SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 23, 1997
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3-D GEOPHYSICAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-27564 13-3841601
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(State or other Jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
8226 Park Meadows Drive, Littleton, Colorado 80124
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 858-0500
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7076 South Alton Way, Building H, Englewood, Colorado 80112
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(Former name or former address, if changed since last report.)
The Exhibit Index appears on Page 5
Page 1 of 14 pages.
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Item 5. Other Events.
a) On September 23, 1997, the Registrant's wholly-owned Mexican subsidiary,
Geoevaluaciones, S.A. de C.V. ("Geo") was served with notice of a lawsuit and a
complaint (the "Complaint") filed in the 10th Federal District Court in Mexico
City by Kelman Technologies, Inc., the successor to Capilano Geophysical Ltd.
("Capilano"), claiming damages of Cdn $11,215,714 (plus interest and expenses,
including legal fees) based on Geo's alleged failure to reimburse Capilano for
Capilano's outlays and expenditures under a letter of intent between Geo and
Capilano entered into in June of 1991 (the "Letter of Intent"). The Complaint
does not name the Registrant as a co- defendant, nor is the Registrant mentioned
in the Complaint.
On October 6, 1997, the law firm of Basham, Ringe Y Correa, on behalf of
Geo, filed a timely answer to the Complaint (the "Answer"). The Answer denies in
its entirety Capilano's right to any of the claimed damages, interest and
expenses. The Answer (1) contests each of the numbered "facts" set forth in the
Complaint as either not grounded in fact or as misconstructions of actual
events, (2) points out that the last paragraph of the Letter of Intent expressly
states that the letter is non-binding and "is intended to constitute a Letter of
Intention only," and (3) states that the Letter of Intent was expressly
superseded by a Technical Assistance Agreement duly executed by Geo and Capilano
on June 1, 1992.
While Geo currently is not able to estimate the effect, if any, on Geo's
results of operations and financial position which may result from the
resolution of this matter, the Registrant believes that (1) Geo has meritorious
defenses to each of the allegations contained in the Complaint, (2) Geo should
succeed in its defense of the Complaint, and (3) that the lawsuit will not have
a material adverse effect on the Registrant's financial position. The former
stockholders of Geo have pledged 60,000 shares of the Registrant's Common Stock
to provide for any costs incurred by the Registrant in connection with this
lawsuit.
b) The Registrant intends to borrow up to $1,200,000 (the "Loans") from
four persons (collectively, the Lenders"), including Joel Friedman, Chairman of
the Board ($250,000), Wayne P. Widynowski ($250,000), Executive Vice President
and a Director, and Ronald Koons ($100,000), Vice President and Chief Financial
Officer. The Loans will mature in six months, or earlier upon the refinancing of
the Registrant's existing loan facility with Wells Fargo Bank, N.A., will bear
interest at 12% per year and will be subordinate to the Registrant's obligations
to Wells Fargo Bank. To induce the Lenders to make the Loans, the Registrant
will issue five year options to purchase, at $6.50 per share, 12,500 shares of
Registrant's Common Stock for each $250,000 principal amount of the Loans.
Page 2 of 14 pages.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements.
Not required.
(b) Pro Forma Financial Information.
Not required.
(c) Exhibits.
10.1 Form of Subordinated Promissory Note
10.2 Form of Non-Qualified Stock Option Agreement
Page 3 of 14 pages.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
3-D GEOPHYSICAL, INC.
By: /s/ Joel Friedman
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Name: Joel Friedman
Title: Chairman
Date: October 8, 1997
Page 4 of 14 pages.
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EXHIBIT INDEX
Exhibit Page
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10.1 Form of Subordinated Promissory Note 6
10.2 Form of Non-Qualified Stock Option Agreement 9
Page 5 of 14 pages.
3-D GEOPHYSICAL, INC.
FORM OF SUBORDINATED PROMISSORY NOTE
US $250,000.00 October __, 1997
New York, New York
FOR VALUE RECEIVED, 3-D GEOPHYSICAL, INC., a Delaware corporation
(the "Maker"), hereby promises to pay to the order of __________________ (the
"Holder") the principal sum of ________________________________ DOLLARS
($__________.00), together with accrued and unpaid interest thereon, on April
__, 1998 (the "Payment Date"), provided that if such Payment Date is not a
Business Day, as defined below, payment shall be made on the next succeeding
Business Day.
The payment of this Note is subordinated pursuant to the terms of a
Subordination Agreement and Assignment, dated as of October __, 1997, by and
among the Holder, the Maker and Wells Fargo Bank (Texas) N.A. (the
"Subordination Agreement") and is subject to all of the terms and conditions of
the Subordination Agreement.
