lenders' prior
approval of any change in voting control of the Company, which control is
currently held by Mr. Kozun.
Potential Anti-Takeover Provisions. The Company's Board is authorized to issue
from time to time, without shareholder authorization, an unlimited number of
preferred shares in one or more designated series or classes. Further, Alberta
law requires that at least 50% of the Board of Directors of the Company be
residents of Canada. In addition, the Company's term loan requires the lender's
prior approval of any change in the voting control of the Company, which
control is currently held by Mr. Kozun. Any of these provisions could
discourage, hinder or preclude an unsolicited acquisition of the Company and
could make it less likely that shareholders receive a premium for their shares
as a result of any such attempt.
Limitation of Liability and Indemnification of Officers and Directors. Pursuant
to the Company's By-laws, as authorized under applicable Alberta law, directors
and officers of the Company are indemnified for monetary damages except where
the liability relates to the failure to act honestly and in good faith with a
view to the best interests of the Company. Further, the Company's By-laws
provide that the Company shall indemnify its directors, officers, employees or
agents to the full extent permitted by the Business Corporations Act (Alberta),
and the Company shall have the right to purchase and maintain insurance on
behalf of any such person against the liability except where the liability
relates to the directors' failure to act honestly and in good faith with a view
to the best interests of the Company. The Company maintains an insurance policy
covering its officers and directors and indemnifying them against loss on
account of claims made against them. The Company has entered into
indemnification agreements with each of its directors and officers, which
provide that the Company will indemnify the indemnitee to the fullest extent
permitted by applicable law, provided the indemnitee acted in good faith and in
a matter he reasonably believed to be in the best interest of the Company and,
with respect to any criminal action, had reasonable cause to believe his conduct
was lawful. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
Risk of Enforcing Judgments Against Foreign Persons and Corporations. The
Company is an Alberta, Canada corporation. The majority of the Company's
directors and officers and the experts named herein are residents of Canada and
most of their and the Company's assets are located outside of the United States.
As a result, it may be difficult for shareholders resident in the United States
to effect service within the United States upon the Company and such persons, or
to realize in the United States upon judgments of courts of the United States
predicated upon the civil liability provisions of the United States federal
securities laws. The Company has been advised by its Canadian counsel, Burstall
Ward, that there are certain factual and legal issues that Canadian courts would
consider before (i) enforcing judgments of United States courts obtained against
the Company or such other persons predicated upon the civil liabilities
provisions of such securities laws or (ii) imposing liabilities in original
actions against the Company or such other persons predicated solely upon such
securities laws.
No Dividends. The Company has paid cash dividends on its Common Shares only
once in connection with proceeds received by the Company from an insurance
policy upon the death of an officer of the Company and does not expect to
declare or pay any cash or other dividends in the foreseeable future. In
addition, pursuant to the terms of the Company's bank operating line of credit,
the extent to which the Company may pay dividends in the future is restricted
to a maximum of $72,000 ($100,000 Canadian dollars) per annum.
Shares Eligible for Future Sale. Future sales of Common Shares by existing
shareholders pursuant Rule 144 under the Securities Act could have an adverse
effect on the price of the Company's securities. Of the Company's 4,634,589
Common Shares outstanding at April 20, 1998, 1,045,623 are "restricted
securities" as that term is defined in Rule 144 promulgated under the "Act" and
under certain circumstances may be sold without registration pursuant to such
Rule and the remaining 3,588,966 are freely transferable without restriction or
further registration under the Act. The 2,080,000 common shares to be issued on
the consummation of the Continental Acquisition will also be "restricted
securities" as that term is defined in Rule 144 promulgated under the "Act" and
under certain circumstances may be sold without registration pursuant to such
Rule. The Company is unable to predict the effect that sales made under Rule
144, or otherwise, may
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<PAGE> 14
have on the then prevailing market price of the Company's securities although
any substantial sale of restricted securities pursuant to Rule 144 may have an
adverse effect. Sales of Common Shares, or the possibility of such sales, in the
public market may adversely affect the market price of the securities offered
hereby. None of the existing shareholders of the Company has any registration
rights with respect to the Common Shares; however Whale Securities Co. L.P. has
demand and piggy-back registration rights with respect to the securities
underlying the Underwriter's Warrant.
Effect of Outstanding Options and Warrants. The Company has outstanding (i)
Underwriter's Warrants to purchase an aggregate of 280,000 Shares, (ii) options
to purchase 384,500 Shares under the Company's 1995 Stock Option Plan, as
amended and (iii) a warrant to purchase 100,000 Shares. For the respective terms
of such securities, the holders thereof are given an opportunity to profit from
a rise in the market price of the Company's Common Shares with a resulting
dilution in the interests of the other shareholders. Further, the terms on which
the Company may obtain additional financing during that period may be adversely
affected by the existence of such options and warrants. The holders of such
securities may exercise them at a time when the Company might be able to obtain
additional capital through a new offering of securities on terms more favorable
than those provided by therein.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of any of the
Common Shares by the Selling Securityholder, although the Company will receive
proceeds from any exercise of the warrants.
The Selling Securityholder is not obligated to exercise his warrants and
there can be no assurance that such holder will choose to exercise all or any of
his warrants. In the event that all of the 100,000 outstanding warrants
exercisable for Common Shares offered hereby are exercised, the estimated net
proceeds to the Company would be $480,000 after deducting expenses of this
Offering.
The Company intends to use the estimated net proceeds received upon
exercise of the warrants, if any, for working capital.
The allocation of the estimated net proceeds from this Offering set forth
above represents the Company's best estimate based upon its current plans and
assumptions regarding general economic and industry conditions and its
anticipated future revenues and expenditures, including that no events occur
(such as a significant decline in the demand for its services) which would
cause the Company to abandon any particular efforts and that competitive
conditions remain stable. If any of these factors change, or if cash flow
generated from operations does not meet expectations, the Company may find it
necessary or advisable to reallocate some of the proceeds within the
above-described categories or to use portions thereof for other purposes.
Accordingly, the Company reserves the right, as unanticipated events occur, to
reallocate the proceeds from this Offering, including possibly for the
acquisition of or merger with similar or complementary companies. However, the
Company has no agreements, understandings or commitments with respect to any
such transaction.
SELLING SECURITYHOLDER
The following table sets forth the name of the Selling Securityholder and
the number of Common Shares beneficially owned at the commencement of this
Offering, and the number of Common Shares offered for sale, based on information
provided to the Company by such Selling Securityholder. The Common Shares are
being registered to permit public secondary trading of the Common Shares, and
the Selling Securityholder may offer the Common Shares for resale from time to
time. See "Plan of Distribution."
The Company has filed with the Commission under the Act a Registration
Statement on Form S-3, of which this Prospectus forms a part, with respect to
the resale of the Common Shares. The Company has agreed, among other things, to
bear certain expenses in connection with the registration and sale of the Common
Shares being offered by the Selling Securityholder. See "Plan of Distribution."
The Selling Securityholder holds warrants issued by the Company which, upon
exercise, allow such Selling Securityholder to purchase Common Shares. The
Selling Securityholder is expected to exercise his warrants and pay for his
Common Shares immediately prior to offering such Common Shares pursuant to this
Prospectus.
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<PAGE> 15
The Selling Securityholder is not an officer or director of the Company and
beneficially owns less than one percent of the outstanding Common Shares of the
Company.
SELLING SECURITYHOLDER
<TABLE>
<CAPTION>
AMOUNT BENEFICIALLY OWNED
PRIOR TO OFFERING (1) AMOUNT BEING OFFERED (1)
------------------------- ------------------------
<S> <C> <C>
Thomas Payne............... 100,000 100,000
Total...................... 100,000 100,000
- ----- ========================= ========================
</TABLE>
(1) Based on information provided by the Selling Securityholder. The number of
Common Shares owned prior to the Offering and the number of Common Shares
being offered includes the Common Shares issuable upon exercise of warrants
owned by the Selling Securityholder. The Selling Securityholder is
registering for resale the Common Shares issuable upon exercise of the
warrants.
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<PAGE> 16
PLAN OF DISTRIBUTION
The Company has been advised that the Common Shares offered hereby by the
Selling Securityholder may be sold by the Selling Securityholder or by his
transferees or other successors in interest. The distribution of all securities
offered hereby may be effected from time to time in one or more transactions on
the Nasdaq National Market or on other exchanges on which the Common Shares may
be traded, in the over-the-counter market, in negotiated transactions, through
the writing of options on the Common Shares or a combination of such methods of
sale, or through other means. Sales may be effected at fixed prices which may be
changed, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. The Selling
Securityholder is not restricted as to the price or prices at which they may
sell their Common Shares. Sales of Common Shares by the Selling Securityholder
may depress the market price of the Company's Common Shares.
Transactions may be effected by sales to or through broker-dealers, and
such broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the sellers or the purchasers of the Common
Shares for whom such broker-dealers may act as agent or to whom they sell as
principal, or both (which compensation to a particular broker-dealer might be
in excess of customary commissions). The Selling Securityholder and any
broker-dealers or agents who participate in the distribution of Common Shares
hereunder may be deemed to be "underwriters" as that term is defined in the
Act, and any commissions received by them and profit on any resale of the
Common Shares as principal might be deemed to be underwriting discounts and
commissions under the Act.
The Selling Securityholder is subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including without
limitation Regulation M, which provisions may limit the timing of purchases and
sales of Common Shares.
The Company has registered the Common Shares for resale pursuant to an
agreement with the Selling Securityholder and has agreed to pay the expenses of
registration in connection with this Offering. The Company will not receive any
proceeds from the sale of Common Shares by the Selling Securityholder although
the Company will receive proceeds from any exercise of the Warrants.
At the time a particular offer of Common Shares is made, to the extent
required, a supplement to this Prospectus will be distributed which will
identify and set forth the aggregate amount of Common Shares being offered and
the terms of the Offering.
In order to comply with certain states' securities laws, if applicable,
the Common Shares may be sold in such jurisdictions only through registered or
licensed brokers or dealers. In certain states the Common Shares may not be
sold unless they have been registered or qualified for sale in such state, or
unless an exemption from registration or qualification is available and is
obtained.
LEGAL MATTERS
The validity of the securities offered hereby and certain legal matters in
connection with the offering with respect to Canadian law have been passed upon
for the Company by Burstall Ward, Calgary, Alberta.
EXPERTS
The financial statements of the Company incorporated in this Prospectus by
reference to the Annual Report on Form 10-KSB, as amended, for each of the three
years ended September 30, 1997, have been incorporated herein in reliance on the
report of Ernst & Young, Chartered Accountants, given on their authority as
experts in accounting and auditing. The financial statements of Continental
incorporated in this Prospectus by reference to the Annual Report on Form
10-KSB, for the years ended December 31, 1996 and 1995, have been incorporated
herein in reliance on the report of Meyers Norris Penny & Co., Chartered
Accountants, given on their authority as experts in accounting and auditing.
- 15 -
<PAGE> 17
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED HEREIN
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE SELLING SECURITYHOLDERS. THIS VENTURE SEISMIC LTD.
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF.
_______________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE 100,000 COMMON SHARES
----
<S> <C>
Available Information.......................... 4
Incorporation of Certain Documents by Reference 4
Prospectus Summary............................. 5
The Company.................................... 5
Risk Factors................................... 7
Use of Proceeds................................ 13
Selling Securityholder......................... 13
Plan of Distribution........................... 15 _______________
Legal Matters.................................. 15
Experts........................................ 15 PROSPECTUS
- ------- -- _______________
</TABLE>
APRIL __, 1998
<PAGE> 18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered are as follows:
<TABLE>
<S> <C>
SEC Registration Fee*..................................$160.48
Accounting Fees and Expenses...........................$
Legal Fees and Expenses................................$
Miscellaneous Expenses.................................$
Total..................................................$
</TABLE>
--------
* Previously Paid.
Item 15. Indemnification of Directors and Officers.
The By-Laws of the Registrant provides that the Registrant shall indemnify
any person to the full extent permitted by the Business Corporations Act
(Alberta) (the "BCA"). Section 119 of the BCA, relating to indemnification, is
hereby incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers or controlling persons of the Registrant pursuant to the Registrant's
By-laws, the Registrant has been informed that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
The Registrant's By-Laws include certain provisions permitted pursuant to
Alberta law whereby officers and directors of the Registrant are to be
indemnified against certain liabilities. The Registrant's By-Laws also limit,
to the fullest extent permitted by Alberta law, a director's liability for
monetary damages for breach of fiduciary duty, except liability for (i) breach
of the director's duty to act honestly and in good faith and (ii) acts or
omissions where the director did not have reasonable grounds for believing his
conduct was lawful.
The Registrant has entered into indemnification agreements with each of
its executive officers and directors, the form of which is filed as Exhibit
10.13 to the Registrant's Registration Statement on Form SB-2 (File No.
33-97132).
The Registrant has obtained and maintains a policy of insurance covering
its officers and directors and indemnifying them against loss on account of
certain claims made against them.
Item 16. Exhibits.
<TABLE>
<S> <C> <C>
(a ) 4.1 Form of Specimen Certificate of Company's Common Shares (1)
4.3 Form of Warrant*
5.1 Opinion of Burstall Ward regarding legality of securities being registered
10.31 Securities Purchase Agreement, dated March 27, 1998, by and among the Registrant,
Continental Holdings Ltd. ("Continental") and the Shareholders of Continental
10.32 Credit Agreement, dated March 27, 1998, between the Registrant and
Continental Holdings Ltd.
10.33 General Security Agreement, dated March 27, 1998, between the Registrant and
Continental Holdings Ltd.
10.34 Form of Employment Agreement between the Registrant and Mr. Stinn, dated
March 27, 1998.
23.1 Consent of Ernst & Young, Chartered Accountants
23.2 Consent of Meyers Norris Penny & Co., Chartered Accountants
23.3 Consent of Burstall Ward (contained in Exhibit 5.1)
24.1 Power of Attorney (contained on signature page hereof)
</TABLE>
* Previously Filed.
(1) Incorporated by reference from the Company's Registration Statement on
form SB-2 (File No. 33-97132)
<PAGE> 19
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424 (b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or controlling
persons pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(5) For purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
<PAGE> 20
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing Form S-3 and has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Calgary, Province of Alberta, on the 20th day of April, 1998.
VENTURE SEISMIC LTD.
By: /s/ BRIAN KOZUN
Brian W. Kozun
Chairman, President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below under the heading "Signature" constitutes and appoints Brian W. Kozun and
Gregory B. Wiebe or either of them, his true and lawful attorney-in-fact and
agent with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities to sign any or all amendments
to this registration statement, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting alone,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, each acting alone, or
his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this post
effective Amendment to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ BRIAN KOZUN Chairman of the Board of April 20, 1998
Brian W. Kozun Directors, President and Chief
Executive Officer
(Principal Executive Officer)
/s/ GREG WIEBE Chief Financial Officer (Principal April 20, 1998
Gregory B. Wiebe Financial and Accounting Officer)
/s/ DAN McARTHUR Director April 20, 1998
P. Daniel McArthur
/s/ JOSEPH CIAVARRA Director April 20, 1998
J. Joseph Ciavarra
/s/ STUART NORMAN Director April 20, 1998
Stuart Norman
/s/ MICHAEL BENINGER Director April 20, 1998
Michael J. Beninger
</TABLE>
<TABLE>
<S> <C> <C>
/s/ BACHNER, TALLY, Authorized representative April 20, 1998
POLEVOY & MISHER LLP of the Registrant in the
________________________ United States
Bachner, Tally, Polevoy
& Misher LLP
</TABLE>
<PAGE> 21
Exhibit Index
<TABLE>
<S> <C> <C>
(a ) 4.1 Form of Specimen Certificate of Company's Common Shares (1)
4.3 Form of Warrant*
5.1 Opinion of Burstall Ward regarding legality of securities being registered
10.31 Securities Purchase Agreement, dated March 27, 1998, by and among the Registrant,
Continental Holdings Ltd. ("Continental") and the Shareholders of Continental
10.32 Credit Agreement, dated March 27, 1998, between the Registrant and
Continental Holdings Ltd.
10.33 General Security Agreement, dated March 27, 1998, between the Registrant and
Continental Holdings Ltd.
10.34 Form of Employment Agreement between the Registrant and Mr. Stinn, dated
March 27, 1998.
23.1 Consent of Ernst & Young, Chartered Accountants
23.2 Consent of Meyers Norris Penny & Co., Chartered Accountants
23.3 Consent of Burstall Ward (contained in Exhibit 5.1)
24.1 Power of Attorney (contained on signature page hereof)
</TABLE>
* Previously Filed.
(1) Incorporated by reference from the Company's Registration Statement on
form SB-2 (File No. 33-97132)
<PAGE> 1
Exhibit 5.1
April 21, 1998
Venture Seismic Ltd.
3110 - 80 Avenue S.E.
Calgary, Alberta T2C 1J3
Dear Sirs:
You have requested our opinion with respect to the offering and sale by a
stockholder of the Corporation (the "Selling Stockholder") of 100,000 common
shares (the "Shares")of Venture Seismic Ltd. (the "Corporation") issuable upon
the exercise of the warrants pursuant to the Corporation's Registration
Statement on Form S-3(the "Registration Statement") under the Securities Act of
1933, as amended (the "Act").
We have examined originals, or copies certified or otherwise identified to
our satisfaction of such documents and corporate and public records as we deem
necessary as a basis for the opinion hereinafter expressed. With respect to
such, we have assumed the genuineness of all signatures appearing on all
documents presented to us as originals, and the conformity to the originals of
all documents presented to us as conformed or reproduced copies. Where factual
matters relevant to such opinion were not independently established, we have
relied upon the certificates of officers and responsible employees and agents
of the Corporation.
We are members of the Law Society of Alberta, are not permitted to practice
law in any other province in Canada and are not experts in the laws of other
provinces of Canada or of any other jurisdiction. This opinion is rendered
solely with respect to the laws of the Province of Alberta and the federal laws
of Canada applicable therein.
Based upon the foregoing, it is our opinion that the Shares, when issued
and paid for in the manner described in the Registration Statement, will be
validly issued as fully paid and non-assessable common shares of the
Corporation.
We hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement, and to the use of our name as counsel to the Corporation
and the statements with respect to us appearing under the headings "Risk Factors
- -- Risk of Enforcing Judgments against Foreign Persons and Corporations" and
"Legal Matters" included in the Registration Statement and in the Prospectus
forming a part thereof. In giving this consent, we do not thereby concede that
we come within the categories of persons whose consent is required by the Act or
the General Rules and Regulations promulgated thereunder.
Yours truly,
/s/ Burstall Ward
-----------------
BURSTALL WARD
-----------------
<PAGE> 1
SECURITIES PURCHASE AGREEMENT Exhibit 10.31
This Securities Purchase Agreement (the "AGREEMENT") is made and entered into on
the 27th day of March, 1998 among CONTINENTAL HOLDINGS LTD., an Alberta
corporation ("CONTINENTAL") LESLIE J. STINN, SANDRA KELLY, ELAINE B. MCCARTHY,
GREGORY A. STINN AND ROY D. SELF (individually, each a "SECURITYHOLDER", and
collectively, the "SECURITYHOLDERS"), being the owners of all of the issued and
outstanding shares of capital stock of Continental and VENTURE SEISMIC LTD., an
Alberta corporation (the "BUYER").
The Securityholders collectively own all of the issued and outstanding shares of
capital stock of Continental (the "SHARES"), with each Securityholder owning the
number and type of Shares set forth opposite such Securityholder's name in
column A of Exhibit A hereto. The Buyer desires to purchase from the
Securityholders, and the Securityholders desire to sell to the Buyer, all of the
Shares in accordance with the provisions of this Agreement. References in this
Agreement to "SECTION A" refer to a section in Appendix A hereto.
NOW THEREFORE, intending to be legally bound hereby, the parties hereto agree as
follows:
1.1 SALE AND PURCHASE OF THE SHARES. Subject to the terms and conditions of this
Agreement and on the basis of and in reliance upon the representations,
warranties, covenants and agreements set forth herein, on the Closing Date (as
defined in Section 2(a) hereof), each Securityholder shall sell to the Buyer and
the Buyer shall purchase from each Securityholder the following:
(a) all of those Class "B" Shares owned by such Securityholder in
exchange for the aggregate share purchase price (the "SHARE
CONSIDERATION") allocated among and payable to each individual
Securityholder by issuing on the Closing Date an aggregate of
2,080,000 fully paid and non-assessable common shares in the
capital of the Buyer (the "VENTURE STOCK"), issuable to each
Securityholder in accordance with that number of the Venture
Stock set forth after such Securityholder's name in column B
of Exhibit A registered in the respective names of the
Securityholders and bearing the legend set forth in A.1.5(g)
of Appendix A; and
(b) all of those Class "C", Series I Shares owned by such
Securityholder in exchange for the aggregate cash purchase
price of $1,500,000.00 (U.S.) (the "CASH CONSIDERATION"),
allocated among and payable to each individual Securityholder
in such amounts or percentages as set forth after such
Securityholder's name in columns C, D and E of Exhibit A,
payable as follows:
(i) $500,000.00 (U.S.) on the Closing Date; and
(ii) $1,000,000.00 (U.S.) on or before January 1, 1999
with simple interest to accrue and be payable on such
amount at the prime rate of the Main Downtown Branch
of the Royal Bank of Canada in Calgary, Alberta, plus
1.0%, such interest to be due and payable on the
outstanding principal amount from the Closing Date up
to and including the date upon which such amount,
together with all interest payable thereon in
accordance with this sub-paragraph 1.1(b)(ii), is
paid in full to the Securityholders, all to be
evidenced by promissory notes to be delivered by the
Buyer to the Securityholders on the Closing Date, in
negotiable form and in the form and content
reasonably satisfactory to the Securityholders, in
such principal
<PAGE> 2
-2-
amounts with respect to each Securityholder as is set forth after such
Securityholder's name in column E of Exhibit A,
such Class "B" Shares and Class "C" Shares together representing 100% of the
issued and outstanding Shares of Continental as of the Closing Date (the Share
Consideration and the Cash Consideration hereinafter collectively called the
"PURCHASE PRICE" for the Shares).
1.2 METHOD OF PAYMENT OF CASH CONSIDERATION. The Cash Consideration, when paid
by the Buyer to the Securityholders, shall be paid by way of trust cheques drawn
from the trust account of Burstall Ward, Alberta legal counsel for the Buyer, or
bank drafts drawn from the Buyer's account with Alberta Treasury Branches
("ATB").
2. CLOSING.
(a) The closing (the "CLOSING") of the sale and purchase of the
Shares described in Section 1.1 hereof shall take place at the
offices of the Buyer's Alberta solicitors, Burstall Ward,
commencing at 10:00 a.m., local time, on the third (3rd)
business day after satisfaction or waiver of all closing
conditions specified in Sections 8 and 9 or at such other date
as the parties hereto agree, with the date on which the
Closing takes place being referred to herein as the "CLOSING
DATE". Notwithstanding anything herein contained, the parties
agree that in the event the transactions contemplated by this
Agreement are not completed on or before August 31, 1998, the
parties shall be released from all obligations under this
Agreement, other than those pursuant to Section 5 and Section
8.1.
(b) At the Closing, each Securityholder shall deliver to the
Buyer, free and clear of all security interests, pledges,
liens, transfer and stamp tax obligations, encumbrances,
claims and other charges thereon of every kind, the
certificates for the Shares to be sold by such Securityholder
in negotiable form, duly endorsed in blank, or with separate
stock transfer powers attached thereto and signed in blank,
representing in the aggregate all of the issued and
outstanding Shares of Continental, in exchange for delivery by
the Buyer of the following documents to the Securityholders on
Closing:
(i) Burstall Ward trust cheque or ATB bank draft in the
amount of $500,000.00 (U.S.), made payable to Tharp
Sinclair Watson Quigley Taylor, in trust for the
Securityholders;
(ii) the promissory notes, duly executed, sealed and
delivered by the Buyer, which are referred to in
sub-paragraph 1.1(b)(ii) above; and
(iii) share certificates for the Venture Stock, duly issued
from the Buyer's capital stock, free and clear of all
security interests, pledges, liens, transfer and
stamp tax obligations, encumbrances, claims and other
charges thereon of every kind and nature whatsoever,
and issued to the individual Securityholders as
specified in sub-paragraph 1.1(a) of this Agreement.
(c) At the Closing, the Securityholders shall make available to
the Buyer the written resignations of all the directors and
officers of Continental effective as of the Closing Date
except for such directors and officers as the Buyer shall
designate in writing, and shall
<PAGE> 3
-3-
cause to be made available to the Buyer and any continuing
directors and officers of Continental (the "POST-CLOSING
CONTINENTAL DIRECTORS AND OFFICERS") all minute books, stock
record books, books of account, corporate seals, leases,
contracts, agreements, securities, bank, checking and money
market accounts, other investments, deposits, customer and
subscriber lists, files and other documents, instruments and
papers belonging to Continental and shall cause full
possession and control of all of the assets and properties of
every kind and nature, tangible and intangible, of Continental
and of all other things and matters pertaining to the
operation of the business of Continental to be transferred and
delivered to the post-Closing Continental directors and
officers. At the Closing, the Securityholders shall also
deliver to the Buyer, and the Buyer shall deliver to the
Securityholders, the agreements, certificates and other
instruments and documents referred to in Sections 8 and 9
hereof, respectively.
(d) After the Closing, the Buyer shall make all agreements,
documents, information and other items referred to in Section
2(c) hereof available to the Securityholders for inspection,
in each case upon reasonable prior notice to the Buyer, during
normal business hours, at no expense to the Buyer and only for
a proper purpose, including without limitation the use thereof
in connection with (i) the indemnification and other
obligations of the Securityholders hereunder and (ii) the
payment of any liability to any third party which is owed by
any Securityholder.
3. PRE-CLOSING BALANCE SHEET ADJUSTMENTS.
(a) The Buyer acknowledges the declaration by Continental,
effective December 31, 1997, of a bonus of up to $1,000,000.00
(Cdn.) in the aggregate payable to the Securityholders, and
the redemption and cancellation of its outstanding 748 Class
"C", Series II Shares from the Securityholders for up to an
aggregate of $748,239.00 (Cdn.) (collectively, the "BONUS
TRANSACTIONS"). Continental shall pay for such redemptions on
or before the earlier of (i) June 25, 1998, or (ii) the
Closing Date. Each of the Securityholders hereby agree to the
terms and conditions of the redemption, including the
consideration payable to each in exchange for the 748 Class
"C", Series II Shares described herein.
