3-D GEOPHYSICAL INC
S-1, 1996-10-08
OIL & GAS FIELD EXPLORATION SERVICES
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<PAGE>   1
    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1996
                                                 REGISTRATION NO. 333-
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                             ---------------------

                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933

                             ---------------------

                             3-D GEOPHYSICAL, INC.
             (Exact name of Registrant as specified in its charter)
 
<TABLE>
<S>                             <C>                             <C>
            DELAWARE                          1382                         13-3841601
(State or other jurisdiction of   (Primary Standard Industrial          (I.R.S. Employer
 incorporation or organization)   Classification Code Number)        Identification Number)
</TABLE>
 
                             ---------------------
 
<TABLE>
<S>                                             <C>
                                                            JOEL FRIEDMAN, CHAIRMAN
              7076 SOUTH ALTON WAY                           3-D GEOPHYSICAL, INC.
                   BUILDING H                                 599 LEXINGTON AVENUE
           ENGLEWOOD, COLORADO 80112                        NEW YORK, NEW YORK 10022
                 (303) 290-0214                                  (212) 317-1234
  (Address, including zip code, and telephone       (Name, address, including zip code, and
   number, including area code, of Registrant's                    telephone
          principal executive offices)             number, including area code, of agent for
                                                                    service)
</TABLE>
 
                             ---------------------

                                   Copies to:
 
<TABLE>
<S>                                             <C>
            PETER S. KOLEVZON, ESQ.                         CHARLES L. STRAUSS, ESQ.
       KRAMER, LEVIN, NAFTALIS & FRANKEL                  FULBRIGHT & JAWORSKI L.L.P.
                919 THIRD AVENUE                        1301 MCKINNEY STREET, SUITE 5100
            NEW YORK, NEW YORK 10022                          HOUSTON, TEXAS 77010
                 (212) 715-9100                                  (713) 651-5151
</TABLE>
 
                             ---------------------

        APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
  As soon as practicable after this Registration Statement becomes effective.
 
     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  / /
 
     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.  / /
 
     If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  / /
 
     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.  / /
 
                        CALCULATION OF REGISTRATION FEE
 
<TABLE>
<CAPTION>
=====================================================================================================
                                                                       PROPOSED MAXIMUM
                                                      PROPOSED MAXIMUM     AGGREGATE       AMOUNT OF
TITLE OF EACH CLASS OF                  AMOUNT TO BE   OFFERING PRICE      OFFERING      REGISTRATION
SECURITIES TO BE REGISTERED              REGISTERED     PER SHARE(1)       PRICE(1)           FEE
- -----------------------------------------------------------------------------------------------------
<S>                                   <C>             <C>              <C>              <C>
Common Stock, par value
  $0.01 per share.....................   4,600,000(2)       $8.00         $36,800,000       $11,152
=====================================================================================================
</TABLE>
 
(1) Estimated solely for purposes of calculating the registration fee pursuant
    to Rule 457 promulgated under the Securities Act of 1933, as amended, based
    on the average of the high and low prices of the Common Stock as reported by
    the Nasdaq National Market on October 1, 1996.
 
(2) Includes 600,000 shares of Common Stock which the Underwriters have the
    option to purchase solely to cover over-allotments, if any.
 
     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

================================================================================
<PAGE>   2
 
                             3-D GEOPHYSICAL, INC.
 
                             CROSS REFERENCE SHEET
                 (SHOWING LOCATION IN PROSPECTUS OF INFORMATION
                         REQUIRED BY ITEMS OF FORM S-1)
 
<TABLE>
<S>    <C>                                                 <C>
I.     Forepart of the Registration Statement and Outside
         Front Cover Page of Prospectus..................  Outside Front Cover Page of
                                                             Prospectus

II.    Inside Front and Outside Back Cover Pages of
         Prospectus......................................  Inside Front and Outside Back Cover
                                                             Pages of Prospectus

III.   Summary Information; Risk Factors and Ratio of
         Earnings to Fixed Charges.......................  Prospectus Summary; Risk Factors

IV.    Use of Proceeds...................................  Use of Proceeds

V.     Determination of Offering Price...................  Outside Front Cover Page of
                                                             Prospectus; Underwriting

VI.    Dilution..........................................  *

VII.   Selling Security Holders..........................  *

VIII.  Plan of Distribution..............................  Outside Front Cover Page of
                                                             Prospectus; Underwriting

IX.    Description of Capital Stock to be Registered.....  Outside Front Cover Page of
                                                             Prospectus; Description of
                                                             Capital Stock; Underwriting

X.     Interests of Named Experts and Counsel............  Legal Matters

XI.    Information with Respect to the Registrant........  Prospectus Summary; Risk Factors;
                                                             The Company; Dividend Policy;
                                                             Price Range of Common Stock;
                                                             Capitalization; Selected
                                                             Historical and Pro Forma
                                                             Financial and Operating Data;
                                                             Management's Discussion and
                                                             Analysis of Financial Condition
                                                             and Results of Operations;
                                                             Business; Management; Security
                                                             Ownership of Management and
                                                             Principal Stockholders; Certain
                                                             Transactions; Shares Eligible for
                                                             Future Sale; Financial Statements

XII.   Disclosure of Commission Position on
         Indemnification for Securities Act
         Liabilities.....................................  *
</TABLE>
 
- ---------------
 
* Not Applicable
<PAGE>   3
 
     Information contained herein is subject to completion or amendment. A
     registration statement relating to these securities has been filed with the
     Securities and Exchange Commission. These securities may not be sold nor
     may offers to buy be accepted prior to the time the registration statement
     becomes effective. This prospectus shall not constitute an offer to sell or
     the solicitation of an offer to buy nor shall there be any sale of these
     securities in any State in which such offer, solicitation or sale would be
     unlawful prior to registration or qualification under the securities laws
     of any such State.
 
                  SUBJECT TO COMPLETION, DATED OCTOBER 8, 1996
 
PROSPECTUS
                                4,000,000 SHARES
 
[3-D GEOPHYSICAL LOGO]                                     3-D GEOPHYSICAL, INC.
                                  COMMON STOCK
                               ------------------
     All of the shares of common stock, par value $.01 per share (the "Common
Stock"), offered hereby are being sold by 3-D Geophysical, Inc. (the "Company").
 
     The Common Stock is traded on the Nasdaq National Market under the symbol
"TDGO". The last reported sale price for the Common Stock on the Nasdaq National
Market on October   , 1996 was $          per share.
                               ------------------
       SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN
         FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF
                        THE COMMON STOCK OFFERED HEREBY.
                               ------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
   AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
      SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
      COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
        PROSPECTUS.
            ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
 
<TABLE>
<S>                               <C>                  <C>                  <C>
- --------------------------------------------------------------------------------
                                                           UNDERWRITING
                                        PRICE TO           DISCOUNTS AND         PROCEEDS TO
                                         PUBLIC           COMMISSIONS(1)         COMPANY(2)
</TABLE>
 
- --------------------------------------------------------------------------------
 
<TABLE>
<S>                               <C>                  <C>                  <C>
Per Share                                   $                    $                    $
- -------------------------------------------------------------------------------------------------
Total(3)                                    $                    $                    $
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
 
  (1) For information regarding indemnification of the Underwriters, see
      "Underwriting".
 
  (2) Before deducting expenses payable by the Company estimated at $          .
 
  (3) The Company has granted the Underwriters a 30-day option to purchase up to
      600,000 additional shares of Common Stock solely to cover over-allotments,
      if any. If such option is exercised in full, the total Price to Public,
      Underwriting Discounts and Commissions and Proceeds to Company will be
      $          , $          and $          , respectively. See "Underwriting".
 
                               ------------------
 
     The shares of Common Stock are being offered hereby by the several
Underwriters named herein, subject to prior sale, when, as and if accepted by
them and subject to certain conditions. It is expected that certificates for the
shares of Common Stock offered hereby will be available for delivery on or about
            , 1996 at the office of Smith Barney Inc., 333 West 34th Street, New
York, New York 10001.
 
SMITH BARNEY INC.
 
                    RAUSCHER PIERCE REFSNES, INC.
 
                                                               SIMMONS & COMPANY
 
                                                          INTERNATIONAL
 
          , 1996
<PAGE>   4
 
                                   [PHOTOS.]
 
     IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
 
                                        2
<PAGE>   5
 
                               PROSPECTUS SUMMARY
 
     Unless the context indicates otherwise, all references herein to the
"Company" or to "3-D Geophysical" mean 3-D Geophysical, Inc. and its
subsidiaries, the principal ones of which operate four seismic data acquisition
businesses (the "Operating Subsidiaries") -- Geoevaluaciones, S.A. de C.V.
("Geoevaluaciones"), Northern Geophysical of America, Inc. ("Northern"), Paragon
Geophysical, Inc. ("Paragon") and Kemp Geophysical Corporation ("Kemp"). In
addition, the Company processes seismic data through another subsidiary,
Procesos Interactivos Avanzados, S.A. de C.V. ("PIASA"). The Operating
Subsidiaries were acquired concurrently with the consummation of the Company's
initial public offering (the "Initial Public Offering") in February 1996. Unless
the context indicates otherwise, certain technical and other terms used in this
Prospectus have the meanings assigned to them in the Glossary appearing
elsewhere herein.
 
     The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, all information
included in this Prospectus assumes that the Underwriters' over-allotment option
will not be exercised. In this Prospectus, unless otherwise indicated,
references to "dollars" and "$" are to United States dollars, references to
"pesos" are to Mexican pesos and references to "Canadian dollars" and "C$" are
to Canadian dollars, and the terms "United States" and "U.S." mean the United
States of America, its states, territories and possessions and all areas subject
to its jurisdiction.
 
                                  THE COMPANY
GENERAL
 
     3-D Geophysical, Inc. is one of the leading providers of land-based and
shallow water three-dimensional ("3-D") and two-dimensional ("2-D") seismic data
acquisition services to the oil and gas industry in the Western Hemisphere. As
of September 30, 1996, the Company's nine crews operated land-based and shallow
water seismic data acquisition systems, primarily utilizing state-of-the-art,
24-bit equipment, with a total of approximately 12,000 channels, in Alaska, the
Rocky Mountain, West Coast and Appalachian regions, Mexico and elsewhere in
Latin America.
 
     The seismic data acquisition services industry is currently experiencing
several significant changes, including a continuing consolidation of service
providers. This consolidation is due in part to the trend by oil and gas
exploration and production companies to rely on third-party contractors to
provide increasingly more sophisticated and extensive 3-D seismic surveys. These
surveys require a greater number of recording channels and therefore substantial
capital expenditures. This trend is rationalizing the seismic services industry
and creating a competitive advantage for companies with extensive 3-D channel
capacity and greater financial resources.
 
     The Company believes that (i) its state-of-the-art systems, (ii) its
ability to relocate equipment and crews among the regions in which it operates,
(iii) the regional experience of its management and crews in performing 3-D and
2-D surveys, and (iv) the quality of its services and relationships with
customers will enable the Company to take advantage of this industry trend.
 
     Since the Initial Public Offering, the Company has:
 
     - Increased its channel capacity from approximately 7,500 to approximately
       12,000 channels;
 
     - Expanded its operations in Alaska with seismic data acquisition contracts
       with Arco Alaska Inc., a subsidiary of Atlantic Richfield Company
       ("ARCO"), BP Exploration (Alaska) Inc. ("BP Alaska") and Marathon Oil
       Company ("Marathon");
 
     - Obtained two of the first group of 3-D seismic data acquisition contracts
       awarded to date by Petroleos Mexicanos ("PEMEX"), Mexico's national oil
       company;
 
     - Established a presence in Peru by opening a branch office, entering into
       a seismic data acquisition contract with a subsidiary of ARCO and opening
       a seismic data processing center; and
 
     - Entered into a letter of intent to acquire J.R.S. Exploration Company
       Limited ("J.R.S. Exploration"), a seismic data acquisition business that
       has been operating in Western Canada since 1978 using up to four crews
       utilizing 24-bit seismic data acquisition systems with a total of
       approximately 2,000 channels.
 
                                        3
<PAGE>   6
 
  INDUSTRY OVERVIEW
 
     Seismic data is the principal source of information used by geoscientists
to map potential or existing oil and gas bearing formations and the geologic
structures that surround them. Seismic data is acquired over a specified area by
deploying a network of electronic cables over the area to which electronic
receivers, or geophones, are attached. Once this network is deployed, an energy
source, such as truck mounted vibrators ("vibroseis") or dynamite, is used to
generate sound waves over a pre-determined set of frequencies that move through
the rock formation under the area and reverberate back to the surface in
milliseconds. The geophones capture the changing velocity and character of these
sound waves as they travel down and back through the earth's surface and
transmit this information a short distance along an electrical path (a
"channel") to a remote signal conditioner. The remote signal conditioner
digitizes the analog data and transmits it to a central electronics unit that
stores the acquired data. The data is then sent to a processing center where
mathematical algorithms are applied to separate signals from interference and to
correct distortion. Migration techniques are also applied to produce a spatial
representation of the subsurface formations that were surveyed. After
processing, the data is transferred to a computer workstation that allows the
data to be viewed and reconfigured by a geoscientist who interprets the data
with computer-aided exploration techniques in order to plot features and map the
structures of the subsurface area.
 
     In the past, a 2-D survey was the standard technique utilized to acquire
seismic data. 2-D seismic data can be visualized as a single vertical plane of
subsurface information. 3-D seismic surveys produce data that is best visualized
as a cube of information that can be sliced into numerous planes. Thus, 3-D
surveys provide different views of a subsurface geologic structure and much
higher resolution of the structure than is available from a 2-D survey and have
proven to be more reliable indicators of the oil and gas potential in the area
surveyed. As a result, drilling based on 3-D seismic surveys has improved the
economics of finding oil and gas. Consequently, demand for 3-D seismic surveys,
and for surveys that cover wide areas and utilize a greater number of channels,
has increased in the past several years. Furthermore, due to the enhanced
information provided, 3-D surveys have proven to be a cost effective and
efficient tool for oil and gas exploration and, increasingly, the development of
existing reserves.
 
  BUSINESS STRATEGY
 
     The Company's objective is to capitalize on the consolidation taking place
in its industry to enhance its position as one of the leading providers of
land-based and shallow water seismic data acquisition services and to become a
significant provider of related services to the oil and gas industry in the
Western Hemisphere. The Company intends to achieve this objective by:
 
     - Optimizing the utilization of its state-of-the-art seismic data
       acquisition systems by relocating equipment and crews among the regions 
       in which the Company operates;
 
     - Expanding its operations in Mexico and elsewhere in Latin America by
       seeking further contract opportunities with PEMEX and other oil companies
       operating in Latin America;
 
     - Pursuing opportunities in the United States, including Alaska, by
       attempting to strengthen existing business relationships with
       multinational companies and their affiliates, such as ARCO, BP Alaska,
       Marathon and others;
 
     - Pursuing strategic acquisitions by seeking to acquire providers of
       seismic data acquisition and related services, such as J.R.S. 
       Exploration, that complement the Company's geographic market coverage 
       and strategy for growth; and
 
     - Expanding the Company's data processing and interpretation and reservoir
       characterization services already being provided to PEMEX in Mexico into
       other markets.
 
                                        4
<PAGE>   7
 
                                  THE OFFERING
 
Common Stock offered.......  4,000,000 shares
 
Common Stock to be
  outstanding after the
  Offering(1)..............  11,600,000 shares
 
Use of proceeds............  Of the net proceeds of this Offering, the Company
                             intends to use (i) approximately $20.0 million to
                             purchase additional systems, additional channel
                             capacity for the six 24-bit seismic data
                             acquisition systems it presently owns and related
                             vehicles and equipment to enhance the Company's 3-D
                             seismic data acquisition capacity; (ii)
                             approximately $6.0 million to repay indebtedness
                             incurred in connection with the Company's purchase
                             in May 1996 of two 24-bit seismic data acquisition
                             systems; and (iii) the balance, if any, for working
                             capital and other general corporate purposes. See
                             "Use of Proceeds" and "Business -- Capital
                             Expenditures."
 
Nasdaq National Market
  symbol...................  "TDGO"

- ---------------
 
(1) Excludes (a) 720,000 shares reserved for issuance upon the exercise of
    options granted and to be granted under the 3-D Geophysical 1995 Long-Term
    Incentive Compensation Plan, as amended, of which options for 624,350 shares
    have been granted as of September 30, 1996, and (b) 265,002 shares reserved
    for issuance upon the exercise of options granted other than pursuant to
    such plan to certain directors and key employees of the Company (see
    "Management -- Director Compensation" and "Management -- Long-Term Incentive
    Compensation Plan").
 
                                        5
<PAGE>   8
 
         SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
 
     On February 9, 1996, simultaneously with the consummation of the Initial
Public Offering, 3-D Geophysical acquired in separate transactions, in exchange
for cash, notes and shares of Common Stock, Geoevaluaciones, PIASA, Northern's
land-based seismic data acquisition operations, Paragon and Kemp. See "Certain
Transactions." For accounting purposes, the acquisitions of Geoevaluaciones and
PIASA were treated as a recapitalization of Geoevaluaciones and PIASA with
Geoevaluaciones (combined with PIASA) deemed to be the acquiror and predecessor
of 3-D Geophysical. Accordingly, the combined net assets of Geoevaluaciones and
PIASA were valued at historical cost and the consideration given to the former
stockholders of Geoevaluaciones and PIASA was treated for accounting purposes as
a dividend. The acquisitions of Northern's land-based seismic data acquisition
operations, Paragon and Kemp (the "Purchased Companies") were treated as
business combinations accounted for by the purchase method of accounting as
prescribed by Accounting Principles Board Opinion No. 16 and Securities and
Exchange Commission ("SEC") Staff Accounting Bulletin No. 48 and are included
within 3-D Geophysical's historical consolidated statement of operations
commencing February 9, 1996. The acquisition of Paragon's common stock in
exchange for shares of Common Stock was accounted for at Paragon's historical
cost. Northern's land-based seismic operations and Kemp were valued at the fair
market value of consideration given. In connection with the acquisitions of
Northern's land-based seismic data acquisition operations and Kemp, the excess
of consideration given over the fair market value of net assets is being
amortized on a straight-line basis over 15 years. For purposes of identification
and description, the Company is referred to as the "Predecessor" for the period
prior to the Initial Public Offering and the acquisition of the Purchased
Companies as described below, the "Successor" for the period subsequent to the
Initial Public Offering and the acquisition of the Purchased Companies and the
"Company" for both periods.
 
     Summary historical financial data is provided for Geoevaluaciones and PIASA
on a combined basis because, as described in the preceding paragraph,
Geoevaluaciones and PIASA are considered the acquirors of the Purchased
Companies for accounting purposes and therefore are deemed to be the predecessor
of 3-D Geophysical. The historical financial information for each of the three
years ended December 31, 1995 and for the six months ended June 30, 1995 was
derived from financial statements appearing elsewhere in this Prospectus. The
historical financial information for the years ended December 31, 1991 and 1992
was derived from Geoevaluaciones' financial statements (1991 is unaudited) which
do not appear elsewhere in this Prospectus. The historical financial information
for the six months ended June 30, 1996 represents combined operations for the
entire six months for Geoevaluaciones and also includes operations for the
Purchased Companies for the period from February 9, 1996 to June 30, 1996. As a
result, the Successor's statement of operations for the six months ended June
30, 1996 is not comparable to the Predecessor's statement of operations for the
six months ended June 30, 1995. The pro forma consolidated statements of
operations for the year ended December 31, 1995 and the six-month periods ended
June 30, 1995 and 1996 assume that the Company had completed the
recapitalization, the acquisition of the Purchased Companies and the Initial
Public Offering on January 1, 1995. The following summary pro forma statement of
operations information was derived from the pro forma consolidated financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.
The pro forma consolidated statement of operations data may not be indicative of
actual results that would have been achieved if the transactions had occurred on
the dates indicated or the results which may be realized in the future.
 
     The pro forma consolidated statement of operations information does not
include the effects of the proposed acquisition of J.R.S. Exploration (see
"Business -- Proposed Acquisition of J.R.S. Exploration"). For a presentation of
the pro forma effects of this proposed acquisition, see the adjusted pro forma
consolidated financial statements, including the notes thereto, appearing
elsewhere in this Prospectus.
 
     The following summary financial data is qualified in its entirety by the
more detailed information appearing in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.
 
                                        6
<PAGE>   9
 
         SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
 
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                                                     COMPANY
                                                                                 ------------------------------------------------
                                                                                                         PRO FORMA(2)
                                          PREDECESSOR(1)                                      -----------------------------------
                     ---------------------------------------------------------                                  SIX MONTHS
                                                                    SIX MONTHS   SIX MONTHS     YEAR               ENDED
                               YEAR ENDED DECEMBER 31,                ENDED        ENDED        ENDED     -----------------------
                     --------------------------------------------    JUNE 30,     JUNE 30,    DEC. 31,     JUNE 30,     JUNE 30,
                      1991    1992      1993      1994      1995       1995         1996        1995         1995         1996
                     ------  -------   -------   -------   ------   ----------   ----------   ---------   ----------   ----------
<S>                  <C>     <C>       <C>       <C>       <C>      <C>          <C>          <C>         <C>          <C>
STATEMENT OF
 OPERATIONS DATA:
Net sales........    $4,241  $10,342   $17,638   $17,660   $9,825     $4,847      $ 19,539     $39,852     $ 14,746     $ 23,362
Expenses:
 Cost of data
   acquisition...     2,574    7,577    13,146    11,004    5,968      2,840        14,452      30,901       10,711       17,971
 Depreciation and
  amortization...       651      941       990     1,468      662        443         1,649       3,425        1,804        1,971
 General and
   administrative
   expenses......       538      908     1,280     1,814    1,038        546         2,585       4,287        2,113        2,950
                     ------  -------   -------   -------   ------     ------      --------     -------      -------      -------
Operating
 income..........       478      916     2,222     3,374    2,157      1,018           853       1,239          118          470
Other income
 (expense):
 Miscellaneous...        (3)      63       270        87      503        102           364         416          105          364
 Interest
   expense.......      (283)    (669)   (1,032)     (466)    (803)      (520)         (296)       (583)        (630)        (338)
 Foreign currency
   transaction
   gains
   (losses)......        45       --        33       (92)    (120)        12            81        (120)          12           81
                     ------  -------   -------   -------   ------     ------      --------     -------      -------      -------
Income (loss)
 before provision
 for taxes.......       237      310     1,493     2,903    1,737        612         1,002         952         (395)         577
Provision
 (benefit) for
 income taxes....        66       95       418     1,000      130        144           277        (145)        (208)         128
                     ------  -------   -------   -------   ------     ------      --------     -------      -------      -------
Income (loss)
 before
 extraordinary
 item............       171      215     1,075     1,903    1,607        468           725       1,097         (187)         449
                                                                                               =======      =======      =======
Extraordinary
 item, net.......        --       --        --        --       --         --            57
                     ------  -------   -------   -------   ------     ------      --------
Net income.......    $  171  $   215   $ 1,075   $ 1,903   $1,607     $  468      $    782
                     ======  =======   =======   =======   ======     ======      ========
Weighted average
 shares
 outstanding.....                                                                    6,301       6,232        6,232        6,232
PER SHARE
 INFORMATION:
Income before
 extraordinary
 item............                                                                 $    .12     $   .18     $   (.03)    $    .07
                                                                                  ========     =======      =======      =======
Extraordinary
 item............                                                                 $    .01
                                                                                  ========
Net earnings.....                                                                 $    .13
                                                                                  ========
STATEMENT OF CASH
 FLOWS DATA:
 Operating
   activities....    $  997  $ 1,724   $ 2,199   $ 4,399   $1,672     $1,030      $ (3,527)
 Investing
   activities....    (1,362)    (671)     (747)   (3,262)     204       (250)      (20,094)
 Financing
   activities....       (11)    (655)      (63)   (2,058)  (1,423)      (710)       25,877
OTHER FINANCIAL
 DATA:
EBITDA(3)........    $1,171  $ 1,920   $ 3,515   $ 4,837   $3,202     $1,575      $  2,947     $ 4,960     $  2,039     $  2,886
OPERATING DATA:
Number of crews
 at end of
 period:
 I/O SYSTEM
   TWO(R)
   crews.........                  2         2         2        2          2             6           7            5            6(4)
 DFS-VTM crews...                 --        --        --       --         --             1           1            4            1(4)
 Number of
   recording
   channels at
   end of
   period........                672       672       960      960        960        10,548       7,500        5,220       10,548(5)
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                       COMPANY         COMPANY AS OF
                                                                                        AS OF         JUNE 30, 1996 AS
                                                                                    JUNE 30, 1996       ADJUSTED(6)
                                                                                    -------------     ----------------
<S>                                                                                 <C>               <C>
BALANCE SHEET DATA:
  Working capital................................................................      $ 4,350            $
  Total assets...................................................................       49,321
  Long-term debt and capital leases, less current portion........................        9,653
  Total stockholders' equity.....................................................       25,960
</TABLE>
 
- ---------------
 
(1)  Amounts represent the combination of Geoevaluaciones and PIASA, the
     Predecessor.
 
(2)  Reflects pro forma adjustments for the acquisitions of the Purchased
     Companies and the consummation of the Initial Public Offering. See the pro
     forma consolidated financial statements, including the notes thereto,
     appearing elsewhere in this Prospectus for a discussion of the assumptions
     made and adjustments applied in the preparation of this data.
 
                                        7
<PAGE>   10
 
(3)  EBITDA represents earnings before interest expense, taxes, depreciation and
     amortization. EBITDA should not be considered as an alternative to net
     income as an indicator of the Company's operating performance or as an
     alternative to cash flow as a better measure of liquidity.
 
(4)  As of September 30, 1996, the Company had six crews operating I/O SYSTEM
     TWO(R) systems, two crews operating DFS-V(TM) systems and one crew
     providing drilling and survey services for a seismic data acquisition crew
     operated by PEMEX.
 
(5)  As of September 30, 1996, the Company's systems had a total of 
     approximately 12,000 channels.
 
(6)  Reflects the sale of shares of Common Stock offered hereby and the
     application of a portion of the estimated net proceeds as described in "Use
     of Proceeds."
 
                                        8
<PAGE>   11
 
            CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR"
       PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
 
     The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. The factors discussed under
"Risk Factors," among others, could cause actual results to differ materially
from those contained in forward-looking statements made in this Prospectus,
including, without limitation, in "Business" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," filings by the
Company with the SEC and the Company's press releases. When used in this
Prospectus, the words "estimate," "project," "anticipate," "expect," "intend,"
"believe" and similar expressions are intended to identify forward-looking
statements.
 
                                  RISK FACTORS
 
LIMITED COMBINED OPERATING HISTORY
 
     3-D Geophysical was incorporated in March 1995 and concurrently with the
Initial Public Offering in February 1996 acquired the Operating Subsidiaries and
PIASA. Prior to the Initial Public Offering, the Operating Subsidiaries operated
independently and neither the historical results of their separate operations
nor their pro forma financial information are necessarily indicative of the
results that would have been achieved had the Operating Subsidiaries been
operated on an integrated basis or the results that may be realized in the
future. Although members of management of the Company have extensive experience
in providing land-based seismic data acquisition services and in managing
businesses that provide such services, there can be no assurance that management
will be able to implement the Company's operating and growth strategies
successfully. See "Management."
 
DEPENDENCE UPON ENERGY INDUSTRY SPENDING
 
     Demand for the Company's services depends upon the level of capital
expenditures by oil and gas companies for exploration, production, development
and field management activities. These activities depend in part on oil and gas
prices, expectations about future prices, the cost of exploring for, producing
and delivering oil and gas, the sale and expiration dates of leases in the
United States and abroad, the discovery rate of new oil and gas reserves in land
and shallow water areas, local and international political, regulatory and
economic conditions and the ability of oil and gas companies to obtain capital.
In addition, a decrease in oil and gas expenditures could result from such
factors as unfavorable tax and other legislation or uncertainty concerning
national energy policies. Beginning in 1982, a sharp decline in oil and gas
prices led to a worldwide reduction in oil and gas activities. This decline
resulted in a significant reduction in the overall demand for seismic services.
No assurance can be given that current levels of oil and gas activities will be
maintained or that demand for the Company's services will reflect the level of
such activities. Decreases in oil and gas activities could have a significant
adverse effect upon the demand for the Company's services and the Company's
results of operations.
 
CAPITAL INTENSIVE BUSINESS; RAPID OBSOLESCENCE OF TECHNOLOGY
 
     The Company competes in a capital intensive industry. As the number of
channels per 3-D crew has increased significantly over the past few years, the
capital costs of fully equipping each crew have also increased. The development
of seismic data acquisition equipment has been characterized by rapid
technological advancements in recent years and the Company expects this trend to
continue. There can be no assurance that manufacturers of seismic equipment will
not develop new systems that have competitive advantages over systems now in use
that either render the Company's current equipment obsolete or require the
Company to make significant incremental capital expenditures to maintain its
competitive position. The Company's strategy is to upgrade its data acquisition
systems as often as necessary to maintain its competitive position. Furthermore,
any significant increase in the level of the Company's operations may require it
to acquire additional data acquisition systems. To do so will likely require
large expenditures of capital in addition to the
 
                                        9
<PAGE>   12
 
Company's planned capital expenditures. There can be no assurance that the
Company will have the capital necessary to upgrade its equipment to maintain its
competitive position or to acquire any additional required equipment, or that
any required financing therefor will be available on favorable terms. If the
Company is unable to raise the capital necessary to update or increase the
capacity of its data acquisition systems to the extent necessary, it will be
unable to update such systems or increase its level of operations and may be
materially and adversely affected as a result. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," "Business -- Capital
Expenditures" and "Business -- Competition."
 
SUBSTANTIAL COMPETITION
 
     The Company has extensive competition in each of the regions in which it
operates. Competitive factors include price, crew experience, equipment
availability, technological expertise and reputation for dependability and
safety. Certain of the Company's major competitors have more crews and operate
data acquisition systems having significantly more channels than the Company,
provide integrated data acquisition, processing and interpretation services and
have far greater financial and other resources than the Company and more
extensive relationships with major integrated and multinational oil and gas
companies. Such resources enable these competitors to maintain state-of-the-art
technology and certain other advantages relating to costs that may provide them
with an advantage over the Company in bidding for contracts. In addition,
certain competitors of the Company take an economic interest in oil and gas
exploration and development projects for which they perform services for their
customers. There can be no assurance that the Company will be able to compete
successfully against its competitors for contracts to conduct seismic surveys.
See "Business -- Competition."
 
SUBSTANTIAL RISKS OF DOING BUSINESS IN LATIN AMERICA
 
     For the year ended December 31, 1995 and for the six months ended June 30,
1996, 24.7% and 21.3%, respectively, of the pro forma net sales of the Company
resulted from the operations of Geoevaluaciones and PIASA in Mexico (the
"Mexican Operations"). The level of land-based seismic data acquisition services
in Mexico has in the past been vulnerable to economic downturns and changes in
government policies and public spending. Since December 1994, Mexico has
experienced an economic crisis characterized by a significant devaluation of the
peso, exchange rate instability, increased inflation, high domestic interest
rates, negative economic growth, reduced consumer purchasing power and high
unemployment. Despite certain austerity measures, volatility in the peso to
dollar foreign exchange rate and financial markets persisted through 1995. The
peso to dollar exchange rate (as published by Banco Mexicano de Comercio
Exterior) at the close of the last business day of 1993, 1994, 1995 and on June
30, 1996 was 3.13, 5.00, 7.68 and 7.59, respectively. On September 30, 1996,
such exchange rate was 7.55. Inflation in Mexico for the year ended December 31,
1995 and for the six months ended June 30, 1996 was approximately 52.0% and
15.3%, respectively, based on the consumer price index.
 
     The December 1994 devaluation of the peso had a number of effects on the
Mexican economy that have adversely affected the financial condition of
businesses in Mexico, including the Company's Mexican Operations. The
devaluation caused the peso value of dollar denominated indebtedness associated
with the Mexican Operations, which consists primarily of equipment financing, to
increase significantly, and also greatly increased the rate of inflation,
resulting in a sharp rise in nominal interest rates on peso denominated
financing.
 
     The prices the Company pays for certain equipment, energy and other
materials for the Mexican Operations are set, in part, by reference to
international prices denominated in currencies other than pesos, and the results
of operations of the Mexican Operations, denominated in pesos, are translated
into dollars for inclusion in the Company's financial statements. However, the
operations and revenues of the Mexican Operations are primarily peso-denominated
and the Company has not hedged against currency risks in Mexico, except that
certain of the costs incurred by the Mexican Operations may be adjusted,
pursuant to the Company's contracts with PEMEX, to take into account economic
events such as inflation and devaluation of the peso (see "Business -- Marketing
and Customers -- Contracts"). The Company is subject to foreign
 
                                       10
<PAGE>   13
 
exchange risks primarily in connection with the conversion into dollars of the
results of operations of the Mexican Operations. Increases in the peso to dollar
exchange rate will result in a reduction of the dollar value of peso-based
revenues of the Company as well as the dollar value of peso-based expenses of
the Company. Likewise, decreases in such rate will result in increases in the
dollar value of such revenues and expenses. As a result, such fluctuations could
have a material adverse effect on the financial condition and results of
operations of the Company. The Company does not currently employ any hedging
method to reduce such foreign exchange risks. While the Company may from time to
time evaluate methods to reduce such foreign exchange risks, the adoption of any
particular method will depend on existing market conditions. The Company cannot
reasonably predict what method, if any, it will adopt to reduce foreign exchange
risks, and there can be no assurance that it will adopt any such method or that,
if adopted, any such method will reduce such risks.
 
     There can be no assurance that future developments in the Mexican
political, economic, social or diplomatic condition, over which the Company has
no control, will not have a material adverse effect on the Company's financial
condition or results of operations or the market price of its securities.
 
     In June 1996, the Company established a branch and opened a seismic data
processing center in Peru. In September 1996, the Company entered into a
contract to provide land-based seismic data acquisition services there and
intends to continue to seek expansion opportunities in Peru and other countries
in Latin America. In general, so long as the Company derives a significant
portion of its revenues outside the United States, in addition to currency
risks, the Company will be subject to risks associated with international
operations, including war, civil disturbance and government activity, which may
limit or disrupt the Company's operations.
 
DEPENDENCE ON SIGNIFICANT CUSTOMER
 
     24.7% and 21.3% of the pro forma net sales of the Company for the year
ended December 31, 1995 and six months ended June 30, 1996, respectively, and in
excess of 95% of the net sales of the Mexican Operations in those periods, were
derived from land-based seismic data acquisition services provided to PEMEX. The
loss of PEMEX as a customer would have a material adverse effect on the
Company's financial condition and results of operations. See
"Business -- Marketing and Customers -- Customers."
 
RELIANCE ON KEY SUPPLIER
 
     The Company is dependent on Input/Output, Inc. ("Input/Output") for
additions to and replacements for its I/O SYSTEM TWO(R) seismic data acquisition
systems. Although Input/Output is not the only supplier of seismic data
acquisition systems, it is the Company's primary supplier and the Company
considers Input/Output's systems to be among the state-of-the-art seismic data
acquisition systems for performing 3-D seismic surveys on land and in shallow
water. Therefore, should a system be substantially damaged, or should a
significant systems failure occur, and should Input/Output be unwilling or
unable to furnish replacement parts or otherwise repair such systems, the
Company may be unable to obtain such replacements from other sources and would
have to acquire other equipment that may be less advanced technologically.
Although the Company believes it will be able to obtain systems from
Input/Output or another source of state-of-the-art seismic data acquisition
systems in the future, should it be unable to do so, the Company's anticipated
revenues could be reduced significantly and the amount of cash needed for
capital expenditures could be increased significantly. See "Business -- Capital
Expenditures."
 
OPERATING RISKS; WEATHER
 
     The Company's crews often conduct operations in extreme weather, in
difficult terrain that is not easily accessible and under other hazardous
conditions. Accordingly, its operations are subject to risks of injury to
personnel and loss of equipment. Fixed costs, including costs associated with
operating leases, labor costs and depreciation, account for more than half of
the Company's costs and expenses. As a result, low productivity resulting from
weather interruptions, equipment failures or other causes such as fires and
accidental explosions resulting from the handling of equipment and supplies can
result in significant operating losses. In addition,
 
                                       11
<PAGE>   14
 
while the Company has insurance policies that protect it against liabilities
that may be incurred in the ordinary course of its business, the Company is
unable to insure fully against all possible loss or liability. For example, no
insurance is available at a cost deemed reasonable by the Company for war,
nationalization, appropriation or other extreme events. See
"Business -- Operating Conditions" and "Business -- Marketing and
Customers -- Contracts."
 
RELIANCE ON KEY PERSONNEL
 
     The Company's operations are dependent on the efforts of Messrs. Richard
Davis, Luis Ferran, Joel Friedman, Ronald Koons, Charles Merchant and Wayne
Widynowski. If any of these key persons becomes unable to continue in his
present role, or if the Company is unable to attract and retain other skilled
employees, the Company's business could be adversely affected. See "Management."
 
POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON STOCK
 
     Upon completion of this Offering, the Company will have outstanding
11,600,000 shares of Common Stock. The Company and its officers and directors
have agreed that for a period of 120 days from the date of this Prospectus they
will not without the prior written consent of Smith Barney Inc. (i) sell, offer
to sell, solicit an offer to buy, contract to sell or otherwise transfer or
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for, or any rights to purchase or acquire, shares of
Common Stock, or (ii) grant any options or warrants to purchase shares of Common
Stock (other than the grant of options under the 3-D Geophysical 1995 Long-Term
Incentive Compensation Plan, as amended (the "Plan"), and Common Stock issuable
upon the exercise of options granted under the Plan or otherwise to officers,
directors and other key employees of the Company). The 1,400,681 shares of
Common Stock issued in connection with the founding of 3-D Geophysical will be
eligible for resale in the public market commencing in March 1997 and the
1,599,319 shares of Common Stock issued to the former stockholders of the
Operating Subsidiaries and PIASA simultaneously with the consummation of the
Initial Public Offering will be eligible for resale in the public market
commencing in February 1998, subject in each case to certain volume and other
restrictions provided for in Rule 144 ("Rule 144") promulgated under the
Securities Act of 1933, as amended (the "Securities Act"). The Board has granted
pursuant to the Plan options to purchase an aggregate of 624,350 shares of
Common Stock and has granted options to purchase an additional aggregate of
265,002 shares of Common Stock other than pursuant to the Plan to certain
directors and key employees of the Company (see "Management -- Director
Compensation" and "Management -- Long-Term Incentive Compensation Plan"). The
Company intends to register under the Securities Act the shares issuable upon
exercise of such options and, upon such registration, such shares will be
eligible for resale in the public market, except that any such shares issued to
affiliates are subject to certain restrictions under Rule 144.
 
     Sales of substantial amounts of the Common Stock in the public market could
adversely affect prevailing market prices and the ability of the Company to
raise equity capital in the future. See "Shares Eligible for Future Sale" and
"Underwriting."
 
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION,
BY-LAWS AND DELAWARE GENERAL CORPORATION LAW
 
     Certain provisions of the Certificate of Incorporation and By-laws may tend
to deter potential unsolicited offers or other efforts to obtain control of the
Company that are not approved by the Board of Directors. Such provisions may
therefore deprive the stockholders of opportunities to sell shares of Common
Stock at prices higher than prevailing market prices. See "Description of
Capital Stock -- Certain Anti-Takeover Effects of Certain Provisions of the
Certificate of Incorporation, By-laws and Delaware General Corporation Law."
 
                                       12
<PAGE>   15
 
                                  THE COMPANY
 
     3-D Geophysical, Inc. is one of the leading providers of land-based and
shallow water 3-D and 2-D seismic data acquisition services to the oil and gas
industry in the Western Hemisphere. As of September 30, 1996, the Company's nine
crews operated land-based and shallow water seismic data acquisition systems,
primarily utilizing state-of-the-art, 24-bit equipment, with a total of
approximately 12,000 channels, in Alaska, the Rocky Mountain, West Coast and
Appalachian regions, Mexico and elsewhere in Latin America.
 
     The Company conducts its operations through the four Operating
Subsidiaries -- Geoevaluaciones, Northern, Paragon and Kemp. In addition, the
Company processes seismic data through another subsidiary, PIASA.
 
     3-D Geophysical, Inc., a Delaware corporation, was incorporated in March
1995. The Company's principal offices are located at 7076 South Alton Way,
Building H, Englewood, Colorado 80112, and its telephone number is (303)
290-0214.
 
                                       13
<PAGE>   16
 
                                USE OF PROCEEDS
 
     The net proceeds to the Company from the sale of the 4,000,000 shares of
Common Stock offered hereby, after deducting the underwriting discount and
estimated expenses of this Offering to be paid by the Company, are estimated to
be approximately $     million ($     million if the Underwriters'
over-allotment option is exercised in full), assuming an offering price of
$       per share, the last reported sale price of the Common Stock on the
Nasdaq National Market on October   , 1996. The Company anticipates that it will
use the net proceeds for the following purposes: (i) approximately $20.0 million
to purchase additional systems, additional channel capacity for the six 24-bit
seismic data acquisition systems it presently owns and related vehicles and
equipment to enhance the Company's 3-D seismic data acquisition capacity; (ii)
approximately $6.0 million to repay indebtedness incurred in connection with the
Company's purchase in May 1996 of two 24-bit seismic data acquisition systems;
and (iii) the balance, if any, for working capital and other general corporate
purposes.
 
     The additional systems referred to in clause (i) above include a 1,000
channel seismic data acquisition system that is presently leased from The
Andrews Group International, Inc. under a lease that contains a purchase option.
See "Use of Proceeds," "Business -- Capital Expenditures" and "Certain
Transactions." The indebtedness referred to in clause (ii) above consists of a
portion of the $12 million borrowed under a term loan from First Interstate Bank
of Texas, N.A. that matures on July 31, 1999 and bears interest at an annual
rate equal to the prime rate plus 1%. See "Capitalization" and
"Business -- Capital Expenditures."
 
     The Company may revise its plans in response to future changes in the oil
and gas industry in general and the demand for its services in particular, its
results of operations, its other capital requirements and other relevant
factors. Until the proceeds are utilized as set forth above, the Company intends
to invest the net proceeds of this Offering in money market obligations,
certificates of deposit or other short-term, interest bearing securities.
 
                                DIVIDEND POLICY
 
     The Company intends to retain its earnings, if any, to finance the
expansion of its business and for general corporate purposes and does not
anticipate paying any cash dividends on the Common Stock in the foreseeable
future. Any payment of future dividends will be at the discretion of the Board
of Directors and will depend upon, among other things, the Company's earnings,
financial condition, capital requirements, level and terms of indebtedness,
contractual restrictions with respect to the payment of dividends and other
factors that the Board of Directors may deem relevant. The Company is a party to
a loan agreement that restricts the payment of dividends and certain other
matters. See "Capitalization," "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity" and
"Business -- Capital Expenditures."
 
                          PRICE RANGE OF COMMON STOCK
 
     Since the Initial Public Offering in February 1996 of Common Stock at $7.50
per share, the Common Stock has been traded on the Nasdaq National Market under
the symbol "TDGO." The following table sets forth, for the periods indicated,
the high and low sale prices per share for the Common Stock as reported by the
Nasdaq National Market:
 
<TABLE>
<CAPTION>
                                                                            HIGH     LOW
                                                                            ----     ---
    <S>                                                                     <C>      <C>
    1996
    First Quarter (February 6 through March 31)...........................  10 3/8   7 7/16
    Second Quarter........................................................  12 1/2   8 1/2
    Third Quarter.........................................................  11 3/4   6 3/4
    Fourth Quarter (through October   )...................................
</TABLE>
 
     On October   , 1996, the last reported sale price of the Common Stock as
reported by the Nasdaq National Market was $     .
 
                                       14
<PAGE>   17
 
                                 CAPITALIZATION
 
     The following table sets forth the capitalization of the Company as of June
30, 1996, and as adjusted to reflect the sale of shares of Common Stock offered
hereby and the application of a portion of the estimated net proceeds therefrom
as described in "Use of Proceeds." This table should be read in conjunction with
the consolidated financial statements of the Company, including the notes
thereto, appearing elsewhere in this Prospectus.
 
<TABLE>
<CAPTION>
                                                                              JUNE 30, 1996
                                                                           --------------------
                                                                                          AS
                                                                           ACTUAL      ADJUSTED
                                                                           -------     --------
                                                                              (IN THOUSANDS)
<S>                                                                        <C>         <C>
Current portion of long-term debt and capital leases.....................  $ 5,372     $
                                                                           =======     ========
Long-term debt and capital leases, excluding current portion(1)..........  $ 9,653     $
                                                                           -------     --------
Stockholders' equity:
  Preferred Stock, $.01 par value per share; 1,000,000 shares authorized;
     none issued and outstanding.........................................       --           --
  Common Stock, $.01 par value per share; 25,000,000 shares authorized;
     7,600,000 shares issued and outstanding and 11,600,000 shares issued
     and outstanding, as adjusted........................................  $    76     $
  Additional paid-in capital.............................................   28,263
  Retained earnings......................................................      635
  Cumulative foreign currency translation adjustments....................   (3,014)
                                                                           -------     --------
          Total stockholders' equity.....................................   25,960
                                                                           -------     --------
          Total capitalization...........................................  $35,613     $
                                                                           =======     ========
</TABLE>
 
- ---------------
 
(1) The Company's long-term debt is described below:
 
     On May 31, 1996, the Company acquired seismic data acquisition equipment
(the "Equipment") from the manufacturer thereof, Input/Output, for an aggregate
of approximately $8.5 million in cash and refinanced certain conditional sales
agreements with Input/Output for an additional $4.5 million of equipment. A
portion of the purchase price for the Equipment and the funds for the
refinancing were paid from the proceeds of a $12 million borrowing under a $15
million term loan (the "Term Loan") from First Interstate Bank of Texas, N.A.
(the "Bank") pursuant to a Loan Agreement between the Company and the Bank,
dated as of May 29, 1996 (the "Loan Agreement"). The Term Loan is payable in
substantially equal monthly installments through July 31, 1999, bears interest
at an annual rate equal to the prime rate plus 1% (9.25% at June 30, 1996) and
is secured by a lien on the Company's accounts, accounts receivable, equipment,
machinery, fixtures, inventory, goods, chattel paper, documents, instruments,
investment property, general intangibles, and other personal property, whether
then owned or thereafter acquired, and all products and proceeds thereof, and by
guarantees by certain of the Company's subsidiaries. The Loan Agreement also
provides for a $3 million revolving credit loan (the "Revolving Credit Loan")
which may be drawn down from time to time through May 29, 1997 in an amount of
up to 70% of the Company's "Eligible Accounts" (as defined in the Loan
Agreement). The rate of interest and the security for the Revolving Credit Loan
are the same as those described above for the Term Loan. In addition to certain
customary affirmative covenants, the Loan Agreement contains restrictions on the
Company with respect to (i) incurring Debt (as defined), incurring or permitting
to exist Liens (as defined) on its property, assets or revenues, (iii) declaring
or paying any dividends or other distributions on its capital stock (or
acquiring any of its capital stock), (iv) issuing capital stock, (v) entering
into transactions with affiliates, (vi) disposing of assets, and (vii) certain
other matters. The Loan Agreement also contains financial covenants with respect
to minimum tangible net worth, the ratio of tangible net worth to net
liabilities and the ratio of EBITDA to debt service.
 
                                       15
<PAGE>   18
 
         SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
 
     On February 9, 1996, simultaneously with the consummation of the Initial
Public Offering, 3-D Geophysical acquired in separate transactions, in exchange
for cash, notes and shares of Common Stock, Geoevaluaciones, PIASA, Northern's
land-based seismic data acquisition operations, Paragon and Kemp. See "Certain
Transactions." For accounting purposes, the acquisitions of Geoevaluaciones and
PIASA were treated as a recapitalization of Geoevaluaciones and PIASA with
Geoevaluaciones (combined with PIASA) deemed to be the acquiror and predecessor
of 3-D Geophysical. Accordingly, the combined net assets of Geoevaluaciones and
PIASA were valued at historical cost and the consideration given to the former
stockholders of Geoevaluaciones and PIASA was treated for accounting purposes as
a dividend. The acquisitions of Northern's land-based seismic data acquisition
operations, Paragon and Kemp (the "Purchased Companies") were treated as
business combinations accounted for by the purchase method of accounting as
prescribed by Accounting Principles Board Opinion No. 16 and SEC Staff
Accounting Bulletin No. 48 and are included within 3-D Geophysical's historical
consolidated statement of operations commencing February 9, 1996. The
acquisition of Paragon's common stock in exchange for shares of Common Stock was
accounted for at Paragon's historical cost. Northern's land-based seismic
operations and Kemp were valued at the fair market value of consideration given.
In connection with the acquisitions of Northern's land-based seismic data
acquisition operations and Kemp, the excess of consideration given over the fair
market value of net assets is being amortized on a straight-line basis over 15
years. For purposes of identification and description, the Company is referred
to as the "Predecessor" for the period prior to the Initial Public Offering and
the acquisition of the Purchased Companies as described below, the "Successor"
for the period subsequent to the Initial Public Offering and the acquisition of
the Purchased Companies and the "Company" for both periods.
 
     Selected historical financial data is provided for Geoevaluaciones and
PIASA on a combined basis because, as described in the preceding paragraph,
Geoevaluaciones and PIASA are considered the acquirors of the Purchased
Companies for accounting purposes and therefore are deemed to be the predecessor
of 3-D Geophysical. The historical financial information for each of the three
years ended December 31, 1995 and for the six months ended June 30, 1995 was
derived from financial statements appearing elsewhere in this Prospectus. The
historical financial information for the years ended December 31, 1991 and 1992
was derived from Geoevaluaciones' financial statements (1991 is unaudited) which
do not appear elsewhere in this Prospectus. The historical financial information
for the six months ended June 30, 1996 represents combined operations for the
entire six months for Geoevaluaciones and also includes operations for the
Purchased Companies for the period from February 9, 1996 to June 30, 1996. As a
result, the Successor's statement of operations for the six months ended June
30, 1996 is not comparable to the Predecessor's statement of operations for the
six months ended June 30, 1995. The pro forma consolidated statements of
operations for the year ended December 31, 1995 and the six-month periods ended
June 30, 1995 and 1996 assume that the Company had completed the
recapitalization, the acquisition of the Purchased Companies and the Initial
Public Offering on January 1, 1995. The following selected pro forma statement
of operations information was derived from the pro forma consolidated financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.
The pro forma consolidated statement of operations data may not be indicative of
actual results that would have been achieved if the transactions had occurred on
the dates indicated or the results which may be realized in the future.
 
     The pro forma consolidated statement of operations information does not
include the effects of the proposed acquisition of J.R.S. Exploration (see
"Business -- Proposed Acquisition of J.R.S. Exploration"). For a presentation of
the pro forma effects of this proposed acquisition, see the adjusted pro forma
consolidated financial statements, including the notes thereto, appearing
elsewhere in this Prospectus.
 
     The following selected financial data is qualified in its entirety by the
more detailed information appearing in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.
 
                                       16
<PAGE>   19
 
         SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
 
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                                                                               COMPANY
                                                                                                              ----------
                                                                    PREDECESSOR(1)
                                             -------------------------------------------------------------
                                                                                                SIX MONTHS    SIX MONTHS
                                                        YEAR ENDED DECEMBER 31,                   ENDED         ENDED
                                             ---------------------------------------------       JUNE 30,      JUNE 30,
                                              1991     1992      1993      1994      1995          1995          1996
                                             ------   -------   -------   -------   ------      ----------    ----------
<S>                                          <C>      <C>       <C>       <C>       <C>         <C>           <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................    $4,241   $10,342   $17,638   $17,660   $9,825        $4,847       $ 19,539
Expenses:
 Cost of data acquisition................     2,574     7,577    13,146    11,004    5,968         2,840         14,452
 Depreciation and
   amortization..........................       651       941       990     1,468      662           443          1,649
 General and administrative expenses.....       538       908     1,280     1,814    1,038           546          2,585
                                             -------  -------   -------   -------   ------       -------        -------
Operating income.........................       478       916     2,222     3,374    2,157         1,018            853
Other income (expense):
 Miscellaneous...........................        (3)       63       270        87      503           102            364
 Interest expense........................      (283)     (669)   (1,032)     (466)    (803)         (520)          (296)
 Foreign currency transaction gains
   (losses)..............................        45        --        33       (92)    (120)           12             81
                                             -------  -------   -------   -------   ------       -------        -------
Income (loss) before provision for
 taxes...................................       237       310     1,493     2,903    1,737           612          1,002
Provision (benefit) for income taxes.....        66        95       418     1,000      130           144            277
                                             -------  -------   -------   -------   ------       -------        -------
Income (loss) before extraordinary
 item....................................       171       215     1,075     1,903    1,607           468            725
Extraordinary item, net..................        --        --        --        --       --            --             57
                                             -------  -------   -------   -------   ------       -------        -------
Net income...............................    $  171   $   215   $ 1,075   $ 1,903   $1,607        $  468       $    782
                                             =======  =======   =======   =======   ======       =======        =======
Weighted average shares outstanding......                                                                         6,301
PER SHARE INFORMATION:
Income before extraordinary item.........                                                                      $    .12
                                                                                                                =======
Extraordinary item.......................                                                                      $    .01
                                                                                                                =======
Net earnings.............................                                                                      $    .13
                                                                                                                =======
STATEMENT OF CASH FLOWS DATA:
 Operating activities....................    $  997   $ 1,724   $ 2,199   $ 4,399   $1,672        $1,030       $ (3,527)
 Investing activities....................    (1,362)     (671)     (747)   (3,262)     204          (250)       (20,094)
 Financing activities....................       (11)     (655)      (63)   (2,058)  (1,423)         (710)        25,877
OTHER FINANCIAL DATA:
EBITDA(3)................................    $1,171   $ 1,920   $ 3,515   $ 4,837   $3,202        $1,575       $  2,947
OPERATING DATA:
Number of crews at end of period:
 I/O SYSTEM TWO(R) crews.................                   2         2         2        2             2              6
 DFS-VTM crews...........................                  --        --        --       --            --              1
 Number of recording channels at end of
   period................................                 672       672       960      960           960         10,548
 
STATEMENT OF CASH FLOWS DATA:
 Operating activities....................
 Investing activities....................
 Financing activities....................
OTHER FINANCIAL DATA:
EBITDA(3)................................   $ 4,960      $  2,039      $  2,886
OPERATING DATA:
Number of crews at end of period:
 I/O SYSTEM TWO(R) crews.................         7             5             6(4)
 DFS-VTM crews...........................         1             4             1(4)
 Number of recording channels at end of
   period................................     7,500         5,220        10,548(5)
</TABLE>
 

<TABLE>
<CAPTION>
                                                         COMPANY
                                           -------------------------------------
                                                       PRO FORMA(2)
                                           -------------------------------------
                                                               SIX MONTHS
                                             YEAR                ENDED
                                             ENDED      ------------------------
                                           DEC. 31,      JUNE 30,      JUNE 30,
                                             1995          1995          1996
                                           ---------    ----------    ----------
<S>                                         <C>         <C>           <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................   $39,852      $ 14,746      $ 23,362
Expenses:
 Cost of data acquisition................    30,901        10,711        17,971
 Depreciation and
   amortization..........................     3,425         1,804         1,971
 General and administrative expenses.....     4,287         2,113         2,950
                                            -------      --------      --------
Operating income.........................     1,239           118           470
Other income (expense):
 Miscellaneous...........................       416           105           364
 Interest expense........................      (583)         (630)         (338)
 Foreign currency transaction gains
   (losses)..............................      (120)           12            81
                                            -------      --------      --------
Income (loss) before provision for
 taxes...................................       952          (395)          577
Provision (benefit) for income taxes.....      (145)         (208)          128
                                            -------      --------      --------
Income (loss) before extraordinary
 item....................................     1,097          (187)          449
                                            =======      ========      ========
Extraordinary item, net..................
Net income...............................
Weighted average shares outstanding......     6,232         6,232         6,232
PER SHARE INFORMATION:
Income before extraordinary item.........   $   .18      $   (.03)     $    .07
                                            =======       =======       =======
Extraordinary item.......................
Net earnings.............................
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                     COMPANY        COMPANY AS OF
                                                                                      AS OF         JUNE 30, 1996
                                                                                  JUNE 30, 1996     AS ADJUSTED(6)
                                                                                  -------------     --------------
<S>                                                                               <C>               <C>
BALANCE SHEET DATA:                                                        
  Working capital..............................................................      $ 4,350           $
  Total assets.................................................................       49,321
  Long-term debt and capital leases, less current portion......................        9,653
  Total stockholders' equity...................................................       25,960
</TABLE>
 
                                       17
<PAGE>   20
 
- ---------------
 
(1)  Amounts represent the combination of Geoevaluaciones and PIASA, the
     Predecessor.
 
(2)  Reflects pro forma adjustments for the acquisitions of the Purchased
     Companies and the consummation of the Initial Public Offering. See the pro
     forma consolidated financial statements, including the notes thereto,
     appearing elsewhere in this Prospectus for a discussion of the assumptions
     made and adjustments applied in the preparation of this data.
 
(3)  EBITDA represents earnings before interest expense, taxes, depreciation and
     amortization. EBITDA should not be considered as an alternative to net
     income as an indicator of the Company's operating performance or as an
     alternative to cash flow as a better measure of liquidity.
 
(4)  As of September 30, 1996, the Company had six crews operating I/O SYSTEM
     TWO(R) systems, two crews operating DFS-V(TM) systems and one crew
     providing drilling and survey services for a seismic data acquisition crew
     operated by PEMEX.
 
(5)  As of September 30, 1996, the Company's systems had a total of 
     approximately 12,000 channels.
 
(6)  Reflects the sale of shares of Common Stock offered hereby and the
     application of a portion of the estimated net proceeds as described in "Use
     of Proceeds."
 
                                       18
<PAGE>   21
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
     The following discussion has been divided into several sections: the first
section contains the pro forma results of operations for the four Operating
Subsidiaries and PIASA for the periods indicated based on the pro forma
consolidated financial statements of the Operating Subsidiaries, PIASA and 3-D
Geophysical assuming the Initial Public Offering was consummated and the
Operating Subsidiaries and PIASA were acquired on January 1, 1995. The second
section contains a discussion of the combined financial statements of the
Company for the periods indicated. For accounting purposes, the Mexican
Operations are considered the predecessor company, and the combined financial
statements include the operating results of the Mexican Operations for all the
periods and the operating results of the Purchased Companies only for the period
beginning February 9, 1996. As a result, the Company's statement of operations
for the six months ended June 30, 1996 is not comparable to the statement of
operations for the period ended June 30, 1995. Finally, there is a discussion of
the liquidity and capital resources of the Company, the impact of the Mexican
economy and certain other matters. The following discussion of the results of
operations and the financial position of 3-D Geophysical and of the Operating
Subsidiaries and PIASA should be read in connection with "Selected Historical
and Pro Forma Financial and Operating Data," and the financial statements,
including the notes thereto, appearing elsewhere in this Prospectus.
 
PRO FORMA RESULTS OF OPERATIONS
 
  Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
 
     NET SALES. Pro forma net sales for the Company increased 58.4% to $23.4
million in the six months ended June 30, 1996 from $14.7 million in the six
months ended June 30, 1995. The increase is primarily the result of an increase
in seismic survey activities in the United States. Pro forma net sales in the
United States increased 85.6% to $18.4 million in the six months ended June 30,
1996 from $9.9 million in the six months ended June 30, 1995. The increase is
primarily the result of increased seismic survey activities in the Rocky
Mountain and West Coast regions. Pro forma net sales for the Mexican Operations
increased 42.9% to $5.0 million in the six months ended June 30, 1996 from $3.5
million in the six months ended June 30, 1995 due primarily to inflation. In
addition to the $3.5 million net sales in the six months ended June 30, 1995,
net sales in that period also include $1.3 million of contractual price
adjustments related to increased costs due to the devaluation of the peso which
occurred in December 1994. There were no such contractual adjustments in the
1996 period.
 
     COST OF DATA ACQUISITION. Pro forma cost of data acquisition for the
Company increased 67.8% to $18.0 million in the six months ended June 30, 1996
from $10.7 million in the six months ended June 30, 1995. The increase is
primarily the result of increased seismic survey activities in the United
States. Pro forma cost of data acquisition in the United States increased 78.6%
to $14.1 million in the six months ended June 30, 1996 from $7.9 million in the
six months ended June 30, 1995 due to greater activity in the Rocky Mountain and
West Coast regions. Pro forma cost of data acquisition for the Mexican
Operations increased 37.9% to $3.9 million in the six months ended June 30, 1996
from $2.8 million in the six months ended June 30, 1995 due primarily to
inflation.
 
     DEPRECIATION AND AMORTIZATION. Pro forma depreciation and amortization for
the Company increased 9.3% to $2.0 million in the six months ended June 30, 1996
from $1.8 in the six months ended June 30, 1995. This increase is primarily the
result of the acquisition of new equipment which was partially offset by the
Mexican Operations where depreciation and amortization decreased 27.3% to
$322,000 in the six months ended June 30, 1996 from $443,000 in the six months
ended June 30, 1995. The decline in depreciation and amortization in the Mexican
Operations is attributable primarily to the devaluation of the peso and to a
lesser extent decreases in capital expenditures.
 
     GENERAL AND ADMINISTRATIVE EXPENSES. Pro forma general and administrative
expenses for the Company increased 39.6% to $3.0 million in the six months ended
June 30, 1996 from $2.1 million in the six months ended June 30, 1995. The
increase is primarily the result of the establishment of a 3-D Geophysical
headquarters, public company expenses and increased payroll. Pro forma general
and administrative expenses in the United States increased 49.4% to $2.4 million
in the six months ended June 30, 1996 from $1.6 million
 
                                       19
<PAGE>   22
 
in the six months ended June 30, 1995. Pro forma general and administrative
expenses for the Mexican Operations increased 11.5% to $609,000 in the six
months ended June 30, 1996 from $546,000 in the six months ended June 30, 1995.
The increase in general and administrative expenses in the Mexican Operations is
attributable primarily to the costs of evaluating business opportunities in
Latin America.
 
     OPERATING INCOME. Pro forma operating income for the Company increased
298.3% to $470,000 in the six months ended June 30, 1996 from operating income
of $118,000 in the six months ended June 30, 1995. The increase is primarily
related to improvements in the operations in the United States which recognized
an operating profit of $330,000 in the six months ended June 30, 1996 compared
to a loss of $900,000 in the six months ended June 30, 1995. Pro forma operating
income for the Mexican Operations decreased 86.2% to $140,000 in the six months
ended June 30, 1996 from $1.0 million in the six months ended June 30, 1995. The
decrease is primarily attributable to a $1.3 million price adjustment realized
in the six months ended June 30, 1995 as a result of contractual adjustments
relating to the devaluation of the peso in December 1994. There were no such
contractual adjustments in the 1996 period.
 
     MISCELLANEOUS INCOME (EXPENSE). The Company recognized pro forma
miscellaneous income of $364,000 in the six months ended June 30, 1996 compared
to miscellaneous income of $105,000 in the six months ended June 30, 1995. The
increase is primarily the result of interest income in Mexico due to high
interest rates and interest income related to a trade receivable converted to a
note, which was paid in July 1996.
 
     INTEREST EXPENSE. The Company's pro forma interest expense decreased 46.3%
to $338,000 compared to pro forma interest expense of $630,000 in the six months
ended June 30, 1995. The decline in interest expense is attributable to lower
borrowing costs for the Mexican Operations compared with the six months ended
June 30, 1995.
 
     FOREIGN CURRENCY TRANSACTION GAINS (LOSSES). The Company recognized pro
forma foreign currency gains of $81,000 in the six months ended June 30, 1996
compared to foreign currency gains of $12,000 in the six months ended June 30,
1995. The gains are attributable to the reduction of dollar liabilities of the
Mexican Operations and the fluctuation of the peso to dollar exchange rate.
 