1. Interest. Maker agrees to pay interest from the date hereof on
the unpaid portion of the principal amount of this Note from time to time
outstanding at the rate of 12% per annum through the Payment Date (but in no
event higher than the maximum rate permitted by applicable law), compounded
annually and payable on or before the Payment Date and thereafter until the
principal amount of this Note is paid in full, subject to the provisions of
Section 3 hereof.
2. Business Day. For the purposes of this Note, the phrase "Business
Day" means any day that is not a Saturday or Sunday or a legal holiday on which
banks are authorized or required by law to be closed in New York, New York.
3. Prepayment. Subject to its obligations under the Subordination
Agreement, the Maker may, at its option, on five (5) Business Days notice to the
Holder, prepay the principal amount of this Note at any time in whole, or from
time to time in such part as the Maker shall specify in such notice, with
accrued interest on the amount prepaid to the date of prepayment, in each case
without penalty or premium therefor. The Maker shall, in the event the Maker
refinances its existing credit facility with Wells Fargo Bank (Texas) N.A.,
dated May 29, 1996, as amended through the date hereof (the "Refinancing"),
prepay the entire principal amount of this Note within ten (10) Business Days of
the consummation of the Refinancing, together with accrued interest on the
amount prepaid to the date of prepayment.
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4. Method and Place of Payment. All payments of principal and
interest on this Note shall be made by check or wire transfer in lawful money of
the United States of America at such address as the Holder shall designate in
writing to the Maker.
5. Defaults. Any of the following shall constitute an event of
default (an "Event of Default") hereunder:
(a) If the Maker shall fail to pay any principal or interest due
hereunder, which failure shall remain uncured for a period of five (5) days; or
(b) If any voluntary proceeding shall be commenced by the Maker
under any chapter of the Federal Bankruptcy Code or other law relating to
bankruptcy, bankruptcy reorganization, insolvency or relief of debtors, or any
such proceeding is commenced against the Maker and such proceeding is not
dismissed within sixty (60) days from the date on which it is filed or
instituted; or
(c) If the Maker becomes insolvent or is unable to pay its debts as
they become due or makes an assignment for the benefit of creditors; or
(d) The dissolution or other winding up of the Maker; or
(e) In the event that the holders of any indebtedness of the Company
in excess of $50,000 shall accelerate the maturity of any such indebtedness or
shall declare such indebtedness to be due and payable prior to the stated
maturity thereof.
Upon the occurrence of any Event of Default the unpaid principal of
this Note and any accrued and unpaid interest hereunder shall, at the sole
option of the Holder, become immediately due and payable. Upon the occurrence of
any Event of Default the Holder may exercise any and all rights and remedies
available to the Holder at law or in equity; however the failure of the Holder
to exercise the option described in the preceding sentence or any such right or
remedy at any time shall not constitute a waiver of the Holder's right to
exercise such optionor any such right or remedy at any other time, subject in
any such case to the provisions of the Subordination Agreement.
6. Expenses. The Maker agrees to pay all reasonable expenses
incurred by the Holder in connection with the collection and enforcement of this
Note, including, without limitation, reasonable attorneys' fees and
disbursements.
7. Waiver of Notice, etc. The Maker hereby waives presentment,
notice of demand for payment, protest, notice of dishonor and any other notice
of any kind with respect to this Note.
8. Successors and Assigns. This Note shall be binding upon the Maker
and its successors and assigns and shall inure to the benefit of the Holder, its
personal representatives and successors and assigns.
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9. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
principles of conflict of laws thereof.
IN WITNESS WHEREOF, the Maker has caused this instrument to be duly
executed this ___ day of October, 1997.
3-D GEOPHYSICAL, INC.
By:
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Name:
Title:
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3-D GEOPHYSICAL, INC.
FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT
NON-QUALIFIED STOCK OPTION AGREEMENT (this "Agreement"), dated as of
October __, 1997, between 3-D GEOPHYSICAL, INC., a Delaware corporation
(the"Company"), and _______________ (the "Optionee").
The Company's Board of Directors (the "Board") has determined that
the objectives of the Company will be furthered by granting to the Optionee a
stock option in partial consideration of the Optionee's making a loan to the
Company in the principal amount of $250,000 (the "Loan") pursuant to a
Subordinated Promissory Note of the Company in that principal payable to the
order of the Optionee, dated the date hereof.
In consideration of the foregoing and of the mutual undertakings set
forth in this Agreement, the Company and the Optionee hereby agree as follows:
SECTION 1. Grant of Option.
1.1 The Company hereby grants to the Optionee a stock option (the
"Option") to purchase 12,500 shares, par value $.01 per share (the "Shares"), of
common stock of the Company ("Common Stock") at a purchase price of $6.50 per
share (the "Exercise Price"). It is intended that the Option shall not qualify
as an "incentive stock option" as defined in section 422 of the Internal Revenue
Code of 1986, as amended.