(b) Continental shall pay the entire $1,000,000.00 (Cdn.) bonus
portion of the Bonus Transactions to the Securityholders, as
declared, on or before the earlier of (i) the Closing Date or
(ii) June 25, 1998, after payment of which there shall be no
outstanding loans, notes, payables or other indebtedness owed
by Continental to the Securityholders, either individually or
in the aggregate, except pursuant to the Employment Agreements
(as defined in Section 8.5).
4. EXAMINATION OF BUSINESS AND ASSETS.
(a) For the purpose of allowing the Buyer to analyze the business
and affairs of Continental to determine if there are any facts
relating to the Shares or to the business of Continental
which, if known to the Buyer, would cause the Buyer to elect
not to proceed with the purchase of the Shares, all
information relative to the Shares, the business of
Continental and the assets of Continental shall be open to
inspection by the Buyer, the Buyer's financial advisors and
the Buyer's solicitors, Burstall Ward, and Bachner, Tally,
Polevoy and Misher LLP at any reasonable time up to and
including the date hereof, as the Buyer may deem
<PAGE> 4
-4-
reasonably necessary or advisable in order to ensure that each
of the representations, warranties, covenants and agreements
of the Securityholders and Continental herein contained shall
be true and correct on the Closing Date (the "BUYER'S DUE
DILIGENCE").
(b) For the purpose of allowing the Securityholders to analyze the
business and affairs of the Buyer to determine if there are
any facts relating to the Venture Stock or to the business of
the Buyer which, if known to the Securityholders or to any one
of the Securityholders, would cause any one of such
Securityholders to elect not to proceed with the purchase and
sale of the Shares, all information in the possession of the
Buyer, subject to any confidentiality provisions, or as
otherwise may be limited by regulatory authorities or the
rules and regulations of the Securities and Exchange
Commission (the "S.E.C.") or the Nasdaq Stock Market
("NASDAQ") relative to the Venture Stock, to the listing of
the Venture Stock for trading on Nasdaq, to the regulatory
filings of the Buyer, to the publicly filed financial
statements of the Buyer, to the business and affairs of the
Buyer and to the assets of the Buyer, shall be open to
inspection by any one of the Securityholders, the financial
advisors of any one of the Securityholders, and to the
solicitors of the Securityholders, at any reasonable time up
to and including the date hereof, as any one of the
Securityholders may deem reasonably necessary or advisable in
order to ensure that each of the representations, warranties,
covenants and agreements of the Buyer contained in this
Agreement shall be true and correct on the Closing Date (the
"SECURITYHOLDERS' DUE DILIGENCE").
(c) For the purpose of allowing the Buyer, Continental and the
Securityholders to monitor compliance by each of Continental,
the Securityholders and the Buyer with their respective
covenants, representations and warranties made herein up to
and including the Closing Date, each of Continental, the
Securityholders and the Buyer shall continue to have access to
the information and materials described in Section 4(a) and
(b) for such purpose.
5. CONFIDENTIALITY. Between the date of this Agreement and the Closing Date,
each of the Buyer, Continental and the Securityholders shall and shall cause
their respective affiliates and officers and directors, and shall use reasonable
efforts to cause all their other respective employees, auditors, attorneys,
consultants, advisors and agents, to treat as confidential and hold in strict
confidence, unless compelled to disclose by judicial or administrative process
or, in the opinion of its counsel, by other requirements of law, and after prior
written notice to the other party, all confidential information of the
Securityholders and Continental, or the Buyer, as the case may be, furnished to
the Buyer by the Securityholders and Continental or to the Securityholders and
Continental by the Buyer, as the case may be, or any of their respective
representatives in connection with the Contemplated Transactions (as defined in
Section 8.11) and will not release or disclose such confidential information to
any other person, except their respective auditors, attorneys, financial
advisors and other consultants, agents and advisors in connection with the
consummation of the Contemplated Transactions, except as may be required by the
rules of the Alberta Securities Commission, the S.E.C. or Nasdaq, including
without limitation, the issuance of a press release and the filing of a report
on Form 8-K by the Buyer upon execution of this Agreement. If the Closing does
not occur (i) such confidence shall be maintained by the Securityholders and
Continental, or the Buyer, as the case may be, and each party shall cause its
officers and directors and affiliates and shall use reasonable efforts to cause
such other persons to maintain such confidence, except to the extent such
information comes into the public domain (other than as a result of an action by
such party, its officers, directors or such other persons in contravention of
this Agreement), (ii) each party shall and shall cause its officers and
directors and affiliates and shall use reasonable efforts to cause such other
persons to refrain from using any of such
<PAGE> 5
-5-
confidential information except in connection with the Agreement, and (iii) upon
the request of any party, the other party shall promptly return to the
requesting party any written materials remaining in its possession, which
materials it has received from the requesting party, or their respective
representatives.
6. REPRESENTATIONS AND WARRANTIES OF CONTINENTAL AND THE SECURITYHOLDERS. Each
Securityholder represents and warrants as of the date hereof, and as of the
Closing Date to the Buyer as set forth in Section A.1 of Appendix A hereto and
Continental and each of Leslie J. Stinn and Roy Self represents and warrants as
of the date hereof, and as of the Closing Date to the Buyer as set forth in
Section A.2 of Appendix A hereto, which Sections are incorporated in this
Section 6 by reference and are deemed to be a part of this Agreement.
7. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants as of the date hereof, and as of the Closing Date, to the
Securityholders and to each of them as set forth in Section A.3 of Appendix A
hereto, which Section is incorporated in this Section 7 by reference and is
deemed to be a part of this Agreement.
8. CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS. Except for the obligations
of the Buyer contained in Section 5 and Section 8.1 of this Agreement, all
obligations of the Buyer under this Agreement are subject to the fulfilment or
satisfaction, prior to or at the Closing, of each of the following conditions
precedent:
8.1 BUYER LOAN. The Buyer shall, upon execution hereof, forthwith advance to
Continental $4,000,000.00 (U.S.) pursuant to the credit agreement between the
Buyer, as lender, and Continental, as borrower, in substantially the form of
Exhibit B attached hereto (the "CREDIT AGREEMENT"), to be secured with a
security interest in certain of the assets of Continental pursuant to the
security agreement to be granted by Continental pursuant to the Credit Agreement
in substantially the form annexed hereto as Exhibit C (the "SECURITY
AGREEMENT"), subject to a priority agreement with Royal Bank of Canada, if
necessary, with the funds advanced pursuant to the Credit Agreement to be used
solely to assist with the equipping of a marine seismic vessel described as the
"Pacific Titan".
8.2 APPROVAL OF DUE DILIGENCE. The Buyer shall have received the requisite
approval from its board of directors of the Contemplated Transactions and of the
Due Diligence.
8.3 AUDITED FINANCIAL STATEMENTS OF THE COMPANY. Continental shall have provided
such audited financial statements for such periods, in such form as may be
required by the applicable regulatory authorities in connection with the
consummation of the Contemplated Transactions, together with any other audited
financial statements (as necessary) of Continental up to and including the
Closing Date as may be required by the applicable regulatory authorities, with
all costs of all such audits and financial statements to be paid by Continental.
8.4 SHAREHOLDER APPROVAL. The Buyer shall have received the requisite approval
from its shareholders of the Contemplated Transactions in accordance with
applicable law.
8.5 EMPLOYMENT AGREEMENTS. Each of Leslie J. Stinn and Roy D. Self shall have
executed and delivered employment agreements (the "EMPLOYMENT AGREEMENTS") with
Continental providing for a 3 year employment term, which will include
appropriate non-competition provisions, in the form annexed hereto as Exhibit D.
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8.6 REGULATORY, CONTRACTUAL APPROVALS. The Buyer, Continental and each of the
Securityholders shall have obtained all third party consents and approvals and
all applicable governmental, regulatory, stock exchange, shareholder and
contractual approvals necessary in connection with the execution, delivery and
performance of this Agreement and to complete the Contemplated Transactions,
including, without limitation, those consents set forth on Schedule A.2.14
(regarding Continental) and Schedule A.3.5 (regarding the Buyer).
8.7 RELEASES. The Securityholders shall have executed and delivered releases in
favour of Continental in their capacities as directors, officers, shareholders
and employees of Continental, in such form as reasonably required by the Buyer
and as reasonably acceptable to the Securityholders.
8.8 THIRD PARTY CONSENTS AND APPROVALS. The Securityholders and Continental
shall have obtained all third party consents or approvals required by
Continental or by the Securityholders in order to complete the Contemplated
Transactions.
8.9 APPROVAL OF COUNSEL; CORPORATE MATTERS. All actions, proceedings,
resolutions, instruments and documents (including those required to complete the
Bonus Transactions) required to carry out this Agreement or incidental hereto
and all other related legal matters shall have been approved on or before the
Closing Date by Burstall Ward, counsel for the Buyer, in the exercise of their
reasonable judgment. The Securityholders shall also have delivered to the Buyer
on or before the Closing Date such other documents, instruments, certifications
and further assurances as such counsel for the Buyer may reasonably require, as
more particularly described in the draft form of closing agenda attached hereto
and marked Exhibit E, with such additional documents to be added thereto as
mutually agreed to by the parties prior to the Closing Date, acting in a
commercially reasonable manner for transactions similar to the Completed
Transactions (the "CLOSING AGENDA").
8.10 LEGAL OPINIONS. The Buyer shall have received the opinions of Reesor
Martin, Barristers and Solicitors, and Tharp Sinclair Watson Quigley Taylor,
Barristers and Solicitors, counsel to Continental and to the Securityholders,
dated the Closing Date and addressed to the Buyer, in form and content agreed to
on or before Closing, acting in a commercially reasonable manner for
transactions similar to the Contemplated Transactions.
8.11 NO INJUNCTION. There shall not be in effect any injunction, order or decree
of a court of competent jurisdiction that prohibits or delays consummation of
the transactions contemplated by this Agreement (the "CONTEMPLATED
TRANSACTIONS"), or that will require any divestiture by the Buyer as a result of
the Buyer's acquisition of the Shares.
8.12 REPRESENTATIONS, WARRANTIES AND AGREEMENTS. (a) The representations and
warranties of Continental and the Securityholders set forth in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement, and as of the Closing Date with the same effect as though made on the
Closing Date, (b) the Securityholders and Continental shall have performed and
complied in all material respects with the agreements, covenants and conditions
contained in this Agreement required by this Agreement to be performed or
complied with by them prior to or at the Closing, and (c) the Buyer shall have
received a certificate to the foregoing effect signed by the Chief Executive
Officer and Chief Financial Officer of Continental and by the Securityholders.
8.13 LITIGATION. There shall not have been instituted any (a) investigation or
other inquiry by any domestic or foreign national, state, multi-state or
municipal or other local government, any subdivision,
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agency, commission or authority thereof, or any quasi-governmental or private
body exercising any regulatory or taxing authority thereunder (each, a
"GOVERNMENTAL BODY"), (b) action, suit, proceeding, claim, demand, citation,
summons, subpoena or inquiry of any kind or nature whatsoever, civil, criminal,
regulatory or otherwise, at law or equity (each, a "PROCEEDING"), by any
Governmental Body or by any other person or entity and, at what would otherwise
have been the Closing Date, remain pending to delay, restrain or prohibit the
Contemplated Transactions or to seek any divestiture or to revoke or suspend any
consent, waiver, registration, certificate, approval, grant, franchise,
concession, permit, license, exception or authorization of, or declaration or
filing with, or notice or report to, (i) any Governmental Body and (ii) any
other person required or obtained in connection with the Contemplated
Transactions (collectively, the "APPROVALS") by reason of any or all of the
Contemplated Transactions; nor shall any Governmental Body have notified any of
the parties hereto or any of their respective affiliates that consummation of
any part of the Contemplated Transactions would constitute a violation of any
law or that it intends to commence a Proceeding to restrain or prohibit any part
of the Contemplated Transactions or to require such divestiture, revocation or
suspension; unless, in either such case, such Governmental Body or other person
shall have withdrawn such notice and abandoned such Proceeding.
8.14 NO MATERIAL ADVERSE EFFECT. No event, occurrence, fact, condition, change,
development or effect shall have occurred, exist or come to exist since the date
of this Agreement that, individually or in the aggregate, has constituted or
resulted in, or could reasonably be expected to constitute or result in, in the
reasonable judgment of an experienced, prudent business person (a) a reduction
in the value of the business of Continental, or (b) a decision not to consummate
the Contemplated Transactions on the terms and conditions set forth in this
Agreement (a "MATERIAL ADVERSE EFFECT").
8.15 PAYMENT OF SECURITYHOLDER TRANSACTION EXPENSES. Continental shall have
paid, or made all necessary arrangements with respect to payment of, all costs,
liabilities and expenses incurred by or for the benefit of Continental and the
Securityholders (including without limitation all legal and accounting fees and
expenses) in connection with the negotiation and execution of this Agreement and
the consummation of the Contemplated Transactions, in each case at no cost or
obligation to the Buyer following the Closing; and Continental and the
Securityholders shall have provided the Buyer with evidence reasonably
satisfactory to the Buyer of such payments or other arrangements.
8.16 PROCEEDINGS SATISFACTORY. All certificates, opinions and other documents to
be delivered by the Securityholders and Continental and all other matters to be
accomplished by the Securityholders or Continental prior to or at the Closing
shall be satisfactory in the reasonable judgment of the Buyer and its counsel.
8.17 CANCELLATION OF INDEBTEDNESS TO SECURITYHOLDERS. Except for reimbursement
for expenses and payments due under the Employment Agreements (the "PERMITTED
INDEBTEDNESS"), on the Closing Date (a) the Securityholders shall have cancelled
any notes payable by Continental to the Securityholders as of the Closing Date;
and (b) any indebtedness owed by Continental to the Securityholders as of the
Closing Date shall, without further consideration, have been repaid, discharged
or contributed to the capital of Continental, which payment, contribution or
discharge shall be evidenced in a form reasonably satisfactory to the Buyer.
Except for the Permitted Indebtedness, as of the Closing Date, there shall be no
outstanding notes, loans, payables or other indebtedness owed by Continental to
any of the Securityholders.
9. CONDITIONS PRECEDENT TO THE SECURITYHOLDERS' OBLIGATIONS. Except for the
obligations of Continental and the Securityholders contained in Sections 5 and
8.1 of this Agreement, all the obligations of the Securityholders under this
Agreement are subject to the fulfilment or satisfaction, prior to or at the
<PAGE> 8
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Closing, of each of the following conditions precedent:
9.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS. (a) The representations and
warranties of the Buyer set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement, and as of the Closing
Date with the same effect as though made on the Closing Date, (b) the Buyer
shall have performed and complied in all material respects with all agreements,
covenants and conditions contained in this Agreement required by this Agreement
to be performed or complied with by the Buyer prior to or at the Closing, and
(c) the Securityholders shall have received a certificate to the foregoing
effect signed by the Chief Executive Officer and Chief Financial Officer of the
Buyer.
9.2 EMPLOYMENT AGREEMENTS. Continental shall have executed and delivered the
Employment Agreements and the Employment Agreements shall be in full force and
effect, unamended.
9.3 NOMINEE DIRECTOR. The Securityholders shall provide the name of one nominee
director of the Buyer on behalf of the Securityholders acceptable to the Buyer
and the Buyer shall use its best efforts to nominate such nominee director to
stand for election as a director of the Buyer at the special meeting of the
Shareholders of the Buyer to be held prior to the Closing Date; provided that
the nomination of such director shall be conditional upon receipt of the
requisite shareholder approval necessary for the Contemplated Transactions and
the election of such director shall be subject to the Closing of the
Contemplated Transactions.
9.4 CREDIT AGREEMENT, SECURITY AGREEMENT. The Credit Agreement shall have been
duly executed and delivered by the parties thereto on the date hereof, and the
Buyer, contemporaneously therewith, shall have advanced the funds contemplated
by the Credit Agreement for the purposes specified therein.
9.5 APPROVAL OF SECURITYHOLDERS' COUNSEL; CORPORATE MATTERS. All actions,
proceedings, resolutions, instruments and documents (including those required to
complete the Bonus Transactions) required to carry out this Agreement or
incidental hereto and all other related legal matters shall have been approved
on the Closing Date by Reesor Martin and Tharp Sinclair Watson Quigley Taylor,
counsel for the Securityholders, in the exercise of their reasonable judgment.
The Buyer shall also have delivered to the Securityholders such other documents,
instruments, certifications and further assurances as such counsel for the
Securityholders may reasonably require, as more particularly described in the
Closing Agenda.
9.6 DIRECTOR AND SHAREHOLDER APPROVALS.
(a) Continental shall have received the approval of its board of
directors and the unanimous approval of all of its
shareholders, both to the Agreement and to the Contemplated
Transactions, and certified copies of the resolutions
containing these approvals shall be delivered by Continental
to the Securityholders and the Buyer on the Closing Date.
(b) The Buyer shall have received the required approval of its
board of directors and of its shareholders, both to the
Agreement and to the Contemplated Transactions, and certified
copies of the resolutions or minutes containing these
approvals shall be delivered by the Buyer to the
Securityholders on the Closing Date.
9.7 RELEASES. On the Closing Date, Continental shall have executed and delivered
to each of the Securityholders a general release in favour of each such
Securityholder in his or her, as the case may be, respective capacity as a
director, officer, employee and independent contractor of Continental, in such
form
<PAGE> 9
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as mutually acceptable to the parties.
9.8 DIRECTORS' APPROVAL - EMPLOYMENT AGREEMENTS - CONTEMPLATED TRANSACTIONS.
(a) Continental, by way of written resolution made effective March
1, 1998 shall have received the approval of its board of
directors and the unanimous approval of its shareholders to
the Employment Agreements and certified copies of the
resolutions containing these approvals shall be delivered by
Continental to Roy Self and Leslie A. Stinn on the Closing
Date.
(b) Continental, by way of written resolution shall have received
the approval of its board of directors and the unanimous
approval of its shareholders to the Contemplated Transactions,
and certified copies of the resolutions containing these
approvals shall be delivered by Continental to the
Securityholders on the Closing Date.
9.9 THIRD PARTY CONSENTS AND APPROVALS. The Buyer shall have obtained all third
party consents and approvals necessary in connection with the execution,
delivery and performance of this Agreement and as required by the Buyer in order
to complete the Contemplated Transactions, including without limitation, those
set forth on Schedule A.3.5. hereof and all applicable and required
governmental, legal, regulatory, stock exchange and contractual approvals.
9.10 APPROVAL OF DUE DILIGENCE. The Securityholders shall have approved the
results of the Securityholders' Due Diligence.
9.11 REGULATORY, CONTRACTUAL APPROVALS. The Buyer, Continental and each of the
Securityholders shall have obtained all third party consents and approvals and
all applicable governmental, regulatory, stock exchange, shareholder and
contractual approvals necessary in connection with the execution, delivery and
performance of this Agreement and to properly complete the Contemplated
Transactions, including, without limitation, those consents set forth in
Schedule A.2.14 (regarding Continental) and Schedule A.3.5 (regarding the
Buyer).
9.12 NO MATERIAL ADVERSE EFFECT. No event, occurrence, fact, condition, change,
development or effect shall have occurred, exist or come to exist since the date
of this Agreement that, individually or in the aggregate, has constituted or
resulted in, or could reasonably be expected to constitute or result in, in the
reasonable judgment of an experienced, prudent business person (a) a reduction
in the value of the business of the Buyer, or (b) a decision not to consummate
the Contemplated Transactions on the terms and conditions set forth in this
Agreement (a "VENTURE MATERIAL ADVERSE EFFECT").
9.13 PROCEEDINGS SATISFACTORY. All certificates, opinions and other documents to
be delivered by the Buyer and all other matters to be accomplished by the Buyer
prior to or at the Closing shall be satisfactory in the reasonable judgment of
the Securityholders, Continental and their counsel.
9.14 ADDITIONAL CLOSING DOCUMENTS. The Buyer shall provide to the
Securityholders on the Closing Date the following:
(a) a certified copy of the directors' resolution of the Buyer,
approving the Agreement and all transactions contemplated by
the Agreement, including without limitation the approval and
due authorization of the issuance and delivery of the Venture
Stock to the Securityholders on the Closing Date, and
authorizing and directing the execution and delivery of the
<PAGE> 10
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Agreement by the Buyer, together with all other documents
required pursuant to the Closing Agenda;
(b) the legal opinion of Burstall Ward addressed to the
Securityholders, made effective as of the Closing Date, in
form and content as agreed to on or before the Closing, acting
in a commercially reasonable manner for transactions similar
to the Contemplated Transactions, confirming that the
Agreement and all of the Contemplated Transactions have been
duly approved by the Buyer's shareholders and the Buyer's
board of directors, that the Venture Stock has been duly and
properly issued by the Buyer, from treasury, as fully paid and
non-assessable shares, and, to the best of their knowledge,
information and belief, having made reasonable and adequate
inquiry in that regard, is free and clear of all security
interests, pledges, liens, transfer and stamp tax obligations,
encumbrances, claims and other charges thereon of every kind
and nature whatsoever, and further, confirming that the
Agreement and all of the Contemplated Transactions, including,
without limitation, the issuance of the Venture Stock to the
Securityholders has been made and done in compliance with all
applicable corporate and securities laws, regulations, and
policies, including without limitation the rules, regulations
and policies of the Alberta Securities Commission, and that
the required Form 20 has been duly filed with the Alberta
Securities Commission and to the best of their knowledge,
information and belief, having made reasonable inquiry in that
regard, and in reliance upon an opinion of Bachner, Tally,
Polevoy and Misher LLP and (A) assuming (i) the accuracy of
the representations and warranties provided by the
Securityholders in this Agreement and (ii) that the Buyer has
complied in all material respects with the requirements of
section 4(2) of the Act, the offer and sale of the Venture
Stock by the Buyer is exempt from registration under the Act;
and (B) under the federal securities laws of the United States
as currently in effect, and assuming the accuracy of the
representations and warranties made by the Securityholders in
this Agreement, except to the extent that the Venture Stock
issued to the Securityholders constitute "restricted
securities" as such term is defined under Rule 144 of the Act,
or that any of the Securityholders may be deemed an
"affiliate" of the Buyer, as such term is defined under Rule
144 of the Act, as of the date of issuance, the Venture Stock
will have no prohibition on transfer; and
(c) a true copy of the written verification from Nasdaq referred
to in Section 13.7, if obtainable.
10. INDEMNIFICATION.
10.1 INDIVIDUAL INDEMNIFICATION BY THE SECURITYHOLDERS AND CONTINENTAL.
(a) From and after the Closing, each Securityholder shall
reimburse, indemnify and hold harmless the Buyer and its
affiliates (including, without limitation, Continental) (each
such person and its successors and assigns is referred to
herein as a "BUYER INDEMNIFIED PARTY") against and in respect
of any and all damages, losses, settlement payments,
deficiencies, liabilities, costs and expenses suffered,
sustained, incurred or required to be paid by any Buyer
Indemnified Party because of or that result from, relate to or
arise out of the untruth, inaccuracy or breach of, any
representation or warranty of such Securityholder in whole or
in part contained in Section A.1 of this Agreement and any and
all actions, suits, claims, proceedings, investigations,
demands, assessments, audits, fines, judgments, costs and
other expenses (including without limitation reasonable legal
fees and expenses) incident to any of the foregoing or to the
enforcement of this Section 10.1.
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(b) Each Securityholder and Continental shall indemnify and hold
harmless the Buyer and each person, if any, who controls the
Buyer within the meaning of the Act (as defined) against any
losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to,
all reasonable costs of defense and investigation and all
attorneys' fees), to which the Buyer or such controlling
person may become subject, under the Act or otherwise, and
will reimburse, as incurred, the Buyer and such controlling
persons for any legal or other expenses reasonably incurred in
connection with investigating, defending against or appearing
as a third party witness in connection with any losses,
claims, damages or liabilities, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Proxy
Statement (as defined in Section 13.6) or any amendment or
supplement thereto, but only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with
written information furnished to the Buyer by or on behalf of
such Securityholder or Continental, as the case may be,
specifically for use in the preparation of the Proxy Statement
or any such amendment or supplement thereof. This indemnity
will be in addition to any liability which the Securityholders
and Continental may otherwise have.
10.2 SEVERAL INDEMNIFICATION BY STINN AND SELF. From and after the Closing, each
of Leslie J. Stinn and Roy D. Self shall reimburse, indemnify any Buyer
Indemnified Party against and in respect of fifty percent (50%) of:
(a) any and all damages, losses, settlement payments,
deficiencies, liabilities, costs and expenses suffered,
sustained, incurred or required to be paid by any Buyer
Indemnified Party because of or that result from, relate to or
arise out of:
(i) the untruth, inaccuracy or breach of, or the failure
to fulfil, any representation, warranty (other than a
representation or warranty contained in Section A.1
of this Agreement), agreement, covenant or statement
of any Securityholder contained in this Agreement or
in any certificate or other writing furnished to the
Buyer by or on behalf of any Securityholder or
Continental in connection herewith;
(ii) any claim by any former shareholder of Continental
involving the Contemplated Transactions or any prior
transaction involving any shares of capital stock of
Continental or any predecessor corporation
(including, without limitation, claims relating to
any and all decisions and determinations made with
respect to amounts or allocations of purchase price
or other consideration) and not already provided for
in the Financials (as defined in Section A.2.4); or
(iii) any liability or obligation relating to or arising
out of the business, operations or assets of
Continental or the actions or omissions of
Continental's directors, officers, shareholders,
employees or agents; and prior to the Closing Date
and not already provided for in the Financials (as
defined in Section A.2.4), including without
limitation any liability or obligation relating to,
and any claim which arises out of or is based upon,
(1) negligence, (2) strict liability, (3) any
Environmental Claim (as defined in Section A.2.19
hereof) or which otherwise relates to, or involves a
claim,
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liability or obligation which arises out of or is
based upon, any Environmental Law (as defined in
Section A.2.19 hereof) to the extent that such
liability or obligation relates to or arises out of,
in whole or in part, any activity occurring,
condition existing, omission to act or other matter
existing prior to the Closing Date, (4) any other
statute, rule or regulation or (5) any express or
implied representation, warranty, agreement or
guarantee made by or on behalf of Continental, or any
liability or obligation which is imposed on
Continental or any successor corporation by operation
of law, in connection with any product designed,
used, rented, sold, manufactured, shipped or
installed by or on behalf of Continental, or for any
service performed by or on behalf of Continental,
including without limitation any acts, omissions,
workmanship or material performed or sold by
Continental, in any case prior to the Closing Date
and irrespective of the date that any claim, suit or
other cause of action related to any of the foregoing
is filed or otherwise instituted against Continental
or any successor corporation (with all references to
Continental in this Section 10.2(a)(iii) also deemed
to be references to any predecessor in business of
Continental); provided, however, that the foregoing
shall not apply to liabilities and obligations of
Continental described in Section A.2.7(a) hereof; and
(b) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines,
judgments, costs and other expenses (including without
limitation reasonable legal fees and expenses) incident to any
of the foregoing or to the enforcement of this Section 10.2.