     INCOME TAX EXPENSE (BENEFIT). The Company recognized pro forma income tax
expense of $128,000 in the six months ended June 30, 1996 compared to pro forma
income tax benefit of $208,000 in the six months ended June 30, 1995. The
increase is attributable to earnings increases in the operations in the United
States and a higher effective tax rate in the Mexican Operations due to lower
inflation adjustments.
 
  Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
 
     NET SALES. Pro forma net sales for the Company decreased 4.2% to $39.9
million for the year ended December 31, 1995 from $41.6 million for the year
ended December 31, 1994. The decline is primarily the result of decreased
seismic survey activities in the Mexican Operations partially offset by an
increase in survey activities in the United States. Pro forma net sales in the
United States increased 25.4% to $30.0 million for the year ended December 31,
1995 from $23.9 million for the year ended December 31, 1994. The increase is
primarily attributable to operations in the Rocky Mountain region where sales
increased 29.0% to $19.9 million. A third crew was added for the entire fourth
quarter which was leased from an unrelated seismic contractor. Pro forma net
sales for the Mexican Operations decreased 44.4% to $9.8 million for the year
ended December 31, 1995 from $17.7 million for the year ended December 31, 1994.
The decline in net sales in the Mexican Operations is attributable primarily to
the devaluation of the peso as well as the decline in demand for seismic surveys
by PEMEX in 1995 due to the economic turmoil in Mexico in 1995 and PEMEX's
internal transition from 2-D to 3-D as its primary seismic survey technique.
 
     COST OF DATA ACQUISITION. Pro forma cost of data acquisition for the
Company increased 8.2% to $30.9 million for the year ended December 31, 1995
from $28.6 million for the year ended December 31, 1994. The increase is
primarily the result of increased seismic survey activities in the United
States. The increase in the cost of data acquisition in the United States was
partially offset by a decline in survey activities in the Mexican Operations.
Pro forma cost of data acquisition in the United States increased 42.0% to
 
                                       20
<PAGE>   23
 
$24.9 million for the year ended December 31, 1995 from $17.6 million for the
year ended December 31, 1994. The increase is primarily attributable to
significant equipment rental expenses in the Rocky Mountain region. Pro forma
cost of data acquisition for the Mexican Operations decreased 45.8% to $6.0
million for the year ended December 31, 1995 from $11.0 million for the year
ended December 31, 1994. The decline in cost of data acquisition in the Mexican
Operations is attributable primarily to the devaluation of the peso and to a
lesser extent is attributable to decreases in personnel due the decline in
demand for seismic surveys by PEMEX in 1995.
 
     DEPRECIATION AND AMORTIZATION. Pro forma depreciation and amortization for
the Company decreased 19.7% to $3.4 million for the year ended December 31, 1995
from $4.3 million for the year ended December 31, 1994. The decrease is
primarily the result of the devaluation of the peso which was partially offset
by capital expenditures in the operations in the United States. Pro forma
depreciation and amortization in the United States remained relatively unchanged
at $2.8 million for the year ended December 31, 1995 from the year ended
December 31, 1994. Pro forma depreciation and amortization for the Mexican
Operations decreased 54.9% to $662,000 for the year ended December 31, 1995 from
$1.5 million for the year ended December 31, 1994, primarily due to the
devaluation of the peso and to a lesser extent decreases in capital
expenditures.
 
     GENERAL AND ADMINISTRATIVE EXPENSES. Pro forma general and administrative
expenses for the Company decreased 6.9% to $4.3 million for the year ended
December 31, 1995 from $4.6 million for the year ended December 31, 1994. The
decrease is primarily the result of decreased general and administrative
expenses for the Mexican Operations due the devaluation of the peso, partially
offset by increased overhead in the operations in the United States. Pro forma
general and administrative expenses in the United States increased 16.3% to $3.3
million for the year ended December 31, 1995 from $2.8 million for the year
ended December 31, 1994. Pro forma general and administrative expenses for the
Mexican Operations decreased 42.8% to $1.0 million for the year ended December
31, 1995 from $1.8 million for the year ended December 31, 1994. The decline in
general and administrative expenses for the Mexican Operations is attributable
primarily to the devaluation of the peso and to a lesser extent decreases in
personnel due to the decline in demand for seismic surveys by PEMEX in 1995.
 
     OPERATING INCOME. Pro forma operating income for the Company decreased
70.3% to $1.2 million for the year ended December 31, 1995 from $4.2 million for
the year ended December 31, 1994. Pro forma operating income in the United
States decreased to a loss of $918,000 for the year ended December 31, 1995 from
operating income of $801,000 for the year ended December 31, 1994. The losses in
the United States were primarily attributable to a decline in seismic activities
in the Rocky Mountain region in the first half of 1995. Pro forma operating
income for the Mexican Operations decreased 36.1% to $2.1 million for the year
ended December 31, 1995 from $3.4 million for the year ended December 31, 1994.
The decline in operating income in the Mexican Operations is attributable
primarily to the devaluation of the peso as well as the decline in demand for
seismic surveys by PEMEX in 1995 due to the economic turmoil in Mexico in 1995
as well as PEMEX's internal transition from 2-D to 3-D as its primary seismic
survey technique.
 
     MISCELLANEOUS INCOME (EXPENSE). The Company recognized pro forma
miscellaneous income of $416,000 for the year ended December 31, 1995 compared
to pro forma miscellaneous income of $77,000 for the year ended December 31,
1994. The increase is primarily the result of interest income in Mexico due to
high interest rates and a gain on sale of equipment in Mexico.
 
     INTEREST EXPENSE. The Company recognized pro forma interest expense of
$583,000 for the year ended December 31, 1995 compared to $80,000 for the year
ended December 31, 1994. The increase is primarily due to increased debt levels
at Paragon.
 
     FOREIGN CURRENCY TRANSACTION GAINS (LOSSES). The Company recognized pro
forma foreign currency losses of $120,000 for the year ended December 31, 1995
compared to foreign currency losses of $92,000 for the year ended December 31,
1994.
 
     INCOME TAX EXPENSE (BENEFIT). The Company recognized a pro forma income tax
benefit of $145,000 for the year ended December 31, 1995 compared to a pro forma
income tax expense of $1.4 million for the year ended December 31, 1994. The tax
benefit is attributable to losses incurred in the United States at an effective
tax rate of 34% partially offset by earnings from the Mexican Operations taxed
at an adjusted effective tax rate
 
                                       21
<PAGE>   24
 
of 7.5%. The effective tax rate in Mexico for the year ended December 31, 1995
was lower than the 34% statutory rate due to favorable inflation adjustments.
 
COMBINED RESULTS OF OPERATIONS
 
  Six Months Ended June 30, 1996 compared to Six Months Ended June 30, 1995
 
     NET SALES. Net sales increased 303.1% to $19.5 million in the six months
ended June 30, 1996 from $4.8 million in the six months ended June 30, 1995. The
increase is primarily attributable to the inclusion of $14.6 million of net
sales for the Purchased Companies and a 42.9% increase to $5.0 million in the
six months ended June 30, 1996, from $3.5 million in the six months ended June
30, 1995, for the Mexican Operations due primarily to inflation. In addition to
the $3.5 million net sales in the six months ended June 30, 1995, net sales in
that period also include $1.3 million of contractual price adjustments related
to increased costs due to the devaluation of the peso which occurred in December
1994. There were no such contractual adjustments in the 1996 period.
 
     COST OF DATA ACQUISITION. Cost of data acquisition increased 408.9% to
$14.5 million in the six months ended June 30, 1996 from $2.8 million in the six
months ended June 30, 1995. The increase is primarily attributable to the
inclusion of $10.6 million of data acquisition costs for the Purchased Companies
and a 37.9% increase to $3.9 million in the six months ended June 30, 1996, from
$2.8 million in the six months ended June 30, 1995, for the Mexican Operations
due primarily to inflation.
 
     DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
272.2% to $1.6 million in the six months ended June 30, 1996 from $443,000 in
the six months ended June 30, 1995. The increase is primarily attributable to
the inclusion of $1.3 million of depreciation and amortization for the Purchased
Companies, including $163,000 of goodwill amortization attributable to the
acquisitions of the Purchased Companies. This increase was partially offset by a
27.3% decrease to $322,000 in the six months ended June 30, 1996, from $443,000
in the six months ended June 30, 1995, for the Mexican Operations.
 
     GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 373.4% to $2.6 million in the six months ended June 30, 1996 from
$546,000 in the six months ended June 30, 1995. The increase is primarily
attributable to the inclusion of $2.0 million of general and administrative
expenses for the Purchased Companies and a 9.0% increase to $595,000 in the six
months ended June 30, 1996, from $546,000 in the six months ended June 30, 1995,
for the Mexican Operations.
 
     OPERATING INCOME. Operating income decreased 16.2% to $853,000 in the six
months ended June 30, 1996 from $1.0 million in the six months ended June 30,
1995. The operating income of the Mexican Operations decreased 84.8% to $155,000
in the six months ended June 30, 1996 from $1.0 million in the six months ended
June 30, 1995. The decrease in the operating income of the Mexican Operations in
the six months ended June 30, 1996 compared to the six months ended June 30,
1995 is due to contractual revenue adjustments of $1.3 million, which were
realized during the second quarter of 1995 and did not recur during 1996,
attributable to increased costs resulting from the devaluation of the peso
during December 1994. The decrease in the operating income of the Mexican
Operations was partially offset by the inclusion of $698,000 of operating income
for the Purchased Companies.
 
     MISCELLANEOUS INCOME (EXPENSE). Miscellaneous income of $364,000 was
recognized in the six months ended June 30, 1996 compared to miscellaneous
income of $102,000 in the six months ended June 30, 1995. The increase is
primarily the result of interest income in Mexico due to the high interest rates
available in Mexico, interest income from the offering proceeds of the Initial
Public Offering and interest income from the conversion of a trade receivable to
an interest-bearing note receivable.
 
     INTEREST EXPENSE. Interest expense decreased 43.1% to $296,000 in the six
months ended June 30, 1996 from $520,000 in the six months ended June 30, 1995.
The decrease is due to lower borrowing costs in the Mexican Operations compared
to the six months ended June 30, 1995.
 
     FOREIGN CURRENCY TRANSACTION GAINS (LOSSES). A foreign currency gain of
$81,000 was recognized in the six months ended June 30, 1996 compared to a
foreign currency gain of $12,000 in the six months ended June 30, 1995. The
gains are attributed to the reduction of U.S. dollar liabilities of the Mexican
Operations and the fluctuation of the peso to dollar exchange rate.
 
                                       22
<PAGE>   25
 
     INCOME TAX EXPENSE (BENEFIT). Income tax expense from operations was
$277,000 in the six months ended June 30, 1996 compared to income tax expense of
$144,000 in the six months ended June 30, 1995. The increase is primarily
attributable to earnings of the Purchased Companies taxed at a 34% rate,
partially offset by a 21% effective tax rate for earnings of the Mexican
Operations. The lower tax rate in Mexico is due to inflation adjustments.
 
     EXTRAORDINARY ITEM NET OF INCOME TAX EXPENSE. A $57,000 extraordinary item
was recognized in the six months ended June 30, 1996, net of tax expense of
$36,000. The extraordinary item is due to a gain recognized on the early
extinguishment of debt. No extraordinary items were recognized in the six months
ended June 30, 1995.
 
  Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
 
     NET SALES. Net sales decreased 44.4% to $9.8 million for the year ended
December 31, 1995 from $17.7 million for the year ended December 31, 1994. The
decline in net sales was attributable primarily to the devaluation of the peso
as well as the decline in demand for seismic surveys by PEMEX in 1995 due to the
economic turmoil in Mexico in 1995 as well as PEMEX's internal transition from
2-D to 3-D as its primary seismic survey technique.
 
     COST OF DATA ACQUISITION. Cost of data acquisition decreased 45.8% to $6.0
million for the year ended December 31, 1995 from $11.0 million for the year
ended December 31, 1994. The decline in cost of data acquisition in the Mexican
Operations is attributable primarily to the devaluation of the peso and to a
lesser extent decreases in personnel due the decline in demand for seismic
surveys by PEMEX in 1995.
 
     DEPRECIATION AND AMORTIZATION. Depreciation and amortization decreased
54.9% to $662,000 for the year ended December 31, 1995 from $1.5 million for the
year ended December 31, 1994. The decline in depreciation and amortization in
the Mexican Operations is attributable primarily to the devaluation of the peso
and to a lesser extend decreases in capital expenditures.
 
     GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased 42.8% to $1.0 million for the year ended December 31, 1995 from $1.8
million for the year ended December 31, 1994. The decline in general and
administrative expenses in the Mexican Operations is attributable primarily to
the devaluation of the peso and to a lesser extent decreases in personnel due to
the decline in demand for seismic surveys by PEMEX in 1995.
 
     OPERATING INCOME. Operating income decreased 36.1% to $2.2 million for the
year ended December 31, 1995 from $3.4 million for the year ended December 31,
1994. The decline in operating income in the Mexican Operations is attributable
primarily to the devaluation of the peso as well as the decline in demand for
seismic surveys by PEMEX in 1995 due to the economic turmoil in Mexico in 1995
as well as PEMEX's internal transition from 2-D to 3-D as its primary seismic
survey technique.
 
     MISCELLANEOUS INCOME (EXPENSE). Miscellaneous income of $503,000 was
recognized for the year ended December 31, 1995 compared to miscellaneous income
of $87,000 for the year ended December 31, 1994. The increase is primarily the
result of interest income in Mexico due to high interest rates and a gain on the
sale of equipment.
 
     INTEREST EXPENSE. Interest expense increased 72.3% to $803,000 for the year
ended December 31, 1995 from $466,000 for the year ended December 31, 1994. The
increase in interest expense is attributable to higher borrowing costs in 1995
due to the economic impact of the devaluation of the peso.
 
     FOREIGN CURRENCY TRANSACTION GAINS (LOSSES). Foreign currency losses of
$120,000 were recognized for the year ended December 31, 1995 compared to
foreign currency losses of $92,000 for the year ended December 31, 1994.
 
     INCOME TAX EXPENSE (BENEFIT). Income tax expense was $130,000 for the year
ended December 31, 1995 compared to income tax expense of $1.0 million for the
year ended December 31, 1994. The decline is attributable to lower earnings and
inflation adjustments to the 35% tax rate in Mexico which reduced the effective
tax rate to 7.5%.
 
                                       23
<PAGE>   26
 
  Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
 
     NET SALES. Net sales of $17.7 million in 1994 remained relatively unchanged
from 1993 due to greater utilization of Geoevaluaciones' heliportable crew
operating in Central Mexico and Geoevaluaciones' vibroseis crew operating in
Northern Mexico, offset by the 12% increase in the average peso to dollar
exchange rate for 1994 compared to 1993.
 
     COST OF DATA ACQUISITION. Cost of data acquisition decreased 16.3% to $11.0
million in 1994 from $13.1 million in 1993 as a result of improved efficiencies
in operations of the heliportable crew which resulted in lower rental costs and
Geoevaluaciones' decision in 1994 to end subcontracting of processing services
and to perform such services itself through its arrangement with PIASA which
reduced technical assistance costs. These costs also decreased as a result of
the increase in the average peso to dollar exchange rate for 1994 compared to
1993.
 
     DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased 48.3% to $1.5 million in 1994 from $1.0 million in 1993 as a result of
the acquisition of additional seismic equipment offset by the 12% increase in
the average peso to dollar exchange rate in 1994 compared to 1993.
 
     GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 41.7% to $1.8 million in 1994 from $1.3 million in 1993 as a result of
higher personnel costs and Geoevaluaciones' decision in 1994 to end
subcontracting of processing services and to perform such services itself
through its arrangement with PIASA, partially offset by decreases as a result of
the increase in the average peso to dollar exchange rate for 1994 compared to
1993.
 
     OPERATING INCOME. Operating income increased 51.8% to $3.4 million in 1994
from $2.2 million in 1993 as a result of improved efficiencies in the operations
of the heliportable crew and Geoevaluaciones' decision in 1994 to end
subcontracting of processing services and to perform such services itself
through its arrangement with PIASA.
 
     MISCELLANEOUS INCOME (EXPENSE). Miscellaneous income, which consists of the
interest income and miscellaneous non-operating expense line items, decreased
67.8% to $87,000 in 1994 from $270,000 in 1993. The decrease is primarily a
result of taxes (other than income taxes) related to prior years that were
refunded during 1993.
 
     INTEREST EXPENSE. Interest expense decreased 54.8% to $466,000 in 1994 from
$1.0 million in 1993. The decrease in the interest expense resulted from lower
borrowing costs and a decrease in capital leases.
 
     FOREIGN CURRENCY TRANSACTION GAINS (LOSSES). Foreign currency transaction
losses were $92,000 in 1994 compared to gains of $33,000 in 1993 due to the
increase in the average peso to dollar exchange rate in 1994 compared to 1993.
 
     INCOME TAX EXPENSE (BENEFIT). Income tax expense increased 139.2% to $1.0
million in 1994 from $418,000 in 1993 as a result of increased earnings in 1994.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     From December 31, 1995 to June 30, 1996, total assets of the Company
increased to $49.3 million from $4.5 million, total liabilities increased to
$23.4 million from $2.7 million and total stockholders' equity increased to
$26.0 million from $1.8 million. These increases resulted from the Initial
Public Offering, the concurrent acquisition of the Operating Subsidiaries and
PIASA and new capital expenditures partially financed by the Term Loan (see
"Capitalization").
 
     On February 9, 1996, the Company completed the Initial Public Offering of
4,000,000 shares of Common Stock at a price to the public of $7.50 per share.
Subsequently, on February 21, 1996, the underwriters exercised their
over-allotment option to purchase an additional 600,000 shares at a price to the
public of $7.50 per share. The net proceeds to the Company (after deducting
underwriting discounts and commissions and offering expenses) were approximately
$28.7 million. Of this amount, approximately $3.5 million was treated, for
accounting purposes, as a dividend to the former stockholders of Geoevaluaciones
and PIASA,
 
                                       24
<PAGE>   27
 
approximately $10.3 million was used to purchase the land seismic assets of
Northern and all of the capital stock of Kemp, approximately $4.6 million was
used to repay indebtedness of the Operating Subsidiaries, $152,000 was used to
retire capital leases and $1.1 million was paid subsequent to the closing of the
acquisitions as a purchase price adjustment for the purchase of the land seismic
operation of Northern Geophysical. The remaining proceeds were used primarily
for working capital and capital expenditures. See "Certain Transactions."
 
     At June 30, 1996, the Company had $2.9 million of cash. The Company
utilized $3.5 million of net cash from operating activities in the six months
ended June 30, 1996 as compared to providing $1.0 million in the same period of
the prior year. The reduction in net cash provided by operating activities is
primarily attributable to a net increase in working capital.
 
     Net cash used in investing activities increased to $20.1 million in the six
months ended June 30, 1996 from $250,000 in the same period of the prior year.
This increase is primarily due to the cash utilized to purchase Northern and
Kemp and for capital expenditures.
 
     Net cash provided by financing activities increased to $25.9 million for
the six months ended June 30, 1996 from a net cash utilized of $710,000 in the
comparable period in the prior year due to the completion of the Initial Public
Offering and the closing of the Loan Agreement.
 
     The Company used $9.8 million for capital expenditures in the six months
ended June 30, 1996 as compared to $250,000 in the same period of the prior
year. On May 31, 1996, the Company purchased approximately $8.5 million of
equipment from Input/Output. This purchase increased the Company's recording
channel capacity from approximately 7,500 to approximately 12,000 channels.
Simultaneously with the purchase of the equipment, the Company entered into the
Loan Agreement with First Interstate Bank of Texas, N.A. The Loan Agreement is
for three years and provided $7.5 million of financing for the above equipment
and $4.5 million of refinancing of conditional sales agreements for equipment
acquired by the Operating Subsidiaries prior to the Initial Public Offering. As
of September 30, 1996, the Company had $3.0 million available under the Term
Loan and $2.0 million available under the Revolving Credit Loan portion of the
Loan Agreement (see "Capitalization"). The new equipment will be utilized to
meet the requirements of a contract with BP Alaska, increase the capacity of one
of the Company's Mexican crews for a recently awarded 3-D contract with PEMEX
and increase the channel capacity of the Company's two crews in the Rocky
Mountain region.
 
     At September 30, 1996, the Company's estimated backlog of data acquisition
surveys totaled approximately $48 million. The Company expects to complete
approximately 44% of these commitments during 1996; however, commitments are
subject to cancellation at the option of the Company's customers, on short
notice and without penalty. See "Business -- Marketing and
Customers -- Backlog."
 
     The Company currently plans to continue to upgrade and expand the existing
data acquisition capabilities of the Operating Subsidiaries through the purchase
of additional systems, additional channel capacity for the six 24-bit seismic
data acquisition systems it presently owns and related vehicles and equipment.
In addition, the Company plans to repay $6.0 million of the indebtedness
incurred in May 1996 to purchase two 24-bit seismic data acquisition systems and
other capital equipment and to acquire up to three additional I/O SYSTEM TWO(R)
systems. The Company believes that its planned capital expenditures and
operating requirements for the next 12 months will be funded from a portion of
the net proceeds of this Offering, cash from operations and, to the extent
available, borrowings under the Loan Agreement. The Company may revise its plans
in response to future changes in the oil and gas industry in general and the
demand for its services in particular, its results of operations, its other
capital requirements and other relevant factors. 3-D Geophysical periodically
evaluates opportunities to acquire businesses and assets; however, the Company
does not have any current understanding, arrangement or agreement to acquire any
such businesses or assets other than the proposed acquisition of J.R.S.
Exploration for shares of Common Stock (see "Business -- Proposed Acquisition of
J.R.S. Exploration"). The Company believes that, in addition to cash from
operations and borrowings under the Loan Agreement, it may fund any such
acquisitions through the issuance of additional debt or equity securities. The
issuance of additional equity securities, including shares of Common Stock, in
connection with any such acquisitions would result in additional dilution to
purchasers of Common Stock in
 
                                       25
<PAGE>   28
 
this Offering. See "Risk Factors -- Capital Intensive Business; Rapid
Obsolescence of Technology," "Use of Proceeds" and "Business -- Capital
Expenditures."
 
IMPACT OF MEXICAN ECONOMY
 
     For the year ended December 31, 1995 and for the six months ended June 30,
1996, pro forma net sales from the Mexican Operations were 24.7% and 21.3%,
respectively, of pro forma net sales of the Company. The Company's financial
performance is, and will continue to be, affected by economic conditions in
Mexico.
 
     The level of land-based seismic data acquisition services in Mexico has in
the past been vulnerable to economic downturns and changes in government
policies and public spending. Since December 1994, Mexico has experienced an
economic crisis characterized by a significant devaluation of the peso, exchange
rate instability, increased inflation, high domestic interest rates, negative
economic growth, reduced consumer purchasing power and high unemployment.
Inflation in Mexico for the year ended December 31, 1995 and for the six months
ended June 30, 1996 was approximately 52.0% and 15.3%, respectively, based on
the consumer price index.
 
     The December 1994 devaluation of the peso has had a number of effects on
the Mexican economy that have adversely affected the financial condition of
Mexican companies, including Geoevaluaciones. The devaluation caused the peso
value of Geoevaluaciones' dollar denominated indebtedness, which consists
primarily of equipment financing, to increase significantly, and also greatly
increased the rate of inflation, resulting in a sharp rise in nominal interest
rates on peso denominated financing.
 
     The prices Geoevaluaciones pays for certain equipment, energy and other
materials are set, in part, by reference to international prices denominated in
currencies other than pesos. Pursuant to Geoevaluaciones' contracts with PEMEX,
certain of the costs incurred by Geoevaluaciones may be adjusted to take into
account economic events such as inflation and devaluation of the peso (see
"Business -- Marketing and Customers -- Contracts"). Geoevaluaciones' results of
operations, denominated in pesos, are translated into dollars for inclusion in
the Company's financial statements. However, increases in the peso to dollar
exchange rate will result in a reduction of the dollar value of peso-based
revenues of the Company as well as the dollar value of peso-based expenses of
the Company. Likewise, decreases in such rate will result in increases in the
dollar value of such revenues and expenses. As a result, such fluctuations could
have a material adverse effect on the financial condition and results of
operations of the Company. The table below sets forth the peso to dollar
exchange rate during the periods indicated (based on the average of the closing
rates published by Banco Mexicano de Comercio Exterior for each business day
during such period) and the closing rate for the last day of each such period.
 
<TABLE>
<CAPTION>
                                                           PESO TO DOLLAR EXCHANGE RATES
                                                      ----------------------------------------
                                                                                  SIX MONTHS
                                                       YEAR ENDED DECEMBER           ENDED
                                                               31,                 JUNE 30,
                                                      ----------------------     -------------
                                                      1993     1994     1995     1995     1996
                                                      ----     ----     ----     ----     ----
    <S>                                               <C>      <C>      <C>      <C>      <C>
    Average.........................................  3.11     3.48     6.42     6.07     7.50
    Period end......................................  3.13     5.00     7.68     6.31     7.59
</TABLE>
 
While the Company may from time to time evaluate methods to reduce foreign
exchange risks, the adoption of any particular method will depend on existing
market conditions. The Company cannot reasonably predict what method, if any, it
will adopt to reduce foreign exchange risks, and there can be no assurance that
it will adopt any such method or that, if adopted, any such method will reduce
such risks.
 
     The financial statements of Geoevaluaciones for the three years ended
December 31, 1995 and the six months ended June 30, 1995 and 1996 have been
prepared using the peso as the functional currency as prescribed by Statement of
Financial Accounting Standards No. 52 ("Statement 52"). Statement 52 requires
that an entity's reporting currency, which for Geoevaluaciones is the dollar,
should be used as the functional currency if inflation in the primary economic
environment exceeds 100% over a three-year period. If Mexico experiences
inflation of at least 25% during 1996, the cumulative Mexican inflation rate for
the three years ending December 31, 1996 will exceed 100%. If the financial
statements of Geoevaluaciones had been
 
                                       26
<PAGE>   29
 
prepared using the dollar as the functional currency for the year ended December
31, 1995 and the six months ended June 30, 1996, net income would have been
lower.
 
FEDERAL INCOME TAXES
 
     Provisions for income taxes are based on pretax income reported for
financial statement purposes. Such provisions differ from amounts currently
payable because certain items of income and expenses are recognized for income
tax purposes in periods different from the periods for financial statement
purposes. The tax effects of these timing differences, primarily with respect to
depreciation and amortization, are reflected as deferred income taxes. The
Company's income from the Mexican Operations will be subject to the statutory
tax rate of 34% in Mexico net of applicable inflation adjustments. Any Mexican
income tax paid will be available as a credit against the Company's federal
income taxes in the United States pursuant to tax treaties between Mexico and
the United States.
 
IMPACT OF INFLATION AND CHANGING PRICES; SEASONALITY
 
     The general availability of seismic data, equipment and crews, and the
level of exploration activity in the oil and gas industry, directly affect the
cost of acquiring seismic data. The pricing of the Company's seismic data
acquisition services is primarily a function of these factors. The Company
believes that inflationary trends had no material impact on the results of its
operations in the United States during the year ended December 31, 1995 or the
six months ended June 30, 1996. The Mexican Operations in these periods were
affected by the inflationary pressure on the Mexican economy insofar as the peso
was devalued, the cost of peso-denominated financing rose sharply and the
Mexican government sought to curb public spending. Inflation in Mexico for the
year ended December 31, 1995 and for the six months ended June 30, 1996 was
approximately 52.0% and 15.3%, respectively, based on the consumer price index.
As a result, net sales decreased once sales from Mexican Operations were
translated from pesos to dollars. See "Risk Factors -- Substantial Risks of
Doing Business in Latin America."
 
     The Company's seismic data acquisition operations historically have been
subject to seasonal fluctuation, with the greatest volume of data acquisition
occurring during the summer and fall. The consolidation of the Operating
Subsidiaries, the expansion into Latin America and the proposed expansion into
Canada, if completed successfully, may enable the Company to deploy its crews
and utilize its equipment in disparate regions. The Company will attempt to
conduct operations year round with fewer days of down-time caused by inclement
weather by working during the favorable operating seasons of different regions.
The Company believes that the geographical diversification of its operations may
reduce the impact of seasonal fluctuations.
 
                                       27
<PAGE>   30
 
                                    BUSINESS
 
GENERAL
 
     3-D Geophysical, Inc. is one of the leading providers of land-based and
shallow water 3-D and 2-D seismic data acquisition services to the oil and gas
industry in the Western Hemisphere. As of September 30, 1996, the Company's nine
crews operated land-based and shallow water seismic data acquisition systems,
primarily utilizing state-of-the-art, 24-bit equipment, with a total of
approximately 12,000 channels, in Alaska, the Rocky Mountain, West Coast and
Appalachian regions, Mexico and elsewhere in Latin America.
 
     The seismic data acquisition services industry is currently experiencing
several significant changes, including a continuing consolidation of service
providers. This consolidation is due in part to the trend by oil and gas
exploration and production companies to rely on third-party contractors to
provide increasingly more sophisticated and extensive 3-D seismic surveys. These
surveys require a greater number of recording channels and therefore substantial
capital expenditures. This trend is rationalizing the seismic services industry
and creating a competitive advantage for companies with extensive 3-D channel
capacity and greater financial resources.
 
     The Company believes that (i) its state-of-the-art systems, (ii) its
ability to relocate equipment and crews among the regions in which it operates,
(iii) the regional experience of its management and crews in performing 3-D and
2-D surveys, and (iv) the quality of its services and relationships with
customers will enable the Company to take advantage of this industry trend.
 
     Since the Initial Public Offering, the Company has:
 
     - Increased its channel capacity from approximately 7,500 to approximately
       12,000 channels;
 
     - Expanded its operations in Alaska with seismic data acquisition contracts
       with Arco Alaska Inc., a subsidiary of ARCO, BP Alaska and Marathon;
 
     - Obtained two of the first group of 3-D seismic data acquisition contracts
       awarded to date by PEMEX;
 
     - Established a presence in Peru by opening a branch office, entering into
       a seismic data acquisition contract with a subsidiary of ARCO and opening
       a seismic data processing center; and
 
     - Entered into a letter of intent to acquire J.R.S. Exploration, a seismic
       data acquisition business that has been operating in Western Canada since
       1978 using up to four crews and utilizing 24-bit seismic data acquisition
       systems with a total of approximately 2,000 channels.
 
  BUSINESS STRATEGY
 
     The Company's objective is to capitalize on the consolidation taking place
in its industry to enhance its position as one of the leading providers of
land-based and shallow water seismic data acquisition services and to become a
significant provider of related services to the oil and gas industry in the
Western Hemisphere. The Company intends to achieve this objective by:
 
     - Optimizing the utilization of its state-of-the-art seismic data
       acquisition systems by relocating equipment and crews among the regions 
       in which the Company operates;
 
     - Expanding its operations in Mexico and elsewhere in Latin America by
       seeking further contract opportunities with PEMEX and other oil companies
       operating in Latin America;
 
     - Pursuing opportunities in the United States, including Alaska, by
       attempting to strengthen existing business relationships with
       multinational companies and their affiliates, such as ARCO, BP Alaska,
       Marathon and others;
 
     - Pursuing strategic acquisitions by seeking to acquire providers of
       seismic data acquisition and related services, such as J.R.S. 
       Exploration, that complement the Company's geographic market coverage 
       and strategy for growth; and
 
     - Expanding the Company's data processing and interpretation and reservoir
       characterization services already being provided to PEMEX in Mexico into
       other markets.
 
                                       28
<PAGE>   31
 
INDUSTRY OVERVIEW
 
     Seismic data is the principal source of information used by geoscientists
to map potential or existing oil and gas bearing formations and the geologic
structures that surround them. Seismic data is acquired over a specified area by
deploying a network of electronic cables over the area to which electronic
receivers, or geophones, are attached. Once this network is deployed, an energy
source, such as vibroseis or dynamite, is used to generate sound waves through a
pre-determined set of frequencies that move through the rock formation under the
area and reverberate back to the surface in milliseconds. The geophones capture
the changing velocity and character of these sound waves as they travel down and
back through the earth's surface and transmit this information a short distance
along a channel to a remote signal conditioner. The remote signal conditioner
digitizes the analog data and transmits it to a central electronics unit that
stores the acquired data. The data is then sent to a processing center where
mathematical algorithms are applied to separate signals from interference and to
correct distortion. Migration techniques are also applied to produce a spatial
representation of the subsurface formations that were surveyed. After
processing, the data is transferred to a computer workstation that allows the
data to be viewed and reconfigured by a geoscientist who interprets the data
with computer-aided exploration techniques in order to plot features and map the
structures of the subsurface area.
 
     In the past, a 2-D survey was the standard technique utilized to acquire
seismic data. 2-D seismic data can be visualized as a single vertical plane of
subsurface information. 3-D seismic surveys produce data that is best visualized
as a cube of information that can be sliced into numerous planes. Thus, 3-D
surveys provide different views of a subsurface geologic structure and much
higher resolution of the structure than is available from a 2-D survey and have
proven to be more reliable indicators of the oil and gas potential in the area
surveyed. As a result, drilling based on 3-D seismic surveys has improved the
economics of finding oil and gas. Consequently, demand for 3-D seismic surveys,
and for surveys that cover wide areas and utilize a greater number of channels,
has increased in the past several years. Furthermore, due to the enhanced
information provided, 3-D surveys have proven to be a cost effective and
efficient tool for oil and gas exploration and, increasingly, the development of
existing reserves.
 
     The oil and gas industry relies upon seismic data for the exploration of
new oil and gas reserves and for delineating the size and structure of
previously identified oil and gas fields to improve the development of those
fields. Seismic data, once acquired and processed, results in computer-generated
representations of the earth's subsurface. 2-D seismic data is collected in a
linear fashion along the surface of the earth (typically using 120 recording
channels). The acquisition of 3-D seismic data involves the use of at least 480
recording channels, allows a greater volume of seismic data to be gathered and
yields dense, 3-D grids, with a higher degree of resolution of the earth's
subsurface than a 2-D seismic survey can produce.
 
     The amount of data that can be acquired and the ability to record, process
and represent seismic data are dependent upon the type of equipment used during
the seismic data acquisition process. Seismic acquisition systems are either
traditional or distributed systems. In traditional systems, such as a DFS-V(TM)
system, signals received from the energy source are transmitted to a central
electronics unit in analog (nondigital) form with each channel requiring its own
set of wires, consequently increasing the cable weight. Traditional systems are
limited to 480 channels and are used primarily for 2-D seismic surveys. The
traditional system uses a 16-bit converter to translate signals from analog to
digital data. This technology cannot eliminate distortion of the signal that may
be caused by noise in the area or weaknesses in the signal if it is remote from
the central electronics unit.
 
     Alternatively, in a state-of-the-art distributed system, received signals
are amplified, filtered and converted into digital data by means of a 24-bit
analog-to-digital converter at remote signal conditioners before they are
transmitted to the central electronics unit on a single set of wires. Certain
distributed systems can be expanded to up to approximately 10,000 channels,
although the Company believes that the average distributed system currently used
in the land-based seismic data acquisition industry is significantly less than
10,000 channels. The 24-bit analog-to-digital converter extends the decibel
range of seismic recording and reduces system distortion to provide superior
signal fidelity. This technological innovation provides higher resolution data,
which is especially beneficial for 3-D surveys in geologically complex or noisy
areas, and
 
                                       29
<PAGE>   32
 
substantially reduces power consumption. Distributed systems have flexible
configuration capability and improved digital signal quality, and the lighter
weight cables allow a crew to acquire greater volumes of data, as required in
3-D surveys, over a wider area with fewer people and in less time. Distributed
systems are used primarily for 3-D surveys.
 
SEISMIC DATA ACQUISITION SERVICES
 
     The Company is engaged in land-based and shallow water seismic data
acquisition on a contract basis for its customers and not for its own account.
Seismic data acquisition projects typically begin at the time a customer
requests the Company to formulate a proposal to acquire seismic data on the
customer's behalf. The Company's geophysicists work with the customer in
designing the specifications of the proposed survey and, once the specifications
are agreed upon, the survey is taken to the field where one or more of the
Company's crews commence the process of acquiring data.
 
     As of September 30, 1996, the Company operated a total of nine working
seismic crews, of which six were utilizing state-of-the-art, 24-bit seismic data
acquisition systems with a total of approximately 12,000 channels. Of the six
crews, one operates in Mexico, one in Alaska and four in the remainder of the
United States. In addition, the Company operated two crews in the United States
utilizing 16-bit seismic data acquisition systems with a total of approximately
480 channels and one crew providing drilling services in Mexico. The Company is
presently scheduled to commence work in Peru in October 1996, where it will
deploy a crew that will utilize a state-of-the-art, 24-bit data acquisition
system with a total of 1,000 channels. Each crew is either land transportable or
heliportable, or both. The Company attempts to shift entire crews and equipment
from one geographic location to another in order to capitalize on the varying
seismic operating seasons in the Company's regions of operation and to maximize
the Company's efficient use of human resources and equipment. Most of the
Company's data acquisition systems, which include remote signal conditioners,
cables, geophones and central electronic units, can be readily interchanged and
relocated, depending upon the needs of the Company's customers.
 
     A seismic crew typically consists of a supervisor, permitting agents who
secure permission to enter a landowner's property, surveyors who mark the
locations for the placement of geophones and other equipment, general laborers
who place and move the geophones and other equipment, a drill crew to drill
holes and shooters to detonate the dynamite, if dynamite is used as the energy
source, or a vibroseis crew to operate the vibroseis trucks, if vibroseis is
used as the energy source, and an observer who operates the central electronics
unit and controls the recording of the seismic data. A fully staffed seismic
crew in the United States typically has from 10 to 25 personnel for 2-D seismic
surveys and from 20 to 60 personnel for 3-D seismic surveys, depending upon the
size and nature of the survey requested by the customer. Vehicles assigned to
each crew consist of a recording truck, two or more cable and geophone trucks, a
dynamite or vibroseis truck, several personnel vehicles with off-road capability
and, where necessary, helicopters.
 
     The Company utilizes helicopters to facilitate seismic data acquisition in
a wide range of terrains, including terrain that is inaccessible by wheeled or
tracked vehicles. The Company's experience is that helicopter use reduces the
overall cost and environmental impact of seismic data acquisition projects
through improved productivity, as crews and equipment can be more rapidly
deployed with less surface disturbance.
 
SEISMIC DATA PROCESSING AND INTERPRETATION
 
     The processing of seismic data involves the conversion of such data, by
means of sophisticated computer software designed for this purpose, into graphic
representations of cross-sections of the earth's subsurface. PIASA and
Geoevaluaciones currently provide data processing and interpretation services to
PEMEX and the Company has opened a processing center at its branch location in
Peru. The Company intends to expand its processing and interpretation capacity
in the future and to offer such services to its customers in other geographic
regions. However, the Company has not yet developed a formal business plan to
implement this intention, and there can be no assurance that any such attempted
expansion will be successful.
 
                                       30
<PAGE>   33
 
GEOGRAPHIC AREAS OF OPERATION
 
     The Company's seismic data acquisition operations are conducted throughout
the United States (including Alaska), Mexico and elsewhere in Latin America.
Geoevaluaciones primarily conducts its operations in Mexico and provides its
primary customer, PEMEX, a full complement of seismic data acquisition,
processing and interpretation services and reservoir characterization. The
Company has established a presence in Peru by opening a branch office, entering
into a seismic data acquisition contract and opening a seismic data processing
center. In addition, the Company is seeking to expand its operations into Canada
and has entered into a letter of intent to acquire J.R.S. Exploration, a
Calgary-based provider of land-based seismic data acquisition services (see
"-- Proposed Acquisition of J.R.S. Exploration").
 
     The following table presents certain pro forma financial information about
the operations of the Company during the year ended December 31, 1995 and the
six months ended June 30, 1995 and 1996:
 
<TABLE>
<CAPTION>                                                                                       
                                                                                                
                                                                                                
                                                                SIX MONTHS ENDED JUNE 30,       
                                      YEAR ENDED         ---------------------------------------
                                   DECEMBER 31, 1995           1995                  1996       
                                   -----------------     -----------------     -----------------
                                    (PRO FORMA)(1)                   (PRO FORMA)(1)
                                                         (DOLLARS IN THOUSANDS)
    <S>                            <C>         <C>       <C>         <C>       <C>         <C>
    Net sales....................  $39,852     100.0%    $14,746     100.0%    $23,362     100.0%
      United States..............   30,027      75.3       9,899      67.1      18,375      78.7
      Mexico.....................    9,825      24.7       4,847      32.9       4,987      21.3

    Operating income.............    1,239         *         118         *         470     100.0
      United States..............     (918)        *        (900)        *         330      70.2
      Mexico.....................    2,157         *       1,018         *         140      29.8

    Total assets(2)..............        *         *           *         *      49,321     100.0
      United States..............        *         *           *         *      40,724      82.6
      Mexico.....................        *         *           *         *       8,597      17.4
</TABLE>
 
- ---------------
 
 * Not applicable
 
(1) For a discussion of the assumptions made and adjustments applied in the
    preparation of this information, see the pro forma consolidated balance
    sheet of 3-D Geophysical contained in the pro forma consolidated financial
    statements, including the notes thereto, appearing elsewhere in this
    Prospectus.
 
(2) Balance sheet items are presented as of the last day of the period
    indicated.
 
CAPITAL EXPENDITURES
 
     There are many competitors in the land-based seismic data acquisition
business and substantial financial and other resources are required to maintain
the state-of-the-art technology necessary to permit effective competition in
bidding for contracts. Seismic data acquisition technology has progressed
rapidly over recent years and the Company expects this trend to continue. The
cost of sophisticated seismic data acquisition equipment and related crew
training has increased significantly over the last several years. The cost of
equipping a crew with a state-of-the-art system, such as an I/O SYSTEM TWO(R)
(including training and ancillary equipment), can range from approximately $3.0
to $10.0 million, the largest component of which is attributable to the channel
boxes. The Company's strategy is to update its data acquisition systems as often
as necessary to maintain its competitive position. To do so, however, may
require large expenditures of capital in addition to the Company's planned
capital expenditures. There can be no assurance that the Company will have the
capital necessary to upgrade its equipment to maintain its competitive position
or to acquire any additional required equipment, or that any required financing
therefor will be available on favorable terms. If the Company is unable to raise
the capital necessary to update or increase the capacity of its data acquisition
systems to the extent necessary, it will be unable to update such systems or
increase its level of operations and may be materially and adversely affected as
a result. Furthermore, the Company may require additional capital expenditures
in the event that the level of its operations increases significantly.
 
                                       31
<PAGE>   34
 
     The Company's current plan is to expand significantly its data acquisition
systems after the consummation of this Offering. Specifically, the Company
intends to increase its channel capacity by up to 5,000 channels through the
purchase of additional systems and equipment, including a 1,000 channel seismic
data acquisition system currently being rented from The Andrews Group
International, Inc. for use in Peru (see "Use of Proceeds" and "Certain
Transactions") and the purchase of equipment currently being rented and used in
the Rocky Mountain region. The Company anticipates that the funds for such
expenditures will come from a portion of the net proceeds of this Offering (see
"Use of Proceeds") and cash from operations. The Company may revise its plans in
response to future changes in the oil and gas industry in general and the demand
for its services in particular, its results of operations, its other capital
requirements and other relevant factors. See "Risk Factors -- Capital Intensive
Business; Rapid Obsolescence of Technology," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources" and "-- Competition."
 
OPERATING CONDITIONS
 
     The Company's crews often conduct operations in extreme weather, in
difficult terrain that is not easily accessible and under other hazardous
conditions. Accordingly, the Company's operations are subject to risks of injury
to personnel and loss of equipment. Fixed costs, including costs associated with
operating leases, labor costs and depreciation, account for more than half of
the Company's costs and expenses. As a result, low productivity resulting from
weather interruptions, equipment failures or other causes such as fires and
accidental explosions resulting from the handling of equipment and supplies can
result in significant operating losses. In addition, while the Company has
insurance policies that protect it against liabilities that may be incurred in
the ordinary course of its business, the Company is unable to insure fully
against all possible loss or liability. For example, no insurance is available
at a cost deemed reasonable by the Company for war, nationalization,
appropriation or other extreme events.
 
     The Company's seismic data acquisition operations historically have been
subject to seasonal fluctuations, with the greatest volume of data acquisition
occurring during the summer and fall in the United States. The consolidation of
the Operating Subsidiaries and the expansion into Latin America has enabled the
Company to deploy its crews and utilize its equipment in disparate regions. As a
result, the Company expects to conduct its operations year round with fewer days
of down-time caused by inclement weather by working during the favorable
operating seasons of different regions. The Company believes that by widening
the geographical scope of its operations, the impact of seasonal fluctuations
may be reduced.
 
MARKETING AND CUSTOMERS
 
     Marketing. Since the Initial Public Offering, the Company has continued
marketing to existing customers on a regional basis in order to preserve these
long-term relationships. The Company has established a corporate marketing
center in Englewood, Colorado, which is responsible for (i) coordinating
marketing and communication activities, (ii) expanding the Company's marketing
to integrated and multinational oil and gas companies, and (iii) standardizing
and coordinating the submission of bids.
 
     Contracts. The Company provides its services to customers pursuant to
contracts which are occasionally varied or modified by mutual consent. In many
instances, such contracts are cancelable by the customer on short notice without
penalty. Contracts are obtained by the Company either through competitive
bidding, in response to invitations for bids, or by direct negotiation with a
prospective customer.
 
     Most of the Company's contracts result from competitive bidding. Most
frequently, customers invite bidders to provide quotations on the cost to gather
seismic data over a specified region within a specified period of time. Some
customers, primarily large oil companies, require at least three bids in order
to award a contract. Contracts are awarded primarily on the basis of price, crew
experience and equipment availability, technological expertise and reputation
for dependability and safety.
 
     Contract terms, whether bid or negotiated, generally provide for payment by
the customer on either a "turnkey" or a "term" basis or on a combination of both
methods. Under a turnkey contract, payments for data acquisition services are
based upon a fixed fee for each unit of data collected, and the Company bears
substantially all of the risk of business interruption due to inclement weather
and other hazards. Term
 
                                       32
<PAGE>   35
 
contracts, on the other hand, provide for payment based on agreed rates per unit
of time, which may be expressed in periods ranging from days to months, and most
of the risk of business interruption (except for interruptions caused by failure
of the Company's equipment) is borne by the customer. When a combination turnkey
and term contract is used, the risk of business interruption is shared in an
agreed percentage by the Company and the customer. In each case, progress
payments are usually required unless it is anticipated that the job will be
completed in less than 30 days.
 
     Geoevaluaciones' contracts are procured from a bidding process that is
regulated by Mexican law. PEMEX, as a government-owned company, prepares
specifications of projects for which seismic-related services are required. All
potential bidders that meet certain technical, legal and other requirements
submit bids which must include seismic data acquisition, processing and
interpretation services. Geoevaluaciones and PIASA submit a single bid for their
combined services. PEMEX places no restrictions on the participation of
foreign-owned companies in the bidding process. Geoevaluaciones' contracts with
PEMEX contain price terms which are fixed at the time the contracts are signed
and in the past have been denominated in pesos. These contracts contain cost
adjustment provisions which are triggered upon the occurrence of certain
economic events such as a devaluation of the peso, a change in the rate of
inflation or an increase in the statutory minimum wage rate. The adjustments may
be requested by Geoevaluaciones, but only with respect to the direct costs
incurred by Geoevaluaciones under a contract that are affected by the economic
event. While these adjustment features protect Geoevaluaciones against partial
declines in its peso-denominated profit margin, they do not protect
Geoevaluaciones from a decline in the dollar value of its profits or net assets.
See "Risk Factors -- Substantial Risks of Doing Business in Latin America" and
note 2 to the financial statements of Geoevaluaciones.
 
     The Company's contracts specify that the seismic data acquired by the
Company belongs to the Company's customer, and the Company does not acquire any
seismic data for its own account. All of the customer's information is
maintained in confidence.
 
     Customers. The Company's customers include and have included a number of
major oil companies and their affiliates, including PEMEX, ARCO, BP Alaska and
Marathon, as well as many smaller, independent oil and gas companies. In the
year ended December 31, 1995 and the six months ended June 30, 1996, the
Company's net sales to PEMEX were approximately $9.8 million and $5.0 million,
or 24.7% and 21.3%, respectively, of the Company's pro forma net sales in those
periods. In the year ended December 31, 1995, Duncan Oil, Inc. accounted for
$4.3 million, or 11%, of the Company's pro forma net sales. In the six months
ended June 30, 1996, Seitel, Inc. accounted for $3.2 million, or 14%, of the
Company's pro forma net sales. No other single customer accounted for more than
10% of the pro forma net sales in those periods. The loss of PEMEX as a customer
would have a material adverse effect on the Company's financial condition and
results of operations.
 
     A large portion of the Company's net sales in any period may be
attributable to a limited number of customers, even though the mix of customers
changes over time as contracts are awarded and completed. Each of the Operating
Subsidiaries has a number of customers for which, over the years, services have
been repeatedly provided.
 
     Safety and Environmental Program. Certain of the Company's customers,
including PEMEX and other large oil and gas companies, require, as a condition
of awarding contracts, that a safety program designed to reduce the hazards
associated with the seismic data acquisition business be in place. The Company
employs a full-time safety officer who is in charge of implementing a
Company-wide health, safety and environmental program intended to comply with
the requirements of major oil and gas companies and applicable regulatory
authorities.
 
     Backlog. At September 30, 1996, the Company's backlog of data acquisition
surveys was approximately $48.6 million. Approximately 68% of the backlog was
attributable to the Company's operations in the United States, and approximately
32% of such backlog related to the operations in Mexico and Peru. The majority
of such backlog consisted of written orders or commitments; however, contracts
for services are occasionally varied or modified by mutual consent and, in many
instances, are subject to cancellation by the customer on short notice without
penalty. Consequently, the Company's backlog as of any particular date may not
be
 
                                       33
<PAGE>   36
 
indicative of the Company's actual operating results for any succeeding fiscal
period. Subject to the foregoing, the Company anticipates that approximately 44%
of the orders and commitments included in backlog at September 30, 1996 will be
completed prior to the end of 1996 and it is expected that the balance will be
completed in 1997.
 
COMPETITION
 
     The Company has extensive competition in each of the regions in which it
operates. Contracts for seismic data acquisition services generally are awarded
on the basis of price, crew experience, equipment availability, technological
expertise and reputation for dependability and safety. Competition is
particularly intense for providers of more technologically advanced seismic
data. Certain of the Company's major competitors have more crews and operate
data acquisition systems having significantly more channels than the Company,
provide integrated data acquisition, processing and interpretation services and
have far greater financial and other resources than the Company and more
extensive relationships with major integrated and multinational oil and gas
companies. These resources enable these competitors to maintain state-of-the-art
technology and certain other advantages relating to costs that may provide them
with an advantage over the Company in bidding for contracts. In addition,
certain competitors of the Company take an economic interest in oil and gas
exploration and development projects for which they perform services for their
customers. There can be no assurance that the Company will be able to compete
successfully against its competitors for contracts to conduct seismic surveys.
See "Risk Factors -- Dependence Upon Energy Industry Spending," "Risk
Factors -- Capital Intensive Business; Rapid Obsolescence of Technology" and
"Risk Factors -- Substantial Competition."
 
EMPLOYEES
 
     As of September 30, 1996, the Company employed approximately 1,628 people,
of whom 16 performed management and marketing functions, 64 performed
administrative services or clerical functions, 128 were geophysicists or
rendered engineering or other technical services and approximately 1,420 were
members of the Company's seismic crews or performed other functions. None of the
Company's employees is represented by a labor union or is a direct or indirect
party to a collective bargaining agreement. The Company believes it has good
relations with its employees.
 
PROPERTIES
 
     The Company occupies 13 leased and two owned facilities. The owned
facilities are both located in Ohio and are utilized by Paragon to house its
administrative and maintenance operations. Of the 13 leased facilities, 4 are
located in Mexico, 2 are located in each of Colorado and Texas and 1 is located
in each of Alaska, New York, Peru, North Dakota and Ohio. These properties are
utilized for administration, maintenance and storage and range in size from
approximately 2,000 to approximately 26,000 square feet. The terms of the leases
range from month-to-month to leases that expire in 2002 and provide for annual
rents ranging from approximately $7,200 to approximately $165,000. The Company's
annual lease expense under these leases totals approximately $470,000.
Approximately 60% of the Company's New York City offices is utilized by persons
unrelated to the Company. Mr. Joel Friedman, the Chairman of the Board of
Directors of the Company, has agreed to reimburse the Company for any amounts
under the New York City lease (which provides for an aggregate annual rental of
$165,000) that are payable with respect to space that is not utilized by the
Company (see "Management -- Employment and Consulting Agreements;
Non-Competition Agreements" and "Certain Transactions").
 
     The Company believes that its facilities are adequate for its present and
reasonably foreseeable needs.
 
LEGAL PROCEEDINGS
 
     The Company is a defendant in or party to a number of lawsuits arising in
the ordinary course of its business, which lawsuits the Company believes have
little substantive merit. While the outcome of these
 
                                       34
<PAGE>   37
 
lawsuits cannot be predicted with certainty, the Company does not believe that
any of these lawsuits will have a material adverse effect on its operations or
financial position.
 
     Geoevaluaciones has a dispute, and may be threatened with litigation, in
connection with certain agreements it entered into with Capilano International
Inc., a Canadian company ("Capilano"). The dispute concerns a certain Letter of
Intent and a Technical Assistance Agreement, dated June 1, 1991 and June 3,
1992, respectively (the "Capilano Agreements"). Capilano stated in its 1994
Annual Report to Shareholders that it has had difficulty in collecting amounts
owing from a Mexican company (presumably, Geoevaluaciones) to which Capilano
supplied technical assistance. Geoevaluaciones maintains that it is not
obligated to compensate Capilano for certain services Geoevaluaciones believes
were either inadequately provided or not provided at all by Capilano. While the
parties have had discussions in the past to attempt to resolve the dispute, the
most recent discussions were in September 1996 and no resolution was reached.
The Company currently is not able to estimate the effect, if any, on its results
of operations and financial position which may result from the resolution of
this matter. Therefore, the financial statements of the Company do not reflect
any adjustments related to this matter. A portion of the amounts payable to the
former stockholders of Geoevaluaciones in connection with the acquisition by 3-D
Geophysical of the stock of Geoevaluaciones owned by such stockholders is held
in escrow and available to pay amounts in settlement or otherwise in connection
with the dispute with Capilano. See "Certain Transactions."
 
REGULATION
 
     Seismic data acquisition operations are subject to various laws and
regulations in the United States, Mexico, Peru and Canada, as well as other
countries in which the Company may operate in the future. Such laws and
regulations govern various aspects of operations, including the discharge of
explosive materials into the environment, requiring removal and cleanup of
materials that may harm the environment or otherwise relating to the protection
of the environment, access to private and governmental land to conduct seismic
surveys and use of local employees and suppliers by foreign contractors. The
Company believes that it has conducted its operations in substantial compliance
with applicable environmental laws and regulations governing its activities.
 
PROPOSED ACQUISITION OF J.R.S. EXPLORATION
 
     In July 1996, the Company signed a letter of intent to purchase J.R.S.
Exploration, a land-based seismic data acquisition business headquartered in
Calgary, Alberta, Canada. J.R.S. Exploration has been operating in Western
Canada since 1978 using up to four seismic crews utilizing 24-bit seismic
recording systems manufactured by Sercel that have a total of approximately
2,000 channels. J.R.S. Exploration's two principal customers accounted in the
aggregate for over 50% of J.R.S. Exploration's revenues in its fiscal year ended
November 30, 1995. J.R.S. Exploration is currently a party to seismic data
acquisition services contracts with these two customers which expire on June 30,
1997 and September 30, 1998. For its fiscal year ended November 30, 1995, J.R.S.
Exploration had revenues of approximately C$11.0 million and earnings before
interest, taxes and depreciation of approximately C$2.3 million. As of October
2, 1996, the exchange rate was approximately $.73 per Canadian dollar.
 
     If the acquisition is consummated, the Company will seek to expand J.R.S.
Exploration's business during winter, the peak Canadian operating season, by
shifting certain of the Company's equipment to Canada during the period from
January through April, and the Company believes that it will be able to utilize
J.R.S. Exploration's equipment in the United States (including Alaska) during
the other months of the year.
 
     Under the terms of the letter of intent, the Company will acquire all of
the issued and outstanding shares of capital stock of J.R.S. Exploration for
approximately 480,000 shares of Common Stock. The consummation of the
acquisition is subject to customary conditions, including the negotiation and
execution of mutually satisfactory definitive documentation and the completion
of a satisfactory due diligence review by the Company.
 
                                       35
<PAGE>   38
 
                                   MANAGEMENT
 
DIRECTORS AND EXECUTIVE OFFICERS
 
     The table below provides information concerning the executive officers and
directors of the Company, and sets forth their respective ages as of September
30, 1996, and the positions they hold with the Company:
 
<TABLE>
<CAPTION>
                    NAME                  AGE                      POSITION(S)
    ------------------------------------  ---    ------------------------------------------------
    <S>                                   <C>    <C>
    Mr. Joel Friedman(a)(b).............  57     Chairman of the Board of Directors

    Mr. Richard D. Davis(b).............  61     President, Chief Executive Officer and Director;
                                                 President of Kemp

    Mr. Wayne P. Widynowski.............  51     Executive Vice President and Chief Operating
                                                 Officer; President of Northern

    Mr. Luis H. Ferran(b)...............  47     Executive Vice President -- Latin American
                                                 Operations and Director; President of
                                                 Geoevaluaciones, PIASA and 3-D Geophysical of
                                                 Latin America, Inc.

    Mr. Ronald L. Koons.................  49     Vice President, Chief Financial Officer,
                                                 Secretary and Treasurer

    Mr. G.C.L. Kemp.....................  63     Vice President

    Mr. Charles O. Merchant.............  46     Vice President; President of Paragon

    Mr. Robert P. Andrews(c)............  41     Director

    Mr. Ralph M. Bahna(c)(d)............  54     Director

    Mr. Douglas W. Brandrup(a)(d).......  56     Director

    Mr. Arthur D. Emil(c)...............  71     Director

    Mr. P. Dennis O'Brien(a)(c)(d)......  54     Director

    Mr. Emir L. Tavella.................  66     Director

    Mr. John D. White, Jr.(b)...........  38     Director
</TABLE>
 
- ---------------
 
(a) Member of the Audit Committee
 
(b) Member of the Executive Committee
 
(c) Member of the Compensation Committee
 
(d) Member of the Stock Option Committee
 
     Mr. Joel Friedman has served as Chairman of the Board of 3-D Geophysical
since February 1996 and as Chairman of the Board of Paragon since August 1994.
He was President and Chief Executive Officer of 3-D Geophysical from March 1995
until February 1996. Mr. Friedman has been since August 1994 the chairman of
Consolidated Health Care Associates, Inc., a Nasdaq National Market listed
company, and was the chief executive officer of that company from August 1994
until March 1996. Since 1969, he has been an officer, director and shareholder
of Founders Property Corporation and its affiliated companies ("Founders"), a
private real estate concern. From 1975 to 1986, Mr. Friedman was president and a
director of Kenai Corporation, a publicly-held company engaged in contract
drilling for oil and natural gas, wellhead equipment manufacturing and
remanufacturing and oil and gas exploration and production.
 
     Mr. Richard D. Davis has served as President, Chief Executive Officer and a
Director of 3-D Geophysical since February 1996 and as President of Kemp since
June 1996. From March 1994 to June 1996, Mr. Davis was Vice President of
Operations of Kemp. From 1988 to March 1994, as president and sole owner of
D-Cube International Inc., he was an independent consultant to several major oil
companies in the area of seismic acquisition services. From 1983 to 1988, Mr.
Davis was a director of Seismic Enterprises, Inc. (now Seitel, Inc.) and
president and chief operating officer of Triangle Geophysical Co. From 1979 to
1983, he was executive vice president of Geo Seismic Services, Inc., which at
one time operated 38 seismic data acquisition crews.
 
                                       36
<PAGE>   39
 
     Mr. Wayne P. Widynowski has served as the Executive Vice President and
Chief Operating Officer of 3-D Geophysical and as President of Northern since
February 1996. From 1981 to February 1996, Mr. Widynowski was employed by
Northern's predecessors, most recently as Executive Vice President. Prior to
1981, Mr. Widynowski was employed as an operations manager by United
Geophysical, Inc., a subsidiary of the Bendix Corporation. Mr. Widynowski is the
current chairman of the Rocky Mountain operations of the International
Association of Geophysical Contractors.
 
     Mr. Luis H. Ferran has served as Executive Vice President -- Latin American
Operations and a Director of 3-D Geophysical and as President of Geoevaluaciones
and PIASA since February 1996 and as President of 3-D Geophysical of Latin
America, Inc., a wholly-owned subsidiary of the Company, since its formation by
the Company in May 1996. Mr. Ferran was one of the founding shareholders of
Geoevaluaciones in 1977 and has been General Manager of Geoevaluaciones since
1982. Prior to forming Geoevaluaciones, Mr. Ferran was a supervisor with
Compania Mexicana de Exploraciones, S.A. de C.V., a Mexican company associated
with PEMEX.
 
     Mr. Ronald L. Koons has served as Vice President, Chief Financial Officer,
Secretary and Treasurer of 3-D Geophysical since September 30, 1996. Mr. Koons
was the executive vice president, chief financial officer and treasurer of
Tuboscope Vetco International Corp. ("Tuboscope"), an oilfield service company,
from October 1993 to April 1996 and senior vice president, chief financial
officer and treasurer of Tuboscope from November 1991 to October 1993. From
August 1988 to November 1991, Mr. Koons was the vice president, chief financial
officer and treasurer of Eastman Christensen Company ("Eastman"), an oilfield
service company. He served as controller of Eastman from June 1987 to August
1988 and treasurer of Eastman from September 1986 to June 1987.
 
     Mr. G.C.L. Kemp has served as a Vice President of 3-D Geophysical since
February 1996. Mr. Kemp founded Kemp and was its Chairman and President from
1978 until June 1996. From 1974 to 1978, Mr. Kemp was worldwide geophysical
operations supervisor for Phillips Petroleum. From 1964 to 1974, he was manager
for Petty Geophysical Engineering Company. From 1953 to 1964, he was a surveyor
and manager of a number of international seismic operations for Mobil Corp.,
Shell Oil Co. and British Petroleum Co., PLC.
 
     Mr. Charles O. Merchant has served as a Vice President of 3-D Geophysical
since February 1996. He has been employed as an executive officer of Paragon
since 1989, most recently since August 1994 as President. Prior thereto, he was
employed by various geophysical service-related companies, including Frontier
Exploration, Inc. from 1988 to 1989 and Professional Geophysics, Inc., Precision
Geophysical, Inc. and Rogers Exploration from 1983 to 1986. Mr. Merchant has
held positions in technical, marketing, supervisory and managerial areas in the
geophysical industry.
 
     Mr. Robert P. Andrews has served as the president of The Andrews Group
International Inc., a Texas corporation which supplies goods and services to the
oil and gas industry in Central and South America, in particular Mexico, since
1987 and as the president of A.G.I. Mexicana, S.A. de C.V., a Mexican company
which sells goods and services relating to computer hardware and software for
use in the oil and gas industry in Mexico, since 1991. Until February 1996, Mr.
Andrews was also the President and Chairman of the Board of PIASA. A.G.I.
Mexicana conducts the business of The Andrews Group International, Inc. in
Mexico and acts as the exclusive representative for several companies in Mexico,
including Input/Output and Landmark Graphics Corp. A.G.I. Mexicana also acts as
a non-exclusive distributor for various corporations in Mexico. See "Certain
Transactions."
 
     Mr. Ralph M. Bahna currently serves as president of Masterworks Development
Corporation ("Masterworks"), a company that he founded in 1990 to develop a
series of hotels called Club Quarters. Between 1981 and 1988, Mr. Bahna was
chief executive officer of Cunard Line Limited, which owns, among other cruise
liners and hotels, the Queen Elizabeth 2, and was also a divisional managing
director of Trafalgar House PLC, the parent company of Cunard Line Limited. From
1988 until he became president of Masterworks in 1990, he pursued investment and
non-profit endeavors.
 