1.2 In the event of any change in the outstanding shares Common
Stock by reason of a stock dividend, split-up, recapitalization, combination,
exchange of shares or similar transaction, the type and number of shares or
securities subject to the Option, and the exercise price therefor, shall be
adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction, so that Optionee shall receive upon exercise of the
Option the same class and number of outstanding shares or other securities or
property that Optionee would have received in respect of Common Stock if the
Option had been exercised immediately prior to such event, or the record date
therefor, as applicable. After any such adjustment, the number of shares subject
to the Option shall be rounded to the nearest whole number.
1.3 In the event that Company shall enter into an agreement (i) to
consolidate with or merge into any person, other than one of its subsidiaries,
and shall not be the continuing or surviving corporation of such consolidation
or merger, (ii) to permit any person, other than one of its subsidiaries, to
merge into the Company and the Company shall be the continuing or surviving
corporation, but, in connection with such merger, the then outstanding shares of
Common Stock shall be changed into or exchanged for stock or other securities of
the Company or any other person or cash or any other property or the shares of
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Common Stock outstanding immediately before such merger shall after such merger
represent less than 50% of the outstanding common shares and common share
equivalents of the Company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than one of its
subsidiaries, then, and in each such case, the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option to purchase the number
and kind of shares of stock or other securities, cash or any other property that
the Optionee would have been entitled to receive as a result of such merger or
sale of assets had the Optionee fully exercised the Option and been a
stockholder of record prior to such merger or sale of assets, and the agreement
governing such transaction shall make proper provisions to so provide.
SECTION 2. Exercisability.
The Option shall become exercisable in full on the date the Company
receives the principal amount of the Loan. The unexercised portion of the Option
shall expire and cease to be exercisable at 12:01 a.m. on the 5th anniversary of
the date of this Agreement.
SECTION 3. Method of Exercise.
The Option or any part thereof may be exercised only by the giving
of written notice to the Company on such form and in such manner as the Board
shall prescribe. Such written notice must be accompanied by payment of the full
purchase price for the number of shares being purchased. Such payment may be
made by one or a combination of the following methods: (a) by certified or
official bank check (or the equivalent thereof acceptable to the Company); or
(b) by such other method as the Company may authorize. The date of exercise of
the Option shall be the date on which: (a) written notice of exercise shall have
been duly given as provided in Section 7 of this Agreement; and (b) the Company
shall have received payment of the full purchase price for the number of shares
being purchased.
SECTION 4. Death.
If the Optionee dies during the period in which the Option is
exercisable the Option shall be exercisable until the earlier of the expiration
date of the Option (specified in Section 2 of this Agreement) and the first
anniversary of the date of the Optionee's death.
SECTION 5. Investment Representations. The Optionee hereby
represents and warrants to and agrees with the Company as follows:
5.1 Acquisition of Shares for Own Account. The Optionee will acquire
the Shares, if at all, pursuant to this Agreement with the Optionee's own funds,
and not with the funds of anyone else. The Shares will be acquired, if at all,
for the Optionee's own account, not as a nominee or agent and not for the
account of any other person or firm, and for investment and without any view to
the distribution thereof or of any portion thereof or interest therein. No one
else has or will have on any exercise of the Option or any portion thereof any
interest, beneficial or otherwise, in any of the Shares to be acquired on such
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exercise. The Optionee is not, and prior to any exercise of the Option will not
be, obligated to transfer any of the Shares or any portion thereof or any
interest therein to anyone else and the Optionee does not and will not have any
agreement or understandings to do so. The Optionee does not, and on any exercise
of the Option will not, intend to subdivide the Optionee's acquisition of any
Shares with anyone.
5.2 Agreement to Refrain from Resales. The Optionee agrees that,
notwithstanding any provision of this Agreement to the contrary, the Optionee
shall in no event make any disposition of all or any part of or interest in the
Shares and that such Shares shall not be encumbered, pledged, hypothecated, sold
or transferred by the Optionee nor shall the Optionee receive any consideration
for such Shares or for any interest therein from any person, unless and until
prior to any proposed transfer, encumbrance, disposition, pledge, hypothecation
or sale of any Shares, either: (1) a registration statement on Form S-1 or S-8
(or any other form replacing such form or appropriate for the purpose) under the
Securities Act of 1933, as amended (the "Act"), with respect to such shares
proposed to be transferred or otherwise disposed of shall be then effective; or
(2) (i) the Optionee shall have notified the Company of the proposed disposition
and shall have furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, (ii) the Optionee shall have
furnished the Company with an opinion of counsel in form and substance
satisfactory to the Company to the effect that such disposition will not require
registration of any such Shares under the Act or qualification of any such
Shares under any other securities law, (iii) such opinion of counsel shall have
been concurred in by counsel for the Company and (iv) the Company shall have
advised the Optionee of such concurrence.