10.3 INDEMNIFICATION BY THE BUYER.
(a) From and after the Closing, the Buyer shall reimburse,
indemnify and hold harmless each Securityholder (each such
person and his or her heirs, administrators, personal
representatives and assigns is referred to herein as a
"SECURITYHOLDER INDEMNIFIED PARTY") against and in respect of:
(i) any and all damages, losses, settlement payments,
deficiencies, liabilities, costs and expenses
suffered, sustained, incurred or required to be paid
by such Securityholder Indemnified Party because of
or that result from, relate to or arise out of:
A. the untruth, inaccuracy or breach of, or the
failure to fulfil, any representation,
warranty, agreement, covenant or statement
of the Buyer contained in this Agreement or
in any certificate or other writing
furnished to the Securityholders by or on
behalf of the Buyer in connection herewith;
or
B. any liability or obligation relating to or
arising out of the business, operations or
assets of Continental conducted after the
Closing Date or the actions or omissions of
Continental's directors, officers,
shareholders, employees or agents after the
Closing Date (other than the
Securityholders) including, without
limitation, any liability or obligation
relating to, and any claim which arises out
of or is based upon, (i) negligence, (ii)
strict
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liability, (ii) any Environmental Claim (as
defined in Section A.2.19 hereof) or which
otherwise relates to, or involves a claim,
liability or obligation which arises out of
or is based upon, any Environmental Law (as
defined in Section A.2.19 hereof) to the
extent that such liability or obligation
relates to or arises out of, in whole or in
part, any activity occurring, condition
existing, omission to act or other matter
existing subsequent to the Closing Date
(iii) any other statute, rule or regulation
or (iv) any express or implied
representation, warranty, agreement or
guarantee made or on behalf of Continental,
or any liability or obligation which is
imposed on Continental or any successor
corporation by operation of law, in
connection with any product designed, used,
rented, sold, manufactured, shipped or
installed by or on behalf of Continental, or
for any service performed by or on behalf of
Continental, including, without limitation,
any acts, omissions, workmanship or material
performed or sold by Continental, in any
case subsequent to the Closing Date and
irrespective of the date that any claim,
suit or other cause of action related to any
of the foregoing is filed or otherwise
instituted against Continental or any
successor corporation (with all references
to Continental in this Section 10.3(a)(B)
also deemed to be references to any
predecessor in business of Continental); and
(ii) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines,
judgments, costs and other expenses (including
without limitation reasonable legal fees and
expenses) incident to any of the foregoing or to the
enforcement of this Section 10.3.
(b) The Buyer shall indemnify and hold harmless the
Securityholders and Continental, each of its directors, and
each person, if any, who controls Continental within the
meaning of the Act, against any losses, claims, damages or
liabilities (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and
investigation and all attorneys' fees) to which the
Securityholders and Continental or any such director, nominee,
officer or controlling person may become subject, under the
Act or otherwise, and will reimburse, as incurred, the
Securityholders, Continental and such controlling persons for
any legal or other expenses reasonably incurred in connection
with investigating, defending against or appearing as a third
party witness in connection with any losses, claims, damages
or liabilities, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Proxy
Statement, or any amendment or supplement thereto, or arise
out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or
alleged omission was made in the Proxy Statement or any
amendment or supplement thereto other than in reliance upon
and in conformity with written information furnished by the
Securityholders and Continental to the Buyer specifically for
use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Buyer may otherwise
have.
10.4 LIMITATIONS ON LIABILITY.
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(a) Except as otherwise provided in Section 10.6 hereof and except
that this limitation shall not apply to any indemnification
claims arising under or with respect to Sections 10.1 and
11(a) hereof, Leslie J. Stinn and Roy D. Self shall not be
liable to any Buyer Indemnified Party under Section 10.2 for
any misrepresentation or breach of warranty until the
aggregate amount for which they would otherwise (but for this
provision) be liable to any or all Buyer Indemnified Parties
for all such misrepresentations and breaches of warranty
exceeds in the aggregate the sum (the "DEDUCTIBLE") of
$25,000.00.
(b) Except as otherwise provided in Section 10.6 hereof and except
that this limitation shall not apply to any indemnification
claims arising under or with respect to Sections 10.1 and
11(a) hereto, the indemnification liability of each of Leslie
J. Stinn and Roy Self to any Buyer Indemnified Party under
Section 10.2 for any misrepresentation or breach of warranty
shall be limited to fifty percent (50%) of any claim or demand
made thereunder.
(c) Except as otherwise provided in Section 10.6 hereof and except
that this limitation shall not apply to any indemnification
claims arising under or with respect to Sections 10.1 and
11(a) hereto, the indemnification liability of each
Securityholder to any Buyer Indemnified Party under Section
10.2 for any misrepresentation or breach of warranty shall be
limited to the percentage of any claim or demand made
thereunder equal to the percentage set forth after such
Securityholder's name in column C on Exhibit A.
(d) Except as otherwise provided in Section 10.6 hereof and except
that this limitation shall not apply to any indemnification
claim arising under or with respect to Section 11(b) hereof,
the Buyer shall not be liable to any Securityholder
Indemnified Party under Section 10.3 hereof for any
misrepresentation or breach of warranty until the aggregate
amount for which it would otherwise (but for this provision)
be liable to any or all Securityholder Indemnified Parties for
all such misrepresentations and breaches of warranty exceeds
in the aggregate the Deductible.
10.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as provided in Section
10.6 hereof, the representations and warranties given or made by the
Securityholders or the Buyer in this Agreement or in any certificate or other
writing furnished in connection herewith shall survive the Closing for a period
of two years after the Closing Date and shall thereafter terminate and be of no
further force or effect, except that (a) all representations and warranties
relating to Taxes and Tax Returns (each as defined in Section A.2.10 hereof) and
to Environmental Claims (as defined in Section A.2.19 hereof) shall survive the
Closing for the period of the applicable statutes of limitation plus any
extensions, (b) all representations and warranties set forth in Sections A.1 and
11(a) hereof shall survive the Closing without limitation and (c) any
representation or warranty as to which a claim shall have been asserted during
the survival period shall continue in effect with respect to such claim until
such claim shall have been finally resolved or settled. Notwithstanding any
investigation or audit conducted before or after the Closing Date or the
decision of any party to complete the Closing, each party shall be entitled to
rely upon the representations and warranties of the other party or parties set
forth herein.
10.6 EXCEPTIONS TO LIMITATIONS. Nothing herein shall be deemed to limit or
restrict in any manner any rights or remedies which any Buyer Indemnified Party
has, or might have, at law, in equity or otherwise, against the Securityholders,
or which any Securityholder Indemnified Party has, or might have, at law, in
equity or otherwise, against the Buyer, based on any willful misrepresentation,
willful breach of warranty or
<PAGE> 15
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willful failure to fulfil any agreement or covenant.
10.7 PAYMENT OF INDEMNIFICATION OBLIGATIONS. In the event that any
Securityholder or the Buyer is required to make any payment under this Section
10, such party shall promptly pay the Buyer Indemnified Party or the
Securityholder Indemnified Party, as the case may be, the amount of such
indemnity obligation. If there should be a dispute as to such amount, such
Securityholder or the Buyer, as the case may be, shall nevertheless pay when due
such portion, if any, of the obligation as shall not be subject to dispute. The
difference, if any, between the amount of the obligation ultimately determined
as properly payable under this Section 10 and the portion, if any, theretofore
paid shall bear interest for the period from the date the amount was demanded by
the Buyer Indemnified Party or the Securityholder Indemnified Party, as the case
may be, until payment in full, payable on demand, at the fluctuating rate per
annum which at all times shall be 1.0 percentage point in excess of the rate
which is publicly announced from time to time by The Royal Bank of Canada as its
"PRIME RATE".
10.8 INDEMNIFICATION PROCEDURE. All claims for indemnification under this
Section 10 shall be asserted and resolved as follows:
(a) In the event that any claim or demand for which a party (the
"INDEMNIFYING PARTY") would be liable to any Buyer Indemnified
Party or Securityholder Indemnified Party (in either case, the
"INDEMNIFIED PARTY") hereunder is asserted against an
Indemnified Party by a third party, the Indemnified Party
shall take immediate steps to notify the Indemnifying Party of
such claim or demand, specifying the nature of such claim or
demand in as much detail as possible and the amount or the
estimated amount thereof to the extent then feasible (which
estimate shall not be conclusive of the final amount of such
claim or demand), together with all documentation required by
the Indemnifying Party and which the Indemnified Party has the
power to obtain or is able to obtain, and detailing such claim
or demand sufficiently to permit a decision regarding
indemnification to be made by the Indemnifying Party
(collectively called the "CLAIM NOTICE"). The Indemnifying
Party shall have 20 days from the receipt of the Claim Notice
(the "NOTICE PERIOD") to notify the Indemnified Party (i)
whether or not the Indemnifying Party disputes the
Indemnifying Party's liability to the Indemnified Party
hereunder with respect to such claim or demand and (ii) if the
Indemnifying Party does not dispute such liability, whether or
not the Indemnifying Party desires, at the sole cost and
expense of the Indemnifying Party, to defend against such
claim or demand, provided that the Indemnified Party is hereby
authorized (but not obligated) prior to and during the Notice
Period to file any motion, answer or other pleading which the
Indemnified Party shall deem necessary or appropriate to
protect the Indemnified Party's interests. In the event that
the Indemnifying Party notifies the Indemnified Party within
the Notice Period that the Indemnifying Party does not dispute
the Indemnifying Party's obligation to indemnify hereunder and
desires to defend the Indemnified Party against such claim or
demand and except as hereinafter provided, the Indemnifying
Party shall have the right to defend by appropriate
proceedings, which proceedings shall be promptly settled or
prosecuted by the Indemnifying Party to a final conclusion. If
the Indemnified Party desires to participate in, but not
control, any such defense or settlement the Indemnified Party
may do so at the Indemnified Party's sole cost and expense. If
the Indemnifying Party elects not to defend the Indemnified
Party against such claim or demand, whether by not giving the
Indemnified Party timely notice as provided above or
otherwise, then the Indemnified Party, without waiving any
rights against the Indemnifying Party, may defend against any
such claim in the Indemnified
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Party's sole discretion and, if it is ultimately determined
that the Indemnifying Party is responsible therefor under this
Section 10, then the Indemnified Party shall be entitled to
recover from the Indemnifying Party the amount of any judgment
and, subject to Section 10.8(c) hereof, all indemnifiable
costs and expenses of the Indemnified Party with respect
thereto, including without limitation interest as provided in
Section 10.7 hereof.
(b) If the Indemnified Party elects to defend any such claim or
demand or the Indemnifying Party elects not to defend such
claim or demand, then the Indemnified Party covenants to
diligently defend any such claim or demand to the full extent
an experienced, prudent businessperson would in the
circumstances. The Indemnified Party shall, prior to entering
into any settlement of any such claim or demand, provide the
Indemnifying Party with full particulars of such proposed
settlement and obtain in writing the approval of such
Indemnifying Party to such settlement, such approval to not be
unreasonably withheld. The Indemnified Party shall have the
right to control the defense of any such claim or demand and
the amount of any judgment and, subject to Section 10.8(c)
hereof, the reasonable costs and expenses of defense shall be
included as part of the indemnification obligations of the
Indemnifying Party hereunder. If the Indemnified Party should
elect to exercise such right, the Indemnifying Party shall be
consulted by the Indemnified Party on an ongoing basis with
respect to all material issues related to the defense of such
claim or demand, and have the right to participate in, but not
control, the defense of such claim or demand at the sole cost
and expense of the Indemnifying Party.
(c) Notwithstanding any other provisions of Section 10 of this
Agreement, the Indemnifying Party's obligation to indemnify
the Indemnified Party with respect to the reasonable costs and
expenses incurred by the Indemnified Party in defending any
particular claim or demand, is subject to the following
qualifications and limitations:
(i) all such costs and expenses must be reasonable given
the nature and extent of such claim or demand ; and
given the nature and extent of the relevant defense,
(ii) prior to retaining any professional services in
connection with the defense of such claim or demand,
the Indemnified Party shall first advise the
Indemnifying Party of the need for such professional
services, shall consult with the Indemnifying Party
regarding the identity and the expected fees of the
professional to be retained and shall, to the extent
possible, acting reasonably, come to a mutual
agreement with the Indemnifying Party regarding the
professional to be retained, and
(iii) all such costs and expenses incurred with respect to
the provision of legal services shall be subject to
taxation.
(d) In the event the Indemnified Party should have a claim against
the Indemnifying Party hereunder which does not involve a
claim or demand being asserted against or sought to be
collected by a third party, the Indemnified Party shall take
immediate steps to send a Claim Notice with respect to such
claim to the Indemnifying Party.
(e) Subject to the provisions of Sections 10.8(b) and 10.8(c)
hereof, the Indemnified Party's failure to give immediate
notice to the Indemnifying Party of any actual, threatened or
possible claim or demand which may give rise to a right of
indemnification hereunder shall
<PAGE> 17
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not relieve the Indemnifying Party of any liability which the
Indemnifying Party may have to the Indemnified Party unless
the failure to give such notice materially and adversely
prejudiced the Indemnifying Party.
11. NO BROKERS' OR FINDERS' FEES.
(a) Each of the Securityholders represents and warrants that all
discussions, activities and negotiations relative to this
Agreement have been carried on by such Securityholder directly
without the intervention of any person who may be entitled to,
or has claimed entitlement to, any brokerage or finder's fee
or other commission in respect hereof or the consummation of
the Completed Transactions, irrespective of the validity of
such claim, other than as disclosed in the December 8, 1997
letter from Canaccord Capital Corporation to the Buyer, and
each Securityholder agrees to indemnify and hold harmless the
Buyer Indemnified Parties against any and all claims, losses,
liabilities and expenses (including without limitation
reasonable legal fees and expenses) which may be incurred or
paid by the Buyer as a result of such Securityholder's
dealings, arrangements or agreements with any such person
contrary to the representation and warranty contained in this
sub-paragraph 11(a).
(b) The Buyer represents and warrants that all discussions,
activities and negotiations relative to this Agreement have
been carried on by the Buyer and its affiliates directly
without the intervention of any person who may be entitled to,
or has claimed entitlement to, any brokerage or finder's fee
or other commission in respect hereof or the consummation of
the Contemplated Transactions, irrespective of the validity of
such claim, other than as disclosed in the December 8, 1997
letter from Canaccord Capital Corporation to the Buyer and the
Buyer agrees to indemnify and hold harmless each
Securityholder against any and all claims, losses, liabilities
and expenses (including without limitation reasonable legal
fees and expenses) which may be incurred or paid by such
Securityholder as a result of the Buyer's or any of the
Buyer's affiliates' or associates' dealings, arrangements or
agreements with any such person contrary to the representation
and warranty contained in this sub-paragraph 11(b).
12. COVENANT NOT TO COMPETE.
(a) From the date of this Agreement until the third anniversary of
the Closing, each of the Securityholders agrees that he or
she, as the case may be, will not, anywhere in North America,
unless acting for the Buyer or its affiliates (including
without limitation Continental) or in accordance with the
Buyer's prior written consent, (i) (directly or indirectly)
own, manage, operate, join, control, finance or participate in
the ownership, management, operation, control or financing of,
or be connected as an officer, director, employee, principal,
agent, representative, consultant, investor, owner, partner,
manager, joint venturer or otherwise with, or permit his name
to be used by or in connection with, any business or
enterprise engaged anywhere in North America by Continental on
the Closing Date or during the three-year non-compete period
stated above or at the time of its termination, (ii) call on
or solicit any person who or which during such non-compete
period is a customer of Continental with respect to any
business covered by clause (i) above or (iii) solicit the
employment of any person who during such non-compete period is
employed by Continental on a full or part-time basis.
<PAGE> 18
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(b) The restriction provided in Section 12(a) above shall not be
construed to prohibit the ownership by the Securityholders (as
a group) of not more than 5% of any class of securities of any
corporation (other than the Buyer) which is engaged in any of
the foregoing businesses, having a class of securities
registered pursuant to the Securities Act (Alberta), or which
are publicly traded on a recognized securities exchange,
provided that such ownership represents a passive investment
and that neither the Securityholders nor any group of persons
including the Securityholders in any way, either directly or
indirectly, manages or exercises control of any such
corporation, guarantees any of its financial obligations,
otherwise takes any part in its business, other any exercising
his or her rights as a shareholder, or seeks to do any of the
forgoing.
(c) Each of the Securityholders acknowledges that (i) the
provisions of this Section 12 are reasonable and necessary to
protect the legitimate interests of the Buyer and its
affiliates (including, without limitation, Continental), (ii)
any violation of this Section 12 will result in irreparable
injury to the Buyer and its affiliates (including, without
limitation, Continental) and that damages at law would not be
reasonable or adequate compensation to the Buyer and its
affiliates (including, without limitation Continental,) for a
violation of this Section 12 and (iii) the Buyer and its
affiliates (including, without limitation, Continental) shall
be entitled to have the provisions of this Section 12
specifically enforced by preliminary and permanent injunctive
relief without the necessity of proving actual damages and
without posting bond or other security as well as to an
equitable accounting from the violating Securityholder of all
earnings, profits and other benefits arising out of any
violation of this Section 12 by such Securityholder, including
without limitation estimated future earnings related to any
such violation by such Securityholder. In the event that the
provisions of this Section 12 should ever be deemed or held by
a court of competent jurisdiction to exceed the time,
geographic, product or any other limitations permitted by
applicable law, then such provisions shall be deemed reformed
to the maximum permitted by applicable law.
(d) The Buyer and each of the Securityholders intend to and do
hereby confer jurisdiction to enforce the covenants set forth
in this Section 12 upon the courts of any jurisdiction within
the geographical scope of such covenants. In addition to
Section 15.8 hereof and not in limitation thereof, if the
courts of any one or more of such jurisdictions hold such
covenants unenforceable in whole or in part, it is the
intention of the Buyer and each covenanting Securityholder
that such determination not bar or in any way adversely affect
the right of the Buyer and its affiliates (including without
limitation Continental) to equitable relief and remedies
hereunder in courts of any other jurisdiction as to breaches
or violations of this Section 12 only, such covenants being,
for this purpose, severable into diverse and independent
covenants.
13. FURTHER AGREEMENTS OF THE PARTIES.
13.1 CONDUCT OF BUSINESS OF CONTINENTAL. Except as expressly permitted by or
contemplated by this Agreement, the Credit Agreement, the Employment Agreements
and except as otherwise agreed to or required in connection with the leasing,
outfitting and operation of the "Pacific Titan" in an aggregate amount not to
exceed $12,000,000.00 (U.S.) (hereinafter collectively called the "EXTRAORDINARY
EXPENDITURES") between the date of this Agreement and the Closing Date,
Continental shall conduct its business only in the ordinary course in
substantially the same manner as heretofore conducted, and use all its
reasonable efforts to preserve intact its present business organization, and to
preserve the goodwill of
<PAGE> 19
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persons having business relations with Continental. Without limiting the
generality of the foregoing, except as otherwise expressly permitted or
contemplated in this Agreement, and except for the Extraordinary Expenditures,
between the date of this Agreement and the Closing Date, Continental shall pay
accounts payable and pay and perform other obligations of the business of
Continental when they become due and payable in the ordinary course of business
consistent with prior practice, or when required to be performed, as the case
may be, and shall not:
(a) amend its articles or certificate of incorporation or by-laws;
(b) declare or pay any dividend or make any other payment or
distribution in respect of its capital stock, other than the
Bonus Transactions;
(c) purchase, redeem, issue, sell or otherwise acquire or dispose
of, either directly or indirectly, any of its capital stock,
or reclassify, split or otherwise change any of its capital
stock or grant or enter into any options, warrants, puts or
calls or other rights to purchase, sell or convert any
obligation into any of, its capital stock, other than the
Bonus Transactions;
(d) organize any subsidiary or acquire any capital stock or other
equity securities of any person or any equity or ownership
interest in any business;
(e) borrow any funds or incur, assume or acquire any obligation or
liability (whether fixed, accrued, contingent or otherwise,
whether due or to become due) or in the aggregate amount of
more than $25,000.00 except for current liabilities incurred
in the ordinary course of business in connection with the
purchase of goods or services consistent with prior practice;
(f) utilize its existing credit facility with Royal Bank of Canada
other than in the ordinary course of business and other than
to effect payment in accordance with Section 3(b) of the
$1,000,000.00 (Cdn.) bonus;
(g) enter into any commitment letter, offer to finance or loan
agreement regarding the leasing, outfitting or operation of
the "Pacific Titan" with any of Export Development
Corporation, Northstar Trade Finance Inc. or their respective
agents or affiliates without the prior express written consent
of the Buyer (collectively, the "EDC FINANCING");
(h) pay, discharge or satisfy any encumbrance (other than an
encumbrance then required to be paid, discharged or
satisfied), claim, liability or obligation (whether fixed,
accrued, contingent or otherwise, whether due or to become
due), except for payment, discharge or satisfaction for cash
of a claim, liability or obligation that is a current
liability either shown on the most recent financial statement
of Continental provided to Buyer, or incurred since the date
of such financial statement in the ordinary course of business
consistent with prior practice;
(i) make or grant any material increase in the compensation
(whether salary, commission, bonus, benefits (retirement,
severance or other) or other direct or indirect remuneration)
of any employees of Continental, or enter into any employment
contract with any employee of Continental other than the
Employment Agreements;
<PAGE> 20
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(j) sell, assign, transfer, convey, lease, pledge, encumber or
otherwise dispose of any of its assets or properties (real or
personal, tangible or intangible) or any other material right,
other than in the ordinary course of business;
(k) enter into any instrument which would constitute a material
lease or contract or enter into any material amendment,
supplement or waiver in respect of any material lease or
contract;
(l) incur any severance pay obligation by reason of this Agreement
or the Contemplated Transactions;
(m) grant or extend any power of attorney other than in the
ordinary course of business which does not affect a material
part of Continental's business or act as guarantor, surety,
co-signer, endorser, co-maker, indemnitor, or otherwise in
respect of the obligation of any person other than through
endorsements of negotiable instrument in the ordinary course
of business;
(n) cancel or compromise any material debt or claim, or waive or
release any material right, other than adjustments in the
ordinary course of business for goods or services sold and
received which, in the aggregate, are not material;
(o) make any capital expenditures or capital additions or
improvements in excess of an aggregate of $25,000.00, other
than pursuant to capital expenditure commitments disclosed on
any Schedule hereto or not required to be disclosed thereon;
(p) enter into or amend any collective bargaining or union
contract or agreement;
(q) institute or settle any Proceeding;
(r) incur any tax liability other than in the ordinary course of
business;
(s) in any other manner, modify, change or otherwise alter in a
material way the fundamental nature of the business of
Continental as presently conducted; or
(t) agree or otherwise commit, whether in writing or otherwise, to
do, or take any action or omit to take any action that would
result in, any of the foregoing, without the prior express
written consent of the Buyer.
13.2 FURTHER ASSURANCES. Following the Closing, the Securityholders, Continental
and the Buyer shall, and shall cause each of their affiliates to, from time to
time, execute and deliver such additional instruments, documents, conveyances or
assurances and take such other actions as shall be necessary, or otherwise
reasonably requested by the other party, to confirm and assure the rights and
obligations provided for in this Agreement and render effective the consummation
of the Contemplated Transactions.
13.3 TAX MATTERS.
(a) Between the date of this Agreement and the Closing Date,
Continental shall (i) file on a timely basis all tax returns
required to be filed by or with respect to Continental within
such time period and pay all taxes shown to be due thereon;
provided that A. all such tax returns
<PAGE> 21
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will be true, correct, and complete when filed by Continental
and B. submit each of such tax returns to the Buyer for the
Buyer's review and approval prior to filing, and (ii) shall
not make or cause to be made any election, or file any tax
return or amended tax return reflecting any position, that
could result in adverse tax consequences to the Buyer or to
Continental for any period, except for elections made in
accordance with historical practices of Continental.
(b) Each of the Buyer, Continental and the Securityholders will
provide the other parties with such assistance as may
reasonable be requested by any of them in connection with the
preparation of any tax return, any audit or other examination
by any taxing authority, any Proceedings relating to liability
for taxes, or any other claim arising under this Agreement,
and each will retain and provide the others with any of their
respective records or information that may be relevant to any
such tax return, audit or examination, Proceeding or claim.
Such assistance shall include making employees available on a
mutually convenient basis to provide additional information
and explanation of any material provided hereunder and shall
include providing copies of any relevant tax returns and
supporting work schedules.
13.4 EXCLUSIVITY. From the date hereof until the earlier of the Closing Date or
the date of termination of this Agreement pursuant to Section 14 hereof, neither
any of the Securityholders nor Continental shall (i) solicit, initiate or
encourage the submission of inquiries, proposals or offers from any person
relating to A. any business combination with Continental or B. the sale of a
material portion of the assets and/or capital stock of Continental (a
"TRANSACTION"), (ii) enter into or participate in any negotiations, nor initiate
any discussions or continue any discussions initiated by others, regarding any
Transaction, or furnish to any other person any information with respect to the
assets or business of Continental for the purposes of pursuing a possible
Transaction with any other party, or (iii) otherwise participate in, assist,
facilitate, or encourage any effort or attempt by any other person to do any of
the foregoing. Neither the Securityholders nor Continental shall authorize their
investment bankers or other advisors to violate the provisions of this paragraph
and shall use reasonable efforts to prevent their investment bankers or other
advisors from violating the provisions of this paragraph.
13.5 RETRIEVAL OF CONFIDENTIAL INFORMATION. At the Closing, the Securityholders
and Continental shall deliver to the Buyer a list of all persons (other than
directors, officers, employees, legal advisors and accountants of Continental)
who received confidential information concerning Continental and copies of all
confidentiality agreements entered into by such persons in connection with the
solicitation of prospective acquirors of Continental. Following the Closing, the
Securityholders and Continental shall, with respect to confidential information
given to such persons pursuant to or in connection with confidentiality
agreements that do not run directly to Continental, authorize the Buyer to
retrieve or cause its agents to retrieve all such confidential information from
such persons. The Securityholders and Continental shall provide their full
cooperation in connection with the foregoing. In addition the Securityholders
and Continental shall assign to the Buyer all rights of the Securityholders and
Continental, if any, to enforce the confidentiality agreements entered into by
such persons.