                                       37
<PAGE>   40
 
     Mr. Douglas W. Brandrup is a practicing attorney and senior partner at the
law firm of Griggs, Baldwin & Baldwin in New York City, where he has practiced
since 1974. Mr. Brandrup is chairman of Equity Oil Company, a publicly-held oil
and gas production and exploration company, and has been a director of that
company since 1975.
 
     Mr. Arthur D. Emil is a practicing attorney and currently of counsel to the
law firm of Kramer, Levin, Naftalis & Frankel in New York City. Between 1986 and
1993, he was a senior partner of and, upon retirement, of counsel to the law
firm of Jones, Day, Reavis & Pogue. He served as an executive officer, director
and chairman of the executive committee of North European Oil Company from 1955
to 1979. In addition, he served as general counsel for various companies,
including the New England Patriots and Bartell Media Corp., a communications
company. He is a trustee of various philanthropic institutions. Kramer, Levin,
Naftalis & Frankel provides legal services to 3-D Geophysical and will render
its opinion on the legality of the Common Stock offered hereby. Mr. Emil is a
general partner of South Norwalk Redevelopment Limited Partnership ("SNRLP"), a
Connecticut limited partnership formed in 1981 to rehabilitate a portion of
Norwalk, Connecticut. On July 25, 1994, a creditor of SNRLP, Scirocco Partners
("SP"), sought to foreclose on a SNRLP mortgage it held and SNRLP, seeking to
avoid the foreclosure, filed a voluntary petition for reorganization on August
15, 1994 in the United States Bankruptcy Court, District of Connecticut (Case
No. 94-51676). In a related case, SP has sued Mr. Emil in connection with a
personal guarantee limited to interest and certain expenses he gave in
connection with the mortgage. No determination has been made in either the
bankruptcy proceeding or the private suit.
 
     Mr. P. Dennis O'Brien served as the president and chief operating officer
of Advance Geophysical Corp. ("Advance"), a company that develops software for
the geophysical industry, from 1988 to 1994. In March 1994, Advance merged with
a subsidiary of Landmark Graphics Corporation, a major software developer in the
geophysical industry. From April 1994 to June 1995, Mr. O'Brien served as the
chief operating officer of Advance. Since July 1995, Mr. O'Brien has provided
consulting services to software development companies serving the petroleum
industry.
 
     Mr. Emir L. Tavella is a founder, and since May 1995 a partner and
director, of Sagoil S.A., an Argentinian petroleum supply company associated
with Sagoil Inc., a Canadian company. From February 1987 to April 1995, Mr.
Tavella was the general manager for exploration activities for PLUSPetrol S.A.,
an Argentinian petroleum exploration and production company.
 
     Mr. John D. White, Jr., a co-founder of the Company, has been president of
Megansett Capital, Inc., a private investment firm and associated with Founders
since August 1993. Mr. White was Executive Vice President, Chief Financial
Officer, Secretary and Treasurer of 3-D Geophysical from March 1995 to September
30, 1996, when he resigned. Mr. White has agreed to render financial and
advisory services to the Company in connection with this Offering. See "Certain
Transactions." From January 1995 to February 1996 he was acting Chief Financial
Officer of Paragon. From 1991 to 1993, he was a senior vice president of Laidlaw
International, Inc., a subsidiary of the investment bank Laidlaw Holdings, Inc.
From 1987 to 1990, he was a vice president in the mergers and acquisitions group
of PaineWebber, Incorporated and for five years prior thereto he was employed by
Digital Equipment Corporation where he held a variety of finance positions.
 
ELECTION OF DIRECTORS
 
     The Certificate of Incorporation provides for the Board of Directors to be
divided into three classes. The members of the first class of directors will
serve until the 1997 annual meeting of stockholders and that class consists of
Messrs. Andrews, Brandrup and White. The members of the second class of
directors will serve until the 1998 annual meeting of the stockholders and that
class consists of Messrs. Bahna, Davis, Emil and Tavella. The members of the
third class of directors will serve until the 1999 annual meeting of
stockholders and that class consists of Messrs. Ferran, Friedman and O'Brien.
 
BOARD COMMITTEES
 
     The Board has established an Executive Committee consisting of Messrs.
Davis, Ferran, Friedman and White. The Executive Committee has the authority to
exercise all the powers of the Board in the management
 
                                       38
<PAGE>   41
 
of the business and affairs of the Company, subject to certain limitations under
the General Corporation Law of the State of Delaware.
 
     The Board has established an Audit Committee consisting of Messrs.
Brandrup, Friedman and O'Brien. The Audit Committee annually will recommend to
the Board the appointment of the independent public accountants to serve as
auditors for the Company. In addition, the Audit Committee will discuss and
review the scope and fees of the prospective annual audit and review the results
with the auditors, review compliance with existing major accounting and
financial policies of the Company, review the adequacy of the financial
organization of the Company and consider comments by the auditors regarding
controls and accounting procedures and management's response to those comments.
 
     The Board has established a Compensation Committee consisting of Messrs.
Andrews, Bahna, Emil and O'Brien. The Compensation Committee meets periodically
to determine the compensation of certain of the Company's executive officers and
other significant employees and the Company's personnel policies.
 
     The Board has established a Stock Option Committee consisting of Messrs.
Bahna, Brandrup and O'Brien to administer the Plan and to grant options
thereunder.
 
DIRECTOR COMPENSATION
 
     Each member of the Board who is not an employee of the Company receives:
(i) an annual retainer of $10,000; (ii) $750 per meeting of the Board of
Directors or any committee thereof at which such Director is present in person;
and (iii) reimbursement of all ordinary and necessary expenses incurred in
attending any meeting of the Board of Directors or committee thereof. Directors
who are full-time employees of the Company do not receive any compensation for
serving as directors. Any newly elected or appointed non-employee director
automatically receives a nonqualified option under the Plan to purchase 10,000
shares of Common Stock at an exercise price equal to the fair market value of
the Common Stock on the date of grant. Such option vests in cumulative
installments of one-third on each of the first, second and third anniversaries
of the date of grant and expire on the tenth anniversary of the date of such
grant.
 
     On February 9, 1996, non-employee directors (Messrs. Andrews, Bahna,
Brandrup, Emil and O'Brien) were awarded nonqualified stock options to purchase
10,000 shares of Common Stock pursuant to the Plan. The exercise price of these
options was equal to the price to the public in the Initial Public Offering of
$7.50 per share. Upon joining the Board in April 1996, Mr. Tavella was granted
an option under the Plan to purchase 10,000 shares of Common Stock at an
exercise price of $12.3125 per share. On September 30, 1996, each non-employee
director (Messrs. Andrews, Bahna, Brandrup, Emil, O'Brien and Tavella) was
granted a nonqualified ten year option to purchase 6,667 shares of Common Stock
at an exercise price of $8.50 per share. These options, which were not granted
pursuant to the Plan, vest in full on February 6, 1997.
 
EXECUTIVE COMPENSATION
 
     3-D Geophysical was incorporated in March 1995 and conducted no operations
until February 1996, when it consummated the Initial Public Offering and
acquired the Operating Subsidiaries and PIASA. No salaries were paid during 1995
by 3-D Geophysical. Compensation to be paid to the Company's chief executive
officer and the four other most highly compensated executive officers during
1996 is disclosed below (see "Management -- Employment Agreements;
Non-Competition Agreements" and "Management -- Long-Term Incentive Compensation
Plan"). The Board has not adopted a bonus plan, but anticipates that it will
adopt and implement a performance-based cash bonus plan in 1997.
 
EMPLOYMENT AGREEMENTS; NON-COMPETITION AGREEMENTS
 
     Each of Messrs. Friedman, Davis, Widynowski, Ferran, Koons, Kemp and
Merchant has entered into an employment agreement with the Company that expires
on December 31, 1998, except for the agreement with Mr. Koons, which expires on
September 30, 1999, and for the agreement with Mr. Ferran, which expires on
December 31, 2000. The employment agreements provide for base annual salaries as
follows: Mr. Friedman:
 
                                       39
<PAGE>   42
 
$125,000 plus an annual office allowance of $75,000, a portion of which is being
applied to payments under the Company's New York City lease (see
"Business -- Properties"); Mr. Davis: $155,000; Mr. Widynowski: $140,000; Mr.
Ferran: $140,000; Mr. Koons: $125,000; Mr. Kemp: $75,000; and Mr. Merchant:
$82,500. Certain of the Company's executive officers are entitled to an
automobile allowance, and, in addition, each executive officer who has entered
into an employment agreement will be eligible pursuant to his employment
agreement for a bonus to be determined in the discretion of the Board or a
committee thereof.
 
     Each of the employment agreements with Messrs. Friedman, Ferran, Koons and
Kemp contains a covenant not to compete during the employee's employment with
the Company or its subsidiaries and for one year thereafter unless the Company
terminates the employee's employment without cause. Each of the agreements with
Messrs. Davis, Merchant and Widynowski contains a similar covenant not to
compete but provides that upon termination of the agreement, other than by the
Company for cause (as defined in the agreement) or by the employee without good
reason (as defined in the agreement), the employee's covenant not to compete
will lapse unless the Company pays the employee 80% of the employee's base
salary in the year following such termination. These employment agreements and
covenants not to compete were entered into in the ordinary course of business.
Mr. Davis' agreement also provides that upon termination under certain
circumstances he will receive a payment for certain relocation expenses and the
continuation of certain benefits for a one-year period. Mr. Kemp receives a
monthly payment of $4,167 for 36 months, ending in March 1999, in consideration
of the covenant not to compete contained in his employment agreement. With the
exception of Mr. Kemp's agreement, the employment agreements entered into with
the Company's executive officers do not provide for any separate payment to be
made with respect to the covenants not to compete during the term of the
agreements. In addition, in connection with the acquisition by 3-D Geophysical
of Geoevaluaciones, Mr. Ferran and the other former stockholders of
Geoevaluaciones entered into the Geoevaluaciones Non-Competition Agreement
(defined below) under which Mr. Ferran and such former stockholders were
entitled to certain additional consideration (see "Certain Transactions").
 
     Until September 30, 1995, Mr. White served as the Company's Executive Vice
President and Chief Financial Officer under an employment agreement that was to
expire on December 31, 1998 and provided for a base salary of $150,000. Upon his
resignation as an officer of the Company, Mr. White and the Company entered into
an agreement terminating this employment agreement (see "Certain Transactions").
 
LONG-TERM INCENTIVE COMPENSATION PLAN
 
     The purpose of the Plan is to provide directors, officers, and other key
employees and consultants of the Company and its subsidiaries with additional
incentives by providing them with the opportunity to increase their ownership
interests in the Company. The maximum number of shares of Common Stock that may
be subject to awards granted under the Plan is 720,000 shares, which may be
authorized and unissued shares, treasury shares or shares acquired by the
Company for purposes of the Plan. Shares of Common Stock which are attributable
to awards which have expired, terminated or been cancelled or forfeited during
any calendar year, in addition to shares in respect of which a stock
appreciation right ("SAR") is settled for cash or shares tendered in payment
upon the exercise of an option or SAR, are available for issuance or use in
connection with future awards. In the event of a stock split, stock dividend,
recapitalization or the like, the Stock Option Committee will equitably adjust
the number of shares available under the Plan and subject to outstanding awards
and the exercise prices of outstanding awards.
 
     Awards under the Plan are granted by a Committee of the Board of Directors
appointed for that purpose (the "Stock Option Committee") and may include: (i)
options to purchase shares of Common Stock, including incentive stock options
("ISOs"), nonqualified stock options or both; (ii) SARs, whether in conjunction
with the grant of stock options or independent of such grant; and (iii)
restricted stock. To the extent necessary to comply with Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), awards granted under the Plan are not assignable or transferable except
by the laws of descent and distribution.
 
     The Stock Option Committee consists of two or more directors who qualify as
disinterested persons under Rule 16b-3 under the Exchange Act. Subject to the
terms of the Plan, the Stock Option Committee has the
 
                                       40
<PAGE>   43
 
authority, among other things, to: (i) select the persons entitled to receive
awards under the Plan; (ii) determine the form of awards; (iii) determine the
number of shares of Common Stock covered by an award; and (iv) determine the
terms and conditions of awards, including any restrictions or limitations on
transfer, any vesting schedules or the acceleration thereof and any forfeiture
provisions or waivers thereof. The exercise price of stock options is determined
by the Stock Option Committee subject to the requirement that the exercise price
of an ISO cannot be less than the fair market value of the shares of Common
Stock covered by such grant at the time of grant. The option exercise price is
payable in cash, or, with the consent of the Stock Option Committee, by
surrender of shares of Common Stock held at least six months by the optionee and
having a fair market value on the date of the exercise equal to part or all of
the option exercise price, or by such other payment method as the Stock Option
Committee may prescribe. The exercise price of options granted to non-employee
directors under the Plan may be payable, at the discretion of the non-employee
director, in cash or by surrender of shares of Common Stock held at least six
months by such non-employee director.
 
     All options and SARs not yet exercised shall terminate upon termination of
the grantee's employment for cause. Unless the Stock Option Committee otherwise
specifies: (i) if a grantee's employment terminates for reasons other than
cause, disability or death, the grantee's options or SARs or both generally will
remain exercisable for three months after termination to the extent that they
were exercisable at termination, but will not be exercisable after the scheduled
expiration date of the award; and (ii) if a grantee's employment terminates by
reason of disability, the grantee's options or SARs or both generally will
remain exercisable for one year after termination to the extent that they were
exercisable at termination, but will not be exercisable after the scheduled
expiration date of the award. If a grantee's employment terminates for any
reason, the Company generally will have the right to require forfeiture of
restricted shares in exchange for any amount paid by the grantee for such
shares.
 
     Unless sooner terminated by the Board of Directors, the authority to grant
awards under the Plan will terminate on the tenth anniversary of its adoption.
All awards made under the Plan prior to its termination will remain in effect
until they are satisfied or terminated. The Board of Directors may, without
stockholder approval, suspend, discontinue, revise or amend the Plan at any time
or from time to time; provided, however, that stockholder approval must be
obtained for any amendment for which such approval is required by Rule 16-3
promulgated under the Exchange Act, to the extent that the Board of Directors
believes it is appropriate to qualify under Rule 16b-3. The Stock Option
Committee may make certain amendments to outstanding awards, including any
amendments that change or waive the Plan provisions applicable at employment
termination.
 
     The grant of an option or SAR will create no tax consequences for the
grantee or the Company. A grantee will not have taxable income upon exercising
an ISO (except that the alternative minimum tax may apply) and the Company will
receive no deduction at that time. Upon exercising an option other than an ISO,
the participant must generally recognize ordinary income equal to the difference
between the exercise price and fair market value of the stock acquired on the
date of exercise, and, upon exercising an SAR, the participant must generally
recognize ordinary income equal to the cash (or the fair market value of the
stock) received. In each case, the Company will be entitled to a deduction equal
to the amount recognized as ordinary income by the grantee. An award of
restricted shares of Common Stock will not result in taxable income to the
grantee or in a tax deduction for the Company until such time as the shares are
no longer subject to forfeiture (unless the grantee elects an earlier date). At
that time, the grantee generally will recognize ordinary income equal to the
fair market value of the shares less any amount paid for them, and the Company
generally will be entitled to a tax deduction in the same amount. Dividends paid
on forfeitable restricted shares are treated as compensation for federal income
tax purposes.
 
     A grantee's disposition of shares acquired under the Plan generally will
result in short-term or long-term capital gain or loss measured by the
difference between the sale price and the participant's tax basis in such shares
(or the exercise price of the option in the case of shares acquired by exercise
of an ISO and held until a date at least two years after grant and one year
after exercise). Generally, there will be no tax consequences to the Company in
connection with a disposition of shares acquired under an option or other award,
except that the Company will be entitled to a deduction (and the grantee will
recognize ordinary taxable income) if shares
 
                                       41
<PAGE>   44
 
acquired upon exercise of an ISO are disposed of before the applicable ISO
holding periods have been satisfied.
 
     Section 162(m) to the Code generally disallows a public company's tax
deduction for compensation to the chief executive officer or any of the four
other most highly compensated executive officers in excess of $1 million in any
tax year. Compensation that qualifies as "performance-based compensation" is
excluded from the $1 million deductibility cap, and therefore remains fully
deductible by the company that pays it. The Company expects that options granted
with an exercise price at least equal to 100% of fair market value of the
underlying stock at the date of grant, and any restricted stock award
conditioned upon achievement of performance goals, will qualify as such
"performance-based compensation," although other awards under the Plan may not
so qualify. However, there can be no assurance that any awards under the Plan
will qualify as "performance-based compensation" that is fully deductible by the
Company under Section 162(m) of the Code.
 
     The Plan also provides for automatic option grants to directors who are not
otherwise employed by the Company or its subsidiaries. See "-- Director
Compensation."
 
     The Stock Option Committee has granted pursuant to the Plan options to
purchase an aggregate of 385,000 shares of Common Stock to executive officers of
the Company in the amounts and on the terms described below:
 
<TABLE>
<CAPTION>
                                                                 NUMBER OF SHARES      EXERCISE PRICE
             NAME OF OFFICER              DATE OF GRANT         COVERED BY OPTIONS       PER SHARE
    ---------------------------------  --------------------     ------------------     --------------
    <S>                                <C>                      <C>                    <C>
    Mr. Ferran.......................  February 9, 1996               250,000              $ 7.50

    Mr. Davis........................  February 9, 1996                50,000                7.50

    Mr. Widynowski...................  February 9, 1996                45,000                7.50

    Mr. Koons........................  September 30, 1996              30,000                8.25

    Mr. Merchant.....................  February 9, 1996                10,000                7.50
</TABLE>
 
Each of the options vests in cumulative installments of one-third of the number
of shares subject thereto on each of the first three anniversaries of the grant
date and expires on the tenth anniversary of the date of grant. In addition, the
Stock Option Committee granted pursuant to the Plan options to purchase an
aggregate of 179,350 shares of Common Stock to other key employees of the
Company at prices ranging from $7.375 to $12.3125 per share. Each of these
options vests in cumulative installments of one-fourth of the number of shares
subject thereto on each of the first four anniversaries of the grant date and
expires in 2006.
 
     On April 26, 1996 the Stock Option Committee granted nonqualified options
to each of Messrs. Friedman, Davis and Widynowski to purchase 75,000 shares of
Common Stock. These options, which were not granted under the Plan, have an
exercise price of $12.3125 per share, were granted on the same terms and
conditions as are provided for in the Plan, vest in cumulative installments of
18,750 shares on each of the first four anniversaries of the date of grant and
expire ten years after the date of grant.
 
                                       42
<PAGE>   45
 
          SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
 
     The following table sets forth information with respect to beneficial
ownership of Common Stock as of September 30, 1996, and after giving effect to
this Offering, by: (i) all persons known to the Company to be the beneficial
owner of 5% or more of the outstanding Common Stock; (ii) each director; (iii)
each executive officer; and (iv) all officers and directors of the Company as a
group.
 
<TABLE>
<CAPTION>
                                                             COMMON STOCK
                                                          BENEFICIALLY OWNED          COMMON STOCK
                                                           PRIOR TO OFFERING       BENEFICIALLY OWNED
                                                         ---------------------       AFTER OFFERING
                                                          NUMBER                   ------------------
                         NAME                            OF SHARES     PERCENT          PERCENT
  ---------------------------------------------------    ---------     -------     ------------------
  <S>                                                    <C>           <C>         <C>
  Joel Friedman(1)...................................      428,159        5.6%             3.7%
    599 Lexington Avenue
    New York, New York 10022

  Richard D. Davis(2)................................       13,588         *                *

  Wayne P. Widynowski(3).............................        1,000         *                *

  Luis H. Ferran(4)..................................    1,150,916       15.1              9.9
    Rio Churubusco 522
    El Retono 09440
    Mexico, D.F.

  Ronald L. Koons(5).................................           --         --              --

  G.C.L. Kemp(6).....................................       47,329         *                *

  Charles O. Merchant(7).............................       13,588         *                *

  Ralph M. Bahna(8)..................................        5,802         *                *

  Douglas W. Brandrup(8).............................       10,000         *                *

  Arthur D. Emil(8)..................................        5,789         *                *

  P. Dennis O'Brien(8)...............................        5,000         *                *

  Robert P. Andrews(8)...............................      113,859        1.5               *

  Emir L. Tavella(8).................................

  John D. White, Jr..................................      160,342        2.1              1.4

  All officers and directors as a group
    (14 persons)(1)(2)(3)(4)(5)(6)(7)(8).............    1,955,372       25.7             16.9
</TABLE>
 
- ---------------
 
 *  Less than 1%.
 
(1) Includes an aggregate of 109,540 shares of Common Stock, of which (a) 21,908
    shares are owned by Friedman Enterprises, (b) 43,816 shares are owned by Mr.
    Friedman's wife, in which shares Mr. Friedman disclaims any beneficial
    ownership, and (c) 21,908 shares are owned by each of Mr. Friedman's two
    adult children, in which shares Mr. Friedman disclaims any beneficial
    ownership. Excludes 75,000 shares of Common Stock issuable upon exercise of
    a stock option that was not granted under the Plan (see "Management --
    Long-Term Incentive Compensation Plan").
    
(2) Excludes 50,000 shares of Common Stock issuable upon exercise of a stock
    option granted under the Plan and 75,000 shares of Common Stock issuable
    upon exercise of a stock option that was not granted under the Plan (see
    "Management -- Long-Term Incentive Compensation Plan").
    
(3) Excludes 45,000 shares of Common Stock issuable upon exercise of a stock
    option granted under the Plan and 75,000 shares of Common Stock issuable
    upon exercise of a stock option that was not granted under the Plan (see
    "Management -- Long-Term Incentive Compensation Plan").
    
(4) Excludes (a) 15,235 shares of Common Stock owned by Mr. Ferran's wife, all
    of which shares are held in trust by a Mexican bank for her benefit, and in
    which shares Mr. Ferran disclaims any beneficial
    
                                       43
<PAGE>   46
 
     ownership; and (b) 250,000 shares of Common Stock issuable upon exercise of
     a stock option granted under the Plan (see "Management -- Long-Term
     Incentive Compensation Plan"). Includes 57,394 shares of Common Stock, all
     of which shares are held in trust by a Mexican bank for Mr. Ferran's
     benefit.
 
(5)  Excludes 30,000 shares of Common Stock issuable upon exercise of a stock
     option granted under the Plan (see "Management -- Long-Term Incentive
     Compensation Plan").
 
(6)  Includes 8,705 shares of Common Stock owned by Mr. Kemp's wife.
 
(7)  Excludes 10,000 shares of Common Stock issuable upon exercise of a stock
     option granted under the Plan (see "Management -- Long-Term Incentive
     Compensation Plan").
 
(8)  Excludes 10,000 shares of Common Stock issuable upon exercise of a stock
     option granted under the Plan and 6,667 shares of Common Stock issuable
     upon the exercise of a stock option not granted under the Plan. (see
     "Management -- Director Compensation").
 
                              CERTAIN TRANSACTIONS
 
     Simultaneously with the consummation of the Initial Public Offering, 3-D
Geophysical acquired in separate transactions, in exchange for cash, notes and
shares of Common Stock, the Operating Subsidiaries and PIASA, as described
below. Of the approximately $28.7 million of estimated net proceeds to the
Company from the Initial Public Offering, (i) approximately $13.8 million was
used to pay the cash portion of the purchase price to certain former
stockholders of the Operating Subsidiaries and PIASA; and (ii) approximately
$5.9 million was used to repay indebtedness of the Operating Subsidiaries,
including approximately $1.9 million of indebtedness that was guaranteed by or
was owed to certain former stockholders of the Operating Subsidiaries. In
addition, the former stockholders of the Operating Subsidiaries and PIASA
received an aggregate of 1,599,319 shares of Common Stock having a market value,
based on the price to the public in the Initial Public Offering of $7.50 per
share, of approximately $12.0 million in the aggregate.
 
     Under a stock purchase agreement (the "Geoevaluaciones Stock Purchase
Agreement"), 3-D Geophysical purchased from Mr. Ferran, his wife, his
father-in-law and his mother-in-law (collectively, the "Former Geoevaluaciones
Stockholders") all of the issued and outstanding shares of capital stock of
Geoevaluaciones. In connection with this acquisition, 3-D Geophysical entered
into a separate non-competition agreement with each of the Former
Geoevaluaciones Stockholders (collectively, the "Geoevaluaciones Non-Competition
Agreement"). The Geoevaluaciones Stock Purchase Agreement and the
Geoevaluaciones Non-Competition Agreement were entered into on the basis of
arm's-length negotiations among the Former Geoevaluaciones Stockholders and, on
behalf of 3-D Geophysical, Messrs. Friedman and White. Neither 3-D Geophysical
nor the Former Geoevaluaciones Stockholders obtained an appraisal of
Geoevaluaciones or such non-competition covenants in connection with this
transaction; at September 30, 1995, the net book value of Geoevaluaciones was
approximately $2.1 million. Pursuant to the Geoevaluaciones Stock Purchase
Agreement, 3-D Geophysical paid to the Former Geoevaluaciones Stockholders: (i)
$2.45 million in cash at closing; and (ii) $1.0 million by delivery at closing
of four promissory notes, payable in installments at six, 12, 18 and 24 months
after the closing in the following aggregate amounts (which amounts include
interest at 8% per annum): $290,000, $280,000, $270,000 and $260,000,
respectively. Pursuant to the Geoevaluaciones Non-Competition Agreement, 3-D
Geophysical paid to the Former Geoevaluaciones Stockholders: (i) 100,000 shares
of Common Stock that was issued at closing to trusts with Mexican banks for the
benefit of the Former Geoevaluaciones Stockholders, and is to be released
February 9, 1998; and (ii) $2.0 million, reduced by the amount of any
liabilities Geoevaluaciones had not disclosed to the Company and by any amount
paid by Geoevaluaciones to settle or otherwise in connection with
Geoevaluaciones' dispute with a supplier (see "Business -- Legal Proceedings"),
such portion of the consideration consisting of (a) $1.0 million in cash that
was deposited at the closing in a bank account, and which, subject to any such
reduction, may be disbursed only upon the approval of (1) either Mr. Ferran or
another Geoevaluaciones Stockholder, and (2) either Mr. Friedman or Mr. White;
and (b) 117,647 shares of Common Stock that were delivered at closing to trusts
with Mexican banks for the benefit of the Former Geoevaluaciones Stockholders,
and which may not be
 
                                       44
<PAGE>   47
 
released until June 30, 1997 and then only upon the approval of a designated
representative of the Former Geoevaluaciones Stockholders and Mr. Friedman. Mr.
Ferran entered into an employment agreement with the Company and serves as
Executive Vice President -- Latin American Operations, President of
Geoevaluaciones and a Director of the Company. In addition, Mr. Ferran may
receive, pursuant to the Geoevaluaciones Non-Competition Agreement, as described
above, up to a maximum of 57,394 of the shares of Common Stock payable to the
Former Geoevaluaciones Stockholders. Of the amounts paid by the Company to the
Former Geoevaluaciones Stockholders, Mr. Ferran received, as described above,
$645,167 in cash, a note in the principal amount of $263,333, with interest of
8% per annum thereon payable over two years, and will receive up to $263,334 in
cash that may not be released until June 30, 1997 (see "Management -- Employment
Agreements; Non-Competition Agreements" and "Security Ownership of Management
and Principal Stockholders").
 
     Under a stock purchase agreement, 3-D Geophysical purchased from Robert P.
Andrews, Luis H. Ferran and five other stockholders of PIASA all of the issued
and outstanding shares of capital stock of PIASA for approximately $300,000,
consisting of $60,000 in cash and approximately 28,235 shares of Common Stock.
The stock purchase agreement with the former stockholders of PIASA was entered
into on the basis of arm's-length negotiations among Mr. Andrews, the President
and Chairman of the Board of PIASA, and Mr. Ferran, a director and Secretary of
PIASA, on behalf of the former stockholders of PIASA, and Messrs. Friedman and
White, on behalf of 3-D Geophysical. Neither 3-D Geophysical nor PIASA obtained
an appraisal of PIASA in connection with this transaction; at September 30,
1995, the net book value of PIASA was approximately $288,000. Mr. Ferran
received 9,176 shares of Common Stock and $19,500 in connection with the sale of
PIASA, and Mr. Andrews received 10,588 shares of Common Stock and $22,500 in
connection with the sale of PIASA.
 
     Although the acquisitions of Geoevaluaciones and PIASA were made on an
arm's-length basis, Mr. Ferran was the holder of 77% of the outstanding shares
of Common Stock prior to the acquisitions and for accounting purposes the
acquisitions of Geoevaluaciones and PIASA have been treated as a
recapitalization of Geoevaluaciones and PIASA with Geoevaluaciones (combined
with PIASA) as the acquiror of 3-D Geophysical.
 
     Under an asset purchase agreement between Northern's predecessor ("Old
Northern") and 3-D Geophysical, 3-D Geophysical purchased substantially all of
Old Northern's assets related to its land-based seismic data acquisition
business. Neither 3-D Geophysical nor Old Northern obtained an appraisal of the
assets of Old Northern to be acquired by 3-D Geophysical in connection with this
transaction; at September 30, 1995, the net book value of such assets was
approximately $2.0 million. Such asset purchase agreement was the result of
arm's-length negotiations among representatives of 3-D Geophysical and
representatives of Old Northern. The aggregate consideration paid by the Company
was $10.9 million in cash. Wayne P. Widynowski, the Vice President of Marketing
of Old Northern, entered into an employment agreement with the Company and
serves as Executive Vice President and Chief Operating Officer of the Company
and as President of Northern (see "Management -- Employment Agreements;
Non-Competition Agreements," and "Security Ownership of Management and Principal
Stockholders").
 
     Under a merger agreement among Paragon, 3-D Geophysical and a subsidiary of
3-D Geophysical, Paragon merged with the subsidiary with Paragon being the
surviving entity (the "Paragon Merger"). Mr. Friedman, two other individuals and
members of their respective immediate families (the "Former Paragon
Stockholders") each owned one-third of the issued and outstanding capital stock
of Paragon. In August 1994, Paragon purchased all of the net assets of Paragon
Geophysical, Inc., an Ohio corporation, for $1.1 million in cash and, in
addition, assumed long-term liabilities of $1.9 million. To finance the
purchase, Paragon borrowed $1.1 million from a commercial bank that was
guaranteed by the Former Paragon Stockholders and the Former Paragon
Stockholders contributed approximately $150,000 in cash. The Former Paragon
Stockholders received approximately 1,314,261 shares of Common Stock in
connection with the Paragon Merger. In addition, the Company assumed
approximately $4.8 million of Paragon's debt, of which $1.7 million had been
personally guaranteed by Mr. Friedman and certain other Former Paragon
Stockholders. All of this debt was repaid upon consummation of the Initial
Public Offering with a portion of the net proceeds therefrom. The terms of the
Paragon Merger were not determined through arm's-length negotiations
 
                                       45
<PAGE>   48
 
and may have been significantly greater than would have resulted from
arm's-length negotiations. The Company did not obtain an appraisal of Paragon in
connection with the Paragon Merger; at September 30, 1995, the net book value of
Paragon was negative by approximately $496,000. Mr. Friedman, who, prior to the
Paragon Merger, was the President and Chief Executive Officer of 3-D Geophysical
and Chairman of the Board and Chief Executive Officer of Paragon, together with
members of his family, owned a total of 438,087 shares of Common Stock after the
Paragon Merger. Mr. White, who, prior to the Paragon Merger, was acting Chief
Financial Officer of Paragon, served as Executive Vice President, Chief
Financial Officer, Secretary, Treasurer and a Director of 3-D Geophysical until
September 30, 1996 and currently serves as a Director of and consultant to the
Company. Mr. Merchant, who serves as Vice President of the Company and President
of Paragon, owns 13,588 shares of Common Stock as a founder of 3-D Geophysical.
In connection with the Paragon Merger, Messrs. Friedman, White and Merchant
entered into employment agreements. Mr. White entered into a termination
agreement with the Company following his resignation in September 1996 (see
"Management -- Employment Agreements; Non-Competition Agreements," "Security
Ownership of Management and Principal Stockholders" and "Certain Transactions").
 
     Under a stock purchase agreement among G.C.L. Kemp and his wife (the
"Former Kemp Stockholders") and 3-D Geophysical (the "Kemp Stock Purchase
Agreement"), 3-D Geophysical purchased all of the issued and outstanding shares
of capital stock of Kemp. The Kemp Stock Purchase Agreement was entered into on
the basis of arm's-length negotiations among G.C.L. Kemp, on behalf of the
Former Kemp Stockholders, and Messrs. Friedman and White, on behalf of 3-D
Geophysical, and the consideration payable to the Former Kemp Stockholders
thereunder represents the value the Former Kemp Stockholders deemed appropriate
for their business. Neither the Company nor the Former Kemp Stockholders
obtained an appraisal of Kemp in connection with this transaction; at September
30, 1995 the net book value of Kemp was $422,000. The aggregate consideration
paid by the Company to the Former Kemp Stockholders, as modified by amendments
in June 1996, was approximately $958,000, consisting of $625,000 in cash and
$333,000 paid by delivery of 39,176 shares of Common Stock. In addition, the
Company assumed and repaid approximately $152,000 in debt owed by Kemp, of which
$135,000 was guaranteed by Mr. Kemp. In addition, the Company assumed $50,000 of
debt owed by Kemp to Mr. Kemp, of which $25,000 was forgiven by Mr. Kemp in June
1996. Mr. Kemp entered into an employment agreement pursuant to which he serves
as a Vice President of the Company. Mr. Davis entered into an employment
agreement with the Company, pursuant to which he serves as President, Chief
Executive Officer and a Director of the Company. Mr. Davis was appointed as
President of Kemp by the Board of Directors in June 1996.
 
     In connection with its formation in March 1995, 3-D Geophysical issued
1,400,681 shares of Common Stock to the founding stockholders, including
1,084,346 shares to Mr. Ferran, 160,342 shares to Mr. White, 103,271 shares to
Mr. Andrews, 13,588 shares to each of Messrs. Davis and Merchant, 8,153 shares
to Mr. Kemp and 4,620 shares to each of Messrs. Bahna and Brandrup. The amounts
paid by each of these stockholders for the foregoing shares are as follows: Mr.
Ferran -- $399; Mr. White -- $59; Mr. Andrews -- $38; Messrs. Davis and
Merchant -- $5; Mr. Kemp -- $3; Messrs. Bahna and Brandrup -- $1.70. The
founding stockholders (including the individuals named in the preceding
sentence) paid an aggregate of $515 for the foregoing shares. Based on the price
to the public in the Initial Public Offering of $7.50 per share, such number of
shares owned by the founding stockholders had a market value immediately
following the consummation of the Initial Public Offering of $8.1 million in the
case of Mr. Ferran, $1.2 million in the case of Mr. White, $775,000 in the case
of Mr. Andrews, $102,000 in the case of each of Messrs. Davis and Merchant,
$61,000 in the case of Mr. Kemp and $35,000 in the case of each of Messrs. Bahna
and Brandrup.
 
     Mr. Andrews is the sole stockholder of The Andrews Group International,
Inc. ("Andrews Group") which, through its Mexican affiliate, A.G.I. Mexicana,
S.A. de C.V. (collectively, the "Andrews Companies"), acts as the exclusive
representative for several companies in Mexico, including Input/Output and
Landmark Graphics Corporation. Geoevaluaciones and PIASA purchase goods and
services from A.G.I. Mexicana and during the nine months ended September 30,
1996 such purchases totalled approximately $322,000. In addition, as of
September 30, 1996 PIASA owed A.G.I. Mexicana $115,000 for goods and services
purchased prior to the Initial Public Offering. The Company also leases
approximately 1,000 channels of 3-D seismic data acquisition equipment from
Andrews Group under a six-month lease with an automatic monthly renewal
thereafter that provides for a deposit of approximately $300,000 and for monthly
payments of
 
                                       46
<PAGE>   49
 
approximately $110,000. The lease provides the Company with an option to
purchase the equipment for approximately $2,445,000, subject to an offset of 80%
of the rental payments during the six months ending March 1, 1997 and a 10%
discount if the option is exercised during such period. The Company intends to
use a portion of the proceeds of this Offering to purchase the equipment for use
in Peru (see "Use of Proceeds" and "Business -- Customers and Contracts"). The
Company anticipates that it will continue to purchase goods and services from
the Andrews Companies. The Company believes that the past transactions with the
Andrews Companies have been, and that any future transactions with the Andrews
Companies will be, on terms no less favorable to the Company than could be
obtained from an unaffiliated third party.
 
     The Company agreed to pay to a consulting company owned by Mr. White
$250,000 for financial advisory and other consulting services in connection with
the structuring, negotiation and consummation of the acquisitions of the
Operating Subsidiaries and PIASA, of which $125,000 was paid upon the
consummation of the Initial Public Offering and $125,000 is payable in February
1997. In connection with Mr. White's resignation as an executive officer of the
Company and the termination of his employment agreement, the Company agreed to
pay Mr. White $150,000 plus $7,000 per month through December 31, 1998, the
expiration date of the employment agreement, to provide him with office space in
the Company's New York City facility through December 31, 1997 and to provide
him with certain insurance benefits. In exchange therefor, Mr. White has agreed
to render financial advisory and other consulting services to the Company in
connection with this Offering.
 
     The Company leases space in New York City at an annual base rental of
$165,000 to provide offices for Messrs. Friedman and White. Mr. Friedman has
agreed to reimburse the Company for any amounts under the lease that are payable
with respect to space that is not utilized by the Company (see "Business --
Properties").
 
     In the future, transactions with affiliates of the Company are anticipated
to be minimal. Any such transaction will be approved by a majority of the Board
of Directors, including a majority of the disinterested members of the Board of
Directors, and will be made on terms no less favorable to the Company than could
be obtained from an unaffiliated third party.
 
                          DESCRIPTION OF CAPITAL STOCK
 
     3-D Geophysical's Certificate of Incorporation provides for authorized
capital stock of 25,000,000 shares of Common Stock, par value $.01 per share, of
which 11,600,000 shares will be issued and outstanding upon completion of this
Offering, and 1,000,000 shares of Preferred Stock, $.01 par value per share
("Preferred Stock"), of which no shares will be outstanding upon completion of
this Offering.
 
COMMON STOCK
 
     As of the date hereof, 7,600,000 shares of Common Stock are issued and
outstanding. All of the issued and outstanding shares of Common Stock are, and
the shares of Common Stock offered hereby, when issued in this Offering, will
be, validly issued, fully paid and nonassessable.
 
     The holders of Common Stock are entitled to one vote for each share on all
matters voted on by stockholders, and, except as otherwise required by law or as
provided in any resolution adopted by the Board of Directors with respect to any
series of Preferred Stock (as defined below), the holders of shares of Common
Stock exclusively possess all voting power.
 
     The Certificate of Incorporation and By-laws provide that the Board of
Directors will be divided into three classes of directors, with the classes to
be as nearly equal in number as possible (see "Management -- Directors and
Executive Officers").
 
     Subject to any preferential rights of any outstanding series of Preferred
Stock created by the Board of Directors from time to time, the holders of Common
Stock are entitled to such dividends as may be declared from time to time by the
Board of Directors from funds available therefor, and upon liquidation will be
entitled to receive pro rata all assets of the Company available for
distribution to such holders. The Common Stock is
 
                                       47
<PAGE>   50
 
not convertible or redeemable and there are no sinking fund provisions therefor.
Holders of the Common Stock are not entitled to any preemptive rights.
 
     As of September 24, 1996, there were approximately 62 holders of record of
Common Stock.
 
PREFERRED STOCK
 
     The Board of Directors of the Company, without any action by the
stockholders of the Company, is authorized to issue up to 1,000,000 shares of
Preferred Stock, in one or more series and to determine the voting rights
(including the right to vote as a series on particular matters), preferences as
to dividends and in liquidation and the conversion and other rights of each such
series. There are no shares of Preferred Stock outstanding. See "-- Certain
Anti-Takeover Effects of Certain Provisions of the Certificate of Incorporation,
By-laws and Delaware General Corporation Law."
 
CERTAIN ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CERTIFICATE OF
INCORPORATION, BY-LAWS AND DELAWARE GENERAL CORPORATION LAW
 
     The Certificate of Incorporation and By-laws contain a number of provisions
that could make more difficult the acquisition of the Company by means of a
tender or exchange offer, a proxy contest or otherwise. The description of such
provisions set forth below is intended only as a summary and is qualified in its
entirety by reference to the pertinent sections of the Certificate of
Incorporation and the By-laws, forms of which are filed as exhibits to the
Registration Statement of which this Prospectus forms a part.
 
     Classified Board of Directors; Removal of Directors. The classification of
directors will have the effect of making it more difficult for stockholders to
change the composition of the Board of Directors. At least two annual meetings
of stockholders generally will be required to effect a change in a majority of
the Board of Directors. Such a delay may help ensure that the Company's
directors, if confronted by a stockholder attempting to force a proxy contest, a
tender or exchange offer or an extraordinary corporate transaction, would have
sufficient time to review the proposal as well as any available alternatives to
the proposal and to act in what they believe to be the best interest of the
stockholders. The classification provisions will apply to every election of
directors, however, regardless of whether a change in the composition of the
Board of Directors would be beneficial to the Company and its stockholders and
whether a majority of the Company's stockholders believes that such a change
would be desirable.
 
     The Certificate of Incorporation provides that directors of the Company may
only be removed for cause by the affirmative vote of the holders of 80% of the
voting power of all of the then outstanding shares of stock entitled to vote
generally in the election of directors (the "Voting Stock").
 
     The classification provisions could also have the effect of discouraging a
third party from initiating a proxy contest, making a tender or exchange offer
or otherwise attempting to obtain control of the Company, even though such an
attempt might be beneficial to the Company and its stockholders. These
provisions could thus increase the likelihood that incumbent directors will
retain their positions. In addition, the classification provisions may
discourage accumulations of large blocks of the Common Stock by purchasers whose
objective is to take control of the Company and remove a majority of the Board
of Directors, and thus could tend to reduce the likelihood of fluctuations in
the market price of the Common Stock that might result from accumulations of
large blocks for such purpose. Accordingly, stockholders could be deprived of
certain opportunities to sell their shares of Common Stock at a higher market
price than might otherwise be the case.
 
     Preferred Stock. The Certificate of Incorporation authorizes the Board of
Directors to establish one or more series of Preferred Stock and to determine,
with respect to any series of Preferred Stock, the terms and rights of such
series, including (i) the designation of the series, (ii) the number of shares
of the series, which number the Board may thereafter (except where otherwise
provided in the certificate of designation) increase or decrease (but not below
the number of shares thereof then outstanding), (iii) whether dividends, if any,
will be cumulative or noncumulative and the dividend rate of the series, (iv)
the dates at which dividends, if any, will be payable, (v) the redemption rights
and price or prices, if any, for shares of the series, (vi) the terms and
amounts of any sinking fund provided for the purchase or redemption of shares of
the series,
 
                                       48
<PAGE>   51
 
(vii) the amounts payable on shares of the series in the event of any voluntary
or involuntary liquidation, dissolution or winding up of the affairs of the
Company, (viii) whether the shares of the series will be convertible into shares
of any other class or series, or any other security, of the Company or any other
corporation, and, if so, the specification of such other class or series or such
other security, the conversion price or prices or rate or rates, any adjustments
thereof, the date or dates as of which such shares shall be convertible and all
other terms and conditions upon which such conversion may be made, (ix)
restrictions, if any, on the issuance of shares of the same series or of any
other class or series, and (x) the voting rights, if any, of the stockholders of
such series, which may include the right of such stockholders to vote separately
as a class on any matter.
 
     The Company believes that the ability of the Board of Directors to issue
one or more series of Preferred Stock will provide the Company with flexibility
in structuring possible future financing and acquisitions and in meeting other
corporate needs which might arise. The authorized shares of Preferred Stock, as
well as shares of Common Stock, will be available for issuance without further
action by the Company's stockholders, unless such action is required by
applicable law or the rules of any stock exchange or automated quotation system
on which the Company's securities may be listed or traded.
 
     Although the Board of Directors has no intention at the present time of
doing so, it could issue a series of Preferred Stock that could, depending on
the terms of such series, impede the completion of a merger, tender offer or
other takeover attempt. The Board of Directors will make any determination to
issue such shares based on its judgment as to the best interests of the Company
and its stockholders. The Board of Directors, in so acting, could issue
Preferred Stock having terms that could discourage an acquisition attempt
through which an acquiror may be otherwise able to change the composition of the
Board of Directors, including a tender or exchange offer or other transaction
that some, or a majority, of the Company's stockholders might believe to be in
their best interests or in which stockholders might receive a premium for their
stock over the then current market price of such stock.
 
     No Stockholder Action by Written Consent; Special Meetings. The Certificate
of Incorporation provides that, subject to the rights of any holders of
Preferred Stock to elect additional directors under specified circumstances,
stockholder action can be taken only at an annual or special meeting of
stockholders and prohibit stockholder action by written consent in lieu of a
meeting. The Certificate of Incorporation and the By-laws provide that special
meetings of stockholders can be called only upon a written request stating the
purpose of such meeting delivered to the Chairman of the Board, the President or
the Secretary, and signed by a majority of the Board of Directors or by
resolution of the Board or the Executive Committee thereof. Stockholders are not
permitted to call a special meeting or to require that the Board call a special
meeting. Moreover, the business permitted to be conducted at any special meeting
of stockholders is limited to the business brought before the meeting pursuant
to the notice of meeting given by the Company.
 
     The provisions of the Certificate of Incorporation and the By-laws
prohibiting stockholder action by written consent may have the effect of
delaying consideration of a stockholder proposal, including a stockholder
proposal that a majority of the stockholders believes to be in the best interest
of the Company, until the next annual meeting unless a special meeting is called
at the request of a majority of the Board of Directors or by resolution of the
Board or the Executive Committee thereof. These provisions would also prevent
the holders of a majority of the Voting Stock from unilaterally using the
written consent procedure to take stockholder action. Moreover, a stockholder
could not force stockholder consideration of a proposal over the opposition of
the Board by calling a special meeting of stockholders prior to the time a
majority of the Board believes such consideration to be appropriate.
 
     Amendment of Certain Provisions of the Certificate of Incorporation and
By-laws. Under the Delaware General Corporation Law (the "DGCL"), the
stockholders have the right to adopt, amend or repeal the By-laws and, with the
approval of the Board of Directors, the Certificate of Incorporation. The
Certificate of Incorporation provides that the affirmative vote of the holders
of at least 80% of the voting power of the then outstanding shares of Voting
Stock, voting together as a single class, and in addition to any other vote
required by the Certificate of Incorporation or By-laws, is required to amend
provisions of the Certificate of Incorporation or By-laws relating to: (i) the
prohibition of stockholder action without a meeting; (ii) the
 
                                       49
<PAGE>   52
 
prohibition of stockholders calling a special meeting; (iii) the number,
election and term of the Company's directors; or (iv) the removal of directors.
The vote of the holders of a majority of the voting power of the then
outstanding shares of Voting Stock is required to amend all other provisions of
the Certificate of Incorporation. The Certificate of Incorporation further
provides that the By-laws may be amended by the Board of Directors or by the
affirmative vote of the holders of at least a majority of the voting power of
the then outstanding shares of Voting Stock, voting together as a single class.
These super-majority voting requirements will have the effect of making more
difficult any amendment by stockholders of the By-laws or of any of the
provisions of the Certificate of Incorporation described above, even if a
majority of the Company's stockholders believes that such amendment would be in
their best interests.
 
     Anti-Takeover Legislation. Section 203 of the DGCL provides that, subject
to certain exceptions specified therein, a corporation shall not engage in any
business combination with any "interested stockholder" for a three-year period
following the date that such stockholder becomes an interested stockholder
unless (i) prior to such date, the board of directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder, (ii) upon consummation of
the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced (excluding
certain shares), or (iii) on or subsequent to such date, the business
combination is approved by the board of directors of the corporation and at an
annual or special meeting of stockholders by the affirmative vote of a least
two-thirds of the outstanding voting stock which is not owned by the interested
stockholder. Section 203 of the DGCL provides that, except as specified, an
interested stockholder is defined to include (x) any person that is the owner of
15% or more of the outstanding voting stock of the corporation, or is an
affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation at any time within three years
immediately prior to the relevant date, and (y) the affiliates and associates of
any such person.
 
     Under certain circumstances, Section 203 of the DGCL makes it more
difficult for a person who would be an "interested stockholder" to effect
various business combinations with a corporation for a three-year period,
although the stockholders may elect to exclude a corporation from the
restrictions imposed thereunder. The Certificate of Incorporation does not
exclude the Company from the restrictions imposed under Section 203 of the DGCL.
The provisions of Section 203 of the DGCL may encourage companies interested in
acquiring the Company to negotiate in advance with the Board of Directors of the
Company, since the stockholder approval requirement would be avoided if a
majority of the directors then in office approve, prior to the time the
stockholder becomes an interested stockholder, either the business combination
or the transaction which results in the stockholder becoming an interested
stockholder.
 
LIMITATION ON DIRECTORS' LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     The Certificate of Incorporation and By-laws each contain a provision that
eliminates, to the extent currently allowed under the DGCL, the personal
monetary liability of a director to the Company and its stockholders for breach
of his fiduciary duty of care as a director. If a director were to breach the
duty of care in performing his duties as a director, neither the Company nor its
stockholders could recover monetary damages from the director, and the only
course of action available to the Company's stockholders would be equitable
remedies, such as an action to enjoin or rescind a transaction involving a
breach of the fiduciary duty of care. To the extent certain claims against
directors are limited to equitable remedies, this provision of the Certificate
of Incorporation may reduce the likelihood of derivative litigation and may
discourage stockholders or management from initiating litigation against
directors for breach of their duty of care. Additionally, equitable remedies may
not be effective in many situations. If a stockholder's only remedy is to enjoin
the completion of the Board of Directors' action, this remedy would be
ineffective if the stockholder does not become aware of a transaction or event
until after it has been completed. In such a situation, such stockholder would
have no effective remedy against the directors. Liability for monetary damages
remains for (i) any breach of the duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) payment of an
improper dividend or improper repurchase or redemption of the Company's stock
under Section 174 of the DGCL or (iv) any
 
                                       50
<PAGE>   53
 
transaction from which the director derived an improper personal benefit. The
Certificate of Incorporation further provides that in the event the DGCL is
amended to allow the further elimination or limitation of the liability of
directors, then the liability of the Company's directors shall be limited to the
fullest extent permitted by the amended DGCL. The DGCL permits a corporation to
indemnify certain persons, including officers and directors, who are (or are
threatened to be made) parties to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation), by reason of their
being officers or directors of the corporation. The indemnity may include
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by an indemnified officer or
director, provided he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the corporation's best interests and, in the case of
criminal proceedings, provided he had no reasonable cause to believe that his
conduct was unlawful. The By-laws provide indemnification to the fullest extent
allowed pursuant to the foregoing provisions of the DGCL.
 
     The DGCL further permits a corporation to indemnify certain persons,
including officers and directors, who are (or are threatened to be made) parties
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of their being officers
or directors of the corporation. The indemnity may include expenses (including
attorneys' fees) actually and reasonably incurred by the indemnified officer or
director, provided he acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the corporation's best interests. However, no such
person will be indemnified as to matters for which he is found to be liable for
negligence or misconduct in the performance of his duty to the corporation
unless, and only to the extent that, indemnification is ordered by a court. The
Certificate of Incorporation and By-laws provide indemnification of the
Company's directors and officers to the fullest extent allowed pursuant to the
foregoing provisions of the DGCL.
 
     Delaware corporations also are authorized to obtain insurance to protect
officers and directors from certain liabilities, including liabilities against
which the corporation cannot indemnify its directors and officers. The Company
intends to obtain a directors' and officers' liability insurance policy prior to
the closing of this Offering.
 
     All of the foregoing indemnification provisions include statements that
such provisions are not to be deemed exclusive of any other right to indemnity
to which a director or officer may be entitled under any by-law, agreement, vote
of stockholders or disinterested directors or otherwise.
 
TRANSFER AGENT AND REGISTRAR
 
     The transfer agent and registrar for the Common Stock is American
Securities Transfer, Incorporated.
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
     Upon completion of this Offering, the Company will have outstanding
11,600,000 shares of Common Stock. The 4,000,000 shares to be sold in this
Offering (plus any additional shares sold upon exercise of the Underwriters'
over-allotment option) will be, and the 4,600,000 shares sold in the Initial
Public Offering are, freely tradeable in the public market without restriction
or further registration under the Securities Act, except for any shares
purchased by "affiliates" of the Company, as that term is defined in Rule 144
("Rule 144") promulgated under the Securities Act. The remaining 3,000,000
outstanding shares of Common Stock (the "Restricted Shares") which were issued
in connection with the formation of 3-D Geophysical and the acquisitions of the
Operating Subsidiaries and PIASA are deemed to be "restricted securities" within
the meaning of Rule 144 and may be publicly resold only if registered under the
Securities Act or sold in accordance with an eligible exemption from
registration, such as Rule 144. Of the Restricted Shares, 1,400,681 shares will
be eligible for resale in the public market commencing in March 1997 and
1,599,319 shares will be eligible in February 1998, subject in each case to
certain volume and other restrictions under Rule 144.
 
     In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated), including an affiliate of the
Company, who beneficially owns "restricted securities" acquired
 
                                       51
<PAGE>   54
 
from the Company or an affiliate of the Company at least two years prior to the
sale is entitled to sell within any three-month period a number of shares that
does not exceed the greater of (i) one percent of the then outstanding shares of
Common Stock (116,000 shares based on the number of shares outstanding
immediately after completion of this Offering, assuming no exercise of the
Underwriters' over-allotment option), and (ii) the average weekly reported
trading volume of the Common Stock during the four calendar weeks immediately
preceding the date on which notice of such sale is filed with the SEC, provided
certain manner of sale and notice requirements and requirements as to the
availability of current public information concerning the Company are satisfied
(which requirements as to the availability of current public information are
expected to be satisfied commencing 90 days after the date of this Prospectus).
Under Rule 144(k), a person who has not been an affiliate of the Company for a
period of three months preceding a sale of securities by him, and who
beneficially owns such "restricted securities" acquired from the Company or an
affiliate of the Company at least three years prior to such sale, would be
entitled to sell such shares without regard to volume limitations, manner of
sale provisions, notification requirements or requirements as to the
availability of current public information concerning the Company. Shares held
by persons who are deemed to be affiliates of the Company, including any shares
acquired by affiliates in this Offering, are subject to such volume limitations,
manner of sale provisions, notification requirements and requirements as to
availability of current public information concerning the Company, regardless of
how long the shares have been owned or how they were acquired, and, in addition,
the sale of any "restricted securities" beneficially owned by affiliates is
subject to the two-year holding period requirement. As defined in Rule 144, an
"affiliate" of an issuer is a person that directly or indirectly through the use
of one or more intermediaries controls, or is controlled by, or is under common
control with, such issuer.
 
     The Company and its officers and directors have agreed that for a period of
120 days from the date of this Prospectus they will not without the prior
written consent of Smith Barney Inc. (i) sell, offer to sell, solicit an offer
to buy, contract to sell or otherwise transfer or dispose of any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for, or any rights to purchase or acquire, shares of Common Stock, or (ii) grant
any options or warrants to purchase shares of Common Stock (other than the grant
of options under the Plan and Common Stock issuable upon the exercise of options
granted under the Plan or otherwise to officers, directors and other key
employees of the Company).
 
     The Company has outstanding options to purchase an aggregate of 889,352
shares of Common Stock (see "Management -- Director Compensation" and
"Management -- Long-Term Incentive Compensation Plan"), of which options to
purchase approximately 215,000 shares become exercisable in February 1997,
options to purchase approximately 70,000 additional shares become exercisable in
April 1997, options to purchase 4,450 shares become exercisable in August 1997
and options to purchase 10,000 shares become exercisable in September 1997. The
Company intends to register under the Securities Act the shares issuable upon
exercise of options granted under the Plan and otherwise and, upon such
registration, such shares will be eligible for resale in the public market,
except that any such shares issued to affiliates are subject to the volume
limitations and other restrictions of Rule 144.
 
     No prediction can be made as to the effect, if any, that the sale of shares
or the availability of shares for sale will have on the market price of the
Common Stock prevailing from time to time. Nevertheless, sales of substantial
amounts of the Common Stock in the public market could adversely affect
prevailing market prices and the ability of the Company to raise equity capital
in the future. See "Underwriting."
 
                                       52
<PAGE>   55
 
                                  UNDERWRITING
 
     Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each Underwriter named below has severally
agreed to purchase and the Company has agreed to sell to such Underwriter, the
number of shares of Common Stock set forth opposite the name of such
Underwriter:
 
<TABLE>
<CAPTION>
                                                               NUMBER
    UNDERWRITER                                               OF SHARES
    -----------                                               ---------
    <S>                                                       <C>
    Smith Barney Inc........................................
    Rauscher Pierce Refsnes, Inc. ..........................
    Simmons & Company International.........................
 
                                                              ---------
              Total.........................................  4,000,000
                                                              =========
</TABLE>
 
     The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by counsel and
to certain other conditions. The Underwriters are obligated to take and pay for
all of shares of Common Stock offered hereby (other than those covered by the
over-allotment option described below) if any such shares are taken.
 
     The Underwriters, for whom Smith Barney Inc., Rauscher Pierce Refsnes, Inc.
and Simmons & Company International are acting as representatives (collectively,
the "Representatives"), propose to offer part of the shares of Common Stock
directly to the public at the public offering price set forth on the cover page
of this Prospectus and part of the shares of Common Stock to certain dealers at
a price which represents a concession not in excess of $          per share
under the public offering price. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of $          per share to certain other
dealers. After the initial offering of the shares to the public, the public
offering price and such concessions may be changed by the Representatives.
 
     The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 600,000 additional
shares of Common Stock at the price to public set forth on the cover page of
this Prospectus, less the underwriting discounts and commissions. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with this Offering. To the extent such
option is exercised, each Underwriter will be obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number of shares set forth opposite each Underwriter's name in the
preceding table bears to the total number of shares listed in such table.
 
     The Company and its officers and directors have agreed that for a period of
120 days from the date of this Prospectus they will not without the prior
written consent of Smith Barney Inc. (i) sell, offer to sell, solicit an offer
to buy, contract to sell or otherwise transfer or dispose of any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for, or any rights to purchase or acquire, shares of Common Stock, or (ii) grant
any options or warrants to purchase shares of Common Stock (other than the grant
of options under the Plan and Common Stock issuable upon the exercise of options
granted under the Plan or otherwise to officers, directors and other key
employees of the Company).
 
     The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.
 
                                       53
<PAGE>   56
 
                                 LEGAL MATTERS
 
     The legality of the Common Stock offered hereby will be passed upon for 3-D
Geophysical by Kramer, Levin, Naftalis & Frankel, New York, New York. Arthur D.
Emil, who is of counsel to that firm, is a Director of 3-D Geophysical, has been
granted ten-year options to purchase an aggregate of 16,667 shares of Common
Stock and owns 5,789 shares of Common Stock (see "Management -- Directors and
Executive Officers" and "Management -- Director Compensation"). Certain legal
matters for the Underwriters will be passed upon by Fulbright & Jaworski L.L.P.,
Houston, Texas.
 
                                    EXPERTS
 
     The consolidated financial statements of 3-D Geophysical, Inc. as of
December 31, 1995 and 1994 and for the three years in the period ended December
31, 1995 and the financial statements of Northern Geophysical of America, Inc.
(Land-Based Seismic Data Operations) and Paragon Geophysical, Inc. as of
December 31, 1994 and September 30, 1995 and for the two years in the period
ended December 31, 1994 and the nine-month period ended September 30, 1995,
included in this Prospectus, have been included herein in reliance on the
reports of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
 
     The balance sheet of J.R.S. Exploration Company Limited at November 30,
1995 and the statements of operations and retained earnings and changes in
financial position for the year then ended, included in this Prospectus, have
been included herein in reliance on the reports of Garrett Power, Chartered
Accountants, given on the authority of that firm as experts in Canadian
accounting and auditing.
 
                             ADDITIONAL INFORMATION
 
     The Company has filed with the SEC a Registration Statement on Form S-1
under the Securities Act with respect to the shares of Common Stock offered by
this Prospectus. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits and schedules thereto. The
Registration Statement and the exhibits and schedules thereto filed with the SEC
may be inspected, without charge, and copies may be obtained at prescribed
rates, at the public reference facilities maintained by the SEC at its principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549 and at the regional offices or public reference facilities of the SEC
located at 7 World Trade Center, 13th Floor, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. For further information pertaining to the Company and to
the shares of Common Stock offered hereby, reference is made to the Registration
Statement including the exhibits and schedules thereto. The SEC also maintains a
site on the World Wide Web, the address of which is http://www.sec.gov, that
contains reports, proxy and information statements and other information
regarding issuers, such as the Company, that file electronically with the SEC.
 
                                       54
<PAGE>   57
 
                                    GLOSSARY
 
     Certain words and terms commonly used in the seismic business which are
used throughout this Prospectus are defined below.
 
     "ACOUSTIC WAVE" A sonic wave travelling through the earth's subsurface
induced by a release of energy, normally dynamite or vibroseis.
 
     "ACQUISITION SYSTEM" The electronic field instruments and associated
equipment required for seismic acquisition.
 
     "CHANNEL" The electrical path from a geophone to a remote signal
conditioner over which data captured by the geophone is transmitted to the
remote signal conditioner.
 
     "CHANNEL BOX" A remote data collection unit which receives seismic data
from a multi-conductor cable attached to the geophones.
 
     "DFS-V(TM)" Traditional seismic acquisition systems for land applications
manufactured by Texas Instruments, Inc.
 
     "DISTRIBUTED SYSTEM" A seismic acquisition system in which received signals
are transmitted to remote signal conditioners, where they are amplified,
filtered and digitized before transmission to a central recording unit.
 
     "ENERGY SOURCE" Typically a small charge of dynamite or a mechanically
produced vibration.
 
     "GEOPHONES" Electro-magnetic coils placed on the earth's surface to receive
the acoustic waves reflected by subsurface geological layers.
 
     "I/O SYSTEM TWO(R)" Technologically advanced, distributed seismic
acquisition systems for land applications manufactured by Input/Output, Inc.
 
     "REMOTE SIGNAL CONDITIONER" Electronic device that converts the analog
signals captured by a geophone into a digital signal and transmits the converted
signal to a central electronic processing unit.
 
     "SEISMIC PROCESSING SYSTEM" The computer hardware and software required to
convert seismic records to seismic cross-sections.
 
     "SEISMIC RECORD" Seismic data received from one release of energy.
 
     "SEISMIC CROSS-SECTION" A graphic representation of processed seismic
records representing subsurface structural and stratigraphic features.
 
     "TRANSITION ZONES" Swamp, marshland or shallow water areas which are
considered to be distinct from either land or sea for seismic exploration
purposes.
 
     "VIBROSEIS" An energy source whereby the acoustic waves are mechanically
produced by machinery that vibrates on the earth's surface.
 
     "2-D SEISMIC" Seismic data representing a vertical plane of subsurface
information.
 
     "3-D SEISMIC" Seismic data representing a cube of subsurface information
that can be sliced into numerous planes offering different views of the target.
 
