<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
______________________________________________________________________
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE EXCHANGE ACT OF 1934
Commission file number 0-27070
___________________________________________________
VENTURE SEISMIC LTD.
(Exact name of small business issuer as
specified in its charter)
ALBERTA, CANADA N/A
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation of organization)
3110 - 80th Avenue S.E.
Calgary, Alberta T2C 1J3
(Address of principal executive offices)
(403) 777-9070
(Issuer's telephone number)
____________________________________________________
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes X
No___
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 4,634,584 Common Shares, no
par value, were outstanding as of May 14, 1998.
Transitional Small Business Disclosure Format (Check one):
Yes ____ No X
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VENTURE SEISMIC LTD.
INDEX TO FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
<S> <C>
Consolidated Balance Sheets
March 31, 1998 and September 30, 1997............................. 3
Consolidated Statements of Income
Three and six months ended March 31, 1998 and 1997................ 4
Consolidated Statements of Cash Flows
Six months ended March 31, 1998 and 1997.......................... 5
Notes to Consolidated Financial Statements........................ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................... 15
Item 4. Submission of Matters to a Vote of Security Holders............. 15
Item 6. Exhibits and Reports on Form 8-K............................... 16
Signatures.............................................................. 19
</TABLE>
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PART 1. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
VENTURE SEISMIC LTD.
CONSOLIDATED BALANCE SHEETS
(IN U.S. DOLLARS)
<TABLE>
<CAPTION>
March 31, 1998 September 30, 1997
<S> <C> <C>
ASSETS
CURRENT
Cash $ 5,229,339 $ 68,066
Accounts receivable 10,624,200 2,586,688
Work-in-progress 290,000 521,594
Other receivables 223,809 297,707
Prepaid expenses and deposits 367,829 204,276
----------- -----------
16,735,177 3,678,331
CAPITAL ASSETS 20,140,126 17,383,026
INTANGIBLE ASSETS 1,465,343 1,554,503
----------- -----------
$38,340,646 $22,615,860
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank indebtedness $ 350,000 $ --
Accounts payable and accrued liabilities 6,976,242 1,036,147
Deferred revenue 560,000 800,000
Income taxes payable 611,610 118,708
Current portion of long term debt (note 4) 2,693,300 6,580,703
----------- -----------
11,191,152 8,535,558
----------- -----------
LONG TERM DEBT (NOTE 4) 5,891,548 3,746,490
----------- -----------
DEFERRED INCOME TAXES 969,171 674,076
----------- -----------
SHAREHOLDERS' EQUITY
Share capital (note 5) 16,807,290 7,671,366
Retained earnings 3,499,129 1,949,549
Foreign currency translation (17,644) 38,821
----------- -----------
20,288,775 9,659,736
----------- -----------
$38,340,646 $22,615,860
=========== ===========
</TABLE>
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VENTURE SEISMIC LTD.
CONSOLIDATED STATEMENTS OF INCOME
(IN U.S. DOLLARS)
<TABLE>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
---------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE $13,078,677 $10,098,230 $21,706,425 $15,683,001
DIRECT EXPENSES 9,518,370 6,903,473 15,906,769 11,150,221
----------- ----------- ----------- -----------
GROSS MARGIN 3,560,307 3,194,757 5,799,656 4,532,780
----------- ----------- ----------- -----------
EXPENSES
General and administrative 599,177 488,336 1,100,621 886,290
Depreciation 838,082 587,346 1,540,928 1,085,949
Amortization 44,580 38,580 89,160 77,160
---------- ---------- ---------- ----------
1,481,839 1,114,262 2,730,709 2,049,399
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 2,078,468 2,080,495 3,068,947 2,483,381
OTHER INCOME (EXPENSE)
Interest and other income 68,329 843 121,470 6,550
Interest expense (234,905) (134,767) (589,322) (273,338)
----------- ----------- ----------- -----------
(166,576) (133,924) (467,852) (266,788)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 1,911,892 1,946,571 2,601,095 2,216,593
----------- ----------- ----------- -----------
INCOME TAXES
Current 616,834 703,616 616,834 703,616
Deferred 136,181 147,162 434,681 267,162
----------- ----------- ----------- -----------
753,015 850,778 1,051,515 970,778
----------- ----------- ----------- -----------
NET INCOME $ 1,158,877 $ 1,095,793 $ 1,549,580 $ 1,245,815
=========== =========== =========== ===========
EARNINGS PER COMMON SHARE
(NOTE 3)
Basic $0.25 $0.35 $0.36 $0.40
Diluted (U.S. GAAP) $0.25 $0.35 $0.35 $0.40
Fully diluted (CDN GAAP) $0.22 $0.22 $0.25 $0.25
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING
Basic 4,591,000 3,109,000 4,312,000 3,105,000
Diluted (U.S. GAAP) 4,640,000 3,109,000 4,456,000 3,105,000
Fully diluted (CDN GAAP) 5,209,000 5,350,000 6,190,000 5,346,000
</TABLE>
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VENTURE SEISMIC LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN U.S. DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
-------------------------------
1998 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,549,580 $ 1,245,815
Items not involving cash:
Depreciation and amortization 1,630,088 1,163,109
Deferred income taxes 434,681 267,162
Gain on sale of capital assets (32,870) --
Cumulative translation adjustment (196,051) (54,151)
Net change in non-cash working capital (1,702,576) (1,913,446)
----------- -----------
1,682,852 708,489
----------- -----------
FINANCING ACTIVITIES:
Proceeds on issuance of common shares 9,135,924 50,000
Increase in bank indebtedness 350,000 675,856
Proceeds from long term debt 4,915,580 3,820,411
Principal payments on long term debt (6,657,925) (2,277,274)
Net change in non-cash working capital -- (100,000)
----------- -----------
7,743,579 2,168,993
----------- -----------
INVESTING ACTIVITIES:
Purchase of capital assets (4,321,150) (2,614,994)
Proceeds on sale of capital assets 55,992 --
----------- -----------
(4,265,158) (2,614,994)
----------- -----------
INCREASE IN CASH FOR THE PERIOD 5,161,273 262,488
CASH, BEGINNING OF PERIOD 68,066 --
----------- -----------
CASH, END OF PERIOD $ 5,229,339 $ 262,488
=========== ===========
</TABLE>
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VENTURE SEISMIC LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
1. Basis of Financial Statement Presentation
The consolidated financial statements of Venture Seismic Ltd. (the "Company")
are unaudited and reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the financial position of the Company as at March 31, 1998,
operating results for the three and six month periods ended March 31, 1998 and
1997 and statements of cash flows for the six months ended March 31, 1998 and
1997. The consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto, together with
management's discussion and analysis of financial condition and results of
operations, contained in the Company's Annual Report on Form 10-KSB for its
fiscal year ended September 30, 1997. The foregoing interim results for the
three and six month periods ended March 31, 1998 are not necessarily indicative
of the results for the fiscal year ending September 30, 1998 or any other
period.
The consolidated financial statements are prepared in accordance with Canadian
generally accepted accounting principles ("Cdn GAAP"). Certain of these
principles differ from those applicable in the United States ("U.S. GAAP").
Differences, if material, are disclosed in note 3 - Reconciliation to United
States Accounting Principles.
2. Currency Presentation and Exchange Rates
All dollar amounts, unless otherwise stated, are expressed in U.S. dollars.
Since the completion of its initial public offering in November 1995, the
Company has selected U.S. dollars as its currency for financial reporting and
display purposes on the basis that the securities of the Company are listed for
trading on the Nasdaq National Market ("Nasdaq") and the primary users of the
financial statements of the Company are U.S. residents. Accordingly, the
Company applies the "current rate" method to translate its accounts measured in
Canadian ("Cdn") dollars to U.S. dollars. Under this method, average exchange
rates are used for items included in the consolidated income statement and
period end exchange rates are used for the assets and liabilities. Any
significant gains or losses are included as a separate component of
shareholders' equity.
For translation purposes, the exchange rates of Cdn dollars to U.S. dollars, is
calculated using the exchange rates reported by the Federal Reserve Bank of New
York, as the noon buying rate in New York for cable transfers in Cdn dollars, as
certified for custom purposes. The average exchange rates for the three months
ended March 31, 1998 and 1997 are US $0.6991 = $1.00 Cdn and US $0.7358 = $1.00
Cdn, respectively. The average exchange rates for the six months ended March
31, 1998 and 1997 are US $0.7044 = $1.00 Cdn and US $0.7382 = $1.00 Cdn,
respectively. The period end exchange rates at March 31, 1998 and September 30,
1997 are US $0.7033 = $1.00 Cdn and US $0.7234 = $1.00 Cdn, respectively.
3. Reconciliation to United States Accounting Principles
For the periods ended March 31, 1998 and 1997 there were no material differences
in net
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income as calculated in accordance with Cdn GAAP and U.S. GAAP.
The Company adopted the Financial Accounting Statements Board Statement of
Financial Accounting Standards No. 128 "Earnings per Share" in the first quarter
of fiscal 1998. In accordance with this pronouncement, for purposes of U.S.
GAAP, basic earnings per share ("EPS") is computed by dividing net earnings by
the weighted average number of common shares of the Company ("Shares")
outstanding during the period. Diluted EPS is determined on the assumption that
outstanding dilutive stock options and warrants have been exercised and the
aggregate proceeds were used to reacquire Shares using the average price of such
Shares for the period.
<TABLE>
<CAPTION>
Three months ended March 31, 1998
----------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS:
Net income $1,158,877 4,591,000 $0.25
Effect of dilutive securities:
Employee stock options 39,000
Warrants 10,000
---------- --------- -----
Diluted EPS $1,158,877 4,640,000 $0.25
========== ========= =====
</TABLE>
During the three months ended March 31, 1998, the average closing price of the
Shares, as reported on Nasdaq, was $5.82 per share. Underwriter Warrants to
purchase 280,000 shares at exercise prices ranging from $7.00 to $8.25 per share
were not included in the calculation of diluted EPS for the three months ended
March 31, 1998 since the exercise prices were greater than $5.82 per share. The
warrants, which expire in November 2000, were still outstanding at March 31,
1998.
<TABLE>
<CAPTION>
Six months ended March 31, 1998
----------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS:
Net income $1,549,580 4,312,000 $0.36
Effect of dilutive securities:
Redeemable warrants 45,000
Employee stock options 75,000
Warrants 24,000
---------- --------- -----
Diluted EPS $1,549,580 4,456,000 $0.35
========== ========= =====
</TABLE>
During the six months ended March 31, 1998, the average closing price of the
Shares, as reported on Nasdaq, was $6.96 per share. Underwriter Warrants to
purchase 280,000 Shares at exercise prices ranging from $7.00 to $8.25 per share
were not included in the calculation of diluted EPS for the six month period
ended March 31, 1998 since the exercise prices were greater than $6.96 per
share. The warrants, which expire in November 2000, were still outstanding at
March 31, 1998.
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4. Long term debt
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
--------- -------------
<S> <C> <C>
Capital loans, bearing interest at the lender's cost
of funds plus 2.75%, payable in monthly principal
installments of $141,205 ($201,750 Cdn) due February,
September and November 2001. $ 5,268,900 $ 5,244,650
Equipment lease purchase contract, bearing interest
at 20%, payable in monthly installments of $130,600
comprised of principal and interest, due May 1998
(see note 6). 1,388,637 --
Equipment lease, bearing interest at 9%, payable
in quarterly installments of $196,290 comprised of
principal and interest, due January 2001. 1,927,311 --
Equipment lease purchase contracts -- 5,082,543
----------- -----------
8,584,848 10,327,193
Less current portion (2,693,300) (6,580,703)
----------- -----------
$ 5,891,548 $ 3,746,490
=========== ===========
</TABLE>
A general security agreement on all equipment and a fixed charge on certain
equipment have been pledged as collateral for the long term debt. Aggregate
principal payments on a fiscal year basis for long term debt are as follows:
<TABLE>
<S> <C>
1998, remainder of fiscal year $1,298,485
1999 2,652,516
2000 2,716,309
2001 1,681,988
2002 235,550
----------
$8,584,848
==========
</TABLE>
5. Share capital
On November 10, 1997, the Company called for redemption, at a redemption price
of $0.10 per Warrant, all of the Company's 1,610,000 outstanding redeemable
Warrants ("Warrants") which were not exercised prior to 5:00 p.m. on January 5,
1998 (the "Redemption Date"). During the six month period ended March 31, 1998,
1,513,690 Warrants were exercised, at an exercise price of $6.00 per Warrant to
purchase one Share, resulting in the issuance of 1,513,690 Shares and aggregate
proceeds of $9,082,140. The Company incurred costs of $25,978 related to the
exercise of the Warrants. The 96,310 Warrants outstanding after the Redemption
Date were redeemed by the Company for an aggregate of $9,631.