13.6 REGULATORY COMPLIANCE. The Securityholders shall, and shall cause
Continental to, fully cooperate, and take all such actions as may be requested,
with respect to any and all requirements to facilitate the preparation and
filing of the proxy statement (the "PROXY STATEMENT"), or any other documents,
required to be filed by Buyer with the S.E.C. in connection with the
solicitation of the approval of the shareholders of the Buyer of the
Contemplated Transactions, or as otherwise necessary in connection with
<PAGE> 22
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the Contemplated Transactions, including, without limitation, furnishing the
Buyer with any information concerning Continental and its Securityholders, the
preparation of its audited financial statements by Ernst & Young, Chartered
Accountants, for the three years ended December 31, 1997, and for such other
periods as otherwise may be requested by the S.E.C., assistance with respect to
Buyer's preparation of pro forma financial statements and unaudited interim
financial statement information, preparation of amendments and/or responses to
comments from the S.E.C. in relation to any of the foregoing and other matters
incidental to the Contemplated Transactions. Whenever an event occurs which
should be set forth in an amendment to the Proxy Statement or otherwise
disclosed by Continental or any of the Securityholders on the Schedules hereto,
or by the Buyer in any filing required to made by it pursuant to the rules and
regulations of the S.E.C., Continental or the Securityholders, as the case may
be, shall promptly inform the Buyer and will cooperate with the Buyer in
preparing such amendment or filing. With respect to the preparation of the Proxy
Statement, Continental shall be responsible for all costs incurred in connection
with the preparation of its audited and unaudited financial statements as
necessary for the preparation of the Proxy Statement in accordance with the
applicable rules and regulations of the S.E.C. and the Buyer shall be
responsible, and shall reimburse Continental or the Securityholders, as the case
may be, for all other costs incurred in connection with the preparation of the
Proxy Statement, including, without limitation, the preparation of pro forma
financial statements.
13.7 NASDAQ LISTING. Prior to the Closing Date, the Buyer shall prepare and file
with the Nasdaq Stock Market, or such other exchange or market upon which the
Buyer's shares are then primarily listed for trading, a notification of listing
(the "NASDAQ LISTING") of the additional shares of Venture Stock to be issued to
the Securityholders pursuant to the terms hereof, and to the extent obtainable
and prior to the Closing Date, shall obtain written verification of such
listing. For a period equal to the lesser of (i) five years from the Closing
Date or (ii) after an aggregate of 95% of the Venture Stock being acquired by
the Securityholders pursuant to the terms hereof have been transferred or
otherwise disposed of by the Securityholders, the Buyer shall use its best
efforts to maintain the listing of its securities on Nasdaq, or such other
exchange or market as the securities of the Buyer may then be listed for
trading.
13.8 RULE 144 REPORTING AND ALBERTA COMPLIANCE. For a period equal to the lesser
of (i) five years from the Closing Date or (ii) after an aggregate of 95% of the
Venture Stock being acquired by the Securityholders pursuant to the terms hereof
have been transferred or otherwise disposed of by the Securityholders, the Buyer
agrees to:
(a) Make and keep available adequate current public information
regarding the Buyer as such is understood and defined in Rule
144 under the Securities Act;
(b) Comply in all material respects with the reporting
requirements of the Exchange Act applicable to it;
(c) Use its best efforts to otherwise comply with the provisions
of Rule 144 as then in effect and which may be applicable to
it; and
(d) Use its best efforts to comply with the rules and regulations
of the Securities Act (Alberta) in all material respects (the
"ALBERTA ACT").
13.9 REMOVAL OF LEGENDS AND TRANSFER RESTRICTIONS. The legend endorsed on each
certificate for the Venture Stock pursuant to Section A.1.5(g) shall be removed
and the Buyer shall issue a certificate without such legend to the
Securityholders and will instruct the Buyer's transfer agent to remove any
stop-transfer
<PAGE> 23
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instructions to the extent that (i) the Venture Stock issued to such
Securityholder is registered for resale under the Act and a prospectus meeting
the requirements of section 10 of the Act is available, (ii) there is available
an exemption from registration under the Act and, if the Buyer reasonably
requests, the Securityholder (or a valid transferee) provides to the Buyer an
opinion of counsel for the Securityholder (or such transferee) reasonably
satisfactory to the Buyer, or a no-action letter or interpretive opinion of the
staff of the SEC to the effect that a public sale, transfer or assignment of
such Venture Stock may be made without registration under the Act or (iii) Rule
144 (k) under the Act is applicable to such Venture Stock and the applicable
conditions have been met, and the Buyer receives an opinion of counsel of such
Securityholders to such effect. Notwithstanding the previous sentence, the
legend endorsed on each certificate for the Venture Stock pursuant to Section
A.1.5(g) shall be removed and the Buyer shall issue a certificate without such
legend to the Securityholder or a valid transferee, two years after the Closing
Date, provided however, that the holding period as set forth in Rule 144(k)
under the Act, and as calculated in accordance with the provisions of Rule
144(d) under the Act, has been met by either the Securityholder or a valid
transferee, and the Buyer receives a representation letter from such
Securityholder to such effect.
13.10 NOMINEE DIRECTOR OF THE BUYER. The Buyer agrees to use its best efforts to
ensure that a nominee selected by the Securityholders, collectively, is included
on the board of directors' list of nominee directors for each of the next three
annual shareholder meetings of the Buyer.
14. TERMINATION
14.1 TERMINATION PROCEDURES. This Agreement may be terminated before the Closing
Date only as follows:
(a) by written agreement of the Securityholders, Continental and
the Buyer at any time;
(b) by the Buyer, by notice to the Securityholders and
Continental, if satisfaction of any of the conditions to the
Buyer's obligations set forth in Section 8 becomes impossible
and such condition has not been waived by the Securityholders
and Continental; or
(c) by the Securityholders, by notice to the Buyer, if
satisfaction of any of the conditions to the Securityholders'
obligations set forth in Section 9 becomes impossible and such
condition has not been waived by the Buyer.
14.2 EFFECT OF TERMINATION. In the event that this Agreement is terminated
pursuant to Section 14, this Agreement shall terminate without any liability or
further obligation of any party to another, except for the obligations of the
Buyer, Continental and the Securityholders under Sections 5 and 8.1.
15. MISCELLANEOUS.
15.1 ACCOUNTS RECEIVABLE. In the event that all accounts receivable of
Continental as of January 1, 1998 are not collected in full within 90 days after
the Closing, then at the request of the Buyer the Securityholders shall become
obligated to pay the Buyer or Continental, as specified by the Buyer, an amount
equal to the accounts receivable not so collected, less an allowance for
doubtful accounts equal to $25,000.00. Upon receipt of such payment Continental
shall assign to the Securityholders all of its rights with respect to such
uncollected accounts receivable.
15.2 EXPENSES. Except as otherwise indicated in this Agreement, the Buyer and
Continental shall pay
<PAGE> 24
-24-
their own expenses incidental to the preparation hereof and, through the
Closing, the carrying out of the provisions hereof and the consummation of the
transactions contemplated hereby. The Buyer and Continental shall pay their own
expenses incidental to the carrying out of the provisions hereof after the
Closing. Continental shall pay all expenses of the Securityholders, and each of
them, incidental to the preparation hereof, and, through the Closing, the
carrying out of the provisions hereof and the consummation of the transactions
contemplated hereby, including without limitation, the Securityholders' legal
fees and expenses, and incidental to the carrying out of the provisions hereof
after the Closing.
15.3 CONTENTS OF AGREEMENT; PARTIES IN INTEREST; ETC. This Agreement sets forth
the entire understanding of the parties hereto with respect to the transactions
contemplated hereby. This Agreement shall not be amended or modified except by a
written instrument duly executed by each of the parties hereto. Any and all
previous agreements and understandings between or among the parties regarding
the subject matter hereof, whether written or oral, are superseded by this
Agreement.
15.4 ASSIGNMENT AND BINDING EFFECT. All of the terms and provisions of this
Agreement shall be binding upon and enure to the benefit of and be enforceable
by the heirs, administrators, personal representatives and successors of the
parties hereto. This Agreement shall be non-assignable and non-transferable
without the prior written consent of all parties.
15.5 WAIVER. Any term or provision of this Agreement may be waived at any time
by the party entitled to the benefit thereof by a written instrument duly
executed by such party.
15.6 PUBLICITY. Between the date of this Agreement and the Closing Date, except
to the extent required by law, neither the Buyer nor any of the Securityholders
nor Continental shall, and none of them shall permit any affiliate to, issue any
press release or public announcement of any kind concerning, or otherwise
publicly disclose, the Contemplated Transactions without the consent of the
other; and in the event any such public announcement, release or disclosure is
required by law, the parties will consult prior to the making thereof and use
their best efforts to agree upon a mutually satisfactory text; provided that the
Securityholders hereby acknowledge that upon execution of this Agreement, the
Buyer shall prepare and issue a press release and file a report on Form 8-K, the
form and substance of which shall be reviewed by Continental, but be
satisfactory to the Buyer and its counsel.
15.7 NOTICES. Any notice, request, claim, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given if delivered personally or sent by telecopier or other
telecommunications, by registered or certified mail, postage prepaid, or by
recognized courier service, as follows:
If to the Buyer, to:
Venture Seismic Ltd.
3110 80th Avenue S.E.
Calgary, Alberta T2C 1T3
Telecopier: (403) 777-9080
Attention: Brian W. Kozun
With a required copy to:
Burstall Ward
<PAGE> 25
-25-
Barristers & Solicitors
3100, 324 8th Avenue S.W.
Calgary, Alberta T2P 2Z2
Telecopier: (403) 266-6016
Attention: Scott W. Sangster
and to:
Bachner, Tally, Polevoy & Misher LLP
380 Madison Avenue
New York, New York 10017-2590
Telecopier: (212) 682-5729
Attention: Nellie Gilligan
If to the Securityholders, to:
Leslie J. Stinn
612 24th Avenue N.E.
Calgary, Alberta T2E 1X8
Telephone: (403) 230-1698
Gregory A. Stinn
7411 Hunterhaven Place N.E.
Calgary, Alberta T2K 4K7
Telephone: (403) 275-1188
Roy D. Self
69 31st Avenue S.W.
Calgary, Alberta T2S 2Y7
Telephone: (403) 234-8627
Sandra Kelly
3712 3rd Avenue S.W.
Calgary, Alberta T3C 0A6
Telephone: (403) 249-4922
Elaine McCarthy
504 36th Street S.W.
Calgary, Alberta T3C 0A6
Telephone: (403) 242-6118
With a required copy to:
Tharp Sinclair Watson Quigley Taylor
Barristers & Solicitors
800, 933 17th Avenue S.W.
Calgary, Alberta T2P 5R6
Telecopier: (403) 245-3777
<PAGE> 26
-26-
Attention: David H. Sinclair, Q.C.
If to Continental to:
Continental Holdings Ltd.
210, 3030 3rd Avenue N.E.
Calgary, Alberta T2A 6T7
Telecopier: (403) 273-6729
Attention: Les J. Stinn, President
With a required copy to:
Tharp Sinclair Watson Quigley Taylor
Barristers & Solicitors
800, 933 17th Avenue S.W.
Calgary, Alberta T2P 5R6
Telecopier: (403) 245-3777
Attention: David H. Sinclair, Q.C.
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered or telecopied, or if
mailed, on the seventh calendar day following the date of mailing, and if given
by any other means shall be deemed given only when actually received by the
addressees.
15.8 ALBERTA LAW TO GOVERN; CONSENT TO JURISDICTION. This Agreement shall be
governed by and interpreted and enforced in accordance with the laws of the
Province of Alberta. Each of the Buyer and the Securityholders irrevocably and
unconditionally (a) agrees that any suit, action or other legal proceeding
(collectively, "SUIT") instituted by the Securityholders and arising out of this
Agreement shall be brought and adjudicated only in the Province of Alberta, (b)
agrees that any Suit instituted by the Buyer arising out of this Agreement shall
be brought and adjudicated only in the Province of Alberta, and (c) waives and
agrees not to assert by way of motion, as a defense or otherwise in any such
Suit, any claim that it, he or she is not subject to the jurisdiction of the
above courts, that such Suit is brought in an inconvenient forum or that the
venue of such Suit is improper.
15.9 NO BENEFIT TO OTHERS. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the parties
hereto and, in the case of Section 10 hereof, the other Buyer Indemnified
Parties and Securityholder Indemnified Parties, and their heirs, administrators,
personal representatives, successors and assigns, and they shall not be
construed as conferring any rights on any other persons.
15.10 HEADINGS; GENDER; PERSON; SECURITYHOLDERS; DOLLARS; $. All section
headings contained in this Agreement are for convenience of reference only, do
not form a part of this Agreement and shall not affect in any way the meaning or
interpretation hereof. Words used herein, regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context requires. Any reference to a "PERSON" herein shall include an
individual, firm, corporation, partnership, trust, governmental authority or
body, association, unincorporated organization or any other entity. Any
reference to an "AFFILIATE" or an "AFFILIATED
<PAGE> 27
-27-
CORPORATION" herein shall have the meaning ascribed to such terms in the
Business Corporations Act (Alberta), as amended from time to time, except as
otherwise provided for herein. Any reference to "DOLLARS" or "$" shall refer to
dollars of the United States of America.
15.11 TAX TREATMENT.
(a) The Buyer makes no representations regarding the tax
consequences to the Securityholders of the transactions
contemplated by this Agreement. The Securityholders
acknowledge that they have been advised of the tax
consequences of the transactions contemplated by this
Agreement by their own tax advisers, and that they are relying
on their tax advisers in determining their respective tax
consequences in connection with the transactions contemplated
in this Agreement.
(b) None of Continental or any Securityholder makes any
representation regarding the tax consequences to the Buyer of
the transactions contemplated by this Agreement. The Buyer
acknowledges that it has been advised of the tax consequences
of the transactions contemplated by this Agreement by its own
tax advisers, and that it is relying on its tax advisers in
determining its tax consequences in connection with the
transactions contemplated in this Agreement.
15.12 EXHIBITS; APPENDIX; SCHEDULES.
(a) Appendix A hereto and the Schedules referred to herein and
therein are intended to be and hereby are specifically made a
part of this Agreement.
(b) The following Exhibits are intended to be and hereby are
specifically made a part of this Agreement:
Exhibits
A - Allocation of Shares, Venture Stock, Cash Consideration
B - Form of Credit Agreement
C - Form of Security Agreement to the Buyer
D - Form of Employment Agreement
E - Form of Closing Agenda
15.13 SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application of such provision to
such person or circumstance in any other jurisdiction or to other persons or
circumstances in any jurisdiction, shall not be affected thereby, and to this
end the provisions of this Agreement shall be severable.
15.14 COUNTERPARTS; TELECOPIER EXECUTION. This Agreement may be executed in any
number of counterparts and any party hereto may execute any such counterpart,
each of which when executed and delivered shall be deemed to be an original and
all of which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by the parties. It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts. Execution and delivery of
counterparts of this Agreement by telecopier by any party shall be binding on
all parties to
<PAGE> 28
-28-
this Agreement.
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement on the
date first written.
VENTURE SEISMIC LTD.
Per: /s/ Brian Kozun
----------------
Name: Brian W. Kozun
Title: President
THE SECURITYHOLDERS
/s/ D. H. Sinclair /s/ L.J. Stinn
- ------------------ --------------------
WITNESS LESLIE J. STINN
/s/ D. H. Sinclair /s/ Sandra Kelly
- ------------------ --------------------
WITNESS SANDRA KELLY
/s/ D. H. Sinclair /s/ Elaine McCarthy
- ------------------ --------------------
WITNESS ELAINE B. MCCARTHY
(signatures continued on page 29)
<PAGE> 29
-29-
(signatures continued from page 28)
/s/ D.H. Sinclair /s/ Gregory Stinn
- ----------------- ---------------------
WITNESS GREGORY A. STINN
/s/ D. H. Sinclair /s/ R.D. Self
- ----------------- ---------------------
WITNESS ROY SELF
CONTINENTAL HOLDINGS LTD.
Per: /s/ L. J. Stinn
-----------------------
Name: Leslie J. Stinn
Title: President
Per: /s/ R. D. Self
-----------------------
Name: Roy D. Self
Title: Vice-President, Geophysical Operations
<PAGE> 30
APPENDIX A
REPRESENTATIONS AND WARRANTIES
A.1 INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF THE SECURITYHOLDERS. Each
Securityholder hereby represents and warrants to the Buyer as follows:
A.1.1 SHARE OWNERSHIP; AUTHORITY. Such Securityholder is the lawful owner of
record and beneficially of the number of Shares set beside such Securityholder's
name in column A of Exhibit A hereto, free and clear of all security interests,
pledges, liens, encumbrances, claims and other charges and restrictions thereon
of every kind, including without limitation any agreements, subscriptions,
options, warrants, calls, commitments or rights (contingent or otherwise) of any
character granting to any person any interest in or right to acquire from such
Securityholder at any time, or upon the happening of any stated event, any
Shares owned by such Securityholder. Such Securityholder has full right, power
and authority to execute, deliver and perform this Agreement. This Agreement has
been duly executed and delivered by such Securityholder. This Agreement
constitutes the legal, valid and binding obligation of such Securityholder
enforceable against such Securityholder in accordance with its terms; except as
the same may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, (b) laws relating to the availability of
specific performance, injunctive relief or other equitable remedies, and (c) the
extent to which the enforceability of the indemnification provisions contained
in this Agreement may be limited by applicable laws.
A.1.2 VALIDITY OF CONTEMPLATED TRANSACTIONS; ETC. The execution, delivery and
performance hereof by such Securityholder will (a) not contravene or violate any
material provision of any law, rule or regulation currently in effect to which
such Securityholder is subject or (b) will such execution, delivery or
performance violate, be in conflict with in any material respect or result in
the breach (with or without the giving of notice or lapse of time, or both) of
any material term, condition or provision of, or require the consent of any
other party to, any material contract, commitment, agreement, lease, license,
permit, authorization, document or other understanding, oral or written, to or
by which such Securityholder is a party or otherwise bound or affected, except
for such violations which would not either individually or in the aggregate have
a Material Adverse Effect. No authorization, approval or consent, and no
registration or filing with, any governmental or regulatory official, body or
authority is required in connection with the execution, delivery and performance
hereof by such Securityholder, except for those consents, approvals,
authorizations, declarations, filings or registrations the failure of which to
obtain or make individually or in the aggregate would not have a Material
Adverse Effect.
A.1.3 NO CLAIMS AGAINST CONTINENTAL. As of the Closing Date, such Securityholder
shall have no claim, either accrued, absolute, contingent or otherwise, fixed or
unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured,
against Continental for any reason and, in the case of a Securityholder who is
an employee, for wages and benefits owing in the ordinary course of business of
Continental up to and including the Closing Date, other than the Permitted
Indebtedness.
A.1.4 CANADIAN RESIDENTS. Such Securityholder is a resident of Canada within the
meaning of the ITA (as defined in Section A.2.7(b)).
A.1.5 THE VENTURE STOCK, RESTRICTIONS ON TRANSFER, INVESTMENT REPRESENTATIONS.
Such Securityholder acknowledges that, to the best of his or her knowledge,
information and belief, having made due inquiry, the execution of this Agreement
by such Securityholder and the delivery to such Securityholder of a portion of
the Venture Stock has been or will be made in reliance upon, and is conditioned
on, the following representations, warranties, acknowledgments and covenants of
such Securityholder:
<PAGE> 31
APPENDIX A-2
(a) Such Securityholder has such knowledge and experience in
financial, tax and business matters that he or she is fully
capable of evaluating the relative risks and merits of the
obligations incurred under this Agreement and making an
informed decision with respect hereto and has been afforded
the opportunity during the course of negotiating the
Contemplated Transactions to ask questions and secure such
information from the Buyer and its officers and directors as
it deems necessary to evaluate the merits of entering into
this Agreement. Such Securityholder is familiar with the
business, operations, assets, properties, prospects and
financial condition of the Buyer.
(b) Such Securityholder acknowledges a thorough familiarity
with, and an understanding of, the definition of "ACCREDITED
INVESTOR" as defined in Rule 501(a) of Regulation D, as such
Rule is currently in effect and represents and warrants that
such Securityholder is an accredited investor within the
meaning of such definition.
(c) Such Securityholder acknowledges that he or she, as the case
may be, has not received from the Buyer or any person acting
on the Buyer's behalf any general solicitation or public
media advertisements.
(d) Such Securityholder acknowledges that the Venture Stock to
be received by such Securityholder under this Agreement will
not have been registered under the Securities Act of 1933,
as amended (the "ACT"), nor qualified under a prospectus
filed under the Securities Act (Alberta) nor has the Venture
Stock been registered under the securities or "BLUE SKY"
laws of any of the United States or Canada or of any other
jurisdictions and will be "RESTRICTED SECURITIES" as defined
in Rule 144 under the Act, the provisions of which are known
to it.
(e) Such Securityholder represents and warrants to the Buyer
that the Venture Stock is being acquired for investment and
not with a view to, or for resale in connection with, the
distribution thereof, and understands that the effect of
such representation and warranty is that the Venture Stock
must be held by such Securityholder unless and until
subsequently registered under the Act and applicable state
and provincial securities laws, or unless an exemption from
such registration or prospectus requirement is available at
the time of any proposed sale or other transfer. Such
Securityholder understands that Rule 144 under the Act
requires, among other conditions, a holding period prior to
the resale of the Venture Stock without having to satisfy
the registration requirements under the Act, and that there
can be no assurance that Rule 144 will be available or that
the conditions of such Rule will be satisfied so as to allow
any proposed sale. Each Securityholder understands that any
sales made in reliance upon Rule 144 may only be made in
accordance with the terms and conditions thereof.
(f) Such Securityholder agrees not to sell, pledge, hypothecate
or otherwise transfer any of the Venture Stock received by
him or her under this Agreement except or unless: (i) there
is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is
made in accordance with such registration statement; or (ii)
such Securityholder shall have notified the Buyer of the
proposed disposition and shall have furnished the Buyer with
a detailed statement of the circumstances surrounding the
proposed disposition, and, if reasonably requested by the
Buyer, such Securityholder shall
<PAGE> 32
APPENDIX A-3
have furnished the Buyer with an opinion of counsel,
reasonably satisfactory to the Buyer, that such disposition
will not require registration of such the Venture Stock
under the Act.
(g) The certificates representing the Venture Stock to be issued
pursuant hereto will bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED
PURSUANT TO A SECURITIES PURCHASE AGREEMENT DATED AS OF
MARCH 27, 1998, WITH VENTURE SEISMIC LTD. SUCH SHARES HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS AND MAY NOT
BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SHARES UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE
OR PROVINCIAL SECURITIES LAWS OR AN EXEMPTION THEREFROM.
Each Securityholder also understands that the Buyer will instruct its
transfer agent to place a stop transfer notation in its records with
respect to the certificates representing the Venture Stock.
(h) DISCLOSURE MATERIALS. Each Securityholder represents and
warrants to the Buyer that he or it has received and had
full opportunity, prior to the execution of this Agreement
to review thoroughly (along with counsel, accountants or
other advisers) a copy of each of the following documents:
(i) the Buyer's report on Form 10-K for the year ended
September 30, 1997; (ii) the Buyer's proxy statement and
annual report to stockholders distributed in connection with
its March 19, 1998 annual meeting of stockholders; and (iii)
the Buyer's reports on Form 10-Q for the period ended
December 31, 1997 (collectively, the "VENTURE DISCLOSURE
DOCUMENTS").
(i) ACCESS TO INFORMATION. Each Securityholder represents,
warrants and acknowledges that such Securityholder, and the
attorneys, accountants, representatives and agents of such
Securityholder, have had a reasonable time prior to the
execution hereof and completion of the transactions
contemplated hereby, to ask questions and receive answers
concerning the business and operations of the Buyer and to
obtain any additional information necessary to make a fully
informed decision with respect to the execution of this
Agreement, and the investment in the Venture Stock effected
hereby.
Nothing contained herein shall restrict the Securityholders from selling,
pledging or otherwise transferring the Venture Stock acquired by each of them
pursuant to an exemption from registration under the Act and the Alberta Act at
any time provided such sale, pledge or transfer is otherwise consummated in
accordance with the terms and provisions of this Agreement, the provisions of
the Act, the Alberta Act and other applicable laws, rules or regulations.
A.2 SEVERAL REPRESENTATIONS AND WARRANTIES OF CONTINENTAL AND CERTAIN OF THE
SECURITYHOLDERS. Continental and each of Leslie J. Stinn and Roy Self hereby
severally represents and warrants to the Buyer that, to the best of its or his,
as the case may be, knowledge, information and belief, having made due inquiry,
as follows:
<PAGE> 33
APPENDIX A-4
A.2.1 CORPORATE EXISTENCE. Continental is a corporation duly organized, validly
existing and in good standing under the laws of the Province of Alberta, and it
has all requisite power and authority and all necessary licenses, permits and
authorizations to carry on its business as it has been and is now being
conducted and to own, lease and operate the properties used in connection
therewith, except for licenses, permits and authorizations, the absence of which
would not individually or in the aggregate result in a Material Adverse Effect.
Continental is qualified as a foreign corporation authorized to do business and
is in good standing in each jurisdiction in which such qualification is
required, all of which jurisdictions are listed on Schedule A.2.1 hereto.
A.2.2 CAPITALIZATION. The total authorized capital stock of Continental consists
of an unlimited number of Class "A" voting shares (none of which are
outstanding), an unlimited number of Class "B" voting shares and an unlimited
number of Class "C" shares issuable in series, of which the following shares are
issued and outstanding (all such issued and outstanding shares have been
previously defined as the "SHARES"):
<TABLE>
<CAPTION>
CERTIFICATE NO. NAME NUMBER OF SHARES
--------------- ---- ----------------
<S> <C> <C>
B-15 Leslie Stinn 220.8916 Class "B"
B-16 Sandra T. Kelly 20.0811 Class "B"
B-17 Elaine McCarthy 20.0811 Class "B"
B-18 Gregory Stinn 20.0811 Class "B"
B-19 Roy Self 220.8916 Class "B"
C-5 Leslie A. Stinn 236.72 Class "C", Series I
C-6 Sandra T. Kelly 21.52 Class "C", Series I
C-7 Elaine McCarthy 21.52 Class "C", Series I
C-8 Gregory Stinn 21.52 Class "C", Series I
C-9 Roy Self 236.72 Class "C", Series I
</TABLE>
All of the Shares have been duly authorized and validly issued, are fully paid
and non-assessable, were not issued or transferred in violation of the terms of
any agreement or other understanding binding upon Continental and were issued
and transferred in compliance with all applicable charter documents of
Continental and all applicable federal, provincial, state and foreign securities
laws, rules and regulations. There are no outstanding subscriptions, options,
warrants, convertible securities, calls, commitments, agreements or rights
(contingent or otherwise) of any character to purchase or otherwise acquire from
Continental any shares of, or any securities convertible into, the capital stock
of Continental. There are, and have been, no preemptive rights with respect to
the issuance of the Shares or any other capital shares of Continental.