                                       55
<PAGE>   58
 
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                                        PAGE
                                                                                        ----
<S>                                                                                     <C>
3-D GEOPHYSICAL, INC. AND SUBSIDIARIES:
  Report of Independent Accountants...................................................   F-2
  Consolidated Balance Sheet..........................................................   F-3
  Consolidated Statement of Operations................................................   F-4
  Consolidated Statement of Stockholders' Equity......................................   F-5
  Consolidated Statement of Cash Flows................................................   F-6
  Notes to Consolidated Financial Statements..........................................   F-7
NORTHERN GEOPHYSICAL OF AMERICA, INC. (LAND-BASED SEISMIC DATA OPERATIONS):
  Report of Independent Accountants...................................................  F-17
  Balance Sheet.......................................................................  F-18
  Statement of Operations.............................................................  F-19
  Statement of Changes in Net Equity..................................................  F-20
  Statement of Cash Flows.............................................................  F-21
  Notes to Financial Statements.......................................................  F-22
PARAGON GEOPHYSICAL, INC.:
  Report of Independent Accountants...................................................  F-28
  Balance Sheet.......................................................................  F-29
  Statement of Operations.............................................................  F-30
  Statement of Stockholders' Deficit..................................................  F-31
  Statement of Cash Flows.............................................................  F-32
  Notes to Financial Statements.......................................................  F-33
J.R.S. EXPLORATION COMPANY LIMITED:
  Auditor Report......................................................................  F-38
  Balance Sheet.......................................................................  F-39
  Statement of Operations and Retained Earnings.......................................  F-40
  Statement of Changes in Financial Position..........................................  F-41
  Notes to Financial Statements.......................................................  F-42
3-D GEOPHYSICAL, INC. AND SUBSIDIARIES:
  Pro Forma Consolidated Financial Statements.........................................  F-45
  Pro Forma Consolidated Balance Sheet................................................  F-47
  Pro Forma Consolidated Statement of Operations for the year ended December 31,
     1995.............................................................................  F-48
  Pro Forma Consolidated Statement of Operations for the six months ended June 30,
     1995.............................................................................  F-49
  Pro Forma Consolidated Statement of Operations for the six months ended June 30,
     1996.............................................................................  F-50
  Notes to Pro Forma Consolidated Financial Statements................................  F-51
</TABLE>
 
                                       F-1
<PAGE>   59
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Stockholders of
3-D Geophysical, Inc. and Subsidiaries:
 
     We have audited the accompanying combined balance sheet of 3-D Geophysical,
Inc. and Subsidiaries, (the "Predecessor Company" as defined in Note 1) as of
December 31, 1995 and 1994, and the related combined statements of operations,
changes in stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1995. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of 3-D
Geophysical, Inc. and Subsidiaries (as defined in Note 1) as of December 31,
1995 and 1994 and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
 
Mexico City, Mexico                         COOPERS & LYBRAND
May 1, 1996
 
                                       F-2
<PAGE>   60
 
                     3-D GEOPHYSICAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
 
                                     ASSETS
<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                      -----------------------------       JUNE 30,
                                                          1994             1995             1996
                                                      ------------     ------------     -------------
<S>                                                   <C>              <C>              <C>
                                                       PREDECESSOR      PREDECESSOR         SUCCESSOR
                                                      ------------     ------------     -------------
 
<CAPTION>
                                                                                         (UNAUDITED)
<S>                                                   <C>              <C>              <C>
Current assets:
  Cash..............................................   $   241,823      $   609,480      $  2,873,000
  Accounts receivable:
     Trade..........................................     2,326,635        1,786,364        12,302,000
     Other..........................................        99,580          157,690           251,000
  Notes receivable..................................            --               --           975,000
  Deferred income tax assets........................            --               --           108,000
  Prepaid expenses and other assets.................       304,884          238,730           948,000
                                                       -----------      -----------      ------------
          Total current assets......................     2,972,922        2,792,264        17,457,000
Goodwill............................................            --               --         5,985,000
Property and equipment, net.........................     3,460,008        1,746,044        25,283,000
Other assets........................................        14,769            9,610           596,000
                                                       -----------      -----------      ------------
                                                       -----------      -----------      ------------
          Total assets..............................   $ 6,447,699      $ 4,547,918      $ 49,321,000
                                                       ===========      ===========      ============

                                LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Current portion of long-term debt and capital
     leases.........................................   $   621,997      $   181,744      $  5,372,000
  Accounts payable..................................     2,137,719        1,003,511         5,846,000
  Accrued liabilities...............................       967,329        1,005,673         1,596,000
  Income taxes payable..............................        26,283               --           293,000
                                                       -----------      -----------      ------------
          Total current liabilities.................     3,753,328        2,190,928        13,107,000
Long-term debt and capital leases...................       309,000               --         9,653,000
Deferred income tax liability.......................       752,409          530,250           601,000
Commitments and contingencies (Note 8)
Stockholders' equity:
  Preferred Stock, $.01 par value per share;
     1,000,000 shares authorized; none issued and
     outstanding....................................            --               --                --
  Common Stock, $.01 par value per share; 25,000,000
     shares authorized; 7,600,000 shares issued and
     outstanding....................................            --               --            76,000
  Common stock (predecessor company), 1,000 pesos
     par value; 1,200 shares authorized, issued and
     outstanding, .50 pesos par value; 200 shares
     authorized, issued and outstanding.............       292,133          319,796                --
  Additional paid-in capital........................            --               --        28,263,000
  Retained earnings.................................     3,457,670        4,362,577           635,000
  Cumulative foreign currency translation
     adjustments....................................    (2,116,841)      (2,855,633)       (3,014,000)
                                                       -----------      -----------      ------------
          Total stockholders' equity................     1,632,962        1,826,740        25,960,000
                                                       -----------      -----------      ------------
          Total liabilities and stockholders'
            equity..................................   $ 6,447,699      $ 4,547,918      $ 49,321,000
                                                       ===========      ===========      ============
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-3
<PAGE>   61
 
                     3-D GEOPHYSICAL, INC. AND SUBSIDIARIES
 
                      CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
                                                                                     FOR THE SIX MONTHS ENDED
                                          FOR THE YEARS ENDED DECEMBER 31,                   JUNE 30,
                                     ------------------------------------------     --------------------------
                                        1993            1994            1995           1995           1996
                                     -----------     -----------     ----------     ----------     -----------
                                     PREDECESSOR     PREDECESSOR     PREDECESSOR    PREDECESSOR     SUCCESSOR
                                     -----------     -----------     ----------     ----------     -----------
                                                                                    (UNAUDITED)    (UNAUDITED)
<S>                                  <C>             <C>             <C>            <C>            <C>
Net revenues........................ $17,638,376     $17,660,155     $9,824,541     $4,847,000     $19,539,000
Cost of seismic and geophysical
  services..........................  13,146,011      11,003,937      5,967,924      2,840,000      14,452,000
                                     -----------     -----------     ----------     ----------     -----------
                                       4,492,365       6,656,218      3,856,617      2,007,000       5,087,000
General and administrative
  expenses..........................   1,280,335       1,814,000      1,037,658        546,000       2,585,000
Depreciation and amortization.......     989,992       1,468,357        661,657        443,000       1,649,000
Interest income.....................    (151,504)       (164,598)      (264,648)      (132,000)       (326,000)
Interest expense....................   1,031,902         466,463        803,149        520,000         296,000
Foreign currency transaction (gains)
  or losses.........................     (32,778)         92,118        119,722        (12,000)        (81,000)
Miscellaneous.......................    (118,510)         76,816       (237,774)        30,000         (38,000)
                                     -----------     -----------     ----------     ----------     -----------
                                       2,999,437       3,753,156      2,119,764      1,395,000       4,085,000
Income before provision for income
  tax...............................   1,492,928       2,903,062      1,736,853        612,000       1,002,000
Provision for income tax............     417,815       1,000,402        130,044        144,000         277,000
                                     -----------     -----------     ----------     ----------     -----------
Income before extraordinary item....   1,075,113       1,902,660      1,606,809        468,000         725,000
Extraordinary item, net of tax
  expense of $36,000 (see Note 9)...          --              --             --             --          57,000
                                     -----------     -----------     ----------     ----------     -----------
Net income.......................... $ 1,075,113     $ 1,902,660     $1,606,809     $  468,000     $   782,000
                                     ===========     ===========     ==========     ==========     ===========
Per share information:
Income before extraordinary item....                                                               $       .12
Extraordinary item, net of tax
  expense...........................                                                                       .01
                                                                                                   -----------
Net earnings........................                                                               $       .13
                                                                                                   ===========
Weighted average common shares
  outstanding.......................                                                                 6,300,809
                                                                                                   ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-4
<PAGE>   62
 
                     3-D GEOPHYSICAL, INC. AND SUBSIDIARIES
 
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                                                                  CUMULATIVE
                                                                                   FOREIGN
                                                      ADDITIONAL                   CURRENCY
                                          COMMON       PAID-IN       RETAINED     TRANSLATION
                                           STOCK       CAPITAL       EARNINGS     ADJUSTMENTS     TOTAL
                                         ---------    ----------    ----------    ----------    ----------
<S>                                      <C>          <C>           <C>           <C>           <C>
Predecessor:
  Balance, January 1, 1993............   $  58,049             --    $  979,575    $  (54,287)  $   983,337
  Capital contribution................       4,502             --            --            --         4,502
  Dividend paid to shareholders.......          --             --      (270,096)           --      (270,096)
  Stock dividend issued to
     shareholders.....................     229,582             --      (229,582)           --            --
  Foreign currency translation
     adjustments......................          --             --            --        13,724        13,724
  Net income for the year.............          --             --     1,075,113            --     1,075,113
                                         ---------    -----------   -----------   -----------   -----------
Predecessor:
  Balance, December 31, 1993..........   $ 292,133             --    $1,555,010    $  (40,563)  $ 1,806,580
  Foreign currency translation
     adjustments......................          --             --            --    (2,076,278)   (2,076,278)
  Net income for the year.............          --             --     1,902,660            --     1,902,660
                                         ---------    -----------   -----------   -----------   -----------
Predecessor:
  Balance, December 31, 1994..........   $ 292,133             --    $3,457,670   $(2,116,841)  $ 1,632,962
  Foreign currency translation
     adjustments......................          --                          --       (738,792)     (738,792)
  Net income for the year.............          --             --     1,606,809            --     1,606,809
  Capital contribution................      27,663             --            --            --        27,663
  Dividend paid to shareholders.......          --             --      (701,902)           --      (701,902)
                                         ---------    -----------   -----------   -----------   -----------
Predecessor:
  Balance, December 31, 1995..........   $ 319,796             --    $4,362,577   $(2,855,633)  $ 1,826,740
Successor:
  Foreign currency translation
     adjustments (unaudited)..........          --             --            --      (158,367)     (158,367)
  Recapitalization of predecessor
     company (unaudited)..............    (303,330)       303,330            --            --            --
  Acquisition of Paragon
     (unaudited)......................      13,143     (1,033,143)                               (1,020,000)
  Acquisition of Kemp (unaudited).....         391        293,429                                   293,820
  Initial public offering of common
     stock net of underwriting
     discount and offering costs
     (unaudited)......................      46,000     28,699,384            --            --    28,745,384
  Dividend to predecessor company
     shareholders (unaudited).........          --             --    (4,509,577)           --    (4,509,577)
  Net income for the period
     (unaudited)......................          --             --       782,000            --       782,000
                                         ---------    -----------   -----------   -----------   -----------
  Balance, June 30, 1996
     (unaudited)......................   $  76,000    $28,263,000   $   635,000   $(3,014,000)  $25,960,000
                                         =========    ===========   ===========   ===========   ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-5
<PAGE>   63
 
                     3-D GEOPHYSICAL, INC. AND SUBSIDIARIES
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                       FOR THE SIX MONTHS
                                         FOR THE YEARS ENDED DECEMBER 31,                ENDED JUNE 30,
                                     -----------------------------------------     ---------------------------
                                        1993           1994           1995            1995            1996
                                     -----------    -----------    -----------     -----------    ------------
                                     PREDECESSOR    PREDECESSOR    PREDECESSOR     PREDECESSOR       SUCCESSOR
                                     -----------    -----------    -----------     -----------    ------------
                                                                                   (UNAUDITED)    (UNAUDITED)
<S>                                  <C>            <C>            <C>             <C>            <C>
Cash flows from operating
  activities:
  Net income........................ $ 1,075,113    $ 1,902,660    $ 1,606,809     $   468,000    $    782,000
  Adjustments to reconcile net
     income to net cash provided by
     (used in) operating activities:
     Depreciation and
       amortization.................     989,992      1,468,357        661,657         443,000       1,649,000
     Gain on sale of fixed assets...          --             --       (350,430)             --              --
     Changes in operating assets and
       liabilities:
     Effect of change in exchange
       rate on operating assets and
       liabilities..................     108,854        (61,328)       197,319          49,000         (81,000)
     (Increase) decrease in
       receivables..................  (1,065,155)       368,591        504,363         488,000      (4,805,000)
     (Increase) decrease in other
       assets.......................     299,238        (56,098)        66,154         211,000        (706,000)
     Increase (decrease) in accounts
       payable......................      70,175        356,398     (1,156,410)       (626,000)        (64,000)
     Increase (decrease) in accrued
       liabilities..................     669,373       (484,815)        38,744        (123,000)       (580,000)
     Provision for deferred
       income taxes.................       7,779        962,628        130,044         146,000          71,000
     Increase (decrease) in
       taxes payable................      43,729        (57,249)       (26,283)        (26,000)        207,000
                                     -----------    -----------    -----------     -----------    ------------
          Total adjustments.........   1,123,985      2,496,484         65,158         562,000      (4,309,000)
                                     -----------    -----------    -----------     -----------    ------------
          Net cash provided by (used
            in) operating
            activities..............   2,199,098      4,399,144      1,671,967       1,030,000      (3,527,000)
Cash flows from investing
  activities:
  Cash consideration paid to acquire
     seismic data acquisition
     companies......................          --             --             --              --     (10,328,000)
  Purchase of property and
     equipment, net.................    (714,601)    (3,262,335)      (146,776)       (250,000)     (9,807,000)
  Proceeds on sale of equipment.....          --             --        350,430              --          41,000
  Investment in securities..........     (31,959)            --             --              --              --
                                     -----------    -----------    -----------     -----------    ------------
          Net cash provided by (used
            in) investing
            activities..............    (746,560)    (3,262,335)       203,654        (250,000)    (20,094,000)
Cash flows from financing
  activities:
  Payment of dividends to owners of
     predecessor company............    (270,096)            --       (701,902)             --      (3,510,000)
  Proceeds from initial public
     offering, net of underwriting
     discounts......................          --             --             --              --      32,085,000
  Costs in connection with initial
     public offering................          --             --             --              --      (3,340,000)
  Cash paid to retire indebtedness
     of Purchased Companies.........          --             --             --              --      (4,599,000)
  Net (payments on) borrowings under
     factor agreements..............   1,300,465     (1,314,965)      (206,782)       (207,000)             --
  Issuance of Common Stock of
     predecessor company............       4,502             --         27,663              --              --
  Cash proceeds from borrowings
     under notes payable and capital
     leases.........................          --             --             --              --      12,257,000
  Payments on borrowings and capital
     leases.........................  (1,097,450)      (742,972)      (542,471)       (503,000)     (7,016,000)
                                     -----------    -----------    -----------     -----------    ------------
          Net cash provided by (used
            in) financing
            activities..............     (62,579)    (2,057,937)    (1,423,492)       (710,000)     25,877,000
                                     -----------    -----------    -----------     -----------    ------------
Net increase (decrease) in cash.....   1,389,959       (921,128)       452,129          70,000       2,256,000
Cash at beginning of period.........     469,886      1,858,343        241,823         242,000         609,000
Effect of change in exchange rate on
  cash balance......................      (1,502)      (695,392)       (84,472)        (49,000)          8,000
                                     -----------    -----------    -----------     -----------    ------------
Cash at end of period............... $ 1,858,343    $   241,823    $   609,480     $   263,000    $  2,873,000
                                     ===========    ===========    ===========     ===========    ============
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-6
<PAGE>   64
 
                     3-D GEOPHYSICAL, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1. ORGANIZATION AND BASIS OF PRESENTATION
 
     On February 9, 1996, 3-D Geophysical, Inc. ("Company") consummated an
initial public offering (the "Initial Public Offering") and simultaneously
acquired in separate transactions, in exchange for cash, notes and shares of
Common Stock, Geoevaluaciones, S.A. de C.V. ("Geoevaluaciones"), Processos
Interactivos Avanzados, S.A. de C.V. ("PIASA"), certain assets and liabilities
of the land-based seismic data acquisition business of Northern Geophysical of
America, Inc. ("Northern"), Paragon Geophysical, Inc. ("Paragon") and Kemp
Geophysical Corporation ("Kemp") (collectively, Kemp, Paragon and the assts and
liabilities of the land-based seismic data acquisition business of Northern are
referred to as the "Purchased Companies.")
 
     For accounting purposes the acquisitions of Geoevaluaciones and PIASA have
been treated as a recapitalization of Geoevaluaciones and PIASA with
Geoevaluaciones (combined with PIASA) deemed to be the acquiror of the Company
and considered the predecessor company. For purposes of identification and
description, the Company is referred to as the "Predecessor" for the period
prior to the Initial Public Offering and the acquisition of the Purchased
Companies as described below, the "Successor" for the period subsequent to the
Initial Public Offering and the acquisition of the Purchased Companies and the
"Company" for both periods.
 
     The acquisitions of the Purchased Companies have been treated as business
combinations accounted for by the purchase method of accounting as prescribed by
Accounting Principles Board Opinion No. 16 and SEC Staff Accounting Bulletin No.
48. Northern and Kemp were valued at the fair market value of consideration
given. In connection with the acquisitions of Northern and Kemp, the excess of
consideration given over the fair market value of net assets acquired are being
amortized on a straight-line basis over 15 years. The acquisition of Paragon's
common stock in exchange for shares of the Company's Common Stock was accounted
for at Paragon's historical costs. The accompanying consolidated financial
statements include the accounts of Northern, Kemp and Paragon from February 9,
1996, the effective date of the acquisitions. As a result, the Company's
statement of operations for the six months ended June 30, 1996 is not comparable
to the statement of operations for the six months ended June 30, 1995, and the
Company's balance sheet as of June 30, 1996 is not comparable to its balance
sheet as of December 31, 1995.
 
     The consideration paid to the former owners of Northern, Kemp and Paragon
and the allocation of such consideration to the acquired assets is as follows:
 
<TABLE>
    <S>                                                                       <C>
    Cash paid for the stock and assets of the Purchased Companies...........  $10,328,000
    Debt payable to former owner of Northern................................    1,149,000
    Common Stock issued to the former owners of Kemp at the Initial Public
      Offering price of $7.50 per share.....................................      294,000
    Assumption of the liabilities in excess of assets of Paragon............   (1,020,000)
    Liabilities assumed:
    Bank overdraft..........................................................      162,000
    Accounts payable........................................................    4,984,000
    Accrued and other current liabilities...................................    1,130,000
    Debt assumed:
      Current...............................................................    8,007,000
      Non-current...........................................................    3,187,000
                                                                              -----------
    Amounts allocated to acquired assets....................................  $28,221,000
                                                                              ===========
</TABLE>
 
                                       F-7
<PAGE>   65
 
                     3-D GEOPHYSICAL, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
1. ORGANIZATION AND BASIS OF PRESENTATION, CONTINUED
     Allocation of the purchase price to the acquired assets:
 
<TABLE>
    <S>                                                             <C>
    Accounts receivable:                                   
      Trade........................................................ $ 6,575,000
      Other........................................................     123,000
    Deferred income tax assets.....................................     108,000
    Prepaid expenses and other current assets......................     209,000
    Property and equipment.........................................  14,106,000
    Goodwill.......................................................   6,147,000
    Other assets...................................................     953,000
                                                                    -----------
                                                                    $28,221,000
                                                                    ===========
</TABLE>
 
CONDENSED CONSOLIDATED PRO FORMA INFORMATION (UNAUDITED)
 
     The accompanying condensed consolidated pro forma information for the
Company for the six months ended June 30, 1995 and 1996 and for the year ended
December 31, 1995 represents the operations of the Company as if the
acquisitions of the Purchased Companies and the Company's Initial Public
Offering had occurred on January 1, 1995.
 
<TABLE>
<CAPTION>
                                                        YEAR ENDED     SIX MONTHS ENDED
                                                       DECEMBER 31,        JUNE 30,
                                                       ------------   -------------------
                                                           1995        1995        1996
                                                       ------------   -------     -------
                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                    <C>            <C>         <C>
Net sales............................................    $ 39,852     $14,746     $23,362
                                                         ========     =======     =======
Net earnings (loss) before extraordinary item........    $  1,097     $  (187)    $   449
                                                         ========     =======     =======
Earnings (loss) per share............................    $    .18     $  (.03)    $   .07
                                                         ========     =======     =======
</TABLE>
 
     The pro forma results described above assume weighted average common shares
outstanding of 6,232,000 shares.
 
     The Condensed Consolidated pro forma information is not necessarily
indicative of the actual results that would have been achieved if the Initial
Public Offering, recapitalization and acquisitions had occurred on the date
indicated or which may be realized in the future. Neither expected benefits and
cost reductions anticipated by the Company, nor future corporate costs of the
Company, have been reflected in the above condensed consolidated pro forma
information.
 
2. INITIAL PUBLIC OFFERING OF COMMON STOCK
 
     In February 1996, the Company completed the Initial Public Offering of
4,600,000 shares of Common Stock at $7.50 per share. The proceeds, net of the
underwriters' commissions and offering costs, were approximately $28,745,000. Of
these net proceeds, approximately $10,328,000 was used to pay the cash portion
of the purchase price for certain Purchased Companies, $3,510,000 (including
$1,000,000 of escrow funds) was, for accounting purposes, treated as a dividend
to the former shareholders of Geoevaluaciones and approximately $4,599,000 was
used to retire certain indebtedness of the Purchased Companies. The Company
recognized $57,000 of extraordinary gain, net of tax, from the retirement of a
certain portion of this debt.
 
                                       F-8
<PAGE>   66
 
                     3-D GEOPHYSICAL, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
3. SIGNIFICANT ACCOUNTING POLICIES
 
REVENUE RECOGNITION
 
     The Company generates revenue through performing seismic data acquisition
and processing services. Revenues from seismic data services are recognized as
the work progresses on the percentage of completion method or as sold.
 
MAJOR CUSTOMER
 
     One customer, PEMEX, which is owned by the Mexican government, accounted
for approximately 98% of the revenues of the Predecessor for the year ended
December 31, 1995. As of December 31, 1994 and 1995, this customer accounted for
approximately 100% and 99%, respectively, of the Predecessor's trade accounts
receivable. As of June 30, 1996, three customers accounted for 28.8%, 20.5% and
12.5% of the Successor's trade accounts receivable.
 
     During the six months ended June 30, 1995, one customer accounted for 100%
of net sales of the Predecessor and during the six months ended June 30, 1996,
two customers accounted for 25.5% and 18.0% of the Successor's net sales,
respectively.
 
FOREIGN CURRENCY TRANSLATION
 
     The financial statements of the Predecessor and the operations of the
Successor in Mexico use the Mexican peso as the functional currency. Assets and
liabilities are translated into U.S. dollars at the prevailing exchange rate at
the respective balance sheet date. The resulting translation adjustments are
included in stockholders' equity. Income and expenses are translated at the
average exchange rate during the respective reporting period. Gains and losses
resulting from foreign currency transactions are included in income currently.
 
PROPERTY AND EQUIPMENT
 
     Property and equipment is stated at cost, adjusted for accumulated
depreciation and amortization. Equipment held under capital leases is stated at
the present value of future minimum lease payments at the inception of the
leases. Property and equipment are depreciated on the straight-line method over
the estimated useful lives of the assets, which range from three to seven years.
Equipment held under capital leases is amortized on the straight-line method
over the estimated useful life of the assets or the terms of the lease.
 
FAIR VALUE OF FINANCIAL INSTRUMENTS
 
     The carrying amounts reported in the balance sheets for cash, accounts
receivable, accounts payable and notes payable approximate fair value because of
the immediate or short-term maturity of these financial instruments. The
carrying amount of the obligation under capital lease approximates fair value
because the lease agreements bear interest at variable rates which are adjusted
monthly. The carrying amount reported for long-term debt approximates fair value
based on current replacement values.
 
ACCOUNTING FOR INCOME TAXES
 
     Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the differences between the financial statement
carrying value of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured by using enacted tax
rates that are applicable to the future years in which deferred tax assets or
liabilities are expected to be realized or settled. The effect of a change in
tax rates on deferred tax assets and liabilities is recognized in earnings in
the period in which the tax
 
                                       F-9
<PAGE>   67
 
                     3-D GEOPHYSICAL, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
3. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

rate change was enacted. The Company establishes a valuation allowance when it
is more likely than not that a deferred tax asset will not be recovered.
 
RECENT ACCOUNTING PRONOUNCEMENTS
 
     In March 1995, the FASB issued Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets To Be Disposed Of ("Statement 121"). Statement 121 addresses the
accounting for the impairment of long-lived assets, certain identifiable
intangibles and goodwill related to those assets to be held and used. It also
addresses the accounting for long-lived assets and certain identifiable
intangibles to be disposed of. Statement 121 establishes guidance for
recognizing and measuring impairment losses and requires that the carrying
amount of impaired assets be reduced to fair value. Statement 121 will be
effective for fiscal years beginning after December 15, 1995. Management does
not expect the impact of the adoption of Statement 121 to have a material
adverse effect on the Successor's financial condition or results of operations.
 
     During the fourth quarter of 1995, "Statement of Financial Accounting
Standards No. 123" (SFAS 123) was issued by the FASB. The Company will continue
to account for future grants of Common Stock options using the intrinsic value
method under Accounting Principles Board Opinion No. 25, "Accounting for Stock
issued to Employees" and will adopt the disclosure requirements of SFAS 123.
 
UNAUDITED INTERIM FINANCIAL INFORMATION
 
     In the opinion of management, the accompanying unaudited interim financial
statements contain all adjustments (consisting only of normal recurring items)
necessary to present fairly the financial position of the Successor as of June
30, 1996 and the results of the operations and cash flows for the six-month
periods ended June 30, 1995 and 1996 for the Predecessor and Successor,
respectively. The results of operations for all interim periods presented are
not necessarily indicative of the results to be expected for the full year.
 
EARNINGS PER SHARE
 
     Earnings per share is computed using weighted average common shares
outstanding for the period. The number of shares used in the earnings per share
calculation is determined as follows:
 
<TABLE>
        <S>                                                                 <C>
        Shares issued to 3-D stockholders giving effect to the 2,717.66
          for 1 stock split...............................................  1,400,682
        Shares deemed to have been issued to fund cash portion of
          Geoevaluaciones dividend........................................    468,000
        Shares issued to acquire Purchased Companies......................  1,247,820
        Shares sold in the Initial Public Offering........................  2,755,736
        Shares sold upon exercise of the over-allotment option............    428,571
                                                                            ---------
        Weighted average common shares outstanding........................  6,300,809
                                                                            =========
</TABLE>
 
USE OF ESTIMATES
 
     The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities on December 31, 1994 and 1995
for the combined financial statements, and June 30, 1996 for the consolidated
financial statements and the reported amounts of revenue and expenses during the
reporting periods. A significant estimate in the preparation of the Company's
 
                                      F-10
<PAGE>   68
 
                     3-D GEOPHYSICAL, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
3. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

financial statements is related to the percentage of revenue recognized based on
the stage of completion of the Company's contracts. Actual results could differ
from those estimates.
 
4. PREPAID EXPENSES AND OTHER ASSETS
 
     Prepaid expenses and other assets consist of the following:
 
<TABLE>
<CAPTION>
                                                                                
                                                       DECEMBER 31,              JUNE 30,
                                                --------------------------         1996
                                                   1994            1995         ----------
                                                ----------      ----------      (UNAUDITED)
                                                PREDECESSOR     PREDECESSOR     SUCCESSOR
                                                ----------      ----------      ----------
    <S>                                         <C>             <C>             <C>
    Prepaid value added tax..................   $       --      $       --      $  282,000
    Prepaid income tax.......................      235,805         153,434              --
    Guaranty deposits........................       42,114           7,389              --
    Deposits with suppliers..................           --          49,810              --
    Prepaid insurance........................       26,965          28,097         591,000
    Inventory................................           --              --          20,000
    Other miscellaneous assets...............           --              --          55,000
                                                ----------      ----------      ----------
                                                $  304,884      $  238,730      $  948,000
                                                ==========      ==========      ==========
</TABLE>
 
5. PROPERTY AND EQUIPMENT, NET
 
     Equipment consists of the following:
 
<TABLE>
<CAPTION>
                                                
                                                       DECEMBER 31,
                                                --------------------------       JUNE 30,
                                                   1994            1995            1996
                                                ----------      ----------      ----------
                                                PREDECESSOR     PREDECESSOR     SUCCESSOR
                                                ----------      ----------      ----------
                                                                                (UNAUDITED)
    <S>                                         <C>             <C>             <C>
    Field equipment..........................   $3,580,676      $ 2,403,711     $25,454,000
    Transportation equipment.................    1,119,131          698,379       1,688,000
    Office equipment, furniture and
      fixtures...............................    1,196,878          387,551       2,014,000
    Buildings and property...................           --              --          488,000
                                                ----------      -----------     -----------
                                                 5,896,685        3,489,641      29,644,000
    Less accumulated depreciation............   (2,436,677)      (1,743,597)     (4,361,000)
                                                ----------      -----------     -----------
    Equipment, net...........................   $3,460,008      $ 1,746,044     $25,283,000
                                                ==========      ===========     ===========
</TABLE>
 
6. ACCRUED LIABILITIES
 
     Accrued expenses consist of the following:
 
<TABLE>
<CAPTION>
                                                                         DECEMBER 31,
                                                                   -------------------------
                                                                     1994            1995
                                                                   --------      -----------
                                                                         PREDECESSOR
                                                                   -------------------------
    <S>                                                            <C>           <C>
    Value added tax payable.....................................   $273,558      $   328,094
    Accrued salaries, wages and payroll taxes...................    335,027          226,818
    Other accrued expenses......................................    358,744          450,761
                                                                   --------      -----------
                                                                   $967,329      $ 1,005,673
                                                                   ========      ===========
</TABLE>
 
                                      F-11
<PAGE>   69
 
                     3-D GEOPHYSICAL, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
7. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
 
     Notes payable consist of the following:
 
<TABLE>
<CAPTION>
                                                          DECEMBER 31,
                                                     ----------------------       JUNE 30,
                                                       1994          1995           1996
                                                     --------      --------      ----------
                                                          PREDECESSOR            (UNAUDITED)
                                                     ----------------------      SUCCESSOR
                                                     
    <S>                                              <C>           <C>           <C>
    Notes payable to Mexican banks under accounts
      receivable factoring agreements bearing
      interest
      at 24%......................................   $206,782      $     --      $       --
    Note payable to First Interstate Bank of
      Texas, N.A., due in monthly installments
      through July 31, 1999 at a variable interest
      rate of 9.25% at June 30, 1996..............                                12,051,000
    Note payable to former shareholders of
      Predecessor, due in semi-annual installments
      through February 9, 1998 at a fixed interest
      rate of 8%..................................                                 1,000,000
    Note payable to Input/Output, due in monthly
      installments through October, 1996 at a
      fixed interest rate of 9.5%.................                                   310,000
    Notes payable to Century Geophysical, due in
      monthly installments through May, 1997 at a
      fixed interest rate of 12%..................                                   280,000
    Note payable to Ronos Investments, due in
      July, 1996 at a fixed interest rate of
      10%.........................................                                   249,000
    Note payable to the Chubb Group of Insurance
      Companies, due in monthly installments
      through December 1, 1996 at a fixed interest
      rate of 0%..................................                                   171,000
    Note payable to LTI Wire Services, due in
      monthly installments through February, 1997
      at a fixed interest rate of 10%.............                                   114,000
    Capital lease obligations to Southwest Leasing
      Company, due in monthly installments through
      June, 2000 at fixed interest rates varying
      from 9.6% to 12.2%..........................                                   780,000
    Miscellaneous notes payable and capital lease
      obligations, interest payable from 5.9% to
      10.75%, due in monthly installments through
      January, 2000...............................                                   197,000
                                                     --------      --------      -----------
                                                     $206,782      $     --      $15,152,000
                                                     ========      ========      ===========
    Current portion...............................                               $ 5,412,000
    Less: Debt issuance costs allocated to current
      portion.....................................                                   (40,000)
                                                                                 -----------
                                                                                 $ 5,372,000
                                                                                 ===========
    Non-current portion...........................                               $ 9,740,000
    Less: Debt issuance costs allocated to
      non-current portion.........................                                   (87,000)
                                                                                 -----------
                                                                                 $ 9,653,000
                                                                                 ===========
</TABLE>
 
                                      F-12
<PAGE>   70
 
                     3-D GEOPHYSICAL, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The total accounts receivable serving as collateral under the factoring
agreements was approximately $260,000 at December 31, 1994. These invoices are
all stated in Mexican pesos which amounted to 1,300,000 pesos at December 31,
1994.
 
     The Predecessor purchased equipment from a supplier for $350,000 in 1994.
In order to purchase this equipment, the Predecessor entered into a payment plan
with the supplier for this amount. At December 31, 1994 and 1995, $309,000 and
$181,744 remained outstanding, respectively. This loan is payable on a monthly
basis, has a stated interest rate of 10% and is collateralized by the equipment.
The loan is payable in monthly installments ending in 1996.
 
     On May 31, 1996, the Successor refinanced certain conditional sales
agreements of the Purchased Companies and Geoevaluaciones with a manufacturer
for $4,500,000 of equipment. The funds for the refinancing were paid from the
$15 million term loan (the "Term Loan") from First Interstate Bank of Texas,
N.A. (the "Bank") pursuant to a Loan Agreement between the Successor and the
Bank, dated as of May 29, 1996 (the "Loan Agreement"). The Term Loan is payable,
with certain limited exceptions, in equal monthly installments through July 31,
1999, bears interest at an annual rate equal to the prime rate plus 1% and is
secured by a lien on the Successor's accounts, accounts receivable, equipment,
machinery, fixtures, inventory, goods, chattel paper, documents, instruments,
investment property, general intangibles, and other personal property, whether
then owned or thereafter acquired, and all products and proceeds thereof, and by
guarantees by certain of the Successor's subsidiaries. The Loan Agreement also
provides for a $3 million revolving credit loan (the "Revolving Credit Loan")
which may be drawn down from time to time through May 29, 1997 in an amount of
up to 70% of the Company's "Eligible Accounts" (as defined in the Loan
Agreement). The rate of interest and the security for the Revolving Credit Loan
are the same as those described above for the Term Loan. The Loan Agreement
contains restrictions on the Successor with respect to (i) incurring Debt (as
defined), incurring or permitting to exist Liens (as defined) on its property
assets or revenues, (iii) declaring or paying any dividends or other
distributions on its capital stock (or acquiring any of its capital stock), (iv)
issuing capital stock, (v) entering into transactions with affiliates, (vi)
disposing of assets, and (vii) other matters, and contains certain financial
covenants. Available borrowings under the Revolving Credit Loan at June 30, 1996
was $3 million.
 
8. COMMITMENTS AND CONTINGENCIES
 
     The Predecessor has a dispute, and may be threatened with litigation, in
connection with certain agreements entered into by it with Capilano
International Inc., a Canadian company ("Capilano"). The dispute concerns a
certain letter of intent and a technical assistance agreement, dated June 1,
1991 and June 3, 1992, respectively (the "Capilano Agreements"). Capilano stated
in its 1994 Annual Report to Shareholders that it has had difficulty in
collecting amounts owing from a Mexican company (presumably, the Predecessor) to
which Capilano supplied technical assistance. The Predecessor maintains that it
is not obligated to compensate Capilano for certain services the Predecessor
believes were either inadequately provided or not provided at all by Capilano
and the parties disagree upon how certain profits and losses should be allocated
under the Capilano Agreements. While the parties have had discussions in the
past to attempt to resolve the dispute, the most recent discussions were in
September 1996 and there have been no further developments since that time.
Management is not currently able to estimate the effect, if any, on the
Predecessors' results of operations and financial position which may result from
the resolution of this matter. Accordingly, the financial statements do not
reflect any adjustment related to this matter.
 
     The Predecessor rents office facilities under annual operating leases. Rent
expense was $489,512, $302,140 and $298,900 for the years ended December 31,
1993, 1994 and 1995, respectively.
 
                                      F-13
<PAGE>   71
 
                     3-D GEOPHYSICAL, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
9. EXTRAORDINARY ITEM
 
     The Company recognized a $57,000 extraordinary item in the six months ended
June 30, 1996, net of tax expense of $36,000. The extraordinary item is due to a
gain recognized on the early extinguishment of debt.
 
10. INCOME TAXES
 
     The classifications of the provision for income taxes is as follows:
 
<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                       -------------------------------------------
                                                          1993            1994            1995
                                                       -----------     -----------     -----------
                                                       PREDECESSOR     PREDECESSOR     PREDECESSOR
                                                       -----------     -----------     -----------
    <S>                                                <C>             <C>             <C>
    Current........................................     $ 410,036      $    37,774      $      --
    Deferred -- tax depreciation greater (less)
      than depreciation for financial reporting....         7,779          962,628        130,044
                                                        ---------      -----------      ---------
    Provision for income taxes.....................     $ 417,815      $ 1,000,402      $ 130,044
                                                        =========      ===========      =========
</TABLE>
 
     The difference between the statutory federal income tax rate of 34% on
income before taxes and the Predecessors' reported provision for income taxes,
is summarized as follows:
 
<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                       -------------------------------------------
                                                          1993            1994            1995
                                                       -----------     -----------     -----------
                                                       PREDECESSOR     PREDECESSOR     PREDECESSOR
                                                       -----------     -----------     -----------
    <S>                                                <C>             <C>             <C>
    Tax expense at statutory rate..................     $ 507,596      $   987,041      $ 546,346
    Non-deductible profit sharing expense..........        62,325           65,166         42,500
    Net effects of inflation.......................      (152,106)         (51,805)      (458,802)
                                                        ---------      -----------      ---------
    Tax expense at actual rate.....................     $ 417,815      $ 1,000,402      $ 130,044
                                                        =========      ===========      =========
</TABLE>
 
     The deferred tax liability at December 31, 1993, 1994 and 1995 and June 30,
1996 (unaudited) is the result of differences between the financial statement
carrying value and the tax basis of property and equipment.
 
     The effective income tax rates for the six months ended June 30, 1995 and
1996 are 24% and 28%, respectively. The differences between the statutory
federal income tax rate on income before provision for income taxes and
extraordinary item, and the Company's effective income tax rate, result
primarily from the tax benefits associated with inflation adjustments with
respect to the operations of Geoevaluaciones and PIASA and the anticipated
change in the valuation allowance previously established with respect to net
operating loss carryforwards from Paragon.
 
11. COMMON STOCK
 
     The Predecessor is required under Mexican law to establish a legal reserve
equal to 5% of each company's earnings until such time as the reserve equals 20%
of the minimum capital of the company. In 1993, Geoevaluaciones capitalized
$229,582 of earnings.
 
     On February 9, 1996, the former stockholders of Geoevaluaciones (the
"Former Geoevaluaciones Stockholders") sold all of the issued and outstanding
shares of capital stock of Geoevaluaciones to the Company. Pursuant to the
Geoevaluaciones stock purchase agreement, the aggregate consideration paid to
the Former Geoevaluaciones Stockholders by the Company was: (i) $2.45 million
paid in cash at closing; and (ii) $1.0 million paid by delivery at closing of
four promissory notes, payable in installments at six, 12, 18 and 24 months
after the closing in following aggregate amounts (which amounts include interest
at 8% per annum): $290,000, $280,000, $270,000 and $260,000, respectively. In
connection with this acquisition, each of the Former Geoevaluaciones
Stockholders entered into a separate non-competition agreement with the
 
                                      F-14
<PAGE>   72
 
                     3-D GEOPHYSICAL, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
11. COMMON STOCK, CONTINUED

Company pursuant to which the Company paid to the Former Geoevaluaciones
Stockholders: (i) 100,000 shares of Common Stock held in trusts with Mexican
banks for the benefit of the Former Geoevaluaciones Stockholders, and to be
released February 9, 1998; and (ii) $2.0 million, reduced by the amount of any
liabilities Geoevaluaciones had not disclosed to 3-D and by any amount paid by
Geoevaluaciones to settle or otherwise in connection with Geoevaluaciones'
dispute with Capilano, such portion of the consideration consisting of (a) $1.0
million in cash deposited at the closing in a bank account, and which, subject
to any such reduction, may be disbursed only upon the approval of certain
individuals; and (b) 117,647 shares of Common Stock to be delivered at closing
to trusts with Mexican banks for the benefit of the Former Geoevaluaciones
Stockholders, and which may not be released until June 30, 1997 and then only
upon the approval of certain individuals. Pursuant to such stock purchase
agreement, the Company agreed to assume up to an aggregate of $600,000 of the
obligations under any borrowings of Geoevaluaciones from a bank or other
financial institution for working capital purposes.
 
     On February 6, 1996, the former stockholders of PIASA, pursuant to a stock
purchase agreement dated November 7, 1995, sold all of the shares of capital
stock of PIASA to the Company. The aggregate consideration paid by the Company
was approximately $300,000, consisting of $60,000 in cash and approximately
28,235 shares of Common Stock.
 
     In October 1995, the Predecessor and Kemp Geophysical Corporation formed a
joint venture to perform certain land-based seismic data acquisition activities.
In November, the joint venture incurred debt (bearing interest at an annual rate
of 10.75% payable over three years) of $3.9 million to acquire an I/O SYSTEM
TWO(R) system.
 
12. SUPPLEMENTARY CASH FLOW INFORMATION
 
     The following supplementary cash flow transactions occurred for the periods
indicated:
 
<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                          -----------------------------------------
                                                             1993           1994           1995
                                                          -----------    -----------    -----------
                                                          PREDECESSOR    PREDECESSOR    PREDECESSOR
                                                          -----------    -----------    -----------
    <S>                                                   <C>            <C>            <C>
    Interest paid........................................  $ 680,200      $ 449,950      $ 788,900
    Income taxes paid....................................    366,307        209,006         26,283
    Equipment acquired under capital leases..............    118,176        556,985             --
    Equipment acquisitions financed under long term
      finance plan.......................................         --        306,000             --
</TABLE>
 
13. STOCK OPTIONS (UNAUDITED)
 
     The Company has granted the following stock options to its employees,
officers and directors:
 
<TABLE>
<CAPTION>
                                                              NUMBER                          VESTING
                        GRANT DATE                           OF SHARES     EXERCISE PRICE     PERIOD
- -----------------------------------------------------------  ---------     --------------     -------
<S>                                                          <C>           <C>                <C>
February 8, 1996...........................................    525,000          $ 7.50        3 years
April 26, 1996.............................................     41,400            7.375       4 years
April 26, 1996.............................................    225,150           12.3125      4 years
April 26, 1996.............................................     10,000           12.3125      3 years
August 9, 1996.............................................     17,800            7.375       4 years
September 30, 1996.........................................     40,002            8.50         1 year
September 30, 1996.........................................     30,000            8.25        3 years
                                                               -------
          Total............................................    889,352
                                                               =======
</TABLE>
 
     At June 30, 1996, there are no exercisable options.
 
                                      F-15
<PAGE>   73
 
                     3-D GEOPHYSICAL, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
14. SUBSEQUENT EVENT (UNAUDITED)
 
     On October 5, 1996, the Company entered into an operating lease agreement
for field equipment. The lease, which commences December 15, 1996, has a term of
90 days with a 45 day optional extension. Total minimum lease payments under
this operating lease are approximately $2.7 million.
 
                                      F-16
<PAGE>   74
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Stockholders of
  Northern Geophysical of America, Inc.:
 
     We have audited the accompanying balance sheet of the Land-Based Seismic
Data Operations of Northern Geophysical of America, Inc. (the "Company") as of
December 31, 1994 and September 30, 1995, and the related statements of
operations, changes in net equity and cash flows for each of the two years in
the period ended December 31, 1994 and the nine month period ended September 30,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Land-Based Seismic Data
Operations of Northern Geophysical of America, Inc. as of December 31, 1994 and
September 30, 1995, and the results of its operations and its cash flows for
each of the two years in the period ended December 31, 1994 and the nine month
period ended September 30, 1995, in conformity with generally accepted
accounting principles.
 
Denver, Colorado                            COOPERS & LYBRAND L.L.P.
December 19, 1995
 
                                      F-17
<PAGE>   75
 
                     NORTHERN GEOPHYSICAL OF AMERICA, INC.
                      (LAND-BASED SEISMIC DATA OPERATIONS)
 
                                 BALANCE SHEET
<TABLE>
<CAPTION>
                                                       DECEMBER 31, SEPTEMBER 30,  DECEMBER 31,
                                                          1994          1995           1995
                                                        ---------     ---------     ----------
                                                                                    (UNAUDITED)
                       ASSETS
<S>                                                     <C>           <C>           <C>
Current assets:
  Cash...............................................   $      --     $      --     $       --
  Accounts receivable, trade:
     Billed..........................................   1,162,051     3,860,383      4,949,456
     Unbilled........................................     461,696     1,629,655      2,139,195
  Employee advances..................................      12,289        99,161         58,920
  Prepaid expenses...................................     131,431       191,798         62,580
  Other current assets...............................       6,646            --             --
                                                       ----------    ----------    -----------
          Total current assets.......................   1,774,113     5,780,997      7,210,151
Property and equipment, net..........................   4,725,610     3,753,539      3,415,755
Other assets, net....................................      20,508        23,662         15,209
                                                       ----------    ----------    -----------
          Total assets...............................  $6,520,231    $9,558,198    $10,641,115
                                                       ==========    ==========    ===========
             LIABILITIES AND NET EQUITY
Current liabilities:
  Accounts payable...................................  $1,998,335    $5,078,939    $5,533,995
  Notes payable, current portion.....................   3,201,595     1,525,308        927,389
  Obligations under capital leases, current
     portion.........................................     107,953       144,529        138,362
  Accrued liabilities................................     232,973       349,022        537,516
                                                       ----------    ----------    -----------
          Total current liabilities..................   5,540,856     7,097,798      7,137,262
Notes payable, less current portion..................      41,667        18,289         15,642
Obligations under capital leases, less current
  portion............................................     184,360       305,348        278,305
Deferred income tax liability........................     248,862       102,824        105,656
Commitments and contingencies (Note 6)
Net equity...........................................     504,486     2,033,939      3,104,250
                                                       ----------    ----------    -----------
          Total liabilities and net equity...........  $6,520,231    $9,558,198    $10,641,115
                                                       ==========    ==========    ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-18
<PAGE>   76
 
                     NORTHERN GEOPHYSICAL OF AMERICA, INC.
                      (LAND-BASED SEISMIC DATA OPERATIONS)
 
                            STATEMENT OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                           FOR THE  
                                                                            NINE          FOR THE
                                                                           MONTHS          YEAR
                                               FOR THE YEAR ENDED           ENDED          ENDED
                                                  DECEMBER 31,            SEPTEMBER      DECEMBER
                                           --------------------------        30,            31,
                                              1993           1994           1995           1995       
                                           -----------    -----------    -----------    -----------   
                                                                                        (UNAUDITED)   
<S>                                        <C>            <C>            <C>            <C>
Net sales................................. $13,595,840    $15,423,893    $12,734,391    $19,903,147
Costs of seismic and geophysical
  services................................   9,484,957     10,654,165     10,714,692     16,465,216
                                           -----------    -----------    -----------    -----------
                                             4,110,883      4,769,728      2,019,699      3,437,931
General and administrative expenses.......   1,144,958      1,383,506        956,741      1,458,231
Depreciation and amortization.............   1,631,314      1,980,422      1,350,381      1,754,590
Interest expense..........................     291,077        329,656        204,295        265,415
(Gain) loss on disposal of equipment......     (32,707)         4,588        100,410         66,817
Interest income...........................          --             --           (192)            --
                                           -----------    -----------    -----------    -----------
                                             3,034,642      3,698,172      2,611,635      3,545,053
Income (loss) before income taxes.........   1,076,241      1,071,556       (591,936)      (107,122)
Provision (benefit) for income taxes......          --        321,840       (219,016)       (39,635)
                                           -----------    -----------    -----------    -----------
Net income (loss)......................... $ 1,076,241    $   749,716    $  (372,920)   $   (67,487)
                                           ===========    ===========    ===========    ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-19
<PAGE>   77
 
                     NORTHERN GEOPHYSICAL OF AMERICA, INC.
                      (LAND-BASED SEISMIC DATA OPERATIONS)
 
                       STATEMENT OF CHANGES IN NET EQUITY
 
<TABLE>
<S>                                                                               <C>
Net equity, January 1, 1993....................................................   $   74,063
Increase in net equity.........................................................    3,936,653
Net income.....................................................................    1,076,241
                                                                                  ----------
Net equity, December 31, 1993..................................................    5,086,957
                                                                                  ----------
Decrease in net equity.........................................................   (5,332,187)
Net income.....................................................................      749,716
                                                                                  ----------
Net equity, December 31, 1994..................................................      504,486
                                                                                  ----------
Increase in net equity.........................................................    1,902,373
Net loss.......................................................................     (372,920)
                                                                                  ----------
Net equity, September 30, 1995.................................................    2,033,939
                                                                                  ----------
Increase in net equity (unaudited).............................................      764,878
Net income (unaudited).........................................................      305,433
                                                                                  ----------
Net equity, December 31, 1995 (unaudited)......................................   $3,104,250
                                                                                  ==========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-20
<PAGE>   78
 
                     NORTHERN GEOPHYSICAL OF AMERICA, INC.
                      (LAND-BASED SEISMIC DATA OPERATIONS)
 
                            STATEMENT OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                                                        
                                                                                               NINE                      
                                                                                              MONTHS          YEAR     
                                                                YEAR ENDED DECEMBER 31,       ENDED           ENDED    
                                                                -----------------------    SEPTEMBER 30,   DECEMBER 31,
                                                                   1993         1994           1995            1995
                                                                ----------   ----------    ------------    ------------
                                                                                                           (UNAUDITED)
<S>                                                             <C>          <C>           <C>           <C>
Cash flows from operating activities:
  Net income (loss)...........................................  $1,076,241   $  749,716    $ (372,920)   $  (67,487)
  Adjustments to reconcile net income (loss) to net cash
    provided by operating activities:
    Depreciation and amortization.............................   1,631,314    1,980,422     1,350,381     1,754,590
    (Gain) loss on sale of equipment..........................     (32,707)       4,588       100,410        66,817
    Changes in assets and liabilities:
         (Increase) decrease in total accounts receivable,
           trade..............................................  (2,248,157)   1,810,901    (3,866,291)   (5,464,903)
         (Increase) decrease in employee advances.............      31,109       (7,404)      (86,872)      (46,631)
         Decrease in prepaid expenses and other current
           assets.............................................      58,436       37,474       (53,721)       80,795
         Increase (decrease) in accounts payable, trade and
           accrued liabilities................................     897,727      128,263     3,196,653     3,840,203
         Increase (decrease) in deferred income tax
           liability..........................................          --      248,862      (146,038)     (143,206)
                                                                ----------  -----------    ----------    ----------
         Net cash provided (used) by operating activities.....   1,413,963    4,952,822       121,602        20,178
                                                                ----------   ----------    ----------    ---------- 
Cash flows from investing activities:
  Purchase of property and equipment..........................  (1,635,872)    (298,914)     (215,413)     (266,052)
  Proceeds from sale of equipment.............................      22,045        8,110            --        22,218
  Other.......................................................      (8,796)      (7,650)       (3,154)       (4,230)
                                                                ----------   ----------    ----------    ---------- 
         Net cash used by investing activities................  (1,622,623)    (298,454)     (218,567)     (248,064)
                                                                ----------   ----------    ----------    ---------- 
Cash flows from financing activities:
  Principal payments on notes payable.........................  (8,190,753)  (3,476,880)   (4,420,443)   (6,041,753)
  Borrowings on notes payable.................................   4,535,400    4,285,776     2,720,778     3,742,500
  Principal payments on capital leases........................     (72,640)    (131,077)     (105,743)     (140,112)
  Increase (decrease) in net equity...........................   3,936,653   (5,332,187)    1,902,373     2,667,251
                                                                ----------   ----------    ----------    ---------- 
         Net cash used by financing activities................     208,660   (4,654,368)       96,965       227,886
                                                                ----------   ----------    ----------    ---------- 
Net change in cash and cash equivalents.......................          --           --            --            --
Cash and cash equivalents:
  Beginning of period.........................................          --           --            --            --
                                                                ----------   ----------    ----------    ---------- 
  End of period...............................................  $       --   $       --    $       --    $       --
                                                                ==========   ==========    ==========    ========== 
Supplemental disclosures of cash flow information:
  Cash paid during the year for:
    Interest..................................................  $  280,992   $  292,839    $  277,939    $  236,580
    Income taxes paid to Northern.............................          --       72,978       (72,978)      103,571
  Supplemental schedule of noncash financing and investing
    activities:
    Purchase of equipment through the assumption of notes
      payable and capital lease obligations...................  $3,700,898   $  599,836    $  263,307    $  263,307
    Acquisition of property and equipment.....................      93,000           --            --            --
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-21
<PAGE>   79
 
                     NORTHERN GEOPHYSICAL OF AMERICA, INC.
                      (LAND-BASED SEISMIC DATA OPERATIONS)
 
                         NOTES TO FINANCIAL STATEMENTS
 
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
  Basis of Presentation:
 
     The financial statements presented herein include the accounts of the
land-based seismic data operations (the "Company") of Northern Geophysical of
America, Inc. ("Northern"). Net equity presented in the accompanying financial
statements is principally the result of the Company's cash receipts and
disbursements which were processed through Northern's centralized cash
management system. Additionally, the accompanying financial statements do not
include certain debt obligations of Northern to its Parent (as defined below)
and related interest expense, which are collateralized by certain of the
Company's seismic equipment, because such debt was not specifically allocated to
the land-based seismic data operations in the past.
 
     At December 31, 1994, September 30, 1995 and December 31, 1995 (unaudited),
Fairwater Capital Corporation ("Fairwater" or the "Parent") held 81% of the
outstanding common stock of Northern, and all of the outstanding preferred stock
of Northern. The remaining outstanding common stock of Northern is held by
employees. The Company is engaged in land-based seismic data acquisition.
 
     On February 9, 1996, Northern sold certain of its assets and operations to
3-D Geophysical, Inc. ("3-D Geophysical"). The aggregate consideration paid by
3-D Geophysical was approximately $10.5 million cash, reduced by the amount of
any and all outstanding indebtedness of Northern secured by the assets acquired
by 3-D Geophysical other than indebtedness owed to affiliates of Northern, and
further reduced to the extent the net working capital, as defined, of the assets
acquired on the day of the closing was negative, or, alternatively, increased to
the extent such net working capital was positive. The sale of these assets
occurred simultaneously in conjunction with an initial public offering of
securities by 3-D Geophysical. Commencing February 9, 1996, the results of
operations of the Company are included in the financial statements of 3-D
Geophysical, Inc. and Subsidiaries.
 
  Revenue Recognition:
 
     Revenues from seismic and geophysical services are recorded based on the
percentage of completion method.
 
  Property and Equipment:
 
     Property and equipment are carried at cost and include assets under capital
leases which are carried at the lower of cost or present value of future minimum
lease payments at the inception of the lease. Maintenance and repairs are
charged to expense as incurred and expenditures for major improvements are
capitalized. Gains and losses from retirement or replacement are included in
operations.
 
     Depreciation and amortization of equipment, furniture and assets under
capital leases are provided over the estimated useful lives of the assets or the
term of the lease using the straight-line method.
 
  Concentration of Credit Risk:
 
     During the years ended December 31, 1993 and 1994, for the nine months
ended September 30, 1995 and for the year ended December 31, 1995, one customer
accounted for approximately 33%, 26%, 29% and 19.4% (unaudited), respectively,
of seismic and geophysical revenues.
 
     The Company has not incurred any credit losses relating to its seismic and
geophysical services. Allowances for potential credit losses relating to seismic
and geophysical revenues are not maintained nor does the Company require
collateral.
 
                                      F-22
<PAGE>   80
 
                     NORTHERN GEOPHYSICAL OF AMERICA, INC.
                      (LAND-BASED SEISMIC DATA OPERATIONS)
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
 
  General and Administrative Expenses:
 
     General and administrative expenses represent actual costs incurred by
Northern, except for certain costs not related to the land-based seismic data
operations which were determined based on number of employees. Management of the
Company believes the allocation method is reasonable.
 
  Income Taxes:
 
     Northern files federal and certain state income tax returns which include
the operations of the Company. For financial reporting purposes, the Company
computes its provision for income taxes on a separate company basis utilizing
the tax elections made by Northern.
 
  Unaudited Financial Information:
 
     In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting only of normal recurring items)
necessary to present fairly the financial condition, results of operations and
cash flows of the Company as of and for the year ended December 31, 1995.
 
  Use of Estimates
 
     The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods. A significant estimate in the preparation of the Company's financial
statements is related to the percentage of revenue recognized based on the stage
of completion of the Company's contracts. Actual results could differ from those
estimates.
 
2. COST AND BILLINGS ON UNCOMPLETED CONTRACTS:
 
<TABLE>
<CAPTION>
                                              DECEMBER    SEPTEMBER    DECEMBER
                                                31,          30,          31,
                                                1994        1995         1995
                                              --------    ---------    ---------
                                                                      (UNAUDITED)
<S>                                           <C>         <C>          <C>
Cost incurred and estimated earnings on                              
  uncompleted contracts.....................  $461,696    $4,500,278   $7,330,523
Billings on uncompleted contracts...........        --     2,870,623    5,191,329
                                              --------    ----------   ----------
Unbilled accounts receivable................  $461,696    $1,629,655   $2,139,195
                                              ========    ==========   ==========
</TABLE>
 
     Unbilled accounts receivable under customer contracts represents revenue
earned under the percentage of completion method but not yet billable under the
terms of the contract.
 
                                      F-23
<PAGE>   81
 
                     NORTHERN GEOPHYSICAL OF AMERICA, INC.
                      (LAND-BASED SEISMIC DATA OPERATIONS)
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
3. PROPERTY AND EQUIPMENT:
 
     The major classifications of property and equipment are as follows:
 
<TABLE>
<CAPTION>
                                                                                             
                                  ESTIMATED    DECEMBER 31,  SEPTEMBER 30, DECEMBER 31,
                                 USEFUL LIVES      1994          1995          1995     
                                 ------------  ------------  ------------   ------------
                                                                            (UNAUDITED)
<S>                               <C>           <C>           <C>           <C>
Recording instruments..........   2 - 5 years   $10,387,927   $10,185,537   $10,222,644
Field equipment................   2 - 5 years     1,837,972     1,775,366     1,773,007
Vehicles.......................   3 - 5 years       765,576       750,393       750,393
Office furniture and                                                        
  fixtures.....................       7 years       131,921        77,883        78,727
Buildings and property.........      15 years       193,986       151,952        46,348
                                                -----------   -----------   -----------
                                                 13,317,382    12,941,131    12,871,119
Less accumulated depreciation                                               
  and amortization.............                  (8,591,772)   (9,187,592)   (9,455,364)
                                                -----------   -----------   -----------
                                                $ 4,725,610   $ 3,753,539   $ 3,415,755
                                                ===========   ===========   ===========
</TABLE>
 
4. NOTES PAYABLE AND OTHER DEBT:
 
     Notes payable and other debt at December 31, 1994, September 30, 1995 and
December 31, 1995 (unaudited) consist of the following:
 
<TABLE>
<CAPTION>
                                                                                             
                                              DECEMBER 31,  SEPTEMBER 30,  DECEMBER 31,
                                                  1994          1995           1995    
                                              ------------  -------------  ------------
                                                                           (UNAUDITED)
<S>                                           <C>           <C>            <C>
Note payable to Century Geophysical Corp.,                                 
interest payable at 12%, due in monthly                                    
installments through February, 1996,                                       
collateralized by certain property and                                     
seismic equipment............................ $  1,982,481   $    739,930   $   298,932
                                                                           
Note payable to Century Geophysical Corp.,                                 
interest payable at 12% due in monthly                                     
installments through August, 1995,                                         
collateralized by certain seismic                                          
equipment....................................       76,151             --            --
                                                                           
Note payable to First Interstate Bank,                                     
interest payable at prime, (8.5% at December                               
31, 1995, due in full March 31, 1995                                       
(subsequently extended to March, 1996),                                    
collateralized by trade accounts receivable                                
and a letter of credit from the Parent in the                              
amount of $750,000...........................      740,000        640,000       590,000
                                                                           
Note payable to B.O.T. Financial, interest                                 
payable at 10.00%, due in monthly                                          
installments through August 31, 1995,                                      
collateralized by certain seismic                                          
equipment....................................      152,900             --            --
                                                                           
Notes payable to AFCO, interest payable from                               
6.04% to 8.244%, due in monthly installments                               
through April, 1996, collateralized by paid                                
and unearned insurance premiums..............      165,960        122,429        19,922
</TABLE>
 
                                      F-24
<PAGE>   82
 
                     NORTHERN GEOPHYSICAL OF AMERICA, INC.
                      (LAND-BASED SEISMIC DATA OPERATIONS)
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
<TABLE>
<CAPTION>
                                                DECEMBER 31,  SEPTEMBER 30, DECEMBER 31,
                                                    1994          1995         1995
                                                -----------   -----------   -----------
                                                                            (UNAUDITED)
<S>                                              <C>          <C>          <C>
4. NOTES PAYABLE AND OTHER DEBT, CONTINUED:                                   
   Note payable to Pelton Company, Inc.,                                      
   interest payable at 9%, due in monthly                                     
   installments through March 1995,                                           
   collateralized by certain seismic                                          
   equipment....................................     57,355           --           --
   Miscellaneous notes payable, interest from                                 
   prime to 10.75%, due in monthly installments                               
   through                                                                    
   October 31, 1997, collateralized by certain                                
   seismic equipment............................     68,415       41,238       34,177
                                                 ----------   ----------     --------
                                                  3,243,262    1,543,597      943,031
   Less current portion......................... (3,201,595)  (1,525,308)    (927,389)
                                                 ----------   ----------     --------
                                                 $   41,667   $   18,289     $ 15,642
                                                 ==========   ==========     ========
</TABLE>                                                                      
 
     Covenants on notes payable outstanding at December 31, 1995 include
Northern maintaining a minimum amount of shareholders' equity, the maintenance
of certain property insurance coverages and the requirement of informing debtors
of the physical location of the collateral.
 
     The Company was not in compliance with a covenant on a note payable as of
September 30, 1995 and December 31, 1995. The balance of this note, $739,930 and
$298,932 (unaudited), is classified as a current liability at September 30, 1995
and December 31, 1995, respectively.
 