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During the six months ended March 31, 1998 the Company recorded in the share
capital account an income tax benefit of $89,123 associated with expenses
related to the issuance of Shares in the fiscal year ended September 30, 1996.
6. Subsequent events
Subsequent to March 31, 1998:
i) the Company entered into a capital loan agreement whereby the lender
loaned approximately $1,400,000 ($2,000,000 Cdn) to refinance an existing
lease purchase contract of an aggregate principal amount of approximately
$1,400,000. This lease bears interest at the lender's cost of funds plus
2.75%, payable in monthly installments of approximately $28,000 ($40,000
Cdn) plus interest and matures in July 2002. A fixed charge on the leased
equipment has been pledged as collateral for the financing.
ii) the Company loaned $4,000,000 to Continental Holdings Ltd.
("Continental") in conjunction with a definitive Securities Purchase
Agreement to acquire 100% of the outstanding capital stock of Continental
(the "Continental Acquisition") entered into in March 1998. The loan is
being used by Continental to fund a portion of the cost, estimated to
aggregate approximately $10,000,000, of equipping and refurbishing (the
"Refurbishment") a second marine vessel. The loan is payable in quarterly
installments of principal and interest commencing December 1, 1999 and
bears interest at the prime lending rate of the Royal Bank of Canada, plus
1%. Certain assets of Continental have been pledged in favor of the
Company as collateral. Should closing of the Continental Acquisition not
occur prior to August 31, 1998, the loan, including interest, is payable
in quarterly installments commencing December 1, 1999, consisting of
principal and accrued interest, and is convertible into approximately 26%
of the outstanding capital of Continental. Assuming the Continental
Acquisition closes, the loan will become intercompany debt, due and
payable to Venture.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Except for the description of historical facts contained herein, this Form
10-QSB contains certain forward-looking statements that involve risks and
uncertainties. Actual results could differ from those anticipated due to a
number of factors including the outcome of the Continental Acquisition, the
capital intensive nature of the Company's business and its need for additional
funds for operations and debt service requirements, fluctuations in operating
results, dependence upon principal customers and on the activity of the oil and
gas industry, risks associated with international operations and regulatory,
competitive and contractual risks. Factors which could cause such results to
differ materially from those described in the forward looking statements include
those set forth under the heading "Risk Factors" in the Company's Annual Report
on Form 10-KSB for its fiscal year ended September 30, 1997 as filed with the
Securities and Exchange Commission on December 24, 1997. References to the
Company herein, include, where appropriate, its wholly owned subsidiaries Boone
Geophysical, Inc. ("Boone") and Hydrokinetic Surveys of Canada Ltd.
("Hydrokinetic").
RESULTS OF OPERATIONS
Revenue for the three and six month periods ended March 31, 1998 ("1998 three
and six months") increased by approximately 30% and 38% to $13,078,677 and
$21,706,425, respectively as compared to $10,098,230 and $15,683,001 for the
three and six month periods ended March 31, 1997 ("1997 three and six months").
This increase was primarily attributable to additional revenue generated from
increased operations in the Southern United States by Boone. Boone contributed
revenue of $7,307,994 and $11,983,917 for the 1998 three and six months as
compared to $1,295,652 and $3,060,858 for the 1997 three and six months. As a
percentage of revenue, Boone contributed approximately 56% and 55% of the
Company's revenue for the 1998 three and six months as compared to approximately
13% and 20% for the 1997 three and six months. Revenue for the 1998 three and
six months from operations in the Canadian market decreased by approximately 34%
and 23% to $5,770,683 and $9,722,508 as compared to $8,802,578 and $12,622,143
for the 1997 three and six months.
During the 1998 six months, three customers accounted for 40.2% of the
Company's revenue and during the 1997 six months, two customers accounted for
59.8% of the Company's revenue. Although the projects performed by the Company
were generally short term, the inability to replace significant customers would
cause the Company's revenue 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 crews owned by the Company, and thus the limited number of
crews 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 time to time.
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Direct expenses for the 1998 three and six months increased by 38% and 43% to
$9,518,370 and $15,906,769, respectively as compared to $6,903,473 and
$11,150,221 for the 1997 three and six months. Direct expenses as a percentage
of revenue increased to approximately 73% and 73% for the 1998 three and six
months as compared to approximately 68% and 71% for the 1997 three and six
months. The increase in direct expenses as a percentage of revenue in the 1998
three and six months as compared to the 1997 three and six months was due to
increased operations in the United States where the Company typically engages in
lower margin projects due to the highly competitive nature of the business. The
increase in amount was offset partially by the completion of a greater number of
3D projects, which typically generate higher margins than 2D projects, during
the period.
General and administrative expenses for the 1998 three and six months increased
by approximately 23% and 24% to $599,177 and $1,100,621, respectively as
compared to $488,336 and $886,290 for the 1997 three and six months. This
increase was primarily attributable to increased activity levels in the United
States market.
Depreciation expense for the 1998 three and six months increased by 44% and 42%
to $838,082 and $1,540,928 as compared to $581,346 and $1,085,949 for the 1997
three and six months. The increase in depreciation expense is primarily
attributable to seismic data acquisition equipment acquired to expand Boone's
operations, but also includes the acquisition of three 2D systems used in
operations in Canada during the period and the purchase of 250 seismic
acquisition remote units for use in both market places.
Amortization expense for the 1998 three and six months of $44,580 and $89,160 is
related to the amortization of goodwill recognized on the acquisition of Boone,
which the Company acquired in June 1996, and the acquisition of Hydrokinetic.
The comparable charge for the 1997 three and six months of $38,580 and $77,160
did not include a charge for the amortization of Hydrokinetic goodwill since
this acquisition occurred in April 1997.
Interest and other income for the 1998 three and six months increased to
$68,329 and $121,470 as compared to $843 and $6,550 for the 1997 three and six
months. The increase primarily resulted from interest earned on additional
funds on deposit resulting from the exercise of the Company's Warrants.
Interest expense for the 1998 three and six months increased by approximately
74% and 116% to $234,905 and $589,322, respectively, as compared to $134,767
and $273,338 for the 1997 three and six months. This increase primarily
resulted from financing costs related to short term lease purchase commitments
entered into for the lease of seismic equipment to meet demand for increased
operations the United States. The purchase options on these lease contracts
were exercised in December 1997 and January 1998 for an aggregate purchase
price of approximately $3.2 million, with proceeds from the exercise of the
Warrants.
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<PAGE> 12
The Company's effective income tax rate was approximately 39% and 40% for the
three and six months as compared to approximately 44% for the 1997 three and six
months. The decrease in the effective rate for the 1998 periods is primarily
due to a greater portion of the net income being earned in the United States
which is subject to a lower statutory tax rate.
CONTINENTAL ACQUISITION
On March 30, 1998, the Company announced it had entered into a definitive
Securities Purchase Agreement (the "Purchase Agreement") with Continental and
its shareholders for the previously announced proposed acquisition (the
"Continental Acquisition") of 100% of the outstanding capital stock of
Continental, for consideration of 2,080,000 Common Shares (valued at
approximately $12,000,000 as of the date of execution of the amended Letter of
Intent) and cash payments aggregating $1,500,000. Continental is a private
Canadian company engaged in marine seismic data acquisition. The Purchase
Agreement also includes provision for employment agreements between Continental
and certain of the existing management of Continental for a period of three
years commencing March 1, 1998, as well as the nomination, contingent upon the
prior receipt of shareholder approval of the Continental Acquisition, of a
director selected by the Continental shareholders to the Company's Board of
Directors. The Company has also agreed for a period of three years following
closing of the Continental Acquisition to use its best efforts to nominate to
its Board of Directors an individual selected by the Continental shareholders.
If the Continental Acquisition is consummated, the assets and liabilities of
Continental will be reflected on a consolidated basis on the balance sheet of
the Company. As a result of the Continental Acquisition, the Company's long
term debt will increase by approximately $3,000,000. In connection with the
Continental Acquisition, (i) the Company loaned $4,000,000 for the Refurbishment
and (ii) Continental agreed (a) to pay bonuses aggregating approximately
$721,500 to certain members of management and (b) redeem for approximately
$524,000 certain of its preferred shares. The closing of the Continental
Acquisition is subject to a number of conditions any of which may not occur,
including receipt of the requisite shareholder approval, as well as receipt of
certain third-party consents. Reference is made to the Company's Annual Report
on Form 10-KSB for its fiscal year ended September 30, 1997 and the Company's
Registration Statement on Form S-3 (File No. 333-45681), as filed with the SEC
on April 22, 1998 which includes certain financial and other information
relating to Continental and the Continental Acquisition.
QUARTERLY FLUCTUATIONS
The Company's business is subject to substantial quarterly variations as a
result of seasonal activity variations in the seismic industry in Western
Canada. 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
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summer is significantly reduced. As a result the Company has historically
experienced a fluctuation in quarterly results with generally increased activity
in the Company's first and second fiscal quarters and a significant decrease in
revenues and net income during its third and fourth fiscal quarters. With the
acquisition of Boone in June 1996 the Company has diversified its operations by
expanding into the United States, which has somewhat reduced the seasonality
traditionally associated with the Company's Canadian operations. Management
believes if the Continental Acquisition is consummated, the diversification
would further reduce the seasonality associated with the Company's operations.
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.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998 the Company had cash of $5,229,339 and working capital of
$5,544,025, which includes the current portion of long term debt in the amount
of $2,693,300.
The Company maintains operating lines of credit in Canada and the United States.
The Canadian line of credit provides for an aggregate of up to $1,200,000 in
advances available to the Company subject to a limit of: i) the excess in value
of current assets over current liabilities (excluding the current portion of
long-term debt) and ii) 70% of the value of the accounts receivable of the
Company which are less than ninety days old. Borrowings under the Canadian
operating line are payable on demand and bear interest at the bank's prime rate
plus .75%. The Company's Canadian trade receivables have been pledged as
collateral for borrowings under the Canadian operating line. The United States
line of credit provides for an aggregate of up to $250,000 in advances available
to the Company. Borrowings under the United States operating line are payable
on demand and bear interest at prime plus 1.00%. The Company's United States
trade receivables have been pledged as collateral for borrowings under the
United States operating line. At March 31, 1998, advances under the Company's
operating lines of credit aggregated $350,000 and approximately $1,100,000 was
available for advance.
In addition to operating lines of credit at March 31, 1998 the Company had long
term debt consisting of capital loans of $5,268,900 and equipment financing of
$3,315,948. The capital loans bear interest at the lender's cost of funds plus
2.75% and are payable in monthly installments of approximately $141,200 plus
interest and mature in February, September and November 2001. The equipment
lease bears interest at 9% and is repayable in quarterly installments of
approximately $196,000 comprised of principal and interest and matures in
January 2001. In May 1998, the Company refinanced a lease purchase contract for
200 seismic acquisition remotes or 1,200 channels of data acquisition equipment,
with a four year term loan with an aggregate obligation of approximately
$1,400,000. The term loan bears interest at the lender's cost of funds plus
2.75% and is payable in monthly installments of $28,000 plus interest and
matures in July 2002. A general security agreement on all equipment and a fixed
charge on certain equipment have been
13
<PAGE> 14
pledged by the Company as collateral for the long term debt. In addition, the
Company has assigned to the lender the proceeds of its key-man life insurance
policy on Brian Kozun, the Company's Chief Executive Officer. Debt service
requirements relating to the long term debt is estimated to aggregate
approximately $3,266,000 (including principal and interest payments) during the
twelve month period ending March 31, 1999. On a pro forma consolidated basis,
giving effect to the Continental Acquisition and additional long term debt
incurred by Continental related to the equipping of a second marine vessel, the
Company anticipates its long term debt to increase by approximately $3,000,000
and its debt service requirements to increase by approximately $70,000 per
month. At March 31, 1998, the Company was in compliance with all bank covenants.