A.2.3 SUBSIDIARIES; NO INTEREST IN OTHER ENTITIES.
Continental owns no shares of any corporation and has no other ownership or
other investment interest, either of record, beneficially or equitably, in any
association, partnership, joint venture or legal entity, except
<PAGE> 34
APPENDIX A-5
for bank, checking and money market accounts and other cash equivalent
investments and except as described on Schedule A.2.3, with such investments as
described on Schedule A.2.3 to be disposed of prior to the Closing Date.
A.2.4 FINANCIAL STATEMENTS. The Securityholders have delivered to the Buyer
prior to the date hereof (a) the balance sheets of Continental as of December
31, 1995 and 1996 and the related statements of operations, shareholders' equity
and cash flows for the 12-month periods then ended, reported on without
qualification by Meyers Norris Penny & Co., chartered accountants, and (b) the
balance sheet of Continental as of September 30, 1997 (the "SEPTEMBER 1997
BALANCE SHEET") and the related statements of operations, shareholders' equity
and cash flows for the periods then ended as reviewed by Ernst & Young,
chartered accountants (the foregoing financial statements, collectively, the
"FINANCIALS"). Such financial statements (including without limitation all
notes, comments, schedules and supplemental data contained in or annexed to such
statements), correct and complete copies of all of which have been provided to
the Buyer, are accurate, complete and in accordance with the books and records
of Continental and present fairly the consolidated financial position and assets
and liabilities of Continental as of their respective dates and the results of
their consolidated operations for the periods then ended, in conformity with
generally accepted accounting principles applied on a consistent basis.
A.2.5 ACCOUNTS RECEIVABLE. All accounts receivable of Continental (a) are valid
and genuine, (b) arise out of bona fide sales and deliveries of goods,
performance of services or other business transactions, (c) are not subject to
valid defenses, set-offs or counterclaims other than normal returns and
allowances and (d) were generated only in the ordinary course of business.
A.2.6 INVENTORY AND REVENUE PRODUCING EQUIPMENT. All inventory and revenue
producing equipment of Continental reflected on the September 1997 Balance
Sheet, and all inventory and revenue producing equipment owned by Continental as
of the date hereof, was acquired and has been maintained in accordance with the
regular business practices of Continental, consists of items of a quality and
quantity useable, saleable or rentable in the ordinary course of their
businesses consistent with past practice, and is valued in conformity with
generally accepted accounting principles applied on a consistent basis; no
significant amount of such inventory or revenue producing equipment is obsolete,
other than the anticipated replacement of all cable and related computer
instrumentation on the marine seismic vessel "Calgary" to be completed within
one year of the Closing Date.
A.2.7 ABSENCE OF UNDISCLOSED LIABILITIES.
(a) Continental is not liable for or subject to any liability
except for:
(i) the Extraordinary Expenditures, obligations under the
Employment Agreements and the Bonus Transactions;
(ii) those liabilities and obligations adequately and
specifically disclosed on the September 1997 Balance
Sheet and not heretofore paid or discharged;
(iii) those liabilities and obligations arising in the
ordinary course of its business consistent with past
practice under any contract, commitment or agreement
specifically disclosed on any Schedule to this
Appendix A or not required to be disclosed thereon
because of the term or amount involved or otherwise;
and
<PAGE> 35
APPENDIX A-6
(iv) those liabilities and obligations incurred,
consistent with its past practice, in the ordinary
course of its business and either not required to be
shown on the September 1997 Balance Sheet or arising
since September 30, 1997, which liabilities and
obligations in the aggregate are of a character and
magnitude consistent with its past practice.
For purposes of this Section A.2.7, Sections 10.1 and 10.2 hereof, the term
"LIABILITIES" shall include without limitation any direct or indirect liability,
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, either accrued, absolute, contingent or
otherwise, fixed or unfixed, choate or inchoate, liquidated or unliquidated,
secured or unsecured.
(b) Except as provided in Section A.2.18 hereof, Continental does
not provide or maintain, and is not required under applicable
law to provide or maintain, for its employees any pension,
retirement, profit-sharing or other plan or policy for the
benefit of employees which is required to comply with, and,
except as required under the Employment Agreements and as
incurred on an ongoing basis in connection with Continental's
current employees, Continental has no liabilities with respect
to themselves or any other person under, the federal Employees
Retirement Income Security Act of 1974 ("ERISA"), the Income
Tax Act (Canada) (the "ITA"), the Employment Insurance Act
(Canada) or the Canada Pension Plan Act (Canada). Furthermore,
other than the Bonus Transactions, Continental has no
liability for any dividends or distributions to any
Securityholder and since September 30, 1997 has not paid or
delivered or become committed to pay or deliver any dividend,
or made or become committed to make any distribution or
payment, to any shareholder in respect of its capital shares
or redeemed, purchased or otherwise acquired any of its
capital shares.
A.2.8 EXISTING CONDITION. Except as disclosed on Schedule A.2.8 hereto, since
September 30, 1997, Continental has not:
(a) sold, assigned or transferred any of their assets or
properties except in the ordinary course of their businesses
consistent with past practice;
(b) created, incurred, assumed or guaranteed any indebtedness for
money borrowed or incurred any other liabilities exceeding
$25,000.00 in the aggregate except for current liabilities
incurred consistent with past practice;
(c) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting
their businesses, operations, assets, properties or prospects
or (ii) of any item carried on Continental's consolidated
books of account at more than $25,000.00;
(d) suffered any material adverse change in their businesses,
operations, assets, properties, prospects or condition
(financial or otherwise);
(e) made any capital expenditure or capital addition or betterment
except for such as may be involved in the ordinary repair,
maintenance and replacement of their assets;
(f) materially increased the salaries or other compensation of, or
made any material advance
<PAGE> 36
APPENDIX A-7
(excluding advances for ordinary and necessary business
expenses) or loan to, any of their directors, officers or
employees, or to any Securityholder, or made any material
increase in, or any material addition to, other benefits to
which any of their directors, officers or employees or any
Securityholder may be entitled and as consistent with past
practice; or
(g) entered into any material transaction other than in the
ordinary course of their businesses consistent with past
practice.
Except as disclosed on Schedule A.2.8 hereto, since September 30, 1997,
Continental has not made or suffered any amendment to or termination of any
material contract or commitment (including without limitation all international
contracts and commitments) to which they are or were a party or by which they or
any of their properties are or were bound.
A.2.9 ASSETS AND PROPERTIES.
(a) Continental owns outright and has good, valid and marketable
title to all of its properties and assets, real, personal and
mixed, including without limitation all of the properties and
assets reflected on the September 1997 Balance Sheet and those
acquired since September 30, 1997 (except in each case for
properties and assets sold or otherwise disposed of since
September 30, 1997, in the ordinary course of their businesses
consistent with past practice), free and clear of all
mortgages, liens, pledges, security interests, charges,
claims, restrictions and other encumbrances and defects of
title of any nature whatsoever, except liens for current taxes
not yet due and payable and items disclosed on Schedule A.2.9
hereto. All leases, licenses, permits and authorizations in
any manner related to the assets, properties or business of
Continental and all other instruments, documents and
agreements pursuant to which Continental has obtained the
right to use any real or personal property are in good
standing, valid and effective in accordance with their
respective terms, and there is not under any of such leases,
licenses, permits, authorizations, instruments, documents or
agreements any existing default or event which with the giving
of notice or lapse of time, or both, would constitute a
default.
(b) All facilities, buildings, vehicles, equipment, furniture and
fixtures, leasehold improvements and other material items of
tangible personal property owned or used by Continental are in
good operating condition and repair, subject to normal wear
and maintenance, are useable in the regular and ordinary
course of their businesses and conform to all applicable laws,
ordinances, codes, rules and regulations relating thereto and
to the construction, use, operation and maintenance thereof.
A.2.10 TAXES AND TAX RETURNS AND REPORTS. With respect to Continental (referred
to in this Section A.2.10 as the "COMPANY"), (a) all reports, returns,
statements (including without limitation estimated reports, returns or
statements), and other similar filings required to be filed on or before the
Closing Date by the Company (the "TAX RETURNS") with respect to any Taxes (as
defined in this Section A.2.10) have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such Tax Returns are
required to be filed, and all such Tax Returns correctly reflect the liability
of the Company for Taxes for the periods, properties or events covered thereby,
(b) all Taxes payable with respect to the Tax Returns, and all Taxes accruable
with respect to events occurring prior to the Closing Date, whether disputed or
not, and whether or not shown on any Tax Return, will have been paid in full
prior to the Closing Date, or an adequate accrual in accordance with generally
accepted accounting principles is provided with respect
<PAGE> 37
APPENDIX A-8
thereto on the Closing Balance Sheet, (c) no deficiency in respect of any Taxes
which has been assessed against the Company remains unpaid and neither
Continental nor such Securityholder has knowledge of any unassessed Tax
deficiencies or of any audits or investigations pending or threatened against
any Company with respect to any Taxes, (d) there is in effect no extension for
the filing of any Tax Return and the Company has not extended or waived the
application of any statute of limitations of any jurisdiction regarding the
assessment or collection of any Tax, (e) no claim has ever been made by any Tax
authority in a jurisdiction in which the Company does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction, (f) there are no
statutory liens for Taxes upon any asset of the Company except for statutory
liens for current Taxes not yet due, (g) no issues have been raised in any
examination by any Tax authority with respect to the Company which, by
application of similar principles, reasonably could be expected to result in a
proposed deficiency for any other period not so examined, (h) the Company is not
a party to any Tax allocation or sharing agreement or otherwise under any
obligation to indemnify any person with respect to any Taxes, A. the Company is
not a party to any joint venture, partnership or other arrangement that is
treated as a partnership for income tax purposes, (j) there are no accounting
method changes or proposed accounting method changes of the Company that could
give rise to an adjustment under the ITA or under section 481 of the Internal
Revenue Code of 1986, as amended (the "CODE"), for periods after the Closing
Date, (k) there are no requests for rulings in respect of any Tax pending
between the Company and any Taxing authority, (l) since the date of its
ownership by the Securityholders, the Company has not been a member of any
affiliated group and (m) the Company has timely made all deposits required by
law to be made with respect to employees' withholding and other employment
taxes.
For purposes of this Agreement, "TAXES" means any taxes, duties, assessments,
fees, levies or similar governmental charges, together with any interest,
penalties and additions to tax, imposed by any taxing authority, wherever
located (i.e. whether federal, provincial, state, local, municipal or foreign),
including without limitation all net income, gross income, gross receipts, net
receipts, sales, use, transfer, franchise, privilege, profits, social security,
disability, withholding, payroll, unemployment, employment,, workers'
compensation, excise, severance, property, windfall profits, value added, ad
valorem, occupation or any other similar governmental charge or imposition.
A.2.11 BOOKS OF ACCOUNT. The books of account of Continental reflect all of its
items of income and expense, and all of their assets and liabilities required to
be reflected therein, in accordance with generally accepted accounting
principles.
A.2.12 LEGAL PROCEEDINGS; ETC. Except as disclosed on Schedule A.2.12, there are
no disputes, claims, actions, suits or proceedings (including without limitation
local zoning or building ordinance proceedings), arbitrations or investigations,
either administrative or judicial, pending or, to the knowledge of Continental
or such Securityholder, threatened or contemplated, by or against or affecting
Continental or its assets or business, before or by any court or governmental or
regulatory official, body or authority, or before an arbitrator of any kind.
Neither Continental nor such Securityholder has any knowledge of any condition
or state of facts or the occurrence of any event that might reasonably form the
basis of any claim, liability or litigation against Continental. Continental is
not a party to or otherwise bound or affected by the provisions of any judgment,
order, writ, injunction or decree of any court, arbitrator or governmental or
regulatory official, body or authority.
A.2.13 COMPLIANCE WITH LAW. Continental has complied in all material respects
with each, and is not in violation of the material provisions of any law, rule
or regulation currently in effect to which it or its business is, or its
operations, assets or properties are subject and has not in any material respect
failed to obtain or adhere to the requirements of any material license, permit
or other authorization necessary to the
<PAGE> 38
APPENDIX A-9
ownership of its assets and properties or to the conduct of its business, except
where such failure would not result either individually or in the aggregate in a
Material Adverse Effect.
A.2.14 VALIDITY OF CONTEMPLATED TRANSACTIONS; ETC. Except as disclosed on
Schedule A.2.14, the execution, delivery and performance hereof by the
Securityholders will (a) not contravene or violate any material provision of any
law, rule or regulation currently in effect to which Continental is subject, (b)
any judgment, order, writ, injunction or decree of any court, arbitrator or
governmental or regulatory official, body or authority which is applicable to
Continental or (c) the charter documents of Continental; nor will such
execution, delivery or performance violate, be in conflict with in any material
respect or result in the breach (with or without the giving of notice or lapse
of time, or both) of any material term, condition or provision of, or require
the consent which has not been obtained of any other party to, any material
contract, commitment, agreement, lease, license, permit, authorization, document
or other understanding, oral or written, to or by which Continental is a party
or otherwise bound or affected or by which any of the assets or properties of
Continental may be bound or affected, except for such violations which would not
either individually or in the aggregate have a Material Adverse Effect. Except
as disclosed on Schedule A.2.14, no authorization, approval or consent, and no
registration or filing with, any governmental or regulatory official, body or
authority is required in connection with the execution, delivery and performance
hereof by Continental, except for those consents, approvals, authorizations,
declarations, filings or registrations the failure of which to obtain or make
individually or in the aggregate would not have a Material Adverse Effect.
A.2.15 INSURANCE. Schedule A.2.15 contains a true and complete description of
the insurance coverage in effect now or at any time during the past five years
with respect to Continental and its business and properties, together with a
description of all insurance claims in any one case in excess of $25,000.00 made
by Continental during the past five years. Continental has at all times during
the past five years maintained insurance coverage substantially similar to the
insurance coverage currently in effect. There is no default under any such
current coverage, nor has there been any failure to give any notice or present
any claim under any such coverage in a timely fashion or in the manner or detail
required by the policy or binder. There are no outstanding unpaid premiums, and
there are no provisions in any insurance coverage of Continental for retroactive
or retrospective premium adjustments. No notice of cancellation or non-renewal
with respect to, or disallowance of any claim under, any such coverage has been
received by Continental. All products liability and general liability insurance
policies maintained by Continental are and historically have been occurrence
policies and not claims made policies. There are no outstanding performance
bonds or other surety arrangements covering or issued for the benefit of
Continental or its business or as to which Continental has or may incur any
liability, other than for the outfitting of the "Pacific Titan".
A.2.16 CONTRACTS AND COMMITMENTS. Except as listed and described on Schedule
A.2.16 hereto or, in the case of benefit plans and arrangements, Schedule A.2.18
hereto, Continental is not a party to or otherwise bound or affected by any
written or oral:
(a) agreement, contract or commitment with any present or former
shareholder, director, officer, employee or consultant or for
the employment of any person, including without limitation any
consultant;
(b) agreement, contract, commitment or arrangement with any labour
union or other representative of employees;
(c) agreement, contract or commitment for the purchase of, or
payment for, supplies or
<PAGE> 39
APPENDIX A-10
products, or for the performance of services by a third party,
involving in any one case $25,000.00 or more;
(d) agreement, contract or commitment to sell or supply products
or to perform services, involving in any one case $25,000.00
or more;
(e) agreement, contract or commitment not otherwise listed on
Schedule A.2.16 hereto and continuing over a period of more
than six months from the date hereof or exceeding $25,000.00
in value;
(f) representative or sales agency agreement, contract or
commitment;
(g) real property sale agreements wherein Continental is the
vendor or purchaser, real property lease agreements wherein
Continental is the lessor or the lessee and all chattel lease
agreements wherein Continental is the lessor or the lessee;
(h) note, debenture, bond, conditional sale agreement, equipment
trust agreement, letter of credit agreement, loan agreement or
other agreement or contract, commitment or arrangement for the
borrowing or lending of money (including without limitation
loans to or from officers, directors, any Securityholder or
any member of any of their immediate families), agreement,
contract, commitment or arrangement for a line of credit or
guarantee, indemnity, pledge or undertaking in any manner
whatsoever of the indebtedness of any other person;
(i) contracts involving or related to acquisitions, mergers, sales
or dispositions in excess of $25,000.00;
(j) agreement, contract or commitment for any charitable or
political contribution;
(k) agreement, contract or commitment for any capital expenditure
in excess of $25,000.00;
(l) agreement, contract or commitment limiting or restraining it
from engaging or competing in any lines of business with any
person, nor is any officer or employee of Continental subject
to any such agreement;
(m) license, franchise, distributorship or other similar
agreement, contract or commitment, including without
limitation those which relate in whole or in part to any
patent, trademark, trade name, service mark or copyright or to
any ideas, technical assistance or other know-how of or used
by Continental; or
(n) material agreement, contract or commitment not made in the
ordinary course of business.
Except as may be disclosed on Schedule A.2.16 hereto, each of the agreements,
contracts, commitments, arrangements, leases and other instruments, documents
and undertakings listed on Schedule A.2.16 hereto is valid and enforceable in
accordance with its terms, and the parties thereto are in compliance with the
provisions thereof, no party is in default in the performance, observance or
fulfillment of any material obligation, covenant or condition contained therein,
and no event has occurred which with or without the giving of notice or lapse of
time, or both, would constitute a default thereunder; furthermore, except as may
<PAGE> 40
APPENDIX A-11
be disclosed on Schedule A.2.16 hereto, no such agreement, contract, commitment,
arrangement, lease or other instrument, document or undertaking, in the
reasonable opinion of Continental or any Securityholder, contains any
contractual requirement with which there is a reasonable likelihood Continental
or any other party thereto will be unable to comply.
A.2.17 ADDITIONAL INFORMATION. Schedule A.2.17 hereto contains, to the extent
not described in some other Schedule hereto, accurate lists and summary
descriptions of the following:
(a) all vehicles, equipment, furniture and fixtures, leasehold
improvements and other material items of personal property
owned or leased by Continental, specifying which are owned and
which are leased and, with respect to leased property,
specifying the identity of the lessor, the rental rate and the
unexpired term of the lease, and also specifying serial
numbers (where appropriate) and location;
(b) all real property and interests in real property owned, leased
or otherwise held by Continental specifying which are owned
and which are leased and, with respect to leased property,
specifying the identity of the lessor, the rental rate and the
unexpired term of the lease;
(c) the names of all present directors of Continental;
(d) the names and current annual salary or hourly rates of all
present officers and employees of Continental together with a
statement of the full amount of any bonuses, profit sharing or
other remuneration paid to each such person and to any
director during the current or the last fiscal year or payable
to each such person in the future and the basis therefor;
(e) the names and addresses of each bank and other financial
institution or fund in which Continental maintains an account
(whether checking, savings, money market or otherwise), lock
box or safe deposit box, and the account numbers and names of
persons having signing authority or other access with respect
thereto;
(f) a listing and description of all cash equivalent items held by
Continental;
(g) a list of all of licenses, permits and authorizations of
Continental;
(h) the names of all persons authorized to borrow money or incur
or guarantee indebtedness on behalf of Continental;
(i) the names of all persons holding powers of attorney from
Continental and a summary statement of the terms thereof; and
(j) a listing of all current liabilities of Continental in excess
of $25,000.00.
A.2.18 BENEFIT PLANS AND ARRANGEMENTS.
(a) Schedule A.2.18 hereto lists all employee benefit plans,
funds, policies, arrangements, practices, customs and
understandings or programs, whether or not they are or are
intended to be (i) covered or qualified under the ITA, the
Code, ERISA or any other applicable law,
<PAGE> 41
APPENDIX A-12
(ii) written or oral, (iii) funded or unfunded or (iv)
generally available to any or all employees (or former
employees) of Continental (and/or their beneficiaries or
dependents), which were or are established, contributed to or
maintained by Continental, including without limitation
welfare, fringe benefit, pension, profit sharing, retirement,
stock purchase, stock option, stock bonus, disability or wage
continuation, sick pay or vacation pay, supplemental
unemployment, severance or deferred compensation plans (the
"PLANS"). For purposes of this Section A.2.18, the term
"CONTINENTAL" shall include any corporation which is a member
of a controlled group of corporations (as defined in section
414(b) of the Code) which includes Continental, any trade or
business (whether or not incorporated) which is under common
control (as defined in section 414(c) of Code) with
Continental, any organization (whether or not incorporated)
which is a member of an affiliated service group (as defined
in section 414(m) of the Code) which includes Continental and
any other entity required to be aggregated with Continental
pursuant to the regulations issued under section 414(o) of the
Code.
(b) With respect to any such Plans, Continental has made all
contributions thereto which it has accrued on its financial
statements and other books and records as a liability and
Continental has delivered or made available to the Buyer true,
accurate and complete copies of (i) all documents governing
such Plans, and all amendments thereto, (ii) all reports filed
by Continental or Plan officials with respect to such Plans
with the United States Department of Labour, the Internal
Revenue Service (the "IRS") and any other federal, provincial
or state regulatory agency, (iii) all summary plan
descriptions, notices and other reporting and disclosure
material furnished to participants in any of such Plans, (iv)
all actuarial, accounting and financial reports prepared with
respect to any of such Plans and (v) all currently effective
IRS ruling or determination letters on any of such Plans.
(c) The Plans and provisions thereof, the trusts created thereby,
and the operation of the Plans are (and have at all times
been) in compliance with and conform (and at all times have
conformed) to the applicable provisions of the ITA, the Code,
ERISA, other applicable statutes and governmental rules and
regulations.
(d) There is no action, claim or demand of any kind (other than
routine claims for benefits) which has been brought or, to the
knowledge of Continental or any Securityholder threatened,
against any Plan or the assets thereof, or against any
fiduciary of any such Plan.
(e) No Plan is, and Continental does not have any liability,
actual or contingent, with respect to any plan that is (i) a
defined benefit pension plan subject to Title IV of ERISA,
(ii) a multi-employer pension plan, as that term is defined in
sections 4001(a)(e) and 3(37) of ERISA, (iii) a plan providing
life, health or medical benefits to retired employees or (iv)
a self-insured welfare benefit plan.
(f) With respect to any Plan that is an employee welfare benefit
plan (within the meaning of section 3(1) of ERISA) (a "WELFARE
PLAN"), (i) each Welfare Plan for which contributions are
claimed as deductions under any provision of the Code is in
compliance with all applicable requirements pertaining to such
deductions and (ii) any Plan that is a group health plan
(within the meaning of section 5000(b)(1) of the Code)
complies, and in each and every case has complied, with all of
the requirements of section 4980B of the Code, ERISA, Title
XXII of the Public Health Service Act and the applicable
provisions of the
<PAGE> 42
APPENDIX A-13
Social Security Act.
(g) The Buyer has not made any commitment regarding the
continuation of any Plan maintained by Continental after the
Closing Date and the Buyer will be free, in its sole
discretion, to cause Continental to amend, cancel, terminate
or otherwise modify in any and all respects any such Plan.
A.2.19 ENVIRONMENTAL MATTERS. In addition to the representations and warranties
in Section A.2.13 hereof and not in limitation thereof, (a) no releases of
Hazardous Materials (as defined in this Section A.2.19) have occurred at or from
any property which is the subject of this transaction or which was otherwise
owned or used at any time by Continental or any of its predecessors for
management of Hazardous Materials, (b) there are no past, pending, or threatened
Environmental Claims (as defined in this Section A.2.19) against Continental,
(c) there are no leaking underground storage tanks owned by Continental, or
located at any facility owned or operated by Continental and (d) there are no
facts, circumstances, or conditions that could reasonably be expected to
restrict, under any Environmental Law or Environmental Permit (each as defined
in this Section A.2.19) in effect prior to or at the Closing Date, the
ownership, occupancy, use or transferability of any property owned, operated or
leased by Continental. As used in this Section A.2.19:
(i) "ENVIRONMENTAL CLAIMS" means any and all administrative or
judicial actions, suits, orders, claims, liens, notices,
violations or proceedings related to any applicable
Environmental Law or any Environmental Permit brought, issued
or asserted by: (A) a governmental authority for compliance,
damages, penalties, removal, response, remedial or other
action pursuant to any applicable Environmental Law or (B) a
third party seeking damages for personal injury or property
damage resulting from the release of a Hazardous Material at,
to or from any facility of Continental, including without
limitation Continental employees seeking damages for exposure
to Hazardous Materials;
(ii) "ENVIRONMENTAL LAWS" means all federal, provincial, state and
local laws, statutes, ordinances, codes, rules and regulations
related to protection of the environment or the handling, use,
generation, treatment, storage, transportation or disposal of
Hazardous Materials;
(iii) "ENVIRONMENTAL PERMIT" means all permits, licenses, approvals,
authorizations or consents required by any governmental
authority under any applicable Environmental Law and includes
any and all orders, consent orders or binding agreements
issued or entered into by a governmental authority under any
applicable Environmental Law; and
(iv) "HAZARDOUS MATERIAL" means any hazardous or toxic substance,
material or waste which is regulated as of the Closing Date by
any federal, provincial, state or local governmental authority
under any Environmental Law now or hereafter effective,
including, without limitation, any waste, pollutant, hazardous
substance, toxic substance, hazardous waste, special waste,
petroleum or petroleum-derived substance or waste, or any
constituent of any such substance or waste.
A.2.20 INTELLECTUAL PROPERTY.
<PAGE> 43
APPENDIX A-14
(a) The patents, patent applications, trademarks, trademark
applications, trade names and trade name applications and
licenses in respect thereof as set forth in Schedule A.2.20
hereto annexed are:
(i) the only ones necessary so as to enable Continental
to carry on its business as presently conducted; and
(ii) to the knowledge of the Securityholders, Continental
is entitled to use the same and the Securityholders
are not aware of any other person using the same in
the Province of Alberta or in any other jurisdiction
where Continental carries on business.
(b) Continental owns or licenses or otherwise has the right to use
all material licenses, permits, patents, patent applications,
trademarks, trademark applications, service marks, trade
names, copyrights, copyright applications, franchises,
authorizations and other intellectual property rights that are
necessary for the operations of its assets and business,
without infringement upon or conflict with the rights of any
other person with respect thereto, including, without
limitation, all trade names associated with any private label
brands of Continental. To the best knowledge of the
Securityholders, no slogan or other advertising, device,
product, process, method, substance, part or component or
other material now employed, or now contemplated by be
employed, by Continental infringes upon or conflicts with any
rights owned by any other person, and no claim or litigation
regarding any of the foregoing is pending or threatened. No
patent, invention, device, application, principle and no
statute, law, rule, regulation, standard or code involving the
intellectual property is pending or, to the knowledge of the
Securityholders, proposed, except where the consequences in
the aggregate have no material adverse effect on Continental
or its business.