     Annual maturities on the Company's notes payable as of December 31, 1995
(unaudited) are as follows:
 
<TABLE>
                <S>                                                  <C>
                Current...........................................   $927,389
                1997..............................................      4,607
                1998..............................................     11,035
                1999..............................................         --
                2000..............................................         --
</TABLE>
 
                                      F-25
<PAGE>   83
 
                     NORTHERN GEOPHYSICAL OF AMERICA, INC.
                      (LAND-BASED SEISMIC DATA OPERATIONS)
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
5. INCOME TAXES:
 
     The provision for income taxes consists of the following:
 
<TABLE>
<CAPTION>
                                                                                                  
                                                                         NINE                    
                                               YEAR ENDED DECEMBER      MONTHS         YEAR       
                                                       31,               ENDED         ENDED      
                                               --------------------  SEPTEMBER 30,  DECEMBER 31, 
                                                 1993        1994        1995           1995
                                               --------    --------  ------------   ------------ 
                                                                                    (UNAUDITED)
    <S>                                        <C>         <C>         <C>          <C>
    Current:
      Federal...............................   $     --    $ 67,061    $ (67,061)   $  95,182
      State.................................         --       5,917       (5,917)       8,389
                                               --------    --------     --------    ---------
                                                     --      72,978      (72,978)     103,571
    Deferred:
      Federal...............................   $     --     228,684     (134,197)    (131,606)
      State.................................         --      20,178      (11,841)     (11,600)
                                               --------    --------     --------    ---------
                                                     --     248,862     (146,038)    (143,206)
                                               --------    --------     --------    ---------
                                               $     --    $321,840    $(219,016)   $ (39,635)
                                               ========    ========     ========    =========
</TABLE>
 
     The effective income tax rate on income before income taxes differed from
the U.S. federal statutory income tax rate for the following reasons:
 
<TABLE>
<CAPTION>
                                                                                                  
                                                                          NINE                    
                                                      YEAR ENDED         MONTHS         YEAR       
                                                     DECEMBER 31,         ENDED         ENDED      
                                                    ---------------   SEPTEMBER 30,  DECEMBER 31, 
                                                    1993        1994      1995          1995
                                                    ----        ----      ----          ----
                                                                                     (UNAUDITED) 
    <S>                                             <C>         <C>       <C>        <C>         
    U.S. federal statutory rate....................  34%         34%      (34)%         (34)%    
    State taxes, net of federal benefit............   3           3        (3)           (3)     
    Change in valuation............................ (37)         (7)       --            --      
                                                    ---          --       ---           ---      
                                                     --%         30%      (37)%         (37)%    
                                                    ===          ==       ===           ===      
</TABLE>
 
     The temporary differences which give rise to deferred tax assets and
liabilities are as follows:
 
<TABLE>
<CAPTION>
                                                    DECEMBER 31,   SEPTEMBER 30,  DECEMBER 31,
                                                       1994           1995           1995
                                                     ---------      ---------      ---------
                                                                                  (UNAUDITED)
    <S>                                              <C>            <C>            <C>
    Deferred tax assets:
      Vacation accrual............................   $  16,058      $  25,425      $  54,589
      Net operating loss carryovers...............          --        232,660        232,660
      Less valuation allowance....................          --             --             --
                                                     ---------      ---------      ---------
                                                        16,058        258,085        287,249
    Deferred tax liabilities:
      Property, plant and equipment...............    (264,920)      (360,909)      (392,905)
                                                     ---------      ---------      ---------
    Net deferred tax assets (liabilities).........   $(248,862)     $(102,824)     $(105,656)
                                                     =========      =========      =========
</TABLE>
 
     As of December 31, 1995, the Company has incurred approximately $630,000
(unaudited) of net operating loss carryforwards available to reduce income taxes
in future periods. These carryforwards will expire in 2010. The net operating
loss carryforwards will not be available to 3-D Geophysical, Inc. as a result of
the transaction discussed in Note 1.
                                       F-26
<PAGE>   84
 
                     NORTHERN GEOPHYSICAL OF AMERICA, INC.
                      (LAND-BASED SEISMIC DATA OPERATIONS)
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
6. COMMITMENTS AND CONTINGENCIES:
 
  Capital Leases:
 
     The following schedule sets forth the future minimum lease payments under
capital leases, together with the present value of the minimum lease payments as
of December 31, 1995 (unaudited):
 
<TABLE>
    <S>                                                                         <C>
    Year ending December 31:
      1996....................................................................  $180,758
      1997....................................................................   146,220
      1998....................................................................   114,591
      1999....................................................................    59,260
      2000....................................................................        --
                                                                                --------
    Total lease payments......................................................   500,829
    Less amount representing interest and executory costs.....................    84,162
                                                                                --------
    Present value of minimum lease payments...................................   416,667
    Less current portion......................................................   138,362
                                                                                --------
    Long-term obligations under capital lease.................................  $278,305
                                                                                ========
</TABLE>
 
  Operating Leases:
 
     The Company leases premises, vehicles and equipment under operating leases.
One of the premises' lease has a three-year renewal option with a planned rental
increase of 5%. Rent expense was $654,230, $1,815,135, $1,044,667 and $2,798,113
(unaudited), for the years ended December 31, 1993, 1994, for the nine months
ended September 30, 1995 and for the year ended December 31, 1995 (unaudited),
respectively.
 
     Minimum lease payments under operating leases in effect at December 31,
1995 (unaudited) are as follows:
 
<TABLE>
    <S>                                                                          <C>
    Year ending December 31:
         1996..................................................................  $ 72,469
         1997..................................................................    24,235
         1998..................................................................        --
         1999..................................................................        --
         2000..................................................................        --
                                                                                 --------
                                                                                 $ 96,704
                                                                                 ========
</TABLE>
 
                                      F-27
<PAGE>   85
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Stockholders of
Paragon Geophysical, Inc.:
 
     We have audited the accompanying balance sheet of Paragon Geophysical, Inc.
(as defined in Note 1) as of December 31, 1994 and September 30, 1995 and the
related statements of operations, stockholders' deficit and cash flows for the
period from August 25, 1994 through December 31, 1994, the period from January
1, 1994 through August 24, 1994, for the year ended December 31, 1993 and the
nine months ended September 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     As explained in Note 1 to the financial statements, the Successor Company
purchased substantially all of the net assets of the Predecessor Company as of
August 25, 1994. The transaction was accounted for as a purchase whereby the
purchase price was allocated to the assets and liabilities of the Predecessor
based upon their estimated fair value as of August 25, 1994. Accordingly, the
financial statements of the Successor Company are not comparable to those of the
Predecessor Company.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Paragon Geophysical, Inc.
(as defined in Note 1) as of December 31, 1994 and September 30, 1995, and the
results of its operations and its cash flows for the period from August 25, 1994
through December 31, 1994, the period from January 1, 1994 through August 24,
1994, for the year ended December 31, 1993 and the nine months ended September
30, 1995 in conformity with generally accepted accounting principles.
 
Cleveland, Ohio                           COOPERS & LYBRAND L.L.P.
December 6, 1995
 
                                      F-28
<PAGE>   86
 
                           PARAGON GEOPHYSICAL, INC.
 
                                 BALANCE SHEET
 
<TABLE>
<CAPTION>
                                                       DECEMBER 31,     SEPTEMBER 30,     DECEMBER 31,
                                                           1994             1995              1995
                                                       ------------     -------------     ------------
                                                                                          (UNAUDITED)
<S>                                                    <C>              <C>               <C>
                        ASSETS

Current assets:
  Cash................................................  $   67,285       $   141,113       $  244,002
  Receivables:
     Trade, net of allowance for doubtful accounts of
       $61,964, $50,331 and $48,786 (unaudited),
       respectively...................................     884,349           685,530          389,093
     Other............................................      53,965            95,266           73,019
  Inventory...........................................      29,050            17,363           15,585
  Prepaid expenses....................................       4,829             4,749            4,391
                                                        ----------       -----------       ----------
          Total current assets........................   1,039,478           944,021          726,090
                                                        ----------       -----------       ----------
Property and equipment, net...........................   1,964,028         3,151,035        3,016,219
Other assets..........................................      48,036           318,877          559,399
                                                        ----------       -----------       ----------
          Total assets................................  $3,051,542       $ 4,413,933       $4,301,708
                                                        ==========       ===========       ==========
        LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
  Current portion of long-term debt...................  $1,427,146       $ 2,501,134       $4,608,861
  Accounts payable....................................      81,349           194,751          171,567
  Accrued liabilities.................................     229,474           248,815          275,022
  Deposits............................................      21,480             6,200            6,200
                                                        ----------       -----------       ----------
          Total current liabilities...................   1,759,449         2,950,900        5,061,650
                                                        ----------       -----------       ----------
Long-term liabilities:
  Long-term debt......................................   1,532,616         1,959,034           41,836
                                                        ----------       -----------       ----------
Stockholders' deficit:
  Common stock, 40 shares issued and outstanding,
     recorded at stated value.........................       3,000             3,000            3,000
  Additional paid-in capital..........................     150,000           150,000          150,000
  Accumulated deficit.................................    (393,523)         (649,001)        (954,778)
                                                        ----------       -----------       ----------
          Total stockholders' deficit.................    (240,523)         (496,001)        (801,778)
                                                        ----------       -----------       ----------
          Total liabilities and stockholders'
            deficit...................................  $3,051,542       $ 4,413,933       $4,301,708
                                                        ==========       ===========       ==========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-29
<PAGE>   87
 
                           PARAGON GEOPHYSICAL, INC.
 
                            STATEMENT OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                 FOR THE PERIOD    FOR THE PERIOD    FOR THE NINE
                                                     FOR THE     FROM JANUARY 1,   FROM AUGUST 25,      MONTHS         FOR THE
                                                    YEAR ENDED    1994 THROUGH      1994 THROUGH         ENDED        YEAR ENDED
                                                   DECEMBER 31,    AUGUST 24,       DECEMBER 31,     SEPTEMBER 30,   DECEMBER 31,
                                                       1993           1994              1994             1995            1995
                                                   ------------  ---------------   ---------------   -------------   ------------
                                                   PREDECESSOR     PREDECESSOR        SUCCESSOR        SUCCESSOR      SUCCESSOR
                                                   ------------  ---------------   ---------------   -------------   ------------
                                                                                                                     (UNAUDITED)
<S>                                                  <C>            <C>               <C>              <C>            <C>
Net sales..........................................  $4,462,931     $3,336,863        $1,955,088       $3,909,528     $4,694,711
Costs of seismic and geophysical services..........   3,427,360      2,693,024         1,632,845        3,146,189      3,852,281
                                                     ----------     ----------        ----------       ----------     ----------
                                                      1,035,571        643,839           322,243          763,339        842,430
                                                     ----------     ----------        ----------       ----------     ----------
General and administrative expenses................     347,172        184,628           195,548          295,817        463,735
Depreciation and amortization......................     409,411        251,064           363,708          422,923        565,686
Miscellaneous......................................     (20,140)           512                --               --             --
Interest expense...................................     144,843         11,411           155,810          293,660        367,007
Loss on sale of assets.............................      13,018          4,401               700            6,417          7,257
                                                        894,304        452,016           715,766        1,018,817      1,403,685
Income (loss) before income taxes..................   $ 141,267     $  191,823          (393,523)        (255,478)      (561,255)
                                                      =========     ==========
Provision for income taxes.........................                                           --               --             --
                                                                                      ----------       ----------     ----------
        Net loss...................................                                   $ (393,523)      $ (255,478)    $ (561,255)
                                                                                      ==========       ==========     ==========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-30
<PAGE>   88
 
                           PARAGON GEOPHYSICAL, INC.
 
                       STATEMENT OF STOCKHOLDERS' DEFICIT
 
<TABLE>
<CAPTION>
                                                                                    ADDITIONAL
                                                                COMMON    COMMON     PAID-IN      ACCUMULATED
                                                                SHARES    STOCK      CAPITAL        DEFICIT
                                                                ------    ------    ----------    -----------
<S>                                                             <C>       <C>       <C>           <C>
Predecessor:
  Balance December 31, 1992...................................    100     $ 500      $ 283,423     $(459,445)
  Distribution to stockholder.................................     --        --             --       (65,000)
  Net income for the year.....................................     --        --             --       141,267
                                                                 ----     ------     ---------     ---------
Predecessor:
  Balance December 31, 1993...................................    100       500        283,423      (383,178)
  Net income for the period...................................     --        --             --       191,823
                                                                 ----     ------     ---------     ---------
Predecessor:
  Balance August 24, 1994.....................................    100     $ 500      $ 283,423     $(191,355)
                                                                 ====     ======     =========     =========
Successor:
  Issuance of common stock on August 25, 1994.................     40     $3,000     $ 150,000            --
  Net loss for the period.....................................     --        --             --     $(393,523)
                                                                 ----     ------     ---------     ---------
Successor:
  Balance December 31, 1994...................................     40     3,000        150,000      (393,523)
Successor:
  Net loss for the period.....................................     --        --             --      (255,478)
                                                                 ----     ------     ---------     ---------
Successor:
  Balance September 30, 1995..................................     40     $3,000     $ 150,000     $(649,001)
Successor:
  Net loss for the period(unaudited)..........................     --        --             --      (305,777)
                                                                 ----     ------     ---------     ---------
Successor:
  Balance December 31, 1995(unaudited)........................     40     $3,000     $ 150,000     $(954,778)
                                                                 ====     ======     =========     =========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-31
<PAGE>   89
 
                           PARAGON GEOPHYSICAL, INC.
 
                            STATEMENT OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                  FOR THE PERIOD     FOR THE PERIOD
                                      FOR THE     FROM JANUARY 1,    FROM AUGUST 25,  FOR THE NINE      FOR THE
                                     YEAR ENDED    1994 THROUGH       1994 THROUGH    MONTHS ENDED     YEAR ENDED
                                    DECEMBER 31,    AUGUST 24,        DECEMBER 31,    SEPTEMBER 30,   DECEMBER 31,
                                        1993           1994               1994            1995            1995
                                    ------------  ---------------    ---------------  -------------   ------------
                                    PREDECESSOR     PREDECESSOR         SUCCESSOR       SUCCESSOR      SUCCESSOR
                                    ------------  ---------------    ---------------  -------------   ------------
                                                                                                      (UNAUDITED)
<S>                                 <C>           <C>                <C>              <C>            <C>
Cash flows from operating
  activities:
  Net income (loss).................  $  141,267     $ 191,823         $  (393,523)     $(255,478)    $ (561,255)
  Adjustments to reconcile net
     income (loss) to net cash
     provided (used) by operating
     activities:
     Depreciation and
       amortization.................     409,411       251,064             363,708        422,923        565,686
     Loss on sale of assets.........      13,018         4,401                 700          6,417          7,257
     (Increase) decrease in
       receivables..................      (3,539)     (304,492)           (253,077)       157,518        495,256
     (Increase) decrease in
       inventory....................          --            --             (29,050)        11,687         13,465
     (Increase) decrease in prepaid
       expenses.....................      (9,952)        1,678              10,729             80            438
     (Increase) decrease in other
       assets and liabilities.......     112,348      (112,348)             20,490        (10,732)       (34,947)
     Increase (decrease) in accounts
       payable......................     (17,422)       70,531                (400)       113,402         90,218
     Increase (decrease) in accrued
       liabilities..................      63,925       (26,909)            146,913         19,341         45,548
                                      ----------     ---------         -----------      ---------     ----------
          Total adjustments.........     567,789      (116,075)            260,013        720,636      1,182,921
                                      ----------     ---------         -----------      ---------     ----------
          Net cash provided (used)
            by operating
            activities..............     709,056        75,748            (133,510)       465,158        621,666
Cash flows from investing
  activities:
  Purchase of business, net of cash
     acquired.......................          --            --          (1,100,000)            --             --
  Payments of organizational cost...          --            --             (23,650)            --             --
  Loan to affiliate.................          --            --                  --       (275,389)      (517,093)
  Proceeds from the sale of
     equipment......................       5,850         3,050              20,200         90,318         91,318
  Purchase of property and
     equipment......................    (239,334)     (426,324)            (35,852)      (190,835)      (194,279)
                                      ----------     ---------         -----------      ---------     ----------
          Net cash used by investing
            activities..............    (233,484)     (423,274)         (1,139,302)      (375,906)      (620,054)
Cash flows from financing
  activities:
  Proceeds from capital
     contributions of new owners....          --            --             153,000             --             --
  Proceeds from borrowings..........          --            --           1,100,000        291,500        621,500
  Distribution to stockholder.......     (65,000)           --                  --             --             --
  Payments on borrowings............     (21,888)      (17,482)            (57,360)      (306,924)      (446,395)
                                      ----------     ---------         -----------      ---------     ----------
          Net cash provided (used)
            by financing
            activities..............     (86,888)      (17,482)          1,195,640        (15,424)       175,105
                                      ----------     ---------         -----------      ---------     ----------
Net (decrease) increase.............     388,684      (365,008)            (77,172)        73,828        176,717
Cash beginning of period............     120,781       509,465             144,457         67,285         67,285
                                      ----------     ---------         -----------      ---------     ----------
Cash at end of period...............  $  509,465     $ 144,457         $    67,285      $ 141,113     $  244,002
                                      ==========     =========         ===========      =========     ==========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-32
<PAGE>   90
 
                           PARAGON GEOPHYSICAL, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
     The Company:  On August 25, 1994, Paragon Geophysical, Inc., a Delaware
corporation (the "Buyer"), purchased substantially all of the net assets of
Paragon Geophysical, Inc., an Ohio corporation (the "Seller"), for $1,100,000
and accounted for the transaction by the purchase method of accounting (the
"Acquisition").
 
     The assets and liabilities purchased in this transaction are as follows:
 
<TABLE>
        <S>                                                               <C>
        Current assets..................................................  $  864,654
        Property and equipment..........................................   2,292,989
        Other assets....................................................      23,790
        Current liabilities.............................................    (189,311)
        Long-term liabilities...........................................  (1,892,122)
                                                                          ----------
        Purchase price..................................................  $1,100,000
                                                                          ==========
</TABLE>
 
     In connection with the Acquisition, the Seller relinquished the rights to
its name to the Buyer. Concurrent with the Acquisition, the Buyer sold certain
assets to the sole shareholder of the Seller for $19,400. For purposes of
identification and description, the Company is referred to as the "Predecessor"
for the period prior to the Acquisition, the "Successor" for the period
subsequent to the Acquisition and the "Company" for both periods.
 
     The Company is a land geophysical services company primarily engaged in the
contract acquisition of two and three dimensional seismic data. The Company was
founded in 1987 and has grown to include two offices (one in Mount Gilead, Ohio
and a second located in Millersburg, Ohio). As of December 31, 1995, the Company
employs approximately 50 workers and operates two crews primarily in the
Appalachian Basin. The main customers for seismic data are oil and gas
exploration companies.
 
     The unaudited pro forma results of operations for the year ended December
31, 1994 assuming the Successor had acquired the net assets of the Predecessor
as of the beginning of the year ended December 31, 1994 are as follows:
 
<TABLE>
<CAPTION>
                                                                                          TOTAL
                                                                         PRO FORMA      PRO FORMA
                                         PREDECESSOR     SUCCESSOR      ADJUSTMENTS      BALANCES
                                         -----------     ----------     -----------     ----------
<S>                                      <C>             <C>            <C>             <C>
Net sales............................    $ 3,336,863     $1,955,088      $      --      $5,291,951
Operating, general and administrative
  expenses, primarily depreciation of
  property and equipment.............     (3,128,716)    (2,192,101)      (417,515)     (5,738,332)
Other expenses, primarily interest...        (16,324)      (156,510)       (64,282)       (237,116)
                                         -----------     ----------      ---------      ----------
          Net income (loss)..........    $   191,823     $ (393,523)     $(481,797)     $ (683,497)
                                         ===========     ==========      =========      ==========
</TABLE>
 
     Acquisition of the Company by 3-D Geophysical: In November 1995 the Company
entered into a merger agreement among the Company, 3-D Geophysical and a
subsidiary of 3-D Geophysical, Inc, ("3-D"). The Company merged with a
subsidiary of 3-D, with the Company being the surviving entity. The Company's
stockholders received approximately 1,314,261 shares of 3-D common stock in
connection with the merger. In addition, 3-D assumed approximately $4.8 million
of the Company's debt. Commencing February 9, 1996, the results of operations of
the Company are included in the financial statements of 3-D.
 
     Receivables:  The Company's trade and other receivables are primarily from
entities within the oil and gas industry. The Company has established an
allowance for doubtful accounts based upon the historical data of its customers
and other current information. Bad debt expense of $30,331, $25,125, $53,497,
$20,000, and $20,000 was charged to operations for the periods August 25, 1994
through December 31, 1994, January 1,
 
                                      F-33
<PAGE>   91
 
                           PARAGON GEOPHYSICAL, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

1994 through August 24, 1994, the year ended December 31, 1993, the nine months
ended September 30, 1995, and the year ended December 31, 1995, respectively.
 
     Property and Equipment:  Property and equipment is recorded at cost.
Depreciation and amortization is provided over their estimated useful lives and
applied on the straight-line and declining-balance methods. Expenditures for
maintenance, repairs and minor renewals are charged to earnings as incurred.
Expenditures for additions, improvements, replacements, betterments and major
renewals are capitalized. Costs of property and equipment sold or retired and
the related accumulated depreciation are removed from the accounts; resulting
gains or losses are included in earnings.
 
     Inventory:  Inventory represents explosive material used by the Company in
order to obtain seismological data. The inventory is stated at the lower of cost
or market. Cost is determined using the first-in, first-out method. Management
has determined no valuation allowance is necessary as of December 31, 1995.
 
     Organizational Costs:  The Company has capitalized costs incurred in the
organization of the Successor and is amortizing these costs over a five year
period using the straight-line method.
 
     Revenue Recognition:  Revenues from seismic and geophysical services are
recorded based on the percentage of completion method.
 
     Income Taxes:  Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to the differences between the financial
statement carrying value of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured by using enacted tax
rates that are applicable to the future years in which deferred tax assets or
liabilities are expected to be realized or settled. The effect of a change in
tax rates on deferred tax assets and liabilities is recognized in net earnings
in the period in which the tax rate change was enacted. The Company establishes
a valuation allowance when it is more likely than not that a deferred tax asset
will not be recovered.
 
     Supplemental Cash Flows Information:  The Successor paid interest of
$69,810 and $269,750 during the period August 25, 1994 through December 31, 1994
and the nine months ended September 30, 1995, respectively. The Predecessor paid
interest of $11,411 and $144,843 during the period January 1, 1994 through
August 25, 1994 and the year ended December 31, 1993, respectively. The
Predecessor financed the purchase of five vehicles in 1994 for $104,653 and
seven vehicles in 1993 for $100,305. The Successor financed the purchase of
equipment and vehicles for $1,515,830 during the nine months ended September 30,
1995.
 
     Unaudited Financial Information:  In the opinion of management, the
accompanying unaudited financial statements contain all adjustments (consisting
only of normal recurring items) necessary to present fairly the financial
position of the Company as of December 31, 1995 and the results of their
operations and cash flows for the year ended December 31, 1995.
 
USE OF ESTIMATES
 
     The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the combined
financial statements and the reported amounts of revenue and expenses during the
reporting periods. A significant estimate in the preparation of the Company's
financial statements is related to the percentage of revenue recognized based on
the stage of completion of the Company's contracts. Actual results could differ
from those estimates.
 
                                      F-34
<PAGE>   92
 
                           PARAGON GEOPHYSICAL, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
2. PROPERTY AND EQUIPMENT:
 
     Property and equipment consist of the following:
 
<TABLE>
<CAPTION>
                                                   DECEMBER 31,      SEPTEMBER 30,     DECEMBER 31,
                                                       1994              1995              1995
                                                   -------------     -------------     ------------
                                                                                       (UNAUDITED)
    <S>                                            <C>               <C>               <C>
    Property and equipment, at cost:
      Land.......................................   $    62,500       $    62,500       $   62,500
      Building and improvements..................       402,220           402,220          402,220
      Furniture and fixtures.....................        15,093            15,093           15,093
      Equipment..................................     1,384,815         2,941,411        2,944,856
      Vehicles...................................       462,713           502,863          499,413
      Construction in progress...................            --                --               --
                                                    -----------       -----------       ----------
                                                      2,327,341         3,924,087        3,924,082
      Less accumulated depreciation..............       363,313           773,052          907,863
                                                    -----------       -----------       ----------
              Net property and equipment.........   $ 1,964,028       $ 3,151,035       $3,016,219
                                                    ===========       ===========       ==========
</TABLE>
 
3. OTHER ASSETS:
 
     Other assets consist of the following:
 
<TABLE>
<CAPTION>
                                                   DECEMBER 31,      SEPTEMBER 30,     DECEMBER 31,
                                                       1994              1995              1995
                                                   -------------     -------------     ------------
                                                                                       (UNAUDITED)
    <S>                                            <C>               <C>               <C>
    Organizational costs, net of amortization....     $23,256          $  19,708         $ 18,526
    Loan to 3-D Geophysical......................          --            275,389          517,093
    Other........................................      24,780             23,780           23,780
                                                      -------          ---------         --------
                                                      $48,036          $ 318,877         $559,399
                                                      =======          =========         ========
</TABLE>
 
4. ACCRUED LIABILITIES:
 
     Accrued liabilities consist of the following:
 
<TABLE>
<CAPTION>
                                                  DECEMBER 31,      SEPTEMBER 30,     DECEMBER 31,
                                                      1994              1995              1995
                                                  -------------     -------------     -------------
    <S>                                           <C>               <C>               <C>
                                                                                       (UNAUDITED)
    Accrued interest............................    $  86,000         $ 109,910         $ 136,000
    Accrued salaries, wages and payroll taxes...      143,474           138,905           139,022
                                                    ---------         ---------         ---------
                                                    $ 229,474         $ 248,815         $ 275,022
                                                    =========         =========         =========
</TABLE>
 
5. LONG-TERM DEBT:
 
     In August 1994, the Company entered into a promissory note with Chase
Manhattan Bank for $1,100,000 due on October 31, 1996 with an interest rate
equal to the prime rate (8.5% as of December 31, 1995). This note is personally
guaranteed by three of the Company's stockholders.
 
     Effective January 1, 1994, the Company issued a promissory note to a former
stockholder of the Predecessor, for $1,700,000 due February 15, 1996. The annual
interest rate on this note is 8%. This note is guaranteed by the Company and
collateralized by certain assets of the Company. This agreement superseded the
original promissory note between the Predecessor and the former stockholder in
the same amount.
 
                                      F-35
<PAGE>   93
 
                           PARAGON GEOPHYSICAL, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
5. LONG-TERM DEBT, CONTINUED:
     In January 1995, the Company issued a promissory note for the purchase of
Input/Output equipment for $1,480,380 with an interest rate of 9.5%
collateralized by the Input/Output equipment.
 
     During the second quarter of 1995, the Company obtained an unsecured line
of credit for $350,000 from Bank One of Ohio. Borrowings under the line of
credit are due on demand and bear interest at prime plus 1%. This line of credit
is personally guaranteed by three of the Company's stockholders.
 
     Long-term debt consists of the following:
 
<TABLE>
<CAPTION>
                                                    DECEMBER 31,    SEPTEMBER 30,    DECEMBER 31,
                                                        1994            1995             1995
                                                    ------------    -------------    ------------
                                                                                     (UNAUDITED) 
    <S>                                             <C>             <C>              <C>
    Promissory note payable to former stockholder
      with an interest rate of 8%.................   $ 1,700,000     $  1,700,000     $ 1,700,000
    Promissory note payable to Chase Manhattan
      Bank with a variable interest rate (8.5% as
      of December 31, 1995) due on October 31,
      1996........................................     1,100,000        1,100,000       1,400,000
    Note payable to a financial institution with
      an interest rate of 9.5% due March 1998,
      collateralized by Input/Output equipment....            --        1,231,149       1,116,445
    Line of credit to Bank One collateralized by
      accounts receivable with a variable interest
      rate of 9.75% at September 30, 1995 and 9.5%
      at December 31, 1995........................            --          291,500         321,500
    Various notes payable collateralized by
      certain vehicles of the Company with
      interest rates ranging from 5.9% to 10% due
      in installments to January 2000, primarily
      collateralized by vehicles..................       159,762          137,519         112,752
                                                     -----------     ------------     -----------
                                                       2,959,762        4,460,168       4,650,697
    Current portion of long-term debt.............    (1,427,146)      (2,501,134)     (4,608,861)
                                                     -----------     ------------     -----------
                                                     $ 1,532,616     $  1,959,034     $    41,836
                                                     ===========     ============     ===========
</TABLE>
 
     Aggregate principal payments on long-term debt outstanding as of December
31, 1995 (unaudited) is as follows:
 
<TABLE>
    <S>                                                                        <C>
    1996.....................................................................  $4,608,861
    1997.....................................................................      22,456
    1998.....................................................................      10,177
    1999.....................................................................       8,460
    2000.....................................................................         743
                                                                               ----------
                                                                               $4,650,697
                                                                               ==========
</TABLE>
 
6. INCOME TAXES:
 
     Prior to the Acquisition, the Predecessor elected to be treated as an S
corporation under the provisions of Section 1361 of the Internal Revenue Code.
As an S corporation, the Predecessor was not subject to tax on its
 
                                      F-36
<PAGE>   94
 
                           PARAGON GEOPHYSICAL, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
6. INCOME TAXES, CONTINUED:

income; rather the shareholders of the Predecessor were taxed on their share of
the Predecessor's taxable income, whether or not the income was distributed.
 
     Effective August 25, 1994, the Company rescinded its S corporation election
under the Internal Revenue Code and became subject to tax on its income.
 
     A reconciliation of the differences between income taxes computed at the
U.S. federal statutory rate of 35% and the Company's reported federal income
taxes follows:
 
<TABLE>
<CAPTION>
                                                        AUGUST 25,                                
                                                           1994         NINE MONTHS                
                                                          THROUGH          ENDED            YEAR ENDED 
                                                       DECEMBER 31,     SEPTEMBER 30,      DECEMBER 31,
                                                           1994              1995             1995    
                                                       -------------   --------------     ------------
                                                                                          (UNAUDITED)  
    <S>                                                <C>             <C>                <C>
    Income tax benefit at statutory rate at 35%.......   $(137,700)     $  (89,417)       $ (196,440)
    Depreciation not recognized for books.............      (1,430)        (53,689)          (72,584)
    Net operating loss carryforward not recognized....     139,130         143,106           269,024
                                                         ---------      ----------        ----------
    Federal income taxes..............................   $       0      $        0        $        0
                                                         =========      ==========        ==========
</TABLE>
 
     The following is a summary of the deferred tax balances:
 
<TABLE>
<CAPTION>
                                                                                                  
                                                                                                     
                                                       DECEMBER 31,     SEPTEMBER 30,     DECEMBER 31,
                                                           1994            1995              1995    
                                                       -------------   --------------    ------------- 
                                                                                         (UNAUDITED) 
    <S>                                                  <C>            <C>              <C>
    Deferred tax asset (net operating loss
      carryforward)...................................   $ 139,130      $  282,236       $  339,472
    Deferred tax liability (depreciation).............      (1,430)        (55,119)         (74,014)
    Valuation allowance on the deferred tax asset.....    (137,700)       (227,117)        (265,458)
                                                         ---------      ----------       ----------
    Net deferred taxes................................   $       0      $        0       $        0
                                                         =========      ==========       ==========
</TABLE>
 
     At December 31, 1995 (unaudited) the Company has net operating loss
carryforwards of approximately $807,000 which expire in the years 2009 and 2010.
 
                                      F-37
<PAGE>   95
 
                                AUDITORS' REPORT
 
To the Directors of J.R.S. Exploration Company Limited:
 
We have audited the balance sheet of J.R.S. Exploration Company Limited as at
November 30, 1995 and the statements of operations and retained earnings and
changes in financial position for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
 
We conducted our audit in accordance with generally accepted auditing standards
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
 
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at November 30, 1995 and the
results of its operations and changes in its financial position for the year
then ended in accordance with generally accepted accounting principles in
Canada.
 
/s/ GARRETT POWER
 
Chartered Accountants
 
Calgary, Alberta
July 31, 1996
 
                                      F-38
<PAGE>   96
 
                       J.R.S. EXPLORATION COMPANY LIMITED
 
                                 BALANCE SHEET
<TABLE>
<CAPTION>
                                                                       NOVEMBER
                                                                          30,          MAY 31,
                                                                         1995           1996
                                                                      ----------     -----------
                                                                                     (UNAUDITED)
<S>                                                                   <C>            <C>
                               ASSETS

Current Assets:
  Cash and term deposits............................................  $  711,698     $1,424,094
  Accounts receivable...............................................   1,855,745        426,109
  Income taxes recoverable..........................................      35,751             --
  Prepaid expenses..................................................      77,191         55,193
  Current portion of agreement receivable...........................      66,666         66,666
                                                                      ----------     ----------
                                                                       2,747,051      1,972,062
Fixed assets (Note 2)...............................................   5,430,531      4,992,789
Agreement receivable (Note 3).......................................      33,334         33,333
                                                                      ----------     ----------
                                                                      $8,210,916     $6,998,184
                                                                      ==========     ==========

                LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Bank loan (Note 4)................................................  $  200,000     $  125,000
  Accounts payable (Note 10)........................................   1,395,532        287,661
  Income taxes payable..............................................          --        386,628
  Advances from related parties (Note 5)............................     160,811             --
  Current portion of long term debt.................................   1,552,533      1,549,000
                                                                      ----------     ----------
                                                                       3,308,876      2,348,289
Long term debt (Note 6).............................................   1,488,829        655,500
Deferred income taxes...............................................     304,538        304,538
Shareholders' equity:
  Share capital (Note 7)............................................          66             66
  Retained earnings.................................................   3,108,607      3,689,791
                                                                      ----------     ----------
                                                                       3,108,673      3,689,857
                                                                      ----------     ----------
                                                                      $8,210,916     $6,998,184
                                                                      ==========     ==========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-39
<PAGE>   97
 
                       J.R.S. EXPLORATION COMPANY LIMITED
 
                 STATEMENT OF OPERATIONS AND RETAINED EARNINGS
 
<TABLE>
<CAPTION>
                                                  FOR THE           FOR THE              FOR THE
                                                YEAR ENDED      SIX MONTHS ENDED     SIX MONTHS ENDED
                                                NOVEMBER 30,        MAY 31,              MAY 31,
                                                   1995               1995                 1996
                                                -----------     ----------------     ----------------
                                                   C$                 C$                   C$
                                                                  (UNAUDITED)          (UNAUDITED)
<S>                                             <C>               <C>                  <C>
Revenue:
  Contract revenue............................  $11,074,354       $  6,256,941         $  6,980,268
  Interest....................................       71,002             43,697               13,409
                                                -----------       ------------         ------------
                                                 11,145,356          6,300,638            6,993,677
Direct expenses:
  Consulting, management and bonuses..........      425,785            240,813              347,933
  Recording equipment repairs and
     maintenance..............................    1,205,215            405,592              899,610
  Small tools and field supplies..............       31,129             11,091                6,040
  Turnkey costs...............................    2,459,422          1,404,744              734,556
  Vehicle and equipment rentals...............      343,969            183,710              151,959
  Vehicle repairs and fuel....................      412,325            309,659              323,237
  Wages and benefits, including office........    3,146,860          1,692,290            1,989,095
  Depreciation................................    1,971,583            986,056              987,333
                                                -----------       ------------         ------------
                                                  9,996,288          5,233,955            5,439,763
                                                -----------       ------------         ------------
Gross profit..................................    1,149,068          1,066,683            1,553,914
General and administrative costs (see note
  11).........................................    1,238,547            646,832              586,102
                                                -----------       ------------         ------------
Income (loss) before the following............      (89,479)           419,851              967,812
Gain on sale of fixed assets..................        4,507                 --                   --
                                                -----------       ------------         ------------
Income (loss) before provision for income
  taxes.......................................      (84,972)           419,851              967,812
Provision for (recovery of) income taxes......      (64,940)           135,162              386,628
                                                -----------       ------------         ------------
Net income (loss) for the period..............      (20,032)           284,689              581,184
Retained earnings at beginning of period......    3,128,639          3,128,639            3,108,607
                                                -----------       ------------         ------------
Retained earnings at end of period............  $ 3,108,607       $  3,413,328         $  3,689,791
                                                ===========       ============         ============
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-40
<PAGE>   98
 
                       J.R.S. EXPLORATION COMPANY LIMITED
 
                   STATEMENT OF CHANGES IN FINANCIAL POSITION
 
<TABLE>
<CAPTION>
                                                                                                  
                                                                                                  
                                                                                                  
                                                                       SIX MONTHS       SIX MONTHS
                                                        YEAR ENDED        ENDED           ENDED   
                                                       NOVEMBER 30,      MAY 31,         MAY 31,  
                                                           1995           1995             1996   
                                                       ------------    -----------      ----------
                                                                           C $              C $
                                                                       (UNAUDITED)      (UNAUDITED)
<S>                                                    <C>             <C>              <C>
Operations:
  Net income (loss)..................................  $    (20,032)   $   284,689      $  581,184
  Add: Items not requiring a current cash outlay
     Depreciation....................................     2,004,989      1,002,317       1,002,070
     Deferred income taxes...........................      (182,454)            --              --
     Gain on sale of fixed assets....................        (4,507)            --              --
                                                       ------------    -----------      ---------- 
Funds from operations................................     1,797,996      1,287,006       1,583,254
Decrease (increase) in non-cash working capital......      (270,008)        52,926         766,143
                                                       ------------    -----------      ---------- 
Cash provided by operations..........................     1,527,988      1,339,932       2,349,397
                                                       ------------    -----------      ---------- 
Investing:
  Acquisition of fixed assets........................      (285,410)      (140,482)       (564,328)
  Proceeds on sale of fixed assets...................         8,150          3,000              --
  Decrease in investment tax credits.................        55,843             --              --
                                                       ------------    -----------      ---------- 
Cash used in investing...............................      (221,417)      (137,482)       (564,328)
                                                       ------------    -----------      ---------- 
Financing:
  Decrease in long term debt.........................    (2,079,356)    (1,307,793)       (836,862)
  Decrease in advances from related parties..........      (326,000)      (260,000)       (160,811)
                                                       ------------    -----------      ---------- 
Cash used in financing...............................    (2,405,356)    (1,567,793)       (997,673)
                                                       ------------    -----------      ---------- 
Increase (decrease) in cash*.........................    (1,098,785)      (365,343)        787,396
Cash at beginning of year............................     1,610,483      1,610,483         511,698
                                                       ------------    -----------      ----------
Cash at end of year..................................  $    511,698    $ 1,245,140      $1,299,094
                                                       ============    ===========      ==========
</TABLE>
 
- ---------------
 
* For the purpose of this statement, cash is defined as cash and term deposits,
net of bank loan.
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-41
<PAGE>   99
 
                       J.R.S. EXPLORATION COMPANY LIMITED
 
                         NOTES TO FINANCIAL STATEMENTS
                               NOVEMBER 30, 1995
 
1. SIGNIFICANT ACCOUNTING POLICIES:
 
BASIS OF PRESENTATION
 
     Financial statements are denominated in Canadian dollars and are presented
in accordance with Canadian generally accepted accounting principles.
 
DEPRECIATION
 
     Depreciation is calculated using the straight-line (equipment -- 20%) and
declining balance (vehicles -- 30%; office -- 20%) methods at rates which will
depreciate the assets over their estimated useful lives.
 
INVESTMENT TAX CREDITS
 
     Investment tax credits are recorded using the cost reduction method.
 
2. FIXED ASSETS:
 
     Fixed assets are recorded at cost and are comprised of the following.
 
<TABLE>
<CAPTION>
                                                                    1995
                                                         ----------------------------
                                                                         ACCUMULATED
                                                            COST         DEPRECIATION
                                                         -----------     ------------
            <S>                                          <C>             <C>
            Equipment..................................  $12,097,741     $7,224,900
            Vehicles...................................    1,471,725      1,060,322
            Office.....................................      315,448        169,161
                                                         -----------     ----------
                                                         $13,884,914     $8,454,383
                                                         ===========     ==========
</TABLE>
 
3. AGREEMENT RECEIVABLE:
 
     The agreement receivable is unsecured, bears interest at 7% and is
repayable in annual installments of $33,333 plus interest. The 1995 installment
is in arrears.
 
4. BANK LOAN:
 
     The revolving bank loan is payable on demand and bears interest at prime
plus  1/2%. Security on the loan is described in Note 6.
 
5. ADVANCES FROM RELATED PARTIES:
 
     The advances from related parties, including shareholders and companies
controlled by shareholders, are non-interest bearing and have no fixed terms of
repayment.
 
                                      F-42
<PAGE>   100
 
                       J.R.S. EXPLORATION COMPANY LIMITED
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                               NOVEMBER 30, 1995
 
6. LONG-TERM DEBT:
 
<TABLE>
<CAPTION>
                                                                                      1995
                                                                                   ----------
<S>                                                                                <C>
Bank loan, bearing interest at prime plus 1 1/2%, is payable on demand. The bank
  has agreed to accept blended monthly installments of $133,000.................   $2,711,997
Finance loan, bearing interest at 5 1/4%, is repayable in quarterly installments
  of U.S.$19,115 to October 1996................................................      101,998
Finance contracts, bearing interest at rates ranging from 12% to 13%, repayable
  in blended monthly installments of $12,416 to July 1997.......................      227,367
                                                                                   ----------
                                                                                    3,041,362
Less: amount due within one year................................................    1,552,533
                                                                                   ----------
                                                                                   $1,488,829
                                                                                   ==========
</TABLE>
 
     The bank loans are secured by a general security agreement, a debenture
providing a first charge on specific equipment and a floating charge on all
assets of the Company and postponement of claim by certain shareholders and
directors.
 
     The finance loan and contracts are secured by specific equipment and
vehicles.
 
     Estimated principal repayments over the next three years are as follows:
 
<TABLE>
                    <S>                                        <C>
                    1996....................................   $1,552,533
                    1997....................................    1,476,832
                    1998....................................       11,997
</TABLE>
 
7. SHARE CAPITAL:
 
<TABLE>
        <S>                                                                       <C>
        Authorized --
          Unlimited number of Class A voting shares
          Unlimited number of Class B non-voting shares
          Unlimited number of Class D preferred shares
        Issued --
          Class A voting shares................................................    33
          Class B non-voting shares............................................    33
                                                                                  ---
                                                                                   66
                                                                                   ==
</TABLE>
 
     No Class D preferred shares were issued at November 30, 1995.
 
8. INCOME TAXES:
 
     The income tax provision on the income statement differs from the expected
income tax provision as follows:
 
<TABLE>
<CAPTION>
                                                                               1995
                                                                             --------
        <S>                                                                  <C>
        Expected income taxes @ 44.34%....................................   $(37,677)
        Add (deduct) effects of:
          Small business tax reduction....................................    (51,000)
          Non deductible expenses.........................................     23,737
                                                                             --------
                                                                             $(64,940)
                                                                             ========
</TABLE>
 
                                      F-43
<PAGE>   101
 
                       J.R.S. EXPLORATION COMPANY LIMITED
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                               NOVEMBER 30, 1995
 
9. COMMITMENTS:
 
     Subsequent to November 30, 1995, the Company entered into a lease
agreement, with a related company (see Note 10), for their business premises.
The lease calls for annual payments of $96,840 and expires in May 2001.
 
10. RELATED PARTY TRANSACTIONS:
 
     The following summarizes transactions and balances with companies which are
owned by parties related to the shareholders:
 
<TABLE>
<CAPTION>
                                                                               1995
                                                                             --------
        <S>                                                                  <C>
        Pavelow Investments Ltd.
          Rent charged on premises........................................   $ 96,840
        Malpaso Surveys Ltd.
          Survey fees charged.............................................    280,707
          Balance included in accounts payable............................     28,109
        C.M.J. Holdings Ltd.
          Equipment lease charges.........................................     42,185
          Balance included in accounts payable............................     67,909
</TABLE>
 
11. GENERAL AND ADMINISTRATIVE COSTS:
 
     General and administrative costs include interest expense of $416,082,
$235,226 (unaudited) and $92,970 (unaudited), and depreciation of $33,406,
$16,261 (unaudited), and $7,422 (unaudited) for year ending November 30, 1995,
the six months ended May 31, 1995, and the six months ended May 31, 1996,
respectively.
 
                                      F-44
<PAGE>   102
 
                             3-D GEOPHYSICAL, INC.
 
                  PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
 
     The following pro forma consolidated financial statements of 3-D
Geophysical, Inc. (the "Company") include the pro forma consolidated balance
sheet as of June 30, 1996 and the pro forma consolidated statement of operations
for the year ended December 31, 1995 and the six months ended June 30, 1995 and
1996.
 
     On February 9, 1996, simultaneously with the consummation of the Company's
Initial Public Offering (the "Initial Public Offering"), the Company acquired in
separate transactions, in exchange for cash, notes and shares of Common Stock,
Geoevaluaciones, PIASA, Northern's land-based seismic data acquisition
operations, Paragon and Kemp. See "Certain Transactions." For accounting
purposes, the acquisitions of Geoevaluaciones and PIASA were treated as a
recapitalization of Geoevaluaciones and PIASA with Geoevaluaciones (combined
with PIASA) as the acquiror and predecessor of 3-D Geophysical. Accordingly, the
combined net assets of Geoevaluaciones and PIASA were valued at historical cost
and the consideration given to the former stockholders of Geoevaluaciones and
PIASA was treated for accounting purposes as a dividend. The acquisitions of
Northern's land-based seismic data acquisition operations, Paragon and Kemp (the
"Purchased Companies") were treated as business combinations accounted for by
the purchase method of accounting as prescribed by Accounting Principles Board
Opinion No. 16 and Staff Accounting Bulletin No. 48 and are included within the
Company's historical consolidated statement of operations commencing February 9,
1996. The acquisition of Paragon's common stock in exchange for shares of Common
Stock was accounted for at Paragon's historical cost. Northern's land-based
seismic data acquisition operations and Kemp were valued at the fair market
value of consideration given. In connection with the acquisitions of Northern's
land-based seismic data acquisition operations and Kemp, the excess of
consideration given over the fair market value of net assets is being amortized
on a straight-line basis over 15 years.
 
     In July 1996, the Company signed a letter of intent to purchase J.R.S.
Exploration, Ltd. ("J.R.S. Exploration") (see "Business -- Proposed Acquisition
of J.R.S. Exploration"). The consummation of the acquisition is subject to
customary conditions, including the negotiation and execution of mutually
satisfactory definitive documentation and the completion of a satisfactory due
diligence review by the Company. The proposed acquisition of J.R.S. Exploration
is being treated as a probable business combination which will be accounted for
by the purchase method of accounting as prescribed by Accounting Principles
Board Opinion No. 16. The excess of consideration being offered over the fair
market value of the net assets acquired is recorded in the following pro forma
consolidated financial statements as goodwill and is being amortized on a
straight-line basis over 15 years.
 
     The pro forma consolidated balance sheet as of June 30, 1996 gives effect
to the acquisition of J.R.S. Exploration as if such transaction had occurred on
June 30, 1996. The pro forma consolidated statements of operations for the year
ended December 31, 1995 and the six months ended June 30, 1995 and 1996 assumes
the Company had completed the recapitalization, the acquisition of the Purchased
Companies, the Initial Public Offering and the acquisition of J.R.S. Exploration
on January 1, 1995.
 
     The pro forma consolidated financial statements have been derived from: (i)
the audited statement of operations of Geoevaluaciones (as predecessor of the
Company) for the year ended December 31, 1995 appearing elsewhere in this
Prospectus; (ii) the unaudited interim consolidated financial statements of the
Company as of and for the six months ended June 30, 1996 appearing elsewhere in
this Prospectus; (iii) the unaudited interim statements of operations for
Geoevaluaciones, Northern's land-based seismic data acquisition operations,
Paragon and Kemp for the six months ended June 30, 1995 not included in this
Prospectus; (iv) the unaudited statement of operations of Kemp for the year
ended December 31, 1995 not included in this Prospectus; (v) the unaudited
statement of operations of Northern's land-based seismic data acquisition
operations and Paragon for the year ended December 31, 1995 appearing elsewhere
in this Prospectus; (vi) the unaudited interim statements of operations of
Northern's land-based seismic data acquisition operations, Paragon and Kemp for
the period from January 1, 1996 through February 8, 1996 not included in this
Prospectus; and (vii) the U.S. dollar financial statements of J.R.S. Exploration
as of and for the six
 
                                      F-45
<PAGE>   103
 
months ended May 31, 1996, for the year ended November 30, 1995 and the six
months ended May 31, 1995 not included in this Prospectus. The Canadian dollar
J.R.S. Exploration financial statements, appearing elsewhere in this Prospectus,
have been translated into U.S. dollars using the current rate method (i.e.,
assets and liabilities were translated at the June 30, 1996 exchange rate and
revenues and expenses have been translated at the appropriate average exchange
rate for the period). The translation is not included in this Prospectus. The
J.R.S. Exploration financial statements include all adjustments necessary to
conform to U.S. Generally Accepted Accounting Principles ("GAAP"). The principal
difference between U.S. and Canadian GAAP is accounting for income taxes. This
difference, as it relates to J.R.S. Exploration, does not produce a material
difference and therefore no adjustment has been made.
 
     The following summarizes the rates (in U.S. dollars) used to translate the
J.R.S. Exploration financial statements.
 
<TABLE>
<CAPTION>
                                                                   CLOSING RATE     AVERAGE RATE
                                                                   ------------     ------------
    <S>                                                            <C>              <C>
    Six Months Ended May 31, 1995................................         --           0.7192
    Six Months Ended May 31, 1996................................     0.7298           0.7312
    Year Ended November 30, 1995.................................         --           0.7279
</TABLE>
 
     These pro forma consolidated statements of operations may not be indicative
of actual results that would have been achieved if the transactions had occurred
on the dates indicated or the results which may be realized in the future.
Neither expected benefits and cost reductions anticipated by the Company nor
future corporate costs of the Company have been reflected in the pro forma
consolidated statements of operations.
 
                                      F-46
<PAGE>   104
 
                             3-D GEOPHYSICAL, INC.
 
                      PRO FORMA CONSOLIDATED BALANCE SHEET
                                 JUNE 30, 1996
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                  J.R.S.
                                                                  U.S. $
                                                        3-D        U.S.       PRO FORMA
                                                    GEOPHYSICAL   G.A.A.P.  ADJUSTMENTS(A)   PRO FORMA
                                                    -----------   -------   --------------   ---------
<S>                                                 <C>           <C>       <C>              <C>
                      ASSETS

Current assets:
  Cash and cash equivalents.......................    $ 2,873     $1,039       $     --       $ 3,912
  Accounts receivable:
     Trade........................................     12,302        311             --        12,613
     Other........................................        251         --             --           251
Notes receivable..................................        975         49             --         1,024
Deferred income tax asset.........................        108         --             --           108
Prepaid expenses and other assets.................        948         40             --           988
                                                      -------     ------       --------       -------
          Total current assets....................     17,457      1,439             --        18,896
Property and equipment, net.......................     25,283      3,644             --        28,927
Goodwill..........................................      5,985         --          1,147         7,132
Other assets......................................        596         24             --           620
                                                      -------     ------       --------       -------
          Total assets............................    $49,321     $5,107       $  1,147       $55,575
                                                      =======     ======       ========       =======

       LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Current maturities of long-term debt and capital
     leases.......................................    $ 5,372     $1,222       $     --       $ 6,594
  Accounts payable................................      5,846        210             --         6,056
  Accrued liabilities.............................      1,596         --             --         1,596
  Income taxes payable............................        293        282             --           575
                                                      -------     ------       --------       -------
          Total current liabilities...............     13,107      1,714             --        14,821
Long-term debt and capital leases.................      9,653        478             --        10,131
Deferred income tax liability.....................        601        222             --           823
Stockholder's equity
  Preferred stock.................................         --         --             --            --
  Common stock....................................         76         --              5            81
  Additional paid-in capital......................     28,263         --          3,835        32,098
  Retained earnings...............................        635      2,787         (2,787)          635
  Cumulative foreign currency translation
     adjustments..................................     (3,014)       (94 )           94        (3,014)
                                                      -------     ------       --------       -------
Total stockholders' equity........................     25,960      2,693          1,147        29,800
                                                      -------     ------       --------       -------
          Total liabilities and stockholders'
            equity................................    $49,321     $5,107       $  1,147       $55,575
                                                      =======     ======       ========       =======
</TABLE>
 
  The accompanying notes are an integral part of these pro forma consolidated
                             financial Statements.
 
                                      F-47
<PAGE>   105
 
                             3-D GEOPHYSICAL, INC.
 
                 PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
                          YEAR ENDED DECEMBER 31, 1995
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                 RECAPITALIZED
                                      3-D            PURCHASED COMPANIES
                                  GEOPHYSICAL    ---------------------------    PRO FORMA         PRO     
                                     (AA)        NORTHERN   PARAGON    KEMP    ADJUSTMENTS       FORMA    
                                 -------------   --------   -------   ------   -----------      -------   
<S>                                  <C>         <C>        <C>       <C>        <C>            <C>       
Net sales.........................   $ 9,825     $21,920    $4,695    $3,605     $  (193)(HH)   $39,852   
Expenses:                                                                                                 
  Cost of data acquisition........     5,968      18,480     3,852     2,794        (193)(HH)    30,901   
  Depreciation and                                                                                        
    amortization..................       662       1,749       566       238         422(CC)      3,425   
                                                                                    (212)(FF)             
  General and administrative                                                                              
   expenses.......................     1,038       1,447       464       838         500(II)      4,287   
                                     -------     -------    ------    ------     -------        -------
      Total operating expenses....     7,668      21,676     4,882     3,870         517         38,613   
Operating income (loss)...........     2,157         244      (187)     (265)       (710)         1,239   
Other income (expense):                                                                                   
  Miscellaneous...................       503         (89)       (7)        9          --            416   
  Interest expense................      (883)       (263)     (367)      (88)      1,018(EE)       (583)  
  Foreign currency transaction                                                                            
    losses........................      (120)         --        --        --          --           (120)  
                                     -------     -------    ------    ------     -------        -------
Income (loss) before provision                                                                            
  for income taxes................     1,657        (108)     (561)     (344)        308            952   
Provision (benefit) for income                                                                            
  taxes...........................       102         (40)       --        --        (207)(GG)      (145)  
                                     -------     -------    ------    ------     -------        -------
      Net income (loss)...........   $ 1,555     $   (68)   $ (561)   $ (344)    $   515        $ 1,097   
                                     =======     =======    ======    ======     =======        =======
      Earnings per share..........                                                              $  0.18   
                                                                                                =======          
      Number of shares............                                                                6,232(JJ)

                                                                                                       
<CAPTION>
                                      J.R.S. U.S.$     PRO FORMA       ADJUSTED
                                      U.S. G.A.A.P.   ADJUSTMENTS      PRO FORMA
                                      -------------   -----------      ---------
<S>                                     <C>             <C>              <C>
Net sales.........................      $ 8,113         $  --          $47,965
Expenses:                            
  Cost of data acquisition........        5,841            --           36,742
  Depreciation and                   
    amortization..................        1,435            76(DD)        4,936
                                     
  General and administrative         
   expenses.......................          902                          5,189
                                        -------         -----          -------
      Total operating expenses....        8,178            76           46,867
Operating income (loss)...........          (65)          (26)           1,098
Other income (expense):              
  Miscellaneous...................            3            --              419
  Interest expense................           --                           (583)
  Foreign currency transaction       
    losses........................           --                           (120)
                                        -------         -----          -------
Income (loss) before provision       
  for income taxes................          (62)          (76)             814
Provision (benefit) for income       
  taxes...........................          (47)          (27)(GG)        (219)
                                        -------         -----          -------
      Net income (loss)...........      $   (15)        $ (49)         $ 1,033
                                        =======         =====          =======
      Earnings per share..........                                     $  0.15
                                                                       =======
      Number of shares............                                       6,712(JJ)

</TABLE>
 
   The accompanying notes are an integral part of the pro forma consolidated
                             financial statements.
 
                                      F-48
<PAGE>   106
 
                     3-D GEOPHYSICAL, INC. AND SUBSIDIARIES
 
                 PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
                         SIX MONTHS ENDED JUNE 30, 1995
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                         RECAPITALIZED
                                             3-D            PURCHASED COMPANIES                                   
                                          GEOPHYSICAL    ---------------------------    PRO FORMA         PRO     
                                             (AA)        NORTHERN   PARAGON    KEMP    ADJUSTMENTS       FORMA    
                                         -------------   --------   -------   ------   -----------      -------   
<S>                                          <C>          <C>       <C>       <C>         <C>           <C>   
Net sales................................... $ 4,847      $5,591    $2,807    $1,501      $  --         $14,746   
Expenses:                                                                                                         
  Cost of data acquisition..................   2,840       4,570     2,239     1,062         --          10,711   
  Depreciation and amortization.............     443         864       341        59       (114)(FF)      1,804   
                                                                                            211(CC)               
  General and administrative                                                                                      
    expenses................................     546         686       179       452        250(II)       2,113   
                                             -------      ------    ------    ------      -----         -------
        Total operating expenses............   3,829       6,120     2,759     1,573        347          14,628   
Operating income (loss).....................   1,018        (529)       48       (72)      (347)            118   
Other income (expense):                                                                                           
  Miscellaneous.............................     102          --        --         3         --             105   
  Interest expense..........................    (560)        (92)     (166)       (7)       195(EE)        (630)  
  Foreign currency transaction                                                                                    
    losses..................................      12          --        --        --         --              12   
                                             -------      ------    ------    ------      -----         -------
Income (loss) before provision for                                                                                
  income taxes..............................     572        (621)     (118)      (76)      (152)           (395)  
Provision (benefit) for income taxes........     130        (217)       (6)      (47)       (68)(GG)       (208)  
                                             -------      ------    ------    ------      -----         -------
        Net income (loss)................... $   442      $ (404)   $ (112)   $  (29)     $ (84)        $  (187)  
                                             =======      ======    ======    ======      =====         =======
        Earnings (loss) per share...........                                                            $  (.03)  
                                                                                                        =======          
        Number of shares....................                                                              6,232 (JJ) 


<CAPTION>
                                                      
                                                                              ADJUSTED
                                             J.R.S. U.S.$     PRO FORMA         PRO
                                             U.S. G.A.A.P.   ADJUSTMENT        FORMA
                                             -------------   -----------      --------
<S>                                              <C>             <C>              <C>
Net sales...................................    $ 4,531         $  --         $19,277
Expenses:                                    
  Cost of data acquisition..................      3,055            --          13,766
  Depreciation and amortization.............        709            38(DD)       2,551
                                             
  General and administrative                 
    expenses................................        465            --           2,578
                                                -------         -----         -------
        Total operating expenses............      4,229            38          18,895
Operating income (loss).....................        302           (38)            382
Other income (expense):                      
  Miscellaneous.............................         --            --             105
  Interest expense..........................         --            --            (630) 
  Foreign currency transaction                                                         
    losses..................................         --            --              12  
                                                -------         -----         -------
Income (loss) before provision for                                                     
  income taxes..............................        302           (38)           (131) 
Provision (benefit) for income taxes........         97           (13)(GG)       (124) 
                                                -------         -----         -------
        Net income (loss)...................    $   205         $ (25)        $    (7) 
                                                =======         =====         =======                     
        Earnings (loss) per share...........                                  $  0.00
                                                                              =======
        Number of shares....................                                    6,712 (JJ)
</TABLE>
 
   The accompanying notes are an integral part of this pro forma consolidated
                             financial statements.
 
                                      F-49
<PAGE>   107
 
                             3-D GEOPHYSICAL, INC.
 
                 PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
                         SIX MONTHS ENDED JUNE 30, 1996
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                              PURCHASED COMPANIES(BB)                                  
                                   3-D       --------------------------     PRO FORMA         PRO      
                               GEOPHYSICAL   NORTHERN   PARAGON   KEMP     ADJUSTMENTS       FORMA     
                               -----------   --------   -------   -----    -----------      -------    
<S>                               <C>         <C>        <C>       <C>      <C>              <C>       
Net sales........................ $19,539     $2,768     $ 285    $ 770       $  --         $23,362    
Expenses:                                                                                              
  Cost of data acquisition.......  14,452      2,442       263      814          --          17,971    
  Depreciation and amortization..   1,649        178        49       74          21(CC)       1,971    
  General and administrative                                                                           
   expenses......................   2,585        154        49      162          --           2,950    
                                  -------     ------     -----    -----       -----         -------
        Total operating                                                                                
          expenses...............  18,686      2,774       361    1,050          21          22,892    
Operating income (loss)..........     853         (6)      (76)    (280)        (21)            470    
Other income (expense):                                                                                
  Miscellaneous..................     364         --        --       --          --             364        
  Interest expense...............    (296)       (15)      (38)     (34)         45(EE)        (338)   
  Foreign currency transaction                                                                         
    losses.......................      81         --        --       --          --              81    
                                  -------     ------     -----    -----       -----         -------
Income (loss) before provision                                                                         
  for income taxes...............   1,002        (21)     (114)    (314)         24             577    
Provision (benefit) for income                                                                         
  taxes..........................     277         (7)      (40)    (110)          8(GG)         128    
                                  -------     ------     -----    -----       -----         -------
Income (loss) before                                                                                   
 extraordinary item.............. $   725     $  (14)    $ (74)   $(204)      $  16         $   449    
                                  =======     ======     =====    =====       =====         =======
      Earnings (loss) per                                                                              
         share before                                                                                  
         extraordinary item......                                                           $  0.07     
                                                                                            =======           
      Number of shares...........                                                             6,232(JJ)      


<CAPTION>
                                        J.R.S.
                                      U.S.$ U.S.       PRO FORMA       ADJUSTED
                                       G.A.A.P.       ADJUSTMENTS      PRO FORMA
                                     -------------    -----------      ---------
<S>                                     <C>              <C>            <C>
Net sales........................       $ 5,115          $  --          $28,477
Expenses:                         
  Cost of data acquisition.......         3,256             --           21,227
  Depreciation and amortization..           722             38(DD)        2,731
  General and administrative      
   expenses......................           429             --            3,379
                                        -------          -----          -------
        Total operating           
          expenses...............         4,407             38           27,337
Operating income (loss)..........           708            (38)           1,140
Other income (expense):           
  Miscellaneous..................        --             --              364
  Interest expense...............            --             --             (338)
  Foreign currency transaction    
    losses.......................            --             --               81
                                        -------          -----          -------
Income (loss) before provision    
  for income taxes...............           708            (38)           1,247
Provision (benefit) for income    
  taxes..........................           283            (13)(GG)         398
                                        -------          -----          -------
Income (loss) before              
 extraordinary item..............       $   425          $ (25)         $   849
                                        =======          =====          =======
      Earnings (loss) per         
         share before             
         extraordinary item......                                       $  0.13
                                                                        =======
      Number of shares...........                                         6,712(JJ)


</TABLE>
 
   The accompanying notes are an integral part of this pro forma consolidated
                             financial statements.
 
                                      F-50
<PAGE>   108
 
                             3-D GEOPHYSICAL, INC.
 
              NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
 
1. PRO FORMA CONSOLIDATED BALANCE SHEET ADJUSTMENTS
 
     The accompanying pro forma consolidated balance sheet as of June 30, 1996
gives effect to the acquisition of J.R.S. Exploration as if such transaction had
occurred on June 30, 1996.
 
     (A) Adjustments to reflect the acquisition of J.R.S. Exploration for
approximately 480,000 shares of the Company's Common Stock which is currently
valued at $3,840,000 based upon a price of $8.00 per share.
 
     The consummation of the acquisition is subject to customary conditions,
including the negotiation and execution of mutually satisfactory definitive
documentation and the completion of a satisfactory due diligence review by the
Company.
 
2. PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS ADJUSTMENTS
 
     The accompanying pro forma consolidated statements of operations assume
that the Company had completed the recapitalization, the acquisition of the
Purchased Companies, the Initial Public Offering and the acquisition of J.R.S.
Exploration on January 1, 1995.
 
     (AA) As discussed in "Selected Historical and Pro Forma Financial and
Operating," the acquisitions of Geoevaluaciones and PIASA were treated as a
recapitalization of Geoevaluaciones and PIASA with Geoevaluaciones (combined
with PIASA) deemed to be the acquiror and predecessor of 3-D Geophysical.
Accordingly, the historical combined results of Geoevaluaciones have been
adjusted to record interest expense related to the 8% promissory notes, $1
million face value, issued to the former stockholders of Geoevaluaciones.
 
     (BB) To record the results of operations of the Purchased Companies for the
period from January 1, 1996 through February 8, 1996.
 
     (CC) To record the amortization of goodwill associated with the Purchased
Companies over 15 years, and the depreciation associated with the step-up in
basis of the Purchased Companies.
 
<TABLE>
<CAPTION>
                                                                        SIX MONTHS       SIX MONTHS
                                                     YEAR ENDED            ENDED            ENDED
                                                  DECEMBER 31, 1995    JUNE 30, 1995    JUNE 30, 1996
                                                  -----------------    -------------    -------------
    <S>                                           <C>                  <C>              <C>
    Northern....................................        $ 387              $ 183            $ (27)
    Kemp........................................           35                 28                6
                                                        -----              -----            -----
                                                        $ 422              $ 211            $ (21)
                                                        =====              =====            =====
</TABLE>
 
     (DD) To record the amortization of goodwill associated with J.R.S.
Exploration over 15 years.
 
     (EE) To reflect the elimination of interest expense related to debt that
was extinguished from proceeds of the Initial Public Offering.
 
<TABLE>
<CAPTION>
                                                                        SIX MONTHS       SIX MONTHS
                                                     YEAR ENDED            ENDED            ENDED
                                                  DECEMBER 31, 1995    JUNE 30, 1995    JUNE 30, 1996
                                                  -----------------    -------------    -------------
    <S>                                           <C>                  <C>              <C>
    Northern....................................       $   176             $  62             $ 7
    Paragon.....................................           246               111              38
    Kemp........................................            59                 5              --
    Geoevaluaciones.............................           537                17              --
                                                       -------             -----             ---
                                                       $ 1,018             $ 195             $45
                                                       =======             =====             ===
</TABLE>
 
     (FF) To reduce Northern's depreciation to standardize depreciable life of
3-D data acquisition equipment with other Purchased Companies.
 