Net operating cash flows provided by operating activities for the 1998 six
months amounted to $1,682,852 as compared to $708,489 for the 1997 six months.
The increase in operating cash flow for the 1998 six months as compared to the
1997 six months is attributable to (i) increased operating activity in the
United States which resulted in increased cash generated from operations, (ii)
a greater impact of non-cash items such as depreciation and deferred income
taxes and (iii) a positive change in non-cash working capital amounts.
Net cash provided by financing activities for the 1998 six months of $7,743,579
is attributable to cash provided on the exercise of 1,513,690 Warrants during
the period combined with increases in the Company's long term debt and bank
indebtedness. This increase in net cash provided by financing activities was
partially offset by the repayment of approximately $6,700,000 of long term debt
during the 1998 six months, including approximately $3,200,000 used to exercise
equipment lease contract purchase options.
Cash used in investing activities of $4,265,158 for the 1998 six months and
$2,614,994 for the 1997 six months resulted from the purchase of additional
seismic data acquisition equipment during the respective periods.
The Company will require satisfactory operating cash flows to continue
operations, complete capital expenditures and meet its principal and interest
obligations with respect to the Company's long term debt. Assuming the
Continental Acquisition closes, the Company's cash requirements will
significantly increase in the future. The Company anticipates, based on its
current plans and assumptions, funds expected to be generated from operations
will be sufficient to satisfy the Company's existing cash requirements over the
next twelve month period.
The Company's ability to meet its debt service and other obligations depends on
its future performance which is subject to general economic conditions, oil and
gas commodity prices and other business factors beyond the Company's control.
If the Company is unable to generate sufficient cash flow from operations or to
comply with the terms of its long term debt it may be required to refinance all
or a portion of its existing debt or to obtain additional financing, although
there can be no assurance that the Company will be able to obtain such
refinancing or additional financing, on terms acceptable to the Company, if at
all. Any future issuances of equity securities would likely result in dilution
to then existing shareholders, while the incurring of additional indebtedness
would result in increased interest expense and debt charges.
14
<PAGE> 15
Included in the March 31, 1998 accounts receivable balance of $10,624,200 and
the accounts payable and accrued liabilities balance of $6,976,242 were certain
reimbursable amounts which are not included in the Company's revenue or direct
costs. In accordance with the terms of various project agreements, certain
costs are paid by the Company and billed for reimbursement to the customer at
cost. As a result these reimbursable costs are included in accounts receivable
and accounts payable even though they do not impact revenue or direct expenses.
The collection of accounts receivable and the payment of accounts payable are
expected to continue to occur in the normal 30 to 60 day time period following
billing.
Work-in-progress at March 31, 1998 was $290,000 as compared to $521,594 as at
September 30, 1997. The decreased value of work-in-progress primarily reflects
the smaller component of project work which was still in progress at March 31,
1998 and, in accordance with the project terms, will be billed and recognized
in accounts receivable upon completion of the project.
The Company had deferred revenue at March 31, 1998 of $560,000 as compared to
$800,000 at September 30, 1997. Deferred revenue represents billings in excess
of revenue amounts earned on projects, and varies depending upon the completion
status of projects, which may vary from quarter to quarter.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to the Registrant's Annual Report on Form 10-KSB for its
fiscal year ended September 30, 1997 for a description of certain legal
proceedings involving the Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
On March 19, 1998, the Company held its Annual Shareholders' Meeting for its
fiscal year ended September 30, 1997 (the "1997 Annual Meeting"). At the 1997
Annual Meeting: (i) all five director nominees were elected; (ii) the
resolution fixing the number of directors for the ensuing year at five was
approved and ratified; and (iii) the appointment of Ernst & Young, Chartered
Accountants as the independent auditors of the Company was approved and
ratified.
15
<PAGE> 16
The following directors were elected for a one year term by the votes indicated:
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
Brian W. Kozun 4,027,262 22,250
P. Daniel McArthur 4,027,262 22,250
Michael Beninger 4,027,262 22,250
J. Joseph Ciavarra 4,027,262 22,250
Stuart Norman 4,027,262 22,250
</TABLE>
1. The resolution fixing the number of directors for the ensuing year at five
was approved and ratified by a vote of 4,028,132 for; 3,650 against and
17,730 abstaining.
2. The appointment of Ernst & Young, Chartered Accountants as independent
auditors of the Company for the fiscal year ending September 30, 1998 was
approved and ratified by a vote of 4,031,132 for and 18,380 withheld.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Articles of Incorporation of the Registrant and Certificates of
Amendment thereto (1)
3.2 By-laws of the Registrant, as amended (5)
4.2 Form of Underwriter's Warrant (1)
4.3 Form of Warrant (9)
10.3 Priorities Agreement between Province of Alberta Treasury
Branches, Roynat Inc., and Registrant, dated July 25, 1995 (1)
10.4 Buy-Back Agreement between Opseis Inc., Roynat Inc. and
Registrant, dated July 25, 1995 (1)
10.5 Agreement to Assign Life Insurance between Brian Kozun,
Registrant and Roynat Inc. dated July 19, 1995 (1)
10.10 1995 Stock Option Plan, as amended (5)
10.11 Employment Agreement between Registrant and Brian Kozun dated
September 14, 1995 (1)
10.12 Employment Agreement between Registrant and P. Daniel McArthur
dated July 11, 1994, Clarification and Amendment Agreement
effective as of July 11, 1994, Novation Agreement,
16
<PAGE> 17
dated June 28,1995 and Waiver letter dated September 8, 1995
(1)
10.13 Form of Indemnity Agreement (1)
10.14 Lease between Registrant and BRL Corporation, dated September 2,
1994 (1)
10.16 Representative Agreement between the Registrant and Geotrex,
dated July 1, 1995 (1)
10.20 Securities Purchase Agreement dated as of May 31, 1997 between
Registrant, Boone Geophysical, Inc. and Lynn Boone (2)
10.22 Debenture issued to Roynat Inc. by the Registrant dated December
6, 1997 (3)
10.24 Addendum No. 1 to Supplemental Agreement No. 3 between Boone
Geophysical, Inc. and H.S. Resources, Inc. dated March 20, 1997
(5)
10.25 Debenture issued to Roynat Inc. by the Registrant dated April
29, 1997 (5)
10.26 (Representative Form of one of three agreements) Conditional
Sale Agreement between the Registrant and Geo-X Systems Ltd.
dated June 19, 1997 (6) (8)
10.27 Offer to Finance between Roynat Inc. and the Registrant dated
July 16, 1997 (6)
10.28 (a) Outline of credit between the Registrant and Alberta Treasury
Branches dated February 12, 1997 (7)
10.28 (b) Outline of credit between the Registrant and Alberta Treasury
Branches dated February 6, 1998
10.29 Lease Amendment Agreement between the Registrant and BRL
Corporation dated June 3, 1997 (7)
10.30 Waiver letter from Alberta Treasury Branches, dated December 1,
1997 (7)
10.31 Securities Purchase Agreement, dated March 27, 1998, by and
among the Registrant and Continental Holdings Ltd. (9)
10.32 Credit Agreement, dated March 27, 1998, between the Registrant
and Continental Holdings Ltd. (9)
10.33 General Security Agreement, dated March 27, 1998, between the
Registrant and Continental Holdings Ltd. (9)
10.34 (Representative form of one of three agreements) Employment
Agreement between the Registrant and Mr. Stinn, dated March 27,
17
<PAGE> 18
1998 (9).
10.35 Lease Agreement between Amplicon, Inc. and the Registrant, dated
January 22, 1998
10.36 Offer to Finance between Roynat Inc. and the Registrant dated
May 1, 1998
27 Financial Data Schedule
(1) Incorporated by reference from Registrant's Registration
Statement on Form SB-2 (File No. 33-97132)
(2) Incorporated by reference to the Registrant's Form 8-K dated
June 12, 1996
(3) Incorporated by reference to the Registrant's Annual Report on
Form 10-KSB, as amended for year ended September 30, 1996.
(4) Incorporated by reference to the Registrant's Quarterly Report
on Form 10-QSB for the quarter ended December 31, 1996
(5) Incorporated by reference to the Registrant's Quarterly Report
on Form 10-QSB for the quarter ended March 31, 1997
(6) Incorporated by reference to the Registrant's Quarterly Report
on Form 10-QSB for the quarter ended June 30, 1997
(7) Incorporated by reference to the Registrant's Annual Report on
Form 10-KSB for the year ended September 30, 1997
(8) Confidential Treatment requested for a portion of this Exhibit
(9) Incorporated by reference to the Registrant's Registration
Statement on Form S-3 (File No. 333-45681).
18
<PAGE> 19
(b) Reports on Form 8-K
During the quarterly period ended March 31, 1998 the Registrant filed a
report on Form 8-K, dated March 30, 1998, reporting information under Item 2
and Item 7 relating to a potential acquisition of Continental Holdings Ltd.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Venture Seismic Ltd.
/s/ Gregory B. Wiebe
By: Gregory B. Wiebe
Vice President Finance and Chief Financial Officer
Dated: May 14, 1998
19
<PAGE> 1
EXHIBIT 10.28(b)
ALBERTA TREASURY BRANCHES
Sunridge Professional Centre
5 - 2681 36th St NE
Calgary, AB T1Y 5S3
Ph: (403) 974-5242
Fax: (403) 974-5274
February 6, 1998
Venture Seismic Ltd.
3110 80th Ave SE
Calgary AB T2G 1J3
Dear Sirs:
We have completed a review of your credit facilities described in our letter to
you dated August 22, 1996 as amended by letter dated February 12, 1997. We are
pleased to continue those credit facilities on the same terms subject to
amendments in the Schedule of Changes attached. All securities we presently
hold will continue in full force and effect.
If this renewal offer is acceptable please return the enclosed duplicate of
this letter, along with the schedule of changes, signed as indicated below, by
4:00 pm on or before FEBRUARY 20, 1998 or our offer will automatically expire.
As well, please initial each page where indicated.
We look forward to our continued business relationship.
Yours truly,
/s/: Kevin R. Scott
Kevin R. Scott
Accounts Manager
/dsd
INITIALS
/s/GW /s/KRS
<PAGE> 2
Borrower ATB
Page 1
February 6, 1998
Venture Seismic Ltd.
SCHEDULE OF CHANGES
Attached to letters dated August 22, 1996 and February 12, 1997.
Terms used or defined in the Outline of Credit will have the same meaning when
used here.
1. RENEWAL OF REVOLVING LINE OF CREDIT:
$1,700,000.00 (maximum)
- this line of credit is subject to periodic (and at least annual)
review. Next scheduled review date is January 31, 1999.
2. RENEWAL OF ELECTRONIC FUND TRANSFER:
$50,000.00 (payroll authorization limit)
- this loan is subject to periodic (and at least annual) review. Next
scheduled review date is January 31, 1999.
3. ADDITIONAL NEGATIVE COVENANTS:
Borrower will not, without prior written consent of Lender breach the
following restrictions:
- debt to equity ratio not to exceed 2:1.
- working capital ratio not to be less than 1:1.
- minimum shareholders equity of $6,500,000 U.S.
- maintain a debt service coverage ratio of 1.25:1.
4. FINANCIAL REPORTING:
Borrower to provide by the 20th day following each month end:
a) an aged list of accounts receivable;
b) an aged list of trade accounts payable;
c) in-house statements of profit and loss/assets and liabilities.
INITIALS
/s/GW /s/KRS
<PAGE> 3
Borrower ATB
Page 2
February 6, 1998
Venture Seismic Ltd.
Accepted: April 28, 1998
VENTURE SEISMIC LTD.
Per: /s/ Brian Kozun
---------------------------
President & CEO, Director
Per: /s/ Greg Wiebe
---------------------------
VP Finance & CFO
INITIALS
/s/GW /s/KRS
Borrower ATB
<PAGE> 4
Page 1
August 22, 1996
Venture Seismic Ltd.
OUTLINE OF CREDIT
LENDER: Province of Alberta Treasury Branches
BORROWER: Venture Seismic Ltd.
GUARANTOR: Brian Kozun
DETAILS OF CREDIT FACILITIES:
1. $1,200,000 - existing
- - renew revolving line of credit for general operating expenses. Letters of
Guarantee and Letters of Credit can be issued and contained within Line of
Credit.