A.2.21 NO THIRD PARTY OPTIONS. There are no existing agreements, options,
commitments or rights with, to or in any third person to acquire any of the
assets or properties of Continental or any interest therein, except for those
contracts entered into in the ordinary course of business consistent with past
practice for the sale of Continental's products and services.
A.2.22 SCHEDULES; DELIVERY OF DOCUMENTS; CORPORATE RECORDS. The Securityholders
have delivered or made available to the Buyer the originals or true and complete
copies of all documents, including without limitation all amendments,
supplements or modifications thereof or waivers currently in effect thereunder,
referred to on the Schedules hereto or otherwise material to the representations
and warranties in this Agreement and have also delivered to the Buyer copies of
the constating documents of Continental and all amendments thereto and the
By-Laws, as amended, of Continental. The minute and stock record books of
Continental, which have been made available to the Buyer for its inspection,
contain complete and correct copies of all charter documents and the records of
all meetings and consents in lieu of meeting of the Boards of Directors (and any
committees thereof) and voting shareholders of Continental since the dates of
their incorporation.
A.3 REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer hereby represents and
warrants to each of the Securityholders that, to the best of its knowledge,
information and belief, having made due
<PAGE> 44
APPENDIX A-15
inquiry, as follows:
A.3.1 REPORTING ISSUER STATUS. The Buyer is a "reporting issuer" in the Province
of Alberta as that term is defined in the Securities Act (Alberta) and the
common shares of the Buyer are listed and posted for trading on Nasdaq. The
Buyer is not in default of any requirement of the Securities Act (Alberta) or
its regulations which would have a Venture Material Adverse Effect. The Buyer
has not received any notice of default with respect to any material rule of
Nasdaq applicable to the maintenance of its listing thereon. The Venture Stock
is part of a class of securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the Buyer
is subject to Section 13 or 15(d) of the Exchange Act. Since March 1, 1997, the
Buyer has complied in all material respects with the reporting requirements of
the Exchange Act.
A.3.2 AUTHORIZED CAPITAL. The authorized capital of the Buyer consists of an
unlimited number of common shares, of which 4,634,584 common shares are issued
and outstanding as of the date hereof. The following warrants and options to
acquire common shares of the Buyer are issued and outstanding as of the date
hereof:
<TABLE>
<CAPTION>
WARRANTS & OPTIONS OUTSTANDING: NUMBER EXERCISE PRICE
- ------------------------------- ------ --------------
<S> <C> <C>
1) Underwriter option 140,000 $8.25
2) Underwriter warrants 140,000 $7.00
3) Investor relations warrants 100,000 $5.25
4) Stock options 384,500 $3.38 to $ 5.88
(208,500 vested)
</TABLE>
Other than as set forth above, there are no outstanding subscriptions, options,
warrants, convertible securities, calls, commitments, agreements or rights
(contingent or otherwise) of any character to purchase or otherwise acquire from
Buyer any shares of, or any securities convertible into, the capital stock of
Buyer. There are no preemptive rights with respect to the issuance of the
Venture Stock or any other capital shares of Buyer.
A.3.3 CORPORATE EXISTENCE. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the Province of Alberta and the
Buyer has all requisite power and authority and all necessary licenses, permits
and authorizations to carry on its business as it has been and is now being
conducted and to own, lease and operate the properties used in connection
therewith, except for licenses, permits and authorizations, the absence of which
would not individually or in the aggregate result in a Venture Material Adverse
Effect. The Buyer is qualified as a foreign corporation authorized to do
business and is in good standing in each jurisdiction in which such
qualification is required.
A.3.4 CORPORATE POWER AND AUTHORIZATION. The Buyer has the requisite corporate
power and authority to execute, deliver and perform this Agreement and the
Contemplated Transactions. The execution, delivery and performance hereof by the
Buyer has been duly authorized and approved by all necessary corporate action,
other than receipt of requisite shareholder approval. This Agreement is a legal,
valid and binding obligation of the Buyer and is enforceable against the Buyer
in accordance with its terms; except as the same may be limited by (a)
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights, (b) laws
relating to the availability of specific
<PAGE> 45
APPENDIX A-16
performance, injunctive relief or other equitable remedies, and (c) the extent
to which the enforceability of the indemnification provisions contained in this
Agreement may be limited by applicable laws.
A.3.5 VALIDITY OF CONTEMPLATED TRANSACTIONS; ETC. Except as disclosed on
Schedule A.3.5, the execution, delivery and performance hereof by the Buyer will
(a) not contravene or violate any material provision of any law, rule or
regulation currently in effect to which the Buyer is subject, including without
limitation, the rules and regulations of the Alberta Securities Commission, the
S.E.C. or Nasdaq, or (b) the Certificate of Incorporation or By-Laws of the
Buyer; nor will such execution, delivery or performance violate, be in conflict
with in any material respect or result in the breach (with or without the giving
of notice or lapse of time, or both) of any material term, condition or
provision of, or require the consent which has not been obtained of any other
party to, any material contract, commitment or agreement, oral or written, to or
by which the Buyer is a party or otherwise bound or affected or by which any of
the Buyer's assets or properties may be bound or affected, except for such
violations which would not either individually or in the aggregate have a
Venture Material Adverse Effect. Except as disclosed on Schedule A.3.5, no
authorization, approval or consent, and no registration or filing with, any
governmental or regulatory official, body or authority is required in connection
with the execution, delivery and performance hereof by the Buyer, except for
those consents, approvals, authorizations, declarations, filings or
registrations the failure of which to obtain or make individually or in the
aggregate would not have a Venture Material Adverse Effect.
A.3.6 VENTURE STOCK. Assuming the accuracy of the representations and warranties
of the Securityholders provided in this Agreement, the offer and sale of the
Venture Stock by the Buyer is exempt from the registration requirements of the
Act pursuant to section 4(2) thereof. The Venture Stock, when issued from
treasury to the Securityholders, will be issued free and clear of all security
interests, pledges, liens, encumbrances, claims and other charges and
restrictions thereon of every kind and nature whatsoever, including without
limitation any agreements, subscriptions, options, warrants, calls, commitments
or rights (contingent or otherwise) of any character granting to any person any
interest in or right to acquire from such Securityholders at any time, or upon
the happening of any stated event, any of the Venture Stock to be issued to such
Securityholders, excepting only the restrictions on the Venture Stock under
governing security and regulatory laws, regulations and policies. Nothing
contained herein shall restrict the Securityholders from selling, pledging or
otherwise transferring the Venture Stock acquired by each of them pursuant to an
exemption from registration under the Act and the Alberta Act at any time
provided such sale, pledge or transfer is otherwise consummated in accordance
with the terms and provisions of this Agreement, the provisions of the Act, the
Alberta Act and other applicable laws, rules or regulations.
A.3.7 CANADIAN RESIDENT. The Buyer is a Canadian corporation within the meaning
of the ITA.
A.3.8 COMPLIANCE WITH LAWS. The Buyer has complied in all material respects with
each, and is not in violation of the material provisions of any law, rule or
regulation currently in effect to which it or its business is, or its
operations, assets, securities or properties are subject, including, without
limitation, the rules and regulations of the Alberta Securities Commission, the
S.E.C. or Nasdaq, and has not in any material respect failed to obtain or adhere
to the requirements of any material license, permit or other authorization
necessary to the ownership of its assets and properties or to the conduct of its
business, except where such failure would not result either individually or in
the aggregate in a Venture Material Adverse Effect.
A.3.9 CANACCORD CAPITAL CORPORATION INDEMNITY. The Buyer covenants and agrees
except as otherwise agreed to by the Securityholders, on behalf of Continental,
or by Continental, or except as may be
<PAGE> 46
APPENDIX A-17
determined by an appropriate court of law or other governing body, that none of
the Securityholders shall be responsible for or liable for any fees, costs or
expenses payable by Continental or by the Buyer to Canaccord Capital Corporation
for any matters referred to in Canaccord Capital Corporation's letter dated
December 8, 1997 or in connection with this Agreement or the Contemplated
Transactions as referred to in Section 11.
A.3.10 NO JUDGMENTS. The Buyer is not a party to or otherwise bound or affected
by the provisions of any judgment, order, writ, injunction or decree of any
Court, arbitrator or governmental or regulatory official, body or authority,
except for those which would not result either individually or in the aggregate
in a Venture Material Adverse Effect.
A.3.11 VENTURE DISCLOSURE DOCUMENTS. The Venture Disclosure Documents were
prepared in all material respects in accordance with the requirements of
applicable law in effect as of the respective dates of preparation and
accurately describe, in all material respects as of their respective dates, the
business then conducted by the Buyer.
A.3.12 NO RESTRICTIONS ON VENTURE STOCK. Except to the extent that the Venture
Stock issued to the Securityholders constitutes "restricted stock" as such term
is defined under Rule 144 of the Act, or that any of the Securityholders may be
deemed an "affiliate" of the Buyer, as such term is defined under Rule 144 of
the Act, as of the date of issuance, the Venture Stock will have no prohibition
on transfer.
<PAGE> 1
CREDIT AGREEMENT Exhibit 10.32
TO: VENTURE SEISMIC LTD. (the "LENDER")
3110 80th Avenue S.E.
Calgary, Alberta T2C 1J3
FROM: CONTINENTAL HOLDINGS LTD. (the "BORROWER")
210, 3030 3rd Avenue N.E.
Calgary, Alberta T2A 6T7
RE: Line of credit to assist in outfitting the "Pacific Titan" (the "CREDIT")
CREDIT LIMIT - $4,000,000.00 (U.S.)
In consideration of the Lender authorizing the Credit subject to the conditions
contained herein, the Borrower acknowledges and agrees as follows:
1. The Lender shall, subject to the terms and conditions of the general
security agreement granted by the Borrower to the Lender as of the date
hereof (the "GSA"), advance the Credit Limit to the Borrower's account
number 4002085 with Royal Bank of Canada, transit no. 02699 (the
"ACCOUNT"). The Credit shall be utilized solely to assist in the
outfitting of the marine seismic vessel "Pacific Titan" (the "PROJECT").
The Borrower shall present to the Lender all invoices and bills regarding
the Project that the Borrower desires paid utilizing the Credit. All valid
invoices and bills regarding the Project shall be paid from the Credit,
provided however, that the Lender shall review and approve the validity of
such invoices and bills regarding the Project prior to authorizing any use
of the Credit. The Lender's authorization to utilize the Credit shall be
evidenced by the Lender's signature on all cheques issued from the
Account.
2. No interest on the Credit shall accrue or be payable by the Borrower to
the Lender prior to August 31, 1998 (the "CONVERSION DATE").
3. From and after the Conversion Date, the Borrower covenants to pay to the
Lender on August 31, 2002 (the "MATURITY DATE") all amounts outstanding
under the Credit, together with simple interest thereon at a variable rate
per annum equal to 1.0% above the prime lending rate in effect from time
to time for Royal Bank of Canada, which is the variable per annum rate of
interest published from time to time by the Royal Bank of Canada as its
prime lending rate on U.S. denominated commercial loans. Interest shall be
calculated on the outstanding balance of the Credit, shall accrue from day
to day from the Conversion Date and shall be payable quarterly in
accordance with this agreement. Payments of principal and accrued interest
on the outstanding balance of the Credit shall be made: (i) quarterly on
December 1, March 1, June 1
<PAGE> 2
2
and September 1 of each year prior to the Maturity Date, commencing on
December 1, 1999, the principal portion of each such quarterly payment to
equal 1/16 of the amount of the Credit on the Conversion Date, (ii) upon
maturity (whether at stated maturity, by acceleration or otherwise) and
(iii) upon any prepayment, subject to the other provisions hereof and
subject to the GSA. Interest calculated as aforesaid shall be payable at
such rate before and after maturity, default and judgement, until such
outstanding balance of the Credit, together with accrued interest, is paid
in full. All computations of interest shall be made on the basis of a year
of 365 days on the actual number of days elapsed (including the first but
excluding the last day during which any such amount of the Credit is
outstanding). The outstanding balance of the Credit together with interest
accrued and unpaid shall be payable on the Maturity Date unless the Credit
is converted in accordance with Section 6 hereof, whereupon the Lender
shall proceed to discharge all registrations regarding the GSA.
4. The Lender is authorized but not obliged to debit the Account as required
from time to time to pay interest, principal and other costs incurred in
respect of the Credit or otherwise payable by the Borrower to the Lender,
all of which fees and costs the Borrower agrees to pay on demand with
interest after demand at the rate hereinbefore set forth. Any interest
accrued on any such amounts which is not paid by the next date on which an
interest instalment is payable shall continue to accrue as simple interest
from such date and on all further instalment dates until paid and, as
overdue interest, bear interest at the same rate as on principal. All
monies received by the Lender, whether by way of debit as aforesaid or
otherwise, may be applied and allocated by the Lender to such parts of the
outstanding indebtedness as the Lender deems best.
5. Provided the Lender has not exercised any of its remedies under the terms
of GSA, the Borrower may, on two business days prior notice, pre-pay the
Credit, together with all accrued interest as of such date, without
penalty or prepayment bonus.
6. (a) Notwithstanding anything herein contained, the Lender may, at any
time after the Conversion Date up to and including December 1, 1999,
provide written notice to the Borrower of the Lender's intention to
convert the entire Credit, with all accrued interest, to a
fully-diluted 26.2% equity participation in all of the issued and
outstanding share capital, irrespective of class or series, of the
Borrower as of such date (the "EQUITY CONVERSION"), whereupon the
Credit, with all accrued interest, shall be deemed paid in full. The
Borrower shall, upon receipt of notice of the Equity Conversion,
take all necessary actions to implement the Equity Conversion within
30 days of receipt of notice of the Equity Conversion. In the event
the Equity Conversion is not completed to the satisfaction of the
Lender within such time and is not caused by matters beyond
<PAGE> 3
3
the control of the Borrower or its shareholders, this shall
constitute a Default (as such term is utilized in the GSA).
(b) If the Lender desires to exercise its option to convert the Credit
pursuant to Section 6(a) hereof, the Lender shall deliver to the
Borrower, at its address appearing on the first page hereof, a
written notice of its intention to exercise such option (the
"CONVERSION NOTICE"), and together therewith, the Lender shall
surrender this credit agreement for cancellation, provide to the
Borrower a general release with respect to all amounts owed by the
Borrower under this agreement, with all costs regarding the
preparation, authorization, execution and delivery of such general
release on behalf of the Lender to be borne by solely by the
Borrower on a solicitor-client basis, and provide written
instructions regarding the registration and delivery of certificates
for the shares representing the Equity Conversion (the "CONVERSION
SHARES"). The Borrower shall, as soon as reasonably practicable
thereafter (but not later than 30 days after receipt of the
Conversion Notice) issue and forward certificates representing the
Conversion Shares to the Lender at its address appearing on the
first page hereof. The Lender shall be deemed to have become the
holder of record of such shares at the close of business on the date
on which the Conversion Notice is sent to the Borrower (the
"CONVERSION DATE") and shall be regarded for all corporate purposes
after the Conversion Date as the record holder of the number of
Conversion Shares to which it is entitled upon the conversion. The
Borrower may rely on record ownership of this credit agreement for
all corporate purposes, notwithstanding any contrary notice.
Immediately upon receipt of the Conversion Shares, the Lender shall
proceed to discharge all registrations regarding the GSA.
(c) No fractional shares (or scrip representing fractional shares) of
capital stock shall be issued upon conversion of this Credit. In the
event that the Credit to be converted pursuant to the Conversion
Notice would result in the issuance of a fractional share of capital
stock, the Borrower shall pay a cash adjustment in lieu of such
fractional share to the Lender based upon the conversion price
determined in accordance with Section 6(a).
(d) The Borrower shall pay all documentary, stamp or other transactional
taxes attributable to the issuance or delivery of shares of capital
stock upon conversion of the Credit. The Lender shall pay all
corporate income taxes, if any, which the Lender may incur in
connection with this agreement or the Equity Conversion.
<PAGE> 4
4
(e) All shares of capital stock which may be issued upon conversion of
the Credit will, upon issuance by the Borrower in accordance with
the terms of this credit agreement, be validly issued, free from all
taxes and liens with respect to the issuance thereof, free from all
pre-emptive or similar rights and fully paid and non-assessable.
7. This agreement and any other agreements in relation to the Credit are in
addition to and not in substitution for any other agreements between the
Borrower and the Lender, including but not limited to the March 27, 1998
securities purchase agreement among the Lender, the Borrower, Les J.
Stinn, Roy D. Self, Sandra Kelly, Elaine McCarthy and Greg Stinn and the
GSA, each as amended, modified, supplemented, replaced or restated, from
time to time.
IN WITNESS WHEREOF the undersigned has executed this agreement this 27th day of
March, 1998.
CONTINENTAL HOLDINGS LTD.
Per: /s/ L.J. STINN
----------------------------------
Name: Les J. Stinn (c/s)
Title: President
Per: /s/ R.D. SELF
----------------------------------
Name: Roy D. Self
Title: Vice-President, Geophysical Operations
VENTURE SEISMIC LTD.
Per: /s/ BRIAN KOZUN
----------------------------------
Name: Brian Kozun (c/s)
Title: President
<PAGE> 1
Exhibit 10.33
CONTINENTAL HOLDINGS LTD.
THIS SECURITY AGREEMENT DATED March 27, 1998.
1. DEFINITIONS
The following definitions shall apply herein:
"ACT" means the Personal Property Security Act of the Province of Alberta
in effect on the date hereof;
"ACCESSIONS", "ACCOUNT", "CHATTEL PAPER", "CONSUMER GOODS", "DOCUMENT OF
TITLE", "EQUIPMENT", "FINANCING CHANGE STATEMENT", "FINANCING STATEMENT",
"GOODS", "INSTRUMENT", "INTANGIBLE", "INVENTORY", "MONEY", "PURCHASE MONEY
SECURITY INTEREST" and "SECURITY" shall have the meanings ascribed to them
in the Act and shall be deemed to include both the singular and plural of
such terms. All other capitalized words or terms used herein, unless
otherwise defined herein, shall have the meanings ascribed to them in the
Act and the Regulations passed pursuant thereto;
"AGREEMENT", "HEREIN", and similar expressions refer to the whole of this
Security Agreement and not to any particular section or other portion
thereof and extend to and include every instrument which amends or
supplements this Agreement;
"COLLATERAL" means the specific personal property of the Debtor described
on the attached Schedule "A", together with all Accounts of the Debtor and
all documents, writings, papers, books of account and records relating to
the foregoing and all rights and interests therein, but shall not include:
(a) the last day of any term of years reserved by any lease, verbal or
written, or any agreement therefor now or hereafter held by the
Debtor, it being the intention that the Debtor shall stand possessed
of the reversion remaining in respect of any leasehold interest
forming part of the Collateral upon trust to assign and dispose
thereof as Venture may after default direct,
(b) Consumer Goods, or
(c) those specific items, if any, described on the attached Schedule
"B";
"CREDIT AGREEMENT" means the $4,000,000.00 (U.S.) credit agreement entered
into as of the date hereof between Venture, as lender, and the Debtor, as
borrower, as amended, modified, supplemented, replaced or restated, from
time to time;
"DEBTOR" means Continental Holdings Ltd.;
"DEFAULT" means the happening of any one or more of the events or
conditions described in Section 7 and such term shall be deemed to include
each, any, or all such events or conditions, whether any
<PAGE> 2
2
such event is voluntary or involuntary or is effected by operation of law
or pursuant to or in compliance with any judgement, decree or order of any
Court or any order, rule or regulation of any administrative or
governmental body;
"INDEBTEDNESS" means and includes any and all obligations, indebtedness
and liability of the Debtor to Venture pursuant to the Credit Agreement,
(including but not limited to principal, interest and all costs on a full
indemnity basis) present or future, direct or indirect, absolute or
contingent, matured or not, extended or renewed, wherever and however
incurred, together with any ultimate unpaid balance thereof, whether the
same is from time to time reduced and thereafter increased or entirely
extinguished and thereafter incurred again all pursuant to the Credit
Agreement;
"PERMITTED ENCUMBRANCES" means those specific security interests, if any,
whether by way of mortgage, lien, claim, charge or otherwise, listed on
Schedule "A" or hereafter approved in writing by Venture prior to their
creation or assumption;
"PROCEEDS" shall have the meaning ascribed to it in the Act and shall be
interpreted to include bank accounts, cash, trade-ins, Equipment, notes,
Chattel Paper, Goods, contractual rights, Accounts and any other personal
property or obligation received when Collateral or Proceeds thereof are
sold, exchanged, collected or otherwise disposed of;
"RECEIVER" means any one or more persons (whether officers of Venture or
not), firms or corporations appointed pursuant to subsection 9(f) and
shall be deemed to include a receiver, manager, receiver-manager, or
receiver and manager;
"SECURITY INTEREST" means the security interest granted by the Debtor to
Venture pursuant to this Agreement;
"SECURITIES PURCHASE AGREEMENT" means the securities purchase agreement
entered into as of the date hereof among the Debtor, Leslie J. Stinn,
Sandra Kelly, Elaine B. McCarthy, Gregory A. Stinn, Roy D. Self and
Venture, as amended, modified, supplemented, replaced or restated, from
time to time;
"SPECIFICALLY DESCRIBED COLLATERAL" means those items, if any, described
in Schedule "A" which comprise part of the Collateral; and
"VENTURE" means Venture Seismic Ltd.
2. GRANT OF SECURITY INTEREST
For value received (the receipt and sufficiency of which is hereby
acknowledged), the Debtor hereby grants, assigns, conveys, mortgages, pledges
and charges, as and by way of a specific mortgage, pledge and charge and grants
a continuing Purchase Money Security Interest to and in favour of Venture in the
Collateral, subject to the Permitted Encumbrances.
<PAGE> 3
3
3. INDEBTEDNESS SECURED
The Security Interest secures payment and satisfaction of the Indebtedness;
provided however, that if the Security Interest in the Collateral is not
sufficient to satisfy the Indebtedness of the Debtor in full, the Debtor agrees
that the Debtor shall continue to be liable for any Indebtedness remaining
outstanding and Venture shall be entitled to pursue full payment and
satisfaction thereof.
4. ATTACHMENT OF SECURITY INTEREST
The Security Interest shall attach to the Collateral at the earliest possible
moment in accordance with the Act, there being no intention on the part of the
Debtor and Venture that it attach at any later time.
5. REPRESENTATIONS AND WARRANTIES OF THE DEBTOR
The Debtor represents and warrants, and as long as this Agreement remains in
effect and except for Sections 5(j) and (k) below, shall be deemed to
continuously represent and warrant, that:
(a) the Debtor is duly organized, existing and in good standing under
the laws of its incorporating jurisdiction and of each other
jurisdiction in which the nature of its activities make such
necessary;
(b) the Debtor has the right, power and authority to enter into this
Agreement and to grant the Security Interest;
(c) the execution, delivery and performance of this Agreement has been
duly authorized by all necessary corporate action and are not in
contravention of any instrument by which the Debtor has been
incorporated or continued, any instrument amending any such
instrument, any internal regulation of the Debtor, any law, or any
indenture, agreement or undertaking to which the Debtor is a party
or by which it is bound;
(d) the Debtor has not previously carried on business, does not
currently carry on business, and shall not, without the prior
written consent of Venture, in the future carry on business under
any name other than the name set forth in paragraph 1;
(e) the Collateral is genuine and is legally and beneficially owned or
leased by the Debtor free of all security interests except for the
Security Interest and the Permitted Encumbrances;
(f) the description of the Specifically Described Collateral contained
herein is complete and accurate in accordance with the PPSA and all
serial numbers affixed or ascribed to any of the Collateral have
been provided to Venture;
(g) each Chattel Paper, Intangible and Instrument constituting
Collateral is enforceable in accordance with its terms against the
party obligated to pay the same (the "ACCOUNT DEBTOR"), the amount
represented by the Debtor to Venture from time to time as owing by
each Account Debtor shall be the correct amount owing by such
Account Debtor;
(h) the locations specified in the attached Schedule "C" as to business
operations and records are accurate and complete and, except for
such portions of the Collateral removed for repair
<PAGE> 4
4
and then replaced, and except as otherwise agreed to by Venture, and
except for Goods in transit to such locations and Inventory on lease
or consignment, all Collateral shall be situate at one of such
locations;
(i) all financial statements, certificates and other information
concerning the Debtor's financial condition or otherwise from time
to time furnished by the Debtor to Venture are and shall be in all
material respects complete, correct and fair representations of the
affairs of the Debtor stated in accordance with generally accepted
accounting principles applied on a consistent basis;
(j) as of the date hereof, there has not been a material adverse change
in the Debtor's position, financial or otherwise, from that
indicated by the financial statements which have been delivered to
Venture;
(k) as of the date hereof, there are no actions, suits or proceedings
pending or, to the knowledge of the Debtor, threatened against the
Debtor except as have been disclosed in writing to and approved by
Venture; and
(l) none of the Collateral is or shall be Consumer Goods.