     (GG) To reflect an incremental adjustment in income tax expenses as a
result of items (CC)-(FF), assuming a statutory tax rate of 35% in the U.S.,
Mexico and Canada and consolidated returns for U.S. federal income tax purposes.
Does not include the effects of potential limitations in the utilization of pro
forma U.S. net operating losses.
 
                                      F-51
<PAGE>   109
 
     (HH) To reflect the eliminations of intercompany accounts as of December
31, 1995:
 
<TABLE>
        <S>                                                               <C>
        Elimination of Accounts Receivable:
          Geoevaluaciones-Kemp joint venture rental to Kemp.............      $169
          Geoevaluaciones services to Kemp..............................        24
                                                                              ----
                                                                              $193
                                                                              ====
</TABLE>
 
     (II) To reflect additional general and administrative expenses associated
with the establishment of the Company's corporate headquarters, public company
expenses and increased payroll.
 
     (JJ) The number of shares used in the pro forma earnings per share
calculation is determined as follows:
 
<TABLE>
    <S>                                                                         <C>
    Shares Issued to 3-D Geophysical Stockholders.............................  1,400,681
    Shares Issued to Acquire Geoevaluaciones..................................    217,647
    Shares Issued to Acquire PIASA............................................     28,235
    Shares Issued to Acquire Paragon..........................................  1,314,261
    Shares Issued to Acquire Kemp.............................................     39,176
    Shares Issued to Fund Dividend to the former Stockholders of
      Geoevaluaciones and PIASA as Required by Securities and Exchange
      Commission Staff Accounting Bulletin No. 55.............................    601,333
    Shares Issued to Fund Northern Acquisition................................  1,174,667
    Shares Issued to Fund Cash Portion of Kemp Acquisition....................     83,333
    Share Issued to Fund Repayment of Purchased Companies' Debt...............    613,200
    Shares Issued to Fund Underwriting Discount and Offering Costs............    759,333
                                                                                ---------
    Pro forma shares outstanding..............................................  6,231,866
      Shares issued to acquire J.R.S. Exploration (See Note A)................    480,000
                                                                                ---------
    Adjusted pro forma shares outstanding.....................................  6,711,866
                                                                                =========
</TABLE>
 
                                      F-52
<PAGE>   110
 
- ------------------------------------------------------
- ------------------------------------------------------
 
     NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THIS OFFERING AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT
RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
TO WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
SUCH AN OFFER IN SUCH STATE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
                             ---------------------
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
Prospectus Summary....................     3
Summary Historical and Pro Forma
  Financial and Operating Data........     6
Risk Factors..........................     9
The Company...........................    13
Use of Proceeds.......................    14
Dividend Policy.......................    14
Price Range of Common Stock...........    14
Capitalization........................    15
Selected Historical and Pro Forma
  Financial and Operating Data........    16
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations.......................    19
Business..............................    28
Management............................    36
Security Ownership of Management and
  Principal Stockholders..............    43
Certain Transactions..................    44
Description of Capital Stock..........    47
Shares Eligible for Future Sale.......    51
Underwriting..........................    53
Legal Matters.........................    54
Experts...............................    54
Additional Information................    54
Glossary..............................    55
Index to Financial Statements.........   F-1
</TABLE>
 
                             ---------------------
 
     UNTIL             , 199  (25 CALENDAR DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
 
- ------------------------------------------------------
- ------------------------------------------------------
 
- ------------------------------------------------------
- ------------------------------------------------------
 
                                4,000,000 SHARES
 
                             3-D GEOPHYSICAL, INC.
 
                                  COMMON STOCK
 
                             [3-D GEOPHYSICAL LOGO]
                                  ------------
 
                                   PROSPECTUS
 
                                           , 1996
 
                                  ------------
                               SMITH BARNEY INC.
 
                         RAUSCHER PIERCE REFSNES, INC.
 
                               SIMMONS & COMPANY
                                 INTERNATIONAL
 
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE>   111
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
 
     The following table sets forth the costs and expenses, other than
underwriting discount, incurred or to be incurred in connection with the sale of
the Common Stock being registered (all amounts are estimated except the
Securities and Exchange Commission ("Commission") registration fee, the NASD
filing fee and the Nasdaq National Market listing fee), all of which will be
paid by the Registrant.
 
<TABLE>
    <S>                                                                         <C>
    SEC registration fee......................................................  $ 11,152
    NASD filing fee...........................................................     4,180
    Nasdaq National Market listing fee........................................     *
    Printing and engraving costs..............................................     *
    Legal fees and expenses...................................................     *
    Accounting fees and expenses..............................................     *
    Blue Sky fees and expenses................................................     *
    Transfer agent and registrar fees.........................................     *
    Miscellaneous.............................................................     *
                                                                                --------
              Total...........................................................     *
                                                                                ========
</TABLE>
 
- ---------------
 
* To be supplied by amendment.
 
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
 
     The Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") and the Amended and Restated By-laws (the "By-laws") of the
Registrant provide for the indemnification of officers and directors to the
fullest extent permitted by the General Corporation Law of the State of Delaware
(the "DGCL").
 
     Section 145 of the DGCL authorizes indemnification when a person is made a
party to any proceeding by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation or was serving as a
director, officer, employee or agent of another enterprise, at the request of
the corporation, and if such person acted in good faith and in a manner
reasonably believed by him or her to be in or not opposed to the best interests
of the corporation. With respect to any criminal proceeding, such person must
have had no reasonable cause to believe that his or her conduct was unlawful. If
it is determined that the conduct of such person meets these standards, he or
she may be indemnified for expenses incurred and amounts paid in such proceeding
if actually and reasonably incurred by him or her in connection therewith. If
such a proceeding is brought by or on behalf of the corporation (i.e., a
derivative suit), such person may be indemnified against expenses actually and
reasonably incurred if he or she acted in good faith and in a manner reasonably
believed by him or her to be in, or not opposed to, the best interest of the
corporation. There can be no indemnification with respect to any matter as to
which such person is adjudged to be liable to the corporation; however, a court
may, even in such a case, allow such indemnification to such person for such
expenses as the court deems proper. Where such person is successful in any such
proceeding, he or she is entitled to be indemnified against expenses actually
and reasonably incurred by him or her. In all other cases, indemnification is
made by the corporation upon determination by it that indemnification of such
person is proper because such person has met the applicable standard of conduct.
 
     Article Ninth of the Certificate of Incorporation provides that the
Registrant's directors will not be personally liable to the Registrant or its
stockholders for monetary damages resulting from breaches of their fiduciary
duty as directors except for liability (a) for any breach of their duty of
loyalty to the Registrant or its stockholders, (b) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the DGCL, which makes directors liable for
unlawful dividends or
 
                                      II-1
<PAGE>   112
 
unlawful stock repurchases or redemptions, or (d) for transactions from which
directors derive an improper personal benefit.
 
     Article Eighth of the Certificate of Incorporation and Article Fifth of the
By-Laws provide that the Registrant shall indemnify any such person who is or
was a director or officer of the Registrant or was serving as a director or
officer of another enterprise at the request of the Registrant to the fullest
extent permissible under the DGCL. In addition, the Registrant intends to
purchase a liability policy to indemnify its officers and directors against loss
arising from claims by reason of their liability for acts as officers and
directors, subject to limitations and conditions set forth in such policy.
 
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
 
     The following information relates to Common Stock that the Registrant
issued or sold within the past three years that were not registered under the
Securities Act of 1933, as amended (the "Securities Act"):
 
     In connection with its formation, the Registrant issued 1,400,681 shares of
Common Stock for an aggregate of $515 to nine individuals, of whom eight are
officers or directors of the Registrant and three are stockholders of the
Operating Subsidiaries and PIASA. See "Certain Transactions."
 
     In October and November 1995, the Registrant entered into separate
agreements to acquire in separate transactions four land-based seismic data
acquisition businesses and a small processor of seismic data, pursuant to which
the Registrant, in consideration of the stock and assets of these companies,
simultaneously with the consummation of the registrant's initial public offering
issued an aggregate of 1,599,319 shares of Common Stock to 23 persons (including
trusts for the benefit of four of them). See "Certain Transactions" for further
information concerning these transactions and the consideration received by the
Registrant in connection therewith.
 
     Each of the foregoing persons has acquired or agreed to acquire such shares
of Common Stock for its own account, for investment, and agreed not to dispose
of such shares, or any interest therein, in violation of the registration
requirements of the Securities Act. The Registrant believes that the issuances
of Common Stock as described in this Item 15 were transactions that did not
involve any public offering and were exempt from registration under the
Securities Act pursuant to Section 4(2) thereof.
 
ITEM 16. EXHIBITS.
 
     (a) Exhibits
 
<TABLE>
<CAPTION>
      EXHIBIT
        NO.                                   DESCRIPTION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C>                  <S>
        1.1*         -- Form of Underwriting Agreement.

        2.1          -- Asset Purchase Agreement dated as of November 8, 1995 between 3-D
                        Geophysical, Inc. and Northern Geophysical of America, Inc. (the
                        "Asset Purchase Agreement") (Incorporated by reference to Exhibit 2.1
                        of the Registrant's Registration Statement on Form S-1 (No.
                        33-99240)).

        2.2          -- Stock Purchase Agreement among 3-D Geophysical, Inc., Geo Acquisition
                        Sub, Inc. and the stockholders of Geoevaluaciones, S.A. de C.V.,
                        dated as of October 20, 1995 (Incorporated by reference to Exhibit
                        2.2 of the Registrant's Registration Statement on Form S-1 (No.
                        33-99240)).

        2.3          -- Non-Competition Agreement between 3-D Geophysical, Inc. and Luis
                        Ferran dated as of October 20, 1995 (Incorporated by reference to
                        Exhibit 2.3 of the Registrant's Registration Statement on Form S-1
                        (No. 33-99240)).
 
        2.4          -- Non-Competition Agreement between 3-D Geophysical, Inc. and Antonia
                        Echeverria Castellot dated as of October 20, 1995 (Incorporated by
                        reference to Exhibit 2.4 of the Registrant's Registration Statement
                        on Form S-1 (No. 33-99240)).
</TABLE>
 
                                      II-2
<PAGE>   113
 
<TABLE>
<CAPTION>
      EXHIBIT
        NO.                                   DESCRIPTION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C>                  <S>
        2.5          -- Non-Competition Agreement between 3-D Geophysical, Inc. and Yolanda
                        Blasquez Leyva dated as of October 20, 1995 (Incorporated by
                        reference to Exhibit 2.5 of the Registrant's Registration Statement
                        on Form S-1 (No. 33-99240)).

        2.6          -- Non-Competition Agreement between 3-D Geophysical, Inc. and Yolanda
                        Echeverria Blasquez dated as of October 20, 1995 (Incorporated by
                        reference to Exhibit 2.6 of the Registrant's Registration Statement
                        on Form S-1 (No. 33-99240)).

        2.7          -- Stock Purchase Agreement among 3-D Geophysical, Inc. and the
                        stockholders of Kemp Geophysical Corporation, dated as of October 24,
                        1995 (Incorporated by reference to Exhibit 2.7 of the Registrant's
                        Registration Statement on Form S-1 (No. 33-99240)).

        2.8          -- Stock Purchase Agreement among 3-D Geophysical, Inc., Geo Acquisition
                        Sub, Inc. and the stockholders of Procesos Interactivos Avanzados,
                        S.A. de C.V., dated as of November 7, 1995 (Incorporated by reference
                        to Exhibit 2.8 of the Registrant's Registration Statement on Form S-1
                        (No. 33-99240)).

        2.9          -- Agreement and Plan of Merger dated as of November 29, 1995, among 3-D
                        Geophysical, Inc., 3-D Paragon Acquisition Sub, Inc. and Paragon
                        Geophysical, Inc., as amended (the "Agreement and Plan of Merger")
                        (Incorporated by reference to Exhibit 2.9 of the Registrant's
                        Registration Statement on Form S-1 (No. 33-99240)).

        2.10         -- Amendment to the Agreement and Plan of Merger dated as of January 23,
                        1996.

        2.11         -- Amendment dated January 31, 1996 to the Asset Purchase Agreement.

        3.1          -- Amended and Restated Certificate of Incorporation of 3-D Geophysical,
                        Inc.

        3.2          -- Amended and Restated By-laws of 3-D Geophysical, Inc.

        4.1          -- Specimen 3-D Geophysical, Inc. common stock certificate (Incorporated
                        by reference to Exhibit 4.1 to the Registrant's Registration
                        Statement on Form S-1 (No. 33-99240)).

        5.1*         -- Opinion of Kramer, Levin, Naftalis & Frankel regarding the legality
                        of the securities being registered.

       10.1          -- Employment agreement dated February 8, 1995, between 3-D Geophysical,
                        Inc. and G.C.L. Kemp.

       10.2          -- Employment agreement dated February 6, 1995, between 3-D Geophysical,
                        Inc. and Charles O. Merchant.

       10.3          -- Employment agreement dated January 31, 1996, between 3-D Geophysical,
                        Inc. and Richard D. Davis (Incorporated by reference to Exhibit 10.2
                        to the Registrant's Registration Statement on Form S-1 (No.
                        33-99240)).

       10.4          -- Employment agreement dated January 31, 1995, between 3-D Geophysical,
                        Inc. and Wayne P. Widynowski.

       10.5          -- Employment agreement dated September 30, 1996, between 3-D
                        Geophysical, Inc. and Ronald L. Koons.

       10.6          -- Termination agreement dated as of October 1, 1996, between 3-D
                        Geophysical, Inc. and John D. White, Jr.


       10.7          -- Employment agreement dated February 1, 1996, between 3-D Geophysical,
                        Inc. and Luis H. Ferran Arroyo.

       10.8          -- 3-D Geophysical 1995 Long-Term Incentive Compensation Plan, as
                        amended (Incorporated by reference to Exhibit 10.9 to the
                        Registrant's Registration Statement on Form S-1 (No. 33-99240)).
</TABLE>
 
                                      II-3
<PAGE>   114
 
<TABLE>
<CAPTION>
      EXHIBIT
        NO.                                   DESCRIPTION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C>                  <S>
       10.9          -- Employment agreement dated February 1, 1995, between 3-D Geophysical,
                        Inc. and Joel Friedman.

       10.10         -- Loan Agreement between 3-D Geophysical, Inc. and First Interstate
                        Bank of Texas, N.A., dated as of May 29, 1996 (Incorporated by
                        reference to Exhibit 10.1 to the Registrant's Current Report on Form
                        8-K dated May 31, 1996 (File No. 0-27564)).

       10.11         -- Guaranty Agreement by Northern Geophysical of America, Inc. in favor
                        of First Interstate Bank of Texas, N.A., dated as of May 29, 1996
                        (Incorporated by reference to Exhibit 10.6 to the Registrant's
                        Current Report on Form 8-K dated May 31, 1996 (File No. 0-27564)).

       10.12         -- Security Agreement between Geoevaluaciones, S.A. de C.V. and First
                        Interstate Bank of Texas, N.A., dated as of May 29, 1996
                        (Incorporated by reference to Exhibit 10.5 to the Registrant's
                        Current Report on Form 8-K dated May 31, 1996 (File No. 0-27564)).

       10.13         -- Guaranty Agreement by Paragon Geophysical, Inc. in favor of First
                        Interstate Bank of Texas, N.A., dated as of May 29, 1996
                        (Incorporated by reference to Exhibit 10.7 to the Registrant's
                        Current Report on Form 8-K dated May 31, 1996 (File No. 0-27564)).

       10.14         -- Guaranty Agreement by Geoevaluaciones, S.A. de C.V. in favor of First
                        Interstate Bank of Texas, N.A., dated as of May 29, 1996.
                        (Incorporated by reference to Exhibit 10.8 to the Registrant's
                        Current Report on Form 8-K dated May 31, 1996 (File No. 0-27564)).

       10.15         -- Security Agreement between Northern Geophysical of America, Inc. and
                        First Interstate Bank of Texas, N.A., dated as of May 29, 1996
                        (Incorporated by reference to Exhibit 10.3 to the Registrant's
                        Current Report on Form 8-K dated May 31, 1996 (File No. 0-27564)).

       10.16         -- Security Agreement between Paragon Geophysical, Inc. and First
                        Interstate Bank of Texas, N.A., dated as of May 29, 1996
                        (Incorporated by reference to Exhibit 10.4 to the Registrant's
                        Current Report on Form 8-K dated May 31, 1996 (File No. 0-27564)).

       10.17         -- Security Agreement between 3-D Geophysical, Inc. and First Interstate
                        Bank of Texas, N.A., dated as of May 29, 1996 (Incorporated by
                        reference to Exhibit 10.2 to the Registrant's Current Report on Form
                        8-K dated May 31, 1996 (File No. 0-27564)).

       21.1          -- List of subsidiaries of 3-D Geophysical, Inc.

       23.1          -- Consent of Coopers & Lybrand L.L.P.

       23.2          -- Consent of Garrett Power.

       23.3*         -- Consent of Kramer, Levin, Naftalis & Frankel (included in Exh. 5.1)

       27.1          -- Financial Data Schedule.
</TABLE>
 
- ---------------
 
* To be filed by amendment.
 
     (b) Financial Statement Schedules
 
                 REPORT OF INDEPENDENT ACCOUNTANTS ON SCHEDULES
 
NONE.
 
     All other schedules for which provision is made in the applicable
accounting regulations of the Commission are not required under the related
instructions or are inapplicable and, therefore, have been omitted.
 
                                      II-4
<PAGE>   115
 
ITEM 17. UNDERTAKINGS
 
     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
 
     The undersigned Registrant hereby undertakes that:
 
          (1) For purposes of determining any liability under the Securities
     Act, the information omitted from the form of prospectus filed as part of
     this Registration Statement in reliance upon Rule 430A and contained in a
     form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
     (4) or 497(h) under the Securities Act shall be deemed to be part of this
     Registration Statement as of the time it was declared effective.
 
          (2) For the purpose of determining any liability under the Securities
     Act, each post-effective amendment that contains a form of prospectus shall
     be deemed to be a new registration statement relating to the securities
     offered therein, and the offering of such securities at that time shall be
     deemed to be the initial bona fide offering thereof.
 
          (3) For purposes of determining any liability under the Securities
     Act, each filing of the Registrant's annual report pursuant to section
     13(a) or section 15(d) of the Securities Exchange Act of 1934, as amended
     (the "Exchange Act"), and, where applicable, each filing of an employee
     benefit plan's annual report pursuant to section 15(d) of the Exchange Act,
     that is incorporated by reference in the Registration Statement shall be
     deemed to be a new registration statement relating to the securities
     offered therein, and the offering of such securities at that time shall be
     deemed to be the initial bona fide offering thereof.
 
                                      II-5
<PAGE>   116
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement, or amendment thereto, to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on October 8, 1996.
 
                                            3-D GEOPHYSICAL, INC.
 
                                            By:    /s/  RICHARD DAVIS
                                            ------------------------------------
                                                       Richard Davis,
                                               President and Chief Executive
                                                          Officer
 
     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement, or amendment thereto, has been signed by the following
persons in the capacities on the 8th day of October, 1996.
 
<TABLE>
<CAPTION>
                  SIGNATURE                                    TITLE
- ---------------------------------------------   -----------------------------------
<C>                                             <S>                                <C>
              /s/  JOEL FRIEDMAN                Chairman and Director
- ---------------------------------------------
                Joel Friedman                

              /s/  RICHARD DAVIS                Chief Executive Officer, President
- ---------------------------------------------   and Director (principal executive
                Richard Davis                   officer)

             /s/  RONALD L. KOONS               Vice President, Chief Financial
- ---------------------------------------------   Officer, Secretary and Treasurer
               Ronald L. Koons                  (principal financial and accounting
                                                officer)

          /s/  LUIS H. FERRAN ARROYO            Director
- ---------------------------------------------
            Luis H. Ferran Arroyo            

           /s/  ROBERT PACE ANDREWS             Director
- ---------------------------------------------
             Robert Pace Andrews             

             /s/  RALPH M. BAHNA                Director
- ---------------------------------------------
                Ralph M. Bahna               

           /s/  DOUGLAS W. BRANDRUP             Director
- ---------------------------------------------
             Douglas W. Brandrup             

             /s/  ARTHUR D. EMIL                Director
- ---------------------------------------------
                Arthur D. Emil               

            /s/  P. DENNIS O'BRIEN              Director
- ---------------------------------------------
              P. Dennis O'Brien              

             /s/  EMIR L. TAVELLA               Director
- ---------------------------------------------
                Emir L.Tavella               

           /s/  JOHN D. WHITE, JR.              Director
- ---------------------------------------------
              John D. White, Jr.             
</TABLE>
 
                                      II-6

                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
                                                             
<PAGE>   117
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
                                                                                   SEQUENTIALLY
 EXHIBIT                                                                            NUMBERED
   NO.                              DESCRIPTION OF EXHIBIT                            PAGE
- ---------- ---------------------------------------------------------------------  ------------
<C>        <S>                                                                     <C>
   1.1*    -- Form of Underwriting Agreement.

   2.1     -- Asset Purchase Agreement dated as of November 8, 1995 between 3-D
              Geophysical, Inc. and Northern Geophysical of America, Inc. (the
              "Asset Purchase Agreement") (Incorporated by reference to Exhibit 2.1
              of the Registrant's Registration Statement on Form S-1 (No.
              33-99240)).

   2.2     -- Stock Purchase Agreement among 3-D Geophysical, Inc., Geo Acquisition
              Sub, Inc. and the stockholders of Geoevaluaciones, S.A. de C.V.,
              dated as of October 20, 1995 (Incorporated by reference to Exhibit
              2.2 of the Registrant's Registration Statement on Form S-1 (No.
              33-99240)).

   2.3     -- Non-Competition Agreement between 3-D Geophysical, Inc. and Luis
              Ferran dated as of October 20, 1995 (Incorporated by reference to
              Exhibit 2.3 of the Registrant's Registration Statement on Form S-1
              (No. 33-99240)).

   2.4     -- Non-Competition Agreement between 3-D Geophysical, Inc. and Antonia
              Echeverria Castellot dated as of October 20, 1995 (Incorporated by
              reference to Exhibit 2.4 of the Registrant's Registration Statement
              on Form S-1 (No. 33-99240)).

   2.5     -- Non-Competition Agreement between 3-D Geophysical, Inc. and Yolanda
              Blasquez Leyva dated as of October 20, 1995 (Incorporated by
              reference to Exhibit 2.5 of the Registrant's Registration Statement
              on Form S-1 (No. 33-99240)).

   2.6     -- Non-Competition Agreement between 3-D Geophysical, Inc. and Yolanda
              Echeverria Blasquez dated as of October 20, 1995 (Incorporated by
              reference to Exhibit 2.6 of the Registrant's Registration Statement
              on Form S-1 (No. 33-99240)).

   2.7     -- Stock Purchase Agreement among 3-D Geophysical, Inc. and the
              stockholders of Kemp Geophysical Corporation, dated as of October 24,
              1995 (Incorporated by reference to Exhibit 2.7 of the Registrant's
              Registration Statement on Form S-1 (No. 33-99240)).

   2.8     -- Stock Purchase Agreement among 3-D Geophysical, Inc., Geo Acquisition
              Sub, Inc. and the stockholders of Procesos Interactivos Avanzados,
              S.A. de C.V., dated as of November 7, 1995 (Incorporated by reference
              to Exhibit 2.8 of the Registrant's Registration Statement on Form S-1
              (No. 33-99240)).

   2.9     -- Agreement and Plan of Merger dated as of November 29, 1995, among 3-D
              Geophysical, Inc., 3-D Paragon Acquisition Sub, Inc. and Paragon
              Geophysical, Inc., as amended (the "Agreement and Plan of Merger")
              (Incorporated by reference to Exhibit 2.9 of the Registrant's
              Registration Statement on Form S-1 (No. 33-99240)).

   2.10    -- Amendment to the Agreement and Plan of Merger dated as of January 23,
              1996.

   2.11    -- Amendment dated January 31, 1996 to the Asset Purchase Agreement.

   3.1     -- Amended and Restated Certificate of Incorporation of 3-D Geophysical,
              Inc.

   3.2     -- Amended and Restated By-laws of 3-D Geophysical, Inc.

   4.1     -- Specimen 3-D Geophysical, Inc. common stock certificate (Incorporated
              by reference to Exhibit 4.1 to the Registrant's Registration
              Statement on Form S-1 (No. 33-99240)).
</TABLE>
<PAGE>   118
 
<TABLE>
<CAPTION>
                                                                                   SEQUENTIALLY
 EXHIBIT                                                                            NUMBERED
   NO.                              DESCRIPTION OF EXHIBIT                            PAGE
- ---------- ---------------------------------------------------------------------  ------------
<C>        <S>                                                                     <C>
   5.1*    -- Opinion of Kramer, Levin, Naftalis & Frankel regarding the legality
              of the securities being registered.

  10.1     -- Employment agreement dated February 8, 1995, between 3-D Geophysical,
              Inc. and G.C.L. Kemp.

  10.2     -- Employment agreement dated February 6, 1995, between 3-D Geophysical,
              Inc. and Charles O. Merchant.

  10.3     -- Employment agreement dated January 31, 1996, between 3-D Geophysical,
              Inc. and Richard D. Davis (Incorporated by reference to Exhibit 10.2
              to the Registrant's Registration Statement on Form S-1 (No.
              33-99240)).

  10.4     -- Employment agreement dated January 31, 1995, between 3-D Geophysical,
              Inc. and Wayne P. Widynowski.

  10.5     -- Employment agreement dated September 30, 1996, between 3-D
              Geophysical, Inc. and Ronald L. Koons.

  10.6     -- Termination agreement dated as of October 1, 1996, between 3-D
              Geophysical, Inc. and John D. White, Jr.

  10.7     -- Employment agreement dated February 1, 1996, between 3-D Geophysical,
              Inc. and Luis H. Ferran Arroyo.

  10.8     -- 3-D Geophysical 1995 Long-Term Incentive Compensation Plan, as
              amended (Incorporated by reference to Exhibit 10.9 to the
              Registrant's Registration Statement on Form S-1 (No. 33-99240)).

  10.9     -- Employment agreement dated February 1, 1995, between 3-D Geophysical,
              Inc. and Joel Friedman.

  10.10    -- Loan Agreement between 3-D Geophysical, Inc. and First Interstate
              Bank of Texas, N.A., dated as of May 29, 1996 (Incorporated by
              reference to Exhibit 10.1 to the Registrant's Current Report on Form
              8-K dated May 31, 1996 (File No. 0-27564)).

  10.11    -- Guaranty Agreement by Northern Geophysical of America, Inc. in favor
              of First Interstate Bank of Texas, N.A., dated as of May 29, 1996
              (Incorporated by reference to Exhibit 10.6 to the Registrant's
              Current Report on Form 8-K dated May 31, 1996 (File No. 0-27564)).

  10.12    -- Security Agreement between Geoevaluaciones, S.A. de C.V. and First
              Interstate Bank of Texas, N.A., dated as of May 29, 1996
              (Incorporated by reference to Exhibit 10.5 to the Registrant's
              Current Report on Form 8-K dated May 31, 1996 (File No. 0-27564)).

  10.13    -- Guaranty Agreement by Paragon Geophysical, Inc. in favor of First
              Interstate Bank of Texas, N.A., dated as of May 29, 1996
              (Incorporated by reference to Exhibit 10.7 to the Registrant's
              Current Report on Form 8-K dated May 31, 1996 (File No. 0-27564)).

  10.14    -- Guaranty Agreement by Geoevaluaciones, S.A. de C.V. in favor of First
              Interstate Bank of Texas, N.A., dated as of May 29, 1996.
              (Incorporated by reference to Exhibit 10.8 to the Registrant's
              Current Report on Form 8-K dated May 31, 1996 (File No. 0-27564)).

  10.15    -- Security Agreement between Northern Geophysical of America, Inc. and
              First Interstate Bank of Texas, N.A., dated as of May 29, 1996
              (Incorporated by reference to Exhibit 10.3 to the Registrant's
              Current Report on Form 8-K dated May 31, 1996 (File No. 0-27564)).
</TABLE>
<PAGE>   119
 
<TABLE>
<CAPTION>
                                                                                   SEQUENTIALLY
 EXHIBIT                                                                            NUMBERED
   NO.                              DESCRIPTION OF EXHIBIT                            PAGE
- ---------- ---------------------------------------------------------------------  ------------
<C>        <S>                                                                     <C>
  10.16    -- Security Agreement between Paragon Geophysical, Inc. and First
              Interstate Bank of Texas, N.A., dated as of May 29, 1996
              (Incorporated by reference to Exhibit 10.4 to the Registrant's
              Current Report on Form 8-K dated May 31, 1996 (File No. 0-27564)).

  10.17    -- Security Agreement between 3-D Geophysical, Inc. and First Interstate
              Bank of Texas, N.A., dated as of May 29, 1996 (Incorporated by
              reference to Exhibit 10.2 to the Registrant's Current Report on Form
              8-K dated May 31, 1996 (File No. 0-27564)).

  21.1     -- List of subsidiaries of 3-D Geophysical, Inc.

  23.1     -- Consent of Coopers & Lybrand L.L.P.

  23.2     -- Consent of Garrett Power.

  23.3*    -- Consent of Kramer, Levin, Naftalis & Frankel (included in Exh. 5.1)

  27.1     -- Financial Data Schedule.
</TABLE>
 
- ---------------
 
* To be filed by amendment.

<PAGE>   1
                                                                       EXHIBIT A

                             3-D GEOPHYSICAL, INC.
                               200 Madison Avenue
                           New York, New York  10022


                                January 23, 1996

Paragon Geophysical, Inc.
5521 Township Road 260
P.O. Box 30
Millersburg, Ohio  44654

Attn:    Joel Friedman
         Chairman

Dear Mr. Friedman:

             This letter confirms our agreement that the Agreement and Plan of
Merger (the "Agreement"), dated as of November 29, 1995, between 3-D
Geophysical, Inc.  ("3-D") and you is hereby amended as follows:

         (1) The date "January 31, 1996" in Clause (b) of Article X of the
Agreement is hereby changed to  "February 19, 1996."

         (2) Section 2.3(a) of the Agreement is hereby amended to read in its
entirety as follows:

         "(a) Subject to an appropriate amendment to Buyer's Certificate of
         Amendment increasing the number of authorized common stock of Buyer
         and to the provisions of Sections 2.3(b), 2.4 and 2.5, and subject
         further to appropriate adjustment for any stock splits, dividends or
         combinations after the date hereof and on or prior to the Effective
         Time of the Merger, each share of Paragon Common Stock issued and
         outstanding immediately prior to the Effective Time of the Merger
         shall be converted into the right to receive 4.030667 shares of
         Buyer's Common Stock."


         (3) Section 2.5 of the Agreement is hereby amended to read in its
entirety as follows:

         "2.5  Fractional Shares.  Certificates for fractional shares of
         Buyer's Common Stock shall be issued in connection with the Merger in
         rounded amounts determined by the officers of the Buyer and Company."

         (4)  All references to "3-D Paragon Acquisition Sub, Inc." in the
Agreement are changed to read "3-D Paragon Acquisition, Inc."


Except as hereby amended, all other terms and provisions of the Agreement
remain in full force and effect.
<PAGE>   2
             Please evidence your agreement to the foregoing by signing the
enclosed copy of this letter in the space provided for your signature below and
returning it to the undersigned.

                                      Very truly yours,
                                      
                                      3-D GEOPHYSICAL, INC.
                                      
                                      
                                      By: /s/ JOHN D. WHITE, JR.
                                         ------------------------------
                                               John D. White, Jr.,
                                               Vice President and CFO
                                      
                                      
                                      
                                      
                                      3-D PARAGON ACQUISITION, INC.
                                      
                                      
                                      By: /s/ JOHN D. WHITE, JR.
                                         ------------------------------
                                               John D. White, Jr.



Agreed:
PARAGON GEOPHYSICAL, INC.



By: /s/ JOEL FRIEDMAN
   -------------------------------
      Joel Friedman,  Chairman

<PAGE>   1
Draft
1/31/96


                                January 31, 1996


Northern Geophysical of America, Inc.
7076 S. Alton Way, Bldg. H
Englewood, Colorado 80112

Gentlemen:

                 This letter sets forth our agreement to amend, as set forth
below, the Asset Purchase Agreement (the "Agreement") between us dated November
8, 1995.  All capitalized terms used and not defined in this letter shall have
the meanings given such terms in the Agreement.

1.               Article I of the Agreement is hereby amended by

                 (a)      adding to the definition of "Excluded Assets" the
                 following:

                          "and (x) any assets defined as "explosive materials"
                          under, and which are prohibited from being
                          transferred from Seller to Buyer pursuant to, 27 Code
                          of Federal Regulations Part 55.", and by

                 (b)      deleting from the definition of "Excluded Assets" the
                 word "and" and inserting a "," before "(ix)".

2.               In the event that prior to the Closing Date Seller shall have
settled in full those actions forming a part of the Arco Litigation involving
Arco Alaska, Inc. ("Arco") and shall have exchanged with Arco mutual releases
and other appropriate documents in form and substance reasonably satisfactory
to Buyer, then:

                 (a)      The "$10,050,000" amount set forth in Section
                 2.1(b)(i) of the Agreement shall be amended to "$10,450,000;"

                 (b)      the "$1,000,000" to be paid to the Escrow Agent
                 pursuant to Section 2.1(b)(ii) of the Agreement shall be
                 amended to "$500,000;"

                 (c)      the "$9,500,000" amount set forth in Section 2.1(c)
                 of the Agreement shall be amended to "$10,450,000;" and

                 (d)      the penultimate sentence of Section 6.8 of the
                 Agreement shall be deleted in its entirety.
<PAGE>   2
Northern Geophysica
  of America
January 31, 1996
Page 2


3.               (a)      In the event that after the Closing Date and before
                 February 28, 1996 Seller shall have settled in full those
                 actions forming a part of the Arco Litigation to which Arco is
                 a party and shall have exchanged with Arco mutual releases and
                 other appropriate documents in form and substance reasonably
                 satisfactory to Buyer, then:

                          (i)     Buyer shall pay to Seller $400,000 in cash by
                          certified or official bank check payable in clearing
                          house funds to the order of Seller as additional
                          purchase price for the Acquired Assets;

                          (ii)    the amount held by the Escrow Agent pursuant
                          to the Escrow Agreement shall be reduced by $500,000
                          and the Escrow Agent shall promptly pay such amount
                          to Seller; and

                          (iii) the penultimate sentence of Section 6.8 of the
                          Agreement shall be deleted in its entirety.

                 The amounts payable pursuant to paragraphs 3(a)(i) and (ii)
                 above shall be paid without offset with respect to any other
                 rights of Buyer under the Agreement.

                 (b)      In the event Seller and Arco enter into a valid and
                 mutually binding agreement, in form and substance reasonably
                 satisfactory to Buyer, to settle in full those actions forming
                 a part of the Arco Litigation involving Arco, but the
                 settlement of such actions has not been consummated prior to
                 the Closing Date, Buyer shall deposit in escrow with its
                 counsel (pursuant to a mutually satisfactory agreement)
                 $400,000 on the later of (x) the day after the Closing Date,
                 and (y) the date such settlement agreement is executed and
                 delivered by Seller and Arco.

4.               Section 2.1(d) of the Agreement is hereby amended by adding to
the end of clause (iv) thereof the following:

                 ", except that Buyer and its subsidiaries have engaged
                 the Accountants and may continue to do so."

5.               Section 10.2 of the Agreement is hereby amended to change
                 "January 31, 1996" to "February 19, 1996."

6.               The  Buyer hereby waives the financial representations and
warranties made by Seller pursuant to Section 4.7(e) of the Agreement and
waives any requirement that such representations
<PAGE>   3
Northern Geophysical
 of America, Inc.
January 31, 1996
Page 3

and warranties be repeated at the Closing, it being understood and agreed that
notwithstanding such waivers, the representations and warranties contained in
Section 4.7(a) of the Agreement with respect to the Financial Statements remain
in full force and effect.

7.               Except as expressly modified or amended by this letter, all of
the terms and provisions of the Agreement shall remain in full force and
effect.

                 Please indicate your agreement to amend the Agreement as set
forth in this letter by executing in the space provided below and returning to
the undersigned the enclosed duplicate copy of this letter, whereupon it will
become a binding agreement between us.

                                                   Very truly yours,

                                                   3-D Geophysical, Inc.


                                                   By: /s/ JOEL FRIEDMAN
                                                      ------------------------
                                                      Joel Friedman, Chairman
Agreed:

Northern Geophysical of America, Inc.

By: /s/ MICHAEL GARDINER
   ----------------------------------
         Authorized Officer
 

<PAGE>   1



                              AMENDED AND RESTATED

                          CERTIFICATE OF INCORPORATION

                                       OF

                             3-D GEOPHYSICAL, INC.


                         Pursuant to Section 245 of the
                            General Corporation Law
                            of the State of Delaware



                 3-D Geophysical, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies
as follows:

                 1.  That the name of the Corporation is 3-D Geophysical, Inc.

                 2.  That the Certificate of Incorporation of the Corporation
was filed in the office of the Secretary of State of the State of Delaware on
the 29th day of March, 1995.

                 3.  That this Amended and Restated Certificate of
Incorporation amends and restates in its entirety the Certificate of
Incorporation of the Corporation.

                 4.  That the text of the Certificate of Incorporation is
hereby amended and restated to read in its entirety as follows:

                           FIRST:  The name of the Corporation is 3-D 
Geophysical, Inc.

                          SECOND: The address of the Corporation's registered
office in the State of Delaware is 1013 Centre Road, in the City of Wilmington,
County of New Castle.  The name of its registered agent at such address is
Corporation Service Company.

                          THIRD:  The nature of the business or purposes to be
conducted or promoted by the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware ("GCL").

                          FOURTH: The total number of shares of all classes of
stock which the Corporation shall have authority to issue is twenty-six million
(26,000,000) shares, of which one million (1,000,000) shall be designated
Preferred Stock, par value $.01 per share (hereinafter the "Preferred Stock"),
and twenty-five million (25,000,000) shall be designated Common Stock, par
value $.01 per share (hereinafter the "Common Stock").
<PAGE>   2
                          A.      PREFERRED STOCK:

                 Shares of Preferred Stock may be issued from time to time, in
one or more series, as may from time to time be determined by the Board of
Directors, each of said series to be distinctly designated.  All shares of any
one series of Preferred Stock shall be alike in every particular, except that
there may be different dates from which dividends, if any, thereon shall be
cumulative, if made cumulative.   The voting powers, designations and
preferences and the relative, participating, optional or other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of Paragraph C of
this Article FOURTH, the Board of Directors of the Corporation hereby is
expressly granted authority to fix by resolution or resolutions adopted prior
to the issuance of any shares of a particular series of Preferred Stock, the
voting powers, designations and preferences, the relative, participating,
optional or other special rights and the qualifications, limitations and
restrictions of such series, including, but without limiting the generality of
the foregoing, the following:

                 (a)      the distinctive designation of, and the number of
shares of Preferred Stock which shall constitute, such series, which number may
be increased (except where otherwise provided by the Board of Directors) or
decreased (but not below the number of shares thereof then outstanding) from
time to time by like action of the Board of Directors;

                 (b)      the rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock of such series shall
be paid, the extent of the preference or relation, if any, of such dividends to
the dividends payable on any other class or classes or series of the same or
any other class or classes of stock of the Corporation and whether such
dividends shall be cumulative or non-cumulative;

                 (c)      the right, if any, of the holders of Preferred Stock
of such series to convert the same into, or exchange the same for, shares of
any other class or classes or of any series of the same or any other class or
classes of stock of the Corporation and the terms and conditions of such
conversion or exchange;

                 (d)      whether or not Preferred Stock of such series shall
be subject to redemption, and the redemption price or prices and the time or
times at which, and the terms and conditions on which, Preferred Stock of such
series may be redeemed;

                 (e)      the terms of the sinking fund or redemption or
purchase account, if any, to be provided for the Preferred Stock of such
series;

                 (f)      the restrictions, if any, on the issuance of shares
of the same or any other class or classes or of any series of the same or any
other class or classes of stock of the Corporation;
<PAGE>   3
                 (g)      the rights, if any, of the holders of Preferred Stock
of such series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding-up of the
Corporation; and

                 (h)      the voting powers, if any, of the holders of such
series of Preferred Stock which, without limiting the generality of the
foregoing, may be equal to, more than or less than one vote per share and may
include the right, voting as a series by itself or together with other series
of Preferred Stock or all series of Preferred Stock as a class, or, together
with any other class or classes or series of any other class or classes of
stock of the Corporation, to elect one or more directors of the Corporation if
there shall have been a default in the payment of dividends on any one or more
series of Preferred Stock or under such other circumstances and on such
conditions as the Board of Directors may determine.

                          B.      COMMON STOCK:

                 1.       After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the provisions of
Paragraph A of this Article FOURTH), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with respect
to the setting aside of sums as sinking funds or redemption or purchase
accounts (fixed in accordance with the provisions of Paragraph A of this
Article FOURTH), and subject further to any other conditions which may be fixed
in accordance with the provisions of Paragraph A of this Article FOURTH, then
and not otherwise the holders of Common Stock shall be entitled to receive such
dividends as may be declared from time to time by the Board of Directors.

                 2.       After distribution in full of the preferential
amount, if any (fixed in accordance with the provisions of Paragraph A of this
Article FOURTH), to be distributed to the holders of Preferred Stock in the
event of voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation, the holders of the Common Stock, subject to the rights, if any, of
the holders of Preferred Stock to participate therein (fixed in accordance with
the provisions of Paragraph A of this Article FOURTH), shall be entitled to
receive all the remaining assets of the Corporation, tangible and intangible,
of whatever kind available for distribution to stockholders ratably in
proportion to the number of shares of Common Stock held by them, respectively.

                 3.       Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to the provisions of Paragraph A of this Article FOURTH,
each holder of Common Stock shall have one vote in respect of each share of
Common Stock held by him on all matters voted upon by the stockholders.

                          C.      OTHER PROVISIONS:

                 1.       No holder of any of the shares of any class or series
of stock, options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any





                                       3
<PAGE>   4
unissued stock of any class or series or any additional shares of any class or
series to be issued by reason of any issuance of or any increase in the
authorized capital stock of the Corporation of any class or series, or bonds,
debentures, certificates of indebtedness, notes or other securities convertible
into or exchangeable for stock of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock, additional
authorized shares of stock of any class or series or securities convertible
into or exchangeable for stock of any class or series, or carrying any right to
purchase stock of any class or series, may be issued and disposed of pursuant
to a resolution of the Board of Directors to such persons, firms, corporations
or other entities, for such consideration and upon such terms as the Board of
Directors may determine.

                 2.       The relative powers, preferences and rights of each
series of Preferred Stock in relation to the powers, preferences and rights of
each other series of Preferred Stock shall, in each case, be as fixed from time
to time by the Board of Directors in the resolution or resolutions adopted
pursuant to authority granted in Paragraph A of this Article FOURTH and the
consent, by class or series vote or otherwise, of the holders of each of the
series of Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other series of
Preferred Stock whether or not the powers, preferences and rights of such other
series shall be fixed by the Board of Directors as senior to, or on a parity
with, the powers, preferences and rights of such outstanding series, or any of
them; provided, however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred Stock adopted pursuant
to the provisions of Paragraph A of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be therein fixed) of
the outstanding shares of such series voting thereon shall be required for the
issuance of any or all other series of Preferred Stock.

                 3.       Subject to the provisions of subparagraph 2 of this
Paragraph C, shares of any series of Preferred Stock may be issued from time to
time as the Board of Directors of the Corporation shall determine, for such
consideration and upon such terms as the Board of Directors may determine.

                 4.       Shares of Common Stock may be issued from time to
time as the Board of Directors of the Corporation shall determine, for such
consideration and upon such terms as the Board of Directors may determine.

                 5.       The authorized amount of shares of Common Stock and
of Preferred Stock may, without a class or series vote, be increased or
decreased from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.

                          FIFTH:           The following provisions are
inserted for the conduct of the affairs of the Corporation, and it is expressly
provided that the same are intended to be in furtherance and not in limitation
or exclusion of the powers conferred by statute:

                 (a)      The business and affairs of the Corporation shall be
managed by a Board of Directors.  The Board of Directors (exclusive of
directors (the "Preferred Stock





                                       4
<PAGE>   5
Directors") who may be elected by the holders of any one or more series of
Preferred Stock which may at any time be outstanding, voting separately as a
class or classes pursuant to rights to elect directors under specified
circumstances), shall consist of one or more members, the exact number of whom
shall be fixed by or pursuant to the By- laws of the Corporation.

                 (b)      The Board of Directors (exclusive of Preferred Stock
Directors, if any) shall be divided, with respect to the time for which the
directors severally hold office, into three classes, as nearly equal in number
as reasonably possible, with the term of office of the first class to expire at
the first annual meeting of stockholders subsequent to the consummation of the
initial public offering of the Common Stock of the Corporation that is
registered under the Securities Act of 1933, as amended, the term of office of
the second class to expire at the second annual meeting of stockholders after
such public offering and the term of office of the third class to expire at the
third annual meeting of stockholders after such public offering, with each
director to hold office until his or her successor shall have been duly elected
and qualified or until the earlier death, resignation or removal of such
director.  At each annual meeting of stockholders commencing with the first
annual meeting after the division of directors into classes, directors elected
to succeed those directors whose terms then expire shall be elected for a term
of office to expire at the third succeeding annual meeting of stockholders
after their election, each director so elected to hold office until his or her
successor shall have been duly elected and qualified or until the earlier
death, resignation or removal of such director.  If the number of directors
(other than Preferred Stock Directors, if any) is changed, any increase or
decrease shall be apportioned by the Board of Directors among the three classes
so that the number in each class shall be as nearly equal as possible.  The
persons serving as Directors in each class shall be determined by resolution of
the Board of Directors. The election of directors need not be by written ballot
unless the By-laws of the Corporation so provide.

                 (c)      Any vacancies on the Board of Directors resulting
from death, resignation, retirement, disqualification or removal from office of
a director or directors, or otherwise, and newly created directorships
resulting from any increase in the authorized number of directors, shall be
filled in accordance with the provisions set forth in the By-laws of the
Corporation.

                 (d)      Subject to the rights of the holders of any one or
more series of Preferred Stock (and notwithstanding the fact that some lesser
percentage may be specified by law), any director or the entire Board of
Directors may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of shares of stock entitled to vote
generally in the election of directors ("Voting Stock") representing at least
80% of the voting power of all outstanding shares of Voting Stock, voting as a
single class, in addition to any other vote required by law, this Certificate
of Incorporation or the By-laws of the Corporation.

                          SIXTH:  (a) Subject to the rights of the holders of
any one or more series of Preferred Stock, no action relating to the business
or affairs of the Corporation may be taken by the stockholders, except such
actions as are taken at an annual





                                       5
<PAGE>   6
or special meeting of stockholders.  Special meetings of stockholders may only
be called by the Chairman of the Board, the President or Secretary of the
Corporation upon the written request, stating the purpose of such meeting, of a
majority of the Board of Directors or of the Executive Committee thereof.

                 (b)       No action required to be taken or which may be taken
at any annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in writing,
without a meeting, to the taking of any action, is specifically denied.

                          SEVENTH:         Except as otherwise provided in
paragraph (c) of this Article SEVENTH, and in furtherance and not in limitation
of the powers conferred by the laws of the State of Delaware:

                  (a)     The stockholders have the right and are expressly
authorized to adopt, amend or repeal provisions of this Certificate of
Incorporation by the affirmative vote of the holders of Voting Stock
representing at least a majority of the voting power of all outstanding shares
of Voting Stock, voting together as a single class; and

                 (b)      The Board of Directors and the stockholders, by the
affirmative vote of the holders of Voting Stock representing at least a
majority of the voting power of all outstanding shares of Voting Stock, voting
together as a single class, shall have the right and are expressly authorized
to adopt, amend or repeal provisions of the By-laws of the Corporation.

                 (c)      Notwithstanding the provisions of paragraphs (a) and
(b) or this Article SEVENTH, the provisions of Articles FIFTH and  SIXTH and
this paragraph (c) of Article SEVENTH of this Certificate of Incorporation and
the provision of Sections 2 and 6 of Article II of the By-laws of the
Corporation relating to the number of the members of the Board of Directors and
the removal of Directors, respectively, shall not be modified, amended or
repealed without the affirmative vote of the holders of Voting Stock
representing at least 80% of the voting power of all outstanding shares of
Voting Stock, voting as a single class, in addition to any other vote required
by law, this Certificate of Incorporation or the By-laws of the Corporation..

                          EIGHTH: (a)      The Corporation shall to the fullest
extent permitted by Delaware law, as in effect from time to time (but, in the
case of any amendment of the GCL, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), indemnify each
person who is or was a director or officer of the Corporation or of any of its
subsidiaries who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, or was or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she is or was a director or officer of the Corporation or of
any of its subsidiaries, or is or was at any time serving, at the request of
the Corporation, as a director, officer, employee or agent of





                                       6
<PAGE>   7
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise in any capacity, against all expense, liability and loss
(including, but not limited to, reasonable attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by such
director or officer in connection with such proceeding); provided, however,
that, except as provided in Paragraph (e) of this Article EIGHTH, the
Corporation shall not be obligated to indemnify any person under this Article
EIGHTH in connection with a proceeding (or part thereof) if such proceeding (or
part thereof) was not authorized by the Board of Directors of the Corporation
and was initiated by such person against (i) the Corporation or any of its
subsidiaries, (ii) any person who is or was a director, officer, employee or
agent of the Corporation or any of its subsidiaries and/or (iii) any person or
entity which controls or controlled, is or was controlled by or is or was under
common control with the Corporation or has or had business relations with the
Corporation or any of its subsidiaries.

                 (b)      The right to indemnification conferred in this
Article EIGHTH shall be a contract right, shall continue as to a person who has
ceased to be a director or officer of the Corporation or of any of its
subsidiaries and shall inure to the benefit of his or her heirs, executors and
administrators, and shall include the right to be paid by the Corporation the
expenses incurred in connection with the defense or investigation of any such
proceeding in advance of its final disposition; provided, however, that if and
to the extent that Delaware law so requires, the payment of such expense in
advance of the final disposition of a proceeding shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of such director
or officer or former director or officer, reasonably satisfactory to the
Corporation, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer or former director or officer is not
entitled to be indemnified by the Corporation.

                 (c)      The Corporation's obligation to indemnify and to pay
expenses in advance of the final disposition of a proceeding under this Article
EIGHTH shall arise, and all rights and protection granted to directors and
officers under this Article EIGHTH shall vest, at the time of the occurrence of
the transaction or event to which any proceeding relates, or at the time that
the action or conduct to which any proceeding relates was first taken or
engaged in (or omitted to be taken or engaged in), regardless of when any
proceeding is first threatened, commenced or completed.

                 (d)      Notwithstanding any other provision of this
Certificate of Incorporation or the By-laws of the Corporation, no action by
the Corporation, either by amendment to or repeal of this Article EIGHTH or the
By-laws of the Corporation or otherwise, shall diminish or adversely affect any
right or protection granted under this Article EIGHTH to any director or
officer or former director or officer of the Corporation or of any of its
subsidiaries which shall have become vested as aforesaid prior to the date that
any such amendment, repeal or other corporate action is taken.

                 (e)      If a claim for indemnification and/or for payment of
expenses in advance of the final disposition of a proceeding arising under this
Article EIGHTH is not paid in full by the Corporation within thirty days after
a written claim therefor has been





                                       7
<PAGE>   8
received by the Corporation, the claimant may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in substantial part, the claimant shall be entitled to
be paid also the expense of prosecuting such claim.

                 (f)      The right to indemnification and the payment of
expenses incurred in connection with the defense or investigation of a
proceeding in advance of its final disposition conferred in this Article EIGHTH
shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of this Certificate of
Incorporation, the By-laws of the Corporation, any insurance policy, agreement,
vote of stockholders or disinterested directors or otherwise.

                 (g)      In addition to the persons specified in subparagraph
(a) of this Article EIGHTH, the Corporation may also indemnify all other
persons to the fullest extent permitted by Delaware law.

                          NINTH:   A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for payment of an
unlawful dividend or unlawful repurchase or redemption of the Corporation's
securities under Section 174 of the GCL, or (iv) for any transaction from which
the director derived any improper personal benefit.  If the GCL is amended
after the date hereof to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the GCL, as so amended.  No amendment to or repeal of this Article
NINTH shall apply to or have any effect on the liability or alleged liability
of any director of the Corporation for or with respect to any acts or omissions
of such director occurring prior to such amendment.

                 5.  Each share of Common Stock, par value $.01 per share, of
the Corporation which is issued and outstanding, or held in the treasury of the
Corporation, shall be changed as of the Effective Time (as hereinafter defined)
into 2717.66 shares of Common Stock, par value $.01 per share, of the
Corporation.  As soon as practicable after the Effective Time, each holder of
shares of Common Stock shall, upon presentation of one or more certificates
representing such shares for surrender to the Corporation or to its agent
designated for that purpose, be entitled to receive in exchange therefor
certificates representing the number of whole shares of Common Stock into which
such shares of Common Stock shall have been changed as set forth in this
paragraph 5.  Until so surrendered, each certificate which prior to the
Effective Time represented shares of Common Stock shall be deemed, for all
purposes, to evidence ownership of the number of whole shares of Common Stock
which the holder thereof would be entitled to receive upon its surrender to the
Corporation pursuant to the provisions of this paragraph 5.  No fraction of a
share of Common Stock will be issued upon such exchange of shares of Common
Stock, but any holder of shares of Common Stock who would otherwise, pursuant
to the provisions of this paragraph 5, be entitled to a fraction





                                       8
<PAGE>   9
of a share of Common Stock shall instead receive a number of whole shares of
Common Stock determined by rounding such fraction to the nearest whole number,
with any fraction of .5 or more being rounded up to the next higher whole
number and any fraction of less than .5 being rounded down to the next lower
whole number.  The number of whole shares of Common Stock to which a holder of
certificates for Common Stock shall be entitled pursuant to the provisions of
this paragraph 5 shall be computed on the basis of the aggregate number of
shares of Common Stock represented by all such certificates registered in the
name of such holder.  The Effective Time shall be on the same day as, and
immediately prior to, the closing of the Corporation's initial public offering
of Common Stock that is registered under the Securities Act of 1933, as
amended.

                 6.  This Amended and Restated Certificate of Incorporation was
declared advisable by the Board of Directors of the Corporation and was duly
adopted by the Board of Directors in accordance with the provisions of Sections
242 and 245 of the GCL and was duly adopted by the stockholders entitled to
vote thereon in accordance with the provisions of Section 228 of the GCL.

                 IN WITNESS WHEREOF, the Corporation has caused this Amended
and Restated Certificate of Incorporation to be signed by its Chairman of the
Board on this 31st day of January, 1996.



                                        3-D GEOPHYSICAL, INC.
                                        
                                        
                                                                            
                                              /s/ JOEL FRIEDMAN
                                        ------------------------------------
                                                 Joel Friedman,
                                                 Chairman





                                       9

<PAGE>   1
                              AMENDED AND RESTATED

                                    BY-LAWS

                                       OF


                             3-D GEOPHYSICAL, INC.


                                   ARTICLE I
                                  Stockholders

       SECTION 1.  Annual Meeting.  The annual meeting of stockholders shall be
held at the hour, date and place within or without the United States that is
fixed by the Board of Directors or an officer designated by the Board of
Directors, which time, date and place may subsequently be changed at any time
by vote of the Board of Directors.  If no annual meeting has been held for a
period of thirteen months after the Corporation's last annual meeting of
stockholders, a special meeting in lieu thereof may be held if called as
provided in these By-laws, and such special meeting shall have, for the
purposes of these By-Laws or otherwise, all the force and effect of an annual
meeting.  Any and all references hereafter in these By-Laws to an annual
meeting or annual meetings also shall be deemed to refer to any special
meeting(s) in lieu thereof.

       SECTION 2.  Matters to be Considered at Annual Meetings.  At any annual
meeting of stockholders or any special meeting in lieu of an annual meeting of
stockholders (the "Annual Meeting"), only such business shall be conducted, and
only such proposals shall be acted upon, as shall have been properly brought
before such Annual Meeting.  To be
<PAGE>   2
considered as properly brought before an Annual Meeting, business must be:  (a)
specified in the notice of meeting, (b) otherwise properly brought before the
meeting by, or at the direction of, the Board of Directors, or (c) otherwise
properly brought before the meeting by any holder of record (both as of the
time notice of such proposal is given by the stockholder as set forth below and
as of the record date for the Annual Meeting in question) of any shares of
capital stock of the Corporation entitled to vote at such Annual Meeting who
complies with the requirements set forth in this Section 2.

       In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder of record of any
shares of capital stock entitled to vote at such Annual Meeting, such
stockholder shall: (i) give timely notice as required by this Section 2 to the
Secretary of the Corporation, and (ii) be present at such meeting, either in
person or by a representative.  For the first Annual Meeting following the
initial public offering of Common Stock of the Corporation, a stockholder's
notice shall be timely if delivered to, or mailed to and received by, the
Corporation at its principal executive office not later than the close of
business on the later of (A) the 75th day prior to the scheduled date of such
Annual Meeting or (B) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the
Corporation.  For all subsequent Annual Meetings, a stockholder's notice shall
be timely if delivered to, or mailed to and received by, the Corporation at its
principal executive office not less than 75 days nor more than 120 days prior
to the anniversary date of the immediately preceding Annual Meeting (the
"Anniversary Date"); provided, however, that in the event the Annual Meeting is
scheduled to be held on a date more than 30 days before the Anniversary Date or
more





                                     - 2 -
<PAGE>   3
than 60 days after the Anniversary Date, a stockholder's notice shall be timely
if delivered to, or mailed to and received by, the Corporation at its principal
executive office not later than the close of business on the later of (A) the
75th day prior to the scheduled date of such Annual Meeting, or (B) the 15th
day following the day on which public announcement of the date of such Annual
Meeting is first made by the Corporation.

       For purposes of these By-laws, "public announcement" shall mean:  (i)
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service, (ii) a report or other
document filed publicly with the Securities and Exchange Commission (the
"Commission"), including, without limitation, a current report on Form 8-K, or
(iii) a letter or report sent to stockholders of record of the Corporation at
the time of the mailing of such letter or report.

       A stockholder's notice to the Secretary shall set forth as to each
matter proposed to be brought before an Annual Meeting:  (i) a brief
description of the business the stockholder desires to bring before such Annual
Meeting and the reasons for conducting such business at such Annual Meeting,
(ii) the name and address, as they appear on the Corporation's stock transfer
books, of the stockholder proposing such business, (iii) the class and number
of shares of the Corporation's capital stock beneficially owned by the
stockholder proposing such business, (iv) the names and addresses of the
beneficial owners, if any, of any capital stock of the Corporation registered
in such stockholder's name on such books, and the class and number of shares of
the Corporation's capital stock beneficially owned by such beneficial owners,
(v) the names and addresses of other stockholders known by the stockholder





                                     - 3 -
<PAGE>   4
proposing such business to support such proposal, and the class and number of
shares of the Corporation's capital stock beneficially owned by such other
stockholders, and (vi) any material interest of the stockholder proposing to
bring such business before such meeting (or any other stockholders known to be
supporting such proposal) in such proposal.

       If the Board of Directors or a designated committee thereof determines
that any stockholder proposal was not made in a timely fashion in accordance
with the provisions of this Section 2 or that the information provided in a
stockholder's notice does not satisfy the information requirements of this
Section 2 in any material respect, such proposal shall not be presented for
action at the Annual Meeting in question.  If neither the Board of Directors
nor such committee makes a determination as to the validity of any stockholder
proposal in the manner set forth above, the presiding officer of the Annual
Meeting shall determine whether the stockholder proposal was made in accordance
with the terms of this Section 2.  If the presiding officer determines that any
stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Section 2 or that the information provided in a
stockholder's notice does not satisfy the information requirements of this
Section 2 in any material respect, such proposal shall not be presented for
action at the Annual Meeting in question.  If the Board of Directors, a
designated committee thereof or the presiding officer determines that a
stockholder proposal was made in accordance with the requirements of this
Section 2, the presiding officer shall so declare at the Annual Meeting and
ballots shall be provided for use at the meeting with respect to such proposal.





                                     - 4 -
<PAGE>   5
       Notwithstanding the foregoing provisions of this Section 2, a
stockholder shall also comply with all applicable requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the Commission thereunder with respect to the matters set
forth in this Section 2, and nothing in this Section 2 shall be deemed to
affect any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to, and in accordance with the
requirements of, Rule 14a-8 under the Exchange Act.

       SECTION 3.  Special Meetings.  Except as otherwise required by law and
subject to the rights, if any, of the holders of any series of Preferred Stock,
special meetings of the stockholders of the Corporation may only be called by
the Chairman of the Board of Directors, the President or the Secretary of the
Corporation upon the written request, stating the purpose of the meeting, of a
majority of the Board of Directors or of the Executive Committee thereof.

       SECTION 4.  Matters to be Considered at Special Meetings.  Only those
matters set forth in the notice of the special meeting may be considered or
acted upon at a special meeting of stockholders of the Corporation, unless
otherwise provided by law.

       SECTION 5.  Notice of Meetings; Adjournments.  A written notice of all
Annual Meetings stating the hour, date and place of such Annual Meetings shall
be given by the Secretary (or other person authorized by these By-Laws or by
law) not less than 10 days nor more than 60 days before the Annual Meeting, to
each stockholder entitled to vote thereat





                                     - 5 -
<PAGE>   6
and to each stockholder who, by law or under the Certificate of Incorporation
of the Corporation or these By-Laws, is entitled to such notice, by delivering
such notice to him or by mailing it, postage prepaid, addressed to such
stockholder at the address of such stockholder as it appears on the
Corporation's stock transfer books.  Such notice shall be deemed to be
delivered when hand delivered to such address or deposited in the mail so
addressed, with postage prepaid.

       Notice of all special meetings of stockholders shall be given in the
same manner as provided for Annual Meetings, except that the written notice of
all special meetings shall state the purpose or purposes for which the meeting
has been called.

       Notice of an Annual Meeting or special meeting of stockholders need not
be given to a stockholder if a written waiver of notice is signed before or
after such meeting by such stockholder or if such stockholder attends such
meeting, unless such attendance was for the express purpose of objecting at the
beginning of the meeting to the transaction of any business because the meeting
was not lawfully called or convened.  Neither the business to be transacted at,
nor the purpose of, any Annual Meeting or special meeting of stockholders need
be specified in any written waiver of notice.

       The Board of Directors may postpone and reschedule any previously
scheduled Annual Meeting or special meeting of stockholders and any record date
with respect thereto, regardless of whether any notice or public disclosure
with respect to any such meeting has been sent or made pursuant to Section 2 of
this Article I or Section 3 of Article II hereof or





                                     - 6 -
<PAGE>   7
otherwise.  In no event shall the public announcement of an adjournment,
postponement or rescheduling of any previously scheduled meeting of
stockholders commence a new time period for the giving of a stockholder's
notice under Section 2 of Article I and Section 3 of Article II of these
By-laws.

       When any meeting is convened, the presiding officer may adjourn the
meeting if (a) no quorum is present for the transaction of business, (b) the
Board of Directors determines that adjournment is necessary or appropriate to
enable the stockholders to consider fully information which the Board of
Directors determines has not been made sufficiently or timely available to
stockholders, or (c) the Board of Directors determines that adjournment is
otherwise in the best interests of the Corporation.  When any Annual Meeting or
special meeting of stockholders is adjourned to another hour, date or place,
notice need not be given of the adjourned meeting other than an announcement at
the meeting at which the adjournment is taken of the hour, date and place to
which the meeting is adjourned; provided, however, that if the adjournment is
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote thereat and each stockholder who,
by law or under the Corporation's Certificate of Incorporation or these
By-Laws, is entitled to such notice.