5.3 Shares May Be "Restricted Securities"; Certificates Representing
Shares May Be Legended.
The Optionee understands and agrees that:
5.3.1 the Shares, if and when issued, may be "restricted
securities," as that term is defined in Rule 144 under the Act and, accordingly,
the Optionee may be required to hold the Shares indefinitely unless they are
registered under the Act or an exemption from such registration is available;
5.3.2 the Company is not under any obligation to register the Shares
under the Act or to comply with any exemption thereunder; and
5.3.3 certificates representing any Shares received by the Optionee
on exercise of the Option may bear a legend on the face thereof (or on the
reverse thereof with a reference to such legend on the face thereof)
substantially in the form set forth below, which legend restricts the sale,
transfer or disposition of the Shares otherwise than in accordance with this
Agreement:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
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ENCUMBERED, PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
AND CONCURRED IN BY THE COMPANY'S COUNSEL THAT SUCH REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR SUCH TRANSACTION COMPLIES WITH RULES
PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION UNDER SAID
ACT.
SECTION 6. Nonassignability.
The Option shall not be assignable or transferable, voluntarily or
involuntarily, other than by will or by the laws of descent and distribution.
The Option shall be exercisable during the life of the Optionee only by the
Optionee or the Optionee's legal representative.
SECTION 7. Notices.
Any notice to be given to the Company hereunder shall be in writing
by either express delivery, registered or certified mail or confirmed facsimile
transmission and shall be addressed to 3-D Geophysical, Inc., 8226 Park Meadows
Drive, Littleton, CO 80124, Attn: Secretary (Facsimile Number: 303-708-8941), or
at such other address, facsimile number or person's attention as the Company may
hereafter designate to the Optionee by notice as provided in this Section 7. Any
notice to be given to the Optionee hereunder shall be addressed to the Optionee
at the address or facsimile number set forth beneath his signature hereto, or at
such other address or facsimile number as the Optionee may hereafter designate
to the Company by notice as provided herein. A notice shall be deemed to have
been duly given when personally delivered or, if mailed, five days after the
date the notice was so mailed. Notices which are delivered by confirmed
facsimile transmission shall be deemed to have been duly given on the date of
delivery.
SECTION 8. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and the successors and assigns of the Company and the heirs and
personal representatives of the Optionee.
SECTION 9. Governing Law.
This Agreement shall be interpreted, construed and administered in
accordance with the laws of the State of Delaware as they apply to contracts
made, delivered and performed entirely within such state.
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SECTION 10. Severability.
If any provision of this Agreement shall hereafter be held to be
invalid, unen- forceable or illegal in whole or in part, in any jurisdiction
under any circumstances for any reason, (i) such provision shall be reformed to
the minimum extent necessary to cause such provision to be valid, enforceable
and legal while preserving the intent of the parties as expressed in, and the
benefits to the parties provided by, this Agreement or (ii) if such provision
cannot be so reformed, such provision shall be severed from this Agreement and
an equitable adjustment shall be made to this Agreement (including, without
limitation, addition of necessary further provisions to this Agreement) so as to
give effect to the intent as so expressed and the benefits so provided. Such
holding shall not affect or impair the validity, enforceability or legality of
such provision in any other jurisdiction or under any other circumstances.
Neither such holding nor such reformation or severance shall affect or impair
the legality, validity or enforceability of any other provision of this
Agreement.
SECTION 11. Authority.
This Agreement has been duly authorized on behalf of the Company by
the Board of Directors. The Optionee represents that he is free to enter into
this Agreement and that his entering into this Agreement does not violate any
obligation that he has to any other person or legal entity.
SECTION 12. Counterparts.
This Agreement may be executed in one or more counterparts, all of
which taken together shall be deemed one original.
SECTION 13. Specific Performance.
The Optionee agrees that, without prejudice to the rights and
remedies otherwise available to the parties hereunder, the Company shall be
entitled to specific performance or equitable relief by way of injunction of all
of the Optionee's obligations hereunder, without posting any bond and without
proving that damages would be inadequate.
SECTION 14. Entire Agreement.
This Agreement sets forth the entire understanding of the Company
and the Optionee with respect to the subject matter hereof and cannot be amended
or modified, nor can any provision hereof be waived by the Company, except by a
writing signed by both parties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first written above.
3-D GEOPHYSICAL, INC.
ATTEST: By:
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Name:
- ----------------------- Title:
OPTIONEE:
By
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Address:
Facsimile Number:
Social Security Number:
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