6. COVENANTS OF THE DEBTOR AND OF VENTURE
A. The Debtor covenants:
(a) to defend the Collateral against the claims and demands of all other
parties claiming the same or an interest therein and to keep the
Collateral free from all security interests except for the Security
Interest and the Permitted Encumbrances;
(b) except pursuant to or as contemplated by the Securities Purchase
Agreement or as expressly permitted herein, not to sell, exchange,
transfer, assign, destroy, lease or otherwise dispose of the
Collateral or any interest therein without the prior written consent
of Venture;
(c) except as expressly permitted herein, not to move the Specifically
Described Collateral from its current locations, as indicated on
Schedule "C", without the prior written consent of Venture;
(d) upon Default, to assemble and deliver the Collateral to Venture at
such location as Venture may direct;
(e) to notify Venture promptly in writing of:
(i) any change in the information contained in this Agreement
including any information relating to the Debtor (including
its name), the Debtor's business, the Collateral, or the
locations of the Collateral or the records of the Debtor, so
that Venture shall be constantly advised of all places where
the Debtor conducts its business, maintains the Collateral and
maintains its records,
(ii) the details of any significant acquisition of Collateral
(including serial numbers
<PAGE> 5
5
where required under the Act in connection with registration
or as otherwise requested by Venture), and for the purposes of
this Agreement "SIGNIFICANT" shall mean any item or items the
value of which exceeds in the aggregate $100,000.00,
(iii) any Default pursuant to Section 7 hereunder of which the
Debtor is aware,
(iv) the occurrence of any other circumstance which has a
reasonable likelihood of having a material adverse effect on
the Debtor,
(v) the details of any claims or litigation affecting the Debtor
or the Collateral in excess of $25,000.00,
(vi) any material loss or damage to the Collateral,
(vii) any material default by an Account Debtor in payment or other
performance of its obligations with respect to any Collateral,
and
(viii) the return to or repossession by the Debtor of any Collateral
in excess of $25,000.00;
(f) to keep in all material respects all of its property, including the
Collateral, in good order, condition and repair and not to use the
Collateral in violation of the provisions of this Agreement or in
material violation of any other agreement relating to the Collateral
or any policy insuring the Collateral or any applicable statute,
law, by-law, rule, regulation or ordinance having jurisdiction over
the Collateral;
(g) to execute, acknowledge and deliver such further agreements and
documents supplemental hereto (including financing statements,
further schedules to this Agreement, assignments and transfers) and
to do all acts, matters and things as may be reasonably requested by
Venture in order to give effect to this Agreement and to perfect the
Security Interest, including but not limited to any of the same
which may be required to correct or amplify the description of any
Collateral or for any other purpose not inconsistent with the terms
of this Agreement;
(h) to pay all reasonable costs and expenses on a full indemnity basis
(including legal fees as between a solicitor and his own client)
incidental to:
(i) maintaining, protecting and defending the Collateral, the
Security Interest, and all of Venture's rights and interest
arising pursuant to this Agreement, and
(ii) the exercise of any rights or remedies of Venture pursuant to
this Agreement, including but not limited to the reasonable
costs of the appointment of a Receiver and all reasonable
expenditures incurred by such Receiver, the reasonable cost of
any sale proceedings (whether the same prove abortive or not),
and all reasonable costs of inspection, and all other
reasonable costs and expenses incurred by Venture in
connection with or arising out of, directly or indirectly,
this Agreement, all without limitation. All such costs and
expenses shall be payable by the Debtor immediately upon
demand from Venture and until paid shall bear interest from
the
<PAGE> 6
6
date incurred by Venture at the rate of interest then
chargeable by Venture to the Debtor on any of the Indebtedness
under the Credit Agreement. The amount of all such costs and
expenses shall be added to the Indebtedness and shall be
secured by this Agreement;
(i) except where being contested in good faith and by appropriate
proceedings, to punctually pay and discharge all taxes, rates,
levies, assessments and other charges of every nature which might
result in any lien, encumbrance, right of distress, forfeiture or
termination or sale, or any other remedy being enforced against the
Collateral and to provide to Venture upon request satisfactory
evidence of such payment and discharge;
(j) to maintain its corporate existence, and to diligently preserve in
all material respects all its material rights, licenses, powers,
privileges, franchises and goodwill;
(k) to observe and perform in all material respects its obligations and
comply in all material respects with all conditions under leases,
licenses and other agreements regarding the Collateral to which it
is a party or pursuant to which any of the Collateral is held;
(l) to carry on and conduct its business in an efficient and proper
manner so as to preserve and protect the Collateral and income
therefrom;
(m) to keep, in accordance with generally accepted accounting principles
consistently applied, proper books of account and records of all
transactions in relation to its business and the Collateral and will
deliver to Venture the following:
(i) within 90 days after the close of each fiscal year of the
Debtor, copies of A. the balance sheet of the Debtor as of the
end of such fiscal year, B. statements of income of the Debtor
for such fiscal year and C. statements of cash flow and
stockholders' equity of the Debtor for such fiscal year,
setting forth in each case in comparative form the
corresponding figures for the previous annual period,
including notes thereto for the foregoing, all in reasonable
detail, prepared in accordance with generally accepted
accounting principles consistently followed throughout the
periods involved and certified by Ernst & Young or another
firm of independent chartered accountants of recognized
national standing selected by the Debtor and reasonably
satisfactory to Venture,
(ii) within 45 days after the close of each fiscal quarter of the
Debtor, copies of A. the balance sheet of the Debtor as of the
end of such fiscal quarter, B. statements of income of the
Debtor for such fiscal quarter, C. statements of cash flow of
the Debtor for such fiscal quarter, setting forth in each case
in comparative form the corresponding figures for the
preceding fiscal quarter, for the year to date and for the
comparable periods in the preceding year, all in reasonable
detail, prepared in accordance with generally accepted
accounting principles consistently followed throughout the
periods involved and certified in writing by the principal
financial officer of the Debtor as fairly presenting the
financial position and results of operations of the Debtor for
the fiscal quarter indicated, subject to year-end audit
adjustment, and
<PAGE> 7
7
(iii) promptly upon, and in any event within 10 days after
their becoming available, a copy of A. all reports,
financial statements and other materials delivered or
sent by the Debtor to its directors and shareholders and
B. all management letters reviewing the Debtor's
accounting and control procedures that the Debtor
receives from its independent chartered accountants. If
for any period the Debtor shall have any subsidiary or
subsidiaries whose accounts are consolidated with those
of the Debtor, then the financial statements delivered
for such period pursuant to the foregoing clauses A. and
B. shall be the consolidated and consolidating financial
statements of the Debtor and all such consolidated
subsidiaries;
(n) to observe and conform in all material respects to all valid
requirements of law and of any governmental or municipal authority
relating to the Collateral or the carrying on by the Debtor of its
business;
(o) at all reasonable times, to allow Venture access to its premises in
order to view the state and condition of the Collateral and to
inspect its books and records in connection with the Collateral and
make extracts therefrom;
(p) to insure the Collateral for such periods, in such amounts, on such
terms, with such insurers and against such loss or damage by fire
and other such risks as Venture reasonably directs, with loss
payable to Venture and the Debtor as insureds, as their respective
interests may appear, to pay all premiums therefor, to deliver
evidence of the same on request, and to do all acts necessary to
obtain payment to Venture of any insurance proceeds payable to
Venture;
(q) to prevent the Collateral from being or becoming an Accession or a
fixture to other property not covered by this Agreement except for
the Permitted Encumbrances;
(r) to deliver to Venture from time to time promptly upon request:
(i) copies of any Documents of Title, Instruments, Securities and
Chattel Paper constituting the Collateral,
(ii) copies of all books of account and all records, ledgers,
reports, correspondence, schedules, documents, statements,
lists and other writings relating to the Collateral,
(iii) copies of all policies and certificates of insurance relating
to the Collateral, and
(iv) such further information concerning the Collateral, as Venture
may reasonably request, subject to material compliance by
Venture with section 6B of this Agreement and except for such
information as the Debtor is prohibited from providing under
confidentiality agreements with the Debtor's customers or
otherwise; and
(s) not to change the present use of the Collateral.
B. Venture covenants that Venture shall and shall cause its respective
affiliates and officers and directors, and shall use its best efforts to cause
all their other respective employees, auditors, attorneys,
<PAGE> 8
8
consultants, advisors and agents, to treat as confidential and hold in strict
confidence, unless compelled to disclose by judicial or administrative process,
or, in the opinion of its counsel, by other requirements of law, and after prior
written notice to Continental, all confidential information of Continental
furnished to Venture by Continental, or any of its representatives, in
connection with the Credit Agreement or this Agreement and will not release or
disclose such confidential information to any other person, except their
respective auditors, attorneys, financial advisors and other consultants, and
advisors in connection with the Credit Agreement and this Agreement. After the
Indebtedness is paid in full, (i) such confidence shall be maintained by Venture
and Venture shall cause its officers and directors and affiliates and shall use
its best efforts to cause such other persons to maintain such confidence, except
to the extent such information comes into the public domain (other than as a
result of an action by such party, its officers, directors or such other persons
in contravention of this Agreement), (ii) Venture shall and shall cause its
officers and directors and affiliates and shall use its best efforts to cause
such other persons to refrain from using any of such confidential information
except in connection with this Agreement, and (iii) upon the request of
Continental, Venture shall promptly return to Continental any written materials
remaining in Venture's possession or under its control, which materials were
received from Continental or its representatives.
7. EVENTS OF DEFAULT
The following constitute Default:
(a) non-payment when due, whether by acceleration or otherwise, of any
principal or interest forming part of the Indebtedness;
(b) failure of the Debtor to complete the Equity Conversion (as defined
in the Credit Agreement) on and subject to the terms of the Credit
Agreement;
(c) failure of the Debtor to perform or observe any material obligation,
covenant, term, provision or condition contained in this Agreement
(other than as to payment of monies hereunder and Section 7(b)) and
such default shall remain unremedied 30 days from the date the
Debtor receives notice thereof from Venture;
(d) the Debtor makes a voluntary assignment or proposal in bankruptcy or
otherwise acknowledges its insolvency, a bankruptcy petition is
filed or presented against the Debtor, the making of an authorized
assignment for the benefit of the creditors of the Debtor, the
appointment of a receiver, receiver-manager, receiver and manager or
trustee for the Debtor or any assets of the Debtor, or the
institution by or against the Debtor of any other type of insolvency
proceeding under the Bankruptcy and Insolvency Act, the Companies'
Creditors Arrangement Act or similar legislation in any
jurisdiction;
(e) the commencement of any action or proceeding for, terminating the
corporate existence of the Debtor, whether by way of winding-up,
surrender of charter or otherwise;
(f) any encumbrance or security interest affecting the Collateral
becomes enforceable and has not been remedied by the Debtor within
30 days after the Debtor receives notice thereof; provided, however
the Debtor shall not be in default regarding any such encumbrance or
security interest where (i) the Debtor's obligations thereunder are
not at the time due or delinquent; or (ii) the validity thereof is
being contested by the Debtor in good faith and by appropriate
proceedings and provided that no execution in respect of such
encumbrance or
<PAGE> 9
9
security interest has been initiated unless, if initiated, such
execution has been stayed;
(g) any indebtedness for borrowed money of the Debtor in an aggregate
principal amount exceeding $100,000.00 (i) shall be duly declared to
be or shall become due and payable prior the stated maturity
thereof, and is not paid by the Debtor within 30 days of the Debtor
receiving notice thereof or (ii) shall not be paid as and when the
same becomes due and payable, including any applicable grace period,
and is not paid by the Debtor within 30 days of the Debtor receiving
notice thereof;
(h) the Debtor ceases or threatens to cease to carry on its business;
(i) any execution or other process of any Court becomes enforceable
against the Debtor or a distress or analogous process is levied upon
the assets of the Debtor or any part thereof (whether or not forming
part of the Collateral) in excess of $100,000.00 and has not been
remedied by the Debtor within 30 days after the Debtor receives
notice thereof; provided, however, the Debtor shall not be in
default regarding any such execution, distress or process which is
being contested in good faith and by appropriate proceedings,
including any execution or process arising out of any judgment,
order, award or claim against the Debtor with respect to which the
Debtor is in good faith prosecuting an appeal or proceeding for
review, provided that no execution or other process in respect
thereof has been initiated unless, if initiated, such execution has
been stayed;
(j) the Debtor permits any amount which has been admitted as due by it
or is not disputed to be due by it and which forms, or is capable of
being made, a charge upon the Collateral in priority to, or pari
passu with, the charge created by this Agreement to remain unpaid
for 30 days after proceedings have been taken to enforce the same;
(k) the Debtor allows any amount outstanding from it to any governmental
agency pursuant to any state, local, federal or provincial statute,
rule, law or regulation to remain unpaid for 30 days after the
Debtor receives notice of such unpaid amount, provided, however,
that the Debtor is not in default in respect of any payment
obligation with respect thereto if the Debtor is in good faith and
by appropriate proceedings diligently contesting such obligation and
adequate provision is made for the payment thereof;
(l) a corporate dispute occurs within the Debtor between or among any of
its shareholders, directors or officers which may hamper the
business operations of the Debtor or otherwise adversely affect the
Debtor's business, assets or the Collateral; or
(m) any representation or warranty furnished by the Debtor pursuant to
or in connection with this Agreement proves to have been false or
misleading as of the day made in any material respect or to have
omitted any material contingent or unliquidated liability or claim
against the Debtor unless such representation or warranty is
rectified by the Debtor within 30 days after the Debtor receives
notice thereof.
8. ACCELERATION
In the event of a Default Venture, in its sole discretion, may declare all or
any part of the Indebtedness which is not by its terms payable on demand to be
immediately due and payable, without demand, with notice to
<PAGE> 10
10
the Debtor. The provisions of this clause shall not in any way affect any rights
of Venture with respect to any Indebtedness which may now or hereafter be
payable on demand.
9. REMEDIES
Upon Default Venture shall have the following rights and powers, which Venture
may exercise immediately:
(a) to enter upon the premises of the Debtor or any other premises where
the Collateral may be situated and to take possession of all or any
part of the Collateral, by any method permitted by law, to the
exclusion of all others, subject to the Permitted Encumbrances,
including the Debtor, its directors, officers, agents and employees,
and the Debtor hereby waives and releases Venture and any Receiver
from all claims in connection therewith or arising therefrom;
(b) to remove all or any part of the Collateral to such place as Venture
deems advisable;
(c) to preserve and maintain the Collateral and to do all such acts
incidental thereto as Venture considers advisable, including but not
limited to making replacements and additions to the Collateral;
(d) to collect, demand, sue on, enforce, recover and receive Collateral
and give receipts and discharges therefor, and may do any such act
and take any proceedings related thereto in the name of the Debtor
or otherwise as Venture considers appropriate;
(e) to sell, lease, or otherwise dispose of the Collateral in such
manner, at such time or times and place or places, for such
consideration and upon such terms and conditions as Venture deems
reasonable (including without limitation, by deferred payment) all
in Venture's absolute discretion and without the concurrence of the
Debtor, provided however that any sale of the Collateral to Venture
shall be at fair market value at the time of such sale, lease or
disposition, and provided however, that Venture shall not be
required to do so and it shall be lawful for Venture to use and
possess the Collateral for any and all purposes and in any manner
Venture sees fit, all without hindrance or interruption by the
Debtor or any other person or persons, subject to the Permitted
Encumbrances, provided however that none of the foregoing shall
prejudice Venture's right to pursue the Debtor for recovery in full
of the amount of the Indebtedness, including the amount of any
deficiency owing after the application of the proceeds of
realization (and to the extent permitted by law, the Debtor waives
its rights to the protection afforded by any rule of law or
legislation respecting such deficiency);
(f) to appoint by instrument in writing, with or without bond, or by
application to any Court of competent jurisdiction, a Receiver of
the Collateral and to remove any Receiver so appointed and appoint
another or others in his stead. Any such Receiver shall, so far as
concerns responsibility for his acts, be deemed the agent of the
Debtor and not of Venture. Subject to the provisions of the
instrument appointing him, any such Receiver shall have the power to
take possession of the Collateral, to preserve the Collateral or its
value, to carry on or concur in carrying on the business of the
Debtor as it relates to the Collateral and to sell, lease or
otherwise dispose of or concur in selling, leasing or otherwise
disposing of the
<PAGE> 11
11
Collateral (including dispositions by way of deferred payment). To
facilitate the foregoing powers, any such Receiver may enter upon,
use and occupy all premises owned or occupied by the Debtor where
Collateral may be situate, to employ and discharge such employees,
agents or professional advisors as the Receiver deems advisable, to
enter into such compromises, arrangements or settlements regarding
the Collateral as the Receiver deems advisable, to borrow or
otherwise raise money on the security of the Collateral and to issue
Receiver's certificates and do all such other acts as the Receiver
deems advisable in connection with any of the powers referred to
herein. Except as may be otherwise directed by Venture, all monies
received from time to time by the Receiver in carrying out his
appointment shall be received in trust for and paid over to Venture.
In addition, every Receiver may, in the discretion of Bank, be
vested with all or any of the rights and powers of Venture under the
Act or any other applicable legislation or under this Agreement or
any other agreement;
(g) to rescind or vary any contract for sale, lease or other disposition
that the Debtor or Venture may have entered into and to resell,
release or redispose of the Collateral;
(h) to deliver to any purchasers of the Collateral good and sufficient
conveyances or deeds for the same free and clear of any claim by the
Debtor. For such purposes, the purchaser or lessee receiving any
disposition of the Collateral need not inquire whether Default under
this Agreement has actually occurred but may as to this and all
other matters rely upon a statutory declaration of an officer of
Venture, which declaration shall be conclusive evidence as between
the Debtor and such purchaser or lessee, and any such disposition
shall not be affected by any irregularity of any nature or kind
relating to the enforcement of this Agreement or the exercise of the
rights and remedies of Venture;
(i) to exercise any of the powers and rights given to a Receiver
pursuant to this Agreement;
(j) to provide written notice to the Debtor that all the powers,
functions, rights and privileges of the directors and officers of
the Debtor with respect to the Collateral, have or shall cease as of
the date notified therein, except to the extent specifically
continued at any time by Venture in writing; and
(k) to take the benefit of or to exercise any other right, proceeding or
remedy authorized or permitted at law or in equity, whether as a
secured party pursuant to the Act as the same is in force from time
to time or otherwise.
All rights and remedies of Venture are cumulative and may be exercised at any
time and from time to time independently or in combination. No delay or omission
by Venture in exercising any right or remedy shall operate as a waiver thereof
or of any other right or remedy, and no singular partial exercise thereof shall
preclude any other or further exercise thereof or the exercise of any other
right or remedy. Provided always that Venture shall not be liable or accountable
for any failure to exercise its remedies, take possession of, collect, enforce,
realize, sell, maintain, lease or otherwise dispose of the Collateral, or to
institute any proceedings for such purposes. Venture shall have no obligation to
take any steps to preserve rights against other parties, shall have no
obligation to exercise any of the rights and remedies available to it on Default
and shall not be liable or accountable for not exercising any such rights and
remedies.
Venture may waive any Default but no such waiver shall be effective unless made
in writing and signed by
<PAGE> 12
12
an authorized officer of Venture. Any such waiver shall not extend to, or be
taken in any manner whatsoever to affect, any subsequent Default or the rights
resulting therefrom.
By its acceptance of this Agreement, Venture acknowledges that it shall not,
except in the case of the bankruptcy of the Debtor, enforce this Security
Agreement against any personal property of the Debtor used solely for the
personal or household use and enjoyment of the Debtor or the Debtor's immediate
family.
10. VENTURE MAY REMEDY DEFAULT
Venture shall have the right, but shall not be obliged to, remedy any Default of
the Debtor and all sums thereby expended by Venture shall be payable immediately
by the Debtor, together with interest thereon at the rate of interest then
chargeable by Venture to the Debtor on any portion of the Indebtedness under the
Credit Agreement. All such sums shall be added to the Indebtedness and shall be
secured by this Agreement. In no case shall the exercise of Venture's rights
pursuant to this Section 10 be deemed to relieve the Debtor from such Default or
be deemed a waiver of such Default or of any other prior or subsequent Default.
11. USE OF COLLATERAL
Subject to compliance with the Debtor's covenants contained herein and to the
following provisions of this Section 11, until Default the Debtor may:
(a) in the case of Equipment, dispose of the same for the purpose of
immediately replacing it by other Equipment of a similar nature or
of a more useful or convenient character and of at least equal
value;
(b) in the case of Inventory, Accounts and Money, dispose of the same in
the ordinary course of the business of the Debtor and for the sole
purpose of carrying on the same; and
(c) otherwise possess, collect, use, enjoy and deal with the Collateral
in the ordinary course of the Debtor's business in any manner not
expressly or impliedly prohibited herein or otherwise inconsistent
with the provisions of this Agreement.
Notwithstanding the foregoing:
(a) after Default Venture may notify all or any Account Debtors and may
direct such Account Debtors to make all payments owed in respect of
the Collateral directly to Venture; and
(b) the Debtor agrees that any payments on or other Proceeds of
Collateral received by the Debtor, after Default, shall be received
and held by the Debtor in trust for Venture and shall be turned over
to Venture upon request.
If the Collateral at any time includes Securities, after Default, the Debtor
authorizes Venture to transfer the same or any part thereof into its own name or
that of its nominees so that Venture or its nominees may appear on record as the
sole owner thereof. After Default the Debtor waives all rights to receive any
notices or communications in respect of such Securities and agrees that no proxy
issued by Venture to the Debtor or its order as aforesaid shall thereafter be
effective.
<PAGE> 13
13
12. APPROPRIATION OF PAYMENTS
All payments made at any time by the Debtor in respect of the Indebtedness and
all Proceeds realized from any Securities held therefor may be applied (and
reapplied from time to time notwithstanding any previous application) in
accordance with the Credit Agreement, all without prejudice to the rights of
Venture hereunder, including Venture's right to collect from the Debtor the
amount of any deficiency remaining after application of all such payments and
Proceeds.
13. POWER OF ATTORNEY AND AUTHORIZATION TO FILE
The Debtor hereby authorizes Venture to file such Financing Statements and other
documents and do such acts, matters and things (including completing and adding
schedules to this Agreement identifying Collateral or locations) as Venture from
time to time deems appropriate to perfect, continue and realize upon the
Security Interest and to protect and preserve the Collateral. In addition, for
valuable consideration, the Debtor hereby irrevocably appoints Venture and its
officers from time to time, or any one or more of them, to be the true and
lawful attorney of the Debtor, with full power of substitution, in the name of
and on behalf of the Debtor to execute and to do all deeds, transfers,
conveyances, assignments, assurances, and other things which the Debtor ought to
execute and do under the covenants and provisions contained in this Agreement
and generally to use the name of the Debtor in the exercise of all or any of the
rights, remedies and powers of Venture pursuant hereto.
14. MISCELLANEOUS
(a) Subject to the terms of this Agreement, Venture may grant extensions
of time and other indulgences, take and give up security, accept
compositions, compound, comprise, settle, grant releases and
discharges and otherwise deal with the Debtor, debtors of the
Debtor, sureties and others and with the Collateral and other
securities as Venture sees fit, all without prejudice to the
liability of the Debtor to Venture or to Venture's rights in respect
thereof. In addition, and subject to the terms of this Agreement, on
Default Venture may demand, collect, and sue on the Collateral in
either the Debtor's or Venture's name, all at Venture's option, and
may endorse the Debtor's name on any and all cheques, commercial
paper and other Instruments pertaining to or constituting the
Collateral.
(b) Without limiting any other right of Venture, whenever the
Indebtedness is due and payable or Venture has the right to declare
it to be due and payable (whether or not it has been so declared),
Venture may, in its sole discretion, and upon notice to the Debtor
set off against the Indebtedness any and all monies then owed to the
Debtor by Venture or owed pursuant to the Securities Purchase
Agreement to the Debtor by Venture in any capacity, whether or not
due, and Venture shall be deemed to have exercised such right to
set-off immediately at the time of making its decision to do so even
though any charge therefor is made or entered on Venture's records
subsequent thereto.
(c) Neither this Agreement nor the Security Interest may be assigned by
Venture or by the Debtor, without the prior express consent of the
other party.
15. NOTICE
In addition to the notice provisions contained in the Act, whenever the Debtor
or Venture is required or
<PAGE> 14
14
entitled to notify or direct the other or to make a demand or request upon the
other, such notice, direction, demand or request shall be in writing and shall
be sufficiently given only if delivered, transmitted by facsimile, or sent by
prepaid registered mail addressed to the party for whom it is intended in
accordance with the Credit Agreement. Either party may notify the other of any
change in such party's address to be used for the purposes hereof. All such
communications shall, in the case of delivery or facsimile, be deemed received
on the date of delivery and, if mailed as aforesaid, shall be deemed received on
the fifth business day following the date of posting. In the case of a
disruption in postal service all such communications shall be delivered or
transmitted by facsimile.
16. INTERPRETATION
(a) This Agreement shall be governed by and construed in accordance with
the laws of the Province of Alberta.
(b) This Agreement and the security afforded by it is in addition to and
not in substitution for any other security now or hereafter held by
Venture and is intended to be a continuing security agreement and
shall remain in full force and effect until the Indebtedness is paid
in full, except for the provisions of Section 6B of this Agreement
which shall survive the termination of this Agreement. Venture shall
have no obligation to provide such release unless and until the full
amount of the Indebtedness has been paid in full.
(c) If any provision of this Agreement is held invalid, in whole or in
part, by any Court of competent jurisdiction, the remaining terms
and provisions of this Agreement shall remain in full force and
effect and this Agreement shall be enforced to the fullest extent
permitted by law.
(d) The Debtor hereby waives the benefit of all statutory, common law
and equitable rights, benefits and provisions which in any way limit
or restrict Venture's rights and remedies, to the extent that such
waiver is not expressly prohibited by law. The Debtor acknowledges
and agrees that Venture shall have the right to recover the full
amount of the Indebtedness by all lawful means, including the right
to seek recovery of any deficiency remaining after the sale of the
Collateral.
(e) The headings of the sections of this Agreement are inserted for
convenience of reference only and shall not affect or limit the
construction or interpretation of this Agreement.
(f) All schedules, whether attached hereto on the date hereof or
subsequently attached pursuant to the provisions of this Agreement,
form part of this Agreement. With the exception of any schedules
which may be added hereafter by Venture without the concurrence of
the Debtor pursuant to the provisions of this Agreement, no
modification, variation or amendment of this Agreement shall be made
except by a written agreement executed by the Debtor and Venture.
(g) When the context so requires, words importing the singular number
shall be read to include the plural and vice versa, and words
importing gender shall be read with all grammatical changes
necessary to reflect the identity of the parties.
(h) This Agreement shall enure to the benefit of Venture, its successors
and permitted assigns
<PAGE> 15
15
and shall be binding upon the Debtor, its successors and permitted
assigns.
(i) Time shall be in all respects of the essence of this Agreement.
17. RECEIPT OF DOCUMENTS
(a) The Debtor hereby acknowledges receiving a copy of this Agreement.
<PAGE> 16
16
(b) The Debtor hereby waives its right to receive a copy of any
Financing Statement, Financing Change Statement or verification
statement which may be filed by or issued to Venture pursuant to the
Act.
IN WITNESS WHEREOF the Debtor has executed this Agreement as of the day and year
first above written.
CONTINENTAL HOLDINGS LTD.
Per: /s/ L.J. STINN
-------------------------------------
Name: Les J. Stinn (c/s)
Title: President
Per: /s/ R.D. SELF
-------------------------------------
Name: Roy D. Self
Title: Vice-President, Geophysical Operations
DEBTOR ADDRESS:
210, 3030 3rd Avenue N.E.
Calgary, Alberta T2A 6T7
Facsimile: (403) 273-6729
<PAGE> 1
Exhibit 10.34
EMPLOYMENT AGREEMENT
CONTINENTAL HOLDINGS LTD.
- AND-
LESLIE J. STINN
<PAGE> 2
EMPLOYMENT AGREEMENT
THIS AGREEMENT made effective March 1, 1998.