       SECTION 6.  Quorum.  The holders of shares of voting stock representing
a majority of the voting power of the outstanding shares of voting stock
issued, outstanding and entitled to vote at a meeting of stockholders,
represented in person or by proxy at such meeting, shall





                                     - 7 -
<PAGE>   8
constitute a quorum; but if less than a quorum is present at a meeting, the
holders of voting stock representing a majority of the voting power present at
the meeting or the presiding officer may adjourn the meeting from time to time,
and the meeting may be held as adjourned without further notice, except a
provided in Section 5 of this Article I.  At such adjourned meeting at which a
quorum is present, any business may be transacted which might have been
transacted at the meeting as originally noticed.  The stockholders present at a
duly constituted meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.

       SECTION 7.  Voting and Proxies.  Stockholders shall have one vote for
each share of stock entitled to vote owned by them of record according to the
books of the Corporation, unless otherwise provided by law or by the
Corporation's Certificate of Incorporation.  Stockholders may vote either in
person or by written proxy, but no proxy shall be voted or acted upon after
three years from its date, unless the proxy provides for a longer period.
Proxies shall be filed with the Secretary of the meeting before being voted.
Except as otherwise limited therein or as otherwise provided by law, proxies
shall entitle the persons authorized thereby to vote at any adjournment of such
meeting, but they shall not be valid after final adjournment of such meeting.
A proxy with respect to stock held in the name of two or more persons shall be
valid if executed by or on behalf of any one of them unless at or prior to the
exercise of the proxy the Corporation receives a specific written notice to the
contrary from any one of such persons.  A proxy purporting to be executed by or
on behalf of a stockholder shall be deemed valid, and the burden of proving
invalidity shall rest on the challenger.





                                     - 8 -
<PAGE>   9
       SECTION 8.  Action at Meeting.  When a quorum is present, any matter
before any meeting of stockholders shall be decided by the vote of a majority
of the voting power of shares of voting stock present in person or represented
by proxy at such meeting and entitled to vote on such matter, except where a
larger vote is required by law, by the Certificate of Incorporation or by these
By-Laws.  Any election of Directors by stockholders shall be determined by a
plurality of the votes cast, except where a larger vote is required by law, by
the Certificate of Incorporation or by these By-Laws.  The Corporation shall
not directly or indirectly vote any shares of its own stock; provided, however,
that the Corporation may vote shares which it holds in a fiduciary capacity to
the extent permitted by law.

       SECTION 9.  Stockholder Lists.  The Secretary (or the Corporation's
transfer agent or other person authorized by these By-Laws or by law) shall
prepare and make, at least 10 days before every Annual Meeting or special
meeting of stockholders, a complete list of the stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder
as of the record date for such meeting.  Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least 10 days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at
the place where the meeting is to be held.  The list shall also be produced and
kept at the hour, date and place of the meeting during the whole time thereof,
and may be inspected by any stockholder who is present.





                                     - 9 -
<PAGE>   10
       SECTION 10.  Presiding Officer.  The Chairman of the Board or, in his
absence, such other officer as shall be designated by the Board of Directors
shall preside at all Annual Meetings or special meetings of stockholders and
shall have the power, among other things, to adjourn such meeting at any time
and from time to time, subject to Sections 5 and 6 of this Article I.  The
order of business and all other matters of procedure at any meeting of the
stockholders shall be determined by the presiding officer.

       SECTION 11.  Voting Procedures and Inspectors of Elections.  The
Corporation shall, in advance of any meeting of stockholders, appoint one or
more inspectors to act at the meeting and make a written report thereof.  The
Corporation may designate one or more persons as alternate inspectors to
replace any inspector who fails to act.  If no inspector or alternate is able
to act at a meeting of stockholders, the presiding officer shall appoint one or
more inspectors to act at the meeting.  Any inspector may, but need not, be an
officer, employee or agent of the Corporation.  Each inspector, before entering
upon the discharge of his duties, shall take and sign an oath faithfully to
execute the duties of inspector with strict impartiality and according to the
best of his or her ability.  The inspectors shall perform such duties as are
required by the General Corporation Law of the State of Delaware, as amended
from time to time ("GCL"), including the counting of all votes and ballots.
The inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors.  The presiding
officer may review all determinations made by the inspector(s), and in so doing
the presiding officer shall be entitled to exercise his or her sole judgment
and discretion and he or she shall not be bound by any determinations made





                                     - 10 -
<PAGE>   11
by the inspector(s).  All determinations by the inspector(s) and, if
applicable, the presiding officer shall be subject to further review by any
court of competent jurisdiction.





                                     - 11 -
<PAGE>   12
                                   ARTICLE II
                                   Directors

       SECTION 1.  Powers.  The business and affairs of the Corporation shall
be managed by or under the direction of the Board of Directors, except as
otherwise provided by the Certificate of Incorporation or required by law.

       SECTION 2.  Number and Terms.  The number of Directors of the
Corporation shall not be less than five nor more than thirteen (plus such
number of Directors, if any, who may be elected by the holders of any series of
preferred stock - "Preferred Stock Directors"), the exact number of whom shall
be fixed by resolution duly adopted from time to time by the Board of
Directors.

       SECTION 3.  Director Nominations.  Nominations of candidates for
election as directors of the Corporation at any Annual Meeting may be made only
(a) by, or at the direction of, the Board of Directors or (b) by any holder of
record (both as of the time notice of such nomination is given by the
stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of the capital stock of the Corporation entitled to
vote at such Annual Meeting who complies with the timing, informational and
other requirements set forth in this Section 3.  Any stockholder who seeks to
make such a nomination or his representative must be present in person at the
Annual Meeting.  Only persons nominated by, or at the direction of, the Board
of Directors or in accordance with the procedures set forth in this Section 3
shall be eligible for election as directors at an Annual Meeting.





                                     - 12 -
<PAGE>   13
       Nominations, other than those made by, or at the direction of, the Board
of Directors, shall be made pursuant to timely notice in writing to the
Secretary of the Corporation as set forth in this Section 3.  For the first
Annual Meeting subsequent to the consummation of the initial public offering of
the Common Stock of the Corporation, a stockholder's notice shall be timely if
delivered to, or mailed to and received by, the Corporation at its principal
executive office not later than the close of business on the later of (A) the
75th day prior to the scheduled date of such Annual Meeting or (B) the 15th day
following the day on which public announcement of the date of such Annual
Meeting is first made by the Corporation.  For all subsequent Annual Meetings,
a stockholder's notice shall be timely if delivered to, or mailed to and
received by, the Corporation at its principal executive office not less than 75
days nor more than 120 days prior to the Anniversary Date; provided, however,
that in the event the Annual Meeting is scheduled to be held on a date more
than 30 days before the Anniversary Date or more than 60 days after the
Anniversary Date, a stockholder's notice shall be timely if delivered to, or
mailed and received by, the Corporation at its principal executive office not
later than the close of business on the later of (i) the 75th day prior to the
scheduled date of such Annual Meeting or (ii) the 15th day following the day on
which public announcement of the date of such Annual Meeting is first made by
the Corporation.

       A stockholder's notice to the Secretary shall set forth as to each
person whom the stockholder proposes to nominate for election or re-election as
a director:  (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the Corporation's capital stock which are
beneficially owned by such person on the date of such stockholder notice,





                                     - 13 -
<PAGE>   14
(iv) the consent of each nominee to serve as a director if elected, and (v)
such information concerning such person as is required to be disclosed
concerning a nominee for election as director of the Corporation pursuant to
the Exchange Act and the rules and regulations of the Commission thereunder.  A
stockholder's notice to the Secretary shall further set forth as to the
stockholder giving such notice:  (i) the name and address, as they appear on
the Corporation's stock transfer books, of such stockholder and of the
beneficial owners (if any) of the Corporation's capital stock registered in
such stockholder's name and the name and address of other stockholders known by
such stockholder to be supporting such nominee(s), (ii) the class and number of
shares of the Corporation's capital stock which are held of record,
beneficially owned or represented by proxy by such stockholder and by any other
stockholders known by such stockholder to be supporting such nominee(s) on the
record date for the Annual Meeting in question (if such date shall then have
been made publicly available) and on the date of such stockholder's notice, and
(iii) a description of all arrangements or understandings between such
stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by such stockholder or in connection therewith.

       If the Board of Directors or a designated committee thereof determines
that any stockholder nomination was not timely made in accordance with the
provisions of this Section 3 or that the information provided in a
stockholder's notice does not satisfy the informational requirements of this
Section 3 in any material respect, then such nomination shall not be considered
at the Annual Meeting in question.  If neither the Board of Directors nor such
committee makes a determination as to whether a nomination was made in





                                     - 14 -
<PAGE>   15
accordance with the provisions of this Section 3, the presiding officer of the
Annual Meeting shall determine whether a nomination was made in accordance with
such provisions.  If the presiding officer determines that any stockholder
nomination was not timely made in accordance with the terms of this Section 3
or that the information provided in a stockholder's notice does not satisfy the
informational requirements of this Section 3 in any material respect, then such
nomination shall not be considered at the Annual Meeting in question.  If the
Board of Directors, a designated committee thereof or the presiding officer
determines that a nomination was made in accordance with the provisions of this
Section 3, the presiding officer shall so declare at the Annual Meeting and
ballots shall be provided for use at the meeting with respect to such nominee.

       Notwithstanding anything to the contrary in the second sentence of the
second paragraph of this Section 3, in the event that the number of directors
to be elected to the Board of Directors of the Corporation is increased and
there is no public announcement by the Corporation naming all of the nominees
for director or specifying the size of the increased Board of Directors at
least 75 days prior to the Anniversary Date, a stockholder's notice required by
this Section 3 shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if such notice shall
be delivered to, or mailed to and received by, the Corporation at its principal
executive office not later than the close of business on the 15th day following
the day on which such public announcement is first made by the Corporation.





                                     - 15 -
<PAGE>   16
       No person shall be elected by the stockholders as a Director of the
Corporation unless nominated in accordance with the procedures set forth in
this Section 3.  Election of Directors at an Annual Meeting need not be by
written ballot, unless otherwise provided by the Board of Directors or the
presiding officer at such Annual Meeting.  If written ballots are to be used,
ballots bearing the names of all the persons who have been nominated for
election as Directors at the Annual Meeting in accordance with the procedures
set forth in this Section 3 shall be provided for use at the Annual Meeting.

       SECTION 4.  Qualification.  No Director need be a stockholder of the
Corporation.

       SECTION 5.  Vacancies.  Subject to the rights of the holders of any one
or more series of Preferred Stock, any vacancies on the Board of Directors
resulting from death, resignation or removal from office of a director or
directors, or otherwise, and newly created directorships resulting from any
increase in the authorized number of directors, shall be filled exclusively by
the Board of Directors acting by not less than a majority of the remaining
directors then in office, even though less than a quorum of the Board of
Directors.  Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the class of directors
in which the new directorship was created or the vacancy occurred and until
such director's successor shall have been duly elected and qualified or until
the election, resignation or removal of such director.  No decrease in the
number of directors shall shorten the term of any incumbent director.

       SECTION 6.  Removal.  Directors may only be removed from office as
permitted by the Certificate of Incorporation.





                                     - 16 -
<PAGE>   17
       SECTION 7.  Resignation.  A Director may resign at any time by giving
written notice to the Chairman of the Board, the President or the Secretary.  A
resignation shall be effective upon receipt, unless the resignation otherwise
provides.

       SECTION 8.  Regular Meetings.  The regular annual meeting of the Board
of Directors shall be held, without notice other than this By-Law, on the same
date and at the same place as the Annual Meeting following the close of such
meeting of stockholders.  Other regular meetings of the Board of Directors may
be held at such hour, date and place as the Board of Directors may by
resolution from time to time determine without notice other than such
resolution.

       SECTION 9.  Special Meetings.  Special meetings of the Board of
Directors may be called, orally or in writing, by or at the request of a
majority of the Directors then in office, the Chairman of the Board or the
President.  The person calling any such special meeting of the Board of
Directors may fix the hour, date and place thereof.

       SECTION 10.  Notice of Meetings.  Notice of the hour, date and place of
all special meetings of the Board of Directors shall be given to each Director
by the Secretary or the person calling such meeting, or in case of the death,
absence, incapacity or refusal of such person, by the Chairman of the Board,
the President or such other officer as shall be designated by the Board of
Directors.  Notice of any special meeting of the Board of Directors shall be
given to each Director in person, by telephone, or by telex, telecopy
telegram, or other written form of electronic communication, sent to his
business or home





                                     - 17 -
<PAGE>   18
address, at least 24 hours in advance of the meeting, or by written notice
mailed to his business or home address, at least 72 hours in advance of the
meeting.  Such notice shall be deemed to be delivered when hand delivered to
such address, read to such Director by telephone, deposited in the mail so
addressed, with postage thereon prepaid if mailed, dispatched or transmitted if
telexed or telecopied, or when delivered to the telegraph company if sent by
telegram.

       When any Board of Directors meeting, either regular or special, is
adjourned for 30 days or more, notice of the adjourned meeting shall be given
as in the case of an original meeting.  It shall not be necessary to give any
notice of the hour, date or place of any meeting adjourned for less than 30
days or of the business to be transacted thereat, other than an announcement at
the meeting at which such adjournment is taken of the hour, date and place to
which the meeting is adjourned.

       A written waiver of notice signed before or after a meeting by a
Director and filed with the records of the meeting shall be deemed to be
equivalent to notice of the meeting.  The attendance of a Director at a meeting
shall constitute a waiver of notice of such meeting, except where a Director
attends a meeting for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because such meeting is not lawfully
called or convened.  Neither the business to be transacted at, nor the purpose
of, any meeting of the Board of Directors need be specified in the waiver of
notice of such meeting.





                                     - 18 -
<PAGE>   19
       SECTION 11.  Quorum.  At any meeting of the Board of Directors, a
majority of the Directors then in office shall constitute a quorum for the
transaction of business, but if less than a quorum is present at a meeting, a
majority of the Directors present may adjourn the meeting from time to time,
and the meeting may be held as adjourned without further notice, except as
provided in Section 10 of this Article II.  Any business which might have been
transacted at the meeting as originally noticed may be transacted at such
adjourned meeting at which a quorum is present.

       SECTION 12.  Action at Meeting.  At any meeting of the Board of
Directors at which a quorum is present, a majority of the Directors present may
take any action on behalf of the Board of Directors, unless otherwise required
by law, by the Certificate of Incorporation or by these By-Laws.

       SECTION 13.  Action by Consent.  Any action required or permitted to be
taken at any meeting of the Board of Directors or any Committee thereof may be
taken without a meeting if all members of the Board of Directors or such
Committee consent thereto in writing.  Such written consent shall be filed with
the records of the meetings of the Board of Directors and shall be treated for
all purposes as a vote at a meeting of the Board of Directors or such
Committee.

       SECTION 14.  Manner of Participation.  Directors may participate in
meetings of the Board of Directors by means of conference telephone or similar
communications equipment by means of which all Directors participating in the
meeting can hear each other, and





                                     - 19 -
<PAGE>   20
participation in a meeting in accordance herewith shall constitute presence in
person at such meeting for purposes of these By-Laws.  The place of any such
meeting held by means of conference telephone or similar communication
equipment shall be the place specified in the notice of such meeting where at
least one director is present.

       SECTION 15.  Committees.  The Board of Directors, by vote of a majority
of the Directors then in office, may elect from its number, one or more
committees, including an Executive Committee, a Compensation Committee and an
Audit Committee, and may delegate thereto some or all of its powers except
those which by law, by the Certificate of Incorporation or by these By-Laws may
not be delegated.  Except as the Board of Directors may otherwise determine,
any such committee may make rules for the conduct of its business, but unless
otherwise provided by the Board of Directors or in such rules, its business
shall be conducted so far as possible in the same manner as is provided by
these By-Laws for the Board of Directors.  All members of such committees shall
hold such offices at the pleasure of the Board of Directors.  The Board of
Directors may abolish any such committee at any time.  Any committee to which
the Board of Directors delegates any of its powers shall keep records of its
meetings and shall report its action to the Board of Directors.  The Board of
Directors shall have power to rescind any action of any committee, to the
extent permitted by law, but no such rescission shall have retroactive effect.

       SECTION 16.  Compensation of Directors.  Directors shall receive such
compensation for their services as shall be determined by a majority of the
Directors then in office provided that Directors who are serving the
Corporation as employees and who receive





                                     - 20 -
<PAGE>   21
compensation for their services as such, shall not receive any salary or other
compensation for their services as Directors of the Corporation.

                                  ARTICLE III
                                    Officers

       SECTION 1.  Enumeration.  The officers of the Corporation shall consist
of a Chairman of the Board, a President and Chief Executive Officer, a Chief
Financial Officer, a Chief Operating Officer, a Secretary and such other
officers, including, without limitation, a Treasurer, a Comptroller and one or
more Vice-Presidents (including Executive Vice Presidents or Senior Vice
Presidents), Assistant Vice Presidents, Assistant Treasurers and Assistant
Secretaries, as the Board of Directors may from time to time determine.

       SECTION 2.  Qualification.  No officer need be a stockholder or a
Director.  Any person may occupy more than one office of the Corporation at any
time.  Any officer may be required by the Board of Directors to give bond for
the faithful performance of his or her duties in such amount and with such
sureties as the Board of Directors may determine.

       SECTION 3.  Resignation.  Any officer may resign by delivering his or
her written resignation to the Corporation addressed to the Chairman of the
Board of Directors, the President or the Secretary, and such resignation shall
be effective upon receipt unless it is specified to be effective at some other
time or upon the happening of some specified event.





                                     - 21 -
<PAGE>   22
       SECTION 4.  Removal.  The Board of Directors may remove any officer at
any time, with or without cause.

       SECTION 5.  Absence or Disability.  In the event of the absence or
disability of any officer, the Board of Directors may designate another officer
to act temporarily in place of such absent or disabled officer.

       SECTION 6.  Vacancies.  Any vacancy in any office may be filled for the
unexpired portion of the term by the Board of Directors.

       SECTION 7.  Chairman of the Board.  The Chairman of the Board, or a
delegated representative thereof,  shall preside at all meetings of the Board
of Directors and of the stockholders at which he shall be present and shall
have such powers and shall perform such duties as generally pertain to his
office as well as such other powers and duties the Board of Directors may from
time to time designate, or are prescribed by the By-Laws.

       SECTION 8.  President and Chief Executive Officer.  Unless otherwise
determined by the Board of Directors, the President and Chief Executive Officer
of the Corporation shall, subject to the direction of the Board of Directors,
manage the affairs of the Corporation's business and have general supervision
and control of the Corporation's day-to-day business activities.  In the
absence of the Chairman of the Board, or a delegated representative thereof,
the President and Chief Executive Officer shall preside, when present, at all
meetings of stockholders and of the Board of Directors.  The President and
Chief





                                     - 22 -
<PAGE>   23
Executive Officer shall have such other powers and perform such other duties as
the Board of Directors or the Chairman of the Board of Directors may from time
to time designate.

       SECTION 9.  Chief Operating Officer.  Unless otherwise determined by the
Board of Directors, the Chief Operating Officer of the Corporation shall,
subject to the direction of the Board of Directors or the President and Chief
Executive Officer, supervise the operations of the Corporation.  The Chief
Operating Officer shall have such other powers and shall perform such other
duties as the Board of Directors or the Chairman of the Board of Directors may
from time to time designate.

       SECTION 10.  Chief Financial Officer.  Unless otherwise provided by the
Board of Directors, the Chief Financial Officer of the Corporation shall,
subject to the direction of the Board of Directors or the Chairman of the Board
of Directors, have general charge of the financial affairs of the Corporation
and shall cause to be kept accurate books of account.  The Chief Financial
Officer shall have such other powers and shall perform such other duties as the
Board of Directors or the Chairman of the Board of Directors may from time to
time designate.

       SECTION 11.  Vice Presidents and Assistant Vice Presidents.  Any Vice
President (including any Executive Vice President or Senior Vice President) and
any Assistant Vice President shall have such powers and shall perform such
duties as the Board of Directors, the Chairman of the Board of Directors or the
President and Chief Executive Officer may from time to time designate.





                                     - 23 -
<PAGE>   24
       SECTION 12.  Treasurer and Assistant Treasurers; Controller.  The
Treasurer shall, subject to the direction of the Board of Directors and except
as the Board of Directors or the Chief Financial Officer may otherwise
determine, assist the Chief Financial Officer with the financial affairs of the
Corporation and the books of account.  The Treasurer shall have custody of all
funds, securities and valuable documents of the Corporation.  He or she shall
have such other duties and shall perform such other duties as the Board of
Directors, the Chairman of the Board of Directors or the Chief Financial
Officer may from time to time designate.

       Any Controller or Assistant Treasurer shall have such powers and perform
such duties as the Board of Directors, the Chairman of the Board of Directors
or the Chief Financial Officer may from time to time designate.

       SECTION 13.  Secretary and Assistant Secretaries.  The Secretary shall
record all the proceedings of the meetings of the stockholders and the Board of
Directors (including committees of the Board) in books kept for that purpose.
In his absence from any such meeting, a temporary secretary chosen at the
meeting shall record the proceedings thereof.  The Secretary shall have charge
of the stock ledger (which may, however, be kept by any transfer or other agent
of the Corporation).  The Secretary shall have custody of the seal of the
Corporation, and the Secretary, or an Assistant Secretary, or any other person
authorized by the Board of Directors, shall have authority to affix it to any
instrument requiring it, and, when so affixed, the seal may be attested by his
or her signature or that of an Assistant Secretary or such other person.  The
Secretary shall have such other duties and powers as





                                     - 24 -
<PAGE>   25
may be designated from time to time by the Board of Directors, the Chairman of
the Board of Directors or the President and Chief Executive Officer.  In the
absence of the Secretary, any Assistant Secretary or any officer designated by
the Board of Directors may perform their duties and responsibilities of the
Secretary.

       Any Assistant Secretary shall have such powers and perform such duties
as the Board of Directors, the Chairman of the Board of Directors or the
President and Chief Executive Officer may from time to time designate.

                                   ARTICLE IV
                                 Capital Stock

       SECTION 1.  Certificates of Stock.  The shares of the Corporation shall
be represented by a certificate of the capital stock of the Corporation in such
form as may from time to time be prescribed by the Board of Directors.  Such
certificate shall be signed by the Chairman of the Board or the President and
Chief Executive Officer or a Vice President and by the Treasurer or the
Secretary or an Assistant Secretary or an Assistant Treasurer.  The
Corporation's seal and the signatures by officers of the Corporation, the
transfer agent or the registrar may be facsimiles.  In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed on such certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if such officer, transfer agent or
registrar were in office at the time of its issue.  Every certificate for
shares of stock which are subject to any





                                     - 25 -
<PAGE>   26
restriction on transfer and every certificate issued when the Corporation is
authorized to issue more than one class or series of stock shall contain such
legend with respect thereto as is required by law.

       SECTION 2.  Transfers.  Subject to any restrictions on transfer and
unless otherwise provided by the Board of Directors, shares of stock may be
transferred only on the books of the Corporation by the surrender to the
Corporation or its transfer agent of the certificate therefor properly endorsed
or accompanied by a written assignment or power of attorney properly executed,
with transfer stamps (if necessary) affixed, and with such proof of the
authenticity of signature as the Corporation or its transfer agent may
reasonably require.

       SECTION 3.  Record Holders.  Except as may otherwise be required by law,
by the Certificate of Incorporation or by these By-Laws, the Corporation shall
be entitled to treat the record holder of stock as shown on its books as the
owner of such stock for all purposes, including the payment of dividends and
the right to vote with respect thereto, regardless of any transfer, pledge or
other disposition of such stock and regardless of any notice to the contrary
until the shares have been transferred on the books of the Corporation in
accordance with the requirements of these By-Laws.

       SECTION 4.  Record Date.  In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof or entitled to receive payments of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change,





                                     - 26 -
<PAGE>   27
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors, and which record date:  (1) in the case of
determination of stockholders entitled to vote at any meeting of stockholders,
shall, unless otherwise required by law, not be more than sixty nor less than
ten days before the date of such meeting, and (2) in the case of any other
action, shall not be more than sixty days prior to such other action.  If no
record date is fixed:  (1) the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which the meeting is
held, and (2) the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.

                                   ARTICLE V
               Indemnification; Exculpation of Certain Liability

       Indemnification.  (a)  The Corporation shall to the fullest extent
permitted by Delaware law, as in effect from time to time (but, in the case of
any amendment of the GCL, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), indemnify each person who
is or was a director or officer of the Corporation or of any of its
subsidiaries who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, or was or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter





                                     - 27 -
<PAGE>   28
a "proceeding"), by reason of the fact that he or she is or was a director or
officer of the Corporation or of any of its subsidiaries, or is or was at any
time serving, at the request of the Corporation, as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity, against all expense,
liability and loss (including, but not limited to, reasonable attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such director or officer in connection with such proceeding;
provided, however, that, except as provided in Paragraph (e) of this Article
Fifth, the Corporation shall not be obligated to indemnify any person under
this Article Fifth in connection with a proceeding (or part thereof) if such
proceeding (or part thereof) was not authorized by the Board of Directors of
the Corporation and was initiated by such person against (i) the Corporation or
any of its subsidiaries, (ii) any person who is or was a director, officer,
employee or agent of the Corporation or any of its subsidiaries and/or (iii)
any person or entity which controls or controlled, is or was controlled by or
is or was under common control with the Corporation or has or had business
relations with the Corporation or any of its subsidiaries.

       (b)  The right to indemnification conferred in this Article Fifth shall
be a contract right, shall continue as to a person who has ceased to be a
director or officer of the Corporation or of any of its subsidiaries and shall
inure to the benefit of his or her heirs, executors and administrators, and
shall include the right to be paid by the Corporation the expenses incurred in
connection with the defense or investigation of any such proceeding in advance
of its final disposition; provided, however, that if and to the extent that
Delaware law so requires, the payment of such expense in advance of the final
disposition of a





                                     - 28 -
<PAGE>   29
proceeding shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer or former director or
officer, reasonably satisfactory to the Corporation, to repay all amounts so
advanced if it shall ultimately be determined that such director or officer or
former director or officer is not entitled to be indemnified by the
Corporation.

       (c)  The Corporation's obligation to indemnify and to pay expenses in
advance of the final disposition of a proceeding under this Article Fifth shall
arise, and all rights and protections granted to directors and officers under
this Article Fifth shall vest, at the time of the occurrence of the transaction
or event to which any proceeding relates, or at the time that the action or
conduct to which any proceeding relates was first taken or engaged in (or
omitted to be taken or engaged in), regardless of when any proceeding is first
threatened, commenced or completed.

       (d)  Notwithstanding any other provision of the Certificate of
Incorporation or these By-laws, no action by the Corporation, either by
amendment to or repeal of this Article Fifth or otherwise, shall diminish or
adversely affect any right or protection granted under this Article Fifth to
any director or officer or former director or officer of the Corporation or of
any of its subsidiaries which shall have become vested as aforesaid prior to
the date that any such amendment, repeal or other corporate action is taken.

       (e)  If a claim for indemnification and/or for payment of expenses in
advance of the final disposition of a proceeding arising under this Article
Fifth is not paid in full by the Corporation within thirty days after a written
claim therefor has been received by the Corporation, the





                                     - 29 -
<PAGE>   30
claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in
substantial part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim.

       (f)  The right to indemnification and the payment of expenses incurred
in connection with the defense or investigation of a proceeding in advance of
its final disposition conferred in this Article Fifth shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, these By-laws, any
insurance policy, agreement, vote of stockholders or disinterested directors or
otherwise.

       (g)  In addition to the persons specified in subsection (a) of this
Article Fifth the Corporation may also indemnify all other persons to the
fullest extent permitted by Delaware law.

       (h)   A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) for payment of an unlawful dividend or
unlawful repurchase or redemption of the Company's securities under Section 174
of the GCL, or (iv) for any transaction from which the director derived any
improper personal benefit.  If the GCL is amended after the date of adoption of
this By-Law to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the GCL, as so amended.  No amendment





                                     - 30 -
<PAGE>   31
to or repeal of this Article Fifth shall apply to or have any effect on the
liability or alleged liability of any Director of the Corporation for or with
respect to any acts or omissions of such director occurring prior to such
amendment.

                                   ARTICLE VI
                            Miscellaneous Provisions

       SECTION 1.  Fiscal Year.  Except as otherwise determined by the Board of
Directors, the fiscal year of the Corporation shall end on the last day of
December of each year.

       SECTION 2.  Seal.  The Board of Directors shall have the power to adopt
and alter the seal of the Corporation.

       SECTION 3.  Execution of Instruments.  All deeds, leases, transfers,
contracts, bonds, notes and other obligations to be entered into by the
Corporation in the ordinary course of its business without Director action may
be executed on behalf of the Corporation by the Chairman of the Board, the
President and Chief Executive Officer, the Chief Financial Officer, any Vice
President, or any other officer, employee or agent of the Corporation as the
Board of Directors may from time to time authorize.

       SECTION 4.  Voting of Securities.  Unless the Board of Directors
otherwise provides, the Chairman of the Board, the President and Chief
Executive Officer, the Chief Financial Officer or any Vice President may waive
notice of and act on behalf of the Corporation, or appoint another person or
persons to act as proxy or attorney in fact for the Corporation with





                                     - 31 -
<PAGE>   32
or without discretionary power and/or power of substitution, at any meeting of
stockholders or shareholders of any other corporation or organization, any of
whose securities are held by the Corporation.

       SECTION 5.  Resident Agent.  The Board of Directors may appoint a
resident agent upon whom legal process may be served in any action or
proceeding against the Corporation.

       SECTION 6.  Corporate Records.  The original or attested copies of the
Certificate of Incorporation, By-Laws and records of all meetings of the
incorporators, stockholders and the Board of Directors (or any Committee
thereof) and the stock transfer books, which shall contain the names of all
stockholders, their record addresses and the amount of stock held by each, may
be kept outside the State of Delaware and shall be kept at the principal office
of the Corporation, at the office of its counsel or at an office of its
transfer agent or at such other place or places as may be designated from time
to time by the Board of Directors.

       SECTION 7.  Certificate of Incorporation.  All references in these
By-Laws to the Certificate of Incorporation shall be deemed to refer to the
Certificate of Incorporation of the Corporation, as amended and in effect from
time to time.

       SECTION 8.  Amendment of By-Laws.

       These By-Laws may be amended or repealed by the Board of Directors,
subject to the right of the stockholders to adopt, amend or repeal provisions
of these By-Laws in accordance with the provisions of the Certificate of
Incorporation.





                                     - 32 -

<PAGE>   1
                                                                    EXHIBIT 10.2


              EMPLOYMENT AGREEMENT (this "Agreement") dated February 8, 1996
between 3-D Geophysical, Inc. (the "Company"), a Delaware corporation, and
G.C.L. Kemp (the "Employee").


              WHEREAS, the Employee has been an executive officer of Kemp
Geophysical Corporation ("Kemp") for a number of years;


              WHEREAS, the Company has purchased all of the outstanding capital
stock of Kemp pursuant to that certain Stock Purchase Agreement dated as of
October 24, 1995 among the Company and G.C.L. Kemp and Valerie Kemp;


              WHEREAS, the Company desires to employ the Employee on the terms
and conditions provided in this Agreement;


              WHEREAS, the Employee desires to accept such employment and to
render services to the Company and Kemp on the terms and conditions provided in
this Agreement;


              NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the Company and the Employee hereby agree as follows:


       Section 1.  Engagement.  The Company hereby employs the Employee as a
Vice President of the Company and as President of Kemp, and the Employee hereby
accepts such employment, upon and subject to the terms and conditions
hereinafter set forth.
<PAGE>   2
       Section 2.  Term.  Unless sooner terminated as provided in this
Agreement, the term of the Employee's employment under this Agreement shall
commence on the date of the closing of the underwritten initial public offering
of the Company's common stock, and shall end on December 31, 1998 (the "Term").


       Section 3.  Duties and Services.


       3.1  The Employee shall render services to the Company as a Vice
President of the Company and as President of Kemp, shall perform such other
duties and responsibilities as may be assigned to the Employee from time to
time by the Board of Directors (the "Directors") or Chief Executive Officer of
the Company or by the Board of Directors of Kemp and shall abide by the
practices and policies of the Company and Kemp governing the conduct of
employees.


       3.2  During the Term, the Employee shall devote his full energy and time
(exclusive of normal holidays and vacation periods and periods of sickness and
disability) to the performance of the Employee's duties as defined herein and
shall promptly and faithfully perform all the duties which pertain to the
Employee's employment.


       Section 4.  Compensation.


       4.1  Annual Compensation.  In consideration of all of the services to be
rendered by the Employee hereunder,  the Company agrees to pay to the Employee,
and the Employee agrees to accept, a salary at the annual rate of $75,000,
payable in accordance with the Company's normal payroll practices.




                                    - 2 -
<PAGE>   3
       4.2  Potential Bonus.   In addition to the compensation provided for in
Section 4.1, the Employee may receive such bonus, if any, as shall be
determined in the sole discretion of the Directors (or a duly constituted
committee thereof), but nothing in this Agreement shall be construed to require
the Company to pay any such bonus.


       Section 5.  Expenses and Reimbursement.  The Employee shall be
reimbursed by the Company for reasonable and necessary out-of-pocket expenses
incurred by the Employee in performing his duties hereunder, provided such
expenses are approved in accordance with the procedures of the Company then in
effect and are presented for reimbursement in accordance with the Company's
policies and practices then in effect.


       Section 6.  Benefits.   During the Term, the Company agrees to provide
the Employee,  in addition to and not in limitation of the compensation set
forth in Section 4, the following benefits,  which shall be determined in the
sole discretion of the Directors (or a duly constituted committee thereof):


       (a)    The Employee shall be entitled, subject to qualification
requirements, to participate in any and all group insurance plans, group health
or medical insurance plans, group accidental and disability insurance plans
made generally available to the senior executive employees of the Company
provided that the Employee shall be entitled to the maintenance of his current
medical insurance coverage or substantially equivalent coverage during the
Term.





                                     - 3 -


<PAGE>   4
       (b)    The Employee shall be entitled to participate in the Company's
pension, profit-sharing, stock option, stock purchase and other employee
benefit programs made generally available to the senior executive employees of
the Company.

       (c)    The Employee shall be entitled to vacation, sick leave and
holidays in accordance with the Company's policies for senior executive
employees generally.


       Section 7.  Termination.  Subject to the provisions of Section 8, which
shall survive the termination of this Agreement, this Agreement shall terminate
upon:


       (a)    The death of the Employee;


       (b)    Illness, disability or incapacity that prevents the Employee from
performing his duties hereunder for sixty (60) consecutive days, or for any
sixty (60) days within any one hundred and eighty (180) day period, and the
provision of written notice of such termination to the Employee by the Company;
or


       (c)    Upon written notice for Cause, which shall include, without
limitation, (i) the failure of the Employee to observe or perform any material
term of this Agreement for twenty (20) days after written notice thereof
specifying such failure; (ii) any act of illegality, dishonesty, moral
turpitude or fraud in connection with the Employee's employment; (iii) any
course of action which is materially detrimental to the business of the
Company; or (iv) the commission by the Employee of any felony.


       Section 8.  Restrictive Covenants.  In consideration of the undertakings
of the Company set forth herein, the Employee agrees as follows:





                                     - 4 -


<PAGE>   5
       8.1  Covenant Not to Compete.  The Employee will not in any way,
directly or indirectly, as an agent, employee, officer, director, stockholder,
partner or otherwise of any corporation, partnership or other venture or
enterprise compete with the Company or any of its subsidiaries in the provision
of seismic data acquisition or analysis services or any services related
thereto (a "Competing Business") during the Term, other than pursuant hereto,
and for a period of one (1) year after the termination of this Agreement for
any reason whatsoever.   In consideration of the covenant contained in this
Section 8.1, the Company shall pay the Employee an aggregate of $150,000,
payable in thirty six monthly installments of $4,167 each, payable on the final
day of each month, commencing with the first month of the Term.


       8.2  Non-Solicitation Covenant.  During the Term and for a period of one
(1) year after the termination of this Agreement for any reason whatsoever, the
Employee shall not solicit, sell to or contract with, on behalf of the Employee
or on behalf of any Competing Business, any person or entity to which the
Company or any of its subsidiaries shall have provided seismic data acquisition
or analysis services at any time during the Term.


       8.3  Covenant Not to Solicit Employees of the Company.  During the Term
and for a period of one (1) year after the termination of this Agreement for
any reason whatsoever, the Employee shall not solicit for employment any sales,
engineering or other technical or management employee who was employed by the
Company or any of its subsidiaries during the Term.


       8.4  Non-Disclosure Covenant.  The Employee recognizes and acknowledges
that, prior to and in the course of his employment, the Employee may have had
and shall have





                                     - 5 -


<PAGE>   6
access to trade secrets and other confidential or proprietary information of
the Company and its subsidiaries, including, but not limited to, information
acquired or developed by the Company and its subsidiaries concerning seismic
data, marketing strategy, technology, techniques and know-how, customer
specifications and customer lists, cost figures, budgets, sales forecasts and
business plans.  The Employee agrees that the disclosure of any such trade
secrets or information could be harmful to the interests of the Company or its
subsidiaries and that, during the Employee's employment by the Company or its
subsidiaries, the Employee will take appropriate caution to safeguard such
trade secrets and information, and will not during the Term or thereafter use,
disclose, divulge or publish any such trade secrets or information except as
required by law or as the Employee's duties during the Employee's employment by
the Company or its subsidiaries may require or as the Company may in writing
specifically consent.


       8.5  Proprietary Information.  The Employee recognizes and acknowledges
that all documents, manuals, letters, notebooks, reports, records, computer
programs or data banks and other evidences of trade secrets and other
confidential or proprietary information of the Company and its subsidiaries,
including copies thereof, whether prepared by the Employee or others, are the
sole property of and belong exclusively to the Company and its subsidiaries,
and agrees that, during the Employee's employment by the Company or its
subsidiaries, the Employee will under no circumstances remove any such material
for use outside of his offices except in connection with the business of the
Company during the course of the Employee's employment.  In the event of the
termination of this Agreement for any reason whatsoever, the Employee shall
immediately return to the Company any and all documents, manuals, letters,
notebooks, records, computer programs or data banks or





                                     - 6 -


<PAGE>   7
other evidence of trade secrets and other confidential or proprietary
information of the Company and its subsidiaries (and all copies thereof) which
are the property of the Company or any of its subsidiaries.

       8.6  Remedies.  The Employee further agrees that in the event of a
breach or threatened breach of any of the covenants contained in this Section
8, the Company's remedy at law is likely to be inadequate and that accordingly
the Company will be entitled to obtain an injunction or other equitable relief
with regard thereto without proving damages or that damages would not
constitute an adequate remedy.  If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 8 is invalid
or unenforceable, the parties hereto agree that the court making the
determination of invalidity or unenforceability shall have the power to, and is
hereby directed to, reduce the scope, duration or area of the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid
and unenforceable term or provision, and this Agreement shall be enforceable as
so modified after the expiration of the time within which the judgment may be
appealed.


       9.   Miscellaneous Provisions.


       9.1    Notices.  All notices and demands of any kind which any party
hereto may be required or desire to serve upon another party under the terms of
this Agreement shall be in writing and shall be served upon such other party:
(a) by personal service upon such other party at such other party's address set
forth below in this Section 9.1; or (b) by mailing a copy thereof by certified
or registered mail, postage prepaid, with return receipt





                                     - 7 -


<PAGE>   8
requested, addressed to such other party at the address of such other party set
forth below in this Section 9.1; or (c) by sending a copy thereof by Federal
Express or equivalent courier service, addressed to such other party at the
address of such other party set forth below inthis Section 9.1; or (d) by
sending a copy thereof by facsimile to such other party at the facsimile
number, if any, of such other party set forth below in this Section 9.1.


              In case of service by Federal Express or equivalent courier
service or by facsimile or by personal service, such service shall be deemed
complete upon receipt.  In the case of service by mail, such service shall be
deemed complete upon reasonable proof of receipt.  The address and facsimile
number to which, and person to whose attention, notices and demands shall be
delivered or sent may be changed from time to time by notice served, as
hereinabove provided, by any party upon the other party.

              The current addresses and facsimile members of the parties are:

              If, to Employee:             G. C. "Len" Kemp
                                           c/o Kemp Geophysical Corporation
                                           P.O. Box 821148
                                           11777 Katy Freeway 100
                                           Houston, Tx 77079
                                           Fax: (713)496-0091
                        copy to:           John Michael Webb, Esq.
                                           Webb & Lauterbach, P.C.
                                           1990 Post Oak Blvd. Suite 1570
                                           Houston, Tx 77056-3814
                                           Phone:  (713) 626-9800

                                           Fax:  (713) 626-9807





                                     - 8 -
<PAGE>   9


              If, to the Company:          3-D Geophysical, Inc.
                                           200 Madison Avenue
                                           New York, New York 10021
                                           Attention:    Joel Friedman
                                                         Chairman of the Board
                                           Phone:   (212) 953-0100
                                           Fax:      (212) 953-0626

                        copy to:           Peter S. Kolevzon, Esq.
                                           919 Third Avenue
                                           New York, New York  10022
                                           Phone:  (212) 715-9100
                                           Fax:     (212) 715-8000


       9.2    Entire Agreement; Amendment.  This Agreement contains the entire
agreement between the parties, merges all prior negotiations, agreements and
understandings, if any, and states in full all representations, warranties and
agreements which have induced this Agreement.  Each party agrees that in
dealing with third parties no contrary representations will be made.  This
Agreement may not be amended, modified or otherwise changed orally but only by
an agreement in writing signed by the party against whom enforcement of any
amendment, modification or change is sought.


       9.3    Assignment; Binding Nature; No Beneficiaries.  This Agreement may
not be assigned by any party hereto without the written consent of the other
party.  This Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, personal
representatives, legatees, successors and permitted assigns.  This Agreement
shall not confer any rights or remedies upon any person other than the parties
hereto and their respective heirs, personal representatives, legatees,
successors, and permitted assigns.





                                     - 9 -


<PAGE>   10
       9.4    Nonwaiver.  No waiver by any party of any term, provision or
covenant contained in this Agreement (or any breach thereof) shall be effective
unless it is in writing executed by the party against which such waiver is to
be enforced; no waiver shall be deemed or construed as a further or continuing
waiver of any such term, provision or covenant (or breach) on any other
occasion or as a waiver of any other term, provision or covenant (or of the
breach of any other term, provision or covenant) contained in this Agreement on
the same or any other occasion.


       9.5    Remedies.  The remedies provided for or permitted by this
Agreement shall be cumulative and the exercise by any party of any remedy
provided for herein or otherwise available shall not preclude the assertion or
exercise by such party of any other right or remedy provided for herein or
otherwise available.


       9.6    Headings.  The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.


       9.7     Construction.  In this Agreement (i) words denoting the singular
include the plural and vice versa, (ii) "it" or "its" or words denoting any
gender include all genders, (iii) any reference herein to a Section refers to a
Section of this Agreement, unless otherwise stated, (iv) when calculating the
period of time within or following which any act is to be done or steps taken,
the date which is the reference day in calculating such period shall be
excluded and if the last day of such period is not a business day, then the
period shall end on the next day which is a business day, and (v) all dollar
amounts are expressed in United States funds.





                                     - 10 -


<PAGE>   11
       9.8    Governing Law.  This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware
applicable to contracts made and to be entirely performed therein.

       9.9    Counterparts.  For the convenience of the parties, any number of
counterparts hereof may be executed, each such executed counterpart shall be
deemed an original and all such counterparts together shall constitute one and
the same instrument.


              IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date and year first written above.

                                           3-D GEOPHYSICAL, INC.


Attest:                                    By
                                             ----------------------------------
                                              Name:  Joel Friedman
                                              Title:  Chairman of the Board
- -----------------------                       
John D. White
Secretary


                                           EMPLOYEE:

                                           
                                           ------------------------------------
                                           G.C.L. Kemp





                                     - 11 -



<PAGE>   1
                                                                     EXHIBIT A-2



              EMPLOYMENT AGREEMENT (this "Agreement") dated February 6, 1996
between 3-D Geophysical, Inc. (the "Company"), a Delaware corporation, and
Charles O. Merchant (the "Employee").


              WHEREAS, the Employee has been an executive officer of Paragon
Geophysical, Inc., a Delaware corporation ("Paragon"), for a number of years;


              WHEREAS, the Company has acquired, by merger, all of the
outstanding capital stock of Paragon pursuant to that certain Agreement and
Plan of Merger dated November __, 1995 by and among the Company, 3-D Paragon
Acquisition Sub, Inc., a wholly-owned subsidiary of the Company, and Paragon
(the "Merger Agreement");


              WHEREAS, it is a condition to the closing of the transactions
contemplated under the Merger Agreement that the parties hereto enter into this
Agreement;

              WHEREAS, the Company desires to employ the Employee on the terms
and conditions provided in this Agreement;


              WHEREAS, the Employee desires to accept such employment and to
render services to the Company and Paragon on the terms and conditions provided
in this Agreement;


              NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the Company and the Employee hereby agree as follows:
<PAGE>   2
       Section 1.  Engagement.  The Company hereby employs the Employee as Vice
President of the Company and as President of Paragon, and the Employee hereby
accepts such employment, upon and subject to the terms and conditions
hereinafter set forth.


       Section 2.  Term.  Unless sooner terminated as provided in this
Agreement, the term of the Employee's employment under this Agreement shall
commence on the date of the closing under the Merger Agreement and shall end on
December 31, 1998 (the "Term").


       Section 3.  Duties and Services.


       3.1  The Employee shall render services to the Company as a Vice
President and as President of Paragon, and shall perform such other duties and
responsibilities as may be assigned to the Employee from time to time by the
Board of Directors (the "Directors") or Chief Executive Officer of the Company
and shall abide by the practices and policies of the Company and Paragon
governing the conduct of employees.


       3.2  During the Term, the Employee shall devote his full energy and time
(exclusive of normal holidays and vacation periods and periods of sickness and
disability) to the performance of the Employee's duties as defined herein and
shall promptly and faithfully perform all the duties which pertain to the
Employee's employment.


       Section 4.  Compensation.







                                    - 2 -

<PAGE>   3
       4.1  Annual Compensation.  In consideration of all of the services to be
rendered by the Employee hereunder and the covenants of Employee herein, the
Company agrees to pay to the Employee, and the Employee agrees to accept, a
salary at the annual rate of $82,500.


       4.2  Bonus Pool.  The Company intends to create a bonus plan based upon
the earnings of the Company to provide incentives for certain employees of the
Company and its subsidiaries.  The Employee shall be entitled to participate in
such plan on such terms as may be determined by the Chief Executive Officer and
the Directors, in their discretion.  Nothing in this Agreement shall require
the Company to pay any such bonus.


       4.3  Stock Options.  The Company has established a 1995 Long-Term
Incentive Compensation Plan pursuant to which the Company has granted to the
Employee options to purchase 10,000 shares of Common Stock of the Company as
and to the extent set forth in the Option Agreement governing such grant and
subject to the terms and conditions of such plan.


       Section 5.  Expenses and Reimbursement.  The Employee shall be
reimbursed by the Company for reasonable and necessary out-of-pocket expenses
incurred by the Employee in performing his duties hereunder, provided such
expenses are approved in accordance with the procedures of the Company then in
effect and are presented for reimbursement in accordance with the Company's
policies and practices then in effect.





                                     - 3 -
<PAGE>   4
       Section 6.  Benefits.  During the Term, the Company agrees to provide
the Employee, in addition to and not in limitation of the compensation set
forth in Section 4, the following benefits, which shall be determined in the
sole discretion of the Directors (or a duly constituted committee thereof):


       (a)    The Employee shall be entitled, subject to qualification
requirements, to participate in any and all group insurance plans, group health
or medical insurance plans, group accidental and disability insurance plans
made generally available to the senior executive employees of the Company.


       (b)    The Employee shall be entitled to participate in the Company's
pension, profit-sharing, stock option, stock purchase and other employee
benefit programs made generally available to the senior executive employees of
the Company.


       (c)    The Employee shall be entitled to vacation, sick leave and
holidays in accordance with the Company's policies for senior executive
employees generally.


       (d)    During the term of employment under this Agreement, the Company
shall provide the Employee with a Company vehicle.


       Section 7.  Termination.  Subject to the provisions of Section 8, which
shall survive the termination of this Agreement, this Agreement shall terminate
upon:


       (a)    The death of the Employee;





                                     - 4 -
<PAGE>   5
       (b)    Illness, disability or incapacity that prevents the Employee from
performing his duties hereunder for sixty (60) consecutive days, or for any
sixty (60) days within any one hundred and eighty (180) day period, and the
provision of written notice of such termination to the Employee by the Company;


       (c)    Upon written notice by the Company for Cause, which shall
include:  (i) the failure of the Employee to observe or perform any material
term of this Agreement for twenty (20) days after written notice thereof
specifying such failure; (ii) any act of illegality, dishonesty, moral
turpitude or fraud in connection with the Employee's employment; (iii) any
course of action which is materially detrimental to the business of the Company
(other than good faith actions of the employee to fulfill his duties hereunder
in the exercise of his business judgment and in accordance with the direction
of the Chief Executive Officer or Directors of the Company); or (iv) the
commission by the Employee of any felony; or


       (d)    Upon written notice by the employee for Good Reason.  As used
herein, "Good Reason" shall mean: (i) assignment to the Employee of duties
inconsistent with his position as described herein without his consent; or (ii)
the Employee's permanent relocation to a location more than 100 miles from Mt.
Gilead, Ohio; in either case provided that the Company fails to rescind such
assignment or relocation within 20 days after written notice thereof from the
Employee specifying the condition which is the subject of such notice.





                                     - 5 -
<PAGE>   6
       Section 8  Restrictive Covenants.  In consideration of the undertakings
of the Company set forth herein, the Employee agrees as follows:


       8.1  Covenant Not to Compete.  The Employee will not in any way,
directly or indirectly, as an agent, employee, officer, director, stockholder,
partner or otherwise of any corporation, partnership or other venture or
enterprise compete with the Company or its subsidiaries in the provision of
seismic data acquisition or analysis services or any services related thereto
(a "Competing Business")  during the Term, and, unless this Agreement is
terminated by the Company without Cause or by the Employee for Good Reason, for
a period of one (1) year after the termination of this Agreement for any reason
whatsoever other than (i) pursuant hereto; or (ii) by ownership for investment
purposes of no more than 1% of the stock of a company which is traded on a
national securities exchange or interdealer quotation system.

       8.2  Non-Solicitation Covenant.  During the Term and for a period of one
(1) year after the termination of this Agreement for any reason whatsoever, the
Employee shall not solicit, sell to or contract with, on behalf of the Employee
or on behalf of any Competing Business, any person or entity to which the
Company or its subsidiaries shall have provided seismic data acquisition or
analysis services at any time during the Term or to which Paragon provided such
services during the year preceding the commencement of the Term.





                                     - 6 -
<PAGE>   7

       8.3  Covenant Not to Solicit Employees of the Company.  During the Term
and for a period of one (1) year after the termination of this Agreement for
any reason whatsoever, the Employee shall not solicit for employment any sales,
engineering or other technical or management employee who was employed by the
Company during the Term.


       8.4    Certain Payments.  Upon the termination of this Agreement other
than by the Company for Cause or by the Employee without Good Reason, the
provisions of Sections 8.1, 8.2 and 8.3 shall lapse unless, during the year
following such termination, the Company pays to the Employee an amount equal to
80% of the Employee's salary pursuant to Section 4.1 in equal monthly
installments commencing on the first day of the month following such
termination.  The amounts owed pursuant to this Section 8.4 shall be reduced by
any amounts earned by the Employee as an employee or independent contractor
during such year.


       8.5  Non-Disclosure Covenant.  The Employee recognizes and acknowledges
that, prior to and in the course of his employment, the Employee may have had
and shall have access to trade secrets and other confidential or proprietary
information of the Company and its subsidiaries, including, but not limited to,
information acquired or developed by the Company and its subsidiaries
concerning seismic data, marketing strategy, technology, techniques and
know-how, customer specifications and customer lists, cost figures, budgets,
sales forecasts and business plans. The Employee agrees that the disclosure of
any such trade secrets





                                     - 7 -
<PAGE>   8
or information could be harmful to the interests of the Company or its
subsidiaries and that, during the Employee's employment by the Company or its
subsidiaries, the Employee will take appropriate caution to safeguard such
trade secrets and information, and will not during the Term or thereafter use,
disclose, divulge or publish any such trade secrets or information except as
required by law or as the Employee's duties during the Employee's employment by
the Company or its subsidiaries may require or as the Company may in writing
specifically consent.


       8.6  Proprietary Information.  The Employee recognizes and acknowledges
that all documents, manuals, letters, notebooks, reports, records, computer
programs or data banks and other evidences of trade secrets and other
confidential or proprietary information of the Company and its subsidiaries,
including copies thereof, whether prepared by the Employee or others, are the
sole property of and belong exclusively to the Company or its subsidiaries, and
agrees that, during the Employee's employment by the Company or its
subsidiaries, the Employee will under no circumstances remove any such material
for use outside of his offices except in connection with the business of the
Company or its subsidiaries during the course of the Employee's employment.  In
the event of the termination of this Agreement for any reason whatsoever, the
Employee shall immediately return to the Company any and all documents,
manuals, letters, notebooks, records, computer programs or data banks or other
evidence of trade secrets and other confidential or proprietary information of
the





                                     - 8 -
<PAGE>   9
Company and its subsidiaries (and all copies thereof) which are the property of
the Company or any of its subsidiaries.


       8.7  Remedies.  The Employee further agrees that in the event of a
breach or threatened breach of any of the covenants contained in this Section
8, the Company's remedy at law is likely to be inadequate and that accordingly
the Company will be entitled to obtain an injunction or other equitable relief
with regard thereto without proving damages or that damages would not
constitute an adequate remedy.  If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 8 is invalid
or unenforceable, the parties hereto agree that the court making the
determination of invalidity or unenforceability shall have the power to, and is
hereby directed to, reduce the scope, duration or area of the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid
and unenforceable term or provision, and this Agreement shall be enforceable as
so modified after the expiration of the time within which the judgment may be
appealed.


       9.   Miscellaneous Provisions.


       9.1    Notices.  All notices and demands of any kind which any party
hereto may be required or desire to serve upon another party under the terms of
this Agreement shall be in writing and shall be served upon such other party:
(a) by personal service upon such other party at such other party's address set
forth





                                     - 9 -
<PAGE>   10
below in this Section 9.1; or (b) by mailing a copy thereof by certified or
registered mail, postage prepaid, with return receipt requested, addressed to
such other party at the address of such other party set forth below in this
Section 9.1; or (c) by sending a copy thereof by Federal Express or equivalent
courier service, addressed to such other party at the address of such other
party set forth below in this Section 9.1; or (d) by sending a copy thereof by
facsimile to such other party at the facsimile number, if any, of such other
party set forth below in this Section 9.1.


              In case of service by Federal Express or equivalent courier
service or by facsimile or by personal service, such service shall be deemed
complete upon receipt.  In the case of service by mail, such service shall be
deemed complete upon reasonable proof of receipt.  The address and facsimile
number to which, and person to whose attention, notices and demands shall be
delivered or sent may be changed from time to time by notice served, as
hereinabove provided, by any party upon the other party.

              The current addresses and facsimile members of the parties are:

              If, to Employee:             Charles O. Merchant
                                           5707 State Route 61, North
                                           P.O. Box 32
                                           Mt. Gilead, Ohio 43338





                                     - 10 -
<PAGE>   11
              If, to the Company:          3-D Geophysical, Inc.
                                           200 Madison Avenue
                                           New York, New York 10016
                                           Attention: Joel Friedman, Chairman
                                               of the Board
                                           Phone:  (212) 953-0100
                                           Fax:  (212) 953-0626

                        copy to:           Peter S. Kolevzon, Esq.
                                           919 Third Avenue
                                           New York, New York  10022
                                           Phone:  (212) 715-9100
                                           Fax:  (212) 715-8000


       9.2    Entire Agreement; Amendment.  This Agreement contains the entire
agreement between the parties, merges all prior negotiations, agreements and
understandings, if any, and states in full all representations, warranties and
agreements which have induced this Agreement.  Each party agrees that in
dealing with third parties no contrary representations will be made.  This
Agreement may not be amended, modified or otherwise changed orally but only by
an agreement in writing signed by the party against whom enforcement of any
amendment, modification or change is sought.


       9.3    Assignment; Binding Nature; No Beneficiaries.  This Agreement may
not be assigned by either party hereto without the written consent of the other
party.  This Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, personal
representatives, legatees, successors and permitted assigns.  This Agreement
shall not confer any rights or remedies upon any person other than the parties
hereto and their respective heirs,





                                     - 11 -
<PAGE>   12
personal representatives, legatees, successors and permitted assigns.


       9.4    Nonwaiver.  No waiver by any party of any term, provision or
covenant contained in this Agreement (or any breach thereof) shall be effective
unless it is in writing executed by the party against which such waiver is to
be enforced; no waiver shall be deemed or construed as a further or continuing
waiver of any such term, provision or covenant (or breach) on any other
occasion or as a waiver of any other term, provision or covenant (or of the
breach of any other term, provision or covenant) contained in this Agreement on
the same or any other occasion.


       9.5    Remedies.  The remedies provided for or permitted by this
Agreement shall be cumulative and the exercise by any party of any remedy
provided for herein or otherwise available shall not preclude the assertion or
exercise by such party of any other right or remedy provided for herein or
otherwise available.


       9.6    Headings.  The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.


       9.7     Construction.  In this Agreement (i) words denoting the singular
include the plural and vice versa, (ii) "it" or "its" or words denoting any
gender include all genders, (iii) any reference herein to a Section refers to a
Section of the Agreement, unless otherwise stated, (iv) when calculating the
period of time within or following which any act is to be done or steps taken,
the date which is the reference day in calculating such





                                     - 12 -
<PAGE>   13
period shall be excluded and if the last day of such period is not a business
day, then the period shall end on the next day which is a business day, and (v)
all dollar amounts are expressed in United States funds.


       9.8    Governing Law.  This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware
applicable to contracts made and to be entirely performed therein.


       9.9    Counterparts.  For the convenience of the parties, any number of
counterparts hereof may be executed, each such executed counterpart shall be
deemed an original and all such counterparts together shall constitute one and
the same instrument.





                                     - 13 -
<PAGE>   14
              IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date and year first written above.

                                                3-D GEOPHYSICAL, INC.


Attest:                                         By                            
                                                  -----------------------------
                                                  Name:
                                                  Title:
- ----------------------------                            
Secretary


                                                EMPLOYEE:

                                                -------------------------------
                                                Charles O. Merchant





                                     - 14 -

<PAGE>   1


              EMPLOYMENT AGREEMENT (this "Agreement") dated January 31, 1996
between 3-D Geophysical, Inc. (the "Company"), a Delaware corporation, and
Wayne P. Widynowski (the "Employee").

              WHEREAS, the Employee has been an executive officer of Northern
Geophysical of America, Inc. ("Northern") for a number of years;

              WHEREAS, the Company has agreed to purchase substantially all of
the assets of Northern pursuant to that certain Asset Purchase Agreement dated
as of November 8, 1995 by and between the Company and Northern (the "Asset
Purchase Agreement");

              WHEREAS, the Employee is a shareholder of Northern and the
Company has required in connection with the closing of the transactions
contemplated by such Asset Purchase Agreement that the parties hereto enter
into this Agreement;

              WHEREAS, the Company desires to employ the Employee on the terms
and conditions provided in this Agreement; and

              WHEREAS, the Employee desires to accept such employment and to
render services to the Company on the terms and conditions provided in this
Agreement.

              NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the Company and the Employee hereby agree as follows:
<PAGE>   2
       Section 1.  Engagement.  The Company hereby employs the Employee as
Executive Vice President and Chief Operating Officer of the Company, and the
Employee hereby accepts such employment, upon and subject to the terms and
conditions hereinafter set forth.

       Section 2.  Term.  Unless sooner terminated as provided in this
Agreement, the term of the Employee's employment under this Agreement shall
commence on the date of the closing of the Asset Purchase Agreement and shall
end two years thereafter, provided that such term shall automatically be
extended for successive one-year periods, unless at least three months prior to
the date on which such term would otherwise expire, either the Company or the
Employee shall give the other notice to the contrary (as so extended, the
"Term").

       Section 3.  Duties and Services.

       3.1  The Employee shall render services to the Company as Executive Vice
President and Chief Operating Officer of the Company, shall perform such other
duties and responsibilities (including service otherwise consistent with the
Employee's duties hereunder as an officer, director or equivalent position of
any subsidiary, affiliated company or venture of the Company, without
additional compensation) as may be assigned to the Employee from time to time
by the Board of Directors (the "Directors") or Chief Executive Officer of the
Company and shall abide by the practices and policies of the Company governing
the conduct of employees.  The Company and all such subsidiaries, affiliated
companies and ventures are herein collectively referred to as the "3-D
Companies."





                                     - 2 -
<PAGE>   3
       3.2  During the Term, the Employee shall devote his full energy and time
(exclusive of normal holidays and vacation periods and periods of sickness and
disability) to the performance of the Employee's duties as defined herein and
shall promptly and faithfully perform all the duties which pertain to the
Employee's employment.  The previous sentence shall not prohibit the Employee
from activities permitted pursuant to clause (iii) of Section 8.1 or from
activities in connection with ownership of an interest in the real property
owned by Northern in Grand Junction, Colorado, provided that such activities do
not interfere with the performance of Employee's duties hereunder.

       Section 4.  Compensation.

       4.1  Annual Compensation.  In consideration of all of the services to be
rendered by the Employee hereunder and the covenants of Employee herein, the
Company agrees to pay to the Employee, and the Employee agrees to accept, a
salary at the annual rate of $140,000, payable in accordance with the Company's
normal payroll practices.

       4.2  Bonus Pool.  The Company intends to create a bonus plan based upon
the earnings of the Company to provide incentives for certain employees of the
Company and its subsidiaries.  The Employee shall be entitled to participate in
such plan on such terms as may be determined by the Board of Directors of the
Company or a duly constituted committee thereof, in their discretion.  Nothing
in this Agreement shall require the Company to pay any such bonus.

       4.3  Stock Options.  The Company has established a 1995 Long-Term
Incentive Compensation Plan pursuant to which the Company has granted to the
Employee options to





                                     - 3 -
<PAGE>   4
purchase 45,000* shares of Common Stock of the Company as and to the extent set
forth in the Option Agreement governing such grant and subject to the terms and
conditions of such plan.

       Section 5.  Expenses and Reimbursement.  The Employee shall be
reimbursed by the Company for reasonable and necessary out-of-pocket expenses
incurred by the Employee in performing his duties hereunder, provided such
expenses are approved in accordance with the procedures of the Company then in
effect and are presented for reimbursement in accordance with the Company's
policies and practices then in effect.

       Section 6.  Benefits.  During the Term, the Company agrees to provide
the Employee, in addition to and not in limitation of the compensation set
forth in Section 4, the following benefits, which shall be determined in the
sole discretion of the Directors (or a duly constituted committee thereof):

       (a)    The Employee shall be entitled, subject to general qualification
requirements, to participate in any and all group insurance plans, group health
or medical insurance plans, group accidental and disability insurance plans
made generally available to the senior executive employees of the Company
provided that the Employee shall be entitled at the closing of the Asset
Purchase Agreement to medical, health insurance and disability coverage
substantially equivalent to that currently provided to the Employee by Northern
provided that (i) in the event that the group health or medical insurance plans
in which the Employee participates are changed to increase the deductible
amount to be paid by the Employee, the Employee shall be entitled,





- ----------------------------------
*      Subject  to adjustment in connection  with changes to  the
       capitalization of the Company prior to the Company's initial public
       offering.

                                     - 4 -
<PAGE>   5
during the remainder of the Term, to reimbursement from the Company for any
health or medical expenses which but for such change would have been paid by
such plans and which as a result of such change are obligations of the
Employee; and (ii) in the event that this Agreement is terminated pursuant to
Section 7(b), the Company shall pay to the Employee during the lesser of (A)
six months following such termination and (B) the remainder of the Term an
amount equal to the Employee's salary pursuant to Section 4.1 less any payments
to Employee pursuant to any plan of disability insurance based on the
Employee's disability.  Except to the extent set forth in the prior sentence,
any payment owed by the Company pursuant to such sentence is in addition to and
not in lieu of any policy of disability insurance, and payments owed by the
Company pursuant to such sentence shall not be deemed co-insurance but
additional salary.