- - interest calculated on daily outstanding principal at 0.75% above Prime
will be payable on the last day of each month.
- - principal advances and repayments to be in the minimum sum of $75,000.
- - advances will be limited to the least of:
- - the maximum principal of line of credit, and
- - the excess in value of current assets over current liabilities
- - 70% of the Manager's value of unencumbered accounts receivables under 90
days
- - positive liquidity position to apply,
in each case approved by Lender.
- - if advances exceed the maximum amount of credit available as established by
the above formula, Lender may treat the excess as an overdraft. The
Lender's overdraft interest rate in effect will be charged on the full
amount of the excess.
- - this line of credit is subject to periodic (and at least (annual) review.
Next scheduled review date is January 31, 1997.
- - this line of credit will expire and all outstanding amounts under it will
be payable in full on demand by Lender.
<PAGE> 5
Page 2
August 22, 1996
Venture Seismic Ltd.
SECURITY DOCUMENTS:
Security Held:
1. Assignment of Life Insurance on Brian Kozun in the amount of $1,000,000.,
registered at Personal Property Registry. (To be replaced with Assignment in the
amount of $500,000).
2. General Security Agreement covering all present and after acquired personal
property and proceeds including assignment of accounts, inventory and equipment.
3. Financing Statement registered at Personal Property Registry covering
General Security Agreement listed on item #2 above.
4. Solicitor prepared Priority Agreement signed by Alberta Treasury Branches
and Roynat Inc. regarding Alberta Treasury Branches priority over Accounts
Receivable and Inventory.
5. General Assignment of Bookdebts given by the Borrower and registered in
Saskatchewan, Manitoba and British Columbia.
6. Solicitor-prepared Loan Agreement.
7. Revolving line of credit agreement and related promissory note.
8. Authority to Debit Account.
9. Fire and extended coverage insurance policy for the full insurable value of
Borrower's assets, with loss payable to Lender as its interest warrants,
containing acceptable mortgage clause.
10. Such supporting resolutions, certificates, opinions and the like as Lender
may require.
Security To Be Taken:
1. Revolving Loan Agreement and related promissory note to reflect a reduced
interest rate from 1.00% to 0.75%.
2. Assignment of Life Insurance Policy in the amount of $500,000.
3. Agreement, RE: Assignment of Life Insurance Policy.
4. Such supporting resolutions, certificates, opinions and the like as Lender
may require.
<PAGE> 6
Page 3
August 22, 1996
Venture Seismic Ltd.
FEES:
1. any amount in excess of established credit facilities will be subject to a
FEE of 1% of such excess for each minimum 30 day period.
2. for monthly reports not received within 20 days of month-end, the borrower
will be subject to a fee of $50 for each late reporting occurrence of accounts
receivable and payable listings, inventory listings and inhouse financial
statements.
3. a late reporting fee of $100 per month or portion thereof for late
submission of year-end financial statements after expiry of 120 day grace period
may be charged. (Grace period to commence the day following the corporate
year-end).
COVENANTS:
(a) Usual positive and negative covenants required by Lender for Credit
Facilities of this type, as detailed in Loan Agreement dated August 30, 1994.
(b) Additional positive covenants such as:
Borrower will provide to Lender as soon as possible and in any event:
within 120 days after the end of each of its fiscal years, audited financial
statements and accountants comments prepared by a firm of qualified accountants,
and signed by appropriate officers of Borrower, together with Auditors'
Management Letter. In conjunction with presentation of the company's year-end
audited financial review, Alberta Treasury Branches is to be provided with a
copy of its annual operating forecast which is to include "inter alia, a capital
expenditure budget".
within - 20 days following each monthend, accounts receivable and payable
listings, inventory listing, and inhouse financial statements.
(c) Borrower will provide Lender with such information and documentation as
Lender may reasonably require from time to time in respect of the collection and
payment of GST including, without limitation, information concerning the amount
of taxable supplies, GST collected, input tax credits received and GST paid
during each quarterend of Borrower's operations.
<PAGE> 7
Page 4
August 22, 1996
Venture Seismic Ltd.
(d) Borrower will forward to Lender copy of any GST election forms filed with
Revenue Canada Taxation.
(e) Borrower will advise Lender of any transfer or exchange of assets with a
related party where no funds are exchanged (i.e. nil consideration).
(f) Borrower will not, without the prior written consent of Lender, breach the
following restrictions:
- Debt to Equity ratio not to exceed 2:1 at fiscal year-end (September 30,
1996)
- Working Capital ratio not to be less than 1:1 at fiscal year-end
(September 30, 1996)
- Minimum shareholders equity $9,000,000 (can include postponed
shareholders loans, share capital and retained earnings).
CONDITIONS PRECEDENT:
None of the Credit Facilities will be available and the availability of further
advances on any of the loans will be curtailed until the following conditions
precedent have been satisfied, unless waived by Lender:
(a) Lender has received all Security Documents and all registrations and
filings have been completed, in all cases in form and substance satisfactory to
Lender;
(b) Borrower has provided all financial statements, appraisals, environmental
reports and any other information that Lender may require;
(c) Lender is satisfied as to the value of Borrower's assets and financial
condition, and Borrower's ability to carry on business and repay any amount owed
to Lender from time to time.
(d) There is no event of default.
EVENTS OF DEFAULT:
Usual events of default required by Lender for credit facilities of this type,
as detailed in Loan Agreement dated August 30, 1994. Such will not limit
Lender's right to demand payment at any time as described in "Details of Credit
Facilities" above.
<PAGE> 8
Page 5
August 22, 1996
Venture Seismic Ltd.
MISCELLANEOUS:
(a) All legal and other costs and expenses incurred by Lender in respect of the
Credit Facilities, the Security Documents and other related matters will be paid
or reimbursed by Borrower on demand by Lender;
(b) All Security Documents will be prepared by or under the supervision of
Lender's solicitors;
(c) Acceptance of this offer will authorize Lender to instruct its solicitors
to prepare all necessary Security Documents and proceed with related matters;
(d) Lender, without restriction, may waive the satisfaction, observance or
performance of any of the Conditions or Covenants contained in this Outline Of
Credit. Except to the extent that such waiver relates to an obligation of a
Guarantor, the obligations of Guarantors (if any) will not be diminished,
discharged or otherwise affected by or as result of any such waiver.
<PAGE> 1
Exhibit 10.35
Amplicon Financial
5 Hutton Centre Drive, Suite 500
Santa Ana, California 92707
January 22, 1998
Mr. Brian Kozun
Chief Executive Officer
Boone Geophysical, Inc.
874 "A" Wire Road
Huntsville, TX 77340
Re: Lease Agreement Order No. OL-10027
Lease Schedule 1
Dear Mr. Kozun:
We are pleased to inform you that the above referenced transaction has been
approved by the Amplicon, Inc. Finance Committee through February 28, 1998. With
written notice, Amplicon may extend the credit approval at its sole discretion.
The Lessee shall submit quarterly financial statements to Amplicon for review
and consideration of an extension of this approval.
The approval of this transaction is conditioned upon there being no material
adverse change in the financial condition of the Lessee or its Guarantor as
judged solely by Amplicon, and receipt of all documentation required and
approved by Amplicon legal counsel. Lessee will be responsible for all standard
documentation fees including, but not limited to UCC filing fees, lien search
fees, and collateral field audits (as required).
The specific terms of this approval are outlined in the previously-signed Lease
Agreement Order OL-10027, Addendum "A", and Lease Schedule No. 1 as modified on
January 8, 1998; and subsidiary documents to be forwarded to Lessee within the
next few days. The basic terms of this approval, as outlined below, shall
confirm the understanding of Lessee and Amplicon:
<TABLE>
<S> <C>
Lease Schedule 1:
Initial Term 12 Quarterly Rentals;
Monthly Rent $59,544.00 including applicable sales/use tax
Deposit period Equal to one month's rent to be applied to last billing period
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
General Property Description Approximately 250 Sercel Opseis Seismic
Remote Acquisition Recorders. All Property shall be subject to
final approval by the Amplicon Finance Committee.
New Property Cost $2,000,000.00 + 10% including applicable sales tax
Guarantor(s) Venture Seismic Ltd.
</TABLE>
If you have any questions, please do not hesitate to call Peter Leyenaar at
(714) 751-7551, Ext. 340. Thank you for choosing Amplicon as your financing
source.
Sincerely,
Amplicon, Inc.
/s/ J. Kevin Adkins
- --------------------------------
J. Kevin Adkins
<PAGE> 3
LEASE AGREEMENT
AMPLICON FINANCIAL
5 Hutton Centre Drive, Suite 500
Santa Ana, CA 92707
714-751-7551 or 800-755-5055 Facsimile 714-751-7557
LESSEE:
Boone Geophysical, Inc.
874-A Wire Road
Huntsville, TX 77340
1. AGREEMENT/LEASE: Amplicon, Inc. ("Amplicon") agrees to lease to Lessee the
hardware, software and/or other equipment ("Property") described on the Lease
Schedule(s) ("Schedule(s)") referencing this Lease Agreement ("Agreement") and
Lessee agrees to lease from Amplicon the Property subject to the terms set forth
herein and on each Schedule(s) that the parties may from time to time enter into
with respect to this Agreement. Each Schedule identified as being a part of
this Agreement incorporates the terms of this Agreement and constitutes a
separate lease agreement and is referred to herein as the "Lease". The Lease is
in force and is binding upon Lessee and Amplicon upon signed acceptance by
Amplicon.
2. UNIFORM COMMERCIAL CODE ACKNOWLEDGMENT: Lessee acknowledges that it has
covering the Property purchased from the Supplier for lease and Amplicon has
informed or advised Lessee, either previously or by this Lease, of the
following: (i) the identity of the Supplier; (ii) that Lessee may have rights
under the Supply Contract; and (iii) that Lessee may contact the Supplier for a
description of any such rights. This Lease is a "Finance Lease". (The terms
"Finance Lease", "Supply Contract" and "Supplier" as used in this Lease have the
meanings only as ascribed to them under Division 10 of the California Uniform
Commercial Code and have no effect on any tax or accounting treatment of the
Lease). This provision survives termination of the Lease.
3. NO WARRANTIES: AMPLICON IS NOT THE MANUFACTURER, DEVELOPER, PUBLISHER,
DISTRIBUTOR, LICENSER OR "SUPPLIER" OF THE PROPERTY AND MAKES NO EXPRESS OR
IMPLIED OR REPRESENTATION AS TO FITNESS, QUALITY, DESIGN, CONDITION, CAPACITY,
SUITABILITY, VALUE, MERCHANTABILITY, OR PERFORMANCE OF THE PROPERTY OR THE
MATERIAL OR WORKMANSHIP THEREOF OR AGAINST INTERFERENCE BY LICENSERS OR OTHER
THIRD PARTIES, IT BEING AGREED THAT THE PROPERTY IS LEASED "AS IS" AND THAT ALL
SUCH RISKS ARE TO BE BORNE BY LESSEE. Lessee selected the Property and
represents that all the Property is suitable for Lessee's purposes. Amplicon
assigns to Lessee during the term of the Lease any warranty rights it may have
received from the Supplier as a result of Amplicon's purchase of the Property.
If Lessee has any claims regarding the Property or any other matter arising from
Lessee's relationship with the Supplier, Lessee must make them against the
Supplier. This provision survives termination of the Lease.
4. AUTHORIZATION DATE AND LEASE DURATION: A Schedule commences and rent is due
beginning on the date that Lessee certifies in writing to Amplicon that all of
the Property has been received and accepted by Lessee as installed, tested and
ready for use, and Lessee authorizes Amplicon in writing to disburse payment to
the Supplier ("Authorization Date"). Unless and until Lessee provides such
written authorization, Amplicon will not disburse payment to Suppliers. The
Term of each Schedule is reflected on the Schedule and begins on the first day
of the calendar quarter following the Authorization Date. A calendar quarter
commences on the first day of January, April, July and October. Term extends
for an additional twelve month period ("Extension Term") at the rental rate
delineated on the Schedule unless Lessee provides to Amplicon written notice of
Lessee's election not to extend the term at least one hundred eighty days prior
to the expiration of the term.