BETWEEN:
CONTINENTAL HOLDINGS LTD., a body corporate under the laws of the
Province of Alberta and maintaining an office at the City of Calgary,
in the Province of Alberta (hereinafter called the "COMPANY")
- and -
LESLIE J. STINN, an individual residing in Calgary, Alberta
(hereinafter called the "EMPLOYEE")
WHEREAS the Employee has agreed to be employed by the Company as the President
and the Company and the Employee are desirous of entering into an agreement
setting forth the terms and conditions applicable to the employment of the
Employee with the Company as President;
AND WHEREAS the shareholders of the Company have entered into the Securities
Purchase Agreement with Venture;
AND WHEREAS the execution and delivery of this Agreement is one of the
conditions precedent to completion of the transactions pursuant to the
Securities Purchase Agreement.
NOW THEREFORE in consideration of the mutual covenants and agreements herein
contained (the receipt and sufficiency of which are hereby acknowledged by each
of the Company and the Employee), the Company and the Employee agree as follows:
ARTICLE 1
INTERPRETATION
1.1 In this Agreement (including this clause and the premises and recitals
hereof), unless there is something in the subject or context inconsistent
therewith, words importing the singular number shall include the plural and vice
versa, words importing the masculine gender shall include the feminine and
neuter genders and the expressions following shall have the following meanings,
respectively:
"AFFILIATE" has the meaning ascribed to it in the Business Corporations
Act (Alberta);
"AGREEMENT", "THIS AGREEMENT", "HEREIN", "HEREBY", "HEREOF",
"HEREUNDER", and similar
<PAGE> 3
-2-
expressions mean or refer to this agreement (including the Schedules,
if any, attached hereto) and any amendments, modifications, supplements
or restatements hereto, from time to time;
"BUSINESS DAY" means a day on which banks are open for general banking
business in Calgary, Alberta;
"BUSINESS HOURS" means 8:30 a.m. - 5:00 p.m. on a Business Day;
"CONFIDENTIAL INFORMATION" has the meaning ascribed to such term in
Section 4.1 hereof;
"DEVELOPMENTS" has the meaning ascribed to such term in Section 4.4
hereof;
"DUTIES" means the day-to-day job description of the President, as
directed by the board of directors of the Company, such description to
always be consistent with the status and position and past duties of
the President during his employment with the Company;
"PARTY" or "PARTIES" means a party or parties to this Agreement;
"PERSON" means a natural person, firm, corporation, body corporate,
company, trust, partnership, joint venture, unincorporated
proprietorship, or agent of the provincial or federal Crown;
"PRESIDENT" means the Person employed by the Company to carry out the
Duties (being the Employee as of the date hereof);
"SECURITIES PURCHASE AGREEMENT" means the securities purchase agreement
dated March 27, 1998 regarding the purchase by Venture of all of the
issued and outstanding shares of the Company;
"TERM" means three (3) full years, commencing March 1, 1998 and
expiring on February 28, 2001; and
"VENTURE" means Venture Seismic Ltd.
<PAGE> 4
-3-
ARTICLE 2
TERMS OF EMPLOYMENT
2.1 The Employee hereby acknowledges and accepts the employment as the
President for the Term of the Agreement and covenants with the Company that the
Employee shall perform the Duties as President for the Term of this Agreement,
and the Company hereby employs the Employee as President for the Term of this
Agreement, subject to the terms hereof.
2.2 The Term of employment hereunder shall be for 3 full years, commencing on
March 1, 1998, and expiring on February 28, 2001, unless terminated prior
thereto in accordance with Article 6 hereof.
ARTICLE 3
EMPLOYEE'S DUTIES AND RESPONSIBILITIES
3.1 The Employee shall perform for the Company all of the Duties as the
President, and shall perform all duties and accept all responsibilities
incidental to such position. The character of the Employee's Duties may be
changed from time to time within reasonable limits, such changes not to result
in demotion or a reduction in status, and as may be assigned to the Employee by
the Company's chief executive officer or its board of directors, and the
Employee shall cooperate fully with the lawful requirements of the Company's
board of directors and other executive officers. Notwithstanding any such change
in the Duties, the Term shall continue as set forth in Section 2.2 hereof. The
Company shall not be entitled to move or otherwise relocate the Employee without
the express and specific consent and approval of the Employee.
3.2 The Employee shall serve the Company faithfully and to the best of his
ability during the Term. Throughout the Term the Employee shall devote his full
working time and attention to the Duties during the normal Business Hours and on
normal Business Days. The Employee further agrees not to work for any other
business or enterprise during the Term without the prior written consent of the
chief executive officer of the Company.
3.3 The Employee shall obey and carry out all lawful orders and directions
given to him by the chief executive officer of the Company within the scope of
the Duties and shall obey and carry out the general working policies and follow
the established procedures of the Company.
3.4 The Employee shall furnish to the Company, from time to time as requested
by the chief executive officer of the Company, reports of the progress of the
Duties and time spent and activities undertaken by the Employee and from time to
time shall provide such other information as reasonably
<PAGE> 5
-4-
requested by the chief executive officer of the Company, in order to allow the
Company to ensure the prompt and complete performance of the Duties by the
Employee.
3.5 The Employee shall, in the performance of this Agreement, comply with and
be entitled to comply with all applicable laws, regulations and orders of Canada
and of any province or political or territorial subdivision thereof including,
but not limited to, laws, regulations and orders pertaining to labour, wages,
hours of work and other similar provisions.
3.6 The Employee represents to the Company that he has the competence,
experience and skill necessary to perform the Duties, is not subject or a party
to any employment agreement, non-competition covenant, non-disclosure agreement
or other agreement, covenant, understanding or restriction which would prohibit
the Employee from executing this Agreement and performing fully the Duties and
responsibilities hereunder, or which would in any manner, directly or
indirectly, limit or affect the Duties and responsibilities which may now or in
the future be assigned to the Employee by the Company or the scope of assistance
to which he may now or in the future provide to other subsidiaries, Affiliates
or divisions of the Company.
ARTICLE 4
CONFIDENTIAL INFORMATION AND PROPRIETARY RIGHTS
4.1 In the course of performing the Duties, the Employee may obtain
additional information beyond that which the Employee had or knew as of the
effective date of this Agreement, relating to the Company, Venture, the business
or the technology and technical data of the Company or Venture which is of a
confidential and proprietary nature, including but not limited to trade secrets,
know-how, inventions, techniques, processes, formulas, programs, documentation,
data, service manuals, technical reports, customer lists, financial information
and sales and marketing plans (hereinafter referred to as the "CONFIDENTIAL
INFORMATION"). The Employee shall not make use of the Confidential Information
other than as required for the performance of the Duties under this Agreement.
4.2 For a period of 3 years after the termination of this Agreement, the
Employee shall not, without the prior written consent of the Company, divulge or
allow access to the Confidential Information to any Person, except where:
(a) such Confidential Information is available to the public
generally in the form disclosed;
(b) such disclosure of the Confidential Information is compelled
by applicable law;
<PAGE> 6
-5-
(c) such Confidential Information is, at the time of such
disclosure, in the public domain;
(d) such Confidential Information is disclosed to the Employee's
professional advisors, subject to such professional advisors
acknowledging the obligations in Section 4.1 above; or
(e) such Confidential Information has been disclosed to the
Employee by a third party that is not required to maintain the
Confidential Information in confidence.
4.3 The Employee shall not allow the Confidential Information to be used or
acquired by any unauthorized Person, except where:
(a) such Confidential Information is available to the public
generally in the form disclosed;
(b) such disclosure of the Confidential Information is compelled
by applicable law;
(c) such Confidential Information is disclosed to the Employee's
professional advisors;
(d) such Confidential Information is, at the time of such
disclosure, in the public domain; or
(e) such Confidential Information has been disclosed to the
Employee by a third party that is not required to maintain the
Confidential Information in confidence.
4.4 All developments, including inventions, whether patentable or otherwise,
trade secrets, discoveries, improvements, ideas and writings which either
directly or indirectly relate to or may be useful in the business of the Company
or Venture (collectively, the "DEVELOPMENTS") which the Employee, either by
himself or in conjunction with any other Person has conceived, made, developed,
acquired or acquired knowledge of, at any time from and after the effective date
of this Agreement and in the course of his employment by the Company, or which
the Employee, either by himself or in conjunction with any other Person, at any
time from and after the effective date of this Agreement, shall conceive, make,
develop, acquire or acquire knowledge of in the course of his employment by the
Company, whether it be during the Term of this Agreement or at any time
thereafter, while still employed by the Company pursuant to an extension of this
Agreement, shall become and remain the sole and exclusive property of the
Company. The Employee hereby assigns, transfers and conveys, and agrees to so
assign, transfer and convey, all of his right, title and interest in and to any
and all such Developments and to disclose fully as soon as practicable, in
writing, all such Developments to the
<PAGE> 7
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chief executive officer of the Company. At any time and from time to time, upon
the request and at the expense of the Company, the Employee will execute and
deliver any and all instruments, documents and papers, give evidence and do any
and all other acts which, in the reasonable opinion of counsel for the Company,
are or may be necessary or desirable to document such transfer or to enable the
Company to file and prosecute applications for and to acquire, maintain and
enforce any and all patents, trademark registrations or copyrights under
Canadian or foreign law with respect to any such Developments or to obtain any
extension, validation, re-issue, continuance or renewal of any such patent,
trademark or copyright. The Company will be responsible for the preparation of
any such instruments, documents and papers and for the prosecution of any such
proceedings and will fully reimburse the Employee for all reasonable costs and
expenses incurred by him in compliance with the provisions of this Section.
4.5 The provisions of this Article 4 shall survive termination of this
Agreement for a period of 3 years.
ARTICLE 5
COMPENSATION
5.1 (a) For all the services rendered by the Employee hereunder,
the Company shall pay the Employee a monthly gross salary of
$10,000.00 per month, commencing on the effective date of this
Agreement and continuing up to and including the end of the
Term of this Agreement, unless terminated prior thereto in
accordance with Section 6.2(c). The Company agrees that the
Employee's salary will be reviewed at least annually by the
Company's board of directors to determine if any upward
adjustment is appropriate, which upward adjustment shall be in
the sole discretion of the Company's board of directors. The
Company further agrees that the Employee's salary will not
under any circumstances be reduced.
(b) During the Term, the Employee shall also be entitled to
participate in such vacation pay, annual benefits and other
fringe benefit plans, if any, as may be authorized from time
to time by the board of directors in its sole discretion,
provided however that the Employee's participation in such
vacation pay, annual benefits and other fringe benefit plans,
at any particular time and from time to time, shall at any
particular time be consistent with and be comparable in value
to that participation which, at such particular time, has been
authorized by the board of directors of Venture for the
President of Venture with respect to such vacation pay, annual
benefits and such other fringe benefit plans.
<PAGE> 8
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5.2 In addition to the compensation set forth in Section 5.1 hereof, the
Employee shall be entitled to participate in such incentive compensation plans,
if any, as may be established from time to time during the Term by the board of
directors of the Company in their sole discretion, the terms and provisions of
which shall also be in the sole discretion of the Company's board of directors,
provided however that the Employee's participation in such incentive
compensation plans, at any particular time, shall be consistent with and be
comparable or greater in value to that participation which, at such particular
time, has been authorized by the board of directors of Venture for the greater
of the chief financial officer of Venture or the chief operating officer of
Venture with respect to such incentive compensation plans, excepting only the
extent of the Employee's participation in stock option plans of the Company and
of Venture which shall be determined by the Company's board of directors, in
their sole discretion, or by Venture's board of directors, in their sole
discretion, as the case may be.
5.3 The Employee shall be promptly reimbursed for all reasonable costs and
expenses incurred by him in connection with his performance of the Duties during
the Term, such reimbursement to take place within 15 days of presentation of an
itemized account and a written proof of such expenses in accordance with
policies established by the Company.
5.4 The Employee shall be entitled to participate in and to receive all
rights and benefits under any life insurance, disability, medical, dental,
health and accident plans maintained by the Company for their employees
generally, in accordance with his position with the Company and consistent with
and comparable or greater in value, at any particular time, to that
participation enjoyed by the greater of the chief financial officer of Venture
or the chief operating officer of Venture at such particular time, subject only
to the Employee's ability to qualify for participation in such plans. The
Employee's rights under such plans, if any, existing at the date of termination
of this Agreement, shall not be affected by the termination of the Employee if
such termination is due to the Employee becoming incapacitated, ill or injured,
or due to the Employee's death, to the extent that the then existing plans, if
any, allow the Company to continue coverage for the Employee upon his becoming
incapacitated, ill or injured, or due to the Employee's death, and, provided
always that in those cases where termination of this Agreement is due to the
Employee becoming incapacitated, ill or injured, or due to the Employee's death,
the Company shall not be required to obtain alternative or additional coverage
under the same or similar plans.
ARTICLE 6
TERMINATION
6.1 Notwithstanding Article 2, the Company may terminate this Agreement,
without cause, on 30
<PAGE> 9
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days prior written notice to the Employee, to be effective on the 31st day after
the effective date of delivery of such notice pursuant to Section 7.5 hereof,
subject to and only upon strict compliance with the following conditions:
(a) upon payment in full, as a lump-sum cash payment, of the
aggregate of the Employee's remaining gross salary for the
Term, less such withholdings and deductions as may be required
under applicable law, based on the number of months remaining
in the then present 3 year Term;
(b) provided that the Company shall continue to maintain all of
the Employee's benefits, including but not limited to, group
medical, disability and health care, at the same level
existing as at the date of termination of this Agreement,
until the earlier of:
(i) the obtaining by the Employee of alternative
employment;
(ii) the death of the Employee; or
(iii) the expiry of the Term,
or the Company shall pay to the Employee on the effective date
of such termination a lump-sum cash amount in lieu of
maintaining such benefits for the Employee for the total
number of months remaining in the Term, provided however that
such lump-sum cash amount shall have the same monetary value
to the Employee as if the Company had maintained such benefits
for the Employee for the total number of months remaining in
the Term, and further, provided that the Company and the
Employee can first reach a mutual agreement with respect to
the total amount of such cash lump-sum to be paid to the
Employee by the Company;
(c) provided that the Company shall pay to the Employee on the
effective date of such termination, a lump-sum cash amount
equal in value to the aggregate amount of all accrued due and
future anticipated regular vacation pay owed to the Employee
by the Company up to and including the end of the Term,
subject to any applicable withholdings or deductions required
by law; and
(d) provided that the Company shall pay to the Employee on the
effective date of such termination, a lump-sum cash amount
equal in value to the full amount of all annual benefits,
other fringe benefits, and incentive compensation owed by the
Company to
<PAGE> 10
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the Employee for the number of months remaining in the then
present 3 year Term,
whereupon the Employee shall deliver to the Company a release executed by the
Employee in respect of such termination, excepting any payments which are to be
made to the Employee by the Company pursuant to the terms of this Agreement, and
the Company shall deliver to the Employee a release executed by the Company with
respect to the Employee's employment by the Company.
6.2 Each of the following shall give rise to a right of termination of this
Agreement by the Company, other than as provided in Section 6.1:
(a) In the event that the Employee is unable fully to perform his
Duties and responsibilities hereunder to the full extent
required by the board of directors of the Company acting
reasonably, by reason of illness, injury or incapacity not
caused by the negligence of the Company, its employees, agents
or representatives, for 8 consecutive weeks, during which time
he shall continue to be compensated as provided in Article 5
hereof (less any payments due the Employee under disability
benefit programs, worker's compensation and disability
retirement benefits), this Agreement may be terminated by the
Company, and the Company shall have no further liability or
obligation to the Employee for compensation hereunder;
provided, however, that the Employee will be entitled to
receive the payments prescribed under any disability benefit
plan which may be in effect for employees of the Company and
in which he participated, and a pro rata portion of the
incentive compensation, if any, referred to in Section 5.2
hereof in respect of the year during which the Employee first
became disabled. The Employee agrees, in the event of any
dispute under this Section 6.2, to submit to a physical
examination by a licensed physician selected by the chief
executive officer of the Company.
(b) In the event that the Employee dies during the Term and such
death is not caused by the negligence of the Company, its
employees, agents or representatives, the Company shall pay to
his executors, legal representatives or administrators an
amount equal to the instalment of his salary set forth in
Section 5.1 hereof for the month in which he dies, and
thereafter the Company shall have no further liability or
obligation hereunder to his executors, legal representatives,
administrators, heirs or assigns or any other Person claiming
under or through him; provided, however, that the Employee's
estate or designated beneficiaries shall be entitled to
receive the payments prescribed for such recipients under any
death benefit plan or life insurance which may be in effect
for employees of the Company and in which the Employee
participated, and a pro rata
<PAGE> 11
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portion of the incentive compensation, if any, referred to in
Section 5.2 hereof in respect of the year during which the
Employee died.
(c) Nothing in this Agreement shall be construed to prevent its
termination by the Company at any time for "just cause". For
purposes of this Agreement, "cause" shall mean the failure of
the Employee to substantially perform or observe any of the
terms or provisions of this Agreement or to comply
substantially with the lawful and reasonable directives of the
board of directors of the Company, provided that such
directives do not contravene the provisions of this Agreement,
failure to substantially perform the Duties, gross
incompetence in the performance of the Duties, or conviction
at any time of a crime involving moral turpitude, substance
abuse, fraud (whether civil or criminal), or criminal
misappropriation of funds, whether past, present or future.
Such termination shall be effected by notice thereof delivered
by the Company to the Employee and shall be effective as of
the date of delivery of such notice.
6.3 Upon termination of this Agreement pursuant to Section 6.2 or Section
6.6, the Employee shall immediately:
(a) cease to represent himself as providing any duties or
services, including the Duties, to the Company and shall cease
to use any documentation or advertising of the Company and
shall take all reasonable action as may be necessary to remove
such identification as a representative of the Company; and
(b) deliver up to the Company all Confidential Information and
Developments described in Article 4 hereof whether the same is
in the Employee's actual possession or under the Employee's
control.
6.4 (a) Provided that this Agreement has not been terminated by
the Company prior to the natural expiration of the Term and
without "just cause", then from the date of this Agreement
until one year from the termination of this Agreement the
Employee will not, unless acting pursuant hereto or with the
prior written consent of the board of directors of the
Company, directly or indirectly, own, manage, operate, join,
control, finance or participate in the ownership, management,
operation, control or financing of, or be connected as an
officer, director, employee, partner, principal, agent,
representative, consultant or otherwise with or use or permit
his name to be used in connection with, any business or
enterprise engaged in activities or operations similar to the
Company anywhere in the Province of Alberta or the United
States of America.
<PAGE> 12
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(b) The foregoing restriction shall not be construed to prohibit
the ownership by the Employee of not more than 5% of any class
of securities of any corporation which is engaged in any of
the foregoing businesses having a class of securities
registered pursuant to the Securities Act (Alberta), or which
are publicly traded on a recognized securities exchange,
provided that such ownership represents a passive investment
and that neither the Employee nor any group of Persons
including the Employee in any way, either directly or
indirectly, manages or exercises control of any such
corporation, guarantees any of its financial obligations,
otherwise takes any part in its business, other than
exercising his rights as a shareholder, or seeks to do any of
the foregoing.
6.5 Provided that this Agreement has not been terminated by the Company prior
to the natural expiration of the Term and without "just cause", then for one
year from the date of the termination of this Agreement, the Employee agrees
that he will not, either directly or indirectly, call on or solicit any Person,
who or which at the time of such termination was, or within 2 years prior
thereto had been, a customer of the Company or any of its subsidiaries and
Affiliates, with respect to the activities prohibited by Section 6.4(a) hereof,
or solicit the employment of any Person who was employed by the Company or any
of its subsidiaries and Affiliates on a full or part-time basis at the time of
the Employee's termination of employment, unless such Person (a) was
involuntarily discharged by the Company or such Affiliate, or (b) voluntarily
terminated his relationship with the Company or such Affiliate prior to the
Employee's termination of employment.
6.6 Notwithstanding Article 2, the Employee may terminate this Agreement, on
30 days prior written notice to the Company, to be effective on the 31st day
after the effective date of delivery of such notice pursuant to Section 7.5
hereof, in the following circumstances only:
(a) Venture fails to pay the Cash Consideration, as defined in the
Securities Purchase Agreement, to the Securityholders, as
defined in the Securities Purchase Agreement, on or before
January 1, 1999; or
(b) the Company fails to pay the $1,000,000.00 (Cdn.) bonus to
Leslie Stinn and Roy Self on or before June 25, 1998 as
required under section 3 of the Securities Purchase Agreement;
or
(c) the failure of the Company to substantially perform or observe
any of the terms or provisions of this Agreement and such
failure to perform or observe is not remedied to the
satisfaction of the Employee within 30 days from the date that
written notice of
<PAGE> 13
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such failure to perform or observe is provided to the Company,
whereupon the Employee shall receive from the Company, on the effective date of
such termination, full payment of all salary, benefits, annual benefits and
incentive compensation owed to the Employee by the Company up to and including
the expiration of the Term and whereupon the Employee shall deliver to the
Company a release executed by the Employee in respect of such termination,
excepting any payments which are to be made to the Employee by the Company
pursuant to the terms of this Agreement up to and including the expiration of
the Term, and the Company shall deliver to the Employee a release executed by
the Company with respect to the Employee's employment by the Company.
ARTICLE 7
GENERAL
7.1 In the event that any provisions contained in this Agreement shall be
declared invalid, illegal or unenforceable by a court or other lawful authority
of competent jurisdiction, this Agreement shall continue in force with respect
to the enforceable provisions and all rights and remedies accrued under the
enforceable provisions shall survive any such declaration, and any
non-enforceable provision shall to the extent permitted by law be replaced by a
provision which, being valid, comes closest to the intention underlying the
invalid, illegal and unenforceable provision.
7.2 No amendment, modification or rescission of this Agreement shall be
effective unless set forth in writing and signed by the Parties or a duly
authorized representative of each Party.
7.3 No provision hereof shall be deemed waived and no breach excused, unless
such waiver or consent excusing the breach shall be in writing and signed by the
Party to be charged with such waiver or consent. A waiver by a Party of any
provision of this Agreement shall not be construed as a waiver of a further
breach of the same provision.
7.4 Any terms or conditions of this Agreement by which obligations of any
Party are expressed to be applicable or which extend or may extend beyond
termination of this Agreement shall survive and continue in full force and
effect, but only to the extent expressly set out herein.
<PAGE> 14
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7.5 All notices as required hereunder shall be provided by delivery, by
registered mail, or by telecommunication to the Parties hereto at the addresses
as follows:
To the Employee:
Leslie J. Stinn
612 24th Avenue N.E.
Calgary, Alberta T2E 1X8
Telephone: (403) 230-1698
To the Company:
Continental Holdings Ltd.
c/o Venture Seismic Ltd.
3110 80th Avenue S.E.
Calgary, Alberta T2C 1J3
Attention: President
Telephone: (403) 777-9070
Facsimile: (403) 777-9080
Any notice, direction or other instrument shall, if delivered, be deemed to have
been given and received on the day on which it was so delivered, and if not a
Business Day, then on the Business Day next following the day of delivery, and
if mailed, shall be deemed to have been given and received on the 10th day
following the day on which it was so mailed, and, if sent by telegram, telex,
telecommunication or other similar form of communication, be deemed to have been
given and received on the second Business Day following the day it was sent,
where receipt thereof has been confirmed. If for any reason, the method for
giving notice selected by a Party is impractical, that Party shall be obliged to
select an alternate method of giving notice. Any Party may change its address
for notice in the aforesaid manner.
7.6 Time shall be of the essence of this Agreement.
7.7 Each Party hereto will promptly and duly execute and deliver to each
remaining Party such further documents and assurances and take such further
action as such remaining Party may from time to time reasonably request in order
to more effectively carry out the intent and purpose of this Agreement and to
establish and protect the rights and remedies created or intended to be created
hereby.
7.8 The headings in this Agreement are inserted for convenience of reference
only and shall not affect the construction or interpretation of this Agreement.
7.9 This Agreement shall be construed and enforced in accordance with and the
rights of the
<PAGE> 15
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Parties hereto shall be governed by the laws of the Province of Alberta. Each of
the Parties hereto hereby irrevocably attorns to the jurisdiction of the courts
of the Province of Alberta.
7.10 This Agreement constitutes the entire agreement between the Parties with
respect to the matters contained in this Agreement and there are no statements,
representations, warranties, undertakings or agreements, written or oral,
express or implied between the Parties hereto with respect to the matters
contained in this Agreement except as herein set forth, with the Parties
agreeing that in the event of any conflict or inconsistency between the
provisions of the Securities Purchase Agreement (including, without limitation,
the provisions of section 12 thereof) and this Agreement, then, and only to the
extent to resolve such conflict or inconsistency, the provisions of this
Agreement shall prevail and govern.
7.11 This Agreement may not be assigned to any Person by the Employee without
the prior express written consent of the Company. This Agreement may not be
assigned to any Person by the Company without the prior express written consent
of the Employee, which consent can be unreasonably withheld, except only in
those situations where the Company has merged or has been amalgamated with
another company, in which case this Agreement can be assigned to the new company
formed as a result of such merger or amalgamation without the Employee's
consent. Subject thereto, this Agreement and everything herein contained shall
enure to the benefit of and be binding upon the Parties together with their
personal representatives, successors and permitted assigns, if any.
7.12 This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed, shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement and the execution and delivery of
counterparts of this Agreement by telecopier by any party shall be binding upon
the parties hereto.
IN WITNESS WHEREOF the Parties have executed this Employment Agreement as of the
day and year first above written.
CONTINENTAL HOLDINGS LTD.
Per: /s/ L.J. STINN
---------------------------
Name:
Title:
/s/ L.J. STINN
- ------------------------------------------- ----------------------------------
Witness to the signature of LESLIE J. STINN LESLIE J. STINN
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the incorporation by reference in the Registration Statement of Venture Seismic
Ltd. (the "Company") Form S-3 and the related Prospectus of the Company for the
registration of 100,000 of its common shares and to the incorporation by
reference therein of our report dated December 17, 1997 with respect to the
consolidated financial statements of the Company included in its Annual Report
(Form 10-KSB) for the year ended September 30, 1997, filed with the Securities
and Exchange Commission on December 24, 1997.
/s/ ERNST & YOUNG
Chartered Accountants
Calgary, Alberta
April 21, 1998
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in the Registration Statement of Venture Seismic
Ltd. (the "Company") on Form S-3 and the related Prospectus of the Company for
the registration of 100,000 of its common shares and to the incorporation by
reference therein of our report dated February 19, 1998 with respect to the
financial statements of Continental Holdings Ltd. included in the Annual Report
(Form 10-KSB) of Venture Seismic Ltd. for its year ended September 30, 1997,
filed with the Securities and Exchange Commission on December 24, 1997.
/s/ Meyers Norris Penny & Co.
Chartered Accountants
Calgary, Alberta
April 21, 1998