       (b)    The Employee shall be entitled to participate in the Company's
pension, profit-sharing, stock option, stock purchase and other employee
benefit programs made generally available to the senior executive employees of
the Company.

       (c)    The Employee shall be entitled to vacation, sick leave and
holidays in accordance with the Company's policies for senior executive
employees generally but in no case less than four weeks paid vacation per
annum.

       (d)    During the term of employment under this Agreement, the Company
shall pay the Employee $575 per month as a non-accountable allowance for lease
payments, insurance and other expenses of an automobile leased by the Employee.
The Company shall provide all insurance for such vehicles required by law or
applicable lease terms.





                                     - 5 -
<PAGE>   6
       Section 7.  Termination.  Subject to the provisions of Section 8, which
shall survive the termination of this Agreement, this Agreement shall terminate
upon:

       (a)    The death of the Employee;

       (b)    Illness, disability or incapacity that prevents the Employee from
performing his duties hereunder for sixty (60) consecutive days, or for any
sixty (60) days within any one hundred and eighty (180) day period, and the
provision of written notice of such termination to the Employee by the Company;

       (c)    Upon written notice by the Company for Cause, which shall
include: (i) the failure of the Employee to observe or perform any material
term of this Agreement for twenty (20) days after written notice thereof
specifying such failure; (ii) any act of illegality, dishonesty, moral
turpitude or fraud in connection with the Employee's employment; (iii) any
course of action which is materially detrimental to the business of the Company
(other than good faith actions of the employee to fulfill his duties hereunder
in the exercise of his business judgment and not inconsistent with the
direction of the Chief Executive Officer or Directors of the Company); or (iv)
the commission by the Employee of any felony; or

       (d)    Upon written notice by the employee for Good Reason.  As used
herein, "Good Reason" shall mean: (i) assignment to the Employee of duties
inconsistent with his position as described herein without his consent; or (ii)
the Employee's permanent relocation to a location (A) more than 100 miles from
Denver or Grand Junction, Colorado or (B) outside the Anchorage, Alaska
metropolitan area; in either case provided that the Company fails to rescind
such





                                     - 6 -
<PAGE>   7
assignment or relocation within 20 days after written notice thereof from the
Employee specifying the condition which is the subject of such notice.

       Section 8.  Restrictive Covenants.  In consideration of the undertakings
of the Company set forth herein, the Employee agrees as follows:

       8.1  Covenant Not to Compete.  The Employee will not in any way, as an
agent, employee, officer, director, stockholder, partner or otherwise of any
corporation, partnership or other venture or enterprise, compete with the 3-D
Companies in the provision of seismic data acquisition or analysis services or
any services related thereto (a "Competing Business") during the Term, and,
unless this Agreement is terminated by the Company without Cause or by the
Employee for Good Reason, for a period of one (1) year after the termination of
this Agreement for any reason whatsoever other than (i) pursuant hereto; (ii)
by ownership for investment purposes of no more than 1% of the stock of a
company which is traded on a national securities exchange or interdealer
quotation system; or (iii) the sale, use and licensing by the Employee,
directly or indirectly, in a manner which does not interfere with the
performance of Employee's duties hereunder, of seismic data retained by
Northern pursuant to the Asset Purchase Agreement and transferred to the
Employee or an entity in which the Employee has an interest (the "Seismic Data
Library").

       8.2  Non-Solicitation Covenant.  During the Term and for a period of one
(1) year after the termination of this Agreement for any reason whatsoever, the
Employee shall not solicit, sell to or contract with, on behalf of the Employee
or on behalf of any Competing Business, any person or entity to which the 3-D
Companies shall have provided seismic data acquisition or





                                     - 7 -
<PAGE>   8
analysis services at any time during the Term or to which Northern provided
such services during the year preceding the commencement of the Term where such
solicitation, sale or contract relates to the provision of seismic data
acquisition or analysis services or any services related thereto.  This Section
8.2 shall not prohibit the sale, use and licensing by the Employee, directly or
indirectly, in a manner which does not interfere with the performance of
Employee's duties hereunder, of the Seismic Data Library.

       8.3  Covenant Not to Solicit Employees of the Company.  During the Term
and for a period of one (1) year after the termination of this Agreement for
any reason whatsoever, the Employee shall not solicit for employment any sales,
engineering or other technical or management employee who was employed by the
3-D Companies during the six months prior to the conclusion of the Term.

       8.4    Certain Payments.  Upon the termination of this Agreement other
than by the Company for Cause or by the Employee without Good Reason, the
provisions of Sections 8.1, 8.2 and 8.3 shall lapse unless, during the year
following such termination, the Company pays to the Employee an amount equal to
80% of the Employee's salary pursuant to Section 4.1 in equal monthly
installments commencing on the first day of the month following such
termination.  Such lapse shall occur if the Company (i) fails to pay the first
such installment within 20 days of notice from the Employee citing this Section
or (ii) fails to make any subsequent payment within seven days of notice from
the Employee citing this Section.  In the event the Company makes the payment
described in clause (i) of the preceding sentence and the circumstances
described in clause (ii) occur, the remaining payments described in the
preceding sentence shall become





                                     - 8 -
<PAGE>   9
immediately due and payable.  The amounts owed pursuant to this Section 8.5
shall be reduced (or if already paid shall be repaid by the Employee) to the
extent that such amounts plus any amounts earned by the Employee as an employee
or independent contractor during such year exceed 120% of the Employee's annual
salary pursuant to Section 4.1.

       8.5  Non-Disclosure Covenant.  The Employee recognizes and acknowledges
that, prior to and in the course of his employment, the Employee may have had
and shall have access to trade secrets and other confidential or proprietary
information of the 3-D Companies, including, but not limited to, information
acquired or developed by the 3-D Companies and Northern concerning seismic
data, marketing strategy, technology, techniques and know-how, customer
specifications and customer lists, cost figures, budgets, sales forecasts and
business plans (other than the Seismic Data Library).  The Employee agrees that
the disclosure of any such trade secrets or information could be harmful to the
interests of the 3-D Companies and that, during the Employee's employment by
the Company, the Employee will take appropriate caution to safeguard such trade
secrets and information, and will not during the Term or thereafter use,
disclose, divulge or publish any such trade secrets or information except as
required by law or as the Employee's duties during the Employee's employment by
the Company may require or as the Company may in writing specifically consent.

       8.6  Proprietary Information.  The Employee recognizes and acknowledges
that all documents, manuals, letters, notebooks, reports, records, computer
programs or data banks and other evidences of trade secrets and other
confidential or proprietary information of the 3-D Companies, including copies
thereof, whether prepared by the Employee or others, are the sole





                                     - 9 -
<PAGE>   10
property of and belong exclusively to the 3-D Companies, and agrees that,
during the Employee's employment by the Company, the Employee will under no
circumstances remove any such material for use outside of his offices except in
connection with the business of the 3-D Companies during the course of the
Employee's employment.  In the event of the termination of this Agreement for
any reason whatsoever, the Employee shall immediately return to the Company any
and all documents, manuals, letters, notebooks, records, computer programs or
data banks or other evidence of trade secrets and other confidential or
proprietary information of the 3-D Companies (and all copies thereof) which are
the property of the 3-D Companies.

       8.7  Remedies.  The Employee further agrees that in the event of a
breach or threatened breach of any of the covenants contained in this Section
8, the Company's remedy at law is likely to be inadequate and that accordingly
the Company will be entitled to obtain an injunction or other equitable relief
with regard thereto without proving damages or that damages would not
constitute an adequate remedy.  If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 8 is invalid
or unenforceable, the parties hereto agree that the court making the
determination of invalidity or unenforceability shall have the power to, and is
hereby directed to, reduce the scope, duration or area of the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid
and unenforceable term or provision, and this Agreement shall be enforceable as
so modified after the expiration of the time within which the judgment may be
appealed.





                                     - 10 -
<PAGE>   11
       9.   Miscellaneous Provisions.

       9.1    Notices.  All notices and demands of any kind which any party
hereto may be required or desire to serve upon another party under the terms of
this Agreement shall be in writing and shall be served upon such other party:
(a) by personal service upon such other party at such other party's address set
forth below in this Section 9.1; (b) by mailing a copy thereof by certified or
registered mail, postage prepaid, with return receipt requested, addressed to
such other party at the address of such other party set forth below in this
Section 9.1; or (c) by sending a copy thereof by Federal Express or equivalent
courier service, addressed to such other party at the address of such other
party set forth below in this Section 9.1.

              In case of service by Federal Express or equivalent courier
service or by personal service, such service shall be deemed complete upon
receipt.  In the case of service by mail, such service shall be deemed complete
upon reasonable proof of receipt.  The address to which, and person to whose
attention, notices and demands shall be delivered or sent may be changed from
time to time by notice served, as hereinabove provided, by any party upon the
other party.

              The current addresses of the parties are:

              If, to Employee:

                                   Wayne P. Widynowski
                                   7763 South Elm Court
                                   Littleton, Colorado   80122





                                     - 11 -
<PAGE>   12
                        copy to:   Paul F. Lewis, Esq.
                                   Moye, Giles, O'Keefe, Vermeire & Gorrell
                                   1225 Seventeenth Street
                                   29th Floor
                                   Denver, Colorado  80202

              If, to the Company:  3-D Geophysical, Inc.
                                   200 Madison Avenue
                                   New York, New York 10021
                                   Attention:  Joel Friedman, Chief Executive
                                               Officer

                        copy to:   Peter S. Kolevzon, Esq.
                                   919 Third Avenue
                                   New York, New York  10022

       9.2    Entire Agreement; Amendment.  This Agreement contains the entire
agreement between the parties, merges all prior negotiations, agreements and
understandings, if any, and states in full all representations, warranties and
agreements which have induced this Agreement.  Each party agrees that in
dealing with third parties no contrary representations will be made.  This
Agreement may not be amended, modified or otherwise changed orally but only by
an agreement in writing signed by the party against whom enforcement of any
amendment, modification or change is sought.

       9.3    Assignment; Binding Nature; No Beneficiaries.  This Agreement may
not be assigned by any party hereto without the written consent of the other
party.  This Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, personal
representatives, legatees, successors and permitted assigns.  This Agreement
shall not confer any rights or remedies upon any person other than the parties
hereto and their respective heirs, personal representatives, legatees,
successors, and permitted assigns.





                                     - 12 -
<PAGE>   13
       9.4    Nonwaiver.  No waiver by any party of any term, provision or
covenant contained in this Agreement (or any breach thereof) shall be effective
unless it is in writing executed by the party against which such waiver is to
be enforced; no waiver shall be deemed or construed as a further or continuing
waiver of any such term, provision or covenant (or breach) on any other
occasion or as a waiver of any other term, provision or covenant (or of the
breach of any other term, provision or covenant) contained in this Agreement on
the same or any other occasion.

       9.5    Remedies.  The remedies provided for or permitted by this
Agreement shall be cumulative and the exercise by any party of any remedy
provided for herein or otherwise available shall not preclude the assertion or
exercise by such party of any other right or remedy provided for herein or
otherwise available.

       9.6    Headings.  The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.

       9.7     Construction.  In this Agreement (i) words denoting the singular
include the plural and vice versa, (ii) "it" or "its" or words denoting any
gender include all genders, (iii) any reference herein to a Section refers to a
Section of this Agreement, unless otherwise stated, (iv) when calculating the
period of time within or following which any act is to be done or steps taken,
the date which is the reference day in calculating such period shall be
excluded and if the last day of such period is not a business day, then the
period shall end on the next day which is a business day, and (v) all dollar
amounts are expressed in United States funds.





                                     - 13 -
<PAGE>   14
       9.8    Governing Law; Arbitration.  This Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of
Delaware applicable to contracts made and to be entirely performed therein.
Any controversy arising out of or relating to this Agreement or the breach
hereof shall be settled by arbitration in Denver, Colorado before a single,
neutral arbitrator who shall be a former state or federal judge in accordance
with the Commercial Arbitration rules of the American Arbitration Association
then obtaining and judgment upon the award rendered may be entered in any court
having jurisdiction thereof, except that in the event of any controversy
relating to any violation or alleged violation of any provision of Section 8
hereof, the Company in its sole discretion shall be entitled to seek injunctive
relief from a court of competent jurisdiction without any requirement to seek
arbitration.  The party (or aligned parties) substantially prevailing in such
arbitration or judicial proceeding shall receive in addition to other relief
afforded by the arbitrator or judge an award of costs, expert witness fees and
reasonable attorneys' fees.

       9.9    Counterparts.  For the convenience of the parties, any number of
counterparts hereof may be executed, each such executed counterpart shall be
deemed an original and all such counterparts together shall constitute one and
the same instrument.





                                     - 14 -
<PAGE>   15
              IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date and year first written above.


                                           3-D GEOPHYSICAL, INC.

Attest:                                    By /s/ JOEL FRIEDMAN
                                             ------------------------------
                                             Name:  Joel Friedman
/s/ JOHN D. WHITE, JR.                       Title:  Chief Executive Officer
- -------------------------                                                     
Name:  John D. White, Jr.
Title:  Secretary

                                           EMPLOYEE:

                                           /s/ WAYNE P. WIDYNOWSKI
                                           --------------------------------
                                           Wayne P. Widynowski





                                     - 15 -

<PAGE>   1
                         EXECUTIVE EMPLOYMENT AGREEMENT

        EMPLOYMENT AGREEMENT (this "Agreement") dated September 30, 1996
between 3-D Geophysical, Inc., a Delaware corporation (the "Company"), and
Ronald L. Koons (the "Employee"). 

        WHEREAS, the Company desires to employ the Employee on the terms and
conditions provided in this Agreement; and 

        WHEREAS, the Employee desires to accept such employment and to render
services to the Company on the terms and conditions provided in this Agreement; 

        NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the Company and the Employee hereby agree as follows: 

        Section 1.      Engagement.  The Company hereby employs the Employee
as Vice President and Chief Financial Officer, and the Employee hereby accepts
such employment, upon and subject to the terms and conditions hereinafter set
forth. 

        Section 2.      Term.  Unless sooner terminated as provided in this
Agreement, the term of the Employee's employment under this Agreement shall
commence on September 30, 1999 (the "Term"). 
<PAGE>   2
        Section 3.      Duties and Services. 

        3.1     The Employee shall render services to the Company as Vice
President and Chief Financial Officer and shall perform such other duties and
responsibilities as may be assigned to the Employee from time to time by the
Board of Directors (the "Directors") or the Chief Executive Officer of the
Company and shall abide by the practices and policies of the Company governing
the conduct of employees. 

        3.2     During the Term, the Employee shall devote such energy and
time (exclusive of normal holidays and vacation periods and periods of sickness
and disability) as is reasonably necessary to perform the Employee's duties as
defined herein and shall promptly and faithfully perform all the duties which
pertain to the Employee's employment. 

        Section 4.      Compensation.

        4.1     Annual Compensation.  In consideration of all of the services
to be rendered by the Employee hereunder and the covenants of Employee herein,
the Company agrees to pay to the Employee, and the Employee agrees to accept, a
salary at the annual rate of $125,000.00. 

        4.2     Bonus Pool.  The Company intends to create a bonus plan based
upon the earnings of the Company to provide incentives for certain employees of
the Company and its subsidiaries. The Employee shall be entitled to participate
in such plan on such terms as may be determined by the Compensation Committee
of the 





                                      -2-
<PAGE>   3
Directors, in its discretion. Nothing in this Agreement shall require the
Company to pay any such bonus.

        4.3  Grant of Option.  As further consideration of the services to be
rendered by the Employee, on the Effective Date the Employee shall be granted
an option (the "Option"), pursuant to the Company's 1995 Long Term Incentive
Compensation Plan (the "Plan"), to purchase 30,000 shares of the Company's
Common Stock at a per share exercise price equal to the fair market value of
one share of Common Stock on the Effective Date. The Option shall vest in three
equal cumulative annual installments commencing on the first anniversary of the
Effective Date. The terms of the Option shall be governed by the Plan, as well
as the terms of the option agreement entered into pursuant to the terms of the 
Plan.

        Section 5.  Expenses and Reimbursement.  The Employee shall be
reimbursed by the Company for reasonable and necessary out-of-pocket expenses
incurred by the Employee in performing his duties hereunder, provided such
expenses are approved in accordance with the procedures of the Company then in
effect and are presented for reimbursement in accordance with the Company's
policies and practices then in effect.

        Section 6.  Benefits.  During the Term, the Company agrees to provide
the Employee, in addition to and not in limitation of the compensation set
forth in Section 4, the following benefits,




                                      -3-
<PAGE>   4
which shall be determined in the sole discretion of the Directors (or a duly
constituted committee thereof);

        (a)  The Employee shall be entitled, subject to qualification
requirements, to participate in any and all group insurance plans, group health
or medical insurance plans, group accidental and disability insurance plans
made generally available to the senior executive employees of the Company.

        (b)  The Employee shall be entitled to participate in the Company's
pension, profit-sharing, stock option, stock purchase and other employee
benefit programs made generally available to the senior executive employees of
the Company.

        (c)  The Employee shall be entitled to three weeks annual paid
vacation, as well as sick leave and holidays in accordance with the Company's
policies for senior executive employees generally.

        (d)  During the term of employment under this Agreement, the company
shall pay the Employee, on a monthly basis, an amount equal to $650 per month
as a non-accountable allowance for lease payments, insurance and other expenses
of an automobile leased by the Employee.

        Section 7.  Termination.  Subject to the provisions of Section 8, which
shall survive the termination of this Agreement, this Agreement shall terminate 
upon:

        (a)  The death of the Employee;




                                      -4-

<PAGE>   5
        (b)     Illness, disability or incapacity that prevents the Employee
from performing his duties hereunder for sixty (60) consecutive days, or for
any sixty (60) days within any one hundred and eighty (180) day period, and the
provision of written notice of such termination to the Employee by the Company;
or

        (c)     Upon written notice for Cause, which shall include, without
limitation, (i) the failure of the Employee to observe or perform any material
term of this Agreement for twenty (20) days after written notice thereof
specifying such failure; (ii) any act of illegality, dishonesty, moral
turpitude, or fraud in connection with the Employee's employment; or (iii) the
commission by the Employee of any felony.

        Section 8.      Restrictive Covenants. In consideration of the
undertakings of the Company set forth herein, the Employee agrees as follows:

        8.1     Covenant Not to Compete.  The Employee will not in any way,
directly or indirectly, as an agent, employee, officer, director, stockholder,
partner or otherwise of any corporation, partnership or other venture or
enterprise compete with the Company or any of its subsidiaries in the provision
of seismic data acquisition or analysis services or any services related
thereto (a "Competing Business") during the Term, other than pursuant hereto,
and for a period of one (1) year after the termination of this Agreement for any
reason whatsoever, unless this Agreement is terminated without Cause.

                                      -5-


<PAGE>   6
       8.2      Non-solicitation Covenant.  During the Term and for a period of
one (1) year after the termination of this Agreement for any reason whatsoever,
the Employee shall not solicit, sell to or contract with, on behalf of the
Employee or on behalf of any Competing Business, any person or entity to which
the Company or any subsidiary of the Company, shall have provided seismic data
acquisition or analysis services at any time during the Term.

        8.3     Covenant Not to Solicit Employees of the Company.  During the
Term and for a period of one (1) year after the termination of this Agreement
for any reason whatsoever, the Employee shall not solicit for employment any
sales, engineering or other technical or management employee who was employed
by the Company or any of its subsidiaries during the Term.

        8.4     Non-Disclosure Covenant.  The Employee recognizes and
acknowledges that, in the course of his employment, the Employee will have
access to trade secrets and other confidential or proprietary information of the
Company and its subsidiaries, including, but not limited to, information
acquired or developed by the Company and its subsidiaries concerning seismic
data, marketing strategy, technology, techniques and know-how, customer
specifications and customer lists, cost figures, budgets, sales forecasts and
business plans. The Employee agrees that the disclosure of any such trade
secrets or information could be harmful to the interests of the Company or its
subsidiaries and that, during the Employee's employment by the Company or its

                                      -6-


<PAGE>   7
subsidiaries, the Employee will take appropriate caution to safeguard such
trade secrets and information, and will not during the Term or thereafter use,
disclose, divulge or publish any such trade secrets or information except as
required by law or as the Employee's duties during the Employee's employment by
the Company or its subsidiaries may require or as the Company may in writing
specifically consent.

        8.5     Proprietary Information. The Employee recognizes and
acknowledges that all documents, manuals, letters, notebooks, reports, records,
computer programs or data banks and other evidences of trade secrets and other
confidential or proprietary information of the Company and its subsidiaries,
including copies thereof, whether prepared by the Employee or others, are the
sole property of and belong exclusively to the Company and its subsidiaries,
and agrees that, during the Employee's employment by the Company or its
subsidiaries, the Employee will under no circumstances remove any such material
for use outside of his offices except in connection with the business of the
Company during the course of the Employee's employment. In the event of the
termination of this Agreement for any reason whatsoever, the Employee shall
immediately return to the Company any and all documents, manuals, letters,
notebooks, records, computer programs or data banks or other evidence of trade
secrets and other confidential or proprietary information of the Company and
its subsidiaries (and all copies thereof) which are the property of the Company
or any of its subsidiaries.




                                      -7-
<PAGE>   8
        8.6     Remedies. The Employee further agrees that in the event of a
breach or threatened breach of any of the covenants contained in this Section
8, the Company's remedy at law is likely to be inadequate and that accordingly
the Company will be entitled to obtain an injunction or other equitable relief
with regard thereto without proving damages or that damages would not
constitute an adequate remedy. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 8 is invalid
or unenforceable, the parties hereto agree that the court making the
determination of invalidity or unenforceability shall have the power to, and is
hereby directed to, reduce the scope, duration or area of the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid
and unenforceable term or provision, and this Agreement shall be enforceable as
so modified.

        9.      Miscellaneous Provisions.

        9.1     Notices. All notices and demands of any kind which any party
hereto may be required or desire to serve upon another party under the terms of
this Agreement shall be in writing and shall be served upon such other party:
(a) by personal service upon such other party at such other party's address set
forth below in this Section 9.1; or (b) by mailing a copy thereof by certified
or registered mail, postage prepaid, with return receipt requested, addressed
to such other party at the address




                                      -8-
<PAGE>   9
of such other party set forth below in this Section 9.1; or (c) by sending a
copy thereof by Federal Express or equivalent courier service, addressed to
such other party at the address of such other party set forth below in this
Section 9.1; or (d) by sending a copy thereof by facsimile to such other party
at the facsimile number, if any, of such other party set forth below in this
Section 9.1.

        In case of service by Federal Express or equivalent courier service or
by facsimile or by personal service, such service shall be deemed complete upon
receipt. In the case of service by mail, such service shall be deemed complete
upon reasonable proof of receipt. The address and facsimile number to which,
and person to whose attention, notices and demands shall be delivered or sent
may be changed from time to time by notice served, as hereinabove provided, by
any party upon the other party.

        The current addresses and facsimile numbers of the parties are:

                If to the Employee:

                Ronald Koons
                c/o 3-D Geophysical, Inc.
                7076 South Alton Way, Building H
                Englewood, Colorado 80112
                Telecopier No.: (303) 290-0447


                If to the Company:

                3-D Geophysical, Inc.
                599 Lexington Avenue
                  Suite 4102
                New York, New York 10022
                Telecopier No.: (212) 317-9230
                Attention: Joel Friedman, Chairman




                                      -9-
<PAGE>   10
                with a copy to:
                
                Kramer, Levin, Naftalis & Frankel
                919 Third Avenue
                New York, New York  10022
                Telecopier No.:  (212) 715-8000
                Attention:  Peter S. Kolevzon, Esq.


        9.2  Entire Agreement; Amendment.  This Agreement contains the entire
agreement between the parties, merges all prior negotiations, agreements and
understandings, if any, and states in full all representations, warranties and
agreements which have induced this Agreement. Each party agrees that in dealing
with third parties no contrary representations will be made. This Agreement may
not be amended, modified or otherwise changed orally but only by an agreement
in writing signed by the party against whom enforcement of any amendment,
modification or change is sought.

        9.3  Assignment; Binding Nature; Assumption.  This Agreement shall
inure to the benefit of and be enforceable by, and may be assigned by the
Company to, any purchaser of all or substantially all of the Company's business
or assets, any successor to the Company or any assignee thereof (whether direct
or indirect, by purchase, merger, consolidation or otherwise). The Company will
require any such purchaser, successor or assignee to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such purchase, succession or
assignment had taken place. This Agreement may not be assigned by the Employee
without the prior written consent of the Company.

                                      -10-
<PAGE>   11
        9.4     Nonwaiver. No waiver by any party of any term, provision or 
covenant contained in this Agreement (or any breach thereof) shall be effective
unless it is in writing executed by the party against which such waiver is to be
enforced; no waiver shall be deemed or construed as a further or continuing
waiver of any such term, provision or covenant (or breach) on any other occasion
or as a waiver of any other term, provision or covenant (or of the breach of any
other term, provision or covenant) contained in this Agreement on the same or
any other occasion.

        9.5     Remedies. The remedies provided for or permitted by this
Agreement shall be cumulative and the exercise by any party of any remedy
provided for herein or otherwise available shall not preclude the assertion or
exercise by such party of any other right or remedy provided for herein or
otherwise available.

        9.6    Headings. The headings in this Agreement are  inserted for
convenience only and shall not constitute a part hereof.

        9.7     Construction. In this Agreement (i) words denoting the singular
include the plural and vice versa, (ii) "it" or "its" or words denoting any
gender include all genders, (iii) any reference herein to a Section refers to a
Section of the Agreement, unless otherwise stated, (iv) when calculating the
period of time within or following which any act is to be done or steps taken,
the date which is the reference day in calculating such period shall be
excluded and if the last day of such period is not a business day, then the 
period shall end on the next day





                                      -11-
<PAGE>   12
which is a business day, and (v) all dollar amounts are expressed in United
States funds.

        9.8     Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware
applicable to contracts made and to be entirely performed therein.

        9.9     Counterparts. For the convenience of the parties, any number of
counterparts hereof may be executed, each such executed counterpart shall be
deemed an original and all such counterparts together shall constitute one and
the same instrument.

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first written above.




                                        3-D GEOPHYSICAL, INC.

                                        By    /s/ JOEL FRIEDMAN
                                           --------------------------
                                           Name:  Joel Friedman
                                           Title: Chairman


                                        EMPLOYEE:

                                            /s/ RONALD L. KOONS
                                           --------------------------
                                            Ronald L. Koons




                                      -12-
        

<PAGE>   1
                             TERMINATION AGREEMENT



         AGREEMENT, dated as of October 1, 1996, between 3-D Geophysical, Inc.,
a Delaware corporation (the "Company"), and John D. White, Jr. ("JD").

         WHEREAS, JD has resigned as an officer of the Company and the Company
and JD wish to terminate the Employment Agreement dated February 1996 between
them and to provide for JD's advice and assistance in connection with the
Company's presently proposed underwritten public offering of Common Stock;

         NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:


         1.      Termination.  The Employment Agreement between the Company and
JD dated February, 1996, and all rights and obligations thereunder, is hereby
terminated as of October 1, 1996 (the "Effective Date").


         2.      Consideration.

                 2.1      Within 120 days after the Effective Date, the Company
shall pay to JD $150,000 in a lump sum, in cash.

                 2.2      From the Effective Date until December 31, 1998, the
Company shall pay to JD $7,000 a month on the first day of each month.

                 2.3      The Company will, to the extent it is entitled to do
so under the relevant plan, provide to JD, through December 31, 1998,
participation, on the same basis as senior executives of the Company, in
accordance with and subject to the respective terms and conditions thereof as
to eligibility and otherwise, in the Company's medical, dental, long-term
disability and standard life insurance programs (subject to insurability at
standard rates, it being understood and agreed that if insurance becomes
unavailable at standard rates, the Company shall maintain the insurance
provided that the difference in premiums between standard and actual rates is
paid by JD).

                 2.4      The Company shall make available to JD an office at
the Company's New York offices, and such secretarial assistance and general
office support as JD may reasonably require, until December 31, 1997.
<PAGE>   2
                 2.5      JD will dutifully and faithfully provide to the
Company financial and advisory services in connection with the Company's
presently proposed public offering of Common Stock.


         3.      Confidential Information.

                 3.1      JD agrees that he will not disclose to any person,
corporation, firm, partnership or other entity whatsoever (except the Company
or any of its subsidiaries or affiliates), or use for his own benefit, any
confidential or proprietary information with respect to the Company's trade
secrets, financial condition, marketing programs or otherwise related to the
Company's business and affairs that JD learned of or had access to as a result
of his employment by the Company ("Confidential Information"), which
Confidential Information is not in the public domain through no fault of JD's.
Notwithstanding anything hereinabove to the contrary, the Company authorizes JD
to make disclosure of Confidential Information (x) pursuant to a court order by
a court of competent jurisdiction, or (y) to any authority exercising
executive, legislative, regulatory or administrative functions of or pertaining
to a government having jurisdiction with respect to the Company or JD.

                 3.2      The Company shall be entitled, in addition to any
other right and remedy it may have, at law or in equity, to an injunction,
without the posting of any bond or other security and without proving that
damages would not be an adequate remedy, enjoining or restraining JD from any
material violation or threatened material violation of Section 3.1 and JD
hereby consents to the issuance of such injunction.  If any of the restrictions
contained herein shall be deemed to be unenforceable by reason of the extent,
duration or scope thereof or otherwise, then the parties hereto contemplate
that the court shall reduce such extent, duration, scope or other provision
hereof and enforce this Section 3 in its reduced form for all purposes in the
manner contemplated hereby.  This Section 3.2 and Section 3.1 shall survive the
payment of the consideration to JD under this Agreement.


         4.      Miscellaneous Provisions.

                 4.1      Notices.  All notices and demands of any kind which
any party hereto may be required or desire to serve upon another party under
the terms of this Agreement shall be in writing and shall be served upon such
other party:  (a) by personal service upon such other party at such other
party's address set forth below in this Section 4.1; or (b) by mailing a copy
thereof by certified or registered mail, postage prepaid, with return receipt
requested, addressed to such other party at the address of such other party set
forth below in this Section 4.1; or (c) by sending a copy thereof by Federal
Express or equivalent courier service, addressed to such other party at the





                                     -2-
<PAGE>   3
address of such other party set forth below in this Section 4.1; or (d) by
sending a copy thereof by facsimile to such other party at the facsimile
number, if any, of such other party set forth below in this Section 4.1.

                 In case of service by Federal Express or equivalent courier
service or by facsimile or by personal service, such service shall be deemed
complete upon receipt.  In the case of service by mail, such service shall be
deemed complete upon reasonable proof of receipt.  The address and facsimile
number to which, and person to whose attention, notices and demands shall be
delivered or sent may be changed from time to time by notice served, as
hereinabove provided, by any party upon the other party.

                 The current addresses and facsimile numbers of the parties
are:


                 If to JD:

                          599 Lexington Avenue
                          Suite 4102
                          New York, New York  10022
                          Telecopier No.:  (212) 317-9230

                 If to the Company:

                          3-D Geophysical, Inc.
                          599 Lexington Avenue
                          Suite 4102
                          New York, New York  10022
                          Telecopier No.:  (212) 317-9230
                          Attention:  Joel Friedman, Chairman

                 with a copy to:

                          Kramer, Levin, Naftalis & Frankel
                          919 Third Avenue
                          New York, New York  10022
                          Telecopier No.:  (212) 715-8000
                          Attention:  Peter S. Kolevzon, Esq.


                 4.2      Entire Agreement; Amendment.  This Agreement contains
the entire agreement between the parties, merges all prior negotiations,
agreements and understandings, if any, and states in full all representations,
warranties and agreements which have induced this Agreement.  Each party agrees
that in dealing with third parties no contrary representations will be made.
This Agreement may not be amended, modified or otherwise changed orally but
only by an agreement in writing signed by the party against which enforcement
of any amendment, modification or change is sought.




                                     -3-
<PAGE>   4
                 4.3      Assignment; Binding Nature; Assumption.   This
Agreement shall inure to the benefit of and be enforceable by JD and his
personal representatives, heirs, successors and assigns and shall be binding
upon the Company, any purchaser of all or substantially all of the Company's
business or assets, any successor to the Company or any assignee thereof
(whether direct or indirect, by purchase, merger, consolidation or otherwise).
The Company will require any such purchaser, successor or assignee expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such purchase,
succession or assignment had taken place.  This Agreement may not be assigned
by the JD without the prior written consent of the Company.

                 4.4      Nonwaiver.  No waiver by any party of any term,
provision or covenant contained in this Agreement (or any breach hereof) shall
be effective unless it is in writing executed by the party against which such
waiver is to be enforced; no waiver shall be deemed or construed as a further
or continuing waiver of any such term, provision or covenant (or breach) on any
other occasion or as a waiver of any other term, provision or covenant (or of
the breach of any other term, provision or covenant) contained in this
Agreement on the same or any other occasion.

                 4.5      Remedies.  The remedies provided for or permitted by
this Agreement shall be cumulative and the exercise by any party of any remedy
provided for herein or otherwise available shall not preclude the assertion or
exercise by such party of any other right or remedy provided for herein or
otherwise available.  In the event the Company breaches this Agreement, JD
shall be entitled to recover reasonable attorneys fees incurred in connection
with enforcing this Agreement.

                 4.6      Headings; Construction.  The headings in this
Agreement are inserted for convenience only and shall not constitute a part
hereof.  In this Agreement (i) words denoting the singular include the plural
and vice versa, (ii) "it" or "its" or words denoting any gender include all
genders, (iii) any reference herein to a Section refers to a Section of this
Agreement, unless otherwise expressly stated, (iv) when calculating the period
of time within or following which any act is to be done or steps taken, the
date which is the reference day in calculating such period shall be excluded
and if the last day of such period is not a business day, then the period shall
end on the next day which is a business day, and (v) all dollar amounts are
expressed in United States funds.

                 4.7      Governing Law.  This Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of New
York applicable to contracts made and to be entirely performed therein.





                                     -4-
<PAGE>   5
                 4.8      Counterparts.  For the convenience of the parties,
any number of counterparts hereof may be executed, each such executed
counterpart shall be deemed an original and all such counterparts together
shall constitute one and the same instrument.


                 IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.



                                         3-D GEOPHYSICAL, INC.
                                         
                                         
                                         By: /s/ JOEL FRIEDMAN
                                            --------------------------------
                                            Name:   Joel Friedman
                                            Title:  Chairman
                                         
                                         
                                             /s/ JOHN D. WHITE, JR.
                                            --------------------------------  
                                                    John D. White, Jr.
                                         
                                         
                                         


                                     -5-

<PAGE>   1


              EMPLOYMENT AGREEMENT (this "Agreement") dated February 1, 1996
between 3-D Geophysical, Inc. (the "Company"), a Delaware corporation, and Luis
H.  Ferran Arroyo (the "Employee").

              WHEREAS, the Employee has been an executive officer of
Geoevaluaciones, S.A. de C.V. ("Geo"), a Mexican corporation, for a number of
years;

              WHEREAS, the Company has purchased all of the outstanding capital
stock of Geo pursuant to that certain Stock Purchase Agreement dated October
20, 1995 by and among the Company, Geo Acquisition Sub, Inc., a wholly-owned
subsidiary of the Company, and the stockholders of Geo;

              WHEREAS, the Company desires to employ the Employee on the terms
and conditions provided in this Agreement;

              WHEREAS, the Employee desires to accept such employment and to
render services to the Company and Geo on the terms and conditions provided in
this Agreement;

              NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the Company and the Employee hereby agree as follows:

       Section 1.  Engagement.  The Company hereby employs the Employee as
Executive Vice President of Latin American Operations for the Company and as
President of Geo, and the Employee hereby accepts such employment, upon and
subject to the terms and conditions hereinafter set forth.
<PAGE>   2
       Section 2.  Term.  Unless sooner terminated as provided in this
Agreement, the term of the Employee's employment under this Agreement shall
commence on the date of the closing of the underwritten initial public offering
of the Company's common stock and shall end on December 31, 2000 (the "Term").

       Section 3.  Duties and Services.

       3.1  The Employee shall render services to the Company as its Executive
Vice President of Latin American Operations and as President of Geo, and shall
perform such other duties and responsibilities as may be assigned to the
Employee from time to time by the Board of Directors (the "Directors") or Chief
Executive Officer of the Company or by the Board of Directors of Geo and shall
abide by the practices and policies of the Company and Geo governing the
conduct of employees.

       3.2  During the Term, the Employee shall devote his full energy and time
(exclusive of normal holidays and vacation periods and periods of sickness and
disability) to the performance of the Employee's duties as defined herein and
shall promptly and faithfully perform all the duties which pertain to the
Employee's employment.

       Section 4.  Compensation.

       4.1  Annual Compensation.  In consideration of all of the services to be
rendered by the Employee hereunder and the covenants of Employee herein, the
Company agrees to pay to the Employee, and the Employee agrees to accept, a
salary at the annual rate of $140,000, payable in accordance with the Company's
normal payroll practices.
<PAGE>   3
       4.2  Potential Bonus.  In addition to the compensation provided for in
Section 4.1, the Employee may receive a bonus, if any, as shall be determined
in the sole discretion of the Directors (or a duly constituted committee
thereof), but nothing in this Agreement shall be construed to require Geo or
the Company to pay any such bonus.

       Section 5.  Expenses and Reimbursement.  The Employee shall be
reimbursed by the Company for reasonable and necessary out-of-pocket expenses
incurred by the Employee in performing his duties hereunder, provided such
expenses are approved in accordance with the procedures of the Company then in
effect and are presented for reimbursement in accordance with the Company's
policies and practices then in effect.

       Section 6.  Benefits.  During the Term, the Company agrees to provide
the Employee, in addition to and not in limitation of the compensation set
forth in Section 4, the following benefits, which shall be determined in the
sole discretion of the Directors (or a duly constituted committee thereof):

       (a)    The Employee shall be entitled, subject to qualification
requirements, to participate in any and all group insurance plans, group health
or medical insurance plans, group accidental and disability insurance plans
made generally available to the senior executive employees of the Company.

       (b)    The Employee shall be entitled to participate in the Company's
pension, profit-sharing, stock option, stock purchase and other employee
benefit programs made generally available to the senior executive employees of
the Company.





                                     - 3 -
<PAGE>   4
       (c)    The Employee shall be entitled to vacation, sick leave and
holidays in accordance with the Company's policies for senior executive
employees generally.

       Section 7.  Termination.  Subject to the provisions of Section 8, which
shall survive the termination of this Agreement, this Agreement shall terminate
upon:

       (a)    The death of the Employee;

       (b)    Illness, disability or incapacity that prevents the Employee from
performing his duties hereunder for sixty (60) consecutive days, or for any
sixty (60) days within any one hundred and eighty (180) day period, and the
provision of written notice of such termination to the Employee by the Company;
or

       (c)    Upon written notice for Cause, which shall include, without
limitation, (i) the failure of the Employee to observe or perform any material
term of this Agreement for twenty (20) days after written notice thereof
specifying such failure; (ii) any act of illegality, dishonesty, moral
turpitude, or fraud in connection with the Employee's employment; (iii) any
course of action which is materially detrimental to the business of the
Company; or (iv) the commission by the Employee of any felony.

       Section 8.  Restrictive Covenants.  In consideration of the undertakings
of the Company set forth herein, the Employee agrees as follows:

       8.1  Non-Solicitation Covenant.  During the Term and for a period of one
(1) year after the termination of this Agreement for any reason whatsoever, the
Employee shall not solicit, sell to or contract with, on behalf of the Employee
or on behalf of any person, firm,





                                     - 4 -
<PAGE>   5
corporation, partnership, venture or other entity that provides services
similar to those provided by the Company or Geo, or any other subsidiary of the
Company, any person or entity to which the Company or any of its subsidiaries
shall have provided seismic data acquisition or analysis services at any time
during the Term.

       8.2  Covenant Not to Solicit Employees of the Company.  During the Term
and for a period of one (1) year after the termination of this Agreement for
any reason whatsoever, the Employee shall not solicit for employment any sales,
engineering or other technical or management employee who was employed by the
Company or any of its subsidiaries during the Term.

       8.3  Non-Disclosure Covenant.  The Employee recognizes and acknowledges
that, prior to and in the course of his employment, the Employee may have had
and shall have access to trade secrets and other confidential or proprietary
information of the Company and its subsidiaries, including, but not limited to,
information acquired or developed by the Company and its subsidiaries
concerning seismic data, marketing strategy, technology, techniques and
know-how, customer specifications and customer lists, cost figures, budgets,
sales forecasts and business plans.  The Employee agrees that the disclosure of
any such trade secrets or information could be harmful to the interests of the
Company or its subsidiaries and that, during the Employee's employment by the
Company or its subsidiaries, the Employee will take appropriate caution to
safeguard such trade secrets and information, and will not during the Term or
thereafter use, disclose, divulge or publish any such trade secrets or
information except as required by law or as the Employee's duties during the
Employee's





                                     - 5 -
<PAGE>   6
employment by the Company or its subsidiaries may require or as the Company may
in writing specifically consent.

       8.4  Proprietary Information.  The Employee recognizes and acknowledges
that all documents, manuals, letters, notebooks, reports, records, computer
programs or data banks and other evidences of trade secrets and other
confidential or proprietary information of the Company and its subsidiaries,
including copies thereof, whether prepared by the Employee or others, are the
sole property of and belong exclusively to the Company and its subsidiaries,
and agrees that, during the Employee's employment by the Company or its
subsidiaries, the Employee will under no circumstances remove any such material
for use outside of his offices except in connection with the business of the
Company during the course of the Employee's employment.  In the event of the
termination of this Agreement for any reason whatsoever, the Employee shall
immediately return to the Company any and all documents, manuals, letters,
notebooks, reports, records, computer programs or data banks or other evidences
of trade secrets and other confidential or proprietary information of the
Company and its subsidiaries (and all copies thereof) which are the property of
the Company or any of its subsidiaries.

       8.5  Remedies.  The Employee further agrees that in the event of a
breach or threatened breach of any of the covenants contained in this Section
8, the Company's remedy at law is likely to be inadequate and that accordingly
the Company will be entitled to obtain an injunction or other equitable relief
with regard thereto without proving damages or that damages would not
constitute an adequate remedy.  If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 8 is invalid
or





                                     - 6 -
<PAGE>   7
unenforceable, the parties hereto agree that the court making the determination
of invalidity or unenforceability shall have the power to, and is hereby
directed to, reduce the scope, duration or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid and unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.

       9.   Miscellaneous Provisions.

       9.1    Notices.  All notices and demands of any kind which any party
hereto may be required or desire to serve upon another party under the terms of
this Agreement shall be in writing and shall be served upon such other party:
(a) by personal service upon such other party at such other party's address set
forth below in this Section 9.1; or (b) by mailing a copy thereof by certified
or registered mail, postage prepaid, with return receipt requested, addressed
to such other party at the address of such other party set forth below in this
Section 9.1; or (c) by sending a copy thereof by Federal Express or equivalent
courier service, addressed to such other party at the address of such other
party set forth below in this Section 9.1; or (d) by sending a copy thereof by
facsimile to such other party at the facsimile number, if any, of such other
party set forth below in this Section 9.1.

              In case of service by Federal Express or equivalent courier
service or by facsimile or by personal service, such service shall be deemed
complete upon receipt.  In the case of service by mail, such service shall be
deemed complete upon reasonable proof of receipt.  The address and facsimile
number to which, and person to whose attention, notices





                                     - 7 -
<PAGE>   8
and demands shall be delivered or sent may be changed from time to time by
notice served, as hereinabove provided, by any party upon the other party.

              The current addresses and facsimile members of the parties are:

              If, to Employee:             Luis H. Ferran Arroyo
                                           Avenida La Malinche No. 320
                                           Colonia Colinas del Basques
                                           Deleg, Tialplan, Mexico, D.F
                                           Phone:  (525) 532-3919
                                           Fax:       (525) 532-5700

                        copy to:           J.M. Webb, Esq.
                                           Webb & Lauterbach, P.C.
                                           1990 Post Oak Boulevard
                                           Houston, TX  77056
                                           Phone:  (713) 626-9800
                                           Fax:       (713) 626-9807

              If, to the Company:  3-D Geophysical, Inc.
                                   200 Madison Avenue
                                   New York, New York 10016
                                   Attention: Joel Friedman, 
                                      Chairman of the Board
                                   Phone:  (212) 953-0100
                                   Fax:  (212) 953-0626

                        copy to:   Peter S. Kolevzon, Esq.
                                   919 Third Avenue
                                   New York, New York  10022
                                   Phone:  (212) 715-9100
                                   Fax:  (212) 715-8000

       9.2    Entire Agreement; Amendment.  This Agreement contains the entire
agreement between the parties, merges all prior negotiations, agreements and
understandings, if any, and states in full all representations, warranties and
agreements which have induced this Agreement.  Each party agrees that in
dealing with third parties no contrary representations will be made.  This
Agreement may not be amended, modified or otherwise changed orally





                                     - 8 -
<PAGE>   9
but only by an agreement in writing signed by the party against whom
enforcement of any amendment, modification or change is sought.

       9.3    Assignment; Binding Nature; No Beneficiaries.  This Agreement may
not be assigned by any party hereto without the written consent of the other
party.  This Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, personal
representatives, legatees, successors and permitted assigns.  This Agreement
shall not confer any rights or remedies upon any person other than the parties
hereto and their respective heirs, personal representatives, legatees,
successors, and permitted assigns.

       9.4    Nonwaiver.  No waiver by any party of any term, provision or
covenant contained in this Agreement (or any breach thereof) shall be effective
unless it is in writing executed by the party against which such waiver is to
be enforced; no waiver shall be deemed or construed as a further or continuing
waiver of any such term, provision or covenant (or breach) on any other
occasion or as a waiver of any other term, provision or covenant (or of the
breach of any other term, provision or covenant) contained in this Agreement on
the same or any other occasion.

       9.5    Remedies.  The remedies provided for or permitted by this
Agreement shall be cumulative and the exercise by any party of any remedy
provided for herein or otherwise available shall not preclude the assertion or
exercise by such party of any other right or remedy provided for herein or
otherwise available.





                                     - 9 -
<PAGE>   10
       9.6    Headings.  The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.

       9.7     Construction.  In this Agreement (i) words denoting the singular
include the plural and vice versa, (ii) "it" or "its" or words denoting any
gender include all genders, (iii) any reference herein to a Section refers to a
Section of the Agreement, unless otherwise stated, (iv) when calculating the
period of time within or following which any act is to be done or steps taken,
the date which is the reference day in calculating such period shall be
excluded and if the last day of such period is not a business day, then the
period shall end on the next day which is a business day, and (v) all dollar
amounts are expressed in United States funds.

       9.8    Governing Law.  This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware
applicable to contracts made and to be entirely performed therein.

       9.9    Counterparts.  For the convenience of the parties, any number of
counterparts hereof may be executed, each such executed counterpart shall be
deemed an original and all such counterparts together shall constitute one and
the same instrument.





                                     - 10 -
<PAGE>   11
              IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date and year first written above.


                                        3-D GEOPHYSICAL, INC.

Attest:                                    By /s/ JOEL FRIEDMAN
                                             --------------------------------
                                             Name: Joel Friedman
/s/ JOHN D. WHITE, JR.                       Title: Chairman
- ------------------------                           
Secretary

                                           EMPLOYEE:

                                           
                                           /s/ LUIS H. FERRAN ARROYO
                                           -----------------------------------
                                           Luis H. Ferran Arroyo





                                     - 11 -

<PAGE>   1


              EMPLOYMENT AGREEMENT (this "Agreement") dated February 1, 1996
between 3-D Geophysical, Inc., a Delaware corporation (the "Company") and Joel
Friedman (the "Employee").

              WHEREAS, the Employee has been a founder of the Company and has
been instrumental in the formation of the Company and its acquisition strategy;

              WHEREAS, the Employee has been an executive officer of Paragon
Geophysical, Inc., a Delaware corporation ("Paragon") for a number of years;

              WHEREAS, the Company desires to employ the Employee on the terms
and conditions provided in this Agreement;

              WHEREAS, the Employee desires to accept such employment and to
render services to the Company on the terms and conditions provided in this
Agreement;

              NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the Company and the Employee hereby agree as follows:

       Section 1.  Engagement.  The Company hereby employs the Employee as
Chairman of the Board of the Company, and the Employee hereby accepts such
employment, upon and subject to the terms and conditions hereinafter set forth.

       Section 2.  Term.  Unless sooner terminated as provided in this
Agreement, the term of the Employee's employment under this
<PAGE>   2
Agreement shall commence on the date of the closing of the underwritten initial
public offering of the Company's common stock, and shall end on December 31,
1998 (the "Term").

       Section 3.  Duties and Services.

       3.1  The Employee shall render services to the Company as a Chairman of
the Board of the Company and shall perform such other duties and
responsibilities as may be assigned to the Employee from time to time by the
Board of Directors (the "Directors") and shall abide by the practices and
policies of the Company governing the conduct of employees.

       3.2  During the Term, the Employee shall devote such energy and time
(exclusive of normal holidays and vacation periods and periods of sickness and
disability) as is reasonably necessary to perform the Employee's duties as
defined herein and shall promptly and faithfully perform all the duties which
pertain to the Employee's employment.

       3.3   The Employee shall be allowed, to the extent such activities do
not interfere with the performance by the Employee of his duties and
responsibilities under this Agreement, (a) to continue his current affiliation
with and activities on behalf of Founders Capital, Inc. and its affiliated
companies, unless such affiliation or activities would pose a conflict of
interest with the Employee duties hereunder; (b)(i) to serve on boards of
directors or committees of civic or charitable organizations, trade
associations or not-for-profit corporations, (ii) with the





                                    - 2 -
<PAGE>   3
prior written consent of the Board, to serve on the board of directors or
advisory board of any for-profit corporation, and (iii)  to serve as chairman
and chief executive officer of Consolidated Health Care Associates, Inc.; and
(c) to write for publications or speak publicly.

       Section 4.  Compensation.

       4.1  Annual Compensation.  In consideration of all of the services to be
rendered by the Employee hereunder and the covenants of Employee herein, the
Company agrees to pay to the Employee, and the Employee agrees to accept, a
salary at the annual rate of $125,000.00.

       4.2  Bonus Pool.  The Company intends to create a bonus plan based upon
the earnings of the Company to provide incentives for certain employees of the
Company and its subsidiaries.  The Employee shall be entitled to participate in
such plan on such terms as may be determined by the Compensation Committee, in
its discretion. Nothing in this Agreement shall require the Company to pay any
such bonus.

       4.3  Office Allowance.      During the Term, the Company shall pay the
Employee, on a monthly basis, $6,250.00 per month as a non-accountable
allowance for expenses in connection with Employee's office in New York, New
York.





                                     - 3 -
<PAGE>   4
       Section 5.  Expenses and Reimbursement.  The Employee shall be
reimbursed by the Company for reasonable and necessary out-of-pocket expenses
incurred by the Employee in performing his duties hereunder, provided such
expenses are approved in accordance with the procedures of the Company then in
effect and are presented for reimbursement in accordance with the Company's
policies and practices then in effect.

       Section 6.  Benefits.  During the Term, the Company agrees to provide
the Employee, in addition to and not in limitation of the compensation set
forth in Section 4, the following benefits, which shall be determined in the
sole discretion of the Directors (or a duly constituted committee thereof):

       (a)    The Employee shall be entitled, subject to qualification
requirements, to participate in any and all group insurance plans, group health
or medical insurance plans, group accidental and disability insurance plans
made generally available to the senior executive employees of the Company.

       (b)    The Employee shall be entitled to participate in the Company's
pension, profit-sharing, stock option, stock purchase and other employee
benefit programs made generally available to the senior executive employees of
the Company.

       (c)    The Employee shall be entitled to vacation, sick leave and
holidays in accordance with the Company's policies for senior executive
employees generally.





                                     - 4 -
<PAGE>   5
       (d)  During the term of employment under this Agreement, the Company
shall pay the Employee, on a monthly basis, an amount equal to $650 per month
as a non-accountable allowance for lease payments, insurance and other
expenses of an automobile leased by the Employee.

       Section 7.  Termination.  Subject to the provisions of Section 8, which
shall survive the termination of this Agreement, this Agreement shall terminate
upon:

       (a)    The death of the Employee;

       (b)    Illness, disability or incapacity that prevents the Employee from
performing his duties hereunder for sixty (60) consecutive days, or for any
sixty (60) days within any one hundred and eighty (180) day period, and the
provision of written notice of such termination to the Employee by the Company;
or

       (c)    Upon written notice for Cause, which shall include, without
limitation, (i) the failure of the Employee to observe or perform any material
term of this Agreement for twenty (20) days after written notice thereof
specifying such failure; (ii) any act of illegality, dishonesty, moral
turpitude, or fraud in connection with the Employee's employment;  or (iii) the
commission by the Employee of any felony.

       (d)    Upon written notice by either party in the event the closing of
the underwritten initial public offering of the Company's common stock shall
not occur before February 15, 1996.





                                     - 5 -
<PAGE>   6
       Section 8.  Restrictive Covenants.  In consideration of the undertakings
of the Company set forth herein, the Employee agrees as follows:

       8.1  Covenant Not to Compete.  The Employee will not in any way,
directly or indirectly, as an agent, employee, officer, director, stockholder,
partner or otherwise of any corporation, partnership or other venture or
enterprise compete with the Company or any of its subsidiaries in the provision
of seismic data acquisition or analysis services or any services related
thereto (a "Competing Business") during the Term, other than pursuant hereto,
and for a period of one (1) year after the termination of this Agreement for
any reason whatsoever, unless this Agreement is terminated without Cause.

       8.2  Non-Solicitation Covenant.  During the Term and for a period of one
(1) year after the termination of this Agreement for any reason whatsoever, the
Employee shall not solicit, sell to or contract with, on behalf of the Employee
or on behalf of any Competing Business,  any person or entity to which the
Company or any subsidiary of the Company, shall have provided seismic data
acquisition or analysis services at any time during the Term.

       8.3  Covenant Not to Solicit Employees of the Company.  During the Term
and for a period of one (1) year after the termination of this Agreement for
any reason whatsoever, the Employee shall not solicit for employment any sales,
engineering





                                     - 6 -
<PAGE>   7
or other technical or management employee who was employed by the Company or
any of its subsidiaries during the Term.

       8.4  Non-Disclosure Covenant.  The Employee recognizes and acknowledges
that, prior to and in the course of his employment, the Employee may have had
and shall have access to trade secrets and other confidential or proprietary
information of the Company and its subsidiaries, including, but not limited to,
information acquired or developed by the Company and its subsidiaries
concerning seismic data, marketing strategy, technology, techniques and
know-how, customer specifications and customer lists, cost figures, budgets,
sales forecasts and business plans.  The Employee agrees that the disclosure of
any such trade secrets or information could be harmful to the interests of the
Company or its subsidiaries and that, during the Employee's employment by the
Company or its subsidiaries, the Employee will take appropriate caution to
safeguard such trade secrets and information, and will not during the Term or
thereafter use, disclose, divulge or publish any such trade secrets or
information except as required by law or as the Employee's duties during the
Employee's employment by the Company or its subsidiaries may require or as the
Company may in writing specifically consent.

       8.5  Proprietary Information.  The Employee recognizes and acknowledges
that all documents, manuals, letters, notebooks, reports, records, computer
programs or data banks and other evidences of trade secrets and other
confidential or proprietary





                                     - 7 -
<PAGE>   8
information of the Company and its subsidiaries, including copies thereof,
whether prepared by the Employee or others, are the sole property of and belong
exclusively to the Company and its subsidiaries, and agrees that, during the
Employee's employment by the Company or its subsidiaries, the Employee will
under no circumstances remove any such material for use outside of his offices
except in connection with the business of the Company during the course of the
Employee's employment.  In the event of the termination of this Agreement for
any reason whatsoever, the Employee shall immediately return to the Company any
and all documents, manuals, letters, notebooks, records, computer programs or
data banks or other evidence of trade secrets and other confidential or
proprietary information of the Company and its subsidiaries (and all copies
thereof) which are the property of the Company or any of its subsidiaries.

       8.6  Remedies.  The Employee further agrees that in the event of a
breach or threatened breach of any of the covenants contained in this Section
8, the Company's remedy at law is likely to be inadequate and that accordingly
the Company will be entitled to obtain an injunction or other equitable relief
with regard thereto without proving damages or that damages would not
constitute an adequate remedy.  If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 8 is invalid
or unenforceable, the parties hereto agree that the court making the
determination of invalidity or unenforceability shall have the power to, and is
hereby directed to, reduce the scope, duration or area of the term or
provision,





                                     - 8 -
<PAGE>   9
to delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid and unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.

       9.   Miscellaneous Provisions.

       9.1    Notices.  All notices and demands of any kind which any party
hereto may be required or desire to serve upon another party under the terms of
this Agreement shall be in writing and shall be served upon such other party:
(a) by personal service upon such other party at such other party's address set
forth below in this Section 9.1; or (b) by mailing a copy thereof by certified
or registered mail, postage prepaid, with return receipt requested, addressed
to such other party at the address of such other party set forth below in this
Section 9.1; or (c) by sending a copy thereof by Federal Express or equivalent
courier service, addressed to such other party at the address of such other
party set forth below in this Section 9.1; or (d) by sending a copy thereof by
facsimile to such other party at the facsimile number, if any, of such other
party set forth below in this Section 9.1.

              In case of service by Federal Express or equivalent courier
service or by facsimile or by personal service, such service shall be deemed
complete upon receipt.  In the case of service by mail, such service shall be
deemed complete upon





                                     - 9 -
<PAGE>   10
reasonable proof of receipt.  The address and facsimile number to which, and
person to whose attention, notices and demands shall be delivered or sent may
be changed from time to time by notice served, as hereinabove provided, by any
party upon the other party.

        The current addresses and facsimile members of the parties are:

        If, to Employee:           Joel Friedman
                                   3-D Geophysical, Inc.
                                   200 Madison Avenue
                                   New York, New York 10016
                                   Phone:  (212) 953-0100
                                   Fax:    (212) 953-0626
              
        If, to the Company:        3-D Geophysical, Inc.        
                                   200 Madison Avenue           
                                   New York, New York 10016     
                                   Attention: John D. White, Jr.
                                              Vice President    
                                   Phone:  (212) 953-0100       
                                   Fax:  (212) 953-0626         
              
                   copy to:        Peter S. Kolevzon, Esq.
                                   919 Third Avenue
                                   New York, New York  10022
                                   Phone:  (212) 715-9100
                                   Fax:  (212) 715-8000
              
       9.2    Entire Agreement; Amendment.  This Agreement contains the entire
agreement between the parties, merges all prior negotiations, agreements and
understandings, if any, and states in full all representations, warranties and
agreements which have induced this Agreement.  Each party agrees that in
dealing with third parties no contrary representations will be made.  This
Agreement may not be amended, modified or otherwise changed orally but only by
an agreement in writing signed by the party





                                     - 10 -
<PAGE>   11
against whom enforcement of any amendment, modification or change is sought.

       9.3    Assignment; Binding Nature; No Beneficiaries.  This Agreement may
not be assigned by either party hereto without the written consent of the other
party.  This Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, personal
representatives, legatees, successors and permitted assigns.  This Agreement
shall not confer any rights or remedies upon any person other than the parties
hereto and their respective heirs, personal representatives, legatees,
successors and permitted assigns.

       9.4    Nonwaiver.  No waiver by any party of any term, provision or
covenant contained in this Agreement (or any breach thereof) shall be effective
unless it is in writing executed by the party against which such waiver is to
be enforced; no waiver shall be deemed or construed as a further or continuing
waiver of any such term, provision or covenant (or breach) on any other
occasion or as a waiver of any other term, provision or covenant (or of the
breach of any other term, provision or covenant) contained in this Agreement on
the same or any other occasion.

       9.5    Remedies.  The remedies provided for or permitted by this
Agreement shall be cumulative and the exercise by any party of any remedy
provided for herein or otherwise available shall not preclude the assertion or
exercise by such party of any other right or remedy provided for herein or
otherwise available.





                                     - 11 -
<PAGE>   12

       9.6    Headings.  The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.

       9.7     Construction.  In this Agreement (i) words denoting the singular
include the plural and vice versa, (ii) "it" or "its" or words denoting any
gender include all genders, (iii) any reference herein to a Section refers to a
Section of the Agreement, unless otherwise stated, (iv) when calculating the
period of time within or following which any act is to be done or steps taken,
the date which is the reference day in calculating such period shall be
excluded and if the last day of such period is not a business day, then the
period shall end on the next day which is a business day, and (v) all dollar
amounts are expressed in United States funds.

       9.8    Governing Law.  This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware
applicable to contracts made and to be entirely performed therein.

       9.9    Counterparts.  For the convenience of the parties, any number of
counterparts hereof may be executed, each such executed counterpart shall be
deemed an original and all such counterparts together shall constitute one and
the same instrument.





                                     - 12 -
<PAGE>   13
              IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date and year first written above.


                                           3-D GEOPHYSICAL, INC.

Attest:                                    By /s/ RICHARD DAVIS
                                             ------------------------------
                                             Name: Richard Davis
/s/ JOHN D. WHITE, JR.                       Title: President
- ------------------------                           
Secretary

                                           EMPLOYEE:

                                           /s/ JOEL FRIEDMAN
                                           --------------------------------
                                           Joel Friedman





                                     - 13 -

<PAGE>   1
                                                                   EXHIBIT 21.1


                        SUBSIDIARIES OF THE REGISTRANT


Geoevaluaciones, S.A. de C.V., a Mexican corporation 


Northern Geophysical of America, Inc., a Delaware corporation


Paragon Geophysical, Inc., a Delaware corporation


Kemp Geophysical Corporation, a Texas corporation



<PAGE>   1
 
                                                                    EXHIBIT 23.1
 
                       CONSENT OF INDEPENDENT ACCOUNTANTS
 
     We consent to the inclusion in this registration statement on Form S-1 of
our reports on our audits of the financial statements of 3-D Geophysical, Inc.,
Northern Geophysical of America, Inc. (Land-Based Seismic Data Operations) and
Paragon Geophysical, Inc. dated May 1, 1996, December 19, 1995 and December 6,
1995, respectively. We also consent to the reference to our firm under the
caption "Experts".
 
                                            COOPERS & LYBRAND L.L.P.
 
Denver, Colorado
October 4, 1996

<PAGE>   1
 
                                                                    EXHIBIT 23.2
 
                       CONSENT OF INDEPENDENT ACCOUNTANTS
 
     We consent to the inclusion in this registration statement on Form S-1 of
our report on our audit of the financial statements, at November 30, 1995, of
J.R.S. Exploration Company Limited, dated July 31, 1996. We also consent to the
reference to our firm under the caption "Experts".
 
                                            /s/  GARRETT POWER,
                                            Chartered Accountants
 
Calgary, Alberta
October 4, 1996

<TABLE> <S> <C>

<ARTICLE> 5
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   6-MOS
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<PERIOD-START>                             JAN-01-1996
<PERIOD-END>                               JUN-30-1996
<CASH>                                           2,873
<SECURITIES>                                         0
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<ALLOWANCES>                                         0
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<PP&E>                                          29,644
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<BONDS>                                          9,653
                                0
                                          0
<COMMON>                                            76
<OTHER-SE>                                      25,884
<TOTAL-LIABILITY-AND-EQUITY>                    49,321
<SALES>                                              0
<TOTAL-REVENUES>                                19,539
<CGS>                                                0
<TOTAL-COSTS>                                   14,452
<OTHER-EXPENSES>                                 4,234
<LOSS-PROVISION>                                     0
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<INCOME-PRETAX>                                  1,002
<INCOME-TAX>                                       277
<INCOME-CONTINUING>                                725
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                     57
<CHANGES>                                            0
<NET-INCOME>                                       782
<EPS-PRIMARY>                                      .13
<EPS-DILUTED>                                      .13
        

</TABLE>


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