<PAGE> 4
5. RENTAL: The rent payable is shown on the Schedule(s). The quarterly rent is
due to Amplicon, in advance, for each quarter or portion of a quarter beginning
on the Authorization Date and continuing for each quarter that this Lease is in
effect. Rent for portions of a quarter are based on a daily rental equal to
one-ninetieth of the quarterly rent. ALL RENTS SHALL BE PAID WITHOUT NOTICE OR
DEMAND AND WITHOUT ABATEMENT, DEDUCTION OR SETOFF OF ANY AMOUNT WHATSOEVER. THE
OPERATION AND USE OF THE PROPERTY IS SOLELY AT THE RISK OF LESSEE AND THE
OBLIGATION OF LESSEE TO PAY RENT UNDER THE LEASE SHALL BE ABSOLUTE AND
UNCONDITIONAL. Rents will be paid to Amplicon unless otherwise instructed in
writing by Amplicon or its assignee.
6. INDEMNITY: Lessee assumes liability for, and agrees at its own expense to
indemnify and defend Amplicon, its employees, officers, directors and assigns,
from and against any and all claims, liabilities, losses, damages, and expenses
(including legal expenses) of every kind or nature (including, without
limitation, claims based upon strict liability) arising out of the use,
condition (including latent and other defects, whether or not discoverable by
Lessee or Amplicon), operation or ownership of any items of Property (including
without limitation, any claim for patent, trademark or copyright infringement)
or for any interruptions of service, loss of business or consequential damages.
These indemnities and assumptions survive the termination of this Lease.
7. PERFORMANCE OF LESSEE'S OBLIGATION BY AMPLICON: If Lessee fails to perform
any of its obligations under this Lease, Amplicon may, at its option, perform
them for Lessee without waiving Lessee's default. Any amount paid by Amplicon,
and any expense (including reasonable attorneys' fees) or any other liability
incurred by Amplicon as a result of its performance of Lessee's obligations will
be payable to Lessee to Amplicon upon demand.
8. FURTHER ASSURANCES AND NOTICES: Lessee's signing of this Lease constitutes a
firm offer. In consideration of Amplicon's time and effort in reviewing and
acting on the offer, Lessee agrees that its offer is irrevocable for twenty
business days after Amplicon's receipt of the offer and of all credit
information requested by Amplicon. Amplicon's signing of the Lease, including
the Schedule, constitutes acceptance of Lessee's offer. Lessee agrees to sign
and provide any documents which Amplicon deems necessary for confirmation,
assignment and assurance of performance by Lessee of its obligations under the
Lease or for perfection of this Lease and the Property including but not
limited, to the signing and filing of Uniform Commercial Code (UCC) Financing
Statements (which Lessee agrees may be signed by Amplicon on Lessee's behalf).
Lessee authorizes Amplicon to insert applicable dates as necessary to complete
all documentation for the Lease. Prior to Amplicon's acceptance of the Lease
and for the duration of the Lease, Lessee agrees to promptly provide Amplicon
with all credit information reasonably requested by Amplicon including but not
limited to, comparative audited financial statements for the most current annual
and interim reporting periods. Lessee's failure to provide such information to
Amplicon is an event of default under the Lease. ALL NOTICES TO AMPLICON MUST
BE IN WRITING AND SENT CERTIFIED MAIL RETURN RECEIPT REQUESTED TO THE ADDRESS
SHOWN ABOVE OR SUCH OTHER ADDRESS AS TO WHICH LESSEE HAS BEEN NOTIFIED IN
WRITING.
9. DEFAULT: Whenever any amount due under the Lease is not received by Amplicon
or its assignee when due, Lessee shall pay a delinquency charge equal to five
percent of the amount then due (or maximum allowed by law) for the month in
which the amount is due and again for each month that the amount remains unpaid.
An Event of Default shall occur if: (a) Lessee fails to pay any rent or other
payment under the Lease when due and the failure continues for ten days; (b)
Lessee fails to perform or observe any of the covenants or obligations in this
Lease other than Lessee's rental obligation, and such failure is not cured
within ten days after written notice has been provided; (c) Lessee makes an
assignment for the benefit of its creditors, files any petition or takes any
action under any bankruptcy, reorganization or insolvency laws; (d) an
involuntary petition is filed under any bankruptcy statute against Lessee or any
receiver, trustee or custodian is appointed to take possession of Lessee's
properties, unless such petition or appointment is set aside or withdrawn within
sixty days of said filing or appointment; (e) Lessee attempts to or does remove,
transfer, sell, sublicense, encumber, part with possession, or sublet any of the
Property; (f) Lessee attempts to assign or transfer this Lease or its interest
under the Lease or moves any of the
<PAGE> 5
Property from the location(s) set forth on the Schedule without Amplicon's prior
written consent; or (g) Lessee undergoes a sale, buyout, change in control, or
change in ownership of any type, form or manner which, as judged solely by
Amplicon, results in a material deterioration in Lessee's credit worthiness.
10. REMEDIES: Upon an Event of Default, Amplicon may exercise at its sole option
any one or more of the remedies permitted by law, including but not limited to
the following: (a) through legal action, enforce performance by Lessee of the
applicable covenants and obligations of this Lease or recover damages for the
breach of those covenants or obligations; (b) terminate the Lease and Lessee's
rights under the Lease; (c) by notice in writing to Lessee, recover all amounts
due on or before the date Amplicon declared this Lease to be in default, plus,
as liquidated damages for the loss of a bargain and not as a penalty, accelerate
and declare to be immediately due and payable all rentals and other sums payable
under the Lease without any presentment, demand, protest or further notice (all
of which are hereby expressly waived by Lessee), at which time the same shall
become immediately due and payable; and (d) take immediate possession of the
Property, or any part of the Property, from Lessee free from claims by Lessee.
In the case of Software, it is agreed that Lessee's unauthorized use,
disclosure, or transfer of the Software will cause Amplicon significant damages
which, at the time the parties enter the Lease, are impossible to quantify or
predict. Therefore, if Lessee is found to be using (in any manner) all or any
portion of the Software after the termination of this Lease, or after an Event
of Default under the Lease, or if Supplier terminates a license of Lessee's
right to use the Software for an alleged breach of the use, disclosure, or
transfer restrictions imposed on Lessee, the parties hereby agree that
liquidated damages shall be payable immediately by Lessee to Amplicon in an
amount which is equal to two times the amount paid by Amplicon for the Software.
The exercise of any of the foregoing remedies by Amplicon will not constitute a
termination of this Lease unless Amplicon so notifies Lessee in writing. If
Amplicon repossesses the Property, Amplicon may rent or sell the Property in
such a manner and at such times as Amplicon may determine and without notice to
Lessee. In the event Amplicon rents the Property, any rentals received by
Amplicon for the period commenting after the remaining Term(s) of the Schedule
shall be applied to the payment of: (i) all costs and expenses (including
reasonable attorneys' fees) incurred by Amplicon in enforcing its remedies under
this Lease, and (ii) the rentals for the remainder of the Term(s) and all other
sums then remaining unpaid under this Lease. All rentals received by Amplicon
for the period commencing after the remaining Term(s) shall be retained by
Amplicon. Lessee will remain liable to Amplicon to the extent that the
aggregate amount of the sums referred to in clauses (i) and (ii) above exceed
the aggregate rentals received by Amplicon under such agreements for the
remaining Term(s) applicable to the Property covered by such agreements. In the
event that Amplicon sells the Property, the proceeds will be applied to the sum
of : (1) all costs and expenses (including reasonable attorneys' fees) incurred
by Amplicon in enforcing its remedies under this Lease and in disposing of the
Property, (2) the rentals accrued under this Lease, but unpaid up to the time of
such disposition, (3) any and all other sums other than rentals then owing to
Amplicon by Lessee under the Lease, and (4) the stipulated value as would be
determined in the event of a Casualty Occurrence (as defined in the terms and
conditions to the Schedule) on the date of the Property's disposition. The
remaining balance of such proceeds, if any, will be applied first to reimburse
Lessee for any sums previously paid by Lessee as liquidated damages (as set
forth in (c) above), and any remaining amounts will be retained by Amplicon.
Lessee will remain liable to Amplicon to the extent that the aggregate amount of
the sums referred to in clauses (1) through (4) above exceeds the proceeds
received by Amplicon in connection with the disposition of the Property.
Amplicon's remedies under this Lease shall not be deemed exclusive. Waiver of
any default or breach of this Lease shall not to construed as a waiver of
subsequent or continuing defaults or breaches.
11. DISPUTE RESOLUTION: THE PARTIES AGREE THAT ALL DISPUTES, WHETHER BASED IN
TORT OR CONTRACT, RELATING TO OR ARISING OUT OF THIS LEASE (COLLECTIVELY, "LEASE
DISPUTES") WILL BE FILED AND CONDUCTED IN THE CALIFORNIA SUPERIOR COURT FOR THE
COUNTY OF ORANGE, UNLESS AMPLICON OR ITS ASSIGNEE SELECTS AN ALTERNATIVE FORUM.
LESSEE AGREES TO SUBMIT TO THE PERSONAL JURISDICTION OF THE CALIFORNIA SUPERIOR
COURT FOR ALL LEASE DISPUTES. LESSEE WAIVES ITS RIGHTS TO A JURY TRIAL IN ANY
ACTION ARISING OUT OF OR RELATING TO THIS LEASE. If any party to this Lease
brings any action to enforce any of the terms, or to recover for any breach,
then the prevailing party is entitled to recover from
<PAGE> 6
the other party reasonable attorneys' fees and costs, including all JAMS related
costs and costs of collection (including judgment enforcement and collection
costs).
12. MISCELLANEOUS: All agreements, representations and warranties contained in
this Lease, or in any document or certificate delivered pursuant to or in
connection with this Lease, shall expressly survive the termination of this
Lease. If any provision of this Lease is determined by competent authority to
be unenforceable, such determination shall not invalidate the remaining
provisions of the Lease. To the extent permitted by applicable law, Lessee
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect. This Lease has been entered into and shall be
performed in California and, therefore, THIS LEASE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA
(EXCLUSIVE OF PRINCIPLES OF CONFLICT OF LAWS). Time is of the essence of this
Lease and each provision thereof.
******************************************************************
TO THE EXTENT PERMITTED BY APPLICABLE LAW, LESSEE HEREBY WAIVES THE FOLLOWING
RIGHTS AND REMEDIES CONFERRED UPON LESSEE BY LAW: (I) RIGHT TO CANCEL OR
TERMINATE THIS LEASE, (II) RIGHT TO REJECT THE PROPERTY, (III) RIGHT TO REVOKE
ACCEPTANCE OF THE PROPERTY, (IV) RIGHT TO RECOVER DAMAGES FROM AMPLICON FOR ANY
BREACH OF WARRANTY, (V) RIGHT TO RECOVER ANY GENERAL, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES WHATSOEVER, AND (VI) RIGHT TO SPECIFIC PERFORMANCE,
REPLEVIN, DETINUE, SEQUESTRATION, CLAIM AND DELIVERY OR THE LIKE FOR THE
PROPERTY SUBJECT TO THIS LEASE.
THIS LEASE AGREEMENT AND THE APPLICABLE SCHEDULE(S) CONTAIN THE ENTIRE AGREEMENT
BETWEEN AMPLICON AND LESSEE WITH RESPECT TO THE SUBJECT MATTER HEREOF. THE LEASE
CAN ONLY BE MODIFIED IN WRITING, WITH SUCH MODIFICATIONS SIGNED BY A PERSON
AUTHORIZED TO SIGN AGREEMENTS ON BEHALF OF LESSEE AND BY AN AUTHORIZED SIGNER OF
AMPLICON. NO ORAL OR OTHER WRITTEN AGREEMENTS, REPRESENTATIONS OR PROMISES
SHALL BE RELIED UPON BY, OR BE BINDING ON, THE PARTIES UNLESS MADE A PART OF
THIS LEASE BY A WRITTEN MODIFICATION SIGNED BY AN AUTHORIZED SIGNER OF LESSEE
AND AMPLICON.
<TABLE>
<S> <C>
LESSEE: AMPLICON,INC.
/s/ Brian Kozun /s/ Michael L. McClendon
- ------------------------------ -----------------------------------------
(Signature) (Signature)
</TABLE>
This Lease is subject to acceptance by Amplicon's Finance Committee. BY SIGNING
BELOW, THE SIGNER CERTIFIES THAT HE OR SHE HAS READ THIS LEASE AGREEMENT,
INCLUDING THE REVERSE SIDE, HAS HAD AN OPPORTUNITY TO DISCUSS TERMS WITH
AMPLICON, AND IS AUTHORIZED TO SIGN ON BEHALF OF LESSEE. Until this Lease has
been signed by an authorized signer of Amplicon, it will constitute a firm offer
by Lessee.
<TABLE>
<S> <C>
LESSEE/OFFEROR AMPLICON, INC.
OFFER: BOONE GEOPHYSICAL, INC. ACCEPTANCE:
By: /s/ Brian Kozun By: /s/ Michael L. McClendon
--------------------------- -------------------------------
Name: Brian Kozun Name: Michael L. McClendon
----------------------- -------------------------------
Title: C.E.O. Title: Senior Vice President
---------------------- -------------------------------
Date: October 15, 1997 Date: January 22, 1998
---------------------- -------------------------------
</TABLE>
<PAGE> 7
ADDENDUM "A"
TO
LEASE AGREEMENT ORDER NO. OL-10027
This Addendum is supplemental to and made a part of this Lease Agreement Order
No. OL-10027 dated 01/22/98 ( the "Agreement"), and other related documents
under the Agreement (collectively, the "Lease"). The Lease is between Boone
Geophysical, Inc. (as "Lessee") and Amplicon, Inc. ("Amplicon").
Capitalized terms used in this Addendum without definition shall have the
meanings set forth in the Lease, unless specially modified. This Addendum is to
be construed as supplemental to, and part of, the Lease.
At the bottom of the front page of the Agreement after the sentence that
reads as follows:
"BY THE SIGNING BELOW, THE SIGNER CERTIFIES THAT HE OR SHE HAS READ THIS
LEASE AGREEMENT, INCLUDING THE REVERSE SIDE, HAS HAD AN OPPORTUNITY TO DISCUSS
ITS TERMS WITH AMPLICON, AND IS AUTHORIZED TO SIGN ON BEHALF OF LESSEE." insert
the following sentence:
"LESSEE HEREBY REPRESENTS AND WARRANTS TO AMPLICON THAT THE PROPERTY IS
EXCLUSIVELY FOR BUSINESS USE, AND NOT FOR PERSONAL, FAMILY OR HOUSEHOLD USE. TO
THE MAXIMUM EXTENT NOT PROHIBITED BY APPLICABLE LAW, FROM TIME TO TIME IN
EFFECT, LESSEE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, IRREVOCABLY AND
UNCONDITIONALLY WAIVES THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES AND
CONSUMER PROTECTION ACT OF TEXAS BUSINESS AND COMMERCE CODE, CHAPTER 17,
SUBTITLE E. SECTION 17.41-17.63, OTHER THAN SECTION 17.555 THEREOF."
SECTION 9. DEFAULT: Delete the first (1st) sentence and replace it with
the following sentence:
"WHENEVER ANY AMOUNT DUE UNDER THE LEASE IS NOT RECEIVED BY AMPLICON OR ITS
ASSIGNEE WHEN DUE, SAID PAST DUE AMOUNT SHALL BEAR INTEREST COMMENCING ON THE
DUE DATE AND CONTINUING TO (BUT NOT INCLUDING) THE DATE OF PAYMENT THEREOF BY
LESSEE, AT THE DELINQUENCY RATE OF EIGHTEEN PERCENT (18%) PER ANNUM OR THE
MAXIMUM ALLOWED BY LAW."
SECTION 12. MISCELLANEOUS: After the last sentence insert the following
sentence:
"LESSEE ACKNOWLEDGES AND AGREES THAT THE PURCHASE PRICE AND LICENSE FEE AS
SET FORTH ON THE APPLICABLE SCHEDULE OR ITS SUPPORTING DOCUMENTS, REPRESENTS THE
MARKET VALUE OR MARKET PRICE OF THE PROPERTY AS OF THE AUTHORIZATION DATE OF THE
APPLICABLE SCHEDULE.
<TABLE>
<S> <C>
LESSEE INITIALS: /s/ BK AMPLICON INITIALS: /s/ MLM
------ -------
</TABLE>
<PAGE> 8
ADDENDUM "A"
PAGE TWO OF TWO
The following shall be added to the lease:
"SECTION 13. CONSTRUCTION OF THE LEASE:"
"LESSEE AND AMPLICON HEREBY ACKNOWLEDGE AND AGREE THAT THIS TRANSACTION IS
INTENDED AS, AND IS, A TRUE LEASE TRANSACTION AND NOT A CREDIT SALE NOR
FINANCING. NOTWITHSTANDING THE EXPRESS UNDERSTANDING OF THE PARTIES HERETO, IF
A COURT OR ARBITRAL BODY WERE TO DEEM THIS TRANSACTION TO BE A CREDIT SALE OR
FINANCING THEN, IN DETERMINING WHETHER OR NOT AMOUNTS DEEMED TO CONSTITUTE
INTEREST CONTRACTED FOR, CHARGE OR COLLECTED EXCEED THE MAXIMUM RATE OF INTEREST
ALLOWED FROM TIME TO TIME BY APPLICABLE STATE OR FEDERAL LAW ("HIGHEST LAWFUL
RATE"), TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, (A) AMOUNTS DUE HEREUNDER
SHALL BE CHARACTERIZED AS PRINCIPAL, OR AS A NONUSURIOUS EXPENSE, FEE OR
PREMIUM, RATHER THAN INTEREST, (B) AMOUNTS DUE HEREUNDER AFTER ACCELERATION BY
REASON OF A DEFAULT OR OTHERWISE, OR PREPAID, SHALL NOT BE DEEMED TO CONSTITUTE
INTEREST, BUT ANY PORTIONS OF SUCH AMOUNTS DEEMED TO CONSTITUTE INTEREST,
CONTRACTED FOR, CHARGED OR COLLECTED IN CONNECTION WITH SUCH ACCELERATION OR
PREPAYMENT MAY NEVER EXCEED THE HIGHEST LAWFUL RATE, AND (C) ALL AMOUNTS DEEMED
TO CONSTITUTE INTEREST SHALL BE AMORTIZED, PRORATED, ALLOCATED AND SPREAD, IN
EQUAL PARTS THROUGHOUT THE ENTIRE TERM OF THE LEASE."
In all other respects, the terms and conditions of the Lease, as originally set
forth, shall remain in full force and effect. The Lease sets forth the entire
and final understanding between the parties with respect hereto. The terms of
this Addendum have been negotiated and jointly drafted by Amplicon and Lessee
and, therefore, the language of the Addendum shall not be construed in favor or
against either party. The undersigned represent that they have the authority to
enter into this Addendum, and that the same shall be legally binding and
enforceable on the respective principals.
IN WITNESS WHEREOF, the parties hereto, by their authorized signatories, have
executed this Addendum as of the date set forth below their respective
signatures.
<TABLE>
<S> <C>
LESSEE:
BOONE GEOPHYSICAL, INC. AMPLICON, INC.
- ------------------------------ ------------------------------------
BY: /s/ Brian Kozun BY: /s/ Michael L. McClendon
-------------------------- ----------------------------
NAME: Brian Kozun NAME: Michael L. McClendon
---------------------- ----------------------------
TITLE: C.E.O. TITLE: Senior Vice President
---------------------- ----------------------------
DATE: October 15, 1997 DATE: January 22, 1998
---------------------- ----------------------------
</TABLE>
<PAGE> 9
AMPLICON FINANCIAL
5 Hutton Centre Drive, Suite 500
Santa Ana, CA 92707 L E A S E
714-751-7551 or 800-755-5055 Facsimile 714-751-7557 SCHEDULE
NO.
<TABLE>
<S> <C>
LESSEE: CONTACT: Greg Wiebe -- Venture Seismic
Boone Geophysical, Inc. PHONE: 403-777-9070
874-A Wire Road FAX: 403-777-9080
Huntsville, TX 77340
</TABLE>
THIS SCHEDULE IS ISSUED WITH RESPECT TO THE LEASE AGREEMENT ORDER NO. OL-10027
DATED 01/22/98. All of the terms of the Lease Agreement are incorporated into
this Schedule as if fully reflected on the Schedule. The terms of this Schedule
and the Lease Agreement combine to form an individual Lease with an independent
Term.
Any Deposit under this Schedule shall be returned to Lessee (without interest
thereon) if Amplicon does not accept this Schedule. Upon acceptance of this
Lease by Amplicon any such Deposit shall be treated as a Transaction Fee earned
by Amplicon and unless otherwise specified herein shall not be applied to any
rentals or other payments due under the Lease.
<TABLE>
<S> <C> <C>
Term (months): THIRTY-SIX (36)
Deposit: $65,430.00 (TO BE APPLIED TO THE LAST TERM RENTAL PAYMENT)
Monthly Rent: $65,430.00 (LEASE RATE FACTOR OF .029772) (BILLED QUARTERLY)
Property: TOTAL PROPERTY COST: $2,197,721.55 (250 Sercel Opseis
Seismic Remote Data
Acquisition & Peripherals)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Quantity Property Description Serial #
-------- -------------------- --------
</TABLE>
Property more fully described on Exhibit "A" attached hereto and made a part
hereof.
THE MONTHLY LEASE RATE FACTOR OF .029772 MAY BE ADJUSTED BY .000045 FOR EVERY
TEN (10) BASIS POINT ADJUSTMENT IN CORRESPONDING AVERAGE YIELD OF EQUALLY
MATURING US TREASURY NOTES. THE FINAL MONTHLY LEASE RATE FACTOR SHALL BE FIXED
AT THE AUTHORIZED DATE AND SHALL REMAIN CONSTANT THROUGHOUT THE TERM OF THE
LEASE. THE INITIAL INDEX RATE SHALL BE 6.20%.
LESSEE AGREES TO PROVIDE A CORPORATE GUARANTY FROM THE PARENT CORPORATION,
VENTURE SEISMIC LTD. IN A FORM ACCEPTABLE TO AMPLICON, INC. LESSEE HAS THE RIGHT
TO QUIETLY ENJOY THE USE OF THE PROPERTY WITHOUT INTERFERENCE BY AMPLICON OR ITS
ASSIGNEE PROVIDED LESSEE IS IN COMPLIANCE WITH TERMS OF THIS LEASE.
AT THE EXPIRATION OF THE TERM OR, IF EXTENDED PURSUANT TO SECTION 4 OF THE LEASE
AGREEMENT, AT THE EXPIRATION OF THE EXTENSION TERM LESSEE SHALL: (I) PURCHASE
THE PROPERTY FOR A MUTUALLY AGREEABLE PRICE OF 10% OF AMPLICON'S ORIGINAL COST
OF THE PROPERTY; (II) PROMPTLY RETURN ALL,
<PAGE> 10
BUT NOT LESS THAN ALL, OF THE PROPERTY ACCORDING TO THE TERMS AND CONDITIONS OF
ITS LEASE AND LEASE REPLACEMENT PROPERTY FORM AMPLICON WHICH HAS A COST EQUAL TO
OR GREATER THAT THE ORIGINAL COST OF THE PROPERTY; OR (III) EXTEND THE SCHEDULE
FOR A PERIOD OF ONE ADDITIONAL YEAR AT THE RENTAL RATE DELINEATED HEREIN. WITH
RESPECT TO OPTIONS (I) AND (II), AMPLICON AND LESSEE SHALL HAVE ABSOLUTE
DISCRETION REGARDING THEIR AGREEMENT OR LACK OF AGREEMENT TO THE TERMS OF EITHER
SUCH ARRANGEMENT. IF THE PARTIES HAVE NOT AGREED TO EITHER OPTION (I) OR OPTION
(II) BY THE EXPIRATION OF THE APPLICABLE TERM, THEN OPTION (III) SHALL PREVAIL.
AT THE END OF THE EXTENSION PROVIDED BY OPTION (III), THIS LEASE SHALL CONTINUE
SUBJECT TO TERMINATION BY EITHER LESSEE OR AMPLICON AT THE END OF ANY MONTH,
PROVIDED AT LEAST NINETY DAYS PRIOR WRITTEN NOTICE IS DELIVERED TO THE OTHER
PARTY.
THE INDIVIDUAL SIGNING BELOW CERTIFIES THAT HE OR SHE HAS READ THIS SCHEDULE
(INCLUDING THE TERMS ON THE REVERSE SIDE) AND THE LEASE AGREEMENT, AND IS
AUTHORIZED TO SIGN THIS SCHEDULE ON BEHALF OF LESSEE.
THIS SCHEDULE ALONG WITH THE LEASE AGREEMENT CONTAIN THE ENTIRE AGREEMENT
BETWEEN AMPLICON AND LESSEE WITH RESPECT TO THE SUBJECT MATTER HEREOF. THIS
AGREEMENT CAN ONLY BE MODIFIED IN WRITING, WITH SUCH MODIFICATIONS SIGNED BY A
PERSON AUTHORIZED TO SIGN AGREEMENTS ON BEHALF OF LESSEE AND BY AN AUTHORIZED
SIGNER OF AMPLICON. NO ORAL OR OTHER WRITTEN AGREEMENTS, REPRESENTATIONS OR
PROMISES SHALL BE RELIED UPON OR BE BINDING ON THE PARTIES UNLESS MADE A PART OF
THIS LEASE BY A WRITTEN MODIFICATION SIGNED BY AN AUTHORIZED SIGNER OF BOTH
LESSEE AND AMPLICON.
<TABLE>
<S> <C>
LESSEE/OFFEROR AMPLICON, INC.
OFFER: BOONE GEOPHYSICAL, INC. ACCEPTANCE:
By: /s/ Brian Kozun By: /s/ Michael L. McClendon
----------------------- -------------------------------
Name: Brian Kozun Name: Michael L. McClendon
----------------------- -------------------------------
Title: Chief Executive Officer Title: Senior Vice President
----------------------- -------------------------------
Date: October 15, 1997 Date: January 22, 1998
---------------------- -------------------------------
</TABLE>
<PAGE> 11
TERMS AND CONDITIONS
APPLICABLE TO THIS LEASE SCHEDULE
A. RIGHT TO INSPECT THE PROPERTY: Amplicon may during reasonable business hours
enter upon any premises where the Property is located to confirm compliance the
terms of the Lease.
B. TAXES ON THE PROPERTY: All fees, assessments and taxes (except those based
upon the net income of Amplicon) which may now or hereafter become due or are
imposed upon the ownership, sale, possession and/or use of the Property are to
be paid by Lessee. While Lessee will be responsible for payment of all personal
property taxes, Amplicon will file all personal property tax returns. Amplicon
is not responsible for contesting any valuation of, or tax impose on, the
Property (but may do so strictly as an accommodation to Lessee) and will not be
liable or accountable to Lessee therefor. Amplicon retains any and all federal
and state tax credits or benefits relating to the Property.
C. USE, OPERATION AND MAINTENANCE OF THE PROPERTY: Lessee at its own expense,
will provide a suitable place for the operation of the Property, and keep in
force for the duration of the Lease the best standard Supplier's maintenance
agreement(s) which will cause the Supplier(s) to make all the necessary repairs,
adjustment, and replacements in accordance with such maintenance agreement(s)
and entitle Lessee (through Amplicon, if necessary) to obtain available
enhancements, updates, upgrades and changes.
D. ADDITIONS AND MODIFICATIONS TO THE PROPERTY: All additions and modifications
to the Property become a part of the Property and are owned by Amplicon.
Software, as described on any Schedule(s), includes all updates, revisions,
upgrades, new versions, enhancements, modifications, derivative works,
maintenance fixes, translations, adaptations, and copies of the foregoing or of
the original version of the Software whether obtained from the Supplier,
licenser or from any source whatsoever, and references in this Lease to Software
will be interpreted as references to any and all of the foregoing. All additions
and modifications to the Property must be free and clear of any liens or rights
of other parties.
E. INSURING THE PROPERTY: While the Property is in transit and for the duration
of the Lease, Lessee at its own expense shall maintain (i) comprehensive public
liability insurance (naming Amplicon or its assigns as additional insured) for
bodily injury and property damage resulting from the maintenance, use or
transport of the Property and (ii) property and casualty insurance (naming
Amplicon and/or its assigns as sole loss payee) covering all risks of loss or
damage to the Property from any cause whatsoever including, without limitation,
fire and theft. All insurance will be from an insurer(s) and in a form and
amount satisfactory to Amplicon. Lessee shall deliver to Amplicon the original
policies or certificates of such insurance (and each renewal or replacement
thereof) and evidence of the payment of the premiums for such insurance polices.
All polices will provide that no cancellation or material modification of such
insurance shall be effective without thirty days prior written notice to
Amplicon.
F. RISK OF LOSS TO THE PROPERTY: While the Property is in transit and throughout
the duration of the Lease, Lessee assumes all responsibility for loss or damage
or other Casualty Occurrence, as defined herein, to the Property and shall hold
Amplicon harmless. A Casualty Occurrence occurs if, for any reason whatsoever,
any of the Property is lost, stolen, requisitioned, taken, confiscated,
destroyed or irreparably damaged by any cause whatsoever. In the case of
Software, the erasure, inoperability or other incapacity of the Software
triggered by a preprogrammed termination or limiting design or routine embedded
in the Software is also deemed a Casualty Occurrence. In the event of a
Casualty Occurrence as to any Property, Lessee will immediately inform Amplicon
in writing. On the next succeeding rental payment date, Lessee will (i) either
replace the Property with like-kind Property, free and clear of any liens or
rights of other parties, acceptable to Amplicon or Amplicon's assignee and
continue to pay all rentals without interruption as they come due, or (ii) pay
to Amplicon all past due rentals and other amounts then late or due and an
amount equal to the stipulated value as determined by the Casualty Schedule
annexed to the Lease ("Stipulated Value"). When Lessee makes this payment to
Amplicon, the rentals cease to accrue and the Lease with respect to the Schedule
ends. Insurance proceeds received by Amplicon as a result to a Casualty
Occurrence will be applied to reduce Lessee's obligation to pay the Stipulated
Value.
<PAGE> 12
G. OWNERSHIP OF THE PROPERTY: Amplicon at all times retains ownership, title
and/or control over Lessee's right to use the Property in accordance with the
terms of the Lease. Lessee shall protect and defend, at its own expense,
Amplicon's title and/or rights in the Property against all claims and liens and
keep the Property free and clear of all such claims and liens. The Property is
and shall remain personal property of Amplicon. To the extent Software subject
to this Lease may also be the subject of a license agreement between the
Supplier and Lessee, Lessee acknowledges that the license to use the Software
is being provided to Lessee solely because of payments made by Amplicon to the
Supplier and, accordingly, Lessee agrees that Amplicon has an interest in the
license. Lessee agrees that if it or any of its affiliates receives anything
of value from the Supplier (including without limitation, a trade-in,
substitution, discount or upgrade allowance) other than Lessee's right to use
the Software reelected on the Schedule for the duration of this Lease, Lessee
will advise Amplicon and pay to Amplicon an amount equal to such additional
value obtained by Lessee. Lease agrees that it will not surrender, transfer or
modify the license agreement without first obtaining the written consent of
Amplicon.
H. RETURN OF PROPERTY: If Lessee elects to return the Property as provided for
in the Lease, Lessee will discontinue the use of the Property, pay to Amplicon
an inspection, refurbishment and restocking fee equal to three percent of the
Property's original cost, and immediately, at its own expense, ship the
Property, with all manuals, cables, cartons and packing materials as originally
furnished by Supplier, to a location within the United States in accordance with
the Property return instructions provided by Amplicon. In the case of Software,
Lessee will destroy all intangible Software items, and deliver to Amplicon all
tangible items constituting Software. At Amplicon's request, Lessee will also
certify in a written form acceptable to Amplicon that: (i) all the tangible
Software has been delivered to Amplicon; (ii) all intangible records have been
destroyed; (iii) Lessee has not retained the Software in any form: (iv) Lessee
will not use the Software after termination and (v) Lessee has not received from
Supplier(s) anything of value relating to or in exchange for Lessee's use,
rental or possession of the Software during the duration of the Lease (including
a trade-in, substitution or upgrade allowance). Until Lessee has complied with
all the requirement of this Section, rent payment obligations will continue from
month to month at the rental rate delineated on the Schedule.
I. ASSIGNMENT OF LEASE AND/OR PROPERTY: AMPLICON MAY ASSIGN ANY OF ITS
RIGHTS IN THE LEASE AND/OR THE PROPERTY OF AN ASSIGNEE ("ASSIGNEE"). LESSEE
HEREBY CONSENTS TO SUCH ASSIGNMENT AND FURTHER AGREES AS FOLLOWS: (1) ASSIGNEE
DOES NOT ASSUME ANY OF THE OBLIGATIONS OF AMPLICON UNDER THE LEASE; (2) TO PAY
ALL ASSIGNED MONIES DUE UNDER THE LEASE UNCONDITIONALLY WITHOUT OFFSET AND
LESSEE FURTHER AGREES THAT SUCH MONIES SHALL BE PAYABLE NOTWITHSTANDING ANY
DEFENSE OR COUNTERCLAIM WHATSOEVER WHETHER BY REASON OF BREACH OF THE LEASE, THE
EXERCISE OF ANY RIGHT HEREUNDER, OR OTHERWISE, WHICH LESSEE MAY NOW OR HEREAFTER
HAVE AGAINST AMPLICON (LESSEE RESERVES ITS RIGHT TO HAVE RECOURSE DIRECTLY
AGAINST AMPLICON ON ACCOUNT OF ANY SUCH DEFENSE OR COUNTERCLAIM); (3) TO PROVIDE
AMPLICON WITH A COPY OF ANY NOTICES SENT BY LESSEE TO ASSIGNEE UNDER THE LEASE;
(4) THAT SUBJECT TO AND WITHOUT IMPAIRMENT OF LESSEE'S LEASE-HOLD RIGHTS IN AND
TO THE PROPERTY COVERED UNDER THE LEASE, LESSEE SHALL HOLD SAID PROPERTY AND THE
POSSESSION THEREOF FOR THE ASSIGNEE TO THE EXTENT OF THE ASSIGNEE'S RIGHTS
THEREIN, AND (5) SUCH ASSIGNMENT DOES NOT CHANGE LESSEE'S OBLIGATIONS UNDER THIS
LEASE OR INCREASE THE BURDEN AND RISKS IMPOSED ON LESSEE. WITHOUT THE PRIOR
WRITTEN CONSENT OF AMPLICON, LESSEE SHALL NOT ASSIGN THIS LEASE OR ITS INTEREST
IN THE LEASE IN ANY FORM OF MANNER INCLUDING, BUT NOT LIMITED TO, AN ASSIGNMENT
DUE TO A SALE, MERGER, LIQUIDATION, SUB-LEASE, LEVERAGED BUYOUT, CHANGE OF
OWNERSHIP OR CHANGE-IN-CONTROL.
<PAGE> 13
EXHIBIT "A" (LEASE SCHEDULE NO. 01 TO LEASE AGREEMENT ORDER NO. OL-10027) TO
LEASE SCHEDULE WHEREIN
Boone Geophysical Inc. is the Lessee
Lessee's Address: 874 "A" Wire Road, Huntsville, TX 77340
Property Location: Same as above
<TABLE>
<CAPTION>
QTY. DESCRIPTION
Supplier: Mitcham Industries, Inc.
Invoice No: 101277
<S> <C>
50 OPSEIS SAR - 6 CHANNELS, S/N: 6174, 6209, 6214, 6215, 6216, 6217, 6218,
6219, 6220, 6221, 6222, 6223, 6224, 6225, 6226, 6227, 6228, 6229, 6230,
6231, 6232, 6234, 6235, 6236, 6238, 6239, 6240, 6241, 6242, 6243,
6244, 6245, 6247, 6248, 6249, 6251, 6252, 6253, 6261, 6262,
6263, 6265, 6266, 6267, 6268, 6270, 6271, 6272, 6273, 6274
Invoice No: 101273
200 OPSEIS EAGLE SAR, S/N: 5508, 5215, 5554, 5502, 5203, 5279, 5249, 5490,
5402, 5524, 5498, 5199, 5523, 5537, 5566, 5509, 5549, 5538, 5547, 5609, 5485,
5608, 5514, 5521, 5595, 5594, 5227, 5618, 5531, 5588, 5558, 5590, 5572, 5257,
5225, 5412, 5605, 5582, 5576, 5577, 5581, 5529, 5424, 5266, 5540, 5565, 5601,
5560, 5639, 5530, 5429, 5583, 5210, 5568, 5503, 5563, 5561, 5585, 5265, 5562,
5592, 5439, 5246, 5559, 5512, 5539, 5535, 5621, 5500, 5548, 5586, 5640, 5273,
5298, 4966, 5584, 5293, 5642, 4850, 5278, 5518, 5499, 5295, 5494, 5405, 5497,
5551, 5489, 5598, 5533, 5644, 5607, 5403, 5515, 5505, 5646, 5587, 5213, 4048,
5853, 5198, 5391, 5522, 5655, 5620, 5520, 5625, 5627, 5616, 5240, 5624, 5550,
5630, 4605, 5657, 5615, 5593, 5663, 5569, 5573, 5623, 5555, 5163, 4599, 4910,
5591, 5578, 5589, 4878, 5496, 5231, 5613, 5543, 5371, 5193, 5028, 5068, 5397,
5243, 5375, 5619, 5386, 5811, 5196, 5262, 5069, 5168, 5064, 5575, 5449, 5294,
5185, 5205, 5428, 5226, 5516, 5401, 5275, 5282, 5506, 5603, 5634, 5612, 5633,
5190, 5018, 5017, 5177, 5541, 5546, 5542, 5622, 5510, 5272, 5218, 5604, 5178,
5507, 5229, 5285, 5511, 5217, 5206, 5181, 5472, 5571, 5258, 5545, 5492, 5188,
4938, 5411,5600,5810,5389,5631,5234,5553,5392,5233
</TABLE>
Plus all replacement parts, substitutions, additions, attachments,
modifications, updates, upgrades, revisions, new versions, enhancements,
accessories and the proceeds thereof.
LESSEE:
Boone Geophysical, Inc. Amplicon, Inc.
<TABLE>
<S> <C> <C> <C>
BY: /s/: Brian Kozun BY: /s/: Michael L. McClendon
NAME: Brian Kozun NAME: Michael McClendon
TITLE: Chief Executive Officer TITLE: Senior Vice President
DATE: January 30, 1998 DATE: February 9, 1998
</TABLE>
<PAGE> 1
EXHIBIT 10.36
ROYNAT INC.
Suite 4500, Canterra Tower, 400-3rd Avenue, S.W.
Calgary, Alberta T2P 4H2
Tel: (403) 269-7755 Fax: (403) 269-7701
May 1, 1998
CONFIDENTIAL
Venture Seismic Ltd.
3110 - 80 Avenue S.E.
Calgary, Alberta
T2C 1J3
ATTENTION: MR. BRIAN KOZUN, PRESIDENT
Dear Sir:
OFFER TO FINANCE
We are pleased to offer supplemental financing in the amount of $2,000,000 to
be allocated to the following program:
<TABLE>
<CAPTION>
PURPOSE SOURCE
<S> <C> <C>
Refinance equipment $2,000,000 RoyNat $2,000,000
supplier (Mitcham
Industries)
$2,000,000 $2,000,000
</TABLE>
Program changes may only be made with our prior written approval.
REPAYMENT
The principal amount of the financing is to be repaid by 50 monthly instalments
of $40,000 on the 15th of each month commencing June 15, 1998.
If disbursement is delayed, we may, at our option, extend the dates for
scheduled principal repayments.
<PAGE> 2
VENTURE SEISMIC LTD. MAY 1, 1998
PAGE -2-
INTEREST
Interest will be payable on the 15th day of each month at RoyNat's Floating
Base Rate plus 2.75% per annum.
Once disbursement commences we will advise you monthly of the interest rate in
effect and the amount payable on the 15th of that month. RoyNat's Floating
Base Rate for the latest monthly period was 5.36% per annum.
RoyNat's Floating Base Rate for the monthly period will be the arithmetic
average of the 1 month rate applicable to Canadian Dollar bankers' acceptances
on each Business Day during the monthly period, plus .50%.
You may, as provided in the attached Schedule "A", notify us in writing that
you wish to convert the rate of interest to a fixed rate equivalent to RoyNat's
Term Base Rate plus 2.75% per annum.
RoyNat's Term Base Rate, means, at any time, the annual rate of interest which
RoyNat establishes at its principal office in Toronto as the reference rate of
interest which RoyNat will charge for closed fixed rate term loans in Canadian
dollars made to its customers in Canada for varying durations and which it
refers to as "RoyNat's Term Base Rate" for that duration of loan.
SECURITY
This financing will be secured by:
1. Our standard Debenture as follows:
a) A first charge on all seismic equipment subject only to our prior
charge securing the existing financing. Our security will also include a first
fixed charge over 2880 Opseis Eagle Channels, 1500 land geophones, 1000 marsh
geophones, etc. (detailed list to be provided).
b) A floating charge on all other assets, subject only to RoyNat's
existing floating charge which will permit you to deal with these assets in the
ordinary course of business or give security to your Bankers by way of an
assignment of Trade Account Receivables and Trade Inventories.
<PAGE> 3
VENTURE SEISMIC LTD. MAY 1, 1998
PAGE -3-
2. The existing guarantee on our standard form of Boone Geophysical Inc. for
$2,000,000 supported by a collateral debenture secured by a charge on one
1200 Opseis Eagle Data Acquisition System and a floating charge on all other
assets which will permit you to deal with these assets in the ordinary course
of business or give security to your Bankers by way of an assignment of Trade
Account Receivables and Trade Inventories, will be extended to cover this
financing.
3. Waiver for the period this financing is outstanding of the landlord's
interest in your assets located at 3110-80th Avenue S.E., Calgary, Alberta.
Upon acceptance, our Solicitor will contact your Solicitor to obtain the
information necessary to prepare the security documents. Our Solicitor's fees
and disbursements will be for your account.
INSURANCE
Insurance appropriate to the risks involved will be maintained by you, with
loss payable to RoyNat Inc. as mortgagee. If requested, the policies are to be
provided to us.
The existing assignment of insurance of $1,000,000 on the life of Brian Kozun
will be extended to cover this financing.
ACCEPTANCE
This Offer of Finance and the attached schedule are open for acceptance until
May 5, 1998. A commitment fee of $15,000 is earned and payable at the time of
acceptance.
<PAGE> 4
VENTURE SEISMIC LTD. MAY 1, 1998
PAGE -4-
Thank you for the opportunity to participate in your long-term financing
requirements. We appreciate your business and look forward to receiving your
acceptance.
Yours truly,
ROYNAT INC.
/s/: Blain Clow
Blain Clow
Manager, Corporate Lending
/sb
Date Accepted: May 8, 1998
For: Venture Seismic Ltd.
By: /s/ Brian Kozun
CORPORATE GUARANTOR:
Date Accepted: May 8, 1998
Guarantor: Boone Geophysical Inc.
Per: /s/ Brian Kozun
Per:
<PAGE> 5
VENTURE SEISMIC LTD. MAY 1, 1998
PAGE -5-
SCHEDULE "A"
TO OFFER OF FINANCE DATED MAY 1, 1998
IN THE AMOUNT OF $2,000,000
MADE BY ROYNAT INC. TO VENTURE SEISMIC LTD.
WARRANTY
By your acceptance of this Offer of Finance, you warrant that all information
which you furnish is true and correct.
DISBURSEMENT
1. Our funds are to be disbursed not later than November 1, 1998 and extension
of that date is subject to our approval.
2. Our funds will be disbursed after:
a) Completion of legal documentation, satisfactory to our solicitors.
b) Satisfaction of insurance requirements.
c) Satisfactory confirmation of program expenditures.
d) The other funds, if any, required to finance the Program have been
provided.
3. Disbursement may be withheld, if in our opinion, a material adverse change
in risk has occurred.
<PAGE> 6
VENTURE SEISMIC LTD. MAY 1, 1998
PAGE -6-
STANDBY FEE
A standby fee of 2% per annum on the amount undisbursed will be calculated and
payable on the 15th day of each month commencing November 1, 1998. We may, at
our option, deduct these fees from our disbursements.
PREPAYMENT
Prepayment in whole or in part may be made at any time upon payment of 3
months' interest on the principal amount prepaid. Partial prepayment will be
applied in reverse order of scheduled repayment.
However, you may prepay without penalty in each year, on the anniversary date
of the loan, an amount not exceeding 15% of the balance outstanding at the date
of prepayment, non-cumulative.
CANCELLATION
This Offer to Finance, when accepted, will be a binding contract. If you are
unable or unwilling to carry out the contract, you will pay to us as liquidated
damages an amount equal to 3 months' interest on the amount contracted at the
rate that would be applicable on the date of cancellation, as well as any other
fees or charges accrued to that date.
CONVERSION OPTION
We shall, within 60 days of receipt of your written request to convert this
financing to a fixed interest rate, confirm to you:
1. The rate that will apply.
2. The effective date of the conversion.
3. Any extension of the term of the financing that we may require.
4. The prepayment conditions that will apply following conversion.
<PAGE> 7
VENTURE SEISMIC LTD. MAY 1, 1998
PAGE -7-
If you wish to proceed with the conversion on these terms, you must accept our
Amending Letter. If you do not accept our Amending Letter your conversion
request will be considered as withdrawn.
Following conversion, interest at fixed rate will be calculated and payable on
the 15th day of each month.
A fee of $250 will be applicable to the conversion.
UNDERLYING CONDITIONS
1. Working capital will be maintained at not less than a ratio of 1:1. The
calculation of working capital will exclude 25% of the current portion of
term debt.
2. During the term of the financing, RoyNat is to be notified if the equipment
is moved from Alberta so that we may obtain the necessary security
documentation in the new location.
3. All conditions of the existing financing will remain unchanged with the
exception of the following:
i) Working capital will be maintained at not less than a ratio of 1:1. The
calculation of working capital will exclude 25% of the current portion of
term debt.
ii) The change in voting control of the Company, without the prior written
consent of Roynat will no longer constitute an event of default.
ENVIRONMENTAL POLICY
You undertake to have our Standard Environmental Agreements executed and, during
the term of this financing, to comply with all applicable environmental laws and
regulations; to notify RoyNat promptly of any claims, requests or violation
notices received concerning any of your property or the business carried out on;
and to indemnify and save harmless RoyNat against any losses or costs arising
from any breach by you of the environmental laws, which is claimed against
RoyNat Inc.
FINANCIAL STATEMENTS
Your audited consolidated financial statements must be provided within 120 days
after the end of each fiscal year and your unaudited semi-annual financial
statements within 45 days after the end of the half year. All unaudited
financial statements will be approved by the signature of an Officer of the
Company.
<PAGE> 8
VENTURE SEISMIC LTD. MAY 1, 1998
PAGE -8-
PRE-AUTHORIZED PAYMENT SYSTEM
By your acceptance of this Offer of Finance, you authorize RoyNat Inc. to draw
monthly cheques or prepare debits, by paper or electronic entry, in amounts
sufficient to cover payments on the loan and you authorize and instruct your
bank to honour those cheques or debits. However, if RoyNat requests payment by
cheque of amounts due to it, you agree to pay those amounts in this manner.
Please attach your cheque marked "VOID" to this Offer of Finance. You also
agree to renew this authorization if you change your bank or branch or account.
For this authorization, your bank is:
Bank: __________________________________________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
ATTACH SAMPLE CHEQUE MARKED "VOID"
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 5,229,339
<SECURITIES> 0
<RECEIVABLES> 10,624,200
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,735,177
<PP&E> 26,965,071
<DEPRECIATION> 6,824,945
<TOTAL-ASSETS> 38,340,646
<CURRENT-LIABILITIES> 11,191,152
<BONDS> 5,891,548
0
0
<COMMON> 16,807,290
<OTHER-SE> 3,481,485
<TOTAL-LIABILITY-AND-EQUITY> 38,340,646
<SALES> 0
<TOTAL-REVENUES> 13,078,677
<CGS> 0
<TOTAL-COSTS> 9,518,370
<OTHER-EXPENSES> 1,481,839
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 234,905
<INCOME-PRETAX> 1,911,892
<INCOME-TAX> 753,015
<INCOME-CONTINUING> 1,158,877
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,158,877
<EPS-PRIMARY> 0.25<F1>
<EPS-DILUTED> 0.25
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
